Part A

Q.3 (Dec 2016)

Ahmad was saved from drowning by his jobless cousin, Malik. He promised Malik that he
would hire him as a training executive in his company. It has been a year since the incident
and Malik has not received any letter of offer from Ahmad.
By virtue to section 10(1) of Contracts Act 1950, all agreements are contracts if they
are made by the free consent of parties competent to contract, for a lawful consideration and
with a lawful object, are not hereby expressly declared to be void. There are three types of
consideration which are executory, executed and past. In this situation, it falls under past
consideration. Where a promise is made subsequent to and in return for an act that has
already been performed, the promise is made on account of a past consideration. A past
consideration is something that is wholly done by the promisee even before making of the
agreement. It is always supported by the future promise. Under English law the general rule
is that past consideration is insufficient to support a contract. Section 2(d) by the words “ has
done or abstained from doing” suggests that an act prior to the promise is sufficient to
constitute consideration even though it is clearly past provided it is done at the desire of the
promisor. By virtue to the case of Kepong Prospecting Ltd & S.K Jagatheesan & Ors v A.E
Schmidt & Marjorie Schmidt, the issues were the services rendered after the incorporation
but before the agreement sufficient consideration. This was clearly past consideration. The
Privy Council ruled that it did constitute a valid consideration so that Schmidt was entitled to
his claim on the amount.
Q.3 (Dec 2015)
An agreement made without consideration is void. With reference to relevant cases and
provisions, briefly discuss the exceptions to the above rule.
A promise without consideration is a gratuitous undertaking and cannot create a legal
obligation as in the case of Chia Foon Tau v Lim Pey Lin [1998]. However, there are
exceptions by virtue of S.26 of CA 1950. There are exceptional cases where a contract is
enforceable even though there is no consideration. Firstly, natural love and affection. An
agreement without consideration is valid only if the following requirements are complied
with, the agreement is made by a written document,the document is to be registered (if
any),the agreement is made on account of natural love and affection such as A for natural
love and affection, promises to give his son B, RM1, 000. A puts his promise to B in writing
and registered it. This is a contract. And last requirement is the parties to the agreement stand
in a near relation to each other. In the case of Queck Poh Guan (As administrator of the estate
of Sit Kim Boo,deceased) V Quick Awang [1998], the court held that the transfer of the land
was a gift from the deceased mother to the defendant on account of natural love and
affection. Secondly, voluntary compensation. By virtue to section 26 (b) of Contract Act, it is
a promise to compensate wholly or in part a person who has already voluntarily done
something for the promised or something which the promisor was legally compellable to
do.The necessary requirements are, promisee has voluntarily done an act, the act is one which
the promisor was legally compellable to do, and an agreement to compensate, wholly or in
part, the promisee for the act. The act must be performed voluntarily. Voluntarily was defined
in the case of J.M. Wotherspoon & Co Ltd v Henry Agency House [1962] MLJ – the word
‘voluntarily’ means ‘otherwise than at the desire of the promisor’. The court held, as the
plaintiff in this case had acted on the suggestion of the defendant,it shows that the plaintiff’s
act was not voluntarily done, therefore the contract is void. Lastly, a promise to pay debt
barred by limitation law. A statute barred debt refers to a debt, which cannot be recovered
through legal action because of a lapse of time fixed by the law. Section 26(c) creates an
exception to this rule but subject to several conditions which are the debtor made a fresh
promise to pay the statute barred debt, and the promise is in writing and signed by the person
to be charged or his authorized agent in his/her behalf. As an example, A owes B RM1000,
but the debt is barred by limitation. A signs a written promise to pay B 500 on account of the
debt. This is a contract.
Q.2 (June 2015)
Uncle Krishnan wants to give his land to his son, Prem for his graduation. Prem is not
required to pay Uncle Krishnan any money. But Uncle Krishnan is not sure if it is a valid
transaction, since there is no consideration for the transfer of the land. Advise Uncle
Krishnan.
A promise without consideration is a gratuitous undertaking and cannot create a legal
obligation as in the case of Chia Foon Tau v Lim Pey Lin [1998]. However, there are
exceptions by virtue of S.26 of CA 1950. There are exceptional cases where a contract is
enforceable even though there is no consideration which are made on account of natural love
and affection, voluntary compensation, and a promise to pay debt barred by limitation law. In
this situation, it falls under natural love and affection. An agreement without consideration is
valid only if the following requirements are complied with, the agreement is made by a
written document,the document is to be registered (if any),the agreement is made on account
of natural love and affection such as A for natural love and affection, promises to give his son
B, RM1, 000. A puts his promise to B in writing and registered it. This is a contract. And last
requirement is the parties to the agreement stand in a near relation to each other. In the case
of Queck Poh Guan (As administrator of the estate of Sit Kim Boo,deceased) V Quick
Awang [1998], the court held that the transfer of the land was a gift from the deceased mother
to the defendant on account of natural love and affection.