CONSIDERATION
By the end of this chapter, the student
should be able to:
- Define consideration;
- Identify when consideration is
present;
- Explain and apply the legal principles
relating to consideration;
- Explain the distinction between
executory, executed and past consideration;
Section 26 of CA 1950:
Agreement made without
consideration is VOID.
For example:
A offers to sell his house to B at the amount of
RM 250K. B agreed to buy the said house and
pay RM 250K.
As consideration is to pass the ownership to the
B.
Bs consideration is to pay RM 250K.
1.
Executory :
example:
C promises to deliver to D a bicycle and D
promises to pay RM100 for the said bicycle.
1.
Executory :
2. Executed
where an act is done/ promise made in return
for the performance of an act. (reward
situation).
example,:
Laila lost her wallet. She offers a reward of
RM100 for anyone who found her wallet and
returns her wallet. Majnun found her wallet
and returns it to her. She paid the reward of
RM100 to him.
2. Executed
contract arises upon the execution of the
consideration.
example,:
Laila lost her wallet. She offers a reward of
RM100 for anyone who found her wallet and
returns her wallet (promise). Majnun found her
wallet and returns it to her (performance of the
act- Majnuns consideration is executed to
Lailas promise- binding contract). She paid the
reward of RM100 to him. (act/ promise)
3. Past consideration
where a promise is made subsequent to and
in return for an act that has already been
performed.
act done prior to the promise
Consideration which has been done
/completed before the promise made. .
3. Past consideration
S. 26 (b) of CA
S. 2(d) of CA
has done or abstained from doing..
3. Past consideration
Illustration (c) of section 26:
- A find Bs purse and gives it to him. B
promises to give A RM 50. This is a contract.
Section 26 of CA 1950
an agreement
made without consideration is void'.
- But
there are several exceptions:
Section: 26 (a) - (c) of CA 1950
S26(a) of CA:
an agreement made on account of natural love
and affection between parties standing in near
relation to each other and it is in writing and
registered.
Issues:
whether the document signed was valid
according under section 26(a) of CA 1950?
Whether the legal next of kin of TSS are
NEAR RELATION with their adopted nephew
and nieces?
Court held:
The Khoos and Tans children are related to
the four adopted children of Tan Soh Sim
only in a special limited way, which is not
near.
Chinese adopted children are related to their
adoptive parents and brothers. However, they
were not related to the family of the adoptive
mother.
S26(b) of CA:
promise to compensate wholly or in part, a
person who has already voluntarily done
something for the promisor , or something
which the promisor was legally compellable to
do;
Court held:
there was a valid consideration and Schmidt was
entitled to the amount owed to him by the
company.
Facts:
- A dispute arose between a Malaysian and
English
company
resulting
from
an
arrangements. Both had acted as agents for
various products.
- The arrangement is that the Malaysian company
would find the buyer and inform the English
firm who would find the seller. When a sale had
been arranged , the Malaysian firm would
receive a commission.
Facts:
- In this particular dispute, the Malaysian
company had arranged a buyer for such
confectionary and the English firm found a
seller.
- The D (Malaysian firm) wrote a letter to the P
(English company)
agreeing that if X Co
defaulted in payment, it will pay the price of
the goods.
- Later, X Co went bankrupt and defaulted in
payment. The D refused to pay and the P sued
for damages
Court Held:
- There were promises of compensation made by
the defendant firm to the plaintiff in respect of
consignment , but these promises were not
supported by consideration.
- The P had acted on the suggestion of the D =
could not be said to have been done voluntarily.
Thus, the promise to compensate was not
enforceable.
-
Illustration (e) to s. 26
A owes B RM 1,000, BUT the debt is barred by
limitation. A signed a written promise to pay B
RM 500. This is a contract.
Facts:
There was an oral agreement made
between A and R in which R agreed to
transfer the land to A on payment of
$500. upon payment of $500, A possessed
the land.
Later, R claimed that the A had trespassed
on his land and he brought an action
claiming for possession of the land from A.
Court Held:
Consent given by R was freely given. It was
not caused by coercion or undue
influence.
The inadequacy of consideration is
immaterial and the court gave judgment
in favour of the A.
Facts:
A sister agreed to pay an annuity of Rs653 to
her brothers (who provided no
consideration), if their mother transfer some
land to her.
When their mother had given the sister some
land, the sister failed to fulfill her promise.
Her brothers sued the sister.
Court Held:
She was liable on the promise on the
ground that there was valid
consideration for the promise
eventhough it did not move from the
brothers.
EXAMPLE
A owes B a debt of RM 200. Then, B
accept RM 100 being the payment made
by A in full satisfaction of debt.
B IS NOT BOUND by his performance of
waiving .
He may subsequently sue A for the
balance of the debt.
EXAMPLE
Pinnel owes Cole 8 pounds 10s at
11/11/1600. Then he paid 5 pounds 2s
only and has been accepted in full
satisfaction by Pinnel.
Court
Malaysian Law:
Section 64 of CA 1950,
Every promise may dispense with or
remit, wholly or in part, the
performance of the promise made to
him, or may extend the time for such
performance, or may accept instead of
it any satisfaction which he thinks fit.
Illustration S. 64:
a) Where the promisee forbids the promisor from
performing his act.
b) Payment of smaller sum in satisfaction of larger sum
c) Payment by third party in discharge of a debt
d) Where the amount owing under a contract is
unascertained and a person accepts an agreed sum in
satisfaction, the debt is discharged.
e) A composition with creditors for the payment of a
smaller sum, an arrangement whereby each creditor
agrees to accept a stated sum of his debt in full
satisfaction.
Facts:
Bariam Singh (Debtor) owed Kerpa Singh
(Creditor) $8869.64. The debtors son wrote a
letter to Kerpa that Kerpa Singhs offering $4000
in full satisfaction of his fathers debt and
endorsed a cheque for the amount and
stipulating that should Kerpa Singh refuse to
accept his proposal, he must return the cheque.
Kerpa Singh having cashed the cheque and
retained the money and secure the balance of
the debt by issuing a bankruptcy notice on the
Bariam Singh..
Facts:
Court held: