LAW OF CONTRACT:

ELEMENTS OF CONTRACT
(CONSIDERATION)
Prepared by:
NURUL NASIHIN ARIFFIN
KPMBP

Definition

Sec 2(d)
-Consideration is the price or something which one
party pays to buy the promise or the act of the other.
It can take the form of money, physical objects,
services, promised actions, or even abstinence from
a future action.
- Promisee must give something in return for the
promise made by the promisor).
- For example, a person enters a shop and agrees to
buy a second-hand car for RM 10,000. A contract has
been made. The buyers consideration is the promise
to pay RM 10,000. The shop-owners consideration is
its promise to pass ownership of the car to the buyer.
- it can take the form of money, physical objects,
services, promised actions, or even abstinence from
a future action.

Cont
- case: Combe v Combe
P is Ds wife. They have separated. P then
called the D to get approval from D that he
will give her 100 pound yearly as alimony. D
approved and P voluntarily did not file formal
order. D fails to do as promise. P took
action against D for breach of Contract.
Held: P claims was rejected by court because
there is no consideration for D promise. An
agreement without consideration is void.

Cont
- But, it is different with case:
Williams v Williams
P is Ds wife. P has left D. D then promise to
give alimony of 30 pound a week to P with a
condition that P will abstain herself from
taking any credits on Ds name. D fails to do
as he has
promise. P sought action through
court. D in
his defence says that the
agreement is void for lack of consideration.
held: there is valid contract. A promise not
to take credits on Ds name is a good
consideration.

Categories of consideration
Executory
- where the parties exchange promises to
perform acts in the future.
- E.g: C promises to deliver to D a bicycle and D
promises to pay RM100 for the bicycle.
Executed
where an act is done in return for the
performance of an act. (reward situation).
- E.g: 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.

Cont
Past consideration
- where a promise is made subsequent
to and in return for an act that has
already
been performed
- 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.

Cont
- case: Kepong Prospecting Ltd & Ors v
Schmidt
Schmidt claimed payment as promised from a
company to reward his service as an advised
engineer before and after the company was
registered when his service is terminates. In
defense, the company claims that no
consideration
is given for the promise.
held: Court rejected the defense. The service
gave
by Schmidt before the agreement but
after the
company registered is a valid
consideration
under sec 2(d).

Voluntarily

Performed or done of one's free

will, impulse or choice, not
constrained or suggested by
another'
Thus where Romeo saves Juliet's
property from destruction when she
was away and she promises to give
Romeo something for all his trouble

Rules of Consideration
1) Must be sufficient but need not
be adequate
- Every consideration must have
some value in the face of law.
- However, the value need not be
adequate, i.e. need not be in the
same value as the other
consideration.

Cont
- case: Phang Swee Kim v Beh I Hock
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 bought an
action claiming for possession of the land from
A.
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.

Cont
2) Payment to compensate part of debt
- Under S.64: if A owes B RM5000. C pays to B RM
1000 and B accepts them, in satisfaction of his
claim on A. this payment is a discharge of the
whole claim.
3) Not a moral obligation
- The meaning of this rule can be easily explain by
Eastwood v Kenyon
When Respondents promise to pay for the debt made
by P to raise Respondents wife while she was a child
until before he married her is not a consideration. It
is a moral obligation on P to raise his dependent well.

Cont

4) Not a public obligation

- A person who is under duty to carry public obligation
cannot claim his act as consideration to ones promise.
- Case: Collins v Godefroy
P has been subpoenas to court to give statement as
Ds witness. D promises to give reward to P. After
attending court session, D refuses to pay as he
promised. P sued D for breach of contract.
held: court reject the Ps claim. It is everyone duties
to help court to uphold justice.

Cont

- however, if the obligation is more than necessary to

public obligation, it can be a consideration to ones
promise.
case: Glassbrook Brothers v Glamorgan City
Council
P requested D to give extra protection on his mines
when a group of workers strike. D refusal to pay cost
of 2200 pound. P made claims to court.
held: court decides that protection given by the police
is more than a necessary public obligation. The
protection is a valid consideration.

Cont
5) Not a former obligation to the promisor
- A party that already has an obligation to the promisor cannot
claim that his action is a consideration to a new promise
made by the promisor.
case: Stilk v Myrick
a promise made by a ship captain to pay extra wages to the
crew when 2 of them passed away during the voyage.
held: it is not a valid consideration. The crews are under
obligation to perform in case of emergency to bring the ship
to safe destination.
- but, if suppose the former contract has ended and there is a
new contract, then the court will decide contradict as to the
above principle.

Cont
6) Valid as to section 24 contract
Act 1950
- Sec 24 list out 5 situations which if
any of an agreement falls under, the
agreement is void.
- The reasons might be that the object
of agreement or the consideration of
any agreement is unlawful.

Exceptions to consideration

In general rule, the law sets the rule without valid

consideration from both parties, an agreement is
void.
However, there are exceptions:
1) Sec 26(a)
- allows promise made on account o natural love and
affection between parties standing in near relation to
each other to be enforceable even it is lack of
consideration.
- however, the promise may be enforceable only if it
is made in writing and registered under the law, if
any.

Cont
- case: Kwan Teck Meng v Liew Sam Lee
D rented ground floor premise won by X. X
transfer the property to P. X then passed
away. Transfer of property is settled 2
months after X death. When asked by P to
vacant the premise, D refused and claimed
that P has no right since no consideration
given by P to X.
held: the transfer is valid since it fulfils sec
26(a)

Cont
- Case: Re Tan Soh Sim
a Chinese woman raised few adopted children.
When
she was very sick, her siblings signed an
agreement
surrending all their rights on her
properties to her
adopted children. After she
died, a question arises,
whether the
agreement is valid?
held: Court has adopted Chinese customs. The
customs sets that adopted children are considered to be
near relation with their
adopted mother and adopted
sibling, but not with their adopted mother siblings.
Therefore the agreement is void. It fails to fulfill sec
26(a).

Cont
2) Sec 2(b)
- allows agreement without consideration to
be valid if it is a promise to compensate for
something done.
3) Sec 26(c)
- a promise to pay a debt barred by limitation
law 26(c)
- the promise is valid only if it is made in
writing and signed by the person to be
charged therewith or his agent.

Thank You
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