TUTORIAL 3

Prepared by :
Shaidatul Aina Bt Ahmad Saharudin (144091)
Yap Hui San (144024)
Nuranis Qhaleezah Binti Ahmad Pesal (141894)
Nuranis Qhaleeda Binti Ahmad Pesal (141846)
Ng Xin Yun (143148)
Nur Aqilah Binti Shaharuddin (142237)
1. What is the general rule of consideration?

a) Past consideration is good consideration (section 2d, Contracts Act 1950)

Cases : Kepong Prospecting LTD & ORS v SCHMIDT (1968)

b) The consideration must be sufficient but need not be adequate.

(Explanation 2 to section 26 of the Contracts Act 1950)
Cases : Chappell v Nestle (1960) &
Phang Swee Kim v Beh I Hock (1964)

c) The consideration need not move from the promise. (Section 2d of the
Contracts Act 1950)
Cases : Venkata Chinnaya v Verikatara Ma’ya (1881)
d) Natural love and affection is valid consideration. (section 26a of the
Contacts Act 1950)
An agreement made on account of natural love and affection would
be held to be binding in Malaysia if the requirement of Section 26a are
present:
- It is expressed in writing
- It is registered (if applicable); and
- The parties stand in a near relation to each other
Case : Tan Soh Sim, Chan Law Keong & Ors v Tan Saw Keow & Ors

e) Accord and Satisfaction-Part payment may discharge an obligation.

The general rule established in Case of Pinnel’s case, 1602 where it
does not apply in Malaysia. Section 64 of the Contracts Act 1950 reads
“ promise may dispense with remit performance of promise.

Case : Kerpa Singh v Bariam Singh

2. Is there any exceptions available to the general rule of exception?

Yes . Through section 26(a), An agreement made without

consideration is void, unless it is expressed in writing and registered
under the law for the time being in force for the registration of such
documents, and is made an account of natural love and affection
between parties standing in a near relation to each other.
The case of this section is Tan Soh Sim, Chan Law Keong & Ors v Tan
Saw Keow & Ors.

Under Section 26 (b), it is a promise to compensate for something done.

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 provision was legally compellable to do.
3. WHAT IS MEANT BY ADEQUACY OF CONSIDERATION?
In order for the contract to be enforceable, the consideration that is
exchange must be deemed “adequate”. This means that the mutual
exchange must involve a fair price in comparison to the promise that is being
made. Under Malaysian law, the consideration need not be adequate.

Explanation 2 to section 26 of the contract acts 1950 provides that an

agreement is not void merely because the consideration is inadequate.
Illustration (f) to section 26 shows the application of rule.
“A agrees to sell a horse worth RM1,000 for RM10. A’s consent to the
agreement was freely given. The agreement is a contract notwithstanding the
inadequacy of the consideration”

Case : PHANG SWEE KIM v BEH I HOCK

Question 4

Ali and Abu were neighbours. Ali had to go to Singapore for a

business seminar. Before he left, he told Abu “Please look after
my house.” After two weeks of being away, Ali’s house caught fire
and Abu could only save a briefcase containing RM30,000. When
Ali returned home, he thanked Abu for saving his briefcase and
promised he would pay Abu RM2,000 for what he had done.
Later, Ali refused to pay what he had promised. Advise Abu.
Answer:

Past Consideration is good consideration (Section 2d of the Contracts Act

1950)
Abu has served Ali by taking care of Ali’s house. Therefore, this establishes
a legally sufficient consideration notwithstanding the house was on fire.
According to Contract Act 1950 , Section 24, Ali shall pay Abu RM2000 as
Abu has accepted the offer. Consideration shall be made and should
established.
Case : Kepong Prospecting Ltd & ORS v Schmidt (1968)
Question 5

Abby promises to Ben RM 2000 when Ken paints Abby’s

house. As soon as Ken completed painting Abby’s house,
Ben Claims the amount from Abby. Abby refuses to pay Ben
as she argued that Ben did not paint her house as she had
instructed. Decide.
ANSWER:

Abby should pay Ben the RM2000. According to section 2(d) of the Contracts
Act 1950, a party to an agreement can enforce the promise even if he himself
has given no consideration as long as somebody has done so. Even Ben was
third party who provided no consideration for the promise, but Abby and Ben
had come to an agreement which Abby promised to pay Ben as long as Ken
completed painting. There was good consideration for the promise even
though it did not move from Ben.

This principle was applied in case Venkata Chinnaya V Verikatara Ma'ya.

Question 6

Ben borrowed RM 6,000 from Zed. Ben promised to pay back Zed
within one month. After one month, Ben told Zed he didn’t have
enough money to pay the full amount of the loan. Ben negotiated
with Zed, which Ben will pay only RM 4,500 and Zed will accept
the amount as full consideration for the loan and will not ask Ben
to pay the balance in the future. Zed agreed with Ben. However,
two weeks after accepting the payment from Ben, Zed insisted
that Ben pay balance of RM 1,500. Advice Ben.
- Based on (b) and (c) to Section 64 of Contracts Act 1950, part payment of a
debt has an effect to discharge the full debt. In Malaysian Law, the rule in
Pinnel’s case is irrelevant and inapplicable.

- According to case of Kerpa Singh v Bariam Singh (1966), the debtor’s son
offered to give a cheque of RM4000 as full payment in order to discharge his
father from a debt of RM 8650. The Federal Court held that since the creditor
had accepted the offer by cashing the cheque and retaining the money, he
agreed to discharge the debtor from any further liability.

- Therefore, Ben doesn’t need to pay balance of RM 1,500.