CONSIDERATION

Contract Law
 Relevant Chapters
Chapters 5 (Consideration) and 6 (Promissory Estoppel)
Trakic A., et al., Law for Business, (Sweet & Maxwell Asia: Malaysia, 2018)

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Definition
• “when, at the desire of the promisor, the promisee or
any other person has done or abstained from doing,
or does or abstains from doing, or promises to do or
to abstain from doing, something, such act or
abstinence or promise is called consideration for the
promise.”
Section 2(d) of the Contracts Act 1950 • See also section 26 of the CA: “An agreement made
without consideration is void…”
• Illustration (a): “A promises, for no consideration, to
give to B RM1,000. This is a void agreement.”

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 Example
University of Malaya v Lee Ming Chong
[1986] 2 MLJ 148
• University of Malaya appointed the defendant to a
scholarship offered by the Canadian government under
the Colombo Plan, to pursue a course of study in Canada
for the degree of Master of Business Administration and
Accounting. The parties entered into a scholarship
agreement that provided for the defendant to serve the
University for a period not less than five years and a
breach of this term will render him liable to pay the
University on demand RM5000. The defendant breached
the term and contended that the scholarship agreement
was void as it was made without consideration.
• Held: ?

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Types of Consideration
Executory, Executed, and Past Consideration

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 • Section 2(d) of the Contracts Act: “when, at the desire
Executory Consideration of the promisor, the promisee or any other person has
done or abstained from doing, or does or abstains
from doing, or promises to do or to abstain from
doing, something, such act or abstinence or promise
is called consideration for the promise.”
Consideration which is yet to be given or • Section 2(e) of the Contracts Act: “every promise and
performed every set of promises, forming the consideration for
each other, is an agreement”

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 K Murugesu v Nadarajah
[1980] 2 MLJ 82

• The respondent was the tenant of the appellant. He pestered

the appellant to sell the house to him. The appellant finally
wrote on a peace of paper an agreement to sell the
respondent the said house for RM26,000 within three months
from the date of the agreement. Later the appellant refused to
sell and the respondent sued for specific performance. The
appellant contended that there was no consideration for the
offer to sell and the agreement was void for want of
consideration.
• Federal Court held: The agreement was the case of executory
consideration. A promise is made by one party in return for a
promise made by the other; in such a case each promise is
the consideration for the other.

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 • Section 2(d) of the Contracts Act: “when, at the
Executed Consideration desire of the promisor, the promisee or any other
person has done or abstained from doing, or does
or abstains from doing, or promises to do or to
abstain from doing, something, such act or
Consideration which has been completed abstinence or promise is called consideration for
by the party at the time of the contract the promise.”

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Past Consideration
• Example: Albert was swimming in the river and got
into difficulty. Tony, who was passing by, saw Albert
is in difficulty, took his coat off and dived into the
river and saved Albert from drowning. Later, Albert
promised to give Tony RM500 for saving his life.
Consideration that was performed before the Three days later Albert changes his mind.
promise was given and independently of it • Is there an enforceable contract between the
parties?

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 Common Law
Past consideration is no consideration!

• Re McArdle (deceased); McArdle v McArdle [1951] 1 All ER

905
• M and Mrs M lived in a dwelling house that was owned by M’s
deceased father. M and his brothers and sisters were the
beneficiaries of the house. M and Mrs M decorated and
carried out some improvements to the house, and the cost of
£488 was borne by Mrs M. Subsequently, the beneficiaries
addressed a written and signed document to Mrs M in which
they promised to repay Mrs M the £488 for alterations and
improvements she carried out to the dwelling house.Decision:
• The Court of Appeal held that all the work done by Mrs M was
in the past, i.e. before the promise was made by the
beneficiaries to repay her the £488, and as such it is not a
good consideration.

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 Exception – request
Lampleigh v Braithwait [1615] EWHC KB J 17

• Thomas Braithwait (the defendant) committed a murder and

was convicted with the mandatory death penalty. The
defendant requested that Anthony Lampleigh (the plaintiff)
help him get a pardon from the King. Upon the said request,
the plaintiff did everything in his power to get the pardon from
the King for the said felony. As a result of the plaintiff’s great
effort, the defendant was pardoned by the King. Afterward, the
defendant promised to give the plaintiff £100, but he never
fulfilled his promise. Therefore, the plaintiff brought an action
against the defendant for the breach of promise.
• The court found in favour of the plaintiff, saying that although
the plaintiff’s act predated the defendant’s promise, it was
still a good consideration as it was done at the request of the
plaintiff. Therefore, the defendant was under an obligation to
pay £100 to the plaintiff.

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 Past Consideration in Malaysia
Good Consideration!

• Section 2(d) of CA: “when, at the desire of the promisor, the

promisee or any other person has done or abstained from
doing, or does or abstains from doing, or promises to do or to
abstain from doing, something, such act or abstinence or
promise is called consideration for the promise.”
• Section 26(b) of CA: “An agreement without consideration is
void unless – it is a 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.” [Emphasis added]
• Illustration (c): “A finds B’s purse and gives it to him. B
promises to give A RM50. This is a contract.”

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 Sufficiency vis-à-vis Adequacy
Consider this…

Rolls Royce Car Salt and Pepper Set

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 Consideration must be sufficient
but need not be adequate
The courts are generally concerned only with
whether the promisor has made a bargain, not
with whether he has made a good bargain.
• Explanation 2 to section 26 of the CA: “An agreement to which
the consent of the promisor is freely given is not void merely
because the consideration is inadequate; but the inadequacy
of the consideration may be taken into account by the court in
determining the question whether the consent of the promisor
was freely given.”
• Illustration (f) to section 26: “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.”
• Illustration (g) to section 26:“A agrees to sell a horse worth
RM1,000 for RM10. A denies that consent to the agreement
was freely given. The inadequacy of consideration is a fact
which the court should take into account in considering
whether or not A’s consent was freely given.”

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 • Does consideration have to be money?
Consideration Sufficiency •
•
What does this mean? Think about...
Natural love and affection
• Forbearance to sue
Consideration must be something of • Performance of public duty
value in the eyes of the court! • Performance of an existing contractual duty
• Part payment of a debt

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 Natural Love & Affection
Good consideration?

Position under Common Law Position under Malaysian Law

• Eastwood v Kenyon (1840) 11 Ad. & E. 438. • Section 26(a) of the Contracts Act 1950: “An
• K’s promise to repay E. for caring for S. agreement made without consideration is
created a moral obligation, nothing more. void, unless it is expressed in writing and
registered under the law (if any) for the time
being in force for the registration of such
documents, and is made on account of natural
love and affection between parties standing in
a near relation to each other.” [Emphasis
added]

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Forbearance To Sue
• S 2(d) of the CA 1950 – the word “abstinence”
asserts that forbearance is good consideration.

• Example: Brett owes to Rich RM1000 at 10% interest

per year, the money now being due. Brett says he will
pay at the higher rate of 15% interest if Rich promises
Good Consideration? not to sue for the time being. Rich forbears from
suing. This forbearance to sue will be consideration
for Brett’s promise to pay the higher rate of interest,
which is thus enforceable.

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 Performance of an Existing Duty
Good Consideration?

Existing Public Duties Existing Contractual Duties

• Performance of an existing public duty without more • Performance of an existing contractual duty is not
is not good consideration. good consideration... Unless there’s a new
• Glasbrook Bros. Ltd v Glamorgan County Council element.
[1925] AC 270.
• Stilk v Myrick (1809) 2 Camp. 317
• GB owned a colliery. Due to a violent strike wanted
police protection on site. GCC, the police believed a • Hartley v Ponsonby (1857) 7 El & Bl 872.
mobile patrol would do. GB promised to pay the
additional costs for on site protection.GB later
refused to pay, claiming that the police under an • What about Williams v Roffey Bros [1990] 2 WLR
existing public duty to protect the public.
1153?
• House of Lords: The police had provided more than
their normal public duty, therefore promise to pay • Court of Appeal : ‘practical benefit’ is good
extra was enforceable. consideration

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 Part Payment of Debt
Good Consideration?

Common Law Malaysian Law

• Part payment of a debt is not valid consideration for a promise • Does Pinnel’s Rule apply in Malaysia? No!!
to forego the balance.
• Pinner's case
(1602) 5 Rep 117 Court of Common Pleas;
• Section 64 Contracts Act (statutory waiver):
Pinnel (the claimant) was owned £8 10 shillings by Cole (the “Every promisee may dispense with or remit,
defendant). The due date for payment of the debt was
November 11, 1600. However, the claimant was in need of wholly or in part, the performance of the
money and he asked the defendant to expedite payment and to promise made to him, or may extend the time
pay to him a lesser sum of £5 2 shillings and 2p on October 1,
and in return the claimant promised to forego the balance. The of such performance, or may accept instead of
defendant executed part payment of the debt as agreed but
soon after the claimant sued for the balance. The claimant it any satisfaction which he thinks fit.”
argued that part payment of the debt was not good
consideration for his promise to forego the balance.
• Decision: The court held that, as a general rule, part payment
of the debt on the due date is not valid consideration for the
promise to forego the balance.

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 Promissory Estoppel
The situation in Pinnel’s case has been to a certain degree remedied by the equitable
doctrine of promissory estoppel.
Homework: (read chapter 6 - Promissory Estoppel)

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THANK YOU!
Adnan Trakic

Email

adnan.trakic@monash.edu