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Malaysian Business Law Week-4 Lecture Notes

This document discusses the definition and types of consideration in contract law. It defines consideration as something of value done at the request of the promisor. Consideration can be executed, executory, or past. It must be sufficient but not necessarily adequate. Exceptions include natural love and affection, performance of public or contractual duties, and partial payment of debt under certain conditions. Promissory estoppel also makes promises enforceable if relied upon, even without consideration.

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Kyaw Thwe Tun
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157 views3 pages

Malaysian Business Law Week-4 Lecture Notes

This document discusses the definition and types of consideration in contract law. It defines consideration as something of value done at the request of the promisor. Consideration can be executed, executory, or past. It must be sufficient but not necessarily adequate. Exceptions include natural love and affection, performance of public or contractual duties, and partial payment of debt under certain conditions. Promissory estoppel also makes promises enforceable if relied upon, even without consideration.

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Kyaw Thwe Tun
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© © All Rights Reserved
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Week-4 lecture notes

Consideration
Definition of consideration is as follows in Section 2(d) of Contracts Act 1950:
When, at the desire of the promiser, the promise 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 as act or abstinence is called consideration for the promise.
Consideration can be categorized as:
Executed consideration
- Consideration is done at the time of the contract
- Example: A sells B car. B pays now

Executory consideration
- Consideration is yet to be given or performed
- Example: A sells B car. B pays one week later
Case: University of Malaya v Lee Ming Chong
 This case proves that consideration is not just made in terms of monetary
value but can be made through services as well

Past consideration
- Definition: All work done before the promise is made
- At common law, past consideration is not accepted
Case: McArdle v McArdle [1951]
 However, if it is done at the request of the promisor, then it is considered as
good consideration
Case: Lampheigh v Braithwait [1615]
 In Malaysian Law, past consideration is good consideration
Sub-section 2(d) and Section 26(b)
 Past consideration is a valid consideration
 Acts done voluntarily with value can also be considered as good
consideration
**Note: Consideration is only made at the desire/request of the promisor. Voluntary
actions without value are not considered as consideration.

Consideration must be sufficient but need not be adequate


Explained in Section 26 Explanation 2
- As long as something of value in the eyes of the court is being offered, it is a valid
consideration
- Practical benefit does not amount to valid consideration (varies between cases)
Case: Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991]
 If inadequate consideration is found, the court will investigate to see if
consent was freely given (Three parties involved in this case)
Other aspects of consideration to think about
Other aspects of consideration include:
Natural love and affection
- Position under Common Law: Not Accepted
- Position under Malaysian Law: Accepted only if
 Expressed in writing
 Registered (if appliable)
 Parties stand in a near relation to each other
Forbearance to sue
- A good/valid consideration
- Seen in Section 2(d)
 Shows that the word “abstinence” asserts that forbearance to sue is a good
consideration
 Good consideration because you are abstaining from something that you are
legally entitled to, this in itself is already good consideration
Performance of public duty
- Not a good consideration
- Performing an existing public duty without more is not a good consideration
Case: Glasbrook Bros Ltd. V Glamorgan City Council [1925]
 The police had done something that is above their existing public duty,
making it a valid consideration
Performance of an existing contractual duty
- Not a good consideration (same as performance of public duty) unless there are
new elements
- Only good if party has done something beyond/above than requested, then it is a
good consideration
Case: Stilk v Myrick [1809]
 The duty of maintaining the ship was part of the crew’s responsibility.
Therefore, no consideration was made
Case: Hartley v Ponsonbly [1857]
 The crew were allowed to leave but they stayed. This shows that the crew
has done something beyond their duty, making it good consideration.
Part payment of debt
- At Common Law, this is not a valid consideration
Changed due to Pinnel’s Case
 Held that partial payment of debt is not representative in discharging the
whole debt. However, since this is done at the request of the plaintiff at an
earlier date, it provided further benefit to the plaintiff, therefore making it a
good consideration
X lend $10k money from the bank
On the due date, the bank said they will forego $7.5k if X pays $2.5k
The next day, the bank sues X for $7.5k.
Since there is no consideration from X to bank for forgoing $7.5k. (bank can sue)

If the X went to the bank one day before the due date and negotiated with the bank to
forgoing $7.5k and X would give $2.5k (bank can’t sue)

- In Malaysian Law, this valid consideration


Section 64 of Contracts Act 1950
Every promisee may dispense with or remit, wholly or in part, the performance
of the promise made to him, or may extend the time of such performance, or may
accept instead of it any satisfaction which he thinks fit

- if the promise to discharge the debt is made, then it is the promisor’s obligation to
enforce the promise

(Allow third-party consideration) Contract Law section 2(d)


- Case: Hirachand and Punamchand v Temple

Promissory Estoppel
(make the promise, if the other party suffer)/ (whether the other party suffer from another
party mot keeping the promise)
- It is legal principle when a promise is enforceable by law, even if was made
without formal consideration from the promisor to the promisee
- This is because other people were reliant on your promise before making a
decision/incurring expenses based on that promise
- Contrary to Gratuitous Promise or One-sided promise:
Example: Dr Adnan promises to buy coffee for students but he changed his mind
 Dr Adnan cannot be sued because there is no consideration being
exchanged from the students to him

Limitation act states that must suit within 6 years of breaching of contracts.

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