CONSIDERATION

Definition
Currie v Misa
A valuable consideration in the sense of the law may consist either in some right, interest,
profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility
given, suffered or undertaken by the other.

Kepong Prospecting Ltd v Schmidt

• Rule of consideration moving from another person under s2(d) did not prevent the rule
of privity of contract from applying. Although third party to the contract provided the
consideration, he is still prevented to sue and apply for performance of the contract
against him
• Only parties of the contract can sue or be sued. Third party cannot enforce a contract
even if it is made for his benefits.
• Consideration: provided for (essentially) by Schmidt but contract between Mr Tan and
Kepong Prospecting.

Guthrie Waugh Bhd v Malaiappan Muthuchumaru

• must be at the desire of the promisor
• forbearance: forgo the exercise of a legal right
• forbearance (implied/express) to exercise a legal right is good consideration
• lies in detriment the party who has right to resort to court and benefit to the other party
who is saved from the legal proceedings
• under S.2(d), act of forbearance/promise if done at desire of promisor = consideration

Osman bin Abdul Ghani v United Asian Bank Bhd

• forbearance is good consideration.
• guarantees given in consideration for forbearance to sue
*there was a request for the forbearance to sue, and there is forbearance in fact.
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Executory Consideration (mutual promise)

Harrison v Cage
When there is a promise against a promise, one promise is the consideration for the other
because each may have his action against the other for non-performance.

K Murugesu v Nadarajah
• Promise by one party for promise of another party are good considerations.
• Promise made without consideration is void, but when there is a promise against the
promise, the promise is consideration of the other because each may have his action
against the other for non-performance.

Executed Consideration
Carlill v Carbolic Smoke Ball Co
• When Mrs Carlill performed the conditions as set out in the advertisement, there is
executed consideration from Mrs Carlill. In this case, only the defendant’s
(promisor’s) promise has yet to be fulfilled.
• Defendants advertised the promise of a reward for persons to use their smoke balls in
a certain manner.

Past Consideration
Anson – past vs executed
• Past consideration: sentiment of gratitude/ honour prompting a return for benefits
received. (no consideration)
The promise is subsequent to the act and independent. Not in the same transaction.
• Executed consideration: both promise and act which constitutes the consideration are
integral and co-related parts of the same transaction.

Re McArdle
• repairs had been carried out before agreement to pay has been made, it was past
consideration
• past consideration is not good consideration

Lampleigh v Braithwait
• promisor promised to pay the other party a sum of money, for the act of the other
party’s past act.
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• The past act is done in accordance to the promisor’s request.

• Judge held it is good consideration although it is past consideration because it is done
at the promisor’s request

Guthrie Waugh Bhd v Malaiappan Muthuchumaru

Past consideration unlike in England is quite valid in part of our country where Contract
Ordinance is applicable.

GBH Ceramics Sdn Bhd v How It @ Low Aik & Ors

• The letter of guarantee shows that P’s act of delivery was done at D’s request.
• although D’s guarantee to pay was after some time, it is valid

SEA Insurance Bhd v Nasir Ibrahim

• Past consideration is valid if it is done at the request of the promisor.
consideration itself accommodates past consideration so long as the ‘desire’
requirement is specified.
• Deciding whether consideration is past: court should not take a strictly chronological
view. If the consideration and the promise are substantially one transaction, it doesn’t
matter in what order they are given.
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Exceptions: S.26(a),(b),(c), Scholarship, Part Payment

S.26(a)
Queck Poh Guan v Quick Awang
• deceased mother gave defendant a portion of land without consideration
• held: it is a gift out of love and affection under S.26(a)
• strong presumption of love and affection between parent and child, slight evidence is
needed
• circumstances and evidence is looked at to determine whether there is any natural love
and affection

Re Tan Soh Sim

The words ‘relationship’ and ‘near’
• ‘relationship’ and ‘near’ must be read together with regard to the mores of the group
the parties belong and the circumstances the family concerned

‘natural love and affection’

• not only reasonable to be expected, but reasonable to be expected having regard to the
normal emotional feelings of human beings  full effect to “natural”
• if either feeling/relation are lacking, this section does not apply

• The adopted child of the deceased is not in any way near to the deceased’s half-
brother and half-sisters. In fact, the deceased herself is not in near relation to the half
sisters and brothers according to Chinese customs.

S.26(b)
JM Wotherspoon & Co Ltd v Henry Agency House
• P did something at the suggestion of D
• Held: it is not voluntary action thus does not fall under the exception of consideration
under S.26(b)
• The voluntary act must be done at the person’s initiative

S.26(c)
Sri Kapaleeswarar Temple v T Tirunavakarasu
• Under a provision in pari materia to S.26(c), the judge held that a party can waive his
right under the law to be protected from an action from the creditor. A debt may be
barred by limitation by law for the creditor to institute an action.
• However, the debtor can renew the obligation with a new contract. The consideration
of this contract is recognized by the provision.
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Scholarship agreement
University of Malaya v Lee Ming Chong
Scholarship agreements entered was validated under s4(c) of contracts (amendment) act
although there is lack of consideration.

Part-Payment
Kerpa Singh v Bariam Singh
• The son paid a smaller sum to the creditor to dispense of the debt made by his father.
• If the creditor had accepted by cashing the cheque and retaining the money, he agreed
to discharge the debtor from any further liability.
• The creditor accepted the cheque. Judge held the debt is dispensed with the cheque of
smaller amount. Although there is no consideration, it falls under s.64

Associated Pan Malaysia Cement Sdn Bhd v Syarikat Teknikal & Kejuruteraan Sdn Bhd
Our law on waiver in S.64 of Contracts Act is opens to the promisee to dispense with/remit
wholly/in part the performance of the promise made to him or he can accept any promise as
he thinks fit. Consideration nor agreement will be necessary.

Promissory Estoppel
Hughes v Metropolitan Rly Co
• P gave notice for D to repair the house in six months which if he fails to do so, the
tenancy would be terminated. However, during the period, P negotiated with D for the
sale of the house. After the negotiation ended, D didn’t repair the house and the six
months expired.
• Court held that the negotiation constituted a promise that as long as the negotiations
continued, the notice to repair will not be enforced.
• D acted in reliance of this promise, therefore the period for 6 months should
commence from the end of negotiation.
• The promise has the effect of leading the party to suppose that the contract will be
kept in suspense. It is inequitable to enforce the strict legal right after the promise.
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High Trees Case

• D rented flats from P for 99 years. During WW2, P agreed to reduce rent. After the
period of the reduced rent, the P claimed for the full rent.
• Judge held when one party gives a promise with intention that the other party should
act in reliance on that promise and that the party acted in reliance, the promise must be
fulfilled although there is no new consideration given.
The doctrine cannot be used as cause of action because no consideration has been
given for the promise, there is no new contract as there is no consideration.
The party that suffers detriment due to reliance on this promise can use the promise as
a defence.
• However, P can claim the original rate after the period but not during the period.
Circumstances had reverted to the original contractual position by 1945, can claim
original rate.

Boustead Trading (1985) Sdn Bhd v Arab-Malaysian Merchant Bank Bhd

• A bought goods from third party and entered into a factoring agreement with R and
the debts owed by the A to the third party is assigned to R. The third party will send
invoices to respondent for every purchase of A. R would stamp the invoice and send
the invoice to A. The invoice contains clauses which objection must be made 14 days.
• Estoppel was applied to prevent the appellant from challenging the documents sent. A
reasonable person in respondent’s position would be entitled to assume that the
appellant had agreed to the clause and by remaining silence, he agreed to it.
• The representative just have to place sufficient material before a court from which an
inference may fairly be drawn that he was influenced by the opponent’s acting.
• Not necessary the action is the sole reason for the party acting relying on it. It is
sufficient that his conduct was influenced by the representation. Detriment element
does not form part of the doctrine of estoppel.
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Pre-Existing Public Duty

Collins v Godefroy
• P’s act in becoming a witness is under public duty.
• P suffered no detriment (done what he was required to do), D obtained no benefit
(evidence was what the D was entitled under the law)

Glasbrook Bros Ltd v Glamorgan County Council

• if promisee does more than what he is required to do as part of his pre-existing public
duty, this will constitute consideration.
• A asked for police for assistance to patrol the area which is dangerous due to coal
strike. A insist on police garrison of 70 men and was told it will be considered as
‘special duty’. A requisition was signed containing promise to pay for the ‘special
duty’.
• Held: the police force’s action constitute a consideration. If the garrison was
necessary for protection, they were not entitled for the pay. However, they only
agreed the request of appellants to meet his wish, therefore they were entitled for the
pay for the special duty.

Pre-Existing Public Duty

Stilk v Myrick
• performance of a pre-existing contractual duty is no consideration
• When they board the ship, they undertook to do all the work under any emergencies
that will occur, they sold all their service until the end of voyage. If the sailor had
liberty to leave halfway, then the consideration is sufficient, or if the captain had
removed the two sailor which did not intend to leave the ship, the promise will be
valid.
• In this case, the death of the two sailors was one of the emergencies which included in
the undertaking of the remaining sailor when they boarded the ship. The mariners had
sold all their services till the voyage should be completed.

Williams v Roffey Bros & Nicholls (Contractors) Ltd

• if the performance of the pre-existing contractual duty confers a practical benefit to
the promisor, it is still good consideration
• consideration = where one party obtained a benefit as D able to avoid paying penalty
fees to main employer
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Hartley v Posonby
• similar situation to Stilk v Myrick
• However, here, the shortage of the labour was so great that the further prosecution of
the voyage is exceptionally hazardous.
• Thus, there is consideration.

Pre-Existing Contractual Duty to Third Party

Shadwell v Shadwell
• Uncle promised to pay nephew if he married someone. At the time of the promise, the
nephew was already engaged to the someone.
• Court held that the consideration is sufficient as it brings benefit to the uncle. The
benefit is also derived from the plaintiff at the uncle’s request.

Sufficiency of Consideration
Tan Chiw Thoo v Tee Kim Kuay
• ‘sufficiency’ of consideration is different from ‘adequacy’ of consideration
• ‘sufficiency’ is synonymous with ‘validity’ in regard to consideration

Phang Swee Kim v Beh I Hock

• Inadequacy of consideration was not an issue in the transfer of land, when there is no
proof of duress or fraud.

TAC Construction & Trading v Bennes Engineering Bhd

• The law is not concerned whether the agreement is harsh or one sided.
• As long as the promise has value in the eye of law, the court will not interfere in the
fairness of the bargain.
• Consideration must be sufficient and must be capable of expression in economic
terms.

White v Bluett
• Consideration must be real.
• A promise of forbearance for exchange of promise not to complain frequently was not
sufficient consideration.
• If you give up a freedom that you have that does have value and should be considered
consideration.
• No consideration when you give up something that you aren’t legally entitled to do.