Law of Contract
Consideration
- Section 2(d) When the promisor’s wishes, promisee or any third party have done or abstained for doing
something, these are consideration.
- Section 26 A contract without consideration is void.
a) Past consideration
- Case: Kepong Prospecting & SK Jegatheesan v AE Schmidt & Marjorie Schmidt
D as the consulting engineer helped the company in obtaining mining permit and in the incorporation of
the company. After the company was formed, the company had agreed to give D 1% of the value of ore
sold from the mining land. This is consideration of his service before the formation of the company.
Held: Past consideration is a good consideration.
b) Exception
- Section 26(a) An agreement made based on natural love and affection must be in writing, registered
and near relation.
- Case: Re Tan Soh Sim
A woman on her deathbed stated that she intended to leave all her property to her adopted children
Held: The adopted children were not parties standing in a near relation with the family of the adoptive
mother.
c) Adequacy
- Section 26(f) A agrees to sell horses worth RM1000 at a price of RM10. Although inadequacy of the
consideration, the agreement is still a contract.
- Case: Bolton v Madden
The parties sell a house worth $100, 000 for $1000.
Held: This contract is valid because adequacy of the consideration is for the party to consider at the
point of entering the contract.
- Case: Phang Swee Kim v Beh I Hock
The parties entered into a contract to transfer a land with the consideration of RM500.00.
Held: The contract is valid.
d) Part Payment
- Section 64 Promisee may dispense with or remit, wholly or in part, the performance of the promise.
- Illustration (b) of section 64 A owes B RM5,000, but B only pay RM2,000 for the whole debt. Then
it means the whole debt is discharged.
, - Case: : Kerpa Singh v Bariam Singh
Respondent owed Appellant RM8869.94. The R’s son offered to pay RM4,000 as payment in full in
order to discharge his father from liability and the cheque was cashed out. Later, A continue ask the
balance from R. R argued that if the A did not agree to the said sum, the money should be returned to
him.
Held: As the A had cashing the cheque and use the money, he must be taken to have agreed to discharge
the D from any further liability.
Intention to create legal relation
a) Social contract
- Case: Balfour v Balfour
Husband promise to give his wife £30 per month as maintenance when he left but he failed to do that.
The wife divorced and claimed £30.
Held: This promise is only social contract and not bound to the contract.
- Case: Merrit v Merrit
The husband wants to live with other women and the house is registered by both of them. The wife want
the house and he signed a document confirming that when she had repaid the balance on the house, he
would transfer the house into her sole name. After fully paid, he refused to transfer the house.
Held: The contract is valid because they have written down the agreement.
- Case: Wakeling v Ripley
D invited P and her husband to live with him in Australia until his death. He will provide them with
income and give them his property when he dies. Husband gave up his job and moved to Australia.
However, D sold his property and changed his will by excluding the P from it.
Held: There is consideration because the husband gave up his job to move.
b) Commercial contract
- Case: Carlill v Carbolic Smoke Ball
D placed an advertisement stating that any person who purchased and used their smoke ball but still
contracted influenza can get a £100 reward. P buys and uses smoke ball still contracted influenza and
she claim the reward.
Held: D was liable to pay the P because D has made an offer to the world at large. Therefore, there is a
valid contract.
Consideration
- Section 2(d) When the promisor’s wishes, promisee or any third party have done or abstained for doing
something, these are consideration.
- Section 26 A contract without consideration is void.
a) Past consideration
- Case: Kepong Prospecting & SK Jegatheesan v AE Schmidt & Marjorie Schmidt
D as the consulting engineer helped the company in obtaining mining permit and in the incorporation of
the company. After the company was formed, the company had agreed to give D 1% of the value of ore
sold from the mining land. This is consideration of his service before the formation of the company.
Held: Past consideration is a good consideration.
b) Exception
- Section 26(a) An agreement made based on natural love and affection must be in writing, registered
and near relation.
- Case: Re Tan Soh Sim
A woman on her deathbed stated that she intended to leave all her property to her adopted children
Held: The adopted children were not parties standing in a near relation with the family of the adoptive
mother.
c) Adequacy
- Section 26(f) A agrees to sell horses worth RM1000 at a price of RM10. Although inadequacy of the
consideration, the agreement is still a contract.
- Case: Bolton v Madden
The parties sell a house worth $100, 000 for $1000.
Held: This contract is valid because adequacy of the consideration is for the party to consider at the
point of entering the contract.
- Case: Phang Swee Kim v Beh I Hock
The parties entered into a contract to transfer a land with the consideration of RM500.00.
Held: The contract is valid.
d) Part Payment
- Section 64 Promisee may dispense with or remit, wholly or in part, the performance of the promise.
- Illustration (b) of section 64 A owes B RM5,000, but B only pay RM2,000 for the whole debt. Then
it means the whole debt is discharged.
, - Case: : Kerpa Singh v Bariam Singh
Respondent owed Appellant RM8869.94. The R’s son offered to pay RM4,000 as payment in full in
order to discharge his father from liability and the cheque was cashed out. Later, A continue ask the
balance from R. R argued that if the A did not agree to the said sum, the money should be returned to
him.
Held: As the A had cashing the cheque and use the money, he must be taken to have agreed to discharge
the D from any further liability.
Intention to create legal relation
a) Social contract
- Case: Balfour v Balfour
Husband promise to give his wife £30 per month as maintenance when he left but he failed to do that.
The wife divorced and claimed £30.
Held: This promise is only social contract and not bound to the contract.
- Case: Merrit v Merrit
The husband wants to live with other women and the house is registered by both of them. The wife want
the house and he signed a document confirming that when she had repaid the balance on the house, he
would transfer the house into her sole name. After fully paid, he refused to transfer the house.
Held: The contract is valid because they have written down the agreement.
- Case: Wakeling v Ripley
D invited P and her husband to live with him in Australia until his death. He will provide them with
income and give them his property when he dies. Husband gave up his job and moved to Australia.
However, D sold his property and changed his will by excluding the P from it.
Held: There is consideration because the husband gave up his job to move.
b) Commercial contract
- Case: Carlill v Carbolic Smoke Ball
D placed an advertisement stating that any person who purchased and used their smoke ball but still
contracted influenza can get a £100 reward. P buys and uses smoke ball still contracted influenza and
she claim the reward.
Held: D was liable to pay the P because D has made an offer to the world at large. Therefore, there is a
valid contract.
