Consideration PDF

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Consideration and its types...

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CONSIDERATION Consideration as defined in Section 2(d) of Contracts Act 1950, “ when, at the desire of the promisor, the promisee or any other 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”. Generally, consideration is the value given in return for a promise, it is significant as the value given for the subject matter. The main theory of consideration is of an exchange of values, or bargain between parties. Besides that, consideration must be sufficient but need not be adequate where consideration is not bound to be at market value, as long as there is a value given for the promise. Agreement without consideration is void, unless if it is parallel with a few general principles as stated in Section 26(a), (b) and (c) of Contracts Act 1950. In Section 26(a) it states an agreement can only be valid if it is put in writing, registered under the law (if requires) and natural love and affection between parties. Meanwhile, in Section 26(b) of Contracts Act 1950 stated that consideration is considered valid when it is a promise to compensate for something done. This is related to the past consideration where it is a promise to compensate. Section 26(c) states, “it is a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorized in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits.” There are a few types of consideration. Firstly, executed consideration where it is the response to some promise made by the promisor. Basically, executed consideration is the present consideration. Next, executory consideration where it is a promise made in return for another or a promise in return of promise. Executory consideration the future consideration. Executory consideration can be referred in the case of Murugesu v Nadarajah where the Federal Court judge, Chang Min Tat held that “The agreement must be seen to be a 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” Another type of consideration is past consideration where it is the compensation for act that had been done. Past consideration can be a valid consideration if a party voluntarily performs an act before a promise was made, the consideration for the promise is said to be in the past. However, under English Law, past consideration is not recognized. For past consideration, the case of Kepong Prospecting Ltd &

S.K Jagatheesan & Ors v A.E Schmidt & Marjorie Schmidt can be referred to where the Privy Council ruled that it did constitute a valid consideration so that Schmidt was entitled to his claim on the amount. Performance of an existing duties does not amount to good consideration. The reason for the statement is if one is merely carrying out duties, it is not voluntary action however if it is over and above of one’s pre-existing duties then it may be a valid consideration. The consideration must be something more than that what the promisee is already bound to do under by law. There are three situations for the relationship between consideration and pre-existing duties. Firstly, performance of an existing public duty. This can referred to the case of Collins v Godefroy where Lord Tenterden CJ held that the plaintiff’s attendance in court was insufficient consideration that could support Defendant’s promise as he did not do anything over and above his existing public duty. Next, performance of an existing contractual duty owed to the promisor. In the case of Hartley v Ponsonby, a ship left England with a crew of 36, but as a result of desertions these were reduced to only 19, including just five able seamen, who were promised extra pay if they would help to sail the ship back to England. The court said this promise was enforceable: the crew was so reduced that it was dangerous to sail on and that the seamen were no longer bound to serve under the original. The original contract had come to an end, and the seamen were free to make a new contract on whatever terms might be agreed. Lastly, performance of an existing duty imposed by a contract with a third party. For this situation, the case of Shadwell v Shadwell can be referred to. The plaintiff’s uncle congratulated him on his engagement to marry a certain girl and promised that, if he marries the girl, he will give him $150 a year during his (uncle’s) lifetime and until the plaintiff’s annual fee as a barrister ammounts to 600 guiness. The plaintiff married the girl and received the sums as promised. When the uncle died, his executors refused to pay certain instalments that were unpaid during the uncle’s lifetime. The court held that there was a good consideration because the uncle received a benefit because the marriage was an object of interest of a near relative, and that the pl suffered a detriment because he may have made certain changes in his financial liabilities in the hope of receiving the amount promised by the uncle.

References 

Teacher, Law. (November 2013). Consideration in Contract Formation. Retrieved from

https://www.lawteacher.net/free-law-essays/consideration-law/consideration-in-

contract-formation.php?vref=1 

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