Consideration (executed, executory and past) PDF

Preview

Summary

Contain about executory, execution and past consideration, related cases about it and explanation that easy to understand...

Description

CONSIDERATION Definition, section 2(d) of the Contracts Act 1950: “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 a consideration of the promise” General Rule: -Agreement made without consideration is void. (S. 26, Contracts Act) - Consideration is the price of which one party pays to buy the promise or act of the other.  Literally, it means something that is given in return for something else. For example, RM5 for a plate of fried rice  Forms: act, abstinence, or promise to perform a future act/abstinence Types of Consideration 1. Executory consideration, i.e. a promise in exchange for a promise E.g. “Salina promises to sell her purse to Dina for RM50. Dina promises to pay RM50.” Wong Hon Leong David v Noorazman bin Adnan Facts: The appellant promised to pay respondent RM268888 in return for the respondent’s application to convert and subdivide certain land to be developed into a housing estate. Held: The exchange of mutual promise, though it is executory consideration, was good consideration. There was a binding contract. 2. Executed consideration, i.e. a promise for an act. Example, in reward cases. 3. Past consideration, i.e. a promise subsequent to or in return for an act that has already been performed. - S.2(d) and S.26(b)- past consideration is sufficient provided it is “at the desire of the promisor” 1

Positions of past consideration 1. Malaysia: Past consideration is a good consideration Kepong Prospecting Ltd v Schmidt Issue: Whether services rendered after incorporation but before the agreement were sufficient to constitute a valid consideration eventhough they were clearly past. Held: It did constitute a valid consideration. Therefore, Schmidt was entitled to his claim on the amount. 2. English law: Past consideration is not a good consideration Roscorla v Thomas - Plaintiff bought the defendant’s horse (act first). After the sale, the defendant promised that the horse was not vicious. In fact the horse was vicious. The plaintiff sued the defendant for breach of contract. Held: Plaintiff failed in his claim because under English law past consideration is not a good consideration. Rules on Consideration 1. Consideration must have some value. - An act or a promise to do something which one is bound to do will not be a valid consideration. Collins v Gode froy Facts: A promise had been made to pay a witness who was under an order to attend the court as subpoena, for his trouble. Held: The promise was unenforceable because there was no consideration. The duty to attend was a duty imposed by law. 2. Consideration need not be adequate. Thomas v Thomas - Rent payment of 1 pound made by the plaintiff to defendant was a valuable consideration eventhough it was not adequate. Chappell & Co. v Nestle Co. Issue: Whether chocolate wrappers were part of the consideration Held: The wrappers were part of the consideration even though they were of no further value once received by the company. 2

Phang Swee Kim v Beh I Hock - Held: Transfer of land for $500 was valid eventhough it was inadequate. 3. Consideration may move from the promisee or any other person / Consideration need not move from promisee. - Section 2(d), “When at the desire of the promisor, the promisee or any other person…” Venkata Chinnaya v Verikataramaya

agreed to pay annuity Rs 653

A (brothers-promisee) - provides No consideration

B

C

(mother) (sister-promisor) - On the same day, mother gave sister land mentioning she must pay annuity to her brothers

- Sister failed to pay annuity. Brothers sued on the said promise. Held: Sister was liable on the promise because consideration may move from any other person i.e. mother. 4. Consideration must be legal. 5. Consideration must be clearly made. 6. Consideration must be possible to be performed.

Exceptions under S.26  The general rule: contracts without consideration are void. 3

 However, there are 4 exceptions under section 26 where contracts without consideration are not void (valid). They are:

EXCEPTIONS UNDER SECTION 26

S.26(a): 1) An agreement made on account of natural love and affection

S.26(b): 2) Agreement to compensate for a past voluntary act 3) Agreement to compensate for an act the promisor was legally compellable to do

4

S.26(c): 4) Agreement to pay a statute-barred debt

1. An agreement made on account of natural love and affection between parties standing in near relation to each other. [S.26(a)]  Requirements: a) The agreement must be in writing b) The agreement must be registered c) It must be made in account of natural love and affection between parties in near relation to each other. Example, members of immediate family, mother, father, son, sister. Re Tan Soh Sim Issue: Whether an agreement was made on account of natural love and affection and the three sisters and seven half sisters and brothers stood in near relation to their adopted nephews and nieces. Facts: The deceased (Tan Soh Sim) in her last illness had expressed a wish that her estate should be divided amongst the two adopted sons and two adopted daughters. The legal next-of-kin, respecting this wish, drew up an agreement renouncing all rights in favour of the four adopted children who were their nephews and nieces. Held: Chinese adoptive children are related to the adoptive parents and brothers but they are not nearly related to the family of their adoptive mother. Thus, uncles and aunties do not stand in near relation to their nephews and nieces. In this case, there was no natural love and affection between the signatories and donees. 2. Agreement to compensate for a past voluntary act. [S.26(b)]  Requirements: a) A promise to compensate either wholly or partly to promisee b) Promisee did the act voluntarily J.M. Wotherspoon & Co.Ltd. v Henry Agency House Facts: There was a dispute between a Malaysian and English firm. Both had acted as agents for various products. The Malaysian firm would find buyers and English firm would find sellers. Things went wrong. The English firm sued the Malaysian firm for the loss it suffered through non-payment by buyer. Held: Question as to whether plaintiff was a person who had voluntarily done something for the defendant depends on the plaintiff’s action. Plaintiff had acted on the suggestion of defendant so that its action was not voluntarily done. Thus, the promise to compensate plaintiff was not an enforceable contract.

5

3. Agreement to compensate for an act the promisor was legally compellable to do. [S.26(b)]  Requirements: a) Promisee has done the act voluntarily b) The act is one which the promisor was legally compellable to do c) An agreement to compensate, wholly or partly, the promisee for the act. 4. Agreement to pay a statute-barred debt. [S.26(c)]  A statute-barred debt = debt that cannot be recovered through legal action because lapse of time fixed by law  Limit is 6 years from the time of course of action 9Limitation Ordinance 1953)  Exceptions: a. There is a fresh promise made by the debtor to pay the statute-barred debt after the lapse of 6 years. b. The promise is made in writing and signed by the person to be charged or his authorised agent acting on his behalf. Waiver of performance (S.64) - a promisee may waive / dispense with / remit (either wholly or partially, the performance (consideration) promised to him - a promisee may also extend the time for such performance - a promise may accept instead of the consideration promise any satisfaction he thinks fit KERPA SINGH vs BARIAM SINGH The defendant owed the plaintiff more than $8,000. His son gave the plaintiff a cheque for $4,000to asking to forgo the balance. The plaintiff cash the cheque. It was held that the plaintiff cannot recover the balance from the defendant. The English principles of the Rule in Pinnel’s case DOES NOT apply in Malaysia.

6...