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Consideration (Malaysian law) - Coggle Diagram
Consideration (Malaysian law)
Basics
Consideration is defined in
s 2(d) of the Contracts Act 1950
as follows:
"When the desire of the promisor, the promisee or nay other person has done or abstained from doing or promises to do or abstain from doing, something, such act or abstinence or promise are called consideration of the promise".
Refers to the price paid by one party to another in order to obtain the other's consent to the agreement
Need not be in the form of money. It may be in the form of an act done or even an abstinence or forbearance from doing something
Consideration must not be unlawful i.e
s25 & s26
for example:
defeats any law
fraudulent
injures a person/property
immoral
Part Payment of a debt is good consideration
If one person owes a sum of money to another and agrees to pay part of this in full settlement, the rule at common law (Pinnel's Case 1602) is that part-payment of debt is not good consideration for a promise to forgo the balance
Pinnels's Case (1602):
Facts: Cole owed Pinnel $8.50 that was due on 11th November. At Pinnel's request, Cole paid $5.11 on 1st October, which Pinnel accepted in full settlement of the debt. Pinnel sued Cole for the amount owed.
Held: Part-payment itself is not good consideration. But it was held that the agreement to accept part-payment would be binding if the debtor (with the creditor's request), provided some new consideration
Exceptions
Consideration might be provided if the creditor agrees to accept:
Part-payment on an earlier date than the due date (i.e. in Pinnel's Case); or
Chattel instead of money (a "horse, hawk or robe" may be more beneficial than money)
However in Malaysia by virtue of s64, we do allow part payment to resolve the whole debt
Associate Pan Malaysia v Sy. Teknikal & Kejurutetaan Sdn Bhd:
It was held that, s64 is a departure from the common law position
It allows the promise to dispense with/remit wholly or in part the performance of the promise made to him or he can accept any promise which he sees fit
Kerpah Singh v Bariam Singh:
Facts: Creditor accepted smaller sum in satisfaction of the whole debt. The balance is discharged and the creditor is unable to recover the balance
e.g. 'A owes B $5,000. C pays to B $1,000 and B accepts them in satisfaction of his claim to A. This payment is a discharge of the whole claim'.
Section 26 of the Contracts Act 1950
States that agreements without consideration is void. However there are exceptions to this
s26(a): Agreements made on account of natural love and affection between parties standing in near relation to each other
e.g. 'A, for natural love and affection, promises to give his son, B, $1000. A puts his promise in B in writing. This is a contract'.
s26 (b): An agreement to compensate wholly or in part a person who has already
voluntarily
done something for the promisor
(similar to past consideration)
e.g. 'A finds B's purse and gives it to her. B promises to give A $50. This is a contract'.
s26(c): An agreement to compensate wholly or in part a person who has done something which the promisor was legally compellable to do
e.g. 'A supports B's infant son. B promises to pay A's expenses in so doing. This is a contract'.
s26(d): An agreement to pay wholly or in part a statute-barred debt. The agreement must be in writing and signed by the person to be charged therewith or his lawfully authorised agent
e.g. 'A owes B $1,000 but the debt is barred by limitation (more than 6 years). A signs written promises to pay B $500 on account of the debt. This is a contract'. There's a new contract that is in writing and signed
Adequacy of consideration
Provided consideration has some value, courts won't investigate adequacy. Once consent is given freely by the promisor, adequacy is irrelevant
e.g. 'A agrees to sell horse worth RM1,000 for merely RM10, as long as consent to the agreement was given freely where adequacy no longer the issue
Consideration is recognised by the law as having some value: described as "real" or "sufficient" consideration
Chappell & Co Ltd v Nestle Co Ltd (1959):
Facts: Records were sold for 7.5 pence plus 3 chocolate wrappers
Held: The wrappers were part of the consideration although they had minimal value
Phang Swee Kim v Beh I Hock