TUTORIAL 3

CONTRACT

BBL 2014

1. (i)What is past consideration?

Where a promise is made subsequent to and in return for an act that has already been performed, the promise is made on account of a past consideration.

Example

If K finds and returns M’s pen and in gratitude, M promise to pay K RM200/- the promise is made in return for a prior act.

Section 2(d) of the Contracts Act 1950

(ii)Discuss the maxim that past consideration is good consideration.

Section 26 Contract Act 1950:

An agreement made without consideration is void unless:-

a. it is in writing and registered – Section 26 (a) (love and affection)it must be

expressed in writing and registered under the law (if any) for the time being in

force for the registration of such documents and is made on account of

natural love and affection between parties standing in near relation to each

other.

b. or is a promise to compensate for something done Section 26 (b)

It is a promise to compensate wholly or in part a person who has already

voluntarily done something for the promised or something which the

provision was legally compellable to do.

There are three limbs to the exception

i. it is a promise to compensate either wholly or in part the other person

ii. the promisee has voluntarily done something for the promisor. The act

must be performed voluntarily. Voluntarily was defined in the case of J.M.

Wotherspoon & Co Ltd v Henry Agency House [1962] MLJ

iii. An agreement to compensate for an act the promisor was legally

compellable to do.

The necessary ingredients are :-

a. promisee has voluntarily done an act

b. the act is one which the promisor was legally compellable to do

c. an agreement to compensate, wholly or in part, the promisee for the act

Example.

A supports B’s infant son. B promises to pay A’s expenses in so doing. This is a

contract.

** if X pays a fine imposed by the court on Y who promises to compensate

him, that promise is binding under this provision

c. or is a promise to pay debt barred by limitation law. Section 26 (c)

A statute barred debt refers to a debt, which cannot be recovered through

legal action because of a lapse of time fixed by the law.

Section 26(c) creates an exception to this rule but subject to several

conditions:-

1. The debtor made a fresh promise to pay the statute barred debt.

2. The promise is in writing and signed by the person to be charged or his

authorized agent in his/her behalf

Example

A owes B RM1000/-, but the debt is barred by limitation. A signs a written

promise to pay B 500 on account of the debt. This is a contract

Case: Kepong Prospecting v Schmidt

2. Will advertised in the Star newspaper that anyone who found his lost son,

Finn and delivered him to him would be paid RM 10 000.00. Sue accepts

this offer and finds Finn. Sue hands Finn over to Will. Will refuses to pay

the RM 10 000. Advise Sue as to her legal rights.

In this case, Sue can use her legal rights for suing Will. According to

Section 26 (b): It is a promise to compensate wholly or in part a person who

has already voluntarily done something for the promised or something which

the provision was legally compellable to do. This shows that the earlier

contract was valid and also called as a past consideration because there is an

offer, acceptance and consideration.

3. Malfoy promises Crabbe and Goyle that he would pay them RM 1 000.00 if

they would steal the Gryffindor Sword from Dumbledore’s room. Crabbe

and Goyle manage to do so but Malfoy now refuses to pay them the

money. Advise Crabbe and Goyle.

In this situation, Crabbe and Goyle cannot sue Malfoy for any

consideration because the purpose of the contract was illegal and not

enforceable by law. So, in this case, the contract was invalid and

automatically void. Refer to section 24:

Consideration or object of agreement is lawful unless

a.It is forbidden by law

b.it is such a nature, that if permitted, would defeat any law.

c. it involves or implies injury to the person or property of another

d.the court regards it immoral or opposed to public policy.

4. Sasha offered to sell her necklace to Diana for RM 100.00. Diana accepts

Sasha’s offer by paying her the said sum of money. Sasha later discovers

that the necklace is an antique piece of jewellery worth RM 100 000.00 and

insists that Diana return the necklace to her. Is Diana bound to do so?

No. It is because the sale agreement was valid although the

consideration was not adequate. (explanation 2 of section 26)

Similar to the case : CHAPPELL & CO LTD V NESTLE CO LTD &PHANG SWEE

KIMV. BEH I HOCK

5. Puck is an English lawyer. Syed, a Malaysian real estate agent, requests

Puck’s advice on acquisition of certain property. Puck prepares his advice.

Syed promises to pay Puck 20% from the profit he makes from sale of the

profit. Syed acquires the property and sells it for a 200% profit. He now

refuses to pay Puck. Puck thinks he cannot enforce Syed’s promise in the

Malaysian court and seeks your advice as a Malaysian legal expert. What

would your advice be?

My advice to Puck is that he can sue Syed for breach the

contract. ...............unsure

6. Patrick wants to give his land to his daughter Mary on the occasion of her

marriage to John. Mary accepts the land. Patrick wants to transfer the land

to her name but is not expecting any consideration from Mary. Patrick

seeks your advice whether the transfer is a valid contract.

According to me, the transfer is a valid contract. In this situation,

Patrick may refer to section 26 of the Contract Act 1950 stated that: “An

agreement without consideration is void” unless based on Section 26(a): it must be

expressed in writing and registered under the law (if any) for the time being in

force for the registration of such documents and is made on account of

natural love and affection between parties standing in near relation to each

other. So, in a conclusion, the contract is valid because it was made on count

of natural love and affection