LAW OF CONTRACT CONSIDERATION
Introduction The courts will not enforce a contract unless it is supported by consideration e.g. Sharif promised to pay RM 150 to Mahani if she bakes a birthday cake for him Sharif’s consideration is RM 150 and Mahani’s consideration is the act of baking the cake
Definition of Consideration Section 2(d) of the Contracts Act 1950 states that, ‘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 for the promise’.
What is consideration? • Section 2(d) defines consideration as giving something in return for the promise made by the other party • It may be a promise or an act or an omission • In short, the parties must give something in return for the promise made by the other party • An exchange of benefits
Common law definition • Under common law, consideration consists of some right, interest, profit or benefit, accruing to one party or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other • This was stated in Curie v Misa (1875) LR 10 Exch 153
Other definition of consideration • “the essence of consideration is that the promisee has taken upon himself some kind of burden or detriment” • Per Gunn Chit Tuan SCJ in South East Asia Insurance Bhd v Nasir Ibrahim  2 MLJ 355
The legal requirement • Both parties must provide consideration • The promisor does this by promising to perform the obligation contained in the offer • The promisee does it by promising to do or actually doing what is requested in the offer • Where promises are made for consideration, the law will treat them as binding and enforceable
University of Malaya v Lee Ming Chong  2 MLJ 148 • The university selected the defendant for a scholarship offered by the Canadian government. In return, the defendant was to serve the university for a minimum of 5 years or pay RM 5000 on demand. The defendant breached the agreement and argued that the scholarship agreement was void as there was no consideration. • The court held that the fact that the university selected him for the scholarship was the consideration for the plaintiff’s promise to serve it for 5 years.
Types of consideration • There are 3 types of consideration; Executory consideration a promise in exchange for a promise K Murugesu v Nadarajah  2 MLJ 82 Executed consideration an act in exchange for a promise e.g. X offers RM 100 to anyone who found his lost dog
K. Murugesu v Nadarajah  2 MLJ 82 • The Appellant agreed to sell and the respondent agreed to buy a house from the A. The agreement was written on a piece of paper. Later, the appellant refused to perform the contract and argued that there was no consideration in the agreement and therefore the contract is void.
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- Fall '15