Elements of Contract

Seventh Element: Consideration

Consideration
Section 2(d) of Contracts Act 1950
when at the desire of the promisor, the promisee or
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

past
Present/executed
Future/executory

Consideration-definition!
In Currie v. Misa,
the word consideration is defined as
some right, interest, profit or
benefit accruing to one party,
or some forbearance, detriment, loss
or responsibility given, suffered or
undertaken by other.

Laypersons definition
of consideration?

I scratch your back you scratch my back!!!

Executed Consideration(present), Executory

Consideration(future), and Past Consideration
1.A agrees to give B the
book now and B agrees to
make payment now.
(present/executed))
2.A agrees to give B the
book next week when B
makes payment next week.
(future/executory))

3.B at As request
gave his book to A
last week. Now A
promises to pay for
the book. (past)

Consideration
An agreement is void if there is no consideration-s26 & s2(d);
S26(a)
Agreement made on
account of natural
love and affection
Promise to compensate B:
-for voluntary act by B in
the past or
- for past act of B that A was
legally bound to do

S26(c)
Promise to pay
statute barred debt

S26(b)

Conditions of Consideration(5 conditions)

1) Consideration must be lawful: ss. 24 and 25
2)In Malaysia, Consideration must move from the promisee
or someone other than promisee to promisor or someone
other than promisor!
A promises to pay B RM30 if B gives his VCD to A
-A promises to pay B RM30 if C gives his VCD to A
A promises to pay B RM30 if B gives his VCD to C
A promises to pay B RM30 if C gives his VCD to D

A person not a party to the contract cannot enforce it although

he/she gets a benefit! Tweddle v Atkinson (1861)

I promise to pay
your son if he
marries my
daughter

Father of the bride

Of course, my son will

marry your daughter and
I accept the incentive off
that you are willing to
offer him!

Father of b/groom

Conditions of Consideration
3) Consideration need not be adequate
(Thomas v. Thomas) widow paying rental of 1 per
month

Stallion
worth
RM10,000
sold for
RM10!
Read Explanation 2
section 26 of
Contracts Act 1950

Conditions of Consideration
4) Consideration must be sufficient
There are 2 situations where consideration may be
considered as insufficient.

Performance
of existing
public
obligation by
promisee

Performance
of existing
contractual
duty by
promisee to
promisor

Situation 1
The performance of public duty imposed by law
(Collins v Godefroy)
A subpoenaed B to court to give evidence. This was a public duty. A
then promised to pay B a sum of money for attending court to give
evidence. Is the promise enforceable?
(Glasbrook Bros Ltd v. Glamorgan CC)
Owner of a coal mine was facing a workers strike. He sought police
protection for safety men and promised to pay for the protection.
Police were performing a public duty. However, police provided
more protection than necessary. Is the promise enforceable?

Situation 2
performance of an existing contractual obligation
owed to the promisor
(Stilk v Myrick)
Captain of a ship had 5 crew members. Ship had to
travel from London to the Baltic. On the way, 2 of
the crew abandoned ship. The captain promised the
remaining crew members that the wages of the 2
would be divided among them. Is this promise
enforceable?

In summation.
I promise to pay you
$ if you navigate ship
to Baltic

I promise to divide
wages of the crew
who jumped ship
If ship arrives in Baltic

Is there consideration for the

promise of the captain?

Is there consideration for the

promise of the captain?

Conditions of Consideration

5) In Malaysia, a past act by

offeree is a good consideration for
subsequent promise of offeror if..
B in the past promoted
As product upon As
request-s2(d)
Situation1

B in the past found As

wallet and returned it
voluntarily-s26(b)
Situation 2

B in the past looked

after As child-s26(b)
Situation 3

In other words
If

B had done something in the past and

Done upon As request (situation 1)

Done for A voluntarily (situation 2)
Done something A was compellable to do(situation 3)

And a promise is subsequently made by A to

compensate B for the past act
As promise is enforceable under:
Section 2(d) (situation 1)
Section 26(b) (situation 2 & 3)

Elements of Contract

Eighth Element: Free Consent

Consensus ad Idem

1.coercion

2.undue influence

3.fraud
4.misrepresentation

5.mistake

Section 14
Contracts Act
1950

Coercion
Section 15 defines coercion as:
the committing, or threatening to commit any act
forbidden by the Penal Code,
or the unlawful detaining or threatening to detain, any
property,
to the prejudice of any person whatever,
with the intention of causing any person to enter into
an agreement.
( Kesarmal v. Valiappa Chettiar)
Section 73 also provides if A gives B
RM 100 owing to coercion, B must
return amount to him!!!

Barton v Armstrong (1975)

Armstrong was the chairman of an Australian

company.
Armstrong threatened to kill Barton (MD) if
Barton did not surrender his interest in the
company to him.

Is the agreement surrendering

his interest valid?

Coercion
Rescind-means
to undo the
contract!
voidable
coercion

1.Can rescind & reinstate

to original position

contract

2.Can affirm & claim

damages
Sections 19 ,65 and 66
of CA

Undue Influence
Section 16 Contracts Act
Actual Undue
Influence

Presumed Undue
Influence

Undue Influence -actual undue influence

1.B in a position to
dominate influence
What must A
Prove?

2.B dominated
influence upon A
3. A entered into
contract with B
4. Contract not in favor of A
contract is unconscionable!

Undue Influence

What must B
Prove?

A entered into contract willingly upon proper

advise and not because of undue influence!

Undue Influence presumed undue influence

Fiduciary relationship
with A

What must A
Prove?

1. B has actual/apparent
authority over A -presumed
that B has exercised undue
influence over B
2.A entered into contract
with B
3. Contract not in favor of
A/contract is
unconscionable!

As mental capacity is
affected

Undue Influence- presumed undue influence.

When does actual/apparent

authority arise?

1.When B has authority over A/ in fiduciary r/ship with A

2.When A s mental capacity is affected by
age, illness etc.

Undue Influence

What must B
Prove?

A entered into contract willingly upon

proper advise and not because of
undue influence!

Undue Influence

Undue influence

contract

voidable
1.Can rescind &
reinstate to original
position
2.Can affirm &
claim damages
Section 20,65 and 66
of CA

Elements of Contract

Eighth Element: Free Consent

Fraud & Misrepresentation

Section 17 defines fraud so as to include
a)any suggestion, as to a fact, of that which is not true by one who
does not believe it to be true;
b) or the active concealment of a fact by one having knowledge of
belief of the fact;
c)or a promise made without any intention of performing it;
d)or any other act fitted to deceive;
e)or any such act or omission as the law specially declares to be
fraudulentcommitted by a party to a contract
with intent to induce another to enter into the contract.
(Kheng Chwee Lian v. Wong Tak Thong)

Fraud & Misrepresentation

Section 18 of the Contracts Act defines misrepresentation so as
to include
a)the positive assertion, in a manner not warranted by the
information of the person making it, of that which is not true,
though he believes it to be true;
b)or any breach of duty which, without an intent to deceive, gives an
advantage to the person committing it, or anyone claiming under him,
by misleading another to his prejudice, or to the prejudice of anyone
claiming under him;
c)or causing, however innocently, a party to an agreement to make a
mistake as to the substance of the thing which is the subject of the
agreement.

Fraudulent(s17):representation with
respect to a fact knowing it is untrue

Negligent(s18):representation
with respect to a fact believing
it is true, but unwarranted by
information

Innocent(s18):representation with
respect to a fact,
believing it to be true
with reasonable grounds
for belief

Silence can Amount to Fraud or Misrepresentation in these

Situations.-Explanation to section 17 of Contracts Act

1.If there exists a fiduciary

relationship
between parties to the
contract;

2.When silence amounts to

speech;

Situations of fraudulent silence

Fraud & Misrepresentation

voidable
Fraud &
Misrepresentation

contract

May loose this right

1.Can rescind &

reinstate to original
position
2.Can affirm &
claim damages
Section 19,65 and 66
of CA

When does one loose the right to rescind a voidable

contract owing to section 17 and 18?-look at
Exception and Explanation to section 19 of CA

1.A could have

discovered the truth
with ordinary
dilligence

Only if Negligent
And
Innocent
Misrepresentation exists
Only if Fraudulent silence exists

2. If the fraud or
misrepresentation
did not cause A
to enter into a
contract

When does one NOT loose the right to rescind a

voidable contract owing to section 17 and 18?-look
at Exception and Explanation to section 19 of CA

What if Fraudulent
Misrepresentation exists?

A will not loose the right to

rescind even if A could have
discovered the truth with
ordinary dilligence

Bilateral mistake
of a matter of fact

Section 21

Mistak
e
As to a matter of
law

Section 22

Unilateral
mistake of a
matter of fact

Section 23

Common mistake
Bilateral Mistake as to
A Matter of Fact
Mutual mistake
Paul
China
Paul
USA

Common mistake

Mistake as to existence
of subject matter of agreement
Mistake as to title of
land
Mistake as to subject
matter of agreement

Elements of Contract

Ninth Element: Formality

FORMALITIES-section 10(2) of
Contracts Act 1950

1.Hire Purchase Contracts

The Hire-Purchase Act,
1967
2.Transfer of land/interest
in Sabah and Sarawak
Statute of Frauds

1. When considerations and objects of

agreement are unlawful-sections 24 &25
(illegal)
2. When there is no consideration for the
agreement-section 26 (there are 3
exceptions)
3. Agreement in restraint of marriage-section
27(there is an exception)
4. Agreement in restraint of trade-section 28
(there are 3 exceptions)

1. Agreement in restraint of legal

proceedings-section 29 (there are 3
exceptions)
2. Agreement that is uncertain in termssection 30
3. Agreements by way of wager-section
31(there is one exception)

Agreement that is Tainted with Illegality and Void

Void:
1. Loss lies where it
falls
Illegality present

contract

2.Can seek return of

benefits if did not know
of illegality
3. If aware of illegality
seek return of benefits
before agreement
executed
Section 66
of CA