Exception: given at the request of the promisor.
Lampleigh v Brathwait (1615) 80 ER 255 - B’s prior request to L contained an implied promise to pay a reasonable sum for his services. Subsequent mention of £100 was merely fixing the sum.
Pao On v Lau Yiu Long [1980] AC 614 PC on the ground that the service or request raised a promise by implication to pay what it was worth.
See Lord Scarman’s dictum at 629.
Malaysian position:
General rule: s 2(d) and s 26(b)
s 2(d) definition is wide enough to cover the rule in Lampleigh’s case.
See also observation by Gunn Chit Tuan SCJ in South East Asia Insurance Bhd v Nasir Ibrahim [1992] 2 MLJ 355 SC at 362. See also page 362-363 where his Lordship held that past consideration would constitute good consideration for a third party indemnity.
His Lordship also made important point in cases dealing with past consideration (at 363)
Meaning of “past consideration”
Re McArdle [1951] Ch 669
Lampleigh v Brathwait (1616) Hob 105
Guthrie Waugh Bhd v Malaippan Muthucumaru [1972] 2 MLJ 62 FC
Held: the deed of arrangement “was in respect of the past debts of the D. How then can it possibly be said that the deed was not for any past consideration?”
Kepong Prospecting Ltd v Schmidt [1968] 1 MLJ 170; (1967) 2 PCC 465 PC at 472 per Lord Wilberforce.
Held: the agreement established “a legally sufficient consideration”.
‘Desire’ on the part of the promisor: s 2(d)
s 2(d) does not seem to be wide enough to cover all cases of past consideration. It is restricted only to cases where there has been a desire expressed first by the promisor.
“desire” and “request” were used interchangeably?
South East Asia Insurance Bhd v Nasir Ibrahim [1992] 2 MLJ 355 SC
“desire” is a stronger word than “request”.
If the facts of Re McArdle Decd [1951] 1 Ch 669 were to arise in Malaysia, the decision would probably be different: cannot rely on s 2(d) but possibly s 26(b).
Q: “at the request” in Lampleigh v Brathwait (1615) 80 ER 255 and “desire” in s 2(d), are they the same or different?
Meaning of ‘voluntarily done’: s 26(b) Contracts Act
not defined in the Contracts Act.
See illustration (c).
JM Wotherspoon & Co Ltd v Henry Agency House [1962] MLJ 86 at 87, 88, per Suffian J.
Scope of s 26(b)
Leong Huat Sawmill v Man See [1985] 1 MLJ 47 FC
Held: the promise to pay the additional wages did not fall within the purview of s 26(b).
3.4 Consideration move from either promisor or promise?
Common law:
Consideration for the promise must have been provided by the promisee himself and not by somebody else.
Tweddle v Atkinson (1861) 1 B & S 393
Malaysian position:
s 2(d) Contracts Act implicitly says that consideration may move from a party who is not necessarily the promisee; it may move from ‘the promisee or any other person’, i.e. from a third party.
Kepong Prospecting Ltd and SK Jegathesan v AE Schmidt [1968] 1 MLJ 170
Wong Hoon Leong David v Noorazman bin Adnan [1995] 3 MLJ 283 CA
3.5 Adequacy of consideration
The court will not enquire into adequacy, i.e. will not seek to measure comparative value of D’s promise, nor of act or promise given by P in exchange for it.
Common law:
Consideration need not be adequate – the promisee’s consideration does not have to be fair or equal in value to the promisor’s promise.
Eastwood v Kenyon (1840) 11 Ad & E 438 – one of the great contract cases
Thomas v Thomas (1842) 2 QB 851 – widow inherited one of husband’s house.
Chappell & Co Ltd v Nestle Co Ltd [1960] AC 87
The chocolate wrappers formed part of the consideration though the wrappers themselves ere of little value and were thrown away by the manufacturers.
Malaysian position:
s 26 Explanation 2, illustration (f) / (g)
s 27(a) Specific Relief Act
“adequate” vs “sufficiency”
Tan Chiw Thoo v Tee Kim Kuay [1997] 2 MLJ 221 FC
FC considered the distinction between ‘adequacy’ of consideration and ‘sufficiency’ of consideration in a compromise agreement.
See the observation by Peh Swee Chin FCJ (at 232)
Phang Swee Kim v Beh I Hock [1964] MLJ 363
Held: the transfer of a piece of land on the payment of $500 was good consideration, in the absence of fraud or duress.
Macon Works and Trading Sdn Bhd v Phang Hon Chin & Anor [1976] 2 MLJ 177
Nominal consideration in option agreement may constitute a valid consideration.
(at 181): the sum of $1 is indeed a nominal consideration which is quite normal in an option of this nature.
3.6 Sufficiency of consideration
Nature of the consideration in the eyes of law (rather than the quantity of consideration)
Consideration must be sufficient i.e. it must have some value.
7 Exceptions:
- Pre-existing Public Duty
- Pre-existing Contractual Duty
- Pre-existing Contractual Duty to Third Party
- Statute Barred Debt
- Natural Love and Affection
- Scholarship Agreement
- Payment of Lesser Sum (Accord and Satisfaction)
- Promissory Estoppel.
3.6.1 Pre-existing Public Duty
If the promisee performs a legal duty and nothing more than this is not sufficient consideration.
Collins v Godefroy [1831] KB & Ad 950; 109 ER 1040 – P required by subpoena to attend court.
If the promisee exceeds his legal duty, he provides consideration.
Glasbrook Bros Ltd v Glamorgan Country Council [1925] AC 270
Police providing the stationary guard was sufficient consideration. The police only had a public duty to provide such protection as they thought necessary. They had therefore done more than their public duty demanded.
3.6.2 Pre-existing Contractual Duty
If what the promisee does is to perform that contractual duty and no more, the general rule is that it would not be sufficient consideration for any new promise given by the promisor.
Stilk v Myrick [1809] 2 Camp; 107 ER 1168 – sailors only performed their existing contractual duties aboard ship
Foakes v Beer [1884] 9 App Cas 605; 51 CT 833
North Ocean Shipping Co Ltd v Hyundai Construction Co [1978] 3 All ER 1170
But if the promisee has done or promised to do more than what he was obliged to do under his existing contractual duty, then this would of course be sufficient consideration.
Hartley v Ponsonby (1857) – Sailor’s old contract was frustrated.
Williams v Roffey Bros v Nicholls [1990] 1 All ER 512
In special circumstances, the performance by the promisee of an existing contractual duty owed to the promisor can constitute sufficient consideration for a promise by the promisor of additional remuneration.
3 benefits conferred on D by claimant – (claimant continued work; avoiding penalty; avoiding trouble and expense of employing another carpenter).
3.6.3 Pre-existing Contractual Duty to Third Party
The existing duty owed by the promisee could also take the form of an existing contractual duty owed to a third party.
Shadwell v Shadwell [1860] 9 CB (NS) 159; 142 ER 62 – promise to pay a relative about to be married.
Pao On v Lau Yiu Long [1980] AC 614 – “…. a promise to perform, or the performance of, a pre-existing contractual obligation to a third party” – good consideration.
3.6.4 Statute barred debt
Common law:
An acknowledgement of debt merely revived the original cause of action.
Malaysian position:
General rule
s 26 Contracts Act: An agreement made without consideration is void.
Hong Leong Leasing Sdn Bhd v Tan Kim Cheong [1994] 1 MLJ 177
Phiong Khon v Chonh v Chai Fah [1970] 2 MLJ 114
Exception:
s 26(a), (b) & (c)
s 26(c): an agreement made without consideration is void unless it is a promise to pay a debt barred by limitation law.
See illustration (e)
See also Limitation Act 1953 (revised 1981, Act 254), s 26(2)
3.6.5 Natural love and affection
Common law:
Does not recognise natural love and affection as a sufficient consideration.
Bret v JS and his wife (1600) 78 ER 987
Malaysian position:
An agreement made on account of natural love and affection would be held to be binding in Malaysia if the requirements of s 26(a) are present.
Re Tan Soh Sim; Chan Lam Keong & Ors v Tan Saw Keow & Ors [1951] MLJ 21 CA at 28 per Taylor J.
Held: the relationship and nearness depended on the mores of the group to which the parties belonged and the circumstances of the family concerned.
See also observation by Briggs J (at p 28-29).
3.6.6 Scholarship agreements
Scholarship agreements: Contracts (Amendment) Act 1976, s 4(c)
Effect of scholarship agreements entered into by minors:
University of Malaya v Lee Ming Chong [1986] 2 MLJ 148 HC
3.6.7 Payment of debts (lesser sum): accord and satisfaction
Common law:
General rule: payment of a smaller sum is not a satisfaction of an obligation to pay a larger sum.
Exception:
The Rule in Pinnel’s Case (1602) 5 Co Rep 117a - Part payment in full satisfaction of debt. This was an action in debt (not contract) but the rule was later applied in contract cases.
(at p 237): “the gift of a horse, hawk or robe … in satisfaction is good. For it shall be intended that a horse, hawk, or robe … might be more beneficial … than the money…”
Qualification to the rule
Foakes v Beer (1884) 9 App Cas 605 HL – payment of debt by instalment. Provision for interest to be paid.
Mrs. B was not bound by her promise not to take legal proceedings against Dr. F, as the latter had not given any consideration to buy her promise.
D & C Builders Ltd v Rees [1966] 2 QB 617 – followed Pinnel’s Case and Foakes v Beer. Question of estoppel.
If A owes B a debt and pays or promises to pay part of it in return for B’s promise to forego the balance, can A hold B to this promise?
Pinnel’s case – When the debtor offers something other than money as payment and the creditor accepts this in full satisfaction of the debt.
Malaysian position:
Application of the rule in Pinnel’s case in Malaysia
The rule in Pinnel’s case (1602) 77 ER 237 has no application under Contracts Act.
s 64 Contracts Act is wide enough to include all the exceptions to the general rule under English law, and goes much further – the promisee may do away with the promise completely.
See illustration (b) s 64
3.6.8 Promissory estoppel
Common law doctrine of promissory estoppel
Hughes v Metropolitan Rly Co (1884) 9 App Cas 604
Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130 –
Principle: a party who has represented that he will not insist upon his strict rights under the contract will not be allowed to resile from that position, unless he has given reasonable notice of his intention to revert to the original position.
The case includes important issue of estoppel.
Ratio – if an agreement is varied owing to certain conditions once those conditions cease to exist the parties revert to the original agreement
Obiter – contains the promissory estoppel exception. Lord Denning relied on Hughes v. Metropolitan Rly Co. as a precedent.
9(1) Halsbury Laws of England, 4th edition, Reissue 1998, paragraph 1030 as follows:
The High Trees principles usually arises where there is a contract between A and B, and B subsequently grants to A a concession, not supported by consideration, that he will not enforce a particular provision of their contract. Whilst the principle is not confined to concession in respect of pre-existing contractual rights, it only applies where there is some contractual relationship between the parties. Where there is the required pre-existing relationship between the parties, it seems that the High Trees doctrine cannot be used as a cause of action, but only by way of defence. Within the context, the doctrine requires an unambiguous representation of intention by B and a reliance on that representation by A in circumstances where it is inequitable for B to go back on his concession. Even then, the effect of the concession is usually only temporary.
Sim Siok Eng v Govt of Malaysia [1978] 1 MLJ 15 FC
Ahmad bin Salleh v Rawang Hills Resort Sdn Bhd [1995] 3 MLJ 211
Combe v Combe [1951] 1 All ER 767 – Promissory estoppel is only a defence. So a person cannot make use of promissory estoppel to enforce a promise. Consideration is always necessary to enforce a promise
Re Tan Soh Sim [1951] MLJ 21
White v Bluett [1956] LJ EX 36; 2 WR 75
Ward v Byham [1956] 1 WLR 496; [1950] 2 All ER 318
Queck Poh Guan v Quick Awang [1998] 6 MLJ 388
