Consideration

General Rule - The courts will not enforce a contract unless it is supported by consideration

The law enforces bargains to which both parties contribute. The court will not enforce a gratuitous promise.

According to Section 2(d), the promisee must give something in return for promise made by the promisor

South East Asia Insurance Bhd v Nasir Ibrahim

This was an action on a contract of indemnity.

The issue that arose out of this case was, whether the indemnity was invalid on the ground of past consideration since the guarantee was dated 9 August 1986 and the indemnity agreement was dated 19 December 1986.

The argument here was the agreement of indemnity should have come before the guarantee was given to show that the indemnity is consideration for the guarantee to be given.

In the supreme Court, Gunn Chit Tuan SCJ stated that, in light of the wordings in section 2 (d0, Contracts Act 1950, “has done or abstained from doing’ showed that past consideration if done at the desire of the promisor is good consideration.

What is important is that the consideration, whether past or not, is given at the request of the promisor.

As long this is satisfied, the consideration would be valid, in light of section 2(d).

This definition adopted is similar to approach taken in the English case of Currie v Misa

It is an English contract law case, which in the Exchequer Chamber contains a famous statement by Lush J giving the definition of consideration in English law. Lush J said,

“A valuable consideration, in the sense of the law, may consist either in some right, interest, profit, or benefit accruing to the one party, or some forbearance, detriment, loss, or responsibility, given, suffered, or undertaken by the other...

The alternative approach is to define consideration in terms of purchase and sale - consideration being the price paid for the promise

This can be seen in the case of Macon Works & Trading Sdn Bhd v Phang Hon Chin & Anor.

Ds were owners of...