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Considering Consideration

almost 2 years ago



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What is consideration?

Consideration is one of the most important element for a contract to exist. It comes after elements of offer and acceptance which was discussed in earlier article respectively. It can be anything of value which each party must agree to exchange promises in order to make a contract valid. The Contracts Act 1950 governs it.

Section 2(d) Contract Act 1950
“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 so or to abstain from doing something, such act or abstinence or promise is called consideration for the promise
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Consideration for the promise

Ali signs a contract to buy a car from Abu for RM 30,000. Ali’s consideration is the RM 30,000 and Abu’s consideration is the car.

Thus, there is a valid consideration when the Ali pays a price to buy the car and Abu giving the car in exchange.

Consideration ranges from payment of money to performance of an act. But, how do you decide whether it is legally sufficient?

Is my consideration enough?

S 26 (Explanation 2) - An agreement to which the consent of the promisor is freely given is not void merely because the consideration is inadequate; but the inadequacy of the consideration may be taken into account by the court in determining the question whether the consent of the promisor was freely given.

In simple language, it means that the consideration that you give under a contract in return for the promisor’s promise must be sufficient but it doesn't have to be adequate.

For example, Celine promises to sell Chong a laptop worth RM3000 if Celine agrees to give tip on how to ask Maria for a date. This scenario shows there is sufficient consideration.

But, the court will take into account the consideration involved when questions are raised regarding the sufficiency of the consideration in question.

There are situations where a party to an agreement can enforce a promise even though there was no consideration from the party. These situations will be discussed later in the second part of this article.

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This article is for informational purposes only and should not be taken as legal advice. Every situation is unique and dependent on the facts (ie, the circumstances surrounding your individual case) so we recommend that you consult a lawyer before considering any further action. All articles have been scrutinized by a practicing lawyer to ensure accuracy.
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