Business Ethics

Topics: Contract, Contract law, Overdraft Pages: 3 (797 words) Published: October 24, 2012
Question 2
Belton Sdn.Bhd was granted an overdraft facility of RM 500 000 in 1989 by Bank ABC Bhd.Belton Sdn. Bhd's account was frequently in excess. Belton Sdn. Bhd. requested for an additional overdraft facility of RM 100 000, making a total overdraft limit of RM 600 000. The security documentation was executed by Belton Sdn. Bhd, on 2 May 1997. On that date, the amount outstanding was RM 550 000 (debit). In case Belton Sdn. Bhd. defaults in repayment, should bank ABC Bhd. worry that Belton Sdn.Bhd. will raise the defence that as the rm 50 000 was utilized prior to the signing of the security documentation, there was past consideration, therefore the documentation is void? Give reasons for your answer. Reference must be made to relevant sections of the Contracts Act 1950 and Caselaw.

Whether the bank can sues the Belton Sdn Bhd that default in repayment of Rm50,000?

Contract from the issues
Section 2(e) from Contract Act 1950
In this Act the following words and expressions are used in the following senses, unless a contrary intention appears from the context: * Every promise and every set of promises, forming the consideration for each other, is an agreement. Section 26(b) from Contract Act 1950

An agreement made without consideration is void, unless-
* Is a promise to compensate for something done.
It is a promise to compensate, wholly or in part, a person who has already voluntarily done something for the promisor, or something which the promisor was legally compellable to do.

Case law
First case
University Malaya v Lee Ming Chong (FC) 1986
Facts: Lee was given a scholarship to study in Canada on one condition that he must work for the University for 2.5 years. Upon Lee’s return, he left the University and argued that he had not provided consideration and hence there is no contract between Lee and UM.

Federal court held that there was consideration as UM paid the fees. Even if there was no consideration the agreement is...
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