Business Law

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TUTORIAL 2
1. Ali and Abu were neighbours. Ali had to go to Singapore for a business seminar. Before he left, he told Abu “Please look after my house”. After two weeks of being away, Ali’s house caught fire and Abu could only save a briefcase containing RM30,000. When Ali returned home, he thanked Abu for saving his briefcase and promised he would pay Abu RM2,000 for what he had done. Later, Ali refused to pay what he had promised. Advise Abu.

Referring to section 2(d) of Contracts Act1950, the use of the words “ has done or abstained from doing” imply that even if the act was prior to the promise, such an act would constitute consideration so long as it is done at the desire of the promise. Therefore, referring to the situation of Ali, he is bound to fulfil his promise to Abu as in Malaysia, past consideration is good consideration. This principle was established in the case of Kepong Prospecting Ltd v. Schmidt. In 1953 Tan applied to the Government of the State of Johore for a prospecting permit for iron ore. He was assisted in the negotiations by Schmidt, a consulting engineer. A prospecting permit was granted to Tan in November 1953, and in December 1953 Tan wrote to Schmidt stating that Schmidt was to be paid 1 percent of the selling price of all ore that might be sold from any portionof the said land and this was in payment for the work Schmidt had done assisting to obtain the prospecting permit and for any work that Schmidt might doing in assisting to have mining operations started up. Tan then executed a power of attorney in favour of Schmidt which conferred upon Schmidt widely expressed powers to contract for the disposal of any of Tan’s mining properties on such consideration and subject to such conditions as Schmidt thought proper. In September 1955, an agreement was made between the company and Schmidt. Under Clause 1 of the agreement the company inter alia agreed to pay Schmidt 1 percent of all ore that might be won from any land comprised in...
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