Business Law

Topics: Contract, Consideration, Corporation Pages: 9 (3136 words) Published: August 29, 2013
HUTECH & OUM
MBAOUM0512 INTAKE : MAY 2012 – OCTOBER SEMESTER 2012
STUDENT NAME: CHU THI HONG TUYEN ID No.: 2448481

BMLW5103 – BUSINESS LAW ASSIGNMENT
Question 1

Discuss the enforceability of an agreement which lacks consideration. Using legal authorities (relevant statutes and cases) to support your discussion. Answer: A valid contract is an agreement made between two or more parties that creates rights and obligations that are enforced by law. What does the consideration mean? And what does it effect to the agreement? Consideration is something of value exchanged for the promise. It is something given by a promisee in return for something given by the promisor. According section 2(d), Contract Act provides “when at the desire of the promisor, the promise or any other person has done or abstained from doing or to abstain from doing something such act or abstinence or promise is called a consideration of promises” Consideration is another important element of a contract and any agreement made without consideration is a void agreement. Section 26, contract act 1950 provides that “ an agreement made without consideration is avoid”. The Malaysian case which applied the principle of past consideration is the case of: Kepong Prospecting Ltd. & S.K. Jagatheesan & Ors v. A.E. Schmidt & Marjorie Schmidt [1968] 1 MLJ 170 Schmidt, a consulting engineer, had assisted another in obtaining a prospecting permit for mining iron ore in the State of Johore. He also helped in the formation of the company (Kepong Prospecting Ltd.) and was appointed as the Managing Director. Subsequently, Schmidt entered into an agreement with the company. In the agreement, the company agreed to pay him one per cent of the value of all ore sold from the mining land. This was “in Page 1 of 10

HUTECH & OUM
MBAOUM0512 INTAKE : MAY 2012 – OCTOBER SEMESTER 2012
STUDENT NAME: CHU THI HONG TUYEN ID No.: 2448481

consideration of the services rendered by Schmidt on behalf of the company before its formation, after incorporation and for future services...” Later, an issue arose in this case, whether the services rendered by Schmidt after the incorporation of the company but before the agreement was made, were sufficient to constitute a valid consideration, even though they were past. The Privy Council ruled that: it was valid consideration and Schmidt was entitled to claim the amount. However, there are exceptions to this general rule. With these exceptions, even though the agreement is made without consideration, the agreement still valid and will be enforceable. The exceptions include the followings: + agreement made on account of natural love and affection. + agreement to compensate a past voluntary act. + agreement to pay a statue- barred debt. 1. Agreement made on account of natural love and affection. This exception is provides in Section 26(a) , contract Act 1950. The rule provides that any agreement which is made without consideration is still valid if “ it is expressed in writing and registered under the law ( if any) for the time being in force or the registration of such documents and is made on account of natural love and affection between parties standing in a near relation to each other.” This means the agreement that is not supported by any consideration is valid if it fulfils the following conditions: +The agreement is made in writing. +The agreement is registered under the existing law which requires its registration ;and +The agreement is made on account of natural love and affection between the parties standing in near relation to each other. Page 2 of 10

HUTECH & OUM
MBAOUM0512 INTAKE : MAY 2012 – OCTOBER SEMESTER 2012
STUDENT NAME: CHU THI HONG TUYEN ID No.: 2448481

Ex: Mr.A has an estate about 300 sqm. He wants to give 2 his daughter. He talk to their in the family meeting with their husbands in law. This is not a contract until Mr.A puts his promise to his daughters in writing and registers it under a law for the time...
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • The Nature of Agency Business Analysis Essay
  • Forms of Business Organisation Essay
  • Business law Ch 4 Essay
  • aspects of law Essay
  • Commercial Law
  • business ownership Essay
  • types of business Essay
  • Business Entities Outline Essay

Become a StudyMode Member

Sign Up - It's Free