26 August 2016

BTW1042 - MALAYSIAN BUSINESS LAW (SEM. 2, 2016)

MID-TERM EXAM (15%) OPEN BOOK
Question
Markss daughter, Jessica, aged 21, was studying for some law examinations at Great University.
It was a contractual requirement that students in residence at the University were non-smokers,
and Jessica therefore gave up smoking. Mark, however, was worried that under the pressure of
preparing for the examinations Jessica would start smoking again, and so he promised to pay her
RM1000 if she did not smoke at all until she had completed the course. He also promised to buy
her a car if she passed the examinations.
Mark runs a small business, and asked Jessica to prepare a short report on the accounts of
companies. He was pleased with the result, and said he would give her RM500 for all her hard
work.
Jessica passed her examinations, and has not started smoking again.
Mark has not made either of the promised payments, or bought the car. He seeks your advice as
to whether he is legally obliged to do so.
Required:
Advise Mark.
(15 marks)

Suggested Answer:
(Note: this is an answer in a point form. You are, of course, expected in the exam to elaborate each one of the
points in essay format supported with relevant authorities)

Issues: Consideration and Intention

Three possible contracts (promises):
The promise of RM1000 if Jessica refrained from smoking
- Sufficiency of consideration: performance of existing contractual duty. In this case it is
an agreement with a third party (i.e. the University). Can doing something (i.e. not
smoking) which you are already contractually obliged to do in an agreement with a third
party (i.e. the University) still amount to consideration? Answer is yes see Shadwell v
Shadwell; Pao On v Lau Yiu Long. Conclusion: The promise of RM1000 supported with
valid consideration moving from Jessica.
- Intention to create legally binding relationship domestic agreement (presumption is that
there is no intention). Support with relevant cases.
- Conclusion: promise not enforceable

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The promise to buy a car if Jessica passed all the examinations

- Sufficiency of consideration. Any consideration provided by Jessica? What about natural
love and affection? In common law not good consideration. In Malaysia, it could be,
provided conditions are fulfilled in s. 26(a) CA. Support with relevant cases, if any.
Conclusion: the promise to buy a car not supported with valid consideration moving from
Jessica.
- Intention to create legally binding relationship domestic agreement (presumption is that
there is no intention)
- Conclusion: promise not enforceable
The promise of RM500 for the work on company accounts
- Past consideration. Not good in Common law. However, the exception (past
consideration done at the request) applies. In Malaysia s. 2(d) past consideration done
at the desire of the promisor. Support with relevant cases. Conclusion: the promise of RM
500 supported with valid consideration moving from Jessica.
- Intention to create legally binding relationship Subject matter of the agreement is of
commercial nature (presumption is that there is intention)
- Conclusion: promise enforceable