1.Based on the above Provision, discuss the Consideration as one of the Elements of a valid Contract under the Malaysian law. By referring to the Statutes and decided cases, Compare the Position of Consideration between the Malaysian law and the English law.
2.Choose ONE Insurance Company and ONE takaful company in Malaysia. Compare and Discuss the Principles related to Insurance Contract Offered by both Companies. Support your Discussion with relevant Provisions from the Statutes.
1.Consideration is one of the elements of a valid contract. Generally, consideration is the price that a party pays pursuant to the contract. In order to understand what consideration is, a party to a contract should ask himself or herself what benefits he or she derives from the agreement or the promise. The courts in trying to establish an existence of a valid contract will establish whether there was a consideration or not. The courts will not be looking at the adequacy of a consideration since it does not matter how small it could be.
Under s.2 of Contracts Act 1950 (My), the definition of a consideration is a price which a party gives in relation to a promise made to him. Such a promise is for doing something or not to do an act pursuant to the terms therein. A consideration would, therefore, be payable where a party has done something as agreed.
There are two requirements that form a valid consideration. First is the legal sufficiency, in other words, the value of the performance ought to be equivalent to the value of the consideration. Secondly, the consideration must be bargained by both parties. Parties should agree on the consideration that would be payable in such an instance.
Again, a party to a contract cannot rely on what he ought to statutorily do in establishing a consideration. A party to a contract should act beyond what he is ordinarily supposed to be doing. A promise by an individual or a performance of a duty that such a person is obligated to do not amount to consideration.
On the aspect of bargained for, there is an exchange of promise between the contracting parties, both parties benefit from the contract or they get a detriment in accordance with their agreed terms. Under Malaysian contract laws, there are several rules relating to consideration. I have here below discussed the rules relating to both Malaysia and England and made a comparison.
Under Malaysian law of contract, it is considered that past consideration is good enough to establish a valid contract. The court applied this rule in the case of Kepong Prospecting Ltd & Ors v. Schmidt (1968). A past consideration generally entails an act performed before the contract came into place. In many jurisdictions, a past consideration is not usually relied upon and is unenforceable in the court of law since it entails an act or a promise made in the past before the contract came into place.
Subject to s.2 (d) and 26 of Contracts Act 1950 (My), a past consideration is valid. It has been argued by the proponents of past consideration that the courts should not be concerned whether the consideration was made earlier or not. They argue that provided there is a consideration the courts should endeavor to give effect to that consideration.
As stated here above, past consideration is not enforceable in other jurisdiction, especially under common law jurisdictions. The court in the case of Re McArdle (1951) the court of appealed re-emphasized that a past consideration was unenforceable. This was in relation to a promised made after the performance.
The Malaysian case of Re Tan Soh Sim & Ors v Tan Saw Keow (1951), defined what natural love and affection are. In this case a mother who was about to die wanted her property to be given to her adopted children, however, the court held that since there was no natural love and affection, such a promise would not be enforceable. The promised was also unwritten.
Therefore, there are instances where a valid contract would be held to be existing even though a consideration might be lacking. Natural love and affection is such an instance where consideration needs not be provided. Under Malaysian Contract Act 1950 (My) s.26 (a) natural love and affection ought to be in writing in order for it to be enforceable in Malaysia.
Natural love and affection are however not a valid consideration under common law jurisdictions. In the case of Brett v JS & Wife  79 ER 9 & 7 (2003), the court was of the view that natural love and affection does not constitute a valid consideration hence cannot be enforced by the courts.
Under common law, a consideration is ordinarily made by the promisee. The promisor ordinarily makes a promise where the promisee must provide a consideration in accordance with the promise made. However, under Malaysian, any person to a contract may enforce that contract even though he has not made or advanced any consideration. The consideration is not also always given by the promisee as is the case in common law jurisdiction.
What stands out under Malaysian Contract law is the fact that a third party to the contract can provide the consideration. Pursuant to s.2 (d) of the Contracts Act 1950 (My), a third party can provide consideration. This principle can be dated back to the case of Venkata Chinnaya v Verikatara Ma'ya (1881), where the court gave effect to an instance where a third party had given the consideration.
Generally, a consideration under contract law does not need to be adequate. The courts will not inquire into the adequacy of a consideration but would simply establish whether there was a consideration in place. The reason for such a decision by the courts is that parties are free to contract on whatever terms they agree on even if they are absurd or inadequate in the eyes of a reasonable person.
The House of Lords in Chappel & Co v Nestle (1960), held that where the economic value of the consideration is so trivial, the court would still hold a to contract to be valid. Under the Malaysian Contract law section 26, the consideration provided need not be adequate unless consent was given out of duress. In the case of Phang Swee Kim v Beh I Hock (1964) the court held that what is important is for a consideration to be present. The adequacy of the consideration is irrelevant. As I have highlighted here above, as an exception to this instance, a party to an agreement cannot claim to have provided a consideration where statutorily he performed that which he ought to have done
As a general rule, part payment of the debt does not discharge a party from payment of the outstanding balance. Therefore, part payment is not a good consideration for a discharge of the debt. However, as an exception to this principle, when parties to a contract agree that part payment is or would be for the satisfaction of the full debt, the creditor would not again sue for the outstanding balance. This principle was established in the In Pinnel's Case (1602).
Where a third party is supposed to partly pay the debt as agreed for the satisfaction of the whole debt, the creditor would not sue for the outstanding balance. The court in the case of Hirachand Punamchand v Temple (1911), reiterated this principle. The court held that part payment by a third party is a valid consideration.
The performance of an existing duty entails a situation where one of the parties in consideration to the promise made offers to perform what ordinarily he is supposed to do. The question that arises from here is whether in such an instance there is a good consideration.
The court in the case of Currie v Misa (1875), expounded what a consideration is, and it stated that a consideration is a form of profit, benefit or advantaged gained from the agreement by a party. Consideration can also be a detriment, disadvantage or a loss occasioned under that agreement. Therefore, a consideration ought to be more than what a party is ordinarily supposed to do. The court in the case of Balfour V Balfour (1982) also held that a consideration is invalid if it entails a duty to perform what a party is ordinarily supposed to do.
As a general rule, an existing contractual duty does not constitute a valid consideration. The court in the case of Stilk v Myrick (1809) held that where there is a pre-existing contractual obligation a valid consideration would be deemed to be lacking. However, if a party performs beyond his contractual duties there would be a valid consideration. The court reiterated this in the case of Hartley v Ponsonby (1857).
In conclusion, from my discussion here above, it can be evident that Malaysia and English laws vary in some few rules relating to a valid contract. For instance, the issue of past consideration, a party who is advancing the consideration and natural love and affection in relation to consideration are examples of principles that vary between the two areas of jurisdiction. However, both jurisdiction share principles such as the performance of a public duty, pre-existing contractual obligations, consideration being adequate and not sufficient and part payment.
2.For purposes of our study herein, I will take Berjaya General Insurance Bhd and Great Eastern Takaful Berhad insurance companies. These companies are operational in Malaysia and they run insurance businesses. Great Eastern Takaful Berhad, which is a Takaful insurance company, offers insurances in many areas ranging from health, wealth, business and including savings. On the other hand, General Insurance Bhd which is a general insurance company offers insurance covers for traveling, for health and accidents among others.
It is important to highlight the difference between the two companies in terms of their constitution. Takaful companies are Muslim related insurance companies. These companies must be compliant with Sharia law. In terms of its operation, it does not allow investment in income related fields.
The other distinguishing feature between the two insurance companies is that for general insurance when a policy is bought the risks are pooled together and transferred to the insurance company. However, for Takaful participants and insurance companies, the participants generally do not transfer risks but they rather pool together their risks and share between each other (Jaffer, Ismail, Noor, Unwin & Ajayi, 2010).
Finally, the other distinguishing feature relates to shareholders fun. For insurance companies, this fund is owned by the company itself, since ordinarily all risks are transferred to the insurance company. For Takaful companies, however, the participants and operators in these companies own the shareholder's fund. Whenever a member encounters health issues or otherwise as provided under the policy, the donations made by the company are used to compensate.
Now, let us turn to the principles of insurance that relate to the two insurances companies that I have referred to in the above paragraphs.
Generally speaking, insurance law emanates from the law of contract. In contract, the parties to the contract ought to contract from utmost good faith (Kirke La Shelle Co. v. Paul Armstrong Co., 1933). The principle of utmost good faith is a fundamental principle in insurance law too. For insurance companies, the insured is supposed to provide true information within his knowledge on the subject matter to be insured. If wronged information is given, the insurer’s liability would be void and hence the insurer would not be compensated.
In Takaful companies, this principle of insurance is also present. It’s been resolved that this principle should be applied in Takaful companies (Thanasegaran, 2016). For these companies, whenever it is discovered that the terms of insurance were fraudulently given by the insured, he is not supposed to be compensated at whatsoever cost. The participant would, however, be given what he contributed to the shareholder's fund. The principle of utmost good faith has been thought to be in consonance with the Islamic Sharia law since it emphasizes on honesty in whichever activity that a person indulges in (Aziah, 2012).
For most insurance companies, this principle must be there. An insurer must have an insurable interest in a property that he or she seeks to insure (Insurance Act 1996 s. 186.2 (My). The above principle simply means that a property that you are seeking to insurer should either belong to you or you have an interest in the said property since you cannot insure what does not belong to you or in other words that which you have no pecuniary interests in.
Insurance companies have this principle at hand. The only question that an insurer should ask himself is whether he would suffer if the said property or subject matter of insurance is affected. Therefore, for Malaysian insurance companies, a person seeking to purchase a policy must prove that they have an insurable interest.
For Takaful companies, this principle has been incorporated too. During its 52nd meeting, the SAC has established that this principle does not offend Sharia law and hence it should be applicable to Takaful insurance companies.
The principle of contribution is the same as the principle of indemnity (Insurance Act 1996 s.191 (My). Under this principle, the insurers are not supposed to profit from the transaction. Insurance companies are only supposed to get a compensation of what they lost and not anything or amount above. That would be contrary to the principle of contribution. Such a situation arises where an insured has purchased a policy in more than one insurer. Ordinarily, he would not be compensated above the amount that he lost.
For Takaful companies and participants, an individual is only supposed to get a compensation of the amount that he lost (Takaful Act 1986 s. 16 (My). One of the principle elements in Takaful is also the contribution (s. 25). These companies only seek to indemnify and not profit a participant of in the scheme.
The principle of subrogation provides that an insured loses his right in relation to the subject matter after he has been compensated by the insurer (Soe, 1987). An insurer, for instance, would not go to a court of law to try to enforce his right in relation to the subject matter in which he has been compensated. The right in relation to the subject matter shifts to the insurer.
In the above scenarios, the insurer is the one who usually pursues the interests of the insured, for instance, in claiming the amount that he paid the insured. It should not worry the insured the amount that would be payable since his claim would have already been settled by the insurer.
The above principle is also applicable to Takaful insurance companies (Rose, 2013). Once the contributor has been paid the amount that he lost, the Takaful company would ordinarily take up the contributor’s interests and rights and seek to obtain the amount that is payable therefrom.
Under this principle, the insured should endeavor to ensure that the insured subject matter is well taken care of. There should be no negligence on the part of the insurer in handling the subject matter or else he faces the risk of not being compensated. The principle of loss minimization is used in many general insurance companies in Malaysia.
For Takaful companies in Malaysia, this principle though silent, it is present. There is a committee in Takaful companies whose advice and opinion is to key to the operations relating to compensation. In these companies, elements of gambling, negligence or uncertainty established whether they exist or not (Mahmood, 1991). Therefore, an individual who is not sincere in relation to the subject matter in question cannot successfully claim for compensation.
The principle of the nearest cause (Giampietro, 2011), majorly applies to general insurance companies in Malaysia. It provides that where there are two or more likelihoods of causes of a loss, it is the nearest cause that would be assumed to have caused the loss. The above principle is essential to the insurer in trying to prove the cause of the loss and therefore who would pay the insurer.
There are few principles that distinguish Takaful insurance companies from other insurance companies. This paper discusses these principles here below.
Risk sharing is one of the key principles behind the formation of these companies. As I highlighted here above, participants in Takaful voluntarily contributes to forming a pool of resources that cover their risks. For conventional insurance companies, there is payment of premiums while in Takaful there is a voluntary contribution. At the end of the financial year, any surplus amount of loss occasioned is shared amongst the contributors. There is no such sharing in conventional insurance companies in Malaysia.
Takaful companies are meant to help individuals in the society that encounter misfortunes which were obviously unforeseeable. Takaful would help restore such persons to the position they were prior to the misfortune. They do not exist to make a profit, unlike conventional insurance companies.
Mutual protection (Mahmood, 1991) is the consequence of mutual responsibility. Individuals are protected from losses that would obviously take them down. Risks that are otherwise not out of their fault are insured against and hence their future is taken care of.
Whenever the participants contribute to Takaful, they foster their solidarity (Takaful Act s. 4.2 (My). Takaful seems to bring Muslims together, this is especially because Muslim Sharia laws form part and parcel of the law that governs the insurance policies.
From my discussion here above, we have seen the differences in terms of the principles that govern both Takaful insurance companies and General insurance companies. To begin with, we should note that Takaful companies are Muslim related, seeking to insure them against health related incidences and generally their welfare. However, for general insurance companies in Malaysia, they are not based on religion and generally they operate general insurances running from travel related to personal insurance among others.
There are several principles of insurances that are common between the two companies. They include the principle of utmost good faith, the principle of insurable interest, the principle of contribution, the principle of subrogation and principle of loss minimization. For Takaful companies, however, we should note all principles related thereto were supposed to be in consonance with Sharia law. A principle to which Sharia law is against cannot form part of the principles of insurance.
Finally, what distinguishes Takaful companies is their solidarity. Their contribution is meant to foster their unity and to insure them from risks that might be occasioned. They also do not make a profit, a surplus amount is supposed to be shared by the contributors. Conventional companies are different since there is no contribution but instead there is payment of the premiums.
Aziah Abu Kasim, N. (2012). Disclosure of Shariah compliance by Malaysian takaful companies. Journal of Islamic Accounting and Business Research, 3(1), 20-38.
Balfour v. Balfour, 413 So. 2d 1167 (Ala. Civ. App. 1982).
Chappell & Co Ltd v. Nestle Co Ltd, 1960 A.C. 87 (1960).
Contact Act (1950).
Currie v. Misa, 10 Ex. 153 (1875).
Giampietro, A. (2011). Proximate cause in Maritime Insurance.
Hartley v. Ponsonby, 7 E. & B. 872 (1857).
Hirachand Punamchand v Temple  2 KB 330
In re McArdle, 1951 Ch 669 (1951).
Insurance Act 1996 (My).
Jaffer, S., Ismail, F., Noor, J., Unwin, L., & Ajayi, D. (2010). Takaful (Islamic Insurance): Concept, Challenges, and Opportunities. Milliman Research Report.
Kepong Prospecting Ltd & Ors v. Schmidt, 1968 M.L.J.1 170 (1968).
Kirke La Shelle Co. v. Paul Armstrong Co., 263 N.Y. 79, 188 N.E. 163, 188 N.E.2d 163 (1933).
Lawrence v. Texas, 539 U.S. 558, 123 S. Ct. 2472, 156 L. Ed. 2d 508 (2003).
Mahmood, N. R. (1991). Takaful: The Islamic system of mutual insurance: The Malaysian experience. Arab Law Quarterly, 280-296.
Myrick Case, 2 Camp. 317 (1809).
Phang Swee Kim v Beh I Hock  MLJ 383.
Pinnel's Case, 5 Co. Rep. 117, 77 Eng. Rep. 237 (1902).
Rose, F. (2013). Marine insurance: law and practice. CRC press.
Soe, M. (1987). Law of Insurance.
Takaful Act (1986).
Tan Soh Sim & Ors v Tan Saw Keow (1951)
Thanasegaran, H. (2016). Good Faith in Insurance and Takaful Contracts in Malaysia: A Comparative Perspective. Springer.
Venkata Chinnaya v Verikatara Ma'ya (1881) 1 LR 4.
To export a reference to this article please select a referencing stye below:
My Assignment Help. (2018). Consideration Is One Of The Elements Of A Valid Contract . Retrieved from https://myassignmenthelp.com/free-samples/consideration-is-one-of-the-elements-of-a-valid-contract.
"Consideration Is One Of The Elements Of A Valid Contract ." My Assignment Help, 2018, https://myassignmenthelp.com/free-samples/consideration-is-one-of-the-elements-of-a-valid-contract.
My Assignment Help (2018) Consideration Is One Of The Elements Of A Valid Contract [Online]. Available from: https://myassignmenthelp.com/free-samples/consideration-is-one-of-the-elements-of-a-valid-contract
[Accessed 05 June 2020].
My Assignment Help. 'Consideration Is One Of The Elements Of A Valid Contract ' (My Assignment Help, 2018) <https://myassignmenthelp.com/free-samples/consideration-is-one-of-the-elements-of-a-valid-contract> accessed 05 June 2020.
My Assignment Help. Consideration Is One Of The Elements Of A Valid Contract [Internet]. My Assignment Help. 2018 [cited 05 June 2020]. Available from: https://myassignmenthelp.com/free-samples/consideration-is-one-of-the-elements-of-a-valid-contract.
MyAssignmenthelp.com has become one of the leading assignment help provider in New York City and Boston. We provide top class auditing assignment help. Not only auditing, but we also cover more than 100 subjects and our writers deal with all types of assignments with utmost expertise. To make writing process faster and accurate, we have segmented our assignment experts' teams as per their expertise on writing different types of assignments. We guaranteed that students who buy our assignment online get solutions worth their investment.
Answers: Answer to Question 1: A contract is an agreement between two parties, which is binding by law. The parties entering into the business has certain rights and obligations under a contract (Law, 2016). According to the Contract Law, an offer is regarded as a proposal made by one person to another person for doing an act or abstains the person from doing so. The person making the offer is called the promisor and the person receiving the ...Read More
Answer: 1: Issue: The issue associated with this case is that whether Terence is at the authority to terminate the contract with Sara. There is an issue regarding the fact that whether Terrence can sue Peter for breach of contract. Law: Termination of contract takes place when the agreement formed between the parties is no longer recognized by the application of law (Bankins 2015). In this regard, it is worth noting that termination o...Read More
Answers: Answer 1(a) Issue: Was there any contract formation between Avinash and the café? What are the essentials of a valid contract? Relevant law There are four major essentials that determine the validity of a contract. These major essential elements of a valid contract are: Offer Acceptance Consideration The intention of creating a legal relationship Offer: An offer can be referred to as a statement of expr...Read More
Answer: Introduction: It is to be determined whether a valid contract was formed between The Bolton Connect Pty Ltd and Rofi in relation to the chosen case study considering the clause of unconscionable conduct According to Knapp, Crystal & Prince (2016), it can be said that action or statement will be considered to be unconscionable conduct if it is unreasonable and defies good conduct. However, it is to be stated that that this provision ...Read More
Answer: Introduction The constitution is explained to be the set of legal rules and regulations that govern the relationship between the ruled and the ruler in a state. It is said that the United Kingdom does not have a detailed constitution like any other country. It is recognized as the “so-called” Constitution of The United Kingdom. It has the principles and laws of the country. The United Kingdom has an uncodified or unwr...Read More
Just share Requriment and get customize Solution.
Our writers make sure that all orders are submitted, prior to the deadline.
Using reliable plagiarism detection software, Turnitin.com.We only provide customized 100 percent original papers.
Feel free to contact our assignment writing services any time via phone, email or live chat.
Our writers can provide you professional writing assistance on any subject at any level.
Our best price guarantee ensures that the features we offer cannot be matched by any of the competitors.
Get all your documents checked for plagiarism or duplicacy with us.
Get different kinds of essays typed in minutes with clicks.
Calculate your semester grades and cumulative GPa with our GPA Calculator.
Balance any chemical equation in minutes just by entering the formula.
Calculate the number of words and number of pages of all your academic documents.
Our Mission Client Satisfaction
Thank you for your services . I will come back to you again for sure :) Al so I will recommend you to other students as well
I really want to thank you for your help. You did the job how I expect. I highly recommend to my friends and co-workers.
Presentation had a great layout and design, colors were visually engaging and the charts provide a large volume of information in an accessible format.
This is my go-to with homework help....I am so happy with the results! I got an "A" again!!!!!