Question

(a) Explain the following statement under the Malaysian Contract Law : “Consideration must be sufficient but need not be adequate.”

(b) Budget Travels, booked Hotel Kedekut for a 2 day health event for their staff. All the itinerary and the food to be served were confirmed already. The chef of Hotel Kedekut, who knows the manager of Budget Travels, Michael, very well has decided to make pastries and cupcakes for the health event on his own. The event was a success and Michael, being very delighted, promised to pay for the pastries and cupcakes to the chef on behalf of Budget Travels but in the end he didn’t do so. Is Budget Travels under an obligation to do so?

(Total :20 marks)

Answer 1

A). As per the Malaysian law : the consideration between two parties just needs to be sufficient as decided by the parties, and not necessarily adequate as per other valuators such as the market. In this case, whatever the two parties decide to be a reasonable price to value ratio can be input into a contract and must be executed as such. If a seller decides he wants his car sold and towed away and is willing to accept a nominal rate for it, say RM100 then he can choose to do so. He cannot later sue the buyer for not paying the market value of the car.

The alternative can usually happen where a buyer may offer to pay more than the market value of a product just because he/she wants it at any cost. This law recognises the opposite side of the transaction where the price may be lesser than the value of a product. As long as both parties sign a contract on a settled price, that price cannot later be held in dispute if the prices go up or the value goes down.

B). As the food to be served and its price was already decided on in the original contract between Budget travels and Hotel Kedekut, Budget travels is under no legal obligation to pay more for the additional products provided by the chef. The chef decided to make the additional food because of his personal relationship with the manager of Budget travels, however as this was outside the purview of the contract, it can be viewed as a personal favour, goodwill gesture towards a client or even as additional value for the same price. However, as this was not part of the contract, the hotel need not be reimbursed. If Michael has agreed to pay for the cupcakes and pastries in a legally binding way - written/oral contract that can be enforced by law - then he would definitely have to pay the addittonal cost to the hotel. As such, the price agreed on is sufficient for the value promised even if it is not adequate to cover the whole cost, and so legally the hotel cannot seek additional payment from Budget travels.