Consideration Inadequate to value Q5

Danial wants to sell a car worth RM50,000.00 at a price of RM100.00, which is a Consideration in a sum in not equal to the value, is the Consideration valid?

Danial seeks your advise as to what law is applicable to the above situation.

(20 marks, 2018 Q5)


Earlier post about 'Consideration need not be adequate' is referred:

S.26 Contracts Act 1950 is extracted below.

(f) A agrees to sell a horse worth RM1,000 for RM10. A’s consent to the agreement was freely given. The agreement is a contract notwithstanding the inadequacy of the consideration.

Explanation 2—An agreement to which the consent of the promisor is freely given is not void merely because the consideration is inadequate; but the inadequacy of the consideration may be taken into account by the court in determining the question whether the consent of the promisor was freely given.

See also Phang Swee Kim v Beh I Hock [1964] MLJ 383

Sale of a land for $500/- when it was worth more than that. Seller refused to honour promise citing that the price was inadequate for a consideration. The Trial Court Judge held that the agreement was void due to inadequacy of consideration. However upon appeal to the Federal Court, the decision of the Trial Judge was reversed and applied explanation 2 and illustration (f) of Section 26.

Danial has a good and valid contract to sell his car at RM100 despite the actual worth of the car is RM50,000.


Earlier posts.