An agreement executed without consideration is void under Section 26 of the Contracts Act 1950, and the doctrine of estoppel cannot validate such an agreement.

Zabariah Mohd Yusof FCJ:

[1] The appeal before us relates to the issue of whether contracting parties can subsequently mutually agree to vary the terms of an initial agreement, including the agreement with regard to consideration.

[2] In this judgment, we will refer to the parties as they were in the High Court . In the High Court , the appellant herein was the defendant, whereas the respondent was the plaintiff.

The Issue

[3] The issue in the courts below and before us revolves around whether the agreement, ADW2, entered into between the plaintiff and the defendant was executed without consideration and therefore null and void under s 26 of the Contracts Act 1950.

[4] The full trial was conducted at the High Court , which ended in the High Court holding in favour of the defendant, namely, that ADW2 was executed for the practical benefit of the plaintiff (i.e., from the defendant to the plaintiff). To put it simply, the High Court held that ADW2 was executed with consideration and was therefore valid. This decision was reversed by the Court of Appeal, which declared that ADW2 was null and void for want of consideration.

[5] The defendant was granted leave to appeal to this Court premised upon the following questions of law:

Question 1:

Where it is alleged that there was no consideration for the agreement between the parties, is consideration to be proved only within the four corners of the said agreement or can the same be proved by extrinsic evidence?

Question 2:

Whether the practical benefit test, as laid down in Williams v. Roffey Bros and Nicholls (Contractors) Ltd 1991 1 QB 1, is good law.

Question 3:

Whether parties who had made their intention clear by entering into legal relations, are bound by an agreement to vary their previous agreement when they have acted upon the former, namely the variation agreement.

Question 4:

Whether the doctrine of estoppel should be invoked against PKA, the Respondent when it had agreed to the proposal to increase the interest rate and made payment of the same without reservation.

[6] We have heard oral as well as read the written submissions of both parties, and perused the cause papers on 21 August 2024. After due consideration, we unanimously dismissed the appeal with costs and affirmed the decision of the Court of Appeal. Hereinbelow are our full grounds for the said decision.

Background

[7] In 1993, the Government of Malaysia sought to develop and transform Port Klang into a national load centre and regional transhipment hub. To achieve this end, the Port Klang Free Zone ('PKFZ') project was initiated and approved.

[8] Port Kelang Authority (plaintiff) is a statutory corporation established under the Port Authorities Act 1963. The plaintiff had appointed Kuala Dimensi Sdn Bhd (defendant) as a turnkey contractor to construct and develop the PKFZ project.

[9] Following the defendant's appointment, the plaintiff and the defendant executed various contracts in relation to the PKFZ project, among others, namely:

a) the Development Agreement dated 27 February 2003 (DA1);

b) the Supplemental Agreement dated 26 May 2003 (DA2);

c) the Supplemental Agreement to DA1 dated 27 March 2004 (DA3);

d) the Supplemental Agreement for the additional development works dated 30 November 2005 (ADW1);

e) the Supplemental Agreement for additional development works dated 26 April 2006 (ADW2); and

f) the Supplemental Agreement for new additional development works to DA1 dated 26 April 2006 (NADW).

[10] In this appeal, the relevant agreements for consideration are ADW1, ADW2 and NADW. The salient contractual terms of ADW1, ADW2 and NADW can be summarised as follows:

• ADW1: The defendant was appointed as turnkey developer to design, construct, finance and complete additional development works for the PKFZ Project works, including works on junction improvements to the PKFZ, construction of electrical infrastructure and construction of a business-class hotel near the proposed exhibition centre. The defendant was, inter