LOW CHEE GROUP SDN. BHD. v 1. ) WONG KIT LEONG 2. ) MONTEIRO GERARD CLAIR 3. ) RAYMOND TAN

Case Significance

Illustrates the enforceability of a letter of undertaking against the parties bound by its terms: signatories are held to the four corners of the contract and estopped from denying their obligations, and inadequacy of consideration does not, without more, release a party — the court allowed the claim with damages to be assessed.

This High Court decision at Shah Alam, delivered by Judge Noor Hayati binti Haji Mat, concerns the enforcement of a letter of undertaking by way of an originating summons, and the extent to which parties are bound by the terms they have signed. The applicant, Low Chee Group Sdn Bhd, sought relief against three individual respondents founded on a letter of undertaking (LOU) concerning land held under a title in the Mukim of Batu, District of Gombak. The respondents resisted, contending among other things that the undertaking was unsupported by adequate consideration. The proceedings invoked the court's powers under Orders 1A, 28 and 92 rule 4 of the Rules of Court 2012 and provisions of the Contracts Act 1950, including sections 38, 40 and 41.

The court allowed the originating summons. It held that the respondents were bound by the four corners of the contract they had entered into, and were estopped from disputing or denying the responsibilities and obligations they had assumed under the letter of undertaking. On the consideration point, the court was not persuaded that any inadequacy of consideration relieved the respondents of their bargain, consistent with the principle under the Contracts Act 1950 that an agreement is not void merely because the consideration is inadequate, provided the consent of the parties was freely given. Being satisfied that the respondents had undertaken obligations under the LOU and had failed to perform them, so that the applicant was entitled to the relief sought, the court allowed the application with costs of RM10,000, subject to allocatur, ordered that damages be assessed, and indicated that a penal notice might be inserted in the order. The judgment illustrates the enforceability of a clear letter of undertaking against parties bound by its terms, and that inadequacy of consideration does not, without more, release a party from a freely given undertaking.