Legal Case Summary
Kepong Prospecting Ltd v Schmidt [1968] AC 810
Contract law – International agreements – Formation of contract
Facts
T agreed with Schmidt in writing, that in consideration for Schmidt’s assistance to obtain a permit and start mining operations, T would pay Schmidt 1% of the price that all ore from the land was sold at. A year later, KP (the plaintiff) agreed to work the land and undertake T’s agreement to Schmidt. The agreement that KP and Schmidt signed stated it was supplementary to the original agreement between KP and T. These terms were later terminated by a consent order which stated that J would take over the company and provide the company an indemnity from the payment owed to Schmidt. Schmidt claimed for the money that was agreed upon and KP claimed that they had been indemnified by J. The trial judge dismissed Schmidt’s claim and the Federal Court later reversed the decision and ordered KP to pay S. KP appealed the decision.
Issue
The court was required to establish at which point Schmidt had given consideration during proceedings. His first argument was that he had given consideration for the agreement between T and KP. If the court disagreed, Schmidt held that he had given effective consideration for the agreement between himself and KP and therefore he should be able to claim for the money owed to him.
Decision / Outcome
The court dismissed Schmidt’s claim to be able to enforce the original agreement between T and KP as he was not a party to that agreement. However, Schmidt was deemed to have given consideration under Malaysian law for the agreement between himself and KP. Therefore Schmidt could sue for the sum that was owed on the agreement between himself and KP.
Updated 19 March 2026
This case summary remains accurate as a description of the Privy Council’s decision in Kepong Prospecting Ltd v Schmidt [1968] AC 810. The case is a Malaysian law authority and its significance lies in its treatment of past consideration and privity under Malaysian contract law, which differs from English law in relevant respects. The core legal principles described — that Schmidt could not enforce the agreement between T and KP as a non-party, but could recover under the separate agreement to which he was a party — remain correctly stated.
Readers should note that this case is decided under Malaysian contract law and is not directly authority on English contract law. Under English law, the doctrine of privity of contract is governed by the Contracts (Rights of Third Parties) Act 1999, which now permits third parties to enforce contractual terms in certain circumstances where English law applies — a development not reflected in this summary, which predates that Act. This does not affect the accuracy of what the article says about the actual decision, but students should be aware that the English law position has evolved considerably since 1968.
