LAW OF CONTRACT (Contracts Act 1950)*All contracts are agreement. However not all agreements are contract.*S2(g) & (h) only agreement enforceable by law is a valid contract.

Elements need to be fulfill for a valid contract;1)Offer & acceptance2)Consideration3)Intention 4)Capacity5)Consent6)Legality7)Certainty------------------------------------------------------------8) Formalities

PROPOSAL & ACCEPTANCES2(a)- when one person signifies to another his willingness to do or to abstain from doing anything,with a view to obtaining the assent of that other tosuch act or abstinence.

S2(b)- when the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted.

INVITATION TO TREAT (preliminary stage, invite others to make an offer)* A price list* A display of goods – Pharmaceutical Society of Great

Britain v Boots Cash Chemist Ltd* An advertisement –Caelho v The Public Services

Commission* Auctioneer

TO WHOM CAN A PROPOSAL BE MADE1) To a particular person – Boulton v Jones2) To the general public – Carlill v Carbolic Smoke Ball*(Advertisement of Bilateral contract: not offer only ITTAdvertisement of Unilateral contract: offers)

COMMUNICATION OF PROPOSALS2(a) indicates that proposal must be convey. Coincides

will not form an agreement – R v Clarke.

ACCEPTANCE AND COUNTER OFFERS7(a)- Acceptance must be absolute & unqualified. Hyde v Wrench –request reduce price to 950pdDistinction with the following:*request for further information- Stevenson Jaques v

McLean*in the process of negotiation- Lau Brothers & Co. v

China Navigation Co. Ltd.

COMMUNICATION OF ACCEPTANCES7(b)- expressed in usual & reasonable manner,if

prescribes must insist, if not deem accepted.Silence, absence of response/total disregard is not

acceptance – Felthouse v Bindley.Exceptions;• Proposer dispensed.• Proposer allows to perform the condition of proposal.• Proposer allows the acceptance of any consideration

for a reciprocal promise which may be offered with a proposal.

• Acceptance through post- Ignatius v BellS4(2) The communication of an acceptance is

complete; a)as against the proposer, when it is put in a course of

transmission to him, so as to be out of the power of the acceptor; and

b)as against the acceptor, when it comes to the knowledge of the proposer.

REVOCATION OF PROPOSAL

S5(1)- at any time b/f the communication of its acceptance is complete against proposer.

S6 – Proposal is revoked;a) By the communication of notice of revocation.b) Lapse of time/lapse of a reasonable time – Ramsgate

Victoria Hotel v Montefiore.c) Failure of the acceptor to fulfil condition precedent.d) By the death/mental disorder of the proposer. H/e

must comes to the knowledge of the acceptor.

REVOCATION OF ACCEPTANCE

S5(2)- at any time b/f the communication of the acceptance is complete against the acceptor.

CONSIDERATION

Executory : when one promise is made in return for another.

Executed : when a promise is made in return for the performance of an act.

Past: where a promise is made subsequent to and in return for an act that has already been performed – Kepong Prospecting Ltd & S.K Jagatheesan & Ors v A.E Schmidt & Marjorie Schmidt.

EXCEPTIONS – S26a) An agreement made on account of natural love &

affection between parties standing in near relation toeach other & registered– Re Tan Soh Sim.

b)- An agreement to compensate for a past voluntary act. - An agreement to compensate a person who did an act

which the promisor was legally compellable to do.

c) An agreement to pay a statute-barred debt & signed.S2(d) Consideration need not move from promisee.

VENKATA CHINNAYA V VERIKATARA’MA’YAa sister agreed to pay an annuity to her brothers who provided no consideration for the promise

S64 Waiver Of Performance i) payment of a smaller sum in discharge of a larger

sum.ii) payment by a third party in discharge of a debt.iii)amount owing is unascertained & a person accepts

an agreed sum in satisfaction.iv)a composition with creditors for the payment of a

smaller sum.KERPA SINGH V BARIAM SINGH

ADEQUACY OF CONSIDERATION(S26 explanation 2)Consideration need not be adequate as long as it is freely

given.Phang Swee Kim v Beh I Hock

INTENTION TO CREATE LEGAL RELATION

Act silent, English common law principles apply. To determine intention, two presumptions h/e rebuttable;

1)Business agreement – parties intend legal consequences unless specify otherwise.

Rose & Frank Co v Crompton Bros – “…this arrangement is not entered into, nor is this memorandum written, as a formal or legal agreement & shall not be subject to legal jurisdiction in the law courts….”

2) Social, domestic or family agreements – implied no legal relations are contemplated.

Balfour v Balfour – husband works in Sri LankaMerrit v Merrit – bought house under joint names.

a) S11: competent to contract i) of the age of majority according to the law

which he is subject. ii) who is of sound mind. iii) x disqualified from contracting by any law to

which he is subject.*Effect of contract by parties x competent to ctt. Mohori Bibee v Dhurmodas Ghose - mortgage void ab initio Age of Majority Act 1971: age of majority is 18 years. Exceptions: i) in matters relating to marriage,divorce,

dower & adoption;ii) the religion & religious rites & usages of

any class of persons within Malaysia; Rajeswary & Anor v Balakrishnan & Ors

iii) any other written law fixing the age of majority.

CAPACITY TO CONTRACT

iv) Necessaries – S69 a) is supplied by another person with

necessaries suited to his condition in life/anyone whom the minor is bound to support,

b) that person is entitled to reimbursed from the property of such incapable person.

Nash v InmanGovt of M,sia v Gurcharan Singh

…depends: 1) the nature of the goods/services supplied, 2) the minor’s actual needs & 3) his station in life. v) Scholarships – S4(a) Contracts (Amendment) Act 1976

“any contract/agreement between an appropriate authority and any person, with respect to any scholarship, award, bursary, loan, sponsorship or appointment to a course of study, the provision of leave with or without pay or any other facility for the purpose of education or learning”.

vi) Insurance – Insurance Act 1963(Revised 1972) a) over ten years old h/e under sixteen b) written consent of the parents/guardians

is essential. v) Apprenticeship – S13 Children & Young Persons

(Employment) Act 1966“…competent to enter into a contract of

service under this Act otherwise than as an employer, and may sue as plaintiff without his next friend or defend any action without a guardian ad litem”.

child: any person below the age of 14.young person: between the age of 14 and 16.

GUARANTEE & INDEMNITYGuarantee: a contract to perform the promise, or dischargethe liability, of a third person in case of his default.Indemnity: contract by which one party promises to save theother from loss caused to him by the conduct of thepromisor himself/by the conduct of any other person…”

CAPACITY OF PERSON OF SOUND MINDSection 12(1): A person is said to be of sound mind for

the purpose of making a ctt if, at the time when he makes it, he isi) capable of understanding it andii) of forming a rational judgment as to its effet upon his interest.

i.e mentally disordered person, incapacitated through sickness, alcohol or other drugs.

*during periods when he is of sound mind may enter ctt*ctt voidable h/e provided the other party knows of the

unsoundness of mind. Che Som bt Yip v Maha Pte Ltd CORPORATIONS*Artificial persons created by special authority/registered under specific laws. Statutory Corporations – Acts of Parliaments/Enactments of State Assemblies.Companies – Companies Act 1965 – Memorandum & Article Of Association.

CONSENTSection 10(1) “…agreements are contracts if they are

made by the free consent of parties competent to contract…”

Section 14: Consent is said to be free when it is not caused by :-

a) coercion, as defined in Section 15;b) Undue influence, as defined in Section 16;c) Fraud, as defined in Section 17;d) Misrepresentation, as defined in Section 18; ore) Mistake, subject to sections 21, 22 & 23

a) FRAUD – SECTION 17a) Suggesting a fact as true when knowingly it is not true.b) Active concealment of fact when have knowledge of it.c) Making a promise without intention of performing it.d) Any other act fitted to deceive.e) Act/omission which the law declares fraudulent.

Weber v Brown – number of rubber trees on an estate. * though the statement is fraudulent it is irrelevant if it

has not induced or caused the other party to enter into the contract. Aggrieved party must relied on it.

* Standard of proof higher than normal civil case.* Explanation to S17: Mere silence as to facts likely to

affect the willingness of a person to enter into a ctt is not fraud unless;i) it is the duty of the person keeping silence to speak (doct. of uberrimae fidei – Goh Chooi Leong v Public Life Assurance Co. Ltd.- assured failed to disclose previously suffered from Tuberculosis),r/s of the parties t/f there is a positive duty to disclose facts.

ii) his silence is, in itself, equivalent to speech. Kheng Chwee Lian v Wong Tak Thong – fraudulent representation within the meaning of S17(a) & (d). Persuaded to enter 2nd ctt because app informed it was of the same size as the one under the 1st agreement.

b) MISREPRESENTATION – SECTION 18 a) Positive assertion of fact which is not true h/e he

believes it to be true.b) Breach of duty, no intention to deceive, h/e advantage

to him/anyone claiming under him. With v O’Flanaganc) Causing h/e innocently, a party to an agreement to

make a mistake as to the substance which is subject to the contract. (h/e Section 23 states “a ctt is x voidable merely because it was caused by one of the parties to it being under a mistake as to a matter of fact”.i.e no representation from the other party & own mistake in believing such fact than contract not voidable.

Section 19; explanation, if it does not cause the consent than contract not voidable)

*Exception under S19: x voidable if there are means of discovering the truth with ordinary diligence. H/e if false/fraudulent misrepresentation cannot.

*Section 65 & 66: benefit/advantage must restore it.

c) COERCION – SECTION 15 i) Committing or threatening to commit any act forbidden

by the Penal Code orii) The unlawful detaining or threatening to detain any

property,to the prejudice of any person with the intention of causing any person to enter into an agreement.

*if S15 silent than English Principle applies.e.g duress.Kesarmal s/o Letchman Das v Valiappa Chettiar Ct held invalid transfer under the Order of Sultan when two Japanese officers present.Chin Nam Bee Development Sdn Bhd v Tai Kim ChooAdditional payment of RM4,000 if not booking cancel.

*Economic DuressUniverse Tankships of Monrovia black banning of a ship to induce the owners to make a contribution to a welfare fund.

d) UNDUE INFLUENCE – SECTION 16 (1)i) the domination of the will by one party over the

other. ii) obtaining an unfair advantage over the other.

(2)Deemed to be in a position to dominate the will of another(a) where he holds a real/apparent authority over the other, or where he stands in a fiduciary relation to the other; or(b) where he makes a contract with a person whose mental capacity is temporarily or permanently affected by reason of age, illness, or mental/bodily distress.

*Salwath Haneem v Hadjee Abdullah*Datuk Jaginder Singh & Ors v Tara Rajaratnam

Effects: S20;voidable at the option of the aggrieved party, if received benefit, ct may decide as it seem just – Chait Singh v Budin b. Abdullah

e) MISTAKE – SECTION 21,22 & 23 S21: where both parties are under mistake as to matter of

fact, the agreement is void.Raffles v Wichelhaus – ‘The Peerless’

S22: mistake of law not voidable unless the law is not in force in Malaysia.Seck v Wong & Lee – building cttr request plan.

S23: mistake by one party as to matter of fact not voidable.

Tamplin v James – bought land through auction & thought certain field included.

Mistake as to document, general rule, bound by the contract sign. Subramaniam v Retnam – ignorant of English.

Defence of Non Est Factum i.e under a mistaken belief as to the character & class of doc, cause by illiteracy, blindness/senility/fraudulent conduct of the other party. Awang bin Omar v Haii Omar & Anor

LEGALITY

S2(g): an agreement not enforceable by law is said to be void.

S10(1): all agreement are ctt if they are made….…, for a lawful consideration & with a lawful object,…

S24: the consideration or object of an agreement is lawful, unless –a) it is forbidden by a law;b) it is of such a nature that, if permitted, it would defeat any law; Hee Cheng v Krishnan – T.O.L land c) it is fraudulent;d) it involves/implies injury to the person/property of another; ore) the court regards it as immoral, or opposed to public

policy. Pearce v Brooks – vehicle for prostitution.….. Every agreement of which the object/ consideration is

unlawful is void. Ramasamy v Muriappan - kootu

UNCERTAINTY OF TERMS

Section 30: Agreements, the meaning of which is not certain, or capable of being made certain, are void.

Guthing v Lynn – will purchase if the horse brought him good luck.

FORMALITIES

*A ctt can be made orally, in writing or by conduct.Exception: Section 10(2) Contracts Act;“Nothing herein contained shall affect any law by which any ctt is required to be made in writing or in the presence of witnesses, or any law relating to theregistration of documents”.e.g 1) Hire Purchase Act 1967

2) Contracts Act – S26(a) & S26(c )

DISCHARGE OF CONTRACT1) By performance.2) By consent/agreement between the parties.3) By impossibility.4) By breach.

a) DISCHARGE BY PERFORMANCES40:…refused to perform/disabled himself from

performing his promise in its entirety, the promisee may put an end to the ctt, unless he has signified by word/conduct , his acquiescence in its continuance.

Time & Place For Performance:- it is the duty of the promisee to apply for performance at a proper place & within the hours of business.

* If no time is fix, must perform within reasonable time.* Time is of the essence, failure to perform within time,

may rescind. H/e if expressly/by conduct treats as still continuing, ctt exist but time ceases to be of essence.

Yeoh Kim Pong (Realty) Ltd v Ng Kim Pong * If time is not the essence, entitled to damages only & if

want to terminate must provide reasonable notice requesting compliance & failure to comply – terminate.

* If no place is fix, it is the duty of the promisor to ask.Reciprocal Promises:- both parties willing & ready to

perform simultaneously.Central M’sia Development v Chin Pak Chin

– to execute transfer & deliver vacant possession upon paying deposit.

Contingent Contracts:- upon occurrence of event.Tender of Performance:- offer to perform –MM Ally & Co.

i) unconditional. ii) made at a proper time & place.iii) given reasonable opportunity to ascertain the ability & willingness then & there of performing the offer.

iv) offer to deliver – give opportunity to inspect.Performance by 3rd party:- S41: personally performed

h/e

if accepts performance from 3rd party cannot later enforce against promisor (S42).

Chinn Swee Onn v Puchong.Resp obtain judgment against app h/e agreed to forbear execution because 3rd party will take over the judgment debt. In fact already received RM12,000 from 3rd party.

b) DISCHARGE BY AGREEMENTCreated by consent, extinguished by consent, expressed/

implied.1) Through enforcement of the terms of the existing ctt.2) Through subsequent ctt (S63 & S64).

i) Waiver Both parties agrees that one/more of the terms of ctt be altered.ii) NovationSubstitution of a new ctt replacing an earlier ctt.

iii) Release/Rescission Executory ctt may be rescinded by the consent of all parties to the ctt. Both parties is release from performance. (eg:sale of goods). H/e rescission for cause gives the right to damages for breach of ctt.iv) Remission – Section 64

c) DISCHARGE BY IMPOSSIBILITY/FRUSTRATIONSection 57(1) impossibility of performance at the time a

ctt is made. (2) impossibility after it has been made. (3) Promisor knew, the promisee did not

know, therefore the promisor must make compensation.

• Self-induced impossibility cannot be discharge.Ramli bin Zakaria & Ors v Govt of M’sia

• Obligations become more onerous does not mean it is impossible

Khau Daw Yau v Kim Nam Realty Devpt.

DISCHARGE BY IMPOSSIBILITY ALLOWED.

1) Destruction of the subject-matter. Taylor v Caldwell – music hall burnt down.Berney v Tronoh Mines – outbreak of war

2) Supervening events defeat the whole purpose or object of the contract.

Krell v Henry – procession of King Edward VII

3) Death or personal incapacity

4) Supervening illegality.Change in the law, performance become unlawful.

CONSEQUENCES – terminates automatically (void)

therefore S66 applies. Civil Law Act – when parties incurred expenses & involving severable contracts.

d) DISCHARGE BY BREACH – S40A ctt may be put to an end because;

i) Promisor refuse to perform.ii) Disability of the promisor to perform.

However it is the choice of the party who is not in breach i) to continue with the ctt & claim damages (exp/imp).

Sim Chio Huat v Wong Ted Fui- ordering extra work. ii) to repudiate the contract.

Problem arise for wrongful repudiation.1) Choo Yin Loo v Visuvalingam –Pltf agreed to carry work

with 30 workers at all time. His failure entitle Def to puts an end to a ctt.

2) Smith Construction Co. v Phit Kirivata – refusal to issue an architect’s certificate.

Anticipatory Breach: does an act which makes the performance impossible/expressly renounces the ctt.

REMEDIES FOR BREACH

1- Damages2- Rescission of contract3- Quantum Meruit4- Specific Performance5- Injunction

Damagesi) Special damages: the other party knew at the time of

making the contract that the special loss is likely to result from the breach. H/e in Hadley v Baxendale, two condition must be proof,

a) damages arising naturally;b) the damage is not too remote (must be

reasonably expected by both parties) Tham Cheow Tohii) Substantial damage: pecuniary compensation

intended to put the Pltf in the position he wld have enjoyed.

iii) Nominal damages: small token award, Plaintiff proved breach ctt by Defendant but suffered no actual loss.

iv) Exemplary damages: sum awarded which is far greater than the actual pecuniary loss. In exceptional circumstances (eg: breach of promise of marriage, dishonoured of trader’s cheque).

v) Penalty and Liquidated damages: Section 75a sum is stated under the ctt whereby the parties who is not in breach is entitle thereto whether or not there is an actual damage/ loss suffered.

Maniam v The State of Perak“there is no difference between penalty & liquidated damages”

RESCISSION OF CONTRACTSection 40 give the right to a party who is not at fault to

rescind a contract and entitle to claim compensation/ damages under S76. H/e w/ever due have to be paid.

QUANTUM MERUITA reasonable amount awarded base on the work/services

rendered once contract is discharged/rescinded/ repudiated.

Upton RDC v PowellThere is an express contract for services rendered by the

Plaintiff. T/f Defendant have to pay a reasonable amount for services received.

SPECIFIC PERFORMANCEDecree of the ct directing that the contract shall be

performed specifically according to its terms.Specific Relief Act 1950, S11(1) it can be granted;a) performance, wholly or partly of a trust.b) No standard for ascertaining the actual damage.c) Adequate relief cannot be afforded.

Gan Realty Sdn. Bhd. – certain shares not available in the open market.

S12(2) presumption that ‘the breach of a ctt to transfer immobable property cannot be adequately relieved by compensation in money’.

S20 when specific performance will not be granted.

1- money consideration is an adequate relief.2- ctt which runs into such minute/numerous details.3- ctt dependant on the personal qualification/volition of

the parties (ctt of employment).4- ctt requiring supervision by the ct (building ctt).5- terms, the ct cannot find with reasonable certainty. 6- In its nature is a revocable ctt (partnership).7- ctt by trustee in excess of power/breach of trust.8- ctt on behalf of corporations & is in excess of power.9- involves the performance of a continuous duty.10-ctt where both parties thought that the subject-matter

exist h/e before the ctt is made it ceased to exist.

S21(2) ct should not enforce specifically a ctt;• It will give the Pltf an unfair advantage over the Def.• Performance would involve hardship on the Defendant

h/e non performance would not involve hardship on the Plaintiff.

INJUNCTION

Specific Relief Act; S50, granted at the discretion of the H/Ctand can either be ‘temporary’ / ‘perpetual’.Temporary/interlocutory/interim : may be granted at any

period of a suit. To preserve the status quo. Perpetual : can only be granted by the decree made at the hearing & upon the merits of the suit.

S54(f); injunction cannot be granted to prevent a breach of ctt.(if it cannot be enforced by specific performance than cannot prevent the breach by asking for injunction)

S55 h/e states that if a ctt comprises an affirmative agreement coupled with a negative agreement than this shall not preclude the ct from granting an injunction to perform the negative agreement.

Pertama Cabaret Nite Club Sdn. Bhd v Roman Tam

Respondent had signed a contract to appear and sing at the appellant’s night club for a number of days & the ctt also provided that in the event of a breach, the respondent should not perform in Kuala Lumpur during the fixed period of the ctt.