INTRODUCTION
• The law requires that the parties to an
agreement intend that it be legally
enforceable.
• such intention mat be express or implied from
the circumstances.
INTRODUCTION
• Common Law Position:
The transaction may not be enforceable
agreement if the parties did not have the
intention to be legally bound.
• Contract Act 1950:
Nothing specific on the issue of intention as
an element of a contract.
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• To determine whether intention exist or not,
refer to English Common Law.
The law divides agreements into 2 classes:
Commercial or Business Agreement
Social, Domestic & Family Agreement
1. COMMERCIAL OR
BUSINESS AGREEMENTS
• The presumption is that the parties do have the
intention to be legally bound.
1. COMMERCIAL OR
BUSINESS AGREEMENTS
• If a party asserts that they have no intention to
be legally bound, the party have to adduce
evidence to rebut.
• This is normally done by the usage of an
express clause.
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• “Subject to Contract” clause
• A variety of contractual clause may be
employed to negative contractual intention.
• Used to express the intention that the oral or
informal agreements is not binding until the
execution of a full and final agreement in a
formal written instrument.
WINN v BULL (1877) 7 ch.D 29, pg.
32
• “subject to and is dependent upon a formal
contract being prepared”
• There was a written agreement between the
plaintiff and the defendant for the lease of a
house subject to the clause mentioned above,
but no further formal contract was entered
into.
• Held: there was no enforceable contract.
Low Yar Kit v Mohd Isa & Anor
[1963] MLJ 165
• The Defendant gave an option to the agent of
the Plaintiff to buy a parcel of land subject to
a formal contract to be drawn up and agreed
upon by the parties.
• The Plaintiff’s agent duly exercised the option
but the defendant subsequently failed to sign
the agreement for sale.
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• The Plaintiffs instituted proceedings for
specific performance or alternatively, damage
for breach of contract.
• Held: The option was conditional upon and
subject to a formal contract to be drawn up
and agreed upon between the parties.
• The exercise of the option amounted to
nothing more than an agreement to enter into
an agreement.
Daiman Development Sdn Bhd v
Mathew Lui Chin Teck & Anor [1981] 1
MLJ 56
• The respondent (purchaser) signed a booking
“pro forma” to which the parties agreed to the
purchase price of a house to be built by the
appellants (housing developer).
• After that the developer inform the purchaser
that the price of the house was to be increased
the price and the purchaser disagree.
• The developer then refused to continue with the
contract.
• The purchaser sue the developer for breach of
contract and applied for Specific Performance.
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• The appellant contended that upon its proper
construction, the pro forma was “subject to
contract” or until a further document was
mutually agreed and signed.
• Thus, no contractual obligation arose from pro
forma itself.
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• Held:
Appellant was bound with the pro forma and
could not argue that the pro forma did not
create an obligation to purchase and sell the
property.
2. Social, Domestic and Family
Agreements
• Agreements which are made between friends
and family members on certain family or
social arrangements.
2. Social, Domestic and Family
Agreements
• The law presumed that there is no intention
to create legal relation.
• It is not intended to be legally binding
between the parties.
Balfour v Balfour [1919] 2 KB 571
The defendant was a civil servant stationed in
Ceylon (Sri Lanka). while on leave in England
he has promised to pay his wife a monthly
allowance as maintenance.
The wife was unable to accompany the
defendant abroad because of her poor
health.
He then defaulted and the wife sued for
breach of contract.
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• Held:
It was not legally enforceable agreement
because the parties did not intend that they
should be attended by legal consequences.
Merit v Merit [1970]2 All ER 760
There is a matrimonial home which was in
joint name of husband and wife and
mortgage.
The husband left the matrimonial home.
Both husband and wife have a discussion and
the husband promise to pay 40 pounds a
month and the wife pay the outstanding
mortgage.
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• The husband agreed to transfer the property
to the wife’s name after the completion of the
payment of the mortgage.
• The agreement was recorded in writing on a
piece of a paper and signed by the husband.
• But after the fulfillment of the mortgage, the
husband refused to fulfill his promise.
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• Held:
the parties had intended to create legal relations
and accordingly ordered the house to be
transferred to the wife.
Note: This Notes and Copyright therein is the property of Madam Norazla
Abdul Wahab and is prepared for the benefit of her students enrolled in the
MGM 3351 course for their individual study. Any other use or reproduction
by any person WITHOUT CONSENT IS PROHIBITED.