1
INTERPRETATIONCONTRACT ACTS 1950
Definition: What is contract?
S 2(h) – contract is an agreement
enforceable by law
S 2 (g) – an agreement which is not
enforceable by law is considered void
2
S 2 (b) – promise is when a person to whom
the promise is made signifies his assent
thereto, the proposal is said to be accepted.
A proposal when accepted becomes a
promise.
S 2(C) - the person making the proposal is
called the promisor / offeror and the person
who accepts the proposal is called the
promisee/acceptor/offerree
3
 ELEMENTS OF CONTRACT
Offer and acceptance
Consideration
Intention to create legal relations
Capacity to contract
Consent
Certainty
4
 OFFER AND ACCEPTANCE
Proposal – S 2(a) – when a person signifies
to another his willingness to do or to abstain
from doing anything, with a view of
abstaining his ascent of that other to the act
of abstinence, he is said to make proposal
Proposal should be distinguished from ‘an
invitation to treat’ (an attempt to induce
another party to make an offer. It is not an
offer by itself)
5
ITT is a preliminary communication at the
stage of negotiation and a person who
makes an invitation does not want to be
bound by the law.
It is an invitation to another person to make
an offer.
Come on, the
cheapest
strawberry in
the world!!!
6
 EXAMPLES OF AN INVITATION TO
TREAT
 Display of goods in a self service supermarket – it
is an invitation to treat - the proposal is made
when the customer select the goods and brought it
to the counter for payment. When payment is
made, offer is said to be accepted and the contract
is concluded.
 Auctioneer inviting bids for a particular article –
auctioneer invites people who present to bid for
the price. The highest bid will be accepted and the
contract of sale is concluded.
 Advertisement and quotation
7
o
OFFER – WHEN IT IS EFFECTIVE?
S 4 – offer/proposal is only effective if it is
communicated to the acceptor
8
 ACCEPTANCE
S 2(b) – when a person to whom the
promise is made signifies his assent thereto,
the proposal is said to be accepted
9
o COMMUNICATION OF ACCEPTANCE
Acceptance must be communicated / make
known to the offeror
It is said to be communicated if it reaches
the offeror
10
o ACCEPTANCE BY POST
S 4(2)(a) & (b):
Communication of acceptance by post is
complete as against the offeror, when it is
put in the course of transmission to him, so
as to be out of the course of the acceptor
as against the acceptor, when it comes to
the knowledge of the offeror
11
The offeror is bound by a contract made
through post even though he does not know
about the acceptance
The acceptor is bound by the contract
only when the acceptance has reached
the knowledge of the offeror
12
o REVOCATION OF OFFER AND
ACCEPTANCE
S 5(1) – a proposal may be revoked at any
time before the communication of its
acceptance is complete as against the
proposer, but not afterwards
An acceptance may be revoked at any time
before the communication of the acceptance
is complete as against the acceptor, but not
afterwards
13
EXAMPLES
A-offerror
1 Jan
A cannot
cancel
the contract
8 Jan
B-acceptor
post letter of offer
Pos letter of acceptance
(put the letter into a
letter box)
5 Jan
–s.4(2)(a) - Acceptance is completed
against A when the letter is
posted
receives letter of acceptance from B
- S.4(2)(b) – acceptance completed against B
14
S.5(2)
B-acceptor
A-offerror
1 Jan
Post LO to B
5 Jan
Post LA to A
(s.4(2)(a)- contract
concluded)
8 Jan : receive LA from B
B cannot revoke his
acceptance on 8 Jan,
contract completed
against B. (S 5(2))
15
 CONSIDERATIONS
The price which one party pays to buy the
promise or act of the other
need not be adequate – the price suit with
the goods
PANG SWEE KIM V. BEH I HOCK
16
o INTENTION TO CREATE LEGAL
RELATIONS
 Intention relates to somebody’s state of mind
 Law cannot read the mind – use presumption
 In business agreement, there is a presumption that
the parties intend to enter into contractual
relationship/ to enforce the contract
 In social agreement, it is implied that no legal
relation are contemplated, but this presumption
can be rebutted
17
 CAPACITY TO CONTRACT
S 11 – person who is competent to enter into
contract is the one who attain the age of
majority, who is of sound mind, and not
disqualified from contracting from any law
to which he is subject
18
o CONTRACT BY MINOR
 Age of Majority Act 1971 – 18 years
 Effect of contract by minor – VOID
Mohori Bibee v. Dharmodas Ghouse
Hereford J:
‘The privy council have held that the effect of
sections 10 and 11 of the Contract Act of India is
that an infant cannot make a contract within the
meaning of the Act, and that the contract made by
infant is not only voidable but void…the decision
of the Privy Council is binding on this court, and
therefore there can be no doubt whatever that
these transfers are void.’
19
 Exceptions:
 s 4 – matters relating to marriage, divorce, dower
and adoption
 Any other written law which fix the age of
majority
Case: Rajeswary v. Balakrishnan& Ors (1958)
3 MC 178
Held: The age of majority for entering into a
marriage contract differed from other contracts
entered into by a minor and consequently, such
contracts were not affected by the general rule.
20
o Contracts by minor are valid under
certain circumstances
 Contract for necessaries – s 69 – “if a person
incapable of entering into a contract or anyone
whom he is legally bound to support, is supplied
by another person with necessaries suited to his
condition in life, the person who has furnished
such supplies is entitled to be reimbursed from the
property of such incapable person”
21
 Scholarships – s 4 Contracts (Amendment) Act
1976 – “no scholarship agreement shall be
invalidated on the ground that the scholar entering
into such agreement is not of the age of majority
 Insurance – Insurance Act 1963 – “A minor over
the age of 10 may enter into a contract of
insurance but if he is under 16, the written consent
of parent and guardian is needed”
 Apprenticeship – The Children and
Young Persons (Employment) Act 1966 Child is
a person below the age of 14, young person
between the age of 14 and 16
22
 CERTAINTY
Terms in the contract must be certain
If the terms is uncertain or not capable of
being made certain, the agreement is void
Unenforceable
Ali pleases to sell his house for RM50,000
or RM70,000
23
 SOUND MIND
S 12 Contract Act 1950
A person is said to be of sound mind for the
purpose of making the contract, if at the
time when he makes it, he is capable of
understanding it and of forming a rational
judgment as to its effect upon his interest
A person usually suffering from mental
disorder may make a contract during those
periods when he is sound
24
LEGAL EFFECT OF CONTRACTUAL
RELATIONSHIP
Valid contract – obligation to perform the
contract, legal remedies in case of breach
Voidable contract – contract which can be
affirmed or repudiated
Void contracts –cannot be enforced in the
court of law
25
 VALID CONTRACTS
If it fulfilled all the elements of contract that
is offer, acceptance, considerations, legal
capacity of parties, intention to create legal
relations and certainty
26
 VOIDABLE CONTRACT
 S 10 – all agreement are contracts if they are made
by the free consent of the parties
 S 14 – consent is said to be free when it is not
caused by one or more of the following:
 Coercion (threat)
 Undue influence
 Fraud (any act to induce another party to enter
into contract)
 Misrepresentation (true/false statement)
 Mistake
27
 VOID AND ILLEGAL CONTRACTS
 Not enforceable by law
 S 24 – the consideration or object of an agreement
is lawful unless:
 forbidden by law
 if permitted, would defeat any law
 fraudulent
 implies injury to a person or property of another
 court regard it as immoral or opposed to public
policy
28
 REMEDIES
Remedies from the court:
 Damages
 Specific performance
 Injunction
29
DAMAGES
REMEDIES
SPECIFIC
PERFORMANCE
INJUNCTION
30
Remedies granted by the court can be
divided into two types:• 1. Legal remedy
i.e damages
• 2. Equitable remedy
i.e specific performance, injunction and
quantum meruit.
Available to the innocent party but the grant
of these remedies is subject to the discretion
of the court.
31
 DAMAGES
S 75 - A party who has a right to rescind
the contract can seek legal redress
(damages)
Damages are granted to compensate the
innocent party for losses suffered as result
of the contract being breached by the party
in breach.
32
The right to sue for damages is available as
of right to the innocent party when the
contract has been breached.
If the plaintiff can establish that the
defendant has breached the contract, the
plaintiff is automatically entitled to claim
whatever losses which he can prove that he
has suffered due to that breach of contract.
33
Two type of losses: pecuniary and non
pecuniary losses
Pecuniary losses – losses which can be
quantified in financial terms.
Eg: loss of profit, expenses incurred.
Non pecuniary losses – losses which cannot
be precisely stated in financial terms.
Eg: pain and suffering,disappointment,
embarrassment
34
 SPECIFIC PERFORMANCE
A decree directing a contract or certain act
should be performed specifically according
to its original terms
Where the court grants an order of SP, the
contracting party who in breach of the
contract refuses to perform his obligation
under the contract, will be compelled to
perform the obligation.
35
Failure to do so will render him liable for
contempt of court for non-compliance with
an order of court. (CASE: JOHNSON V.
AGNEW [1980] 1 MLJ 367)
Chapter II of the Specific Relief Act 1950
lays down the principles governing the
remedy of SP.
36
 INJUNCTION
An order of court requiring the party to
whom it is addressed to do a specified act to
refrain from doing a specified act.
Equitable remedy available for breach of
contract.
Granting of injunctions as at the discretion
of the court.
Not available to a ptf as of right.
37
 TYPES OF INJUNCTION
Can be divided into temporary and
perpetual injunction. (S 50 of the Specific
Relief Act 1950)
o 1. Temporary injunction
Granted before the trial of the case.
Granted as a provisional measure at an early
stage of the proceedings before the court
has had the opportunity of hearing and
considering the merits of the case.
38
S 51(1) SPA 1950- temporary injunction is
to continue until a specific time, or until
further order of the court. - preserve status
quo of the parties
Can be granted at any time
39
o Perpetual Injunction
Given after the trial as a final judgment.
Permanent order
S 51(2) SPA 1950 – a perpetual injunction
can only be granted by the decree made at
the hearing and upon the merits of the suit;
the def is thereby perpetually enjoined from
the assertion of right, or from the
commission of an act, which would be
contrary to the rights of the ptf.Granted by
the degree made at hearing
40
Eg: Mareva Injunction – preventing the
defendant from removing asset from within
the jurisdiction.
41