l.a.w. o.f. c.o.n.t.r.a.c.t
Dr. Jady @ Zaidi Hassim
Topics of discussion
1.
2.
3.
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5.
6.
Introduction
Elements of a contract
Voidable contracts
Void and illegal contracts
Discharge of contracts
Remedies
(1) Introduction
• Contract Act 1950 (Rev.1974) .
• No provision: apply English law by virtue of s.5
Civil Law Act 1956
• Def: s.2(h) CA 1950 = ‘an agreement
enforceable by law’ and ‘x included social
agreement’.
(a) Offer
(b) Acceptance
(c) Intention
(d) Consideration
(e) Certainty
(f) Capacity
All essential elements must be fulfilled together
and not alternative. S. 10 CA 1950 : made by
free consent of parties competent to contract.
(a) Offer
• S.2(a) CA 1950 – proposal
• S. 2(b) Must be definite promise
with certain specific terms
• Promisor (offeror) must have signified his readiness to
undertake an obligation upon certain terms, leaving no option
of its acceptance or refusal to the offeree.
– Affin Credit v Yap Yuen Fui (1984) : void ab initio where there
was a lack of offer and acceptance
• Offer may be specific (one particular man) and general
– Carlill v Carbolic Smoke Ball (1892) – offer to the whole world
(a) Offer – Issue 1
Advertisement? Invitation to treat?
Advertisement
(1) Coelho v The Public service Commission [1964] held
Malay mail advertisement was an invitation to
qualified person resulting applications were offers.
Order granted.
(2) Guha Majumder v Donough [1974] held – x intend to
be immediately bound, only a negotiation from the
beginning. Claim failed.
Invitation to treat
– Bid
– Supermarket counter
(3) Pharmaceutical Society of Great Britain [1953] held the display of poisons was only an invitation to treat .
Is this advertisement or invitation
to treat?
Harvey v Facey (1893):
Information – not an offer
Carlill v Carbolic Smoke Ball (1892):
Readiness to do or abstain
from doing….
(a) Offer – Issue 2
Communication?
• S.4(1) CA : when it come to the
knowledge of the person to whom it is
made.
– Ahmad Meah v Nacodah (1890): ‘suitable
house’ , vague and not absolute, x contract.
– Wiliams v Carwardine (1883) : to handcuff
the thief with no knowledge eligible to
receive any rewards. No contract but the
court held: still qualified to receive rewards
due to his knowledge.
(a) Offer – Issue 3
revocation?
• s.6 CA 1950
1. communication of notice - s. 6(a)
2. lapse of time – s. 6(b)
3. fail to fulfill a condition of acceptance – s. 6(c)
4. death / mental disorder – s. 6(d)
• How offer ended? Revoked?
- s.5(1): at any time b4 the communication of its
acceptance complete.
- Routledge v Grant (1828) : G can revoked the sale of house
within 6 weeks due to x acceptance of communication by R.
- Byrne v L Van Tienhoven (1880) – postal rule
- Hyde v Wrench (1840) – counter offer the selling of land of
$950, from $1000 - first offer is not an offer.
(b) Acceptance
• S.2(b) – he signifies his assent / acceptance
• S.2(c) = promisee
• S.7(a) Acceptance must be absolute.
- Lau Brothers v China Pacific Navigation [1965]: still
negotiation, agreement not yet formed.
- Low KarYit v Mohamed Isa [1963]: agency, an option subject
to formal contract. X binding.
- Esso Standard Malaya v Southern Cross Airways(M) Bhd
(1972) – subject to formal contract, h/ever no execution of
formal contract was made. Held: Binding due to the intention of
having no formal contract.
• S.7(b) CA : usual and reasonable manner or prescribe
the manner how.
- Eliason v Henshaw (1819) – sending by horse, posting
is not an appropriate way of acceptance.
• Silence?
- Felthouse v Bindley (1862): silence x accepted but
may depends on situation – selling horse for £30.
- e.g. S.8 CA – performance / consideration (cash) - see
Carlill v Smoke Ball
- s.3 ‘the acceptance..by any act or omission of the
party..he intends to communicate..’
(b) Acceptance: When effective?
• S.4(2)(a) communication of an acceptance
- Holwell Securities v Hughes (1974) – condition: come
to the knowledge (orally, telephone or telex). Proposer
wanted acceptance in writing and by hand.
• S.4(2)(b) : complete (against acceptor) when comes to
the k/ledge of proposer.
– Ignatius v Bell (1913): communication by post. Held: bind
offeror, x bind acceptor since acceptance x communicate.
• Revocation
– Henthorn v Fraser (1892) – revocation of offer letter
received after the posting: see s.5(1) and (2).
Ignatius v Bell (1913):
Offer until 20th August
And only received
by defendant on
25th August
Accept and sent notice
by post on 16th August
Issue – Whether communication of acceptance complete?
(c)Consideration
• Definition – s.2(d) something (prize)
• S. 26 CA: agreement without
consideration is void.
- A promise to give $10 for his birthday
but fail to do so.
- Other example:
(1) Gutrie Waugh Bhd v Malaippan [1972]
– statement of claim based on deed was
x consideration.
(2) Wong Hon Leong v Noorazman [1995] –
promise to pay $ for the service was
good consideration.
• Types
(1) Executory – x perform
(2) Executed – that should be performed (promise)
(3) Past consideration – consideration given b4 promise
given
• Need not be adequate
– Explanation 2 s 26 CA – contract x void merely
because the consideration is inadequate.
- Phang Swee Kim v Beh I Hock (1964) – pay
RM500 for land: Held there was adequate
consideration.
• Past Consideration
- S 2(d) CA – valid so long as the promisee had done
pursuant to the desire of the promisor.
- Kepong Prospecting v AE Schmidt (1968): services
prior to company establishment x consideration but
service still available in the future…show sufficient
consideration.
- read S 26(b) CA ..unless it is a promise to
compensate someone who has done something..
• Exceptions
(a) natural love n affection
- Tan Soh Sim v Tan Saw Keow (1951) : done in writing
and registered.
(b) a promise to compensate for something done
- Explanation (d) s 26 CA
(c) a promise to pay a debt barred by limitation law
- Explanation (e) s 26 CA
(d) Certainty
• uncertain = void
-Karuppan Chetty v Suah Thian [1916] :
‘granting lease at RM35.00 per month for as
long as he likes..’
(e) Capacity
• S. 11 CA: age of majority
- Mohori Bibi V Dharmadas Ghose [1903]: infants cannot
make valid contract
- Tan Hee Juan v The Boon Keat [1934] : land transfer by
infants were void.
• Exceptions:
1. necessity
2. scholarship
3. insurance
- GOM v Gurcharan Singh [1971]:
food and clothes
(3) VOIDABLE CONTRACT
• S 10 (1) CA : free consent
• S 13 CA
• S 14 CA
– Coercion
– Undue influence
– Fraud
– Misrepresentation
– Mistake
• S. 19 CA
Status of contract
• Void Contract : s 2(g) CA/ s 14 CA
• Voidable Contract: S 2(i) CA
• Valid until terminated / breached.
1. Coercion
• S 15 CA
• Force? Penal Code?
– Kanhaya Lal v National Bank of India (1913)
limited, forcing someone to enter into agreement
only.
• S 19 (1) CA: Voidable contract
– S 19 (1): option of the party
– S 19 (2): re-position
2. Undue influence
• S 16 CA
(a) s. 16(2)(a) real or apparent authority
– Lai Kwee Lan v Ng Yew Lay (1990)
(b) s. 16(2)(b) mental capacity
– Che som v Maha (1989): mortgage deed
• Burden of proof
– Raghunath Prasad Sarju Prasad (1924): on the person whose position
dominate others.
– Msian French Bank v Abdullah [1991] raised by a party and not d third
party.
– Datuk Jaginder Singh v Tara Rajaratnam: solicitor-client r/ship
– Inche Noriah v Shaik Allie (1929): illiterate woman, deed of gift to her
nephew (relationship).
3. Fraud
• S 17 CA
(a) fact which is not true - Letchemy Arumugam v Annamalay (1982)
(b) active concealment of a fact - Illustration (c) s 19 Contract Act
(c) a promise made without any intention
(d) act fitted to deceive
•
•
•
•
Mere silence or non-disclosure?
– Explanation s 17 Contract Act - not fraud unless it is his duty to say something.
Illustration (a) s 17 Contract Act
– Keates v Lord Cadogan (1851)
Illustration (b) s 17 Contract Act
Illustration (c) s 17 Contract Act
4. Misrepresentation
• S 18 CA
(a) info which is not true though he believes it to be true.
(b) any breach of duty without intention to deceive.
(c) make a mistake as to the substance innocently
• He believe the representation to be true which induces him
into agreement
– Bisset v Wilkinson (1927)
– S 19 CA: voidable
5. Mistake
• S 21 CA
– Illustration (b) s 21 : both parties-void
– Chop Ngoh Seng v Esmail [1948]: sub-matter x existence
– Chan Yoke Lain v Pacific Orient Insurance [1997]: void,
mistake of identity
– Raffles v Wichelhaus (1864)
• S 23 CA: unilateral mistake: voidable
– Tamplin v James (1880)
– Cundy v Lindsay (1878)
• S 22 CA
– Mistake of fact only and not the law
(3) VOID AND ILLEGAL CONTRACT
• S. 2(g) CA: not enforceable by law
• S. 24 CA:
a. forbidden by law
b. defeat any law
c. fraudulent
d. implies injury to person or property
e. immoral
• S. 24(a) and (b) – defeat the law
– Manang Lim Native v Manang Selaman [1986]:
agreement contravene to Sarawak Land Code
• S. 25 CA: void if consideration n object
unlawful
– Chung Khiaw Bank v Hotel Rasa Syg [1990]:
contract prohibited by statute void
•
•
•
•
S. 27 CA: restraint of marriage
S. 28 CA: restraint of trade
S. 29 CA: restraint of legal proceeding
S. 30 CA: uncertainty
Status of void contract
• The crt will not enforce illegal contract
– S. 57(2) CA: the act becomes impossible or
unlawful
– S. 2(g) CA: not enforceable by law
• S. 66 CA: restore or to pay compensation
(4) DISCHARGE OF CONTRACT
• S. 57 (2) - Frustration
• S. 47 – 56 - Performance
• Breach : a refusal to perform
(5) REMEDIES
(a) Cancel the contract
(b) Damages
(c) Specific Performance
(d) Injunction
(e) Quantum meruit
(a) Cancellation of contract
– S. 40: refusal of party to perform promise wholly.
• When a party to a contract has refused to perform, or
disabled himself from performing, his promise in its
entirety, the promisee may put an end to the contract,
unless he has signified, by words or conduct, his
acquiescence in its continuance.
(b) Damages
• S. 74 Contract Act
(a) s 74(1) party who has broken the contract When a contract has been broken, the party who suffers by the breach is
entitled to receive, from the party who has broken the contract,
compensation for any loss or damage caused to him thereby, which
naturally arose in the usual course of things from the breach, or which
the parties knew, when they made the contract, to be likely to result
from the breach of it.
(b) s 74(2) special damages, not given for any remote and
indirect loss or damage sustained by reason of the breach.
– Aim: recover s reasonable sum for breach
(c) Specific Performance
• S 11(1) Specific Relief Act
(a) damages x appropriate; s 11(2) SRA
(b) execution of contract is a matter of trust
• S 20 SRA: SP x apply if:
– S. 20(1)(a) damages will provide an adequate remedy
– contract for personal service
– delay in bringing an action
– S. 20(1)(c) terms of contract are uncertain
• S.21 (2) SRA: discretion of HC to refuse SP
(a) arbitrary / unjust
(b) cause undue hardship
• Venkatachalom Chettiar v Arunasalam [1985]: bargain
that turned out worse than expected cannot constitute
hardship.
(d) Injunction
• S 50 Specific Relief Act 1950
– Positive /Negative
• Mandatory Injunction: requiring something to
be done – Neoh Siew Eng v Too Chee Kwang
(1963)
• Prohibitory Injunction: restraining order
– Illustration (a) s 52 ARS
(e) Quantum Meruit – measurement
THANK YOU