LAW OF CONTRACT:
ELEMENTS OF CONTRACT
(CONSENT)
Prepared by:
NURUL NASIHIN ARIFFIN
KPMBP
Consent in a contract
• Section 10- all agreements are contracts if
they are made by the free consent of parties
competent to contract, for a lawful
consideration and with a lawful object, its not
declared as void.
• Free consent is the basis of contractual
relationship.
• The consent of the parties must be given
freely and voluntarily.
Cont…
• Section 13- two or more persons are said to
consent when they agree upon the same thing
in the same sense.
• Section 14- consent is said to be free when it
is not caused by:(a) Coercion
(b) undue influence
(c) Fraud
(d) Misrepresentation and
(e) Mistake
Cont…
• The effects from those section, the contract
become void or voidable
VOID contracts
• Section 2(g) provides that void contract is an
agreement not enforceable by law. A contract
is VOID when the consideration or object of
an agreement is unlawful.
• Section 24 provides that the consideration or
object of an agreement is lawful, unless which
had been highlighted in section 24(a)-(e).
(see illustration)
• Agreement also that are declare VOID by
Contract Act: section 26- 31
VOIDABLE Contracts
• Section 2(i) states that “an agreement which is
enforceable by law at the option of one more of
the parties thereto, but not at the option of the
other or others, is a VOIDABLE contract”.
• Voidable contracts are valid contracts that can be
made void at the option of party who claimed
that he has been forced to enter into the
contract without free consent.
• Section 10- all agreements are contracts if they
are made by the free consent of parties
competent to contract, for a lawful consideration
and with a lawful object, its not declared as void.
Cont…
• Section 14- consent is said to be free when it
is not caused by:(a) Coercion
(b) undue influence
(c) Fraud
(d) Misrepresentation and
(e) Mistake
Coercion
• Sec 15: “committing or threatening to commit
any act forbidden by the Penal Code or the
unlawful detaining or threatening to detain
any property”.
• E.g: causing grievous hurt, kidnapping,
criminal force and assault, rape, culpable
homicide, murder, extortion.
Cont…
• Case: Kesarmal s/o Letchman Das v Valiappa
Chettiar
A transfer of property which was made under
‘the orders of the Sultan, issued in the
ominous presence of 2 Japanese officers
during the Japanese ocupation of Malaysia
was held to be not valid. This is because the
consent given was not free and therefore the
transfer became voidable at the will of the
party whose consent was so caused.
Cont…
• Case: Chin Nam Bee Development Sdn Bhd v Tai
Kim Choo & 4 Ors
R purchased houses to be constructed by the A.
Each of the R had signed a contract to purchase a
house at $29,500. However, the R were forced
later to pay an additional $4000 under a threat by
the A to cancel the R booking for their houses.
Held: the payment was not voluntary but had
been made under threat. Thus, there was
coercion in the agreement of paying the
additional $4000 to the A.
Undue Influence
• Sec 16: situation where the relations subsisting
between the parties are such that one of the
parties is in a position to dominate the will of the
other and uses that position to obtain unfair
advantage over the other.
• An existence of undue influence is depend on
proof by parties to a contract or by a assumption
by court or when the contract was obvious to be
advantages only to one party.
Cont…
i) Existence of influence by proof
A person claims to be undue influenced must
show to the court the existent of the influence
and that it has urged him to contract.
ii) If it is made under the court assumption
A person claims to have been influence must
show one of the followings:
a) the use of such power by the person in
position to dominate to obtain what he desire.
Cont…
b) Existence of trusty- beneficiary
relationship.
case: Salwath Haneem v Hadjee Abdullah
P’s husband has transferred titles to all his
properties to his 2 brothers. When he passed
away, P claims that the contract was made
under undue influence.
held: the contract is void. P shows to court
that she is in trusty- beneficiary relationship
with her in-laws.
Cont…
c) party’s mental capacity is temporarily or permanently
affected by reason of age, illness, or mental or bodily
stress.
case: Inche Noriah v Shaik Allie bin Omar
An uneducated- old Malay woman executed a deed of gift of a
landed property in S’pore in favour of her nephew who had been
managing her affairs. Before executing the deed the donor had
independent advice from a lawyer who acted in good faith.
However, he was unaware that the gift constituted practically the
whole of her property and did not impress upon her that she could
prudently and equally effectively, have benefited the donee by
bestowing the property upon him by a will.
held: The gift should be set aside as the presumption of undue
influence, which is raised by the relationship proved to have been in
existence between the parties, was not rebutted.
Cont…
iii) Obvious to advantage one party only.
case: Chait Singh v Budin bin Abdullah
P (a chetty) sued D (uneducated man) for
failure to pay debts. The interest rate is at
36%. D has charge his land as security.
held: the interest rate is too high for a loan
with security. It shows that the contract is
advantageous to one party only.
Fraud
• Sec 17: Fraud includes any of the following acts
committed by a party to a contract, or with his
connivance, or by his agent, with the intent to
deceive another party thereto or his agent, or to
induce him to enter into contract
• A contract made under fraud is voidable contract.
• If person that has been fraud wants to rescind the
contract, he must proof that there is fraud in the
contract been made.
Cont…
• There are 5 acts considered as fraud under sec 17: (a)- (e).
• Elements of ‘fraud’
1) there must be a false representation/ statement
2) The representee must have relied on the representation
• Case: Kheng Chwee Lian v Wong Tak Thong
R contracted to buy an estate from A. Under A urge, R
bought another estate which the same size as the 1st
contract. But it is not.
Held: the R was induced by fraud misrepresentation into
signing the 2nd contract. Therefore, the R has the right to
repudiate the 2nd contract since it is made under fraud.
Cont…
• Case: Letchemy Arumugam v Annamalay
D had made a fraudulent misrepresentation to
the P, an illiterate Indian woman rubber- tapper,
and induced her to enter into a sale & purchase
agreement. The D had fraudulently represented
to the P that the document she was required to
sign was a loan that she had taken and to free
and the land from the charge. In fact, it was a
sale agreement of the land.
held: the agreement was voidable at the option
of the P
Cont…
SILENCE & FRAUD
• The general rule, silence does not constitute fraud.
• But there are circumstances where mere silence constitutes
fraud.
• It is when:
(a) the act of silence equivalent to speech that later found
out to be true.
(b) the contract is of uberrimae fidei. It is a contract that
must be made in bona fide.
• If a contract wants to be repudiated under fraud of mere
silence, a person who claims to be fraud must proof that
the silence encourage him to contract and he has taken
steps to investigate the truth but fails.
Misrepresentation
• It is a false statement made by the representor
and which such false representation induces
the other party to enter into a contract.
• Misrep, the person making the representation,
he believes to be true. No intention to make
fraud. (Innocent misrepresentation)
• Sec 18: Misrep includes: sec 18 (a)- (c)
Cont…
Elements of misrepresentation;
a) There must be a false representation, either
through a positive statement or some conduct
b) The representation must be one of fact, not a
mere expression of opinion
Case: Bisset v Wilkinson
Contract of sale a poultry farm is valid even
though the seller made a statement that the
farm can breed 2000 sheep is not true. It is
because it is an opinion. He never breeds a
sheep at the farm before.
Cont…
c) The statement was addressed to the party misled
d) The representation must induce the misled party to
enter into the contract.
case: Peek v Gurney
A claims the company prospectus is deceiving. He
claims to rescind the contract.
held: The claim was rejected. The A bought the
company’s share from former shareholder. The
company prospectus is directed to new applications
to buy shares from the company.
Cont…
case: Horsfall v Thomas
D refused to pay price for cannon brought
from P. he claims that P has made
misrepresentation.
held: D’s act is a breach of contract. D’s
decision to contract was not encourage by
misrepresentation.
Mistake
• Sec 21: where both the parties to an
agreement are under a mistake as to a matter
of fact essential to the agreement, the
agreement is VOID.
• The mistake must be by both parties- mutual
mistake
• There are 2 situation where mistake can
happen under mutual mistake:
1) Mistake as to the existence of the subject
matter of the contract
- look at illustration (a) & (b)to s. 21
Cont…
case: Strickland v Turner
a buyer bought and pay annuity scheme on X
life. The fact that X has already passed away is
unknown to both the buyer and the seller.
held: the contract is void, the subject matter
of the contract
Cont…
2) Mistake as to the identity of the subject matter
- no agreement on the same thing in the same
sense and in other words, no consent.
case: Raffles v Wichelhaus
Raffles agreed to sell cotton to Wichelhaus. The agreement provided
that the cotton was “to arrive England from Bombay.” However, there
were two different ships regularly sailing from Bombay to England,
one leaving in October and the other in December. Raffles shipped the
cotton on the December ship, and defendant Wichelhaus refused to
accept the cotton. Raffles sued on the alleged contract. Wichelhaus
argued that it understood the shipment would be shipped on the
October ship.
held: The court concluded there was “no binding contract.” Since the
parties meant different ships and there was a mistake by both Raffles
and Wichelhaus.
Cont…
• Mistake of Facts by 1 party (Unilateral Mistake)
- Section 23 of CA: The contract is valid.
- unilateral mistake does not affect validity of a
contract.
• Mistake by law
– Section 23 of CA: The contract is valid if the mistake
is of local law. But if of a fact or mistake of other
country law, void.
THANK YOU….
GOOD LUCK !!!