Chapter 5 – OTHER ESSENTIALS OF A
CONTRACT
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What are the other essential elements of a
valid contract?
What are the rules and laws governing the
elements?
How do the rules/laws operate in different
circumstances?
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Meaning – intention to
create contractual
relationship. Intend the
other party to be bound by
obligations.
If this element is absent,
there is no contract.
It is either express or
implied from circumstances.
Express – based on what
both parties intended.
Implied - based on legal
presumption which depends
on type of agreement.
Contracts Act 1950 is silent
on ITCLR, therefore we
import English common law
on this matter.
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Social/domestic/family agreement:
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No legal relations are contemplated, but such
presumption may be rebuttable.
Business agreement:
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there's a presumption that the parties intend
legal consequences to follow unless the
parties specify otherwise.
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Presumption – no ITCLR
No contract
Balfour v Balfour [1919] 2 KB 571
Facts: Husband came back from Ceylon to
stay with his wife. Then he promised to pay
30 pounds per month when he is in
Ceylon.He then went again to Ceylon. Later
he wrote to his wife to live apart. The wife
then obtained divorce decree from court
and ask for the promise.
Held : the wife’s claim cannot succeed
because there was no contract as there was
no ITCLR
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Presumption is rebuttable if circumstances of
the case show to the contrary.
Merrit v Merrit [1970] 2 All ER 760
Fact :A married couple divorced. They made an
arrangement in writing about their house. The
husband promised to transfer his ½ share of
the house if the wife pay all charges in
connection to the house. The wife did pay &
the husband refused to transfer.
Held : by having such arrangement- there was
ITCLR-There was a contract.
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Presumption –
there is ITCLR.
Query? What is
the effect then?
 Hv, presumption
is rebuttable if
circumstances
show to the
contrary.
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If ‘subject to contract’
clauses are used – no
ITCLR (Low Kar Yit &
Ors v Mohd Isa & Anor
[1963] MLJ 165).
Conclusion – it depends
on parties intention and
surrounding
circumstances (Daiman
Development Sdn Bhd v
Mathew Lui Chin Teck &
Anor [1981] 1 MLJ 56).
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At common law,there are 2 types – language
used is vague; certain terms are vague.
In Malaysia, these are covered by S.30.Illustration (a), (b), (c), (d), (e) & (f)
If this element is absent, contract is void
Case: Karuppan Chetty v SuahThian (1916) 1
F.M.S.L.R.300 – parties agreed to a lease for
as long as he likes.
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One of the elements of valid contract –
S.10(1)”All agreement are
contracts…parties competent to
contract…”
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Meaning – party must be of age of majority,
have sound mind & not being disqualified
by law to enter into contract– S.11
If these elements are absent, contract is
void – case: Mohori Bibee v Dhurmodas
Ghose (1903) I.L.R. 30 Cal. 539
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S.2 of Age of Majority Act
1971- 18 year old
Thus, minor is a person
whose age is below 18
General rule :Contracts
entered by minors are void –
Tan Hee Juan v Teh Boon
Keat [1934] MLJ 96
Queries? What is the legal
justification? What is the
effect?-to protect the minors
against consequences of
their own actions as they are
presumed lack of judgment
in their action.
Hv, there are exceptions to
the general rule.
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1.Contract to marry entered by minors/
their parents on their behalf– valid.
Rajeswary & Anor v Balakrishnan & Ors
(1958) 3 MC 178
2.Contracts for necessaries – the minor is
liable to reimburse the supplier.
The basis of a minor’s liability for
necessaries is summed up in Nash v
Inman.
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Common law: minor is liable for contract
for necessaries as the contract is valid
But in Malaysia,the minor is liable to
compensate the necessaries supplied to
him under Sec 69 but the contract is void
as stated in the case of Government of
Malaysia v Gurcharan Singh & Ors [1971] 1
MLJ 211
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Necessaries is not defined in the Contracts Act
1950.Therefore, we have to refer to the definition
provided by English common law.
According to the case : Gov. of M’sia v Gurcharan
Singh – it must be suited to minor’s condition in
life.
E.g. clothes, shelter, education, food and medical
aid.
‘necessaries': must be construed broadly, depends
on the facts of the case, conditions and
circumstances in which supply was made and
purpose which was served.
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What constitutes necessaries: may vary
according to the position of particular
individual.
Test of necessaries: depends on the nature of
goods or services supplied, minor's actually
needs and his station of life.
E.g: clothes cd well be necessaries but if the
minor is already adequately stocked, they may
be treated as mere luxury.
Education in this time and age, held to be
necessaries in Gurcharan Singh’s case
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S.69 – minor is bound to pay for necessaries.
Illustration (a) & (b)
S.69 applicable if:
a. Necessaries must have been actually
supplied;
b. Minor’s liability includes necessaries
supplied to anyone whom he is legally bound to
support such as his wife or child.
c. Supplier of necessaries can only claim
reasonable price and which may not be the
same as the contract price;
d. Minor is bound to pay only if he has the
property to do so.
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Query? If minor has misrepresented
his age, can he still avoid the
contract by pleading minority? YES
 Case: Natesan v Thanaletchumi &
Anor[1952] MLJ 1
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3. Scholarship agreement with
govt bodies - valid (s.4(a)
Contracts (Amendment) Act
1976)
 Scholarship agreement: any
contract between 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.
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‘Appropriate
authority’:includes Federal
Government or State Govt, a statutory
authority or educational institution.
The amendment does not affect the general
law relating to contracts including
scholarship agreement between minors and
private organizations.
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4. Several other legislation allows minors
to enter into valid agreements
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Contract of insurance – minor between 10
and 16 must obtain parents/guardian/
consent – Insurance Act 1963 (Revised 1972)
Contract of apprenticeship or service – valid.
S.13 Children and Young Persons
(Employment) Act 1966 any child (below the
age of 14) or young persons (a person
between the ages of 14 and 16) is competent
to enter into a contract of service other than
as an employee.
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S11:Every person is competent to
contract……who is of sound mind, and
is not disqualified from contracting by
any law to which he is subject.
Sound mind – capable of understanding
and forming a rational judgment as to
the contract and its effect.-S12
S12: covers mentally disordered
person, those incapacitated through
sickness, drugs/alcohol.
Effect – Act doesn’t specify if such
contract are void or voidable.
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In the absence of an authoritative judicial
pronouncement, the law remains
uncertain.
Under common law: contract voidable at
the option of the person of unsound mind
if the fact of mental disorder or
intoxication can be proved, provided the
other party knows of his condition.
Imperial Loan Co v Stone [1892] 1
Q.B. 599.
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A bankrupt and wound up companies cannot
enter into certain types of contract for
example: transfer of land
Corporation and companies can only contract
in transaction within their powers given by
the statutes under which they are
incorporated or licensed memorandum &
article of association.
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General rule – contract can be made
orally/verbally, in writing or by conductDiamond Peek Sdn Bhd v D.R. Tweedie
S.10(2) – unless any law requires a
contract to be in writing.
E.g. S5 of Hire Purchase Act 1967, S.26(a)
and S.26(c) of Contracts Act 1950.
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The other essentials are equally important in
determining whether valid contract exists.
Certain elements are required by CA 1950
and some are required by common law.
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The object and consideration must be lawful
We will be dealing in chapter 7
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