AMJ40302

PROFESIONAL ENGINEER
Lecture W 12 – Law for Engineers

by
Ir. Ts. Dr. HAFIZI BIN ZAKARIA
INTRODUCTION TO LAW
 Introduction
• Classification of law
• Private Law: laws which govern the
relationship between individuals within the
state cover:-
i. contracts (legally enforceable agreements)
between individuals, and
ii. a duty of care between individuals.
TORT
Tort
Tort – cont’d
 Tort – cont’d

tort

unintentional Intentional

Occupier’s
nuisance Defamation negligence
liability
Slander-verbal
Libel-broadcast
Intentional torts
Unintentional tort
Negligence
Negligence: Neighbour test
Negligence: 3 conditions
Negligence: Duty of care
Negligence: Duty of care – 3-fold test
Parties must
be in a
relationship
Harm must of proximity
It must be
be
fair, just and
reasonably
reasonable
foreseeable

Duty of
care
Negligence: Duty of care
Negligence: Duty of care – cont’d
Negligence: Breached of duty of
care - test
Negligence: Breached of duty of
care – reasonable person
Negligence: Breached of duty of
care – foreseeable and causation
Negligence: Breached of duty of
care – factors
Negligence: Proving harm and loss
Vicarious liability
CONTRACT LAW 1950
(ACT 136)
CONTRACT LAW: PART I
Background
 Background – cont’d
(1) Common law vs Federal law (2) Common law & law of equity
vs Malaysian context
• Jamil Bin Harun v Yang • Smith Kline & French
Kamsiah & Anor [1984] 1 MLJ Laboratories Ltd. V Salim
217. (Malaysia) Sdn. Bhd. [1989] 2
• It was decided that courts CLJ 228.
have the authority to decide • It was held that the courts
whether to follow English Law have the authority to put
(common law and law of aside any Common Law or
equity) or Federal law, Law of Equity which cannot
considering the circumstances be applied in Malaysia.
and the scope the written law
permits to do so.
Contract Law in Malaysia
Function 1:
establish what
kinds of promises
will be legally
binding. Function 2: supply
Principles of
procedures for
contract
enforcing legally
originated from
binding promises,
England
or agreement.

Contracts
Act (CA)
1950
WHAT IS A CONTRACT?
 What is a contract?
• General definition: An agreement between
two or more parties that creates an obligation
to perform (or not perform) a particular duty.
• All contracts must be built upon an agreement
although not all agreements are automatically
contracts e.g. social agreements & domestic
agreements.
 What is a contract? – cont’d
S.10 (1): All agreements
are contracts if they are
made by the free
consent of parties
S.2 (h): an agreement
competent to contract,
enforceable by law is a
for a lawful
contract
consideration and with
lawful object, and are
not hereby expressly
declared to be void

CA
1950
TYPES OF CONTRACT
 Types of Contracts
• Formal vs Informal Contracts.
– Formal, need a seal
– Informal, simple & without seal.
• Unilateral vs Bilateral Contracts.
– Unilateral a promise on one side
• Carlill v Carbolic Smoke Ball Company [1892] EWCA Civ 1 (3)
– Bilateral, promises on both sides.
• Forms of Contract
– Oral
– Written
 Unilateral Contract
• (3) Carlill v Carbolic Smoke Ball Company
[1892] EWCA Civ 1
• an English contract law decision by the Court
of Appeal, which held an advertisement
containing certain terms to get a reward
constituted a binding unilateral offer that
could be accepted by anyone who performed
its terms.
Unilateral Contract – cont’d
 Unilateral Contract – cont’d
• (3) Carlill v Carbolic Smoke Ball Company [1892] EWCA
Civ 1
• The case concerned a flu remedy called the "carbolic
smoke ball". The manufacturer advertised that buyers
who found it did not work would be awarded £100. The
company was found to have been bound by its
advertisement, which was construed as an offer which
the buyer, by using the smoke ball, accepted, creating a
contract. The Court of Appeal held the essential
elements of a contract were all present, including offer
and acceptance, consideration and an intention to
create legal relations.
ELEMENTS OF CONTRACT
 Elements of Contract
• (1) Offer /proposal (fix my sink)
• (2) Acceptance (You’ve got a deal)
• (3) Consideration(The value received and given
– the money and the sink fixed)
• (4) Intention to create legal relations
• (5) Certainty
• (6) Legal Capacity
• (7) Free Consent
Offer and Acceptance
ESTABLISHING OFFER AND
ACCEPTANCE
 Offer and Acceptance: Example
• Ali wants to sell his car. He makes an offer to
sell his car to Rahim for RM25,000.00. If Rahim
say yes, the offer is said to be accepted.
• A person who make an offer is now referred as
promisor (offeror) and the party accepting the
proposal as promisee (offeree).
• Once the offer has been made and accepted, it
becomes a promise or an agreement.
Offer
Offer: in CA 1950
 Offer
1. Types of offer
 Offer: Types - Specific
• Specific: the offer only can be accepted by a person who has been
offered.
• Boulton v Jones (1857) 2 H&N 564.
• Jones used to have business dealings with Brockle Hurst. He sent an
order (offer) to Brockle Hurst for the purchase of certain goods. By
the time the order reached Brockle Hurst, he had sold his business
to Boulton. Boulton receiving the order sent all the goods to Jones
as per the order without informing Jones of the changing of the
hands of the business. When Jones learnt that the goods were not
supplied by Brockle Hurst, he refused to pay for the goods. His
contention was that he had never placed an order to Boulton, the
offer being made to Brockle Hurst, and therefore had no intention
to make a contract with Boulton. Held: Jones was not liable to pay.
 Offer: Types – General
• General: the offer is general as it is made to
the public.
• Carlill v Carbolic Smoke Ball Co. [1892] EWCA
Civ 1 (3)
 Offer: When it is Effective
• S.4(1) CA 1950 –A proposal/ offer is only effective if it is
communicated to the acceptor.
• 3 elements are necessary for an offer to be effective
(mutual assent):
1. Intention: There must be serious, objective intention by
the offer or to become bound by the offer.
– Non-offer situations include: expressions of opinion,
statements of intention, preliminary negotiations &
advertisements, catalogues and circulars.
2. Definiteness: The terms of the offer must be reasonably
certain + definite.
3. Communication: The offer must be communicated to the
offeree.
 Offer versus Invitation to Treat
• Invitation to treat-a sort of preliminary
communication which passes between the parties
at the stage of negotiation.
– Advertisement in newpapers, catalogues, circulars &
display of goods in self-service mall.
– Auction sale.
• Invitations to make offers rather than offers, thus,
the advertisor ‟would have several offers to
choose from and could accept the best one
without incurring any liability for the rest that he/
she rejected.
 Offer: Termination
• S.6 CA 1950: A proposal is revoked—
• (a) by the communication of notice of revocation by the
proposer to the other party;
• (b) by the lapse of the time prescribed in the proposal
for its acceptance, or, if no time is so prescribed, by the
lapse of a reasonable time, without communication of
the acceptance;
• (c) by the failure of the acceptor to fulfil a condition
precedent to acceptance; or
• (d) by the death or mental disorder of the proposer, if
the fact of his death or mental disorder comes to the
knowledge of the acceptor before acceptance.
Acceptance
Acceptance: in CA 1950
 Acceptance: Who can Accept
• Offeree
• Agent
 Acceptance

1 Unequivocal

2. Express in some usual manner

3. Communication
 Acceptance: Unequivocal

Absolute:
adjective
1. not qualified or diminished in any way; total.
2. viewed or existing independently and not in relation to other things; not relative or
comparative.
noun
1. a value or principle which is regarded as universally valid or which may be viewed without
relation to other things.

Unqualified:
adjective
1. without reservation or limitation; total.
Acceptance: Unequivocal – Example

1000
Acceptance: Express in some usual
manner
Acceptance: Communication
Consideration
Consideration: in CA
 Consideration: General definition
and Sufficiently & adequacy
• Consideration is defined as the value given in
return for a promise
• Sufficiency & adequacy of consideration.
– Something of legally sufficient value must be given in
exchange for the promise; and
– Must be a bargained-for exchange (the consideration
given by the promisor must induce the promisee to
incur a legal detriment and/or provide a legal benefit
to the promisor, either or both of which are sufficient
to induce the promisor to make the promise.).
Intention to create legal relations
Intention to create legal relations – cont’d
Certainty
Certainty: in CA
Certainty: Examples
Legal Capacity
 Legal Capacity – cont’d

Incompetent
persons
Exception:
Competent
contract of
persons
necessity

Legal
capacity
 Legal Capacity: SS 11 CA 1950

Sound Age of
of mind majority

Person
competent
to contract
Legal Capacity: Age of Majority
Legal Capacity: Sound of Mind

Capable of
Capable of forming a rational
understanding judgment of the
the contract contract on his
interest

Sound of
mind
(SS12(1)
CA 1950)
Legal Capacity: Sound of Mind -
Examples
Legal Capacity: Incompetent

Intoxicated
persons
Mentally
Minors incompetent
persons

Incompetent
person
Legal Capacity: Contract for Necessity
• Exception of contract by minors: Contracts for
necessity
• scholarship;
• insurance, and
• relating to marriage, divorce and dower
Free Consent
Free Consent: in CA 1950
Free Consent: What Constitute a Free
Consent?
CONTRACT LAW: PART II
VOID, VOIDABLE AND ILLEGAL
CONTRACT
Void & Illegal Contract
 Void Contract: Definition
• A void contract is a formal agreement that is
illegitimate and unenforceable from the
moment it is created. There is some overlap in
the causes that can make a contract void and
the causes that can make it voidable.
 Illegal Contract
• An illegal contract is a contract that was made
for an illegal purpose and, consequently,
violates the law. Contracts are illegal if the
performance or formation of the agreement
will cause the parties to engage in activity that
is illegal.
 Void and Illegal Contract
Contract may be void :

Void illegality

Contract Act 1950 does not distinguish that.

Void & Illegal Contract : Reasons in
CA 1950

Fraudulent (ss
24(c))
Injurious to
Offending the
person/
law (ss 24(a),
property (ss
(b))
24(d))

Void Immoral or
Mistakes (ss
against public
21, 22, 23) contract policy (ss 24e)
Void & Illegal Contract : Reasons in
CA 1950 – cont’d
Restraint of trade,
profession,
business
Restraint of (ss 28) Restraint of
marriage (ss legal proceeding
27) (ss 29)

Without Uncertain
consideration
(ss 26) (ss 30)

Unlawful
consideration
Void Impossible
(ss 31)
(ss 25) contract
Void & Illegal Contract : in CA 1950
• Contracts With Mistakes – Section 21, 22 & 23
• SS 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.
• SS 22: A contract is not voidable because it was
caused by a mistake as to any law in force in
Malaysia; but a mistake as to a law not in force in
Malaysia has the same effect as a mistake of fact.
• SS 23: A contract is not voidable merely because it
was caused by one of the parties to it being under
a mistake as to a matter of fact.
Void & Illegal Contract : in CA 1950 – cont’d
• Contracts Offending The Law – Section 24(a) &
(b)
• SS24: The consideration or object of an
agreement is lawful, unless—
– (a) it is forbidden by a law;
– (b) it is of such a nature that, if permitted, it would
defeat any law;
Void & Illegal Contract : in CA 1950
- Example
• HEE CHENG v KRISHNAN [1955] MLJ 103
• There was a contract for the purchase of
house built on a land which is temporary
occupation license was issued.
• This is contrary to rule 41 of Land Rules which
states that no license for temporary
occupation of land shall be transferrable”.
• The court held :
that the contract was void and unlawful.
Void & Illegal Contract : in CA 1950 – cont’d
• Contracts That Are Fraudulent – Section 24(c)
• SS24: The consideration or object of an
agreement is lawful, unless—
– (c) it is fraudulent;
 Void & Illegal Contract
• Contracts Injurious To Person Or Property Of
Another – Section 24(d)
• SS24: The consideration or object of an
agreement is lawful, unless—
– (d) it involves or implies injury to the person or
property of another;
Void & Illegal Contract : in CA 1950
- Example
• Syed Ahamed Alhabshee v. Puteh binti Sabtu
(1922) 5 FMSLR 243
• where the defendant agreed to sell a property
to the plaintiff in which an infant had an
interest. The dealing was detrimental to the
infant’s interest.
• Thus, it was struck down by the court.
Void & Illegal Contract : in CA 1950 – cont’d
• Contracts That Are Immoral Or Against Public
Policy – Section 24(e)
• SS24: The consideration or object of an
agreement is lawful, unless—
– (e) the court regards it as immoral, or opposed to
public policy.
Void & Illegal Contract : in CA 1950
– Immoral Example
• Pearce v. Brooks [1861] ALL ER Rep. 102
• a contract to hire vehicle for the purpose of
prostitution have been deemed immoral and
illegal by the court.
Void & Illegal Contract : in CA 1950
– Offend Public Policy Example
• Sinyium Anak Mutut v. Datuk Ong Kee Hui [1982] 1
MLJ
• The plaintiff had signed an agreement which
committed him to pay to his political party the
allowance paid to him as a Member of Parliament.
• Later, he was elected to Parliament and honoured his
agreement. Subsequently, he lost his seat in the Dewan
Rakyat and sued to recover the money paid to his
party.
The court held:
• that such contractual arrangements as void.
Void & Illegal Contract : in CA 1950
• S. 25 : unlawful consideration (read also SS 24)
• S. 26 : agreement without consideration
• S. 27 : agreement in restraint of marriage of a person other than a
minor
• S. 28 : agreement in restraint of trade, profession or business
(there are exceptions)
• S.29 : agreement in restraint of legal proceeding except contracts
to a dispute arbitration or award of scholarship
• S. 30: agreement that uncertain
• S. 31: agreements by way of wager (more formal term for bet)
• S. 57: An agreement to do an act impossible in itself is void.
 Exceptions Section 28
• Exception 1
Agreement not to carry on business of which
goodwill is sold;

– A buyer may include a term restricting the seller from

carrying on a similar business within specified time
and boundary limit.
– It is to protect the buyer by prohibiting the seller from
taking away the old customer of the business sold.
 Exceptions Section 28

• Exception 2
Agreement between partners prior to dissolution

a partner may agree that some or all of them will not carry
on a same business similar to that partnership within
certain local limits.
 Exceptions Section 28

• Exception 3
During continuance of partnership.

a partner may agree that some or all of them will not

carry on any business that not carried out by the
partnership during the continuance of the partnership.

– To prevent competition.
Voidable Contract: SS 19(1), 20
 Voidable Contract: in CA 1950
• SS 2: An agreement, which is enforceable by
law, at the option of one or more of the
parties thereto, but not at the option of the
other or others, is a voidable contract.
 Voidable Contract

Misre-
Fraud
presentation

Undue
Coercion
influence
Voidable
contract
 Voidable Contract: in CA 1950
• Section 19(1): When consent to an agreement
is caused by coercion, fraud, or
misrepresentation, the agreement is a contract
voidable at the option of the party whose
consent was so caused.
• Section 20: when ‘consent to an agreement is
caused by undue influence, the agreement is a
contract voidable at he option of the party
whose consent was so caused
 Voidable Contract: SS 15 –
Coercion
• committing, or threatening to commit any act
forbidden by the Penal Code, or the unlawful
detaining or threatening to detain, any
property, to the prejudice of any person
whatever, with the intention of causing any
person to enter into an agreement.
 Voidable Contract: SS 16 – Fraud
a. the suggestion, as to a fact, of that which is not
true by one who does not believe it to be true;
b. the active concealment of a fact by one having
knowledge or belief of the fact;
c. a promise made without any intention of
performing it;
d. any other act fitted to deceive; and
e. any such act or omission as the law specially
declares to be fraudulent.
 Voidable Contract: SS 16 –
Fraud - Example
Relationship between Principal & agent
• if A (the agent) without knowledge of his
Principal agrees to obtain money from B’s
lease of the land that belongs to his Principal.
• The agent is unlawfully receiving a secret
profit.
 Voidable Contract: SS 18 –
Misrepresentation
a. the positive assertion, in a manner not warranted by
the information of the person making it, of that which
is not true, though he believes it to be true;
b. any breach of duty which, without an intent to
deceive, gives an advantage to the person committing
it, or anyone claiming under him, by misleading
another to his prejudice, or to the prejudice of anyone
claiming under him; and
c. causing, however innocently, a party to an agreement
to make a mistake as to the substance of the thing
which is the subject of the agreement.
 Voidable Contract: SS 18 –
Misrepresentation vs fraudulent
• Fraudulent: An object and consideration of a
contract is fraudulent.
• This is different with misrepresentation where
one is fraudulently induced by another party to
enter into contract
• ‘misrepresentation’ normally refers to certain
false statement made by a representor and which
includes the other party to enter into a contract
 Voidable Contract: SS 18 –
Misrepresentation
• Silence – may not amount to
misrepresentation as in SS 17
• Example as set in CA 1950
• A sells, by auction, to B, a horse which A knows
to be unsound. A says nothing to B about the
horse’s unsoundness. This is not fraud in A.
 Voidable Contract: SS 18 –
Misrepresentation – cont’d
• Duty to disclose – also in SS 17
• Example as set in CA 1950
• B says to A, ‘If you do not deny it, I shall
assume that the horse is sound.’ A says
nothing. Here, A’s silence is equivalent to
speech.
 Voidable Contract: Example
• supposing that a contractor obtains materials
from a supplier under fraudulent circumstances
which entitles the supplier to avoid the contract.
If the contractor resells the materials to an
employer, who is an innocent purchaser acting in
good faith, the employer will then acquire a good
title as against the supplier unless the supplier
has earlier exercised his option to avoid the
original contract between him and the contractor
before the resale to the employer.
 Voidable Contract: Example
SUPPLIER CONTRACTOR EMPLOYER EFFECT
Sells goods to 1. Contractor buys Employer buys
contractor under goods from goods with good
fraudulent on supplier faith
contractor part fraudulently
2. Contractor sells
goods to
Employer
Supplier never Employer acquire
void the contract goods’ title
against the
supplier
Supplier void the Employer cannot
contract acquire goods’
title against the
supplier
Supplier void the Employer acquire
contract goods’ title
against the
supplier
 CONSEQUENCES OF ILLEGALITY
• General rule under the Contracts Act 1950 is
that the court will not enforce an illegal
contract.
• According to legal maxim: Ex turpi causa non
oritur Actio, neither party to an illegal
contract can enforce it.
• The parties may not be able to recover money
or property transferred under the illegal
contract.
 PALIANAPPA CHETTIAR v
ARUNASALAM CHETTIAR
• The plaintiff bought about 40 acres of rubber land and
in order to avoid certain regulations, he transferred this
land to his son. The father retained the possession of
the land, managed it and received all income from it.
Later the son refused to re-transfer the land, the father
brought this action.

• The plaintiff had practiced deceit on the public

administration of the country ; to make personal
gained. So he has no right to re-transfer the land.
 EXCEPTION TO EX TURPI CAUSA

• 1) In seeking relief , the plaintiff need not rely

on the illegal transaction but has an
independent cause of action

• EG: If A lets his house to B used for a drug

production, he cannot recover any arrears rent
but he can sue for ejection and possession of
the house.
 EXCEPTION TO EX TURPI CAUSA

• 2) Both parties to the contract has no knowledge

with regard to the illegality of the agreement
that they entered into.

• Section 66:
lays down that when agreement is discovered to
be void or when a contract becomes void, the
person who received any advantage under such
agreement or contract is bound to restore it to
the other party or pay adequate compensation
for the same.
MENAKA v LUM KUM CHUM [1977] 1
MLJ 91
• Menaka was a registered moneylender. She
then by using her own name lent a money to
the respondent on the security of a charge of
certain land belonging to the respondent.
However, there was a provision under
Moneylender Ordinance which prohibit a
moneylender from entering into contract and
taking the security in her own name.
MENAKA v LUM KUM CHUM [1977] 1
MLJ 91
• The court held:

that such a contract is void because contravene with

Moneylenders Ordinance but permitted RELIEF under S. 66

Lord Fraser:” neither party aware of the illegality at the time of

making the loan transaction and the documents were
prepared and executed on both sides in complete faith. The
contract was discovered to be void only after the proceeding
had been started”.
EXCEPTION TO EX TURPI CAUSA
• 3) Where only 1 party is unaware of the
illegality of the contract that party will be
able to recover it.
Yeep Mooi v Chu Chin Chua & Ors
[1981] 1 MLJ 91
• The court held that:
The A who had innocently deposited money with
another carrying the business in contravention
of Borrowing Companies Act could recover the
money under S.66.
DISCHARGE OF CONTRACT
 Discharge of Contract: Definition
• Contract that is otherwise VALID may be
unenforceable if the parties have not
genuinely assented to the terms or the
contract is not in the proper form
Discharge of Contract: 4 ways of
Discharge

By By
performance frustration

By By a breach
agreement Discharge of contract
of
contract
Discharge of Contract: by Agreement
• A contract may be discharged by agreement when
both parties agree to bring the contract to an end
and release each other from their contractual
obligations.
– Rescission (the revocation, cancellation, or repeal of a
law, order, or agreement.)
– Novation or accord (the substitution of a new contract
in place of an old one.)
– Satisfaction (the discharge of an obligation by paying a
party what is due)
• SS 63, 64
 Discharge of Contract: by
Performance
• Where both parties have fully performed their
contractual obligations.
• SS 38(1), 41, 48
 Discharge of Contract: by
Frustration
• Where there exists a change in circumstances,
after the contract was made, which is not the
fault of either of the parties, which renders the
contract either impossible to perform or
deprives the contract of its commercial
purpose. Where a contract is found to be
frustrated, each party is discharged from
future obligations under the contract and
neither party may sue for breach.
• SS 57(2)
 Discharge of Contract: by Breach
of Contract
• Where a party to a contract fails to perform,
precisely and exactly, his obligations under the
contract.
• SS 40, 65
BREACH OF CONTRACT, EFFECT AND
REMEDIES
Breach of Contract
 Breach of Contract: Definition
• Breach of contract is a legal cause of action in
which a binding agreement is not honoured by
one or more of the parties to the contract by
non-performance or interference with the
other party's performance.
Breach of Contract: Definition – cont’d
• If the party does not fulfill his contractual
promise, or has given information to the other
party that he will not perform his duty as
mentioned in the contract or if by his action
and conduct he seems to be unable to perform
the contract, he is said to breach the contract.
 Effect of Breach of Contract
• Where one party (A) breaches the contract,
the innocent party (B) is entitled to treat the
contract as ended and may be able to recover
damages.
• Breach of contract is a type of civil wrong.
 Remedy of Breach of Contract
• ‘Remedy’ is the method by which an injured
party enforces a right or correct a loss.
Remedy of Breach of Contract – cont’d

Damages

Specific
Restitution
performance

Rescission Remedies Injunction

 Remedy of Breach of Contract -
Rescission
• The abrogation (the repeal or abolition of a
law, right, or agreement)
of a contract, effective from its inception,
thereby restoring the parties to the positions
they would have occupied if no
contract had ever been formed.
 Remedy of Breach of Contract –
Restitution
• a monetary payment sometimes ordered to be
made as part of a judgment in negligence
and/or contracts cases to restore a loss.
 Remedy of Breach of Contract -
Damages
• To compensate the innocent party for losses
suffered as result of the contract being
breached by the party in breach.
– Compensatory, consequential, punitive, nominal,
liquidated.
 Remedy of Breach of Contract –
Specific Performance
• A decree directing a contract or certain act
should be performed specifically according to
its original terms
• Specific Relief Act
 Remedy of Breach of Contract –
Injunction
• An order of court refrain the party to whom it
is addressed from doing a specified act.
Selection of Remedy
Remedy of Breach of Contract in
CA 1950
CONTRACT LAW: PART III
CONTRACT OF INDEMNITY &
GUARANTEE
Contract of Indemnity
Contract of Guarantee