LAW OF CONTRACT

Prepared by:
Madam Siti Asishah Hassan,
Pensyarah,
Jabatan Undang-Undang,
UiTM Perlis
WHAT IS CONTRACT?

2
Example:
 Introduction
• Contract An agreement made between
two or more parties, which the
law will enforce.
• S. 2(h) of the Contracts Act 1950 –
Contract is an agreement enforceable by law.
• A contract acquires certain rights and obligations
which are legally enforceable.

4
Cont…

If A breaks a promise or refuse to fulfill his

promise....

B may sue A for breach of contract

However, it must be a
VALID CONTRACT

5
Types of Contract

Valid

Void

Voidable

Unenforceable
 Contracts - 2 MAIN TYPES:

Bilateral Unilateral
The standard type
of contract whereby Only one party
both parties (the make a promise
promisor and the and the other
promise) promise to accepts the offer by
do something and performing the
then carry out their condition.
part of promise.
Eg: Finding a lost
cat. The best
eg: Buying a loaf of example of the
bread from the case law : Carlill v
bakery Carbolic Smoke
Ball Co.
Bilateral Contract
promises to sell

promises to buy
Unilateral Contract
promises to give a reward for
those who finds and returns his
lost cat

Finds and returns

the lost cat
 Contract v Agreement

“ALL CONTRACTS ARE AGREEMENTS”

( eg: an agreement between a seller and a buyer)
BUT
“NOT ALL AGREEMENTS ARE CONTRACTS”
( eg: an agreement between a father and a son)

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 ESSENTIALS FOR A VALID CONTRACT

1) Proposal/Offer
2) Acceptance
3) Intention to create legal obligation
4) Consideration
5) Certainty
6) Legal capacity
7) Free consent
8) Legality of the objects
9) Required formalities
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What is Proposal?
 1.PROPOSAL
• S.2(a) of the Contract Act 1950 provides that:
When one person signifies to another his
willingness to do or to abstain from doing
anything, with a view to obtaining the assent of
that other to the act or abstinence, he is said to
make a proposal.

• Example: Mr. Squidward wrote offering to sell

his car to Mr. Crab for RM50,000.

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 The person making the proposal is called

promisor / proposer / offeror

 The party accepting the proposal is called

promisee / proposee / offeree

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 COMMUNICATION OF PROPOSAL
 A proposal can be made in any form
(Section 9 CA 1950):
1) EXPRESS- writing and verbal
2) IMPLIED- by conduct
 A proposal can be made to an individual, a class of
persons, a firm, a company or to the public at
large.
 Types of Offer/Proposal:
– Specific (Individual)
– General (Public at Large)
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Specific: It is made to one person or group of people. Then only that
particular person or group of people can accept.

BOULTON V JONES (1857)

J refused to pay after

Jones J offer BH to
knowing the
purchase certain
changing of hands of
goods
the biz

B sent the BH sold his

goods to Brockle business to B
Boulton
Hurst

Held: Jones was not liable to pay.

There was no contract.
General: It is made to ‘the whole world’ (the public at large), particularly
seen in the cases of rewards and other public advertisements.

Carlill v Carbolic Smoke Ball Co.

(1893) IQB 256

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Cont…
CSB
 issued an advertisement
 offered to pay ₤100 to any person who succumbed to
influenza after having used one of their smoke balls in a
specified period.
Mrs. Carlill
 bought and used the smokes ball as prescribed and caught
influenza.
 sued the company for the promised reward.

Held:
– There was an offer made by the company to the public at
large.
– Acceptance on the part of Mrs. Carlill when she bought and
used the smokes ball.
– Therefore, she was entitled for the reward.
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 Rule:
Offer must be clear and not too vague

GUTHING v LYNN

Pay ₤5 EXTRA if
the horse brings
LUCK

TOO VAGUE

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 RULE:
COMMUNICATION OF PROPOSAL - KNOWLEDGE

 The communication of the proposal is complete when it comes

to the knowledge of the person to whom it is made (S.4(1) of
the Contracts Act 1950).

 Only an addressee may accept the proposal

 A party accepting a proposal must be aware of its existence.

 A party who casually returns a lost property to its owner

cannot legally claim a reward if he is unaware of it at the time
but subsequently discovers the existence of an offer of
rewards for its return.
TAYLOR v LAIRD (1856)
Captain of the ship- resigned from his work – work as ordinary
crew- claim for wages – Df did not receive any offer of work -
Held: he could x claim for the wages

WILLIAMS v CARWARDINE (1833)

Mrs. W gave the info about the murderer of Walter
Carwardine – coz feared that she would soon die –
Held: she was entitled to the reward as long as she aware of
the reward. Motive is irrelevant.

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Cont…
R v CLARKE [1927]

 The Western Australian Gov. offered a reward for

information leading to the arrest and conviction of
persons responsible for the murder of two police
officers.
 Held: The claimed failed on the grounds that the
information was given to clear himself and not in
reliance on the offer of rewards.
 OFFER v INVITATION TO TREAT
PROPOSAL INVITATION TO TREAT
It is capable of acceptance. It is not a proposal

No negotiation An invitation to others to

make an offer

to negotiate an offer

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`
 Invitation to Treat
• Definition:
A sort of preliminary communication which passes
between the parties at the stage of negotiation.

• Examples of invitation to treat:

1) The display of goods with a price ticket attached in
a shop window or on a supermarket.
This is not an offer to sell but an invitation for
customers to make an offer to buy.

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 Cont…
FISHER v BELL [1960]
 A flick knife was displayed in the shop window.
 A shopkeeper was charged with offering weapon
contrary to the provisions of the Restriction of
Offensive Weapon Act 1959.
 Held: The display of goods is an invitation to treat
( not an offer to sell)

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 PHARMACEUTICAL SOCIETY OF GREAT BRITAIN v
BOOTS CASH CHEMISTS LTD
 The Df was charged under Pharmacy and Poisons Act
1933 (unlawful to sell certain poisons unless such sale
was supervised by a registered pharmacist).
 Held: The display was an invitation to treat.
(Payment was to be made at the exit where a cashier
was stationed and in every case involving drugs, a
pharmacist supervised the transaction and authorized
to prevent a sale.)

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Cont…
2. Advertisements, catalogues and brochures.
PARTRIDGE v CRITTENDEN [1968]
 A notice ”Bramble finch cocks and hens, 25s each” was
placed in the classified advertisement page of a periodical.
 The cock has been sold out when the plaintiff attended
the auction.
 Held: the advertisement was an invitation to treat (no
contract exist between them)
• However, there are some situations where an
advertisement may be regarded as a definite offer: Carlill’s
case.

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 Cont…
COELHO v THE PUBLIC SERVICES COMMISSION [1964]
 The Defendant advertised a job vacancy in the newspaper.
The Plaintiff applied for the job and he was employed by the
Defendant. After a while, the defendant wanted to terminate
his post on the ground that he was on probation and the
defendant has the right to terminate his post.
 Held: The advertisement is an invitation to treat. When Coelho
applied, he is making a proposal. When he was employed, the
defendant was accepting the proposal. Thus, a valid contract
exists between them. The defendant cannot simply terminate
his post.
Cont…
3. Auctions
PAYNE v CAVE [1789]
 Defendant made the highest bid (offer) at an auction sale but withdrew
his bid before the fall of the auctioneer’s hammer (acceptance).
 Held: Defendant was not bound to purchase the goods.

HARRIS v NICKERSON [1873]

 It was informed to the public that an auction sale was to include office
furniture. It was found out that there was no office furniture on auction.
The Plaintiff sued the Defendant for breach of contract.
 Held: the auction sale is an invitation to treat. Proposal only exists when
the customer bids. Contract only exist when the auctioneer accepts the
price bids by the customer. There was no contracts exists between the
auctioneer and the customer

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Cont…
4. Tender – SPENCER v HARDING
5. Company prospectus
6. Statements of price in negotiations for the sale of land.

HARVEY v FARCEY [1893]

 Harvey sent telegram to Farcey: “Will u sell us Bumper
Hall Pen? Telegraph lowest cash price…”
 Harvey telegraphed his response: We agree to buy
Bumper Hall Pen for £900 asked by u.
 Held: there was no contract
 TERMINATION OF PROPOSAL
 S.5(1) CA:“A proposal may be revoked at any time before the
communication of its acceptance is complete as against the
proposer, but not afterwards.”
 S. 6 CA states that a proposal is revoked:
a. By notice of revocation – BYRNE v TIENHOVEN
b. By the lapse of time – RAMSGATE VICTORIA HOTEL
c. By the failure of acceptor to fulfil a condition precedent –
FINANCINGS LTD v STIMSON
d. By the death or mental disorder of the party
- BRADBURY v MORGAN
Cont…
REJECTION
 An offer is rejected if:
a) The offeree notifies the offeror to that he does not
wish to accept the offer;
b) The offeree attempts to accept subject to certain
conditions;
c) The offeree makes a counter-offer.
Cont…
• Illustration- S. 5
 A proposes by a letter sent by post to sell his house to B.
 B accepts the proposal by a letter sent by post.
 A may revoke his proposal at any time before or at the
moment when B posts his letter of acceptance, but not
afterwards.
HYDE v WRENCH
 Wrench offered to sell his farm to Hyde for £1,000.
 Hyde replied with a counter-offer of £950 which was refused.
 Then Hyde was prepared to meet the original of offer of
£1,000.
 Held: No contract had been formed
 BYRNE v TIENHOVEN [1880]
• Df offered to sell 1,000 boxes of tinplates to the Pf.
1 Oct: Df posted letter of offer in Cardiff to the Pf in New
York.
8 Oct: Df posted a letter revoking the offer of Oct 1.
11 Oct: Pf received the letter of offer posted on Oct 1 and
sent acceptance by telegram the same day. It also
followed up with letter of acceptance on 15 Oct.
20 Oct: Df’s letter of revocation received by the Pf.

• There was a contract because the revocation of the offer

posted on 8 October was not effective till 20 October when it
was received by the Pf but in the meantime, the latter had
already accepted the offer on 11 October when the telegram
was sent.
 2.ACCEPTANCE
 Definition:
S.2 (b) CA
“when a person to whom the proposal is made
signifies his assent thereto, the proposal is said to
be accepted, a proposal when accepted becomes a
promise.”
 S.9 CA provides that, ”where the acceptance is
made in words, the acceptance is expressed,
where the acceptance is made other than in
words, it is implied.”

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Cont…
 S.7(a) CA
“ Acceptance must be absolute and unqualified.”

Meaning:
The acceptance must be made on exactly the
same terms as proposed without modifications
or variations.

Any modifications or variations of the proposal

does not constitute an acceptance but amounts
to a counter-offer. It is treated as a rejection of
the offer.
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Cont…
HYDE V WRENCH (1840)
June 6- Defendant offered to sell his estate to the
Plaintiff for £1,000.
June 8- Plaintiff replied stating he was willing to buy at
£ 950, defendant refused to sell.
June 27- Plaintiff wrote again offering to pay £1,000

Held:
• By making the counter offer the plaintiff had rejected the
original offer on June 8, and is no longer able to accept it
later.
• There was no contract formed.

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 COUNTER-OFFER v REQUEST / INQUIRY

STEVENSON JAQUES & CO v MCLEAN [1880]

 The defendant offered to the Plaintiff to sell iron and would
open the offer till Monday. On Monday, plaintiff sent telegram
asking about method of delivery. The defendant sent a
telegram telling about the sale to another purchaser. The
plaintiff again sent a telegram accepting the offer without
knowing about the sale to another purchaser.
 HELD: There was a contract between them. There was no
counter-offer but a mere inquiry which should have been
answered and not treated as a rejection of the offer.

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 LAU BROTHERS & CO v CHINA PACIFIC
NAVIGATION CO. LTD.
 The parties negotiate for the delivery of logs through a
series of telegram and letters. Eventually, the defendant
withdrew from the negotiation. Question arises as to
whether there is a binding contract between the parties.
 Held: there is no contract between the parties because they
are in the state of negotiation. No counter-proposal
involved.
 COMMUNICATION OF ACCEPTANCE
 S.7 (b) CA:

The acceptance may “ be expressed in some

usual and reasonable manner, unless the
proposal prescribes a manner in which it is to be
accepted….”

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Cont…
 Silence, absence of response or just total disregard of the
proposal is not acceptance as there is no positive act that can
be related to the proposal.

 The proposer may not throw the burden on the addressee to

a positive act of rejection by saying for instance:

“ if I do not hear from U within a week, I shall assume that

U have accepted my proposal.”

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 FRASER v EVERETT [1889]
 Held: there was no rule of law saying that “silence gives
consent” applicable to mercantile contracts.”

FELTHOUSE v BINDLEY [1862]

 Felthouse (uncle): “If I hear no more about him (nephew), I
shall consider the horse is mine at £30 15s.”
 The nephew did not give answer to this letter but he did ask
the auctioneer, to keep the horse out of auction sale. The
auctioneer by mistake had sold his property.
 Held : There was no contract between the uncle and nephew.
(No communication of acceptance by the nephew)

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 POWELL v LEE
 Pf : applied for the post of headmaster of a school
 Management: decided to give it to him.
However
 The decision was not communicated to the Pf.
( No appointment letter)
 One the managers informed the Pf about the selection.
 Later, the post was given to someone else
 Held: There was no valid contract

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 ACCEPTANCE THROUGH POST
 General Rule:
An acceptance is effective or complete only when it is
communicated to the proposer.
(comes to the actual knowledge of the proposer)

 Exception: (Postal Rule)

S.4(2),The communication of an acceptance is complete:
a. As against the proposer, when it is put in a course of
transmission him, so as to be out of the power of the
acceptor; and
b. As against the acceptor, when it comes to the knowledge
of the proposer.

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Cont…

Illustration (b) of s.4

 B accepts A’s proposal by a letter sent by post.
 The communication of the acceptance is complete:
As against A, when the letter is posted;
As against B, when the letter is received by A

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Cont…
ADAM v LINDSELL (1818)

 2 Sept - The Df wrote to the Pf offering to sell them some

wool and asking for an answer ‘in course of post’.
 5 Sept- It reached too late coz the letter was wrongly
addressed. Same day: the Pf posted a letter of
acceptance which reached the Df on 9 Sept.
 8 Sept- The defendants sold the wool to someone else.

 Held : The contract was formed when the claimant posted

their letter of acceptance.
Cont…
HOUSEHOLD FIRE INSURANCE CO v GRANT (1879)

 Grant applied for shares in the claimant company.

 A letter of allotment was posted but Grant never received it.
 When the company went into liquidation, Grant was asked as
a shareholder, to contribute the amount still outstanding on
the shares he held.
 Held: Grant was a shareholder of the company. The contract
to buy shares was formed when the letter of allotment
(acceptance) was posted.
ENTORES LTD v MILES FAR EAST CORPORATION [1955]
 Denning LJ stated as follows:
“ when a contract is made by post it is clear law throughout
the common law countries that acceptance is complete as
soon as the letter is put into the post box, and that is the place
where the contract is made.”
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 Cont…
IGNATIUS v BELL (1913)
 In the case, the parties had contemplated the use of the post
as a means of communication.
 The plaintiff sent a notice of acceptance by registered post in
Klang on August 16, 1912 but it was not delivered till the
evening of August 25 because the Plaintiff was away.
 The letter had remained in the post office at Kuala Selangor
until picked up by the Defendant.
 Held: the option was duly exercised by the Pf when the letter
was posted on August 16

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 Cont…
BRINKIBON v STAHAG STAHL UND
STAHLWARENHANDELSGESELLSCHAFT
[1983]
 The House of Lords affirmed the rule with respect to
communications by telex established in the Entores case.
 According to the court no universal rule can cover all such
cases and they must be resolved by reference to the
intentions of the parties, by sound business practice and
in some instances, by a judgement where the risks should
lie.

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Cont…

Notes:
 Where there is a delay in the post or the letter of acceptance
is misplaced by the postal authority, the proposer is bound
irrespective of his knowledge of the acceptance, while on the
other hand, the acceptor remains free till actual receipt by
the proposer. This implies that in the meantime, the acceptor
may also withdraw his acceptance.
 Therefore, a proposer should stipulate in a proposal that
acceptance is complete only upon receipt. That would exclude
the postal rule by express terms of the proposal.
 The postal rule also applies to telegram sent through the post
office but not to more instantaneous methods of
communication such as telex and telephone.

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 REVOCATION OF ACCEPTANCE
 S.5(2) states:
“ An acceptance may be revoked at any time before the
communication of the acceptance is complete as against the
acceptor, but not afterwards.”

 Illustration to S.5:
 A proposes by a letter sent by post to sell his house to B,
 B accepts the proposal by a letter sent by post,
 B may revoke his acceptance at any time before or at the
moment when the letter communicating it reaches A, but
not afterwards.

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 DUNMORE v ALEXANDER
• Facts: The letter of acceptance and the letter of
revoking the acceptance were received by the
offeror simultaneously.
• Held: The acceptance had been effectively revoked by
the offeree. There was no contract.

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 3.CONSIDERATION
Section 26 of CA provides that:
“An agreement made without consideration is
void”

Section 2(d) of CA: DEFINITION

“when, at the desire of the promisor, the promisee
or any other person has done or abstained from
doing, or does or abstain from doing, or promises
to do or to abstain from doing something such an
act or abstinence or promise is called a
consideration for the promise.”

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 CURRIE v MISA (1875)
Held :
A valuable consideration, in the sense of the
law, may consists of some rights interests,
profits or benefits accruing to the one party;
or some forbearances, detriments, losses or
responsibilities given, suffered or undertaken
by the other.

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 Consideration a sort of bargain, a quid pro
quo or the price which one party pays to buy the promise
or act of the other.

OSMAN BIN ABDUL GHANI & ORS V UNITED ASIAN BANK

BHD [1987]
 The respondent (the bank) promise not to sue the
appellant if the appellant pay for the debt.
 Held : if the appellant pay for the debt, the respondent
cannot sue the appellant. There was a valid consideration.

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 TYPES OF CONSIDERATION
1. EXECUTORY CONSIDERATION

PROMISE PROMISE

eg: X agrees to sell Y a motorcycle and Y promises to pay

RM 2000 for it.

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Cont…
• K. Murugesu v Nadarajah [1980]
 The appellant agreed to sell a house to the respondent and
the agreement was written on a scrap of paper. It read, in
part, as follows:
“I agree to sell my house no. (address) held under……… to Mr.
Nadarajah, the present tenant of the house at $26,000 within
3 months from date.”
 Held : The contract exists between them due to the existence
of executory consideration.
2.EXECUTED CONSIDERATION

PROMISE ACT

 For example:
X offers RM100 to anyone who finds and returns his camera
which he has earlier lost.
Y finds and returns the camera in response to the offer.
Y’s consideration for X’s promise is executed, and only X’s
liability remains outstanding.

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3.PAST CONSIDERATION

ACT PROMISE

Illustration (c) of S.26:

A finds B’s purse and gives him. B promise to give A RM 50.
This is a contract.

Past consideration may be good consideration.

Section 2(d) = The phrase ‘has done or abstained from doing’.

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• Kepong Prospecting Ltd v A.E Schmidt & Marjorie
Schmidt [1968]

 Held: It did constitute a valid consideration so that Schmidt

was entitled to his claim on the amount.

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 LAMPLEIGH v BRATHWAITE

 However:
Under English Law, past consideration is insufficient to
support a contract.

Re McArdle [1951]
Held: a promise to pay £488 to the wife was made after the
improvement had been completed and was therefore, not
binding.

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 Exceptions to the General Rule
1. An agreement on account of natural love and affection.
(S.26(a))
 Conditions:
 It is expressed in writing;
 It must be registered where a law exists requiring
such registration; and
 It is made on account of natural love and affection
between parties standing in near relation to each
other.
Cont…
 Re Tan Soh Sim [1951]

Held:
The adopted sons and daughters were not nearly related to
the family of their adoptive mother. The court further ruled
that there was no natural love and affection between the
signatories and donees.
Cont…
2. An agreement to compensate for a past voluntary act.
(S.26(b))

 There are two limbs to this exception:

a) It is a promise to compensate either wholly or in part the

other person.
b) The promisee has voluntarily done something for the
promisor.

J.M. Wotherspoon & Co.Ltd. v Henry Agency House [1962]

 Held: The promise was not supported by consideration
because the plaintiff has not done anything voluntarily to
the plaintiff. It was not a valid agreement.
Cont…
3. An agreement to compensate for an act the promisor was
legally compellable to do.(S.26(b))
 3 Conditions:
a) The promisee has voluntarily done an act;
b) The act is one which the promisor was legally
compellable to do; and
c) An agreement to compensate, wholly or inpart, the
promisee for the act
 Illustration (d) of S.26 provides an example:
A supports B’s infant son. B promises to pay A’s expenses
in so doing. This is a contract.
4. An agreement to pay a statute-barred debt. (S.26(c))

 A statute barred-debt refers to a debt which cannot be

recovered through legal action because of a lapse of time
fixed by law.
 2 requirements;
a) The debtor made a fresh promise to pay the statute-barred
debt. For example : ”I know I still owe you $400 which I
borrowed 7 years ago. I shall pay within two months.”
b) The promise is in writing and signed by the person to be
charged or his authorized agent in that behalf.
 Illustration (e) to S.26 provides:
A owes B $1000, but the debt is barred by limitation. A signs
a written promise to pay B $500 on account of the debt. This
is a contract.
 THE RULES OF CONSIDERATION

1. Consideration must have some value

• An act or a promise to do something which one is bound to
do will not be a valid consideration.
STILK V MYRICK (1809)
HARTLEY V PONSONBY (1857)

2. Adequacy of Consideration
PHANG SWEE KIM v BEH I HOCK (1964)
 FC held: the consideration was adequate because the
respondent has agreed to transfer the land to the appellant
for $500. There was a valid contract.

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3. Consideration need not move from the promisee.

Example:
• A,B and C are parties to an agreement.
• C promises to pay A RM1000 if B will repair C’s house.
• B repairs C’s house
• C does not pay A anything.
• Although A has not given any consideration for C’s promise,
he may sue C on the promise because consideration has
moved from B.
Cont…
• CASE:
Venkata Chinnaya v Verikatara ma’ya (1881)
 A sister agreed to pay an annuity of Rs 653 to her
brothers who provided no consideration for the promise.
But on the same day, their mother had given the sister
some land stipulating that she must pay the annuity to
her brothers. When the sister subsequently failed to
fulfill her promise to pay the annuity, her brothers sued
her on the promise.
 Held: She was liable on the promise on the ground that
there was a valid consideration for the promise even
though it did not move from the brothers.

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Cont…
4. Waiver of Performance
 Under English law (Pinnel’s case), it is a general rule that,
payment of a smaller sum is not a satisfaction of a
obligation to pay a large sum.
 However, the rule does not apply in Malaysia.
 S.64 of the Contracts Act provides that:
“Every promisee may dispense with or remit, wholly or in
part, the performance of the promise made to him, or may
accept instead of it any satisfaction which he thinks fit.”
 Illustration C to S.64 provides:
“ A owes B RM5000. C pays to B RM1000 and accepts them
in satisfaction of his claim on A. This payment is a discharge
of the whole claim.
 Cont…
KERPA SINGH v BARIAM SINGH [1966]
 The Defendant owed the Plaintiff $8,869.94. The
defendant’s son offered to pay $4000 as payment in full in
order to discharge his father from liability and that if the
appellant did not agree to the said settlement, the money
should be returned to him. The cheque was cashed and the
money retained by the appellant’s solicitor. Later on the
plaintiff claimed for the balance.
 Held : The acceptance of the cheque from the debtor’s son
in full satisfaction precluded them from claiming the
balance.
 4.INTENTION TO CREATE LEGAL RELATION
 A valid contract requires an intention to create legal
relations. The court determines where there is such an
intention from the language used and the context in which it
is used. There are 2 presumptions have developed in the
determination of intention with respect to agreements:

1. Business / Commercial agreements

2. Social, domestic and family agreements

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Cont…
BUSINESS / COMMERCIAL AGREEMENTS
 Presumption: there is an agreement that the parties
intend legal consequences to follow unless the parties
specify otherwise.

WINN v BULL (1877)

• A written agreement for a lease of a house ‘subject to the
preparation and approval of a formal contract’.
• Held:There was no enforceable contract because no further
formal contract was entered into.

74
LOW KAR YIT v MOHD ISA [1963]
• An option to buy a parcel of land was given by the defendant
to the plaintiff ‘subject to a formal contract’ to be drawn up
and agreed upon by the parties.
• Held: there was no contract.
LIM KENG SEONG & ANOR V YEO AH TEE [1983]
• Few letters have been exchanged between the parties
• Held: there was a contract
DAIMAN DEVELOPMENT SDN BHD v MATTHEW LUI CHIN TECK
[1981]
• The parties agreed to the purchase price of a house so they
signed a ‘pro forma’.
• Held: The appellant was bound by the ‘pro forma’.
Cont…
SOCIAL, DOMESTIC AND FAMILY AGREEMENTS
 In social, domestic or family agreement, it is implied as a
matter of course that no legal relations are contemplated,
but such presumption may be rebuttable.
 Normally it does not constitute a legally binding agreement.
This is because parties have no intention to create legal
relation.
Balfour v Balfour [1919]
 The defendant husband was a civil servant stationed in
Sri Lanka. When he was in England, he had promised his
wife that he will pay her a monthly allowance as
maintenance. The wife was unable to accompany the
husband because of her poor health.
Cont…
 The defendant did not give the plaintiff the monthly
allowance. The plaintiff brought an action against the
defendant for breach of a contract.
 The court held: it was not a legally enforceable agreement
because the parties did not intend that they should be
attended by legal consequences.
Pettitt v Pettitt [1970]
 Lord Diplock said that : Although many agreements between
spouses are not intended to be legally enforceable,
performance of such agreements may give rise to legal
consequences in other fields of law.
Cont… The presumption is rebuttable in the case:

Merrit v Merrit [1970]

 The husband left the matrimonial home which was in the joint
names of husband and wife and subject to a mortgage. The
husband and wife had a discussion in which the husband
agreed to pay the wife £40 a month out of which she should
pay the outstanding mortgage payments and when such
payments had been completed, he would transfer the property
to her sole ownership. The agreement was recorded in writing
on a piece of paper and signed by the husband. Upon
completion of the payment, the husband refused to transfer
the house.
 Held: the parties had intended to create legal relations and
accordingly ordered that the house be transferred to the wife.
 5.CERTAINTY
 At common law, there are two aspects of uncertainty:
1. The language used may be too vague
2. Failure to reach agreement on a vital or fundamental term of
an agreement.
 S. 30 CA: “Agreements, the meaning of which is not certain, or
capable of being made certain, are void.”
 Examples:
A agrees to sell to B ‘ a hundred tons of oil’.
What kind of oil?
Unless if A is a dealer in coconut oil only.
Cont…
 A agrees to sell his ‘white horse for dollars five hundred or
dollars one thousand.’
The agreement is void.
 A agrees to sell B ‘one thousand gantangs of rice at a price to
be fixed by C.’
As the price is capable of being made certain, there is no
uncertainty to make the agreement void.
Karuppan Chetty v Suah Thian (1916)
 The contract was declared void for uncertainty because the
parties agreed to a lease of $35 per month ‘for as long as he
likes’.
 6.LEGAL CAPACITY
 The parties entering into a contract should also be
competent to a contract. It means that they must have the
legal capacity to do so.
1. AGE
 S.11 of the Contracts Acts 1950 provides that:
“Every person is competent to contract who is of the age of
majority according to the law to which he is subject, and
who is of sound mind, and is not disqualified from
contracting by any law to which he is subject.”
 According to S.2 of the Age of Majority Act 1971, the age of
majority is 18 years.
 The general rule:
“ all contracts entered into by a minor are void.”
Cont…
MOHORI BIBEE V DHURMODAS GHOUSE
• The appellant in this case lent the respondent, a minor, a sum of money.
The loan was secured by way of mortgage on some houses belonging to
the respondent. The minor, through the mother, applied for a court
declaration that the agreement was void because the minor had no
capacity to contract.
• Held: The contract with the minor was void and he could not sue or be
sued on any contract.
TAN HEE JUAN V TEH BOON KEAT
• The Plaintiff infant executed transfers of land in favour of the
defendant. The transfers were witnessed and subsequently registered.
The plaintiff by his next of friend, applied to the court an order setting
aside the transfers and for incidental relief. Held : the transactions
were void and ordered the restoration of the property to the minor
 Exceptions to the general rule:

1. Under the Age of Majority Act 1971

a) In matters relating to marriage, divorce, dower and
adoption;
b) The religion and religious rites and usages ;
c) Any other written law fixing the age of majority.
Cont…
 Case Law :
RAJESWARY & ANOR v BALAKRISHNAN & ORS. (1958)
 A promise of marriage entered into by minor. The agreement
was entered into with provisions for dowry and penalty for
breach. Then, the promise to marry is repudiated. The
plaintiff sued for breach of promise to marry. The defendant
pleaded among others the incapacity of the plaintiff to enter
into the contract to marry.
 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.
2. Under Contracts Act 1950
i. Necessaries / Necessities
Necessaries are things which are essential to the existence
and reasonable comfort of the infant such as food, shelter,
clothing, education, medical services, transport etc.
NASH v INMAN [1908]
 The defendant (minor) ordered certain clothes from the
plaintiff (11 fancy waistcoats). The plaintiff sued the
defendant to recover the cost of the clothes supplied.
Based on the evidence given by the minor’s father, the
minor already had adequate supply of clothes suitable and
necessary for his condition in life.
 Held : the minor was not liable because the clothes supplied
by the plaintiff were not necessaries.
Cont…
GOV. OF MALAYSIA v GURCHARAN SINGH [1971]
 The defendant was sued for the amount of $11,500 alleged to
be the sum actually spent by the government in educating the
defendant. It was argued that at the time of the contract he
was a minor.
 Held : the contract was void but since education was
necessaries, the defendant was liable for the repayment of a
reasonable sum spent on him.
3. Scholarships
 S.4(a) Contracts (Amendment) Act 1976 provides that:
“No scholarship agreements shall be invalidated on the
ground that the scholar entering into such agreement is not
of the age of majority.”
 What is scholarship agreement?
Any contract or agreement between the 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.
 The amendment nullifies the decision in Gurcharan Singh’s
case that contract for scholarship was void under Contract
Act 1950.
Cont…
4. Insurance
 Under the Insurance Act 1963 (Revised 1972), a minor over
the age of 10 may enter into a contract of insurance but if
he or she is under 16 years, the written consent of the
parents or guardians is essential.
 This is based on the presumption that it is in a minor’s best
interest to insure himself or his property against
contingencies.
Cont…

5. Apprenticeship
 The Children and Young Persons (Employment) Act 1966
provides the necessary capacity for a minor to enter into a
contract of apprenticeship or service.
 S. 13 reads: “ Notwithstanding anything to the contrary
contained in the Contracts Act 1950 or the provisions of any
other written law, any child or young person shall be
competent to enter into a contract of service under this Act
otherwise than as an employer, and may sue as plaintiff
without his next friend or defend any action without a
guardian ad litem.”
 Cont…
DOYLE v WHITE CITY STADIUM
• D, a professional boxer and a minor entered into the contract with WCS. It
was agreed that if D was disqualified from tournament, he would lost all
the money. D contested that he was minor and not bound by the contract.
• Held: The contract was binding against D because it was for training and
his benefit.
DE FRANCESCO v BARNUM
• The contract between P and D (a minor) for apprentice dancer included
such terms that she could not marry, not receive any payment and not
dance for other person.
• Held: The terms were so harsh and unreasonable therefore the contract
cannot be enforce against minor.
Cont…
2. STATE OF MIND
 A meetings of mind and free consent is the basis of a contract.
 A person suffering from mental disability, either permanently or
temporarily, at the time of the contract obviously lack the capacity.
 S.12(1) of the Contracts Act 1950 provides that:
“ A person is said to be of sound mind for the purpose of making a
contract if, at the time when he makes it, he is capable of
understanding it and forming a rational judgment as to its effect upon
his interests.”
 A person who is competent to enter into a contract is a person who is
of sound mind.
 An unsound mind person refers to person who is mentally disorder as
well as those of a person incapacitated through sickness, alcohol or
other drugs.
 7.FORMALITIES
 The General Rule: a contract can be made orally, in writing or
by conduct.
 In Diamond Peek Sdn. Bhd & Anor v D.R Tweedie [1982] Gunn
Chitt Tuan J. observed:

”Under our law, as in India, an oral contract for the sale of

immovable property is valid and enforceable. The mere fact
that the parties desired to have that agreement put in writing
and drawn up in proper form does not affects its validity.”
Cont...

 However, there are exceptions to the general rule:

 S.10(2) CA provides that:“ Nothing herein contained shall affect
any law by which any contract is required to be made in writing
or in presence of witnesses, or any law relating to the
registration of documents.”
 For example: The Hire-Purchase Act 1967 requires hire-
purchase agreements to be in writing and signed by the hirer
or by his agent and all other parties to the agreement.
 Under the Contracts Act 1950: S.26(a) and S.26(b) requires that
these two agreements need to be in writing; -agreement made
out of natural love and affection and a promise to pay statute-
barred debt.
 9.LEGALITY OF OBJECTS
 The object or consideration of a contract must be that which
is permitted by the law. If the object is not permitted, it is said
to be unlawful.
 GENERAL RULE:
The court will refuse its aid to a person who found his or her
cause of action upon an immoral or illegal act
( maxim: ex dolo malo non aritur actio )
 S.2(g) provides that:
“ An agreement not enforceable by law is said to be void.”
Cont…
 S.24 of the Contracts Act 1950 provides that:
“ The consideration or object of an agreement is lawful
unless:
a) It is forbidden by a law
b) It is of such nature, that, if permitted, it would defeat any law
c) It is fraudulent
d) It involves or implies injury to the person or property of
another
e) The court regards it as immoral, or opposed to public policy.
 8.FREE CONSENT
 Free consent is the basis of a contractual relationship. There
must be a meeting of minds as to the nature and scope of a
contract, a consesus ad idem.
 S.10 (1) provides that: “ all agreements are contracts if they
are made by the free consent of parties competent to
contract…”.
 S.13 provides that: “ two or more persons are said to consent
when they agree upon the same thing in the same sense.”
Cont…
 Consent is said to be free when it is not caused by:

a) Coercion ( as defined in S.15)

b) Undue Influence (as defined in S.16)
c) Fraud (as defined in S.17)
d) Misrepresentation (as defined in S.18)
e) Mistake (subject to S.21,22 & 23)

 If a contract is entered into by virtue of the above

mentioned sections, the contracts is either void or voidable.
Cont…

 Void contract: S.2(g) provides that :

“ an agreement not enforceable by law is said to be void.”

 Voidable contract: S.2(i) provides that:

“an agreement which is enforceable by law at the option of
one or more of parties, but not at the option of the other or
others, is a voidable contract.”

 S.19(1) of the Contracts Act 1950 provides that

“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.”
 COERCION
 Coercion is defined under S.15 CA 1950 as:
“Coercion is the committing, threatening to commit any act
forbidden by the Penal Code, or the lawful 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.”

KANHAYA LAL v NATIONAL BANK OF INDIA (1913)

Held: The plaintiff was entitled to recover money which was
paid as a consequence of coercion caused by the wrongful
interference of the defendant bank with property.
Cont…

KESARMAL S/O LETCHMAN DAS v VALIAPPA CHETTIAR [1954]

 Held: A transfer executed under the orders of the Sultan,

issued in the ominous presence of two Japanese officers during
the Japanese Occupation of Malaya was invalid. The consent
was not freely given and the agreement was voidable at the
will or option of the party whose consent was so caused.
Cont…
CHIN NAM BEE DEVELOPMENT v TAI KIM CHOO & 4 ORS [1988]
 The respondents purchased homes off the plan to be
constructed by the appellants. Each of the respondents had
signed a sale and purchase agreement at $29,000.
Subsequently, the respondent was made to pay an additional
$4,000.
 It was held that: the additional payment was not made
voluntarily but under threat by the appellant to cancel the
respondents’ booking for their houses.

Effect of the Contract:

• A contract is voidable at the option of the party whose
consent was so caused (S.19)
 UNDUE INFLUENCE
 Undue influence is defined under S.16 CA 1950:
“ 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 an unfair advantage
over the other.”
 Essential elements:
• Domination of the will
• Unfair advantage
SALWATH HANEEM v HADJEE ABDULLAH (1894)
Cont…
CHAIT SINGH v BUDIN BIN ABDULLAH (1918)

DATUK JAGINDER SIGH v TARARAJARATNAM (1983)

Effect of the Contract:

• A contract is voidable at the option of the party whose consent
was so caused (S.20)
 FRAUD
 S.17 CA 1950 : to include various acts committed by a party
with intent to deceive the other contracting party.
 There are five different acts which may constitute fraud:
a) The suggestion, as to 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.
Cont…

KHENG CHWEE LIAN v WONG TAK THONG [1983]

 The respondent had been persuaded to enter into a second
contract on the false representation that the area of land to
be transferred was of the same size as the land which the
respondent had agreed to buy under a first agreement.
 Held: the respondent was right in repudiating an agreement
with the appellant on the ground that it was induced by
fraudulent representation within the meaning of S.17(a) and
(d)
Cont.
LETCHEMY ARUMUGAM v ANNAMALAY [1982]

 Held : the agreement is voidable at the option of the plaintiff

and must be rescinded.
Cont…
SILENCE
• Mere silence or non-disclosure would not constitute fraud.
• Exception : For parties who have fiduciary relationship, it is
the duty of the person to disclose material facts. Otherwise,
it may constitute fraud.
Illustrations:
a) 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.
b) B is A’s daughter and has just come of age. Here, the
relation between the parties would make it A’s duty to tell B
if the horse is unsound.
• However, in certain circumstances, silence may constitute a
fraud.
• Illustration (c) to section 17 :
“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.”

Effect of the Contract:

A contract is voidable at the option of the party whose
consent was so caused (S.19)
 MISREPRESENTATION
 Representation: A statement made during the course of
negotiations or it is made before a contract is concluded.
 Misrepresentation refers to certain false statements made by
representor and which induces the other party to enter into a
contract. (Without intent to deceive)
eg: “This is a great car”
- telling someone a PC is “practically new” so that someone
buy it, when it is in fact 5 years old and heavily used’)
 S.18 CA 1950
 Essential Elements:
1. False statement or untrue representation
2. The representation must induce the misled party to enter
into a contract.
Cont…
 SILENCE
Mere silence does not amount to misrepresentation unless it
is the duty of the person keeping silence to speak.
 EXCEPTION: contract of utmost good faith ( uberrimae fidei )
eg. Insurance contract

TYPES OF MISREPRESENTATION
1) Fraudulent Misrepresentation
- as defined in Derry v Peek
- the statement is lie & he knows that it is not true (lie)
2) Negligent Misrepresentation
- making a statement w/out any reasonable grounds for
knowing whether it is true or not – aspect of carelessness
3) Innocent Misrepresentation
- making a statement believes that the
statement is true when it is not. – eg: relying
on outdated info / incorrect info from
someone else
Effect of the Contract:
• A contract is voidable at the option of the
party whose consent was so caused (S.19)
Example:
A real estate broker tries to sell a house to a buyer, who stresses his need
for peace and quiet.
The broker promises that the house is very quiet ( in reality the house
next door is undergoing a very noisy reconstruction)

Fraudulent M : The broker knew about the construction and lied about it.
Negligent M : The broker did not know or simply assumed
Innocent M : If the broker had lived in the house for 10 years and
always found it to be quiet in the past
 MISTAKE
 DEFINITION:
A misunderstanding or erroneous belief about a matter of
fact or a matter of law.
 TYPES OF MISTAKE:
1. Mutual mistake
2. Unilateral mistake

 S.21 : Mistake made by both parties to an agreement-VOID

( Mistake of Fact)
 Illustration B to S.21:
A agrees to buy from B a certain horse. It turns out that the
horse was dead at the time of the bargain, though neither
party was aware of the fact. The agreement is void.
Cont…
RAFFLES v WICHELHAUS (1864)
Two parties agreed to a sale of a cargo of cotton arriving in
London by a ship called “The Peerless”, sailing from Bombay.
But unknown to both parties, there were two ships of the
same name both leaving from Bombay at different times.
Held: they were both negotiating under a mistake and had in
mind different ships, therefore the contract of sale was void.
CHAN YOKE LAIN v PACIFIC & ORIENT INSURANCE CO SDN BHD
[1997]
Held: A personal Accident Insurance contract was void as the
insurer was under mistake as to the identity of the proposer
since the signature in the proposal form was not signed by
the proposer.
Cont…
 S.22: Mistake as to the law in force in Malaysia should not
make the contract voidable. (Mistake of Law)-VALID
 “ A contract is not voidable because it was caused by a
mistake as to any law in force in Malaysia; but as mistake as
to a law not in force in Malaysia has the same effect as a
mistake of fact.”
 Illustration :
A and B make a contract grounded on the erroneous belief
that a particular debt is barred by limitation, the contract is
not voidable.
 S.23: Mistake by one party as to fact should not make the
contract voidable- VALID

 If the mistake is made by both parties, then the agreement is

void.
 because a person is expected to take reasonable care to
ascertain what he is contracting about.

 Mistake as to Document
 One party may have made mistake as to the nature of a
document he has signed.
 General Rule: a person is bound by the terms of the contract
that he signs.
Cont…

SUBRAMANIAM v RETNAM [1966]

The defendant had signed a written agreement in the English
language even though he did not understand the language.
Held: the defendant is bound by the contract.

 Exception: plea of non est factum

AWANG BIN OMAR v HAJI OMAR & ANOR [1949]

The first defendant did not know English and he was
persuaded to sign in the mistaken belief that he was merely
witnessing his brother’s signature. The court found that there
was a mistake as to the nature of the document signed and
therefore the first defendant was not liable.
 DISCHARGE OF CONTRACTS
 When the contract is terminated, it is said to be discharged
and the contracting parties are free from further
obligations arising from it.
 A contract may be discharged by any one of the following
ways:
1. By performance
2. By consent or agreement between the parties
3. By impossibility / frustration
4. By breach
 DISCHARGE BY PERFORMANCE
 A contract is said to be discharged when the parties to the
contract has performed what they have agreed to do in the
contract.
 Example : Suzy enters into a contract with Umy. Suzy has to
give Umy a laptop and in return Umy has to give Suzy RM
1,000. In this case, if Suzy has given Umy the laptop and Umy
has given Suzy RM1,000, the contract is said to be discharged
by performance.
 As a general rule, performance of a contract must be exact and
precise and should be in accordance with what the parties had
promised.
Cont…
Time and Place of Performance:
• Parties to a contract must perform their obligations according
to the time and place that they have agreed in the contract.
 S.56 CA 1950: “Time is said to be the essence of the
contract.”
 If the contract is not performed according to the time and
place that has been agreed, the contract is voidable at the
option of the promisee.
DISCHARGE BY CONSENT/AGREEMENT
 The parties may have agreed in their original contract that it
should end automatically with the happening of some event of
after a fixed period of time.
 S.63 CA 1950: “ if the parties to a contract agree to substitute
a new contract for it, or to rescind or alter it, the original
contract need not be performed.
 Illustration (a):
A owes money to B under a contract. It is agreed between A,B
and C that B shall henceforth accept C as his debtor, instead of
A. The old debt of A to B is at end, and a new debt from C to B
has been contracted.
Cont…
 S.64 CA 1950: “every promisee may dispense with or remit,
wholly or in part, the performance of the promise made to
him, or may extend the time for such performance, or may
accept instead of it any satisfaction which he thinks fit.”
 Illustration (b) to S.64:
A owes B $5,000. A pays to B, and B accepts, in satisfaction of
the whole debt, $2,000 paid at the time and place at which
the $5,000 were payable. The whole debt is discharged.
 DISCHARGE BY IMPOSSIBILITY
 A contract is terminated if the things that the parties agreed to do is
impossible to perform.
 Impossibility can be divided into two categories:
1) Impossibility of performance at the time a contract is made.
2) Impossibility of performance after a contract has been made.

 First category:
 S.57(1) CA 1950- “an agreement to do an act impossible in itself is void.”
 Illustration (a) : an agreement ‘to discover treasure by magic’ is
obviously void.
Cont…

 Second Category:
 S.57(2) CA 1950 – “A contract becomes impossible, or by reason of some
event the promisor could not prevent, unlawful.” ( covers the common law
doctrine of frustration, eg: by supervening event or illegality)
 A contract may be discharged by frustration, the contract is automatically
void.
TAYLOR v CALDWELL (1863)
 The Plaintiff hired the Defendant’s hall for a series of concerts.
Nevertheless, the hall was accidentally burnt down before the date of
concert. Held: the contract may be discharged by frustration.
 BERNEY v TRONOH MINES LTD [1949]
 A contract of employment was discharged by frustration on the outbreak
of war when Japan invaded Malaysia.

KRELL v HENRY [1903]

 A room was hired for a sole purpose of watching the coronation
procession of King Edward VII but owing to the King’s illness, the
procession was cancelled.
 Held : Henry could be excused from paying rent for the room as the
contract was frustrated.

Consequences of Frustration:
S.66 CA 1950- When a contract is void, any person who has received any
advantage under the contract is bound to restore it, or to make
compensation for it, to the person from who he received it.
 DISCHARGE BY BREACH
• When a promisor fails to performs his obligations or to tender
performance, there is a breach of the contract which entitles the party
not in breach to take appropriate action which may include
repudiation.
• S.40 CA 1950: “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.”
• The party not in breach has two options:
1. To continue with the contract and claim damages or
2. To repudiate the contract
Cont…

BAN HONG JOO MINE LTD v CHEN & YAP LTD [1969]
 The appellant had refused to make fortnightly payments for work already
done.
 The appellant ordered the respondent to stop work left.
 Held: The respondent can treat the contract as having been repudiated.
They are entitled to sue the appellant for the work which had been done.
 Consequences of Breach:
S.65 CA 1950- An innocent party may put an end to the contract and he
must restore any benefits which he may received from the other party.
 REMEDIES FOR BREACH OF CONTRACT
• When there is a breach of contract, the party not in default
may claim one or more remedies:
1) Rescission
2) Damages
3) Specific Performance
4) Injunction
5) Quantum Meruit
 RESCISSION
• S.40 CA 1950: “ When a party to a contract has refuse 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.”
• When the contract is put to an end, the contracting parties are no longer
obliged to perform the contract.
• S.65 CA 1950 operates for the contract rescinded due to voidable nature of
the contract. t provides that if the contract is voidable and the party choose
to rescind the contract, the party who has received any benefit under the
contract is bound to restore it to the person from whom he received it.
 DAMAGES
• Damages are awarded to a party as compensation for the damage, loss
or injury he has suffered through a breach of contract.
• The measure of damages recoverable is set out in S.74 CA or in
common law rule laid down in HADLEY v BAXENDALE (1854), the rule is
that an injured party is entitled to:
1) Damages arising naturally
2) If he claims special damages for any loss sustained, he must show that
they are such that the other party knew at the time of making the
contract that the special loss is likely to result from the breach.
3) Such compensation is not to be given for any remote and indirect loss
or damage.
Cont…

• Case Law: THAM CHEOW TOH v ASSOCIATED METAL SMELTERS LTD (1972)
 The appellant had agreed to sell a metal melting furnace to the respondent
and giving an undertaking that the metal furnace would have a
temperature of not lower than 2,600 degrees F.
 However, this specification was not fulfilled and the respondent brought
an action alleging breach of condition and claimed damages, including loss
of profits.
 Held: The appellant would not normally be liable for payment of damages
for loss of profits unless there was evidence that the special object of the
furnace had been drawn to their attention and they had contracted on the
basis that delay in delivery would made them liable to payment for loss of
profits.
Cont…

• There are several types of damages:

1) Substantial Damages
 Pecuniary compensation intended to put the plaintiff in the position
he would have enjoyed had the contract been performed.
2) Nominal Damages
 Consists of a small token award where the plaintiff has proved a
breach of a contractual right but suffered no actual loss.
3) Exemplary Damages
 Consists of a sum awarded which is far greater than the actual
pecuniary loss suffered by the plaintiff. They are awarded only in
exceptional circumstances such as breach of promise to marry
 SPECIFIC PERFORMANCE
• Specific performance is a discretionary remedy
( given at the discretion of the court).
• It is a decree of the court directing that the contract shall be performed
according to its terms.
• This remedy is governed by the Specific Relief Act 1950.
• S.11(1) provides that specific performance may be granted by the court
in the following circumstances:
a) When the act agreed to be done is in the performance, wholly or partly,
of a trust;
Cont…

• Illustration: A holds certain stock in trust for B. A wrongfully disposes of

the stock. The law creates an obligation on A to restore the same
quantity of stock to B and B may enforce specific performance of this
obligation.
b) When there exists no standard for ascertaining the actual damage
caused by the non-performance of the act agreed to be done;
 Illustration: A agrees to buy, and B agrees to sell, a picture by a dead
painter and two rare China vases. A may compel B specifically to
perform this contract, for there is no standard for ascertaining the
actual damage which would be caused by its non-performance.
c) Where the act agreed to be performed is such that its non-performance
would not afford adequate relief.

GAN REALTY SDN BHD & OM v NICHOLAS OM [1969]

The court granted specific performance to enforce a promise to sell
certain shares not available in the open market.
d) When it is probable that pecuniary compensation cannot be got for the
non-performance of the act agreed to be done.
 Illustration:
A transfers without endorsement, but for valuable consideration, a
promissory note to B. A becomes insolvent and C is appointed his
assignee. B compel C to endorse the note, for C has succeeded to A’s
liabilities and a decree for pecuniary compensation for not endorsing
the note would be fruitless.
 S.21(2) SRA provides for the situation whereby court should not grant
specific performance:
a) Where there would give unfair advantage over the defendant,
b) Where the performance of the contract would involve some hardship
on the defendant which he did not foresee and non-performance will
cause hardship to the plaintiff.
 S.18(3) SRA gives power to the court to award compensation in
addition to specific performance is not sufficient to satisfy the justice of
the case.
 INJUNCTION
 Injunction is an act to restraint someone from doing
something or requiring someone to perform a specific act.
 S.50 SRA provides that injunction is granted at the
discretion of the court.
 There are two types of injunction:
1. Temporary / Interlocutory / Interim Injunction
2. Perpetual Injunction
Cont…
 S.51 SRA describes the two types of injunction:
1. Temporary injunction are such as are to continue until a
specified time, or until the further order of the court. They
may be granted at any period of a suit, and are regulated by
the law relating to civil procedure.
2. A perpetual injunction can only be granted by the decree
made at the hearing and upon the merits of the suit, the
defendant is thereby perpetually enjoined from the
assertion of a right, or from the commission of an act, which
would be contrary to the rights of the plaintiff.
 A perpetual injunction can only be granted after a full trial
and upon the merits of a case and the defendant is
permanently prohibited from doing the act or ascertaining a
right for which the injunction was granted.
Cont…

• AMERICAN CYNAMIDE CO v ETHICON (1975)

 The principle established in this case requires the court, in
an application for interlocutory injunction, to ask whether
there is a serious question to be tried in the sense that a
claim is not frivolous or vexatious and not whether the
plaintiff has made a prima facie case.
 NEOH SIEW ENG & ANOR v TOO CHEE KWONG (1963)
 In this case, the court granted a perpetual injunction by
ordering the defendant who was a landlord of the plaintiff
to keep all communication pipes in proper repair and to
comply with all regulations of the Waterworks Department
so that water supply to the premises rented by the plaintiff
would not be disconnected.
Cont…

 Injunction to perform negative agreement.

 S.55 SRA : provides that a contract for which the court is
unable to compel specific performance, it should not
preclude the court from granting an injunction.
 Illustration: A contracts with B to sing for twelve months at
B’s theater and not to sing in public elsewhere. B cannot
obtain specific performance of the contract to sing, but he is
entitled to an injunction restraining A from singing at any
other place of public entertainment.
 PERTAMA CABARET NITE CLUB v ROMAN TAM (1981), In
the case, the court granted an interlocutory injunction when
specific performance is not available.
 QUANTUM MERUIT
 Meaning : ‘as much as he has earned’
 If there is a breach of a contract, the injured party maybe
entitled to claim for work done and services performed.
 2 types of cases :
1) Where one party abandons /refuses to perform the
contract.
2) Where work has been performed under a void contract.