Law of Contract

Prepared by
PN. NORAZLINA ABDUL AZIZ

Introduction
SECTION 2(h): CONTRACT ACT 1950
‘Agreement Enforceable By Law’
Sri Kajang Rock products sdn. Bhd v Maybank

finance berhad{ 1992} 1 CLJ 204
Projection Pte Ltd v The Tai Ping Insurance Co
Ltd{2001} 1 SLR 399
ESSENTIAL ELEMENTS OF A VALID
CONTRACT
1.OFFER
2.ACCEPTANCE
3.CONSIDERATION
4.CAPACITY
5.CERTAINTY
6.INTENTION
7.FREE CONSENT/ VOID@VOIDABLE CONTRACT
DISCHARGE OF CONTRACT
1. Discharge by Performance
2. Discharge by Agreement
3. Discharge by Frustration/Impossibility
4. Discharge by Breach of Contract

REMEDIES
(Discharge by Breach of Contract)
1. Rescission of Contract
2. Damages
3. Specific Performance
4. Injunction
5. Quantum Meruit
Law Of Contract
(Summary)
CONTRACT
7 DISCHARGE
ESSENTIAL OF REMEDIES
ELEMENTS CONTRACT
OFFER
(1st element)
DEFINITION
SEC. 2(a)
Contract Act 1950

TYPES:
•Specific
•General
Boulton v. Jones
Carlill v. Carbolic Smoke Ball
CONDITIONS :
•Clear, certain & final
•Must be communicate
Guthing v Lynn
R v Clarke ;Taylor v Laird
INVITATION TO TREAT v. OFFER
•Advertisement
•Display of Goods Fisher v Bell
Harris v Nickerson •Tender
•Price List Spencer v. Harding
Harvey v facey •Auction
s. 10 Auction Sales Act

REVOCATION OF OFFER
OFFER
Section 5 (1)
‘An Offer remains open until it is revoked by the offeror’
Payne v Caves( 1789)
Routledge v Grant(1828)
Revocation of offer
cases
 Sec 6(a):NOTICE
 Sec 6(b):Timur Permai Holdings Sdn Bhd v Soon seng Plywood &
Timber Sdn. Bhd92)[1998] 3 CLJ 408; National Land finance Co-
operative Society Ltd v sharidal Sdn. Bhd[1983] 2 MLJ 211.LAPSE OF
TIME
 Sec 6(c): Trans Trust S.P.R.L v Dnubian Trading Co. Ltd{1952} 1 All ER
970; Aberfoyle Plantations Ltd. Khaw Bian Cheng[1960] MLJ 47
 FAILURE TO FULFILL STIPULATED ONDITIONS
 Sec 6(d):DEATH OR MENTAL DISORDER
ACCEPTANCE
(2nd element)summary
Definition: sec. 2(b):
‘…when the person to whom the proposal is made….accepts the offer…’
Hyde v Wrench
Conditions: SEC. 7(a) v.

1.Absolute & Unqualified sec. 7(a) COUNTER OFFER
Stevenson Jaques v. McLean ‘Modification of original offer’
Communicated in Usual & Reasonable Manner sec. 7(b)
Effect: rejection of original offer

Acceptance
Conditions no 1
Case of counter offer
Malayan Flour Millsbhd v Saw Eng Chee[1997] 1 MLJ
763
Condition of Acceptance no. 2
General Rule
‘Acceptance Must be Communicated’: sec. 2(b) ( Powell v
Lee)
Provision under section 2(b)

‘signifies his assent’
Silence is not an acceptance( Felthouse v Bindley/ Fraser v

Everett)
Exceptions
1.Unilateral Contract
Carlill v Carbolic Smoke Ball; Eringgton v Eringgton;
New Zealand Shipping v A. m Satterwhaite
2.Offer to the public( Carlill’s case)
3.Reciprocal promises
( sec 2(f)/ sec. 8)
4.Acceptance through post
Postal rule
Sections applicable.
S. 4(1):’offer must comes to the knowledge of offeror’
S.4(2)(a):when the acceptance binds the offeror
S. 4(2)(b):when the acceptance binds the offeree
S. 5(1):revocation of offer
S. 5(2):revocation of acceptance
S. 6(a): method of revocation(notice)
Postal rule
SECTION 4( 2 )( a)
Entores Ltd v Miles Far East Corp. (1955)

 ‘ When the contract is made by post, the acceptance is complete as soon as
the letter is put into the post box…”
Ignatius v Bell
Household Fire Insurance Co. Ltd v Grant(1879)
SECTION 4( 2 ) ( b)
To avoid disadvantaged on the part of the
offeror( exemption clause)
Holwell Securities Ltd v Hughes(1974)
CONSIDERATION
3rd element
Definition: section 2(d)

‘which have value in the eyes of the law’
Currie v Misa(1875)
Categories of Consideration
categories
Past
Executory Executed
{Promise v promise} {Promise v Past Act}
{Promise v Act}
General Rule:
Section 26: “ agreement without consideration is
void”
Exceptions:
1.Contract Made on Account of Natural Love
& Affection, { section 26(a)} RE Tan Soh
Sim
2nd exceptions
2.Contract To Compensate A Past Voluntary
Act, {section 26(b), 1st limb}
 J.M Wotherspoon & co Ltd v Henry

Agency House
 Illustration c
3rd exceptions
3.Contract to compensate for an act, which
the promisor legally compellable to
do
{ section 26(b), 2nd limb}
 Illustration d
4th exceptions
4.Contract to pay a statute- barred debt
{section 26(c)}
 Illustration e
Rules Governing Consideration
1.Adequacy of consideration
 Phang Swee Kim v Beh I Hock
 “ Adequacy is not important to form a valid

contract”
2.Consideration Need Not Come From
The Promisee
 Definition sec. 2(d) “…promisee or any

other person”
 Venkata Chinnaya v Verikataramaya

3. Waiver of Performance
English Law v. Malaysian Law
English
Pinnel’s Case
‘ payment of a smaller sum is not a

satisfaction of an obligation to pay a larger
sum’
Malaysia
section 64
Pan Ah Ba & Anor v Nanyang Construction
Sdn. Bhd.
Kerpa Singh v Bariam Singh
Hirachand Punamchand v Temple
CAPACITY
4th element
Section 10(1); ‘ …parties competent to contract..’
Section 11: who are competent parties?
1.Age of majority
2.Soundmind
3.Not disqualified from contracting

{ bankruptcy}
MINOR
AGE OF MAJORITY ACT 1971
THE AGE OF 18 YEARS OLD and above
Effect of contract entered into by

incompetent person?
VOID: section 2(g) an agreement not
enforceable by law
EXCEPTIONS FOR MINOR
1.Necessaries
 Government of Malaysia v Gurcharan Singh
 Nash v Inman
2.Beneficial contract
 Doyle v White City Stadium
 Children and Young Persons(Employment )
Act 1966
.
3.Scholarships
 Contracts( Amendment) Act 1976 section 4(a)
4.Insurance
 Insurance Act 1963
5.Made under Age of Majority Act 1971

 Section 4(a) marriage, divorce, dower and
adoption
 Rajeswary & Anor v Balakrishnan & ors
UNSOUNDMIND
SECTION 12 (1), (2),(3)
Contract Act 1950

CONTRACTS BY CORPORATIONS
1. STATUTORY CORPORATIONS
Established by act of Parliaments, Enactments of
State assemblies
Have the same contractual capacity and may act in
the same manner as an individual of full capacity
However their contractual capacity is limited
expressly or impliedly by the Statute under which the
corporation was created
Any contract made, which is beyond the powers
conferred by the statute is ultra vires and void
Registered corporations(companies)
Incorporated and registered under the Companies
Act 1965
Artificial legal person, has some rights and capacities
like an individual person
A company has the capacity to enter into a contract
Its contractual capacity is within the limits of the
‘object Clause’ set out under the article of Association
& Memorandum of Association.
If contracting outside the object clause, the
transaction may be declared ultra vires.
What happen to the property or payment?
If declared to be void, means failed to

fulfill one of the exceptions: section 66
(right of restitution)
If falls under one of the exceptions

section 69
entitles a person to be reimbursed
INTENTION
5th element
 General rule:
1.Commercial Agreement
There is Intention to create Legal Relation
 Low Kar Yit v Mohd Isa

 Lim Keng Seong v Yeo Ah Tee
 Daiman Development Sdn. Bhd. v Matthew Lui Chin Teck
2.Social, Domestic & Family Agreement
There is NO Intention to create Legal Relation
Balfour v Balfour
Merrit v Merrit
HOWEVER
EXCEPTIONS TO THE GENERAL RULE:
1. COMMERCIAL AGREEMENT MIGHT NOT HAVE

INTENTION TO CREATE LEGAL RELATION
IF
‘facts of the case shows that parties are not serious to be
bound by a contract”
On the other hand
2. Parties in a social domestic & family agreement
might have the intention to be bound by a valid
contract
If
‘there is seriousness showed in their act or word”

‘The seriousness’
Differ from one case to another
Depending on the facts of the case
‘subject to formal contract’
Bukit Lenang’s caseOakfield does not shows any
intention to enter into the contract.
Lee Chin Kok v Jasmin Arunthuthu
Esso Standard Malaya bhd v Southern Cross Airways
Courts interpretation
Strict interpretation: meaning that the
interpretation of the correspondences between
parties, the intentions of the parties were that legally
binding contracts only came into existence upon the
execution of a formal contract
Cases:
Quek Choon Huat v R.M seow & Anor[1981] 2 MLJ 3
Ong Chong Soo v Tan Eng Tai & Anor[1982] 1 MLJ 307
Yap Eng Thong & Anor v Faber Union Ltd[1973] 1 MLJ
191
Moderate interpretation
Court will look into facts of the case, conduct of
parties etc, to determine the existence of a valid
binding contract
A contact may exist even though there is no
execution of a formal contract
Esso Std Malaya Bhd v Southern Cross Airways
Air Hitam Tin Dredging Malaysia bhd v YC Chin
Enterprises Sdn Bhd[1994] 2 MLJ 754
CERTAINTY OF CONTRACT
6th element
Section 30: “ Agreements, the meaning of which is not
certain, or capable of being made certain, are void.
Illustration (a) – (f) of section 30

Karuppan Chetty v Suah Thian
Held: ‘The contract was void for

uncertainty because the parties agreed to
a lease of $35 per month for ‘as long as he
likes’
Privity of Contract

Law of Contract

Uploaded by

Copyright:

Available Formats

Law of Contract

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Law of Contract

Uploaded by

Copyright:

Available Formats

Prepared by

PN. NORAZLINA ABDUL AZIZ

‘Agreement Enforceable By Law’

Sri Kajang Rock products sdn. Bhd v Maybank

2. Discharge by Agreement

3. Discharge by Frustration/Impossibility

4. Discharge by Breach of Contract

Contract Act 1950

s. 10 Auction Sales Act

Payne v Caves( 1789)

Conditions: SEC. 7(a) v.

Effect: rejection of original offer

Provision under section 2(b)

Silence is not an acceptance( Felthouse v Bindley/ Fraser v

2.Offer to the public( Carlill’s case)

Entores Ltd v Miles Far East Corp. (1955)

Definition: section 2(d)

 J.M Wotherspoon & co Ltd v Henry

{ section 26(b), 2nd limb}

 Phang Swee Kim v Beh I Hock

 “ Adequacy is not important to form a valid

 Definition sec. 2(d) “…promisee or any

 Venkata Chinnaya v Verikataramaya

‘ payment of a smaller sum is not a

3.Not disqualified from contracting

Effect of contract entered into by

5.Made under Age of Majority Act 1971

SECTION 12 (1), (2),(3)

Contract Act 1950

If declared to be void, means failed to

If falls under one of the exceptions

There is Intention to create Legal Relation

 Low Kar Yit v Mohd Isa

There is NO Intention to create Legal Relation

1. COMMERCIAL AGREEMENT MIGHT NOT HAVE

‘there is seriousness showed in their act or word”

Illustration (a) – (f) of section 30

Held: ‘The contract was void for

You might also like