ASSIGNMENT 1

MATRIC
NAME DANISH BIN SAID SUDHIR 012018090283
NO.

SUBJECT LAW OF CONTRACT II CODE WLW20303

PROGRAMME BLC GROUP INDIVIDUAL

DATE OF 17th March 2020

SUBMISSION (Tuesday, during class)

LECTURER’S MADAM DORINA ABDULLAH

QUESTION
‘Rules of Interpretation of Contracts’
The courts have developed a number of rules that are
used when interpreting disputed contracts.
Please explain in details the said rules with the
supporting reported cases
SUBMIT : Tuesday ( 4pm – 6.00 pm)
FORMAT
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TOTAL
MARK
S
‘RULES OF INTERPRETATION OF CONTRACTS’

We make contract or even involve with it in our everyday life. Contract is the main
foundation of all commercial transactions. In a simple words, a contract is a bargain,
a deal, from which both parties expect to earn benefit. When two or more persons
involve and enter into a contract, their intention is been carry out the terms of the
contract as promised. Although as we can see in the present today of business
world, there are many contract that are made and yet been broken by the parties. In
general what does it mean by contract? Legally speaking the term “ contract “ can be
defined as an agreement enforceable by the law which is a contract is an agreement
that legally binding between the parties. Although parties may entered into a valid
contract, but it is essential to establish the extent of the obligations that the parties
have entered into which is the content of the contract itself.

The general rule is that contract can be made wholly by word of mouth ( known as
oral contract) or even wholly in writing (written contract) or combination by word of
mouth and partly in writing. If the contract is made only by word of mouth, the
contents that stipulates in the contract are a matter of evidence for the parties to
submit in which to be decided upon by the judge, in addition if the contract is wholly
made by writing, the court will interpret only the document in which the parties have
chosen to express their agreement.

As generally, when faced with the question of contract interpretation, the court have
developed several number of method and rules that can be used when interpreting
disputed contracts. There are several principles that been established by the court
that act as a guidelines for it to follow in order to determine and produce their
decision to solve certain disputes when in term of interprets the contract. So, what
are the principles of interpretation of contracts that have been establishes by the
court? In the first place for interpretation is to determine the primary point of the
contract and the provisions should be rejected if they are inconsistent with that
purpose. Frequently, when a parties are arguing about the meaning of particular
clause, or condition, the trees are lost in the wood and this main concept is forgotten.
Quoted by Lord Halsbury who was a British lawyer and a Conservative politician
stated that, “Looking at the whole of the instrument and seeing what one must
regard…as its main purpose, one must reject words, indeed whole provisions, if they
are inconsistent with what one assumes to be the main purpose of the contract”. It is
believe that contract interpretation is needed and necessaries if there is a dispute
arose over the terms, words or even the definitions in a contract. If both parties can’t
agree and unanimously on what a certain contract terms means, they need to file a
lawsuit in order for the court review the contract. In this stage the court will take part
in the contract interpretation in order to resolve the disagreement and disputes.

The courts regularly start with the primary goal of contract interpretation which is to
reach at a definition that most plainly reflects the original intent of the parties.
Therefore, a judge may have to interpret the contract in order to regulate and decide
what are the parties intentions or understanding were regarding when the provision
of the contract was originally been agreed upon by the parties. In the construction of
terms of the contracts, the principle that need to be fulfilled by the court is to
determine the intention of the parties that need to be construed objectively. In order
to interpreting the words used by the parties to the contract, the court must takes an
objective view as to what was the intention of the parties. In generally, the objective
of contracts holds that an agreement between the parties are legally binding if, in the
opinion of a reasonable person who is not a party to the contract, an offer is consider
has been made and accepted. This concept has become one of the main standard
or approaches for determining the intent of the parties in agreement since the late
19th century. As prior to that, the previous standard which is known as the subjective
theory of contracts or “meeting of the minds” that was commonly applied throughout
the early 1800s had been replaced by the objective theory of contracts. Therefore,
the main point in the validity of a contract is the acts, or external performances of the
parties, and not the internal state of mind, or intent of the parties that exists when
coming to an agreement. From a different perspective, intent can be defines as an
individual state of mind when performing an act or behaving in certain manner. The
parties must express their intention through actions and unambiguous words.

This objective approach had been adopted and used by the court in order to
determine what are the main reason or intention of a parties to enter into an
agreement compare to adopt the subjective approach. In order to understand and
sees in different perspective, we need to know what does it mean by subjective
approach. The subjective approach can be convey as a legal doctrine whereas its
consider a contract to be structure on the basic of a subjective meeting of minds as
legally binding. This approach require the court to consider the parties state of mind
when determine whether or not the contract is legally enforceable. In comparison,
the court applied the objective approach in order to look at the case from the
perspective and point of view of a rational person. Some legal experts and court
decline the subjective approach, and some believe that through that approach it play
a vital part in the contract law. In order to determine, whether that parties to a
contract have the intention or not, to start a legal relationship, the court will applied
and uses the test of contractual intent. Such a test is objective and not subjective in
nature. It’s uses an objective approach to ratify the contract enforceability. Thus it is
not necessary to have a subjective meeting of the minds to make a contract legally
enforceable. As general, the court will evaluates the entire situation and will attempts
to find out whether or not it will be rational to impute such an intention to the parties.
Compare to the objective approach, some legal experts believe that the subjective
approach to a contract law should be given more attention, this is due to the curb of
creation of contract to objective intent alone my excessively restrict the foundation of
the contract. Overall, this approach had the pros and cons.

As a illustration, this objective approach have been applied in the case of Keng Huat
Co Sdn Bhd v Makhanlall (Properties) Pte Ltd [1984] 1 MLJ 243. As a brief of this
case, the appellant is a company which owned by Mr. Ong Keng Huat. Due to
ending his agreement with the previous partner, Mr. Ong entered into a new lease
agreement with the respondent company for the same premises which listed under
the name of Keng Huat Film Co. (the appellant). The new lease which is entered by
the Mr. Ong includes a Clause 4(e), similar to Clause 4(e) in the 1957 lease whereby
the appellant company given an option to renew the new lease for another ten years
as well at the same time at the same rent and “ containing the like covenants and
provisos as were therein contained”. During the process for renewal the agreement,
the appellant by way of his solicitors requested that the renewed lease contains the
same terms and regulations as to the first lease and add a draft copy of the second
lease for an approval by the respondent. The respondent replied and returned back
the draft lease correctly approved but except with the Clause 4(e) which contain the
covenant for renewal have been deleted. Thus the appellant company disagreed and
insisted that the first Clause 4(e) is the first lease that entitled it to a perpetual
covenant to renew. According to the former Federal Court stated that the court will
excludes evidence of the parties subjective intentions so that any individual purpose
which either of them hopes to attain by the agreement and their own interpretation or
understanding of the agreement is not acceptable. As regard to the case and
explanation above, it can be stated that there is a reason why the court applied the
objective approach compare to subjective approach. In my point of view, by applying
subjective approach it can be consider the best approach whereby this approach
refer to the personal perspectives, the feelings or even opinions when entering the
decision of making judgement. Based on the case above, it is agreeable why the
court applied the objective approach in order to interpret the words used by the
parties who is in the case to the contract, and through this objective approach the
court manage to determine and identify what are the intention of the parties. By
applying this approach it eliminate the subjective approach and determine the
process as well as the best decision which is purely based on the hard facts only.

Moreover the second case that can be relate is in the case of Kwan Chew Holdings
Sdn Bhd v Kwong Yik Bank Bhd [2006] 6 MLJ. In this case the appellant/plaintiff
was a customer of the defendant/respondent bank. The plaintiff brought the claim on
the ground that the defendant is in breach of contract failed to make available to it
funds that it had already promised to the former. Due to the breach, the plaintiff
housing development, known as the Taman Danggi project could not be completed
resulting to the losses that have to bear by the plaintiff. Next the fact is first stated
that the sum agreed to lent was RM 550,000, but the defendant arbitrarily and
unilaterally reduced the loan to RM 520,000. In addition to that, the defendant had
delayed in releasing into the plaintiff’s account loads already approved by way of end
finance. The plaintiff took out proceedings to recover the damages for breach of
contract from the defendant which was dismissed by the High Court. As to the
appeal, it was allow and the Court of Appeal held that ‘ when a court is asked to
determine the true nature of the bargain between contracting parties it is required to
take an objective approach. It must have regard to the factual matrix forming the
background to the contract to determine the objective aim or purpose of the
transaction. It is objective view based on the test of the reasonable man that is the
determining factor and not the subjective view of a party to the contract. Therefore in
this case the defendant was clearly in breach of contract. Under this principle of an
objective approach, the court also stated that by applying this principle it must be
read or along with the objective view which based on the rest of the reasonable man.
In general, in order to determine if that parties or individua; acted with negligence,
this theory of reasonable man test will be applied. It refers as a test whereby a
hypothetical person is used as a legal standard. So by does it mean by reasonable
person. Basically, this hypothetical person is describe and refer as rational or
cautious man which exercises average care, skill as well as common sense in the
conduct of the society which are required of its members for the protection and
safety of their own and others interests too.

Apart from that, in the case of Berjaya Times Square Sdn Bhd v M Concept Sn
Bhd the court applied the objective approach. In this case, the appellant, a property
developer developed a project which came to be known as Berjaya Times Square
(the project). The respondent, who is a private limited company entered into an
agreement to purchase a commercial shop lot in the project (the agreement).
According to the agreement the appellant was to deliver the respondent lot and as
per to clause 22 in the agreement , if the appellant delayed in making delivery, it had
to pay liquidated damages calculated from day to day at the rate of 12% pa of
purchase price. The appellant failed to make delivery on the stipulated date and
despite to the delay the appellant kept the respondent informed of the progress of
the development. The appellant claimed that it is liable to pay on the liquidated
damages according to the agreed formula. The respondent then begin proceedings
against the appellant claiming, a declaration had been rescinded, a order that the
appellant refund the monies in its hands and damages. In the Federal Court the
court held this case regard as the most recent guidelines to interpretation of contract,
whereby it stated that “the court has no power to enhance upon the instrument
which is called upon to interpret, whether it can be a contract, a statute or even
articles of association. It cannot commerce terms to make it more fairer or more
reasonable. Nevertheless, the meaning is not needed or always what the authors or
even parties to the document would have considered. It is significant which the
instrument would transfer to a reasonable person having all the necessary
background information which would reasonably be available to the audience to
whom the instrument is addressed… It is this objective meaning which is ordinary
called the intention of the parties, or the intention of Parliament, or the intention of
whatever person or body was or is consider to have been the author of the
instrument.

As a conclusion, in my point of view the objective theory or approach is regard to be

more practical whereby it is more vital compare to subjective approach. The
objective theory of contracts is consider the dominant philosophy in contract law in
order to dictate the mutual assent to an enforceable agreement. We can see that the
reasons are clear. It is consider a pragmatic rule, based on the determination of
mutual assent on tangible, verifiable external evidence, rather than relying on
problematic proof of subjective intent. Through this approach it enforces the reliance
and expectation interest of the parties. All in all what can I said is that the most
important and essential is that it provide the freedom of contracts and also personal
autonomy of all the parties in contracting process.

Moreover the next principles for construct the rules for interpretation of contracts is
that, the intention of the parties must be found within the four walls of the contractual
document. When the contract is in inwriting, the intention of the parties must be
found within the four walls of the contractual documents and it is not legal or lawful if
there is a present to external evidence. Dating back to the history, in order to
interpret the contract, the Four walls rule been applied by the court whereby the
court requires to resolve contractual disputes based on the words which contained in
the disputed contract. This principles avoid and prohibit the contracting party from
introducing new or external evidence separate from the contract that would and
might change the fundamental terms and condition as intended in the written
contract. Apart from that, this approach also forbid a party from introduce evidences
to interpret an unambiguous term. The court act as the main guardians where
through this principle the court are require to discern what the contracting parties
intended by using the whole document or agreement. For instances, there are no
any applicable agreements or other comprehension between the parties, the entire
agreement is contained within the four corners of the document and any dispute that
arose regards to the meaning contains therein will be governed by this document
only.

We can see and relate this principle in the case of Dato’ Shazryl Eskay bin
Abdullah v Merong Mahawangsa Sdn Bhd & Anor [2014] 3 MLJ. The fact are
stated as according, the appellant was requested by the respondent to lobby and
procure the project which is known as “Cadangan Pembinaan Jambatan
Menggantikan Tambak Johor secara Penswastaan” (bridge project) for a
consideration. This request was express in a letter of undertaking or the contract
addressed to the appellant. The appellant then had succeed in obtaining the bridge
project for behalf of the respondent but the respondent failed to pay RM 20 Million as
the total sum. The appellant filed suit and the bridge project later progress into what
is now known as ‘ the Crooked Bridge Project’ in which the construction had been
terminated by the government. The learned judge in the case dismissed the
appellant claim on the grounds that the claim was incompetent under the letter of
undertaking as the bridge project had been terminated by the government. Thus the
appellant appealed against the decision.

As the appeal is allow with cost, the held that by looking at the words employed in
the letter of undertaking, the appellant claim must succeed for the simple reason that
it referred to the award of the project a opposed to project itself. As stated in Clause
4 it is clearly that the letter of undertaking shall remain valid as long as the award of
the project remains valid and subsisting. In the court point of view it is regarded that
it is wholly complete differences between the award of the project and the project
itself.

The court stated at no time was the award of the project terminated by the
government. Th learned judge had wrongly accept the counsel for the respondent
disagreement that the letter of undertaking become invalid when the government
terminate the “Crooked Bridge Project”. Based on the prior decision the Court of
Appeal does not agree with the disagreement as it would mean that the court will be
reading something which did not appear within the four corners of the letter of
undertaking.

The essence of this principle is that the embodiment of an agreement into a single
writing makes all other utterances of the parties on that topic legally immaterial for
the purpose of determining what are the terms of the contract. In a simple
understanding, this principle refers to the interpretation of a document which must be
deprived primarily from the writing that contain in the document and not from outside
of the document that would consider as external evidence. In order to look within the
four walls of the contractual document it’s require to examine the whole of it, so as to
interpret it as a whole without refer it to any part more. As regard in the case above,
it is agreeable to said that the court make a good decision in order to determine the
right method which are not to read and interpret the contract that are not in the
context of the contract as well as which did not appear within the four corners of the
letter of undertaking. The main reason why the court applied this approach is so the
justice can be maintain and to be served. Through that the right of the people can be
protect.

Furthermore, the next principle that been used and applied by the court in order to
interpreting disputed contracts is known as the natural and ordinary meaning. Under
this rule or principle, it is not the court function and obligation to make the contract
for the contracting parties. It is also not the duty for the court to improve and boost
the contract that the parties have negotiated and made for themselves, however
advisable for some improvement. Generally this approach is common used by the
court whereby in order to determine if the contract language is clear and definite,
usually the court will apply the ordinary meaning of the word or even phrase in
question. Is can also regards as the common usage of the words. If the parties is
clear in used of the term in a technical or special way, the contract will usually be
interpret using this approach, ordinary meanings. As in the case of Koh Siak Poo v
Perkayuan OKS Sdn Bhd & Ors [1989] 3 MLJ, The Supreme Court held that it is
clear that the action by the appellant was to enforce the terms of the deed and the
letter of guarantee. It was a claim based on the respondent contractual obligations
arising from the deed and the letter of guarantee which are couched in words which
are clear and unambiguous. Where the written contracts are clear and unambiguous
the court should not go behind the written terms of the contracts to introduce or even
add new terms to it. Moreover, the court applied the above principles in the case of
Tang Meng Hock v Tang Ming Seng [2010] 1 MLJ. The fact of the case are the
defendant who is the plaintiff brother was selected as the executor of their late
father’s will and after the death of their father the plaintiff as well as the defendant
entered in family arrangement that was narrow to written contract. The contract
which was prepared and been witness by an advocate and solicitor, as well was duly
stamped and registered by the Stamp Office. As stipulated in the contract the
defendant as the donor had agreed to give the plaintiff for love and affection cash
total of RM 60,000 , an apartment unit and a piece of land. As a consideration the
plaintiff had agreed not to make any further claim against the defendant or against
the estate of their deceased father. The defendant had given the plaintiff the cash
and the apartment as agreed but not the land. The plaintiff issued a notice
demanding for the defendant to transfer the land to the plaintiff. Due to that the
defendant challenged the validity of the contract on the grounds of ambiguity and
want of consideration. Then the defendant revoke the family arrangement contract.
Later the plaintiff filed a writ of summons against the defendant for breach of the
family arrangement contract. The defendant counterclaim and sought a declaration
stating that the family arrangement contract is void. The trial judge sustain and
uphold the validity of the family arrangement contract and gave judgement in favour
of the plaintiff as well as dismissed the defendant counterclaim. The defendant
appeal against the decision and stated that the just had wrong in decide that the
contract was void as being general and ambiguous. The defendant also stated that
the contract was consider void as it was based on love and affection in which without
consideration.

As the Court of Appeal held after upon careful and plain reading of the family
arrangement, it was found that the intention of the parties had been expressly set out
therein. The words used and apply in the family arrangement had been drawn up
and witnessed by an advocate and solicitors were specific, clear and unambiguous
and therefore intended to support their ordinary meaning. As the words apply in the
contract were clear and unambiguous, it was the duty of the court to give effect to
the bargain of the parties according to their intention in writing by looking at the
words been used. The courts reads the contract as a whole.

To conclude, this principles states that all language that been used in contracts
should be a simple as well as transparent as possible while interpret the contract.
The main reason why does this principles is consider prominent to the court is that to
reduce the ambiguous language as much as possible in the contract. Its help the
court to read and interpret the meaning of the words used in the contract in order to
avoid overly unclear definition or meaning.

In addition this principles also been applied in the case of Kluang Wood Products
Sdn Bhd & Anor v Hong Leong Finance Bhd & Anor [1999] 1MLJ. The fact of the
case stated as the respondent who is in this case Hong Leong Finance Bhd (HLFB)
wrote to the appellants stating that they had already approved a bridging loan for
RM3.5 Million as well an end finance facility of RM26 Million which made with other
several banks to the appellants for a housing project in Taman Mewah. HLFB had
provided the bridging loan of RM3.5 Million to the appellants but did not provide the
end finance facility as mentioned in the letter. The appellants fully utilised the
bridging loan of RM3.5 Million from HLFB, and later HLFB sued the appellants to
recover the bridging loan and the interest payable and succeeded.

The appellant later brought an action against the HLFB claiming that their failure to
provide the end financing of RM26 Million had caused the failure of their housing
project in addition also disabled the appellants from servicing the bridging loan. The
appellant claimed that the respondents failure had caused them loss and damage
which estimated at RM13 Million. The trial judge found that the respondents had
represented to the appellant through letter of approval that the availability of the end
finance was certain. The said letter placed upon the respondents an obligation to
secure and provide the end finance of RM26 Million. The respondent failure to do so
had caused failure to the housing project and disabled the appellants from servicing
the interest on the bridging loan. The court dismissed the appellant claim. On appeal
the Federal Court allowed the appellant. The main question for the Federal Court
was whether the respondent was consider legally obliged to provide the end finance
loan.

As the judgement majority of the court agree and held that since the respondents
(HLFB) letter of approval clearly approved both bridging loan as well as the end
finance and the court give effect to a clear wording of the said approval letter. As
stated the words of “ total end finance facilities to be syndicate by the respondent
defined that the respondent had undertook to organise with others bank and to make
available the said facilities. The condition did not stated that the respondent shall
undertake or try to organise and make available for the end finance loan. The
Federal Court held that the respondent failure of making available for the end finance
was consider the fundamental breach that went to the root of the contract. The
respondent was consider in breach and was order to pay damages.
As in the case of International Islamic University Malaysia v Elemen Garisan
Sdn Bhd, where in this case the plaintiff had enter into a tenancy contract with the
defendant to house its students for a period of five years. Pursuant to clause 4 of
the tenancy agreement, the plaintiff had paid an amount of RM879,969 to the
defendant as payment of security deposit. This agreements includes all the
provisions such as beds, mattresses, cupboards, chairs and tables for the purposes
of students about 3,000 students. The plaintiff had a meeting resolve outstanding
issues arising from the tenancy agreement and further agreement was made. The
plaintiff surrender the demised premises to the defendant as agreed, however the
joint audit was conducted and despite repeated letter from the plaintiff and solicitor
for the refund of the security deposit, the defendant failed to return back the same.
The plaintiff sued the defendant in order to recover the security deposit. The High
Court had determine whether or not the joint audit was a precondition for the refund
of the security deposit. The court also stated that the words “ joint audit ’ and “by
both parties” in the letter given its ordinary meaning. The meaning to the relevant
words can be describe as the word “joint” means done by two or more persons
together, the word ‘ by “ means through the agency, means of instrumentality as well
as the word “both” simply means “the two, not only the one”. Therefore this can only
be mean that the joint audit must be done physically together by the plaintiff and
defendant. It can’t mean that the defendant will audit first and provide the report later
to the plaintiff as withstand by the plaintiff.

The court concluded that upon the true construction of the collateral agreement in
the letter, the parties must conduct a joint audit in order to assess the withdrawal
from the damages and loss of furniture. Once the parties agreed only then the
plaintiff may refunded the security deposit. It is said that the joint audit was a pre-
condition for the refund of the security deposit and without the present of joint audit
to settle the reduction, the plaintiff claim for the refund of the security deposit will be
consider premature.

In a nutshell, it is the duty and obligation of the judge whereby he/she is the only
person constitutionally empowered to interpret legislation authoritatively. As it is the
function of the court to interpret legislation, they also had establish legal rules when
interpreting statutes in case heard before them. By applying this approach and
principle it provide several benefit or advantages towards the court when interpret
the disputed contracts. As been defined by Lord Tindal ‘the words themselves
alone..do best declare the intention of the lawgiver. The main essential benefit by
applying this principle is that it respect the sovereignty of Parliament and also
prevents unelected judges from making the law. As argued by Viscount Simmonds
that it was not open for the judges to fill in the gaps, as Lord Denning wanted, or
otherwise alter statutes. Apart from that it’s make the law predictable. This principle
allowed a quicker decisions making because the answer/outcome can be found by
just using the literal meaning that takes less time to find out the outcome of a case. It
provide a security of certainty in law, when can be otherwise ambiguous.

The next approach or principle is known as the parol evidence rule. In general this
parol evidence rule prevents the introduction of any new evidence of prior or any
negotiations and agreement that contradict. Modify or even vary the contractual
terms and regulations of the written contract when the written contract is about to
complete as well the final expression of the parties towards the agreement. Under
the process of construction of the written agreement, this established doctrine is to
exclude any evidence of negotiations which can leads the contract on the ground
that it is only the final agreement which records consent, and as such, evidence of
negotiations is unhelpful. The court will allow oral evidence to be produce to modify
the written contract.

There are several reason why does this parol evidence rule existed whereby it
protect and safeguard the terms of the contract. This rule helps to secure the
originality of the written agreement where it eliminate any external terms only where
the document was agreed to be a complete record of the entire contract and all the
prior oral or written agreements merge in the writing. The court usually consider the
following factors in making this determination. The extent to which oral evidence may
be admitted to modify a written contract is provided for in sections 91 and 92 of the
Evidence Act 1950. Under Section 91 of the Evidence Act provides that the contents
and ingredients of the document must be proved by the document itself, that when
the terms of the contract have been reduced by consent of the parties to the form of
a document. No evidence shall be given in proof of the terms of the contract. While
under 92 of the Evidence Act 1950 does not allow any oral evidence of contradict,
differ, add or to or subtract from the terms of a written document unless these oral
evidence comes within one of the provision contained in section. These provision
allow oral evidence to be admitted and are therefore exceptions to the parol
evidence rule.

This approach can be seen and relate in the case of Leong Gan v Tan Chong
Motor Co Ltd, the High Court held that where the words of a written agreements are
required by the law to be registered, it is settled the law that external oral evidence is
inadmissible which subject to the exceptions that contained in the several provision
stipulated under the section 92 of the Evidence Act 1950. Th fact of the case as
above, where under the terms of two leases the applicants das leased a piece of
land to the respondents for a period of 4 years. The leases were registered with
proper registering authority. Then, when the applicants applied for the repossession
of the land, the respondents against on the ground that the parties had orally agreed
that the respondents would occupy the land for period of 12 years.

The High Court held that the respondents can cite or quote any external oral
evidence which is that lease was for 12 years to show that the registered lease was
not what it was meant to be which for 4 years only. There are no evidence was
called and mention to bring the case within any of provision under section 92.
Therefore, the court allowed the applicants claim for repossession.

Moreover under this parol evidence rule, there are several exception to it, which is
consider the most significant and vital exception known as ratification. Ratification is
an equitable remedy whereby it allows a document to be revised in which there had
been a mistake in transcript in recoding either in writing a previous oral agreement.
The reason why does this consider the most significant exception is that ratification
can’t be applied without the present of existence of an exception to the parol
evidence rule, since external evidence must be presented in order to prove the
content of the original oral agreement. Apart to that, this exception require several
conditions to be fulfilled. Firstly both of the parties must come out to make a
complete agreement that was in writing and secondly, the written document must
contain error or mistake. Thirdly, there are no third party have acquired an interest
towards the subject matter of the contract and lastly, the amendment must be able of
expression in a clear terms.

Moreover, the external evidence may be introduced to show to the world at large that
the written agreement does not present the whole bargain between the parties. This
can be relate in the case of Tan Chong & Sons Motor Co (Sdn) Bhd v Alan
McKnight. The Federal Court held that the prohibition against admissibility of
evidence under section 92 of the Evidence Act 1950 only applies where all, as
opposed to some only of the terms of the contract are written and record into the
agreement. The Federal Judge Salleh Abas mention that some terms are given
orally and some in writing, oral evidence could be given to prove the term which
agreed orally. The court held that in this case the oral pre-contractual statements
came within these provision and were consider admissible.

Furthermore in order to see whether the provision under the parol evidence rule
applies even though it regard to be had to the nature of the document and also its
surrounding circumstances. In the case of Kluang Wood Products Sdn Bhd v Hong
Leong Finance Bhd, the court held that the provision applies and that the pre-
contractual statements made by Pang is admissible and valid. Due to the failure of
the housing project Taman Mewah was because to the unavailability of the end
finance and HLFB was liable to compensate to the appellants.

There are also several exception under this principle that we can identify is regards
to the identity of the correct parties. Verbal evidence is consider accepted and valid
where there is ambiguity concerning the identity of the parties to the agreement. This
is mainly so where the external evidence is needed in order to identify the subject
matter of the contract.

As an addition, besides the exceptions that are provided in the parol evidence rule,
there is also other contract known as the collateral contract, in which a device has
been used, to admit a pre-contractual statements which had not been incorporated
into written agreement. Collateral contract is known as separate oral promise that
exist side by side of the written contract which convince the parties to enter into
contract. There are two general situation whereby the court may acknowledge the
existence of the collateral contract when the party has been able to show that it
would have refused to enter into if they did not receive assurance and when there
was a promise not to enforce a particular term in the contract. Under the collateral
contract it exist on the basic of the written contract itself and if it is contradicts with
the written term in the main contract then the collateral contract can override the
inconsistency in the written term.
In conclusion, any parties that enter into a contractual agreement, the court will
presumes that all the essential terms and provision are stated and thus it’s bind over
the parties and if the parties had any disputes brought to the court, the court will not
accept any evidence that might change or alter the principle and the fundamental
basic of the contract in any ways or form which is the parol evidence rule.
Nevertheless this rule is exceptional where the court accepts when the parties give
verbal evidence in certain circumstances and condition where it is consider
ambiguity, mistake and others. Briefly based on the explanation above, I can said
and understood that the principle or rules to interpret a contract are consider very
crucial in order to avoid any problem or disagreement when in term of interpreting
the contract.

REFERENCES

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 e-lawresources.com. (n.d.). Retrieved from http://e-

lawresources.co.uk/Contents-of-a-contract.php

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