2

 Introduction
 The doctrine of
freedom of contract
 Elements of a valid
contract
Outline  Terms of a contract
 Exemption Clauses
 Doctrine of Privity
LAW OF  Discharge of contract
CONTRACT  Remedies
BT20403 COMMERCIAL LAW
TOPIC 3

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LAW OF CONTRACT…in a nutshell INTRODUCTION

ELEMENTS DISCHARGE REMEDIES Contract law is a collective

body of legal rules
Agreement (Offer and relating to legally binding
Acceptance) Rescission
Performance
agreements made between
Consideration
Damages persons in society.
Capacity Agreement
Intention
Specific
Performance
Contracts in Malaysia are
Certainty Frustration governed by Contracts Act
Injunction 1950 (CA 1950) and the
Consent
Breach of
Quantum Meruit
common law.
Legality Contract

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3 4

CONT. CONT.

In interpreting the provisions of the Contracts Act,
English law may also be relied upon when there is
lacunae in the law, and limited to that part of
English law which is suited to local circumstances
(s.3 and s.5 of the Civil Law Act 1956).
See JM Weatherspoon Ltd v Henry Agency House
[1962].
 It is important to note that though reference is
made to the English law, it will only be applicable
as guidance or persuasive authority and will
not bind the decisions of the courts in Malaysia.
 There are times decisions of the court in India may
be referred to since some of the provisions of the
Indian Contracts Act are in pari materia with our
Malaysian Contracts Act.

 However, it will be regarded as a source of

reference only.
5 6

5 6

1
 CONT. CONT.

 Contract law forms the basis of understanding many other
legal subjects i.e., employment law, consumer law,
property law, banking law etc .
 The modern law of contract developed from the old ‘law
merchant’ or ‘lex mercatoria’, i.e. the customs and rules
established over the centuries and adhered to by early
traders and business people.
 During 19th century, expansion of trade and the impact of
the Industrial Revolution led to a vast increase in the
number of contracts made – the emergence of consumer
society.
 laissez-faire - which depends heavily on the
freedom of the individual.

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CONT. What is a Contract?

 Thus, when persons freely enter into a contract by which A contract is:
they intend to be bound, then they are strictly bound.

“…an agreement,
 A court will not interfere in that agreement if it was made enforceable at law, between
freely. two or more persons to do or
refrain from doing some act
 This approach is known as the doctrine of freedom of or acts; the parties must
contract and it forms the basis of modern contract law. intend to create legal
relations and must have
given something or promised to
give something of value as
consideration in return for
any benefit derived from the
agreement.”

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9 10

What is a Contract? What is a Contract?

 S.2(h) CA 1950 : an agreement enforceable by
law is a CONTRACT.
 Therefore, a contract is a legally enforceable
agreement or a promise or set of promises
which the law will enforce.
 Sri Kajang Rock Products Sdn Bhd V
Maybank Finance Berhad :
Held: “A contract is an agreement entered into
voluntarily by two parties or more with
the intention of creating a legal obligation.”
11
 It will create rights and obligations that may be
enforced in the courts.
 Here, the normal method of enforcement is an
action for damages for breach of contract,
though in some cases the court may order
performance by the party in default.
 There is an implied assumption that not all
agreements are contracts.
 Thus, there must be a legal body of rules – a
yardstick, by which to decide whether an agreement
is a contract or not.
12

11 12

2
 Cont. Elements for a
valid contract
 S.10 CA 1950 provides some of the basic elements for a
valid contract, i.e., …
 The basic elements constituting a
“All agreements are contracts if they are made by the free contract are as follows:
consent of parties competent to contract, for a lawful
consideration and with a lawful object, and are not hereby 1. Agreement (offer and
acceptance);
expressly declared to be void.”
2. Intention to create legal
relations;
3. Consideration;
4. Certainty;
5. Capacity;
6. Legality; and
7. Consent

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13 14

Elements of Contract Explanation Elements of Contract Explanation

When you signifies your willingness to Every party to a contract must have
Offer/Proposal be bound by a contract with the other Capacity / the capacity to enter into a contract
party. competency to namely, must be of age of majority, of
When you agree to accept the offer or contract sound mind and not prohibited from
Acceptance proposal made by the other party who contracting.
makes the proposal. Every party must enter into a contract
with free consent and not secured
Offeror/Proposer/ A person who makes the offer. Free consent through means of fraud, coercion,
Promissor undue influence, misrepresentation or
Offeree/Acceptor/ mistake.
Promisee A person who accepts the offer.
The contract must be certain, i.e. not
Consideration A value to be paid for a promise made. Certainty ambiguous or vague.
The contract must be legal.
Intention to create Every party to a contract must have the Legality
legal relations intention to create legal relation.

16
15

15 16

…CONT. Element No. 1: Agreement

Important!!!
Affin Credit [Malaysia] Sdn Bhd V Yap Yuen Fui
In the absence of one/ more of these essentials, a contract may be Held: Where there was no Offer and Acceptance,
void, voidable or unenforceable. the purported Hire Purchase Agreement was declared
Void Ab Initio.
 Void : A void contract has no legal effect at all. A void  Thus, it can be seen that “agreement” forms the
contract is often described as void ab initio (void from the basic of the contract.
outset).
 Agreement consists of :
 Voidable : A voidable contract is legally binding, but one of i. Offer
the parties has the option to set is aside if he so chooses. ii. Acceptance
 Unenforceable : An unenforceable contract is valid in all  Agreement is often described as requiring
respects except that it cannot be enforced in a court of law. consensus ad idem (a meeting of minds) - see Sri
Kajang Rock Products Sdn Bhd v Maybank
Finance Bhd [1992]

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3
  All contracts must be built upon an agreement, but not all
agreements are contracts!
 Social and domestic agreements are not generally
enforceable, unless there is a clear evidence of an
intention to create legal relations.
 Underlying the idea of agreement is, Offer and
Acceptance: one party – proposes or offers or makes a
offer, and if the other party accepts the offer in its entirety
then the parties have agreed.
19
19
 According to section 2(a), the Promisor is actually
presenting to the other party certain terms that can either
be accepted or rejected but which is not open to further
negotiation.
Section 2 [c]
 Person making the Offer is called “The
Promisor” or “The Offeror”
 Person to whom the offer is being made to
is known as “The Promisee” or “The
Offeree”
If he accepts the offer then he is also
called as “The Acceptor”
21
21
 Examples of offer made by conduct are:
i. The highway toll – When the toll operator issue
a ticket, it amounts to proposal and when the
driver takes/accepts the ticket, it amounts to
acceptance for the usage of highway.
ii. Automated car park machine – When the
automated car park machine issues a ticket, there
is a proposal and when the customer takes the
ticket there is an acceptance.
23
23
i. OFFER/PROPOSAL
 Offer is made when one of the parties states the
terms on which he is ready to be bound into a
legally binding enforceable agreement with the
other party once the other party accepts the offer.
Section 2(a) : A proposal is made when one person :
i. Signifies to another his willingness to do or to
abstain from doing anything
ii. with a view to obtaining the assent of that other
to the act or abstinence
20
20
Offer…
 An offer can be made in the form of writing, oral
and by conduct or by combination of all these
methods.
 Preston Corp Sdn Bhd v Edward Leong & Ors
(1982) - It is an intimation by words or conduct,
of a willingness to enter into a legally binding
contract, specifying the terms of the binding
agreement which will be formed should the offer be
accepted by the party to whom it is addressed.
 An offer can either be expressed (words – oral or
writing) or implied (other than words) – section 9.
22
22
Example of contract made by
conduct
Parimala A/P Muthusamy & Ors V Projek Lebuhraya
Utara Selatan
 The first Plaintiff is the wife of the deceased. The
first Plaintiff and a few minors were passengers in
a motorcar driven by the deceased.
 On 6th November 1991, the car entered the
highway through the Pagoh Toll gate and was
travelling through the northbound lane towards
Ayer Keroh at the time of the accident.
 The Deceased died on the spot after hitting a cow
which had strayed onto the northbound North-
South Highway at KM 138.5.
24
24
4
  The Court held that there is a contract between the
Highway user and the Highway operator.
 As per judgment made by Suriyadi J……. “It is my
understanding of the law that the moment a ticket is
extracted at the toll gate as in this case and the highway is
used, a contract is thus struck between the parties making
the Plaintiff a lawful user of the road” [ See also Bromley
V Mercer]
TYPES OF OFFER
1.) Unilateral
 Only ONE party promises something.
 The offer is made to the world at large.
 Only the identity of the Offeror is known.
 An example of Unilateral Contract can be seen in
the case of Carlill V Carbolic Smoke Ball Ltd

25 26

25 26

Carlill v Carlill v Carbolic Smoke Ball

Carbolic Smoke (cont.)
Ball Co. [1893]
 The advertisement also stated that the defendant had
deposited £1000 in a bank to show their sincerity in the
 The defendant company matter.
claimed that the smoke
balls which they
manufactured cured many  The plaintiff bought one of the smoke balls and despite
illnesses and made it using the smoke ball properly, she still caught flu. She
impossible to catch flu. claimed the reward, but the defendant refused to pay.

 They advertised that if

anyone could show that  Held: There was a valid contract between the plaintiff
they have correctly used a and the def. The deposit showed a willingness to be
smoke ball yet still caught bound by terms of the advertisement, making it an offer.
flu, they would be paid
£100 reward.

27 28

27 28

OFFER v PRELIMINARY NEGOTIATIONS

2. Bilateral OR A MERE SUPPLY OF INFORMATION
 BOTH PARTIES make promises.  A statement or response to a query IS NOT an
offer.
 The offer is made to the particular
person or group of people. Harvey v Facey [1893] AC
 The identity of both parties are known.  The appellants telegraphed the respondent – “Will
you sell us Bumper Hall Pen (a property in Jamaica)
[see Powell V Lee] Telegraph lowest cash price.” ?
 The respondent replied, “Lowest price for Bumper
Hall Pen is £900.”
 The appellants then replied in the following words:
"We agree to buy Bumper Hall Pen for the sum of
£900 asked by you. Please send us your title deed in
order that we may get early possession”.
 The respondent however refused to sell at that price.
29 He denied his reply was an offer. 30

29 30

5
 Cont.. OFFER v ITT
Harvey v Facey (cont.)
 Invitation to Treat (ITT) is an invitation to
 The Privy Council held that no contract existed between the enter negotiations and is not an offer yet. It
2 parties. The 1st telegram was simply a request for
information, so at no stage did the respondent make a definite is an expression of willingness to
offer that could be accepted. The statement of price was negotiate.
merely the provision of information.

 In its judgment, the court pointed out that the appellant had
asked 2 questions in the 1st telegram - as to the respondent's
willingness to sell and the lowest price. The respondent only
answered the 2nd question and did not reply as to his
willingness to sell. Thus, he had made no offer. The last
telegram of the appellants was an offer to buy but was never
accepted by the respondent.
 ITT appears to be a proposal but actually stand as a mere
request or invitation to the other party inviting them to
make an offer to form a contract.
 The “acceptance” of an invitation to treat does NOT
create an agreement .

31 32

31 32

EXAMPLES OF ITT
ITT
 A person making an invitation to treat does not intend to 1. Display of Goods
be bound as soon as it is accepted by the person to whom
the statement is addressed.  The display of goods with or
without price tag in shops
 It is not always easy to distinguish between an offer and an constitutes inviting
invitation to treat. customers to make offers to
purchase such items.
 ITT exists in certain types of standard transactions (e.g.
display of goods, advertisements).  Display of goods on shelves
in a self service shop is not
 There are some general rules that apply as to whether or an offer but merely an
not an offer has been made (can be rebutted). invitation to treat. The offer
is made by the customers
when they take the goods to
the counter at which point
the seller decides whether to 34

33 accept the offer or not.

33 34

Fisher v Bell [1960]

 Held: Where goods are displayed in a shop together
with a price label (in this case, a flick knife was
displayed in a shop window), such display is treated
as an invitation to treat by the seller.
 The offer is instead made when the customer
presents the item to the cashier together with
payment. Acceptance occurs at the point the cashier
takes payment.
Pharmaceutical Society of Great Britain v Boots Cash
Chemists [1953]
 Boots Cash Chemists had just instituted a new method for its
customers to buy certain medicines. The company would let
shoppers pick drugs off the shelves in the chemist and then
pay for them at the cash register. Before then, all medicines
were stored behind a counter and an assistant had to get what
was requested.
 The Pharmaceutical Society of Great Britain (PSGB) objected
and argued that under the Pharmacy and Poisons Act 1933,
that was an unlawful practice. Under s.18(1), a pharmacist
needed to supervise at the point where "the sale is effected"
when the product was one listed on the 1933 Act's schedule of
poisons.

35 36

35 36

6
 EXAMPLES OF ITT
Pharmaceutical Society of Great Britain v Boots
Cash Chemists [1953] (cont.)… 2. Advertisement and circulars

 PSGB argued that displays of goods were an "offer" and  Advertisements are generally regarded as
when a shopper selected and put the drugs into their invitations to treat, especially if the advertisement
shopping basket, that was an "acceptance". Since no occurs in a newspaper or catalogues.
pharmacist had supervised the transaction at this point,  Reason: No one could ever offer to supply an infinite
Boots was in breach of the Act. quantity of a product to everyone.

 Held: The display of goods on shelves in a self- Partridge v Crittenden [1968]

service store is not an offer to sell the goods (but
an invitation to treat). No contract was formed merely
by customer taking goods from the shelves.
 The def was charged with unlawfully offering certain
wild birds, the bramblefinch, for sale. He placed the
advertisement in a bird magazine.
 Held: The advertisement did not constitute an offer,
but was merely an invitation to treat.
38

37

37 38

EXAMPLES OF ITT
Coelho v the Public Services Commission [1964]
 Held: The advertisement in the newspaper was an
invitation to qualified persons to apply for the post and
the resulting applications were offers.
 This view was supported in Majumder v AG of
Sarawak [1967] – Held: An advertisement in the
newspaper of a vacancy for the position of a doctor was
an invitation to treat.
 However, advertisement may also amount to an offer -
see Carlill v Carbolic Smoke Ball Co Ltd [1893] 1
QB 256 COA.
39
EXAMPLES OF ITT
3. Auction sales
 The advertisement of an Auction is only ITT
inviting the public to bid for a particular article.
 The bid itself is an offer and the Auctioneer can
either accept or reject the offer.
Harris V Nickerson
 The Plaintiff upon seeing an advertisement of an
auction, travelled to the advertised venue only to
discover that the auction had been cancelled.
 The Plaintiff claimed for the travelling expenses.
 The Court refused to allow the Plaintiff’s claim
because the advertisement for the Auction was not an
Offer but a mere ITT. 40

39 40

EXAMPLES OF ITT Example of ITT

in practice…
4. Tenders
 Zack entered into a shoe
store, Happy Feet, in
 Harvela Investments v Royal Trust Co. of 1Borneo. He wanted to
Canada [1985] - Held: Goods advertised for tender buy a leather shoe for
is an invitation to treat because the owners of the himself. He saw an array
goods request for offers to purchase the goods. of various types, colours,
brands as well as sizes of
shoes. He tried 3 pairs of
shoes before he decided
not to buy any shoes at all.
The shop attendant was
not happy and he asked
Zack to pay for the shoes
that he has tried on.
41 42

41 42

7
  Here, contract has yet to exist between Zack
and Happy Feet. The display of shoes on the
shelves in the store is merely an invitation to
treat (the store is inviting potential buyer(s) to
make an offer to buy the shoe(s)).
 Offer will be made by Zack when he take the
shoes to the counter and prepare to pay for
them.
 Here, offer is yet to be made as Zack was
merely trying the shoes (in order to check its
suitability etc).
43
43
RULES OF A VALID OFFER
2. The Offer MUST be communicated to the offeree before
an acceptance can be made.
 An action made without the knowledge of the offer is not
considered as acceptance.
Fitch v Snedaker (1868)
 Acceptance cannot be made unless the offeree knew
about the existence of the offer
45
45
 Merely communicating the proposal is not sufficient to make
the communication of proposal complete.
 Offer can be expressed in writing, verbally or implied
through conduct provided that it comes to the knowledge of
the acceptor (Section 4 [1]).
47
47
RULES OF A VALID OFFER
1. An Offer must be clear, precise and complete.
Gunthing V Lynn
 The Offeror promised to pay a further sum for a horse if it
was “Lucky”.
 The Court held that the offer was too vague as it was not
specific enough to constitute an offer.
44
44
Lalman Shukla v Gauri Datt (1913),
 The plaintiff’s claim was unsuccessful although he fulfilled
the requirement for acceptance as he had NO
KNOWLEDGE of the offer.
R v Clarke (1927).
 It is a requirement that an acceptance is made in reliance
or pursuance of an offer.
46
46
Section 4 [1]
“Communication of a proposal is complete when it comes to
the knowledge of the person to whom it has been made”
Madam Loh Sai Nyah V American International Assurance Co
Ltd
 The High Court held that there was no Insurance Contract
entered between the parties as the proposal had not
come to the knowledge of the respondent.
 The proposal was only received by respondent on
30.06.1977 whereas the deceased died on 26.06.1977.
48
48
8
 Example of valid offer
in practice…
 Mike lost his wallet and he placed an advertisement
in the daily newspaper offering a reward of RM50 to
anyone who can find his wallet and return it to him.
Alex found the wallet, recognising it as Mike’s
wallet as it contains his identity card and his
driving licence. When he returned the wallet to
Mike, he is happy but said nothing. The next day,
Alex read the advertisement in the newspaper
about the reward. Alex then asked Mike about the
reward. Mike now refused to pay the reward.
49
49
TERMINATION OF AN OFFER
 An offer is effective for a specific period only.
1. An offer will lapse once it is revoked by the offeror - s.5
and s.6 CA 1950.
2. An offer will lapse once an acceptance is made.
3. An offer will lapse if the Acceptor does not response
within the time prescribed.
51
51
Routledge V Grant
 The Def. offered to purchased a house from the Plaintiff.
 He gave the Plaintiff six weeks to decide whether to accept
or to refuse the offer. Before the end of six weeks, the
Def. withdrew his offer.
 The Court held that the Def. was entitled to do so because
there was no valid acceptance yet.
 In addition, since no valuable consideration had been given
to keep the offer open for six weeks, the offeror had only a
moral obligation and not a legal obligation to keep the offer
open for that full period.
 If supported by valuable consideration then the Offeror
have legal duty to keep the offer open until the specified
time.
53
53
 Here, the advertisement constitutes an offer as
rewards are often held to be offers (see Gibbons v
Proctor).
 However, for an offer to be effective, it must be
communicated to the intended recipient
(potential offeree) (s.4(1) CA 1950).
 Although, Alex found and returned the wallet to
Mike (constituting an acceptance), it is not
effective as Alex has no knowledge about the
offer at the time he made the purported
acceptance.
50
50
REVOCATION OF AN OFFER
1. The offeror may revoke or withdrawn the offer at any time
before it has been properly accepted.
Section 5 (1)
“The offeror may withdraw his offer at anytime before a
proper acceptance has been made.”
 However, such revocation is ineffective until
communicated to the Acceptor. (See section 6).
52
52
REVOCATION OF AN OFFER
2. There are also several ways by which an offer could
be revoked as stated under SECTION 6 (a)  (d) as
follows:
a. by the Communication of notice of revocation by
the offeror to the other party.
Lee Seng Heng & Ors V Guardian Assurance Company
 The Court held the insurance policy was effectively
rescinded when the Defendant wrote a letter to the
Plaintiffs cancelling the policy based upon clause 10
of their policy which inter alia stated that “the
Insurance may also be at any time terminated at the
option of the Company [Defendant] on notice to that
effect being given to the insured”.
54
54
9
 b. Lapse of time [if no express time limit set, then it will
depends on the reasonable time] – Read together with
Section 47
Macon Works & Trading Sdn Bhd V Phang Hon Chin & Anor
 If there is no time specified, then it should be within a
reasonable time.
 What is considered as reasonable time varies according to
circumstances and facts of the case.
55
55 56
d. Mental disorder or death of the offeror
 If the offeror died or suffered mental disorder, the offer is
revoked provided that such a situation comes to the
knowledge of the acceptor before acceptance has been
made.
Bradbury V Morgan
 The Court held that if the death of the offeror was not
made known to the acceptor, the acceptance can still be
communicated to create a binding contract.
57
57 58
 There must be a meeting of mind between the
offeror and acceptor (consensus ad idem).
1.
 If parties are still negotiating, agreement is not yet
formed - Lau Brothers & Co v China Pacific
Navigation Co. Ltd. [1965]. 2.
 Another situation where a contract is not yet
concluded is when there is a conditional acceptance, 3.
e.g. when the acceptance is qualified by the term
“subject to a contract” or “subject to a formal contract
being drawn up by the solicitors” – Low Kar Yit & Ors
v Mohd Isa & Anor [1963]. 4.
59 5.
59 60
c. Failure of the acceptor to fulfill a condition precedent to
acceptance.
Industrial concrete products Bhd V Concrete Engineering
products Bhd
 The agreement between the parties is conditional upon
the approval of the Ministry of International Trade and
Industry.
 The Court held that as the Ministry’s approval had not
been obtained, there is no contract between the parties.
56
ii. ACCEPTANCE
 For a contract to be valid, there must be a proper
acceptance by the acceptor.
Section 2 (b)
when the offeree/acceptor signifies his assent to the offer, the
offer is said to be accepted…, when accepted, becomes a
promise.
Section 9
acceptance can either be expressed (made in words) or implied
(e.g., through conduct).
58
RULES FOR A VALID ACCEPTANCE
The acceptance must be made within the specified
time, or within reasonable time (s.6(b));
The acceptance must be absolute and unqualified
(s.7(a));
The acceptance must be expressed in some usual
and reasonable manner, unless the offer prescribes
the manner in which it is to be accepted (s.7(b));
Acceptance can be made by performing conditions
or receiving consideration (s.8); and
Acceptance must be communicated to the offeror.
60
10
 RULES FOR A VALID ACCEPTANCE
1. Acceptance must be made within the specified
time, or within reasonable time.
S.6(b) CA 1950: An offer is revoked:
... by the lapse of the time prescribed in the
offer for its acceptance, or, if no time is so
prescribed, by the lapse of a reasonable time,
without communication of the acceptance…”
 Ramsgate Victoria Hotel v Montefiore (1866)
 Fraser v Everett (1889)
 Macon Works & Trading Sdn Bhd v Phang Hon
Chin (1976)
61
61
 ‘Mirror image’ rule - Any modification or variation of the
offer amounts to COUNTER-OFFER.
COUNTER-OFFER
 If the offeree accepts the offer but then tries to
impose new terms, then there is no acceptance. It will
be considered as making a counter-offer.
 Counter-offer will reject the original offer. It
creates a new offer.
 Counter-offer amounts to a rejection of the
original offer: see Hyde v Wrench (1840).
 Counter-offer differs from request for further
information: see Stevenson, Jacques & Co v
McLean (1880)
63
63
RULES FOR A VALID ACCEPTANCE
3. Section 7(b) the acceptance must be expressed in
some usual and reasonable manner, unless the
offer prescribes the manner in which it is to
be accepted.
 When the acceptance has been communicated but
is not according to the prescribed manner, the
Offeror may, within a reasonable time, insist that
his offer shall be accepted in the manner that has
been specified.
 Otherwise, if he fails to do so, the Offeror is
deemed to have agreed with the acceptance.
65
65
RULES FOR A VALID ACCEPTANCE
2. Section 7(a) - The acceptance must be absolute and
unqualified
 It must be made in reliance upon the offer and it
must correspond with all the terms of the offer.
 The parties must agree to accept the same condition
that have been laid down by the offeror because
without such consensus between the parties, no true
contract can exist.
62
62
Hyde v Wrench (1840)
 Wrench offered to sell his farm to Hyde for £1000.
 Hyde replied saying that he will buy it for £950
which Wrench refused to accept.
 Hyde later agreed to pay the original price, i.e.,
£1000 but Wrench no longer wanted to sell the farm
to him. Therefore, Hyde sued Wrench for breach of
contract.
 Held: There was no contract between them. The
plaintiff (Hyde) had rejected the original offer
(when he made the counter-offer i.e., £950) and that
he was no longer capable of accepting it later.
64
64
Affin Credit [Malaysia] Sdn Bhd V Yap Yuen Fui
 Where a statutory provision sets out a condition precedent
before an offer can be accepted, non-compliance with
that condition will result in no contract whatsoever.
66
66
11
 RULES FOR A VALID ACCEPTANCE RULES FOR A VALID ACCEPTANCE

4. Section 8: Acceptance can be made by performing
conditions of a proposal or the acceptance of any
consideration for a reciprocal promise.
Carlill v Carbolic Smokeball (1893)
 Held: a valid contract existed between the
parties where satisfying conditions for using the
smoke ball constituted acceptance of the offer.
The plaintiff’s communication of acceptance of
the offer was ruled to be not necessary.
5. General Rule: Acceptance has no effect until it is
communicated to the offeror – section 4(2)
 Silence does not amount to acceptance
 The Offeror cannot prescribe silence as a manner
of acceptance.
 The offeror cannot bind the Acceptor by stating
that if he does nothing he well be bound to a
contract.

67 68

67 68

Felthouse v Bindley (1862)  Silence does not amount to acceptance. However

 The Court held that silent acceptance was not communicated
to the offeror. Therefore, such acceptance cannot be treated
as an agreement.
 It was held not binding upon either parties.
Fraser v Everett (1889)
 The court held that “there was no such phrase in law
that silence means agreement.”
there may be exceptions to this rule.
1. If the Acceptor himself stipulate that his silence
shall constitute an acceptance .
2. Silence may also amount to an acceptance if the
conduct of the Acceptor indicates acceptance.

Weatherby v Banham [1832]

 It was held that the receipt and reading of a
periodical after the expiry of a subscription
amounted to an acceptance. However, there may
be exceptions to this rule.

69 70

69 70

 Acceptance must be communicated to the offeror, Postal Rule

but in some cases, the communication of acceptance
may not be necessary – see Carlill v Carbolic
Smoke Ball Co. [1893]  Postal rule (or the mailbox
rule), is an exception to the
general rule.
 However, there is an exception to the general rule  Acceptance by post
that the acceptance must be communicated to the  Deemed to take effect when
Offeror, which known as the POSTAL RULE. the letter is correctly
addressed, properly stamped
 POSTAL RULE - the acceptance is made in writing and placed into the post box.
and using the postal system.

71 72

71 72

12

POSTAL RULE
 Under English law, if the post is a proper and
reasonable method of communication between the
parties, the acceptance is deemed complete
immediately when the letter of acceptance is
posted, even if it is delayed or is lost or destroyed
in the post.
Adams v Lindsell (1818)
 Acceptance is deemed as complete as soon as it is posted.
Ignatius V Bell (1913)
 An acceptance which had been posted but did not
reach the offeror on time was still regarded as a
good acceptance.
73
Adams v Lindsell (1818)
 The defendant wrote to the plaintiff on 2 Sept,
offering to sell them some wool and requested that the
plaintiffs reply ‘in course of post’.
 The offer letter was wrongly addressed and therefore
the plaintiffs did not receive it until 5 Sept.
 As a result, the letter of acceptance was not received
until 9 Sept by the defs, and this was 2 days later
than the defs would have expected to receive it.
Because of this, on 8 Sept the defs had sold the wool
to a 3rd person. The defs sued the plaintiffs for breach
of contract.
 Held: The offer had been accepted as soon as the
letter had been posted. Thus, there was indeed a
contract in existence before the sale of the wool to the
3rd party, although the letter had not actually been
received by the defs. The defs were therefore liable in
breach of contract.
74

73 74

POSTAL RULE POSTAL RULE

Henthorn v Fraser [1892] Household Fire & Carriage Accident Insurance Co v

 The Court has determined the precise timing of the Grant (1879)
acceptance, i.e. the moment the letter of acceptance  Def applied for shares in the plaintiff’s co. The
is posted. company allotted the shares to the def, and duly
addressed to him, posting a letter containing the
notice of allotment. The letter was lost in the post.
 The ‘postal rule’ in Adams v Lindsell has since Later, the company went bankrupt, and asked the
been confirmed in many cases including in: def for the outstanding payments on the shares,
 Dunlop v Higgins (1848) which he refused saying there was no binding
 Household Fire & Carriage Accident contract.
Insurance Co v Grant (1879)
 Byrne v Van Tienhoven (1880)  It was held that there was a valid contract,
because the rule for the post is that acceptance
is effective even if the letter never arrives.

75 76

75 76

POSTAL RULE POSTAL RULE (MALAYSIAN LAW)

 The postal rule applies only to acceptance. Section 4(2)

a. The offeror is bound by the contract the moment the Acceptor
posts his letter of acceptance irrespective of whether the
 However, the postal rule only applies when the offeror has knowledge of acceptor’s action
parties have impliedly or explicitly contemplated
posts as a means of acceptance. b. The Acceptor will only be bound once the offeror receives and
has knowledge of the letter of acceptance.
 It excludes contracts involving land, letters
incorrectly addressed and instantaneous modes of
communication.

77 78

77 78

13
 POSTAL RULE (MALAYSIAN LAW) POSTAL RULE
 Under section 4(2), the Offeror and the Acceptor are bound
by the acceptance at different times.  However, the rule that acceptance is complete
 Although the Acceptor has posted the letter of acceptance, upon posting may be excluded by the express
he can still change his mind if the letter has not reached terms of the offer.
the Offeror.

 The offeror on the other hand, will be bound by the

Holiwell Securities Ltd v Hughes [1974]
contract even though he does not know that the Acceptor  The offer prescribed that the acceptance must be
has posted the letter. by notice in writing to the intending vendor.
Thus, it was held that in such a case, the mere
Ignatius v Bell [1913]
posting of the letter of acceptance was not
sufficient.
 The court held that the communication of acceptance was
complete when the notice of acceptance was posted on 16
August 1912 although the defendant did not know about
the acceptance.

79 80

79 80

POSTAL RULE - Instantaneous

Communication Cont..
 Postal rule only applies to non-instantaneous
 The courts are yet to decide whether e-mail should be
communication and does not apply to regarded as an instantaneous form of communication.
instantaneous method of communication such as
telephone and fax.
 If the Offeree were to convey acceptance by commercially
Entores Ltd. v Miles Far East Corporation (1955) unreasonable means – e.g. by cross-country pony express,
the acceptance would not be effective until it had actually
 The Court held that the postal rule does not apply been received.
to instantaneous communication. Telephone or telex
are virtually instantaneous and stand on a different
footing… the contract is only complete when the
acceptance is received by the Offeror and the
contract is made at the place where the acceptance
is received.

81 82

81 82

Example of postal rule Cont.

 Allen wrote to Jim on 1  To apply the postal rule, the parties must have in
October and offered to
sell his land for contemplation of using post as a means of
RM100,000. Jim acceptance. Under s.4(2)(a) – Allen is bound since
received Allen’s letter the letter of acceptance is already put in the course
on 3 October. Since
Allen did not receive any of transmission to him (the moment it is posted/put
reply from Jim, on 28 into the mailbox on 25/10). As for Jim, he is bound
October, he signed a the moment the letter reached Allen (s.4(2)(b)).
contract to sell the land
to Chan. Unknown to
Allen, Jim had posted a
letter of acceptance on  As such, Allen may be sued for breach of contract as
25 October. Allen only the contract between Allen and Jim is already
received Jim’s letter on concluded on 25 October.
30 October.

83 84

83 84

14
 REVOCATION OF ACCEPTANCE
Section 5
 Acceptance may be revoked at anytime before
communication of the acceptance is complete against the
Acceptor but not afterwards.
Section 4 [3]
 Once there is a proper acceptance, the agreement is
regarded as complete and there is a valid contract which
cannot be revoked.
85
85
CROSS OFFERS
Tinn v Hoffman (1873)
 Mr Hoffman wrote to Mr Tinn an offer to sell him 800 tons of
iron for the price of 69s per ton. He requested a reply to this
offer by post.
 On the same day, without knowing of this offer, Mr Tinn also
wrote to Mr Hoffman. He offered to buy the iron on similar
terms.
 Held - there was no contract between Mr Tinn and Mr
Hoffman for the iron. The cross offers were made
simultaneously and without knowledge of one another. This
was not a contract that would bind the parties for the iron.
87
87
Intention to Create Legal
Relations
 The Contracts Act 1950 is silent on the intention to
create legal relations as one of the requirements of a
valid contract, but case-law clearly dictates the necessity
of this requirement.
 Malaysian courts have applied common law cases on
this subject matter.
 It is up to the Court to ascertain the intention of the
Parties from the language used and the context in which
they are used.
 In order to prove whether there was an intention to
create legal relations, the Court will consider the
relation between the parties concerned.
89
89
WHAT ABOUT CROSS OFFERS?
 Cross-offers refers to an offer made to another in
ignorance that the Acceptor has made the same
offer to the Offeror.
 In a cross offer, both parties state to each other the
same proposal – hence there will be NO
CONTRACT as there is no acceptance.
 To form a valid contract, there must be
communication that consists of an offer and
acceptance.
86
86
Element No. 2: Intention to
Create Legal Relations
 An agreement in itself does not create a contract. For
a valid and binding contract to exist, the parties must
have the intention to create legal relations.
 As such, while every Contract is an agreement, not all
agreements are ‘contract’.
 For example : Rania and Qalesya agreed to meet at
Imago Mall at 7 pm today. Such agreements are
normally made without the intention to have legal
consequences if Rania or Qalesya does not turn up.
88
88
Esso Petroleum Co Ltd V Excise Commissioner
 In domestic, social or family agreements, there is a
presumption against the existence of an intention to create
legal relations, whilst in commercial or business
agreements the rebuttable presumption is that legal
relationships are intended.
Nature of the relationship –
Domestic, Social or Family agreements
 Rebuttable presumption that there was no intention to
create legal relations.
Commercial/Business agreements
 There was an intention to create legal relations unless
specify otherwise.
90
90
15
 Intention to Create Legal Relations
Domestic, social or family agreements
Balfour V Balfour
 Relationship between Husband and Wife
 The husband, a civil servant was stationed in
Ceylon and the wife stay in England and could not
accompany him because of her health problem.
 The husband promised to pay the wife monthly
allowance as maintenance but defaulted the
promise, so the wife sued him.
 Held : there was no legally binding agreement
because the parties did not intend that they should
be attended by legal consequences.
91
91 92
Intention to Create Legal
Relations
In business agreements, the parties
are presumed to have the intention to
create legal relations, unless the
parties specify otherwise.
 See Esso Petroleum Co Ltd v Customs &
Excise Commissioner [1976] and Koh Kia
Hong v Guo Enterprise Pte Ltd [1989]
93
93 94
Consideration
Dunlop Pneumatic Tyre Co Ltd V Safridge & Co Ltd
 Consideration is a promise made for a promise
Currie v Misa (1875)
 “A valuable consideration, in the sense of the
law, may consist in some right, interest, profit or
benefit accruing to the one party, or some
forbearance, detriment, loss or responsibility
given suffered, or undertaken by the other.”
95
95 96
Intention to Create Legal
Relations
 Intention to create legal relationship under social,
domestic and family agreement is a rebuttable
presumption.
 There are cases where the court held that even its
involved family relationship, but the court decided that
the parties concerned intended to be legally binding.
Merrit V Merrit
 Relationship between Husband and Wife
 Regarding the matrimonial House
 The Court held that there was legally binding agreement
between them
92
Element No. 3: Consideration
 Consideration can be regarded as what each Party gives in
return for what it gains from the other Party.
 Section 2(d) - Definition of consideration:
“When at the desire of the promissor, the
promisee or any other person has done or
abstained from doing, or does or abstains from
doing, or promises to or to abstain from doing,
something, such act or abstinence or promise is
called a consideration of promise.”
94
TYPES OF CONSIDERATION
Past Executed Executory
Consideration Consideration Consideration
96
16
 1. PAST CONSIDERATION
 Promise is performed before the formation of
the Contract
 Consideration for act already done/performed
For example:
An old woman age 70 years live alone. Last
Saturday morning, Mr Stark visited her and
voluntarily help her with the housework. The
next day, the old woman went to see Mr Stark and
promise to pay him RM100 as a token of
appreciation.
2. EXECUTED CONSIDERATION
 Promise that has been performed thus giving rise
to the obligation on the Offeror to perform his
promise.
 Act done by one Party as a consideration for the
promise made by the other party.
 If one party makes a promise in exchange for an
act by the other party, when that act is
completed, it is executed consideration.
For example :
Pak Belang offers RM100 reward for the return of
his lost cat. If Miss Nona found the cat and returned
it, Miss Nona consideration is executed.

97 98

3. EXECUTORY CONSIDERATION
Principles of Consideration
 There is an exchange of promise to perform
acts in the future.
 Each promise is a consideration for the other 1. Only lawful consideration can
and the contract is effective as soon as the
promises are exchanged. make the contract lawful and valid.
 A promise made by one party as an
exchanged to a promise/act made by the other  Section 10(1) - ‘All agreements are
party
contracts if they are made by the free
 A promise that will be executed in the future consent of parties competent to contract,
for a lawful consideration …..’
For example:
Mutual promises between promise to work and
promise to pay for the work.

100

99 100

 Section 24 provides the examples of consideration

or object of an agreement that is unlawful. Principles of Consideration
a) It is forbidden by a law (Manang Lim Native Sdn 2. Consideration must be of value, but it need not be
Bhd v Manang Selaman [1986]); adequate.

b) It is of such a nature that, if permitted, it would  Consideration need not be adequate, it must be
defeat any law (Hee Cheng v Krishnan [1955]); “sufficient”

c) It is fraudulent;  Sufficient means it amounts to something that is capable

of expression in economic terms.
d) It involves or implies injury to the person or
property of another (Syed Ahamed Alhabshee v  Which means it need only have some legal value though
Puteh bt Sabtu (1922)); or the value need not be substantial.

e) The court regards it as immoral or opposed to

public policy (Pearce v Brooks [1861]).

101 102

101 102

17

Phang Swee Kim V Beh I Hock
 Mere inadequacy of the Consideration was not a ground to
set aside the agreement as long as the consideration is
sufficient.
Thomas V Thomas
 Consideration need only have some value in the eyes of
the law but need not be adequate.
103
103
Principles of Consideration
4. Section 26 - An agreement without consideration is void.
Guthrie Waugh Bhd V Malaippan Muthucumaru
 If no consideration given by the Promisee, the Promisor
merely owes a moral obligation to perform the Contract.
 However, there are situation where even without
consideration, the agreement still enforceable and are not
void. [see Section 26 (a), (b), (c)].
105
105
c. Section 26 (c) : Written agreement to pay a
debt barred by limitation law
 E.g. A owes B RM1000, but the debt is
barred by limitation. A signs a written
promise to pay B RM500 on account of the
debt. This is a contract.
107
107
Principles of Consideration
3. Consideration need not move from the Acceptor.
 Under the Contracts Act 1950, a party to an
agreement can enforce the promise even if he
himself has given no consideration as long as
someone else has done so.
S.2(d) reads:
‘…when…..the Acceptor or any other person has
done….something……..is called a consideration for
the promise.’
 See Venkata Chinnaya v Verikatara Maya [1881]
104
104
a. Section 26 (a) : in writing and registered under
the law on account of natural love and affection.
E.g., A, for natural love and affection, promises
to give his son, B RM1000 and he puts his
promise to B in writing. This is a contract.
See Re Tan Soh Sim [1951]
b. Section 26 (b) : a promise to compensate for
something done or which the Offeror was legally
compellable to do.
 E.g., A supports B’s son for his education. B
promises to pay A’s expenses in so doing. This
is a contract and A can enforce B’s promise.
 See J.M Wotherspoon & Co Ltd v Henry Agency
House [1962] and Kepong Prospecting & Ors v
A.E. Schmidt & Marjorie Schmidt [1968]
106
106
Element No. 4: Certainty
 The terms of the agreement must be clear, precise and
certain. It cannot be vague. An agreement which is
ambiguous and uncertain is not capable of being accepted as
a valid contract.
 Section 30 – Agreements void for uncertainty
Karuppan Chetty v Suah Thian [1916]
 The requirement of certainty was not met when
the parties agreed upon the granting of a lease
at RM35.00 per month for as long as he likes.
 There was no certainty as to how long be “as
long as he likes”
108
108
18

Element No. 5: Capacity
 Capacity refers to the legal ability to enter into
a Contract. The law generally presumes that
everyone has capacity to contract except
certain categories of people.
 Lack of capacity  not bound by the contract.
 Section 10: “All agreements are contracts if
they are made by the free consent of parties
competent to contract…….”
109
109
1. Age of Majority
 The Age of Majority Act 1971: Section 2 - the age of
majority in Malaysia is 18 years.
 The general rule is that all contracts entered into by a
minor is not merely void, but void ab initio (void from the
beginning).
111
111
Section 66 – Obligation of person who has received advantage
under void agreement or contract that becomes void
 When a contract is discovered to be void or becomes void,
the person who has received any advantage under the
agreement or contract is bound to restore it, or to make
compensation for it, to the person to whom he received it.
113
113
Section 11
“ Every person is competent to contract who is of the (1)
age of majority according to the law to which he is
subject and who is of (2) sound mind and is (3) not
disqualified from contracting by any law to which
he is subject.”
1. Age of Majority Act 1971: Section 2 - the age of majority in
Malaysia is 18 years.
 A person who is under 18 years old is called a minor (or
infant).
110
110
Mohori Bibee v Dhurmodas Ghose [1903]
(India)
 The Privy Council held that the combined
effects of s.10 and s.11 of the Indian
Contracts Act (which is in pari materia
with the Malaysian Contracts Act 1950),
rendered the contracts entered into by
Minor as Void ab Initio and not merely
Voidable.
 Malaysian case that applied the decision in
Mohori Bibee’s case was Tan Hee Juan v
Teh Boon Keat [1934] - The transfer of land
executed by an infant were void.
112
112
MINOR’S FALSE REPRESENTATION OF AGE
 When a minor has made a false representation of
his age, the issue arises whether he should be
estopped from raising the defence that he was a
minor when the contract was entered.
 Estoppel means that a person cannot deny the
truth of a certain matter if he has caused or
permitted another to believe a thing to be true.
Natesan v Thanaletchumi & Anor [1952]
 Held: even if the first defendant had induced the
Plaintiff to enter into the agreement with her and
the second defendant, by falsely representing that
she was of full age, she was not estopped from
avoiding the agreement by pleading her minority.
114
114
19

Stocks v Wilson [1913]
 Held: the Defendant (a minor) was not estopped from
proving his true age. However, if the infant has obtained
property by fraud he can be compelled to restore it; if he
has obtained money he can be compelled to refund it.
115
EXCEPTIONS WHERE MINORS CAN
ENTER INTO A VALID CONTRACT
There are some exceptions where a minor can enter into a valid
contract and be legally liable as follows:
i. Age of Majority Act 1971 (including matters
relating to marriage, divorce, dower, adoption,
religion and religious rites and usage of any
class of persons);
ii. Contracts Act 1950 (contract for necessaries);
iii. Contracts (Amendment) Act 1976 (contract for
scholarships);
iv. Financial Services Act 2013 – Insurance
contracts
v. Children and Young Persons (Employment)
Act 1966 (contract of apprenticeship/service).
116

115 116

Marriage, Divorce, Dower and Adoption

1) 2. Contract For Necessaries
 A minor may enter into a contract of marriage or  A minor who enters into a contract for necessaries is liable for the
divorcement. contract.

 Section 69 : allows a person who has supplied necessaries to the

Section 4 (a) Age Majority Act 1971
“Nothing in this Act shall affect the capacity of any
person to act in the following matters, namely,
marriage, divorce, dower and adoption”.
Rajeswary & Anor v Balakrishnan & Ors [1958]
 The plaintiff (minor) brought an action against the
defendant for breach of promise of marriage. The
defendant claimed that the plaintiff lacked
contractual capacity and thus no valid contract
existed. However, the Court held that such
contract is valid.
117
minor to receive reimbursement from the property of the minor.
 “Necessaries” can be defined as goods and
services that are actually needed by the Minor
and which commensurate with his style or
standard of living.
 This would include education, medical and food.
 Minor are only under a legal obligation to pay for
things necessary for their maintenance and
should pay the reasonable price for any
necessaries purchased.
118

117 118

 Certain items may no longer

Government of Malaysia v Gurcharan Singh & Ors [1971] be needed by a minor although
 The Government sued the 1st def (the minor) and the 2nd and 3rd defs they were initially necessary
(the sureties) for RM11,500 being the sum spent by the Government for
the minor’s education. At the time of contract was made, the 1st def was to that minor.
a minor.
Nash v Inman [1908]
 The court held that the contract was void but since education was  A tailor (the plaintiff) sued a
‘necessaries’, the minor was liable for the repayment of RM2,683 (a minor (the defendant) to
reasonable sum spent on him as he has served the Government for 3
years and 10 months out of the contractual period of 5 years). whom he had supplied clothes
including fancy waistcoats
which worth 22 pound).
 The court held that, although
the clothes were suitable
according to the minor’s life,
they were not considered
necessaries as he already had
sufficient clothing.
119
120

119 120

20
 3) Contracts of scholarship
 May also fall under ‘Necessaries’.
Section 4 (a) Contracts (Amendment) Act 1976
 No scholarship agreements shall be
invalidated on the grounds that the scholar
entering into such agreement is not of the age
of majority.
Government V Gurcharan Singh
It was held that education was included under necessaries.
121
121
5) Contracts of service/apprenticeship
 The Children & Young Persons (Employment) Act
1966, section 1A:
o “child” means any person who has not
completed his fifteenth year of age
o “young person” means any person who, not
being a child, has not completed his eighteenth
year of age.
 Sections 2 until 6 explain the employment of child
and young person in more detailed.
 Section 13 concerned with contractual capacity
i.e., a child or a young person is competent to
enter into a contract of service under the Act and
may sue as plaintiff without his next friend or
defend an action without a guardian ad litem.
123
123
Doyle v White City Stadium (1935)
 A minor agreed to undergo a training to be a boxer. The
court held that he was bound by the terms of this
agreement with the stadium.
125
125
4)Contracts of insurance
 Refer to section 128 and Schedule 8 of the
Financial Services Act 2013
 Paragraph 4 of Schedule 8 is about the
capacity of minor to insure.
122
122
 The Children & Young Persons (Employment) Act 1966,
section 1(2) states that it is only applicable in west
Malaysia.
 For Sabah, refer to the Sabah Labour Ordinance, sections
71-74B under Chapter XI - Special Provisions Relating to
the Employment of Children and Young Persons.
 For Sarawak, refer to the Sarawak Labour Ordinance,
sections 72 – 75B under Chapter XI - Special Provisions
Relating to the Employment of Children and Young
Persons
124
124
(2) Sound Mind
 At the time of making the contract, the contracting
party must not suffer from mental disability.
 Section 11 is to be read together with section 12.
 Section 12(1) reads: “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 of forming a rational
judgment as to its effect upon his interests”.
 Section 12(2) and (3) state that “a person who is
usually of unsound mind, but occasionally of sound
mind, may make a contract during the period when
he is sound. (See illustrations (a) & (b) of section 12)
126
126
21
  Under English law, it is provided that a contract by
a person of unsound mind is voidable at the option
of that person when he is sound mind (but he must
prove to the court that he is of unsound mind while
contracting and the other party knows of his
condition). See Imperial Loan Co v Stone [1892].
 Applied in Malaysian cases of Asia Commercial
Finance (M) Bhd v Yap Bee Lee & Ors. [1991]
Che Som bt Yip v Maha Pte Ltd & Ors (1873)
 It was held that because the defendant did not
know about the Plaintiff’s unsound mind while
contracting, the contract is valid.
Matthews v Baxter (1873)
 Baxter, while drunk, agreed at an auction to purchase a
property. Once sobriety returned, he decided that he
wished to affirm the contract that had been made by him
while drunk.
 Sometime later, he had a change of mind and he sought to
rescind the contract, arguing that he lacked capacity to
enter the contract by reason of intoxication.
 The court held that because Baxter had confirmed the
contract, it was no longer open to him to avoid the contract
on the grounds of intoxication.

127 128

127 128

Coercion (duress)
Element No. 6: Free Consent (paksaan) – section 15

 Section 10 - “All agreements are contracts if they are made consent must be free and not caused Undue influence
by the free consent of parties competent to contract, for a (pengaruh tidak
FREE CONSENT

lawful consideration and with a lawful object, and are not wajar) – section 16
hereby expressly declared to be void.” VOIDABLE
Section 14

Remedy –
s 65
Fraud (Penipuan) –
by:

 Section 13 - meaning of ‘consent’  two or more persons

agreed upon the same thing in the same sense. section 17

Misrepresentation
(salahnyataan) –
section 18
VOID
Mistake (khilaf)- Remedy –
sections 21, 22 and 23 s 66
129 130

129 130

In absence of genuine consent… VOIDABLE CONTRACT

 Section 2(i)  An agreement which enforceable by
law at the option of one or more parties thereto, but
VOIDABILITY OF not at the option of the other is a voidable
contract.
CONTRACTS
 Voidable contracts are contracts where all the
elements of a contract exist, and they are thus
VOIDABLE enforceable in Law.
* Void at the option of  At most, one party to the contract is bound. The
the aggrieved party unbound [or the innocent] party may choose
whether he wants to carry on with the agreement
or terminate the agreement. If he decides to
terminate the contract, then the contract is void.
VOID
* Not enforceable by  Therefore, the innocent party can choose
law whether to regard the contract as void or valid.

131 132

131 132

22
 Section 19 (1)
 When consent is caused by coercion,
fraud or misrepresentation, the
Agreement is a CONTRACT VOIDABLE
at the option of the party whose consent
was so caused.
Section 20
 Consent to an agreement is caused by
undue influence, the agreement is a
CONTRACT VOIDABLE at the option of
the party whose consent was so caused.
133
133
1. COERCION/DURESS
Refer Section 15
 Coercion occurs where a party commits or
threatens a criminal act or unlawfully
detains or threatens to detain an innocent
party’s property with intention to cause the
innocent party to enter into a contract.
 Read together with Sections 19, 65 and 73
 Section 73 - a person to whom money is paid or
anything is delivered, by mistake or under
coercion, must repay or return it.
135
135
2. UNDUE INFLUENCE
 Undue influence occurs where a person uses a
position of influence to persuade someone to enter a
contract that provides the stronger person with a
direct or indirect benefit usually in a fiduciary
relationship.
Section 16 (1)
 Undue Influence occurs where :
i. There is a relationship between the parties and one
party is in the position to dominate the will of the
other; and
ii. The dominant party uses that position to obtain an
unfair advantage over the other.
137
137
Section 65
 When a person at whose option a contract is
voidable rescinds it, the party thereto is
released from any further obligation. The
party rescinding a voidable contract shall
restore any benefits he had received from the
others.
Section 76
 An innocent party who rightly rescinds a
contract is entitled to compensation for any
damages which he has sustained through
non-fulfillment of the contracts.
134
134
Barton V Armstrong [1975]
 Coercion basically means one person
compelling another to do some act against
his will by the use of actual or threatened
physical violence, psychological pressure,
threats, economic duress or the bringing of
unfounded criminal proceedings against
him.
 The target of the coercion need not be the
actual Plaintiff but could involve the
Plaintiff’s family, near relatives or even his
properties.
136
136
 The doctrine of undue influence applies when
one party unconscientiously uses his position
of power of another to obtain an unfair
advantage for himself.
Poosathurai V Kannappa Chettiar (1919)
 The Court held that showing mere influence is
insufficient, but the innocent party would
need to show that the dominating party had
obtained an unfair advantage.
138
138
23

 In other words, undue influence involves one
party taking advantage of his position of
power over another to prevent the latter from
exercising his independent judgment and in
so doing, the first person gains an unfair
advantage for himself.
 Read together with Sections 20 and 65
139
3. FRAUD
Section 17
 Lays down five acts which may constitute fraud. The
act must be made with intent to deceive another
party or to induce him to enter into the contract.
BP (Sabah) Sdn Bhd v Syarikat Jubrin Enterprise (a
partnership firm) & Anor [1997]
 A person is taken to have acted fraudulently or with
intent to defraud if he acts with the intention that
some person be deceived and by means of such
deception that either an advantage should accrue to
him or injury, loss or detriment should befall some
other person. That is what known as ‘fraud’ or
‘fraudulently’.
 Read together with Sections 19 and 65
140

139 140

4. MISREPRESENTATION
 Refer section 18 (read together with sections 19 and 65) Double Acres Sdn Bhd v Tiarasetia Sdn Bhd [2001]
 Common law defines a misrepresentation as untrue  Basic difference between a misrepresentation and a
statement of fact with the intent to induce the other fraud is that in fraud, the person making the
party to enter a contract. representation does not himself believe in its truth.
Whereas, in the case of misrepresentation, he may
 There are three types of misrepresentation, i.e., believe the representation to be true.
fraudulent, innocent & negligent misrepresentation.
 Fraudulent misrepresentation: made with the intent
to deceive
 Innocent misrepresentation : honestly believes that
the statement is true although it is untrue
 Negligent misrepresentation : advice given
negligently. Include situations where a person sought
information or advice from another in the ordinary
course of business.
141 142

141 142

VOID CONTRACTS VOID CONTRACT

Section 2 (g)
 “An agreement not enforceable by law is said to be
void”
MISTAKE
Section 66
 The person who received any advantage under void
agreement or contract is bound to restore it to
the other party or to pay adequate compensation Mistake of fact Mistake of fact Mistake of
for the same.” by both parties by one party Law

Section 73 Section 21 Section 23 Section 22

 A person to whom money is paid or anything is
delivered, by mistake (which is a void contract) or
under coercion, must repay or return it.
144

143 144

24

Mistake of fact by both parties
Section 21
 the mistake must be a matter of fact which is
essential to the agreement.
Chop Ngoh Seng V Esmail & Ahmad Bros (1948-9)
 Where both parties to an agreement are under
a mistake as to a matter of fact essential to the
agreement, the agreement is void.
 What is essential has not been defined, but
from the illustrations under section 21, it cover
mistake concerning the existence, identity
and quality of the subject matter.
145
145
Raffles v Wichelhaus [1864].
 For a mutual mistake to be void, then the item the parties
are mistaken about must be material
Couturier v Hastie [1856]
 Mistake as to the existence of the subject matter,
contract is void.
147
147
Mistake of Law
Section 22
 A distinction is made between a mistake of law in
force in Malaysia and mistake of law not in force in
Malaysia (Foreign Law)
 Mistake of law in force in Malaysia – the contract
would have the same effect as of a mistake of fact in
section 23, i.e., the agreement is valid.
 Reason : Notwithstanding such a mistake, the
agreement is valid may be said to be reflected in the
phrase that “ignorance of the law is no excuse” and
that the person is expected to know or find out the
applicable law in Malaysia that affects his contractual
dealings
149
149
Mutual Mistake
 This is where both parties have
misunderstood one another and are at
cross-purposes in relation to a fundamental
fact of the contract.
 The parties are clear of one another’s
intention and accepts it, but both are
mistaken about an underlying fact.
Example:
 Keisha offers to sell her Apple iPhone to Qiqi.
Qiqi accepted the offer thinking that Keisha
was offering a Samsung Handphone. In this
case, there is no meeting of the mind. As the
offer and acceptance do not correspond, a
contract cannot come into existence.
146
146
Mistake of fact by one party
Section 23
 Unilateral mistake, i.e., a mistake of fact by ONE
party only.
 Contract is ‘not voidable’  this phrase is unclear as
to whether it can be valid or void.
 Scholar such as Visu Sinnadurai argues that
agreement formed by mistake under section 23 is
valid namely because:
i. section 21 considered that mistake by BOTH parties
rendered the contract as void. Therefore, if only ONE
party is under a mistake, then the contract should
still be valid.
ii. Unlike section 21, the mistake under section 23 is
not one that is ‘a matter of fact ESSENTIAL to the
agreement’.
148
148
 Section 22 provides that a mistake as to
foreign law has the same effect as a mistake
of fact.
 A mistake of law not in force in Malaysia
should be interpreted to have the effect of a
mistake of fact under section 21, i.e., the
agreement is void.
 Rationale : a person is not as highly
expected to know foreign laws that are not
in force in Malaysia. (Cheong May Fong, Contract Law in
Malaysia, 2013, Sweet & Maxwell Asia, pg. 365.)
150
150
25
 Non est factum
 Where there is a mistake as to document, the
plea of non est factum – ("it is not [my] deed”) –
allows a signing party to escape performance of
the agreement.
 A claim of non est factum means that the
signature on the contract was signed by mistake,
without knowledge of its meaning, but was not
done so negligently.
 A successful plea would make the contract void
ab initio.
151
151
 Ignorantia legis neminem excusat
‘ignorance of law is not excused’.
 Section 22: “A contract is not voidable because it
was caused by a mistake as to any law in force
in Malaysia; but a mistake as to a law not in
force in Malaysia has the same effect as a
mistake of fact.”
Seck v Wong & Lee (1940)
153
153
Section 24
The object of an agreement is lawful unless:
a) It is forbidden by a law (Manang Lim Native
Sdn Bhd v Manang Selaman [1986]);
b) It is of such a nature that, if permitted, it would
defeat any law (Hee Cheng v Krishnan [1955]);
c) It is fraudulent;
d) It involves or implies injury to the person or
property of another (Syed Alhamed Alhabshee v
Puteh bt Sabtu (1922)); or
e) The court regards it as immoral, or opposed to
public policy (Pearce v Brooks [1861]).
155
155
 Non est factum is difficult to claim as it does not
allow for negligence on the part of the signatory.
E.g. failure to read a contract before signing it
will not allow for non est factum.
 In a successful case, the fundamental basis of
the signed contract must be completely
different from what was intended.
Foster v Mackinnon (1869)
L’Estrange v F Graucob Ltd [1934]
Saunders v Anglia Building Society [1970]
Awang b Omar v Hj Omar v Anor [1949]
152
152
Element No. 7: Legality
-
Section 2(h) - An agreement enforceable by
law is a contract
section 2(g) - An agreement which is not
enforceable by law is void
Section 10 - All agreements are contracts if
they are made by the free consent of
parties competent to contract, for a lawful
consideration and with a lawful object,
and are not hereby expressly declared to be
void.
Section 24 explains what objects are
lawful, and what not.
154
154
TERMS OF A CONTRACT
 “Term” in law of contract refers to stipulation
which gives efficacy to the intention of the
parties.
 Statements made in the negotiation stage
leading to a contract may be incorporated into a
contract and become terms of the contract. A
term of the contract can either be express /
implied.
 A term is legally binding statement or promise
contained in a contract, and helps to indicate
how a contract is to be performed.
156
156
26
 Express & Implied Terms  A term is implied if it is read into the contract by
the court or by the legislature. It is an integral
 A term is express if it has been specifically part of the contract;
agreed upon by parties to a contract & it could be
in oral or in writing or both.  A term is implied by:
 Previous dealings or conduct
 Express terms are identified by looking at the  Custom or usage
document.
 By statute
 Courts
 If no document, then look back at the
negotiations between the parties to see which
oral statements were intended to be terms.  Terms can be classified as conditions,
warranty or innominate terms.

157 158

157 158

(1) Conditions (terma syarat) (3) Innominate Terms

 Where terms in a contract are crucial (vital) to
the operation of the contract, they are known as
conditions.
Wallis v Pratt (1910)
 ‘Condition’ was defined as an obligation which
goes so directly to the substance of the contract,
or in other words, is so essential to its very
nature ,that its non-performance will fairly be
considered by the other party as a substantial
failure to perform the contract at all.
(2) Warranty (terma waranti)
 Terms of lesser importance (side issues to the
main thrust of the contract.
 A contract may include terms that are not easily
classified as conditions or warranties until they
are breached.
 When this happens, the ct will often determine
the legal effect of these terms, i.e. intermediate
or innominate terms.
 The court will ask:
 How serious an effect will the breach of this
term have on the innocent party?
 If the effect is grave/serious: it will be
regarded as the equivalent of a breach of a
condition.
 If the effect is not so serious: breach of
warranty.

159 160

159 160

Why do we have to distinguish these The test for conditions vs

terms?
Remedies
 Under common law, an innocent party who has
suffered a breach of a condition has two rights:
1. To rescind (terminate) the contract and
claim damages; (rescission/termination) or
2. To affirm (maintain) the contract and
claim damages.
warranties
 The court will determine the intention of the
parties in regard to terms by applying one or both
test as follows:
• Was the term essential to the contract?
• Yes: the term is a condition
• No: the term is a warranty

• Poussard v Spiers (1876) • Will the breach cause a serious loss or

• Bettini v Gye (1876) problem for the innocent party?
• Yes: indicates that term is a condition
• No: the term is a warranty
161 162

161 162

27
 Exemption Clause
 Exemption Clause (or disclaimer) is a term of a
contract that attempts either:
 To modify principal obligation(s) arising
under contract of that particular type; or
 To limit / exclude liability of a party which
would otherwise arise a result of a breach by
that party of his obligation to perform the
contract.
 The Contracts Act 1950 contains no provision
dealing with exemption clauses and as such, the
Malaysian courts have followed the English
common law when considering this aspect of the
law.
163
163
(1) Notice must be contemporaneous
with the contract
 For an exemption clause to be effective, it must
be brought to the notice of the contracting
parties before or at the time the contract is
made.
• Olley v Marlborough Court Hotel [1949] (*)
• Thornton v Shoe Lane Parking [1971]
165
165
(2) Notice must be reasonably
sufficient
 If the plaintiff knew that there was writing on the
ticket but did not know or believe that the writing
contained conditions, he will be bound if the party
seeking to rely on the clause has done what is
reasonably sufficient in the circumstances to
bring it to his notice.
 The court has generally adopted the rule of
proposal and acceptance as applying to consumer
transactions, such as travel transactions. The issue
of the ticket is regarded as a proposal and the
acceptance of the ticket an acceptance of that
proposal.
167
167
Exemption Clause (2)
 The courts have tried to protect the position of
the recipient of documents containing exemption
clauses by requiring certain standards of notice
in respect of the terms, including:
1. Notice must be contemporaneous with
the contract
2. Notice must be reasonably sufficient
3. The terms must be part of contractual
documents
164
164
Olley v Marlborough Court Hotel
 Mrs Olley left a fur coat at the coat-check of the
Marlborough Court Hotel. The coat was stored in
a locked room but was stolen. The Hotel argued
that they were protected against the suit under a
contract of service where they had disclaimed
liability for theft. Within each bedroom there was
a notice stating the hotel would not be liable for
theft.
 The court held that the disclaimer was not part of
the contract, and the hotel could not rely upon it.
The contract for the storage of the coat was
formed at the reception desk.
166
166
 The result is that a contract is formed on the
terms stated in the ticket or referred to in it,
irrespective of whether the purchaser has read
the terms.
Parker v South-Eastern Railway Co (1877)
 The requirements of incorporation by ticket were
stated:
1. Did the purchaser of the ticket know that there
was writing on it?
2. Did the purchase know that the ticket
contained or referred to terms?
3. Were reasonable steps taken to bring notice of
the terms to the purchaser’s attention?
• Thompson v LMS Railway Co. [1930] – constructive
knowledge
• Malaysian Airlines System Bhd v Malini Nathan &
Anor [1986]
168
168
28
 (3) The terms must be part of
contractual documents
 The exclusion clause must be an integral part
of the contract.
 The issue of whether the notice is in the nature of
a receipt or voucher becomes crucial on the
basis that if it is a receipt / voucher, it would not
form an integral part of the contract.
 The contents have come too late because the
contract containing the terms has been
completed.
169
169
Causer v Browne [1952]
 A customer took a dress to the dry cleaners and
received a docket, the terms of which protected
the dry cleaners from claims for negligence.
 The court held that the cleaners could not rely on
the terms in the docket. There was no evidence
that the customer knew of the terms and a
reasonable person, in the circumstances, would
not have regarded the document as containing
terms but treated is as no more that a receipt for
the dress.
 See also Sze Hai Tong v Rambler Cycle Co Ltd
(1959)
171
171
 The conditions and warranties implied in a
contract of sale of goods bind the contracting
parties, that is the buyer and seller.
 Where a 3rd party uses goods purchased by
another and suffers injuries caused by some
defects, under common law, he cannot sue the
seller in the contract simply because there is no
contractual relationship between them.
 However, the remedy may lie in tort provided the
plaintiff can prove negligence as in the celebrated
case of Donoghue v Stevenson [1932] AC 562.
173
173
 The question that needs to be asked is whether
reasonable steps have been taken to bring the
contents to the notice of the other party.
Chapelton v Barry Urban District Council [1940]
 it was held that a ticket issued by an attendant to
hirers of Council deck chairs did not constitute a
contractual document. It was considered a means
whereby a user of a deck chair could prove that he
had fulfilled the obligation of paying the
appropriate charge of its hire.
170
170
PRIVITY OF CONTRACT
 The doctrine of privity of contract recognises
that a contract is a private relationship between
those persons who are a party to it. Thus a person
who is not party to the contract can neither
acquire rights nor incur liabilities under the
contract.
 Anyone who wishes to enforce a contract must
show that he is both party to the contract and has
given consideration in return for the promise
which he seeks to enforce (unless the contract be
by deed).
 Tweedle v Atkinson (1831)
 Beswick v Beswick [1968] AC
172
172
DISCHARGE OF CONTRACT
MEANING :
 Discharge of contract means termination of the
contractual relationship between parties.
 Discharge of a contract relates to the
circumstances in which the contract is brought
to an end.
EFFECT:
 Where a contract is discharged, each party is
freed from their continuing obligations under
the contract.
174
174
29
 A CONTRACT MAY BE DISCHARGED IN ONE
OF THE FOLLOWING WAYS
1. Discharge by PERFORMANCE
2. Discharge by BREACH OF AGREEMENTS
3. Discharge by AGREEMENT BETWEEN PARTIES
4. Discharge by IMPOSSIBILITY/FRUSTRATION
5. Discharge by OPERATION OF LAW
175
175
CUTTER
V APPLICABLE LAWS
POWELL
 A seaman who was to be paid his wages after the
end of a voyage died just a few days away from
port. His widow was not able to recover any of his
wages because his contractual obligation had
not been substantially performed.
 The general rule is that performance of a contract
must be exact, precise and should be in
accordance with what the parties had
promised.
177
177
TIME FOR PERFORMANCE OF CONTRACT
APPLICABLE LAWS
 If time is made out to be of essence in a contract, then
the Promisor must carry out his obligations within
the specified period. If time is not of the essence then
the obligation must be done within a reasonable
period.
SECTION 47
 If no time for performance is specified, the agreement
must be performed within a “reasonable time”.
SECTION 56
 If time of performance is specified, then the parties
has to follow what had been agreed
179
179
DISCHARGE BY PERFORMANCE
 Parties to the Contract must perform their
promises in accordance to the Contract.
 A contract becomes discharged through
performance where both parties have fully
performed their contractual obligations within
the time and in the manner prescribed.
176
176
DISCHARGE BY PERFORMANCE
SECTION 38 (1)
 Parties to a contract must perform/offer to perform
their respective promises unless such performance
has been dispensed with by any law.
 At the time and place as agreed in the contract –
section 48 and section 49.
SECTION 40
 When a party to a contract has refused to perform or
disables himself from performing his promise, the
other Party may put an end to the contract unless he
signifies by word or conduct that he is willing to
continue the contract.
178
178
SECTION 76
 A person who rightly rescinds a contract is
entitled to compensation for any damage which
he has sustained through non-fulfillment of the
Contract.
180
180
30
 GAN HWA KIAN & ANOR
V
SHENCOURT SDN BHD
 Def. (Developer) failed to deliver vacant possession
of the property to the Plaintiff within the stipulated
time as time was the essence of the contract.
[Section 38 (1) & Section 56(1)]
 The Plaintiff were held to be entitled to rescind the
sale & purchase agreement.
 The Plaintiffs also entitled to refund all the moneys
paid and claim damages for non-fulfilment of the
contract.
[Section 40 & 76]
181
181
DISCHARGE BY BREACH
-APPLICABLE LAW-
EFFECT OF BREACH
Section 40
 If one party fails to perform their obligation
under the contract, the innocent party is entitled
to treat the Contract as ended from the time of
the terminating event and may be able to recover
damages.
183
183
The Court held that :
 “It should be observed that not every refusal to
perform some part of a contract will amount to a
renunciation. Even a deliberate breach will not
necessarily entitle the innocent party to treat himself
as discharged since it may sometime be that such a
breach can appropriately be sanctioned by damages.”
 “It is not a mere refusal or omission of one of the
contracting parties to do something which he ought
to do that will justify the other in repudiating the
contract but there must be an absolute refusal to
perform his part of the contract. If there is an
absolute refusal to perform, the other party may
treat himself as discharged.”
185
185
DISCHARGE BY BREACH
 Breach of Contract happens where there is an
actual failure by a party to the contract to
perform his obligations under the contract or
an indication of his intention not to do so.
[Oxford Dictionary of Law, 4th Edition]
 There are many circumstances which amount to
breach of contract. For example not complying
with terms of the contract, delay in performance
and refusal to perform.
182
182
RASIAH MUNUSAMY
V
LIM TAN & SONS SDN BHD
 Sale and transfer of a double storey terrace house
which the respondent undertook to build.
 The Respondent claimed that the agreement had
been repudiated on the grounds of refusal of the
appellant to pay the final balance.
184
184
DISCHARGE BY AGREEMENT
 A contract is basically an agreement which was created
by consent of both parties. As such it can also be
discharged by agreement or consent of both parties.
 When the parties agreed to bring the contract to an
end, its also means that the parties agreed to release
each other from their contractual obligations.
 The rule of law in this regard is as follows :
“Eodem modo quo quid constituitur, eodem modo
destruitur”
 Which means that as a contract is formed based on an
agreement, therefore it can also be discharged through
an agreement provided there is mutual consent.
186
186
31

DISCHARGE BY AGREEMENT
-APPLICABLE LAW-
SECTION 63
 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.
187
187 188
 For frustration to apply, it is necessary to prove that
the parties have made no provision for such events in
their contract. This means that, where the parties
have themselves provided for the situation that has
arisen, the provisions that they have made for the
situation in the contract applies, hence no frustration.
189
189 190
1. DESTRUCTION OF SUBJECT MATTER OF THE
CONTRACT
TAYLOR V CALDWELL
 The Defendant agreed to let a music hall to the Plaintiff so
that four concerts could be held there.
 However, before the date of the first concert, the hall was
destroyed by a fire.
 The Plaintiff claimed damages for Defendant’s failure to
make the premises available.
 The Court held that the claim for breach of contract must
fail since it had become impossible to fulfill. The
contractual obligation was dependent upon the continued
existence of a particular object.
191
191 192
DISCHARGE BY IMPOSSIBILITY OR FRUSTRATION
 A contract may be frustrated where there exists a
change in circumstances, after the contract was
made which is not the fault of either of the parties
which renders the contract either impossible to
perform or deprives the contract of its commercial
purpose.
 Doctrine of frustration only operates where the
frustrating circumstances are not due to any fault of
parties.
 Where a contract is frustrated, each party is
discharged from future obligations under the
contract and either party cannot sue each other.
188
DISCHARGE BY IMPOSSIBILITY
-APPLICABLE LAWS-
SECTION 57
 Section 57 (2)
The contract becomes impossible to be performed after
it has been made.
FOUR SITUATIONS OF IMPOSSIBILITIES OR
FRUSTRATION
1. Destruction of subject matter of the contract
2. Impossibility due to non-occurrence of event basic to
contract
3. Death or personal incapacity
4. Unlawful/war 190
2. IMPOSSIBILITY DUE TO NON-OCCURRENCE OF EVENT
BASIC TO CONTRACT
KRELL V HENRY
 The Plaintiff offered to rent some rooms overlooking a
street where processions to the Royal Coronation were
going to take place.
 The Defendant offered to rent the rooms in order to
watch the processions and he put down a deposit to
reserve the rooms. The king fell sick and the processions
were cancelled.
 The Defendant then refused to pay and the Plaintiff sued
for the balance sum. The Court held that the Defendant
was excused from paying the rent for the room as the
holding of the procession on the dates planned must have
been regarded by both parties as basic to enforcement of
the contract
192
32

3. DEATH OR PERSONAL INCAPACITY
ROBINSON V DAVIDSON
 There was a contract between the Plaintiff and the
Defendant”s wife [Defendant was the agent of his wife]
that the wife would play the piano at Plaintiff’s concert.
 On the day in question, the wife was unable to perform
through illness. Their contract did not contain any term as
to what was to be done in case of her being too ill to
perform.
 The Court held that the wife's illness and the consequent
incapacity excused her and that the contract was in its
nature not absolute but conditional upon her being well
enough to perform.
193
193
HA BERNEY V TRONOH MINES
 The Plaintiff sued for breach of contract of
service.
 The Defendants contended that consequent to the
Japanese occupation of Perak, the contract of
employment between them and the Plaintiff was
discharged by frustration.
 The Court held that the invasion of Malaya by the
Japanese frustrated the performance of the
contract and therefore there was no breach of
contract by the Defendants.
195
195
Section 15 of the Civil Law Act 1956
 Money paid before the time of discharge is
recoverable. If the party has incurred expenses in
the performance of the contract before the time of
discharge, he may retain the whole or any part of
the sum already paid but not in excess of the
expenses incurred.
197
197
4. WAR OR DECLARATION OF WAR
 If a contract is made and war breaks out making one of
the parties to the contract an enemy alien, then the
contract will be frustrated.
AVERY V BOWDEN
 A ship was supposed to pick up some cargo at Odessa.
 With the outbreak of the Crimean War, the Government
made it illegal to load cargo at an enemy port, so the
ship could not perform its contract without breaking
the law.
 The contract was therefore frustrated.
 Also refer to illustration Section 57 (d)
194
194
EFFECT OF FRUSTRATION
 The contract is terminated as to the future only. It
is not void from the beginning.
PUBLIC FINANCE BHD V EHWAN BIN SARING
 The Court held that pursuant to Section 57 (2) of
the Contracts Act 1950, the agreement had
become void and the appellants were obliged to
return the money he received from the
Respondent under Section 66.
 Other than that, the remedy under Section 15 of
the Civil Law Act 1956 also applicable.
196
196
DISCHARGE BY OPERATION OF LAW
 Occurs when a contract is discharged without
either party wishing it to be so, such as:
 A material alteration of a written document
without the consent of the other party makes
the contract unenforceable by the party
making the alteration.
 Bankruptcy
 Merger
 Death of either party
 Lapse of time under Limitations Act
198
198
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 THE MEANING OF REMEDY
 Remedy is a way to solve problem.
 When one party to a contract unjustifiably fails or refuses
LAW OF CONTRACT to perform his part of the contract, the other party has a
right of legal action.
 The methods which are given by the law to an innocent
party by which he may enforce a right or redress an injury
REMEDIES FOR BREACH are called “remedies”
OF CONTRACT  A contract would be of no value if there were no remedy
to enforce the rights arising there under.

 Derived from the Latin maxim :

“Ubi jus, ibi remedium”

Where there is a right, there is a remedy
199 200

199 200

THE POSSIBLE REMEDIES AVAILABLE FOR

BREACH OF CONTRACT ARE : 1. RESCISSION & CLAIM DAMAGES
1.Rescission & claim  Rescission (cancellation) is the revocation of a
damages contract.
 On a breach of a condition of a contract, the
injured party may treat the contract as at an end
4. Quantum 2. Specific and refuse to perform or fulfill his part of the
Meruit Performance contract.
 The purpose of awarding damages is to
compensate the Plaintiff for the loss suffered
due to the Defendant’s breach of contract.
3. Injunction
 Damages are governed by SECTIONS 74-76
201 202

201 202

Section 40
 When one 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.
203
Section 76
 Party rightfully rescinding contract is entitled to
compensation for any damage which he has sustained
through the non-fulfilment of the contract.
EXAMPLE
 A, a singer contracts with B, the manager of a theatre
to sing at his theatre for two nights in every week
during the next two months and B engages to pay her
RM100 for each night’s performance.
 On the sixth night A willfully absents herself from the
theatre and B in consequence rescinds the contract.
 B is entitled to claim compensation for the damage
which he has sustained through the non-fulfilment of
the contract.
204

203 204

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 2. SPECIFIC PERFORMANCE
Section 11 SRA
 Provides the circumstances when a Court may
 Governed by the SPECIFIC RELIEF ACT 1950
grant Specific performance
(SRA)
Section 20 & 21 SRA
 Specific Performance is a discretionary order
granted by the courts directing a person to carry  Provides the circumstances when specific
out their obligations under the Contract. performance cannot be granted

 It is a specialized remedy used by the Courts when Section 18 [3] SRA

no other remedy [such as money] will adequately  Allows the Court to grant compensation in
compensate the injured party addition to the Order of Specific Performance.

205 206

205 206

3. INJUNCTION  Prohibitory injunction is a restraining order,

stopping something from being done.
 Governed by the SRA
 A discretionary Court Order and only granted Polygrams Records Sdn Bhd V Hilary Ang & Ors
when it is just and equitable to do so having
regard to all the circumstances of the case.  The Plaintiff and the Defendants entered into an
agreement where the Defendants will perform only
 An injunction may be: at the Plaintiff’s theatre for two years.
i. PROHIBITORY  Within that 2 years, the Defendants suddenly want
Preventing the breach of contract to do performance for third party.
 The Plaintiff applied for an Injunction to prohibit
ii. MANDATORY the Defendants from performing for the third party.
Requiring a person to perform some contractual [Allowed by the Court]
obligation
207

207 208

 Mandatory Injunction is a Court Order requiring

something to be done. Another example of injunction….

Neoh Siew Eng & Anor V Too Chee Kwang INTERLOCUTORY INJUNCTION
 Where it freezes the status quo between the
parties until the dispute can be heard by the
 The landlord refused to keep the water supply
court / maintain status quo to the subject matter
open for his tenants.
in a pending suit.
 The tenants applied injunction from the court to
order the landlord to keep the water supply open
for them.
 The Court granted mandatory injunction
requiring the water supply to be open to the
tenants.

209 210

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 Low Kwye Ying V Chan Yek Ying The Court held that:
 The Plaintiff was a tenant of the ground floor of the
premises of which the Defendant was the landlord and
“there had been a breach by the Defendant of the
owner. covenant for quiet enjoyment and in the
 The Plaintiff had throughout the period of her tenancy
circumstances a temporary injunction would be
use of the water, the kitchen, the bathroom and the issued against her to restore the status quo of the
toilet on the ground floor. parties until the suit was finally disposed of.”
 The Defendant however took steps to cut off the water
supply to the Plaintiff by locking the water tap and she
altered the premises on the ground floor. As a result, the
Plaintiff and her family were deprived of the use of the
bathroom, the kitchen and the toilet.
 The Plaintiff sought an injunction and declaration
against the Defendant.
211 212

211 212

4. QUANTUM MERUIT
 Means “as much as is deserved”
 Quantum Meruit determined the amount to be paid for END OF DISCUSSION
services :
&
i. When no contract exists [eg. Doctor giving
emergency aid] or; THANK YOU
ii. Where the parties to a contract have failed to agree
on a price; or

iii. Where a party has carried out work in the

reasonable expectation of a contract being formed
but an agreement is never reached on the essential
terms of the contract.
213 214

213 214

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