INTRODUCTION

s.10

 All agreements are contracts if they are made by

the free consent of parties competent to contract

Introduction: Voidable Contract

…

s.13

 Two or more persons are said to consent when

they agree upon the same thing in the same
sense
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s.14

 Consent is said to be free when it is not caused by

 Coercion (s.15)

Undue influence (s.16)

Introduction: Voidable Contract



 Fraud (s.17)

 Misrepresentation (s.18)

 Mistake (ss21 – 23)

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IF THERE IS NO ‘FREE CONSENT’ ?
s.19
 When consent to an agreement is caused by

Introduction: Voidable Contract

coercion, fraud or misrepresentation, the
agreement is a contract voidable at the option of
the party whose consent was so caused

s.20
 When 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
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 So, what about mistake?
 S.21
 Where both parties to an agreement are under a
mistake as to a matter of fact essential to the
agreement, the agreement is void.
S.22

Introduction: Voidable Contract


 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
 S.23
 A contract is not voidable merely because it was
caused by one of the parties to it being under a
mistake as to a matter of fact
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TERMINOLOGY

Voidable contract
 S.2(i) : an agreement which is enforceable by law
at the option of one or more parties thereto, but

Introduction: Voidable Contract

not at the option of the other or others, is a
voidable contract

Void agreement
 S.2(g): [a]n agreement not enforceable by law is
said to be void

A contract is not voidable

 It is a valid contract 6
VOIDABLE CONTRACT
S.2(i) : an agreement which is enforceable by law at
the option of one or more parties thereto, but not at
the option of the other or others, is a voidable contract

Introduction: Voidable Contract

 “enforceable”
 Can be enforced or not

 “option” – “of one or more parties”

 At the option of the innocent party

So, it means that the innocent party has the option to

enforce the contract or not. Can choose to:
1. Rescind the contract (terminate it), or
2. Continue the contract (affirm it) 7
Introduction: Voidable Contract
RESCIND THE CONTRACT
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INTRODUCTION
 Rescission denotes the act of terminating the
contract
 The contract does not terminate automatically

Introduction: Voidable Contract

Option must be:
1. Exercised within a reasonable time
 Otherwise, can be deemed to have affirmed the
contract
2. Communicated
 S.67: The rescission of a voidable contract may be
communicated … in the same manner, and subject
to the same rules, as apply to the communication …
of a proposal 9
s.3
 The communication of proposals … are deemed to
be made by any act or omission of the party
proposing … by which he intends to communicate
the proposal … or which has the effect of
communicating it

Introduction: Voidable Contract

s.4(1)
 The communication of a proposal is complete
when it comes to the knowledge of the person to
whom it is made

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NOTE

 In this topic, the contract is voidable because

there is no free consent

Introduction: Voidable Contract

 A contract can, however, also be voidable due to a
breach of contract
 Rescission is different for both

 Contracts which are voidable due to s.19 & s.20

 Rescission ab initio
 Contracts that are voidable due to breach of
contract
 Rescission is from date it is communicated
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EFFECT OF RESCISSION
s.65

Introduction: Voidable Contract

When a person at whose option a contract is voidable
rescinds it, the other party thereto need not perform
any promise therein contained in which he is
promisor. The party rescinding a voidable contract
shall, if he has received any benefit thereunder from
another party to such a contract, restore the benefit,
so far as may be, to the person from whom it was
received 12
 s.66

When … a contract becomes void, any person

who has received any advantage under the …

Introduction: Voidable Contract

contract is bound to restore it, or to make
compensation for it, to the person from whom he
received it.

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 s.65 S.66

When a person … … any person who

rescinds it, the other has received any

Introduction: Voidable Contract

party … need not advantage under the
perform any promise … contract is bound to
… The party restore it, or to make
rescinding … shall compensation for it …
… restore the benefit

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SATGURPRASAD V HAR NARAIN DAS [1932]
If the matter could be regarded one as of contact,
their Lordships think that it would fall within the
terms of section 65 of the Contract Act [s.66

Introduction: Voidable Contract

Malaysian Contracts Act] which provides that ‘when a
contract becomes void’ – and their Lordships would
have no difficulty in holding these words sufficient to
cover the case of a voidable contract which had been
avoided – any person who has received any advantage
under such a contract is bound to restore it to the
person from whom he received it, or make
compensation therefore” 15
YONG MOK HIN V UNITED MALAY STATES
SUGAR INDUSTRIES [1967]
Under the provisions of section 65, the obligation
to restore any benefit received is restricted to the
party rescinding the contract but under section

Introduction: Voidable Contract

66 the obligation is extended to any party who
had gained an advantage or benefit under the
contract.

But this section [s.66] deals with contracts which

are discovered to be void or becomes void. It
would include voidable contracts which become
void by rescission.
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 BADIADDIN BIN MOHD MAHIDIN V ARAB
MALAYSIAN FINANCE BHD [1998]
“any person”
 Only those who are parties to the contract

Introduction: Voidable Contract

 To extend the meaning of ‘any person’ in s.66 o
strangers to the agreement would be in violation
of the elementary principle of contract

s.66 = restitution
 “It is necessary to bear in mind that s.66 … only
confers a discretionary remedy in the nature of
restitution … to be exercised by the court
within the ambit of the section and within the 17
principles of law of contract …”
 S.76

A person who rightly rescinds a contract is

entitled to compensation for any damage which

Introduction: Voidable Contract

he has sustained through the non-fulfilment of
the contract

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HAJI AHMAD YARKHAN V ABDUL GHANI & ANOR
AIR 1937 NAG 270

[T]hese words [through the non-fulfilment of the

contract] indicates to my mind that the
distinction which the English law draws between

Introduction: Voidable Contract

contracts rescinded on the ground of fraud and
rescinded for other reasons … The distinction is
this. When any contract is avoided for breach, it
remains operative as to the past and so claims for
restitution in respect of acts of performance prior
to the rescission are precluded. But when it is
rescinded for fraud, the act has retrospective
effect and the contract is rescinded ab initio just
as if it had never been in force … consequently, 19
restitution is all that can be claimed …”
1. When any contract is avoided for breach
 it remains operative as to the past
 claims for restitution in respect of acts of
performance prior to the rescission are precluded.

Introduction: Voidable Contract

2. When it is rescinded for fraud
 the act has retrospective effect
 the contract is rescinded ab initio
 just as if it had never been in force
 restitution is all that can be claimed

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ABDUL RAZAK BIN DATUK ABU SAMAH V SHAH
ALAM PROPERTIES SDN BHD [1999] 2 MLJ 500
There had been fraudulent misrepresentation
and thereby granted a rescission of the contract.

Introduction: Voidable Contract

The assessment of damages should not be on the
footing of a breach of contract, ie to place the
innocent party in the same position as though the
contract had been performed, because the
contract has been set aside.

It should be assessed instead on the footing that

the contract had been rescinded, ie to put the
innocent party in the position he would have
been had he not relied on the fraudulent
21
inducement.
Introduction: Voidable Contract
AFFIRM THE CONTRACT
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INTRODUCTION

A contract that is affirmed, means that you

continue with the contract as it is

Introduction: Voidable Contract

but

in cases of misrepresentation or fraud, may ask

that one is “put in the position in which he would
have been if the representation had been true”
 S.19(2) Contracts Act

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 s.19(2)

Sesuatu pihak kontrak, yang kerelaannya

disebabkan oleh frod atau salahnyata, boleh, jika

Introduction: Voidable Contract

ia fikir patut, berbuat demikian supaya kontrak
itu hendaklah dilaksanakan juga dan mendesak
supaya ia ditempatkan dalam kedudukan yang
seharusnya jika nyataan yang telah dibuat itu
adalah benar.

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Introduction: Voidable Contract
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Introduction: Voidable Contract
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