FACULTY OF BUSINESS AND MANAGEMENT

MAY 2023

BBUN 2103

BUSINESS LAW

MATRICULATION NO : 960425125107001

IDENTITY CARD NO. : 960425-12-5107

TELEPHONE NO. : 017-22204425

E-MAIL : HANKITEO@GMAIL.COM

LEARNING CENTRE : SARAWAK LEARNING CENTRE

 TABLE OF CONTENT
Pages

1.0 INTRODUCTION ………………………………………………………………………..………3

2.0 CONTRACT FORMATION
2.1 Offer ……………………………………………………………………………………...4
2.2 Acceptance……………………………………………………………………………...5
2.3 Reply (Consideration) ………………………………………………………………...6
2.4 Capacity………………………………………………………………………………….6
2.5 Intention………………………………………………………………………………….6
2.6 Certainty…………………………………………………………………………………7
2.7 Willingness (Mutual consent) ………………………………………………………7

3.0 EVALUATION OF THE CIRCUMSTANCES THAT CAUSE A CONTRACT TO BE

VERIFIABLE
3.1 Mistakes by both parties…………………………………………………………….8-10
3.2 Invalid reply / purpose…………………………………………………………………11
3.3 Part of the reply / purpose is invalid………………………………………………….11
3.4 Agreement without consideration…………………………………………………….11
3.5 Covenants that prevent marriage…………………………………………………….11
3.6 Agreements in restraint of trade……………………………………………………...11
3.7 Agreements preventing legal action………………………………………………….11
3.8 Agreements containing uncertainties…………………………………………….….12
4.0 RELEASE OF CONTRACT
4.1 Release by execution of the terms of the contract…………………………………13
4.2 Release through agreement of the contracting parties / release through
agreement. A contract can be released through an agreement agreed by
both parties in the contract…………………………………………………………...14
4.3 Release through breach of contract / release through breach of contract……….15
5.0 EFFECTS OF CONTRACT BREAK
5.1 Release due to frustration…………………………………………………………16-18
6.0 Summary………………………………………………………………………………………..19
7.0 References…………………………………………………………………………………...…20
1.0 INTRODUCTION
The Contracts Act 1950 through Section 2(h) defines a contract as "an agreement
which is enforceable by law". So, a terminological difference exists between the word
"agreement" and "contract". While these two come from a relationship or
understanding between two parties, a contract must meet several conditions in its
nature to allow itself to be recognized and enforced by law. The absence of any of
these elements will directly eliminate its enforceability as stated in section 2(g) of the
Act. So, with this, it can be concluded that while all contracts are agreements, not all
agreements are contracts.
A contract is a law that governs the affairs of the agreement. An agreement is an
agreement between two or more parties regarding a matter. It should be understood
that the term contract is more specific while the term agreement is more general.
Contract law in Malaysia is basically governed and enforced by the Contract Act
1950 (AK 1950). If new matters arise regarding contracts for which there is no
provision under the Act, English law is allowed to be referred to through the
enforcement of S.5 of the Civil Law Act 1956.
Basically, a contract will only occur if there are two or more parties who want to form
a contract for any reason that is clear and also allowed by the law that has been
written down in the stipulated provisions.

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2.0 Contract Formation
There are several important elements in the formation of a contract that must be
present for a contract to be valid in terms of contract law. For a contract to be valid
and legally enforceable, certain elements must be met.
2.1 OFFER
Section 2 (h) of the Contract Act 1950 has defined a contract as an agreement,
enforceable by law which the contract, will legally bind the parties involved. The
condition for an offer is that it must be a clear offer, and communicated to the party
who will accept the offer. If the offer given is not clear, or not communicated to the
concerned party, it is invalid.
Therefore, an offer is one of the essential elements to make the contract valid, and
binding on both parties. Without an offer, there will be no valid contract between the
two.
In principle, an offer or also referred to as a proposal is a promise, an
acknowledgment made by a person called the offeror (offeror) to another person
called the offeree (offeree) with the intention that it will create a legally binding
relationship. when the promise, acknowledgment or offer is accepted by the other
party (Salleh Buang & Nordin Torji, 1992).
An offer is also defined as a firm promise to be bound on the condition that some
terms must be accepted (Cheshire, 1986). In the case of Preston Corporation Sdn.
Bhd. v. Edward Leong and Others, [1982] 2 MLJ 22, Judge Salleh Abas defined an
offer as a sign of the offer maker's willingness to enter into a valid and legally binding
contract. The terms, whether express or implied, must indicate that they will become
binding upon acceptance by the offeror. In order to make an offer legally valid, it
must contain a promise to bind together with the terms that have been agreed upon
(Lee Mei Pheng & Detta Samen, 1997).
According to section 2(a) of the Contract Act 1950 states:
"when a person expresses his willingness to another person to do or refrain from
doing something, with the intention of obtaining the consent of that person to do
something or refrain from doing that person, then it can be said that the person
makes a proposal."
The term used by the Contracts Act 1950 is "proposal" rather than "offer". The use of
the term proposal is more descriptive of the first step in creating a contract, usually
verbally followed by correspondence, while the term offer is more comprehensive
meaning that in a situation where one party who binds a contract requires the other
party to accept it in order to make a legally valid contract (Awther Singh, 1978).
An offer must be clear, complete, final and detailed as much as possible with the aim
of avoiding any ambiguity and doubt in the future. A person who makes a proposal
(offer) is called a promise maker according to section 2 (c) of the Contract Act 1950.
An offer is an undertaking by one party to another party who is willing to comply with
the conditions set by the promise maker.

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 2.2 ACCEPTANCE
This acceptance is presented as an agreement or acceptance to the offer that has
been offered as stated in Section 2 (b) of the Contract Act 1950. This agreement
means that the recipient of this offer will agree to the Terms and Conditions set. With
the acceptance of this offer, then a contract was successfully created.
Acceptance according to section 2(b) of the Contract Act 1950 states that when the
person to whom the proposal (offer) is made expresses agreement with the proposal
then it can be said that the proposal is accepted, a proposal when accepted is a
promise.
Acceptance can be accepted in writing that is either verbal or deed. There are three
main forms of acceptance that can be done, namely (Sinnadurai, V, 1991):
i) Acceptance in the form of an agreement - it refers to a bilateral contract
which is a contract made between two or more parties where the party has
been identified and can be ascertained.
ii) Acceptance in the form of execution - the recipient of the offer needs to
show the offer maker that the offer is accepted. A contract is formed when the
performance is done by the offeree.
iii) Acceptance in the form of no reaction or silence - in certain circumstances
only it applies. The offeror cannot pressure the offeree to acknowledge his
acceptance, silence can sometimes be considered an acceptance.
Acceptance must be made absolutely and unconditionally if you want to create an
agreement as stated in section 7 of the Contract Act 1950. Acceptance must be
made while the proposal is still open. Acceptance is a manifestation of the period of
agreement by the recipient of the offer who has been invited or has fulfilled the
conditions of the offer.
There are three factors in determining acceptance to create a valid contract:
i) The recipient of the offer intends to contract
ii) The offeree accepts the period stated by the offer maker
iii) The offeree communicates the acceptance to the offer maker

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 2.3 REPLY (CONSIDERATION)
The consideration referred to here is the price paid by the party receiving the
promise to the party making the promise. Without reciprocation, the agreement made
is void. This element of consideration is essential to create a legally binding and
binding contract. This is stated in Section 26 of the Contract Act 1950, Agreements
without consideration are void, unless the contract is in writing and registered.
It is defined under Section 2(d) of the Contract Act, 1950 which is: - "When, at the
will of the promisor, the promise or another person has made or refrained from
making an act or prohibition or a promise is called in return for the promise. For
example, when a person buys fish at the supermarket and has paid the price of the
fish, then the seller hands over the fish, then both parties have fulfilled their
respective rewards through their actions.

2.4 CAPACITY
Section 11 of the Contract Act 1950 deals with matters relating to a person's ability
or qualification. Section 11 of the Contract Act explains the eligibility to contract. A
qualified person must be: -
i) reaches the age of majority according to the law to which he is subject;
ii) sane; and is not void of a contract under any law to which it is subject.
Therefore, if a contract is made by a child or a lunatic, then the contract will be void
because it is possible that he does not know the effects and consequences of the
contract. According to Section 10(1) of the Contract Act, 1950 an agreement must be
made voluntarily by the parties qualified for the contract, for consideration and legal
object. Therefore, those under the age of 18 are not eligible to enter into a contract,
except in certain cases.

2.5 INTENTION
An agreement between two parties becomes a valid contract when there is evidence
showing that there is an intention to establish a relationship that binds the parties
legally.
The parties concerned must have intended, or be considered to have intended to
create a legal relationship. The Contracts Act 1950 does not say anything about this,
but as this Act is not a complete code then English common law principles apply.
According to English law, an agreement is not a real contract unless it is the mutual
intention of the parties to be legally enforceable. An intention is usually implied or
considered from the condition of the agreement itself. It is however a matter of
interpretation for the court to determine whether an agreement is intended to have
legal effect or not.

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 2.6 CERTAINTY
CERTAINTY is one of the important elements in a contract. An agreement that has
an element of uncertainty, vagueness, ambiguity or confusion is invalid and will not
be binding on any of the parties involved.
There are situations where even if the conditions (a)-(c) are met, the agreement will
also be void if there is no certainty or ambiguity regarding what was promised by
both parties. If an agreement is vague or uncertain, then the contract itself is void
and unenforceable. This is clearly explained under Section 30 of the Contract Act,
1950 (Revised 1974).
2.7 WILLINGNESS (MUTUAL CONSENT)
All parties involved must have free consent. This is because the validity of this
contract can be disputed, if the consent of the parties involved in this contract is
accepted by force and unwillingly.

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3.0 EVALUATION OF THE CIRCUMSTANCES THAT CAUSE A CONTRACT TO
BE VERIFIABLE
3.1 Mistakes by both parties.
Section.21 of the Contract Act 1950: Where both parties to the agreement are in
error regarding a matter of fact that is essential to the agreement, then the
agreement is void. An agreement is void if both parties have made a mistake
regarding an important matter in the agreement.

Case: Raffles vs Wichelhaus

The plaintiff and the defendant entered into a contract of sale and purchase of a
cargo of cotton from Bombay. The cargo will be carried by the 'Peerless' ship.
Unbeknownst to both parties, there are 2 ships named 'Peerless' that will sail from
Bombay. One will sail in October while the other will sail in December. The
Defendant thought the Plaintiff wanted to buy cotton brought by a ship that sailed in
October, whereas the plaintiff wanted cotton brought on a December voyage.
Court Decision: The contract between them is null and void because both of them
were wrong about the facts about the ship.

Case: Couturier vs. Hastie

Two parties have entered into a contract for the sale of corn. Both parties assumed
that at the time of making the contract, the corn was on a voyage from Salonica to
England. Unbeknownst to them, a few days before the contract was formed, the
corns were sold by the captain of the ship in the Port of Tunis as the corns started to
spoil due to being stored in a hot place.
Court Decision: The contract is invalid because they were mistaken about the
existence of the subject matter of the contract.
3.1 Invalid reply / purpose.
The consideration or purpose of an agreement is legally valid, except;
(a) it is prohibited by law
(b) it is of such a nature that if allowed, it would frustrate the provisions of any
law; or
(c) it constitutes fraud; or
(d) it is imminent or involves disaster to oneself or another people's property;
or
(e) the court considers it immoral or contrary to public policy.

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Section 24 lists what is the consideration / purposes in the contract that can make a
contract invalid and unenforceable.
i. The consideration or purpose of an agreement is invalid if it is prohibited by
law.
Example:
- Section 26(1) of the Civil Law Act, 1956: All contracts, whether oral or written, by
way of gambling or betting are null and void.
- Section 26(2) of the Civil Law Act, 1956: Claims for money or goods as a result of
betting cannot be made.
ii. The consideration or purpose of an agreement is invalid if it frustrates the
provisions of the law.
Case: Hee Cheng vs Krishnan
The plaintiff had entered into a contract with the defendant to purchase a house built
by the defendant on temporary occupation license land. The defendant breached the
promise and the plaintiff demanded specific performance.
Court Decision: According to Rule 41, Land Regulations 1930, no temporary
occupation license can be transferred. The contract is void under S.24 where if
allowed, it would frustrate the relevant provisions of the law.
iii. The consideration or purpose of an agreement is invalid if it is fraudulent
For example (e) Section 24: If A, B and C make an agreement to divide between
them the proceeds they obtained fraudulently. This Agreement is void under Section
24(c).
Example: Kimi promises to pay Emma RM2,000 if Emma agrees to deceive the
customs in Port Klang that the imported goods are duty-free. This agreement is void
under S.24(c).
iv. The consideration or purpose of an agreement is invalid if it involves harm
to the person or property of others
Example: Lola promises to pay RM1,000 to Dido if Dido agrees to beat up Riko. The
agreement is void under S.24(d).

Case: Syed Ahmad b. Mohamed Al-Habsyee vs Puteh bt. Saturday

The defendant who is the trustee of land belonging to a child has agreed to sell the
land to the plaintiff.

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Court Decision: The agreement made by the defendant is null and void because
such an agreement can harm the interests of the child.

v. The consideration or purpose of an agreement is invalid if it is immoral or

contrary to public policy.
Case: Aroomoogam Chitty vs Lim Ah Hang
The plaintiff has lent a sum of money to the defendant for the purpose of running a
prostitution business. The defendant said that the money was borrowed by him to
buy jewellery and clothes for prostitutes under his care. The defendant also claimed
that the plaintiff had been informed about the purpose of the loan. The plaintiff
denied the defendant's allegations and said that to the best of his knowledge, the
defendant was running a rickshaw business. After the defendant failed to explain the
amount borrowed, the plaintiff sued the defendant.
Court Decision: The agreement between the plaintiff and the defendant is invalid and
void because it was made for immoral purposes. The plaintiff's claim for refund was
dismissed.
For example (f) Section 24: A promises to get B a job in the public service and B
promises to pay RM1000 to A. This agreement is void because the consideration is
legally invalid and detrimental to the public service. It will only encourage corrupt
practices in our country.
Case: Foster vs. Driscoll
Court decision: The agreement to smuggle whiskey into the United States is invalid
because it is against the national interest.
Case: Regazzoni vs K.C. Sethia
The defendant agreed to sell Indian jute to the plaintiff and conspired to take it by
ship to Genoa for sale in South Africa. Indian law at the time prohibited the export of
goods from India to South Africa. The plaintiff has claimed damages for the
defendant's failure to deliver as promised.
Court Decision: Contract void for being contrary to public policy.
Case: Parkinson vs College of Ambulance Ltd
The secretary to the defendant's welfare association promised and gave a
guarantee that he would get a knighthood for the plaintiff if the plaintiff donated
enough money to the fund of the defendant's welfare association. The plaintiff had
donated £1000, but had not received the promised knighthood on the day of the
award. The plaintiff sued to recover the money.
Court Decision: The transaction was clearly illegal and the plaintiff's claim was
rejected.

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 3.2 Part of the reply / purpose is invalid.
Section 25 AK 1950: If any part of a consideration for one or more purposes, or one
or part of one of several considerations for a purpose, is invalid in law, then the
agreement is void.
3.3 Agreement without consideration.
Section 26 AK 1950: An agreement made without consideration is void.
3.4 Covenants that prevent marriage.
Section 27 AK 1950: Every agreement which prevents the marriage of a person,
other than a person who has not reached the age of puberty, is void.
3.5 Agreements in restraint of trade.
Section 28 AK 1950: Every agreement by which a person is prevented from carrying
on a profession or trade or any lawful business is void to that extent.
Case: Wrigglesworth vs Anthony Wilson
The defendant, a lawyer, had promised his employer that he would not
practice law within 5 miles of Kota Bharu for a period of 2 years after finishing his
employment with his employer's firm. After completing his service, the defendant
continued to open his firm in Kota Bharu. His former employer applied for an
injunction from the court to prevent the defendant from doing so. Court Decision: The
agreement is void in terms of S.28. The application for an injunction was refused.

3.6 Agreements preventing legal action.

Section 29 AK 1950: Every agreement, by which a party to the agreement is
prevented from enforcing his rights absolutely under or in respect of any contract, by
ordinary action at law before an ordinary tribunal, or which limits the time within
which it can enforce its rights, is void to that extent.
Case: Corporation Royal Exchange vs Teck Guan
The respondent had taken out an insurance policy with the appellant company to
cover its shop in Ampang. On November 25, 1911, the respondent's shop was
destroyed by fire. The respondent made a claim on December 8 but the claim was
rejected by the appellant company on January 5, 1912. The respondent initiated
legal action on May 6, 1912. The respondent's actions did not meet the conditions
contained in the insurance policy which stated, "if a claim is made and rejected and
legal action is not commenced within 3 months of such rejection…then all benefits
under this policy will be extinguished.”

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Court Decision: The condition is null and void because it contradicts S.28 of the
Contract Enactment at the time (same as S.29 AK now).

3.7 Agreements containing uncertainties

Section 30 AK 1950: Agreements whose meaning is uncertain or cannot be
determined are void.
Case: Karuppan Chetty vs Suah Thian
The parties concerned agree to lease for RM35 per month 'for as long as the person
making the lease likes'.
Court Decision: The requirements of the provision are not met. The contract is
invalid.
2. Betting agreement.
Section 31(1) AK 1950: Betting agreements are void, and no suit shall be brought to
recover anything purported to be won from any bet or anything entrusted to any
person to comply with the result of any gambling or any event other unspecified
where any bets are made.

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4.0 RELEASE OF CONTRACT
Release of contract = Termination of contract / termination of contractual obligations.
A contract is considered 'released' when the parties to the contract are no longer
required to perform their obligations in the contract. How is the contract discharged?
4.1 Release by execution of the terms of the contract.
Performance = Full performance or complete fulfilment of one's obligations under the
contract.
General rule: The contract will only be released if the obligations under the contract
are fully performed completely, accurately and precisely.
Section 38(1) AK 1950: The parties to a contract must perform or must offer to
perform their respective promises, unless such performance has been waived or
excused by the provisions of this Act or any other law.
Section 40 AK 1950: If a party to a contract has refused to perform, or has not
allowed himself to perform his promise in its entirety, then the promise may terminate
the contract, unless he has shown, by words or conduct, his agreement to continue
the contract.
Case: Bolton vs Mahadeva
The plaintiff has agreed to install a heating device in the defendant's house. After it
was installed, the defendant found that the device could not be used and refused to
make payment.
Court Decision: The plaintiff is not entitled to any part of the payment agreed
between them.
Case: Cutter vs Powell
The defendant had promised to pay Cutter 30 guineas if he would serve with him
sailing from Kingston, Jamaica to Liverpool. Before the voyage ended, Cutter died
and his wife (plaintiff) claimed the promised payment.
Court Decision: Full performance of the contract is a condition that must be met
before payment can be made. The plaintiff is not entitled to receive the promised
payment from the defendant.
Exceptions:
In the following circumstances, the plaintiff / aggrieved party in the contract
is entitled to claim payment even if the contract is not fully implemented.
a) Divisible contract
b) Implementation of a large part

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 c) Implementation is prevented
d) Violation that is not a fundamental matter of the contract

4.2 Release through agreement of the contracting parties / release through

agreement. A contract can be released through an agreement agreed by both
parties in the contract.
The agreement of both parties can be made in any way as long as both know that an
agreement has been reached to release their respective obligations according to the
contract.
Section 63 AK 1950: If the parties to a contract agree to replace it with a new
contract, or to cancel or amend it, then the original contract does not need to be
executed.
Section 63 explains the effect of novation, cancellation & modification.
i. Novation
Replacement of the original contract with a new contract.
ii. Effect of novation:
Releasing the party concerned from the performance of his obligations in
the original contract. The consent of both contracting parties is necessary
for novation.
iii. Cancellation
The contract can be cancelled with the consent of both parties at any time
before it is executed.
iv. Alterations
Any one or more conditions contained in a contract can be changed with the
consent of the contracting parties.
Section 64 AK 1950: Every promise may exempt or reduce part or all of the
performance of the promise made to him, or may extend the time for such
performance, or may accept in lieu of any performance of the promise he thinks fit.
Section 64 describes implementation by remittance.
Remittance = The promisee can reduce, alleviate / waive either the whole / part of
the implementation of the promise made to him. The promisee can extend the
execution time / accept any other execution in lieu despite the incomplete execution.
Case: Kerpa Singh vs Bariam Singh
The appellant has obtained a judgment of RM8,650 against the respondent. The
respondent's son has sent a check worth RM4,000 to the appellant in full payment of
his father's debt to the appellant and if the appellant refuses to accept it to return it to
the son. The check was cashed and kept by the appellant's lawyer.
Court Decision: Since the check was received and cashed by the appellant, the
appellant has agreed to accept the payment in full payment of the respondent's debt
to him.

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4.3 Release through breach of contract / release through breach of contract.
A contract is released from its execution if any party under the contract fails to fulfil
its obligations as agreed according to the terms and conditions of the contract.
The failing party is deemed to have breached the contract. Thus, giving the
aggrieved party the right to cancel the breached contract by claiming damages from
the breaching party.
Circumstances that allow the aggrieved party to cancel the contract
i. Rejection of contract.
A repudiation of a contract occurs when one of the parties to the contract chooses
and declares to the other party, either by word or deed, that he does not want to
continue with the contract.
Section 40 AK 1950: If a party to a contract has refused to perform, or has not
allowed himself to perform his promise in its entirety, then the promise may terminate
the contract, unless he has shown, by words or conduct, his agreement to continue
the contract.
Case: Chen Chuan Development Sdn Bhd vs Ng Ah Hock
The appellant (housing developer) has agreed to sell a shop house to the
respondent for a price of RM49,500. The respondent has already paid the
reservation money to the appellant. The appellant then tried to increase the price of
the shop house to RM85,000. The appellant then returned the buyer's check and
order money. The respondent lawyer was one of the payees of the check and he
cashed it.
Court Decision: A repudiation of the contract occurred when the appellant wrote to
the respondent informing him of the price increase and his action to return the
reservation money. The action of the respondent's lawyer in cashing the received
check clearly shows his acceptance of the appellant's breach of contract and this
situation causes the contract to expire due to the appellant's breach of contract.
i. Fundamental breach of contract.
If the basis of the contract has been breached, this clearly leads to the destruction of
the contract as a whole.
Case: Upali (Malaysia) Sdn Bhd vs Kontrak Manufacturing Services Sdn
Bhd

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In the agreement between the plaintiff and the defendant, it was agreed that the
defendant should store the plaintiff's chocolates in the defendant's factory at a
temperature not exceeding 20°C. The plaintiff then claimed that the chocolates were
not stored by the defendant according to the temperature agreed in the contract.
Court decision: Storage of goods according to the temperature set in the contract is
an important condition in the contract that forms the whole contract. Therefore, the
defendant's failure to comply with the conditions has caused the plaintiff to have the
right to terminate the contract.
5.0 EFFECTS OF CONTRACT BREAK
As a result of breach of contract committed by one of the parties in the contract, it
gives several rights to the breached party, namely:
i. Right to treat the contract as continuing (S.40 AK 1950).
i. Right to treat the contract as terminated (S.40 AK 1950).
Case: Ban Hong Joo Mines Ltd vs Chen & Yap Ltd
The appellant asked the respondent to carry out the excavation work and in return,
the appellant would pay the respondent every 2 weeks. The respondent was then
asked to terminate his employment because the appellant failed to pay. The
respondent made a claim because he considered the appellant's action as an action
to terminate the contract.
Court Decision: The appellant's action is indeed a rejection and the respondent is
entitled to make a claim either for damages due to breach of contract or quantum
merit for the work that has been carried out by the respondent.
iii. Rights under S.65 AK 1950.
Section 65 AK 1950: When a person who has the option to cancel a contract cancels
it, the other party to the contract does not have to perform any promise contained in
the contract where he is the promise maker. A party who rescinds avoidable contract
shall, if he has received any benefit from it from another party to the contract, return
such benefit, as far as may be, to the person from whom he received it.
When the aggrieved party chooses to terminate the breached contract, then the
breaching party no longer needs to perform any promises it has made under the
contract. The aggrieved party is required to return any benefit he has received from
the contract to the party who has breached the contract.

5.1 Release due to frustration.

Section 57(1) AK 1950: An agreement to do an act which in itself is impossible is
void.

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Section 57(2) AK 1950: A contract to perform an act which, after the contract is
made, becomes impossible, or because of an event which the promise maker cannot
prevent, becomes invalid, then the contract becomes impossible or invalid.
When frustration occurs, both parties are released from performing their respective
obligations under the contract.
Circumstances that can frustrate the contract:
i. When the main thing to the performance of the contract is destroyed.
Case: Taylor vs. Caldwell
The defendant has agreed to allow the plaintiff to rent and use the music hall and its
premises for the purpose of performing. Before the day of the performance, a fire
broke out and destroyed the music hall. The plaintiff claims damages from the
defendant for the alleged breach of contract on the part of the defendant, despite the
fact that he did not commit any fault and breach.
Court Decision: The contract is subject to an implied condition that both parties must
be discharged when the execution of the contract becomes impossible to continue
due to events that occur without the fault of either party. The defendant is innocent.
i. When an event that is the basis of a contract does not occur.
Case: Krell vs. Henry
The plaintiff had agreed to let the defendant a room in his flat to witness the
coronation ceremony of King Edward VII. The plaintiff assured that the rented space
would provide a clear view of the ceremony later. The defendant agreed to hire the
premises at the rate of £75 on 26 and 27 June 1902. The contract made no mention
of the program of ceremonies other than that they would take place on those two
dates and would cross the rented flat. When the contract was entered into, the
defendant paid £25 to the plaintiff and it was agreed that the balance of £50 would
be paid on June 24, 1902. The ceremony was cancelled on account of the King
being seriously ill. For this reason, the plaintiff has claimed the balance of £50 from
the defendant.
Court Decision: The contract is void. This is because the coronation ceremony and
the position of the rented flat are fundamental matters that form the contract between
the two parties. The ceremony that will be held is in fact a basic matter in the
contract that has been made. The defendant rented the flat for the purpose of
witnessing the ceremony and although the defendant's failure to witness it was not
due to default on the part of the plaintiff, the defendant was eventually released from
his obligation to pay the remaining rent.

i. When death / disability has prevented one party from performing

personal obligations.
Case: Robinson vs. Davison

17
The defendant's wife (a prominent pianist) had made an agreement to perform in a
concert. He then fell ill and failed to keep his promise. The plaintiff sued the
defendant and claimed damages for breach of contract.
Court Decision: The health condition of the defendant's wife is a major condition in
the agreement. The contract was released even though it was not breached by him
by not holding a concert performance but his failure was due to his health not being
able to continue the promised performance.

Case: Condor vs The Baron Knights

A was hired to play the drums for 7 nights in a row, for 5 years. A fell ill and the
doctor advised him to play the drums only for 4 nights. Contract A has been
terminated.
Court Decision: Because A is ill, he cannot possibly continue his contract.
ii. When the law changes / government intervention suddenly makes any
attempt to perform the contract illegal.
Case: Lee Kin vs Chan Suan Eng
Court Decision: A lease that can be renewed for 5 years is said to be frustrated when
a new enactment is enacted providing that the lease must be renewed once a year.
iii. There is a war.
Case: Berney vs Tronoh Mines
Court Decision: A contract of service was frustrated due to the war waged by the
Japanese army in Malaya at that time.

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6.0 Summary
It is important that users know their rights as users. By knowing the laws that protect
their rights, to some extent consumers will not become victims of profiteers. Who is
categorized as a user? A consumer is a person who enters into a contract with
another person where he himself is not in the business, and the other party makes
the contract in the business. While the goods transferred or purchased under the
contract are supplied for own use
In Malaysia, consumers are protected in their rights by various laws, among which is
contract law. Most of the contracts made by users are usually simple contracts,
unwritten, or made and agreed in front of a lawyer. Only special contracts such as
contracts for the sale of land, or lease-purchase agreements are made in writing.
In conclusion, the elements of a contract must exist to make a contract legally valid.
If one of the elements is missing, the contract can be disputed and voided. When a
contract has been made and executed, then either party cannot change their mind
and cancel the agreement except in the permitted cases such as the fish brought
home is rotten or the money given is insufficient. If one party violates the terms of the
contract, then the other party can make a claim for breaking the contract.

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7.0 References
7.1 https://ms.wikipedia.org/wiki/Kontrak_di_Malaysia
7.2 http://onlyyoumylaw.weebly.com/topik-2-undang-undang-kontrak.html
7.3https://www.ikim.gov.my/index.php/2005/10/26/asas-undang-undang-kontrak/
7.4 https://oarep.usim.edu.my/jspui/bitstream/123456789/15627/1/Elemen
%20Tawaran%20dan%20Penerimaan%20dalam%20Pembentukan%20Kontrak
%20Jual%20Beli%20dari%20Perspektif%20Undang-Undang%20Sivil%20dan
%20Undang-Undang%20Syariah.pdf.

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