CONTRACT LAW

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Contract and Business Law by Rozanah Ab Rahman & Safrina Warda Othman.
 LEGAL AND
ILLEGAL CONSIDERATION
 CONSIDERATION

• CONSIDERATION IS THE SYMBOL OF BARGAIN AND RECIPROCAL OBLIGATIONS

• THE ESSENCE OF THE CONSIDERATION IS SUBJECT TO THE PARTIES. THEY WILL AGREE
ON THE AMOUNT OF CONSIDERATION AND THE MANNER OF PERFORMING IT.

• CONSIDERATION IS A ‘PRICE’ GIVEN IN RETURN FOR A PROMISE

• CONSIDERATION SHOULD BE SOMETHING OF VALUE IN THE EYES OF THE LAW.

 CONSIDERATION

SECTION 26, CA SECTION 2(D) CA

• An agreement without • When, at the desire of the promisor,

consideration is void the promise or any other person has
done or abstained from doing or
promises or to do or abstain from
doing something, such act or
abstinence or promise is called a
consideration for the promise”
 • A VALUABLE CONSIDERATION, IN
THE EYES OF THE LAW,
• MAY CONSISTS EITHER IN SOME
RIGHT, INTEREST, PROFIT, OR
CURRIE V BENEFIT ACCRUING TO THE ONE
PARTY,
MISA • OR SOME FORBEARANCE,
DETRIMENT, LOSS,
• OR RESPONSIBILITY GIVEN,
SUFFERED OR UNDERTAKEN BY THE
OTHER’
• WHEN, AT THE DESIRE OF THE PROMISOR,
• THE PROMISEE OR ANY OTHER PERSON HAS DONE
OR ABSTAINED FROM DOING,
• OR DOES OR ABSTAINS FROM DOING,
SECTION 2 (D)
• OR PROMISES TO DO OR TO ABSTAIN FROM DOING,
SOMETHING,
CONTRACT ACT
1950
• SUCH ACT OR ABSTINANCE OR PROMISE IS CALLED
A CONSIDERATION FOR THE PROMISE’
CLASSIFICATION
 1. EXECUTORY CONSIDERATION
-when a promise is made in return for another promise.
A B
A agrees to sell his car to B for RM5k
• Here, B promise to pay RM5k is the consideration for A’s
promise to sell the car; and
• A promise to sell the car is the consideration for B’s
promise to pay RM5k.
 These are lawful consideration.
 This is reciprocal promise & every promise & sets of
promise forming the consideration for each other, is an
agreement.
Murugesu v Nadarajah[1980] 2 MLJ 82
• The respondent was the tenant of the appellant. He
pestered the appellant to sell the house to him. The
appellant finally wrote on a piece of paper an
agreement to sell the respondent the said house for
RM26,000 within three months from the date of the
agreement. Later the appellant refused to sell and the
respondent sued for specific performance
• The appellant contended that there was no
consideration for the offer to sell and the agreement
was void for want of consideration.
• Federal Court held: The agreement was the case of
executory consideration. A promise is made by one
party in return for a promise made by the other; in
such a case each promise is the consideration for the
other.
 2. EXECUTED CONSIDERATION

One promise made in return for the performance of an act.

Eg: A advertise a reward of RM1000.00

to anyone who finds & returns his cat. B
finds and returns the cat to A in response
to the offer.
B’s consideration for A promise is
executed.
Only A’s liability remains outstanding,
that is to pay B the RM1000.00 rewards
 3. PAST CONSIDERATION

A promise made in return for an act that has already been performed

Eg: C found & return B’s lost laptop.

To express his gratitude, B promise to reward
C RM200.00.
B promise to reward C is made in return for
B’s consideration that is past.

Under English law, past consideration will not

create a contract because the act was
performed before the promise of reward was
made. This is regarded as gratuitous.
• Past consideration is
not valid because it
has been done
without reference to
the existing promise
ENGLISH
COMMON LAW
Re McArdle [1951]
Ch 669
Lampleigh v Brathwait
(1615) Hob 105
Section 2(d) Contract
Act 1950

Past consideration is
considered as valid
“when, at the desire MALAYSIAN
of the promisor, the LAW
promisee or any
other person has
done or abstained
from doing …”
 Kepong Prospecting Ltd & Ors v. A.E Schmidt & Marjorie Schmidt (1968)
1MLJ 170

Fact: Issue:
Following the formation of Whether
Fact: the company, an agreement services
A consulting was entered into between rendered after Judgment:
engineer, had them under which the incorporation, The Privy
assisted another in company undertook to pay but before Council held
obtaining a him 1% of the value of all agreement, that it validly
prospecting permit ore sold from the mining were amounted to
for mining iron ore land. There was ‘in sufficient to consideration
in Johore. He also consideration of the constitute a .
helped in the So, Schmidt
service rendered by the valid
subsequent was entitled
formation of the consulting engineer for consideration
and on behalf of the even though to the amount
company, Kepong claimed.
Prospecting Ltd. company prior to its they were past
and was appointed formation, after acts.
Managing Director. incorporation and for
future service.”
 • Agreement made on account
of natural love and affection
E X CE P T I O N S TO T H E • Agreement to compensate a
RU L E O F past voluntary act
CO N S I D E RAT I O N
• Agreement to pay a statute-
barred debt
26. An agreement made without consideration is void, unless—
it is in writing and registered
(a) it is expressed in writing and registered under the law (if any) for the time being in force
for the registration of such documents, and is made on account of natural love and affection
between parties standing in a near relation to each other;
or is a promise to compensate for something done
(b) it is a promise to compensate, wholly or in part, a person who has already voluntarily done
something for the promisor, or something which the promisor was legally compellable to do;
or is a promise to pay a debt barred by limitation law
(c) it is a promise, made in writing and signed by the person to be charged therewith, or by his
agent generally or specially authorized in that behalf, to pay wholly or in part a debt of which
the creditor might have enforced payment but for the law for the limitation of suits.
 1. Agreement made on account of natural love and affection

1. It is expressed
Section 26(a) CA, provides: An agreement in writing ‘Near relation’:
An agreement without consideration made on the varies from one
2. It is registered social group to
is void, unless it is expressed in ground of natural (if applicable);
writing and registered under the law love and another as it
and depends on
(if any) for the time being in force affection would
for the registration of such be binding in 3. The parties customs and
documents, and is made on account Malaysia if the stand in near practices of such
of natural love and affection requirements of relation to each groups. It is not
between parties in near relation to section 26(a) are other defined in the
each other present, viz: (natural love and Act.
affection)
 Tan Soh Sim, Chan Law Keong & Ors v Tan Saw Keow

JUDGMENT
FACT

ISSUE
It is one of the
Malaysian case which
judicially construed
the meaning of
'natural love and
affection'. In this case,
a woman on her
deathbed expressed
her intention to leave
all her properties to
her four adopted
children.
whether she has The court held that the
fulfilled S. 26(a)? claims of the adopted
children were not effective
as it was contrary to
Section26(a) - that it was
not in writing, and there
was no natural love and
affection between parties
standing in near relation to
each other, since the four
children were adopted and
did not have natural
relations (blood ties) to
that woman.
 Queck Poh Guan v. Quick Awang (1998)

in the case of that the transfer

COURT HELD
IDRIS J
parent and child,
there is no doubt
a strong
presumption of
love and affection
exists and any
slight evidence of
them will suffice.
of 1/3 portion in
the land was a
gift from the
deceased mother
to the defendant,
her son, on
account of natural
love and affection
thus valid.
 Kwan Teck Meng & Ors v Liew Sam Lee
(1963)

FACT

HELD
A father executed a The transfer is based
memorandum of on love and affection
transfer whereby he therefore by way of a
transferred the whole gift.
of his title and
interest in certain
land to 4 of his sons,
his daughter in law
and a trustee for his
youngest son.
 2. Agreement to Compensate a Past Voluntary Act

Section 26(b) CA : it is a
promise to compensate,
wholly or in part, a If a promisee has done
person who has already some act voluntarily on
voluntarily done his own will for the
something for the promisor (without being
promisor, or something requested by the
which the promisor was promisor), and after that Eg: You support your
legally compellable to the promisor promises to niece cost of living.
do; compensate the promisee Your sister promise to
for such act, then the pay your expenses in
promise is enforceable doing so. This is a
contract and you can
enforce your sister’s
This is similar to Section 2(d) , past consideration, where the promise.
promisee did the act first, the promisor promises the reward.

Facts: A dispute arose
between a Malaysian and
English company resulting
from an arrangements.
Both had acted as agents
for various products.
The arrangement is that the
Malaysian company would
find the buyer and inform
the English firm who
would find the seller.
When a sale had been
arranged , the Malaysian
firm would receive a
commission.
To invoke S26 (b): promise must act
voluntarily for the promisor.
J.M. Wotherspoon
& Co Ltd v Henry Agency House [1962] mlj 86
Facts: The Malaysian company
had arranged a buyer for such
confectionary and the English
firm found a seller. The D
(Malaysian firm) wrote a letter
to the P (English company)
agreeing that if X Co defaulted
in payment, it will pay the price
of the goods. Later, X Co went
bankrupt and defaulted in
payment. The D refused to pay
and the P sued for damages
Issue: Whether the P was a person
who had already voluntarily done
something for D?
Court Held:
There were promises of
compensation made by the
defendant firm to the plaintiff in
respect of consignment , but these
promises were not supported by
consideration. The P had acted on
the suggestion of the D, So it could
not be said to have been done
voluntarily. Thus, the promise to
compensate was not enforceable.
 3. Agreement to Pay a Statute=Barred Debt

Limitation for action in

contract under
Section 26 (c) of CA: Limitation Ordinance Illustration (e) to s. 26
A statute-barred debt 1953: 6 years.
an agreement to pay a A owes B RM 1,000,
refers to a debt which
statute-barred debt. Eg: 6 years is given for BUT the debt is barred
cannot be recovered
a promise, made in action arising from a by limitation. A signed
through legal action
writing and signed by a breach of contract. a written promise to
because of a lapse of
debtor /his authorised After the allocated time pay B RM 500. This is
time fixed by law.
agent. expires, the aggrieved a contract.
party can no longer
sue.
 CONSIDERATION FROM A THIRD
PARTY

Section 2(d) Contract Act

English Common Law 1950
Consideration must “ … the promisee or any other
person …”
move from the
Venkata Chinnaya v Verikatara
promisee/acceptor Ma’ya (1881) ILR 4 Mad. 137
MUST CONSIDERATION MOVE
FROM THE PROMISEE???/

Who should furnish a consideration? Under Malaysian Contract Act,

a promisee can enforce the promise even though he personally does
not give any consideration. Such consideration can come from other
persons.
“S.2 (d) : any other persons.”
Eg. You promise to pay me RM50.00 once my gardener clean your
garden.
As soon as my gardener clean your garden, I can claim the amount
from you although I do not personally give any consideration for
your promise. This is because the consideration has moved from my
gardener.
 Venkata Chinnaya v Verikatara
Ma’ya (1881),

A sister agreed to pay an annuity of Rs653 to her brothers who provided no

consideration for the promise.
But on the same day their mother had given the sister some land, stipulating
that she must pay the annuity to her brothers.
The sister subsequently failed to pay the annuity and was sued by her
brothers.
The court held she was liable to pay the annuity.
There was good consideration for the promise even though it did not move
from her brothers.
 ADEQUACY OF CONSIDERATION

Explanation 2 of Section 26: Agreement is Illustration.

not void merely because the consideration A agrees to sell a horse worth RM 1,000 for RM
is not adequate. It might be void if the 10. A’s consent to the agreement was freely given.
parties to the contract can show that the The agreement is a contract notwithstanding the
consent given was caused by coercion inadequacy of the consideration.

Case: Phang Swee Kim v Beh I Hock [1964] mlj 383

what is the amount
of consideration that
is sufficient for each
promise???
Facts: The Respondent agreed to transfer to the appellant a parcel of land on
payment of $ 500 when the land was subdivided although the land was worth
much more. The Respondent later refused to honour the promise, contending that
the promise was unenforceable.
The trial judge held that the agreement was void due to inadequacy of
consideration.
The Federal Court reversed the decision and granted decree specific performance
as the contract was valid even there was inadequacy of consideration.
INTENTION TO CREATE
LEGAL RELATIONS
 INTENTION TO CREATE A
LEGAL RELATIONSHIP

• THE PARTIES
CONTEMPLATE THAT
THE AGREEMENT BE
ENFORCEABLE IN LAW
 Malaysian Courts refer to
English Common Law
cases (English precedents)
in determining the existence
of intention.

CONTRACT ACT 1950 IS Common Law principle:

SILENT ON INTENTION
There is no binding
contract unless the involved
parties in the agreement
have the intention to enter
such relationship under the
law.
H O W TO D E T E RMI N E T H E E X I S T E N C E O F
INTENTION?

• Objective test
(reasonable man test)
• Presumption based on the
types of contract
 1.Objective test (reasonable man test)

• The court will refer to the opinion of

a reasonable man.

• If the promisor did not intend to

create legal relation, it is not the
promisor to decide, but the court
would presume an intention exists if
a reasonable man is of the option - a person of normal
that intention existed to bind the intelligence
- does nothing a prudent
promisor.
would not do
- does not omit to do
anything that a prudent
man would do
 2. Presumption of Intention

Agreement between
a) Social, family or husband and wife
other domestic
agreement
2 types of agreement

b) Commercial Agreements between

agreement parent and child
 A) SOCIAL, FAMILY OR OTHER DOMESTIC
AGREEMENT

How would the court know whether there is an intention

to create legal relations?

The presence or absence of an intention to create legal relations depends

upon the inference to be drawn by the court from the language used by
the parties and the circumstances in which they use it.
 1. Agreement between husband and wife
Legal Principle:
Agreement between husband and wife have generally been presumed not to be intended to create legal relations,
BUT such presumption may be rebuttable depends on the facts of each case.

Balfour v. Balfour Merritt v. Merritt

• Fact:
• The defendant, who was a civil servant stationed
in Ceylon, came to England with his wife. Later,
he returned to Ceylon, but his wife stayed back
in England on doctors’ advice. The husband,
before sailing, promised her £30 a month until
she returned. He failed to pay, and the wife sued
him on the promised.
• Judgment:
• There was no contract as the parties did not
intend that the agreement should be attended by
legal consequences.
• Facts of the case:
• The husband left his wife and went to live with another
woman. The wife pressed the husband to plan. The
husband made certain oral promises and then, on the wife’s
insistence, he wrote and signed and dated these notes:
• ‘In consideration of the facts that you will pay all charges
in connection with the house…until such time as the
mortgaged repayment has been completed, I will agree to
transfer the property to your sole ownership.’
• The wife paid the mortgage, but the husband refused to
transfer the house to her. The wife sued for a declaration.
Judgement:
• the Court of Appeal made a declaration that the wife was
now the sole beneficial owner of the matrimonial home on
the footing that the principle of Balfour v. Balfour does not
apply to a husband and wife who are not living in amity
 2. Agreements between parent and child

The principle in Balfour v. Balfour has been applied to an agreement between

mother and daughter in Jones v. Padavatton (1969)

Mrs. Padavatton was working as a secretary in the USA.

Her mother, Mrs. Jones, offered to provide the daughter’s expenses if she
would return to England to study for the Bar.
Mrs. Padavatton accepted.
A little later, Mrs. Jones offered in addition to provide a house for her
daughter, some of the rooms to be let to tenants.
Later Mrs. Padavatton became so uncooperative that, 2 years later, Mrs.
Jones claimed possession of the house.
Mrs. Padavatton resisted on the ground that her mother was contractually
bound by the agreement.
 The court held:
Mrs. Jones was entitled to
possession. The original agreement
was motivated by the mother’s
desire for the daughter to succeed at
the bar. They were originally on
good terms, and they had no
intention to enter into a stiff
contractual agreement.
 SIMPKINS V PAYS [1955] 1 WLR 975
INTENTION TO CREATE LEGAL RELATIONS IN THE
FORMATION OF CONTRACTS IN A DOMESTIC CONTEXT.

• Facts
• Ms. Simpkins was a paying boarder at Ms. Pays house, who lived with her granddaughter.
Ms. Simpkins habitually entered into newspaper competitions. Concerning one weekly
Sunday newspaper competition, the three agreed that Ms. Simpkins would fill in a weekly
coupon, with each person making three forecasts, yet submitting them in Ms. Pays name, and
divide the prize in the event of winning. A forecast made by Ms. Pays’ granddaughter in one
of the coupons submitted won a prize of £750 under Ms. Pays name. Ms. Pays refused to
distribute the prize and Ms. Simpkins claimed for one-third of the prize under their
agreement.
SIMPKINS V PAYS [1955] 1 WLR 975

Issue
The question arose as to whether there was an intention to create legal relations in the
informal arrangement between the Parties so as to constitute a legal agreement to
distribute the shares

Held
The Court held that, irrespective of the familial relations and the informal context,
there was mutuality in the arrangement between the Parties, by which they agreed to
the manner of the submission of the forecast in Ms. Pays name on a weekly basis and
that, if there was a success, all three persons would share the prize money equally.
Despite the domestic context, the filling out of the coupon by Ms. Simpkins was not a
voluntary service to Ms. Pays but rather pursuant to an agreement by which each
Party had shares in the result, thus showing an intention to create legal relations. The
Court held that the mutual arrangement, no matter how informal, constituted a legally-
binding agreement to divide the shares in thirds.
 There is presumption that the parties do intend to make
a legally binding contract unless presumed otherwise.

B)COMMERCIA It is not necessary in the ordinary run of commercial

agreements for the plaintiff to supply affirmative
L AGREEMENT evidence that there was such an intention.

However, the defendant way rebut the presumption by

reference to the words used by the parties and/or the
circumstances in which they used them.
 ROSE AND FRANK CO V JR CROMPTON AND BROS LTD, [1925]

• Facts
• An American company and English company entered into a sole agency agreement in 1913 for the sale of
paper goods in the USA. The written agreement contained a clause stipulating that it was not a formal nor
legal agreement, and an “honorable pledge” between business partners. Subsequently, the American
company placed orders for paper which were accepted by the British company. Before the orders were
fulfilled, the British company terminated the agency agreement and refused to send the goods, claiming that
the 1913 agreement was not legally binding and that, consequently, the orders did not create legal
obligations.
• Issue
• The questions arose as to whether the sole agency agreement of 1913 constituted a legally binding contract.

• Held
• Firstly, as to the 1913 agreement, the Court gave overriding weight to the provision in the agreement that
expressly provides that it is to be solely an “honorable pledge”, as demonstrating that the parties did not
intend the arrangement as a legally-binding contract.. In this case, the document and circumstances did not
intend to create any legal interest, and the clause expressly precluding the agreement’s legal enforceability
applies
 CARLILL V. CARBOLIC SMOKE
BALL
Fact:
The defendant had made extravagant claims
in an advertisement about the efficacy of
their smoke ball in preventing influenza.
They supported the claims with a promise
to pay £100 to anybody who used it and
yet caught influenza within a give period.
They stated that in order ‘to show sincerity’
the had deposited £1000 with their
bankers.
The plaintiff bought the preparation, used it
and caught influenza.
Defence:
• The defendant contended that the
advertisement was a ‘mere puff’ and was
no intended to create legal relation.
Court of Appeal rejected this.
• The fact of the deposit in the bank was
strong evidence that the defendant had
contemplated legal liability when they
issued the advertisement.
 ISMAIL BIN MOHD YUNOS V FIRST
REVENUE SDN. BHD [2000] 5 MLJ 42

Facts: P and D signed 2 MOUs where D in consideration

of P having secured a joint venture arrangements with
the Selangor State Government, promised to pay P
certain sums of money.

D refused to honour the agreement, claiming that the

MOU are not enforceable on the grounds of
uncertainty.

Held: Both MOUs were binding on the parties

because the MOUs were intended by the parties to
have contractual effect upon them.
CAPACITY TO CONTRACT
(LEGAL CAPACITY)
 THE PARTIES THE
WHO INTEND TO
ENTER INTO AN
PARTIES
AGREEMENT SHOULD BE
SHOULD HAVE LEGALLY
FULL
CONTRACTUAL COMPETEN
CAPACITY T
 General Rule

All agreements are contracts if

Section 10 of they are made by the free consent
the CA 1950 of parties competent to contract

A person is said to be competent to

contract if he is one ‘who is of the
Section 11 of age of majority according to the law
the CA 1950 to which he is subject, and who is
of sound mind, and is not
disqualified from contracting by
any law to which he is subject’.
 ‘COMPETENT’
SECTION 11 CONTRACT ACT 1950

A PERSON A PERSON
A PERSON
WHO IS OF WHO IS NOT
WHO IS OF
AGE OF DISQUALIFIED
SOUND MIND
MAJORITY BY ANY LAW
 THE AGREEMENT WILL BE RENDERED
VOID

- Mohori Bibee v Dharmodas Ghose

LEGAL EFFECT OF
(1903)ILR 30 Cal 539
INCOMPETENCE

- Tan Hee Juan v The Boon Keat [1934]

MLJ 96
 MOHORI BIBEE V DHURMODAS GHOSE

• The plaintiff, Dharmodas Ghose, while he was a minor, mortgaged his property in favour
of the defendant, Brahmo Dutt, who was a moneylender to secure a loan of Rs. 20,000.
The actual amount of loan given was less than Rs. 20,000. At the time of the transaction
the attorney, who acted on behalf of the money lender, had the knowledge that the
plaintiff is a minor.
• The plaintiff brought an action against the defendant stating that he was a minor when
the mortgage was executed by him and, therefore, mortgage was void and inoperative
and the same should be cancelled.
• The Defendant, amongst other points, contended that the plaintiff had fraudulently
misrepresented his age and therefore no relief should be given to him, and that, if
mortgage is cancelled as requested by the plaintiff, the plaintiff should be asked to repay
the sum of Rs. 10,500 advanced to him.
 MOHORI BIBEE - JUDGMENT

The Privy Council was held that the minor's contract is

void and not merely voidable on the basis of section 10,
11, 183, 184 and old sections 246 and 247(now section 30
of the Partnership Act).
The combine effect of these sections and particularly
section 10 and 11 renders the minor contact completely
void . According to the Privy Council section 11 should
be literally construed and that only a person who is of the
age of the majority is competent to contract. A minor’s
contract is, therefore, ab initio and wholly void.
The PC decided that a party who is a minor cannot be
compelled to repay any moneys which he has received in
the contract.
Section 65 of the Indian CA (similar with Section 66 of Malaysian CA) does not
apply to a minor contract. It applies to a contract between competent parties,
whereas in a case involving a minor, the contract never exist from the beginning.

What does Section 66 CA says???

“When an agreement is discovered to be void, or when a contract becomes void,

any 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 from whom he
received it.”
 TAN HEE JUAN V TEH BOON KEAT

• The plaintiff was an infant. The pltf transferred land to def. It was
witnessed and registered. Later the pltf applied to ct to set aside the
transfer.
• The ct ruled that the transaction was void and ordered the
restoration of the property to the minor.
• In this case, the pltf had received the purchase price from the def.
The court made an order declaring the transfer void, but refused to
EXCEPTION TO
GENERAL RULE
 1. Age of Majority Act
1971

Exception to the General

2. Contract for
necessaries
3. Contract of
Rule scholarship

4. Contract of Insurance

5. Contracts of services
or apprenticeship
 Age of Majority Act 1971 provides exception to
general rules that includes:
the capacity of any person to act in matters
relating to marriage, divorce, dower, adoption;
the religion & religious rites and usages of any
class of persons within Malaysia; and
1. AGE OF any other written law fixing the age of majority.
MAJORITY ACT 1971 It shows that minor can enter into contract of
promise of marriage and the contracts are valid.
Minor also can enter into valid contract depending
on the statute that provide the age of majority for
particular purposes
Eg: voting 21 yo
Eg: to join trade union 16 yo
 R A J E S WA RY & A N O R V B A L A K R I S H N A N & O R S ( 1 9 5 8 )
Fact
• A promise of marriage entered by minor.
• The agreement was entered into with
provisions for dowry and penalty for breach.
• Then, the promise to marry is repudiated.
The plaintiff sued for breach of promise to
marry.
• The defendant pleaded that since the plaintiff
is a minor then the agreement is void.
Judgment
• Marriage contracts entered by minors was
valid.
• Since one of the parties breach the contract,
the other party has the right to sue.
• This case was not affected by the principle
established in the Mohori Bibee’s case.
 • Section 69 of CA 1950

• “If a person, incapable of entering

2. CONTRACT into a contract or anyone whom he is
FOR legally bound to support, is supplied
NECESSARY by another person with necessaries
suited to his condition in life, the
person who has furnished such
supplies is entitled to be reimbursed
from the property of such incapable
person”
- NECESSARIES INCLUDE EVERYTHING THAT
IS ESSENTIAL AND BENEFICIAL TO THE
MINOR
- E.G. FOOD, DRINK, CLOTHING AND EDUCATION

- DEFINITION ON WHAT CONSTITUTES

NECESSARY VARIES AND DEPENDANT UPON NECESSARIES
CIRCUMSTANCES AND CASES
- E.G. WINTER COAT

- THE MINOR WILL HAVE TO PAY A

REASONABLE PRICE FOR THE NECESSARY
GOVT. OF MALAYSIA v. GURCHARAN SINGH & ORS [1971] 1 MLJ
211

The government sued the first defendant as the promiser and the second
and third defendant as sureties for breach of contract. The claim was for
RM11,500, the sum actually spend by the government in educating the
first defendant.
At the time of the contract, the first defendant was a minor and the defence
was essentially that the contract was void due to lack of capacity.

It was held that the contract was void but the court ruled that since
education was 'necessaries', the first defendant was liable for the
repayment of a reasonable sum spent on him.
NASH v. INMAN [1908] 2 KB 1

A tailor sued a minor to whom he had supplied clothes,

including 11 fancy waistcoats. It was decided that, as the minor
was an undergraduate at Cambridge University at the time, the
clothes were suitable according to the minor’s station in life.
Unfortunately for the tailor, however, it was further decided
that they were not necessary, as he already had sufficient
clothing.

Point of law: If a minor orders something that they already

have enough then those items can’t be necessaries.
Roberts v Gray: CA 1913

The infant had entered into a contract with

the claimant to go on a joint tour so he
will become a professional billiard player.
Later, the def (infant) refused to go.
Held: The contract could be construed as
one for necessaries, because it was for
teaching, instruction and employment.
Scarborough v. Sturzaker (1905)

Facts:
Sturzaker, a minor, periodically rode his bike to work for about
15km. He bought a new bike and traded in his old one as part
payment before the delivery of the new one. He then attempted to
avoid the contract.

Held :The bike was a class of goods that

could be classified as a necessary. In this
case, it was in fact a necessary.
If Sturzaker refused to pay, can the court
make him liable? Can the seller of the new
bike recover the balance of the payment?
 Section 2 : Contracts (Amendment) Act 1976
Section 4(a): Contract (Amendment) Act 1976
A scholarship agreement entered into by an infant is
valid when the scholarship, award, bursary, loan or
sponsorship is granted by the Federal or State
Government, a statutory authority, or an educational
institution such as a university
3. CONTRACT OF
SCHOLARSHIP
Govt of Malaysia v. Gurcharan Singh & Ors
The decision of which revolved around the validity
of a scholarship agreement entered into by a minor.
Held: such an agreement which enable a minor ‘to
qualify for and accept the appointment as a teacher is
a provision for necessaries’ and would therefore fall
within the ambit of section 69.
 •Section 153 of the Insurance Act 1963
(Revised) provides that “a minor over the
age of 10 years may enter into a contract of
insurance but if he or she is under 16 years,
the written consent of the parents or
4. CONTRACT guardian is essential.
OF INSURANCE

•Clements v London & Northwestern

Railway [1894] 2 QB 482, CA; a contract
enabling a minor to pursue a career as a
professional boxer and as an author have
been held binding as being for their benefit.
 5. CONTRACTS OF SERVICES OR APPRENTICESHIP

•Children and Young Persons (Employment) Act 1966 (Act 350)

• Defines a child as a person under 14 years of age and a young person as under 16.
• Children may be employed in light work done within the family, specified public entertainment,
apprenticeships, and work sponsored by the government.
• Forbids night work and underground work for children and young persons, and sets forth hours of
work.
• The Minister responsible for labour may declare an employment suitable for children or young
persons if he is satisfied that such employment poses no threat to the life, limb, health or morals of the
employee (s. 2(4)). Children and young persons shall be competent to enter into a contract of service,
provided that no damages or indemnity under the Employment Act 1955 shall be recoverable from a
child or young person for breach of service (s. 13).
FALSE REPRESENTATION
ON AGE

THE MINOR IS NOT

ESTOPPED FROM PLEADING
MINORITY IN AVOIDING A
CONTRACT

NATESAN V
THANALETCHUMI
 CERTAINTY

• IT IS IMPORTANT THAT
TERMS AND CONDITIONS
OF A CONTRACT BE CLEAR
AND CERTAIN. COURTS
WILL NEVER ACCEPT
TERMS OR CONDITIONS
WHICH ARE VAGUE AND
OBSCURE
KARUPPAN CHETTY V SUAH THIAN
(1916) 1 FMSLR 300

The court declared that the contract

was void. The terms used in the
contract was too vague and too
obscure. The parties agreed to a
lease of RM 35 per month ‘for as
long as he likes.
 AGREEMENTS, THE
MEANING OF
WHICH IS NOT
CERTAIN OR
CAPABLE OF BEING
LEGAL EFFECT OF MADE CERTAIN, IS
UNCERTAINTY VOID

SECTION 30
CONTRACT ACT
1950
PERSON OF SOUND MIND & NOT
DISQUALIFIED
 Section 11 of CA
• “ Every person is competent to contract who is of the age of
• majority according to the law to which he is subject, and who
is of
• sound mind, and is not disqualified from contracting by any
law to
• which he is subject.”

PERSON OF Section 12 of CA
SOUND MIND • (1) 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 can
understand it and of forming a rational judgment as to its
effect upon his interests.
• (2) A person who is usually of unsound mind, but occasionally
of sound mind, may make a contract when he is of sound
mind.
• (3) A person who is usually of sound mind, but occasionally of
unsound mind, may not make a contract when he is of
unsound mind
 Illustration (a)
• A patient in a mental hospital, who is at
intervals of sound mind, may contract
during those intervals.
Illustration (b)
EXAMPLE
• A sane man, who is delirious from fever,
or who is so drunk that he cannot
understand the terms of a contract or
form a rational judgment as to its effect
on his interests, cannot contract whilst
such delirium or drunkenness lasts.
 Matthews v. Baxter (1873)
English common law: contract is LR 8 Exch 132 Contracts Act 1950: void.
voidable.

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.
 •Loss of capacity: the said party may
have the capacity to contract but loss
due to some circumstances under any
Not disqualified laws or
•He is capable according to the CA
1950 but lost it according to other laws
to which he is subjected to.

•Eg: Declared bankrupt

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