Group Members : Dharshmi Priya Kali Selvi Tharshini a/p Rathumani Ruben Raj s/o Kiron Jessy Wilson

Lecturer’s Name : MR SivaramSubject : Business LawTopic : Free Consent

Illegal and Void Contract Discharge of Contract

OUTLINE Voidable Contracts (Free Consent) Illegal & Void Contracts Discharge of Contracts

1. Discuss a case laws on consent 2. Discuss about sections/situations/illustrations/on

void and illegal contracts. 3. Discuss differences ‘void contract’ and ‘voidable

contract’. 4. Briefly discuss about how to discharge from a contract

Voidable Contracts Section 10 of Contracts Act 1950:‘agreements are contracts if they are made by the

free consent of both parties’. Consent is said to be free when it is not

caused by one or more of the followings: Coercion Undue influence Fraud Misrepresentative Mistake

COERCION Section 15 of the Contracts Act 1950 :

“committing, or threatening to commit any act forbidden by the Penal Code, or the unlawful

detaining or threatening to detain, any property, to the prejudice of any person whatsoever, with the intention of causing any person to enter into the

agreement”. Case Law:

Kannahaya Lal vs National Bank of India (cotton mill) Kesarmal s/o Letchman Das v Valiappa Chettiar

Undue Influence Section 16 of the Contracts Act 1950:‘relationship exists between parties and one party is in a dominant position over the other and he uses

that position to take unfair advantage over the other’

Undue Influence (cont..) ILLUSTRATION

A, a man weakened by disease or age, is induced, by B’s influence over him as his medical attendant, to agree to pay B an unreasonable sum for his professional services. B employs undue influence.

Case Law: Polygram Records s/b v The Search (Mr Eric) Malaysia French Bank Berhad v. Abdullah bin

Mohd Yusof (P dominate & take unfair advantage)

FRAUD Section 17 of the Contract Act 1950:

‘to include certain acts which are committed with intent to induce/deceive another party to

enter into a contract’.

Example: through suggestion, active concealment of fact, blank promise deceive act and fraudulent acts according to the law. In other words, a fraud exists if the person who is making the statement itself does not belief it to be true.

FRAUD (cont..) Illustration:

A sells his horse to B which A knows to be unsound. However, A tells B that the horse is sound. This is fraud in A.

If A does not tell B that the horse is sound, then this is not fraud is A.

Case Law: Wong Cheong Kong Sdn Bhd v Predential

Assurance Sdn Bhd (involves assumed fraudulent insurance claim)

MISREPRESENTATIVE Section 18 of the Contract Act 1950

‘misrepresentation’ refers to certain false statement made by the representation and which induces the other party to enter into a contract’. difference between misrepresentation and

fraud is that in fraud the person making the representation does not himself believe the representation to be true.

MISREPRESENTATIVE (cont) Case Law

Keates v. Lord Cardogen (ruinious conritioned house, defendant keeps silence)

Bisset v. Wilkinson (2,000 sheep's, the statement was merely an honest opinion)

MISTAKE Section 21 of the Contract Act 1950:“Where both parties to an agreement are under

value a mistake as to a matter of fact essential to the agreement, the agreement is void”.

ILLUSTRATION: A agrees to buy from B a certain horse. It turns

out that the horse was dead at the time of the bargain, though neither party was aware of the facts. The agreement is void.

MISTAKE (cont..) Case Law

Chan Yoke Lain v Pacific & Orient Insurance Co SDN BHD (mistake in the signature, Plaintiff’s claim dismissed).

ILLEGAL AND VOID CONTRACTS

Contract may be illegal: By way of statute On the grounds of public policy.

Where a contract is illegal, the consequences are as follows: The contract is void and therefore neither party can sue

upon it; Money paid or property transferred under the contract is

normally not recoverable Related transactions will also be void

ILLEGAL AND VOID CONTRACTS (cont..)

Certain can are expressly declared void by statue. The most notable example are wagering contracts.

(Rendered void by the Gaming Act 1845) and restrictive trading agreements; (Controlled by the Restrictive Trade Practices Act 1976)

Categories of contract which are void at common law on the grounds of public policy Contracts to aus the jurisdiction of the courts Contracts prejudicial to the status or marriage Contracts in restraint of trade (RET)

VOID CONTRACT VOIDABLE CONTRACT

It is not enforceable by law It is enforceable at law at the option of one or

more of the parties

It creates no legal rights A voidable contract can only be objected by the

party who has been subject to fraud, coercion,

misrepresentation and undue influence

It creates no obligations on any

party

If the contract is revoked by a person right

fully then he can also receive the compensation

An agreement which is against

the public policy or against any

law is also void

The contract is voidable at the option of the

party whose consent is caused

Under this contract no

compensation can be paid to any

party

Contracts caused by fraud, undue influence,

misrepresentation or by coercion are voidable

contracts

DICHARGE OF CONTRACTS Definition :

‘Termination of a contractual obligation on court orders (through an order of discharge) or mutual

agreement or caused by breach of contract, frustration of contract, performance of contract.’

Discharge by performance, Discharge by frustration , Discharge by breach of contract.

DISCHARGE BY PERFORMANCE Section 38(1) of Contract Acts:

performance of a contract must be exact and precise and should be in accordance with what parties had

promised. ILLUSTRATION:

Thus, if Ali promises to deliver goods to Muthu on 3 January 2009 on payment of RM3000, Ali is bound to deliver the goods to Muthu on that day and Muthu is bound to pay the RM3000. Performance may be form a third party and not necessarily from the promisor.

Case Law: RE Krishnan Rengasamy, ex.p. Arab Malaysian Credit Bhd, (not done within

the stipulates time Section 42)

DISCHARGE BY FRUSTRATION Section 57 (2) of Contract Act 1950‘a contract to do an act which after the contract

is made, becomes impossible, or by reason of some event which the promisor could not

prevent., unlawful , becomes void when the act becomes impossible or unlawful’.

Case Law: Taylor v. Caldwell (concerts was accidently burnt) Berney v Tronoh Mines Ltd. (Outbreak of war)

DISCHARGE BY BREACH

Section 40 of Contract Act 1950‘when a party to a contract has refused to

perform or disabled himself from performing his promise in its entirety, the innocent party may

put an end to the contract’.

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