l.a.w. o.f. c.o.n.t.r.a.c.t

Dr. Jady @ Zaidi Hassim

1. Introduction 2. Elements of a contract3. Voidable contracts 4. Void and illegal

contracts5. Discharge of contracts6. Remedies

Topics of discussion

(1) Introduction• Contract Act 1950 (Rev.1974) .• No provision: apply English law by

virtue of s.5 Civil Law Act 1956• Def: s.2(h) CA 1950 = ‘an

agreement enforceable by law’ and ‘x included social agreement’.

• Contract Act 1950 (Rev.1974) .• No provision: apply English law by

virtue of s.5 Civil Law Act 1956• Def: s.2(h) CA 1950 = ‘an

agreement enforceable by law’ and ‘x included social agreement’.

(a) Offer(b) Acceptance(c) Intention (d) Consideration(e) Certainty(f) Capacity

All essential elements must be fulfilled together and not alternative. S. 10 CA 1950 : made by free consent of parties competent to contract.

(a) Offer • S.2(a) CA 1950 – proposal

• S. 2(b) Must be definite promise with certain specific terms

• Promisor (offeror) must have signified his readiness to undertake an obligation upon certain terms, leaving no option of its acceptance or refusal to the offeree.– Affin Credit v Yap Yuen Fui (1984) : void ab initio

where there was a lack of offer and acceptance

• Offer may be specific (one particular man) and general– Carlill v Carbolic Smoke Ball (1892) – offer to the

whole world

Advertisement? Invitation to treat?Advertisement

(1) Coelho v The Public service Commission [1964] held Malay mail advertisement was an invitation to qualified person resulting applications were offers. Order granted.

(2) Guha Majumder v Donough [1974] held – x intend to be immediately bound, only a negotiation from the beginning. Claim failed.

Invitation to treat– Bid– Supermarket counter(3) Pharmaceutical Society of Great Britain [1953] held

- the display of poisons was only an invitation to treat .

(a) Offer – Issue 1

Carlill v Carbolic Smoke Ball (1892):

Readiness to do or abstain from doing….

Carlill v Carbolic Smoke Ball (1892):

Readiness to do or abstain from doing….

Harvey v Facey (1893):

Information – not an offer

Harvey v Facey (1893):

Information – not an offer

Is this advertisement or invitation to treat?

Communication? • S.4(1) CA : when it come to the

knowledge of the person to whom it is made.

– Ahmad Meah v Nacodah (1890): ‘suitable house’ , vague and not absolute, x contract.

– Wiliams v Carwardine (1883) : to handcuff the thief with no knowledge eligible to receive any rewards. No contract but the court held: still qualified to receive rewards due to his knowledge.

(a) Offer – Issue 2

revocation? • s.6 CA 1950

1. communication of notice - s. 6(a)2. lapse of time – s. 6(b)3. fail to fulfill a condition of acceptance – s. 6(c)

4. death / mental disorder – s. 6(d)

(a) Offer – Issue 3

• How offer ended? Revoked? - s.5(1): at any time b4 the communication of its acceptance complete.

- Routledge v Grant (1828) : G can revoked the sale of house within 6 weeks due to x acceptance of communication by R.

- Byrne v L Van Tienhoven (1880) – postal rule

- Hyde v Wrench (1840) – counter offer the selling of land of $950, from $1000 - first offer is not an offer.

• S.2(b) – he signifies his assent / acceptance• S.2(c) = promisee• S.7(a) Acceptance must be absolute.

- Lau Brothers v China Pacific Navigation [1965]: still negotiation, agreement not yet formed.

- Low Kar Yit v Mohamed Isa [1963]: agency, an option subject to formal contract. X binding.

- Esso Standard Malaya v Southern Cross Airways(M) Bhd (1972) – subject to formal contract, h/ever no execution of formal contract was made. Held: Binding due to the intention of having no formal contract.

(b) Acceptance

• S.7(b) CA : usual and reasonable manner or prescribe the manner how.- Eliason v Henshaw (1819) – sending by horse, posting is not an appropriate way of acceptance.

• Silence? - Felthouse v Bindley (1862): silence x accepted but may depends on situation – selling horse for £30.

- e.g. S.8 CA – performance / consideration (cash) - see Carlill v Smoke Ball - s.3 ‘the acceptance..by any act or omission of the party..he intends to communicate..’

• S.4(2)(a) communication of an acceptance- Holwell Securities v Hughes (1974) – condition: come to the knowledge (orally, telephone or telex). Proposer wanted acceptance in writing and by hand.

• S.4(2)(b) : complete (against acceptor) when comes to the k/ledge of proposer. – Ignatius v Bell (1913): communication by post. Held: bind

offeror, x bind acceptor since acceptance x communicate.

• Revocation– Henthorn v Fraser (1892) – revocation of offer letter

received after the posting: see s.5(1) and (2).

(b) Acceptance: When effective?

Ignatius v Bell (1913):

Offer until 20th August

Accept and sent notice by post on 16th August

And only received by defendant on 25th August

Issue – Whether communication of acceptance complete?

• Definition – s.2(d) something (prize)• S. 26 CA: agreement without

consideration is void.- A promise to give $10 for his birthday

but fail to do so. - Other example:

(1) Gutrie Waugh Bhd v Malaippan [1972] – statement of claim based on deed was x consideration.

(2) Wong Hon Leong v Noorazman [1995] – promise to pay $ for the service was good consideration.

(c)Consideration

• Types (1) Executory – x perform

(2) Executed – that should be performed (promise)

(3) Past consideration – consideration given b4 promise given

• Need not be adequate– Explanation 2 s 26 CA – contract x void merely

because the consideration is inadequate.

- Phang Swee Kim v Beh I Hock (1964) – pay RM500 for land: Held there was adequate consideration.

• Need not be adequate– Explanation 2 s 26 CA – contract x void merely

because the consideration is inadequate.

- Phang Swee Kim v Beh I Hock (1964) – pay RM500 for land: Held there was adequate consideration.

• Past Consideration - S 2(d) CA – valid so long as the promisee had done

pursuant to the desire of the promisor.- Kepong Prospecting v AE Schmidt (1968): services prior to company establishment x consideration but service still available in the future…show sufficient consideration.

- read S 26(b) CA ..unless it is a promise to compensate someone who has done something..

• Exceptions(a) natural love n affection - Tan Soh Sim v Tan Saw Keow (1951) : done in writing and registered.

(b) a promise to compensate for something done- Explanation (d) s 26 CA

(c) a promise to pay a debt barred by limitation law- Explanation (e) s 26 CA

(d) Certainty • uncertain = void

-Karuppan Chetty v Suah Thian [1916] : ‘granting lease at RM35.00 per month for as long as he likes..’

• S. 11 CA: age of majority- Mohori Bibi V Dharmadas Ghose [1903]: infants cannot make valid contract

- Tan Hee Juan v The Boon Keat [1934] : land transfer by infants were void.

(e) Capacity

• Exceptions:1. necessity2. scholarship3. insurance

- GOM v Gurcharan Singh [1971]: food and clothes

(3) VOIDABLE CONTRACT

• S 10 (1) CA : free consent• S 13 CA• S 14 CA– Coercion – Undue influence– Fraud– Misrepresentation – Mistake

• S. 19 CA

Status of contract

• Void Contract : s 2(g) CA/ s 14 CA• Voidable Contract: S 2(i) CA • Valid until terminated / breached.

1. Coercion

• S 15 CA• Force? Penal Code?– Kanhaya Lal v National Bank of India (1913)

limited, forcing someone to enter into agreement only.

• S 19 (1) CA: Voidable contract– S 19 (1): option of the party– S 19 (2): re-position

2. Undue influence• S 16 CA

(a) s. 16(2)(a) real or apparent authority–Lai Kwee Lan v Ng Yew Lay (1990)(b) s. 16(2)(b) mental capacity–Che som v Maha (1989): mortgage deed

• Burden of proof–Raghunath Prasad Sarju Prasad (1924): on the person whose position dominate others.–Msian French Bank v Abdullah [1991] raised by a party and not d third party. –Datuk Jaginder Singh v Tara Rajaratnam: solicitor-client r/ship–Inche Noriah v Shaik Allie (1929): illiterate woman, deed of gift to her nephew (relationship).

3. Fraud • S 17 CA(a) fact which is not true - Letchemy Arumugam v Annamalay (1982)(b) active concealment of a fact - Illustration (c) s 19 Contract Act (c) a promise made without any intention(d) act fitted to deceive

• Mere silence or non-disclosure?– Explanation s 17 Contract Act - not fraud unless it is his duty to say something.

• Illustration (a) s 17 Contract Act – Keates v Lord Cadogan (1851)

• Illustration (b) s 17 Contract Act • Illustration (c) s 17 Contract Act

4. Misrepresentation

• S 18 CA(a) info which is not true though he believes it to be true.(b) any breach of duty without intention to deceive.(c) make a mistake as to the substance innocently

• He believe the representation to be true which induces him into agreement–Bisset v Wilkinson (1927)–S 19 CA: voidable

5. Mistake

• S 21 CA– Illustration (b) s 21 : both parties-void– Chop Ngoh Seng v Esmail [1948]: sub-matter x existence– Chan Yoke Lain v Pacific Orient Insurance [1997]: void,

mistake of identity– Raffles v Wichelhaus (1864)

• S 23 CA: unilateral mistake: voidable– Tamplin v James (1880)– Cundy v Lindsay (1878)

• S 22 CA– Mistake of fact only and not the law

(3) VOID AND ILLEGAL CONTRACT

• S. 2(g) CA: not enforceable by law• S. 24 CA:

a. forbidden by lawb. defeat any lawc. fraudulentd. implies injury to person or propertye. immoral

• S. 24(a) and (b) – defeat the law– Manang Lim Native v Manang Selaman [1986]:

agreement contravene to Sarawak Land Code

• S. 25 CA: void if consideration n object unlawful– Chung Khiaw Bank v Hotel Rasa Syg [1990]:

contract prohibited by statute void

• S. 27 CA: restraint of marriage• S. 28 CA: restraint of trade• S. 29 CA: restraint of legal proceeding• S. 30 CA: uncertainty

Status of void contract

• The crt will not enforce illegal contract– S. 57(2) CA: the act becomes impossible or

unlawful– S. 2(g) CA: not enforceable by law

• S. 66 CA: restore or to pay compensation

(4) DISCHARGE OF CONTRACT

• S. 57 (2) - Frustration• S. 47 – 56 - Performance• Breach : a refusal to perform

(5) REMEDIES

(a) Cancel the contract(b) Damages (c) Specific Performance(d) Injunction(e) Quantum meruit

– S. 40: refusal of party to perform promise wholly.• When a 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.

(a) Cancellation of contract

• S. 74 Contract Act(a) s 74(1) party who has broken the contract - When a contract has been broken, the party who suffers by the breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from the breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it.

(b) s 74(2) special damages, not given for any remote and indirect loss or damage sustained by reason of the breach.–Aim: recover s reasonable sum for breach

(b) Damages

• S 11(1) Specific Relief Act (a) damages x appropriate; s 11(2) SRA(b) execution of contract is a matter of trust

• S 20 SRA: SP x apply if:–S. 20(1)(a) damages will provide an adequate remedy–contract for personal service–delay in bringing an action–S. 20(1)(c) terms of contract are uncertain

• S.21 (2) SRA: discretion of HC to refuse SP (a) arbitrary / unjust(b) cause undue hardship•Venkatachalom Chettiar v Arunasalam [1985]: bargain that turned out worse than expected cannot constitute hardship.

(c) Specific Performance

• S 50 Specific Relief Act 1950– Positive /Negative

• Mandatory Injunction: requiring something to be done – Neoh Siew Eng v Too Chee Kwang (1963)

• Prohibitory Injunction: restraining order– Illustration (a) s 52 ARS

(d) Injunction

(e) Quantum Meruit – measurement

THANK YOU