PART A QUESTION 1

The issue in the case of Mi So is whether there is a valid contract as Mi So have posted
her acceptance before the deadline given in the terms of the contract.
'A legally binding arrangement between two parties' can be a simplified description of a
contract. The contractual transactions in Malaysia were largely regulated by the
Contract Act 1950 (hereinafter referred as CA 1950). If there are any cases where the
contract law is unable to deal with properly, it is essential to introduce English law.
There are plenty of contracts that are offered, approved or even refused around the
world every day. Many of these contracts are signed either verbally or in writing. As
examples of orally made contracts, such as buying coffee at a supermarket, buying a
cell phone reload voucher. Whereas contracts, such as the purchasing of a house or the
purchase of a vehicle, are in writing. A contract is created when two parties agree to do
some actions in return for the other's acts with the correct mental intent, under the
correct conditions, within the scope of the law, and with any detriment to the both of
them. This formation requires the existence of all these elements; the absence of one
element or the presence of an issue, such as illegality, will invalidate the contract.
There are number of elements of acceptance when it comes to Postal Rule. The first
condition is the acceptance takes effect once it is posted. In accordance with Section
4(1) of CA 1950, when it comes to the knowledge of the person to whom it is made—
the offeree, the communication of the proposal is complete. However, the rule of when it
is come to the knowledge of the offeror, the communication of acceptance is complete
is not include in the postal rule. This is because according to Section 4(2)(b) of the CA
1950, acceptance by post takes effect when the offeree posts the letter and not when
the letter has reached the offeror. A letter is deemed to have been posted when it is
deposited in an official letter box or given directly to an authorized post
office's employee. Therefore, because of the postal law, the offeror is obliged as they
are legally bound when the offeree posts the letter of acceptance, even if the letter of
acceptance is pending, destroyed and the offeror has no knowledge of the acceptance.
This can be seen in the case of Adams v Lindsell [1818], on 2nd September, the
defendant has offered to sell some of his wool to the plaintiff. In his offer, he requests an
answer ‘in course of post’ and arrived at him before the deadline. Unfortunately, the
defendant’s letter was wrongly addressed and thus the plaintiff received it on 5 th of
September which delayed the process. Consequently, the defendant had already sold
the wool to someone else because the letter of acceptance arrived at him two days after
the desired deadline. Based on the facts, the court held that the contract was legally
bind as soon as the letter had been posted. Thus, the defendant had breached the
contract.
As stated earlier, there is a few conditions or element to be fulfilled in order for the
acceptance to be valid in postal rule. Secondly, according to Section 7(a) of CA 1950,
the acceptance must be absolute and unqualified. Absolute in this context means
definite without any doubt, confusion or uncertainty while unqualified means having the
right knowledge. The case that can further explain this is Ignatius v Bell [1913], where
the defendant in this case gave the plaintiff the right to buy a piece of his land only if the
option was exercised by latest on 20 th of August 1912 by notice in writing. The plaintiff
sent the acceptance letter on 16 th of August by registered post in Klang. However, the
defendant received the letter only by 25 th August. The plaintiff then sued the defendant
for specific performance over his rights to buy the defendant’s land. This can be referred
back to Section 4 of the CA 1950, the acceptance was absolute and the contract was
binding when the plaintiff posted the letter on the 16 th of August as both parties
contemplated the use of post to communicate.
Applying the case of Adams v Lindsell [1818] and the case of Ignatius v Bell [1913], the
agreement has been legally bind starting on 27 th of January which on the day she
posted her letter of acceptance. This is because there is no breach of terms in Mi So
part, as she has followed all the terms in the contract and she has fulfilled all the
elements of an acceptance in Postal Rule. Thus, she has the rights to work in Moonlight
Sdn Bhd as a cashier. However, if the circumstance was changed and the acceptance
using a fax machine which it never arrives to Moonlight, the answer will be different.
This is because a modern communication system such as telephone, telex, fax and
website are classified as instantaneous and the postal rule does not apply. This can be
seen in the case of Entores Ltd. v Miles Far East Corp. The complainants, Entores,
were a company that was based in London. They had sent an offer to purchase 100
tons of copper cathodes to the defendants, Miles Far East Corp. Their company was
based in Amsterdam and this offer was communicated by Telex, a form of
instantaneous communication. The Dutch company sent an acceptance of this offer by
Telex to the complainants. When the contract was not fulfilled, the complainants tried to
sue the defendants for damages. The court held that the contract and damages were to
be determined by English law. It was clarified that the postal rule did not apply for
instantaneous communications. Since Telex was a form of instant messaging, the
normal postal rule of acceptance would not apply and instead, acceptance would be
when the message by Telex was received. So, if Moonlight Sdn Bhd doesn’t have the
proper knowledge of Mi So acceptance as the letter never reached the appropriate
destination, thus, Moonlight Sdn Bhd and Mi So is not legally bound. The company can
give the position to others.

CONSIDERATION
The issue in this case is whether there is a valid consideration which entitles Jane to the
1% shares of the sale from HH Prospecting Ltd. Consideration has been called the
‘badge of enforceability’ in contract. This is particularly important where the agreement
involves a promise to act in particular way in the future. In exchanges where there is an
immediate, simultaneous transfer of, for example, goods for money. The doctrine of
consideration applies in theory but rarely causes any practical problems. The further
definition for this principle is provided in Section 2(d) of the Contract Act 1950
(hereinafter referred as CA 1950), when at desire of the promisor to do something or
abstain from doing it in a promise is called a consideration of that promise. Illustrated in
the case of Currie v Misa [1875], stated that consideration consists of a benefit to the
promisor or a detriment to the promise. In a simple term, consideration is the price of
which one party pays to buy the promise or the act of other. In reality, when you bought
something, you give them the money and they give you the product you have
purchased. Thus, it equal to consideration.
The general rule for consideration is any agreement made without consideration is void.
This is the provision under Section 26 of CA 1950. This means that both parties of the
contract must provide something in return for the other’s promise, this was illustrated in
Section 24 of CA 1950. For instance, Sara have promised to Daniel that she will pay
him if he cleans her shoe. So, in return for the payment, Daniel wash Sara’s shoe.
Basically, there are three types of consideration; executory, executed and past
consideration. Executory consideration discusses on a promise made in exchange for
another promise this includes a promise to do or to abstain from doing something in the
future. For instance, Sara promises to lend Ryda money on 20 th of June 2020 and Ryda
promise to pay it back on August 2020, then there is a valid binding agreement between
them. As such in the case of K Murugesu v Nadarajah [1980], where the appellant
promised to sell his house to the respondent but under some circumstances he failed to
do so. The respondent applied for a specific performance. The defense counsel argued
that there was no consideration therefore the agreement was void. The federal court
held that the agreement was a case of executory consideration that relates to illustration
given in Section 24 (a) CA 1950. Next, an executed consideration where it defines as a
promise for an act. Example, Sara lost her beloved cat and offers anyone that found her
lost cat, RM1000. In accordance to the offer made by Sara, Israq found the cat and
return it to Sara. Sara’s part in this executed consideration completed by Israq is giving
him the RM1000 as promised. This illustrated in the case of Carlil v Carbolic Smoke Ball
Co Ltd [1893], where the company of Carbolic Smoke Ball promise to give anyone that
can’t be cure by using that smoke ball, £100. However, the defendant refuses to pay the
plaintiff the promise money, thus force Carlil brought an action against the defendant to
the court. The court held that the defendant is entitled to make a payment of the
promised money towards the plaintiff. The last types of consideration to be discuss is
past consideration. The position of past consideration in English law is a bad
consideration. In contrast, Malaysia recognizes the position of past consideration as a
good consideration. Past consideration defines as a consideration that consist of
something wholly performed before the making of the promise. In simple term, a
promise was made subsequent to the act or omission. Given the same example of Sara
that lost her cat. But this time, Sara does post a status saying that her cat is lost but she
didn’t say that she will give any rewards. However, Israq found her cat and return it out
of pity of Sara’s situation and a kind intention to help her. After Israq returned her cat,
she promised to pay Israq RM1000. The promise made by Sara in this situation was
subsequent to the act of Israq thus it is a past consideration. This can be seen in the
case of Kepong Prospecting Ltd v Schmidt [1968], where the defendant is a consulting
engineer who assisted Mr. X to acquire a mining iron ore prospecting permit and
assisted in the company's subsequent development, contributing to his appointment as
Managing Director. They entered into an agreement after the establishment of the
company where the company would pay him 1 percent of the value of all the ore sold
from the mining property. The court held that the services rendered by Schmidt were
adequate to constitute a legitimate and binding consideration before the promise was
made.
As this being said, it is clear that Jane and Mr Harry entered into a past consideration,
and because of the recognition of this consideration in Malaysia contract law, Yana is
entitled to the 1 percent shares from Mr Harry’s company. Step aside the fact that they
are a dispute or problem circulating between these two parties, but Jane is still entitled
because; the fact that her situation and circumstances are the same with the case of
Kepong Prospecting Ltd v Schmidt [1968] and both of them have entered into a contract
since both parties have given their consideration; Jane gave her consideration on the
part where she helped the establishment of HH Prospecting Ltd and in obtaining a
prospect permit for logging in Kelantan. While Mr Harry and his company has made
their consideration on part where they promise to give Jane the 1 percent shares and
give her the position as a Managing Director. Thus, this contract is valid and must be
performed as long as it is stated in the agreement.
There are elements that needs to be fulfilled in order for the agreement considered to
have consideration in it. The first one is the consideration must be ‘sufficient’ but need
not to be ‘adequate’. These words can seem interchangeable at first glance but they
actually mean something very different in this context. Discussing the former; sufficient,
means that what is being put forward must be something which the courts will recognize
or have recognized as legally capable of constituting consideration. This can be seen in
the case of Thomas v Thomas [1842], where the promise to pay £1 per annum rent was
sufficient to support the promise of a right to live in a house. As long as there is a
payment, promise to pay, or money is always considered as a valid consideration. While
the latter; adequate, indicates that the court are not generally interested in whether
there is a match in value between what is being offered by each party, so no need for
proportionality. This can be seen in the case of Chappell & Co Ltd v Nestle Co [1960],
where Nestle had a special offer stating that if customers sent in three wrappers from 6d
chocolate bars as well as 1s6d, Nestle going to give away the records of “Rockin’
Shoes” which owned by Chappell & Co. Nestle willing to pay the royalties at 6.25% of
1s 6d however Chappel & Co argued that consideration must be sufficient but need not
to be adequate. Hence, the chocolate wrappers were part of the consideration as it was
part to increase sales and provided value. Therefore, Chappell & Co were granted the
injunction and Nestle could not sell the records. Secondly, the consideration may move
from a person who is not a promise. This is not valid under English Law but it is valid in
Malaysia as provided in Section 2(d) of CA 1950. The part that explains this under the
provision is ‘when the person or any other person has done something’. This was
illustrated in the case of Venkata Chinnaya v Verikatara Ma’ya [1881], a sister promised
to pay her brothers an annuity of Rs653, which did not give the promise any
consideration. On the same day, however, their mother gave her sister some ground,
saying that she had to give her brothers an annuity. Subsequently, the sister refused to
pay the annuity and her brothers sued her. She was liable to pay the annuity, the court
ruled. Although it did not transfer from its brothers, there was good consideration for the
promise. Third, part payment may discharge an obligation. An acceptance of smaller
sum of the payment made, in full satisfaction will be binding on creditor with condition
the debtor is discharged from the obligation to pay the full amount of the debt. A quick
example, the original debt amount of Sara towards Ryda is RM1000. However, through
a persuasion, Ryda agreed that Sara only need to pay RM500 which is half of the
original amount. This consider as a valid consideration thus the contract is not void. This
was rule in Section 64 (a) and (b) of CA 1950, that part payment of a debt has an effect
to discharge the original obligation. In the case of Kerpa Singh v Bariam Singh [1966],
the son of the debtor offered to send an RM4000 cheque as a complete payment in
order to discharge his father from an RM 8650 debt. The Federal Court held that he
agreed to discharge the debtor from any further liability since the creditor had accepted
the offer by cashing the cheque and retaining the money. Lastly, past consideration is
considered as a good consideration. This can be seen in the case of Kepong
Prospecting Ltd v Schimdt [1968].
However, there are four exceptional cases where agreements are valid without
consideration provided under Section 26 of CA 1950. The first one is an agreement on
account of natural love and affection. At common law, promise made in consideration
out of natural love and affection is void. However, in Malaysia, we recognize natural
love and affection and provided under Section 26 (a) of CA 1950. This kind of
agreement is void if it didn’t follow these three requirements; the agreement must be in
writing, the agreement must be registered and it must be made in account of natural
love and affection between parties in near relation to each other for example immediate
family such as mother, father and others. Illustrated in the case Re Tan Toh Sim, where
the deceased expressed a desire that her estate should be split between the two
adopted sons and two adopted daughters. In accordance with this wish, the legal next-
of-kin drafted an agreement renouncing all rights in favor of the four adopted children,
who were their nephews and nieces. The court held that Chinese adoptive children are
related to their adoptive parents and brothers, but that their adoptive mother's family is
not nearly related to them. Therefore, their nephews and nieces are not closely related
to uncles and aunties. There was no natural love and intimacy between the signatories
and donors in this situation. Second, an agreement that intend to compensate for an act
the promisor was legally compellable to do this provided under the same section but
different sub-section — (b). As always, there are requirements to fulfill this; promisee
has done the act voluntarily, the act is one which the promisor was legally compellable
to do, and an agreement to compensate, wholly or partly of the promisee for the act.
Lastly, an agreement to pay a statute-barred debt — (c), where the debt in this situation
cannot be recovered through legal action because lapse of time fixed by law. This is
because according to Limitation Ordinance 1953 where the limit to claim is 6 years from
the time of course of action.
Basically, there are three types of consideration; executory, executed and past
consideration. Executory consideration discusses on a promise made in exchange for
another promise this includes a promise to do or to abstain from doing something in the
future. For instance, Sara promises to lend Ryda money on 20 th of June 2020 and Ryda
promise to pay it back on August 2020, then there is a valid binding agreement between
them. As such in the case of K Murugesu v Nadarajah [1980], where the appellant
promised to sell his house to the respondent but under some circumstances he failed to
do so. The respondent applied for a specific performance. The defense counsel argued
that there was no consideration therefore the agreement was void. The federal court
held that the agreement was a case of executory consideration that relates to illustration
given in Section 24 (a) CA 1950. Next, an executed consideration where it defines as a
promise for an act. Example, Sara lost her beloved cat and offers anyone that found her
lost cat, RM1000. In accordance to the offer made by Sara, Israq found the cat and
return it to Sara. Sara’s part in this executed consideration completed by Israq is giving
him the RM1000 as promised. This illustrated in the case of Carlil v Carbolic Smoke Ball
Co Ltd [1893], where the company of Carbolic Smoke Ball promise to give anyone that
can’t be cure by using that smoke ball, £100. …………… The last types of consideration
to be discuss is past consideration. The position of past consideration in English law is a
bad consideration. In contrast, Malaysia recognizes the position of past consideration as
a good consideration. Past consideration defines as a consideration that consist of
something wholly performed before the making of the promise. In simple term, a
promise was made subsequent to the act or omission. Given the same example of Sara
that lost her cat. But this time, Sara does post a status saying that her cat is lost but she
didn’t say that she will give any rewards. However, Israq found her cat and return it out
of pity of Sara’s situation and a kind intention to help her. After Israq returned her cat,
she promised to pay Israq RM1000. The promise made by Sara in this situation was
subsequent to the act of Israq thus it is a past consideration. This can be seen in the
case of Kepong Prospecting Ltd v Schmidt [1968] …………………

INTENTION TO CREATE LEGAL RELATION

One of the core ingredients of a lawful and binding contract is the intention to create
legal relations, which, in its absence, makes the contract null and void ab initio. This is
because the intention to create legal relations consists of a party's readiness to
recognize the legal sequences of the agreement that they entered into. In order to
create legal relations, any contracting party's motion must have the requisite and
necessary intention of entering into a legally binding contract. Although no section
regulating the issue of intention is stated in the Contracts Act 1950, it appears that the
position of Malaysia is the same as the position of English Law. When deciding if there
is a concise and specific intention for the parties to be bound by their contractual
obligations, the court shall analyze the declaration or promises or, in other words, the
'statement of intent' that is made to each other. Either the offeror or the offeree or both
can create this 'statement of intention’. Also, the court will apply an objective test where
the court will look at what the parties appear to have agreed on rather than what the
parties say they have agreed. In Carlill v Carbolic Smoke Ball Co, the Court of Appeal
found the claims made in the commercial which indicated the defendants' intent to enter
into legally binding relationships. The commercial claimed that an amount of money had
been deposited into their bank by the defendants to pay for the reward. The Court held
that, from the money deposited, a fair man would construe that there was an intention to
be bound.
The law divided agreements into two classes, social and domestic agreements, and
business agreements. The first to be discuss is social and domestic arrangements. This
group is made up of agreements between family members, colleagues, and friends. The
legislation believed that it was not meant to be legally binding by social agreement.
However, there are some presumptions where one party reasonable relied, believed
and acted upon the agreement and they would suffer significant loss. In Balfour v
Balfour (1919), the defendant who worked in Ceylon agreed to send £ 30 monthly as
maintenance costs to the plaintiff. This was an arrangement between husband and wife,
but he refused to keep up the payments when the marriage ended. The Court held that
the arrangement was not legally enforceable because there was no consideration given
by the claimant and there was no intention of creating a legal relationship.
CAPACITY
As long as the consideration and intention of the agreement is lawful and not specifically
declared to be null and he willingly and voluntarily enters into the contract, the courts of
justice shall enforce his contract. However, the legislation restricted the capacity of
those people to bind together by a contract or to enforce a promise they had made.
These people include minors, insane and bankrupts. For a legally binding contract, the
capacity of a party to enter into a contract is an important aspect. As stipulated in
Section 10(1) of the Contract Act 1950 (hereinafter referred as CA 1950) — all
agreements are contracts where they are concluded with the free consent of the parties
responsible for the contract, for legal consideration and for a legitimate reason, and are
not hereby explicitly declared void. Whereas Section 11 of CA 1950 lays down the
requirements for persons who are competent to contract — any person who is of
majority age under the law to which he is subject and who is of sound mind is
competent to contract and who is not excluded from contracting under any law to which
he is subject. As specified in section 2 of the Age of Majority Act 1971, a person who is
under 18 years of age is a minor in Malaysia. In other words, at 18 years of age, one
has achieved the age of majority. Only those of this age are thus legally qualified to
enter into a binding agreement.
While all contracts entered into by a minor are presumed void as a general rule, the
statute, however, limited the right of such parties to enforce a promise made to them.
The marriage contract, employment and apprenticeship contract, contract for
necessaries, scholarship agreement and insurance contract are the exceptions to this
general rule that have made the contract still legitimate and enforceable. In Johan’s
case, he has entered the contract for necessaries and a marriage contract. Let’s
discuss on the first exemption of the general rule and can be applied in Johan’s
scenario; the marriage contract by a minor. A minor in Malaysia may enter into a
marriage contract and is bound by the agreement. A contract of marriage entered into
on their behalf by minors or their parents has been held to be binding. Section 4(a) of
the 1971 Age of Majority Act now provides that nothing in this Act shall impair any
person's right to act in the following matters, namely marriage, divorce, dowry, and
adoption. In the case of Rajeswary & Anor v Balakrishnan & Ors [1958], the plaintiff who
is a minor entered into a marriage agreement with the defendant following a traditional
practice. The defendant later, however, repudiated the pledge of marriage and argued
that the claimant was unable to enter into a marriage contract since she was a minor at
the time. The court held that a contract of marriage entered into by minors should be
distinguished from another class of contract and that it was exempt from the general
principle that a contract entered into by a minor would be void. In Malaysia, Muslim
marriage is regulated by each state's distinct Islamic Family Law Enactment and the
Federal Territories Act 1984 (hereinafter referred as IFLA 1984) stipulates that a male
must be 18 years of age and that the female must be 16 years of age before a marriage
can be solemnized. If a man wants a woman to solemnize a marriage, but they are
below the minimum age, the Shariah judge must sign the contract for them provided in
section 8 IFLA. Thus, for males and females, IFLA 1984 forbids early marriage
solemnization. As this being said, Johan is liable for his contractual agreement between
him and Riana. This is because applying these two view or element; It is a contractual
agreement of marriage thus provided under Section 4(a) of the 1971 Age of Majority Act
and even though he didn’t get married yet, and he just promise to marry her, he is still
obligated to carried it out. This is because the breach of promise to marry is dealt by
Contract law in Malaysia. In order to enforce the promise, it does not require any written
agreement or mutual promise which is expressly worded but it is sufficient enough as
long there is evidence of consideration to create the promise. These elements are well
stipulated in the case of Johan and Riana. Thus, Johan is liable to marry her.
Second exemption to be discuss is contract for necessaries. While all contracts entered
into by minors are void, section 69 of the CA 1950 permits the repayment of the minor's
property to a person who has been supplied with necessaries to the minor. In the
Contracts Act 1950 or under the Sale of Goods (Malay State) Ordinance 1957, the term
necessaries is not defined. All that is said under section 69 of the Contracts Act is that
what is given must be tailored to the situation of the minor in existence, and therefore
assistance would be the definition of common law. Necessary goods have been legally
specified in section 2 of the English Sale of Goods Act 1893 as meaning 'goods relevant
to the life condition of such a child and to its actual sale and delivery requirement.' The
tailor failed in his action in Nash v Inman [1908] because he had failed to identified that
the clothes were sufficient for the situation in the life of the minor and the student was
already sufficiently supplied with clothes in this case. Therefore, whatever goods
supplied to the minor must be supplied to the minor's actual requirements and
conditions of life and need at the time of delivery of the minor. For guidance, the
Malaysian court referred to its ruling. Chang Min Tat J claimed in Government of
Malaysia v Gurcharan Singh and Ors [1971] that in his view, the term necessaries must
be broadly interpreted and it is incumbent on taking into account the facts of the case,
the conditions and circumstances in which the supply was made and the purpose for
which it is served in any decision involving whether or not what is supplied is necessary.
Applying this to the scenario of Johan, it is most unlikely and impossible for Chattier to
take legal action against him as Chattier doesn’t properly state that the loan is for the
use of either Johan’s education or something that in the criteria of “necessaries” and the
fact that Johan use it to purchase something other than his necessities such as watch
and shoes. Hence, he also not liable towards his contractual agreement between him
and Chattier as he is minor at that time, and the contract doesn’t belong in either of the
exemption to the general rule.
In conclusion, for a contract to be valid, the essential ingredients of a contract must be
present. The common requirements to be present in an enforceable contract are offer,
acceptance, consideration and capacity. It assumed that everyone is capable of
entering into a contract, but a minor is in need of legal protection because of their age
incapable to appreciate their own actions. The technology does not change the
necessities of these elements to form a valid contract, but one has to be careful when
dealing with minor’s contract because it can create a problem and challenges to a
person who deals with them.
PART B QUESTION 3

Restraint of trade is a common

law doctrine which means that a
person’s or a party’s
future liberty to carry on a
trade, business or profession in
such manner and with such
person(s)
is restricted. In other words, it
is an enforceability of
contractual restrictions on
freedom to
conduct businesses.
Restraint of trade is a doctrine of common law which suggests that the future freedom of
an individual or a party to carry on a trade, company or career in such a manner and
with that person(s) is limited. In a simple manner, it is an enforceability of contractual
limitations on the right to do business. This legal concept can be observed in one old
decided case of Mitchel v Reynolds [1711], the defendant in this case leased a bakery
to the plaintiff for five years. As part of the lease, the defendant agreed not to compete
with the plaintiff in the baking trade within the town, as long as there are in the lease
term. If the defendant insists to breach this term, he will have to pay the plaintiff a bond
for 50 pounds. Later, the defendant violates the agreement made saying not to compete
and the plaintiff sued him for payment on the bond. In court, the defendant argued that
the agreement not to compete is unlawful as it restrains him on his right to trade.
However, the court held that in favor of the plaintiff where it was decided that this
restraint of trade is lawful and reasonable, although the general restraints of trade is
unlawful. It was due to a legitimate transaction; the rental or sale of the bakeshop
business and it was reasonably necessary to effectuate the main purpose. Given that if
the defendant reopened his bakery, he will attract his old customers and deprive the
plaintiff of the benefit of his bargain.
In Malaysia, under Section 28 of the Contract Act 1950 (hereinafter referred to as CA
1950), the general principles of restraints of trade have been clearly stipulated, which
specifies that any agreement under which someone is prohibited from practicing a legal
profession or business of any kind is to that degree void. We may infer from this law that
all the provisions or arrangements in the trade restraint contract are invalid since
Section 28 of CA 1950 usually forbids any restraint of trade. For example, in practical
terms, any trade restriction agreement against an employee after leaving his former
employer is invalid in the section above. In Wrigglesworth v Wilson Anthony [1964], the
defendant, a lawyer and solicitor, entered into a service agreement with the legal firm of
the plaintiff. Clause 8 of the said agreement established that the defendant shall not
carry on the business or career of a lawyer and solicitor within a radius of five miles
from Kota Bharu Town for a period of two years after the termination of his engagement
by the complainant's practice without first obtaining the written consent of the
complainant. Such written permission was not given by the plaintiff. On 7 December
1963, with effect from 31 December 1965, the plaintiff agreed to release the defendant
from the terms and obligations of the aforementioned agreement. The plaintiff claimed
an injunction, until 31 December 1965, to bar the defendant from practicing or carrying
on the business or occupation of a lawyer and solicitor within a distance of five miles
from Kata Bharu, Kelantan. The court then ruled the case by applying Section 28 of the
Contracts (Malay States) Ordinance 1950, which specifies that "any agreement by
which anyone is prevented from exercising a legal profession, trade, or business of any
kind is void to that extent." Accordingly, an agreement by which a lawyer and solicitor is
retrained from exercising his profession within five miles from Kota Bharu town for two
years is void. The distance and place in respect of restraint are irrelevant.
However, after discussing this, there are three exceptions to Section 28 of CA 1950,
where the covenant in restraint of trade is valid and exist in certain contracts. The first
type of contract and may applied to the case of Majeeda is contracts between vendor
and purchaser for the sale of the goodwill of a business. This principle is stipulated
under Exception 1 provided in Section 28 of CA 1950. Provided that such limits appear
to the court reasonable in regard being had to the nature of the business. In other
words, this exception concerns the restriction of trade in cases concerning the sale of
the goodwill of a business, where the seller of the goodwill of a business has entered
into an agreement not to conduct a similar business in competition with the purchaser.
This exception is relevant to the exemption if it prevents the vendor from carrying on a
similar business in competition with the business purchased from the vendor by the
purchaser, the area of restriction is within defined local limits, the business is carried on
by the purchaser or his heirs in the same business, and the existence of the business is
fairly taken into account. If the above conditions have been met, the vendor's agreement
will not be restraints to trade. This can be seen in the case of Polygram Records Sdn
Bhd v The Search [1994], where the court held that from the very beginning, the
provision banning the Search Group from making any recordings after the expiry of their
contract with the plaintiffs was invalid as it is an agreement to restraints of trade. The
court claimed that if the Malaysian courts take the view that a specific agreement is a
trade restriction agreement, the courts have no choice but to find it unconstitutional
under Section 28 of CA 1950. However, the judgment clearly states that Section 28 of
the Contracts Act, 1950 is specifically held to be applicable only to cases in which a
person has been restrained from pursuing his trade or career during the post-contract
phase and not during the period in which his employment contract is still in effect.
Applying the case of Mitchell v Reynolds [1711] and Polygram Records Sdn Bhd v The
Search [1994], the clause in her contract is not amount to restraint of trade as it falls
under the Exception 1 of the Section 28 of CA 1950, the sale of a goodwill.  In other
words, if an employee is still bind under the employment and their job has not been
terminated, then the 'restraint of trade' provision would still be enforceable if there were
any stipulated in it. As such, prior to terminating their employment contract, the
employee would also be forbidden from having any direct or indirect involvement in any
rival corporation. This is common sense, since it is normal for an employee to have a
duty of care to ensure that their employers behave in good faith and for the benefit of
their current employer. Majeeda is working on part-time basis with Mari Mari Event
which clearly a rival and a competitor in the same field of business where her employer
is in. Thus, Majeeda is obligated to follow the terms stipulated and stated in her
employment contract.