CHP6

Void and voidable

1. Tua is seventy years old. Last month Tua was hospitalised at the Maya
Hospital for two weeks. During the said two weeks a strong bond of
friendship was developed between Tua and a doctor at the hospital, Dr.
Senyum. A day after her discharge from the hospital Tua signed a
contract to sell her house to Dr. Senyum for RM 250,000. The market
value of Tua’s house is RM 500,000. Yesterday Tua wrote to Dr Senyum
stating that she had changed her mind about selling the aforesaid house.
Dr Senyum seeks your advice on the legal position. Advise Dr Senyum.
(chp 4 pg6, chp6, pg)

Dr. Senyum is advised to rely on the section 26 - explanation 2 as the

agreement is not void merely because the consideration is inadequate.In the
case of Phang Swee Kim V Beh I Hock, it was held that consideration only
needs to have some value, but need not be adequate. Therefore the contract is
valid. In contrast, Tua may argue that there is an undue influence under s16 CA
1950 because there is a fiduciary relationship between Tua and Dr Senyum.
She may also argue that Dr. Senyum was in a position to dominate her mind
and obtain unfair advantage from her. If Tua able to prove the existence of
undue influence, she can choose either to continue the contract or reject the
contract. However, it is unlikely that the undue influence can be applied
because Dr. Senyum Dr. Sunyum is just a doctor, he is not the expert for
analysing the properly market price. Therefore it is impossible for Tua to
consult Dr. Senyum or rely on his advice to set the selling price. It seems more
likely that Tua voluntarily sell the property at RM250k which is not at the
market price. In conclusion, Dr. Senyum is entitled to buy the property if he
pays the sum of RM250k which was previously agreed by Tua.

2. Explain the various type of vitiating factors.

Coercion, undue influence, fraud, misrepresentation & mistake.

(Refer notes for elaboration.)

3. Section 14 Contracts Act 1950 states that consent is free when it is not
caused by one or more of the vitiating factors. Briefly explain the vitiating
factors by stating the relevant sections of the Contracts Act 1950.

4. Tom is the Chairman of Cheezy Berhad and he hold 55% of shares in the
company, which made him as the majority shareholder of Cheezy Berhad,
Jerry always wanted to be in control in the company. Jerry threaten Tom
by placing a knife on his neck to get him to sign the agreement of transfer
of shares to Jerry. Tom was too frighten and he signed the agreement.
Determine whether the agreement is valid?
 This falls under coercion (vitiating element) due to the fact that Jerry threaten
Tom by placing a knife on his neck to get him to sign the agreement of transfer
of shares to Jerry. Discuss definition of coercion, s 15 (please refer to pg1).
Nuri Asia Sdn Bhd v Fosis Corp Sdn Bhd- the court held that the execution of
the written guarantee clearing came within the scoop of ‘committing or
threatening to commit criminal act’. The written guarantee was tainted with
coercion and so there was no free consent. In conclusion, the agreement signed
by Tom is voidable at the option of Tom. He can choose to continue the
contract or cancel the contract.

5. Mrs Yang wish to purchase another car as her daughter has been using
her car to travel to work. So, Mrs Yang approach Mr Tee Pu Kuat, a car
dealer, to purchase a car. After 2 weeks, Mr Tee called Mrs Yang and
asked her to sign the purchase of car agreement. However, the agreement
that Mrs Yang signed was actually to sell her old car. Mrs Yang was shock
and she would like to sue Mr Tee. Advise Mrs Yang whether she can sue
Mr Tee.

-The scenario of the question involves the element of fraud base on the fact that
Mr tee had an intention to deceive Mrs Yang when he represented her
agreement was for purchasing the new car. Mrs Yang had relied on the false
statement made by him. So, Mrs Yang can sue Mr Tee under fraud.

-Discuss Letchumy v Annamalay

-Conclusion, according to Section 19, Mrs Yang can have the option to make
the contract to br voidable. She can either to continue the contract or cancel the
contract.
Terms of contract

1. What is the difference between condition, warranty and innominate

terms?

A condition is a term that is vital to the contract. Non-performance condition

may be considered by the injured party as amounting to substantial failure to
honour the contract and therefore the injured party can set aside the contract

A warranty is a term which is considered by the parties to be of lesser

important to the main purpose of the contract. If the party breach the
warranty , the injured party must continue the contract and they also have the
right to sue for damages for any loss that they suffer as a result of the breach.

Innominate terms is a term which is too complex to be classified either as a

condition or a warranty. The court will determine the seriousness of the breach
and determine whether such breach should entitle the injured party to have the
right to terminate the contract or merely to claim damages.

2. What is an exemption/exclusion clause? How an exemption/ exclusion

clause can be incorporated into a contract?
•Definition of exclusion clause
•Incorporating by notice / by signature.

3. Benny has entered into a contract with Alan for the purpose of a BMW
car for RM350,000. Two weeks later, the car was delivered to Benny and
he was shocked that the car was without the engine. Benny is very upset
and decides to sue Alan.
A) Explain what is condition, warranty and innominate terms. (12 marks)
Refer to question 1
B) Advise Benny whether Alan has breached the terms of the contract and
determine the effect of a breach of condition or warranty in a contract. (8
marks)
Based on the facts of the case, a car engine is the most important part of car
and without the engine, the car cannot be used for the purpose it was bought.
As such, Alan has breached the condition as the car engine is vey vital or
essential term which is so fundamental to the contract.
In the case of Tan Chong & Sons Motors Co Sdn Bhd v Alan McKnight, the
court held that the effect of breach of condition and warranty as follows:
1) Breach of condition - the innocent party has the right to terminate
the contract and claim damages

2) Breach of warranty – the innocent party cannot terminate the

3) contract and entitled to claim damages only

In conclusion, Benny has the right to reject the car and terminate the contract.
4.  Contrast between ‘Conditions’ and ‘Warranty’ terms in a contract.
 Conditions 
 A condition is a term in the contract which is so vital or essential to the main purpose
of the contract that its breach by one party will entitle the innocent party to repudiate
(terminate) the contract. It must be so fundamental to the contract without which the
contract would collapse.
 Warranty
 A warranty is a minor term. A breach of warranty will not repudiate the whole
contract. It only gives rise to an action for damages, not repudiation of the whole
contract. Why? Because a warranty is only secondary or collateral to the main term of
the contract and its breach will not affect the efficacy of the whole contract.

Discharge of contract

1. How the contract can be discharged?

(a) Performance: performance must be exact and precise, after both

parties already performed the duties under the contract, the contract
comes to an end.
(b) Breach: when one party refused to perform or disable from
performing his promise, the innocent party may treat the contract as
being discharged and sue for damages.
(c) Frustration: after a contract is made, something happens, and cause
the performance under the contract to become impossible, the
contract is said to be void, and the obligations under the contract
comes to an end.
(d) Consent: Due to the fact that the contract is formed based on an
agreement, therefore the contract can also be discharged by party
provided in the contract.

2. Hank, an American, agreed to buy an expensive antique from

Ahmad, which he had seen at Ahmad’s house. At the time the
agreement was made, neither Hank nor Ahmad were aware that the
antique, along with other articles, had already been destroyed in a
fire at Ahmad’s house. After the contract had been made but before
delivery, the Government introduced the new legislation to prevent
antique to be exported from Malaysia. Consider the validity of the
contract.
•The agreement is void under S.2(g) CA 1950 because both parties made
the mistake as to the existence of the subject matter. Both parties were
 not aware that the antique had been destroyed at the time of the
agreement. Therefore Hank can set aside the contract under Section21
CA 1950.
•There is change of law in Malaysia after the contract had been made
which states that export of antique is no longer possible, so Ahmad is
not allowed to perform the contract. Therefore the contract is frustrated
under S57(2) CA 1950 and the contract between them is void.

3. James, the owner of ABC Berhad, an event management firm,

entered into an agreement with DEF Company to rent an exhibition
hallfor 5 days at the cost of RM1,000 per day for the purpose of
holding an education fair. After both parties signed the contract, the
hall was destroyed by fire 3 days before the fair started and the fair
had to be cancelled. Advise the parties on the validity of their
agreement.
On the fact given, James entered into the agreement with DEF to rent an
exhibition hall and the hall which was essential for the performance of
the contract was destroyed by fire 3 days before the fair.

Contract can be discharged by 4 methods: performance, agreement,

frustration, breach. Frustration is relevant to the fact of question.

Discuss section 57 & case law: Taylor v Caldwell

Base on the fact given, it is similar to the case of Taylor v Caldwell, the
incident was happened after the parties entered into the contract, the
parties cannot control the incident from happening and importantly it is
not the fault of the party.

Conclusion, it is safe to conclude that the contract is frustrated and

therefore the contract is void.

4. Under s57, with reference to case law, outline circumstances/

instances that would render the contract discharge by frustration
and the consequences to the contract.

 Outline 4 situations which can caused the contract to be discharged by

frustration.
 Refer google classroom.
 S57(2)- the contract discharged by frustration is void.
 S66
 Taylor v Caldwell. The plaintiff had hired out a music hall to the
 defendant for the performance of a series of concerts, but the hall was
destroyed by fire before the date of performance. The court held that the
contract had been discharged by frustration.
 Robinson v Davinson. A piano player was booked to perform, but was
ill on the day of the concert. He was sued for breach of contract, but it
was held that the contract had been frustrated when his illness made him
impossible to perform.

5. Kent who runs an animal farm and he offers to sell his calves to
Clark. Few days later after the contract, the Calves suffer disease
which may cause them to die in another two weeks’ time. Discuss the
validity of the contract.
Introduction
 Discuss the relevant area of law: Frustration
 S57
 Effect of the contract: the contract is void from the time of the
frustrating event.
 Application of the law to the QS: Base on the fact, all the calves were
dead subsequently after the parties entered the contract, the contract has
now become impossible to perform by the subsequent frustrating
event.
Conclusion: the contract between Kent and Clark is void
Remedies

1. Explain the following remedies:

(i) damages

Damages enable the innocent party to receive compensation from the party
who is responsible for the breach of contract.

(ii) injunction

Injunction it restrains a party from breaking their contract or from committing a

wrongful act. In addition, injunction also obliges the party to perform certain
act in future.

(iii) specific performance

Specific performance is an order by the court to direct a person to carry out

their obligation/duty as stated under the contract.

2. What is the meaning of ‘Mitigation of Loss’? Discuss.

•The party who asks for damages is under the duty imposed by the law to
mitigate the loss, which means ………………………………………….
•S74
 •Kebatasan Timber case.

3. Is specific performance a compulsory remedy? When the courts award

such remedy? Discuss briefly.
•Not a compulsory remedy! It is an equitable remedy.
•Explain the meaning of equitable remedy. *given base on the discretion*
•When must be granted? * Granted if monetary compensation (damages)
cannot solve the problem

4. Ah Chong’s neighbour is the musician. He always plays the piano at

midnight which cause disturbance to the neighbours. Advise Ah Chong the
suitable remedies which can be applied to solve the above situation.
 Introduction: Briefly outline 3 remedies (damages, specific performance,
injunction)
 In considering the fact of the case, it seems that injunction is the suitable
remedy.
 Outline the reason.
 Definition of injunction.
 Conclusion: On view of the above discussion, Ah Chong is advised to
apply injunction from the court to solve the problem. If the court grants
injunction to Ah Chong, Ah Chong can stop him from playing the piano at
midnight.