This document summarizes a business law lecture on contract law which discusses the key elements of a valid contract including consideration and capacity. It examines the requirements for consideration such as the need for an act, abstinence or promise in exchange, exceptions where consideration is not needed, and the sufficiency of consideration. It also analyzes the capacity of parties focusing on minors and the exceptions where minors can enter into valid contracts.
This document summarizes a business law lecture on contract law which discusses the key elements of a valid contract including consideration and capacity. It examines the requirements for consideration such as the need for an act, abstinence or promise in exchange, exceptions where consideration is not needed, and the sufficiency of consideration. It also analyzes the capacity of parties focusing on minors and the exceptions where minors can enter into valid contracts.
This document summarizes a business law lecture on contract law which discusses the key elements of a valid contract including consideration and capacity. It examines the requirements for consideration such as the need for an act, abstinence or promise in exchange, exceptions where consideration is not needed, and the sufficiency of consideration. It also analyzes the capacity of parties focusing on minors and the exceptions where minors can enter into valid contracts.
This document summarizes a business law lecture on contract law which discusses the key elements of a valid contract including consideration and capacity. It examines the requirements for consideration such as the need for an act, abstinence or promise in exchange, exceptions where consideration is not needed, and the sufficiency of consideration. It also analyzes the capacity of parties focusing on minors and the exceptions where minors can enter into valid contracts.
Lecture 4 Contract Law – Consideration and Capacity
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Consideration (d) 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, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise;
s.26 CA Agreement made without consideration is void.
Exceptions — s.26 (a) It is in writing, registered & made for natural love & affection between parties in relation to each other; or
s.26 (b) promise to compensate person for voluntarily doing
something for promisor; or
s.26 (c) promise in writing to pay statute barred debts that cannot be enforced due to Limitation Act 1953
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ILLUSTRATIONS (a) A promises, for no consideration, to give B RM1, 000. Agreement void,
(b) A, for love & affection, promises, in writing and
registered, to give son, B, RM1,000. This is a contract.
(c) A finds B’s purse and gives it to him. B promises to
give A RM50. This is a contract.
(d) A supports B’s infant son. B promises to pay A’s
expenses. This is a contract.
(e) A owes B RM1,000, but debt barred by limitation. A
signs written promise to pay B RM500 on account of the debt. This is a contract.
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Unlawful Consideration S 24 Contracts Act 1950 The consideration or object of an agreement is lawful, unless— (a) it is forbidden by a law; (c) it is fraudulent; (d) it involves injury to the person or property of another; or (e) the court regards it as immoral, or opposed to public policy.
Every agreement of which the object or consideration is unlawful
is void.
ILLUSTRATIONS (e) A, B and C enter into agreement for division of gains acquired by fraud. Agreement is void. (f) A promises to obtain for B employment in public service, and B promises to pay RM1,000 to A. Agreement is void.
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Sufficiency of Consideration Wisma Denmark Sdn Bhd v. Landcorp Finance Bhd [2008] 1 CLJ 704 Payment of RM1,100.00 by Defendant is not consideration for purchase of 2 properties worth more than RM150m. The effect of the above is that Defendant would get 2 properties belonging to Plaintiff with no cost except for RM1,100.00 whereas Plaintiff would be deprived of both properties for a meagre RM1,100.00. That in itself shows undue advantage and lack of consideration, agreements void under s 26 Contracts Act 1950.
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Past Consideration Kepong Prospecting Ltd &Ors v Schmidt [1968] 1 MLJ 170, Services rendered after incorporation but before the date of the agreement (i.e. past consideration), can under the law of Malaysia, validly amount to consideration for an agreement to pay, since Section 2(d) of the Contracts Act 1950) expressly provides for this; in point or fact there is no doubt that such services were rendered… Sufficient consideration is therefore established.
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Payment of a lesser sum s.64. Every promisee may dispense with or remit, wholly or in part, the performance of the promise made to him, or may extend the time for such performance, or may accept instead of it any satisfaction which he thinks fit.
ILLUSTRATIONS (a) A promises to paint picture for B. B later forbids him to do so. A no longer bound to perform the promise. (b) A owes B RM5,000. A pays B who accepts, in satisfaction of whole debt, RM2,000. Whole debt is discharged.
Once the promisee accepts part performance or
payment, he cannot demand for the balance as the debt is discharged. 24/8/2020 Jenita Kanapathy 7 Intention to Create Legal Relations * The Contracts Act 1950 does not expressly refer to an intention to create legal relations. * However, the doctrine or principle is very much part of our domestic law. There is no contract unless parties to agreement intend to be legally bound and for their agreement to have legal consequences. * Whether parties intend to be legally would be determined objectively i.e. whether reasonable parties to such an agreement would have intended to create legal relations. 24/8/2020 Jenita Kanapathy 8 24/8/2020 Jenita Kanapathy 9 Intention to Create Legal Relations 2 types of agreements – 1. Social/domestic agreements - Presumption that there is no intention to create legal relations. E.g. agreements between, parent and child and husband and wife, close friends.
Balfour v Balfour (1919) 2 KB 571
D was a civil servant stationed in Ceylon. D and wife, P, came to England on leave. When leave was over, D went back to Ceylon but P stayed back on doctor’s advice. D promised to pay her £30 per month. D did not keep his promise.
CA: no contract since they did not intent that agreement should have legal consequences. Rationale – otherwise courts would be flooded with these sort of cases
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Intention to Create Legal Relations Choo Tiong Hin & Ors v Choo Hock Swee [1959] MLJ 67 Plaintiff and his wife had a farm. Their children helped in the farm which grew into a successful business enterprise. Differences arose after the wife died. The father remarried and left the family home. He claimed possession of the farm from his sons and a declaration that he was the owner of the property. The sons claimed that they were entitled to an equal share as they had helped in the creation of the family wealth.
Court: there was no intention to create legal relations.
This was a private family arrangement depending for its efficacy upon a sense of filial duty and paternal responsibility on the part of the sons and their father. 24/8/2020 Jenita Kanapathy 11 Intention to Create Legal Relations 2. Business/Commercial Agreements – Presumption parties intended to enter into legal relations. Merritt v Merritt (1970)1 WLR 1121 H left his wife for another woman. Both met & talked. H wrote: “in consideration that you will mortgage of house, I will agree to transfer house to you.” W paid the mortgage but H refused to transfer house to her. CA: wife is owner of house. Balfour v Balfour does not apply because it only applies if agreement between H & W made when both amicable to each other.
Wakeling v Ripley (1951) 51 SR (NSW) 183
Elderly man invited his sister & her husband to live with him in Australia until his death. He will provide them with income & leave them his property when he dies. Husband gave up his job and they moved to Australia. Dispute arose. Courts: There was something more than a mere family or social arrangement. The consideration was the fact the husband gave up his job to move. 24/8/2020 Jenita Kanapathy 12 Intention to Create Legal Relations Conduct of the parties and the surrounding circumstances may also be taken into consideration to deduce any such intention
Sri Kajang Rock Products Sdn Bhd v Mayban Finance 10
Bhd & Ors [1992] 1 CLJ 204 To constitute a valid contract there must be separate and definite parties thereto; those parties must be in agreement, that is there must be a consensus ad idem; those parties must intend to create legal relations in the sense that the promises of each side are to be enforceable simply because they are contractual promises and as clear and helpful an enunciation of the principles as any which should guide the Court in determining the ever recurring question of whether there has been a contract between the parties. 24/8/2020 Jenita Kanapathy 13 Essential Element Competent Parties
Matt Bowers, 2028 Max Carter, 2015
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Capacity – Minors General rule - contract by minors (i.e. person who has not attained the age of 18 years) is void. s.10(1) All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void. Who is a minor? s 11 Contracts Act 1950 - Every person is competent to contract if he is of age of majority & is of sound mind & is not disqualified from contracting by any law. S 2 Age of Majority Act 1971 - every male and female in Malaysia attaining 18 shall be of the age of majority. 24/8/2020 Jenita Kanapathy 15 Capacity – Minors Exceptions: (i) Minors can get married if its part of their custom or religion – S 4 Age of Majority Act 1971 (ii) Contracts for necessaries with minors are valid - S.69 Contracts Act 1950 - ‘a person who supplies to a minor necessaries suited to his condition in life is entitled to be reimbursed from the minor. ‘necessaries’ - includes goods and services such as food, shelter, clothing, medical services. Test is to look at nature of goods or services supplied, the minor’s actual needs and his station in life.
Govt of Malaysia v Gurcharan Singh (1971)
Gurcharan given scholarship to do teacher’s training in UK. He was to work for government for 5 years on his return. He worked for 3 yrs. Government claimed compensation of RM11,500. Gurcharan claimed he was a minor at time contract entered into and contract is void. Court: contract was for necessaries. He had to pay for them.
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Capacity – Minors (iii) Scholarship agreements s 4 Contracts (Amendment) Act 1976 - scholarship agreements entered into with minors are valid.
(iv) Contracts of insurance – a minor may enter into
contract of insurance, if he is > 10 years but, if he is < 16 years, he must have consent of parent or guardian - s.153(1) Insurance Act 1996
(v) Employment Contracts - any child (below 14) and
any young person (between 14 & 16) is competent to enter into contracts of service - s 13 Children & Young Persons (Employment) Act 1966 24/8/2020 Jenita Kanapathy 17 Capacity – Minors Effect of contracts entered into with minors -
S 66 Contracts Act 1950 - the agreement
is void but any person who received any advantage is bound to return it, or make compensation for it, to person from whom he received it –
Law School Survival Guide (Volume I of II) - Outlines and Case Summaries for Torts, Civil Procedure, Property, Contracts & Sales: Law School Survival Guides
Law School Survival Guide (Volume I of II) - Outlines and Case Summaries for Torts, Civil Procedure, Property, Contracts & Sales: Law School Survival Guides
