CONSENT

Consent of the Parties to

the Contract
The objectives:
To determine a valid consent according to
Contract Act 1950 as one of the essential
elements of contract.
What are the circumstances that would impair

or affect the validity of the consent given?

What constitutes
consent?
Section 10(1) of the Contracts Act

all agreement are contracts if they are made by free

consent of parties competent to contract
Section 13 of CA, elaborates it as 'two or more

person are said to consent when they agree upon

the same thing in the same sense
Hence, consent must be free.

Circumstances that
would affect the Validity
of the Agreement
S 14 of the Contract Act has listed 5

circumstances where consent given is to be said

not be given freely:
(a) Coercion (S 15)
(b) undue influence (S16)
(c) Fraud (S 17)
(d) Misrepresentation (S 18) ; and
(e) Mistake (S 21,22 & 23) .

Circumstances that
would affect the Validity
of the Agreement
In such cases the contract may be set aside by the

court and declared the said contract either void or

voidable.

Void & voidable

Contract
Void contract - section2(g)

means an agreement in which no rights or

obligations are created at all.

Void & voidable

Contract
Voidable contract - section 2(i)

means an agreement which gives the rights to the

parties whether to affirm or reject the contract.

1. Coercion (Voidable)
S. 14(a) of CA:

The consent is not freely given when the making of

the consent is caused by coercion.

1. Coercion (Voidable)
What is coercion?
The practice of compelling a person or

manipulating him to behave in an involuntary way

by use of threats some other form of force.

Coercion?
S. 15 of CA,
The coercion include;
the committing or threatening to commit any act

forbidden by penal code,

i.e. Putting a gun to Abu's head" or putting a "knife under
Abus throat" to compel Abu to transfer his land to
Minah.

What constitute
Coercion?

The unlawful detaining or threatening to detain any

property to the prejudice of any person,

i.e. threat to close down his market stall and to seize his
goods if he refuse to enter into agreement (i.e . Pay
toll).

What constitute
Coercion?

with intention of causing any person to enter into an

agreement.

Valiappa Chettiar [1954]

MLJ 119
Facts: The sultan transfer of property on the basis

of coercion of two Japanese officer during Japanese

occupation in Malaya.
Held: Consent was not given freely and the

transfer of the property is not a valid transfer

because the consent given is caused by coercion.

Chin Nam Bee Development Sdn Bhd v Tai

Kim Choo & 4 Ors. [ 1988] 2 MLJ 117
Respondent purchased houses off to be constructed

by the appellant.
Each of the respondents had signed a sale and
purchase agreement to purchase house at RM
29,500.
Subsequently, the Respondent were forced to pay
additional RM 4,000 under a threat by the
appellant to cancel the respondents booking of their
house.

Chin Nam Bee Development Sdn Bhd v Tai

Kim Choo & 4 Ors. [ 1988] 2 MLJ 117

Court held:
respondents promise to pay extra money
for house-booking is voidable since the
promise made under coercion

EFFECT
i) Rescission (Section 19)-

VIODABLE
ii) Restitution (Section 65)
Iii) Compensation (Section 66)

Maskell v Horner
[1915] 3 KB 106
Lord Reading CJ stated that:
if a person pays money, which he is not bound to pay,
under a compulsion of urgent and pressing necessity or of
seizure, he can recover it as money had and received.

2. Undue Influence
S. 14(b) of CA:

The consent is not freely given when the

making of the consent is caused by undue
influence.

2. Undue Influence
It means that influence alone is not sufficient. It
is necessary to establish such influence is
undue.

Example:
Ali constantly visits his aunt B while she is ill. She

is alone and her son does not visited her. Ali always
urges her to leave her property to him instead of
her son. Failing to do so, he will stop from
visiting her. It finally brings over a lawyer to write
a new will in favor of B.
Isnt it Undue Influence?

What is undue influence?

One person taking advantage of a position of

power or influence over another person.

He uses his power to persuade someone into
signing (or not to sign) a contract.
Party to the contract had lost the ability to exercise
his/her judgment.

What constitute Undue

Influence?
S.16(1) of CA/ Ingredients:i) Domination of the will by one party over other

party; (the other party was in position to dominate

the will of the first party),; and

What constitute Undue

Influence?
S.16(1) of CA/ Ingredients:ii) The use of that position to obtain an unfair
advantage in the contract .
(The person who in the position of domination had
used that position to obtain unfair advantages for
himself and causing loss or injury to other party)

What constitute
Dominant Position
S16(2) of CA:
(a): when party holds a real and apparent

authority over the other

i.e. father authority over a child, senior officer over
junior officer
OR
where he stands in a fiduciary relationship
(amanah)
e.g.: lawyer-client, doctor-patient.

What constitute
Dominant Position
S16(2) of CA:
(b) Where party makes a contract with a person

whose mental capacity is affected by reason of

age
e.g. illness or mental or bodily distress.

Salwath Haneem v Hadjee

Abdullah (1894) SSLR 57
The Plaintiff's husband made a

conveyance of property belonging to

himself and the plaintiff to his brother; B
and C.
The Plaintiff initially agreed to the
conveyance the said property but after
her husbands death, she brought an
action seeking to set aside the agreement
on the ground of Undue Influence.

Salwath Haneem v Hadjee

Abdullah (1894) SSLR 57
Held:
There was a confidential relationship

existed between plaintiff and the B and C.

Therefore, the burden of proof was on B &
C to show the plaintiff was fully
understood to the agreement that made
and the consent was freely be given.
Since both B &C failed to discharge the
burden, the said contract was set aside.

Tara Rajaratnam [1985]

MLJ 105
Facts:
T was the owner of one piece of land. J as a lawyer to T
had used his position to influence T, to transfer his
land to the 3rd party.

Held:
The consent given is not freely given and the transfer
become voidable as it was caused by undue influence.

Inche Noriah v Shaik Allie Bin

Omar [1929] AC 127
A Malay woman who was great age and wholly

illiterate, depends wholly on R (her nephew) to get

supply of food and cloths. All matters are settled by
R, until she has no idea of how much her own
property worth.
It leads to the execution of the deed of gift of
landed property in Singapore in favour of
Respondent.

Inche Noriah v Shaik Allie Bin

Omar [1929] AC 127
Held:

As action that gave to R an estate under a writing

agreement = UI.

Abdullah (1918) 1 FMSLR

348
Facts:

P is a Sikh moneylender sued the

Defendant who was an illiterate Malay
agriculturist upon a pro-note.
The note provided for interest at the rate
of 36%. Defendant has charge his land as
security and the interest charged
exceeded 18%.

Abdullah (1918) 1 FMSLR

348
This circumstance raise in the opinion of

the court that the said transaction was

unconscionable.
The interest rate is too high for a loan
with security. It shows that the contract is
advantageous to one party only.
Thus, UI.

Effects of Undue
Influence
S. 20 of CA, 1950:
A party to the contract may rescind a contract on

the ground that he has entered into that agreement

by influence of the other party
(Voidable /Rescission + Restitution).

Effect of Undue
Influence
However, where the complainant has received any

benefit there under, the court may set aside the

contract and ordering the complainant to restore
benefits he has obtained under the contract.

3. Fraud
Section 14(c) of the Contract Act provides that the

consent given caused by fraud is not a valid

consent (not freely given).

Fraud is : a deception (penipuan) made for personal

gain or to damage another individual.

Certain acts which are committed with

intent to deceive another party or to induce

him to enter into a contract.

Examples:

The seller (Kassim) found the necklace on the

street, he then told the buyer (Sofea) that it
was new and special edition.
Ah Keong sell a radio for RM500 telling
Aminah that it is fully functional, when he
knows that it is actually totally broken

What constitute
Fraud?
Sec 17 of CA; fraud includes:
a) fraud includes the suggestion as to fact which is

not true by one who does not believe it to be true.

(the maker knows the facts are not true/ false).

Kheng Chwee Lian v Wong Tak

Thong [1983]2 MLJ 320
the respondent had been persuaded by the appellant to
enter into second contract on the false
representation that the area of land to be
transferred was the same size as the land which the
respondent had agreed to buy under a first
agreement. In fact, the area even less than that.

Kheng Chwee Lian v Wong Tak

Thong [1983]2 MLJ 320
Court held:
The respondent had been induced by
fraudulent misrepresentation into signing
the second agreement and that
misrepresentation was fraudulent meaning of
Section 17 (a) and (d).

What constitute
Fraud?
b) the active concealment of a fact by one

having knowledge of belief of the fact.

Letchemy Arumugan v Annamalay

[1982] 2 MLJ 198
the defendant had induced the plaintiff an illiterate
Indian woman to enter into sale and purchase
agreement.
The defendant had fraudulently represented to the
plaintiff that the document that she was signed was
for loan she took and it was to free the land from a
charge .

Letchemy Arumugan v Annamalay

[1982] 2 MLJ 198
In fact the document that she signed was included a
sale agreement relating to land, a transfer of the
land and further agreement to purchase three
unapproved sub-lots in her own land.
Held:

The agreement was voidable.

What constitute
Fraud?
c) a promise made without any intention of

performing it

What constitute
Fraud?
For example;
Skim Cepat Kaya and Kad Gores & Menang
The owner of the house (A) promised to the tenant
(B) that he will repair the defects of the house and he
will disburse the said repairs done by the tenant.
However, after the said repairs are completed, the
owner of the house refused to pay that. He actually
from the very beginning does not intend to pay for
that. A = a promise made without an intention to
perform it'

Fraud?
(Explanation of S.17)
Mere silence as to facts likely to affect the

willingness of a person to enter into contract is

not fraud
unless the person has the duty to speak or

his silence is equivalent to speech.

Gen. Rule: silence does not constitute a

fraud .
See Illustration (a) of section 17
See Illustration (d) of section 17

See Illustration (a) of section 17

A sell by auction to B a horse which A knows to be

unsound. A says nothing to B about the horses

unsoundness. This is not fraud in A.
See Illustration (d) of section 17
A and B , being traders enter upon a contract. A

has private information of a change in prices which

would affect Bs willingness to proceed with the
contract. A is not bound to inform B.

However, in certain circumstances, SILENCE

MAY CONSTITUTE A FRAUD.

The law puts a duty upon a person in position of
trust a duty to speak and disclose all relevant
information to the person putting trust in him in
any transaction between them.
See Illustration (b) of section 17
See Illustration (c) of section 17

See Illustration (b) of section 17

B is the daughter and has just come of age. Here,

the relation between parties would make it As duty

to tell B if the horse is unsound. (if A not tellfraud).
See Illustration (c) of section 17
B says to A, If you don not deny it, I shall assume

that the horse is sound. A says nothing. Here, As

silence is equivalent to speech. (If A did not speak
the truth- his silence=fraud).

4. Misrepresentation
According to Section 14(d) of the Contract Act, the

consent is not freely given when it caused by

misrepresentation.

False statement of fact made by one party

before or at the time of making the contract

;
which is addressed to other party ;
and induces the other party to enter into
the contract.

Furthermore, the maker believe in the

truth of the statement

( the maker honestly believed that facts of
such statement is True, in fact the said
statement is False ).

 example
A (seller) is telling the buyer (B) that a

radio is "practically new" so that B buy it, it is

in fact 5 years old and heavily been used. So
in the above example, if the seller didn't know
the radio was actually old, he would only be
liable for an innocent misrepresentation

What constitute
misrepresentation?
S.18 (a) of CA:
Representation of one of the fact which is

not true but he believes it to be true

(Innocent misrepresentation)

What constitute
misrepresentation?

S. 18(b) of CA:
There is a duty imposed to a party to disclose
information to each other but the parties failed
to do it or breach of it Negligent
Misrepresentation.
Basically, it means that you did not directly lie

(without intention to deceive), but you made a

representation about something while having no
reasonable reasons for believing it to be true.

 For example:
A broker tries to sell a house to a buyer, who stresses

his need for peace and quiet. The broker promises that
the house is very quiet. In reality, the house next door
is undergoing a very noisy reconstruction. Although
the broker did not know this, his promise of that house
was quiet was made without he having any reason to
believe that was the case. he simply assumed that the
house is quiet. The broker in this case is making
negligent misrepresentation.

Duty of Misled Party

to Exercise Diligence
The misrepresentation does not

make the contract voidable if

the misled party had the
opportunity to investigate and
ascertain the truth of the
representation.

Caparo Industries v Dickman,

- an auditor (Dickman) who had negligently

approved an overstated account of a

company's profitability.
- A takeover bidder (Caparo) relied on these
statements and pursued its takeover on the
basis that the company's finances were sound.
- Once it had spent its money acquiring the
company's shares and a company control, it
found that the finances were in poorer
shape than it had been led to believe. Caparo
sued the auditor for negligence
misrepresentation.

Caparo Industries v Dickman,

The House of Lords however held:
there was no duty of care between an
auditor and a third party pursuing a
takeover bid.
The auditor had done the audit for the
company.
The bidder could have paid for and done
its own audit.

Misrepresentation
(Summary)
There must be false representation
The Misrepresentation must be one fact (mere

expression of opinion is not a representation of

fact).
The Misrepresentation must be made by a
party to the contract
The party was acted or induce the contract
by relying on that misrepresentation
The P must have suffered damage as a result
of misrepresentation

Opinion is not
Misrepresentation
Bisset v Wilkinson,
contract of sale a poultry farm is valid even though

the seller made a statement that the farm can

breed 2000 sheep is not true.
It is because it is an opinion. He never breeds a
sheep at the farm before.
Thus, the contract is valid.

Silence is not a
misrepresentation
Generally, a party to a

contract is not bound to

disclose materials facts to
the other party.

Silence is not a
misrepresentation
Keats v Lord Cardogan,
D lets a house that was in bad condition

to P.
P however, never ask any information
from D with regard to the house.
The act of D is not misrepresentation P
should caution and investigate.

Effect or Remedies of
Misrep. & fraud
Section 19 (1) of Contract Act
1950.- voidable/ Rescission (S. 34
of the Specific Relief Act 1950.
Section 65- Restitution / restore
the benefit
Section 66-compensation/ recover
any benefit

5. Mistake
When one party to a contract enters into

it under some misunderstanding.

The contract entered into is invalid/ void
as if they know the true facts they would
never have entered into the contract.

1) Common Mistake - Mistake of

facts by both parties = VOID
Section 21 of CA-

Elements:
i) both parties to an agreement under mistake
(mutual).
ii) mistake relating to a matter of fact
essential to the agreement.
Explanation of S.21
An erroneous opinion as to the subject
matter of the agreement is not amount
to mistake as to a matter of fact.

Illustrations:
A) Mistake as to existence (kewujudan) of subject matter

or where both parties were unaware that the

subject matter of the contract of the contract had
already perished at the time of contract was
entered into
Illustration (a) of Section 21
A agrees to sell B a specific cargo of goods supposed to
be on its way from England to Kelang. Before the day of
bargain, the ship that carry the same had been cast
away and the goods lost. Neither party aware of the
facts. The agreement is VOID.

B) Mistake as to identity of subject matter

Raffles v Wichelhaus
Facts:
Raffles agreed to sell cotton to Wichelhaus. The agreement provided
that the cotton was to arrive England from Bombay. However, there
were two different ships regularly sailing from Bombay to England,
one leaving in October and the other in December.
Raffles shipped the cotton on the December ship, and defendant
Wichelhaus refused to accept the cotton. Raffles sued on the alleged
contract. Wichelhaus argued that it understood the shipment
would be shipped on the October ship.

B) Mistake as to identity of subject matter

Raffles v Wichelhaus
Held:
The court concluded there was no binding contract.

Since the parties meant different ships and there was a

mistake as to identity of the subject matter by both
Raffles and Wichelhaus.

C) Mistake as the possibility of

performing the contract

Illustration (c) of Section 21

C)

Mistake as the possibility of

performing the contract
Sheikh Brothers v Ochsner

The appellant granted to the respondent, license

and authority to cut and manufacture all sisal
growing on 5,000 acres of land in Kenya, and
to deliver to the appellant 50 tons per month
of sisal fiber for sale. Respondent then was
unable to do so as the leaf potential of the
sisal was not sufficient to produce that much.
Held: it was mistake as to the possibility of
performing the contract. The said agreement
was void.

2) Mistake of Facts by 1 party

(UNILATERAL MISTAKE)
Section 23 of CA:
The contract is not voidable or still valid. But

the party making the mistake would be

entitled to an order of rescission.

 1) Mistake as to identity of party to the contract

E.g: A wants to
contracted with C.

contract

with

but

instead

CUNDY V LINDSAY
Blenkarn offered to buy goods from the Plaintiff by
pretending to be Belkiron & Co. a reputable
business on the same street. He signed the letter in
such a way that it could be read as Belkiron. Then,
the Pliantiff dispatched the goods and sold to the
defendant who took the property in good faith. The
plaintiff sued defendant because of that mistake.
Held: the offer by the plaintiff was only to Belkiron
& Co, so it could not be accepted by Blenkern.
Hence, there is no contract between the plaintiff and
Blenkern.

2) Mistake as to quality of subject

matter
E.g:

A agrees to buy from B a picture that A

believe to be genuine Lats drawing but
which in fact was painted by Leman. B in
this case intends to sell a picture by Leman
but A believes that the sale is of a picture
painted by Lat.
What is the effect of the said contract?
A = mistake as to quality of subject
matter= not voidable = right to rescission.

3. Mistake by Law
Section 22 of CA:
A contract is valid in the event of mistake by law.

See ILLUSTRATION of section 22 of CA.

A and B make a contract grounded on the

erroneous belief that a particular debt is barred
by limitation ; the contract is not voidable
i.E . Debt is already barred by Limitation Law, but
still you claim for that.

Note: This Notes and Copyright therein is the property of Madam

Norazla Abdul Wahab and is prepared for the benefit of her students
enrolled in the MGM 3351 course for their individual study. Any other
use or reproduction by any person WITHOUT CONSENT IS PROHIBITED.
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