Faculty of Architecture, Planning and Surveying
Shah Alam




Stated briefly the essential elements of a valid contract.
Contract is the foundation or base of all commercial transactions. A contract is a
bargain, a deal from which both parties expect to benefit. In world of business, in which
is built upon agreement making and to know that it will be carried out or that some
remedy will be obtained instead. Distinguishing those agreement which are contract is
essential and legally enforce from those which are not.

clause 2 (a). Promises which form the consideration or part of the consideration for each other are called reciprocal promises. and if so. The person making the proposal is called the "promisor" and the person accepting the proposal is called the "promisee". something.Definition The word ‘contract’ may be defined as ‘an agreement enforceable by the law’. Every promise and every set of promises. a contract comes into existence when the following requirements are met: 1. when it was formed and what terms it contains. When the person to whom the proposal is made signifies his assent thereto. A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable. The parties intend their agreement to be legally enforceable. but not at the option of the other or others. is a voidable contract. The parties have reached an agreement 2. becomes a promise. and 10. In many cases.. In order for an agreement to become a contract. when accepted.(b). with a view to obtaining the assent of that other to the act or abstinence. 8. Intention to create legal relations 4.(c). 7. Proposal(offer) and acceptance 2.(j). is an agreement. he is said to make a proposal.. Essentials Elements of a Valid Contract All contracts are agreement. Certainty . but not all agreement is contract. or promises to do or to abstain from doing. such act or abstinence or promise is called a consideration for the promise. When. there are 8 elements to be fulfilled: 1. the promisee or any other person has done or abstained from doing. 9. When one person signifies to another his willingness to do or to abstain from doing anything. the proposal is said to be accepted: a proposal. Consideration – lawful consideration with a lawful object 3. An agreement enforceable by law is a contract. forming the consideration for each other. 2. 6. 5. or does or abstains from doing. it is important to determine whether or not there is a contract. 4. at the desire of the promisor. Example. An agreement not enforceable by law is said to be void. a contract is an agreement which is legally binding between parties. the interpretation of the following words and expression are used in the following senses. As in Malaysia Contract Act 1950. 1. 3. An agreement which is enforceable by law at the option of one or more of the parties thereto. In principle.

the proposal is said to be accepted. If posted. Legality of the objects 8. The first step towards creating a contract is that one person shall signify or make a proposal or offer to the other. what agreement was reach. Legal relationship 6. Can be individual or all people. The acceptance ● ● ● ● ● Must be communicated. When there is a proposal and acceptance. there is an agreement made between these parties. the law uses two-stage analysis. On other occasions. Required formalities. when and. if by phone. fax. or email. Must be of the offer made. Must be definition/clear statement. and acceptance. proposal(offer). Can be revoked at any time prior to acceptance. When the person to whom the proposal is made signifies his assent there of the proposal is said to be accepted. A proposal when accepted becomes a promise. Must be reach to other person. A proposal when accepted becomes a promise. occurs on the date posted. The offer ● ● ● ● ● ● Must be communicated. 1. PROPOSAL AND ACCEPTANCE Where the agreement is reduced to writing there is usually little doubt about the existence and content of the agreement. if so. In order to investigate such a situation. Proposal is made when one person signifies to another his willingness to do or to abstain from doing anything. Unconditional and absolute The process made with reasonable time. there may be doubt about whether.5. When the person to whom the proposal is made signifies his assent thereto. it occurs when . otherwise it could be a counter offer. Free consent 7. with a view to obtaining the assent of that other to such act or abstinence. with a view to obtaining the acceptance of that another person to whom the offer is made. Must be distinguished from an invitation to treat which is where a party communicates that it is prepared to enter negotiations with a view to forming a contract.

Particular person 2. insist that his proposal shall be accepted in the prescribed manner. X and Clarke were later arrested and charged with the murders. Held: his claim failed because although he has seen the offer. Ali : Promisee. This acceptance may be expressed in some usual and reasonable manner. within a reasonable time after the acceptance is communicated to him. the proposer may. Proposal can be made either to: 1. If a party accepting a proposal is not aware about the proposal. Clarke later claimed for the reward. 227. Communication of Acceptance Acceptance of a proposal must be communicated to the proposer for there to be a binding contract between the parties. Case Example: R v Clarke (1927) 40 C.L. Communication of proposal. The person accepted the proposal is known as “promisee”. The proposal has now become a promise. Example: You propose to give Ali a bicycle and Ali accepted your proposal. Clarke was later found not guilty. then there is no contract. he accept the acceptance. and not otherwise. You : Promisor. it was no present to his mind when he gave the information to the police. An Australia government offered a reward for information in regards of a murder of 2 police officers. . General public A proposal is said to have been communicated only if the party who accepts it knew about the proposal. Clarke later gave some information to the police which resulted in the arrest of another person Y. and the acceptance is not made in such of manner.received. but if he fail to do so. unless the proposal prescribes a manner in which it is to be accepted. The person who made the proposal is known as “Promisor”.R.

This is because when there is a proposal and the proposal is accepted. The Defendant made an advertisement in the newspaper that they would offer a sum of money to anyone who would still suffer from influenza (flu) after using their product. according to the instructions. the there is an agreement. Acceptance through Post It is communicated when it comes to actual knowledge of the proposer. Held: The Plaintiff had accepted the offer the company has made to the world at large and therefore is entitled to the money. Miles Far East Corporation (1955) 2 QB 327. On the other hand when there is an invitation to treat. The person who accepts the invitation to treat is actually the person making the proposal. it may not always that it is a proposal. This may happen when the offer is actually inviting you to make the proposal. When this situation happens. Carbolic Smoke Bail Co. it is not yet a proposal. the offer is kwon as an invitation to treat. when it comes to the knowledge of the proposer. and that is the place where the contract is made.Case Example: Carbill v. Invitation to treat must be distinguished from proposal. it constitutes an agreement. Defendant argued that there was no valid contract because the Plaintiff did not communicate his acceptance to them. Case Example: Entores Ltd v. as against the proposer. As against the acceptor. and 2. The Plaintiff used the product according to the instructions. so as to be out of the power of the acceptor. (1893) 1 OB 256. “When a contract is made by post. accept the proposal. According to the sub-section: The communication of an acceptance is complete:1. This is the legal position under English Law and it appears to the similar under local law.” Invitation to Treat Sometimes when a person offers something to you. When the person who is making the invitation to treat. when it is put in a course of transmission to him. The Plaintiff asked for the sum of money that the Defendant has promised but the Defendant refused to pay. but still became ill. Case Example: . it is clear law throughout the common law countries that acceptance in complete as soon as the letter is put into the post box.

Revocation must take place before acceptance. In this situation. They are: 1. since there was a registered pharmacist at the cashier. lapse of reasonable time. but not afterwards. Later. and put it in a basket. something. The court held that when the goods are displayed. The issue in this case was whether a sale had occurred when the shopper put the displayed item into his basket. Boot Cash Chemist Ltd (1953) 1 QB 401. Acceptance of this sale is only made when the cashier receives the money from the shopper. When the shopper took it off the display." Example: You promise to give Ahmad. absence of consideration will not make the agreement void. . 2. or does or abstains from doing. 1. or promises to do or to abstain from doing. In this case.Pharmaceutical Society of Great Britain v. Revocation by lapse of time or if there is no time provided. 3. Proposal may be revoked where the acceptor fails to fulfill a condition precedent to acceptance. Ahmad cannot take any action against you because there was no consideration from Ahmad. you change your mind and refused to give your car to Ahmad. Communication of notice of revocation by the proposer to the other party. the defendant was not liable. that is a proposal. that was merely an invitation to treat. The defendants were charge under the Pharmacy and Poisons Act 1933 (U. Revocation of Proposal An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor. 2. Ahmad agrees to have the car. CONSIDERATION When. 4. your friend a car. at the desire of the promisor. There are 4 exceptions to this general rule. but not afterwards. under the Act. Death or mental disorder of the proposer.K). it is provide that it is unlawful to sell certain poison unless such sale was supervised by a registered pharmacist. There are 4 ways for revocation. An agreement that is made out of Love and Affection. This is because. the promisee or any other person has done or abstained from doing. Revocation of Offer A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer. such act or abstinence or promise is called a consideration of the promise. Under these exceptions.

In order for an agreement to be valid under this exception. Agreement to compensate for Past Voluntary Act. In the event that the promisor did not do what he has promised. Example: You promise to give your brother a car. the promisor promised to give the promisee something because the promisee has done something voluntarily before the promise was made. although Ali did not give any consideration AFTER you have made the promise. your mother. the promisee can sue him for breach of promise. Your brother accepted the promise but did not promise to give you anything in return. son. An Agreement to Compensate for a Past Voluntary Act s. because the promise that you gave is valid. there are 3 conditions to fulfill: ● ● The promisee has voluntarily done an act The act that was done by the promisee was actually an act that the promisor .. father. The agreement must be made in writing 2. Example: Ali your neighbor had watered your garden while you were on holiday in Bahamas. sister (blood relationship). 4. 26(b) Under this exception. Agreement on Account of Natural Love and Affection Under this exception. it must be made according to this conditions: 1. When this happens. In the event that you breach the promise. i. members of your immediate family. The agreement must be registered 3. Agreement to Compensate an Act the Promisor was legally Compelled to do In order to use this exception. It must be made because of natural love and affection between parties attending in near relation to each other. he can bring an action against you. he can bring an action against you for breach of promise.e. In the event that you have failed to give the crystal vase to him. 3. Example. the promise made by the promisor is valid although there was no consideration on the promise’s part. Agreement to compensate for an Act the promisor was Legally Compelled To Do. When you returned.2. you promised Ali to give him a crystal vase for his trouble. Agreement to pay a Statute Barred Debt. an agreement is valid although there is no consideration being exchange between the parties of the contract.

there must be intention between the parties that they want to enter into a legal relationship between n them.Barred Debt A debt which cannot be recovered by the creditor through Legal action because there is a lapse of time which has been determined by the law For contract matters. for what the promisee had done. either wholly or in part of the debt. unless proven otherwise. arguing that the promise was unenforceable because of the inadequacy of consideration. A Statute . The Respondent later refused to honour the promise. after the lapse of 6 years. The promise is made in writing and signed by the person to be charged or his authorized agent acting on his behalf. Domestic/ social/ Family Agreements. a creditor can do so if it falls under these 2 conditions: 1. There are two types of relationship: 1.26(c) although a debt cannot be recovered if it is statute barred. An Agreement to Pat. Business/ Commercial Agreements Under the agreement made in Business transaction. There is a promise made by the debtor to pay the statute barred debt. For agreement to be a contract. FC held: The consideration was adequate because the respondent has agreed to transfer the land to the appellant for $500. There was a valid contract 3. Beh 1 HOCK (1964) MLJ 383. Yeo Ah Tee (1983) 2 MLT 39. INTENTION TO CREATE LEGAL RELATION An agreement does not always mean contract. Case: Lim Keng Siong 8 Anor v.himself was legally bound to do: and ● The agreement must be to compensate the promisee either wholly or partly. 2. Case Example: Case: Phang Swee Kim v. according to S. Nevertheless. it is always presumed that the parties have the intention to create legal relations. Business/ Commercial Agreements 2. -This is provided by the Limitation Ordinance 1953. The Appellant agreed to buy a land for from the respondent for the price of $500. although the land was worth much more. you can take matter to the court within 6 years from the time the causes of action arise. .

The court said that it was the intention of the parties to come to a definite and complete agreement on the subject of the sale and the mere fad that a written contract had to be drawn up and executed by them did not necessarily mean that there was not legally binding and enforceable agreement. the meaning of which is not certain. Furthermore.' The nature of A's trade affords an indication of the meaning of the words and A has entered into a contract for the sale of one hundred tons of coconut oil.In this case the respondent claimed that there was a contract entered into between him and the appellant. There is no uncertainty here to make the agreement. The agreement is void for uncertainty (b) A agrees to sell to B one hundred tons of oil of a specified description. 5. (d) A agrees to sell B “all the grain in my granary at ipoh”. This is because parties have no intention to create legal relation. There is nothing to show which of the two prices was to be given The agreement is void. (e) A agrees to sell to B `one thousand gantang of rice at a price to be fixed by C" As the price is capable of being made certain. agrees to sell to B 'one hundred tons of oil. or capable of being made certain. there is no uncertainty here to make the agreement void. (a) A agrees to sell to B " a hundred tons of oil. The appellant on the other hand stated that the sale was subject to contract. 4. are void. known as an article of commerce. This is based on the fad that there are few letters that have been exchanged between appellant and the defendant. LEGAL CAPACITY All agreements are contract 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 void.' Domestic Agreement Domestic agreement normally does not constitute a legally binding agreement. The Federal Court held that there is a contract made between the two and ordered the agreement of sate be specifically performed. CERTAINTY Agreements. the appellant had informed the respondent's solicitor that they did not wish to proceed with the sale. There is no uncertainty here to make the agreement void. (f) A agrees to sell to B `my white horse for ringgit five hundred or ringgit one thousand. There is nothing whatever to show what kind of oil was intended. (c) A who is a dealer in coconut oil only.

he would be bound by the contract the he made." Scholarship Notwithstanding anything to the contrary contained in the principal act. Although only those who are 18 years and above can enter into a contract. This is provided by the Age of Majority Act 1971. no scholarship agreement shall be invalidated on the ground that. The age of majority is 18 years old. The real foundation is an obligation which the law imposes on the infant to make a fair payment in respect of needs satisfied. (a) the scholar entering into such agreement is not of the age of majority (b) such agreement is contrary to any provisions of any law in force relating to money lenders. and is not disqualified from contracting by any law to which he is subject. there are two situations when minors are bound by the contract they have entered into. those below 18 are known as minor. "A infant. Case: Government of Malaysia . What are necessaries? Necessaries include. is incapable of making a contract of purchase in the strict sense of the words. incapable of entering into a contract. but if a man satisfies the needs of the infant or lunatic by supplying to him necessaries. the person who has furnished such supplies is entitled to be reimbursed from the property of such incapable person. food. medical services. like a lunatic.Who are competent to contract? Every person is competent to contract who is of the age of majority according to the law to which he is subject and who is of sound mind. or anyone whom he is legally bound to support. shelter. If a person.Gurcharan Singh (1971) 1 MLJ 211. is supplied by another person with necessaries suited to his condition in life. or . These are: ● ● Necessaries scholarship Necessaries If a minor enters into a contract of necessaries. education. clothing. the law will imply an obligation to repay him for the services so rendered and will enforce that obligation against the estate of the infant or lunatic. The consequence in that the basis of the action is hardly contract.

the consideration or object of an agreement is said to be unlawful. If the object is not permitted.) 6. Every agreement of which the object or consideration is unlawful is void.(c) such agreement lacks consideration. 9. coercion. undue influence. it is said to be unlawful. The Commercial Law of Malaysia. object is void. Consent is said to be free. for a lawful consideration and with a lawful object. LEGALITY OF THE OBJECTS The object or consideration of a contract must be that which is permitted by the law. award. A contract which contain an unlawful. and are not hereby expressly declared to be void. fraud. What is scholarship agreement? Any contract or agreement between the appropriate authority and any person. 8. unless a) it is forbidden by a law b) it is of such a nature. REQUIRED FORMALITIES . loan. 8. with respect to any scholarship. that. if permitted. The consideration or object of an agreement in lawful. bursary. sponsorship or appointment to a course of study.' (Beatrix Vohrah and Wu Min Ann. 7. In each of the above cases. it would defeat any law c) it is fraudulent d) it involves or implies injury to the person or property of another or e) the court regards it as immoral. or opposed to public policy. 6. mistake. FREE CONSENT All agreement are contract if they are made by the free consent of parties competent to contract. the provision of leave with or without pay or 'any other facility for the purpose of education or learning. misrepresentation. when it is not caused by: 5. 7.

. “Introduction To Commercial Law”.A contract can be made either: ● ● ● Orally Writing Both orally and in writing. O’Reilly & Thomas Telford Limited 1999. Example Example would be under the Hire-Purchase Act 1967 which requires the purchase agreement to be in writing. certain law would require that the agreement be made in writing. Malaysia Law Journal. International Law Book Services. “ Civil Engineering Construction Contract” . Book Craft (Bath) Ltd. “ The Malaysian Standard Form of The Building Contract”. Sometimes. REFERENCES Book sources: 1. 4. Laws Of Malaysia. S. M. Tunku Intan Mainura Tunku Makmar. 3. Contracts Act 1950 (Act 136). EDC UITM. Vincent Powell. If this is the provision. If it is not in writing the agreement shall not be enforceable by the owner of the good. 2. Contracts (Amendment) Act 1976 (A 329) & Government Contracts Act 1949 (Act 120). therefore the agreement has to be in writing so that it would be a valid contract.