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Statutory protection of Malaysian consumers

against unfair contract terms: Has enough been
done?

Article in Common Law World Review September 2015

DOI: 10.1177/1473779515600142

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Article

Common Law World Review

2015, Vol. 44(3) 203221
Statutory protection The Author(s) 2015
Reprints and permission:
of Malaysian consumers sagepub.co.uk/journalsPermissions.nav
DOI: 10.1177/1473779515600142

against unfair contract clw.sagepub.com

terms: Has enough

been done?

Adnan Trakic

Abstract
The Malaysian Consumer Protection Act 1999 (CPA) was amended in 2010 by the Consumer
Protection (Amendment) Act 2010 which inserted into the Act Part IIIA entitled Unfair
Contract Terms. This article argues that the addition of Part IIIA is a welcome move towards
greater consumer protection in Malaysia, but that the situation on the ground is still far from
perfect. Some of the provisions in the CPA seem to be a source of many uncertainties. This
article seeks to identify some of the most troubling inconsistencies and loopholes, and it
attempts to offer a measured interpretation of those provisions from different angles.

Keywords
Unfair contract terms, consumers, Malaysia

Introduction
The terms which give an unfair advantage to one contracting party at the expense of the other
may be called unfair contract terms.1 They are frequently found in standard form contracts. A
standard form contract, also known as a contract of adhesion, a boilerplate contract or a
take it or leave it contract, is a contract which is normally prepared by one of the contracting
parties with little or no prior negotiation with the other party to the contract. It operates on a
take it or leave it basis.2 On the one hand, these contracts may have an efficiency role if they
enable the transaction costs to be reduced to a minimum. The need for the buyer and seller to

Department of Business Law and Taxation, Monash University Malaysia, Selangor, Malaysia

Corresponding author:
Adnan Trakic, Department of Business Law and Taxation, Monash University Malaysia, Jalan Lagoon Selatan, Bandar
Sunway, Selangor, Subang Jaya 47500, Malaysia.
Email: adnan.trakic@monash.edu

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204 Common Law World Review 44(3)

negotiate all the details of the contract every time a sale transaction takes place is eliminated.
In addition, transparency is good for better understanding and for market discipline, but
transparency in itself is not enough to legitimate contract terms which are unfair.3 In some
jurisdictions, a contract term may be unfair if the term is not reasonably necessary to protect
the legitimate interests of the party who would be advantaged by the term,4 and it would
cause financial or non-financial detriment to a party if the term were to be applied or
relied on.5
On the other hand, standard form contracts may also easily disadvantage the consumer as the
consumer may be placed in a position of unequal bargaining power in comparison with the
other party to the contract, often a commercial entity. Further, unfair terms in consumer
contracts can affect competition by making contracts hard to understand. They can limit a
consumers choices. They can transfer risk to the consumer without the consumer being aware
of the transfer.
The purpose of the unfair contract legislation is to strengthen the rights of consumers to
challenge unfair contract terms in standard form contracts in areas like airline tickets, banking
and financial services, couriers, mobile phone contracts, pay TV, rental cars, reward programs,
residential tenancies and utilities. These include unfair terms like high exit penalty and default
fees.
Consumers are often given standardized drafted agreements by the other party to the con-
tract which have been prepared in ways to fully protect the other party against the possible
claims by the consumer. Although theoretically it can be said that consumers have the freedom
to contract, in reality they may have no choice but to sign the agreement if they wish to enter the
contract to obtain the goods or services offered by the commercial entity. In most cases, if the
consumer disagrees with the content of the standard form contract, the supplier will decline to
proceed with a transaction. If the consumer decides to approach another supplier, the situation
may be the same, if not worse. Unfair contract terms are not limited only to standard form
contracts as they may also be found in negotiated contracts.
Malaysia, unfortunately, was one of those rare common law countries which did not have
legislation regulating unfair contract terms. As a result, Malaysian consumers were not ade-
quately protected by the law and in the absence of proper legislation the courts could not do
much either. As we discuss below, there have been some daring Malaysian judges who did
decide to remedy the significant imbalances created by unfair contract terms by applying
English case law, most notably on the evolving doctrine of inequality of bargaining power.
However, the application of this doctrine has triggered judicial discussion as to whether it could
be applied as part of Malaysian law.
Some argued that Malaysian legislators did not see the urgency of enacting laws which most
neighbouring Commonwealth countries already had, despite constant reminders by scholars
and practitioners that such laws were urgently needed. This became obvious when the Con-
sumer Protection Act 1999 (CPA) (Malaysia) was passed without any provision for the effect
of unfair contract terms. The legislators rectified this in 2010 when they passed the Consumer
Protection (Amendment) Act 2010 (Malaysia), which added a new Part IIIA entitled Unfair
Contract Terms. Arguably, this is one of the most significant amendments undertaken for the
protection of consumers in Malaysia, but the amendments must be understood and applied in
the wider framework of the CPA, which seriously hinders and limits their application.6 The
provisions contained in Part IIIA together with the actual limitations of their application
are explained in the later part of the article.

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Unfair contract terms in Malaysia

In Malaysia, until very recently, there was no specific legislation which regulated unfair
contract terms. The Contracts Act 1950 (Malaysia), which governs contracts in Malaysia, is
silent on unfair contract terms. There was some advance when the Consumer Protection Act
1999 (CPA) was passed, but it too had many loopholes and failed to address the matter ade-
quately.7 It did not contain any provision on unfair terms in consumer contracts.
There was some dissatisfaction with the CPA and calls that Malaysian legislators enact a
new law based on the UK Unfair Contracts Terms Act 1977 (UCTA), which would provide an
adequate protection against the unfair contract terms in all contracts. As an alternative, there
were proposals that at least the provisions of the UCTA should be included into the CPA to
protect consumers against unfair terms in the consumer contracts. Both demands were
unsuccessful, and it was only in 2010 that the CPA was amended by the Consumer Protection
(Amendment) Act 2010 (Malaysia), which introduced provisions on unfair contract terms. The
Amendment Act 2010 was gazetted on 1 February 2011.
Prior to that, the Malaysian judiciary, with no legislation on unfair contract terms to refer to,
found a solution on unfair contracts in English common law and equity in the doctrine of
inequality of bargaining power, a solution which was not uncontested. Therefore, before
proceeding to the 2010 amendments in CPA, the article includes some comments on the
doctrine of inequality of bargaining power and the Malaysian law prior to the Amendment Act
in 2010.

The doctrine of inequality of bargaining power and its application in Malaysia prior to
the Consumer Protection (Amendment) Act 2010
There are some cases in the UK where the courts bravely attempted to remedy the injustice
caused by unfair contract terms by applying the doctrine of inequality of bargaining power. For
example, Lord Denning MR in Lloyds Bank v Bundy8 stated that English law should assist the
party whose bargaining power is grossly impaired. He argued that the court should set aside the
contract in which the stronger party has taken undue advantage of the weaker in the context of
inequality of bargaining power.
However, Lord Dennings attempt to apply the doctrine of inequality of bargaining power
was short-lived in the UK, as it was rejected by the House of Lords in Westminster Bank Plc v
Morgan.9 The House of Lords contended that the majority of the Court of Appeal in Lloyds
Bank v Bundy did not base their decisions on Lord Dennings view but decided the case based
on the orthodox interpretation of the doctrine by Court of Appeal in Allcard v Skinner.10
Although Lord Dennings liberal interpretation of the doctrine was not adopted by the House
of Lords in the UK, the courts in Malaysia have followed it in their quest to help parties affected
by an unfair contract.
In Saad Bin Marwi v Chan Hwan Hua,11 the Malaysian Court of Appeal, after referring to
judgments from Australia,12 Canada,13 England,14 India15 and New Zealand,16 concluded that
the Malaysian courts should recognize this doctrine as part of Malaysian law in accordance
with section 3(1)(a) of the Civil Law Act 1956.17 In this case Mr Saad, a farmer who made his
living partially by harvesting coconuts, rented land from the respondent, a businessman. Saad
had also owned land which was valued at approximately RM2.4 million (about US$675,000).
The respondent managed to convince Saad to sell the land to him for RM42,000 (about
US$11,800). He even got Saad to sign the written agreement to effect the sale. The agreement

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206 Common Law World Review 44(3)

signed was in English. Saad did not understand English, and he was not represented by a
lawyer. Furthermore, the agreement stated that the respondent was obliged to pay the deposit of
RM4,200 (US$1,180) but that deposit was not paid. In fact, the deposit was to be offset by way
of rental which was payable by Saad to the respondent for the rented land on which coconuts
were harvested. According to the agreement, Saad was obliged to obtain indefeasible title
within 12 months of the agreement and a court order establishing his ownership, which was
almost impossible for him to do. Later, Saad decided to terminate the agreement with the
respondent.
In an action before the High Court, Saad argued, inter alia, that the agreement was vitiated
by undue influence. The trial judge rejected his argument of undue influence and ordered him
to pay damages to the respondent of RM1.2 million. Saad appealed to the Court of Appeal on
the basis of unfair advantage, which prompted the court to look into the applicability and
scope of the doctrine of inequality of bargaining power under Malaysian law.
The Court of Appeal judge, Gopal Sri Ram JCA (as he then was), discussed the doctrine of
inequality of bargaining power quite extensively in the judgment by referring to the above-
mentioned jurisdictions. He posed two questions: the first question was in regard to the
application of the doctrine in Malaysia in the absence of any specific legislation, while the
second question was in relation to the exact scope and nature of the doctrine. Answering the
first question, the learned judge stated:

In my judgment, the time has arrived when we should recognise the wider doctrine of inequality of
bargaining power. And we have a fairly wide choice on the route that we may take in our attempt to
crystallise the law upon the subject . . . We may adopt the English doctrine of unconscionability in
toto. That is a choice that is available to us because of s. 3(1)(a) of the Civil Law Act 1956.18

On the scope and the nature of the doctrinei.e. whether it should be interpreted literally (as
Lord Dennings approach in Lloyds Bank v Bundy) or whether it should be treated in a more
restrictive and orthodox way (as it has been done by the Court of Appeal in Allcard v Skinner
and the House of Lords in Westminster Bank Plc v Morgan)the learned judge stated:

What is therefore called for is a fairly flexible approach aimed at doing justice according to the
particular facts of a case. Historically, that is what equity is all about. That brings me to the third
alternative. This is to adopt the English doctrine (of unconscionability) but apply it in a broad and
liberal way as in Canada.19

After an extensive elaboration of the doctrine, the Court of Appeal allowed the appeal by Saad
and held that the agreement concluded between the parties was an unconscionable bargain
which resulted in the agreement being unenforceable.
Saad is perhaps the first Malaysian case in which doctrine of inequality of bargaining power
was applied without reference to the well-established doctrine of undue influence. In the earlier
Federal Court decision of Datuk Joginder Singh v Tara Rajaratnam,20 the word uncon-
scionable was used, but only in the context of the doctrine of undue influence. The use of
undue influence, in contrast with the doctrine of inequality of bargaining power, has legislative
support in section 14 of the Contracts Act 1950.21
On the one hand, Saad was clearly seen by many as an attempt to fill the loophole in
Malaysian law when it came to unfair contract terms. The notion to do fairness amongst the
parties who are in unequal bargaining positions seems reasonable. On the other hand, arbitrary

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Trakic 207

decisions by judges to apply the doctrine when they feel it appropriate may affect the certainty
of the law.22 The question of how to balance these two conflicting interests in the law of
contract was highlighted by the Court of Appeal in American International Assurance Co Ltd. v
Koh Yen Bee,23 which was decided one year after Saad. In this case, the appellant was an
insurance company and the respondent was the appellants insurance agent. The respondents
agency was terminated by the appellant and, as a result, the respondent brought an action before
the court claiming that the termination of the agency was, inter alia, unfair and unjust. The
learned trial judge entered judgment for the respondent. However, the appellant appealed to the
Court of Appeal. The respondent relied on Saad, where the doctrine of inequality of bargaining
power was invoked and recognized as part of Malaysian law.
However, the Court of Appeal rejected the respondents argument and allowed the appeal.
The court distinguished this case from Saad and agreed that the decision to allow the appeal in
Saad was correct and fair based on the facts of the case. However, at the same time, the Court of
Appeal expressed some doubts as to whether the doctrine of inequality of bargaining power
was part of Malaysian law. The learned Court of Appeal judge, Abdul Hamid Mohamad JCA
(as he then was) observed the following:

We do not wish to enter into an argument whether the doctrine of inequality of bargaining power or
unconscionable contract may be imported to be part of our law. However, we must say that we have
some doubts about it for the following reasons. First is the specific provision of s. 14 of the Con-
tracts Act 1950 which only recognises coercion, undue influence, fraud, misrepresentation and
mistake as factors that affect free consent. Secondly, the restrictive wording of s. 3(1) of the Civil
Law Act 1956, in particular, the opening words of that subsection, the cut-off date and the proviso
thereto. Thirdly, the fact that the court by introducing such principles is in effect legislating on
substantive law with retrospective effect. Fourthly, the uncertainty of the law that it may cause.24

Therefore, here there are two Court of Appeal judgments, one pointing out that the doctrine of
inequality of bargaining power should be applied as part of Malaysian law (Saad) and the other
expressing some serious doubts as to whether the doctrine could be regarded as part of Malay-
sian law due to a number of legal constraints. Both cases have some very strong and supportive
arguments in favour of their views. It remains to be seen if the issue will be raised again before
the Federal Court to adjudicate the matter and make a final decision. However, until then, the
Saad decision, accepting the doctrine of inequality of bargaining power as part of Malaysian
law, remains authoritative.
In fact, the High Court in Standard Chartered Bank Malaysia Bhd v Foreswood Industries
Sdn Bhd25 also referred to the decision of the Court of Appeal in Saad. In this case, the
defendant alleged that the bank (the plaintiff) had unconscientiously taken advantage of its
position during the Asian Financial Crisis by substantially increasing the interest rate.
Furthermore, the defendant argued that the banks right to reserve for itself the right to review
the margin of interest rates was harsh and onerous. The High Court applied the Court of Appeal
decision in Saad to the facts of the case and held that the defendant was not in a position of an
unequal bargaining power as he could still go to another bank. The learned High Court judge,
Clement Skinner J, stated:

With regard to the first defendants assertion that it had no choice but to agree with the plaintiffs
right to increase the interest margin or spread, I again find this to be but another bare assertion on
the part of the first defendant because it has not made any attempt to show the court why it could

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208 Common Law World Review 44(3)

not, if it regarded such a term as harsh and onerous, refuse to accept such a term and instead go
elsewhere to obtain the banking facilities that it required. In my view it is not unusual for financial
institutions, when affording banking facilities to their customers, to reserve for themselves the right
to review the margin of interest rates. I do not think that in reserving to themselves this right they
can be accused of sharp practice or of victimising a customer by using their unequal bargaining
power to overmatch or overreach a customer into accepting such a term for the simple reason that
the customer can always go elsewhere to seek his banking facilities if he thinks the terms of bor-
rowing are too harsh or onerous. The position would be quite different of course if the customer can
point to some circumstance that prevented him from going elsewhere, such as, for example, that he
was pressurised into not doing so by the financial institution for then it is that element which makes
the transaction unconscionable as it can be said that the stronger party has acted oppressively or
unconscientiously.

With respect, the argument and reasoning by the learned judge that the defendant was not in an
unequal bargaining position is untenable. The learned judge himself admitted that it is not
unusual for financial institutions, when affording banking facilities to their customers, to
reserve for themselves the right to review the margin of interest rates. In other words, it is
a common practice done by all the financial institutions. Why then would the learned judge
expect the defendant to instead go elsewhere to obtain the banking facilities that it required?
Even though this case has made a reference to the doctrine of inequality of bargaining power
with approval, its application to the facts of the case is contentious.
It needs to be noted that the doctrine of inequality of bargaining power has been raised and
applied in the above cases in contracts which are not strictly classified as consumer con-
tracts under the CPA. The consumer claims are normally brought before the Tribunal for
Consumer Claims (the Tribunal).26 The jurisdiction of the Tribunal is limited only to con-
sumer claims not exceeding RM25,000.27 One may wonder how the Tribunal dealt with the
unfair contract terms complaints before the unfair contract terms provisions were incorpo-
rated into the CPA in 2010. The author is unaware of any instance where the doctrine of
inequality of bargaining power was raised before the Tribunal from its inception in 1999 till
the amendment in 2010. But should the doctrine be raised before the Tribunal, can the
Tribunal ignore it?
It is submitted that the doctrine should be recognized and applied by the Tribunal in the
same manner as was done by the court in Saads case. The Court of Appeal in Saads case has
crystalized this common law doctrine into a Malaysian common law which is still a law until
the Federal Court rules otherwise. Therefore, it would certainly here be binding upon the
Tribunal if it had been raised before 2010.

Part IIIA of the Consumer Protection Act 1999 and unfair contract terms
It was obvious to Malaysian legislators that something had to be done to provide more pro-
tection to consumers from unfair contract terms, particularly those unilaterally drafted by
powerful commercial entities in standard form contracts. Judicial attempts to serve justice and
to protect consumers who often found themselves in unequal bargaining positions were also a
wake-up call that something urgently had to be done. Besides, Malaysia was perhaps one of the
last remaining Commonwealth countries that had not passed legislation on unfair contract
terms. Most of Malaysias neighbours have enacted laws dealing with unfair contracts,
including Australia,28 Brunei,29 China,30 Hong Kong,31 New Zealand,32 the Philippines33 and

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Trakic 209

Singapore.34 There is, however, no unfair contracts law in Vietnam.35 Some of these laws are
modelled on the Unfair Contract Terms Act 1977 (UK) (UCTA).36
Finally, the Consumer Protection (Amendment) Act 2010 (Malaysia) was enacted with the
addition of a new Part IIIA entitled Unfair Contract Terms. So, instead of enacting a separate
piece of legislation on unfair contract terms like in the UK, Malaysia decided to insert these
provisions in the existing CPA. This was inspired by recommendations of the Law Commission
of Indias Report on Unfair (Procedural & Substantive) Terms in Contract (2006).37
The decision to incorporate provisions on unfair contract terms into the CPA would prac-
tically mean that it only applies to consumer contracts (i.e. contracts in which the consumer
acquires the goods or services for personal, domestic or household purposes or consumption)
and not commercial contracts (i.e. contracts in which the consumer acquires the goods or
services for trade, manufacturing, etc.). Besides, the preamble of the Consumer Protection Act
(CPA) states that the Act provides for the protection of consumers only.38 This seems to be in
direct contrast with the newly inserted section 24B, which states that the provisions on unfair
contract terms shall apply to all contracts.39 This section seems to suggest that Part IIIA applies
not only to consumer contracts but also to commercial contracts.40 However, by looking closely
into the definition of the unfair term in section 24A(c) which provides that an unfair term is a
term in a consumer contract . . . , it becomes clear that Part IIIA applies only to consumer
contracts. In addition to it, one may wonder again why would the legislators include provisions
on unfair contract terms into the CPA if they intended them to be applicable to commercial
contracts as well, which are clearly not covered by the CPA. If they really intended the pro-
vision to be applicable to commercial contracts, then they should have enacted a separate piece
of legislation on unfair contract terms like in the UK or they could have just inserted the
relevant provisions into the Contracts Act 1950.41 Therefore, one has no choice but to conclude
that Part IIIA applies only to consumer contracts that fall within the ambit of the CPA.
Furthermore, it can be suggested that the newly added Part IIIA was meant to apply mostly
to standard form contracts. Standard form contracts, as discussed earlier, are contracts that
would often contain unfair contract terms due to the inability of consumers to negotiate the
terms. A standard form contract has been defined in section 24A(b) as a

consumer contract that has been drawn up for general use in particular industry, whether or not the
contract differs from other contracts normally used in that industry.42

However, section 24A(a) equates the definition of contract under Part IIIA with the definition
of a contract under section 2 of the Contracts Act 1950.43 The definition of a contract under the
Contracts Act 1950 obviously includes not only standard form contracts but also other types of
contract which are negotiated by parties. Hence it can be said that Part IIIA applies to negoti-
ated contracts as well. The additional proof for that can be found in section 24C(2)(d), which
provides that one of the circumstances that the court or the Tribunal may take into consider-
ation before deciding procedural unfairness is whether or not, prior to or at the time of entering
into the contract, the terms of the contract were subject to negotiation or were part of a standard
form contract.44 This section points out clearly that Part IIIA applies to both negotiated as well
as standard form contracts.45
Part IIIA would apply to all terms in a contract that are deemed as unfair. As mentioned
earlier, section 24A(c) defines an unfair term as a term in a consumer contract which, with
regard to all the circumstances, causes a significant imbalance in the rights and obligations of
the parties arising under the contract to the detriment of the consumer.46 The wording

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210 Common Law World Review 44(3)

significant imbalance has not been defined by the Act. Generally, in the common law system,
it is left to the court or Tribunal to determine whether a term causes significant imbalance by
referring not only to the term itself but to the contract as a whole. Sometimes, one particular
term could appear as unfriendly towards the consumer but there could perhaps be many other
terms in the contract which would be in favour of the consumer. Even though Parliament did
not define significant imbalance, it did lay down the circumstances of procedural and sub-
stantive unfairness in which significant imbalance may appear.
The concept of procedural and substantive unfairness which has been inserted into Part IIIA
has been modelled on the recommendations of the Report of the Law Commission of India on
Unfair (Procedural & Substantive) Terms in Contract (August 2006).47 The concept of pro-
cedural and substantive (contractual) imbalance is not new to the common law.48 Lord
Brightman in the Privy Council in Hart v OConnor49 observed the following:

If a contract is stigmatised as unfair, it may be unfair in one of two ways. It may be unfair by
reason of the unfair manner in which it was brought into existence; a contract induced by undue
influence is unfair in this sense. It will be convenient to call this procedural unfairness. It may
also, in some contexts, be described (accurately or inaccurately) as unfair by reason of the fact
that the terms of the contract are more favourable to one party than to the other. In order to distin-
guish this unfairness from procedural unfairness, it will be convenient to call it contractual
imbalance. The two concepts may overlap.50

Common law courts have always been more willing to invalidate contracts on the ground of
procedural unfairness (i.e. for lack of free consent as per section 14 of the Contracts Act
1950) than on the ground of substantive unfairness because of the classical contract theory.
The classical contract theory51 states that the parties are at liberty when concluding their
contracts and whatever is agreed that subsequently ought to be fulfilled and if necessary
enforced by the courts. Courts are not to interfere and rewrite the contract for the parties.52
The common law courts have traditionally been very fond of this doctrine, as can be seen
from the wordings of Sir George Jessel MR in Printing and Numerical Registering Co v
Sampson:53

. . . if there is one thing which more than another public policy requires it is that men of full age and
competent understanding shall have the utmost liberty of contracting, and that their contracts when
entered into freely and voluntarily shall be held sacred and shall be enforced by courts of justice.
Therefore, you have this paramount public policy to consider that you are not lightly to interfere
with this freedom of contract.54

The classical contract theory seems to be in line with the rational consumer theory55 developed
and advocated by the neo-classical economists.56 The essence of this theory is that consumers
act rationally in making decision. This is because their decisions are mostly driven by self-
interest and naturally before making any decision one will first weigh the pros and cons of it
and choose the one that benefits him the most. However, both classical contract theory and
rational consumer theories have been criticized by the scholars. Terry argued that classical con-
tract theory could be appropriate for unsophisticated nineteenth century market place but in the
current context, due to significant economic and social changes, the freedom to contract is dis-
torted by the inequality of bargaining power.57 Likewise, rational consumer theory has been
contested by many scholars, including neo-classical economists and legal scholars, who argued

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Trakic 211

that consumers are after all human beings embellished with emotions and it is in a humans
nature to make mistakes.58
Since the common law courts are generally reluctant to declare the contract as voidable on
the grounds of substantive unfairness due to both classical contract theory and rational con-
sumer theory, the Law Commission of India in its Report on Unfair (Procedural & Substantive)
Terms in Contract (August, 2006) made recommendations that legislation on unfair contract
terms should contain separate provisions on procedural and substantive unfairness. In its
summary section, the report explained the reasons for having a separate provision dealing with
procedural and substantive unfairness:

In the light of the views expressed as above, it appears to us that if any legislation is to be more
effective and realistic, it is necessary to make separate provisions dealing with procedural and
substantive unfairness. We are aware that in certain quarters it has been considered that it is dif-
ficult to put these concepts in separate compartments in a statute but we do not agree. We have not
found any difficulty. In fact, as pointed by several authors, the focus should not be confined only to
procedural unfairness and we must move forward to deal with substantive unfairness also rather
than merely state that where parties have signed contracts with their eyes wide open, if such con-
tracts contained a term which was unfair in itself, the party had himself or itself to blame. This was
the method of interpretation of contracts at a time when principles of substantive unfairness were
not effectively developed. Today, we find in practice that there are a large number of substantively
unfair terms in different types of contracts i.e. contracts or terms which are by themselves unfair.
Therefore, the law must be reformed to be able to stretch its hands to rectify such substantive
unfairness.59

It is important to note that even though the common law courts and jurists have recognized
the differences between the procedural and substantive unfairness, the author is unaware of
any common law country that has actually dealt with them separately in the legislation. To
the contrary, it was presumed that the provisions on the substantive unfairness would auto-
matically include procedural unfairness. In fact, the substantive unfairness in most cases is
a product or result of procedural unfairness. The contract, for instance, may contain an exclu-
sion clause which limits or excludes the liability of the supplier for negligence. The exclusion
clause may be declared by the court or the Tribunal as substantively unfair. However, sub-
stantive unfairness may also lead the court or the Tribunal to enquire whether there was a
procedural unfairness (i.e. whether the consumer was placed in unequal bargaining power
where he had no choice but to accept the term in order to get the wished facility). Hence,
as Lord Brightman rightly pointed out, both procedural and substantive unfairness may
overlap.
Nonetheless, Malaysian legislators decided to follow the recommendations made by the
Report of the Law Commission of India and legislated separate provisions on procedural and
substantive unfairness. Malaysia is probably the only common law country which did so.
Be that as it may, it is recognized that consumer protection should go beyond procedural
unfairness.60 It is quite possible that procedural unfairness may result in substantive unfairness,
and because of that, Part IIIA provides the circumstances which the court or the Tribunal may
take into consideration in deciding whether a contract is procedurally or substantively unfair.
Procedural and substantive unfairness have been dealt with separately in the statute in two
different sections. Section 24C deals with procedural unfairness while section 24D provides for
substantive unfairness.

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212 Common Law World Review 44(3)

Procedural unfairness
Procedural unfairness refers to the unfairness that takes place during the negotiation stage, i.e.
before the contract is concluded. In fact, all the vitiating factors, recognized by the Malaysian
Contracts Act 1950, such as coercion (section 15), undue influence (section 16), fraud (section
17) and misrepresentation (section 18) will render a contract voidable due to procedural
unfairness.61 In the context of consumer contracts, procedural unfairness has been specifically
defined by section 24C(1) as:

a contract or a term of a contract is procedurally unfair if it has resulted in an unjust advantage to

the supplier or unjust disadvantage to the customer on account of the conduct of the supplier or the
manner in which or circumstances under which the contract or the term of the contract has been
entered into or has been arrived at by customer and supplier.62

In order to know whether there was procedural unfairness, (i.e. whether the contract or any of
its terms conferred unfair advantage to the supplier or unfair disadvantage to the consumer)
the Tribunal or the court may take into consideration the factors enumerated in section 24C(2):

a. the knowledge and understanding of the consumer in relation to the meaning of the
terms of the contract or their effect;
b. the bargaining strength of the parties to the contract relative to each other;
c. reasonable standards of fair dealing;
d. whether or not, prior to or at the time of entering into the contract, the terms of the con-
tract were subject to negotiation or were part of a standard form contract;
e. whether or not it was reasonably practicable for the consumer to negotiate for the altera-
tion of the contract or a term of the contract or to reject the contract or a term of the
contract;
f. whether expressions contained in the contract are in fine print or are difficult to read or
understand;
g. whether or not, even if the consumer had the competency to enter into the contract based
on his or her capacity and soundness of mind, the consumer(i) was not reasonably
able to protect his or her own interests or of those whom he or she represented at the
time the contract was entered; or (ii) suffered serious disadvantages in relation to other
parties because the consumer was unable to appreciate adequately the contract or a term
of the contract or its implications by reason of age, sickness, or physical, mental, edu-
cational or linguistic disability, or emotional distress or ignorance of business affairs;
h. whether or not independent legal or other expert advice was obtained by the consumer
who entered into the contract;
i. the extent, if any, to which the provisions of the contract or a term of the contract or its
legal or practical effect was accurately explained by any person to the consumer who
entered into the contract;
j. the conduct of the parties who entered into the contract in relation to similar contracts or
courses of dealing between them; and
k. whether the consumer relied on the skill, care or advice of the supplier or a person con-
nected with the supplier in entering into the contract.63

For instance, a consumer is entitled in the course of negotiations with the supplier to have
full transparency about the product or services required. The terms of the contract must be

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Trakic 213

written in plain and simple language which a consumer can understand before entering into the
contract.64 Likewise, the supplier is obliged to provide the accurate explanation to the con-
sumer about the contractual terms and their legal and practical effects.65 In fact, full transpar-
ency and disclosure must be made by the supplier to the consumer before the transaction is
concluded to enable the consumer to make informed decisions. It is not uncommon that the sup-
plier of goods or services does not bother to explain the terms of the sale agreement to the
consumer. In that case, the consumer would be entitled to allege that the contract or its term
is procedurally unfair.
The same applies to other factors. If any one of them can be established by the consumer and
if the consumer can prove that the contract or a term of the contract which caused unfair
advantage to the consumer was induced by any of the factors, the court or tribunal may declare
the contract or its term to be procedurally unfair.

Substantive unfairness
Substantive unfairness or contractual imbalance as it has been referred to by Lord Brightman
in Hart v OConnor,66 refers to unfair contractual terms which have been included in a con-
tract. A consumer contract or a term of the contract can be declared as unfair by the court or
tribunal based on its substance. It is submitted that it is not necessary to prove that the sub-
stantively unfair term is procedurally unfair at the same time. Therefore, the submission by the
supplier that the contract has been concluded in a transparent manner and that all reasonable
steps have been taken to ensure that the consumer is fully aware of the content of the contract or
a term will not turn a substantively unfair contract into a fair contract in the eyes of the law.67
The fact that CPA has a separate provisions dealing with procedural and substantive unfairness
suggests that they ought to be dealt with separately.
Section 24D(1) explains that:

a contract or a term of a contract is substantively unfair if the contract or the term of the contract

a. is in itself harsh;
b. is oppressive;
c. is unconscionable;
d. excludes or restricts liability for negligence; or
e. excludes or restricts liability for breach of express or implied terms of the contract with-
out adequate justification.68

Even though the statute has provided the features of the substantively unfair contract or a
term, it did not define what they really mean and when they will arise. In other words, the court
or tribunal will need to decide when a contract or a term of the contract will be considered as
harsh, oppressive or unconscionable by reference to earlier decided cases.
Furthermore, section 24D(2) lists eight factors which the court or tribunal may take into
consideration when deciding whether a contract or a term of a contract is substantively unfair,
namely:

a. whether or not the contract or a term of the contract imposes conditions(i) which are
unreasonably difficult to comply with; or (ii) which are not reasonably necessary for the
protection of the legitimate interests of the supplier who is a party to the contract;
b. whether the contract is oral or wholly or partly in writing;

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214 Common Law World Review 44(3)

c. whether the contract is in standard form;

d. whether the contract or a term of the contract is contrary to reasonable standards of fair
dealing;
e. whether the contract or a term of the contract has resulted in a substantially unequal
exchange of monetary values or in a substantive imbalance between the parties;
f. whether the benefits to be received by the consumer who entered into the contract are
manifestly disproportionate or inappropriate to his or her circumstances;
g. whether the consumer who entered into the contract was in a fiduciary relationship with
the supplier; and
h. whether the contract or a term of the contract (i) requires manifestly excessive secu-
rity for the performance of contractual obligations; (ii) imposes penalties which are dis-
proportionate to consequences of a breach of contract; (iii) denies or penalises the early
repayment of debts; (iv) entitles the supplier to terminate the contract unilaterally with-
out good reason or without paying reasonable compensation; or (v) entitles the supplier
to modify the terms of the contract unilaterally.69

The factors listed above in section 24D(2) can be considered as the guidelines to the courts
and tribunals to decide when the term is oppressive, harsh, and unconscionable. In other
words, they are examples of substantively unfair terms.

Burden of proof and effect of unfair terms

The burden of proof to show that a contract or a term of a contract is not unfair is on the party
relying on it. In some cases, the supplier or a commercial entity, in the case of a standard form
contract, may rely on exemption clauses which could be unfair. So, for that kind of situation,
section 24E clearly states that if a contract or term of a contract excludes or restricts liability,
or excludes rights, duties and liabilities, it is for the supplier relying on such exclusion or
restriction to prove that it is not without adequate justification.70 Section 24F goes even further
by giving the power to the court or tribunal to raise the issue of unfairness of a contract or a term
of a contract even in situations where none of the parties raised the issue in its pleadings.71
According to section 24G(1), if the court or tribunal comes to the decision that a contract or
a term of a contract is either procedurally or substantively unfair, or both, then the court may
declare the contract or a term as unenforceable or void, and it may grant judgment or make an
award respectively.72 Alternatively, section 24G(2) explains that if the unfair terms of the
contract are severable, then the court may give effect to the remaining terms of the contract and
enforce them without the unfair terms.73 A court or tribunal may even ask the parties to modify
or vary certain terms of the contract in accordance with section 24H and section 112, so that the
contract can be enforced and the consumer adequately protected.74
Non-compliance with the provisions spelled out in Part IIIA will not only have an effect on the
contract or a term of a contract, but it will also attract criminal liability. Section 24I(1) states:

Any person who contravenes any of the provisions of this Part commits an offence and shall on
conviction be liable

a. if such person is a body corporate, to a fine not exceeding two hundred and fifty thou-
sand ringgit, and for a second and subsequent offence, to a fine not exceeding five hun-
dred thousand ringgit;

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Trakic 215

b. if such person is not a body corporate, to a fine not exceeding one hundred thousand
ringgit or to imprisonment for a term not exceeding three years, or to both, and for a
second and subsequent offence, to a fine not exceeding two hundred and fifty thousand
ringgit or to imprisonment for a term not exceeding six years, or to both.75

In addition, section 24I(2) provides that in a case of continuing offence, the offender shall,
in addition to the penalties under ss. (1), be liable to a fine not exceeding two thousand ringgit
for each day or part of a day during which the offence continues after conviction.76
Section 24J, which is the last section in Part IIIA, empowers the Minister to make necessary
regulations under this part. As at the time of writing, no such regulations have been made. For
that matter, it is submitted that the UKs Unfair Terms in Consumer Contracts Regulations
1999 could be a model based on which Malaysian regulations on this matter could be
developed.77

Issues arising in Malaysia from Part IIIA of the Consumer Protection

Act 1999
Currently, the courts and the Tribunal in Malaysia are able to assist consumers if they are
placed in an unequal bargaining position not only by reference to the doctrine of inequality of
bargaining power but also by statutory provisions in Part IIIA of the CPA. Perhaps at this stage
it is timely to say that Part IIIA of the CPA encompasses the long-disputed doctrine of
inequality of bargaining power. This brings us to the next question, which is whether the
doctrine of inequality of bargaining power can still be used after the Amendment Act 2010
came into force, bearing in mind that section 3 of the Civil Law Act 1956 allows the use of
common law only in the absence of any written law. Thus the question posed earlier by the
Court of Appeal in Saad and American International Assurance discussed above on whether
the doctrine of inequality of bargaining power is part of Malaysian law is now even more
relevant. Could the courts and the Tribunal say that, now that Malaysia has written provisions
on the unfair contract terms in the form of Part IIIA of the CPA, the doctrine of inequality of
bargaining power is inapplicable?
With respect, such a proposition is untenable in the opinion of the author. The CPA does not
define unconscionable, oppressive and harsh terms or the circumstances in which each will
arise. For that, courts and tribunals should refer to the prior judicial decisions as they are bound
by stare decisis in interpreting what amounts to unconscionable, oppressive and harsh terms.
Consequently, it is argued that the doctrine of inequality of bargaining power is the law of the
land and should continue to be applied by courts and tribunals.
Another contentious and unsettled issue is in regard to the extent of jurisdiction of the
Tribunal for Consumer Claims which has been set up under the CPA to adjudicate consumer
complaints.78 The limit of the Tribunals jurisdiction has been well marked by the statute.
Section 98 provides that the Tribunal can hear only complaints not exceeding RM25,000. What
about consumer contracts the value of which exceeds RM25,000? In fact, could they be in the
first place regarded as consumer contracts for the purpose of the CPA at all? If claims
exceeding RM25,000 cannot be brought before the Tribunal then naturally parties should be
allowed to bring those claims for adjudication before the courts. This should solve the problem
if the court would have allowed the complainant to rely on unfair contract provisions contained
in the Part IIIA. However, if the argument that contracts the value of which exceeds RM25,000

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216 Common Law World Review 44(3)

are not regarded as consumer contracts is accepted, then on what ground could the court allow
the complainant to rely on the Part IIIA, as it applies only to consumer contracts?
It is submitted that section 104 of the CPA envisaged that the parties should have been
allowed to bring their claims either before the court of relevant jurisdiction (magistrates
courts) or the Tribunal. Section 104 excludes the jurisdiction of the court if the claim is lodged
with the Tribunal and the Tribunal has the jurisdiction to hear it unless the proceedings before
the court were commenced before the claim was lodged with the Tribunal.79 In other words, if
the claimant has decided to question the fairness of the term in the consumer contract before the
magistrates court and not before the Tribunal, that is allowed by section 104 of the CPA. The
Tribunal does not have exclusive jurisdiction over those claims. Section 104 prevents the
duplicity of proceedings but it does not provide for the Tribunals exclusive jurisdiction over
the claims. This conclusion is made if the words of the statute are interpreted literally.
Another way of looking at it would be by using the purposive approach and asking: What is
the purpose behind the establishment of the Tribunal? Most certainly, the Tribunal was
established to ease the load of cases taken by the courts and to provide speedier and more
efficient resolution of consumer complaints.
If one were to accept the proposition that the Tribunal has exclusive jurisdiction over
consumer contracts and that they are the contracts the value of which does not exceed
RM25,000 (approximately 4,700) then, in that case, the application of Part IIIA becomes
significantly limited. In other words, the statutory provisions on the unfair contact terms would
not afford any protection to the consumers whose claims are exceeding RM25,000. This is a
serious limitation.
To make things even more complicated, the Tribunal does not have jurisdiction to adju-
dicate the claims arising from personal injury or death.80 To put it in perspective, if the con-
sumer were to sue the manufacturer for personal injury suffered as a result of using the latters
defective product and if the manufacturer relied on the exemption clause which excluded the
liability for negligence howsoever caused, in that case the consumer should have been allowed
to argue that such exemption clause is substantively unfair. In fact, section 24D(1)(d) explicitly
states that a contract or a term of contract is substantively unfair if the contract or the term of
the contract excludes or restricts liability for negligence. There are two ways in which this
could be considered with reference to the statutory provisions.
First is that the Tribunal would hear the claim by the consumer and probably declare the
exemption clause or the whole contract as unenforceable or void. This has been explicitly
provided by section 24G(1):

In this Part (i.e. Part IIIA), where a court or the Tribunal comes to the conclusion, having regard to
section 24C and 24D that a contract or a term of a contract is either procedurally or substantively
unfair or both, the court or the Tribunal may declare the contract or the term of the contract as unen-
forceable or void and the court may grant judgment, and the Tribunal may make an award as pro-
vided for under section 112 of this Act.

Therefore, besides declaring the impugned unfair term or contract as unfair, the Tribunal may
also award remedies provided under section 112. However, section 112(3) expressly provides
that the Tribunal does not have power . . . to award any damages for any non-pecuniary loss or
damage. Thus, should the consumer claim compensation or damages for the personal injury
suffered (as is commonly done in similar cases), the Tribunal would have no jurisdiction to
award any sort of remedy in form of damages.81 In that case, one may quite rightly ponder and

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Trakic 217

ask what is the purpose of declaring the term as unenforceable or void if remedy cannot be
provided?
This question brings us to the second approach, which is more reflective of the words
contained in section 99(3), which explicitly excludes the Tribunals jurisdiction to deal with a
claim arising from personal injury or death. Therefore, reading the provision literally, the
Tribunal does not have jurisdiction not only to grant damages for any non-pecuniary loss or
damage as stated in section 112(3) of the CPA but also to deal or declare any term of contract in
such a claim as unenforceable.
Regardless of which approach one may adopt, it is argued that the parties in these situations
should be allowed to submit their claims before the court and then the court should be allowed
to apply Part IIIA of the CPA. However, it needs to be noted that this proposition would place
such consumers in a disadvantageous position. There is always a risk that the court may refuse
to allow parties to rely on the provisions of Part IIIA if the claim exceeds RM25,000, as in that
case the consumers contract would not be strictly regarded as consumer contract covered by
the CPA.82 In addition to this, the consumer would have to incur legal fees for the represen-
tation and the due legal process before the court.

Conclusion
Although the newly enacted Part IIIA of the CPA may have some inconclusive provisions, it is
a welcome development and a move towards bringing Malaysian consumer laws in line with
those of many developed countries. The division of unfairness by sections 24C and 24D into
procedural unfairness and substantive unfairness ensures that the negotiation process, as well as
the outcome of it leading up to the formation of a contract, must be fair and just. Any significant
imbalance in the rights and obligations between the contracting parties would render the
contract or a term of a contract unfair. As a result, the contract or a term of a contract can be
proclaimed as unenforceable or void. Alternatively, if the circumstances of the case permit, the
court may order the parties to modify the impugned term so that the contract can be saved.
Besides, non-compliance with any of the provisions under Part IIIA would warrant criminal
liability with large fines and imprisonment. It is expected that the courts and the Tribunal would
readily apply these provisions. The inconsistencies and the loopholes contained in the CPA
should be reconsidered and remedied by the legislators and the courts. Consumers should not
be burdened by the inherent weaknesses of the statutory provisions. If the wording of the
provisions are not adequate to provide remedies to the consumers then the common law
doctrine of inequality of bargaining power is more than enough to fill in the gaps.

Acknowledgments
Acknowledgements to my colleague Associate Professor Paul Latimer of the Department of
Business Law and Taxation, Monash University, Melbourne, Australia for helpful comments
on this article.

Declaration of Conflicting Interest

The author(s) declared no potential conflicts of interest with respect to the research, authorship,
and/or publication of this article.

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218 Common Law World Review 44(3)

Funding
The author(s) received no financial support for the research, authorship, and/or publication of
this article.

Notes
1. See e.g. Consumer Protection Act 1999 (Malaysia), ss 24A(c); Unfair Contract Terms Act 1977 (Ch.
396) (Singapore) s. 3; Australian Consumer Law s. 24(1)(a)).
2. See e.g. Sihombing, Mahmood and Latimer (1991: 5-7805-790); Commonwealth of Australia
(2010: 7).
3. Willett (2011: 355).
4. See e.g. Consumer Protection Act 1999 (Mal.), s. 24D(2)(a)(ii); Unfair Contract Terms Act 1977 (Ch.
396) (Sing.), s. 3(2)(b)(1); Australian Consumer Law, s. 24(1)(b).
5. See e.g. Consumer Protection Act 1999 (Mal.), s. 24D(2)(e); Unfair Contract Terms Act 1977 (Ch.
396) (Sing.), ss 2(2) and 3(2)(a); Australian Consumer Law. s. 24(1)(c).
6. There are many unsettled issues in regard to the exact scope and meaning of the provisions in Part
IIIA. Some of these most notable issues will be discussed below.
7. See e.g. Amin (2013); Abdullah and Yusoff (2011).
8. [1975] QB 326.
9. [1985] UKHL 2; [1985] 1 All ER 821.
10. [1887] 36 Ch D 145.
11. [2001] 2 AMR 2010; [2001] 3 CLJ 98.
12. Commercial Bank of Australia Ltd. v Amadio [1983] 152 CLR 447; Westwill Pty. Ltd. v Heath [1959]
52 SASR 46 Shib Lal v The Collector of Bareilly 1.
13. Paris v Machnick [1972] 32 DLR 723; Black v Wilcox [1976] 70 DLR (3d) 192.
14. Credit Lyonnais Bank Nederland NV v Burch [1997] 1 All ER 144; Portman Building Society v
Dusangh [2000] 2 All ER 221.
15. Shib Lal v The Collector of Bareilly [1894] ILR 16 All 423; Lakshminarayana v Singaravelu AIR
[1963]; Rangasami Gounder v Periamuthu Gounder [1977] 1 Mad LJ 231; Manak Chand v Puran
AIR [1960] Madh Prad 235; Davis v Maung Shwe Go [1911] LR 38 IA 155; Ramalinga Pillai v Jaga-
damba Ammal AIR [1951] Mad 612.
16. Hart v OConnor [1985] AC 1000.
17. Section 3 of the Civil Law Act 1956 (Mal.) is the statutory authority for the reception of English com-
mon law and equity in Malaysia, subject to certain limitation stated thereto.
18. Ibid.
19. Ibid. In the Canadian case of Black v Wilcox [1976] 70 DLR (3d) 192, the Court of Appeal applied the
doctrine to rescind the contract in which the seller who was under the influence of alcohol, to the
buyers knowledge, sold his land for undervalued consideration. Evans JA said (at 196): A long line
of judicial authority in this province has followed the principle stated in Vanzant v Coates [1917] 40
OLR 556, 39 DLR 485, and restated in Mundinger v Mundinger [1969] 1 OR 606, 3 DLR (3d) 338
(affirmed [1970] SCR vi, 14 DLR (3d) 256n) that in a situation of this nature, the Court will invoke
the equitable rule that a person who is not equal to protecting himself will be protected, not against his
own folly or carelessness, but against his being taken advantage of by those in a position to do so by
reason of their commanding and superior bargaining position. The combination of inequality of posi-
tion and improvidence is the foundation upon which the doctrine is based.
20. [1983] 2 Malayan Law Journal 196.
21. Contracts Act 1950 (Mal.), ss 14, 16 and 20.

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Trakic 219

22. See Cheong (2005: x).

23. [2002] 4 Malayan Law Journal 301.
24. Ibid. at 319.
25. [2004] 6 CLJ 320.
26. Section 85 of the CPA states: There shall be established a tribunal to be known as the Tribunal for
Consumer Claims.
27. CPA 1999 (Mal.), s. 98.
28. Competition and Consumer Act 2010 (Cth.) (Australian Consumer Law), as well as the parallel Aus-
tralian Securities and Investments Commissions Act 2001 (Cth.) (intended to protect consumers of
financial products and services).
29. Brunei Emergency (Unfair Contract Terms) Order 1994 (Brunei). In addition to re-enacting the pro-
visions of the UCTA, the Brunei Act also contains provisions of the Misrepresentation Act 1967
(UK).
30. Contract Law of the Peoples Republic of China: Article 5 The parties shall observe the principle of
equity in defining each others rights and obligations. Article 6 The parties shall observe the principle
of good faith in exercising their rights and fulfilling their obligations.
31. Control of Exemption Clauses Ordinance (Cap. 71) (Hong Kong); promoted by the Hong Kong
Consumer Council in 2012 to encourage and assist traders to avoid using unfair terms (Consumer
Council, 2012).
32. New Zealand plans to include unfair contract terms provisions in s. 26A in its Fair Trading Act 1986
(NZ) by the Fair Trading Amendment Act 2013 (NZ) as from 18 March 2015.
33. Constitution of the Republic of the Philippines 1987 Article XVI (General Provisions), s. 9; Con-
sumer Act of the Philippines (Republic Act No. 7394), art 2.
34. Unfair Contract Terms Act 1977 (Ch. 396) (Singapore); also the Consumer Protection (Fair Trading)
Act 2003 (Ch. 52A) (Singapore), which identifies certain standard form contracts containing exemp-
tion clauses as unfair. The Second Schedule lists 20 specific unfair practices as a protection to their
consumers, including: List 11: Taking advantage of a consumer by including in an agreement terms
or conditions that are harsh, oppressive or excessively one-sided so as to be unconscionable. List 20:
Using small print to conceal a material fact from the consumer or to mislead a consumer as to a mate-
rial fact, in connection with the supply of goods or services.
35. Nguyen (2011).
36. Unfair contract laws in jurisdictions such as Israel, PRC and Thailand are discussed by e.g. Aziz and
Yusoff (2010).
37. See Law Commission of India (2006).
38. Consumer has been defined in s. 3(1) of the CPA 1999 as a person who: (a) acquires or uses goods
or services of a kind ordinarily acquired for personal, domestic or household purposes, use or con-
sumption; and (b) does not acquire or use the goods or services, or holds himself out as acquiring
or using the goods or services, primarily for the purpose of(i) resupplying them in trade; (ii) con-
suming them in the course of a manufacturing process; or (iii) in the case of goods, repairing or treat-
ing, in trade, other goods or fixtures on land.
39. CPA 1999 (Mal.), s. 24B.
40. It is submitted that this provision needs to be amended whereby the reference to all contract will be
replaced with consumer contracts.
41. See Chieh (2010).
42. CPA 1999 (Mal.), s. 24A(b).
43. Ibid. at s. 24A(a).
44. Ibid. at s. 24C(2)(d).

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220 Common Law World Review 44(3)

45. See Amin (2013: xcii).

46. CPA 1999 (Mal.), s. 24A(c).
47. Above, n. 80.
48. See some of the literature discussing procedural and substantive unfairness: Terry (1982); Duggan
(1991).
49. [1985] AC 1000. See also the decision of the Supreme Court of New South Wales by McHugh JA in
West v AGC Advances Ltd. [1986] 5 NSWLR 610.
50. [1985] AC 1000 at 10171018.
51. It is also known as freedom of contract or sanctity of contract theory.
52. Chancery mends no mans bargain per Lord Nottingham in Maynard v Mosely (1678) 3 Swanst
651, 655; 36 ER 1009, 1010.
53. [1875] LR 19 Eq 462.
54. Ibid.
55. It is also known as rational choice theory or rational action theory.
56. For further explanation see Mankiw (2012: 7).
57. See Terry (1982: 314).
58. See Epstein (2006). See also Sims (2013: 752).
59. See Law Commission of India (2006: 136).
60. See Amin (2013: at xcv).
61. Contracts Act 1950, s. 19.
62. CPA 1999 (Mal.), s. 24C(1). Emphasis added.
63. Ibid. at s. 24C(2).
64. Ibid. at s. 24C(2)(f). See also Baker v Asia Motor Co. Ltd. [1962] MLJ 425.
65. CPA 1999 (Mal.), s. 24(2)(i).
66. [1985] AC 1000 at 10171018.
67. This is where the problem with the common law courts used to lay. As discussed earlier, common
law courts were reluctant to declare a term of a contract as unfair for fear of falling into a trap of
rewriting the contract for the parties. Besides, classical contract theory was always used as justifi-
cation for their policy of non-interference. However, all that was needed to convince the courts to
change the course of their action was to enact legislation allowing them to declare terms as unfair
on the substantive grounds. As seen earlier, this was done by most of the common law countries and
now Malaysia.
68. CPA 1999 (Mal.), s. 24D(1).
69. Ibid. at s. 24D(2).
70. Ibid. at s. 24E.
71. Ibid. at s. 24F.
72. Ibid. at s. 24G(1).
73. Ibid. at s. 24G(2).
74. Ibid. at ss 24 H and 112.
75. Ibid. at s. 24I(1).
76. Ibid. at s. 24I(2).
77. See Singh (2012: cxxxiii).
78. CPA 1999 (Mal.), s. 85.
79. Ibid. at s. 104. Emphasis added.
80. Ibid. at ss 99(3) and 112(3).
81. As per CPA 1999 (Mal.), ss 99(3) and 112(3).
82. Part IIIA only applies to consumer contracts as per CPA 1999 (Mal.), s. 24A(c).

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