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Law of contract

1. 1. Contracts and agreements come into play in almost every aspect of life. The study andthe
application of the law of contract make up a core component of the learning and thepractice
of law. Contract is a voluntary, deliberate, and legally binding agreement betweentwo or more
competent parties. Contracts are usually written but may be spoken or implied,and generally
have to do with employment, sale or lease, or tenancy. A contractualrelationship is evidenced
by an offer, acceptance of the offer, and a valid (legal and valuable)consideration. Each party
to a contract acquires rights and duties relative to the rights andduties of the other parties.
However, while all parties may expect a fair benefit from thecontract it does not follow that
each party will benefit to an equal extent. Existence ofcontractual-relationship does not
necessarily mean the contract is enforceable, or that it isnot void or voidable. Contracts are
normally enforceable whether or not in a written form,although a written contract protects all
parties to it. Some contracts such as for sale of realproperty, instalment, or insurance policies
must be in writing to be legally binding andenforceable. Other contracts are assumed in, and
enforced by, law whether or not theinvolved parties desired to enter into a contract. Besides,
contract is an agreement which thelaw will enforce. Contracts can also be formed orally. The
remedy at law for breach ofcontract is usually "damages" or monetary compensation. In
equity, the remedy can bespecific performance of the contract or an injunction. Both remedies
award the damagedparty the "benefit of the bargain" or expectation damages, which are
greater than merereliance damages, as in promissory estoppels. In law, the term minor also
infant or infancy is used to refer to a person who is underthe age in which one legally
assumes adulthood and is legally granted rights afforded toadults un society. Depending on
the jurisdiction and application, this age may vary, but isusually marked at either 18 or 21.
Specifically, the status of “minor” is defined by the age ofmajority. In many countries,
including Brazil, Croatia, India, the United Kingdom, Australia,Canada and New Zealand, a
minor is presently defined as a person under the age of 18. In theUnited States, where the
age of majority is set by the individual states, „minor‟ usually refersto someone under the age
of 18, but can be used in certain areas to define someone under theage of 21. Contract is an
agreement which the law will enforce. We should consider twoscenarios. The first is if we ask
a friend or colleague to have lunch with us and they agree.There is an offer and an
acceptance. If we were to be asked if we are suing the friend orcolleague for breach of
contract our answer would be an emphatic no. Another example, wemake a booking at a
hotel, we fail to turn up. The hotel having reserved a room for us has 1

2. 2. been unable to sell the room to anyone else. If the hotel were to sue us we would accept
thefact because there is an intention to create legal relations. In the same way if the hotel
hadsold our room we would consider legal action of our own. A legally binding contract
needsoffer, acceptance, intent to create legal relations and consideration. It is the presence of
intentto create legal relations and of consideration that converts a social agreement into a
legalagreement. There are seven elements of a valid contract. The first element is Offer. A
proposal, according to Section 2(a) of the Contracts Act1950 is an act or utterance signifying
the willingness of the person to be bound by hispromises implied in the act or utterance and
with a view to obtaining the assent of the otherperson to the act or utterance. Furthermore,
according to Section 2 (a), an offer must signifythe willingness of the proposer (offeror) to
fulfil his promises if accepted by the offeree thatmean offer must be certain and also must be
differentiated from an enquiry. It is also must bedifferentiated from intent to trade. During the
build up to an agreement there is often a periodof negotiation which differentiates an offer
from negotiations. The concept of intent to tradeis one of the most important and must be
thoroughly understood. Besides, advertisements,catalogues and circulars are not usually an
offer. If in doubt read again the section on offerand differentiating from intent to trade. In an
auction the bid is the offer and acceptance iswhen the auctioneers hammer falls. Acceptance
is the second element of a valid contract. According to Section 2(b) of theContracts Act
specifies that when a person to whom an offer is made signifies his assentthereto, the offer is
said to be accepted. Acceptance may be expressed, that is oral or written,and implied from
the conduct of the offeree. An acceptance must also comply with certainrules before it
becomes valid and enforceable. Where an offer specifies the form ofacceptance, failure to
accept in the specified form, unless the proposer does not object,invalidates the acceptance.
According to Section 7(a), the acceptance must be absolute andunqualified. , it means that
the offeree‟s intention to accept must be clearly understood,without any doubt, from his
conduct. There are numerous circumstances in the commercialenvironment where the
conduct of certain parties appears to be acceptance but the law doesnot recognise such
conduct as acceptance. The third element is Consideration. According to Section 2(d) of the
Contracts Act,consideration is an act done or abstention from doing an act, or a promise to do
or a promise 2

3. 3. to abstain from doing, something. There are three forms of consideration,


executedconsideration, executor consideration, and past consideration. The fourth element is
Intention to Create Legal Relations. The Contracts Act 1950does not contain any provision
relating to intention of the parties to a contract to be bound inlaw. Nevertheless, intention is
an essential element of an enforceable contract. In this respect,based on the Civil Law Act
1956, English law may be applied. In law, agreements arecategorised into two, which is family
and social contracts or agreements and commercialcontracts or agreements. Capacity to
contract is the fifth element of a valid contract. Contractual Capacity isthe legal ability to enter
into a contract. Minors have particular rights and obligationsestablished by the court when it
comes to contracts. Once a person reaches age 18, they areconsidered a legal adult in every
state in the nation. In addition to minors, other persons areable to avoid contracts. Mentally
impaired and intoxicated people, convicts, and aliens lackthe capacity to enter into a contract.
In principle, every person is qualified to contract.According to Section 10, every agreement
made by the free consent of the parties competentto contract for a lawful consideration and
with a lawful object is a contract. But who iscompetent to contract? According to Section 11
prescribes that a person who is of the age ofmajority and of sound mind is competent to
contract. According to the Age of Majority Act1971, for every individual person, the age of
majority is 18 years old. Sound mind is,according to Section 12 of the Contracts Act, the
capability of a person in understanding thecontract and forming a rational judgment as to its
effect upon his interests and whether he isusually or occasionally of unsound mind. According
to Section 11, a person who has notreached the age of majority is not competent to contract.
One of the elements constituting avalid contract is a valid contract is that the parties entering
the contract are those who havethe competency to contract. This is based on Section 10 (1)
of the Contract Act 1950.Competency refers to the capacity of being adult, having a sound
mind and not forbidden bylaw to enter any contract example bankruptcy. This principle is
based on Section 11 of theContract Act 1950 which provides that “every person is competency
to contract that is of theage of majority according to the law to which hi is subject, and who is
of sound mind, and isnot disqualified from contracting by any law to which he is subject”. In
Malaysia, the age ofmajority is recognized as above eighteen years of age as stated in the
Age of Majority Act 3

4. 4. 1971: “The majority of all males and females at the age of eighteen years and every
suchmale attaining that age shall be of the age of majority”. The next element is Certainty.
Every term of an agreement must be certain or capableof being ascertained. Where the terms
of an agreement are not certain, the contract may bevoid. This is stated in Section 30 CA
1950. The last element is Free Consent. The meeting of two or more minds leads to
theformation of an agreement. If this agreement satisfies certain conditions, a
legallyenforceable contract is formed. On that basis, every contract must be voluntarily
donewithout any negative element which affects a person‟s capacity to make
independentdecisions. Independent decisions are decisions which are made after due
consideration of theeffects of a contract on the person. According Section 10 states that every
agreement is acontract if it is made by the free consent of the parties. And in Section 14
consent is said to befree if it is not caused by coercion, undue influence, fraud,
misrepresentation or mistake. In today‟s world, much dependence is placed on other people
to fulfil personal needswhich in earlier times were often personally attended to. As such, often
without being fullyaware and conscious, many a person enters into a contract which not only
gives rise to legalrights but also creates obligations which much be honoured. Whilst little
difficulty arises inthese matters, so far as adults are concerned, an increasing number of such
transactions arebeing entered into, by children. And it has often been said that contracts
involving a childmay not be valid. Does this therefore mean that children can enter into a
contract and yet getaway from their obligations when the time to fulfil them arises? There are
some few cases forus to review and was the fact for us to refer. First, there is a case called
Mohori Bibee v Dharmodas Ghose in 1903 can be refer to.It was held that the agreement
made by a minor is void. The court in this case held thataccording to Section 9 and Section 10
of the Indian Contract Act, which is in pari material toSection 10 and Section 11 of the
Malaysian Contracts Act, a contract by a minor was void.The appellant in this case loan a sum
of money to the respondent, a minor, secured on a housewhich was leased to the appellant.
The minor, through the mother, applied for a courtdeclaration that the lease was void
because the minor had no capacity to contract. The courtheld that the contract with the minor
was void and he could not sue or be sued on anycontract. Besides of that, there is another
case can be refer. That case is Tan Hee Juan v Teh 4

5. 5. Boon Keat in 1934. In this case, the plaintiff had transferred ownership of a piece of land
tothe defendant. He then applied to the court for an order to set aside the transfer. The
courtreferred to Mohori Bibee and held that the contract was void and ownership of the land
had tobe returned to the plaintiff. In Malaysia, the Mohari Bibee case in 1903 was followed in
thecase of Tan Hee Juan v Teh Boon Keat in 1934. Plaintiff who is a minor said that
contractthat involved a minor is said to be void. So there is no contract at all. So it was held
that theplaintiff succeeds in his claimed and therefore Tan Hee Juan should not have to pay
back tothe defendant. Later, in 1950 Contract Act had been made and in the Section 69 of the
Actprovides that if a person, incapable of entering contract or anyone whom he is legally
boundto support, is supplied by another person with necessaries suited to his condition in life,
theperson who has furnished such supplies is entitle to be reimbursed from property of
suchincapable person. But the word necessary is not defined in the Act. But later, in the case
ofgovernment of Malaysia v Gucharan Singh & Ors, Judge Chang Min Tat concluded the
worldnecessaries must be construed broadly and in any decision involving whether what
aresupplied are or are not necessaries, it is incumbent to have regard to the facts of the case,
theconditions and circumstances in which the supply was and the purposed which is
served.Thus an infant is totally incompetent and incapable of entering into contract and there
is nocontract on which he can be sued. In effect of Section 10 & 11 of contract Act 1950,
thecourts held in the cases of Mohori Bibee v Dharmods Ghose (1903), Tan Hee Juan v
TehBoon Keat (1934) and Government of Malaysia V Gurcharan Singh (1971) that all
suchagreements are void. Therefore, all contracts entered by a minor are generally void and
minorcannot sue or be sued on such void contracts. However, there are some exceptions
towards a minor binding a valid contract. UnderSection 69 of Contract Act 1950, it is said that
“if a person, incapable of entering into acontract, or anyone whom he is legally bound to
support, is supplied by another person withnecessaries suited to his condition in life, the
person who has furnished such supplies isentitled to be reimbursed from the property of such
incapable person.” Under necessaries aminor can enter into valid contract if only it is the basic
need of the minor and suitable of hisstation in life or lifestyle. Contract of Scholarship between
a minor and the government ornon government organization is also under Section 4 (a)
Contracts (Amendment) Act 1976 –“the scholar entering into such agreement is not of the
age of majority”. Similarly, a minormay enter into a contract of marriage or divorcement as
provided by Section 4 (a) AgeMajority Act 1971: “Nothing in this Act shall affect the capacity
of any person to act in the 5

6. 6. following matters, namely, marriage, divorce, dowries and child adoption and religion
andreligious practise and ceremonies of the races in Malaysia”. A minor may also enter into
acontract of insurance, pursuant to the Insurance Act 1966 – a minor between the ages of
10years and 16 years may contract to affect an insurance policy with the consent in writing
ofhis parents or guardian. If a minor has attained the age of 16 years, he is not required
toobtain the consent. There are some cases shows the facts. The case of Rajeswary
vBalakrishanan, the court held that when the defendant, a Sri Kankan Hindu broke his
promiseof marriage with the plaintiff, also a Sri Lanka Hindu, the defendant was, according to
theirreligious practice, in breach of his contract of marriage, although at the time of
contractingthe plaintiff was a minor. Besides, The Government of Malaysia v Gurcharan Singh
and Ors,this case is Gurchran is a student who had received a government scholarship to
undergoteacher training and was bonded to serve the government. However, Gurcharan left
theservice before completing his 5 years bond. When the Government sued Gurcharan
forbreach of contract, he contended that he had no capacity to contract. The court,
nevertheless,held that education was a necessary. Since he had partly fulfilled his bond, he
was ordered toreimburse a reasonable sum, taking into account his partly completed service.
After discussed and explained the Minor‟s Capacity to Contract in Malaysia, in myopinion, I
have some suggestion that I think it should or it maybe can adopt or amend to thecurrent law
in Malaysia. Firstly, according to The Employment Act 1955, and the Childrenand Young
Persons (Employment) Act 1966 prescribe that children below the age of 14 andyoung
persons between the ages of 14 and 16 are competent to enter into a contract ofemployment
but shall not become an employer. This Act should add into exception. At leastthe young
person at the ages of 14 is allowed to become an employer. This is because somefamily or
persons are too poor and need their young child to work to continue their live.Second, the
scholarship should give to the students between 16 and 18. This is because somestudents
who are have their talent and always jump the stage of class. When they finish theirSijil
Pelajaran Malaysia (SPM) is just only 16 years of age. But they are not qualified toreceive any
scholarship just because their still consider is a minor. It is not fair for thosetalent students.
Lastly, is insurance. The insurance are effect between the ages of 10 to 16. Itshould be
amending to from the age of 1o to its just born. The baby who just born shouldhave the
rights to have cover by insurance with the consent in writing of his parents orguardian due to
baby is also human and should enjoy all the rights for a human. 6

7. 7. In conclusion, our law is good enough but doesn‟t recognized a minor for enter into
acontract. But with some amendment, it will benefit the minor with some guardian
orguarantor from their parents. (2,992 words) 7

8. 8. Reference: (1) Itslaw.blogspot.com (2) OPPapers.com (3) 05/12/2006 The Star by Bhag
Singh 8