LAW240

Notes
Types of Law
1. Public Law
Govern a relationship between individual & states
-divided into Constitutional Law
-It deals with question such as Supremacy of Parliament

2. Criminal Law
Contains various of offences committed by an individual against the stages.
-Its objective is to punish criminals & prevent crimes

3. Private Law
Private or civil law is to give compensation, to get back property and to expose obligations
-Law of Contract, Law of Thought, Family Law

Sources of Malaysian Law

1. Historical Sources
Has influence the development of Law.
e.g. Religious Beliefs, Local Customs, Opinion of Juries

2. Legal Sources

3. Places where law can be found

Statutes, Law report, Textbooks.

MALAYSIAN LAW

• Written Law
• Unwritten Law

WRITTEN LAW
Law made by parliament and any subordinates bodies (State of Assemblies)

Federal Constitution (FC)

Supreme law of the land. Any general law that is inconsistent with the FC is, to the extent of the
inconsistency, void.
- Can be amended by a simple majority (2/3 majority) by total number of Legislature.
- The FC establishes a constitutional monarchy and a federal system of the government.

State Constitution
State is headed by a hereditary constitutional ruler (Sultan, Raja, Yang di-Pertuan Besar), as for Penang,
Malacca, Sabah and Sarawak (Ex-British Colonies) they are referred as Yang di-Pertua Negeri because
they do not have rulers but Governors appointed.
- Possesses its own constitution regulating the government of the state
Legislation
Legislation refers to laws made by a person or body that has power to make law. In Malaysia, both
Parliament and the Legislative Assemblies possess authority to enact laws in their respective areas.

Laws made by Parliament may extend throughout the country and extraterritoriality . Laws made by the
State Assembly can only apply to the state.

Act - law made after Merdeka in 1957

Enactment - law made by State Legislative Assembly except Sarawak where its law are called
Ordinances

Ordinances - law made by the King (Yang di-Pertuan Agong) during proclamation of an Emergency.
Also laws made before Malayan Union 1946.

Subsidiary Legislation (Subordinate Legislation/Delegated Legislation)

Rules and regulations enacted by the authority under powers conferred on it by a statute.
- Made by person/bodies on power given by the Parliament/State Assemblies.
- Must not contravene with Parents Act or Federal Constitution, if not it is void.

• The Federal Subsidiary Legislation

• The State Subsidiary Legislation

The Common Law (Unwritten Law)

A portion of Malaysian law which is not written (i.e. the law which is not enacted by the Parliament or
the State Assemblies and is not found in the written Federal and State Constitution)

Unwritten Law comprises:

• English Law
• Judicial Decision of the Superior Courts
• Customs of the Local Inhabitants
• Islamic Law
English Law
English Law is a part of the Malaysian Law. It can be English Common Law or Rules of Equity.

According to:

S.3 of the Civil Law Act 1956 - any court in Malaysia shall apply the common law and the rules of
equity as administered in England.

S.5(2) - English Commercial Law shall apply to Penang, Malacca, Sabah and Sarawak.

However, since there are so many local statutes already passed which deals with commercial matters,
there is no total reliance on English Commercial Law (e.g. Companies Act 1965 and Partnership 1961
etc)

Therefore, the application on English Law is subjected to two limitations:

1. It applied only in the absence of the local statutes on the particular subject
2. It suited to local circumstances

Judicial Decisions
Malaysian Law can be found in the Judicial Decision of the Courts. Decision of the Courts were made
and still being made. This system is known as "The Doctrine of Binding Judicial Precedent"

Judges do not decide cases arbitrarily. They used to follow certain accepted principles commonly
known as precedents. Precedents are decisions made by the judges previously in similar
situations/cases. These rules and principles are a guideline for a binding decision in the future.

Customs
Customs of the local inhabitants in Malaysia are also the source of Law. Generally, Customs relating to
family law, marriages, divorce and inheritance. Adat applies to Malays. Customary Law applies to
Chinese and Indians.

In Malaysia, there are two types of Malay Customary Law; Adat Perpatih and Adat Temenggong.

Adat Perpatih is known among Malays in Negeri Sembilan and Naning in Malacca.
Adat Temenggong originated from Palembang, Sumatera.

Islamic Law
This law applies to Muslims only. According to Federal Constitution, the states have power to
administer Islamic Law. The Head of Religion in a state is the Sultan. In Penang, Malacca, Sabah.
Sarawak and Federal Territory, Yang di-Pertuan Agong (YDPA) is the Head of the State.
The System of Courts in Peninsular Malaysia
The Subordinate Courts (Inferior Courts) in Peninsular Malaysia consist of the Penghulu's Court,
Magistrates' Courts and Sessions Courts.

Syariah Courts will enforce Islamic Law against the Muslims. Islamic Law therefore applies to
Muslims only.

Subordinate or Inferior Courts

Penghulu's Courts
• Lowest level of Subordinate Courts
• Presided by Penghulu or Headman appointed by the State Government or Mukim
• Criminal jurisdiction of a Penghulu's Court is limited to try offences of a minor nature where a
punishment by a fine not exceeding twenty five ringgit (RM25.00)

Magistrates' Courts
Dealing with minor civil and criminal cases
• First Class Magistrate
• Second Class Magistrate

First Class Magistrate

• Having jurisdiction to try all offences for which maximum term of punishment does not exceed
10 years of imprisonment or all offences punishable with fine

Where a person is found guilty, the magistrate may pass any sentence not exceeding
1. Five (5) years of imprisonment
2. A fine of ten thousand ringgit (RM10,000)
3. Whipping up to twelve (12) strokes
4. A combination of any above

Second Class Magistrate

• Having jurisdiction to try offences where the maximum term of imprisonment does not exceed
12 months or offences punishable with fine ONLY

A second class magistrate may pass any sentence

1. Not exceeding six (6) months imprisonment
2. A fine not more than one thousand ringgit (RM1,000)
3. Any sentences combining
For civil matters, the first class magistrate has authority to try all actions where the amount of the
dispute or the value of the subject matter does not exceed twenty five ringgit (RM25.00). The second
class magistrate shall only has jurisdiction to try civil matters where the plaintiff seeks to recover a debt
or money not exceeding three thousand ringgit (RM3,000)

Sessions Court
 • Highest of the Subordinate or Inferior Courts
• Criminal jurisdiction extends to all offences other than offences punishable with death.
• It can pass any sentences other than death sentence.

In civil matters, it has jurisdiction to try all actions where the amount in dispute or the subject matter
does not exceed one hundred thousand ringgit (RM100,000)

Superior Courts
The Superior Courts of Malaysia comprises;
• The High Court of Malaya
• The High Court in Sabah & Sarawak
• The Court of Appeal
• The Federal Court

The High Court

• Consist of two chief judges, one in Peninsular Malaysia & One in Sabah and Sarawak
• Jurisdiction of the High Court is original, appellate and supervisory
• It has unlimited criminal and civil powers

For civil matters, which cannot be determined in the Subordinate Courts is heard before the High Court
• In criminal cases, no case may be brought to the High Court unless an offender has been
properly committed for trial after preliminary hearing in Magistrates' Court
• In exercising its appellate jurisdiction, the High Court hears civil and criminal appeals from the
Magistrates' and Sessions Courts
• The High Court has power to refer any points of law arising in the appeal for decision of the
Court of Appeal if it feels for the public interest and paramount importance
• The High Court has been given general supervisory and revisionary jurisdiction over all
Subordinate Courts

The Court of Appeal

The Court of Appeal has jurisdiction to hear and determine any appeal against any High Court decision
on criminal matters.
• Has jurisdiction to hear and determine civil appeals for cases with the value of the subject
matter is two hundred and fifty thousand ringgit (RM250,000)
• When it has been heard, it has no power to review the case, no power to re-open, re-hear nor to
re-examine its decision for whatever reason

The High Court of Appeal has jurisdiction to hear and determine any appeal against any high court
decisions on criminal matters as well as civil appeals for cases where the amount of the subject matter
is at least RM250,000 where appeal has been heard and disposed by the Court of Appeal. It has no
power to review the case. The court also has no power to reopen, rehear nor to re-examine its decisions
for whatever purposes.

The Federal Court

Highest and final court in Malaysia
The Federal Court has jurisdiction in the following matters:
• To hear civil and criminal appeals from decision of a High Court
• To exercise exclusive original jurisdiction given by the Federal Constitution. (eg: It can hear
any disputes on any matter between any state and the Federal Government)
• It can also declare the validity of any federal or state legislation in excessing their power
• To determine constitutional questions which arisen in the proceedings of a High Court but
referred to the Federal Court for decision
• To give its opinion on any question referred to it by Yang Di-Pertuan Agong concerning the
effect of any provision of the Constitution

LAW OF CONTRACT
What is Contract?
2 or more parties entered into an agreement. According to S.2(h) of the Contracts Act, an agreement
enforceable by law.
-If parties hold an agreement, there is a agreement binding. If one of the parties have breached the
contract, the innocent parties can take an action against the contract breaker.

The statutes of the Contract Act 1950 (revised 1974), if the contract is silent of certain matters, they
will refer to English Law.

ELEMENTS OF CONTRACT
1. Offer/Proposal and Acceptance
2. Consideration
3. Intention to create legal relations
4. Free Consent
5. Capacity
6. Certainty
7. Legality
8. Formalities

*IF ONE OF ABOVE ELEMENTS IS MISSING, THERE IS NO CONTRACT.

Rights & Obligations

Once you have entered into an agreement, the law recognises its rights and obligations

Proposal
According to S.2(a) of the Contracts Act, "When one person signifies to another his willingness to do
or to abstain from doing anything with a view or by hoping to get assent from the Acceptor.

Types of Proposal

• Offer to an individual
Addressed to a particular person/bodies

• Offer to the world at large

Refers to anybody but provided that he/she fulfils the conditions of offer
e.g Advertisement to give reward for giving information of a loss property

CASE: Carlill v Carbolic Smoke Ball Co Ltd (page 12)

The defendants made an advertisement to give reward to anyone who still get the influenza after using
the product according to the instructions given. The Plaintiff used the products and followed the
instructions given but still became ill. The Plaintiff claims the reward but the defendants refused to
fulfil their promise. The plaintiff sued the defendants. It was held that the plaintiff had accepted the
offer made to the world at large made by the defendants (when she fulfilled the condition of the
offer). The Plaintiff was entitled to claim for the reward.

Communication of Proposal (CoP)

General rule stated that the proposal is only effective when it is communicated to the Acceptor.
-The CoP is complete when the Acceptor knows about it
-If the Acceptor forgets about the offer, he/she is in the same position as if he does not know about the
offer.

According to S.4(1), a communication of proposal is complete when it comes to the knowledge of the
acceptor.

CASE: R v Clarke (Page 13)

The Western Australian Government offered a reward for information leading to the arrest and
conviction of a person responsible for the murder of 2 police officers. X and Clarke were arrested and
charged with the murders but shortly after, the latter gave information which lead to another arrest, Y.
X and Y were later convicted for the offence and Clarke did not commit the murder claimed the reward.
His claim failed because the information was given to clear himself and not in reliance on the offer of
the reward.

Revocation of Proposal
According to General Rule, a proposal may be revoked at any time before acceptance.
According to S.5(1), a proposal may be revoked at any time before valid acceptance made by the
acceptor.
OFFER + ACCEPTANCE = CONTRACT

How can a proposal be revoked?

The revocation of a proposal must be communicated to the acceptor.
- According to S.6(a), the acceptor must know about the revocation

The notice of revocation of offer must come to the knowledge of the acceptor. It is not for the offeror
just to change his mind that he wants to revoke the offer. He must communicate about the revocation of
the offer to the acceptor.

According to S.4(3)(a), the communication of proposal is effective against the proposer when he/she
posts the letter of revocation.

According to S.4(3)(b), the communication of revocation of proposal is complete against the acceptor
at the moment it comes to the knowledge of the acceptor.

**S.5(1), S.6(a), and S.4(3)(b) must be read together

1. The revocation of ROP must be communicated to the Acceptor.

 CASE: Bryne v Tienhovern (page 22 & 23)
The defendant offered to sell 1000 boxes of tin plates. Defendants posted a letter of offer to the plaintiff
on 1st October. Defendant revoked his offer by post on 8th October. Plaintiff accepted the offer by
sending a letter and telegram on 11th October. Plaintiff received the letter of revocation of offer on 20th
October.

It was held that the contract was valid on 11th October the moment letter was posted. The letter
of revocation is efficient on 20th October.
2. By the lapse of time prescribed
- According to S.6(b), if a proposal is stated for a fixed time then it cannot be accepted after the time.
If no time is fixed, it can be accepted within reasonable time.

CASE: Ramsgate Victoria Hotel Co Ltd v Montefiore (page 23 & 24)

3. By failure of the acceptor to fulfil the conditions of proposal

- According to S.6(c), if the proposer made his proposal subjected to the fulfilment of a condition,
failure on the part f the acceptor to fulfil such condition will terminate the proposal. Then no
acceptance happen.

e.g An offer to buy goods may be terminated if the goods offered for sale are seriously damaged before
acceptance.

CASE: Financings Ltd v Stimson

The defendants made a high purchase for the plaintiff. The defendant made a condition before he
bought the car, it must be in a good condition. However, before it is sold to the defendant, the car was
badly damaged and had been stolen. The defendant refused to buy the car. The plaintiff then sued the
defendant.

It was held that the offer has been terminated because the plaintiff failed to fulfil the condition of
the offer.

4. S.6(d) - Dealing with death or mental disorder of the proposer

-Must be known or notified to the acceptor before acceptance taken place.
-If the acceptance taken place before the acceptor knows about these facts, the acceptance is VALID

Invitation to Treat (ITT)

Sometimes it may appear that a person is making an offer but in actual fact that he is not. He is making
an Invitation to Treat (ITT).

Invitation is a process of negotiation. The maker of invitation is the one who invites anyone (the public)
to make a proposal. Then it is up to the maker of ITT whether to accept or to reject. If it is accepted,
then there is contract.

Examples of ITT

1. Display of Goods
Display of goods in a shop window or in a self service shop are considered as ITT. The shopkeeper is
the maker of ITT by displaying goods in a shop window or self service shop. They are preparing to
consider an offer made by the customer. The offer is made by the customer when he/she selects the
goods for the payment at the counter. It is up to the shopkeeper whether to accept or reject the offer
made. If it rejected, there is no contract.

CASES:
Fisher v Bell
Pharmaceutical Society of Great Britain v Boots Cash Chemist Ltd

2. Advertisement or Circulars
The advertisement for selling goods or jobs applications that are being put in newspapers, magazines or
all sorts of circulars are considered as ITT.

CASES:
Patridge v Crittendon
Cocks v Hens

3. Tenders
The announcement for tenders in a newspaper are considered as ITT

4. Auction Sales
The auction sale itself is an ITT. The auction is a maker of ITT by conducting auction sales. They are
inviting the bidders to bid for the price. The bidders are making an offer when they bid. It is up to the
auctioneer to accept or reject the offer. The acceptance happen when the auctioneer knock down the
hammer.

ACCEPTANCE
It should be noted that where there is an offer, it is followed by acceptance.

According to S.2(b), an acceptance happens when the acceptor signifies his assent (menyatakan
persetujuan).

Characteristics of Acceptance

• According to S.2(b), only the acceptor can accept the proposal/offer.

• According to S.7(a), the acceptance must be absolute and unqualified (counter proposal)
• According to S.7(b), the acceptor may decide the manner of acceptance but if the proposer
fixed the mode of acceptance then it must be followed.
• Acceptance must be in positive form. Silence does not mean consent. This is because S.2(b)

CASE: Felthouse v Bindley

The plaintiff (Uncle) brought a letter to his nephew that he wanted to buy the horse. The letter
contained "If i hear no more from you, then i will consider that the horse is mine". The nephew did not
communicate his acceptance but he told the defendant (Auctioneer) to set aside the horse. However, the
defendant mistakenly sold the horse to a third party. The plaintiff then sued the defendant.

It was held that there was no contract because the nephew did not communicate his acceptance.

Although general rule stated that the acceptance must be communicated but there is an exception rule
that the acceptor need to communicate his acceptance. These situations are:

• When there is an offer to the world at large (CASE: Carlill v Carbolic Smoke Ball Co Ltd)
• When there is postal rule (CASE: Adams v Lindsell)

Communication of Acceptance (CoA)

General rule of CoA, the acceptance is effective only when it is communicated to the proposer.

According to S.4(2)(b), the CoA is complete against the acceptor when it comes to the knowledge of
the proposer. The CoA is effective when the offeror knows about the acceptance.

CASE: Felthouse v Bindley

Postal Rule (Exception Rule)

There is an exception to the general rule of CoA when an acceptance is made by post or telegram. This
exception rule is known as Postal Rule.

According to Postal Rule, once the letter is posted or the telegram is dispatched, the proposer is bound
by the contract even though the letter is lost, delayed, destroyed or the proposer did not know about the
acceptance.

According to S.4(2)(b), the CoA is complete against the proposer when it is on the way to him and out
of the control of the acceptor.

CASE: Adam v Lindsell

The defendant offered to sell wool to the plaintiff by post. The plaintiff then posted a letter of
acceptance. However in the meantime, the defendant had sold the wool to the third party.

It was held that there was contract between them at the moment the letter of acceptance was
posted.

e.g. 1st July - A posted a letter of proposal to B

3rd July - B posted a letter of acceptance to A

According to S.4(2)(a), the CoA is complete against A the moment B posted the letter of acceptance
regardless whether the letter is lost, destroyed, or A has no knowledge about the acceptance.

CASES:
Ignatius v Bell (page 20)
Entored Ltd v Miles Far East Corporation (page 19)

Revocation of Acceptance
According to S.5(2), an acceptance may be revoked at any time before the acceptance comes to the
knowledge of the proposer (even after the acceptor has posted the letter of acceptance)

Acceptor can revoke his acceptance at any time before the offeror knows about the acceptance. In such
case, the acceptor can use the speedier method of communication (phone)

e.g. 1st Sept - A offers by letter to sell his house to B

2nd Sept - B accepts and sent a letter by post (A is bound by contract with B S.4(2)(a))
10th Sept - A receives the letter of acceptance (B is bound by contract when the letter of
acceptance comes to his knowledge.

If B wishes to revoke his acceptance, he can do so at any time before the letter of acceptance
reaches A (10th September).

CASE: Dunmore v Alexander

Counter Proposal
According to S.2(b), an acceptance happen when the acceptor signifies his assent. When an offer is
accepted, it becomes a promise. The acceptance must be made exactly according to the original terms
of the offer without modification of additions.

According to S.7(a), an acceptance must be absolute and unqualified (mutlak dan tidak bersyarat),
meaning that the acceptance must be made without doubt and without adding any new terms of offer.

If there is any addition or modification of the original terms of proposal to the new terms, there is no
acceptance but merely a counter proposal.

Counter proposal is a rejection of the original proposal. Once it is rejected, the original proposal is
terminated then it cannot be subsequently accepted.

e.g. A offers to sell his bungalow to B for RM100k

B tells that he wishes to buy the house for RM80k
A rejects and later B wanted to buy the house at the original price. B is making counter proposal

Once he rejects the original price, he cannot accept it later.

CASE: Hyde v Wrench (page 14 & 15)

The defendant offered to sell his estate to the plaintiff on 6th June for $1000. On 8th June, the plaintiff
made counter proposal to purchase at $950. When the defendant refused to accept this proposal on 27th
June, the plaintiff wrote again purportedly accepting the original price.

The court ruled that no acceptance had occurred because the plaintiff's letter on 8th June had
rejected the original proposal which COULD NOT be revived.

**Postal rule (must remember dates, if else no need to memorise)

 Consideration
One party has given or promised to give some advantage or benefits to the other party. The moving of
advantage or benefit from one party to another is known as consideration.

According to S.2(d), consideration is when at the desire/request of the promisor, the promisee or any
other person has done or abstained from doing or does or abstain from doing something or promises to
do or to abstain from doing something, such act or abstinence or promise is called consideration.

Example of Consideration
Midah promises Baba RM50.00 if he cuts the grass in her garden. Midah is contractually bound to pay
Baba RM50.00. This is because the cutting of the grass is the advantage/benefit (consideration)
received by Midah in return for her promise.

Types of Consideration
• Executory
• Executed
• Past

i) Executory Consideration
When one promise is made in return for another promise.

For example,
A agrees to sell his car to B for RM15,000 and B promised to pay for it on delivery.

CASE: K. Murugesu vs Nadarajah (page 29)

The appellant agreed to sell a house to the respondent and the agreement was written on a scrap paper.
It is as follows:
"I agree to sell my house no. (address) held under.......to Mr. Nadarajah, the present tenant
of the house at $26,000 within three months from the date"

ii) Executed Consideration

When a promise is made in return for doing an act.

For example,
Offer to the world at large. A promise to give a reward for those who can return a lost cat. When B
found the cat and returned it to A, the act of finding the cat is considered as a consideration executed
by B

CASE: Carlill vs Carbolic Smoke Ball Co Ltd

iii) Past Consideration
A promise made after the performance of an act.

For example,
Ah Yam drowned in the river, Ee Teck is in difficulty and saved Ah Yam from drowning.
Two weeks later, Ah Yam offered to give RM3,000 for his effort.
The act of saving Ah yam was done before the promise

CASE: Kepong Prospecting Ltd vs Schmidt (page 30)

Schmidt, a consulting engineer had assisted another in obtaining a prospecting permit for mining iron
in the state of Johor. He also helped in subsequent formation of the company, Kepong Prospecting Ltd
and was appointed Managing Director. After the company was formed, an agreement entered between
them under which the company undertook to pay him 1% of the value of all sold from mining land.
This was in consideration of the services rendered by the consulting engineer on the behalf of the
company prior to its formation after incorporation and for the future.

Agreement Without Consideration

An agreement without consideration is void according to General Rule. Therefore it is not binding.

For example,
Siti promises Khir to give RM100 as gift. The promise is not enforceable
as a contract because no consideration has been given by Khir in return for Siti's promise.

Exceptions to General Rule (Contract without Consideration)

According to S.26, provided several exceptions where certain agreements without consideration is still
valid. Such agreements can be summarised as follows:

1) An agreement made on account natural and affection between parties standing in near relation
- S.26(a)

For this agreement to be valid, a few requirements must be fulfiled:

• It must be in a written and registered form
• It must be made on account of natural love and affection

CASE: Re Tan Soh Sim (page 32)

2) An agreement to compensate for a past voluntarily act where the promisor was compelled by
law to do so - S.26(b)

If the promisee has done something voluntarily for the promisor, the promisor then promised to
compensate the promisee, he can be compelled or forced by law to fulfil his promise.

For this agreement to be valid, certain requirements must be fulfiled:

• The promisee has voluntarily done the act
• The act done by the promisee made the promisor compellable by law to compensate
• It must be a promise to compensate either wholly or partly
For example,
Bobo saves Kum Kum's property from fire while Kum Kum is away and later
Kum Kum promised to give him something which he has done. That promise considered as promise
made by Kum Kum to compensate Bobo who has done something voluntarily for Kum Kum.
It is binding on Kum Kum to enforce his promise: that is to compensate Bobo.

CASE: J. M. Wotherspoon & Co. Ltd vs Henry Agency House (page 33)

3) An agreement to pay a statute barred debt - S.26(c)

A statute barred debt is a debt which cannot be recovered through legal action because of the lapse of
time. The time limit for an action is 6 years.

S.26(c) makes an exception to the above rule:

• The debtor must make a fresh promise to pay the debt
• The promise must be in written form and signed by a person to be charged or his authorised
agent

Consideration need not move from the promisee

Under English Law, consideration must move from the promisee but under local law, an agreement is a
valid contract even though a party has not given any consideration. He can enforce such promise
provided that somebody else has given consideration on his behalf.

According to S.2(d), consideration can move from promisee or any other person.

For example,
Ali, Adam and Siti are parties to an agreement. Siti promised to pay Ali RM3,000 if
Adam will repair her car. Adam repairs her car and unfortunately Siti fails to pay Ali as promised.
Although Ali has not given any consideration for Siti's promise, he may sue Siti on the promise because
consideration has been moved from Adam.

CASE: Venkata vs Verikatara'ma'ya (page 37)

Waiver of Performance
According to S.64, every promisee may dispense with or remit, wholly or partly, the performance of
the promise made to him, or may extend the time for such performance, or may accept it.

For example,
Rocky owes Bibah RM10,000. Rocky paid RM8,000 and Bibah accepted it in the satisfication
of the whole debt. So the whole debt is discharged.

CASE: Kerpa Singh v Bariam Singh (page 38 & 39)

 Intention To Create Legal Relations
Intention is the third element of contract. Since Constracts Act is silent on the question of intention,
then the English Law applies.

Intention to create legal relations mean that the innocent party wishes to bring an action against the
contract breaker when there is breach of contract.

There are 2 presumptions in determining intention to create legal relations:

• In business agreements, there is presumption that parties intend to create legal relations
• In social, domestic or family agreements, it is implied that parties have no intention to create
legal relations

CASE: Balfour vs Balfour (page 43)

The defendant was a civil servant stationed in Ceylon (Sri Lanka) and while on leave in England, he
had promised to pay his wife monthly allowance as maintenance. The wife was unable to accompany
the defendant abroad because of her poor health. He defaulted and the wife sued for breach of contract.
It was held that it was not legally enforceable agreement because the parties did not intend that
they should be attended by legal consequences.

However, the presumption above can be rebutted if the parties concerned entered into a written
agreement. In such a case, the parties intend to create legal relations.

CASE: Merrit vs Merrit (page 44)

Illegality
A contract may be void because of illegality. Certain agreements are considered illegal where:
• It is forbidden by law
• Its nature if permitted would defeat any law
• It is fraudulent
• It involves injury to the person or property
• The court regards it as immoral or opposed to the public policy

Uncertainty of Terms
According to S.30, the meaning of the agreements must be certain or capable of being certain. If not,
such agreement is void.

CASE: Karuppan Chetty vs Suah Thian (page 46)

The contract was void for uncertainty because the parties agreed to a lease of $35 per month for as long
as he likes.

Formalities
A contract can be made orally, in writing or by conduct according to general rule. However, in
Contracts Act there are 2 provisions requiring agreements to be in written form:
• Agreements made on account of natural love and affection between parties standing in near
relations
• Agreements to pay a statue barred debt according to S.26(c)
Law of Agency
 Agency is defined as the relationship between agent and principal.

Principal is defined as a person who gives an instruction to another (agent) to act on his behalf. As a
principal, he must have full capacity in order to make a contract.

Agent is a person who acts for another (principal). He does not need to possess full capacity in dealings
between principal and third parties. He can be a minor

CASE: Chan Yin Tee vs William Jacks and Co (Page 381)

**Law of Agency is covered by part x of the Contracts Act 1950 (Revised 1974)

In Law of Agency, there are two contracts:

• Contract between Principal and the Agent
• Contract between the Principal and Third Party through the work of the Agent

Types of Agency

There are five (5) types of Agency (refer page 380)

1. By express appointment by the Principal
2. By implied appointment by the Principal
3. By ratification
4. By necessity
5. By the Doctrine of Estoppel or holding out

By Express Appointment
The authorisation for the creation of agency by express appointment can be in written or oral. If the
agent is authorised to enter into contracts under seal, his appointment must be made under power of the
Attorney.

Implied Appointment
The law will presume the creation of agency by implication through:

1. A person by his words or conduct holds out another person (an agent) as having authority to act
on his behalf. In such a case, if the agent performed the act within the ordinary course of
business, the principal will be bound by the contracts made by the agent
CASE: Chan Yin Tee vs William Jacks & Co (page 381)
2. The relationship of principal and agent may also exist between husband and wife who lived
together. There is a presumption that the wife has to pledge her husband's credit for neccesaries
which are suit for their style of living. However, this presumption can be rebutted (refer page
382)

Agency by Ratification
Before this type of agency arises, one of two situations must exist:
 • An Agent who was appointed has exceeded his authority
• A person who has no authority to act for the Principal has acted as if he has the authority

Rights of Principal
When any of the above situations happen, the principal either reject the contract since he has not
authorised it or accept the contract. When he accepts and confirms the contract the it is known as
Ratification.

Effects of Ratification
If the Principal accepts and confirms the contract, it is VALID and binding on the principal.

The effect of the ratification is retrospective that is backdated or effective at the time when the original
contract was made by the Agent and not from the date of Principal's ratification. (refer page 383)

Conditions for the Ratification

There are nine (9) conditions that must be observed for the ratification. (refer page 383)
• The Act or Contract must be unauthorised
• The unauthorised act mus be recognised by law
• The Agent, must at the time, expressly act as an agent (S.149)

CASE: Keighley Maxted vs Durant (Page 384)

• The Principal must exist or capable of being ascertained when the contact is made.

CASE: Kelner vs Baxter (Page 384)

• The Principal must have the capacity at the time the contract is made and at the time of
ratification.
• The Principal must have full knowledge of material facts
• The Principal must ratify the whole contract
• The ratification must be made within reasonable time

CASE: Metropolitan Asylum Board vs Kingham & Sons (Page 385)

• The ratification must not injure a third party

Agency By Necessity
A person may become an Agent by Necessity even though he has not been appointed.
Two situations of Agency by Necessity:
 1. A wife who is deserted or justified in leaving her husband and has no means of support can
pledge her husband's credit for the necessaries of life according to the income and position of
the husband even against his wishes. However, if she has been given an adequate allowance and
has means of her own money or earning capacity there is no Agency by Necessity.

2. Through commercial relationship, when someone who has been entrusted to look after one's
property, he can use his own discretion to protect that property even though he has no express
authority to do so.

Before Agency by Necessity can arise:

• It is impossible for the Principal's instructions

CASE:
Great Northern Railway vs Swaffield (Page 386)
Springer vs Great Western Railway (Page 387)

• To prevent the loss suffered by the Principal especially when it involves perishable goods. E.g.
The Agent sold them in order to prevent them from rotting.
• The Agent has acted in good faith

Agency by Estoppel (STOP)

A person is not bound by a contract made by other person if he has not given such authority. However,
if a person by his words or conduct allows a third party to believe that A is his agent and A is not and
the third party believes and relies on it which may cause to his detriment, that person (Principal) will be
estopped or precluded from denying the A's authority.

Suppose A tells T in the presence of P that A is P's agent and P does not contradict this statement. P,
later cannot deny that A is his agent if T sells goods to A believing him to be P's agent and later claims
for the price.