Capacity to Contract

Capacity is concerned with the age and mental soundness at which a person is capable of making a
valid contract.

The general presumption under common law is that a person who enters into a contract has the
full capacity to do so.

Section 11 Contracts Act 1950 states that only a person who is of sound mind and the age of
majority is competent to contract.

Minors - Who is a minor?

A minor is a person who has not reach the age of majority. In Mohori Bibee v Dhurmodas
Ghose it was held that an infant (age below 18) cannot make a valid contract

In Malaysia, Section 2 of the Age of Majority Act 1971 states that the age of majority is 18 years old.
Anyone below 18 years is regarded as a minor.

General Rule on Minors:

The general rule is all contracts entered into by a minor are void. This is a protection given to minors
as it is presumed that minors may lack judgment and may be exploited. But there are exceptions to
this rule and that is when the minor contracts for necessaries.

Tan Hee Juan v Teh Boon Keat [1934], the High Court, in a case where a minor had transferred
land, applying the Privy Council decision in Mohori Bibee v Dhurmodas Ghose case, agreed that
contracts by minors are void.

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 There are exceptions to the general rule:

Minors can enter into:-

Contracts for
Necessaries

Contracts of
Contracts for
service of
scholarships
Apprenticeship

Contracts of
Insurance

❖ Contracts for necessaries – see Section 69 CA 1950.

❖ Contracts for scholarship
❖ Contracts of insurance
❖ Contracts of service of apprenticeship

A. Contracts for Necessaries

Section 69 CA – which deals with necessaries, states:

If a person, incapable of entering into a contract, …is supplied by another person with necessaries
suited to his condition in life, the person who has furnished such supplies is entitled to be
reimbursed from the property of such incapable person.

The important points to note in Section 69 are:

❖ The necessities must have been actually supplied to a minor by the person.

❖ The person who supplied the necessaries is only entitled a reimbursement, because the word
use in section 69 is ‘reimbursed’. (a reasonable price)

❖ The minor is not personally liable, because he is an ‘incapable person’ – see word in Section
69. Therefore, the minor is obliged to pay only if he has the ‘property’ to do so.

‘Necessaries’ are things which are essential to the existence and reasonable comfort of the
infant such as food, shelter, clothing, medical services and even education, but luxurious items
are excluded. (Note: What are necessities is not statutorily defined. See S 69 CA – see
below. It varies from case to case depending on the minor’s station in life).

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 The test for necessaries depends on:
i. The nature of the goods or services supplied
ii. The minor’s actual needs and his station in life

❖ Education has also been held to be included in the term, ‘necessaries’ –

➢ Government of Malaysia v Gurcharan Singh (1971).

Nash v Inman
A tailor sued for the price of the clothes, including 11 fancy waist coats, supplied to an infant
undergraduate. The court held that since the father was able to bring evidence that the son, a minor,
was already adequately stocked with the goods in question, the clothes were no longer a necessity.

B. Scholarship Agreements

✓ Under Section 4(a) of the Contracts (Amendment) Act 1976, a scholarship agreement
between a minor and an appropriate authority cannot be invalidated on the ground of his
minority.

✓ Appropriate authority refers to the Federal Government, State Government, statutory

authority or an educational institution, e.g. university.

C. Contracts of Insurance

The Financial Services Act 2013 provides that a minor age 16 years or above may enter into a
contract of insurance. But if the minor is aged above 10 but is below 16 years old, he has to
have the consent of his parent or guardian.

D. Contracts of Service (Apprenticeship)

Under the Children & Young Persons (Employment) (Amendment) Act 2010, children and
young persons are allowed to do ‘light work’ in family enterprises, any licensed public
establishments, any approved internships, apprenticeships and Government-sponsored work.

But they are not permitted to do hazardous work or any underground work.

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Certainty
Another essential element of a valid contract is that the terms of the agreement must be
certain. There would be no binding contract if it cannot be established with certainty what it
was that the parties had contracted for.

Agreements void for uncertainty.

Section 30 states – ‘Agreements, the meaning of which is not certain, or capable of being
made certain, are void’.

Aspects of uncertainty:

There are about FIVE (5) aspects of uncertainty in a contract: -

1. Uncertainty as to the language used.

If the language use is too vague, in such a situation the court is likely to hold that
there is no concluded agreement i.e. the contract will be void for uncertainty.

2. The contract is incomplete.

This is where the court finds that there is failure to reach agreement on a vital or
fundamental term of an agreement e.g. where the critical or essential terms has yet
to be agreed upon.

3. Uncertainty as to subject matter - see illustration in S 30.

a. A agrees to sell to B ‘a hundred tons of oil’. There is nothing whatever to

show what kind of oil was intended. The agreement is void for uncertainty.

b. A agrees to sell to B one hundred tons of oil of a specified description, known

as an article of commerce. There is no uncertainty here to make the
agreement void.

c. A, who is a dealer in coconut oil only, agrees to sell to B ‘one hundred tons of
oil’. The nature of A’s trade affords an indication of the meaning of the
words, and A has entered into a contract for the sale of one hundred tons of
coconut oil.

d. A agrees to sell to B ‘all the grain in my granary at Ipoh’. There is no

uncertainty here to make the agreement void.

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 4. Uncertainty as to Price – see illustration in S 30.

e. A agrees to sell to B ‘one thousand gantangs of rice at a price to be fixed by

C’. As the price is capable of being made certain, there is no uncertainty here
to make the agreement void.

f. A agrees to sell to B ‘my white horse for RM500 or RM1000.’ There is nothing
to show which of the two prices was to be given. The agreement is void.
(Here the price is not certain).

5. Uncertainty as to Duration of Time - A case to illustrate the point is:

Karuppan Chetty v Suah Thian

In this case the parties agreed to a lease at a rent of $35 per month ‘for as long as he
likes’.

The court held that the lease was void for uncertainty because the duration of the
lease was uncertain.

Legality

An agreement may contain all the requirements of a valid contract but it may still be illegal
and unenforceable.

Section 10 provides that all agreements are contracts if they are made…for lawful
consideration and with a lawful object.

Section 24 provides that the following consideration and objects are unlawful –

(a) it is forbidden by law;

(b) it is of such a nature that, if permitted, it would defeat any law;

(c) it is fraudulent;

(d) it involves or implies injury to the person or property of another; or

(e) the court regards it as immoral, or opposed to public policy.

Therefore, every agreement of which the object or consideration is unlawful is void.

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Privity of Contract.

✓ The common law doctrine of privity of contract dictates that only persons who are
parties to a contract are entitled to take action to enforce it .
✓ It means that only those who are parties to the contract or privy to the contract can
sue or be sued on it .
✓ A contract generally, cannot confer rights or impose obligations arising under it on
any person except the parties to it.
✓ A person who is not a party to a contract may not enforce a contract even though he
stands to gain a benefit from the contract (a third party beneficiary).

Examples

✓ If A enters into a contract with B, only A and B can sue on the contract, C who is not
a party to the contract cannot do so.
✓ A buys a car from B and gives it to his wife C. The car was faulty. C cannot take an
action in contract against B because she is not a party to the contract between A and
B.

Since the Contracts Act 1950 is silent on this matter, the English law is applied pursuant to
the Civil Law Act 1956.

In Kepong Prospecting Ltd v Schmidt (1968), it was held that the English principle of privity
of contract, namely that only a party to a contract can sue or be sued, is also applicable in
Malaysia.

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Terms of Contract
Introduction

Once a valid contract has been formed between the parties, it now becomes necessary to
ascertain what the parties have actually agreed upon.

Thus, statements made during negotiation leading to the agreement will be incorporated
into the contract in the form of terms.

What are terms in a contract?

Terms basically are the clauses that appear in a written contract. They define the rights and
duties of the parties, a breach of which would entitle the injured party to an action for
damages for breach of contract.

TERMS are either expressed or implied and can be further classified into conditions,
warranties or innominate terms.

A. Express Terms

What did the parties say or write? An express term can be made orally or in writing – see
Section 9.

Usually express terms are in writing. Identification of express terms is by looking at the
contract document.

B. Implied Terms

Implied terms do not appear in the contract but are presumed based on certain grounds.
Implied terms read into the contracts may be justified by reference to a number of
acceptable practices such as from customs or trade usage, provision of statutes or inferred
by judges out of necessity to give business efficacy to the contract
i.e. to give the full effects to the intention of the parties.

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IMPLIED TERMS

IMPLIED
TERMS

BY CUSTOMS
BY COURTS BY STATUTES
AND TRADE USAGE

Implied Terms

In addition to the express terms which the parties have adopted, there may be implied
terms imported into the contract from its context. Implied terms do not appear in the
contract but are presumed based on certain grounds. Implied terms read into the contracts
may be justified by reference to a number of acceptable practices such as from customs or
trade usage, provision of statutes or inferred by judges out of necessity to give business
efficacy to the contract i.e. to give the full effects to the intention of the parties.

➢ By court - when the term must obviously have been the intention of the parties or
that it is necessary in order to give business efficacy to the contract:
Case: The Moorcock [1889] 14 PD 64

➢ By Statutes – example: Sections 14, 15 & 16 Sale of Goods Act 1957, Sections 7(1) &
(2) Hire Purchase Act 1967.

i. S14 (a) – provides for the implied condition that a vendor who sells goods must
possess the right to sell.

ii. S14(b) – provides ‘an implied warranty that the buyer shall have and enjoy quiet
possession of the goods, and in subsection (c) implied that goods sold ‘shall be
free from any charge or encumbrance in favour of any third party not declared or
known to the buyer before or at the time when the contract is made’.

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 • By customs and trade usage

This means the contract may be regarded as containing customary or trade terms
not specifically mentioned by the parties.

TRADE USAGE: The manner and custom that is commonly practiced and generally
accepted and used by others in a trade.

Yung Ung Kai v Enting [1965] – terms implied by trade usage

D entered into a written agreement with P for the sale of timber which had
communal and customary rights. In order to cut timber, license from the Govt. is
necessary but the agreement between the parties did not stipulate about the
license. D tried its best but the govt. refused to give the license. D claimed for the
deposit back from P.

held: Obtaining a license is an implied term in the contract and its failure amounted
to frustration of the contract.

Here for business efficacy the High court implied a term in the contract i.e. the sale
of timber was to be subjected to the obtaining of the necessary license because ‘it
must have been in the minds of the parties’ that without a license one cannot cut
timber.

TERMS

TERMS

INNOMINATE
CONDITION WARRANTY
TERMS

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Conditions

A condition is a term in the contract which is so vital or essential to the main purpose of the
contract that its breach by one party will entitle the innocent party to repudiate the
contract. It must be so fundamental to the contract without which the contract would
collapse.

(To repudiate means to refuse to be bound or to refuse to accept – the contract)

S 12 SOGA 1957 – give both terms a definite meaning:

S 12 (2) SOGA 1957 states – A condition is a stipulation essential to the main purpose of the
contract, the breach of which gives rise to a right to treat the contract as repudiated.

Warranty

A warranty is a minor term. A breach of warranty will not repudiate the whole contract. It
only gives rise to an action for damages, not repudiation of the whole contract. Why?
Because a warranty is only secondary or collateral to the main term of the contract and its
breach will not affect the efficacy of the whole contract.

S12(3) Sale of Goods Act states – A warranty is a stipulation collateral to the main purpose
of the contract, the breach of which give rise to a claim for damages but not the right to
reject the goods and treat the contract as repudiated.

Example: A contract for the sale and purchase of a Toyota Camry for RM150k and the car
was subsequently delivered without the engine. The car simply cannot be used for the
purpose it was bought. A very vital or essential term so fundamental to the contract has
been breached that in law it would be termed as a breach of a condition.

Innominate Terms

This is a term that is neither a condition nor a warranty. Much will depend on the
circumstances and effect of the breach. If the effect of breach is substantial then the
innocent party may repudiate the contract, but if the effect of breach is minor then it would
be treated as a breach of warranty.

Innominate or intermediate terms -- are terms which cannot be classified as conditions or

warranties. They fall in between them. The court would have to look into the seriousness of
the breach and determine whether the plaintiff would be entitled to terminate the contract
or only be entitled to damages only.

If there is no substantial loss then the innocent party would not be allowed to repudiate the
contract but only claim for damages, as in the case below.

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Voidable, Void and Illegal Contracts
Void means the agreement is invalid or has no legal effect (ab initio), as such no rights or
obligations are created at all. Void contracts are no enforceable in law.

Voidable means the contract can be regarded as void or valid at the option of the innocent
party. A voidable contract has legal effect until avoided. It gives one party, but not the
other, the choice of either affirming or rejecting the contract. The agreement is valid and
binding until the party entitled to avoid it opts to do so.

FREE CONSENT

The key element that will determine whether a contract is valid, void or voidable rest on the
presence of ‘free consent’.

The law as in S10 (1) states that all agreements are contracts if they are made by the free
consent of the parties.

This is followed by Section 14 where it states consent is ‘free’ when it is not caused by one
or more of the following elements:

VITIATING FACTORS EFFECT OF VITITATING FACTORS ON A

CONTRACT
COERCION (s15) VOIDABLE
UNDUE INFLUENCE(s16) VOIDABLE
FRAUD(s17) VOIDABLE
MISREPRESENTATION(s18) VOIDABLE
UNILATERAL MISTAKE (s 23) VALID
BILATERAL MISTAKE (s 21) VOID

Vitiating Factors

If the consent was obtained by one or more of the above means then the contract is said to
have been vitiated for lack of consent because one party was put in a disadvantageous
position. (Vitiate means make invalid or make ineffective – become invalid).

Why is free consent important when parties enter into a contract?

A contract must be made at the free will of the parties and not where one party obtains an
unfair advantage over the other. Both sides must negotiate on equal grounds and be willing
parties.

If consent to an agreement is not given freely the agreement is either void or voidable.

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Section 19 (1) states that when consent to an agreement is caused by coercion, fraud, or
misrepresentation, the agreement becomes a contract voidable at the option of the
innocent party.

COERCION – Section 15

Coercion is defined in Section 15 as the

✓ committing or threatening to commit any criminal act, or

✓ the unlawful detaining or threatening to detain, any property, to the prejudice of any
person whatever,
✓ with the intention of causing any person to enter into an agreement.’

Effects of Contract Due to Coercion: When consent to an agreement is caused by coercion,

the agreement is voidable at the option of the innocent party.

UNDUE INFLUENCE – Section 16

Section 16 (1) states that there is undue influence in a contract:

i. Where there is a relationship between the parties in which one party is in the
position to dominate the will of the other party; and
ii. The dominant party uses that position to obtain an unfair advantage over the other
party.

Section 16(2) states - a person is deemed to be in a position to dominate the will of another –

• where he holds a real or apparent authority over the other, or where he stands in a
fiduciary relation to the other, or

• Where he makes a contract with a person whose mental capacity is temporarily or

permanently affected by reason of age, illness, or mental or bodily distress.

Section 16(3)(a) provides that where the transaction on the face of it appears
to be unconscionable, then the burden of proving that the contract was not induced by
undue influence shall lie on the party who is in a position to dominate the will of the other.

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Illustration (a)

A having advanced money to his son, B, during his minority, upon B’s coming of age, obtains,
by misuse of parental influence, a bond from B for a greater amount than the sum due in
respect of the advance. A employs undue influence

Illustration (b):

A, a man enfeebled by disease or age, is induced by B’s influence over him as his medical
attendant, to agree to pay B an unreasonable sum for his professional services. B employs
undue influence.

Undue Influence” occurs where the relations subsisting between the parties are such that

✓ one of the parties is in a position to dominate the will of the other and
✓ he uses that position to obtain an unfair advantage over the other.
✓ Once the above requirements are established, the dominant party bears the burden
of proving that the contract was not induced by his undue influence.

What is the effect of Undue Influence?

The effect of undue influence is to render the contract voidable at the option of the innocent
party. The innocent party can recover his losses under the Contracts Acts.

Examples of relationships wherein undue influence is presumed:

Undue influence is Undue influence is

presumed not presumed

parent & child

Employer & Employee
doctor&patient
Principal & Agent
solicitor&client

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FRAUD – Section 17

There must be intention to deceive or to induce the other party to enter into the contract,
and there must be reliance on the false statement by the other party.

A false statement by itself does not give rise to fraud. The person must have relied on the
statement made by the representor and then entered into the contract.

Letchumy v Annamalay [1982] - fraud

P, an illiterate Indian woman rubber tapper was induced to enter a sale and purchase
agreement, when all she wanted was to take a loan by charging her property. D fraudulently
represented to her that the document she was signing was for a loan to be used to
discharge her land. The documents were actually an agreement to sell her land.
Subsequently the defendants sold off her land. She sought to bring an action to rescind the
agreement. The court held that there was fraud and the contract had to be rescinded. She
was also awarded damages for the fraud.

Weber v. Brown [1908]

The seller made a fraudulent representation on the number of rubber trees on a rubber
estate, causing the buyer to purchase the estate. The sale was set aside.

Definition of fraud

S17 defines fraud to mean acts done with intention to deceive or induced the other party
to enter into a contract. This section gives 5 different kinds of fraudulent acts:

(a) Suggesting a fact by one who knows that it is not true

(b) the active concealment of a fact by one having knowledge of the fact;

(c) a promise made without any intention of performing it;

(d) committing any other act fitted to deceive, and

(e) any such act or omission as the law specially declares to be fraudulent.

Even though there are 5 types of fraudulent acts, generally when a person causes another to
act on a false representation which the maker himself does not believe it to be true, he
commits a fraud.
14
Section 17 (a) – suggestion of fact which is not true

Operation of S17 (a) govern by S19 illustrations (a):-

A, intending to deceive B, falsely represents that 500 gantangs of indigo are made annually
at A’s factory, and thereby induces B to buy the factory. The contract is voidable at the
option of B.

Section 17 (b) – Concealment

The operation of S17 (b) is governed by Section 19 illustration (c):

B, having discovered a vein of ore on the estate of A, adopts means to conceal and does
conceal the existence of the ore from A. Through A’s ignorance B is enabled to buy the
estate at an undervalue. The contract is voidable at the option of A.

Section 17 (c): - promise made without any intention to perform it

This section covers fraudulent promise i.e. promises made without any intention of
performing it at all. Here the promisor knows that he cannot perform when he makes his
promise or he makes a promise which he intends to break.

Edgington v Fitzmaurice – Section 17(c) case:

The company issued a prospectus stating that they intended to expand their business, buy
more vans etc. However the real intention was that there were creditors pressing them for
payment and the money was used for that purpose.

The court held there was fraud under section 17 (c).

EFFECT OF FRAUD

• Section 19(1), the contract is voidable at his option.

• Section 19(2), he can:
✓ Rescind the contract and claim damages
✓ Affirm the contract and claim damages.

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MISREPRESENTATION - Section 18

Misrepresentation means a false statement made by one party (representor) which induces
the other party (representee) to enter into a contract.

There are 3 main ingredients essential to prove misrepresentation:

• Nature of statement
An actionable misrepresentation must be a false statement of fact, not opinion or
future intention or law.

• Was the statement material?

• Was the plaintiff induced?

The misrepresentation must be material, in the sense that it would have induced a
reasonable person to enter into the contract.

Innocent misrepresentation

S18 (a)

In the case of innocent misrepresentation, there is no element of fraud or negligence

present. The maker of the false statement honestly believes that his statement is true, but
however it turns out to be untrue.

Negligent misrepresentation

S 18 (b)

In negligent misrepresentation, there is no intention to deceive the other contracting party,

and the maker honestly believes in what he had represented, but he failed to take adequate
care at the time of making the statement e.g. where the party making the statement is
careless as to its truth.

Hedley Byrne v Heller & Partners.

HB contacted A’s banker HP for references. The bank gave a favorable report of A’s credit-
worthiness. HP bank headed the document “Without Responsibility”. HB relied on the
misleading report and gave substantial credit to A and later suffered heavy loss when A
went into liquidation. HB sued HP bank in negligence.

Held: Where a person (HP bank) is so placed that others would rely on his judgment, then
he has a duty of care to that others to give the right information.

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What is the effect of misrepresentation?

The effect of misrepresentation provided for in Section 19 (1) is that, when consent to an
agreement is caused by… misrepresentation the agreement is a contract voidable at the
option of the innocent party.

MISTAKE – sections 21 (void) & 23 (valid)

Mistake by both parties

Section 21 states that where there is a mistake by both the parties, the agreement is void if
both parties are under a mistake as to a matter of fact essential to the agreement.

Illustrations to section 21:

The illustrations below showed a situation where the subject matter no longer exists at the
time of the contract. The subject matter is essential or fundamental to the agreement; its
absence would render the contract void.

Illustration:

(a) A agrees to sell B a specific cargo of goods supposed to be on its way from England
to Klang. It turns out that, before the day of the bargain, the ship conveying the
cargo had been cast away and the goods were lost. Neither party was aware of
the facts. The agreement is void.

(b) A agrees to buy from B a certain horse. It turns out that the horse was dead at the
time of the bargain, though neither party was aware of the fact. The agreement
was void.

The 2 key elements that must be satisfied under Section 21 are –

(i) that both the parties are under a mistake as to a matter of fact, and

(ii) the matter of fact is essential to the agreement’.

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A case in point will be Raffles v Wichellhaus:

The parties had an agreement for the sale of a cargo of cotton arriving from London by a
ship called ‘The Peerless’ sailing form Bombay. Unknown to the parties there were two ships
of the same name both leaving from Bombay at different times. One party was thinking
about the Peerless sailing in October while the other was thinking about the one sailing in
November.

They both were negotiating under a mistake of fact as they had different ships in mind.
Since both parties were not thinking of the same thing in the same sense, the contract was
void for mutual mistake.
UNILATERAL MISTAKE:

Mistake made by one party only – Section 23

S 23: Contract caused by mistake of one party as to matter of fact:

This is a mistake of fact caused by one party to the agreement. It does not make the
contract void. The contract is valid.

In Tamplin v Jones, there was bidding for a public house at an auction. A bid was made in
the mistaken belief that the property includes a field.The court held that there was a valid
contract between the parties. The courts held on to the doctrine of ‘caveat emptor’ (buyer
must be aware what you are buying).

The effects of Breach for Void & Voidable Contracts

Consequence of void contracts – s66.

Such agreements are not enforceable. Under Section 66 – for void contract, the person who
received any advantage under the contract must restore it to the other party or pay
compensation.

Consequence of voidable contracts – s65

Section 65 provides that in a voidable contract the innocent party who rescinds (terminates)
the contract, he must restore or ‘give back’ any benefit received from the other party. But at
the same time, if the innocent party has provided services or supplied goods to the other
party, the innocent party can recover reasonable sum for it and if the innocent party has
paid money, he may be entitled to recover the sum paid.

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VOID AND ILLEGAL CONTRACTS
(Sections 24, 25, 26 & 30)
Section 2 (g) – a void contract is an agreement which is not enforceable by law.

Unlawful agreements – Sections 24 & 25:

Section 24: The consideration or object of an agreement is lawful, unless –

a. It is forbidden by law
b. it is of such a nature that , if permitted, it would defeat any law
c. it is fraudulent
d. it involves injury to the person or property of another
e. the court regards is as immoral or opposed to public policy.

In each of the above cases, the consideration or object of the agreement is unlawful.
Therefore every agreement where the object or consideration is unlawful, the agreement is
void.

Illustration:

1. A and B enter into an agreement to divide amongst themselves money acquired by

fraud. The agreement is void, as its object is unlawful.

2. A promises to obtain for B a job in the government services, and B promises to pay A
RM1000. The agreement is void, as the consideration for it is unlawful.

Agreement forbidden by law – Section 24 (a) & (b):

Chung Khiaw Bank Ltd v Hotel Rasa Sayang

A loan was given to the Hotel by CK Bank. The hotel secured the loan by giving the bank
several documents of guarantee. The documents of guarantee showed that the hotel shares
were purchased by Company A and the hotel in return had also gave financial assistant to
Company A. Section 67 of the Companies Act 1965 does not allow companies to loan money
in order to buy back its own shares. The loan agreement was against the law and therefore
void.

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Agreement that is fraudulent – Section 24 (c):

This category of fraud under 24(c) is about fraudulent object or consideration.

E.g. 1 - An agreement to divide gains acquired by illegal betting.

E.g. 2 – In a relationship between Principal and Agent where the agent secretly make a profit
our of the Principal e.g. Agent agrees for money and without the knowledge of the Principal,
to obtain for B a lease of land belonging to the Principal, thus making a secret profit out of
the Principal. This is unlawful.

Contract injurious to persons or property – Section 24 (d):

If 2 parties conspired for profit to cause physical damage to a person’s property or cause
physical harm to him, the agreement is unlawful.

Agreement that is immoral or against public policy – Section 24 (e):

The law covers 2 aspects i.e. immorality and public policy.

Immorality:

a. Illustration K – A agrees to let her daughter for hire to B for concubinage. The
agreement is void, because it is immoral.

b. Aroomogam Chitty v Lim Ah Hang – an agreement to lend money for the purpose of
running a brothel.

Public policy:

A contract is said to be against public policy if it brings harm to society.

Examples:

a. A promised by a married person to marry another who knows that this person is
married is against public policy.

b. Contracting with the enemy when the country is at war.

Section 25 – an agreement is also void if part of the consideration or object is unlawful.

Illustration:

A promise to supervise, on behalf of B, a legal manufacture of indigo, and an illegal business

in dangerous drugs. B promises to pay A, a salary of RM100k a year. The agreement is void
because the object of A’s promise and the consideration for B’s promise, part of it is
unlawful.
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Other cases of Void Contracts:

Section 26 – agreements made without consideration is void unless made in writing and on
account of natural love and affection. (See consideration notes).

Section 30 – agreement void for uncertainty – agreements, the meaning of which is not
certain, or capable of being made certain, are void e.g. A agrees to sell to B ‘a hundred tons
of oil.’ What kind of oil? Agreement void.

21