SBSD2073-01 COMMERCIAL LAW

SEMESTER 1 2022/2023

GROUP ASSIGNMENT

LECTURER: DR HAKIMAH BINTI MUHAMMAD ZIN

GROUP MEMBERS

NO. NAME MATRIC NO.

1. AHMAD FAIRUZ MAHARDIKA A20BS0184

2. JUVIPRIYA SEVA A21BS0040

3. NURFARIAH NAYLI BINTI MOHD NAIM A21BS0106

4. LIU ERN QI A21BS0048

5. NUR ELZAHRA BINTI MAT SAMAN@MOHD A21BS0084

SUFFIAN
1.0 Malaysian law on the capacity to contract

Contract Act 1950 section 10, all agreements must be made with the free consent of parties
competent to contract.

Contract Act section 11, every person is competent to contract, who is of the age of majority
according to the law to which he is subject, and who is of sound mind, and is not
disqualified from contracting by any law to which he is subject.

According to section 11, there are three consents on that which are the age of majority, sound
mind, and not disqualified from contracting.

1.1 Age of majority

Age of Majority Act 1971 section 2 stated the age of the majority is defined as 18 years old.
As a result of which in order to enter a contract, the parties must be 18 years old and above.
Then, the contract is said to be valid. On the contrary, if the party is less than 18 years old
which means that the person does not have any ability or capacity to the contract legally, any
of the contracts made by the minor is void.

For example, Kay, who is aged 17 years and 9 months old, borrowed money in the amount of
RM4500 to buy a laptop from Chris and promised that he would return the money to Chris.
After 3 months, Chris sued Kay because of not returning the money. However, Jay proved
that he was a minor when making the contract. So, the court held that Chris could not claim
the money back as Kay is a minor, and the contract made between them is void.

1.2 Sound mind

Contract Act 1950 section 12(1), a person is said to be of sound mind for the purpose of
making a contract if, at the time when he makes it, he is capable of understanding it and of
forming a rational judgement as to its effect upon his interests.

Contract Act 1950 section 12(2), a person who is usually of unsound mind, but
occasionally of sound mind, may make a contract when he is of sound mind.

Contract Act 1950 section 12(3), a person who is usually of sound mind, but occasionally
of unsound mind, may not make a contract when he is of unsound mind.
Based on the Contract Act 1950, the party is said to be of sound mind at the time when the
contract was made and is able to understand the contract that the party entered. The sound
mind could be referred to as the mental state of the party at the time of entering a legal
contract. A person of sound mind has the ability as well as the capacity to understand the
contract made. However, the party is usually an unsound mind but the party sometimes
sound mind has the capacity to make a contract when the party sound mind. In contrast, the
party may not make any contract when the party is unsound mind.

For example, Jeff made a contract with Hanson. Jeff said he was willing to buy Hanson’s car
but at that time Jeff is drunk. After Jeff sobered up, he refused to buy Hanson’s car. Hanson
brought it into court and sued Jeff that there was a valid contract between them as there was
an offer made by Jeff and acceptance made by Hanson. The court held that there is no valid
contract between them as the contract was made at the time of Jeff's unsound mind.

1.3 Qualification

Apart from that, the party that is disqualified is also defined as does not have the ability and
capacity to enter a contract. There are some basics that lead to a person could not enter a
contract are political status such as alien enemies, ambassadors, and foreign sovereigns;
financial status such as insolvents; legal status such as felons and convicts.

1.4 Exception

Apart from that, there are some exceptions to the general rules which are: (1) contracts of
necessaries (2) scholarship agreements (3) insurance agreements (4) marriage contracts (5)
contracts of indemnity (6) contracts of service apprenticeship. All the minors who fall under
these conditions are said to have the ability and capacity to enter a contract.

1.4.1 Contract of necessaries

Contract Act 1950 section 69, a person who has supplied necessaries to the minor is to be
reimbursed from the property of the minor.

In terms of the Contract Act 1950 section 11, the English Sales of Goods Act 1893 section 2
stated that necessaries are goods suitable to the condition in life of such infant or minor or
another person, and to his actual requirements at the time of the sale and delivery. In short,
necessaries are referred to as goods and services which become a basic requirement to
maintain the minor’s current living condition.

From the case, Roberts V. Gray

The court held that the contract was made based on the minor’s benefit instead of necessaries.
Thus, the defendant could terminate the contract and claim damages for breach of contract.

1.4.2 Scholarship agreements

Contract (Amendment) Act 1976 section 4(a) states provide that no scholarship agreements
shall be invalidated on the ground that the scholar entering into a such agreement is not of
the age of majority

From the case, Government of Malaysia V. Gurcharan Singh & Ors

The court held that the contract between the government and the minor is void. However,
‘education’ could be defined as necessaries. So, the minor is liable for the repayment of the
amount for his education based on the actual amount stated in the contract.

1.4.3 Insurance agreements

Insurance Act 1963, a minor above the age of 10 may enter into a contract of insurance but if
he or she is under 16 years would require written parental consent to own an insurance
policy

1.4.4 Marriage contracts

The Age of Majority Act 1971 section 4(a), the Contracts Act does not affect the capacity of
any person to deal with marriage, divorce, dower, and adoption

From the case, Rajeswary & Anor V. Balakrishnan & Ors

The court held that the age of majority to enter a marriage was not affected by the general
rule.

Law Reform (Marriage and Divorce) Act 1976 section 10, any marriage purported to be
solemnised in Malaysia shall be void if at the date of the marriage either party is under the
age of eighteen years unless, for a female who has completed her sixteenth year, the
solemnization of such marriage was authorised by a licence granted by the Chief Minister

According to Law Reform (Marriage and Divorce) Act 1976, a minor has the ability and
capacity to enter a marriage contract. The marriage contract is valid. However, for a minor
who wishes to have married, the licence of solemnization is needed to be granted by the
Chief Minister as the condition of a legitimate marriage.

Law Reform (Marriage and Divorce) Act 1976 section 12(1), a person who has not completed
his or her twenty-first year shall, notwithstanding that he or she shall have attained the age
of majority, nevertheless be required, before marrying, to obtain the consent in writing of (a)
his or her father; (b) if the person is illegitimate or his or her father is dead, of his or her
mother; (c) if the person is an adopted child, of his or her adopted father, or if the adopted
father is dead, of his or her adopted mother; or (d) if both his or her parents (natural or
adopted) are dead, of the person standing in loco parentis to him or her before he or she
attains that age, but in any other case no consent shall be required.

1.4.5 Contracts of indemnity

Contract Act 1950 section 77, a contract by which one party promises to save the other from
loss caused to him by the conduct of the promisor himself, or by the conduct of any other
person, is called a contract of indemnity

1.4.6 Contracts of service apprenticeship

Children and Young Persons (Employment)(Amendment) Act 2019 section 2(2a), any child or
young person may enter into a contract of service and be employed and a minimum age of 13
years old provided only light work
2.0 Consequence of contract made by minor

A contract made by a minor is considered voidable, which means that it cannot be enforced
by the law until the minor becomes an adult. A minor has the option to affirm or disaffirm a
contract within a reasonable time after attaining majority (age 18), and if they choose to
disaffirm it, they are entitled to any money or goods received under the contract, and any
money or goods that they have to return must be returned in a reasonable condition.

However, there are some exceptions to this rule. A minor cannot disaffirm a contract for
necessities such as food, clothing, and shelter. Also, a contract for personal service, such as
apprenticeship, cannot be disaffirmed. In these cases, the minor is bound to perform the
contract and can be sued for breach of contract if they do not fulfill their obligations.

It is important to note that when a minor enters into a contract, the other party may not be
aware of the minor’s age. Therefore, if the other party is aware that the person with whom
they are contracting is a minor, they cannot claim ignorance of the person’s age as a defense
if the minor later disaffirms the contract. Also, any contracts entered into by a minor are
generally not binding on the parents or legal guardians of the minor

2.1 Relevant Sections in the Contracts act of 1950

Section 11:This section states that a person who is of unsound mind is not capable of entering
into a contract. It also states that a person who is a minor is not capable of entering into a
contract except as provided by the Act.

Section 12: This section states that a contract entered into by a minor is voidable at his
option. It also provides that a minor has the right to disaffirm a contract within a reasonable
time after attaining majority.

Section 69: This section states that a minor is not bound by a contract for necessaries, and
that he is liable to pay a reasonable price for them.

Section 70: This section states that if a minor has misrepresented his age and has contracted
as if he were of full age, he is liable as if he were of full age.
Section 71: This section states that if a minor has entered into a contract for personal service,
he is bound by it, and can be sued for breach of contract if he fails to perform it.

Section 72: This section states that a minor can be a party to a contract of guarantee or
indemnity.

Section 73: This section states that a contract entered into by a minor is not binding on his
parents or legal guardians.

2.2 Relevant Cases Contract by Minor

2.2.1 Case : Mohori Bibee v Dhurmodas Ghose

Dharmodas Ghosh (defendant) mortgaged his home. He obtained a loan while still a minor
from Bhramo Dutta(plaintiff), a moneylender. The plaintiff's lawyer was aware of the
defendant's age at the time. Later, the respondent only paid Rs. 8000 and refused to pay the
remaining sum. His guardian at the time was the defendant's mother, thus the defendant filed
a lawsuit against the plaintiff, claiming that the plaintiff had entered into a contract with a
minor.
The trial court held that because the mortgage was executed by a person who was an infant at
the time of its execution, the mortgage deed or contract between the plaintiff and the
defendant was void and invalid. Plaintiff appealed to the High Court because he was not
pleased. The Trial Court's judgement was supported by the High Court. The defendant was
not bound by the promise made in the contract, and the plaintiff was not required to pay the
defendant back the money that had been loaned to him, according to the High Court, thus he
could not be made to pay it back.

2.2.2 Case : Leha binte Jusoh v Awang Johari

Awang Johari (respondent) expressed interest in purchasing land that belonged to Mat Bin
Jusoh. Awang and Mat came together to discuss the arrangement. The deal was then
completed. Awang paid the whole amount for the land. Awang also named Mat as the
property's trustee. Unfortunately, Mat became ill and passed away a few years later.
Leha binte Jusoh (appellant), the late Mat's sister, is grieving his passing. Later, she was
informed of Mat and Awang's purchase deal. Awang was still a minor when the arrangement
was made, she realised after looking at the papers.
Leha and her lawyer filed this case with the High Court.Awang won in the high court after
the first trial. Leha took the decision to file a federal court appeal. The agreement was invalid
according to the federal court. In exchange for the respondent giving up the lands he was
occupying, the court ordered Leha binte Jusoh (the appellant) to pay back the purchase
money to the Awang.

2.2.3 Case : Government of Malaysia v Gurcharan Singh &ORS

The agreement states that the first defendant would get a scholarship from the Malaysian
government to attend the Malayan Teachers Training Institution in exchange for serving the
government while receiving teacher preparation. Gurcharan Singh (defendant) served for just
three years and ten months of the five-year contract's term. However, at the time of the deal,
the defendant was minor.The Government of Malaysia (plaintiff) had filed a lawsuit against
ORS as well as the second and third defendants, Gurcharan Singh and ORS, alleging that
they had broken the agreement they had signed. The amount sought as damages in this
lawsuit is RM11,500.
The court decided that the contract was invalid, but because education was deemed
"necessary," Gurcharan (the minor) was held responsible for paying back the fair amount that
was used on him. Gurcharan served the government for 3 years and 10 months out of the
contractual period of 5 years, hence the sum ordered as payment to the government was
RM2,683.

2.2.4 Case : Roberts v Gray (1913)

Billiards player Gray (defendant) is a minor. He consented to travel the world as a
professional pool player alongside Roberts (the plaintiff). According to the contract, the
plaintiffs would cover all costs, and the net earnings would be split evenly between them. The
defendant renounced the agreement a few days after the tour's scheduled start date. Gray
declined to travel even though the contract was still legally binding since he believed he had
been misunderstood. Roberts, though, has deducted a portion of the trip's preparatory
expenses. Gray was the target of Robert's lawsuit for breach of contract. Roberts sued Gray
for €6,000 in damages.
According to the Court of Appeal's Civil Division, the defendant could not repudiate any
portion of the contract since it was binding on him as a whole. The agreement was a contract
for the defendant to get training and education for his job as a pool player. The defendant is
bound by a contract for the requirement. He is therefore responsible for paying damages for
his breach.

3.0 Consequence of contract made by an intoxicated person

People who are intoxicated are someone who is not sane and unconscious as a result of their
intoxication. This occurs when a person consumes an excessive amount of alcohol. Alcohol is
synonymous with alcoholic beverages or liquor that is always consumed when socializing or
enhancing the mood of someone who is experiencing difficulties. Incorrect medication use
can also result in insane behavior. When compared to regular person, an intoxicated person
has different perceptions, emotions, movements, vision, and hearing. As a result, individuals
may act in ways that are harmful to themselves and those around them.

According to the explanation, it is not impossible for an intoxicated person to create a

free-will contract with another person. This issue is separated into two parts: they can
continue the contract and void it when they are not intoxicated. Michael being intoxicated is
an example of this scenario since he consumed alcohol of such a high grade that he consented
to get into a contract with Malik. According to the contract, Michael agreed to buy the house
provided by Malik while drunk and unconscious. When Michael awoke from his
drunkenness, he cancelled the pact he had made with Malik.

3.1 Relevant Sections in the Contracts act of 1950

Section 12(1), the set down the criteria of sound mind which is a person is said to be of sound
mind for the purpose of making a contract if he is capable of understanding it and of forming
a rational judgment as to its effect upon his interests.

Section 12(2), the capacity to contract for those who are usually of unsound mind which is a
person who are usually of unsound mind have a limited capacity to enter into a contract
during periods in which they are lucid or of sound mind.
Section 12(3), when a person who is normally of sound mind but occasionally of unsound
mind can only make contracts during the periods when they are of sound mind.

3.2 Relevant Cases Contract by Unsound Mind

3.2.1 Case: Mathews v Baxter

Mr. Baxter (defendant), did attend an auction. At an auction, Mr. Mathews' (plaintiff)
property was agreed to be purchased by Mr. Baxter while he was intoxicated. When he
regained his sobriety, he made the decision that he wanted to confirm the agreement that he
had made while intoxicated. Later, after having a change of heart, he attempted to cancel the
agreement, claiming that his drunkenness prevented him from doing so.
The court determined that Baxter could no longer evade the contract on the basis of
drunkenness because he had confirmed it. This was true even though he had successfully
outlined the defense's essential components.

3.2.2 Case: Che Som bte Yip v Maha Pte Ltd

Che Som (plaintiff), who suffered from a mental disorder, received a loan from the defendant,
Maha Pte Ltd. The defendant knew nothing of the plaintiff's incapacity at the time she
executed the required mortgage documents.
For the plaintiff to be found guilty, the defendant must show that they "knew or ought to have
known that the plaintiff was mentally deficient and lacked contractual capacity."
Therefore, it is a matter of presumption to determine whether the defendant knew or should
have known about the plaintiff's mental impairment at the time the promise was signed. The
court determined that the contract was valid since the defendant was not aware of granting a
loan to the plaintiff, even though the plaintiff had a mental disorder.
4.0 Summary

In Malaysia, the capacity to contract is governed by the Contracts Act 1950. According to
this act, the following individuals are considered to be incapable of contracting:

-Minors (individuals under the age of 18)

-Individuals who are of unsound mind or unable to understand the nature and consequences
of the contract they are entering into.

-Individuals who are under duress, undue influence, or fraud.

A contract entered into with an individual who falls under any of the above categories
may be considered voidable and can be set aside by the court. However, the other party to the
contract may still have valid legal rights under the contract. It's always good to seek legal
advice when dealing with contracts and potential legal issues.

Under Malaysian law, a contract entered into by a minor is considered voidable,

meaning that it can be set aside or canceled by the minor. However, the other party to the
contract may still have valid legal rights under the contract. The minor may also be liable for
any damages incurred by the other party as a result of the contract. The other party may sue
the minor for any goods or services supplied under the contract.

A contract entered into by an intoxicated person may be considered voidable,

meaning that it can be set aside or canceled by the person who was intoxicated at the time of
entering into the contract. However, the other party to the contract may still have valid legal
rights under the contract. The intoxicated person may also be liable for any damages incurred
by the other party as a result of the contract.
Reflection (individual)