CHAPTER 5

CAPACITY
 INTRODUCTION
•This chapter examines the element in the formation of a contract, that is the
requirement that parties must have the capacity to contract.
•The aim of the law is, on the one hand, to protect persons who have no capacity
to contract and, on the other hand, to safeguard the interests of those who
transact with them.
•There are two main categories of persons who lack capacity to contract, i.e.,
minors and persons who are not of sound mind.
•This chapter will deal with: (i) provisions on capacity to contract; (ii) exceptions
to the general rule on capacity to contract; (iii) effect of agreements entered
into by minors and the remedies available; and (iv) agreements by persons of
unsound mind.
CAPACITY TO CONTRACT
•Pursuant to s 10(1) of the Contracts Act, the capacity of a party to enter into a
contract is an essential element for a valid contract. All agreements are
contracts if entered into, inter alia, by "parties competent to contract".

•Section 10(1) of the Contracts Act provides:

All agreements are contracts if they are made by the free consent of parties
competent to contract, for a lawful consideration and with a lawful object, and
are not hereby expressly declared to be void.

•Section 11 of the Contracts Act sets out the criteria for persons who are
competent to contract:
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.
 Age of majority
•The age of majority of persons in Malaysia is 18 years old as provided in s.2 of
the Age of Majority Act 1971 ( Act 21) as follows:
Subject to the provisions of s.4, the minority of all males and females shall cease
and determine within Malaysia at the age of eighteen years and every such male
and female attaining that age shall be of the age of majority.

•Section 4 of the Age of Majority Act provides:

Nothing in this Act shall affect:
(a) the capacity of any person to act in the following matters, namely, marriage,
divorce, dower and adoption;
(b) the religion and religious rites and usages of any class of persons within
Malaysia;
(c) any provision in any other written law contained fixing the age of majority for
the purposes of that written law.
 Any law to which he is subject
•The phrase "any law to which he is subject" in s.11 of the Contract Enactment
1899 (in pari materia with s.11 of the Contracts Act) was considered in the
early case of Kandasamy v Suppiah (1919) 1 FMSLR 381
• In this case, the defendant was sued upon a promissory note that he
executed when he was 18 years old. The issue arose as to which law should
be applied in determining the age of majority of the defendant, as there
was then no enactment subsisting in the Federated Malay States which
defined the age of majority for general purposes.
•The Magistrate interpreted the words "any law to which he is subject" in s 11
of the Contract Enactment 1899 to mean the personal law of the person
whose contract is in question. The personal law of the defendant in this case
was Hindu law, which places the age of majority at 16 years of age. Thus,
the Magistrate held that the defendant was competent to contract and gave
judgment against him.
•The defendant appealed and his appeal was allowed. The Court held that the
common law applied and under the common law, the age of majority was
21 years of age.
• Innes ACJC stated:
“There are certain branches of jurisprudence with which the written law in
force in these States either does not deal at all or in dealing with them
does not do so exhaustively. I mention by way of illustration the law of
wills, of trusts, of torts and of succession. In some instances the practice of
the Court and the legal profession has filled these blanks and has brought
into life what in a British Court is described as 'a common law'. By this
common law the age of majority for general purposes in these States is
21. It is the practice of this Court and of the legal profession to interpret
the word 'minor' used in the Registration of Titles Enactment, 1911, as
meaning a person under 21 years of age ... The same interpretation is put
upon the word 'minor' used in the Civil Procedure Code ... The age of
majority in the neighbouring Colony is 21 and the disadvantages of a
divergent law upon this subject in the two jurisdictions are obvious. I allow
this appeal upon the ground that the defendant being under 21 at the
time of the execution of the promissory note was not competent to
contract and accordingly the transaction is a void agreement.” at
381-382.
• With the enactment of the Age of Majority Act 1971, the position at
common law as laid down in Kandasamy v Suppiah is superseded.
• Pursuant to s 2 of the Act, the age of majority became 18 years of age.
Section 3 of the Act provides the manner in which age is to be computed:
• (1) All computations of age under this Act shall be reckoned according to
the Gregorian calendar.
• (2) In computing the age of any person the day on which he was born
shall be included as a whole day, and he shall be deemed to have
attained the age of eighteen years at the beginning of the eighteenth
anniversary of that day.

EXCEPTIONS TO GENERAL RULE ON CAPACITY TO CONTRACT

• There are several exceptions to the general rule that a person is
competent to enter into a contract at the age of majority of 18 years.
These include marriage contracts, scholarship agreements and
employment contracts provided under specific statutes.
 Marriage contracts: Law Reform (Marriage and Divorce) Act 1976
•In Rajeswary & Anor v Balakrishnan & Ors 7 (1958)3 MC 178 the High Court
held that a contract to marry did not fall within the general principle laid
down in Mohori Bibee v Dharmodas Ghose [1903] 1 LR 30 Cal 539; [1903130
LR IA 114, PC (Appeal from India) that contracts with minors are void. The
parties in this case were Hindus, the first plaintiff and first defendant having
completed a betrothal ceremony following the arranged marriage plans
initiated by the second plaintiff and the second defendant (fathers of the first
plaintiff and the first defendant respectively). The first defendant
subsequently repudiated his promise to marry the first plaintiff who claimed,
inter alia, damages against the first defendant for breach of promise to marry.
The first defendant pleaded, inter calia, the incapacity of the first plaintiff to
enter into the contract to marry, as she had been a minor at that time.
• The Court in this case distinguished marriage contracts entered into by
minors from other classes of contracts and in particular excluded them
from the application of the principle laid down in Mohori Bibee's case.
• Good J commented on Mohori Bibee as follows:
“… nowhere in the course of the arguments or the judgment is any reference
to be found which would indicate that their Lordships had marriage
contracts in mind. The case concerned a business contract, namely a
mortgage executed by a minor in favour of a moneylender to secure the
repayment of a loan of 20,000 rupees at 12 per cent interest.” at 192.

• The Court was of the view that the customs and mores of the population
must be considered. Good J continued:
“I should have thought that it was open to serious doubt whether the Indian
Legislature when it enacted the Indian Contract Act ever contemplated
that it would have any application to marriage contracts, for the reason
that it is a well-known fact, which is expressly referred to in the judgment
of Taraporewala J in Fernandes v Gonsalves ILR 48 Born 673, that
marriage contracts in India are commonly made between minors
• or between an adult and a minor.., and, having regard to the population
of India, such contracts must in the nature of things number thousands
every day of the year. It is difficult to believe that it was the intention of
the Legislature to deny to a minor party to such a contract any remedy
for its breach.“
• Thus, it was held that an action was maintainable by the first plaintiff on
the agreement entered into between her father, acting as her guardian
and on her behalf, and the first defendant whereby the latter promised
to marry the first plaintiff.
• However, the coming into force of the Law Reform (Marriage and
Divorce) Act 1976 has superseded the above decision in relation to the
minimum age for marriage.
• Section 10 of the Act provides that "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".
• However, there is provision for a female who has completed her 16th
year to apply for a licence granted by the Chief Minister under s 21(2) of
the Act. Section 21(2) of the Law Reform (Marriage and Divorce) Act
provides that:
The Chief Minister may in his discretion grant a licence under this authorising
the solemnisation of a marriage although the female party to the marriage
is under the age of eighteen years, but not in any case before her
completion of sixteen years.
• In relation to marriage and divorce, the Law Reform (Marriage and
Divorce) Act only recognises the native customary law of natives of Sabah
and Sarawak and aboriginal custom of the aborigines of West Malaysia.
• The Act is also inapplicable to a Muslim or any person who is married
under Muslim law. The case of Rajeswary v Baiakrishnan is, however, still
relevant for an action for breach of promise to marry.
• It should be noted too that notwithstanding that the minimum age for
marriage is 18 years, under s 12(1) of the Law Reform (Marriage and
Divorce) Act, a person below the age of 21 years is required, before
marrying, to obtain the consent in writing of his or her father. If,
however, the court is satisfied that the consent is unreasonably withheld
or the person who could give the consent is dead or that it is impracticable
to obtain the consent, the court may, on application, grant such consent.
 Scholarship agreements: Contracts (Amendment) Act 1976
•Section 4 of the Contracts (Amendment) Act 1976 provides:
Notwithstanding anything to the contrary contained in the principal Act, no
scholarship agreement shall be invalidated on the ground that-
(a)the scholar entering into such agreement is not of the age of majority;

•This Amendment Act came into force on February 27, 1976 and was a
legislative response to the legal obstacles of enforcing scholarship
agreements entered into with scholars who were minors when they took up
the scholarships.
•The defence of lack of capacity of minors to contract was raised in actions for
breach of scholarship agreements.
• A significant case in this respect is Government of Malaysia v Gurcharan
Singh & Ors [1971] MLJ 211 where the High Court held that the scholarship
agreement was void and unenforceable.
• The definition of 'scholarship agreement' is set out in s2 of the Contracts
(Amendment) Act as follows:
"scholarship agreement" means any contract or agreement between an
appropriate authority and any person (hereinafter in this Act referred to as
a "scholar") with respect to, any scholarship, award, bursary, loan,
sponsorship or appointment to a course of study, the provision of leave
with or without pay, or any other facility, whether granted directly by the
appropriate authority, or by any other person or body, or by any
government outside Malaysia, for the purpose of education or learning of
any description.”
 Employment contracts: Children and Young Persons (Employment) Act 1966
•Under the Children and Young Persons (Employment) Act 1966, any child or
young person may enter into a contract of service and be employed. However,
such person cannot be an employer.
•Section 13 of the Children and Young Persons (Employment) Act provides as
follows:
Notwithstanding anything to the contrary contained in the Contracts Act 1950 or
the provisions of any other written law, any child or young person shall be
competent to enter into a contract of service under this Act otherwise as an
employer, and may sue as plaintiff without his next friend or defend any action
without a guardian ad litem;

•Provided that no damages and no indemnity under s13 of the Employment Act
1955, shall be recoverable from a child or young person for a breach of any
contract of service.
• Under the Act, "child" means any person who has not completed his 14th
year of age or of such age as the Yang di Pertuan Agong may by
notification in the Gazette prescribe and "young person" means any
person who, not being a child, has not completed his sixteenth year of
age.
• A concern of this legislation is that it legitimises child labour. On the other
hand, it cannot be denied that children and young persons do enter into
employment and by giving recognition to such contracts, the Act allows
the minor in question to enforce the contract and sue for wages.
• At the same time, they are protected from being sued for damages and
indemnity under s13 of the Employment Act 1955 (Revised 1981) Act 265.
• Section 18 of the Children and Young Persons (Employment). Act also
provides that the minor will not be relieved of any rights, duties or
liabilities conferred or imposed upon him by the provisions of any other
written laws.
 EFFECT OF AGREEMENTS ENTERED INTO BY MINORS
•The effect of agreements entered into by minors under the Contracts Act is
different from the common law. Under the common law, all contracts
entered into by minors (originally called "infants") are voidable at the option
of the minor, either before or after becoming an adult.
•The manner in which such contracts may be avoided depended upon the type
of contract. For contracts where the minor had obtained an interest of a
permanent or continuing nature, for example, interest in land (that is,
contracts conferring benefits or rights on the minor), the contract is binding
until disclaimed by the minor.
•For contracts which are not continuous in operation, for example, a promise
to pay for goods (that is, contracts creating obligations on the minor), the
contract is not binding unless ratified by the minor within a reasonable time
after reaching the age of majority
• In both cases, the contract can be enforced by the minor although he
would not normally be entitled to obtain specific performance of the
contract, but can only recover damages for breach. This is because specific
performance will not be granted by the court where it is not prepared to
enforce the contract at the suit of either party. Since the contract could
not be enforced against the minor, equity will not allow a minor to obtain
specific performance against the other party.‘
• In the United Kingdom, the Infants Relief Act 1874 has been repealed by
the Minors' Contracts Act 1987.
• In Malaysia, the most important decision on the effect of agreements
entered into by minors is the Privy Council decision of Mohori Bibee v
Dharrnodas Ghose [1903] 1 LR 30 Cal 539; [1903] 30 LR IA 114, PC
(Appeal from India).
• In this case, the respondent, then a minor, executed a mortgage in favour
of Brahmo Dutt, a money-lender. Subsequently, the respondent by his
mother and guardian as next friend commenced an action against Brahmo
Dutt, stating that the respondent was underage when he executed the
mortgage, and praying for a declaration that it was void and inoperative,
and should be delivered up to be cancelled.
• The Privy Council referred to ss 2(e) - (i), 10 and 11 of the Indian Contract
Act (which are in pari materia with ss 2(e—(i), 10 and 11 of the Contracts
Act) and concluded as follows:
• “Looking at these sections their Lordships are satisfied that the Act makes
it essential that all contracting parties should be "competent to contract,"
and expressly provides that a person, who by reason of infancy is
incompetent to contract, cannot make a contract within the meaning of
the Act.” at 547-548
• The Privy Council held that the mortgage executed by the respondent
was void, and the moneylender was not entitled to repayment of the
money on a decree being made declaring the mortgage invalid.
• It should be noted that ss 10 and 11 of the Indian Contract Act do not
provide for the effect of agreements entered into by minors. However,
reading both sections together that a minor is incompetent to contract,
the Privy Council held that any such contract will thus be void and
unenforceable. This aspect of the decision in Mohoni Bibee has been
followed by the Malaysian courts.
REMEDIES FOR AGREEMENTS ENTERED INTO BY MINORS
•There are two provisions in the Contracts Act providing for relief for
agreements entered into by minors.
•Section 66 provides that any party receiving any advantage from an
agreement discovered to be void must restore the benefit received.
Section 69 provides for a claim for necessaries supplied to persons
incapable of contracting.
•Besides these two provisions, this part will also examine: (i) the relief of
specific performance for contracts entered into or on behalf of minors; (ii)
minors' false representation of age; and (iii) minors recovering benefits
conferred to another.
 Restitution under section 66 Contracts Act
•The Privy Council in Mohori Bibee also held that s65 of the Indian Contract
Act (which is in pari materia with s 66 of the Contracts Act) is inapplicable to
agreements by minors.
•Section 66 of the Contracts Act provides as follows:
•When an agreement is discovered to be void, or when a contract becomes
void, any person who has received any advantage under the agreement or
contract is bound to restore it, or to make compensation for it, to the
person from whom he received it.
•According to the Privy Council:
•This section [s 65 of the Indian Contract Act, equivalent to s 66 of the
Contracts Act] ... starts from the basis of there being an agreement or
contract between competent parties; and has no application to a case in
which there never was, and never could have been, any contract.
• This approach has been criticised by the Fifth Indian Law Commission. The Law
Commission in their report concluded as follows:
– We feel that the Judicial Committee had not correctly interpreted s 65 and we are of the opinion that an
agreement is 'void' or 'discovered to be void' even though the invalidity arises by reason of the
incompetency of a party to a contract. We recommend that an explanation be added to s 65 to indicate
that that section should be applicable where a minor enters into an agreement on the false
representation that he is a major.21
• In the local case of Leha binte Jusoh v AwangJohari bin Hashim [1978] 1 MLJ 202, FC.,
the Federal Court applied the first principle stated in Mohori Bibee, namely, that
agreements by minors are void, but did not adopt the second principle on s 66 of the
Contracts Act.
• In this case, the respondent alleged that he had entered into an agreement to purchase
certain lands belonging to an estate of which the appellant was the administratrix. At
the time of the alleged agreement, the respondent was a minor. The purchase price
had been paid in full and the respondent had been let into possession. The Federal
Court held that the agreement was void and applied s66 of the Contracts Act to order
the refund of the purchase price to the minor, on condition that the minor vacate the
land which he had occupied
• In the course of the judgment, Ong Hock Sim FJ stated:
• The Privy Council in Mohori Bihee v Dharmodas Ghose ruled that "the
• (Indian Contracts) Act makes it essential that all contracting parties should be
competent to contract" and specifically enacts that a person incompetent to
contract by reason of infancy cannot make a contract within the meaning of the
Act. Our Contracts Act 1950 is in pari materia with the Indian Contracts Act (see ss
10 and 11). The learned judge accordingly held.. the agreement ... to be void and
no specific performance can be ordered on the agreement as an agreement for
sale…
• We ordered the appellant to repay the $5000/- purchase price on the respondent
vacating the lands occupied by him, pursuant to s66 of the Contracts Act 1950. The
deposit to be refunded to the appellant..”
• This decision is important. If the Federal Court's decision that s66 of the Contracts
Act is applicable to agreements by minors is followed, suppliers of goods to
minors can claim under s66 and are not restricted to a claim under s69 which
requires proof that the goods supplied amount to necessaries. Unfortunately, the
Federal Court did not discuss at length the divergent position from the Privy
Council decision of Mohori Bibee that it adopted in respect of s66 of the Contracts
Act.
 Necessaries under section 69 Contracts Act
•Section 69 of the Contracts Act provides as follows:
If a person, incapable of entering into a contract, or anyone whom he is legally
bound to support, 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.
•Similar to s 66 which provides relief for void and unenforceable agreements, s 69
is also a restitutionary provision. Section 69, however, provides specifically for a
claim for necessaries for supplies made to persons incapable of entering into a
contract, that is, minors and persons of unsound mind. This part will examine
the scope and basis of liability for necessaries.
•"Necessaries" was the subject of judicial interpretation in Government of
Malaysia v Gurcharan Singh & Ors [1971] MLJ 211 In this case, the Government
of Malaysia sued the first defendant as the promisor and the second and third
defendants as sureties for breach of an agreement entered into by them with the
plaintiff for providing a course of training at a Malayan Teachers' Training
Institution between 1960-4961.
• The cause of action was founded on a breach of the agreement by the first
defendant to serve the Government as a teacher for five years after his
training. The first defendant submitted that the contract was void as it was
entered into during his minority.
• The High Court applied the decision in Mohori Bibee's case and agreed
that the contract was void. However, it also held that the education and
training supplied to the first defendant fell within the definition of
"necessaries" under s69 of the Contracts Act. The first defendant was
therefore liable for repayment of the sum expended on his education and
training.
• Chang Min Tat J stated:
“There is no statutory definition of what are necessaries, save that what is
supplied must be suited to the infant's condition in life… Whether the
article supplied is a necessary for the infant concerned is a question of fact
and law . In my view, the word "necessaries" must be construed broadly
and in any decision involving whether what are supplied are or are not
necessaries, it is incumbent to have regard to the facts of the case, the
conditions and circumstances in which the supply was made and the
purpose which is served…
• In my view of the circumstances of this case, the provision of professional
or vocational training for the first defendant in a Teachers' Training
Institution to enable him to qualify for and accept the appointment as a
teacher is a provision for necessaries. It follows that in my judgment I rñust
find the first defendant liable for the repayment of the sums expended on
his education and training as being expended on necessaries.” at 215-217.
• The importance of the above decision in the context of scholarship
agreements has lessened following the enactment of the Contracts
(Amendment) Act 1976.
• However, the decision remains significant on the scope of "necessaries" as
the Court made extensive references to both English and American cases.
The Court also held that the basis for necessaries is not based on contract.
 Meaning of "necessaries suited to his condition in life"
•As the meaning of necessaries is not defined in the Contracts Act, the common
law cases on this concept are helpful. An early case which gave an exposition of
necessaries is Chappie v Cooper 13M &W 252, which held that necessaries
comprise of things and services essential for a reasonable existence in life. In this
case, the burial expenses incurred by the defendant, a widow who was a minor,
for the funeral of her late husband was held to amount to necessaries .
• Alderson B, in delivering the judgment of the Court, defined "necessaries" in the
following manner:
“…it seems clear that an infant can contract so as to bind himself in those cases
where it is necessary for him to have the things for which he contracts; or where
the contract is, at the time he makes it, plainly and unequivocally for his benefit ...
Things necessary are those without which an individual cannot reasonably exist. In
the first place, food, raiment, lodging, and the like. About these there is no doubt.
• Again, as the proper cultivation of the mind is as expedient as the support of
the body, instruction in art or trade, or intellectual, moral and religious
information may be a necessary also; Again, as man lives in society, the
assistance and attendance of others may be a necessary to his well-being.
Hence attendance may be the subject of an infant's contract. Then the classes
being established, the subject-matter and extent of the contract may vary
according to the state and condition of the infant himself. His clothes may be
fine or coarse according to his rank; his education may vary according to the
station he is to fill; and the medicines will depend on the illness with which he
is afflicted, and the extent of his probable means when of age. So, again, the
nature and extent of the attendance will depend on his position in society; and
a servant in livery may be allowed to a rich infant, because such attendance is
commonly appropriated to persons in his rank of life. But in all these cases, it
must be first made out that the class itself is one in which the things furnished
are essential to the existence and reasonable advantage and comfort of the
infant contractor. Thus, articles of mere luxury are always excluded, though
luxurious articles of utility are in some cases allowed. So, contracts for
charitable assistance to others, though highly to be praised, cannot be
allowed to be binding, because they do not relate to his own personal
advantage.”
• Section 69 of the Contracts Act on the claim for necessaries has
incorporated the common law on this subject that the items supplied
must be "suited to his condition in life".
• What things and services are suited to the condition of life of a minor will
depend on the minor's standing with reference to his station in society. As
an example, clothes are necessaries, but they need not be so in the same
quantity or of the same quality for everyone.
• Thus, in Nash v Inman 30 (190812 KB 1, CA, it was held that the clothes
supplied to the defendant, a minor, which included, among other things,
fancy waistcoats were not necessaries. In this case, the defendant was an
undergraduate at Cambridge University from a well to do family. There
was evidence to show that at the time the clothes were supplied, the
defendant had already been provided with clothes suitable and necessary
and proper for his condition in life, and for his position as an
undergraduate of Cambridge University.
•Items which are ornamental (decorative) in nature are not considered as
necessaries. In Ryder v Wombwell (1868) LR 4 Ex 32 the defendant was the
younger son of a deceased baronet of good fortune. During the defendant's
infancy, the plaintiff supplied to him a silver-gilt goblet which he had ordered
for the purpose of making a gift to a friend and also a pair of jewelled
solitaires, or ornamental studs, composed of diamonds and rubies.
•No evidence was given of anything peculiar in the defendant's station
rendering it exceptionally necessary for him to have such articles. The Court
of the Exchequer Chamber rejected the plaintiff's claim and held that the
articles supplied to the defendant were not necessaries.
• The Court stated that:
“… the question in such cases is not whether the expenditure is one which an
infant, in the defendant's position, could not properly incur. There is no doubt
that an infant may buy jewellery or plate, if he has the money to pay and pays
for it. But the question is whether it is so necessary for the purpose of
maintaining himself in his station that he should have these articles, so as to
bring them within the exception under which an infant may pledge his credit
for them as necessaries ... It is enough for the decision of this case if we hold
that such articles as are here described are not prima facie necessary for
maintaining a young man in any station of life, and that the burthen lay on the
plaintiff to give evidence of something peculiar making them necessaries in
this special case, and that he has given no evidence at all to that effect.”

• As regards statutory provisions, s 2 of the former English Sale of Goods Act

1893 defined "necessaries" as "goods suitable to the condition in life of such
infant or minor or other person, and to his actual requirements at the time
of the sale and delivery".
• This provision is now found in s 3(3) of the current Sale of Goods Act 1979.
The Malaysian Sale of Goods Act 1957 (Revised 1989) Act 382 which
originated from the 1893 Act does not have this provision.
• In relation to services rendered, education and training that will benefit a
minor are considered as necessaries.
• In Roberts v Gray [1913] 1 KB 520, CA the defendant, an infant, entered
into a contract to go on a world tournament with the plaintiff, a
professional billiard player. The plaintiff alleged that under the contract,
he had expended much time and trouble and incurred liabilities in making
arrangements for billiard matches. Subsequently, a dispute arose and the
defendant repudiated the contract. The plaintiff brought an action against
the defendant for damages for breach of contract. The English Court of
Appeal held that the contract was binding upon the defendant and he
could not repudiate any part of it.
• Cozens-Hardy MR stated that:
• “… as early as Lord Coke - Co. Lilt 172A- it has been held that an infant's
contract for necessaries is binding, and it was laid down by him that that
doctrine also applied not merely to bread and cheese and clothes; but' to
education and instruction ... Fry LJ in [Walter v Everard [1891] 2 QB 369]
pointed out that education must not be taken in its narrow technical sense
as merely meaning education to enable a man by the work of his hands to
hereafter maintain himself as an artisan, but has a much wider meaning
than that; it applies to education and instruction in the social state in
which the infant is, and in which he may expect to find himself when he
becomes an adult…If, therefore, this is a contract falling within a class to
which the doctrine of necessaries applies, and if, taken as a whole, it is for
the infant's benefit, I see no foundation whatever for the argument that
the infant is not liable for damages in the event of his repudiating or
declining to perform the contract entered into.” at 525-527.
• However, contracts for necessaries which contain harsh and burdensome
terms would not be enforceable against an infant.
• In De Francesco v Barnum (1890) 45 Ch. D 430 the defendant, an infant,
entered into a contract of apprenticeship for seven years, to be taught
stage dancing by the plaintiff. The contract provided that the infant would
not accept any professional engagement or marry during the term of
seven years without the consent of her master. There was no stipulation
that the master should provide dancing engagements for the infant or
maintain her while she was unemployed. The infant entered into a
professional engagement to perform as a stage dancer with a third party.
The plaintiff brought an action against the defendant to enforce the
contract and claim damages for its breach.
• The Court held that the provisions of the contract were unreasonable and
could not be enforced against the defendant.
• .Fry LJ stated:
“Is there or is there not in this case a valid contract between the infants and Signor Dc
Francesco? Now, from a very early date it has been held that one exception as to
the incapacity of an infant to bind himself relates to a contract for his good
teaching or instruction whereby he may profit himself afterwards ... There is
another exception, which is based on the desirableness of infants employing
themselves in labour; therefore, where you get a contract for labour and you have
a remuneration of wages, that contract, I think, must be taken to be, prima facie,
binding upon an infant… the contract by which an infant binds himself to learn an
art or trade to his own future profit is, prima facie, valid and binding. But no doubt
the law has grafted on that general principle certain well-known and defined
exceptions ... that an infant cannot bind himself to a penalty; that the contract to
impose a penalty on an infant is void ... I think it may be taken that, wherever you
find extraordinary or unusual stipulations contained in a contract, either of
apprenticeship or of service, there the Court at least must be on the watch lest the
infant should be held to be bound by a contract which is not reasonable and which
is not good in law and which is not maintainable.”
 Basis of liability for necessaries
•There has been some debate as to the basis of liability for the supply-of necessaries to a
minor. The liability of a minor to pay for necessaries supplied arises not because there is a
valid contract between the minor and the supplier, but because the minor has obtained a
benefit. Thus, in order to prevent unjust enrichment, he should be required to pay for the
benefit which he has obtained.
•This theory is supported by the judgment of Fletcher-Moulton Li in Nash v Inman [1908] 2
KB 1, CA.,
"An infant, like a lunatic, is incapable of making a contract of purchase in the strict sense of
the words; but if a man satisfies the needs of the infant or lunatic by supplying to him
necessaries, the law will imply an obligation to repay him for the services so rendered, and
will enforce that obligation against the estate of the infant or lunatic. The consequence is
that the basis of the action is hardly contract. Its real foundation is an obligation which the
law imposes on the infant to make a fair payment in respect of needs satisfied. In other
words the obligation arises re and not consensus.”
• The second theory is that liability is based on "consensus", namely contract.
According to this theory, a minor can enter into a valid contract for the supply
of necessaries. The contract for necessaries is an exception to the rule that
minors are not competent to contract. Support for this theory can be found in
the judgment of Buckley LJ, also in the case of Nash v Inman:
“The Act of 1874 [the Infants' Relief Act 1874] provides that 'all contracts,
whether by specialty or by simple contract, henceforth entered into by infants
for the repayment of money lent or to be lent, or for goods supplied or to be
supplied (other than contracts for necessaries), and all accounts stated with
infants, shall be absolutely void'... The contract for necessaries is therefore
excepted and is left as a contract which is not void. The plaintiff, when he
sues the defendant for goods supplied during infancy, is suing him in contract
on the footing that the contract was such as the infant, notwithstanding
infancy, could make. The defendant, although he.was an infant, had a limited
capacity to contract. In order to maintain his action the plaintiff must prove
that the contract sued on is within that limited capacity.”
• The basis of liability is important in cases of executory contracts. If the basis is
"re", there is no obligation because the minor has yet to obtain a benefit. If
the basis is "consensus", the minor will have obligations under the contract.
• In Malaysia, this question was addressed by Chang Min Tat J in Government of
Malaysia v Gurcharan Singh & 0rs [1971] 1MLJ 211 as follows:
“If an infant is totally incompetent and incapable of entering into a contract, there
is no contract on which he can be sued. Further the liability of an infant for
necessaries supplied to him does not arise ex con tractu and the obligation is
not consensus. It is re and section 69 of our Ordinance, which embodies the
English common law of the liability of an infant to pay a reasonable sum for
necessaries makes it clear that it is so in this country.”

• Section 69 comes under Part VI of the Contracts Act, which is entitled "Of
Certain Relations Resembling Those Created By Contract". This indicates that
the relationship provided for in s 69 of the Contracts Act is not contractual but
quasi-contractual.
 Specific performance of contracts entered into on behalf of minors
•A contract entered into on behalf of minors can be specifically enforced if (i)
the contract is one which is within the competence of the person concerned
to enter on behalf of minor so as to bind him; and
•(ii) it is for the benefit of the minor.

•In Sri Kakularn Subrahman yam & Anor v Kurra Subba Rao [1945] AIR PC 95
PC (Appeal from India) the mother of a minor entered into a contract for the
sale of immovable property belonging to the minor, on behalf of the minor.
The purchase price was applied towards discharging certain debts left by the
minor's deceased father. The minor subsequently claimed for the possession
of lands contracted to be sold and for profits. The Privy Council held that he
was not entitled to recover possession of the property and stated as follows:
“… the act of the mother and guardian in entering into the contract of sale in
the present case was an act done on behalf of the minor appellant.
• In such a case [cases of contracts entered into on behalf of a minor by his
guardian or by a manager of his estates] it has been held by the High
Courts of India ... that the contract can be specifically enforced by or
against the minor, if the contract is one which it is within the competence
of the guardian to enter into on his behalf so as to bind him by it, and
further, if it is for the benefit of the minor.” at 96-97
• This decision is in respect of contracts entered into on behalf of minors. It
should be noted that in Leha binte Jusoh's case discussed above, the
Federal Court declined to grant specific performance of the said contract.
 Recovery of benefits received by minors
•Besides the remedies provided in the Contracts Act, the equitable remedies
provided in the Specific Relief Act have been considered to obtain recovery of
benefits received by minors. A provision that has been considered is s 40 of
the Specific Relief Act that provides as follows:
On adjudging the cancellation of an instrument, the court may require the
party to whom the relief is granted to make any compensation to the other
which justice may require.

•The equivalent of this section under the Indian Specific Relief Act (s 41) was
considered in Mohori Bibee as to whether it would be applicable to a contract
entered into by minors. The Privy Council did not state its position but
merely held that it would not interfere with the discretion of the Appellate
Court which concluded that "under the circumstances of this case justice did
not require them [the Appellate Court] to order the return by the
respondent of money advanced to him with full knowledge of his infancy.
• Section 41 of the Specific Relief Enactment 1903 (in pari matenia with s 40
of the Specific Relief Act) was considered in the local case of Tan Hee
Juan next friend Tan See Bok and Lai Soon v Teh Boon Keat [1934] MLJ
96. In this case, the plaintiff minor signed a transfer of land to the
defendant and received the purchase price. Subsequently, the minor
wished to cancel the transfer.
• Hereford J held that the transfer was void pursuant to ss 10 and 11 of the
Contracts Act and Mohori Bibee. The question arose whether on the
cancellation of the instrument of transfer, the court could, under s 41 of
the Specific Relief Enactment, order the minor to return the purchase
price.
• The High Court held that the phrase "may require" in s 41 gives
discretion to the court to make such an order. This discretion, however,
would be used only in "very unusual circumstances" which so far has only
been used if the parties were recover the property and to keep the
purchase price. In this case, there was no fiduciary relation between the
parties.
• In addition, Hereford J was of the view that the principle behind the
section giving the court the discretion to order refund of the purchase
money was to-enable the court to order a refund where the minor had
obtained an unfair advantage; it would be unfair to the defendants if the
minor had the advantage of the purchase money in addition to the
advantage of being the owner of the property without being called on to
return the money.
• However, in this case, the minor plaintiff's estate had not received any
advantage of all or any part of the purchase money.
• Where a minor obtains a benefit by fraud, that is, by misrepresenting his
age, if the goods thus obtained are still in his possession, the court can
order the minor to return them; however, if the goods thus obtained are
no longer in his possession, the supplier cannot be allowed to sue him
for the price of the goods because to do so would amount to enforcing a
void contract. In K Leslie Ltd v Sheill [ 1914] 3 KB 607, CA, the plaintiffs
were moneylenders who gave a loan of £400 to the defendant minor who
misrepresented his age.
• The English Court of Appeal, while appearing to regret that no relief could
be given to the plaintiffs, held that the plaintiffs could not sue to recover
because to do so would be to enforce the void contract.
• Lord Sumner stated:
“There is no question of tracing it [the money advanced], no possibility of
restoring the very thing got by the fraud, nothing but compulsion through
a personal judgment to pay an equivalent sum out of his [the infant's]
present or future resources, in a word nothing but a judgment in debt to
repay the loan. I think this would be nothing but enforcing a void contract
.”

In the same vein, Kennedy LJ held that:

“…whilst Courts of Equity have interfered to make an infant restore property
found in his possession which he had obtained by fraudulent
misrepresentation ... there is no case in which I can find that a Court of
Equity has given judgment against an infant in circumstances like the
present, that is to say, in which it has interfered on the ground of the fraud
of the infant, whereby he induced the making of the contract of loan, to
order the infant to pay the plaintiff a sum equal to the sum borrowed
under the void contract, and so, in effect, to the amount of the principal
lent, to give validity as against the infant to a void contract.”
 Minor recovering benefits conferred to another
•Under the common law, the minor may succeed to recover benefits
conferred to another if he can prove that a total failure of consideration has
occurred.
•In Pearce o Brain 52 [1929]2 KB 310 Swift J stated that "there is direct
authority that money paid under a void contract cannot be recovered unless
there is a total failure of consideration".
•In that case, the infant plaintiff exchanged his motorcycle and sidecar for a
second-hand motorcar belonging to the defendant. The car broke down after
the plaintiff had driven it for 70 miles. The plaintiff claimed to repudiate the
contract on the ground that he was an infant when he entered into it. He
claimed for the return of his motorcycle and offered to return the damaged
car to the defendant. The defendant refused and the plaintiff brought an
action against him. It was held that the contract was void but the plaintiff was
not allowed to recover the motorcycle. In this case, there was no total failure
of consideration as the plaintiff had used the car for 70 miles.
•Similarly, in Valentini v Canali 53 (1889) 24 QBD 166 , the Court held that a
minor cannot recover if he has received some benefit under the contract. In
this case, a minor took a lease of a house and agreed to pay the landlord £102
for the furniture. He paid £68 and gave a promissory note for the balance.
After some months' use of the house and furniture, he wanted to set aside
the lease and recover the money paid. The Court held that the lease was
cancelled and the promissory note was returned, but the minor could not
recover the money paid.
•Lord Coleridge CJ stated:
“When an infant has paid for something and has consumed or used it, it is
contrary to natural justice that he should recover back the money which he
has paid.”
 Minor's false representation of age
•Where a minor has made a false representation of his age, the issue arises whether
he should be estopped from raising the defence that he was a minor when the
contract was entered into.
•Estoppel means that a person cannot deny the truth of a certain matter if he has
caused or permitted another to believe a thing to be true. Section 115 of the
Evidence Act 1950 (Revised 1971) Act 56 provides as follows:
When one person has by his declaration, act or omission intentionally caused or
permitted another person to believe a thing to be true and to act upon such belief,
otherwise than but for that belief he would have acted, neither he nor his
representative in interest shall be allowed in any suit or proceeding between
himself and that person or his representative in interest to deny the truth of that
thing.
•Section 115 of the Indian Evidence Act 1872 (in pari materia with the above
provision) was argued in Mohori Bibee in relation to the minor's misrepresentation
of his age.
• The Privy Council held that estoppel did not apply in this case as the other
party was aware of the minor's incapacity to enter into the transaction.
The Board also added that in the same vein, the contract would not be
voidable on the grounds of misrepresentation and fraud since this would
be a case that the fraud or misrepresentation did not cause the consent.
• The position on estoppel against minors has been made clear by the High
Court in Natesan v Thanaletcurni & Anor [1952] MLJ 1
• Wilson J, on the basis of the decision in Khan Gul v Lakha Singh AIR (1929)
Lahore 609, held that even if the first defendant had induced the plaintiff
to enter into the agreement with her and the second defendant, by falsely
representing that she was of full age, she was not estopped from avoiding
the agreement by pleading her minority.
• This position is supported by the Privy Council's decision in Mahomed Syedol Arffin v Yeoh
Ooi Gark [1916] 2 AC 575, PC (Appeal from Malaysia) which held that an action could not be
maintained against the appellant for inducing the respondent to lend him money by falsely
representing himself to be of full age. In this case, the respondent, a moneylender, brought
an action against the appellant for certain sums of money.
• In defence, the appellant stated that at the time of the transactions sued upon, he was an
infant. At that time, the respondent had asked the appellant for proof of majority and the
appellant had given a doctor's certificate whereby a doctor had certified that, in his opinion,
upon examination, the appellant was 21 years old.
• In Stocks v Wilson [1913] 2 KB 235, the defendant, a minor, by fraudulently representing that
he was of full age, induced the plaintiff to sell and deliver to him certain goods. The plaintiff
failed to discharge the burden of showing that these goods were necessaries, and so could
not sue on the contract for the price. Lush I held that the defendant was not estopped from
proving his true age:
“Nor is the infant estopped from proving the true facts, which again, if such an estoppel were
permitted, would deprive the infant of the protection necessary for his security ... If the infant
has obtained property by fraud he can be compelled to restore it; if he has obtained money he
can be compelled to refund it. If he has not obtained either, but has only purported to bind
himself by an obligation to transfer property or to pay money, neither in a Court of law nor a
Court of Equity can he be compelled to make good his promise or to make satisfaction for its
breach.”
 AGREEMENTS BY PERSONS OF UNSOUND MIND
•Under s11 of the Contracts Act, persons who are competent to contract must be of
sound mind. Section 12(1) of the Contracts Act sets out what is a sound mind for the
purposes of contracting:
•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 judgment
as to its effect upon his interests.
•Sections 12(2) and (3) of the Contracts Act emphasise this test by focusing on the
soundness of mind of the contracting party at the time when the contract is made.
•Section 12(2) of the Contracts Act provides:
A person who is usually of unsound mind, but occasionally of sound mind, may make a
contract when he is of sound mind.
•While s12(3) of the Contracts Act provides that:
A person who is usually of sound mind, but occasionally of unsound mind, may not make
a contract when he is of unsound mind.
•The illustrations in s12 of the Contracts Act give examples of the class of persons who are
and are not of sound mind for the purpose of contracting. Illustration (a) states that:
A patient in a mental hospital, who is at intervals of sound mind, may contract during
those intervals.
• In this context, it should be noted that the Mental Health Act 2001 (Act
615)(which repealed and replaced the Mental Disorders Ordinance 1952, the
Mental Health Ordinance (Sarawak) 1961 and the Lunatics Ordinance
(Sabah) 1951), makes provisions for dealing with the property of a mentally
disordered person (s63) the execution of instruments for dealing with such
property (s64) and the performance of certain contracts entered into by
mentally disordered persons (s65).
• Illustration (b) in s 12 of the Contracts Act states that:
• A sane man, who is delirious from fever, or who is so drunk that he cannot
understand the terms of a contract, or form a rational judgment as to its
effect on his interests, cannot contract whilst such delirium or drunkenness
lasts.
• Illustration (b) states that a contracting party may not contract so long as his
delirium or drunkenness results in his being unable to understand the terms
of a contract or form a rational judgment as to its effect on his interests.
• It is noted that the connector used in s 12(1) of the Contracts Act is "and"
instead of "or". For consistency, the illustration should be read as requiring
the contracting party to be both unable to understand the terms of a
contract and unable to form a rational judgment as to its effect on his
interests before he is said to be incompetent to contract within the meaning
of the section.
• Under the common law; a contract entered into by a person of unsound mind can be
rescinded if it can be shown that (i) at the time the contract was entered into, he was
incapable of understanding his actions; and (ii) the other party knew of his condition.
A contract entered into under such circumstances is thus voidable. The person who is
of unsound mind has an option whether to continue with the contract or to rescind it.
• In Imperial Loan Company Ltd v Stone [1892] 1 QB 599. CA, an action was brought on a
promissory note which the defendant had signed as surety. The jury found that the
defendant was insane when he signed the note, but could not agree on the question
whether this incapacity was known to the agent of the plaintiffs who was present when
the note was signed. The matter went before the Court of Appeal.
• Lord Esher MR laid down the principle as follows:
“…what I am about to state appears to me to be the result of all the cases. When a person
enters into a contract, and afterwards alleges that he was so insane at the time that he
did not know what he was doing, and proves the allegation, the contract is binding on
him in every respect, whether it is executory or executed, as if he had been sane when
he made it, unless he can prove further that the person with whom he contracted knew
him to be so insane as not to be capable of understanding what he was about .”
• Similarly, Lopes LJ in the same case stated:
“In order to avoid a fair contract on the ground of insanity, the mental
incapacity of the one must be made known to the other of the contracting
parties. The defendant who seeks to avoid a contract on the ground of his
insanity, must plead and prove, not merely his incapacity, but also the
plaintiff's knowledge of that fact, and unless he proves these two things he
cannot succeed.”
• The same principle was enunciated in Hart v O'Connor [1985] 1 AC 1000;
[1985] 3 WLR 214, PC (Appeal from New Zealand). In this case, the
appellant-contracted to buy farmland in New Zealand which was the
subject of a testamentary settlement. The agreement was expressed to be
between the appellant and one Jack O'Connor, who was then the sole
trustee of the estate.
• Subsequently, the respondents, the trustees and beneficiaries of the
estate, applied to set aside the agreement on the ground, inter alia, that
Jack O'Connor had been of unsound mind when he entered into the
contract. The Privy Council held that the contract was not voidable as Jack
O'Connor's unsoundness of mind was not apparent to the other
contracting party when he entered into the contract.
Claims for necessaries for maintaining a person of unsound mind has been
allowed. In the case of In re Beavan; Davies, Banks & Co v Beavan 69 [1912]
Ch D 196. In this case, a customer of a bank became of unsound mind. His son
arranged with the bank to continue his banking account and to draw upon it
on behalf of the lunatic for the maintenance of the lunatic's household and
for the necessary outgoings of his estate. At the time of his death, the
account was overdrawn and the bank claimed to prove as creditors for the
amount of the overdraft. The court held that although the bank were not
creditors of the lunatic, they were entitled under the doctrine of subrogation
to stand in the shoes of creditors paid by the son by means of the lunatic's
banking account for necessaries supplied for the maintenance of the lunatic's
household, and for the necessary outgoings of his estate. Neville J stated:
“Now it is not disputed that the law is that a person maintaining another of
unsound mind is entitled to recoupment from his estate in respect of
necessary expenditure, having regard to the position in life of the person of
unsound mind.”
• The English principles on the effect of contracts entered into with persons of unsound
mind set out above have been applied in Malaysian cases. In Asia Commercial Finance
(M) Bhd v Yap Bee Lee [1991]1CLJ 271, the first defendant signed a letter of guarantee
for the benefit of the plaintiff (a finance company). The plaintiff obtained a judgment in
default against the first defendant. The first defendant's husband applied as her
guardian ad 1 item for the judgment in default to be set aside on the ground that the
first defendant was of unsound mind at the time she signed the guarantee. A report
from an expert at Hospital Bahagia showed that the first defendant had bipolar
depression. The plaintiff opposed the application on the ground that they were not
informed that the first defendant was of unsound mind. The High Court referred to
Imperial Loan's case and held that the contract was voidable only if the first defendant
was of unsound and the plaintiff had knowledge of this fact. The Contracts Act was not
referred to in this case.
• In Che Som Binte Yip Alias Mrs Som Ismail &2 Ors v Maha Private Limited & 2 Ors 72
[1989]2CLJ 893 the first and second plaintiffs took action on behalf of the third plaintiff
for a declaration that a deed of mortgage allegedly executed by the third plaintiff in
favour of the third defendant bank be declared null and void and of no legal effect. It
was submitted that the third plaintiff was of unsound mind and incapable of managing
himself and his affairs at the time of the execution of the mortgage deed. The Court
cited Imperial Loan Co Ltd v Stone and Hart v O'Connor and stated:
“The general rule is that a deed executed by a person who has no mental capacity to do so is
voidable .. “
•In Chemsource (M) Sdn Bhd v Udanis bin Mohammad Nor [2002] 6 MLJ 273, the
defendant suffered from Parkinson's disease and it caused physical as well as mental
disabilities. The plaintiff was said to be fully aware of the defendant's condition at all
material times. It was the defendant's case that the plaintiff took advantage of the
defendant's disease and had induced the defendant to execute various agreements
for the benefit of the plaintiff and to the detriment of the defendant. The High Court
referred to ss11 and 12 of the Contracts Act and the case of Imperial Loan Co Ltd v
Stone and concluded that the issues of Parkinson's disease and the capacity of the
defendant to contract were triable issues that needed a full trial.
•Abdul Malik Ishak J stated:
“As to whether Parkinson's disease had affected the mental capacity of the defendant
to enter the said agreement, this can only be decided and adjudicated upon after a full
blown trial had been conducted. A mental patient could not, under the law, make a
valid contract. Of crucial importance to determine would be whether the defendant at
the time of contracting was suffering from such a degree of mental disability that he
was so incapacitated and incapable of understanding the nature of the contract”
• If the defendant was incapable of understanding the nature of the
contract, then the contract was not void but voidable at the option
of the defendant provided that the plaintiff knew or ought to have
known of the mental disability of the defendant... On the other end
of the scale, if the contract was made by the defendant at the time
and during the lucid interval, then that contract would be binding
upon the defendant notwithstanding the fact that his disability was
known to the plaintiff (Hall v Warren (1804) 9 Ves 605 and Selby v
Jackson (1844) 6 Beav 192). Of crucial importance would be
whether the plaintiff knew-or ought to have known that the
defendant was mentally disordered and had no contractual
capacity to enter the said agreement.
• While the above three cases held that contracts by persons of
unsound mind are voidable following the English position, an earlier
High Court decision of Sim Kon Sang Peter (administrator of the
estate of Chong Yu Tai , decd) v Datin Shim Tok Keng [1989]2CLJ
893 appears cognisant that the provisions of the Contracts Act
governing unsoundness of mind would have the effect that the
agreements are void.
• In that case, the plaintiff claimed that the deceased, when she was alive,
had transferred to the defendant certain undivided shares of her land
when she was, as the defendant well knew, of unsound mind. The plaintiff
therefore claimed that the transfers were void and of no effect. The
defendant claimed that the agreements were voidable and not void, citing
Asia Commercial Finance (M) Bhd v Yap Bee Lee & Ors and Imperial Loan
Co Ltd v Stone.
• Ian Chin J stated:
“Since section 11 of the [Contracts] Act covers not only cases relating to the
age of majority but also cases of unsoundness of mind, the decision in Tan
Hee Juan v Teh Boon Keat & Anor, though a decision in respect of a want
of age, applies equally to a case relating to unsoundness of mind.
Therefore, if the Act applies to the present case, it means that any contract
made by a person of unsound mind is void and not merely voidable. The
contrary is the case if the English common law applies. See Asia
Commercial Finance (M) Bhd v Yap Bee Lee & Ors and Imperial Loan Co Ltd
v S tone.”
• However, the Court went on to hold that the English common law applied
as the contract was made in Sabah before the Contracts Act came into
force, and therefore, the contract was voidable and not void.
• The authors of Pollock and Mulla have taken the position that s 11 of the
Indian Contract Act (which is in pari materia with s 10 of the Malaysian
Contracts Act) which makes agreements entered into by minors to be
wholly void should apply accordingly to agreements by persons of unsound
mind who are also incompetent to contract, citing the case of Machaima v
Usman Bean [1989]2CLJ 893.
• This proposition is correct based on a parallel analysis of the position on
capacity to contract of minors and of persons of unsound mind, which are
premised on similar legal reasoning and are provided in the same sections
of the Contracts Act governing capacity to contract.