LAW 083

INTRODUCTION TO THE LAW OF CONTRACT, TORTS & CRIMES

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LAW FOUNDATION
UiTM SELANGOR DENGKIL CAMPUS
SEMESTER: JAN-JUN 2022
LAW OF CONTRACT

Identify the correct area of law, create the relevant issue and apply the appropriate principles of law.

QUESTION 1
Mila offered to sell her 'Honda BRV' worth RM90,000 to Abil for only RM50,000. Abil accepted the
offer. Mila later changed her mind and refused to continue with the contract on the ground that the price
was too low. Advise Mila. (20 marks)

Whether the adequacy of consideration is important in forming a valid contract.

In the elements of a contract that is formed, one of the elements that makes a contract valid is
consideration. Consideration can be defined as an act or abstinence or promise by the promisor or any
other person as required by the promisor in return for his promise. In short, both parties must receive
something from each other. It is a price that has to be paid by a party in return for a favor or a promise.
Rules that may govern consideration include that consideration need not be adequate but must be
sufficient, meaning that consideration must not be necessarily adequate. The adequacy of the price that is
paid to a party in return for a promise does not matter, as long as the promisor receives something.
Section 26 of the Contracts Act 1950 provides that an agreement to which the consent of the promisor is
freely given is not void merely because the consideration is inadequate. This means although the
consideration is not adequate, once it has been offered and accepted it is considered as valid and binding.
We can take the case of Phang Swee Kim v. Beh I Hock [1964] MLJ 383, the respondent had claimed
that the appellant had trespassed the land and said the land belonged to him. The appellant counterclaimed
that she was entitled to the possession of the land by arguing that there was an oral agreement between her
and the respondent, because he had agreed to transfer the land to her for payment of RM500. It was held
that the inadequacy of the consideration was immaterial and the agreement was valid.

If we implement these principles in Mila’s case, Abil had accepted Mila’s offer to buy the Honda car that
is worth RM90000 for RM50000. Mila, however, did not want to sell the car after the acceptance because
she felt that the car was being sold at a very low price, which she could not generate any profit from the
sale. However, whether the car was being sold at a price that is too low or not is not significant, this is
because a consideration should at least be sufficient in order to make the contract valid. Abil accepted
Milas offer by paying RM50000, this acceptance has some economic value, therefore it is sufficient to
make the contract valid. If we refer to the previous case law, the amount of RM500 paid to buy the land
can be clearly seen that it was inadequate, however this information is immaterial because the promisee
had fulfilled her promise by paying rm 500 in return for the land, making it sufficient to validate the
contract.
Therefore, Mila has to sell the car to Abil for RM5000 as the agreement between them was binding
although the consideration may be inadequate. The grounds that the price of the car being sold was too
low is irrelevant to this matter.

QUESTION 2
Lieya aged 16 is the youngest daughter of a prominent lawyer. In October 2021, she ordered and received
five designer’s dresses from Bernard Boutique at the cost of RM5000. Until now Bernard Boutique has
not received the payment from Lieya. Advise Bernard Boutique on their rights against Lieya under
contract law.(20 marks)

The issue in this case is whether both parties have the capacity to enter into a contract and make the
contract legally binding.

whether the 5 clothes being sold by BB is considered as necessaries for a minor under the Section 69
contract acts 1950

In the elements of forming a contract, the parties who are binded to the contract must have full capacity.
Capacity refers to the ability to understand the terms and obligations of the contract. This element is
important so that both parties can execute their parts according to the terms of the agreement. Section 10
of the Contracts Act 1950 provides that all agreements are contracts if they are made by free consent of
parties that are competent to form a contract. The question of whether a party is “competent” can be
challenged by a few factors. One is if they are a minor, there are certain effects that are implied onto the
agreement. A minor can be defined as someone who is below the age of 18 and is incompetent to enter
into a contract, therefore, any agreements or contracts made by minors are void under the law. However,
there are certain exceptions in situations that a contract entered by a minor becomes valid. The first
exception is if the goods and services are a part of the minor’s category of necessaries. Luxurious articles
do not actually fall within the category of necessaries. We also need to consider the nature of the goods
and services, the minors actual needs and the minors condition of life. We can refer to the case of Nash v.
Inman [1908] 2 KB 1. The customer was a minor, and a Cambridge undergraduate who purchased 11
fancy waistcoats by a supplier. The minor was also a son of an architect and was charged with 122$ for
the waistcoats. It was held that the clothes supplied by the tailor were not classified as necessaries as the
minor had already been adequately supplied with clothes.

If we apply these principles to this case, it is clear that Bernard Boutique had the full capacity to enter into
a contract. Lieya, on the other hand, is still a minor, thereby incompetent to enter into a contract. Not only
was she a minor, but she was also the daughter of a prominent lawyer. Meaning to say that it is likely that
Lieya has already been adequately supplied with clothes as her father has a high paying job. Moreover,
Bernard’s Boutique is a shop that supplies designer dresses, which are considered to be luxurious items.
In the exceptional circumstances that a contract entered by a minor becomes valid, the goods and items
have to be classified as necessaries. The clothes supplied to Lieya do not count as necessaries as luxurious
items cannot be considered as necessaries and she has also been adequately supplied with clothes herself.
Referring back toNash v. Inman [1908] 2 KB 1, the minor was also a daughter of someone of high social
status, which indicates that she is supplied with an adequate amount of clothes. Both of the minors in
these situations have a stable condition of life and therefore clothes cannot be counted as necessaries.

Thus, there was no contract between Bernard Boutique and Lieya as one of these parties was incompetent
to enter into the contract and had no capacity to make the contract binding.

QUESTION 3
Robert enters into a tenancy agreement for a condo at Puncak Impian for as long as he likes. The owner of
the condo agrees that Robert may pay the rent at RM900 per month or RM1000 per month. Robert also
ordered some furniture from Syarikat Perabot but did not state the design and material of the furniture.
Advise Robert as to the legal status of such agreements. (20 marks)

The issue in this case is whether the requirement of certainty had been fulfilled by these agreements,
therefore making it valid and legally binding.

In the elements of a contract that is formed, Section 30 of the Contracts Act provides that the terms of the
contract must be certain and definite. This element is known as certainty, which expresses that there
should be no vagueness or uncertainty in a contract. Otherwise, the contract is invalid and therefore, void.
To illustrate this matter further, if A agrees to sell B “100 boxes of canned drinks’, there is no certainty
whatsoever to show what kind of canned drinks was intended to be sold, thus the agreement is void.
For example, the conditions, price and period must be stated clearly and be known towards the promisee.
Next, the language used shall also be understood by both parties so that they can understand the intention
and the object of the agreement. In the case of Karuppan Chetty v Suah Thiam [1916] 1 FMSLR 300,
where the promisor offered a contract towards the promisee that they can rent an asset at RM35 per month
for as long as he likes. It was held that due to the uncertainty of contract, where the period of the stay was
not explicitly stated, the court held that the agreement was void.

If we apply these principles to this case, Robert had entered into a contract with two parties, which are the
owner of the condo at Puncak Impian and Syarikat Perabot. These contracts differ for its object of
agreement, intention and conditions. Firstly, the tenancy agreement stated that Robert can stay at the
condo for as long as he likes, which implies that there is vagueness and uncertainty in the aspect of the
period of agreement. The period of the stay should be of importance to provide certainty to both the
promisor and promisee. Therefore, the contract that was made is invalid and cannot be enforced, unless
the tenant was provided the period of the stay from the first place. Just like the situation in Karuppan
Chetty v Suah Thiam [1916] 1 FMSLR 300, the promisee had also been told that they can stay at the
house for as long as they like, which caused the element of certainty to be absent in the agreement. Next,
we can look at the agreement made between Syarikat Perabot and Robert. Syarikat Perabot did not state
the design and material of the furniture when Robert ordered the furniture. Therefore, this has caused
Robert to not know the intention and the object of agreement.

Therefore, both contracts that were made did not fulfill the requirements of a valid contract, as the
conditions, period, intentions and object were uncertain. The legal status of the contract is invalid. Next,
the element of certainty is of importance as it determines the validity of a contract