UMAR KHALID BIN MUSA 2019109117

The issue in this case is whether AMF Finance can sue Wan Endut and Ramly
Enterprise after Wan Endut had defaulted in payment and was indebted to the AMF
Finance in a sum in excess of RM2.7 million as principal and interest on 8.7.2015.

The doctrine of privity can be defined as a doctrine where only parties to the
contract can take or be brought for legal action. The doctrine of privity has two general
rule consists of the benefit rule and the burden rule. The benefit rule requires only party
to contract can sue for the benefits while the burden rule requires only parties to the
contract can be sued. In the case of Beswick v Beswick, where the defendant had failed
to pay the annual allowance to the plaintiff after the plaintiff’s husband had sole his
business to him. The court held that despite the fact that the husband has clearly
intended her to benefit from the contract, it was held that the widow cannot sue the
defendant after he failed because she was not a party to the contract. Another case in
point would be the case of Tweedle v Atkinson, where in this case, where the plaintiff
was engaged to be married and his father and future father-in-law had made a contract
providing that they will give certain sum of money to the plaintiff. The court held that a
contract which was made for the benefit of a third party, the third party has no rights
under it. In the case of Kepong Prospecting Ltd v Schmidt, the court affirmed the
position of privity of contract in Malaysia where a non-contracting party cannot sue and
be sued on a contract.

However, the doctrine of privity is subject to exceptions. The exceptions can be

divided into two categories which is (i) common law and equity and (ii) statutory
exceptions.

In light of the above discussion, the statutory exceptions under section 79 of the
Contracts Act 1950 is relevant. The statutory exceptions provide that the doctrine of
privity will not apply when a contract of guarantee was involved. Section 79 of the
Contracts Act 1950 defines a contract of guarantee as a contract which involves a
security or guarantee given by a one person to secure. Pursuant to the case of
Razshah Enterprise v Arab Malaysian Finance [2010], the person who gives the
guarantee is called the surety, the person in respect of which default the guarantee is
given is called the principal debtor and the person to whom the guarantee is given is
called a creditor. Section 80 of the Contracts Act 1950 provides that the consideration of
guarantee must be anything done or any promise made for the benefit of the principal
debtor. On the other hand, the obligations of a guarantor is stipulated under section 81
of the Contracts Act. This is evident in the case of which involves a security or
guarantee given by a one person to secure. Pursuant to the case of Razshah Enterprise
v Arab Malaysian Finance [2010], where it involved a secure of payment by the
appellant of 53 pieces of land and the court held that a guarantor is liable for all defaults
by the debtor.

Applying it to our present dispute, AMF Finance can sue Ramly Enterprise after
Wan Endut had defaulted in payment and was indebted to them in a sum in excess of
RM2.7 million as principal and interest on 8.7.2015. Following the case of Razshah
Enterprise v Arab Malaysian Finance, the surety in our present case is Ramly
Enterprise, the creditor is AMF Finance and the principal debtor is Wan Endut.
Generally, only Wan Endut can be sued for the breach of contract as she is a party privy
to the contract. However, as the contract between AMF Finance, Ramly Enterprise and
Wan Endut is clearly a contract of guarantee, it falls under the exception provided in
section 79 of the Contracts Act 1950. The agreement made between them was a
contract of guarantee because it fulfills the requirements of consideration off guarantee
under section 80 of the Contracts Act 1950. This can be seen when Ramly Enterprise
had executed of 53 pieces of land in order to secure repayment and interest of the loan
borrowed by Wan Endut. Thus, following section 81 of the Contracts Act 1950, AMF
Finance can sue Wan Endut and Ramly Enterprise after Wan Endut had defaulted in
payment and was indebted to them in a sum in excess of RM2.7 million as principal and
interest on 8.7.2015.
 To conclude, AMF Finance can sue Wan Endut and Ramly Enterprise after Wan
Endut had defaulted in payment and was indebted to the AMF Finance in a sum in
excess of RM2.7 million as principal and interest on 8.7.2015.