LAW OF CONTRACT:

ELEMENTS OF CONTRACT
(CONSENT)
Prepared by:
NURUL NASIHIN ARIFFIN
KPMBP
 Consent in a contract
Section 10- 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, its
not declared as void.
Free consent is the basis of contractual
relationship.
The consent of the parties must be given
freely and voluntarily.
 Cont
Section 13- two or more persons are said
to consent when they agree upon the same
thing in the same sense.
Section 14- consent is said to be free
when it is not caused by:-
(a) Coercion
(b) undue influence
(c) Fraud
(d) Misrepresentation and
(e) Mistake
 Cont
The effects from those section, the
contract become void or voidable
 VOID contracts
Section 2(g) provides that void contract
is an agreement not enforceable by law. A
contract is VOID when the consideration
or object of an agreement is unlawful.
Section 24 provides that the
consideration or object of an agreement
is lawful, unless which had been
highlighted in section 24(a)-(e).
(see illustration)
Agreement also that are declare VOID by
Contract Act: section 26- 31
 VOIDABLE Contracts
Section 2(i) states that an agreement which is
enforceable by law at the option of one more of the
parties thereto, but not at the option of the other or
others, is a VOIDABLE contract.
Voidable contracts are valid contracts that can be
made void at the option of party who claimed that he
has been forced to enter into the contract without free
consent.
Section 10- 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, its not declared as void.
 Cont
Section 14- consent is said to be
free when it is not caused by:-
(a) Coercion
(b) undue influence
(c) Fraud
(d) Misrepresentation and
(e) Mistake
 Coercion
Sec 15: committing or threatening
to commit any act forbidden by the
Penal Code or the unlawful detaining
or threatening to detain any
property.
E.g: causing grievous hurt,
kidnapping, criminal force and
assault, rape, culpable homicide,
murder, extortion.
 Cont
Case: Kesarmal s/o Letchman Das v
Valiappa Chettiar
A transfer of property which was made
under the orders of the Sultan, issued in
the ominous presence of 2 Japanese officers
during the Japanese ocupation of Malaysia
was held to be not valid. This is because the
consent given was not free and therefore
the transfer became voidable at the will of
the party whose consent was so caused.
 Cont
Case: Chin Nam Bee Development Sdn Bhd v
Tai Kim Choo & 4 Ors
R purchased houses to be constructed by the A.
Each of the R had signed a contract to purchase a
house at $29,500. However, the R were forced
later to pay an additional $4000 under a threat by
the A to cancel the R booking for their houses.
Held: the payment was not voluntary but had
been made under threat. Thus, there was coercion
in the agreement of paying the additional $4000 to
the A.
 Undue Influence
Sec 16: situation where the relations
subsisting between the parties are such that
one of the parties is in a position to dominate
the will of the other and uses that position to
obtain unfair advantage over the other.
An existence of undue influence is depend on
proof by parties to a contract or by a
assumption by court or when the contract was
obvious to be advantages only to one party.
 Cont
i) Existence of influence by proof
A person claims to be undue influenced must show to the
court the existent of the influence and that it has urged
him to contract.
ii) If it is made under the court assumption
A person claims to have been influence must show one of
the followings:
a) the use of such power by the person in position
to dominate to obtain what he desire.
 Cont
b) Existence of trusty- beneficiary
relationship.
case: Salwath Haneem v Hadjee Abdullah
Ps husband has transferred titles to all his
properties to his 2 brothers. When he passed
away, P claims that the contract was made
under undue influence.
held: the contract is void. P shows to court
that she is in trusty- beneficiary relationship
with her in-laws.
 Cont
c) partys mental capacity is temporarily or
permanently affected by reason of age, illness, or
mental or bodily stress.
case: Inche Noriah v Shaik Allie bin Omar
An uneducated- old Malay woman executed a deed of gift
of a landed property in Spore in favour of her nephew who
had been managing her affairs. Before executing the deed
the donor had independent advice from a lawyer who
acted in good faith. However, he was unaware that the gift
constituted practically the whole of her property and did
not impress upon her that she could prudently and equally
effectively, have benefited the donee by bestowing the
property upon him by a will.
held: The gift should be set aside as the presumption of
undue influence, which is raised by the relationship proved
to have been in existence between the parties, was not
rebutted.
 Cont
iii) Obvious to advantage one party only.
case: Chait Singh v Budin bin Abdullah
P (a chetty) sued D (uneducated man) for
failure to pay debts. The interest rate is at
36%. D has charge his land as security.
held: the interest rate is too high for a loan
with security. It shows that the contract is
advantageous to one party only.
 Fraud
Sec 17: Fraud includes any of the following
acts committed by a party to a contract, or with
his connivance, or by his agent, with the intent
to deceive another party thereto or his agent,
or to induce him to enter into contract
A contract made under fraud is voidable
contract.
If person that has been fraud wants to rescind
the contract, he must proof that there is fraud
in the contract been made.
 Cont
There are 5 acts considered as fraud under sec 17: (a)- (e).
Elements of fraud
1) there must be a false representation/ statement
2) The representee must have relied on the representation
Case: Kheng Chwee Lian v Wong Tak Thong
R contracted to buy an estate from A. Under A urge, R bought
another estate which the same size as the 1st contract. But it
is not.
Held: the R was induced by fraud misrepresentation into
signing the 2nd contract. Therefore, the R has the right to
repudiate the 2nd contract since it is made under fraud.
 Cont
Case: Letchemy Arumugam v Annamalay
D had made a fraudulent misrepresentation to the
P, an illiterate Indian woman rubber- tapper, and
induced her to enter into a sale & purchase
agreement. The D had fraudulently represented to
the P that the document she was required to sign
was a loan that she had taken and to free and the
land from the charge. In fact, it was a sale
agreement of the land.
held: the agreement was voidable at the option of
the P
SILENCE & FRAUD
Cont
The general rule, silence does not constitute fraud.
But there are circumstances where mere silence constitutes fraud.
It is when:
(a) the act of silence equivalent to speech that later found out to
be true.
(b) the contract is of uberrimae fidei. It is a contract that must be
made in bona fide.
If a contract wants to be repudiated under fraud of mere silence, a
person who claims to be fraud must proof that the silence
encourage him to contract and he has taken steps to investigate
the truth but fails.
 Misrepresentation
It is a false statement made by the
representor and which such false
representation induces the other party
to enter into a contract.
Misrep, the person making the
representation, he believes to be true.
No intention to make fraud. (Innocent
misrepresentation)
Sec 18: Misrep includes: sec 18 (a)- (c)
 Cont
Elements of misrepresentation;
a) There must be a false representation, either
through a positive statement or some conduct
b) The representation must be one of fact, not a
mere expression of opinion
Case: Bisset v Wilkinson
Contract of sale a poultry farm is valid even
though the seller made a statement that the
farm can breed 2000 sheep is not true. It is
because it is an opinion. He never breeds a
sheep at the farm before.
 Cont
c) The statement was addressed to the party
misled
d) The representation must induce the misled
party to enter into the contract.
case: Peek v Gurney
A claims the company prospectus is
deceiving. He claims to rescind the contract.
held: The claim was rejected. The A bought
the companys share from former
shareholder. The company prospectus is
directed to new applications to buy shares
from the company.
 Cont
case: Horsfall v Thomas
D refused to pay price for cannon
brought from P. he claims that P has
made misrepresentation.
held: Ds act is a breach of contract.
Ds decision to contract was not
encourage by misrepresentation.
 Mistake
Sec 21: where both the parties to an agreement
are under a mistake as to a matter of fact
essential to the agreement, the agreement is
VOID.
The mistake must be by both parties- mutual
mistake
There are 2 situation where mistake can happen
under mutual mistake:
1)Mistake as to the existence of the subject matter
of the contract
- look at illustration (a) & (b)to s. 21
 Cont
case: Strickland v Turner
a buyer bought and pay annuity
scheme on X life. The fact that X has
already passed away is unknown to
both the buyer and the seller.
held: the contract is void, the
subject matter of the contract
 Cont
2) Mistake as to the identity of the subject matter
- no agreement on the same thing in the same
sense and in other words, no consent.
case: Raffles v Wichelhaus
Raffles agreed to sell cotton to Wichelhaus. The agreement provided that the cotton
was to arrive England from Bombay. However, there were two different ships
regularly sailing from Bombay to England, one leaving in October and the other in
December. Raffles shipped the cotton on the December ship, and defendant
Wichelhaus refused to accept the cotton. Raffles sued on the alleged contract.
Wichelhaus argued that it understood the shipment would be shipped on the October
ship.
held: The court concluded there was no binding contract. Since the parties meant
different ships and there was a mistake by both Raffles and Wichelhaus.
 Cont
Mistake of Facts by 1 party (Unilateral
Mistake)
- Section 23 of CA: The contract is valid.
- unilateral mistake does not affect validity
of a contract.
Mistake by law
Section 23 of CA: The contract is valid if the
mistake is of local law. But if of a fact or
mistake of other country law, void.
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