CONTRACT LAW

Lecture 2
Contents
◦ Capacity
CAPACITY
English Law
Types of Capacities

Minors

Companies
Capacity Mental
Incapacity

Drunkenness
MINORS
English Law
Minors
◦ Under the age of 18 (Family Law Reform Act 1969)
◦ Law protects the minors (Common law and Minors’ Contracts Act 1987 made some modifications to
common law)
◦ Current law on Minors: back to common law (as modified by Minors’ Contracts Act 1987)
◦ At whose expense? Others who deal with them in good faith!
◦ GR: Contract with a minor is VOIDABLE!
Minors – Voidable
◦ The minor is entitled to set the contract aside (repudiate/terminate) provided that he does
so before he reaches 18 or within a reasonable time thereafter
◦ However, it cannot be set aside by the other party.
◦ Minor can enforce the contract as against the other party but the other party cannot, in general,
enforce the contract against the minor.
Minors – 2 Golden Rules

Exceptions (contract is valid)

• Necessaries
• Beneficial contracts of service (Employment)

Other contracts (VOIDABLE)

• Voidable at the instance of the minor
• Binding on the other party
Exceptions to GR of Exceptions
(contract is valid)

Minors

Necessaries Contract of Employment

Necessary Goods Eg: Contract to give

Necessary Services Generally for his benefit
Benefit of the minor Station in life of the minor publishers right to publish
(but not necessarily)
(wide definition) the minor’s memoirs

Higher the status, the

Look at the contract as a Chaplin v Leslie Frewin
greater the range of
whole (Publishers) Ltd
necessaries

Peters v. Fleming
- Rich father Nash v. Inman Clements v London and De Francesco v Barnum
- Actual needs when he - 2 requirements: North Western Railway Roberts v Gray
entered into contract

(2) Suitable to minor’s

1) Goods suitable to the
actual requirements (no
condition in life
supply from others)
Peters v Fleming (1840) 6 M & W 42
◦ Claimant brought action to recover price of goods supplied (rings including a gold ring, gold watch-chain, and pins) and
services rendered (repair of ring) against defendant, an infant.
◦ Defendant, a rich gentleman’s son and a University of Cambridge undergraduate, pleaded infancy and that goods and services
supplied were not necessaries and that he was therefore not bound by the contract.
◦ Claimant contended that the goods and services were necessaries suitable to defendant’s “degree, estate and condition” so that
the infant was bound.
◦ Held: goods and services supplied were necessaries, infant liable
◦ Per Alderson B:
◦ The articles must be for real use, and such as would be necessary and suitable to the degree and station in life of the infant.
Nash v Inman [1908] 2 KB 1
◦ P, a Savile Row tailor, brought an action against D to recover £145 being the credit price charged for clothes supplied to D, an
undergraduate at Trinity College, Cambridge.
◦ D pleaded infancy and that the goods were not "necessaries.”
◦ S.2 Sale of Goods Act 1893: minor must “pay a reasonable price” for “necessaries…sold and delivered to” him; and necessaries
means “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”
◦ Held: not necessaries because not suitable to actual requirements
◦ P must show that he has supplied "necessaries" i.e.
◦ First, that goods supplied are suitable to the condition in life of the infant;
◦ And, secondly, that they are suitable to his actual requirements at the time of the sale and delivery - or, in other words, that the
infant has not then got a supply from other sources
◦ D already had a sufficient wardrobe supplied by his father.
◦ Since P did not satisfy the 2nd limb contract was not binding on D.
Clements v London and North Western
Railway Co [1894] 2 QB 482
◦ LNWR Co employed Clements, a minor. Together with the employment contract, Clements signed an agreement to join an
insurance scheme for the company’s employees.
◦ By doing so Clements gave up his statutory right to personal injury benefits against the company.
◦ Clements was injured. Benefits payable under insurance scheme were less favourable than those payable under statute.
◦ Clements purported to repudiate the agreement to join the insurance scheme and brought action against the company for
statutory benefits instead.
◦ Held: C bound by agreement, could not claim statutory benefits
◦ The contract taken as a whole was for the benefit of Clements and therefore binding on him.
De Francesco v Barnum (1890) 45 Ch D 490
◦ Apprenticeship deed between an infant and De Francesco, a dancing master, for seven years, for infant to be instructed in stage
dancing. Deed included the following terms:
1. Infant could not marry;
2. Infant could not accept any professional engagement without master’s consent;
3. No provision for remuneration to the infant except during an engagement
4. No undertaking to provide her with any engagement or with clothes, lodging, or food, except when abroad;
5. Master could terminate apprenticeship at any time
◦ Held: Child not bound
◦ The court must regard the contract as a whole and the circumstances of the case.
◦ The contract contained stipulations of an unusual character which placed an inordinate power in the hands of the master.
◦ Contract was not for the benefit of the infant.
◦ Therefore, the infant was not bound by the contract.
Roberts v Gray [1911-13] All ER Rep 870
◦ G, a professional billiards player, aged 19 years, entered into an agreement with R, a noted billiards player, for a tour round the
world together for a period of 18 months.
◦ R was to be responsible for all expenses of the tour, and the net profits of the tour after deducting expenses were to be equally
divided between them.
◦ A few days after the date fixed for the commencement of the tour G repudiated the agreement.
◦ R sued G for breach of contract, and G raised his infancy as a defence.
◦ Issue: was the contract for the benefit of G?
◦ Held:
◦ The agreement was a contract for the education and instruction of G in his profession of billiards player and was, on the
whole for his benefit, and therefore binding on him for the breach of which he was liable in damages.
◦ Where it is necessary to consider whether a contract by an infant is for his benefit the contract must be looked at as a whole; it
will not be rendered unenforceable by the fact that it contains provisions which, standing alone, would be adverse to the infant.
Voidable
◦ The minor is entitled to set the contract aside provided that he does so before he reaches 18 or within a
reasonable time thereafter
◦ However, it cannot be set aside by the other party.
◦ Minor can enforce the contract as against the other party but the other party cannot, in general, enforce
the contract against the minor.
Court’s Approach:
◦ McKendrick: “[Courts]… allow minority to act as a defence to a claim brought against the minor by an
adult (as in Nash v Inman), but they have refused to allow that same minority to be used as the
foundation for an active claim by the minor…”
Steinberg v Scala (Leeds) Ltd [1923] 2 Ch 452,
CA
◦ The infant plaintiff subscribed for shares in a company which were allotted to her.
◦ She subsequently repudiated the contract and her allotment of shares was set aside.
◦ She sought the return of the money which she had paid for the shares.
◦ Claim failed. Consideration for her payment had not wholly failed because shares had
been allotted to her.
Misrepresentation of Age
◦ R Leslie Ltd v Shields [1914] 3 KB 607
◦ Minor obtained a loan of £400 by fraudulently misrepresenting his age
◦ Obiter: “…if a minor obtains property…by means of a false representation of full age,
[equity] can compel him to restore that property to the person deceived, provided that it is
identifiable and still in his possession. If the identity of the property is lost through dissipation,
the equitable remedy of restitution is not available.”
S3 Minors’ Contracts Act 1987
◦ Protection of party contracting with a minor
◦ S3 provides a restitutionary remedy to persons contracting with minors
◦ S3(1): Where a person (plaintiff) has entered into an unenforceable contract with a minor (defendant), or a contract
which the defendant has repudiated (terminated), “the court may, if it is just and equitable to do so, require the
defendant to transfer to the plaintiff any property acquired by the defendant under the contract, or any property
representing it.”
◦ This remedy is additional to any other remedy that the plaintiff may have: S3(2).
MENTAL CAPACITY
English Law
Mental Capacity

GR: Contract
Voidable if:
Valid
then the contract is
VOIDABLE at the
option of the person
suffering from mental
incapacity.
No Understanding
• The person was incapable of
understanding the nature of the
transaction; and

Knowledge
• the other party knew this
Imperial Loan Co v Stone [1892] 1 QB 599,
CA
◦ Action by lender against surety. Surety pleaded insanity.
Held:
◦ A contract made by a person of unsound mind (D) is not voidable at D’s option if the other party to the contract (C)
believed at the time he made the contract that D was of sound mind.
◦ In order to avoid a fair contract on the ground of insanity the mental incapacity of D must be known to C.
◦ D must plead and prove both his insanity and the knowledge of C; the burden of proof of both those facts lies on
D.
Hart v O’Connor [1985] AC 1000
◦ H agreed to purchase farm land from O, who was then sole trustee of his father’s estate and who farmed the land in
partnership with his brothers.
◦ O was then 83 but, unknown to H, was of unsound mind.
◦ Agreement was drawn up by H’s solicitor.
◦ The plaintiffs, who were one of O’s brothers and his two sons, sought to set aside the agreement on grounds of O’s
lack of capacity and also that it was an unconscionable bargain.
◦ Held (per Lord Brightman): Contract could not be set aside for O’s mental incapacity, since H was unaware of it.
Mental Incapacity Act 2005
A person lacks mental capacity
◦ ‘if at the material time he is unable to make a decision for himself…because of an impairment of, or a
disturbance in the functioning of, the mind or brain’ (S2(1)).
◦ The impairment or disturbance may be temporary or permanent (S2(2)).
Necessaries
◦ If necessary goods or services are supplied to a person who lacks capacity to contract, he must pay a reasonable price for
them (S3 Sale of Goods Act 1979)
◦ And necessaries, for this purpose, are defined to mean goods or services ‘suitable to a person’s condition in life and to his
actual requirements at the time when the goods or services are supplied’) (S7 Sale of Goods Act 1979).
DRUNKENNESS
English Law
Drunkenness

GR: Contract
Voidable if:
Valid

then the contract is

VOIDABLE.
No Understanding
• The person was incapable of understanding the
nature of the transaction; and

Knowledge
• the other party knew this
Gore v Gibson (1843) 13 M&W 621
◦ Action by indorsee (P) against indorser (D) of a bill of exchange.
◦ D pleaded that when he indorsed the bill
◦ he was so intoxicated, and thereby so entirely deprived of sense, understanding, and the use of his reason, as to be
unable to comprehend the meaning, nature, or effect of the indorsement, or to contract thereby;
◦ and that P had at the time of the indorsement notice of this fact.
◦ Held: Contract was VOIDABLE
Per Pollock CB:
◦ “No contract made by a person in [an intoxicated] state, when he does not know the consequences of his act, is
binding upon him”
Necessaries
S.3(2) Sale of Goods Act 1979:
◦ “Where necessaries are sold and delivered to a minor or to a person who by reason of mental
incapacity or drunkenness is incompetent to contract, he must pay a reasonable price for
them.”
COMPANIES
English Law
Companies
◦ Contracts will be Valid
◦ Previously, a company was not bound by contracts entered into ultra vires (beyond) its powers set out in
the objects clause.
◦ Now S39 Companies Act 2006 provides that ‘the validity of an act done by a company shall not be
called into question on the ground of lack of capacity by reason of anything in the company’s
constitution’.
Questions: Capacity (English Law)
Minors:
1. Who are minors and what statute/Act provides for this?
2. What is the GR for contracts made with minors?
3. What is the exception to the GR in order for a contract involving a minor to be valid and enforceable?
4. What are “necessaries?”
5. What is meant by “voidable?”
6. When are employment contracts unenforceable?
7. Can property be restored to a contracting party when there has been a misrepresentation of age? How
Questions: Capacity (English Law)
Mental Capacity:
1. What is the GR for contracts made with a mentally incapacitated party?
2. Under what conditions can a contract be made voidable?
3. What is the legal definition of a person lacking mental capacity?
4. Do persons lacking mental capacity have to pay for necessaries?
Questions: Capacity (English Law)
Drunkenness:
1. What is the GR for contracts involving a drunken party?
2. What are the conditions necessary to be fulfilled to render a contract involving drunkenness voidable?
3. What is the rule on necessaries for contracts involving drunkenness?

Companies:
◦ What is the rule for contracts involving companies?
CAPACITY
Malaysian Law
Capacity

Minors

Companies
Capacity Mental
Incapacity

Drunkenness
MINORS
Malaysian Law
Minors
◦ S10(1) CA 1950:
provides that contracts can be made only by “parties competent to contract”
◦ S11 CA 1950:
“Every person is competent to contract who is of the age of majority according to the law…and who is of
sound mind…”
◦ S2 Age of Majority Act 1971:
provides that all persons in Malaysia attain the age of majority at 18.
◦ GR: Contract with a minor is VOID! (not Voidable)
◦ CA 1950 does not expressly stipulate what effect minority has on an agreement i.e. it does not state
whether such an agreement or contract is void or voidable. Case law provides the answer.
Tan Hee Juan v Teh Boon Keat [1934] MLJ
96
◦ S10 and S11 of CA 1950 render all agreements entered into by minors VOID.
◦ [Contrast English law – contracts entered into by minors are either valid in the case of necessaries and beneficial contracts of
service or voidable at the instance of the minor.]
◦ P, an infant, executed transfers of lands in favour of D which were subsequently registered in D’s favour. It appears that D did
not know of P’s infancy.
◦ P then applied to the Court for an order setting aside the transfers and for incidental relief.
◦ The Court made an order declaring the transfers void, and refused to order the refund of the purchase price paid by D
[i.e. the infant got back his lands and got to keep the purchase price]
Held (per Hereford J)
◦ “The Privy Council have held that the effect of sections 10 and 11 of the Contract Act of India is that an infant cannot make a contract within the meaning of
the Act, and that a contract made by an infant is…void. Mohori Bibee v Dharmodas Ghose 30 Calcutta 539. That decision of the Privy Council is binding on
this Court.”
◦ The transfer was therefore void.
◦ With regard to refunding the money paid by D:
◦ “…there is a discretion [under S40 Specific Relief Act 1950], in a case of this sort, to order the refund of the purchase money, [but] it is only where there are
very unusual circumstances that that discretion can be exercised…
◦ Before such discretion is exercised, there must be some fiduciary relation between the parties.
◦ Now, in this case, there is no such relation at all between the parties.”
◦ [S40 Specific Relief Act 1950:
◦ “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.”]
◦ “A number of English cases were cited to me in some of which restitution by the infant has been ordered, but [those were cases where] the contracts were in the
view of the Common Law not void but only voidable, and the principle on which restitution is ordered is different in such cases as compared with cases where
the contract is absolutely void.”
Could S.66 CA 1950 have been applied to order
refund in Tan Hee Juan?
◦ S66 CA 1950:
◦ “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.”
◦ Tan Hee Juan makes no mention of this section.
◦ The Privy Council in Mohori Bibee in discussing the effect of section 65 of the Indian Contracts Act
(section 66 of our Act ), stressed that any reliance on that section must start from the basis of there being
an agreement or contract between competent parties and it could have no application to a case (as in the
case of infants) in which there was or never had been any contract.
Mohori Bibee v Dhurmodas Ghose (1903) 30
Cal 539, 30 IA 114 (PC)
◦ MB, with knowledge of DG’s minority, loaned DG some money secured by mortgage over DG’s property.
◦ Subsequently DG commenced action for declaration that mortgage was void for lack of capacity.
◦ MB purported to rely on English law, contended that the mortgage was voidable and she could thereby recover the loan.
◦ Held (Privy Council)
◦ Contract of loan was void, not voidable
◦ Whether a contract is void or voidable presupposes the existence of a contract
◦ S65 Indian CA presupposes an agreement or contract between competent parties and has no application in the case of an
infant where there never was, and never could have been, any contract
◦ Justice did not require DG to compensate MB under the Indian Specific Relief Act :“it is [not] equitable to compel a person
to pay any moneys in respect of a transaction which as against that person (infant), the legislature has declared to be void.”
Mohori Bibee v Dhurmodas Ghose

VOID
• Agreement with a minor is Void, not voidable

S65 ICA (S66 CA) Inapplicable

• When the agreement is void, minor need not restore or
compensate the other party
Leha bte Jusoh v Awang Johari bin Hashim
[1978] 1 MLJ 202, FC
◦ In 1952, Awang, then a minor, agreed to purchase land from M who received the purchase price and allowed Awang into
occupation of the land; but the land remained in M’s name.
◦ Awang brought action against Leha, administratrix of M’s estate for declaration
(i) That Leha held the land on trust for him and
(ii) That he was entitled to the land pursuant to the agreement.
◦ L contended that A was not entitled to this relief because the 1952 agreement was void due to A’s infancy.
◦ Trial judge agreed that the 1952 agreement was void but went on to hold that L nevertheless held the land on trust for A.
◦ L appealed to the Federal Court.
Held
◦ “The Privy Council in Mohori Bibee v Dhumodas 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 sections 10 and 11).
◦ Accordingly the agreement of March 1, 1952 is void and no specific performance can be ordered on the agreement as an
agreement for sale.”
◦ However, the trial judge erred in deciding that L held the land on trust for A and specifically enforcing that trust because that
was in effect enforcing an agreement that was void ab initio.
◦ Held: L’s appeal was allowed and the order of the High Court judge was set aside.
◦ It was held that: Contract is VOID
◦ But S.66 is applicable i.e L must refund the purchase price ($5000) to A and on condition that A vacate the land which he had
occupied
Leha and Mohori Bibee
◦ This decision flies in the face of Mohori Bibee (a decision binding on the FC) which makes it clear that S.66 does not apply
where there is no contract to begin with.
◦ Further, Ong Hock Sim FJ gave no reasons why this aspect of Mohori Bibee was not applicable to this case.
◦ There are no other reported Malaysian cases on whether S.66 applies in cases of minors’ contracts.
◦ Leha bte Jusoh v Awang Johari bin Hashim:

VOID
• Agreement with a minor is Void, not voidable

S66 CA Applicable
• Even if the agreement is void, the minor is required
to reimburse or compensate the party
The Law as it Stands

Mohori
Leha
Bibee

VOID VOID

S.66 CA S.66
Inapplicable Applicable
By the way…
◦ Fifth Indian Law Commission felt that Privy Council had incorrectly
interpreted S.65 Indian Contracts Act and recommended that the section
should be applicable to a void minor’s contract where the minor has
misrepresented his age when entering into the contract.
Necessaries
◦ S69 CA 1950:
“If a person, incapable of entering into a contract, or anyone whom he is legally bound to
support, is supplied by another with necessaries suited to his condition in life, the person
who has furnished supplies is entitled to be reimbursed from the property of such incapable
person.”
Government of Malaysia v Gurcharan Singh
& Others [1971] 1 MLJ 211
◦ G, an infant, entered into a written agreement with GOM whereby GOM would provide G a teachers’ training course.
◦ In return G agreed to serve the GOM for 5 years after completion of the course. D2 and D3 signed agreements guaranteeing
G’s performance.
◦ G completed the course, served GOM for 3 years 10 months and then left their service.
◦ GOM brought action against G as promisor and D2 and D3 as sureties for $11,500 being the actual amount spent on G’s
training
i. As damages for breach of contract
ii. Alternatively, as reimbursement under S69 for supply of necessaries suited to G’s condition in life
◦ Defence:
i. Contract between G and GOM was void because of G’s infancy; therefore neither G nor D2 and D3 were liable for breach
of contract
ii. Alternatively, GOM’s claim was excessive and unreasonable taking into account the time that G had served
Held (Per Chang Min Tat J)
◦ An infant's contract is under the Indian Contracts Act and our Contracts (Malay States) Ordinance void and not merely voidable.
◦ As D2 and D3 were sureties, their liability was co-extensive with that of the principal debtor (G), and as the principal debtor was not liable,
the sureties also were not liable (for breach of contract).
◦ However, S.69 embodies the common law of England regarding liability for necessaries supplied to an infant.
◦ The word "necessaries" must be construed broadly.
◦ The provision of professional or vocational training for G in a Teacher's Training Institution to enable him to qualify for and accept
appointment as a teacher was a provision for necessaries.
◦ G was therefore liable under S69 for the repayment of the sum expended for his education and training as being expended on necessaries.
◦ It also follows that the sureties are themselves liable as such sureties.
◦ The amount of damages payable must be based on repayment of the proportion of the actual sum expended based on the completed months of
service.
◦ Judgment for the plaintiff against the defendants for 14/60 x $11,500 = $2,683.
Note
◦ S4 of the Contracts (Amendment) Act 1976:
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
Can suppliers of goods, which are not necessaries, be restricted
to claim for the goods supplied under S.69? Or can they rely on
S.66?

Leha bte Jusoh v Awang Johari bin Government of Malaysia v

Hashim Gurcharan Singh

VOID
• Agreement with a minor is Void, not
Necessaries
voidable • S69 CA
S66 CA Applicable
• Even if the agreement is void, the
minor is required to reimburse or
compensate the party
Cheong May Fong, Chapter 6 (page 128)
◦ If FC’s decision (in Leha) that S.66 CA is applicable to agreements by minors is followed, suppliers of goods to minors can
claim under S.66 and are not restricted to a claim under S.69 which requires proof that the goods supplied amount to
necessaries.
◦ Unfortunately, the FC did not discuss at length the divergent position from the Privy Council decision of Mohori Bibee that it
adopted in respect of S.66 CA.
MENTAL INCAPACITY
Malaysian Law
Mental Incapacity
◦ S10 CA 1950 refers to “parties competent to contract”
◦ S11 CA 1950: “Every person is competent to contract…who is of sound mind”
◦ S12(1) CA 1950: “A person is…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 on his
interests.”
Mental Incapacity (Cont.)
S12(1)

• “A person is…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 on his interests.”

S12(2)

• “A person who is usually of unsound mind, but occasionally of sound mind, may make a contract when he is
of sound mind”. [i.e. may contracts during lucid intervals]

S12(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. [may not make contracts during occasional bouts of unsoundness of mind]
Mental Incapacity (Cont.)
◦ CA 1950 does not expressly stipulate what effect minority has on an agreement i.e. it does not
state whether such an agreement or contract is void or voidable.
◦ Refer to case law.
Sim Kon Sang Peter v Datin Shim Tok Keng
[1994] 2 MLJ 517
◦ In 1973 and 1974 C executed transfers of lands in Sabah in favour of D who paid the $33,000 purchase price.
◦ Lands were then registered in D’s name.
◦ In 1973 and 1974 the Contracts Act 1950 did not apply to Sabah.
◦ S, executor of C’s estate, brought these proceedings to set aside the transfers and to have the lands retransferred to S as executor of
C’s estate on grounds that C was of unsound mind and that D was aware of C’s unsoundness of mind
◦ [i.e. S sought to rely on common law argument that the transfers were voidable at the instance of the person of unsound mind]
◦ Held (per Ian Chin J):
◦ Since s.11 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 [but only 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.
Sim Kon Sang Peter v Datin Shim Tok Keng
[1994] 2 MLJ 517
◦ Since the transfers took effect before the Contracts Act 1950 came into force in Sabah, the law to be
applied was the English common law. The Contracts Act 1950 did not apply retrospectively.
◦ Therefore, in this case, the transfers were not void but voidable [but only] if the defendant knew at
the time of the transfers that the deceased was of unsound mind.
◦ On the facts, C was of unsound mind when she executed the transfers but D, on the dates of the two
transfers, was not aware that C was of unsound mind. The common law requirements were not
satisfied.
◦ S’ claim was therefore dismissed.
◦ The contrary is the case if the English common law applies. See Asia Commercial Finance (M)
Bhd v Yap Bee Lee & Ors 1 and Imperial Loan Co v Stone.
DRUNKENNESS
Malaysian Law
Drunkenness
◦ Illustration (b) to S. 12 CA 1950:
◦ “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.”
COMPANIES
Malaysian Law
Companies
◦ Previously, via third parties, a company was not bound by contracts entered into ultra vires (beyond) its
powers set out in the objects clause.
◦ S. 20(1) Companies Act 1965 provides that no entering into of an agreement by the company shall be
invalid by reason only of the fact that the company was without capacity or power.
Questions: Capacity (Malaysian Law)
Minors:
◦ What is the age of majority in Malaysia and what statute provides this?
◦ What is the GR for contracts formed with minors in Malaysia?
◦ According to the CA 1950, who is competent to contract?
◦ What is the difference between the decisions in Mohori Bibee and Leha?
◦ What about necessaries?
◦ Can scholarship agreements be invalidated on the grounds of incapacity of a minor?
Questions: Capacity (Malaysian Law)
Mental incapacity
1. By virtue of the CA 1950, who is a person of “sound mind?”

Drunkenness
2. What is the GR for contracts formed with a drunken party?

Companies
3. What is the rule for contracts formed with companies?