TOPIC 2 LAW OF CONTRACT

PART 2- 8. FREE CONSENT-(Element of Contract)

(Void, voidable and illegal contract)

PART 3- Discharge of contract

PART 4- Remedies for breach of contract
PART 2
ELEMENT OF CONTRACT -8. FREE CONSENT
VOIDABLE CONTRACT
(KONTRAK BOLEH BATAL)
 Element of Contract
8.CONSENT OF PARTIES
(Persetujuan/Kerelaan bebas)

Section 10(1) Contracts Act 1950 :

“all agreements are contract if they are
made by the free consent of parties
competent to contract”

• In order for a contract to be a valid

contract, the parties to the contract have
to consent to the contract.
 What constitute Consent?
Section 13 Contracts Act 1950 :
“two or more persons are said to consent
when they agreed upon the same thing in the
same sense”
VOIDABLE CONTRACT
(Kontrak boleh batal)
 WHAT CONSTITUTE FREE CONSENT?
Section 14 Contracts Act 1950 provides that “consent is said
to be free if it is not caused by:

A)Coercion, as defined in section 15

B) Undue influence, as defined in section 16
C) Fraud, as defined in section 17
D) Misrepresentation, as defined in section 18
E) Mistake subject to sections 21,22 and 23
If a contract is entered into by virtue of the above
mentioned sections, the contract is either void or voidable.

VOID CONTRACT (Kontrak terbatal)

•Section 2(g) Contracts Act 1950: “an agreement not
enforceable by law is said to be void”

VOIDABLE CONTRACT (Kontrak boleh batal)

•Section 2(i) Contracts Act 1950: “an agreement which is
enforceable by law at the option of one or more of the
parties, but not at the option of the other or others is a
voidable contract”
 A) COERCION
(Paksaan)
• Section 15 Contracts Act 1950 provides that:
“coercion is the committing , or threatening to
commit any act forbidden by the Penal Code,
or the unlawful detaining or threatening to
detain, any property to the prejudice of any
person whatever, with the intention of
causing any person to enter into an
agreement”
 Coercion covers:
• 1. Committing or threatening to commit any
act forbidden by the Penal Code
• 2. Detaining or unlawful detaining of property
prejudice to any person.
 Case: Dulichand v Ram Kishen Singh
• Involved money paid by the owner to prevent
the sale of his property.
• Privy Council held that the money paid could
be recovered. The contract is voidable due to
the existence of coercion in the contract.
 Kesarmal s/o Letchuman Das v
Valiappa
• It involved a transfer of land executed under
the order of a Sultan in presence of 2
Japanese officers during the Japanese
Occupation of Malaya.
• Court held that the contract to transfer the
land is voidable.
• The consent was not obtained freely.
• Element of coercion exists in the contract.
Chin Nam Bee Development Sdn Bhd v
Tai Kim Chow
• The respondent purchased a home plan from the
appellant. The respondent has signed a sale and
purchase agreement at $29 500. Subsequently
the respondent was made to pay additional
$4000 if not the appellant will cancelled the
booking.
• The court held that the additional payment was
not made voluntarily but has been made under
threat.
• Contract should be voidable.
Universe Tankships of Monrovia v International
Transport Workers Federation
• Involve banning of ship to induce the owner to
make contribution to a welfare fund.
• Court held that action was illegitimate.
Payment could be recovered
 Effect of contract
• Section 19 Contracts Act 1950
• A contract is voidable at the option of the
party whose consent was so caused.
 B) UNDUE INFLUENCE
(Pengaruh tak berpatutan)

• Section 16 Contracts Act 1950

• “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 an unfair advantage over
the other”
 2 Elements of undue influence
• 1. Domination of will by one party over the
other
• 2. Obtain an unfair advantage
 Burden of proof
• Burden of proof lies upon the one who is
dominating the will of another.
• He must prove that the contract was not
induced by undue influence.
 Salwath Haneem v Hadjee Abdullah
• The plaintiff’s husband executed a transfer of property
belonging to himself and the plaintiff to his brothers.
• P agreed to the transfer but after her husband’s death,
she brought an action seeking to set aside the
agreement and transfer.
• The court held that the burden of proof lies upon the
brothers to prove that the plaintiff executed the
transfer freely without subject to undue influence.
• Since the brothers failed to discharge the burden, the
transaction was set aside.
 Chait Singh v Budin Abdullah
• The defendant was illiterate. The plaintiff sued
the defendant on a loan at 36% interest.
• The plaintiff failed to prove that undue
influence did not exist in the contract.
• The court held that the contract is voidable on
ground of undue influence.
 Datuk Jaginder Singh v Tara Rajaratnam

• The respondent and the 1st appellant were in

solicitor and client relationship. The
respondent claimed that she was induced by
the 1st and 2nd appellant to transfer her land to
the 2nd appellant.
• Court held that the burden is on the appellant
to prove undue influence does not exist .
Since the appellant cannot discharge the
burden, the transaction was set aside.
 Effects of the contract
• Section 20 Contracts Act 1950
• “an agreement caused by undue influence is a
contract voidable at the option of the party
whose consent was so caused.
 C)FRAUD
(Secara tipu)

• Section 17 provides that fraud are various acts under (a),(b),

(c),(d),(e) committed by parties to a contract with intent to
deceive the other contracting party.
a)The suggestion as to a fact of that which is not true by one
who does not believe it to be true
b) The active concealment of a fact by one having knowledge of
belief of the fact
c)A promise made without any intention of performing it
d) Any other act fitted to deceive
e) Any such act or omission as the law specially declares to be
fraudulent
 Burden of Proof
• Burden of proof lies upon the person who is
making the claim.
 Kheng Chwee Lian v Wong Tak Thong
• The respondent has been induced to enter
into a second contract on the false
representation that the area of land to be
transferred was of the same size as the land
which the respondent had agreed to buy
under the first agreement.
• Court held that the contract should be
repudiated on the ground that it was induced
by fraudulent representation.
Letchemy Arumugan v Annamalay
• The defendant had asked the plaintiff to sign a
document for a loan. Actually the document is
a sale agreement.
• Court held that the agreement is voidable at
the option of the plaintiff and must be
recinded.
 Silence
• Silence may/ may not amount to fraud. For
parties who have fiduciary relationship, the
party is under the duty to disclose material
facts. If no disclosure is made silence may
amount to fraud.
 Effects of Contract
• According to Section 19 the contract is
voidable.
 D) MISREPRESENTATION
(Salahnyataan)

• Misrepresentation refers to certain false

statements made by a representor and which
induces the other party to enter into a
contract.
 Section 18 Contracts Act 1950 provides that
Misrepresentation includes the following situations:
• A) a person making a statement which he
believes it to be true but then it is not true.
• B) Representation made by a person which gives
advantage to him, even though he has no
intention to deceive.
• C) The person who receives the representation
makes a mistake as to the substance of the thing
which is the subject of the agreement. Even if the
representor is innocent.
 Silence
• Does silence constitutes a misrepresentation?
• - Mere silence does not amount to
misrepresentation unless it is the duty of the
person keeping silence to speak.
• -For contract of utmost good faith, the party
must disclose all the relevant materials in the
contract. If no disclosure made then the party
should be liable for misrepresentation.
• Contract is induced by misrepresentation.
 Effects of Contract
• According to Section 19 Contracts Act 1950,
contract is voidable.
 E) MISTAKE
(Khilaf)

• Definition: Misapprehension
• - failure to understand something
• -believe about something which is not correct
• Section 21: Both parties make mistake as to
fact of an agreement. The agreement is void
 Raffles v Wichelhaus
• Both parties made mistake about a ship which
sailed from Bombay. Both did not know that
there were 2 ships sailing from Bombay. One
in October and the other one in December.
One party referred to Peerless which sailed in
October, whereas the other party referred to
Peerless which sailed in December
• Court held that the contract is void due to
both parties made mistake as to fact.
 Couturier v Hastie
• Both parties entered into a contract to sell
corn. Both parties thought that the corn was
carried by a ship from Salonic to England. In
fact the corn has already been sold in Tunisia.
• Court held that the contract is void because
both parties make mistake as to fact.
 Section 22: Mistake as to the law in
force in Malaysia – contract is valid
• Seck v Wong & Lee
• A contractor asked for a work plan from an
architect. The architect asked for payment
from the contractor. Contractor paid without
knowing that the law does not allow such
payment.
• The court held that this should not make the
contract voidable. The contract should not get
back his money.
Section 23: Mistake by one party as to
fact- contract should be void
• Mistake made by one party as to its fact should not
effect the validity of the contract.
• Case: Hartog v Colin & Shields
• Contract for selling Argentina hare skin. The party
agreed to buy at a certain price per pound. Actually
the offeror quoted a price per piece. Trade custom
also fixed the price by reference to piece.
• Court held that the contract was void for mistake.
 Ingram v Little
• In order to buy a car from the owner, the
buyer introduced himself as a well known
person. The owner checked on him and
agreed to the contract. It happened that the
cheque was a bounce cheque. The car had
been sold to a 3rd party. The owner tried to get
back the car. The court held the contract is
void because one party is at mistake as to the
buyer.
 Mistake as to Document
• Mistake as to document exist when the party
has make a mistake as to the nature of
document he has signed.
• General rule: Person is bound by the terms of
the contract that he signs.
 Awang bin Omar v Haji Omar
• A party signed a document which was written
in English in mistaken believe that he is
witnessing his brother’s signature. He then
prove that if he know about the document he
would have not signed the document.
• Court held the party should not be
responsible.
VOID AND ILLEGAL CONTRACTS
(Perjanjian yang menyalahi undang-undang)
 Void and Illegal Contracts
• A void contract is an agreement not
enforceable by law- Section 2(g) of the
Contracts Act 1950
• Section 24 of CA1950 provides that the
consideration or object of an agreement is
unlawful if it falls within any of the
subsections of the section.
 The said section reads:
• Section 24 CA 1950- The consideration or object of an
agreement is lawful unless:
• 1. it is forbidden by a law
• 2. it is of such a nature that, if permitted, it would defeat
any law
• 3. it is fraudulent
• 4. it involves or implies injury to the person or property
of another or
• 5. the court regards it as immoral or opposed to public
policy
• In each of the above cases, the consideration
or object of an agreement is said to be
unlawful. Every agreement of which the
object or consideration is unlawful is VOID
ILLUSTRATIONS PAGE 132 LEE ME
PENG
 TOPIC 2
LAW OF CONTRACT
PART 1 FORMATION OF CONTRACT
PART 2 VOIDABLE CONTRACT
PART 3 DISCHARGE OF CONTRACT
PART 4 REMEDIES
PART 3
DISCHARGE OF CONTRACT
 DISCHARGE OF CONTRACT
What is a discharge of contract?
It means that a contract is terminated
- (Kontrak ditamatkan)
It involved a situation whereby the parties to the
contract is no longer oblige to perform the
contract.
 Bolton v Mahadeva
• The plaintiff promised to install heaters in the
defendant house. The plaintiff installed the
heater but then the heaters were not working.
The defendant did not pay the plaintiff.
• Court held that the defendant should not pay
the plaintiff because the contract has not
been discharge on part of the plaintiff (he is
supposed to install heaters which works and
not broken heaters)
 THERE ARE 4 WAYS IN WHICH
A CONTRACT CAN BE DISCHARGE
Contracts may be discharged by any one of the
following ways:
1. By performance
2. By consent or agreement between parties
3. By impossibility/Frustration
4. By breach
 1. DISCHARGE BY PERFORMANCE
Both parties have to carry out their obligations.
Section 40 Contracts Act 1950:
“when a party to a contract has refused to perform or
disabled himself from performing, his promise in its entirety
, the promisee may put an end to the contract unless he has
signified by word or conduct his acquiescence in its
continuance.”
SIMPLE ILLUSTRATION
You enter into a contact with Ali. You are to give Ali a book
and in return Ali has to give you RM 100. In this situation, a
contract is said to be discharge by performance if you have
given Ali the book and Ali has given you the RM 100.
 CONTINUE…1. DISCHARGE BY PERFORMANCE

• It means that the contract must be strictly

performed in accordance with the terms of
the contract unless the parties have agreed
otherwise.
• Promisor must be prepared to performed his
obligations at the ‘time’ and ‘place’ at which
he has undertaken to do.
 2. DISCHARGE BY CONSENT/AGREEMENT
Under this way, a contract can be discharged if the parties
to the contract agrees/consent that the contract will be
discharged. This agreement can be made during the
contract or after the contract has been made.
SIMPLE ILLUSTRATION
You entered into a contract with Amin. In the contract both
of you agreed that the contract will be put to an end if the
profit of your business is less than RM 1 million a year. If
the profit is less, then the contract is said to be discharged
by agreement.
This type of discharge can be seen under S.63 and S.64 of the Contract Act 1950
Section 63 CA 1950:
If the parties to a contract agree to substitute a new contract for it, or to rescind or
alter it, the original contract need not be performed
SIMPLE ILLUSTRATION

Section 64 CA 1950:
Every promisee may dispense with or remit wholly or in part the performance of the
promise made to him or may extend the time for such performance or may accept
instead of it any satisfaction which he thinks fit
 3. DISCHARGE BY IMPOSSIBILITY OF PERFORMANCE/
FRUSTRATION
Section 51 Contracts Act 1950 provides for two situations
of impossibility of performance.
•1. Impossibility of performance at the time a contract is made
•2. Impossibility after it has been made.

Section 57 (1) An agreement to do an act impossible in

itself is void
Section 57(2) provides that performance which becomes
impossible, or by reason of some event the promisor could
not prevent is unlawful.
 CONTINUE…3. DISCHARGE BY IMPOSSIBILITY OF
PERFORMANCE/ FRUSTRATION
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 who he received it.
SIMPLE ILLUSTRATION
A contract to sing for B at a concert for RM 1000 which are paid
in advance. A is to ill to sing. A is not bound to make
compensation to B for the loss of the profits which B would have
made if A had been able to sing but must refund to B the RM
1000 paid in advance.
Impossibility of Performance will affect
the contract to be frustrated
Frustration occurs due to:
•1. Destruction of the subject matter of the
contract.
•2. The supervening events defeats the whole
purpose or objects of the contract
•3. Supervening illegality discharges a contract
affected by it.
•4.Declation of war
1. Destruction of the subject matter of
the contract
Taylor v Cadwell
•A music hall hired by the defendant from the
plaintiff for a series of concert was burnt down
before the date of concert.
•Court held that the contract was discharged
due to frustration.
 2. The supervening events defeat the
whole purpose or objects of the contract
• Krell v Henry
• A room was hired for the purpose of watching
the coronation procession. However the
coronation procession was cancelled
• It was held that the defendant could be
excused from paying rent for the room as the
contract was frustrated.
 3. Supervening illegality discharges a
contract affected by it.
• Lee Kin v Chan Suan Eng
• A lease for 5 years was held to be frustrated
by the enactment of a new law prescribing
annual renewal.
 4. Declaration of war
• Finelvet AG v Vinava Shipping Co Ltd
• All contracts with enemy aliens will be
frustrated.
 4. DISCHARGE BY BREACH
Under this way, a contract can be put to an end if a party to the contract did
not do what they have promised to do in the contract.

The party who is not in breach of the contract has 2 options:

1.To continue with the contract and claim damages
2.Repudiate the contract
 Chow Yin Lou v Visuvalingam
• The plaintiff provides a less number of workers
compared to what he was supposed to do under
the contract. Due to this, the defendant stopped
payment. Plaintiff then proceeds to sue the
defendant for damages claiming that he had
been prevented by the defendant’s default from
completing the contract.
• Court held that the act of the plaintiff in
employing less number of workers constitutes
breach of contract which renders the contract
repudiated.
 TOPIC 2
LAW OF CONTRACT
PART 1 FORMATION OF CONTRACT
PART 2 VOIDABLE CONTRACT
PART 3 DISCHARGE OF CONTRACT
PART 4 REMEDIES
PART 4
REMEDIES
 REMEDIES
When there is a breach of contract, the injured party may
claim one or more of these remedies.
Remedies for breach of contract are available for the party
not in default to claim.
• The remedies available are:
• 1. Rescission
• 2.Damagess
• 3.Specific performance
• 4.Injuction
• 5.Quantum Merit
 1. RESCISSION
(Penamatan/the cancellation of a contract)
Section 40 Contracts Act 1950 provides that:
•“when a party to a contract has refused to perform or
disabled himself from performing his promise in its
entirety, the promise may put an end to the contract,
unless he has signifies, by words or conduct, his
acquiescence in its continuance”
•The contract then is put to an end. The parties to the
contract are no longer obliged to perform the contract.
 ILLUSTRATION
• A enter into a contract to buy a camera online with a
specific description.
• B later send by post the agreed camera.
• However, later A found out that the specification
needed did not confirm to the specification in the
contract agreed by them.
• So, in this case, A has a right to rescind or cancel the
contract because B has breach the contract by not
sending/posting the camera with the agreed
specification.
• As for the contract rescinded due to voidable nature
of the contract, section 65 Contracts Act 1950
operates. According to section 65:
• “when a person at whose option a contract is
voidable rescinds (membatalkan) it, the other party
thereto need not perform any promise therein
contained in which he is promisor. The party
rescinding a voidable contract shall, if he has
received any benefit thereunder from another party
to such contract, restore the benefit, so far as may
be to the person from whom it was received”
• Section 65 provides that if the contract is
voidable and the party choose to rescind it,
the party who has received any benefit under
the contract is bound to restore it to the
person from whom he received it.
 ILLUSTRATION
• The camera has already in the hands of A. A
rescind the contract.
• A later must give the camera back to B.
 2. DAMAGES
(Ganti rugi/compensation for loss or injury)

• Damages is remedies available in terms of

money consideration.
• Section 75 Contracts Act 1950 provides for the
party who sustain damage (pihak yang
menanggung kerugian), has the right to
rescind (batalkan) the contract and is also
entitled for compensation (pampasan/ganti
rugi).
 3. SPECIFIC PERFORMANCE
• Specific performance is said to be granted when
the court compel the defaulting party to
perform his contract (memaksa pihak yang
ingkar untuk melaksanakan kontrak)
• Specific performance tends to force a party to
do the act contracted for.
• This remedy is given at the discretion (budi
bicara) of the court and it is governed by
Specific Relief Act 1950.
• Specific performance is an order of a court which
requires a party to perform a specific act, usually
what is stated in a contract

ILLUSTRATION
A enter into a contract to play a football for TM
Team for a term of a year. Later A breach of the
contract and played the football for another
Team. TM Team can ask from the court to
requires A to play for TM Team according to the
contract.
 4. INJUNCTION
• Injunction is an act to restraint someone from doing
something or requiring someone to perform a specific
act
• Injunksi adalah satu tindakan untuk menahan diri
seseorang daripada melakukan sesuatu atau
memerlukan seseorang untuk melakukan perbuatan
tertentu.
• injunction typically orders the cessation
(perberhentian) or prohibition of the doing of a
specific act
 ILLUSTRATION
• This illustration is regarding the infringement of trademark.
• For example, A has running a chicken rice shop for a years by
using the specific logo for his trademark.
• Later, B also want to run a chicken rice shop and using the
similar logo for the trademark.
• This will causes confusion to the customer and also causes a
lost to A.
• A can ask the court to grant an injunction to B by
restraining/prohibiting B from using the similar trademark.
 Temporary Injunction
• Temporary injunction is also known as interim
or interlocutory injunction. It is granted at the
discretion of the court for a specified time until
further order by the court.
• In American Cynamid v Ethicon, in order to
grant interim or interlocutory injunction, court
must satisfies that there is a serious question to
be tried in the sense that the claim is not
frivolous or vexatious.
 Perpetual Injunction
• It is also known as permanent injunction. It
can only be granted after a full trial and upon
a merit of a case. The defendant is
permanently prohibited from doing the act or
asserting a right for which the injunction was
granted.
Neoh Siew Eng & Anor v Too Chee
Kwong
• The defendant was the landlord and the
plaintiff was the tenant (penyewa). Court
granted a perpetual injunction by ordering the
defendant to keep all communication pipes in
proper repair and to comply with all
Waterworks Department so that supply to the
plaintiff’s premise would not be disconnected.
 5. QUANTUM MERUIT
• It means ‘as much as he has earned’.
('Seberapa banyak yang dia telah usahakan'.)
• On breach of contract the party injured maybe
entitled to claim for work done and services
performed. (Atas pelanggaran kontrak parti yang cedera
berhak untuk menuntut untuk kerja yang dilakukan dan
perkhidmatan yang dilaksanakan.)
 ILLUSTRATION
• A Man (Plaintif) talks to a neighbor (Defendant) and tells him
he's going to build a wall on their property that will give a
benefit to both the man and his neighbor; the Man implies
that it would be cheaper for both of them if the Man perform
the labor instead of hiring a professional. The neighbor agrees
that the wall should be built, but no price is negotiated. The
man builds the wall, and then asks the neighbor to
compensate him for the benefit of the wall that he conferred
on the neighbor (usually half the value of the wall).
 Continue…Illustration
• The neighbor refuses. The man is entitled to some
compensation based on quantum meruit. This is because
there was an implied promise between the man and the
neighbor, which is derived from contract law, because the
man was acting under the assumption that the neighbor
would pay for part of his services The plaintiff files suit in
court on the basis of quantum meruit. The plaintiff makes an
estimation of value conferred on the defendant, which the
defendant has not paid.