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INTERPRETATION- CONTRACT ACTS 1950

Definition: What is contract?S 2(h) – contract is an agreement

enforceable by law S 2 (g) – an agreement which is not

enforceable by law is considered void

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S 2 (b) – promise is when a person to whom the promise is made signifies his assent thereto, the proposal is said to be accepted. A proposal when accepted becomes a promise.

S 2(C) - the person making the proposal is called the promisor / offeror and the person who accepts the proposal is called the promisee/acceptor/offerree

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ELEMENTS OF CONTRACTOffer and acceptanceConsiderationIntention to create legal relationsCapacity to contractConsentCertainty

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OFFER AND ACCEPTANCEProposal – S 2(a) – when a person signifies

to another his willingness to do or to abstain from doing anything, with a view of abstaining his ascent of that other to the act of abstinence, he is said to make proposal

Proposal should be distinguished from ‘an invitation to treat’ (an attempt to induce another party to make an offer. It is not an offer by itself)

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ITT is a preliminary communication at the stage of negotiation and a person who makes an invitation does not want to be bound by the law.

It is an invitation to another person to make an offer.

Come on, the cheapest

strawberry in the world!!!

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EXAMPLES OF AN INVITATION TO TREAT

Display of goods in a self service supermarket – it is an invitation to treat - the proposal is made when the customer select the goods and brought it to the counter for payment. When payment is made, offer is said to be accepted and the contract is concluded.

Auctioneer inviting bids for a particular article – auctioneer invites people who present to bid for the price. The highest bid will be accepted and the contract of sale is concluded.

Advertisement and quotation

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o OFFER – WHEN IT IS EFFECTIVE?

S 4 – offer/proposal is only effective if it is communicated to the acceptor

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ACCEPTANCES 2(b) – when a person to whom the

promise is made signifies his assent thereto, the proposal is said to be accepted

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o COMMUNICATION OF ACCEPTANCE

Acceptance must be communicated / make known to the offeror

It is said to be communicated if it reaches the offeror

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o ACCEPTANCE BY POSTS 4(2)(a) & (b):Communication of acceptance by post is

complete as against the offeror, when it is put in the course of transmission to him, so as to be out of the course of the acceptor

as against the acceptor, when it comes to the knowledge of the offeror

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The offeror is bound by a contract made through post even though he does not know about the acceptance

The acceptor is bound by the contract

only when the acceptance has reached

the knowledge of the offeror

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o REVOCATION OF OFFER AND ACCEPTANCE

S 5(1) – a proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards

An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards

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EXAMPLES

A-offerror B-acceptor

post letter of offer

5 JanPos letter of acceptance(put the letter into aletter box)A cannot

cancelthe contract

–s.4(2)(a) - Acceptance is completedagainst A when the letter isposted

receives letter of acceptance from B

- S.4(2)(b) – acceptance completed against B

1 Jan

8 Jan

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S.5(2)

A-offerror B-acceptor

1 JanPost LO to B

5 JanPost LA to A

(s.4(2)(a)- contract concluded)

8 Jan : receive LA from BB cannot revoke his acceptance on 8 Jan, contract completed against B. (S 5(2))

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CONSIDERATIONSThe price which one party pays to buy the

promise or act of the otherneed not be adequate – the price suit with

the goodsPANG SWEE KIM V. BEH I HOCK

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o INTENTION TO CREATE LEGAL RELATIONS

Intention relates to somebody’s state of mind Law cannot read the mind – use presumption In business agreement, there is a presumption that

the parties intend to enter into contractual relationship/ to enforce the contract

In social agreement, it is implied that no legal relation are contemplated, but this presumption

can be rebutted

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CAPACITY TO CONTRACTS 11 – person who is competent to enter

into contract is the one who attain the age of majority, who is of sound mind, and not disqualified from contracting from any law to which he is subject

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o CONTRACT BY MINOR Age of Majority Act 1971 – 18 years Effect of contract by minor – VOIDMohori Bibee v. Dharmodas GhouseHereford 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 the contract made by infant is not only voidable but void…the decision of the Privy Council is binding on this court, and therefore there can be no doubt whatever that these transfers are void.’

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Exceptions: s 4 – matters relating to marriage, divorce, dower

and adoption Any other written law which fix the age of

majorityCase: Rajeswary v. Balakrishnan& Ors (1958)

3 MC 178Held: The age of majority for entering into a

marriage contract differed from other contracts entered into by a minor and consequently, such contracts were not affected by the general rule.

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o Contracts by minor are valid under certain circumstances

Contract for necessaries – s 69 – “if a person incapable of entering into a contract or anyone whom he is legally bound to support, is supplied by another person with necessaries suited to his condition in life, the person who has furnished such supplies is entitled to be reimbursed from the property of such incapable person”

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Scholarships – s 4 Contracts (Amendment) Act 1976 – “no scholarship agreement shall be invalidated on the ground that the scholar entering into such agreement is not of the age of majority

Insurance – Insurance Act 1963 – “A minor over the age of 10 may enter into a contract of insurance but if he is under 16, the written consent of parent and guardian is needed”

Apprenticeship – The Children and

Young Persons (Employment) Act 1966 Child is a person below the age of 14, young person between the age of 14 and 16

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CERTAINTYTerms in the contract must be certainIf the terms is uncertain or not capable of

being made certain, the agreement is voidUnenforceable

Ali pleases to sell his house for RM50,000 or RM70,000

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SOUND MINDS 12 Contract Act 1950A person is said to be of sound mind for the

purpose of making the 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 upon his interest

A person usually suffering from mental disorder may make a contract during those periods when he is sound

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LEGAL EFFECT OF CONTRACTUAL RELATIONSHIP

Valid contract – obligation to perform the contract, legal remedies in case of breach

Voidable contract – contract which can be affirmed or repudiated

Void contracts –cannot be enforced in the court of law

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VALID CONTRACTSIf it fulfilled all the elements of contract that

is offer, acceptance, considerations, legal capacity of parties, intention to create legal relations and certainty

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VOIDABLE CONTRACT S 10 – all agreement are contracts if they are made

by the free consent of the parties S 14 – consent is said to be free when it is not

caused by one or more of the following:Coercion (threat)Undue influenceFraud (any act to induce another party to enter

into contract)Misrepresentation (true/false statement)Mistake

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VOID AND ILLEGAL CONTRACTS Not enforceable by law S 24 – the consideration or object of an agreement

is lawful unless: forbidden by law if permitted, would defeat any law fraudulent implies injury to a person or property of another court regard it as immoral or opposed to public

policy

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REMEDIESRemedies from the court: Damages Specific performance Injunction

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REMEDIESREMEDIES

SPECIFIC PERFORMANCE INJUNCTION

DAMAGES

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Remedies granted by the court can be divided into two types:-

• 1. Legal remedyi.e damages• 2. Equitable remedyi.e specific performance, injunction and

quantum meruit.Available to the innocent party but the grant

of these remedies is subject to the discretion of the court.

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DAMAGESS 75 - A party who has a right to rescind

the contract can seek legal redress (damages)

Damages are granted to compensate the innocent party for losses suffered as result of the contract being breached by the party in breach.

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The right to sue for damages is available as of right to the innocent party when the contract has been breached.

If the plaintiff can establish that the defendant has breached the contract, the plaintiff is automatically entitled to claim whatever losses which he can prove that he has suffered due to that breach of contract.

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Two type of losses: pecuniary and non pecuniary losses

Pecuniary losses – losses which can be quantified in financial terms.

Eg: loss of profit, expenses incurred.Non pecuniary losses – losses which cannot

be precisely stated in financial terms.Eg: pain and suffering,disappointment,

embarrassment

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SPECIFIC PERFORMANCEA decree directing a contract or certain act

should be performed specifically according to its original terms

Where the court grants an order of SP, the contracting party who in breach of the contract refuses to perform his obligation under the contract, will be compelled to perform the obligation.

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Failure to do so will render him liable for contempt of court for non-compliance with an order of court. (CASE: JOHNSON V. AGNEW [1980] 1 MLJ 367)

Chapter II of the Specific Relief Act 1950 lays down the principles governing the remedy of SP.

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INJUNCTIONAn order of court requiring the party to

whom it is addressed to do a specified act to refrain from doing a specified act.

Equitable remedy available for breach of contract.

Granting of injunctions as at the discretion of the court.

Not available to a ptf as of right.

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TYPES OF INJUNCTIONCan be divided into temporary and

perpetual injunction. (S 50 of the Specific Relief Act 1950)

o 1. Temporary injunction Granted before the trial of the case.Granted as a provisional measure at an early

stage of the proceedings before the court has had the opportunity of hearing and considering the merits of the case.

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S 51(1) SPA 1950- temporary injunction is to continue until a specific time, or until further order of the court. - preserve status quo of the parties

Can be granted at any time

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o Perpetual InjunctionGiven after the trial as a final judgment.

Permanent orderS 51(2) SPA 1950 – a perpetual injunction

can only be granted by the decree made at the hearing and upon the merits of the suit; the def is thereby perpetually enjoined from the assertion of right, or from the commission of an act, which would be contrary to the rights of the ptf.Granted by the degree made at hearing

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Eg: Mareva Injunction – preventing the defendant from removing asset from within the jurisdiction.