Chapter 2 - Contract Law

1
INTRODUCTION
2.1 Definition of “contract”:
A contract is an agreement between

2 or more parties which is enforceable
at law.
2.1.1 Terminologies
Contract • Foundation of all

Law commercial activities
HT311 TOPIC 2 CONTRACT LAW 2

Continue…
DEFINISI KONTRAK menurut Seksyen 2(h) Akta

Kontrak 1950:
Kontrak adalah sesuatu perjanjian yang

boleh dikuatkuasakan oleh undang-undang
Bukan semua perjanjian adalah kontrak.
Tetapi semua kontrak adalah perjanjian.

Continue…
Wide range of
General principle
contracts
• e.g. simple • Freedom of

consumer contract – everyone
contracts to is free to enter into
construction any contract
contracts, sale and
purchase
agreements in
convincing
transactions

2.1.2 Elements of a Contract
Offer
Certainty Of Acceptance Of
Contract The Offer
Intentions To
Create Legal Capacity
Relation
Consideration

Element of Contract # 1
Offer
An expression of willingness to contract on a

specific set of terms, made by the offeror with
the intention that, if the offer is accepted, he or
she will be bound by a contract.
Merriam- • A process to present a

Webster person with something in
Online order to satisfy a
Dictionary requirement.

Continue offer…..
Section 2(a) CA 1950 Section 2(c) CA 1950
• when one person • the person making

signifies to another the proposal is
his willingness to called the
door to abstain “promisor” and the
from doing person accepting
anything, with a the proposal is
view to obtaining called the
the assent of that “promisee”.
other to the act or
abstinence, he is
said to make a
proposal.

Continue offer…..
A proposal must be a
An offer or proposal is
definite promise to be
necessary for the
bound provided
formation of an
certain specified
agreement.
terms are accepted.
The promisor (also known as the ‘offeror’) must

have declared his readiness to undertake an
obligation upon certain terms, leaving the
option of its acceptance or refusal to the
offeree, the person to whom the offer is made.

Continue offer…..
Invitation To Treat
The proposal before the actual “offer”
Invitation to treat is an effort made by a

person to persuade and influence an offer.
An invitation to treat is NOT an offer which is

capable of being turned into a contract by
acceptance.
An invitation to treat is mere invitation by one

party to the other party to make and offer.

Continue offer…..
Example of Invitation to Treat
Advertisement
Brochure/Price List
Inquiries through telephone
Good display in shop windows and

shelves
Auctions

Continue offer / eg of invitation to treat…
Advertisement

Continue offer…..
Inquiries through Telephone
A request for information is not a

counter-offer.
If you ask the offeror for information

or clarification about the offer, that
doesn’t extinguish the offer; you’re
still free to accept it if you want.

DISPLAY
Pameran barang di kedai layan diri di mana

perbuatan mempamerkan barang-barang di kedai-
kedai adalah merupakan satu pelawaan sahaja,
yang mempelawa orang ramai membuat tawaran
untuk membelinya.
Mana-mana pelanggan yang berminat
membelinya akan membuat tawaran
di meja pembayaran.
Maka di meja pembayaran itulah wujudnya tawaran

yang boleh diterima atau ditolak oleh kasyier jualan.

Continue offer…..
Kes : PHARMACEUTICAL SOCIETY OF GREAT

BRITAIN LWN BOOTS CASH CHEMIST LTD
FAKTA KES : Pihak defendan telah dituduh di bawah

Akta Ubatan dan Racun, 1933 yang menyatakan
adalah salah menjual racun-racun tertentu, kecuali di
bawah penyeliaan ahli farmasi yang berdaftar.
Kes ini bergantung pada berlaku tidaknya jualan
dalam kedai layan diri apabila seorang pelanggan
memilih barang yang ingin dibelinya dan
meletakkan barang itu ke dalam bakul besinya.
Bayaran akan dibuat di lorong keluar pada
seorang juruwang yang bertugas. Dan
setiap jualan yang melibatkan dadah,
seorang ahli farmasi akan menyeliakan
urusniaga itu, dan berkuasa menahan
sesuatu jualan.
KES PAMERAN DI KEDAI LAYAN DIRI
KEPUTUSAN MAHKAMAH
Mahkamah memutuskan bahawa peragaan

itu hanya merupakan pelawaan tawaran.
Cadangan untuk membeli berlaku apabila
pelanggan meletakkan barang tersebut di
dalam bakul. a
Oleh itu, kontrak hanya berlaku di meja

juruwang. Oleh yang demikian, tuan punya
kedai tidak melakukan jualan yang
menyalahi undang-undang.

AUCTION
Menurut Seksyen 10 Enakmen Jualan Lelong, bab

81 bagi Negeri-negeri Melayu Bersekutu :
“ Jualan lelong secara awam dan

sempurna apabila pelelong
mengumumkan penyempurnaannya
dengan menjatuhkan tukul kayunya”
• Lelongan biasanya bermula dengan tindakan

pelelong menyatakan harga pembukaan &
memberikan peluang kepada orang ramai bagi
membuat tawaran harga tinggi.
• Tindakan pelelong membuka tawaran harga ini
hanyalah satu pelawaan tawaran & bukan satu
tawaran
Setiap pihak yang menyebut harga yang
mereka ingini membuat tawaran kepada
pelelong.
Apabila tiada lagi yang membuat

tawaran, pelelong akan mengetuk tukul
sebagai tanda penerimaan.
Penerimaan berlaku apabila tukul diketuk

dan orang yang menawarkan harga
tertinggi terikat dengan kontrak.

LELONGAN
Kes : PAYNE LWN CAVE (1789)
Defendan iaitu Cave

menyertai lelongan Namun demikian, beliau
yang dikendalikan oleh menarik diri sebelum
payne dan membuat tukul diketuk.
tawaran tertinggi
Persoalannya, adakah sudah

berlaku kontrak dan adakah ia
telah melakukan pecah
kontrak kerana enggan membeli
barang itu.

KEPUTUSAN MAHKAMAH
Tindakan pelelong itu adalah satu

pelawaan tawaran dan tawaran dilakukan
oleh Cave.
Penerimaan hanya berlaku apabila Payne

mengetuk tukul.
Selagi tukul belum diketuk, penerimaan belum
berlaku dan kontrak yang sah belum wujud.
Oleh kerana penarikan diri dibuat sebelum tukul
diketuk, maka belum ada kontrak antara dua
pihak itu dan Cave tidak dikira melakukan pecah
kontrak.
BROUCHER
Iklan tidak dibuat sebagai satu tawaran

kontrak kerana pihak yang mengiklankan
pada dasarnya tidak menujukan iklan itu
kepada pihak-pihak tertentu secara
khusus
Kenyataan yang terdapat dalam iklan bukan satu

tawaran tapi hanya sekadar pelawaan.
Jadi daripada sudut undang-undang

kontrak, pengiklan tidak terikat supaya
menjual apa yang diiklankan

Kes :
COELHO LWN THE PUBLIC SERVICE
COMMISION (1964)
Dalam kes ini, mahkamah memutuskan

yang iklan di dalam akhbar adalah satu
pelawaan tawaran dan bukan satu
tawaran.
Apabila satu-satu pihak menawarkan

pekerjaan dalam surat khabar, ia hanya
pelawaan tawaran dan bukannya satu
tawaran

Memberikan Maklumat
Pada dasarnya, memberi maklumat adalah satu

pelawaan tawaran dan bukan satu tawaran.
Pemberi maklumat hanya memaklumkan apa yang

perlu bagi pengetahuan pihak satu lagi.
Maklumat juga diberikan semata-mata atas

kehendak pihak lain tanpa sebarang niat hendak
mengikat diri dengan kontrak.
Tindakan penjual ataupun penyedia

perkhidmatan yang hanya memberikan
maklumat tidak boleh dianggap sebagai
tawaran, tetapi ia adalah pelawaan
tawaran.
KES : HARVEY LAWAN FACEY (1893) AC 552
Perhubungan telegraf antara Harvey (H)

dengan Facey (F)
H : Adakah tuan ingin menjual kepada kami Bumper

Hall Pen? Kirim telegram kepada kami harga yang
paling rendah baginya.
F : Harga Bumper Hall Pen yang paling rendah £900.

H : Kami bersetuju membeli Bumper Hall Pen dengan
harga £900 yang diminta itu.
F tidak menjawab telegram yang terakhir

daripada H sebaliknya H telah menuntut di
mahkamah bahawa telah ada satu kontrak
pembeliannya dengan F.
KEPUTUSAN MAHKAMAH
Mahkamah Majlis Privy memutuskan bahawa ini

bukanlah suatu kontrak
Telegram kedua (daripada F) bukan suatu cadangan

menjual.
Kandungan telegram cuma suatu kenyataan yang
berbentuk pelawaan iaitu harga Bumper Hall Pen
yang paling rendah sekiranya dia mengambil
keputusan untuk menjual
Begitu juga telegram yang terakhir daripada H tidak

dapat dianggap penerimaan suatu cadangan

Continue offer………
Certainty
Elements of
Offer
Communication

Elements Of Offer
Certainty of Offer Communication of Offer
• A legal requirement of • Communication of offer

a valid offer to is complete when it
contract; that it must comes to the
be precise and definite knowledge of the
in order to be subject person to whom it is
to acceptance. made by virtue of
• The certainty of offer Section 4(1).
depend on a proposal
with a definite promise
to be bound provided
certain specific terms
are accepted.

S.O is made by a person
to a particular person
with the agreed amount
or condition.
Specific Offer E.g.: Ms A offers to sell
her spa to Ms B for
RM100,000. This offer is
specific as it is made to
Ms B only.
Types of
Offer
G.O is made by a particular
person to a wider audience
(i.e. public) if one of them
General Offer has met agreed condition.
E.g.: An offer made by Ms A
to award a free stay at her
hotel to anyone who is able
to find her lost cat.
Element of Contract # 2 Acceptance of the offer
Webster Online
Dictionary
Merriam-
Process of agreeing either

expressly or by conduct to the
act or offer of another so that a
contract is concluded and the
parties become legally bound.
An act of accepting the offer which someone

made to us.

Continue acceptance…
S.2(c) CA
Calls the person accepting the

proposal the ‘promisee’

S. 9 Provides so far as the acceptance
of any promise is made in words,
the acceptance is said to be
EXPRESSED.
If the acceptance is made other

than in words, the acceptance is
said to be IMPLIED.

Acceptance – comes into existence upon
the offeree unconditionally accepts the offer.
The offeree says,

Eg “OK, I accept.”
Contrast with
The offeree says,

Eg “I accept subject to
conditions….”
The offeree says,

Eg
“I accept but…..”

Continue acceptance…
Elements of Acceptance
Absolute
Period
Instantaneous
Manner
Communication Non-instantaneous

Cont Elements of acceptance…
An offer can only be bound
Absolute if the recipient of the offer
agreed to the terms and
regulation.
A Counter Offer is not Acceptance

If a counter offer is made, the original offer is
rejected and the counter offer can then itself be
accepted or rejected. Once a counter offer is made
and the original offer rejected, the offeree can no
longer accept the original offer.
Hyde v. Wrench
In this case, the defendant offered to sell
his estate to the plaintiff for £1,000. In
reply, plaintiff made a counter-proposal to
purchase at £950. It was held that there
was no contract which existed between
them.
KES : HYDE LAWAN WRENCH
Pada 6 Jun, defendan (W) menawarkan hendak

menjual tanah kepada plaintif dengan harga
£1000. Pada 8 Jun, plaintif menjawab dan
menawarkan hendak membeli rumah itu dengan
harga £950. Pada 27 Jun, defendan menolak
kehendak plaintif itu. Pada 29 Jun, plaintif
menulis surat menyatakan kesediaan membeli
dengan harga asal £1000.
Mahkamah telah memutuskan bahawa

tiada kontrak wujud di antara mereka.
Plaintif telah menolak cadangan asal pada
8 Jun sehinggakan tidak layak
menerimanya kemudian.
Period
Acceptance must be made within the period

specified in the offer or within a reasonable
period if there is no specified time given in
the offer as prescribed under section 6(b) of
the CA 1950.

Manner
An acceptance must be expressed in

some usual and reasonable manner,
unless the proposer prescribes the
manner in which it is to accepted under
section 7(b) of the CA 1950.

Communication
Acceptance
Communication
Manner
Instantaneous Non- Instantaneous
Knowledge Postal-Rule
Letter Posted

An offeror may stipulate the manner of
acceptance by advising the offeree that if
he/she wishes to accept the offer, the
offeree should perform stipulated acts
waiving the need to communicate
acceptance.
Section 4(2)(a) Section 4(2)(b)
• The communication
• The communication
of an acceptance as
of an acceptance is
against the proposer
complete as against
when it is put in a
the acceptor when
course of
it comes to the
transmission to him,
knowledge of the
i.e. upon posting the
proposer.
letter of acceptance

Acceptance
Instantaneous
must be
Communication:
communicated
General Rule
When the mode of acceptance is instantaneous
communication, the general rule of law is that the
contract will be formed when acceptance of the
offer is communicated to the offeror and that
communication is received.
Meaning of Instantaneous Communication

Face to face communication, telephone
conversations and telex messages are all
considered forms of instantaneous communication.

Entores Ltd v Miles Far East
Corporation [1955] 2 QB 327
P in London sent a telex to D in Amsterdam

offering to buy goods from D. D sent a
telex in return to P accepting the offer.
Held: acceptance must be received.

Another situation…. Kaedah pos
Postal Rule Definition
• A rule of contract law that makes an

exception to the general rule that an
acceptance is only created when
communicated directly to the offeror.
One interesting problem that has surfaced in contract law

is the use of modern technology in the communication of
an acceptance.
It has led to an exception to the general rule

that acceptance must be personally delivered to
the offeror.

In the absence of specific instruction to the contrary
by the offeror, a person may mail an acceptance to the
offeror and the contract is said to be perfected when
the acceptor places this acceptance in the mail box for
return mail even if, in fact, it never reaches the offeror.
This is known as the postal rule. If the post office loses

or delays the acceptance letter, there is still a binding
contract.
Case: Ignatius vs. Bell (1913)
In this particular case, the letter of

acceptance was not delivered by the
postman but remained in the post office.
The court held that acceptance was
complete upon posting.

Kaedah pos
Kes : Ignatius lwn Bell
Kedua-dua pihak telah bersetuju

menggunakan perkhidmatan pos sebagai
media komunikasi. Ignatius telah membuat
cadangan untuk menjual tanahnya kepada
Bell, di mana cadangan itu terbuka sehingga
20 Ogos. Bell terima cadangan tersebut dan
menghantar notis penerimaan melalui pos
pada 16 Ogos. Walaubagaimanapun, notis
tersebut hanya sampai kepada Ignatius
pada 25 Ogos.
Mahkamah memutuskan, dengan merujuk

kepada Seksyen 4(2)(a), bahawa komunikasi
penerimaan adalah lengkap apabila notis
tersebut telah diposkan pada 16 Ogos
walaupun Ignatius tidak mengetahui tentang
penerimaan tersebut
Kaedah pos
Penerimaan adalah lengkap apabila

komunikasi penerimaan itu telah
sampai kepada pengetahuan
pencadang.
Ini menggambarkan bahawa

pencadang terikat apabila penerima
menghantar penerimaannya, tetapi
penerima tidak pula terikat dengan
sehingga penerimaan itu benar-benar
tiba kepada pencadang

Silence
Uncle said, “I
heard no more
from my
nephew, I shall
consider the
Felthouse v horse is
Silence is no
Bindley (1862) mine.”Horse
acceptance
11 DBNS 869 : sold by mistake.
Nephew never
communicated
acceptance to
his uncle. Held:
No acceptance

Kes : Felthaouse lwn Bindley
F telah mencadangkan untuk membeli kuda

anak saudaranya dengan harga £30 15pence.
F menulis, “Jika saya tidak mendapat apa-apa
jawapan, saya menganggap kuda itu milik
saya dengan harga £30 15pence
Mahkamah telah memutuskan bahawa ini

adalah penerimaan senyap sahaja dan
tidak disampaikan kepada pencadang;
penerimaan itu tidak boleh disyaratkan
sebagai persetujuan
REVOCATION OF OFFER AND ACCEPTANCE
“Revocation” comes from the root word of

“revoke” which can be defined as to bring
or call back something.
“Revoke” means to bring back or cancel the

offer and acceptance.
Webster Online
Dictionary
Merriam-
Describe revocation as an act or

instance of revoking something
which are previously agreed
upon.

Circumstances for Revocation of Offer And Acceptance
Communicating the notice of revocation by the

proposer to the party to whom the proposal was
made under section 6(a).
The time prescribed in the proposal for its

acceptance elapses, or if no time is prescribed for
acceptance, by he lapse of a reasonable time under
section 6(b)
The failure of the acceptor to fulfill a condition

precedent to acceptance under section 6(c)
The death or mental disorder of the proposer if the

fact of the proposer’s death or mental disorder
comes to the knowledge of the acceptor before
acceptance under
HT311 TOPIC section
2 CONTRACT LAW 6(d) 49
The communication of revocation has
reached it completion when the followings
have been achieved. Communication of
revocation is complete:
As against the person who makes the

revocations: When it is put in the
course of transmission to the person
to whom it is made by virtue of
section 4(3)(a).
As against whom it is made only when

it comes to his knowledge by virtue of
section 4(3)(b).

Element of Contract # 3 Capacity
The parties entering into a contract should also

be competent to contract, i.e. they must have
the legal capacity to do so.
Capacity refers to the ability of the parties to a
contract to fully understand its terms and
obligations – section 11 of the CA
Webster Online
Dictionary
Merriam-
Define capacity as an individual’s

mental or physical ability.

Capacity
Section II
Competent Sounds of
Mind
Age of Majority (18 years)
Exception
Necessity Scholarshi Insurance Service

p/ Loan
Criteria of capacity under the law of contract

Exceptions to the
General Rule
General Rule
• Section 11, the • There are some
parties entering into exemptions to the
a contract should discussed general
be competent to rule.
contract according
to the law which is
subject and of
sound mind.

Types of
Explanation
contract
Contract of The meaning of necessaries is defined
necessaries in S.3(3) of the Sale of Goods Act 1950:
under S.69 CA • “Necessaries means goods suitable
to the condition in life of the minor or
other person concerned and to his
actual requirements at the time of the
sale & delivery”.
• The test as to whether service is
necessary will depend on the condition
of the minor’s life.
Contract of A scholarship agreement entered into
Scholarship by an infant when the
(Amendment) Act scholarship/loan/sponsorship is
1976 granted by the Federal or State
Government, a statutory authority or
an educational institution e.g.
university
Types of contract Explanation
Contract of • Insurance Act 1996: An infant over the
Insurance age of 10 may enter into a contract of
insurance.
• However, if he is below the age of 16,
he can only do so with the written
consent of is parents or guardian.
Contract of • In Malaysia, young persons ≤ 18 years
apprentice or old are allowed to work legally under
service the Children & Young Person
(Employment) Act 1966.
• Except young female persons are not
permitted to work in hotels, bars,
restaurants, boarding houses or clubs
except such establishments are under
the management or control of the
parent or guardian or when approval is
granted by the Director General of
Labour for that purpose under S. 2(3) of
Act.
Element of Contract # 4 Consideration
S 2(d) “when, at the desire of the promisor, the

promisee or any other person has done or
abstained from doing, or does or abstains
from doing, or promises to do or to
abstain from doing, something, such act
or abstinence or promise is called a
consideration for the promise”
Something of value in
Consideration is the
the eyes of the law
return or reward or
(need not be of market
reason for the promise.
value).

Consideration (S26)
With Consideration Without

Consideration
Valid
Void Valid
S 26(a) S 26(b) S 26(c)
Non-adequate Move from 3rd Past Part Payment

party Consideration

S.26 CA 1950, an To be valid,
General Rule
General Rule
agreement without consideration must
consideration is be sufficient in that
void. it is ‘something
which is of value in
the eyes of the
law’. Consideration
may be valid
although it cannot
be given monetary
equivalent.

Exceptions to Consideration
Types of
Explanation
Agreement/Promise
An agreement • Requirements under S. 26(a):
name on account of 1) It is expresses in writing.
natural love & 2) It is registered (if
affection S.26(a) applicable).
3) The parties stand in near
relation to each other.
• Near relation: varies from one

social group to another as it
depends on customs and
practices of such groups.

Types of
Explanation
Agreement/Promise
A promise to A promise to compensate, wholly
compensate for or in part, a person who has
something done: already voluntarily done
S.26 (b) something for the promisor was
legally compellable to do.
A promise to pay A promise made in writing and
debt barred by signed by the person to be
limitation law: charged therewith, or by his
S.26 (c) agent generally or specially
authorised in that behalf, to ay
wholly or in part a debt of which
the creditor might have enforced
payment but for the law or the
limitation of suits.
Types of Consideration
Types of
Explanation
Consideration
Past • Where a promise is made
Consideration subsequent to and in return for
an act already been performed,
the promise is made on account
of a past consideration.
• e.g.: Nani finds and return
Iza’s I-pad and in gratitute, Iza
promies to reward her with a
RM200, the promise is made in
return for a prior act.

Types of
Explanation
Consideration
Executed • When a promise for the performance
Consideration of an act done by the other and when
the act constituting the consideration
is completely performed the
consideration is said to be executed.
• E.g.: Emma offer a reward for the
return her lost cat, and Fatimah finds
and returns the cat to Emma and
claims the reward. Fatimah has
already performed her consideration
when she makes the claim. That is
executed consideration and valid.
(When Fatimah made her claim, her act
was in the past, but her act did not
occur before Emma made her promise)

Types of
Explanation
Consideration
Executory • Consideration may be executor
Consideration where the parties exchange
promises to perform acts in the
future. E.g.: Abu promises to
deliver goods to Din and Din
promises to pay for the good.

Intentions To Create
Element of Contract # 5 Legal Relation
Intention to create
legal relations means
An agreement is not a
the readiness of each
binding contract unless
party to accept the
the parties intend to
legal consequences of
create legal relations.
he/she does not
perform the contract.

Intention To Create Legal Relations
Presumptions in Law Proven Intention
Arrangements Positive
Family Business
Negative Positive

PRESUMPTIONS
IN LAW
A legal inference as
to the existence or
Assumptions
Merriam truth of a fact not
or beliefs
Webster certainty known
which are
Online that is drawn from
drawn from
Dictionary the known or proved
proven law.
existence of some
other fact.

DOMESTIC Presumption that agreements
ARRANGEMENTS between family members will
not usually be legally binding.
Balfour v Balfour [1919] 2 KB 571
A husband, who was working abroad, had

agreed to make certain payments to his
wife. When he stopped making them, his wife
went to court to try to enforce the payments.
Held: In an agreement made between members of a

family in the course of a family life, the law will
ordinarily imply from the circumstances of the case
that the parties did not intend their agreement to
have legal consequences.
KES : JONES LAWAN PADAVATTON (1969)
Puan Jones menawarkan kepada anaknya,

Padavatton yang bekerja di A.S supaya kembali
ke England bagi menyambung pelajaran
dengan balasan si ibu akan menanggung
perbelanjaan dan menyediakan rumah dan
bilik-bilik bagi disewakan kepada mana-mana
penyewa. Padavatton bersetuju dengan
cadangan itu.
Namun demikian 2 tahun selepas itu, hubungan

mereka renggan dan Pn. Jones bercadang
hendak mengambil alih rumah itu. Padavatton
membantahnya dengan alasan, ibunya sudah
terikat dengan kontrak.

Mahkamah memutuskan, oleh kerana
janji itu dibuat semata-mata hendak
mendorong anaknya menyambung
pelajaran, maka diandaikan bahawa si
ibu tiada niat hendak mengikat dirinya
dengan kontrak daripada segi undang-
undang.
Walaubagaimanapun, terdapat keadaan-keadaan

tertentu yang menjadikan sesuatu perjanjian
keluarga dan sosial ini berubah menjadi satu
kontrak yang sah.
Ini berlaku apabila terdapat fakta-fakta

yang boleh menafikan andaian awal itu,
contohnya perselisihan faham antara
suami isteri
BUSINESS
ARRANGEMENTS
It is here that there

is a very strong
presumption that Presumption – will be
there is an intention legally binding
to create legal
relations.

Element of Contract # 6 Certainty Of Contract
Certainty of contract means the terms of a

contract must be certain and not vague.
Thus it can be verified by both parties before the

agreement takes place.
An agreement which is uncertain or is not capable

of being made certain is considered void.
E.g.: If travel agent offers to sell a holiday package,

there would not be a contract as the exact holiday
package could not be determined.

Voidable Contract
The term “voidable” come from the

root word “void”.
Void can be defined as illegal,

forbidden or terminated.
Voidable contract can be set aside.

VOIDABLE CONTRACT
Without Free Consent
Coercion Undue Influence Fraud Misrepresentation
Effect
Voidable at Opinion
of Innocent Party
Continue Rescind
Contract Contract
Insist-Right Benefit
Position HT311 TOPIC 2 CONTRACT LAW Return 73
TERM
Certainty of contract means the terms of a

contract must be certain and not vague.
Thus it can be verified by both parties before the

agreement takes place.
An agreement which is uncertain or is not capable

of being made certain is considered void.
E.g.: If travel agent offers to sell a holiday package,

there would not be a contract as the exact holiday
package could not be determined.

General Rule S. 19(1) CA 1950
A voidable contract
occurs when the
A voidable contract contract was
is a contract that is entered due to
made without free coercion, undue
consent of parties influence, fraud
and
misrepresentation.

Coercion can cause a contract to be
COERCION terminated if the mentioned
illegitimate acts are found.
“Coercion is the
committing or
threatening to commit
Online Dictionary
Merriam Webster
any act forbidden by

To achieve something the Penal Code or the
Section 15
by force or threat. 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”

UNDUE An excessive and improper authority
INFLUENCE on another person.
Section 16 “undue influence”
A contract is said to be influenced by

“undue influence” 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 an unfair
advantage over the other.

In particular and without prejudice to the
generality of the foregoing principle, a person is
deemed to be in a position to dominate the will
of another:
• Where he holds a real or apparent authority over

the other. Or where he stands in a fiduciary
relation to the other; or
• Where he makes a contract with a person

whose mental capacity is temporarily or
permanently affected by reason of age, illness
or mental or bodily distress.

Where a person who is in a position to
dominate the will of another enters into a
contract with him, and the transaction
appears, on the fact of it or on the evidence
adduced, to be unconscionable, the burden
of proving the contract was not induced by
undue influence shall lie upon the person in
apposition to dominate the will of the other

Elements of
Explanation of Situations
Undue Influence
Relation between • Where he hold a real or
the parties to apparent authority over the other,
each other must or where he stands in a fiduciary
be such that one relation to the other; or
is in a position to • Where he makes a contract with
dominate the will a person whose mental capacity
of another. A is temporarily or permanently
person is deemed affected by reason of age,
to be in a position illness or mental or bodily
to dominate the distress.
will of another.

Elements of Undue
Explanation of Situations
Influence
Burden of proving • There is presumption that there is
that the contract undue influence in cases where
was not induced by there’s confidential relationship
undue influence between the parties e.g. solicitor-
lies upon the client relationship.
person who was in • In order to rebut the presumption
a position to that there is undue influence, the
dominate the will court must be satisfied that the
of another donor was acting independently of
any influence from the done and
with the full appreciation of what
he is doing.

FRAUD
Merriam
• An act of deceiving or
Webster
misrepresenting
Online
something.
Dictionary
• Fraud includes certain acts

which are committed with the
Section 17
intention to induce another
party to enter into a contract.

Section 17: Different Acts which Constitute Fraud
(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 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.

A false representation of fact
MISREPRESENTATION made orally or in writing or
by conduct.
“Misrepresentation” includes:-
(b) Any breach of duty

which, without an intent
(a) The positive assertion,
to deceive, gives an
in a manner not
advantage to the person
warranted by the
committing it, or anyone
information of the person
claiming under him, by
making it, of that which is
misleading another to his
not true, though he
prejudice, or to the
believes it to be true
prejudice of anyone
claiming under him

S.18 CA 1950, misrepresentation is limited to innocent
misrepresentation.
Innocent misrepresentation is an untruth statement that

the speaker believes is accurate
As in the case of fraud, silence in certain situations

where there is a duty imposed to disclose, may amount
to a misrepresentation under S. 18(b)
The basic difference between fraud & misrepresentation

is that in fraud, the maker does not believe in the truth
of the statement made, whereas in misrepresentation,
the maker believes that the statement is true.

Consequences of a Voidable Contract
S. 19(2) S. 65
The innocent party The party

(the other party) rescinding a
may, if he thinks fit, voidable contract
insist that the shall, if he has
contract be received nay benefit
performed, & that from the other party
he shall put in the such contract,
position in which he restore the benefit
would have been if to the person from
the representation whom it was
made had been true. received.

Void Agreements
An agreement without legal force or effect. Void

Agreements is considered not in existence from the very
beginning.
Void Agreements
Mistake Illegality No Consideration Etc
Effect
Not in Unenforceable Return

Existence- by Law Benefit
Beginning HT311 TOPIC 2 CONTRACT LAW 88
Void Agreements
Mistake
Agreement which is entered into, due to

mistake of fact essential to the agreement by
both parties (S.21) is considered void.

Other Void Agreements
Illegality No Etc
Consideration
Natures of Void Agreements
• Agreements are void if any part of their

considerations & objects are unlawful:
S.25
1 • Under S. 24, the consideration or object
of an agreement is unlawful if it falls
within any of the subsections of the
section.

The said section reads:
The consideration or object of any agreement is

lawful unless:
It is forbidden by a law
It is such nature that, if permitted, it

would defeat any law
It is fraudulent
It involves or implies injury to the

person or property of another
The court regards it as immoral or

opposed to public policy
• An agreement made without
consideration unless it is in writing and
registered, or is a promise to
2 compensate for something done, or is a
promise to pay a debt barred by
limitation law: S. 26.
• An agreement in restraint of marriage

3 S.27
• An agreement in restrain of trade

except of an agreement not to carry
on business of which goodwill is sold,
or an agreement made prior to a
4 dissolution of a partnership or an
agreement made during the
continuance of a partnership-
(exception: S.28)
• An agreement in restrain of legal
proceedings except for a contract
5 agreeing to refer disputes to
arbitration or a contract relating to
scholarship: S. 29
• An agreement, the meaning of which

6 is not certain, or capable of being
made certain: S. 30
7 • An agreement by way of wager: S. 31

Consequences of a Void Agreements
S. 2(g) CA S. 66 CA
Any person who has

received any
advantage under the
A void agreement is
agreement is bound
an agreement not
to restore it, or to
enforceable by the
make a
law
compensation for it,
to the person from
whom he received it.

DISCHARGE OF CONTRACT
Merriam Webster
Online Dictionary
The parties to the contract are

released from the obligations of
the contract

Discharge Of Contract
Performance Frustration Agreement Breach
Impossible Effect
Benefit
Physical Legal
Effect
Return Receive
CONTRACT RETURN
ENDS BENEFIT
Discharge by Performance
General Rule: Performance of a contract must be

exact and precise and should be in accordance
with what the parties had promised.
• The parties to a contract must

either perform or offer to perform
their respective promises, unless
such performance has been
dispensed with by law
S. 38(1)

Discharge by Frustration
A contract is frustrated when there is a

change in the circumstances which renders a
contract legally or physically impossible of
performance (S 57(2)).
Discharge by frustration can only be applied

when the impossibility of performing the
contract arise without the fault of either party.
Events which will frustrate a booking

contract are for instance, the destruction of
the hotel by fire, or the death of the client.

Case: Robinson vs. Davidson (1871)
In this case the contract was that the

defendant must play the piano at a concert
on a specified date. On the specified date,
the defendant was unable to perform as she
was ill. It was held that the contract was
discharged by frustration.

Consequences of Frustration
S. 57(2) CA
• The contract does not become voidable
but is brought to an end forthwith &
automatically
S. 57(3) CA
• Compensation must be paid by the
promisor to the promisee for loss through
non-performance of act known to be
impossible or unlawful
S. 66 CA
• Any person who has received any
advantage under the agreement is bound
to restore it, or to make a compensation
for it, to theperson from he received it.
Discharge by Agreement
When both parties to the contract agree that the

contract should no longer continue, both the
parties are discharged from their obligations.
The contract comes to an end by the agreement

of both promisor and promisee.

Discharge by Breach
A refusal to perform a contract may occur

before the time for the performance is due, or
during the time of performance itself.
A refusal to perform a contract when

performance is due would amount to a
discharge.
A cancellation by either party will

amount to a breach of contract.

Consequences of Breach
S. 65 CA
The effect of an innocent party putting an

end to the contract is that the innocent
party must restore any benefits he may
received from the other party.
People who have gained the benefits from the

agreement need to pay back the compensation.
In the innocent party has paid money

under the contract, he may be entitled
to recover the sum paid.

Remedies for Breach of Contract
Merriam Webster Online Dictionary
• To recover a right or to prevent or

obtain redress for a wrong
‘Remedy’ is the method by which an injured party

enforces a right or corrects a loss.
The remedies available to the injured party will

depend on the nature of the breach and the
results will differ between the parties.

Remedies
Damages Specific Injunction Quantum

Performance Meriut
Mitigation of
Loss
Damages
Inadequate
Prohibitory Interlocutory Mandatory

Damages
The main purpose of damages is to enable the

innocent party to receive monetary
compensation from the party responsible for the
breach of contract.
Damages are not awarded to punish a wrongdoer,

but rather to put the injured party back in the
position that they would have occupied if the
contract had been performed as originally intended.
Damages are granted to a party as

compensation for the damage, loss or
injury he has suffered through a breach
of contract.

S 74 of the CA S 75 of the CA
• The party may recover • The plaintiff is only

damages for other allowed to recover a
expenses incurred as a reasonable sum for
result of the breach, for breach of contract. Is a
the loss of profits sum is stipulated in the
arising as a result of contract, the amount of
the breach, and for the damages recoverable
difference between by the plaintiff cannot
the price of goods as exceed the sum
contracted for and the stipulated in the
actual price the goods contract.
were sold as a result of
the breach.

Case • Brown Vs. Hilton Hotels Corp.
In this case, the hotel failed to honour

plaintiffs’ confirmed reservations. Plaintiffs
were unable to find other accommodations
and so were forced to fly home. The
plaintiffs sought and received damage for
breach of contract.

Mitigation of Loss
An act to make
Merriam Webster
something less severe
Online Dictionary:
or painful.
The law imposes a duty upon the person

claiming damages (the injured party) to take
all responsible steps to reduce or minimize
or mitigate their loss.

In the case whereby the customer or the
hotel breaches the contract in a hotel
reservation case, the innocent party must
attempt to mitigate the loss.
Thus, when a customer cancels the
reservation, the hotel must attempt to mitigate
the loss by renting the room to another guest.
If the hotel is unable to relet the room, the
hotel is entitled to collect compensatory
damages from the guest.
Commonly, the appropriate amount of
compensatory damages is the agreed price for
the room.

Specific Performance
Is a court order requiring the

defendant to perform the act promised
in the contract.
Section under the

Explanation
CA
S. 20(1)(a) The court will exercise its
description not to decree
specific performance where
damages will provide an
adequate remedy.
S. 20(1)(c) Specific performance will be
refused where the terms of
the contract are uncertain.

Section under
Explanation
the CA
S. 21 The court has discretion to refuse
specific performance where the
granting of it would cause undue
hardship to the defendant
S. 11 (2) Specific performance may be granted
in respect of agreements relating to
land transactions where there is a
presumption that the breach of a
contract to transfer immovable
property cannot be adequately
relieved by compensation in money.

Injunction
An injunction is a discretionary court Order.

Unlike specific performance, this is a court
order restraining a party from breaking their
contract or from committing a wrongful act
(an order prohibiting performance) and will not
be awarded if damages are an adequate
remedy.
Merriam Webster Online Dictionary
A writ granted by a court of equity

whereby one is required to do or to
refrain from doing a specified act

Types of Injunctions Explanation
Used by a party to maintain

Interlocutory
the status quo of the subject
Injunction
matter in a pending suit.
Mandatory A court order requiring
Injunction something to be done.
Prohibitory Restraining order: Stopping

Injunction something from being done.

Quantum Meruit
Quantum Meruit means ‘as much as he has earned’

and only arises in cases of part performance.
An award made where one party has completed all or

part of his side of the bargain before the other’s
breach.
It is a payment of the “amount deserved” for what has

been done up until the breach. It is a restitutory
award.
The aim of the award is to put the plaintiff in the

position he would have been in the position he would
have been in if the contract had been performed. It is
a compensatory award.
"It takes less time to do a thing right, than it
does to explain why you did it wrong."

Chapter 2 - Contract Law

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1

2.1 Definition of “contract”:

A contract is an agreement between

Contract • Foundation of all

HT311 TOPIC 2 CONTRACT LAW 2

DEFINISI KONTRAK menurut Seksyen 2(h) Akta

Kontrak adalah sesuatu perjanjian yang

Bukan semua perjanjian adalah kontrak.

Tetapi semua kontrak adalah perjanjian.

HT311 TOPIC 2 CONTRACT LAW 3

• e.g. simple • Freedom of

HT311 TOPIC 2 CONTRACT LAW 4

HT311 TOPIC 2 CONTRACT LAW 5

An expression of willingness to contract on a

Merriam- • A process to present a

HT311 TOPIC 2 CONTRACT LAW 6

Section 2(a) CA 1950 Section 2(c) CA 1950

• when one person • the person making

HT311 TOPIC 2 CONTRACT LAW 7

The promisor (also known as the ‘offeror’) must

HT311 TOPIC 2 CONTRACT LAW 8

The proposal before the actual “offer”

Invitation to treat is an effort made by a

An invitation to treat is NOT an offer which is

An invitation to treat is mere invitation by one

HT311 TOPIC 2 CONTRACT LAW 9

Inquiries through telephone

Good display in shop windows and

HT311 TOPIC 2 CONTRACT LAW 10

HT311 TOPIC 2 CONTRACT LAW 11

Inquiries through Telephone

A request for information is not a

If you ask the offeror for information

HT311 TOPIC 2 CONTRACT LAW 13

Pameran barang di kedai layan diri di mana

Maka di meja pembayaran itulah wujudnya tawaran

HT311 TOPIC 2 CONTRACT LAW 14

Kes : PHARMACEUTICAL SOCIETY OF GREAT

FAKTA KES : Pihak defendan telah dituduh di bawah

Mahkamah memutuskan bahawa peragaan

Oleh itu, kontrak hanya berlaku di meja

HT311 TOPIC 2 CONTRACT LAW 16

Menurut Seksyen 10 Enakmen Jualan Lelong, bab

“ Jualan lelong secara awam dan

• Lelongan biasanya bermula dengan tindakan

Apabila tiada lagi yang membuat

Penerimaan berlaku apabila tukul diketuk

HT311 TOPIC 2 CONTRACT LAW 18

Kes : PAYNE LWN CAVE (1789)

Defendan iaitu Cave

Persoalannya, adakah sudah

HT311 TOPIC 2 CONTRACT LAW 19

Tindakan pelelong itu adalah satu

Penerimaan hanya berlaku apabila Payne

Iklan tidak dibuat sebagai satu tawaran

Kenyataan yang terdapat dalam iklan bukan satu

Jadi daripada sudut undang-undang

HT311 TOPIC 2 CONTRACT LAW 21

Dalam kes ini, mahkamah memutuskan

Apabila satu-satu pihak menawarkan