LIA1009

CONTRACT LAW ASSIGNMENT

SEMESTER 2, 2020/2021

NAME MATRICS NO

Sasithra Avadiar S2030949

Ching Jee Joo U2004063

Nur Irdina Jailani U2004089

Tharshini A/P Santa Kumaran U2004103

Lim Ban Wei U2004154

1.0 Introduction 3

2.0 Coercion 3
2.1 Remedies under the Contracts Act 1950 4
2.2 Remedies under the English Common Law 5
2.3 Comparison 6

3.0 Undue Influence 6

3.1 Remedies under the Contracts Act 1950 6
3.2 Remedies under the English Common Law 8
3.3 Comparison 9

4.0 Fraud 10
4.1 Remedies under the Contracts Act 1950 10
4.2 Remedies under the English Common Law 13
4.3 Comparison 14

5.0 Misrepresentation 14
5.1 Remedies under the Contracts Act 1950 15
5.2 Remedies under the English Common Law 15
5.3 Comparison 16

6.0 Conclusion 17

BIBLIOGRAPHY 18
1.0 Introduction
S10(1) of the Contracts Act (‘CA’) illustrates that the element of free consent of a party is
given primary importance in determining the validity of a contract. When both parties in a
contractual relationship collectively agree with a unison of mind, the agreement between them is
done with consent. However, to establish that the parties entered into with free consent, they
should prove it was free from coercion, fraud, misrepresentation, undue influence and mistake as
declared in s14. Furthermore, s2(i) defined ‘voidable contract’ as an enforceable contract that can
be rescinded or affirmed by the parties to the contract only.

In determining elements which give rise to voidable contracts, reference should be made to
s19(1). An agreement becomes voidable at the option of the party whose consent was caused by
coercion, fraud or misrepresentation. S20 further supports that agreements entered into under
undue influence will become voidable at the option of the party to the contract whose consent was
neglected. Therefore, in our answer, we will be discussing and comparing in detail the remedies
available for voidable contracts in the CA 1950 and in the English Common Law, which are
applicable in Malaysia. In addition, we will compare the remedies under both laws to examine
their differences and similarities.

2.0 Coercion
Coercion is governed by s15 of the CA. This section construes that coercion may arise in two
situations: (1) where one commits or threatens to commit any prohibited act under the Penal
Code, or (2) where one detains or threatens to detain any property; either one must be combined
with the intention to force someone into an agreement. For the first situation, the plaintiff must
specify which provision did the alleged act fall under the Penal Code, as explained in the case of
Teck Guan Trading Sdn Bhd v Hydrotek Engineering. 1 Under the English common law
principle, threats to property are not specifically protected as it only recognises actual or
threatened violence to persons. In the case of Barton v Armstrong,2 the Privy Council held that
there was duress as the respondent had coerced the appellant to enter into an agreement otherwise
he would be murdered. Thus, the said contract was voidable at the option of the appellant. The
doctrine of duress was expanded beyond threats to persons through Occidental Worldwide

1 [1996]4 MLJ 331.

2 [1975]2 WLR 1050.
Investment Corp v Skibs a/s Avanti & Ors 3 where the court held that the plea of coercion would
be available in such cases where one is threatened to have his property destroyed. This type of
duress is known as “economic duress”. The elements for the courts’ guidance in determining
coercion are laid down in Pao On v Lau Yiu Long;4 firstly, whether the plaintiff had contested
during the coercion, secondly, whether he had another alternative open to him such as an adequate
legal remedy, thirdly, whether he was independently advised and lastly, whether after entering the
contract he took steps to avoid. The element of vitiation of consent is illustrated in the case of
5
Universe Tankships Inc of Monrovia v International Transport Workers Federation & Ors
where the court held there was economic duress as the plaintiff’s consent was vitiated to enter into
the contract to avoid heavy financial loss. The concept of economic duress is also applicable in
6
Malaysia as seen in Mohd Fariq Subramaniam v Naza Motor Trading Sdn Bhd which
followed the elements where the court held that there was no coercion as there was no protest or
attempts to repudiate the agreement either before or after the contract was fulfilled.

2.1 Remedies under the Contracts Act 1950

The remedies for coercion are governed under s19(1), s65, s66 and s73 CA. First and
foremost, s19(1) states that when consent to an agreement is caused by coercion, the agreement is
a contract voidable at the option of the party whose consent was so caused. When the contract is
voidable, the party with the consent so caused will have the option to either rescind the contract or
to affirm it. There are two methods to rescind a contract. Firstly is through communication.
According to s67, the rescission of a voidable contract is to be communicated or revoked in the
same way as revoking a proposal. Secondly, by making an application to the court under the
Specific Relief Act. After rescinding the contract, there are two sections applicable for
restitutions, namely s65 which states that when a party rescinds the voidable contract, the other
party thereto need not perform any promise in the contract while the party rescinding shall restore
the benefit that he received to the person from whom it was received. S66, on the other hand,
requires that any party who has received any advantage under the agreement or contract is bound
to restore it, or to make compensation for it when an agreement is discovered to be void, or when

3 [1976]1 Lloyd’s Rep 293.

4 [1980] AC 614.
5 [1982]2 WLR 803.
6 [1998]6 MLJ 193.
a contract becomes void. S66 is said to be applicable in voidable contracts in the cases of Satgur
Prasad v Har Narain Das7 and Yong Mok Hin v United Malay States Sugar Industries.8
Communicating or taking action within reasonable time is an essential matter for a contract to be
rescinded, which is emphasized in the case of Chin Kim v Loh Boon Siew 9 where the court held
that the plaintiff had not acted within reasonable time to exercise his option and thus, it was
assumed that he had affirmed the contract. On the other hand, s73 allows parties being coerced to
claim restoration of the money paid or things delivered without requiring them to enter into a
contract. In Chin Nam Bee Development Sdn Bhd v Tai Kim Choo & 4 Ors,10 the court held that
the meaning of coercion is wider than the definition in s15 and the plaintiff was able to claim the
additional money they were threatened to pay.

2.2 Remedies under the English Common Law

Lord Diplock in Universe Tankships Inc of Monrovia v International Transport Workers
11
Federation & Ors stated that the remedy to economic duress is an action for restitution of
property or money exacted under any contract induced by duress. The statement illustrates that
parties claiming for remedies may only claim for restitution so as to place the parties to the
position as if the contract was never entered into. The party rescinding the contract is generally
bound to restore the other party to the same position before the contract by restoring anything he
received in the contract12. The other essential requirement of rescinding a contract for remedy is to
act with reasonable promptness after duress is removed 13. In North Ocean Shipping Co Ltd v
Hyundai Construction Co Ltd,14 the court held that as the parties only took legal actions several
months after the contract was completed, they had affirmed the contract and thus they are not
entitled to claim for remedies. Thus, this shows that to claim for remedies, the party rescinding
the contract should act within reasonable time for restitution.

7 [1932] 59 IA 147 CPC

8 [1967] 2 MLJ 9
9 [1970] MLJ 197
10 [1988]2 MLJ 117
11 [1982]2 WLR 803.
12 Van Dyke v. Wood, 60 App. Div. 208, 70 N. Y. Supp. 324
13 Black, H. (1916). Treatise on the Rescission of Contracts and Cancellation of Written Instruments. Kansas City,
Mo, Vernon law book company
14 [1978] 3 All ER 1170
2.3 Comparison

The statutory provision and English common law principle in Malaysia both emphasize on
taking the legal action to rescind the contract within reasonable time, as proven by the case of
North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd,15 where the plaintiff only took
action after several months the contract has been completed and is over the reasonable time for
rescission. The Malaysian case of Chin Kim v Loh Boon Siew16 affirms this where the court held
that the plaintiff is not entitled to rescind the contract as they only took legal action 4 years after
the contract was ended. Besides, both law only grant restitution for contracts entered due to
coercion, which can be seen in the case of Universe Tankships Inc of Monrovia v International
Transport Workers Federation & Ors17 where Lord Diplock stated that the remedy to economic
duress is not an action for damages but an action for restitution of property or money exacted
under any contract induced by duress. On the other hand, Malaysian law has s65 and s66 which in
the case of Yong Mok Hin v United Malay States Sugar Industries 18 the court stated that it
would include voidable contracts which become void by rescission.

3.0 Undue Influence

Undue influence in Malaysia is governed by s16 of the CA 1950, which specifically provides
for contracts entered due to undue influence.

S16 of CA 1950 has embodied the concept of undue influence under English law. Similarly
with the legal position of English law, s16(1) provides for actual undue influence, s16(2) provides
for cases of presumed undue influence while s16(3) mentions about the burden of proof on the
wrongdoer in proving that the innocent party was not under undue influence when contracting
with him.

3.1 Remedies under the Contracts Act 1950

The remedies for contracts entered into under undue influence is rescission. Contracts entered
into under undue influence contain the element of abusing the relationship between the parties, so

15 [1978] 3 All ER 1170

16 [1970] MLJ197
17 [1982]2 WLR 803.
18 [1967] 2 MLJ 9
as to transact in a way that transfers benefits to the defendant. The decision of the innocent party
to contract is not freely exercised. Hence, the court will not enforce such a contract which is
contrary to the fundamental concept of contract, free consent as shown in s10.

Where the consent of a party to a contract has been caused by undue influence, the contract is
voidable and s10 applies to provide remedies. The innocent party is given a choice, either
affirming or rescinding the contract. Such contract may be rescinded unconditionally, or rescinded
upon such terms and conditions the court deems just if the parties have received any benefit from
it. The latter option of granting the court the power to rescind a contract on terms the court seems
just only exists in s20, due to the equitable nature of doctrine of undue influence. Both options
have the purpose of restitution, to put both parties back to the position as if the contract has never
been entered into.

After rescinding a voidable contract, s65 and s66 will apply for the restitution of both parties.
Under s66, any party who has received any benefit must give back what he has received.

Lapse of time is a bar from rescinding a voidable contract. According to Chin Kim v Loh
Boon Siew19, the innocent party must exercise his rights to rescind the contract within a
reasonable time, otherwise he will be presumed to have affirmed such contract, losing his right to
set it aside. Besides , the option to rescind must also be communicated, according to s.67, in the
same means for communication of proposal as provided in s.3 and s.4(1).

The right of the third party, who is a bona fide purchaser for value without notice is also a bar
from rescission. If a third party acquires some interest in the subject matter of the contract, in
good faith and for value, the victim cannot rescind the contract he made with the wrongdoer. For
example, if A purchases B’s house through undue influence, B has the right to rescind the
contract. However, B can only set the contract aside before A sells the house to a third party to the
contract, who buys the house for value and in good faith, without knowledge of the existence of
undue influence in contract between A and B. In Tengku Abdullah ibni Sultan Abu Bakar v
Mohd Latiff bin Shah Mohd,20 the Court of Appeal stated that ‘a third party may safely take
under such a transaction and enforce it if, and only if, he is a bona fide purchaser for value
without notice (actual or constructive) of the invalidating circumstances’. If the third party is with

19 [1970] MLJ 197

20 [1996] 2 MLJ 265, CA
knowledge of the undue influence and does not give value, then the victim can set aside the
transaction with the wrongdoer.

3.2 Remedies under the English Common Law

English case of Allcard v Skinner 21 is the starting point of doctrine of undue influence. The
doctrine was discovered in this case, where the court divided undue influence into two main
categories, actual undue influence and presumed undue influence. Actual undue influence arises
when ‘the gift was the result of undue influence expressly used by the donee for the purpose’.
Presumed undue influence arises when there exists a relationship of trust and confidence between
the parties which is fair to presume the donee has exercised undue influence on the donor. In
Bank of Credit and Commerce International SA v Aboody,22 the Court of Appeal maintained the
division made in Allcard’s case and further subdivided presumed undue influence into Class 2A
and Class 2B, which was later adopted by House of Lords in Barclays Bank v O’Brien.23 Class
2A refers to fiduciary relationships; Class 2B refers to relationships which reposed trust and
confidence, and with proof of its existence, can raise the presumption of undue influence.

The remedies for undue influence under English common law is rescission, which is similar
to CA 1950. If a person’s consent to a contract is vitiated by undue influence, the contract is
voidable at his option. He can either affirm the contract and carry out with his obligation, or
approach the court and declare it void. If he chooses to rescind it, both parties to the contract must
be subjected to restitution. Any parties entitled to avoid the contract receive any benefit
thereunder shall reinstate it back.

The jurisprudential basis for the remedies is that a contract can only be legally binding and
enforceable on the parties when they agree upon the terms of the contract freely. The consent of
the influenced party has been vitiated by the wrongdoer, so as to contract on terms which transfer
benefits to the wrongdoer. This was expressed by Lord Eldon LC in Huguenin v Baseley,24 who
stated that the question was not whether the plaintiff knew what she was doing, had done, or
proposed to do, but it is about how the intention was produced. The existence of restitution is also

21 (1887) 36 Ch D 145.
22 [1992] 4 All 4 ER 955; [1990] 1 QB 923, CA.
23 [1993] 4 All ER 417
24 (1807) 14 Ves 273
to protect the vulnerable groups from being exploited by those in a dominant position to them
who use such positions to exert undue influence, but not to set aside transactions on the ground of
the plaintiff’s folly, imprudence or lack of foresight.

However, there may be some circumstances in which the right to rescind has been lost.
Affirmation is one of the bars to rescission of contracts under undue influence. After the undue
influence has been withdrawn, the action or omission of the influenced party may constitute
evidence of whether he intended to affirm the contract. In Allcard v Skinner,25 Allcard was
introduced to Skinner who was the lady superior of a religious sisterhood. Allcard later became a
professed member and bound herself to observe the rules of poverty, chastity and obedience. The
rules of poverty required her to give up all her earthly possessions while rules of obedience
disallowed her to seek advice from the outside of the sisterhood. She subsequently transferred
certain stocks she had to Skinner and made a will to her in 1872. She left the sisterhood in 1879
and revoked the will immediately yet did not recover her property from Skinner until 6 years had
elapsed. It was held that due to her inactivity after being freed from the spiritual influence, she is
said to have acquiesced in the gift. Therefore, she is barred from relinquishing her property.

Lapse of time is another factor that bars the rights to rescind the contract. If the influenced
party took no steps to exercise his right to rescind for a considerable time after knowing he was
subjected to undue influence when he contracted, he may be regarded as being affirmed to the
contract therefore losing his rights to rescind.

Another bar is the third parties have acquired rights in the subject matter before the contract
is avoided. As transactions affected by undue influence are voidable, not void, third parties who
acquire some interest in the subject-matter of the contract in good faith without notice and for
value cannot be displaced by the person seeking rescission.

3.3 Comparison

The remedies for contracts entered into under undue influence under Contracts Act 1950 is
exactly the same as English Common Law. Under both laws, contracts under undue influence can
be set aside by the influenced party and order for restitution. Both Malaysian statute, CA 1950
and English case laws illustrate similar remedies for undue influence, i.e. rescission and
25 (1887) 36 Ch D 145.
restitution, subject to several bars. The bars of rescission as applied in English Common Law are
also applicable in Malaysian cases. The bar of affirmation, initially laid down by Allcard v
Skinner,26 is also applied in the local case of Polygram Records Sdn Bhd v The Search.27 The
lapse of time as well as the right of third parties - Bona fide purchaser for value without notice are
also bars developed by English cases then accepted and applied in Malaysia.

4.0 Fraud

Based on s17, fraud is any act made with the intention to deceive or to induce an innocent
party to enter into a contract whereby: (1) the fact or suggestion given is false and the person
giving the information very well know the information is not true, (2) there is an active
concealment of fact even after having knowledge of the fact, (3) a promise that is made without
any intention to perform it, (4) any act that was intended to deceive and (5) act or omission that is
declared as fraudulent according to law. Illustration of this section explains that mere silence does
not amount to fraud unless the person had responsibility to speak for example due to their
fiduciary relationship or when his silence is equivalent to speech.

In the English common law case, Derry v Peek,28 the court held that the statement in the
company’s prospectus was not fraudulent. Instead, it was made in honest belief that the Board of
Trade’s approval for the company’s right to use steam-powered trams was forthcoming and they
will definitely obtain it. However in the end, the application was rejected and the plaintiff sued the
defendant on fraudulent misrepresentation as they bought shares in the company with reliance on
the steam-powered trams statement. The court held that fraudulent misrepresentation is a
statement that is known false but was carelessly made as to the truth of the statement .

4.1 Remedies under the Contracts Act 1950

S19(1), states that a contract caused by fraud or misrepresentation is voidable thus the
innocent party can rescind, or affirm the contract. However, two matters should be noted for
remedies in fraud. When rescinding, the relief is different. When affirming, s19(2) states that a
party to a contract, whose consent was caused by fraud or misrepresentation, may insist on the

26 (1887) 36 Ch D 145.
27 [1994] 3 MLJ 127
28 (1889) LR 14 App Cas 337, HL
contract being fulfilled and that he be placed in the role he would have been in if the
representations made were true.

S65 and s66 of the CA are applicable when a contract is rescinded. However, a person
who committed fraud cannot recover money under s65. This is in accordance with the Indian
Supreme Court’s decision in Mithoolal Nayak v Life Insurance Corporation of India, 29 with
regards to s64 of the Indian Contracts Act, which is in pari materia with Malaysia’s s65. In
addition, s76 is not applicable in cases involving fraud as it is only applicable for cases that are
void ab initio instead of rescinded ab initio. This is in accordance with the case of Haji Ahmad
Yarkhan v Abdul Gani Khan and another,30 where the court held that damages for rescission
under s75 of the Indian Contract Act (in pari materia with s76 of the Contracts Act) will not be
eligible because the section only provides redress for damage done by the breach of contract, not
for cases of rescission ab initio. As a result, the only remedy available is restitution.

However, there are situations where a contract is not voidable or valid. The exceptions
under s19 provides that when a party, whose consent to a contract was caused by fraudulent
silence, under s17, negligent misrepresentation and innocent misrepresentation, had the means to
discover the truth with his ordinary diligence, the said contract is valid. Besides, s19 explanation
reiterates that when the fraud in a contract did not affect the consent of a party to enter into a
contract, the contract is valid as well.

In the case of Lau Hee Teah v Hargill Engineering Sdn Bhd & Anor, 31 the appellant had
entered into an agreement to take a loader on hire-purchase as hirer, with the first respondent as
dealer and the second respondent as owner. The first respondent who was the seller did not
disclose the information of the year of the manufacture of the machine and the fact that it had
been involved in an accident before this to the hirer. The Federal Court held that this did not
amount to fraudulent misrepresentation as there was no active duty on the part of the seller to
inform the hirer of these things.

29 AIR 1962 SC 814

30 AIR 1937 Nagpur 270
31 [1980] 1 MLJ 145, FC
 In Tay Tho Bok v Segar Oil Palm Estate Sdn Bhd,32 Mohd Ghazali J held that the plaintifffs
didn't have a way of knowing if the water pipes and transmission lines were within the limits of
the land they wanted to buy. Thus, exceptions in s19 of the CA did not apply as the plaintiffs did
not have the means to discover truth. The court held that there was an active concealment of fact
and defendant’s act amounted to fraud under s17 of the CA as even prior to signing the contract
defendant knew the existence of transmission line and pipelines on the land but defendant’s
agents informed the plaintiffs that the boundary of the land was up to transmission lines and
pipelines and those structures were not within the land.

In the case of Tan Chye Chew & Anor v Eastern Mining and Metals Co Ltd,33 the Federal
Court found that the trial judge had erred in his judgment where the judge has not borne in mind
that a high standard of proof is required in cases where fraud is alleged. In this case, there was
insufficient evidence to support the finding of fraud. The court only considered that there had
been misrepresentation by the second appellant as from the description of the locality and the
actual area, it is obvious that a mistake might easily be made as to the precise area. However, the
contract was not void on account of misrepresentation by the second appellant as the respondent
company had entered into the contract without checking the true position of the mining land
despite having the facilities to do so. They realised the risk involved in taking the unusual course
of entering into the contract without further check. The duty to exercise ordinary diligence is
subjective. Firstly, the court considers whether truth can be discovered through ordinary diligence
and secondly the court takes into account the capabilities of the plaintiff in the particular case.

Inapplicability of the said exception to fraudulent misrepresentation is explained in the

case of Weber v. Brown,34 where the plaintiff (respondent) sued the defendant (appellant) for false
and dishonest misrepresentation on the amount of rubber trees on an estate which the latter had
subsequently purchased. The number of trees depicted was much greater than the actual number
on the estate. The Court of Appeal agreed with the lower court's conclusion that the appellant
rendered the alleged misrepresentation falsely and fraudulently, causing the respondent to obtain
and then exercise the right of purchase. The appellant attempted to invoke the exception to s19 of
the Contracts Enactment 1899 which is the same as exception in s19 of Contracts Act 1950 as a

32 [1996] 3 MLJ 181

33 [1965] 1 MLJ 201, FC Singapore
34 (1908) FMSLR 12
defence. However, the defence was dismissed as the exception would not extend to cases of
fraudulent misrepresentation. The court also noted that s19, in which the appellant's claims were
based, was a section declaring the voidability of such contracts, and that the majority of the cases
cited by counsel were about particular performance or rescission. 35 The respondent in the case
before their Lordships did not seek to avoid the contract, but rather demanded damages for the
fraudulent misrepresentation.

4.2 Remedies under the English Common Law

Under common law, the remedies available for fraud are the same as Malaysia, where the
contract is voidable thus the innocent party can rescind or affirm the contract. Two things should
be noted when dealing with fraud. When rescinding, the relief is rescission and the contract is set
aside. When affirming, the party to a contract, whose consent was caused by fraud or
misrepresentation, may insist on the contract being fulfilled and that he be placed in the role he
would have been in if the representation was accurate.

In Abdul Razak bin Datuk Abu Samah v Shah Alam Properties Sdn Bhd & Anor
Appeal,36 the Court of Appeal found the complainant had been induced into entering into a sale
and purchase agreement for an apartment by the defendant's fraudulent misrepresentation. The
court granted rescission of contract and had to determine the amount of damages that could be
recovered by the plaintiff. It was held that recoverable damages could not be determined on the
same basis as damages for breach of contract in order to put the innocent party in the same
situation as if the contract had been fulfilled. This is due to the fact that the contract had been set
aside in this case. The court went on to say that damages should be calculated as if the contract
had been cancelled, in order to put the innocent party in the same position as if it hadn't relied on
the fraudulent inducement. This would include all expenditure reasonably and properly incurred
in consequence of and flowing directly from the fraudulent misrepresentation, whether before or
after the date of rescission. The case of Archer v Brown 37 was referred to during the judgement.

35 Yow Kah Lun. (July 2006). Voidable and Void Construction Contracts. Retrieved from
https://core.ac.uk/download/pdf/11781198.pdf
36 [1992] 2 MLJ 500
37 [1985] 1 QB 401
4.3 Comparison

The common law and Malaysian law both give the option to either rescind or affirm the
contract once fraud has been discovered. When rescinded, the innocent party is put in the same
position as if he had not relied on the fraudulent inducement. Rescission nullifies the contract and
puts the parties back in the role they were in prior to the contract's creation. The defrauded party
cannot sleep on his rights, but must be reasonably diligent in seeking his remedy, and if he delays
beyond a reasonable time, his right to rescind is lost. A plaintiff waives the right to rescind if,
after discovering the alleged fraud, the plaintiff chooses to perform the contract and accept its
benefits. This can be seen in Malaysian case of Abdul Razak bin Datuk Abu Samah v Shah
Alam Properties Sdn Bhd & Anor Appeal 38 and the common law case of Archer v Brown.39

Apart from that, in Malaysia even if such consent was caused by misrepresentation or by
silence, fraudulent within the meaning of s17, the contract is not voidable, if the party whose
consent was so caused had the means of discovering the truth with ordinary diligence. But this is
40
not the same in common law based on the case of Nocton v Lord Ashburton case where Lord
Burshton states that no one has the right to make a comment that, on the surface, conveys a false
impression and then justify himself by claiming that the person to whom he made the statement
has the ability to correct it.

5.0 Misrepresentation

Misrepresentation is defined in s18 of the CA 1950 and is generally a false pre-contractual

statement of fact, made orally or in writing, which induced a party to enter into a contract. Justice
Abdul Wahab laid down the elements of misrepresentation in Chuah Tong Yeong v Kuala
Lumpur Golf and Country Club Bhd, 41 whereby a successful action in misrepresentation would
require: (1) a representation, (2) the said representation induced the plaintiff to enter into the
contract, (3) it is a false representation and finally, (4) the case was appropriate for rescission.
One of the types of misrepresentation, which is fraudulent misrepresentation, is governed under
s17 of the said Act.

38 Supra, note 36
39 [1985] 1 QB 401
40 [1914-1915] All ER Rep 45
41 [2003] 6 MLJ 577
5.1 Remedies under the Contracts Act 1950

Remedies for misrepresentation are governed by s19 of the CA 1950, which are similar as
coercion and fraud. According to the said provision, the innocent party has the option to rescind
or affirm a contract. If the said party chooses to affirm, he can be put in a position as if the
misrepresentation was indeed accurate in the first place. Meanwhile, if he chooses to rescind the
contract, s65 and s66 will be applicable. S65 explains how the innocent party shall restore the
benefit he received to the other party; meanwhile, s66 provides that all parties to the contract must
restore or make compensation for the benefit they have received. Generally, the effect of a
rescission is restitutionary.

In Lee Cheong Fah v Soo Man Yoke, 42 Justice Abdul Malik Ishak explained at length
regarding the damages for misrepresentations under the Act. He first asserted that according to the
Contracts Act 1950, an innocent party may treat the contract to be void or demand for it to be
performed. He went on to explain that there are generally two types of misrepresentation: (1)
innocent misrepresentation and, (2) fraudulent misrepresentation (concepts borrowed from the
English Common Law and will be explained further in the following section). The common
remedy for innocent misrepresentation is rescission of the contract while for fraudulent
misrepresentation, it would usually be repudiation or damages.

5.2 Remedies under the English Common Law

The English Common Law has identified the three types of misrepresentation which are
fraudulent misrepresentation, negligent misrepresentation and innocent misrepresentation; which
are also applicable in Malaysia and determined according to the statement maker’s state of mind.
The remedies may have slight differences depending on the type of misrepresentation. For both
fraudulent and negligent misrepresentation, aside from rescission, damages are also available as
remedies. This is because the representee may sue for both contract and tort, namely tort of deceit
and tort of negligence respectively. This is unlike innocent misrepresentation which does not
allow damages as a form of remedy.

42 [1996] 2 MLJ 627

 Malaysian Courts have referred to common law cases in several landmark cases involving
misrepresentation. In Abdul Razak bin Datuk Abu Samah v Shah Alam Properties Sdn Bhd &
Anor Appeal,43 Justice Gopal Sri Ram referred to the case of Archer v Brown in determining that
representees of a fraudulent or negligent misrepresentation may apply for a decree of rescission
and also, an award of damages. The damages shall be assessed with the aim to place the innocent
party into a position he would be in if he had not relied on the fraudulent (or negligent)
misrepresentation.

In Sim Thong Realty Sdn Bhd v Teh Kim Dar @ Tee Kim,44 the Court of Appeal referred
to the common law position in identifying the remedies for innocent misrepresentation and
negligent misrepresentation. For innocent misrepresentation, the Court explicitly stated that our
law is the same as England prior to the passing of the said country’s Misrepresentation Act 1967,
whereby the innocent party may only sue for rescission and consequent restitution but not
damages. Meanwhile for negligent misrepresentation, the Court referred to the case of Hedley
45
Byrne & Co Ltd v Heller & Partners Ltd where it was held that innocent parties in such cases
may claim for damages as it lies under the tort of negligence. Therefore, the innocent party must
prove a special relationship which gives rise to a duty of care as well as other necessary elements
to form the tort of negligence.

5.3 Comparison
As Malaysian courts have referred to the English Common Law in making judgments for
cases concerning misrepresentation, remedies that are available in Malaysia are not restricted to
what is enshrined in the CA 1950. The said act only provides the option to either rescind or affirm
the contract. Meanwhile, the English Common Law allows the innocent party to claim for
damages at the same time under the law of tort. Nevertheless, the position in England itself has
long changed with the passing of the Misrepresentation Act 1967.

6.0 Conclusion
Contracts Act 1950 is the primary written statutory provision in Malaysia which deals with
contract law. Although common law principles have been adapted into our system and aren't
43 [1992] 2 MLJ 500
44 [2003] 3 MLJ 460
45 [1964] AC 465
declared statutorily, we can see its implementation in our country through case laws. Both the CA
1950 and English Common Law do offer remedies for the parties of the voidable contract. They
are mostly similar to one another and differ in some circumstances as we have discussed and
compared previously. Nevertheless, we are of the opinion that our Contracts Act is more
transparent and systematic compared to the principles adopted through English Common Law.
BIBLIOGRAPHY

LEGISLATIONS

Contracts Act 1950

Contracts Enactment 1899 (UK)

Specific Relief Act 1950

Indian Contracts Act 1872

CASES

Allcard v Skinner (1887) 36 Ch D 145

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MLJ 500

Archer v Brown [1985] 1 QB 401

Asbir, Hira Singh & Co v Supramaniam a/l Pitchaimuthu & Ors [2000] 1 MLJ 83

Bank of Credit and Commerce International SA v Aboody [1992] 4 ALL ER 955

Barclays Bank v O’Brien [1993] 4 ALL ER 417

Barton v Armstrong [1975] 2 WLR 1050

Chin Kim v Loh Boon Siew [1970] MLJ 197

Chuah Tong Yeong v Kuala Lumpur Golf and Country Club Bhd [2003] 6 MLJ 577

Derry v Peek (1889) 14 App Cas 337

Haji Ahmad Yarkhan v Abdul Gani Khan and another AIR 1937 Nagpur 270

Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465

Huguenin v Baseley (1807) 14 Ves. 273

Lau Hee Teah v Hargill Engineering Sdn Bhd & Anor [1980] 1 MLJ 145
Lee Cheong Fah v Soo Man Yoke [1996] 2 MLJ 627

Mithoolal Nayak v Life Insurance Corporation of India AIR 1962 SC 814

Mohd Fariq Subramaniam v Naza Motor Trading Sdn Bhd [1998] 6 MLJ 193

Nocton v Lord Ashburton[1912-1915] All ER Rep 45

North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd [1978] 3 ALL ER 1170

Occidental Worldwide Investment Corp v Skibs a/s Avanti & Ors [1976] 1 Lloyd’s Rep 293

Pao On v Lau Yiu Long [1980] AC 614

Polygram Records Sdn Bhd v The Search & Anor [1994] 3 MLJ 127

Satgur Prasad v Har Narain Das [1932] 59 IA 147 CPC

Sim Thong Realty Sdn Bhd v Teh Kim Dar @ Tee Kim [2003] 3 MLJ 460

Tan Chye Chew & Anor v Eastern Mining and Metals Co Ltd [1965] 1 MLJ 201

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Tengku Abdullah ibni Sultan Abu Bakar v Mohd Latiff bin Shah Mohd [1996] 2 MLJ 265

Universe Tankships Inc of Monrovia v International Transport Workers Federation & Ors [1982]
2 WLR 803

Weber v Brown (1908) FMSLR 12

Yong Mok Hin v United Malay States Sugar Industries [1967] 2 MLJ 9
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TURNITIN REPORT