Contract

The principles governing nature and

sufficiency of consideration
 Consideration must move form the
promisee
 Consideration need not move to the
promisor
 Past consideration is not good

consideration
 Consideration must be sufficient need
 Promissory estoppel
 Pinnel’s case: According to common law if a
creditor says he will accept RM 10.00 “ in full
settlement of a RM 1,000,000/-: there us
nothing legal to stop him to reaming the
balance should the debtor’s circumstances
improve.
 In Central London Property Trust v High Trees
House Ltd [1947] 1 KB 130 though in tracing
its development one can see that it has its
origins in certain cases from as far back as the
lasts two centuries. Estoppels as a
 Three main requirement I
order for the doctrine to
apply
1. There should be a clear and
unambiguous promise, altering his
legal rights will not be enforced in
the future;
2. The debtor should relied on that
promise, altering his legal position so
some so that;
3. It would be inequitable for the
promisor to go back on this promise
 Estoppels
 Foakes v Beer(1884) this common law
principle’s laid down in Pinnel’s Case was
affirmed by the House
 This doctrine derives from the decision of
House of Lords in Huges v Metropolitan
Railway Co (1877)
 Developed by Denning in obiter dicta in
Central London Property Trust Ltd.
 Recognized in Tool Metal Manufacturing
Co Ltd v Tungsten Electric Co Ltd (1955)
 How to apply the
doctrine
 In order for the doctrine to operate the promissory
made a promise that is an unequivocal promise.
 The other party that promisee has acted on the promise.
 On the balance of authority suggests that it is not
necessary to show that the other party has acted to his/
her detriment. It is, however, necessary for the affected
party to show that as a result of the promise he was led
to act differently form the way he would otherwise have
done
 In F.A Ajayi v R T Briscose (Nigeria) Ltd (1964)
Lord Hodson stated that the promiser can resile from his
promise on giving the promisee a reasonable opportunity
of resuming his position. It is only when the promise
cannot resume his former position that the promise
becomes irrevocable.
 Section 64 Contract Act
1950
 ….Promisee may dispense with or remit, wholly
or in part, the performance of the promise mad
to him, or may extend the time for such
performance, or may accept instead of it any
satisfaction which he thinks

 Illustrations
 (b) a owes B RM 50000. A pays to B and B
accepts, in satisfaction of the whole debt, Rm
2000 paid at the time and place at which the
RM 5000/- were payable. The whole debt is
discharged.
 refuses to perform or
disables himself then there
is a breach and puts an end
to the contract
 Family agreement
 The traditional approach of the courts to ‘family’
agreements of this nature is that there is
reputable presumption that the parties did not
create legal relations: Balfour v Balfour (1919)
 It is possible for a parent and child to enter into
a binding contract , but there must be clear
evidence that they intended legal consequences
to flow form their agreement.
 In Jones v Padavatton(1999) the majority of the
Court of Appeal held that a mother’s promise to
her daughter to pay her a monthly allowance if
she moved from the USA to England and read
the Bar was held to be unenforceable.
 Jpmes ‘s case the court was influenced by the
vagueness of the agreement.
 Section 26(a) Contract
Act
 Expressed in writing
 Registered
 Parties stand in a near relation to each
others

 Tan Soh Sim’s case meaning of relation

varies from one social group to another
as it depends on customs and practices
of such groups
 Voidable Contact S.2(j)
 Contract is voidable where o ne
party has a choice to continue or
rescind the contract.
 Contract are Voidable S.19 &2
1. Contracts entered into with free
consent S.10 &14
2. Consent caused by coercion, fraud,
mispresentation or undue influence
 Coercion S. 15
 Defendant threatens to commit act of
criminal nature
 D unlawfully detains or threatens to
detains P’S PROPERTY WITH INTENTION
TO CUASE P TO ENTER INTO CONTRACT
Economic duress:
 Universe Tankship of Monravia, HL
accepted econ. Duress as coercion
 Teck Guan Trading Sdn Bhd, court
accepted this concept but held that econ
duress is not allowed where parties deal
which other at arm’s length.
 Coercion
 RELIEF:
1. Proved…..contract becomes
voidable….S.19(1)
2. If P rescinds contract……(a) restitution
under s 65 &S 66 apply
(b) P may also claim compensation under
S 76
3 S 73….Person under coercion must repay
money paid or returns goods delivered.
4 Chin Nam Bee Development, court held
definition of coercion in s 15 does not
apply to s 73.
 Undue influence S 16
 Occurs :
I) relationships bet. Parties which
enables
one party to dominate the other and
ii) dominant party has used his position to
obtain unfair advantage
iii) Here P has to show to the court that D
had capacity to influence him unduly to
contract: HSBC V SYARIKAT Utd Leong
Enterprise Sdn Bhd
 Fraud s.17
 S. 17
(A) D suggests a fact which is not true and he
himself does not believe it to be true:
(B) D conceals a fact which he knows

(C) D makes a promise without intending to

perform it;
(D) D commits any act to deceive P;

(E) E Any act/omission declared fraudulent in any

law
2. Silence is not fraud ..D has dutl to speak Hargill
Engineering Sdn Bhd (FC)
 S 16(3) TO BE READ WITH S.16(1)
….CONTRACTS APPEARS
UNCONSCIONABLE ON THE FACE OF
IT, BURDEN OF PROOF IS REVERSED
TO DOMINANT PART.
 Independent legal advice: D can show P
was not unduly influenced if P had
obtained indept legal advice… Ince
Noriah v Sahil Alllie b Omar
 S.20 Court has power to set aside
contract induced by undue influence.
 FRAUD BURDEN OF
PROOF
 Beyond reasonable doubt: E &O
HOTEL SDN BHD V ELLARIOUS
 MISPRESENTATION s.18
(non fraudulent Misrep)
 S18 says
(a) Makes positive assertion in manner not
warranted by info that he has;
(b) (b) without intent to deceive, acts in
breach of duty, misleads the other party P
and D gains some advantage and
(c) (c) causes P to make mistake as to
substance of thing which is subject of
agreement
(d) Segar Oil Palm Est Sdn D misled P to
think land free of encumbrances
 Exceptions to S 19

 Not voidable for mispresentation or

fraudulent.
 Silence if P could have discovered
truth with ordinary diligence
TanChye Chew v Eastern Mining
&Metals Co Ltd
 Does not apply to fraudulent
misrepresentation
 MISTAKE s 21-23

1. S.21: Agreement is void if parties mistake as to essential fact:
 (1) Must prove 2 things:
 (i) mutual mistake- both parties
 mistake
 (ii) Mistake as to essential fact.
 (2) If mistake is to price value), contract is not void.
 2. S.22: Mistake as to Malaysian Law does not make
contract void/voidable.
But mistake as to foreign law makes contract void as it is treated
as mutual mistake as to fact.

 3. S.23: Unilateral Mistake: Contract is not voidable if one party is

 under mistake as to matter of fact.
 4. Relief:
 S.73: Restoration of money paid under mistake- party who has received must
 restore.
 5. Rectification: s.30 Specific Relief Act ’50
 (1) Mutual mistake: can be rectified
 (2) Unilateral mistake: no rectification.
 (3) Court must be satisfied that the parties intended to make agreement- must
enquire into
 intention of agreement and not on what language.
 Southwind Development Sdn. Bhd. V Hass Plantations Sdn. BHd.
 1. “Void”:s.2(h)
 A void agreement s not enforceable
by law.
 2. What Agreement are Void

 1. S.24: Agreement where

 consideration or object is unlawful
 (ie forbidden by law, fraudulent,
 injury,immoral,against public policy).
 2. S.26:No consideration.
 3. S.27:Restrain of marriage.
 4. S.28:Restrain of trade.
 5. S.29:Restrain of legal proceedings.
 Asia Commercial Finance(M) Bhd v Leong Shin :
 agreement to withhold legal proceedings was held
 to be void.
 6. S.30: Uncertainty.
 7. S.31: By way of wager.
 8. Contract by minors: Mohori Bibee v Dhurmodas Ghose.
3. S.66:Relief/Effect of Void Contract
1. S.66: If agreement is discovered to
be void, person who has receive
advantage must restore it.
2. Agreement discovered to be void:
AT inception Harnath Kaur v Inda Bahadar Singh
3 S66 is not applicable where parties were not
aware of illegality at the time contract was
made ie not in pari delicto Ng Siew San v
Menaka
4 S 116 inapplicable where contact made with
minors: Mohari Bibee v Dhurmodas Ghose
5 5 Strangers to agreement is void: Badiaddin
b Mohd Mahidin v Aran Malaysian Finanace Bhd
6 Restitution; is available under s 166
Consideration or objects
unlawful
 S 24 VOID IF THE CONDIERATION or
object are unlawful
 S25 Agreement is void if the consideration
or object is unlawful in part
 S 24
a) FORBIDDEN BY LAW
b) defeat any law
c) fraudulent
e) injury to person/property
f)immoral or against public policy
Theresa Chong v Kin Khoon
& Co
 F.C held contract is against the
public policy
 prejudices the State
 Abuses justice- pay money not to
report
 Imposes restriction on freedom
 Restraint of Trade S 28
Sect 1 restraint of trade is void
Three exceptions to s. 28
1) A agreement not to carry on business of which goodwill is sold;
2) ….BET partners before dissolution or
3) …. Bet. Partners during continuance of partnership

Cases Wrigglesworth v Wilson Anthony D a legal assistant

agreed not to open legal firm within a distance. P relied the
section exception. Court held D was not partner and it was
declared the contract made was void.

Stamford College Group Sdn v Raja AQBDULLAH BIN Raja

Othman; The lecturer agreed not to lecture for a duration of 2
years. The court held that if it restricts from carrying out hid
trade or profession, contract is void as in this case and if it
only restricts the manner in which has to carry out his trade
then s 28 does not apply.
 Frustration S 57
Sect 57(2)
1. Must show contract is imposiblelor unlawful to carry out
2. Unlawfulness must be supervising
3. No self induced: Ramli Zakaria &Ors v Government of
Malaysia.

What is the test ?

Davies Contractors Ltd v Faareham UDC…. Building contractor
stopped building due to increase in cost. HL held to
establish frustration must show that without default of
either party the contract is incapable of being performed.
What is the effect of frustration?
1. S 57(2) Contract void at date of frustration.
2. S 66….. Person who has received advantage is bound to
restore or compensate.
3. S 15 &16 of CLA 56 gives effects of frustration
 Breach S 40 ..if a party refuses to
perform then there is a breach and
puts an end to the contract
 Chong Yik Development Sdn Bhd v Setapak Heights
Development Sdn Bhd

Gopal Sri Ram JCA held that:

1. Contract can be divided into 2 types
a) Fundamental terms- conditions
b) less important terms- warranty
2. Fundamental term is breached, innocent party can
consider himself as discharged
3. Warranty or less important terms are breached, innocent
cannot discharge himself but can sue for damages
4. If uncertain whether fundamental or less important term
is breached ( i.e. innominaate term breached), it depends
on its importance in construction. If it goes to the root of
the contract, then it is fundamental terms
5. In this case there was breach of fundamental terms
 REFUSAL TO PERFORM
Wong Poh Oi v Gertrude Guok & Anor
In this defendant had agreed to build the house
for the plaintiff. He refused to carry the
construction and asked for extra sum for the
extra work done. D refused to pay as refusal
to perform the contract. This resulted the
contract was terminated by D and sold house
to 3 RD PARTY. Plaintiff sued for wrongful
termination. It was held that the curt would
look at intention P whether P refused to
perform. In the case P disputed the amount to
pay for extra work, not intention to refuse to
perform. D was wrong in law to terminate the
contract.
 Effect of the breach
 S40 Contract is voidable- P can
continue to seek for specific
performance,
 claim for damages
 claim restitution

Breach of warrant or less important

term can only claim damages s 74 76
 Damages
 Nominal damages only a small
amount
 Exemplary damages; large amount
awarded
 Assessing damages Court tend to
use net loss approach
 REMOTENESS OF
DAMAGES
 S 74 PROVIDES FOR THE TEST FOR
REMOTENESS OF DAMAGES. Hadley v
Baxendale…Malaysian courts applied the
above case.
 It is held that losses which arise
naturally in the usual course of events or
 Extra ordinary losses which arise within
the reasonable contemplation of the
parties at the time of entering into
contract
 Victoria Laundry Ltd. V
Newman Industries LTD
 P COULD ALWAYS RECOVER FORSEEABLE LOSSES/
DAMAGES (NETT PROFIT NATURALLY ARISING
 What is reasonably foreseeable depends on the
knowledge of the parties had, especially D
 With regard to the 2nd knowledge is actual or imputed
knowledge
In this case, D delayed transporting boilers for repair- P
sued for loss of ordinary profits and extra ordinary
loss of profits due to lucrative government contract.
The court held that extra ordinary loss was too remote
as P could not show D knew or ought to know of
lucrative contract. P was not able to claim the second
limb
 BBMB K TRENGGANU V
MAE PERKAYUAN SDN
BHD
 Sup CT held that measure of damages for
breach of contract in s74 is same as England.
 Sup Ct in Elkobina(M) SB V Mensa Mercantile
and F.CT in Tan Sri Khoo Teck Puat v Plenitude
Holding S.B used Hadley v Baxendale test and
did not refer to s 74

In Hadley v Baxendale: D delayed returning shaft

of mill- P sued claiming loss of profit. Held that
loss of profit did not fall under 1st limb as
normally mills have spare shaft. D did not
know P had no spare shaft then it was too
remote and P could not claim under the 2nd limb
 Mitigation of damages
 Plaintiff must take reasonable steps to mitigate the
losses- if not he cannot claim
 One must understand that in mitigating loss, P
has not incurred extra losses or expenses
 In Mitigating his loss, if P has incurred extra losses
he can recover them from D
Kebatasan Timber Extraction Co: supplied timber.
He unloaded more that 500 ft from sawmill. P
ignored it and ordered timber from 3 rd party. P
sued D fro RM 16,000/- extra and argued
reasonable steps taken. D argued that P could
have spent RM 1,000/- t haul original timber.
Federal Court held P hand not taken reasonable
steps. P could not recover RM 16,000 but only RM
1000/-
 Time of assessment of
Damages
 Miliangos v George Frank (Textiles):
HL held general rule is that
damages hold be assessed as at date
of breach. In interest of justice the
court can assess at some other
dates.
 Specific performance
Section 11-19 Special Relief
Act 1950
 S 16 Court will not grant SP of part of contract
unless case under
A) S13 where part unperformed is small, court
may direct SP of part that can be performed and
compensation of unperformed part
B) S 14 where [art unperformed is large, court will
not grant SP but may direct SP for small part
that may be performed provided P relinquishes
further performance and right to claim
compensation of poor work done
C) S15 court may grant SP for independent part of
contract
 S 20 SRA 1950
 Section 20(1)(a) No SP if monetary
compensation is adequate. Sekemas
SB V Lian Seng Co SB
 S20(1)(b) SP not granted
i) Contract contains minute/numerous
details
ii) Contract for personal services
iii) Contract shows SP not a suitable
remedy
 S21 SRA 1950
 S21(1) Court has discretion to grant SP-
can be corrected by a court of appeal
based on accepted judicial principles
 S21(2) Court may not grant SP
a) If P has unfair advantage over S although
no fraud or misrepresentation by P
b) WHERE SP would cause undue and
unforeseen hardship on D;
non-performance would not cause
hardships on P
 Injunction
 Mareva injection is an example of interim /
interlocutory injuction to prevent D from
disposing his property.
 Principles:
a) P mist shoe good arguable case- prima facie
b) Balance of hardships
c) Full and frank disclosure
d) P must show D has assets within the country
e) P must undertake damages
 Sec 55 SRA 1950
 Negative covenants means a term in contract
where one party undertakes not to do an act
 If the party breaches the negative covenant,
the other party can get injunction to enforce
covenant.
Pertama Cabaret Nite Club SDN v Roman Tam;
D, Hong Kong singer contracted to sing in P
night club and not to sing anywhere else in KL
for that period. D breached contract. Court
granted prohibition injunction which D was a
foreigner and risk that P could not receive
damages