Law of Contract: Alizah Ali Uitm Johor

LAW OF CONTRACT
ALIZAH ALI
UITM JOHOR
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Element no 7: FREE CONSENT
At the end of the class student will able to understand…
1. Definition of consent & free consent
2. Legal effect
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FREE CONSENT
REQUIREMENT OF What is the meaning of

FREE CONSENT CONSENT?
• Sect 10(1) of CA 1950: • Sect 13 of CA 1950:
• All Agreements are • 2 or more persons
contracts if they are • Agreed upon
made by free consent • The same thing in the
of parties.. same sense
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What is the meaning of FREE CONSENT?
Sect 14 of CA coercion
1950: Undue influence

NOT caused by 
fraud
Effect: mispresentation
Void/voidable mistake
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EFFECT CONTRACT WITHOUT FREE
CONSENT
Sect 2(g) CA 1950:
void “an agreement NOT enforceable by law”
 Mistake
Sect 2(i) CA 1950:

voidable “an agreement which is enforceable by law at the
option of one…of the parties”
 Coercion  Undue influence

 Fraud  Mispresentation
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COERCION
Definition Effect
• Sect 15: • Sect 15  voidable
• “Coercion” is the
committing, or threatening
to commit any act
forbidden by the Penal
Code, …with the intention
of causing any person to
enter into an agreement.”
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COERCION
Kesarmal s/o Letchman Das vs Valiappa Chettiar
transfer
Chin Nam Bee Dev Sdn Bhd vs Tai Kim Choo
additional fee of RM 4000
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UNDUE INFLUENCE
Definition Effect
• Sect 16(1) CA 1950: • Sect 20 of Contract Act 1950
• “a contract is said to be induced  voidable
by “undue influence” where the
relations subsisting between the
parties are such that one of the
parties is in position to dominate
the will of the other and uses
that position to obtain an unfair
advantage over the other.”
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UNDUE INFLUENCE-
2 essential elements
The domination of the will

by one party over the other
party
The dominating party

obtains an unfair
advantage in the contract
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UNDUE INFLUENCE-
presumption
Illustration (b) Sect 16

Illustration (a) Sect 16
“…where he makes a contract with a
“…where he holds a real or
person whose mental capacity is
apparent authority over the other, or
temporarily or permanently affected
where he stands in a fiduciary
by reason of age, illness, or mental
relation to the other
or bodily distress.”
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UNDUE INFLUENCE-
• Case:
Salwath Haneem vs Hadjee Abdullah
Datuk Jaginder Singh Vs Tara Rajaratnam
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FRAUD
Definition Effect
• Sect 17: • Sect 19  voidable
• “Fraud” includes any
…acts committed by a
party to contract …
with intent to deceive
another party…
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FRAUD
Derry vs Peek
“Fraud is proven when …”
Illustration (a) to section 19 :
“A, intending to deceive B, falsely represents that 500

gantangs of indigo are made annually at A’s factory,
and thereby induces B to buy the factory. The contract
is voidable at the option of B.
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FRAUD – element of fraud
False statement / representation
Given with intention to deceive
The representee must have relied on

the representation
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FRAUD - cases
•  Kheng Chwee Lian vs Wong Tak Thong
Transfer land
•  Letchemy Arumugam vs Annamalay
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FRAUD- Burden of proof
On those who claim that there is

fraudulent
He has to prove all the elements of fraud
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FRAUD
Q: Does Silence Constitute Fraud?
Explanation to section 17 :
“Mere silence …is not fraud, unless …it is the duty of the person
keeping silence to speak, or unless his silence is …equivalent to
speech.”
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FRAUD
Illustration (a) to Illustration (c) to

however
section 17 section 17
• A sells, by auction, • ……. • B says to A, “if you
to B, a horse which do not deny it, I
A knows to be shall assume that
unsound. A says the horse is
nothing to B about sound.” A says
the horse’s nothing. Here, A’s
unsoundness. This silence is
is not fraud equivalent to
speech
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MISPRESENTATION
Definition Effect
• Sect 18: • Sect 19(1)  voidable
• It is a false representation • Sect 19(2) Plf may insist
given by one of the that the contract shall be
parties. However, it was performed
without intention to
deceive.
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MISPRESENTATION - ELEMENT
False representation
One of fact, not a mere expression of opinion
Addressed to the party misled
Induce the misled party to enter into the contract
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MISPRESENTATION - ELEMENT
• A, by a mispresentation, leads B • Tan Chye Chew vs Eastern
erraneously to believe that 500 Mining Metals Co Ltd
gantangs of indigo are made
annually at A’s factory, which
shows that 400 gantangs of
indigo have been made. After
this, B buy the factory. The
contract does not voidable on
account of A’s mispresentation
Illustration (b) Duty to exercise

Section 19 diligence
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MISTAKE
Definition Effect
• Sect 21: • Sect 21  void
• Where both the parties … • Sect 66 any advantage
are under a mistake as to a bound to restore/make
matter of fact essential to
the agreement, the compensation
agreement is void
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MISTAKE - ELEMENT
made by both parties

(mutual mistake)
relating to “a matter of fact

essential to the agreement
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MISTAKE
Q : ‘Fact Essential to the Agreement’?
1) Mistake as to the existence of the subject matter.
Illustration (b) to section 21 :

A agrees to buy from B a certain horse. But the horse was
dead at the time of the bargain, though neither party was
aware of the fact. The agreement is void.
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MISTAKE
2. Mistake as to the identity of the subject matter.
Raffles V Wichelhaus
cargo of cotton “The Peerless”
 from Bombay to London
 different times.
• Held : The contract was void
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MISTAKE
3. Mistake as to the possibility of performing the
contract.
Sheikh Brothers V Ochsner
• license and authority to cut and manufacture all sisal growing on
5000 acres of land in Kenya.
• Held : The agreement was void.
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Unilateral MISTAKE
a person is expected to
not voidable, take reasonable care to
Section 23 ascertain
still valid what he is contracting
about
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Unilateral MISTAKE
 Section 23
 not voidable, still valid
 because a person is expected to
take reasonable care to ascertain
what he is contracting about.
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LAW OF CONTRACT

REQUIREMENT OF What is the meaning of

1950: Undue influence

Sect 2(i) CA 1950:

 Coercion  Undue influence

Chin Nam Bee Dev Sdn Bhd vs Tai Kim Choo

additional fee of RM 4000

The domination of the will

The dominating party

Illustration (b) Sect 16

Datuk Jaginder Singh Vs Tara Rajaratnam

Illustration (a) to section 19 :

“A, intending to deceive B, falsely represents that 500

False statement / representation

Given with intention to deceive

The representee must have relied on

On those who claim that there is

He has to prove all the elements of fraud

Q: Does Silence Constitute Fraud?

Illustration (a) to Illustration (c) to

One of fact, not a mere expression of opinion

Addressed to the party misled

Induce the misled party to enter into the contract

Illustration (b) Duty to exercise

made by both parties

relating to “a matter of fact

1) Mistake as to the existence of the subject matter.

Illustration (b) to section 21 :

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