LAW OF

CONTRACT

CAPACITY TO CONTRACT
Introduction
❑ The law places limitations upon the capacity of
certain persons to make a binding promise
❑ Whether a person has the legal qualification or
ability/competency to make a contract
❑ Consequently, a contract made by an incompetent
person may become unenforceable in court
❑ Section 10(1) of the Contracts Act 1950 - “All
agreements are contracts if they are made by the
free consent of parties competent to contract, for
a lawful consideration and with a lawful object,
and are not hereby expressly declared to be void ”
Who are competent to
contract?
■ Under section 11 of the Contracts
Act 1950, “Every person is
competent to contract who is of the
age of majority according to the
law to which he is subject, and who
is of sound mind, and is not
disqualified from contracting by
any law to which he is subject”
The requirement
■According to section 11, in
order to be competent to
enter into a contract, the
parties must fulfill the
following requirement:
■ Age of majority
■ Sound mind
■ Not disqualified by law
Age of majority
■ Section 2 of the Age of Majority Act 1971
provides that all persons in Malaysia
attain the age of majority at the age of
18
■ Therefore, an eighteen-year-old may
enter into a legally binding contract
■ A person under 18 is called a minor or an
infant
Agreement made by a
minor
■ A minor cannot make a contract
■ If he does so, the contract becomes void
■ Consequently, no legal action can be taken on the minor or
by the minor
■ i.e. he cannot sue or be sued
■ A minor is considered as unable to fully understand or
appreciate the effect of a contract on his/her interests
■ The court attempts to protect the minor’s interest from
adults who might take advantage of their inexperience
■ At the same time, responsibility is shifted to the other party
who is assumed to be in a better position to understand
the contract and its effect
Tan Hee Juan v Teh Boon
Kiat [1934] MLJ 96
■ The plaintiff who was a minor, executed the
transfer of land in favour of the defendant
which was witnessed and registered. Later,
the plaintiff applied to the court for an
order to set aside the transfer of the land.
■ The court held that the transaction was
void and ordered restoration of the
property back to the minor.
Exceptions
■ There are certain situations where a minor
may enter into a legally binding contract
■ The courts will enforce the contract
despite one party being a minor
■ There exceptions include:
▪ Contract for necessaries
▪ Contract of service or apprenticeship
▪ Contract of insurance
▪ Contract for scholarship
▪ Contract for marriage
1. Contract for
necessaries
■ Section 69 of the Contracts Act 1950 allows
a person who has supplied necessaries to a
minor to receive reimbursement from the
property of the minor
■ Consequently, he can sue the minor for
payment of the goods supplied
■ Hence, a minor who contracts for necessity
cannot avoid the contract on the ground
that he is a minor
What is necessaries?
■ The word necessaries is not defined in the Act or
other relevant statutes
■ The common law regarded necessaries as binding
only if it benefits the minor
■ It covers those that are essential for survival such
as food, clothes, shelter
■ Section 2 of the English Sale of Goods Act 1893
defined necessary goods as ‘goods suitable to the
condition in life of such an infant and to his actual
requirement at the date of the sale and delivery’
■ In addition, if a minor has adequate supply of the
goods i.e. his parents has provided the goods to
him, then it is not considered as necessaries
Nash v Inman [1908] 2 KB
1
■ A tailor sued for the price of clothes worth
£22 19s 6d which included 11 fancy
waistcoats supplied to a Cambridge student
■ The court held that the action must fail as
there was no evidence to indicate that the
clothes were suitable to the minor’s
condition in life. Furthermore, the minor’s
parent had provided him with adequate
clothes.
Government of Malaysia v
Gurcharan Singh [1971] 1 MLJ
211
■ A minor was sent for teacher’s training abroad under a
government scholarship
■ The issue was the validity of a scholarship agreement
entered into by the minor with the government
■ The minor contended that section 69 does not cover
education and instruction as he was sent to England not to
satisfy his need for training but to meet the government’s
need for more qualified teachers
■ The court held that in the circumstances, the provision of
professional or vocational training for the minor in a
Teacher’s Training Institution to enable him to qualify for
and work as a teacher is part of necessaries under section
69.
Govt of Malaysia v
Gurcharan Singh
■ The judge concluded that, “the word ‘necessaries’ must be
construed broadly…it is incumbent to have regard to the
facts of the case, the conditions and circumstances in
which the supply was made and the purpose which is
served”
■ In making a decision, the court considered that “Whether
the article supplied is a necessary for the infant concerned
is a question of fact and law and the fact must be found on
the evidence adduced. Each case therefore stands to be
decided on the facts pertaining to it and whether what is
supplied is a necessary suited to the infant’s condition
becomes as much a question of law as of fact”
Scope of necessaries
■ Certain services provided to a minor may
be considered as necessaries
■ This includes education, medical and legal
advice
■ In Chapple v Cooper (1844) 13 M&W 252,
the provision of a funeral for the minor’s
deceased husband was held to be a
necessity
■ In Flower v Western Rly Co [1894] 2 QB
65, a season ticket for rail travel to and
from work was also held to be a necessity
2. Scholarship agreement
■ Section 4 of the Contracts (Amendment)
Act 1976 states that, ‘…no scholarship
agreement shall be invalidated on the
ground that-
a) The scholar entering into such agreement
is not of the age of majority
b) Such agreement is contrary to any
provision of any law in force relating to
moneylenders; or
c) Such agreement lacks consideration
3. Contract of insurance
■Under the Insurance Act 1963
(revised 1972), a minor over the
age of 10 may enter into a
contract of insurance
■However, a minor under the age of
16 can only do so with the written
consent of the parents or guardian
4. Contract of
Apprenticeship
■ Under section 13 of the Children & Young Persons
(Employment) Act 1966, a minor is competent to
enter into a contract of apprenticeship or service
■ A child is one below the age of 14 while a young
person is one who is between the age of 14-16
■ The child or young person may sue or be sued
under contracts of service, but no damages or
indemnity can be recovered from the minor for
breach of contract
Doyle v White City Stadium
[1935] 1 KB 110

■ Doyle, a professional boxer was a minor. He entered

into a contract with White City Stadium.
■ It was agreed that if Doyle was disqualified from a
tournament, he would lose all the money due to him.
■ He was later disqualified from a tournament and the
stadium refused to pay him any money
■ Doyle contested the contract on the ground that he
was a minor and therefore not bound by it.
■ The court held that the contract was binding because
it was for his training and was beneficial for his career.
De Francesco v Barnum
(1890) 45 Ch D 43
■ The defendant who was a minor, became an
apprentice dancer under a contract with the
plaintiff. The contract included terms that she
could not marry, could not receive any
payment and could not dance for other
persons.
■ The court held that the terms of the contract
were so harsh and unreasonable that the
contract cannot be enforced against the minor.
5. Marriage contracts
■ Section 4(a) of the Age of Majority Act 1971
provides that, ‘nothing in this Act shall
effect (a) the capacity of any person to act
in the following matters, namely marriage,
divorce, dower and adoption…’
■ Thus, marriage contracts are not affected
by the general rule on minor’s capacity
■ This is normally subject to the customary
laws of an individual
■ Consequently, a minor may sue and be
sued for breach of promise to marry
Rajeswary v Balakrishnan
(1958) 3 MC 178
■ A promise of marriage was made by the defendant who
was a minor. He later repudiated the promise to marry.
The plaintiff sued him for breach of promise.
■ One of the arguments made by the defendant was that
he has no legal capacity to enter into the contract to
marry as he was a minor.
■ The court held that the age of majority for entering into
a marriage contract differed from other contracts
entered into by a minor and consequently such
contracts were not affected by the general rule.
Recovery of property
■ Section 65 of the Contracts Act 1950
requires a party who rescinds a contract
to return any benefit received by him in
the contract prior to rescission.
■ Section 66 states that any person who
has received any advantage under an
agreement which is void must restore it
or make compensation to the other
party
Valentini v Canali (1889)
24 QBD 166
■ A minor took a lease of a house and agreed to pay
the landlord £102 for furniture. He paid £68 and gave
a promissory note for the balance. After some months
of living in the house and using the furniture, the
minor applied to set aside the lease and recover the
money already paid.
■ The court ordered cancellation of the lease and
promissory note but did not allow him to recover the
money paid. The court observed that when a minor
has paid for something which he has used or
consumed; it is contrary to natural justice that he
should be able to recover the payment.
Misrepresentation of age
■ If a minor misrepresented his age and
thereby induced another person to
contract with him, the minor can still
avoid the contract on the plea of
minority
■ Thus, the other party cannot sue the
minor
■ In R Natesan v Thanaletchumi [1952]
MLJ 1, the court held that an infant is
not prevented from pleading infancy to
avoid liability on the contract
Persons of unsound
mind
■ The definition of sound mind (for
the purpose of contract) is
provided in section 12(1) of the
Contracts Act 1950
■ ‘A person is said to be of sound
mind for the purpose of making a
contract if, at the time when he
makes it, he is capable of
understanding it and of forming a
rational judgment as to its effect
upon his interest’
Effect of contract
■ The court in Sim Kon Sang Peter
v Datin Shim Tok Keng held that
since Section 11 of the Contracts
Act 1950 covers cases relating to
age of majority and unsoundness
of mind, contracts made by an
unsound person has the same
effect as a minor
■ Therefore, a contract by unsound
person is also void
Occasional sound
mind
■ If a person is usually
unsound but is occasionally
sound at certain intervals,
he may enter into a valid
and binding contract at the
time he is sound
■ Section 12(2) of the
Contracts Act 1950
■ Illustration (a) to section
12(2)
Occasional
unsoundness of mind
■ A sound person may occasionally
become unsound for a limited
period
■ For instance, a person who is
drunk or delirious from fever
■ Any contract made by him during
that period of unsoundness is
void
■ Section 12(3) of the Contracts Act
1950
■ Illustration (b) to section 12(2)
Contract for
necessaries
■ Section 69 of the Contracts Act
1950 also applies to an unsound
person
■ Illustrations (a) and (b) to section
69
■ Hence, a person who supplies
necessities to an unsound person
or those legally dependent on him
(wife and children) may claim
reimbursement from the property
of the unsound person
Conclusion
■ A person must reach the age of
majority and be of sound mind
to enter into a legally binding
contract
■ Any contract made by an
incompetent person will be
void and unenforceable in law
■ Nevertheless, the contract may
become legally enforceable if it
falls under the scope of section
69 of the Contracts Act 1950 or
necessaries under common law