Contracts
1
LAWS OF MALAYSIA
REPRINT
Act 136
CONTRACTS ACT 1950
Incorporating all amendments up to 1 January 2006
PUBLISHED BY
THE COMMISSIONER OF LAW REVISION, MALAYSIA
UNDER THE AUTHORITY OF THE REVISION OF LAWS ACT 1968
IN COLLABORATION WITH
PERCETAKAN NASIONAL MALAYSIA BHD
2006
2
CONTRACTS ACT 1950
First enacted ... ... ... ... ... ...
1950 (F.M. Ordinance
No. 14 of 1950)
Revised
... ... ... ... ... ... ...
1974 (Act 136 w.e.f.
1 July 1974)
PREVIOUS REPRINTS
First Reprint
...
...
...
...
...
1997
Second Reprint ...
...
...
...
...
2000
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LAWS OF MALAYSIA
Act 136
CONTRACTS ACT 1950
ARRANGEMENT OF SECTIONS
PART I
PRELIMINARY
Section
1.
Short title
2.
Interpretation
PART II
OF THE COMMUNICATION, ACCEPTANCE AND
REVOCATION OF PROPOSALS
3.
Communication, acceptance and revocation of proposals
4.
Communication, when complete
5.
Revocation of proposals and acceptances
6.
Revocation how made
7.
Acceptance must be absolute
8.
Acceptance by performing conditions, or receiving consideration
9.
Promises, express and implied
PART III
OF CONTRACTS, VOIDABLE CONTRACTS AND
VOID AGREEMENTS
10.
What agreements are contracts
11.
Who are competent to contract
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ACT 136
Section
12.
What is a sound mind for the purposes of contracting
13.
"Consent"
14.
"Free consent"
15.
"Coercion"
16.
"Undue influence"
17.
"Fraud"
18.
"Misrepresentation"
19.
Voidability of agreements without free consent
20.
Power to set aside contract induced by undue influence
21.
Agreement void where both parties are under mistake as to matter of fact
22.
Effect of mistake as to law
23.
Contract caused by mistake of one party as to matter of fact
24.
What considerations and object are lawful, and what not
Void Agreements
25.
Agreements void if considerations and objects unlawful in part
26.
Agreement without consideration, void, unless--
(a) it is in writing and registered;
(b) or is a promise to compensate for something done;
(c) or is a promise to pay a debt barred by limitation law
27.
Agreement in restraint of marriage void
28.
Agreement in restraint of trade void
Exception 1--Saving of agreement not to carry on business of which
goodwill is sold;
Exception 2--of agreement between partners prior to dissolution;
Exception 3--or during continuance of partnership
29.
Agreements in restraint of legal proceedings void
Exception 1--Saving of contract to refer to arbitration dispute that may
arise
Exception 2--Saving of contract to refer questions that have already
arisen
30.
Agreements void for uncertainty
31.
(1) Agreements by way of wager void
(2) Exception in favour of certain prizes for horse racing
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PART IV
OF CONTINGENT CONTRACTS
Section
32.
"Contingent contract"
33.
Enforcement of contracts contingent on an event happening
34.
Enforcement of contracts contingent on an event not happening
35.
When event on which contract is contingent to be deemed impossible, if
it is the future conduct of a living person
36.
(1) When contracts become void which are contingent on happening of
specified event within fixed time
(2) When contracts may be enforced which are contigent on specified
event not happening within fixed time
37.
Agreement contingent on impossible events void
PART V
OF THE PERFORMANCE OF CONTRACTS
Contracts which must be Performed
38.
Obligation of parties to contracts
39.
Effect of refusal to accept offer of performance
40.
Effect of refusal of party to perform promise wholly
By whom Contracts must be Performed
41.
Person by whom promise is to be performed
42.
Effect of accepting performance from third person
43.
Devolution of joint liabilities
44.
(1) Any one of joint promisors may be compelled to perform
(2) Each promisor may compel contribution
(3) Sharing of loss by default in contribution
45.
Effect of release of one joint promisor
46.
Devolution of joint rights
Time and Place for Performance
47.
Time for performance of promise where no application is to be made and
no time is specified
48.
Time and place for performance of promise where time is specified and
no application to be made
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ACT 136
Section
49.
Application for performance on certain day to be at proper time and place
50.
Place for performance of promise where no application to be made and
no place fixed
51.
Performance in manner of at time prescribed or sanctioned by promisee
Performance of Reciprocal Promises
52.
Promisor not bound to perform unless reciprocal promisee ready and
willing to perform
53.
Order of performance of reciprocal promises
54.
Liability of party preventing event on which contract is to take effect
55.
Effect of defaults as to that promise which should be first performed, in
contract consisting of reciprocal promises
56.
(1) Effect of failure to perform at fixed time, in contract in which time
is essential
(2) Effect of failure when time is not essential
(3) Effect of acceptance of performance at time other than that agreed
upon
57.
(1) Agreement to do impossible act
(2) Contract to do act afterwards becoming impossible or unlawful
(3) Compensation for loss through non-performance of act known to be
impossible or unlawful
58.
Reciprocal promise to do things legal, and also other things illegal
59.
Alternative promise, one branch being illegal
Appropriation of Payments
60.
Application of payment where debt to be discharged is indicated
61.
Application of payment where debt to be discharged is not indicated
62.
Application of payment where neither party appropriates
Contracts which need not be Performed
63.
Effect of novation, rescission and alteration of contract
64.
Promisee may dispense with or remit performance of promise
65.
Consequences of rescission of voidable contract
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Section
66.
Obligation of person who has received advantage under void agreement,
or contract that becomes void
67.
Mode of communicating or revoking rescission of voidable contract
68.
Effect of neglect of promisee to afford promisor reasonable facilities for
performance
PART VI
OF CERTAIN RELATIONS RESEMBLING THOSE
CREATED BY CONTRACT
69.
Claim for necessaries supplied to person incapable of contracting, or on
his account
70.
Reimbursement of person paying money due by another, in payment of
which he is interested
71.
Obligation of person enjoying benefit of non-gratuitous act
72.
Responsibility or finder of goods
73.
Liability of person to whom money is paid, or thing delivered, by mistake
or under coercion
PART VII
OF THE CONSEQUENCES OF BREACH OF CONTRACT
74.
(1) Compensation for loss or damage caused by breach of contract
(2) Compensation for failure to discharge obligation resembling those
created by contract
75.
Compensation for breach of contract where penalty stipulated for
76.
Party rightfully rescinding contract entitled to compensation
PART VIII
OF INDEMNITY AND GUARANTEE
77.
"Contract of indemnity"
78.
Rights of indemnity holder when sued
79.
"Contract of guarantee", "surety", "principal debtor", and "creditor"
80.
Consideration for guarantee
81.
Surety's liability
82.
"Continuing guarantee"
83.
Revocation of continuing guarantee
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ACT 136
Section
84.
Revocation of continuing guarantee by surety's death
85.
Liability of two persons, primarily liable, not affected by arrangement
between them that one shall be surety on other's default
86.
Discharge of surety by variance in terms of contract
87.
Discharge of surety by release or discharge of principal debtor
88.
Discharge of surety when creditor compounds with, gives time to, or
agrees not to sue principal debtor
89.
Surety not discharged when agreement made with third person to give
time to principal debtor
90.
Creditor's forbearance to sue does not discharge surety
91.
Release of one co-surety does not discharge others
92.
Discharge of surety by creditor's act or omission impairing surety's
eventual remedy
93.
Rights of surety on payment or performance
94.
Surety's right to benefit of creditor's securities
95.
Guarantee obtained by misrepresentation invalid
96.
Guarantee obtained by concealment invalid
97.
Guarantee on contract that creditor shall not act on it until co-surety joins
98.
Implied promise to indemnify surety
99.
Co-sureties liable to contribute equally
100.
Liability of co-sureties bound in different sums
PART IX
OF BAILMENT
101.
"Bailment", "bailor" and "bailee"
102.
Delivery to bailee how made
103.
Bailor's duty to disclose faults in goods bailed
104.
Care to be taken by bailee
Bailee when not liable for loss, etc., of thing bailed
105.
106.
Termination of bailment by bailee's act inconsistent with conditions
107.
Liability of bailee making unauthorized use of goods bailed
108.
Effect of mixture, with bailor's consent, of his goods with bailee's
109.
Effect of mixture, without bailor's consent, when the goods can be
separated
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Section
110.
Effect of mixture, without bailor's consent, when the goods cannot be
separated
111.
Repayment by bailor of necessary expenses
112.
Restoration of goods lent gratuitously
113.
Return of goods bailed, on expiration of time or accomplishment of
purpose
114.
Bailee's responsibility when goods are not duly returned
115.
Termination of gratuitous bailment by death
116.
Bailor entitled to increase or profit from goods bailed
117.
Bailor's responsibility to bailee
118.
Bailment by several joint owners
119.
Bailee not responsible on re-delivery to bailor without title
120.
Right of third person claiming goods bailed
121.
Right of finder of goods; may sue for specific reward offered
122.
When finder of thing commonly on sale may sell it
123.
Bailee's particular lien
124.
General lien of bankers, factors, wharfingers, advocates and policy
brokers
Bailments of Pledges
125.
"Pledge", "pawnor" and "pawnee"
126.
Pawnee's right of retainer
127.
Pawnee not to retain for debt or promise other than that for which goods
pledged. Presumption in case of subsequent advances
128.
Pawnee's right as to extraordinary expenses incurred
129.
Pawnee's right where pawnor makes default
130.
Defaulting pawnor's right to redeem
131.
Pledge by possessor of goods, or of documentary title to goods
132.
Pledge where pawnor has only a limited interest
Suits by Bailees or Bailor againts Wrongdoers
133.
Suit by bailor or bailee against wrongdoer
134.
Apportionment of relief or compensation obtained by such suits
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ACT 136
PART X
AGENCY
Appoinment and Authority of Agents
Section
135.
"Agent" and "principal"
136.
Who may employ agent
137.
Who may be an agent
138.
Consideration not necessary
139.
Agent's authority may be expressed or implied
140.
Definitions of express and implied authority
141.
Extent of agent's authority
142.
Agent's authority in an emergency
Sub-agents
143.
When agent cannot delegate
144.
"Sub-agent"
145.
(1) Representation of principal by sub-agent properly appointed
(2) Agent's responsibility for sub-agent
(3) Sub-agent's responsibility
146.
Agent's responsibility for sub-agent appointed without authority
147.
Relation between principal and person duly appointed by agent to act in
business of agency
148.
Agent's duty in naming such person
Ratification
149.
Right of person as to acts done for him without his authority. Effect of
ratification
150.
Ratification may be expressed or implied
151.
Knowledge requisite to valid ratification
152.
Effect of ratifying unauthorized act forming part of a transaction
153.
Ratification of unauthorized act cannot injure third person
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Revocation of Authority
Section
154.
Termination of agency
155.
Termination of agency, where agent has an interest in subject-matter
156.
When principal may revoke agent's authority
157.
Revocation where authority has been partly exercised
158.
Compensation for revocation by principal or renunciation by agent
159.
Notice of revocation or renunciation
160.
Revocation and renunciation may be expressed or implied
161.
When termination of agent's authority takes effect as to agent, and as to
third persons
162.
Agent's duty on termination of agency by principal's death or insanity
163.
Termination of sub-agent's authority
Agent's duty to Principal
164.
Agent's duty in conducting principal's business
165.
Skill and diligence required from agent
166.
Agent's accounts
167.
Agent's duty to communicate with principal
168.
Right of principal when agent deals, on his own account, in business of
agency without principal's consent
169.
Principal's right to benefit gained by agent dealing on his own account
in business of agency
170.
Agent's right of retainer out of sums received on principal's account
171.
Agent's duty to pay sums received for principal
172.
When agent's remuneration becomes due
173.
Agent not entitled to remuneration for business misconducted
174.
Agent's lien on principal's property
Principal's duty to Agent
175.
Agent to be indemnified against consequences of lawful acts
176.
Agent to be indemnified against consequences of acts done in good faith
177.
Non-liability of employer of agent to do a criminal act
178.
Compensation to agent for injury caused by principal's neglect
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ACT 136
Effect of Agency on Contract with Third Persons
Section
179.
Enforcement and consequences of agent's contracts
180.
Principal how far bound when agent exceeds authority
181.
Principal not bound when excess of agent's authority is not separable
182.
Consequences of notice given to agent
183.
Agent cannot personally enforce, nor be bound by, contracts on behalf of
principal
Presumption of contract to contrary
184.
Rights of parties to a contract made by agent not disclosed
185.
Performance of contract with agent supposed to be principal
186.
Right of person dealing with agent personally liable
187.
Consequence of inducing agent or principal to act on belief that principal
or agent will be held exclusively liable
188.
Liability of pretended agent
189.
Person falsely contracting as agent not entitled to performance
190.
Liability of principal inducing belief that agent's unauthorized acts were
authorized
191.
Effect, on agreement, of misrepresentation or fraud by agent
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LAWS OF MALAYSIA
Act 136
CONTRACTS ACT 1950
An Act relating to contracts.
[Kuala Lumpur, Johore, Kedah, Kelantan,
Negeri Sembilan, Pahang, Perak, Perlis,
Selangor and Terengganu--23 May 1950;
Malacca, Penang, Sabah and Sarawak--1 July 1974]
PART I
PRELIMINARY
Short title
1. (1) This Act may be cited as the *Contracts Act 1950.
(2) Nothing herein contained shall affect any written law or any
usage or custom of trade, or any incident of any contract, not
inconsistent with this Act.
Interpretation
2. In this Act the following words and expressions are used in the
following senses, unless a contrary intention appears from the
context:
(a) when one person signifies to another his willingness to do
or to abstain from doing anything, with a view to obtaining
the assent of that other to the act or abstinence, he is said
to make a proposal;
(b) when the person to whom the proposal is made signifies
his assent thereto, the proposal is said to be accepted: a
proposal, when accepted, becomes a promise;
*NOTE--See Appendix--Contracts (Amendment) Act 1976 [Act A329] with respect to Scholarship
Agreements.
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ACT 136
(c) the person making the proposal is called the "promisor"
and the person accepting the proposal is called the
"promisee";
(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;
(e) every promise and every set of promises, forming the
consideration for each other, is an agreement;
(f) promises which form the consideration or part of the
consideration for each other are called reciprocal promises;
(g) an agreement not enforceable by law is said to be void;
(h) an agreement enforceable by law is a contract;
(i) an agreement which is enforceable by law at the option of
one or more of the parties thereto, but not at the option of
the other or others, is a voidable contract; and
(j) a contract which ceases to be enforceable by law becomes
void when it ceases to be enforceable.
PART II
OF THE COMMUNICATION, ACCEPTANCE AND
REVOCATION OF PROPOSALS
Communication, acceptance and revocation of proposals
3. The communication of proposals, the acceptance of proposals,
and the revocation of proposals and acceptances, respectively, are
deemed to be made by any act or omission of the party proposing,
accepting, or revoking, by which he intends to communicate the
proposal, acceptance, or revocation, or which has the effect of
communicating it.
Communication, when complete
4. (1) The communication of a proposal is complete when it comes
to the knowledge of the person to whom it is made.
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(2) The communication of an acceptance is complete--
(a) as against the proposer, when it is put in a course of
transmission to him, so as to be out of the power of the
acceptor; and
(b) as against the acceptor, when it comes to the knowledge of
the proposer.
(3) The communication of a revocation is complete--
(a) as against the person who makes it, when it is put into a
course of transmission to the person to whom it is made, so
as to be out of the power of the person who makes it; and
(b) as against the person to whom it is made, when it comes to
his knowledge.
ILLUSTRATIONS
(a) A proposes, by letter, to sell a house to B at a certain price.
The communication of the proposal is complete when B receives the
letter.
(b) B accepts A's proposal by a letter sent by post.
The communication of the acceptance is complete--
as against A, when the letter is posted;
as against B, when the letter is received by A.
(c) A revokes his proposal by telegram.
The revocation is complete as against A when the telegram is
despatched. It is complete as against B when B receives it.
(d) B revokes his acceptance by telegram.
B's revocation is complete as against B when the telegram is
despatched, and as against A when it reaches him
Revocation of proposals and acceptances
5. (1) A proposal may be revoked at any time before the
communication of its acceptance is complete as against the proposer,
but not afterwards.
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ACT 136
(2) An acceptance may be revoked at any time before the
communication of the acceptance is complete as against the acceptor,
but not afterwards.
ILLUSTRATION
A proposes, by a letter sent by post, to sell his house to B.
B accepts the proposal by a letter sent by post.
A may revoke his proposal at any time before or at the moment when B posts
his letter of acceptance, but not afterwards.
B may revoke his acceptance at any time before or at the moment when the
letter communicating it reaches A, but not afterwards.
Revocation how made
A proposal is revoked--
6.
(a) by the communication of notice of revocation by the
proposer to the other party;
(b) by the lapse of the time prescribed in the proposal for its
acceptance, or, if no time is so prescribed, by the lapse of
a reasonable time, without communication of the acceptance;
(c) by the failure of the acceptor to fulfil a condition precedent
to acceptance; or
(d) by the death or mental disorder of the proposer, if the fact
of his death or mental disorder comes to the knowledge of
the acceptor before acceptance.
Acceptance must be absolute
7. In order to convert a proposal into a promise the acceptance
must--
(a) be absolute and unqualified;
(b) be expressed in some usual and reasonable manner, unless
the proposal prescribes the manner in which it is to be
accepted. If the proposal prescribes a manner in which it
is to be accepted, and the acceptance is not made in that
manner, the proposer may, within a reasonable time after
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the acceptance is communicated to him, insist that his
proposal shall be accepted in the prescribed manner, and
not otherwise; but, if he fails to do so, he accepts the
acceptance.
Acceptance by performing conditions, or receiving consideration
8. Performance of the conditions of a proposal, or the acceptance
of any consideration for a reciprocal promise which may be offered
with a proposal, is an acceptance of the proposal.
Promises, express and implied
9. So far as the proposal or acceptance of any promise is made in
words, the promise is said to be express. So far as the proposal or
acceptance is made otherwise than in words, the promise is said to
be implied.
PART III
OF CONTRACTS, VOIDABLE CONTRACTS AND VOID
AGREEMENTS
What agreements are contracts
10. (1) 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.
(2) Nothing herein contained shall affect any law by which any
contract is required to be made in writing or in the presence of
witnesses, or any law relating to the registration of documents.
Who are competent to contract
11. 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.
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ACT 136
What is a sound mind for the purposes of contracting
12. (1) 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 interests.
(2) A person who is usually of unsound mind, but occasionally of
sound mind, may make a contract when he is of sound mind.
(3) A person who is usually of sound mind, but occasionally of
unsound mind, may not make a contract when he is of unsound mind.
ILLUSTRATIONS
(a) A patient in a mental hospital, who is at intervals of sound mind, may
contract during those intervals.
(b) A sane man, who is delirious from fever, or who is so drunk that he
cannot understand the terms of a contract, or form a rational judgment as to its
effect on his interests, cannot contract whilst such delirium or drunkenness
lasts.
"Consent"
13. Two or more persons are said to consent when they agree upon
the same thing in the same sense.
"Free consent"
Consent is said to be free when it is not caused by--
14.
(a) coercion, as defined in section 15;
(b) undue influence, as defined in section 16;
(c) fraud, as defined in section 17;
(d) misrepresentation, as defined in section 18; or
(e) mistake, subject to sections 21, 22 and 23.
Consent is said to be so caused when it would not have been given
but for the existence of such coercion, undue influence, fraud,
misrepresentation, or mistake.
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"Coercion"
15. "Coercion" is the committing, or threatening to commit any
act forbidden by the Penal Code, or the 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.
Explanation--It is immaterial whether the Penal Code is or is not in force
in the place where the coercion is employed.
ILLUSTRATION
A, on board an English ship on the high seas, causes B to enter into an
agreement by an act amounting to criminal intimidation under the Penal Code.
A afterwards sues B for breach of contract at Taiping.
A has employed coercion, although his act is not an offence by the law of
England, and although section 506 of the Penal Code was not in force at the
time when or place where the act was done.
"Undue influence"
16. (1) A contract is said to be induced 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.
(2) 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--
(a) where he holds a real or apparent authority over the other,
or where he stands in a fiduciary relation to the other; or
(b) 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.
(3) (a) 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 face of it or on the evidence adduced, to be
unconscionable, the burden of proving that the contract was not
induced by undue influence shall lie upon the person in a position to
dominate the will of the other.
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ACT 136
(b) Nothing in this subsection shall affect section 111 of the
Evidence Act 1950 [Act 56].
ILLUSTRATIONS
(a) A having advanced money to his son, B, during his minority, upon B's
coming of age, obtains, by misuse of parental influence, a bond from B for a
greater amount than the sum due in respect of the advance. A employs undue
influence.
(b) A, a man enfeebled by disease or age, is induced, by B's influence over
him as his medical attendant, to agree to pay B an unreasonable sum for his
professional services. B employs undue influence.
(c) A, being in debt to B, the moneylender of his village, contracts a fresh
loan on terms which appear to be unconscionable. It lies on B to prove that the
contract was not induced by undue influence.
(d) A applies to a banker for a loan at a time when there is stringency in the
money market. The banker declines to make the loan except at an unusually
high rate of interest. A accepts the loan on these terms. This is a transaction in
the ordinary course of business, and the contract is not induced by undue
influence.
"Fraud"
17. "Fraud" includes any of the following acts committed by a
party to a contract, or with his connivance, or by his agent, with
intent to deceive another party thereto or his agent, or to induce him
to enter into the contract:
(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 a fact by one having knowledge
or belief of the fact;
(c) a promise made without any intention of performing it;
(d) any other act fitted to deceive; and
(e) any such act or omission as the law specially declares to be
fraudulent.
Explanation--Mere silence as to facts likely to affect the willingness of a
person to enter into a contract is not fraud, unless the circumstances of the case
are such that, regard being had to them, it is the duty of the person keeping
silence to speak, or unless his silence is, in itself, equivalent to speech.
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ILLUSTRATIONS
(a) A sells, by auction, to B, a horse which A knows to be unsound. A says
nothing to B about the horse's unsoundness. This is not fraud in A.
(b) B is A's daughter and has just come of age. Here, the relation between
the parties would make it A's duty to tell B if the horse is unsound.
(c) B says to A, "If you do not deny it, I shall assume that the horse is
sound." A says nothing. Here, A's silence is equivalent to speech.
(d) A and B, being traders, enter upon a contract. A has private information
of a change in prices which would affect B's willingness to proceed with the
contract. A is not bound to inform B.
"Misrepresentation"
"Misrepresentation" includes--
18.
(a) the positive assertion, in a manner not warranted by the
information of the person making it, of that which is not
true, though he believes it to be true;
(b) any breach of duty which, without an intent to deceive,
gives an advantage to the person committing it, or anyone
claiming under him, by misleading another to his prejudice,
or to the prejudice of anyone claiming under him; and
(c) causing, however innocently, a party to an agreement to
make a mistake as to the substance of the thing which is the
subject of the agreement.
Voidability of agreements without free consent
19. (1) When consent to an agreement is caused by coercion, fraud,
or misrepresentation, the agreement is a contract voidable at the
option of the party whose consent was so caused.
(2) A party to a contract, whose consent was caused by fraud or
misrepresentation, may, if he thinks fit, insist that the contract shall
be performed, and that he shall be put in the position in which he
would have been if the representations made had been true.
Exception--If such consent was caused by misrepresentation or by silence,
fraudulent within the meaning of section 17, the contract, nevertheless, is not
voidable, if the party whose consent was so caused had the means of discovering
the truth with ordinary diligence.
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ACT 136
Explanation--A fraud or misrepresentation which did not cause the consent
to a contract of the party on whom the fraud was practised, or to whom the
misrepresentation was made, does not render a contract voidable.
ILLUSTRATIONS
(a) A, intending to deceive B, falsely represents that five hundred 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.
(b) A, by a misrepresentation, leads B erroneously to believe that five
hundred gantangs of indigo are made annually at A's factory. B examines the
accounts of the factory, which show that only four hundred gantangs of indigo
have been made. After this B buys the factory. The contract is not voidable on
account of A's misrepresentation.
(c) B, having discovered a vein of ore on the estate of A, adopts means to
conceal, and does conceal, the existence of the ore from A. Through A's
ignorance B is enabled to buy the estate at an undervalue. The contract is
voidable at the option of A.
(d) A is entitled to succeed to an estate at the death of B; B dies; C, having
received intelligence of B's death, prevents the intelligence reaching A, and
thus induces A to sell him his interest in the estate. The sale is voidable at the
option of A.
Power to set aside contract induced by undue influence
20. When consent to an agreement is caused by undue influence,
the agreement is a contract voidable at the option of the party whose
consent was so caused. Any such contract may be set aside either
absolutely or, if the party who was entitled to avoid it has received
any benefit thereunder, upon such terms and conditions as to the
court may seem just.
ILLUSTRATIONS
(a) A's son has forged B's name to a promissory note. B, under threat of
prosecuting A's son, obtains a bond from A for the amount of the forged note.
If B sues on this bond, the court may set the bond aside.
(b) A, a moneylender, advances RM100 to B, an agriculturist, and, by undue
influence, induces B to execute a bond for RM200 with interest at 6 per cent per
month. The court may set the bond aside, ordering B to repay the RM100 with
such interest as may seem just.
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23
Agreement void where both parties are under mistake as to
matter of fact
21. Where both the parties to an agreement are under a mistake as
to a matter of fact essential to the agreement, the agreement is void.
Explanation--An erroneous opinion as to the value of the thing which forms
the subject-matter of the agreement is not to be deemed a mistake as to a matter
of fact.
ILLUSTRATIONS
(a) A agrees to sell B a specific cargo of goods supposed to be on its way
from England to Kelang. It turns out that, before the day of the bargain, the ship
conveying the cargo had been cast away and the goods lost. Neither party was
aware of the facts. The agreement is void.
(b) A agrees to buy from B a certain horse. It turns out that the horse was
dead at the time of the bargain, though neither party was aware of the fact. The
agreement is void.
(c) A, being entitled to an estate for the life of B, agrees to sell it to C. B was
dead at the time of the agreement, but both parties were ignorant of the fact. The
agreement is void.
Effect of mistake as to law
22. A contract is not voidable because it was caused by a mistake
as to any law in force in Malaysia; but a mistake as to a law not in
force in Malaysia has the same effect as a mistake of fact.
ILLUSTRATION
A and B make a contract grounded on the erroneous belief that a particular
debt is barred by limitation: the contract is not voidable.
Contract caused by mistake of one party as to matter of fact
23. A contract is not voidable merely because it was caused by one
of the parties to it being under a mistake as to a matter of fact.
What considerations and objects are lawful, and what not
The consideration or object of an agreement is lawful, unless--
24.
(a) it is forbidden by a law;
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(b) it is of such a nature that, if permitted, it would defeat any
law;
(c) it is fraudulent;
(d) it involves or implies injury to the person or property of
another; or
(e) the court regards it as immoral, or opposed to public
policy.
In each of the above cases, the consideration or object of an
agreement is said to be unlawful. Every agreement of which the
object or consideration is unlawful is void.
ILLUSTRATIONS
(a) A agrees to sell his house to B for RM10,000. Here, B's promise to pay
the sum of RM10,000 is the consideration for A's promise to sell the house, and
A's promise to sell the house is the consideration for B's promise to pay the
RM10,000. These are lawful considerations.
(b) A promises to pay B RM1,000 at the end of six months, if C, who owes
that sum to B, fails to pay it. B promises to grant time to C accordingly. Here
the promise of each party is the consideration for the promise of the other party,
and they are lawful considerations.
(c) A promises, for a certain sum paid to him by B, to make good to B the
value of his ship if it is wrecked on a certain voyage. Here A's promise is the
consideration for B's payment, and B's payment is the consideration for A's
promise, and these are lawful considerations.
(d) A promises to maintain B's child, and B promises to pay A RM1,000
yearly for the purpose. Here the promise of each party is the consideration for
the promise of the other party. They are lawful considerations.
(e) A, B and C enter into an agreement for the division among them of gains
acquired, or to be acquired, by them by fraud. The agreement is void, as its
object is unlawful.
(f) A promises to obtain for B an employment in the public service, and B
promises to pay RM1,000 to A. The agreement is void, as the consideration for
it is unlawful.
(g) A, being agent for a landed proprietor, agrees for money, without the
knowledge of his principal, to obtain for B a lease of land belonging to his
principal. The agreement between A and B is void, as it implies a fraud by
concealment, by A, on his principal.
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25
(h) A promises B to drop a prosecution which he has instituted against B for
robbery, and B promises to restore the value of the things taken. The agreement
is void, as its object is unlawful.
(i) A's estate is sold for arrears of revenue under a written law, by which
the defaulter is prohibited from purchasing the estate. B, upon an understanding
with A, becomes the purchaser, and agrees to convey the estate to A upon
receiving from him the price which B has paid. The agreement is void, as it
renders the transaction, in effect, a purchase by the defaulter, and would so
defeat the object of the law.
(j) A, who is B's advocate, promises to exercise his influence, as such, with
B in favour of C, and C promises to pay RM1,000 to A. The agreement is void,
because it is immoral.
(k) A agrees to let her daughter to hire to B for concubinage. The agreement
is void, because it is immoral, though the letting may not be punishable under
the Penal Code.
Void Agreements
Agreements void if considerations and objects unlawful in part
25. If any part of a single consideration for one or more objects, or
any one or any part of any one of several considerations for a single
object, is unlawful, the agreement is void.
ILLUSTRATION
A promises to superintend, on behalf of B, a legal manufacture of indigo, and
an illegal traffic in other articles. B promises to pay to A a salary of RM10,000
a year. The agreement is void, the object of A's promise and the consideration
for B's promise, being in part unlawful.
Agreement without consideration, void, unless--
An agreement made without consideration is void, unless--
26.
it is in writing and registered
(a) it is expressed in writing and registered under the law (if
any) for the time being in force for the registration of such
documents, and is made on account of natural love and
affection between parties standing in a near relation to
each other;
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or is a promise to compensate for something done
(b) it is a promise to compensate, wholly or in part, a person
who has already voluntarily done something for the promisor,
or something which the promisor was legally compellable
to do; or
or is a promise to pay a debt barred by limitation law
(c) it is a promise, made in writing and signed by the person
to be charged therewith, or by his agent generally or
specially authorized in that behalf, to pay wholly or in part
a debt of which the creditor might have enforced payment
but for the law for the limitation of suits.
In any of these cases, such an agreement is a contract.
Explanation 1--Nothing in this section shall affect the validity, as between
the donor and donee, of any gift actually made.
Explanation 2--An agreement to which the consent of the promisor is freely
given is not void merely because the consideration is inadequate; but the
inadequacy of the consideration may be taken into account by the court in
determining the question whether the consent of the promisor was freely given.
ILLUSTRATIONS
(a) A promises, for no consideration, to give to B RM1, 000. This is a void
agreement,
(b) A, for natural love and affection, promises to give his son, B, RM1, 000.
A puts his promise to B into writing and registers it under a law for the time
being in force for the registration of such documents. This is a contract.
(c) A finds B's purse and gives it to him. B promises to give A RM50. This
is a contract.
(d) A supports B's infant son. B promises to pay A's expenses in so doing.
This is a contract.
(e) A owes B RM1,000, but the debt is barred by limitation. A signs a
written promise to pay B RM500 on account of the debt. This is a contract.
(f) A agrees to sell a horse worth RM1,000 for RM10. A's consent to the
agreement was freely given. The agreement is a contract notwithstanding the
inadequacy of the consideration.
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27
(g) A agrees to sell a horse worth RM1,000 for RM10. A denies that consent
to the agreement was freely given.
The inadequacy of the consideration is a fact which the court should take
into account in considering whether or not A's consent was freely given.
Agreement in restraint of marriage void
27. Every agreement in restraint of the marriage of any person,
other than a minor during his or her minority, is void.
Agreement in restraint of trade void
28. Every agreement by which anyone is restrained from exercising
a lawful profession, trade, or business of any kind, is to that extent
void.
Saving of agreement not to carry on business of which goodwill is sold
Exception 1--One who sells the goodwill of a business may agree with the
buyer to refrain carrying on a similar business, within specified local limits, so
long as the buyer, or any person deriving title to the goodwill from him, carries
on a like business therein:
Provided that such limits appear to the court reasonable, regard being had
to the nature of the business.
of agreement between partners prior to dissolution
Exception 2--Partners may, upon or in anticipation of a dissolution of the
partnership, agree that some or all of them will not carry on a business similar
to that of the partnership within such local limits as are referred to in exception
1.
or during continuance of partnership
Exception 3--Partners may agree that some one or all of them will not carry
on any business, other than that of the partnership, during the continuance of
the partnership.
Agreements in restraint of legal proceedings void
29. Every agreement, by which any party thereto is restricted
absolutely from enforcing his rights under or in respect of any
contract, by the usual legal proceedings in the ordinary tribunals, or
which limits the time within which he may thus enforce his rights,
is void to that extent.
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Saving of contract to refer to arbitration dispute that may arise
Exception 1--This section shall not render illegal a contract by which two
or more persons agree that any dispute which may arise between them in
respect of any subject or class of subjects shall be referred to arbitration, and
that only the amount awarded in the arbitration shall be recoverable in respect
of the dispute so referred.
Saving of contract to refer questions that have already arisen
Exception 2---Nor shall this section render illegal any contract in writing,
by which two or more persons agree to refer to arbitration any question between
them which has already arisen, or affect any law as to references to arbitration.
*Exception 3--Nor shall this section render illegal any contract in writing
between the Government and any person with respect to an award of a
scholarship by the Government wherein it is provided that the discretion
exercised by the Government under that contract shall be final and conclusive
and shall not be questioned by any court.
In this exception, the expression "scholarship" includes any bursary to be
awarded or tuition or examination fees to be defrayed by the Government and
the expression "Government" includes the Government of a State.
Agreements void for uncertainty
30. Agreements, the meaning of which is not certain, or capable of
being made certain, are void.
ILLUSTRATIONS
(a) A agrees to sell to B "a hundred tons of oil". There is nothing whatever
to show what kind of oil was intended. The agreement is void for uncertainty.
(b) A agrees to sell to B one hundred tons of oil of a specified description,
known as an article of commerce. There is no uncertainty here to make the
agreement void.
(c) A, who is a dealer in coconut oil only, agrees to sell to B "one hundred
tons of oil". The nature of A's trade affords an indication of the meaning of the
words, and A has entered into a contract for the sale of one hundred tons of
coconut oil.
(d) A agrees to sell to B "all the grain in my granary at Ipoh". There is no
uncertainty here to make the agreement void.
*NOTE--See AppendixContracts (Amendment) Act 1976 [Act 32a] with respect to Scholarship
Agreements.
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29
(e) A agrees to sell to B "one thousand gantangs of rice at a price to be fixed
by C". As the price is capable of being made certain, there is no uncertainty here
to make the agreement void.
(f) A agrees to sell to B "my white horse for five hundred ringgit or one
thousand ringgit". There is nothing to show which of the two prices was to be
given. The agreement is void.
Agreements by way of wager void
31. (1) Agreements by way of wager are void; and no suit shall be
brought for recovering anything alleged to be won on any wager, or
entrusted to any person to abide the result of any game or other
uncertain event on which any wager is made.
Exception in favour of certain prizes for horse racing
(2) This section shall not be deemed to render unlawful a subscription
or contribution, or agreement to subscribe or contribute, made or
entered into for or toward any plate, prize, or sum of money, of the
value or amount of five hundred ringgit or upwards, to be awarded
to the winner or winners of any horse race.
(3) Nothing in this section shall be deemed to legalise any
transaction connected with horse racing forbidden by any written
law.
PART IV
OF CONTINGENT CONTRACTS
"Contingent contract"
32. A "contingent contract" is a contract to do or not to do
something, if some event, collateral to the contract, does or does not
happen.
ILLUSTRATION
A contracts to pay B RM10,000 if B's house is burnt. This is a contingent
contract.
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Enforcement of contracts contingent on an event happening
33. (a) Contingent contracts to do or not to do anything if an
uncertain future event happens cannot be enforced by law unless and
until that event has happened.
(b) If the event becomes impossible, such contracts become void.
ILLUSTRATIONS
(a) A makes a contract with B to buy B's horse if A survives C. This contract
