Element of Contract

Element of Contract
Free Consent
Elements that may affect the free consent.
1. Coercion
Section 15 CA 1950: "Coercion is the
committing or threatening to commit any
act forbidden by Penal Code, or unlawful
detaining any property, with the intention
of causing any person to enter into an
agreement."
CASE: KESARMAL s/o LETCHMAS DAS v
VALIAPPA CHETTIAR (1954)
2. Undue Influence
Section 16(1) CA 1950: "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 position
to dominate the will of the other and uses
that position to obtain an unfair advantage
over the other"
Elements of undue influence
1. Presumption of domination
a. Holding a real or apparent authority.
b. Standing in a fiduciary relation
2. Effect of undue influence in a contract
The contract is voidable.
3. Fraud
Elements of fraud
1. There must be a false representation or
statement.
2. It was given by one party to another with
intention to deceive.
3. The representee must have relied on the
representation.
CASE: KHENG CHWEE LIAN v WONG TAK
THONG (1983)
CASE: LETCHEMY ARUMUGAM v
ANNAMALAY (1982)
Effect of fraud in contract
Section 19(1) CA 1950: "When consent is
caused by fraud, the agreement is
voidable."
Section 17 CA 1950: "Fraud include any
following acts committed by a party to a
contract with intent to deceived other
party: a) the suggestion as to a fact, which
is not true; b) the active concealment of a
fact; c) a promise made without any
intention of performing it; d) any other act
fitted to deceive; e) any such act the law
specially declares to be fraudulent."
CASE: DERRY v PEEK (1889)
4. Misrepresentation
Elements of misrepresentation:
1. There must be a false represeentation,
either through a positive statement or
some conduct.
2. The representor was innoncent to
deceive.
3. The representation must be one of fact ,
not mere expression of opinion.
4. The statement was addressed to party
misled.
5. The representation must induce the
misled party to enter into the contract.
Section 18 CA 1950: "Misrepresentation
includes: a) The positive assertion, which is
not true, though he believes it to be true; b)
any breach of duty which, without an intent
to deceive by misleading another to his
prejudice; c) causing , however innocently, a
party to an agreement to make a mistake
as to the substance which is subject of the
agreement."
5. Mistake
Elements of mistake
1. Mistake as to the existence of the subject
matter of the contract.
2. Mistake as to the identity of the subject
matter, both parties at cross-purposes.
CASE: RAFFLES v WICHELHAUS (1864)
3. Mistake as to the possibility of
performing the contract.
CASE: SHEIKH BROTHERS LTD v OCHSNER
(1957)
Effect of mutual mistake in contract
Section 66 CA 1950: "When an agreement
is discovered to be void, any person who
received any advantage is bound to restore
it or to make compensation for it to the
person from whom he received it."
Unilateral mistake
Section 23 CA 1950: "A contract is not
voidable merely because it was caused by
one of the parties to it begin under a
mistake as to a matter of fact."
Section 21 CA 1950: "Where both parties to
an agreement are under a mistake as to a
matter of fact essential to the agreement,
the agreement is void."
Certainty
Section 30 CA 1950: "Agreements, the
meaning of which is not certain, or capable
of being made certain, are void."
Element of making valid contracts is
contract must be certain, definite, clear and
detail.
CASE: KARUPPAN CHETTY v SUAH THIAN
(1916)
Intention to Create Legal
Relation
1. Commercial or Business agreement.
Concerns with profit making and making
money out of something. For example;
selling/ hiring/ renting something.
CASE: LOW KAR YIT v MOHD ISA (1963)
CASE: LIM KENG SEONG v YEO AH TEE
(1983)
2. Social, Domestic and Family agreement.
Not involving any business or profit making
activities which normally between family
members or friend.
CASE: BALFOUR v BAL8FOUR (1919)
CASE: MERRITT v MERRITT (1970)
The Act is silent on this matter.
Consideration
Definition
Consideration is act or promise that done
by one party as required by the other party
in return for his promise.
Section 2(d) CA 1950: "When, at the desire
of promisor, the promisee or any other
person has done or abstained from doing
or does or promises something, such act is
called consideration,"
Categories of consideration
1. Executory Consideration
Promise in return to a promise : it is when a
person promise to do something in return
for his promise the other party promises to
do something.
Section 24 CA 1950
CASE: K.MURUGESU v NADARAJAH
2. Executed Consideration
Performance of an act in return to a
promise: It is when the other party
performs the act as required by promisor.
CASE: CARLILL v CARBOLIC SMOKE BALL
CO (1893)
3. Past Consideration
Past act in return to a promise:
Consideration complete before the promise
is made.
CASE: LAMPLEIGH v BRATHWAT (1615)
CASE: KEPONG PROSPECTING LTD v
A.E.SCHMIDT (1968)
Requirement of Consideration
1. Contract made on account of natural
love and affection.
Section 26 CA 1950
CASE: RE TAN SOH SIM (1951)
2. Contract to compensate a past voluntary
Act.
CASE: J.M.WOTHERSPOON & CO LTD v
HENRY AGENCY HOUSE (1962)
3. Contract to compensate for act, which
promisor was legally compellable to do.
4. Contract to pay a statute-barred debt
Rules governing consideration
1. Adequacy of consideration
CASE: PHANG SWEE KIM v BEH I HOCK
(1964)
CASE: BOLTON v MADDEN (1873)
2. Consideration not necessarily must come
from the promisee
CASE: VENKATA CHINNAYA v
VERIKATARAMAYA
3. Waiver of performance
A. English Law
CASE: PINNEL'S CASE (1602)
B. Malaysian Law
CASE: PAN AH BA & ANOR v NANYANG
CONSTRUCTION SDN BHD (1969)
Methods of Waiver of Performance
1. Payment of smaller sum in discharge of a
larger sum.
2 Part payment by a 3rd party in discharge
of a debt.
3. If a person accepts an agreed sum in
satisfaction of an unascertained debt, that
debt is discharge.
4. Composition with creditors for the
payment of a smaller sum.
Capacity
Requirement as to capacity
Competent
1. An adult
2. Sound mind
3. Not disqualified from contracting by any
law.
Not Competent
1. Minor or children
Valid contract for minor fall under following
exception:
A. Contracts for necessaries
B, Beneficial contracts or contracts of
apprenticeship.
C Contracts of scholarships
D, Contracts for insurance
E. Contracts made under the age of
Majority Act 1971
2. Insane or drunken person
Section 11 CA 1950: "Every person is
competent to contract who is .. of sound
mind.. "
3. Bankrupts or insolvents
Section 10(1) CA 1950: "All agreements are
contract if they are made by parties
competent to contract."
Acceptance
Definition: When offeree agrees or accepts
the offer made by the offeror.
Section 2(b) CA 1950: "When the person to
whom the proposal is made signifies his
assent... the proposal is said to be
accepted."
Conditions of a valid acceptance
Acceptance must be absolute and
unqualified.
Section 7(a) CA 1950: "The acceptance must
be absolute and unqualified."
CASE: HYDE v WRENCH (1840)
CASE exceptions: STEVENSON JAQUES v
MCLEAN (1880)
Acceptance must be communicated in
some ' usual & reasonable manner'
Section 7(b) CA 1950: "... the acceptance
must be expressd in some usual and
reasonable manner, unless the proposal
prescribes the manner in whhich it is to be
accepted... " ; "... if the proposal prescribes a
manner and the acceptance is not made in
that manner, the proposer may, within a
reasonable time.., insists the prescribes
manner bbut if he fails to do so, he accepts
the acceptance."
CASE: ELIASON v HENSHAW (1819)
CASE: WETTERN ELECTRIC v WELSH
DEVELOPMENT AGENCY (1983)
Mode of accceptance
Acceptance must be communicated
Section 3 CA 1950: "The communication of
acceptance are deemed to be made by any
act of the party , which he intends to
communicate the acceptance."
CASE: POWELL v LEE (1908)
Silence is not an acceptance
CASE: FRASER v EVERETT (1889)
CASE: FELTHOUSE v BINDLEY (1862)
EXCEPTIONS:
Unilateral Contract: When offeror dispensed
with or waived the need of communication
of acceptance.
CASE: ERRINGTON v ERRINGTON
General Offer: When there is an offer to the
public
Reciprocal Promises: Form the
consideration for the promises
each other party to the
contract
Section 2(f) CA 1950: "Promises which
form the consideration for each other
are called reciprocal promises."
Section 8 CA 1950: "... the acceptance of
any consideration for a reciprocal promise
is acceptance of the proposal."
Acceptance through post: Acceptance
through post complete when the letter of
acceptance is posed, even though it not
come to the actual knowledge by the
offeror.
Section 4(2) CA 1950: "The communication
of an acceptance is complete as against the
proposer, when it is put in a course of
transmission to him."
CASE: ENTORES LLTD v MILES FAR EAST
CORP. (1955)
CASE: IGNATIUS v BELL (1913)
Offer
Definition
When a person promise or proposes
something to another party with the
intention that his promise or proposal
would be accepted by that other party.
Section 2(a) CA 1950: "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... he said to make a proposal."
How to make an offer
Express: The offer made in word clearly in
writing or verbally.
Implied: The offer implied from the conduct
of the parties and no word being used in
the offer.
Section 9 CA 1950: "So far as the proposal
is made in words, the promise is said to be
express. So far as the proposal is made
otherwise than in words, the promise is
implied. "
Types of offer
A) Specific Offer: The offer is addressed to
specific or particular person. The person is
known as offeror.
A) CASE : BOULTON v JONES (1857)
B) General Offer: The offer is addressed to
the public large.
B) CASE : CARLILL v CARBOLIC SMOKE
BALL CO (1893)
Section 2(b) CA 1950
Condition of vallid offer
A) An offer must be ceertain
CASE: GUTHING v LYNN(1831)
B) An offer must be communicated
Section 2(a) CA 1950 and Section 4(1) CA
1950 : "The communication of proposal is
complete when it comes to the knowledge
of the person to whom it is made."
CASE : TAYLOR v LAIRD (1856)
CASE: R v CLARKE (1927)
Offer distinguished from ITT
Advertisement
CASE: HARRIS v NICKERSON (1873)
CASE : COELHO v THE PUBLIC SERVICES
COMMISSION (1964)
CASE: CARLILL v CARBOLIC SMOKE BALL
CO (1893)
Display of Goods in a Self-service Shop
CASE: PHARMACEUTICAL SOCIETY OF
GREAT BRITAIN v BOOTS CASH CHEMIST
LTD (1953)
CASE: FISHER v BELL (1960)
Tender
CASE: SPENCER v HARDING (1870)
Price lis or Quotation
CASE: HARVEY v FACEY (1893)
CASE: PRESTON CORPORATION SDN BHD
v EDWARD LEONG & OTHERS
Auctioneer Inviting Bids
Section 10 of the Auction Sales Act: "A sale
bu public auction shall be complete when
the auctioneer announces its completion by
the fall of the hammer..."
Revocation of offer
Section 5(1) CA 1950: "A proposal may be
revoked at any time before the
communication of its acceptance is
complete as against the proposer."
CASE: PAYNE v CAVE (1789)
Modes of revocation
1. By communication of notice of
revocation
a. Revocation of offer under the postal rule
Section 6(a) 1950
CASE: HENTHORN v FRASER (1892)
2. Revocation by lapse of time
Section 6(b) 1950
CASE: FRASER v EVERETT (1889)
3. Revocation by failure of the offeree to
fulfill a condition acceptance.
Section 6(c) 1950
CASE: PYM v CAMPBELL (1856)
4. Revocation by death or mental disorder
of the offeror.
Section 6(d) 1950
CASE: BRADBURY v MORGAN (1862)
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