S.15.

for duress to amount to a defence the D should be able to show that his consent to the
agreement was not free in that such consent was caused by coercion as defined by S.15. In
this case, D did not even attempt to do so.
Problematic question – undue influence

Yurariz is a newcomer in the music industry Malaysia. She promotes her songs online and
writes her songs. She has the intention to record her first album and still searching for the
right company to manage her career and produce her first album. She has no experience and
she would like to appoint a manager to manage her career path and her album. Pak Hassan,
her uncle who brought her up and took care of her, suggested his friend, Mr Eric from
Bintang Recording Sdn Bhd ("BPSB"). Pak Hassan arranged a meeting between Mr Eric and
Yurariz to discuss on this matter.

Mr Eric informed Yurariz that he has vast experience of 20 years in the music industry in
Malaysia and has managed other singers. Mr Eric suggested himself to be Yurariz's manager
and Pak Hassan convinced Yurariz to choose Mr Eric. Yurariz agrees to appoint Mr Eric to
be her manager and BPSB to produce her first album. Before the agreement is executed, Mr
Eric would often visit Yurariz at home and advise her whenever she asked for his opinion. Mr
Eric, as the manager has started to plan the career path for Yurariz.

One of the terms of the agreement is the first contract was for a period of two years, with an
option for two further periods of one year each, exercisable at the discretion of BPSB. Other
terms of the contract are pertaining to choice of genre of songs to be decided by BPSB. There
is no mention anywhere, whether Yurariz be will involved in the selection of songs to be
inserted in the album. Yurariz has not been given the time to read up the contract before she
signed it up. Mr Eric urged Yurariz to sign the agreement and if she refuse, BPSB would
offer the deal to someone else. Yurariz immediately signed the agreement.

Now, Yurariz discovers the unclear terms and would like to rescind the contract. Advise her
whether she could take action against Pak Hassan, Mr Eric and BPSB.

Ans (bless Jayson)

IS: whether contract is with free consent – no

The first issue is whether the contract entered between Yurariz and Mr Eric is entered with
the free consent of the parties.

The law applicable includes Section 10 (1) of CA 1950 in which 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.
Besides, Section 13 of CA connotes that two or more persons are said to consent when they
agree upon the same thing in the same sense. Additionally, Section 14(a) of CA provides that
consent is said to be free when it is not caused by coercion, as defined in section 15.

In application, in order for a contract to be binding, a contract must fulfill the pre- requisite
elements as being provided in Section 10(1), Section 13 and Section 14 of CA in which the
consent of the parties must be freely given. In the circumstance that Mr Eric threatened
Yurariz to enter into an agreement, his action will then affect the free consent of Yurariz in
entering the contract. However, referring to the facts given, the act of Eric not giving Yurariz
time to read the contract and urging Yurariz to sign agreement does not amount to coercion

LAKSHANA KATHIRESAN
as it does not fit the definition of coercion under Section 15 of CA namely either threating of
an act forbidden by Penal Code and unlawful detention of property. However, it should be
noted that the duress exerted by Eric towards Yurariz has affected the free consent of Yurariz
in entering the contract. Therefore, since duress is existed and the consent of the parties were
not given freely in pursuant to Section 10, 13 and 14 of CA. Thus, the contract between Eric
and Yurariz shall declare to be void.

In conclusion, it is highly likely that the contract entered between Yurariz and Mr Eric is not
entered with the free consent of the parties.

IS: whether induced to sell - yes

The second issue is whether Yurariz was induced by Eric to sell his land through the doctrine
of undue influence.

The law applicable includes Section 10 (1) of CA 1950 in which 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.
Besides, Section 13 of CA connotes that two or more persons are said to consent when they
agree upon the same thing in the same sense. Additionally, Section 14(b) of CA provides that
consent is said to be free when it is not caused by undue influence, as defined in section 16.

In application, in order for a contract to be binding, a contract must fulfill the pre- requisite
elements as being provided in Section 10(1), Section 13 and Section 14 of CA in which the
consent of the parties must be freely given. In the circumstance that Yurariz was induced by
Eric to enter into an agreement, his action will be regarded as undue influence. Thus, as being
provided under Section 14(b) of CA, the lack of free consent by the parties through undue
influence will render the contract to be void. Referring to the facts given, the act of Eric
advises Yurariz to sign the agreement with BPSB amounts to undue influence as the free
consent of the parties have yet to be reached. Since an undue influence is existed in the
contract and the consent of Yurariz was not given freely in pursuant to Section 10, 13 and 14
of CA. Thus, the contract between Yurariz and Eric shall declare to be void through the
virtue of Section 10 of CA.

Moreover, with regards to the doctrine of undue influence, it arises when there was an
existing special relationship of trust and confidence between the parties at the time of the gift
or contract. The relationship had grown and developed over a period of time before the
making of the disputed transaction. In Malaysia position, Section 16(1) of CA states that the
elements of Undue Influence in which the wrongdoer was in a dominant position in his
relationship with the complainant, the wrongdoer utilised that dominant position to obtain the
transaction and the transaction was unfair to the complainant.

In the case of Allcard v Skinner, undue influence is the victimisation of one party by the
other. He is entitled to set the transaction aside by actually proving that there is unfair undue
influence to obtain the transaction. However, in the recent Malaysian High Court case of
Lesley Chan Siew Yoke v RHB Bank Berhad, it was decided that courts do not readily
invoke the doctrine of presumption on mere allegation of undue influence. Therefore, in order
to prove the allegation of undue influence, the actual and presumed undue influenced must be
taken into consideration.
With regards to actual undue influence, the innocent party must establish the actual proof of
evidence along with affirmation and the elements of actual undue influence under Section
16(1) of CA in which one of the parties is in position to dominate the will of another and the
dominant person use the position to obtain unfair advantage from another party.

In the case of Poosathurai v Kannappa Chettiar & Ors, the Privy Council held that it is not
sufficient to have mere-influence but the influence must be "undue" in that the dominant
person has used his position to obtain an unfair advantage. Thus, both elements under Section
16(1) of CA must be satisfied.

Referring to the situation above, the relations between the Yurariz and Eric is such that Eric
is in a position to control the will of Yurariz and he had utilized that dominant position to
gain unfair advantage over Yurariz by advising him to sign an agreement with BPSB without
clarifying the terms and conditions stipulated in the contract. Through this, it is established
that Eric is in the position to dominate the will of Yurariz as Yurariz has full trust and
confidence on Eric who often visit Yurariz at home and advise her whenever she asked his
opinion. Eric, by possessing the dominant position over Yurariz had then obtain advantage
over Yurariz by unduly influencing him to sign an agreemnt with BPSB without reading the
terms in the agreement.

Through the facts of the case, the contract is said to be induced by 'indecent influence' where
the connections between the parties are such that one of the parties is in a situation to exercise
control over the other and uses that stance to acquire an unfair benefit over another. This is
because Yurariz has largely dependent on Mr Eric in giving her advice and this had led Mr
Eric who is her manager to exercise control over Yurariz and uses that stance to acquire an
unfair benefit over Yurariz. Therefore, since both elements of actual undue influenced as
being spelled out in Section 16(1) of CA are satisfied, it has shown that Eric has unduly
induced Yurariz in entering the contract in pursuant to the case of Poosathurai v Kannappa
Chettiar & Ors.

On the other hand, if this were brought under common law position, the presumed undue
influence will be utilised in the event that the victim could not actually prove the use of
undue influence by the dominant party. According to Section 16(2)(a) of CA, a person is
deemed to be in a position dominating the will of another where a person holds a real or
apparent authority over the other or there is an existence of fiduciary relationship.

Referring to the situation above, Eric has entered into a contract with Yurariz. Eric, acting as
an advisor to Yurariz has then fall under Class (2B) in which there is an actual existence of
relationship where trust & confidence is in existence. By possessing the trust & confidence
over Yurariz who is a newcomer to the music industry with very littlle knwoledge about the
industry, Eric had abused the trust & confidence by inducing Yurariz insigning the agreement
with BPSB without reading the terms of the agreement. As such, it can be seen that the
failure of Eric in taking care the advantage of Yurariz while while acting as Yurariz’s
manager by further clarifying the terms in the contract has then abused the trust & confidence
given by Yurariz.

Moroever, in Polygram Records SB v The Search, a contract was entered between the group
& Eric Yeoh with the duration of 2 years, exercisable at the discretion of the plaintiff & not
the group. However, the group entered into new contract due to some changes in the group.
The contracts may seem similar but there was major modification, and the group claimed that
it was not brought to their attention. They therefore made recording of album under a new
company and was sued by Eric. The group claimed UI. The court held that regarding the 1st

LAKSHANA KATHIRESAN
contract, there was no misrepresentation & UI, and regarding the 2nd one, there was evidence
to show that there existed close relationship, built in trust and confidence among the group &
Eric, hence he possessed UI.

In applying the case of Polygram to the current situation, it is established that there is an
existence of trust & confidence relationship between Yurariz and Eric. However, Eric had
abused such relationship by inducing Yurariz who believes and have full confidence over him
to sign the contract without giving her time to read the agreement. Thus, through the virtue of
this case, it can be seen that when there is an existence of close, built in trust relationship
between the parties, Eric who abuse such relationship is deemed to have influence dYurariz
unduly.

Similarly, iIn the case of Tong Seng Din Bon & Anor v Ban Chap Ah Seng, the Court
dismissed the distribution of assets from the first and second plaintiffs to the defendant on
terms of excessive control. Evidence revealed that the defendant had thoroughly won over the
affection and faith of both the plaintiffs, who were an elderly childless couple, to such a
degree that the defendant was regarded as their son. The defendant, who was in a position of
active trust on the part of the plaintiffs, had subtly exercised excessive control over them.

With regards to the situation above, Eric had completely won over the affection and trust of
the newcomer of music industry, Yurariz. Eric, who had been in the position of active trust of
Yurariz, had subtly exercised undue control over them by inducing him tosign the agreement
with BPSB without going throiugh the terms and condition in the agreement. Therefore, since
Eric has abused his trust and confidence relationship over Yurariz, pursuant to the case of
Tong Seng Din Bon, he is said to exercised undue influence over Yurariz.

In conclusion, Yurariz was induced by Eric to enter into the agreement with BPSB through
the doctrine of undue influence.

IS: whether defaulting party bears burden of proof over innocent party - yes

The second issue is whether Eric who is the defaulting party bears the burden of proof over
Yurariz who is an innocent party.

According to Section 16(3)(a) of CA, 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. In
Raghunath Prasad v Sarju Prasad, it was held that the party who is being accused of exerting
undue influence over the complainant has to prove that he does not do so.

Referring to the facts given, in the circumstance that Eric is in a position to control the will of
Yurariz and unduly influence him in entering a contract and the undue influence is proven, as
being provided in Section 16(3)(a) of CA and the case of Raghunath, the burden of proof that
the contract was not caused by undue interference will then lie on Eric who is in the position
dominating the will of Yurariz.

Nevertheless, Eric as the defaulting party may also rebut the presumption of undue influence.
The rebut of undue influence can be raised through the prove that the other party has acted of
his own free will is to show that legal advice had been obtained before the complainant
signed the alleged document. However, the fact that legal advice had been obtained will not,
in itself, necessarily rebut any presumption of undue influence.
In Inche Noriah v Shaik Allie bin Omar (Appeal from Singapore), the appellant has conveyed
her property to the respondent absolutely during her lifetime. The respondent is the
appellant’s nephew by marriage. The court held that although the appellant has received
independent legal advice from solicitor, the solicitor gains most of appellant’s information
via the respondent. Hence the independent legal advice received by the appellant does not
rebut the presumption of undue influence.

Refer to the situation above, it is established that Yurariz did not recive any forms of
independent legal advice from any parties as Eric has constrained her to sign the contract
immediately. As such, it can be seen that there is an absence of legal advice received from
Yurariz in clarfying her position and obligation in the agreement with BPSB. Hence, it is
believed that Yurariz who put all his trust on Eric had not brought to the attention as to the
consequences of the contract. Therefore, since Yurariz did not receive any forms of
independent advice prior entering the contract, the rebuttal of presumed undue influence
cannot be successfully established through the case of Inche Noriah.

Similarly, in Pengiran Othman Shah bin Pengiran Mohd Yusoff v Karambunai Resorts SB, it
was held that since there was independent legal advice seek, hence the appellant is able to
prove there was no undue influence.

Referring to the situation given, in order for Eric to prove the contract was entered through
the free consent of parties, it is obliged for Eric to show Yurariz has received independent
legal advices. Through the judgement laid down in Pengiran Othman Shah, in the
circumstance where there existed an independent legal advice on the part of Yurariz, Eric
could possibly rebut the presumption of undue influence on the ground that the contract
entered between he and Yurariz is of the free will of the party as legal advices have been
obtained by Yurariz. However, due to the fact that there is an absence in obtaining legal
advice and Yurariz had put all his faith and trust on Eric, thus, Eric could have influenced
Yurariz unduly and the contract between them shall not be voidable as a result of undue
influence.

Moreover, Section 16(3)(a) of CA further provides that where a person who is in a position to
dominate the will of another, 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.

In applying Section 16(3)(a) of CA to the current circumstance, it is alleged that Eric was in
the position of dominating the will of Yurariz. Therefore, the burden of proof lies within Eric
in proving the contract was not induced by undue influence and the free will of Yurariz was
freely given upon entering the contract.

In conclusion, Eric who is the defaulting party bears the burden of proof over Yurariz who is
an innocent party.

IS: innocent party can claim damages - yes

The third issue is whether Yurariz as the innocent party is entitled to claim remedies over
Eric as a defaulting party.

According to Section 20 of CA, where the assent of a party to a contract has been triggered
by undue influence, the contract shall be null and void at the alternative of that party.
Moreover, Section 65 of CA further states that when a party decides to rescind an invalid

LAKSHANA KATHIRESAN
contract, the other party does not need to do so. The party that relinquishes it if it receives
any advantages, restores it. Section 2 (j) provides that a contract which ceases to be legally
enforceable becomes null and void when it fails to be enforceable. S66 contains that if an
agreement is found to be void, or if the contract has become void, any person who has
received any benefit under the agreement or contract is obligated to regain it or compensate
the person from whom it is obtained.

In the case of Tengku Abdullah ibn Sultan Abu Bakar & Ors v Mohd Latiff bin Shah Mohd
&Ors and other appeals, Gopal Sri Ram JCA stated: "The impact of undue influence on the
contract is laid down in s. 20(1) of CA. The remedy available for an innocent party to be
relieved of all its obligations under a contract of undue influence is revocation. The
conditions in which that remedy may arise in the case of a contract are set out in s 34(1) of
the Specific Relief Act.." It should be noted that there is no ban in the Act [Special Relief
Act] against the granting of any other kind of remedy to a party which seeks to resolve the
wrong committed against it by another party as a result of the exercise of undue influence in
the broader sense that we discussed earlier.

Referring to the facts given, the signing of agreement with BPSB by Yurariz was affected by
the undue influence of Eric, thus, the agreement becomes a null and voidable at the
alternative of Yurariz as being set out in Section 20 of CA. The usual remedy by which an
innocent party may relieve himself of all his obligations under a contract procured by undue
influence is rescission. Pursuant to Section 65 of CA, Yurariz’s consent to an agreement has
been caused by undue influence, thus, the agreement is a voidable at the option of Yurariz.
Hence, Yurariz as the innocent party has the option to rescind it and the contract may have
been set aside either absolutely or upon such terms and conditions as the court may deem.
Hence, since the sale and purchase agreement were under the undue influence, the parties
have the choice to either rescind or affirm the contract.

Furthermore, after the contract becomes null and void, it will become impossible to be
enforced by law and thus void as provided for in S2 (j). Pursuant to S66 of CA, when a
contract is found to be void or to be void, both Yurariz and Eric are obligated and bound to
regain or compensate for any advantage that either of them has obtained under the contract to
the person from whom it was received.

In conclusion, it is highly likely that Yurariz as the innocent party is entitled to claim
remedies over Eric as a defaulting party.

Abu approaches Ali to negotiate for the purchase of Ali’s car, but Ali appears unwilling to
sell it. Abu, however, tells Ali that he has knowledge of Ali’s history of imprisonment due to
his past criminal activities, and threatens to reveal the secret to Ali’s employers, if Ali refuses
to sell the car to him. Feeling pressured by the threat, Ali reluctantly sells the car to Abu. Ali
now wants to rescind the contract on the ground of coercion.

Advise Ali.

Problematic question – coercion (present/not present based on 1st limb of S15)

IS: whether coerced into contract (NO)