TOPIC 2:

LAW OF CONTRACT

(LAW 416 BUSINESS LAW)

1
Table of contents
1. What is contract?
2. Elements of contracts:
i) Offer/Proposal
ii) Acceptance
iii) Consideration
iv) Intention to create legal relation
v) Certainty

2
Table of contents
 vii) Free consent

3. Discharge of contract
4. Remedies of Contract

3
WHAT IS A CONTRACT?

 Section 2(h) of the Contract Act:

A contract is an agreement enforceable by

law.

It means a contract is an agreement

which is legally binding between the
parties

4
All contracts are agreement, but not all
agreement are contract. In order for an
agreement to become a contract, there
are certain elements to be fulfilled:-
 1. Proposal/ Offer 2. Acceptance
3.Consideration
4. Intention to create legal relations
5. Certainty
6. Legal capacity
7. Free Consent
5
OFFER/PROPOSAL

6
PROPOSAL/OFFER

Section 2 (a) of the Contract Act:

An offer is a proposal made by the offeror

7
The Difference Between Invitation to
treat and Offer

Sometimes, when a person offers

something to you, it may not always mean
that it is a proposal/ an offer. This may
happen when the offer is actually inviting
you to make the proposal. When this
situation happen, it is known as invitation
to treat.

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INVITATION TO TREAT
 An invitation to treat is not a proposal,
but a sort of preliminary communication
which passes between the parties at the
stage of negotiation.

9
An invitation to treat must be
distinguished from proposal.
 This is because when there is a proposal and
the proposal is accepted , it constitutes an
agreement.

 On the other hand, when there is an invitation

to treat, it is not yet a proposal. The person
who accepts the invitation to treat is actually
the person making the proposal. When the
person who is making the invitation to treat ,
accepts the proposal, there is an agreement.

10
Examples of invitation to treat

 a price list,
 a display of goods with price tags in
a supermarket,
 an advertisement
 an auctioneer inviting bids for a
particular article.

11
Harris v Nickerson
 Held: An Advertisement is an invitation to
treat

12
Display of goods in supermarket
Pharmaceutical Society of Great Britain v Boots Cash
Chemist limited [1953] 1QB 401
 Facts:-

 Boots cash Chemist ltd (Defendants) were charged under

the Pharmacy and Poison Act 1933 UK which provides that
it was unlawful to sell certain poison unless such sale was
supervised by a registered pharmacist.

 Issue:
 whether the display of goods on the shelves constituted
an offer?

13
 The court ruled that the goods displayed was only
an invitation to treat.

 A proposal to buy made when the customer

placed the article in the basket. Acceptance of
this sale is only made when the cashier receives
the money from the customer.

 That being the principle, since there was a

registered pharmacist at the cashier, the shop
owners was not liable.
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 COMMUNICATION
OF PROPOSAL
 A proposal must be communicated to
the acceptor before it can be
accepted.

 The communication of offer is complete

when it comes to the knowledge of the
person to whom it is made. (Sec 4(1) )

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 A proposal is said to have been
communicated only if the party who
accepts it knew about the proposal.

 If a party accepting the proposal is not

aware about the proposal, then there is no
contract.

16
 To whom can a proposal be made?

 Proposal can be made either to :-

 particular person
 general public

17
TERMINATION OF PROPOSAL
 COULD BE MADE BY:
i) Counter offer
ii) Revocation
iii) Rejection of offer

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ACCEPTANCE

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2. ACCEPTANCE
 Section 2 (b) of the Contract Act:

 when the person to whom the proposal is

made signifies his assent thereto, the proposal
is said to be accepted.

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General Rule of Acceptance

 Acceptance of a proposal must be

communicated to the proposer in order
to create a binding contract between
parties.

21
Elements of Acceptance
 1. The acceptance must be absolute
and unqualified (Sec 7(a) ).

 If the parties are still negotiating, an

agreement is not yet formed.

 The acceptor must accept to the exact

terms proposed by the offeror/proposer
without any modifications or variation.
22
 if he introduces a new term, he is
making a counter-offer.

 the effect of counter-offer is it

destroys the original offer.

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Case: Hyde v Wrench [1804]

Facts: Defendant offered to sell his

estate to the Plaintiff for $1000.In
reply the Plaintiff made a counter
proposal to purchase at $950.

Held: there was no contract exist

between them.
24
Elements of acceptance
2. Acceptance may be expressed in some
usual and reasonable manner unless
proposal prescribes a manner in which it
is to be accepted.

3. An acceptance must be made within a

reasonable period (Section 6 (b) )

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Communication of an acceptance
 Acceptance only effective when it has
been communicated.
The communication can be by word of
mouth (eg: telephone), letters, telex,
facsimile or by recorded message.
Eg: Acceptance is to be communicated in
counter offer

26
EXCEPTIONS WHERE AN
ACCEPTANCE NEED NOT TO BE
COMMUNICATED
 The acceptance is not to be communicated in the
following situations:

 A) reciprocal promise
 B) acceptance through post
 C) offer to public

 The law recognizes that acceptance may be

implied from conduct .

27
Case: Carbill v carbolic Smoke Ball co
(1893) 1QB 256
(Acceptance by conduct/performance)
 Facts: The Defendant made an
advertisement in the newspaper that they
would offer a sum of money to anyone
who would still suffer from flu after using
their product, according to the
instructions.

 The Plaintiff used the product according to

the instructions but still became ill.

28
 The Plaintiff asked for the sum of money that the
Defendant has promised but the Defendant
refused to pay.

 Defendant argued that there is no valid contract

because the Plaintiff did not communicate his
acceptance to them.

 Court held: The Plaintiff had accepted the offer

the company made to the world at large by
performance (by using the Defendant’s product).
Therefore he is entitled to the money.

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ACCEPTANCE THROUGH POST (POSTAL
RULE)

S.4(2) - exception to the

general rule.

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The Postal Rule.
 S. 4(2) (a) - the communication of
acceptance is complete as against:

 proposer: when it is put in a course

of transmission to him, so as to be
out of the power of the acceptor;

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 S. 4(2) b : the communication
of acceptance is complete as
against:

 acceptor:when it comes to
the knowledge of the
proposer.
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EXAMPLE:
You accepts Mr X’s proposal by a letter sent
by post.
 In this situation, the communication of the
acceptance is complete:
 As against Mr X, when the letter is
posted;
 As against you, when the letter is
received by Mr X.

33
Case: Ignatius v Bell [1913]

In this case, the letter of acceptance was

not delivered by the postman but
remained in the post office. The court held
that acceptance was complete upon
posting.

Here acceptance is complete in case of

acceptance through post upon posting.

34
 However, postal rule does not apply to
instantaneous circumstances such as
telephone, telex and telefax.

 An acceptance made by these modes must

actually come to the knowledge of the
offeror/proposer to be effective and form
a binding contract.

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 REVOCATION OF OFFER/
PROPOSAL
AND
REVOCATION OF ACCEPTANCE

36
 REVOCATION

 Revocation of proposal/offer

 Section 5 (1) of the Contract Act:-

A proposal may be revoked at any time
before the communication of its
acceptance is complete as against the
proposer, but not afterwards.

37
 Revocation of Acceptance

 Section 5(2) of the Contract Acts

 An acceptance may be revoked at any time
before the communication of the acceptance is
complete as against the acceptor, but not
afterwards.

 Example:-
 Mr A propose by letter sent by post to sell his
lap top to Mr B . Mr B accepts the proposal by
letter sent by post. Mr B may revoke his
acceptance at any time before or at the
moment when the letter communicating it
reaches Mr A, but not afterwards.

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CONSIDERATION

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 Considerationis a price paid
by each party for the promise
of the other.

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 As a general rule under Section 26:
“Agreement without consideration is
void.”

This means that if it is only the promisor

who give something to the promise, but
the promisee does not give something in
return, therefore the agreement is void.

41
 For instance:-

 A agree to sell his house to B for

RM100,000.00. Here, B’s promise to pay
the sum of RM100,000.00 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 RM100,000.00. These are
lawful consideration.

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ELEMENTS OF
CONSIDERATION
1) Consideration Need not be Adequate
As a general rule, consideration must be
sufficient.

 Section 26 Explanation 2: An Agreement

is not void merely because the
consideration is inadequate.

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Phang Swee Kim v Beh I Hock (1964) MLJ 383

 Facts:
 Appellant agreed to buy a land from the
respondent for the price of RM500.00 although
the land was worth more.
 Respondent later refused to honor the promise
arguing that the promise was unenforceable
because of the inadequacy of consideration.
 Fed Court held: The consideration was adequate
because the Respondent has agreed to transfer
the Land to the Appellant for RM500.00. There
was a valid contract.
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2)Past consideration is a good
consideration

Kepong Prospecting Ltd v Schmidt [1968]

1 MLJ 170

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EXCEPTIONS TO THE GENERAL RULE THAT A
CONTRACT MUST EXIST WITH CONSIDERATION

 There are 4 exceptions to this general rule. Under this

exception, absence of consideration will not make the
agreement void. They are:-

 1. CONTRACTS RELATED TO NATURAL LOVE AND

AFFECTION.
 2. AN AGREEMENT TO COMPENSATE FOR A PAST
VOLUNTARY ACT.

 3. AN AGREEMENT TO COMPENSATE A PERSON WHO

DID AN ACT WHICH THE PROMISOR WAS LEGALLY
COMPELLABLE TO DO.

 4. AN AGREEMENT TO PAY A STATUTE-BARRED DEBT.

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1) An agreement that is made out of
love & affection (s.26(a)

Under this exception an agreement is

valid although there is no consideration
being exchange between the parties of
the contract.

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 For agreement to be valid under this exception, it
must be made according to the following
conditions:-

1) The agreement must be made in writing

2) The agreement must be registered
3) It must be made because of natural love and
affection between parties standing in near
relation to each other.

 Eg: members of your immediate family i.e

your mother, father, son, sister.
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 ii) An agreement to compensate for a
past voluntary Act (S 26(b)

 Under this exception the promisor

promised to give the promisee something
because the promisee has done something
voluntarily before the promise was made.

49
 When this happens, the promise made by
the promisor is valid although there was
no consideration on the promisee’s part.
In the event the promisor did not do what
he had promised, the promisee can sue
him for breach of promise.

50
 Eg: Hassan found Ani’s handphone and
return the handphone to her. Ani promise
to give Hassan RM50.00 In the event Ani
failed to give Hassan RM100.00, Hassan
can bring an action against Ani because
the promise made by Ani is valid although
Hassan did not give any consideration
AFTER Ani has made the promise.

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 iii) Agreement to compensate an act
the Promisor was legally compelled
to do (S26(b))
 In order to use this exception, there are
three conditions to be fulfilled:-
i) The promisee has voluntarily done an
act
ii) The act that was done by the promisee
was actually an act that the promisor
himself was legally bound to do; and
iii) The agreement must be to
compensate the promise either wholly
or partly, for what the promisee had52

done.
 For instance:
 You have look after your neighbour’s
infant son while he was away on a holiday.
When they came back, they promised to
compensate you for the expenses that you
have incurred. In this situation, if they
failed to give you compensation , you can
take an action against them for breach of
promise.

53
iv) An agreement to pay a statute
Barred debt (Section 26 (c).
What is statute Barred debt?

 A debt which can’t be recovered

through legal action because of a
lapse of time fixed by law.

 e.g. for contract, you cant take matter

to court after 6 years from the time the
cause of action arise.
54
 However, although a debt cannot be recovered if
it is statute barred, a creditor can do so if it falls
under these 2 conditions:-

 a) FRESH PROMISE- There is a promise made by

the debtor to pay the statute barred debt, after
the lapse of 6 years, either wholly or in part of
the debt.
 b) PROMISE MUST BE IN WRITING AND
SIGNED.

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INTENTION TO CREATE
LEGAL RELATIONS

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 INTENTION TO CREATE A LEGAL
RELATION

POINTS:
Mere fact of an agreement does not itself
create a binding legal contract.

Intention is needed to prove a binding legal

contract.

For an agreement to be a contract, there must

be intention between the parties that they want
to enter into a legal relationship between them.

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PRESUMPTIONS:
 BUSINESS AGREEMENT – Intend legal
consequences

 2) DOMESTIC, SOCIAL OR FAMILY

AGREEMENT – implied – no legal relations
are contemplated but may be rebuttable.

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(1) Business/Commercial
Agreement

 Under the agreement made in business

transaction, it is always presume that
the parties have the intention to create
legal relation, unless proved otherwise.

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(2) Domestic Agreement

 Domestic agreement normally does not

constitute a legally binding agreement.

 This is because the parties have no

intention to create legal relation.

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Balfour v Balfour (1919) 2 KB 571

Principle: there is no legal intention

to create legal relation between two
spouses.
 Fact: The Defendant husband was a civil
servant stationed in Sri Lanka. When he
was in England, he had promised his wife
that he will pay her a monthly allowance
as maintenance. The wife was unable to
accompany the husband to Sri Lanka due
to ill health.
61
 The Defendant did not give the Plaintiff the
monthly allowance as maintenance. The wife
(Plaintiff) brings an action against the
Defendant for breach of contract.

The court held:

The agreement entered into between Plaintiff and
Defendant was not legally enforced agreement
because the parties did not intend to be a legally
binding agreement.

62
 However, not all social, domestic or family
agreement are not legally enforceable.

 In the case of Merit v Merit [1970],

 Facts:The husband left matrimonial home . The

house was under joint name between Plaintiff
and Defendant and subjected to mortgage.

 Husband and wife had discussion and decided

that the husband agreed to pay the wife 40
pounds a month for the purpose of paying the
outstanding mortgage payments. When the
payment is completed, the husband would
transfer the property to her. 63
 The agreement was made in writing on a paper
and the husband signed it. After the payment is
completed, the husband refused to transfer the
property to the wife.

 The court held:

In the light of all the surrounding circumstances,
the parties had the intention to create legal
relations. Therefore the court ordered that the
house be transferred to the wife.

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CERTAINTY OF
CONTRACT

65
CERTAINTY OF CONTRACT
 The terms of a contract must be certain
and not vague. An agreement which is not
certain or is not capable of being made
certain is void. (S.30 of C.A)

KARUPPAN CHETTY V. SUAH THIAN

 The parties agreed to lease of RM35
per month “for as long as he likes.”
Held: the contract was void.
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LEGAL CAPACITY

67
 LEGAL CAPACITY

 Section 10 (1) of Contract Act:-

 All agreements are contract if they are
made by the free consent of the
parties competent to contract , for
a lawful consideration and with a lawful
object and are not hereby expressly
declared void

68
Who are competent to contract?

 Section 11 of Contract Act:-

 Every person is competent to contract who

is of the age of majority according to the
law which he is subject and who is of
sound mind, and not disqualified from
contracting by any law to which he is
subject.

69
 Age of majority
 The age of majority is 18 years old. This is
provided by the age of Majority Act 1971.

 Those below 18 known as the minor.

 The general rule is that all contracts entered by

a minor are void.
 The contractual incapacity of a minor is regarded
as a protection of the minor against the
consequences of its own actions and presumed
lack of judgment in such a case.
70
CASE: TAN HEE JUAN V.
TEH BOON KIAT
 Issue:
 whether the contract between Tan and
Teh was void because Tan was a
minor?
 Held: the contract between them was
void.

71
 Although only those who are 18 years
and above can enter into a contract,
there are situations when minor are
bound by the contract they have entered
into:-
1) Necessaries
2) Beneficial contract of employment and
education
3) Scholarship

72
4) Insurance
5) Apprenticeship

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NECESSARIES

74
POINTS:

 UNDER THE COMMON

LAW, A MINOR IS LIABLE
ON CONTRACTS FOR
‘NECESSARIES’.

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 Necessaries- include food, shelter, clothing,
medical service, education.

Section 69 of the Contract Act:

 If a person incapable of entering into a contract
or anyone whom he is legally bound to support,
is supplied by another person with necessaries
suited to his condition in life, the person who has
furnished such supplies is entitled to reimbursed
from the property of such incapable person.

76
 It is an obligation the law imposes on the
infant to make a fair payment in respect
of needs satisfied.

77
CASE: NASH V. INMAN
 ISSUE:
 Whether the Plaintiff can sue the
Defendant for the price of the waistcoats?
 Held:
 The Court of Appeal held that, because
evidence showed that the Defendant
already had an adequate number Of
clothes fit for his station in life, the
waistcoats were not necessaries and
therefore the tailor could not succeed.

78
BENEFICIAL CONTRACTS OF
EMPLOYMENT AND
EDUCATION.

79
A beneficial contract of an
employment
 A beneficial contract of an employment
made by the minor is a valid contract
and can be enforced against the minor.

 Case: Doyle v White City Stadium ltd

80
DE FRANCESCO V BARNUM
 Principle: A minor is bound by
beneficial contract unless the terms
of the contract appear to be unfair
and unreasonable.

81
BENEFICIAL CONTRACTS OF
EMPLOYMENT AND EDUCATION.

 1) THE GOVERNMENT OF
MALAYSIA V. GURCHARAN SINGH
& ORS.

 2) ROBERTS V. GRAY

82
1) THE GOVERNMENT OF MALAYSIA V.
GURCHARAN SINGH & ORS.

 ISSUE:
 Whether the contract between the parties
was void because the defendant was a minor
at the time the contract was entered?

 Held:
 It was a void contract, but since education
was necessaries, the first Defendant was
liable for the repayment of the monies spent
on him.

83
2) ROBERTS V. GRAY

 ISSUE:
 whether the Defendant bound with the
contract entered into since he was a
minor?
 Held:
The Defendant was bound by his contract,
because the teaching and experience he
would receive from the Plaintiff would be
for his benefit and there were no terms
which were harsh or unreasonable to the
defendant. the Defendant could not
repudiate any part of the contract as it
was binding on him.

84
 (iii) Scholarship

Section 4 (a) of Contract

(Amendment)Act 1976:-

 “No scholarship agreements shall be

invalidated on the ground that the scholar
entering the agreement is not of the age
of majority …”

85
OTHER BINDING CONTRACTS
There are other legislation that allow
minors to enter into valid agreements.
a) insurance
b) apprenticeship

86
A) INSURANCE
 Under the Insurance Act 1963, (revised
1972), a minor over the age of 10 may
enter into a contract of insurance.

 a minor of 10-16 years may enter into a

contract of insurance with the written
consent of the parents or guardians.

87
B) APPRENTICESHIP
 S.13 of the Children and Young
Persons (Employment) Act 1966 says
that:
“any child or young person shall be
competent to enter into a contract
of service under this act otherwise
than as an employer and may sue
as Plaintiff without his next friend
or defend any action without a
guardian ad litem.”
88
CONT.
 This section means that a child is
defined as any person below the age
of 14 and a young person as one
between the ages of 14 and 16.

89
 

FREE CONSENT

90
 Free consent
Section 10 (1) of the Contract Act:-

 “All agreements are contract 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.

91
 What constitute Consent?

 Section 13 of the Contract Act:

 “Two or more persons are said to consent
when they agree upon the same thing in
the same sense.”

92
 Section 14 of Contract Act:-
 Consent is said to be free when it is not
caused by:-
 Coercion, as defined in Section 15
 undue influence as defined in Section 16
 fraud as defined in Section 17
 misrepresentation as defined in Section 18
 mistake as defined in Section 21,22 and 23

93
Effects of contract in the above
circumstances

 If any of the above circumstances

proven, it will impair the validity of an
agreement because consent to it is not
free. The agreement is either void or
voidable.

94
 Section 19 of Contract Act:-
 When consent to an agreement is caused by
coercion, fraud or misrepresentation and
undue influence (s20) the agreement is a
contract is voidable at the option of the party
whose consent was so caused.

 If the contract under mistake of fact

essential to agreement, the agreement is
void (Section 21)

95
 Void- no right and obligation created

 Voidable contract refers to agreement

which gives one or more parties but not
the other the choice of either affirming or
rejecting it.

96
a) Coercions

 Coercion as defined in Section 15:-

 Coercion is the committing, or threaten to

commit any act forbidden by the Penal
Code, or 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.

97
 Coercion refers to an unlawful act done with the
intention of causing the person to enter into an
agreement

 Eg: You went to Petaling Street for a window

shopping. You see a fake Gucci watch. You asked
the seller for the price. Petaling street seller said
that watch cost about RM50.00.You didn’t want
to buy the watch because it is expensive. The
seller threaten you with a knife and ask you to
buy the watch. You then pay for the price and
take the watch.

98
 Q: Whether your consent is free? No
because there is a coercion by watch
seller.

 What is the effect of the contract?

VOIDABLE means you can either accept
the contract or terminate it.

99
(b) Undue influence

 A party may rescind a transaction on the

ground that he was pressured to enter
into it by the influence of the other who
was able to exercise against him.

 As defined in Section 16:-

 A contract is said to be induced by undue
influence where the relations subsisting
between the parties are such one of the
parties is in a position to dominate the will
of the other and uses that position to
obtain unfair advantage over the other.
100
There are 2 ingredients:-
(i) the domination of the will of the
other
(ii) obtaining an unfair advantage over
the other.

 In certain circumstances, a person is

deemed to be in a position to dominate
the will of another.
101
Section 16 (2) provides 3 such
circumstances:-

(1)when one party holds a real /apparent

authority over another .
For example: a parent’s authority over a child

102
(2)where one party stands in a fiduciary
relation to the other.
Eg: in the case of the confidential relationship
between a solicitor & client, trustee and
beneficiary, religious advisor & follower

 Eg: Ayah Pin advise one of his follower to

transfer his land to him for RM100.00 if he want
to go to heaven.

 Here Ayah pin is said to be in a position to

dominate the will of his follower and obtain unfair
advantage over his follower.

103
 (3) Where a party makes a contract with a person whose
mental capacity is temporarily or permanently affected
by reason of age, illness or mental or bodily distress.

 (In this circumstances, there is a rebuttable

presumption of undue influence.)

Effect of contract
 Section 20:-
 the contract is voidable at the option of the
party whose consent was so caused.

104
(c) Mistake (Section 21 –S23)

The Elements of Mistake:

1) The mistake must be made by both

parties

1) The mistake relates to a matter of fact

essential to the agreement.

105
i) mistake of fact essential to agreement (Section 21)

When both parties to an agreement are under a

mistake as to a matter of fact essential to the agreement,
the agreement is void.

For eg: Mrs Daisy owns two hotels. She offers to sell one
of them to Jeffry. Mrs Daisy thinks she is selling the hotel
situated in Johor Bahru while Jeffry thinks that he is
purchasing the hotel situated in Melaka. Both parties make
a mutual mistake to an important fatc i.e identity of the
hotel.
Therefore, either party will be able to terminate the
contract.

106
 We must distinguish mistake of fact essential to
agreement and a mere mistake of fact.

Freeman v Kiamesha Concord Inc (1974)

Facts: A guest at a resort hotel misread an advertisement
concerning memorial day weekend entertainment and so
believed that a popular entertainer would be performing
for three nights during the weekend rather than one.
Upon learning the truth, he sought to cancel part of his
three days reservation. The court held that his mistake
was a mere mistake of fact and it was unilateral. Therefore,
although he departed the resort before the end of three
days weekend, he remained obliged to pay his hotel bill in
full.
107
 Why?????
 Section 23 of the contract Act
provides:-
 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

108
d) Misrepresentation
 refers to certain false statement made by a
representor and which induces the other party
to enter into contract.

 Under Sec 18 of Contract Act:

Misrepresentation is confined to innocent
misrepresentation.

 Innocent misrepresentation is an untrue

statement that the speaker believe is accurate.

109
 For eg:
Mr Lim arrived at a hotel on a hot day and found
out that the temperature in the lobby is
uncomfortably warm. He asked the manager if
the air conditioning is working properly. The
repair person had worked on it that afternoon
and informed the manager that it was working
properly. Based on that statement, the manager
believing the air conditioner is working properly,
informed Mr Lim who then contracted for a room.
Later, Mr Lim discovered that the temperature
failed to cool.

110
 This is the situation where the
manager had made an innocent
misrepresentation which enable Mr
Lim to terminate the contract.

111
 FRAUD

Fraud is the suggestion as to fact of

that which is not true by one who
does not believe it to be true.

112
 Section 17 of the contract Act
fraud within the meaning of this section requires
the doing of an act by a party to a contract with
the necessary intention to deceive the other
contracting party.

 Fraud also refers to deceitful acts intended to

induce the other party to enter into contract.

113
Letchemy Arumugan v Annamalay
[1982] 2 MLJ 198

Facts:-
 The Defendant had made a fraudulent
misrepresentation to the Plaintiff, an illiterate
Indian woman rubber tapper and induced her to
enter into a sale purchase agreement.

 The Defendant had fraudulently represented to

the Plaintiff that the document she was required
to sign was for a loan she took and to free the
land from a charge. In fact the documents she
signed included a sale agreement relating to the
land, a transfer of the land.

 The court found the agreement was voidable

at the option of the Plaintiff and must be
114
rescinded.
The basic difference between
misrepresentation and fraud is that in
fraud the person making the
representation does not himself believe in
its truth whereas in cases of
misrepresentation, he may believe the
representation to be true.

115
DISCHARGE OF
CONTRACT

116
DISCHARGE OF CONTRACT

 It means that the contract is terminated.

 There are four ways in which a contract
can be discharged:-
 By performance
 By consent/agreement between
parties
 Frustration
 Breach of contract

117
a) Discharge By performance

 A contract is said to be discharged by

performance when the parties to contract
has performed what they have agreed to
do in the contract.

118
b) Discharge By Agreement
 A contract is said to be discharged by agreement
if the Parties to contract agrees/consent that
the contract will be discharged. This agreement
can be made during the contract or after the
contract has been made.

 Eg: You entered into contract with Siti. In the

contract both of you agree that the contract will
be put to an end if the profit of your business is
less than RM1 million a year. If the profit is less,
then the contract is said to be discharged by
agreement.
119
c) Discharge by frustration
 A contract is terminated if the things that the
parties agreed to do is impossible to perform. It
can either be at the time the contract was made
or when the contract has been made that the
obligation became impossible to perform.

a)Taylor v Caldwell (1863)

 Fact: The Plaintiff hired the Defendant’s hall for
the purpose of performing of concerts.
Nevertheless, the hall was accidentally burnt
down before the date of concert.
 The court held that the contract may be
discharged by frustration.
120
 b) Declaration of war would as
general rule frustrate all contracts
with enemy aliens.

Iraq v US

Consequences of frustrations
 Frustration terminate the contract
automatically and the contract is void.

121
 d) Discharge by breach of contract

 A contract can be put to an end if a party

to the contract did not do what they have
promised to do in the contract.

 Section 40 of the Contract Act:-

 When a party to a contract has refused to
perform or disabled himself from
performing his promise in its entirely, the
promise may put to an end to the contract
unless he has signified, by word or
conduct, his acquiescence in its
continuance. 122
The party who is not in breach of the
contract has 2 options:-
 1) to continue with the contract and claim
damages or
2) repudiate the contract

 Effect:- Contract is voidable

123
 Effect of breach of contract
 Section 65 of the Contract Act:-
 If the party who is not in breach terminated the contract,
he must restore any benefits which he may have received
from the other party.

 For example:
 Mah Wi, a singer enter into contract with Ajai (manager of
Planet Hollywood) to sing at his Planet Hollywood for two
nights in every weeks during the next two months. Ajai
agrees to pay Mah Wi RM10,000.00 for each night. On the
sixth night, Mahwi willfully absent himself from the show.
Consequently, Ajai rescinds the contract. Ajai must pay
Mah Wi for the five nights on which he had sing.

124
REMEDIES FOR BREACH OF
CONTRACTS

125
REMEDIES FOR BREACH OF CONTRACT

 When there is a breach of contract, the

injured party may claim one or more of
these remedies:-
1.Damages
2.Specific performance
3.Injunction

126
1. Damages

 Damages are granted to a party as

compensation for the damage, loss or injury he
has suffered through a breach.

 Law relating to damages arising from the breach

of contract is found in Section 74 to 76 of the
Contract Act.

 The award of damages aims to put the Plaintiff

in the position he would have been if the contract
had been performed.
127
Brown v Hilton Hotels Corp (1974)

Facts: the Hotel failed to honour Plaintiff’s

confirmed reservations. The Plaintiff were
unable to find other accommodations and so
were forced to fly home.

The Plaintiff received damages for breach of

contract.

128
2. Specific Performance

 This is when the court directs the party

to the contract to do exactly what he has
promised in the terms of contract.
 It is given at the discretion of the court.
 It is governed by the Specific Relief Act
1950.

129
 Specific performance may be granted by the
court in the following situations:

(i) When the act agreed to be done is in the

performance, wholly or partly of a trust
(ii) When there exists no standard for
ascertaining the actual damage caused by
the non-performance of the act agreed to be
done
(iii) When the act agreed to be performed is
such that its non-performance would not afford
adequate relief.
130
Section 20 of SRA 1950 – where
specific performance will not be
granted: :

1)The contract involves many minutes or

numerous details
2)Money/damages are an adequate relief
3)The contract involves on the personal
qualifications of a party such as a contract
of employment

131
4)The contract requires the
constant supervision of the court
5)The terms of the contract are
not certain
6)Where there is evidence of
fraud
7)Where there is a delay in
bringing the action.
132
3. Injunctions

Injunction is an order of the court requiring

a party to do something (mandatory) or not
to do something (restraining/preventive).

Two types of injunctions:-

 (1) Temporary/Interlocutory
 (2) Perpetual or permanent

133
 Neoh Siew Eng v Too Chee
Kwang[1963] MLJ 272

In this case, the court granted a perpetual

injunction requiring the landlord to keep
water supply open for his tenants.

134
Pertama Cabaret Nite Club Sdn Bhd v
Roman Tam (1981) 1 MLJ 149

 A singer has signed a contract to appear

and sing at the Appellant’s night club for a
number of days. The contract provided
that in the event of breach, the
respondent should not perform in Kuala
Lumpur during the fixed period of the
contract.

 The Respondent declined to honour the

contract and attempted to sing in a rival
club.
 Federal Court granted an interlocutory
injunction. 135
THANK YOU

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