Question 1

Identification of issues
Whether Lim would be recovering the deposit sum of RM50,000 from Daud

Explanation of law
As stated in s.2(g) CA 1950, an agreement not enforceable by law is said to be void, while in s.2(h)
CA 1950, an agreement enforceable by law is a contract.

S.32 CA 1950 refers a contingent contract as “a contract to do or not to do something, if some

event, collateral to the contract, does or does not happen”. A conditional or contingent is one where
the formation of the contract is dependent upon, or subject to, the fulfillment of a particular
condition.

Based on s.33 CA 1950, a contingent contract that is dependent upon an uncertain future event
cannot be enforced by law unless and until that event happens and if that event becomes impossible,
the contract becomes void.

Condition precedent is the existence or formation of a contract depends upon the fulfillment of the
stipulated condition. Where the condition is precedent, the agreement is not fully binding until the
event occurs.

S.36(1) CA 1950 stated that a contingent contract to do or not to do anything if a specified

uncertain event does not happen within a fixed time become void if, at the expiration of the time
fixed, the event has not happened, or if, before the time fixed, the event becomes impossible.

In case of Aberfoyle Plantations Ltd. v. Khaw Bian Cheng [1960] MLJ 47. Privy Council, the
vendor unable to obtain the renewal of expired leases and causes the vendor unable to fulfill the
condition within a stipulated time period, it was agreed that the agreement shall become null and
void and vendor refund the deposit to purchaser.

S.74 CA 1950 stated that a contract has been broken, the party who suffers by the breach is entitled
to receive, from the party who has broken the contract, compensation for any loss or damage
caused to him

In case of Liputan Canggih Sdn Bhd v. Sonstar Sdn Bhd, between the defendant and the
plaintiff was only a conditional sale and purchase agreement which was not binding on the parties
until the condition precedent had been fulfilled. The plaintiff unable to relied S.74 CA 1950 due
to the defendant had not fulfilled the condition precedent. There was no contract in existence what
more a breach.
According to s.6(1)(a) LA 1953, provided the following actions shall not be brought after the
expiration of six years from the date on which the cause of action accrued, that is to say— (a)
actions founded on a contract or on tort.
S.5 NLC 1965 refers “restrictions in interest” as any limitation or restriction imposed by the State
Authority on the powers of the registered proprietor to do such things with regard to his land or
any of his powers of dealing.

In the case of Khatijah abdullah & Ors v. Mohd Isa Biran [2017] 7 CLJ 513, the SPA had
become void and s.33 CA 1950 applies. A void contract does not generate any enforceable right
or duty. Where there is neither right nor duty, limitation cannot be invoked. The defence of s.
6(1)(a) LA 1953 was thus not available to the vendor. The sale was contingent upon consent to
transfer being obtained by the vendor from the State Authority. The Land was subject to an express
restriction in interest in s.5 NLC 1965 as follows:
Sekatan Kepentingan:Tanah ini tidak boleh dipindahmilik, dipajak atau digadai melainkan
dengan kebenaran Pihak Berkuasa Negeri.

Application of law
Clause 4 of the SPA had clearly stated that if the Vendor is unable to obtain Consent from the State
Authority within six months from the date of the SPA, the SPA shall become null and void and
the Vendor shall refund the deposit to the purchaser. Under “Restriction in interest”, requirement
for consent to transfer from the State Authority is a condition precedent which must be fulfilled
before any transfer of the Land is possible. Until fulfilled by the Vendor, the SPA shall not take
effect and the sale could not be completed. Here, Lim entered into a Sale and Purchase Agreement
with Daud to purchase the property at pice of RM500,000. However, Daud’s application for
Consent to transfer the Property to Lim was unsuccessful which means he failed to comply with
Clause 4. As a consequence, a transfer of the Land has become impossible and therefore the SPA
has been rendered void and unenforceable and s.33 of the Contracts Act 1950 applies. Since the
SPA had become null and void, Lim should be entitled to a refund of the deposit paid to Daud as
stated in Clause 4.

However, Lim cannot claim for compensation for loss and damages as being a conditional SPA,
there could not be breach of contract to warrant damages to be assessed by the Court. S.74 of the
Contracts Act 1950 cannot be relied upon to allow for damages to be assessed as this section would
only be applicable if there was breach of contract. Hence, Lim is only applicable for a deposit
refund but not subject to loss or damages compensation.

A void contract does not generate any enforceable right or duty. Where there is neither right nor
duty, limitation cannot be invoked. The defence of limitation was thus not available to Daud to bar
Lim’s claim to recover the deposit sum.

Conclusion
Lim is advised he could recovering the deposit sum of RM 50,000 from Daud. Daud had shown
that the condition precedent had not fulfilled by Daud. Hence there was no contract existence. SPA
had become void. A void contract does not generate any enforceable right or duty. Where there is
neither right nor duty, limitation cannot be invoked. Hence, Daud would not be able to succeed in
relying on the statute of limitation as a defence to bar Lim’s claim to recover the deposit sum.
However Lim unable to get any extra compensation for loss or damage, due to there was no
contract in existence.