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This chapter:
describes the basic principles of the law
governing contracts
Introduction
Elements of a Contract
Privity of Contract
Terms of a Contract
Voidable Contracts
Void and Illegal Contracts
Restraint of Trade and Legal Proceedings
Discharge by Frustration, Performance and Breach
Remedies
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INTRODUCTION
1. Offer (Proposal)
section 2(a), Contracts Act 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 to the act or
abstinence, he is said to make a proposal
the promisor (offeror) must have declared his
readiness to undertake an obligation upon
certain terms, leaving the option of its
acceptance or refusal to the offeree. See Affin
Credit (Malaysia) Sdn Bhd v Yap Yuen Fui
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ELEMENTS OF A CONTRACT
(cont.)
the communication of a proposal is complete
when it comes to the knowledge of the person
to whom it is made section 4(1)of the
Contracts Act 1950
compare offer with option and advertisement
is complete when it comes to the knowledge of
the person to whom it is made section 4(1)of
the Contracts Act 1950
compare offer with option and advertisement
Provision of Consideration
consideration may move from a person who is
not the promisee. It may move from the
promisee or any other person section 2(d)
1. Coercion
is defined in section 15, Contracts Act 1950
see Kanhaya Lal v National Bank of India, Ltd,
Kesarmal s/o Letchman Das v Valiappa Chettiar,
Allied Granite Marble Industries Sdn Bhd v Chin
Foong Holdings Sdn Bhd & Ors
2. Undue Influence
is defined in section 16, Contracts Act 1950
3 matters to be dealt with under section 16(3)
are:
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VOIDABLE CONTRACTS (cont.)
3. Fraud
is defined in section 17, Contracts Act 1950
wherever a person causes another to act on a false
representation which the maker himself does not believe to
be true, he is said to have committed a fraud
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VOIDABLE CONTRACTS (cont.)
4. Misrepresentation
is defined in section 18, Contracts Act 1950
see Tan Chye Chew & Anor v Eastern Mining & Metal
Co., Malayan Miners Co (M) Ltd v Lian Hock & Co,
Maria Chia Sook Lan v Bank of China
5. Mistake
cases where there is a mistake of fact see section 21,
Contracts Act 1950
section 22 provides for cases where there is a mistake
as to law
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 section 23
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VOID AND ILLEGAL
CONTRACTS
a void contract is an agreement not enforceable by law
section 2(g)
according to section 24, the consideration or object of an
agreement is lawful unless:
a) it is forbidden by a law
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
e) the court regards it as immoral, or opposed to public policy
agreements are void if any part of their considerations and
objects are unlawful section 25
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VOID AND ILLEGAL
CONTRACTS (cont.)
agreements declared void by the Contracts Act 1950:
1. An agreement made without consideration unless it is
in writing and registered, or is a promise to
compensate for something done, or is a promise to
pay a debt barred by limitation law section 26
2. An agreement in restraint of marriage section 27
3. An agreement in restraint of trade except for an
agreement not to carry on business of which goodwill
is sold; or an agreement made prior to a dissolution
of a partnership or an agreement made during the
continuance of a partnership section 28
1. Restraint of Trade
all contracts restraining a person from carrying
on a lawful profession, trade or business is to
that extent prima facie void section 28
3 exceptions to the general rule:
1. Restrictions on the sale of the goodwill of a
business
2. Agreements between partners made upon or in
anticipation of a dissolution
3. Agreements between partners not to carry on
business during the continuance of the partnership
Effects of Frustration
to discharge a contract immediately, but only as to the
future. The contract is not void ab initio, but only void
from the time of the frustrating event.
a total failure of consideration would need to be
established in order that the money be recovered
see Fibrosa Spolka Akcyjna v Fairburn Lawson Combe
Barbour Ltd
2. Discharge by Performance
performance of a contract must be exact and
precise and should be in accordance with what the
parties had promised section 38(1)
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DISCHARGE BY FRUSTRATION,
PERFORMANCE AND BREACH (cont.)
3. Discharge by Breach
when a party fails to perform their obligations
as agreed
can occur due to:
Failure to comply with a term of the contract
Anticipatory breach
Delay in the performance where time is of the
essence
Effects of Breach
the innocent party is entitled to treat the contract
as ended and may be able to recover damages
partial breach the innocent party still has to
carry out his obligations but may sue for
damages
if the innocent party ends the contract, he must
restore any benefits received from the other party
section 65
1. Rescission
an equitable remedy, which allows an innocent
party to cancel the contract by rescinding or, if
there has been misrepresentation by the other
party, raising that misrepresentation as a
defence if sued for damages or specific
performance by the other party
2. Restitution
is sometimes referred to as quasi-contract. It is
not contractual and does not rely on the plaintiff
suffering loss or damage. Its basis is unjust
enrichment; that is, those situations where it
would be very unfair if the defendant was to be
allowed to retain the money, or the goods or
services, without payment
3. Damages
main purpose is to enable the innocent party
to receive monetary compensation from the
party responsible for the breach of contract.
Damages are granted to a party as
compensation for the damage, loss or injury
he has suffered through a breach of contract
the general principle for the assessment of
damages is compensatory section 74
Mitigation of Loss
duty upon the person claiming damages to take
all reasonable steps to reduce, minimize or
mitigate their loss
if he fails in doing so, the amount of damages to
recover will be reduced
if the plaintiff is able to avoid loss, damages will
not be recoverable for the potential loss
4. Specific Performance
is a discretionary order granted by the courts
directing a person to carry out their obligations
under the contract. It is not generally used in
breach of contract actions unless damages
prove to be inadequate.
the court has a discretion to refuse specific
performance where the granting of it would
cause undue hardship to the defendant
section 21,Specific Relief Act 1950
5. Injunction
is a discretionary court order
may be:
a) prohibitory preventing the breach of a contract
b) mandatory requiring a person to perform some
contractual obligation
c) interlocutory where it freezes the status quo between
the parties until the dispute can be heard by the court
is an equitable remedy can be varied or
dissolved if the court discovers later that the
application was made on suppressed facts or facts
upon which the order was granted no longer exist
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REMEDIES (cont.)
6. Mareva Injunction
prevents the defendant removing or disposing of
any assets in the jurisdiction until the court
makes a decision
a plaintiff must be able to establish all the
following:
a) the defendant has assets that are in the courts
jurisdiction
b) there is a real risk that the defendant will remove or
get rid of any assets before judgement
c) the plaintiff can establish a substantive cause of
action such as a claim for damages
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Remedies (cont.)
8. Quantum Meruit
means as much as he has earned and only
arises in cases of part performance
can arise where:
a) a defendant has prevented a plaintiff from carrying
out the remainder of their contractual duties
b) the parties cannot agree on payment
c) the parties agree on payment for the part-
performance but not the actual amount
Introduction
Elements of a Contract
Privity of Contract
Terms of a Contract
Voidable Contracts
Void and Illegal Contracts
Restraint of Trade and Legal Proceedings
Discharge by Frustration, Performance and Breach
Remedies
Business Law All Rights Reserved
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