This document discusses key aspects of contract law in Malaysia based on the Contracts Act 1950. It defines a contract and outlines the essential elements that must be present for an agreement to be considered a valid and enforceable contract, including offer and acceptance, consideration, intention to create legal relations, capacity of parties, consent, legality, and certainty. It also examines topics like formation of contracts, discharge of contractual obligations, and exceptions.

1. LAW OF CONTRACT (Contracts Act 1950)
*All contracts are agreement. However not all
agreements are contract.
*S2(g) & (h) only agreement enforceable by law is a valid
contract.
Elements need to be fulfill for a valid contract;
1)Offer & acceptance
2)Consideration
3)Intention
4)Capacity
5)Consent
6)Legality
7)Certainty
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8) Formalities

2. PROPOSAL & ACCEPTANCE
S2(a)- 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
such act or abstinence.
S2(b)- when the person to whom the proposal is made
signifies his assent thereto, the proposal is said to be
accepted.
INVITATION TO TREAT (preliminary stage, invite
others to make an offer)
* A price list
* A display of goods – Pharmaceutical Society of Great
Britain v Boots Cash Chemist Ltd
* An advertisement –Caelho v The Public Services
Commission
* Auctioneer

3. TO WHOM CAN A PROPOSAL BE MADE
1) To a particular person – Boulton v Jones
2) To the general public – Carlill v Carbolic Smoke Ball
*(Advertisement of Bilateral contract: not offer only ITT
Advertisement of Unilateral contract: offers)
COMMUNICATION OF PROPOSAL
S2(a) indicates that proposal must be convey. Coincides
will not form an agreement – R v Clarke.
ACCEPTANCE AND COUNTER OFFER
S7(a)- Acceptance must be absolute & unqualified.
Hyde v Wrench –request reduce price to 950pd
Distinction with the following:
*request for further information- Stevenson Jaques v
McLean
*in the process of negotiation- Lau Brothers & Co. v
China Navigation Co. Ltd.

4. COMMUNICATION OF ACCEPTANCE
S7(b)- expressed in usual & reasonable manner,if
prescribes must insist, if not deem accepted.
Silence, absence of response/total disregard is not
acceptance – Felthouse v Bindley.
Exceptions;
• Proposer dispensed.
• Proposer allows to perform the condition of proposal.
• Proposer allows the acceptance of any consideration
for a reciprocal promise which may be offered with a
proposal.
• Acceptance through post- Ignatius v Bell
S4(2)The communication of an acceptance is complete;
a)as against the proposer, when it is put in a course of
transmission to him, so as to be out of the power of
the acceptor; and
b)as against the acceptor, when it comes to the
knowledge of the proposer.

5. REVOCATION OF PROPOSAL
S5(1)- at any time b/f the communication of its
acceptance is complete against proposer.
S6 – Proposal is revoked;
a) By the communication of notice of revocation.
b) Lapse of time/lapse of a reasonable time – Ramsgate
Victoria Hotel v Montefiore.
c) Failure of the acceptor to fulfil condition precedent.
d) By the death/mental disorder of the proposer. H/e
must comes to the knowledge of the acceptor.
REVOCATION OF ACCEPTANCE
S5(2)- at any time b/f the communication of the
acceptance is complete against the acceptor.

6. CONSIDERATION
Executory : when one promise is made in return for
another.
Executed : when a promise is made in return for the
performance of an act.
Past: where a promise is made subsequent to and in
return for an act that has already been performed –
Kepong Prospecting Ltd & S.K Jagatheesan & Ors v
A.E Schmidt & Marjorie Schmidt.
EXCEPTIONS – S26
a) An agreement made on account of natural love &
affection between parties standing in near relation to
each other & registered– Re Tan Soh Sim.
b)- An agreement to compensate for a past voluntary act.
- An agreement to compensate a person who did an act
which the promisor was legally compellable to do.

7. c) An agreement to pay a statute-barred debt & signed.
S2(d) Consideration need not move from promisee.
VENKATA CHINNAYA V VERIKATARA’MA’YA
a sister agreed to pay an annuity to her brothers who
provided no consideration for the promise
S64 Waiver Of Performance
i) payment of a smaller sum in discharge of a larger
sum.
ii) payment by a third party in discharge of a debt.
iii)amount owing is unascertained & a person accepts
an agreed sum in satisfaction.
iv)a composition with creditors for the payment of a
smaller sum.
KERPA SINGH V BARIAM SINGH
ADEQUACY OF CONSIDERATION(S26 explanation 2)
Consideration need not be adequate as long as it is freely
given.
Phang Swee Kim v Beh I Hock

8. INTENTION TO CREATE LEGAL RELATION
Act silent, English common law principles apply. To
determine intention, two presumptions h/e rebuttable;
1)Business agreement – parties intend legal
consequences unless specify otherwise.
Rose & Frank Co v Crompton Bros – “…this
arrangement is not entered into, nor is this memorandum
written, as a formal or legal agreement & shall not be
subject to legal jurisdiction in the law courts….”
2) Social, domestic or family agreements – implied no
legal relations are contemplated.
Balfour v Balfour – husband works in Sri Lanka
Merrit v Merrit – bought house under joint names.

9. a) S11: competent to contract
i) of the age of majority according to the law
which he is subject.
ii) who is of sound mind.
iii) x disqualified from contracting by any law to
which he is subject.
*Effect of contract by parties x competent to ctt.
Mohori Bibee v Dhurmodas Ghose - mortgage void ab initio
Age of Majority Act 1971: age of majority is 18 years.
Exceptions: i) in matters relating to marriage,divorce,
dower & adoption;
ii) the religion & religious rites & usages of any
class of persons within Malaysia;
Rajeswary & Anor v Balakrishnan & Ors
iii) any other written law fixing the age of
majority.
CAPACITY TO CONTRACT

10. iv) Necessaries – S69
a) is supplied by another person with necessaries
suited to his condition in life/anyone whom the minor is
bound to support,
b) that person is entitled to reimbursed from the
property of such incapable person.
Nash v Inman
Govt of M,sia v Gurcharan Singh
…depends: 1) the nature of the goods/services
supplied, 2) the minor’s actual needs & 3) his station
in life.
v) Scholarships – S4(a) Contracts (Amendment) Act
1976
“any contract/agreement between an appropriate
authority and any person, with respect to any
scholarship, award, bursary, loan, sponsorship or
appointment to a course of study, the provision of
leave with or without pay or any other facility for the

11. vi) Insurance – Insurance Act 1963(Revised 1972)
a) over ten years old h/e under sixteen
b) written consent of the parents/guardians is
essential.
v) Apprenticeship – S13 Children & Young Persons
(Employment) Act 1966
“…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”.
child: any person below the age of 14.
young person: between the age of 14 and 16.
GUARANTEE & INDEMNITY
Guarantee: a contract to perform the promise, or discha
the liability, of a third person in case of his default.
Indemnity: contract by which one party promises to sav
other from loss caused to him by the conduct of the
promisor himself/by the conduct of any other person…”

12. CAPACITY OF PERSON OF SOUND MIND
Section 12(1): A person is said to be of sound mind for
the purpose of making a ctt if, at the time when he
makes it, he is
i) capable of understanding it and
ii) of forming a rational judgment as to its effet
upon his interest.
i.e mentally disordered person, incapacitated through
sickness, alcohol or other drugs.
*during periods when he is of sound mind may enter ctt
*ctt voidable h/e provided the other party knows of the
unsoundness of mind. Che Som bt Yip v Maha Pte Ltd
CORPORATIONS
*Artificial persons created by special authority/registered
under specific laws. Statutory Corporations – Acts of
Parliaments/Enactments of State Assemblies.
Companies – Companies Act 1965 – Memorandum &
Article Of Association.

13. CONSENT
Section 10(1) “…agreements are contracts if they are
made by the free consent of parties competent to
contract…”
Section 14: Consent is said to be free when it is not
caused by :-
a) coercion, as defined in Section 15;
b) Undue influence, as defined in Section 16;
c) Fraud, as defined in Section 17;
d) Misrepresentation, as defined in Section 18; or
e) Mistake, subject to sections 21, 22 & 23
a) FRAUD – SECTION 17
a) Suggesting a fact as true when knowingly it is not true.
b) Active concealment of fact when have knowledge of it.
c) Making a promise without intention of performing it.
d) Any other act fitted to deceive.
e) Act/omission which the law declares fraudulent.

14. Weber v Brown – number of rubber trees on an estate.
* though the statement is fraudulent it is irrelevant if it
has not induced or caused the other party to enter into
the contract. Aggrieved party must relied on it.
* Standard of proof higher than normal civil case.
* Explanation to S17: Mere silence as to facts likely to
affect the willingness of a person to enter into a ctt is
not fraud unless;i) it is the duty of the person keeping
silence to speak (doct. of uberrimae fidei – Goh Chooi
Leong v Public Life Assurance Co. Ltd.- assured failed
to disclose previously suffered from Tuberculosis),r/s of
the parties t/f there is a positive duty to disclose facts.
ii) his silence is, in itself, equivalent to
speech.
Kheng Chwee Lian v Wong Tak Thong – fraudulent
representation within the meaning of S17(a) & (d).
Persuaded to enter 2nd
ctt because app informed it was
of the same size as the one under the 1st
agreement.

15. b) MISREPRESENTATION – SECTION 18
a) Positive assertion of fact which is not true h/e he
believes it to be true.
b) Breach of duty, no intention to deceive, h/e advantage
to him/anyone claiming under him. With v O’Flanagan
c) Causing h/e innocently, a party to an agreement to
make a mistake as to the substance which is subject to
the contract. (h/e Section 23 states “a ctt is x voidable
merely because it was caused by one of the parties to it
being under a mistake as to a matter of fact”.i.e no
representation from the other party & own mistake in
believing such fact than contract not voidable.
Section 19; explanation, if it does not
cause the consent than contract not voidable)
*Exception under S19: x voidable if there are means of
discovering the truth with ordinary diligence. H/e if
false/fraudulent misrepresentation cannot.
*Section 65 & 66: benefit/advantage must restore it.

16. c) COERCION – SECTION 15
i) Committing or threatening to commit any act forbidden
by the Penal Code or
ii) The unlawful detaining or threatening to detain any
property,
to the prejudice of any person with the intention of
causing any person to enter into an agreement.
*if S15 silent than English Principle applies.e.g duress.
Kesarmal s/o Letchman Das v Valiappa Chettiar
Ct held invalid transfer under the Order of Sultan when
two Japanese officers present.
Chin Nam Bee Development Sdn Bhd v Tai Kim Choo
Additional payment of RM4,000 if not booking cancel.
*Economic Duress
Universe Tankships of Monrovia
black banning of a ship to induce the owners to make a
contribution to a welfare fund.

17. d) UNDUE INFLUENCE – SECTION 16
(1)i) the domination of the will by one party over the
other.
ii) obtaining an unfair advantage over the other.
(2)Deemed to be in a position to dominate the will of
another
(a) where he holds a real/apparent authority over the
other, or where he stands in a fiduciary relation to the
other; or
(b) where he makes a contract with a person whose
mental capacity is temporarily or permanently affected
by reason of age, illness, or mental/bodily distress.
*Salwath Haneem v Hadjee Abdullah
*Datuk Jaginder Singh & Ors v Tara Rajaratnam
Effects: S20;voidable at the option of the aggrieved party,
if received benefit, ct may decide as it seem just –
Chait Singh v Budin b. Abdullah

18. e) MISTAKE – SECTION 21,22 & 23
S21: where both parties are under mistake as to matter of
fact, the agreement is void.
Raffles v Wichelhaus – ‘The Peerless’
S22: mistake of law not voidable unless the law is not in
force in Malaysia.
Seck v Wong & Lee – building cttr request plan.
S23: mistake by one party as to matter of fact not
voidable.
Tamplin v James – bought land through auction &
thought certain field included.
Mistake as to document, general rule, bound by the
contract sign. Subramaniam v Retnam – ignorant of
English.
Defence of Non Est Factum i.e under a mistaken belief as
to the character & class of doc, cause by illiteracy,
blindness/senility/fraudulent conduct of the other party.
Awang bin Omar v Haii Omar & Anor

19. LEGALITY
S2(g): an agreement not enforceable by law is said to be
void.
S10(1): all agreement are ctt if they are made….…, for a
lawful consideration & with a lawful object,…
S24: 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; Hee Cheng v Krishnan – T.O.L land
c) it is fraudulent;
d) it involves/implies injury to the person/property of
another; or
e) the court regards it as immoral, or opposed to public
policy. Pearce v Brooks – vehicle for prostitution.
….. Every agreement of which the object/ consideration is
unlawful is void. Ramasamy v Muriappan - kootu

20. UNCERTAINTY OF TERMS
Section 30: Agreements, the meaning of which is not
certain, or capable of being made certain, are void.
Guthing v Lynn – will purchase if the horse
brought him good luck.
FORMALITIES
*A ctt can be made orally, in writing or by conduct.
Exception: Section 10(2) Contracts Act;
“Nothing herein contained shall affect any law by which
any ctt is required to be made in writing or in the
presence of witnesses, or any law relating to the
registration of documents”.
e.g 1) Hire Purchase Act 1967
2) Contracts Act – S26(a) & S26(c )

21. DISCHARGE OF CONTRACT
1) By performance.
2) By consent/agreement between the parties.
3) By impossibility.
4) By breach.
a) DISCHARGE BY PERFORMANCE
S40:…refused to perform/disabled himself from
performing his promise in its entirety, the promisee
may put an end to the ctt, unless he has signified by
word/conduct , his acquiescence in its continuance.
Time & Place For Performance:- it is the duty of the
promisee to apply for performance at a proper place &
within the hours of business.
* If no time is fix, must perform within reasonable time.
* Time is of the essence, failure to perform within time,
may rescind. H/e if expressly/by conduct treats as still
continuing, ctt exist but time ceases to be of essence.

22. Yeoh Kim Pong (Realty) Ltd v Ng Kim Pong
* If time is not the essence, entitled to damages only & if
want to terminate must provide reasonable notice
requesting compliance & failure to comply – terminate.
* If no place is fix, it is the duty of the promisor to ask.
Reciprocal Promises:- both parties willing & ready to
perform simultaneously.
Central M’sia Development v Chin Pak Chin
– to execute transfer & deliver vacant possession upon
paying deposit.
Contingent Contracts:- upon occurrence of event.
Tender of Performance:- offer to perform –MM Ally & Co.
i) unconditional.
ii) made at a proper time & place.
iii) given reasonable opportunity to ascertain the ability
& willingness then & there of performing the offer.
iv) offer to deliver – give opportunity to inspect.
rd

23. if accepts performance from 3rd
party cannot later
enforce against promisor (S42).
Chinn Swee Onn v Puchong.
Resp obtain judgment against app h/e agreed to forbear
execution because 3rd
party will take over the judgment
debt. In fact already received RM12,000 from 3rd
party.
b) DISCHARGE BY AGREEMENT
Created by consent, extinguished by consent, expressed/
implied.
1) Through enforcement of the terms of the existing ctt.
2) Through subsequent ctt (S63 & S64).
i) Waiver
Both parties agrees that one/more of the terms of ctt
be altered.
ii) Novation
Substitution of a new ctt replacing an earlier ctt.

24. iii) Release/Rescission
Executory ctt may be rescinded by the consent of all
parties to the ctt. Both parties is release from
performance. (eg:sale of goods). H/e rescission for
cause gives the right to damages for breach of ctt.
iv) Remission – Section 64
c) DISCHARGE BY IMPOSSIBILITY/FRUSTRATION
Section 57(1) impossibility of performance at the time a
ctt is made.
(2) impossibility after it has been made.
(3) Promisor knew, the promisee did not know,
therefore the promisor must make compensation.
• Self-induced impossibility cannot be discharge.
Ramli bin Zakaria & Ors v Govt of M’sia
• Obligations become more onerous does not mean it is
impossible
Khau Daw Yau v Kim Nam Realty Devpt.

25. DISCHARGE BY IMPOSSIBILITY ALLOWED.
1) Destruction of the subject-matter.
Taylor v Caldwell – music hall burnt down.
Berney v Tronoh Mines – outbreak of war
2) Supervening events defeat the whole purpose or
object of the contract.
Krell v Henry – procession of King Edward VII
3) Death or personal incapacity
4) Supervening illegality.
Change in the law, performance become unlawful.
CONSEQUENCES – terminates automatically (void)
therefore S66 applies. Civil Law Act – when parties
incurred expenses & involving severable contracts.

26. d) DISCHARGE BY BREACH – S40
A ctt may be put to an end because;
i) Promisor refuse to perform.
ii) Disability of the promisor to perform.
However it is the choice of the party who is not in breach
i) to continue with the ctt & claim damages (exp/imp).
Sim Chio Huat v Wong Ted Fui- ordering extra work.
ii) to repudiate the contract.
Problem arise for wrongful repudiation.
1) Choo Yin Loo v Visuvalingam –Pltf agreed to carry work
with 30 workers at all time. His failure entitle Def to
puts an end to a ctt.
2) Smith Construction Co. v Phit Kirivata – refusal to issue
an architect’s certificate.
Anticipatory Breach: does an act which makes the
performance impossible/expressly renounces the ctt.

27. REMEDIES FOR BREACH
1- Damages
2- Rescission of contract
3- Quantum Meruit
4- Specific Performance
5- Injunction
Damages
i) Special damages: the other party knew at the time of
making the contract that the special loss is likely to
result from the breach. H/e in Hadley v Baxendale, two
condition must be proof,
a) damages arising naturally;
b) the damage is not too remote (must be
reasonably expected by both parties) Tham Cheow Toh
ii) Substantial damage: pecuniary compensation intended
to put the Pltf in the position he wld have enjoyed.

28. iii) Nominal damages: small token award, Plaintiff proved
breach ctt by Defendant but suffered no actual loss.
iv) Exemplary damages: sum awarded which is far greater
than the actual pecuniary loss. In exceptional
circumstances (eg: breach of promise of marriage,
dishonoured of trader’s cheque).
v) Penalty and Liquidated damages: Section 75
a sum is stated under the ctt whereby the parties who
is not in breach is entitle thereto whether or not there
is an actual damage/ loss suffered.
Maniam v The State of Perak
“there is no difference between penalty & liquidated
damages”
RESCISSION OF CONTRACT
Section 40 give the right to a party who is not at fault to
rescind a contract and entitle to claim compensation/
damages under S76. H/e w/ever due have to be paid.

29. QUANTUM MERUIT
A reasonable amount awarded base on the work/services
rendered once contract is discharged/rescinded/
repudiated.
Upton RDC v Powell
There is an express contract for services rendered by the
Plaintiff. T/f Defendant have to pay a reasonable
amount for services received.
SPECIFIC PERFORMANCE
Decree of the ct directing that the contract shall be
performed specifically according to its terms.
Specific Relief Act 1950, S11(1) it can be granted;
a) performance, wholly or partly of a trust.
b) No standard for ascertaining the actual damage.
c) Adequate relief cannot be afforded.
Gan Realty Sdn. Bhd. – certain shares not available
in the open market.

30. S12(2) presumption that ‘the breach of a ctt to transfer
immobable property cannot be adequately relieved by
compensation in money’.
S20 when specific performance will not be granted.
1- money consideration is an adequate relief.
2- ctt which runs into such minute/numerous details.
3- ctt dependant on the personal qualification/volition of
the parties (ctt of employment).
4- ctt requiring supervision by the ct (building ctt).
5- terms, the ct cannot find with reasonable certainty.
6- In its nature is a revocable ctt (partnership).
7- ctt by trustee in excess of power/breach of trust.
8- ctt on behalf of corporations & is in excess of power.
9- involves the performance of a continuous duty.
10-ctt where both parties thought that the subject-matter
exist h/e before the ctt is made it ceased to exist.

31. S21(2) ct should not enforce specifically a ctt;
• It will give the Pltf an unfair advantage over the Def.
• Performance would involve hardship on the Defendant
h/e non performance would not involve hardship on the
Plaintiff.
INJUNCTION
Specific Relief Act; S50, granted at the discretion of the H/Ct
and can either be ‘temporary’ / ‘perpetual’.
Temporary/interlocutory/interim : may be granted at any
period of a suit. To preserve the status quo.
Perpetual : can only be granted by the decree made at the
hearing & upon the merits of the suit.
S54(f); injunction cannot be granted to prevent a breach of ctt.
(if it cannot be enforced by specific performance than
cannot prevent the breach by asking for injunction)

32. S55 h/e states that if a ctt comprises an affirmative
agreement coupled with a negative agreement than
this shall not preclude the ct from granting an
injunction to perform the negative agreement.
Pertama Cabaret Nite Club Sdn. Bhd v Roman Tam
Respondent had signed a contract to appear and sing at
the appellant’s night club for a number of days & the
ctt also provided that in the event of a breach, the
respondent should not perform in Kuala Lumpur during
the fixed period of the ctt.