Law of contract

Contracts and agreements come into play in almost every aspect of life. The study and
the application of the law of contract make up a core component of the learning and the
practice of law. Contract is a voluntary, deliberate, and legally binding agreement between
two or more competent parties. Contracts are usually written but may be spoken or implied,
and generally have to do with employment, sale or lease, or tenancy. A contractual
relationship is evidenced by an offer, acceptance of the offer, and a valid (legal and valuable)
consideration. Each party to a contract acquires rights and duties relative to the rights and
duties of the other parties. However, while all parties may expect a fair benefit from the
contract it does not follow that each party will benefit to an equal extent. Existence of
contractual-relationship does not necessarily mean the contract is enforceable, or that it is
not void or voidable. Contracts are normally enforceable whether or not in a written form,
although a written contract protects all parties to it. Some contracts such as for sale of real
property, instalment, or insurance policies must be in writing to be legally binding and
enforceable. Other contracts are assumed in, and enforced by, law whether or not the
involved parties desired to enter into a contract. Besides, contract is an agreement which the
law will enforce. Contracts can also be formed orally. The remedy at law for breach of
contract is usually "damages" or monetary compensation. In equity, the remedy can be
specific performance of the contract or an injunction. Both remedies award the damaged
party the "benefit of the bargain" or expectation damages, which are greater than mere
reliance damages, as in promissory estoppels.

In law, the term minor also infant or infancy is used to refer to a person who is under
the age in which one legally assumes adulthood and is legally granted rights afforded to
adults un society. Depending on the jurisdiction and application, this age may vary, but is
usually marked at either 18 or 21. Specifically, the status of “minor” is defined by the age of
majority. In many countries, including Brazil, Croatia, India, the United Kingdom, Australia,
Canada and New Zealand, a minor is presently defined as a person under the age of 18. In the
United States, where the age of majority is set by the individual states, „minor‟ usually refers
to someone under the age of 18, but can be used in certain areas to define someone under the
age of 21. Contract is an agreement which the law will enforce. We should consider two
scenarios. The first is if we ask a friend or colleague to have lunch with us and they agree.
There is an offer and an acceptance. If we were to be asked if we are suing the friend or
colleague for breach of contract our answer would be an emphatic no. Another example, we
make a booking at a hotel, we fail to turn up. The hotel having reserved a room for us has

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been unable to sell the room to anyone else. If the hotel were to sue us we would accept the
fact because there is an intention to create legal relations. In the same way if the hotel had
sold our room we would consider legal action of our own. A legally binding contract needs
offer, acceptance, intent to create legal relations and consideration. It is the presence of intent
to create legal relations and of consideration that converts a social agreement into a legal
agreement. There are seven elements of a valid contract.

The first element is Offer. A proposal, according to Section 2(a) of the Contracts Act
1950 is an act or utterance signifying the willingness of the person to be bound by his
promises implied in the act or utterance and with a view to obtaining the assent of the other
person to the act or utterance. Furthermore, according to Section 2 (a), an offer must signify
the willingness of the proposer (offeror) to fulfil his promises if accepted by the offeree that
mean offer must be certain and also must be differentiated from an enquiry. It is also must be
differentiated from intent to trade. During the build up to an agreement there is often a period
of negotiation which differentiates an offer from negotiations. The concept of intent to trade
is one of the most important and must be thoroughly understood. Besides, advertisements,
catalogues and circulars are not usually an offer. If in doubt read again the section on offer
and differentiating from intent to trade. In an auction the bid is the offer and acceptance is
when the auctioneer's hammer falls.

Acceptance is the second element of a valid contract. According to Section 2(b) of the
Contracts Act specifies that when a person to whom an offer is made signifies his assent
thereto, the offer is said to be accepted. Acceptance may be expressed, that is oral or written,
and implied from the conduct of the offeree. An acceptance must also comply with certain
rules before it becomes valid and enforceable. Where an offer specifies the form of
acceptance, failure to accept in the specified form, unless the proposer does not object,
invalidates the acceptance. According to Section 7(a), the acceptance must be absolute and
unqualified. , it means that the offeree‟s intention to accept must be clearly understood,
without any doubt, from his conduct. There are numerous circumstances in the commercial
environment where the conduct of certain parties appears to be acceptance but the law does
not recognise such conduct as acceptance.

The third element is Consideration. According to Section 2(d) of the Contracts Act,
consideration is an act done or abstention from doing an act, or a promise to do or a promise

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to abstain from doing, something. There are three forms of consideration, executed
consideration, executor consideration, and past consideration.

The fourth element is Intention to Create Legal Relations. The Contracts Act 1950
does not contain any provision relating to intention of the parties to a contract to be bound in
law. Nevertheless, intention is an essential element of an enforceable contract. In this respect,
based on the Civil Law Act 1956, English law may be applied. In law, agreements are
categorised into two, which is family and social contracts or agreements and commercial
contracts or agreements.

Capacity to contract is the fifth element of a valid contract. Contractual Capacity is
the legal ability to enter into a contract. Minors have particular rights and obligations
established by the court when it comes to contracts. Once a person reaches age 18, they are
considered a legal adult in every state in the nation. In addition to minors, other persons are
able to avoid contracts. Mentally impaired and intoxicated people, convicts, and aliens lack
the capacity to enter into a contract. In principle, every person is qualified to contract.
According to Section 10, every agreement made by the free consent of the parties competent
to contract for a lawful consideration and with a lawful object is a contract. But who is
competent to contract? According to Section 11 prescribes that a person who is of the age of
majority and of sound mind is competent to contract. According to the Age of Majority Act
1971, for every individual person, the age of majority is 18 years old. Sound mind is,
according to Section 12 of the Contracts Act, the capability of a person in understanding the
contract and forming a rational judgment as to its effect upon his interests and whether he is
usually or occasionally of unsound mind. According to Section 11, a person who has not
reached the age of majority is not competent to contract. One of the elements constituting a
valid contract is a valid contract is that the parties entering the contract are those who have
the competency to contract. This is based on Section 10 (1) of the Contract Act 1950.
Competency refers to the capacity of being adult, having a sound mind and not forbidden by
law to enter any contract example bankruptcy. This principle is based on Section 11 of the
Contract Act 1950 which provides that “every person is competency to contract that is of the
age of majority according to the law to which hi is subject, and who is of sound mind, and is
not disqualified from contracting by any law to which he is subject”. In Malaysia, the age of
majority is recognized as above eighteen years of age as stated in the Age of Majority Act

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1971: “The majority of all males and females at the age of eighteen years and every such
male attaining that age shall be of the age of majority”.

The next element is Certainty. Every term of an agreement must be certain or capable
of being ascertained. Where the terms of an agreement are not certain, the contract may be
void. This is stated in Section 30 CA 1950.

The last element is Free Consent. The meeting of two or more minds leads to the
formation of an agreement. If this agreement satisfies certain conditions, a legally
enforceable contract is formed. On that basis, every contract must be voluntarily done
without any negative element which affects a person‟s capacity to make independent
decisions. Independent decisions are decisions which are made after due consideration of the
effects of a contract on the person. According Section 10 states that every agreement is a
contract if it is made by the free consent of the parties. And in Section 14 consent is said to be
free if it is not caused by coercion, undue influence, fraud, misrepresentation or mistake.

In today‟s world, much dependence is placed on other people to fulfil personal needs
which in earlier times were often personally attended to. As such, often without being fully
aware and conscious, many a person enters into a contract which not only gives rise to legal
rights but also creates obligations which much be honoured. Whilst little difficulty arises in
these matters, so far as adults are concerned, an increasing number of such transactions are
being entered into, by children. And it has often been said that contracts involving a child
may not be valid. Does this therefore mean that children can enter into a contract and yet get
away from their obligations when the time to fulfil them arises? There are some few cases for
us to review and was the fact for us to refer.

First, there is a case called Mohori Bibee v Dharmodas Ghose in 1903 can be refer to.
It was held that the agreement made by a minor is void. The court in this case held that
according to Section 9 and Section 10 of the Indian Contract Act, which is in pari material to
Section 10 and Section 11 of the Malaysian Contracts Act, a contract by a minor was void.
The appellant in this case loan a sum of money to the respondent, a minor, secured on a house
which was leased to the appellant. The minor, through the mother, applied for a court
declaration that the lease was void because the minor had no capacity to contract. The court
held that the contract with the minor was void and he could not sue or be sued on any
contract. Besides of that, there is another case can be refer. That case is Tan Hee Juan v Teh

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Boon Keat in 1934. In this case, the plaintiff had transferred ownership of a piece of land to
the defendant. He then applied to the court for an order to set aside the transfer. The court
referred to Mohori Bibee and held that the contract was void and ownership of the land had to
be returned to the plaintiff. In Malaysia, the Mohari Bibee case in 1903 was followed in the
case of Tan Hee Juan v Teh Boon Keat in 1934. Plaintiff who is a minor said that contract
that involved a minor is said to be void. So there is no contract at all. So it was held that the
plaintiff succeeds in his claimed and therefore Tan Hee Juan should not have to pay back to
the defendant. Later, in 1950 Contract Act had been made and in the Section 69 of the Act
provides that if a person, incapable of entering 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 entitle to be reimbursed from property of such
incapable person. But the word necessary is not defined in the Act. But later, in the case of
government of Malaysia v Gucharan Singh & Ors, Judge Chang Min Tat concluded the world
necessaries must be construed broadly and in any decision involving whether what are
supplied are or are not necessaries, it is incumbent to have regard to the facts of the case, the
conditions and circumstances in which the supply was and the purposed which is served.
Thus an infant is totally incompetent and incapable of entering into contract and there is no
contract on which he can be sued. In effect of Section 10 & 11 of contract Act 1950, the
courts held in the cases of Mohori Bibee v Dharmods Ghose (1903), Tan Hee Juan v Teh
Boon Keat (1934) and Government of Malaysia V Gurcharan Singh (1971) that all such
agreements are void. Therefore, all contracts entered by a minor are generally void and minor
cannot sue or be sued on such void contracts.

However, there are some exceptions towards a minor binding a valid contract. Under
Section 69 of Contract Act 1950, it is said that “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 be reimbursed from the property of such incapable person.” Under necessaries a
minor can enter into valid contract if only it is the basic need of the minor and suitable of his
station in life or lifestyle. Contract of Scholarship between a minor and the government or
non government organization is also under Section 4 (a) Contracts (Amendment) Act 1976 –
“the scholar entering into such agreement is not of the age of majority”. Similarly, a minor
may enter into a contract of marriage or divorcement as provided by Section 4 (a) Age
Majority Act 1971: “Nothing in this Act shall affect the capacity of any person to act in the

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following matters, namely, marriage, divorce, dowries and child adoption and religion and
religious practise and ceremonies of the races in Malaysia”. A minor may also enter into a
contract of insurance, pursuant to the Insurance Act 1966 – a minor between the ages of 10
years and 16 years may contract to affect an insurance policy with the consent in writing of
his parents or guardian. If a minor has attained the age of 16 years, he is not required to
obtain the consent. There are some cases shows the facts. The case of Rajeswary v
Balakrishanan, the court held that when the defendant, a Sri Kankan Hindu broke his promise
of marriage with the plaintiff, also a Sri Lanka Hindu, the defendant was, according to their
religious practice, in breach of his contract of marriage, although at the time of contracting
the plaintiff was a minor. Besides, The Government of Malaysia v Gurcharan Singh and Ors,
this case is Gurchran is a student who had received a government scholarship to undergo
teacher training and was bonded to serve the government. However, Gurcharan left the
service before completing his 5 years bond. When the Government sued Gurcharan for
breach of contract, he contended that he had no capacity to contract. The court, nevertheless,
held that education was a necessary. Since he had partly fulfilled his bond, he was ordered to
reimburse a reasonable sum, taking into account his partly completed service.

After discussed and explained the Minor‟s Capacity to Contract in Malaysia, in my
opinion, I have some suggestion that I think it should or it maybe can adopt or amend to the
current law in Malaysia. Firstly, according to The Employment Act 1955, and the Children
and Young Persons (Employment) Act 1966 prescribe that children below the age of 14 and
young persons between the ages of 14 and 16 are competent to enter into a contract of
employment but shall not become an employer. This Act should add into exception. At least
the young person at the ages of 14 is allowed to become an employer. This is because some
family or persons are too poor and need their young child to work to continue their live.
Second, the scholarship should give to the students between 16 and 18. This is because some
students who are have their talent and always jump the stage of class. When they finish their
Sijil Pelajaran Malaysia (SPM) is just only 16 years of age. But they are not qualified to
receive any scholarship just because their still consider is a minor. It is not fair for those
talent students. Lastly, is insurance. The insurance are effect between the ages of 10 to 16. It
should be amending to from the age of 1o to its just born. The baby who just born should
have the rights to have cover by insurance with the consent in writing of his parents or
guardian due to baby is also human and should enjoy all the rights for a human.

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In conclusion, our law is good enough but doesn‟t recognized a minor for enter into a
contract. But with some amendment, it will benefit the minor with some guardian or
guarantor from their parents.

(2,992 words)

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Reference:

(1) Itslaw.blogspot.com
(2) OPPapers.com
(3) 05/12/2006 The Star by Bhag Singh

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Law of contract

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