Mind Map Gallery Element of Contract
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Element of Contract
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Edited at 2020-10-09 02:34:39
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Element of Contract
Free Consent
Elements that may affect the free consent.
1. Coercion
Section 15 CA 1950: "Coercion is thecommitting or threatening to commit anyact forbidden by Penal Code, or unlawfuldetaining any property, with the intentionof causing any person to enter into anagreement."
CASE: KESARMAL s/o LETCHMAS DAS vVALIAPPA CHETTIAR (1954)
2. Undue Influence
Section 16(1) CA 1950: "A contract is said tobe induced by "undue influence" where therelations subsisting between the parties aresuch that one of the parties is in positionto dominate the will of the other and usesthat position to obtain an unfair advantageover the other"
Elements of undue influence
1. Presumption of domination
a. Holding a real or apparent authority.
b. Standing in a fiduciary relation
2. Effect of undue influence in a contract
The contract is voidable.
3. Fraud
Elements of fraud
1. There must be a false representation orstatement.
2. It was given by one party to another withintention to deceive.
3. The representee must have relied on therepresentation.
CASE: KHENG CHWEE LIAN v WONG TAKTHONG (1983)
CASE: LETCHEMY ARUMUGAM vANNAMALAY (1982)
Effect of fraud in contract
Section 19(1) CA 1950: "When consent iscaused by fraud, the agreement isvoidable."
Section 17 CA 1950: "Fraud include anyfollowing acts committed by a party to acontract with intent to deceived otherparty: a) the suggestion as to a fact, whichis not true; b) the active concealment of afact; c) a promise made without anyintention of performing it; d) any other actfitted to deceive; e) any such act the lawspecially declares to be fraudulent."
CASE: DERRY v PEEK (1889)
4. Misrepresentation
Elements of misrepresentation:
1. There must be a false represeentation,either through a positive statement orsome conduct.
2. The representor was innoncent todeceive.
3. The representation must be one of fact ,not mere expression of opinion.
4. The statement was addressed to partymisled.
5. The representation must induce themisled party to enter into the contract.
Section 18 CA 1950: "Misrepresentationincludes: a) The positive assertion, which isnot true, though he believes it to be true; b)any breach of duty which, without an intentto deceive by misleading another to hisprejudice; c) causing , however innocently, aparty to an agreement to make a mistakeas to the substance which is subject of theagreement."
5. Mistake
Elements of mistake
1. Mistake as to the existence of the subjectmatter of the contract.
2. Mistake as to the identity of the subjectmatter, both parties at cross-purposes.
CASE: RAFFLES v WICHELHAUS (1864)
3. Mistake as to the possibility ofperforming the contract.
CASE: SHEIKH BROTHERS LTD v OCHSNER(1957)
Effect of mutual mistake in contract
Section 66 CA 1950: "When an agreementis discovered to be void, any person whoreceived any advantage is bound to restoreit or to make compensation for it to theperson from whom he received it."
Unilateral mistake
Section 23 CA 1950: "A contract is notvoidable merely because it was caused byone of the parties to it begin under amistake as to a matter of fact."
Section 21 CA 1950: "Where both parties toan agreement are under a mistake as to amatter of fact essential to the agreement,the agreement is void."
Certainty
Section 30 CA 1950: "Agreements, themeaning of which is not certain, or capableof being made certain, are void."
Element of making valid contracts iscontract must be certain, definite, clear anddetail.
CASE: KARUPPAN CHETTY v SUAH THIAN(1916)
Intention to Create LegalRelation
1. Commercial or Business agreement.
Concerns with profit making and makingmoney out of something. For example;selling/ hiring/ renting something.
CASE: LOW KAR YIT v MOHD ISA (1963)
CASE: LIM KENG SEONG v YEO AH TEE(1983)
2. Social, Domestic and Family agreement.
Not involving any business or profit makingactivities which normally between familymembers or friend.
CASE: BALFOUR v BAL8FOUR (1919)
CASE: MERRITT v MERRITT (1970)
The Act is silent on this matter.
Consideration
Definition
Consideration is act or promise that doneby one party as required by the other partyin return for his promise.
Section 2(d) CA 1950: "When, at the desireof promisor, the promisee or any otherperson has done or abstained from doingor does or promises something, such act iscalled consideration,"
Categories of consideration
1. Executory Consideration
Promise in return to a promise : it is when aperson promise to do something in returnfor his promise the other party promises todo something.
Section 24 CA 1950
CASE: K.MURUGESU v NADARAJAH
2. Executed Consideration
Performance of an act in return to apromise: It is when the other partyperforms the act as required by promisor.
CASE: CARLILL v CARBOLIC SMOKE BALLCO (1893)
3. Past Consideration
Past act in return to a promise:Consideration complete before the promiseis made.
CASE: LAMPLEIGH v BRATHWAT (1615)
CASE: KEPONG PROSPECTING LTD vA.E.SCHMIDT (1968)
Requirement of Consideration
1. Contract made on account of naturallove and affection.
Section 26 CA 1950
CASE: RE TAN SOH SIM (1951)
2. Contract to compensate a past voluntaryAct.
CASE: J.M.WOTHERSPOON & CO LTD vHENRY AGENCY HOUSE (1962)
3. Contract to compensate for act, whichpromisor was legally compellable to do.
4. Contract to pay a statute-barred debt
Rules governing consideration
1. Adequacy of consideration
CASE: PHANG SWEE KIM v BEH I HOCK(1964)
CASE: BOLTON v MADDEN (1873)
2. Consideration not necessarily must comefrom the promisee
CASE: VENKATA CHINNAYA vVERIKATARAMAYA
3. Waiver of performance
A. English Law
CASE: PINNEL'S CASE (1602)
B. Malaysian Law
CASE: PAN AH BA & ANOR v NANYANGCONSTRUCTION SDN BHD (1969)
Methods of Waiver of Performance
1. Payment of smaller sum in discharge of alarger sum.
2 Part payment by a 3rd party in dischargeof a debt.
3. If a person accepts an agreed sum insatisfaction of an unascertained debt, thatdebt is discharge.
4. Composition with creditors for thepayment of a smaller sum.
Capacity
Requirement as to capacity
Competent
1. An adult
2. Sound mind
3. Not disqualified from contracting by anylaw.
Not Competent
1. Minor or children
Valid contract for minor fall under followingexception:
A. Contracts for necessaries
B, Beneficial contracts or contracts ofapprenticeship.
C Contracts of scholarships
D, Contracts for insurance
E. Contracts made under the age ofMajority Act 1971
2. Insane or drunken person
Section 11 CA 1950: "Every person iscompetent to contract who is .. of soundmind.. "
3. Bankrupts or insolvents
Section 10(1) CA 1950: "All agreements arecontract if they are made by partiescompetent to contract."
Acceptance
Definition: When offeree agrees or acceptsthe offer made by the offeror.
Section 2(b) CA 1950: "When the person towhom the proposal is made signifies hisassent... the proposal is said to beaccepted."
Conditions of a valid acceptance
Acceptance must be absolute andunqualified.
Section 7(a) CA 1950: "The acceptance mustbe absolute and unqualified."
CASE: HYDE v WRENCH (1840)
CASE exceptions: STEVENSON JAQUES vMCLEAN (1880)
Acceptance must be communicated insome ' usual & reasonable manner'
Section 7(b) CA 1950: "... the acceptancemust be expressd in some usual andreasonable manner, unless the proposalprescribes the manner in whhich it is to beaccepted... " ; "... if the proposal prescribes amanner and the acceptance is not made inthat manner, the proposer may, within areasonable time.., insists the prescribesmanner bbut if he fails to do so, he acceptsthe acceptance."
CASE: ELIASON v HENSHAW (1819)
CASE: WETTERN ELECTRIC v WELSHDEVELOPMENT AGENCY (1983)
Mode of accceptance
Acceptance must be communicated
Section 3 CA 1950: "The communication ofacceptance are deemed to be made by anyact of the party , which he intends tocommunicate the acceptance."
CASE: POWELL v LEE (1908)
Silence is not an acceptance
CASE: FRASER v EVERETT (1889)
CASE: FELTHOUSE v BINDLEY (1862)
EXCEPTIONS:
Unilateral Contract: When offeror dispensedwith or waived the need of communicationof acceptance.
CASE: ERRINGTON v ERRINGTON
General Offer: When there is an offer to thepublic
Reciprocal Promises: Form theconsideration for the promiseseach other party to thecontract
Section 2(f) CA 1950: "Promises whichform the consideration for each otherare called reciprocal promises."
Section 8 CA 1950: "... the acceptance ofany consideration for a reciprocal promiseis acceptance of the proposal."
Acceptance through post: Acceptancethrough post complete when the letter ofacceptance is posed, even though it notcome to the actual knowledge by theofferor.
Section 4(2) CA 1950: "The communicationof an acceptance is complete as against theproposer, when it is put in a course oftransmission to him."
CASE: ENTORES LLTD v MILES FAR EASTCORP. (1955)
CASE: IGNATIUS v BELL (1913)
Offer
Definition
When a person promise or proposessomething to another party with theintention that his promise or proposalwould be accepted by that other party.
Section 2(a) CA 1950: "When one personsignifies to another his willingness to door to abstain from doing anything with aview to obtaining the assent of thatother... he said to make a proposal."
How to make an offer
Express: The offer made in word clearly inwriting or verbally.
Implied: The offer implied from the conductof the parties and no word being used inthe offer.
Section 9 CA 1950: "So far as the proposalis made in words, the promise is said to beexpress. So far as the proposal is madeotherwise than in words, the promise isimplied. "
Types of offer
A) Specific Offer: The offer is addressed tospecific or particular person. The person isknown as offeror.
A) CASE : BOULTON v JONES (1857)
B) General Offer: The offer is addressed tothe public large.
B) CASE : CARLILL v CARBOLIC SMOKEBALL CO (1893)
Section 2(b) CA 1950
Condition of vallid offer
A) An offer must be ceertain
CASE: GUTHING v LYNN(1831)
B) An offer must be communicated
Section 2(a) CA 1950 and Section 4(1) CA1950 : "The communication of proposal iscomplete when it comes to the knowledgeof the person to whom it is made."
CASE : TAYLOR v LAIRD (1856)
CASE: R v CLARKE (1927)
Offer distinguished from ITT
Advertisement
CASE: HARRIS v NICKERSON (1873)
CASE : COELHO v THE PUBLIC SERVICESCOMMISSION (1964)
CASE: CARLILL v CARBOLIC SMOKE BALLCO (1893)
Display of Goods in a Self-service Shop
CASE: PHARMACEUTICAL SOCIETY OFGREAT BRITAIN v BOOTS CASH CHEMISTLTD (1953)
CASE: FISHER v BELL (1960)
Tender
CASE: SPENCER v HARDING (1870)
Price lis or Quotation
CASE: HARVEY v FACEY (1893)
CASE: PRESTON CORPORATION SDN BHDv EDWARD LEONG & OTHERS
Auctioneer Inviting Bids
Section 10 of the Auction Sales Act: "A salebu public auction shall be complete whenthe auctioneer announces its completion bythe fall of the hammer..."
Revocation of offer
Section 5(1) CA 1950: "A proposal may berevoked at any time before thecommunication of its acceptance iscomplete as against the proposer."
CASE: PAYNE v CAVE (1789)
Modes of revocation
1. By communication of notice ofrevocation
a. Revocation of offer under the postal rule
Section 6(a) 1950
CASE: HENTHORN v FRASER (1892)
2. Revocation by lapse of time
Section 6(b) 1950
CASE: FRASER v EVERETT (1889)
3. Revocation by failure of the offeree tofulfill a condition acceptance.
Section 6(c) 1950
CASE: PYM v CAMPBELL (1856)
4. Revocation by death or mental disorderof the offeror.
Section 6(d) 1950
CASE: BRADBURY v MORGAN (1862)