Contracts Act 1950: Capacity to Contract

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Questions and Answers

Which type of contract is an exception to the void ab initio status for minors?

Loan contracts

Marriage contracts (correct)

Service contracts

Rental agreements

What must a person be to enter into a valid contract under the Contracts Act 1950?

Of sound mind

An adult

A resident of Malaysia

Both A and B (correct)

Under which section can a person who is usually unsound of mind make a contract?

S.11 Contracts Act 1950 (correct)

S.15 Contracts Act 1950

S.10 Contracts Act 1950

S.12 Contracts Act 1950

What is the legal status of an agreement made by a person under the age of majority?

Void ab initio Signup and view all the answers

Which type of contract is NOT typically valid for a minor under the exceptions listed?

Lease agreements Signup and view all the answers

What is the legal status of a contract entered into by a person who is not of the age of majority?

Void ab initio Signup and view all the answers

Which of the following types of contracts is NOT void if entered into by a minor?

Marriage contracts Signup and view all the answers

In the case of wilful breach of a contract of service, what is the consequence for termination?

Termination can occur without notice upon indemnity payment Signup and view all the answers

Which section of the Indian Contracts Act is considered in pari materia with the Contracts Act regarding void agreements?

Section 65 Signup and view all the answers

What must a person do if they received an advantage from a void contract?

They must return it or make compensation Signup and view all the answers

What is the court’s discretion regarding minors and void contracts?

Minors may be required to make payment Signup and view all the answers

Which act dictates regulations for employment of children and young persons?

Children and Young Persons Employment Act Signup and view all the answers

What can be claimed by a minor despite their contract being void ab initio?

Remedies for services rendered Signup and view all the answers

What age defines a 'child' under the Children and Young Persons Employment Act 1966?

Under 15 years Signup and view all the answers

Which statement best describes the implication of the Contracts (Amendment) Act 1976 regarding scholarship agreements?

Scholarship agreements are fully enforceable regardless of the scholar's age. Signup and view all the answers

What is the maximum age for a 'young person' as defined in the Children and Young Persons Employment Act 1966?

18 years Signup and view all the answers

Which option is NOT allowed for female young persons under the employment regulations?

Working in bars under any circumstance Signup and view all the answers

What can a child or young person do under the Contracts Act 1950 regarding contracts of service?

They are competent to enter into contracts of service. Signup and view all the answers

Which type of work is permissible for children under the Children and Young Persons Employment Act 1966?

Light work in family undertakings Signup and view all the answers

According to the Contracts (Amendment) Act 1976, which of the following statements is true?

Minors can claim payments under certain conditions. Signup and view all the answers

What must be done for a female young person to work in a club not managed by her guardian?

Obtain approval from the Director-General. Signup and view all the answers

Which of the following scenarios is a misconception about scholarship agreements for minors?

Scholarship agreements are automatically void for minors. Signup and view all the answers

What is a restriction placed on young persons regarding work in hospitality establishments?

They may work in hotels if their guardian manages it. Signup and view all the answers

Study Notes

Capacity

Agreements are contracts if made by competent parties (Contracts Act 1950, s.10)
A person is competent to contract if they are of the age of majority and of sound mind (Contracts Act 1950, s.11)
The age of majority in Malaysia is 18 years for both males and females (Subject to section 4)

Age of Majority

Subject to section 4, the minority of all males and females in Malaysia ceases and determines at the age of eighteen.
Attaining 18 years of age, a person becomes of majority.

Sound Mind

A person is capable of understanding the contract and forming a rational judgment about its effect on their interests at the time of contract (Contracts Act 1950, s. 12).
A person usually of unsound mind can contract when of sound mind.
A typically sound-minded person cannot contract when of unsound mind.

General Rule for Contracts Made By Minors

A contract entered into by a person who is not of the age of majority is void ab initio, meaning invalid from the beginning.
Exceptions include: marriage contracts, scholarship contracts, and employment contracts (including insurance contracts).

Exceptions

Nothing in this Act affects a person's capacity to act in matters like marriage, divorce, dower, or adoption (Age of Majority Act).

Case Study: Rajeswary and Anor v Balaksrishnan & Ors

This case involved a betrothal ceremony and arranged marriage plans.
One party repudiated their promise to marry.
The other party sought damages for breach.

Law Reform (Marriage and Divorce) Act 1976

Any marriage solemnised in Malaysia is void if either party is under 18 at the time of the marriage.
'Solemnsied' is defined in the context of the marriage.

Scholarships

A scholarship agreement entered into by a minor is not invalidated under the Contracts (Amendment) Act 1976, s. 4(a).

Case Study: Government of Malaysia v Gurcharan Singh & Ors

The high court held a scholarship agreement was void if entered into by a minor.
This led to a judicial amendment and to this day, they can still claim payment under s.69.
This does not make the agreement valid though.

Employment Contracts

Children and Young Persons Employment Act 1966 defines "child" as someone under 15, and "young person" as someone under 18, who are not children.
A child can do light work within family, in any public entertainment (based on license conditions), with Federal/State government approval (at school, training, vessel), or as apprentices (approved by an authority).
Similarly a young person can do any of these jobs in addition to employment (domestic/office, factory, etc) or as a ship's hand.
Note that in specific employment, i.e., in entertainment places, a female young person can also be engaged without needing parent/guardian authorisation/approval

Remedies in case of Void Contract by Minor

If a minor enters into contracts, any contract that is void ab initio, except in the case of marriage, scholarships and employment contracts, are able to claim remedies under the law. This includes (but is not limited to) marriage, scholarship and employment contracts.
Courts have discretion to direct payment from a minor to avoid injustice under the specific relief act (s.40).

Case Study: Tan Hee Juan v Teh Boon Keat

This case highlights the need for a fiduciary relationship to get certain remedies.
Recovery of money paid to a minor under a contract void ab initio can be claimed under s.69

Case Study: Mohori Bibee v DharmodasGhose

It establishes that a contract entered into by a minor is void ab initio.

Case Study: Leha bte Jusoh v Awang Johari bin Hashim

This case reaffirms that a minor cannot enter into a contract in the way a major adult contract.
This includes the purchase of land, and the payment of purchase price from the minor's side.

Necessaries

"Necessaries" are items suited to the minor's condition in life, not just basic needs.
The nature and extent of "necessaries" vary based on the minor's social circumstances.
Cases like Government of Malaysia v Gurcharan Singh clarify interpretation of this concept.
Cases on this include: Gucharan Singh and Chapple v Cooper.

Case Study: Gucharan Singh

The Gucharan Singh case dealt with vocational training and teacher qualifications as necessities.

Case Study: Chapple v Cooper

This case discussed burial expenses as the necessity of a minor.

Suited to Condition in Life

The determination of 'necessaries' requires careful consideration of the minor's particular circumstances and living conditions.

Misrepresentation of Age

A minor who misrepresents their age and enters into a contract might still be bound by it, especially if the other party relied on the lie.
Section 115 of the Evidence Act 1950 prevents challenging the truth of a lie, yet the minor might still be allowed to provide evidence of their true age to avoid the contract.
Exceptions may be possible under particular legal circumstances, e.g., where the minor misrepresented their age, Natesan & Than Letchumi

Case Study: Mahomed Syedol Ariffin v Yeoh Ooi Gark

This case further clarified the issue of misrepresenting age.

Case Study: Natesan v Than Letchumi

Highlights that a minor who misrepresented their age to enter into a contract can still be recognised as one, and that this misrepresentation will not stop the case.

Termination of contract

Under employment act 1955, an employee and Employer can terminate the contract without notice via payment of an indemnity.
Any willfull breach of contract can also terminate employment without notice.

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Description

This quiz explores the legal principles surrounding the capacity to contract under the Contracts Act 1950 in Malaysia. Key topics include agreements, age of majority, sound mind, and the implications of contracts made by minors. Test your understanding of the requirements for competent parties to enter into contracts.