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Questions and Answers
What is required for an agreement to be classified as a contract according to Section 10(1) of the Contracts Act 1950?
What is required for an agreement to be classified as a contract according to Section 10(1) of the Contracts Act 1950?
According to Section 11 of the Contracts Act 1950, what is NOT a requirement for a person to be competent to contract?
According to Section 11 of the Contracts Act 1950, what is NOT a requirement for a person to be competent to contract?
Which of the following statements about minors and contracts is TRUE?
Which of the following statements about minors and contracts is TRUE?
In the context of the Contracts Act 1950, what does 'necessaries' refer to?
In the context of the Contracts Act 1950, what does 'necessaries' refer to?
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What is the contractual incapacity of a minor primarily intended to do?
What is the contractual incapacity of a minor primarily intended to do?
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In the case of Nash v Inman, what was the main issue at hand?
In the case of Nash v Inman, what was the main issue at hand?
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What is the age of majority in Malaysia as defined in the Age of Majority Act 1971?
What is the age of majority in Malaysia as defined in the Age of Majority Act 1971?
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What would happen to contracts made by an individual who is below the age of majority?
What would happen to contracts made by an individual who is below the age of majority?
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What was concluded about the waistcoats in relation to the defendant's needs?
What was concluded about the waistcoats in relation to the defendant's needs?
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Under what circumstances might a minor be bound by a beneficial contract?
Under what circumstances might a minor be bound by a beneficial contract?
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What did the court decide in De Francesco v Barnum regarding the contract with the minor?
What did the court decide in De Francesco v Barnum regarding the contract with the minor?
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What impact does the Contracts (Amendment) Act 1976 have on scholarship agreements?
What impact does the Contracts (Amendment) Act 1976 have on scholarship agreements?
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In which case was it ruled that a minor could be held liable for repayment of money spent on his education?
In which case was it ruled that a minor could be held liable for repayment of money spent on his education?
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What is required for a minor to be bound by a contract according to the discussion?
What is required for a minor to be bound by a contract according to the discussion?
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Which feature is NOT a characteristic of beneficial contracts for minors?
Which feature is NOT a characteristic of beneficial contracts for minors?
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Why was the contract involving Gurcharan Singh considered void?
Why was the contract involving Gurcharan Singh considered void?
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What is the primary characteristic of coercion in contract law?
What is the primary characteristic of coercion in contract law?
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Under what condition is a contract considered voidable?
Under what condition is a contract considered voidable?
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What is the effect of a contract formed under mistake of fact?
What is the effect of a contract formed under mistake of fact?
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Which case illustrates the concept of coercion effectively?
Which case illustrates the concept of coercion effectively?
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What distinguishes misrepresentation from fraud in contract law?
What distinguishes misrepresentation from fraud in contract law?
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Which of the following best describes undue influence?
Which of the following best describes undue influence?
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What happens when one party has apparent authority over another in a contractual agreement?
What happens when one party has apparent authority over another in a contractual agreement?
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Which statement about coercion is false?
Which statement about coercion is false?
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What occurs when both parties are under a mistake about a fact essential to an agreement?
What occurs when both parties are under a mistake about a fact essential to an agreement?
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In the example provided, what essential fact was mutually mistaken by Mrs. Daisy and Jeffry?
In the example provided, what essential fact was mutually mistaken by Mrs. Daisy and Jeffry?
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What defines a unilateral mistake of fact, as illustrated in the case of the guest at the resort hotel?
What defines a unilateral mistake of fact, as illustrated in the case of the guest at the resort hotel?
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What can be inferred about the guest's obligation to pay his hotel bill after learning of the mistake?
What can be inferred about the guest's obligation to pay his hotel bill after learning of the mistake?
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What type of misrepresentation involves a statement the speaker believes to be true?
What type of misrepresentation involves a statement the speaker believes to be true?
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What defines fraud in a contractual context?
What defines fraud in a contractual context?
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How did the manager's belief regarding the air-conditioner's function lead to Mr. Lim entering a contract?
How did the manager's belief regarding the air-conditioner's function lead to Mr. Lim entering a contract?
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What happens if the maker of a false representation believes it to be true?
What happens if the maker of a false representation believes it to be true?
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In the context of misrepresentation, which of the following would not be considered a misrepresentation?
In the context of misrepresentation, which of the following would not be considered a misrepresentation?
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In the court's decision, what was concluded about the agreement signed by the plaintiff?
In the court's decision, what was concluded about the agreement signed by the plaintiff?
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Which element is essential for establishing fraud?
Which element is essential for establishing fraud?
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What was the result of Mr. Lim's experience at the hotel with the air-conditioner?
What was the result of Mr. Lim's experience at the hotel with the air-conditioner?
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What type of agreement was the plaintiff unknowingly involved in due to fraud?
What type of agreement was the plaintiff unknowingly involved in due to fraud?
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What is indicated by the case Felthouse v Bindley regarding acceptance?
What is indicated by the case Felthouse v Bindley regarding acceptance?
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According to the Postal Rule, when is acceptance considered complete?
According to the Postal Rule, when is acceptance considered complete?
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What outcome arose from Ignatius v Bell regarding the communication of acceptance?
What outcome arose from Ignatius v Bell regarding the communication of acceptance?
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In the case of Felthouse v Bindley, which statement is true regarding the nephew's conduct?
In the case of Felthouse v Bindley, which statement is true regarding the nephew's conduct?
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What does Section 4(2)(b) of the Contracts Act 1950 state regarding acceptance?
What does Section 4(2)(b) of the Contracts Act 1950 state regarding acceptance?
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What scenario does the Postal Rule create for offerees?
What scenario does the Postal Rule create for offerees?
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In the context of acceptance, what is NOT true about implied acceptance?
In the context of acceptance, what is NOT true about implied acceptance?
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What was the main issue in the case of Entores v Miles for East Corporation?
What was the main issue in the case of Entores v Miles for East Corporation?
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Study Notes
Introduction to the Law of Contract
- The law of contract defines an agreement between two or more parties that is legally binding.
- The principle legislation in Malaysia for contract law is the Contracts Act 1950.
- Key aspects of a contract include: offer/proposal, acceptance, intention to create legal relationship, consideration, certainty, legal capacity, and free consent.
- Contracts can be discharged by several means like performance, agreement, breach, frustration, and operation of law.
- Remedies for a breach of contract are available, which depend on the circumstances.
Learning Outcomes
- Students should be able to:
- Explain basic contract elements and validate a contract.
- Outline the processes of discharging a contract and available remedies.
- Describe online contracts.
What is a Contract?
- A contract is a legally binding agreement between two or more parties.
- Section 2(h) of the Contracts Act 1950 defines a contract as an agreement enforceable by law.
- A contract must be free from factors rendering it voidable, such as coercion, duress, fraud, undue influence, or misrepresentation.
Elements of a Contract
- All contracts are agreements, but not all agreements are contracts.
- Key elements required for an agreement to become a contract are:
- Offer/Proposal
- Acceptance
- Intention to create legal relations
- Consideration
- Certainty
- Legal capacity
- Free consent
Offer/Proposal
- Section 2(a) of the Contracts Act 1950 defines a proposal as signifying willingness to do or abstain from doing something to obtain another party's assent.
- The person making the offer is called a promisor.
- Key aspects and case study provided.
Communication of Proposal
- A proposal must be communicated to the acceptor before it can be accepted.
- Section 4(1) of the Contracts Act 1950 defines communication completion upon the acceptor's knowledge of the offer.
- A proposal is communicated only if the acceptor had knowledge of the proposal.
- Case study presented: R v Clarke (1940) 40 CLR 227.
To Whom Can a Proposal Be Made?
- A proposal can be made to:
- A particular person
- The general public
- Case Study presented: Carlill v Carbolic Smoke Ball Co Ltd [1893]1QB
Invitation to Treat (ITT)
- An offer should be differentiated with an invitation to treat.
- An invitation to treat is a preliminary communication leading to negotiations.
- Examples: price lists/catalogues, displays of goods in a supermarket.
- Case studies presented: Pharmaceutical Society of Great Britain v Boots Cash Chemist Limited [1953] and Majumder v A-G of Sarawak (1967).
Auction
- The purpose of an auction is to attain the highest price for the item.
- The auctioneer is considered to invite bids, not to make an offer from the auctioneer.
- A bid constitutes an offer from the bidder which the auctioneer may accept or decline.
Tender
- A tender request is considered an invitation to treat.
- The submitted tender is the offer.
Revocation of Offer/Proposal
- A party can revoke an offer before acceptance is communicated.
- Section 6 of the Contracts Act 1950 provides information on different ways of revoking an offer.
- Case study presented: Felthouse v Bindley (1862)
Acceptance
- Section 2(b) of the Contracts Act 1950 defines acceptance as the person to whom the proposal signifies assent.
- The person accepting the offer is called a promisee.
- Acceptance must be communicated to the offeror to be valid.
- A proposal once accepted becomes a promise.
- Case Study presented: Hyde v Wrench (1840) and Felthouse v Bindley (1862)
Elements of Acceptance
- Acceptance must be absolute and unconditional.
- Modification or variation of a proposal does not constitute acceptance but instead constitutes a counter proposal, which is a rejection of the original proposal.
- Acceptance must be made within a reasonable time.
Communication of an Acceptance
- Acceptance is effective only when communicated to the offeror.
- Communication can be in writing, spoken words etc.
- Communication can be implied by conduct (case example provided).
- The postal rule exception: acceptance is effective when the letter is posted (case example provided).
Revocation of Acceptance
- An acceptance can be revoked before its communication is complete against the acceptor (section 5(2) of the Contracts Act 1950).
- Revocation of acceptance may be before or at the time the offer/proposal is received.
Intention to Create Legal Relations
- For an agreement to be a contract, there must be an intention between the parties that they want to enter into a legally binding relationship.
- The intention is crucial for establishing legal consequences.
- Two kinds of relationships are; Business/Commercial and Domestic/Social/Family Agreements.
- Case Studies presented; Lim Keng Siong v Yeo Ah Tee (1985) 2 MLJ and Balfour v Balfour (1919) 2 KB 571 & Merritt v Merritt (1970) 2 All ER 760.
Consideration
- Consideration is the price paid by one party to buy the promise or act of the other party.
- Section 2(d) in the Contracts Act 1950 explains the meaning of consideration in detail.
- Types of consideration: executory, executed, and past consideration (case study included)
- Consideration need not be adequate but must be sufficient (case study included).
- Waiver of performance exception (case study included)
- Agreements relating to natural love and affection (section 26(a)) (case study included).
- Agreement to compensate for an act the promisor was legally compelled to do (section 26(b)) (case study included).
- Agreement to pay a statute barred debt (section 26(c)) (case study included).
Certainty
- The terms of a contract must be certain and not vague.
- Agreements that are not capable of certainty are void under section 30 of the Contracts Act 1950.
- Case study included on uncertainty in agreement.
Legal Capacity
- Section 10(1) of the Contracts Act 1950 states that all agreements are contracts if they are made by free consent of the competent parties with legal consideration.
- Section 11 of the Contracts Act 1950 defines a competent person as that person is at the age of majority as stated by the law and person is of sound mind.
- Minors who don’t have the legal capacity to contract are bound in limited situations (scholarships, insurance, employment) (case studies included).
Free Consent
- Section 10(1) of the Contracts Act 1950 states that all agreements are contracts if they are made by free consent of the competent parties.
- Section 13 of the Contracts Act 1950 defines consent as when two or more persons agree upon the same thing in the same sense.
- Section 14 defines factors that cause consent to be not free: coercion, undue influence, fraud, misrepresentation, mistake.(case studies presented for each.)
Misrepresentation
- Section 18 of the Contracts Act 1950 defines misrepresentation as an untrue statement.
- It is confined to innocent misrepresentation (that the speaker believes the statement to be accurate).
- Misrepresentation refers to certain false statements.
- Case study included.
Fraud
- Fraud occurs when a party induces another into a contract via deceit.
- This is an unlawful act done by one party in order to induce the other party's decision to enter into the contract.
- Case Study presented.
Q&A
- A section dedicated to Q&A for clarifications.
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