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What is required for an agreement to be classified as a contract according to Section 10(1) of the Contracts Act 1950?

  • It must be witnessed.
  • It must be notarized.
  • It must be written.
  • It must have free consent. (correct)
  • According to Section 11 of the Contracts Act 1950, what is NOT a requirement for a person to be competent to contract?

  • Being of sound mind.
  • Being of the age of majority.
  • Not being disqualified from contracting.
  • Having legal representation. (correct)
  • Which of the following statements about minors and contracts is TRUE?

  • Minors can only contract for goods valued over a certain amount.
  • Minors can enter into any contract without exception.
  • Minors are bound by contracts for necessaries. (correct)
  • Contracts with minors are always void.
  • In the context of the Contracts Act 1950, what does 'necessaries' refer to?

    <p>Essential items like food and medical services. (B)</p> Signup and view all the answers

    What is the contractual incapacity of a minor primarily intended to do?

    <p>Protect the minor from the consequences of their lack of judgment. (D)</p> Signup and view all the answers

    In the case of Nash v Inman, what was the main issue at hand?

    <p>Whether the clothes provided were considered necessaries. (B)</p> Signup and view all the answers

    What is the age of majority in Malaysia as defined in the Age of Majority Act 1971?

    <p>18 years old. (D)</p> Signup and view all the answers

    What would happen to contracts made by an individual who is below the age of majority?

    <p>They are voidable at the discretion of the minor. (B)</p> Signup and view all the answers

    What was concluded about the waistcoats in relation to the defendant's needs?

    <p>They were not necessaries since the defendant had adequate clothing. (D)</p> Signup and view all the answers

    Under what circumstances might a minor be bound by a beneficial contract?

    <p>If the contract provides education or training that is beneficial. (C)</p> Signup and view all the answers

    What did the court decide in De Francesco v Barnum regarding the contract with the minor?

    <p>The terms were unreasonably harsh, making the contract unenforceable. (D)</p> Signup and view all the answers

    What impact does the Contracts (Amendment) Act 1976 have on scholarship agreements?

    <p>It modifies the law relating to scholarship agreements with governmental institutions. (C)</p> Signup and view all the answers

    In which case was it ruled that a minor could be held liable for repayment of money spent on his education?

    <p>The Government of Malaysia v Gurcharan Singh &amp; Ors (C)</p> Signup and view all the answers

    What is required for a minor to be bound by a contract according to the discussion?

    <p>The contract must provide fair terms. (D)</p> Signup and view all the answers

    Which feature is NOT a characteristic of beneficial contracts for minors?

    <p>Requirement of adult consent. (C)</p> Signup and view all the answers

    Why was the contract involving Gurcharan Singh considered void?

    <p>The education received was not considered a necessity. (A)</p> Signup and view all the answers

    What is the primary characteristic of coercion in contract law?

    <p>It involves threatening to commit an unlawful act to compel agreement. (D)</p> Signup and view all the answers

    Under what condition is a contract considered voidable?

    <p>When coercion has been used to obtain consent. (C)</p> Signup and view all the answers

    What is the effect of a contract formed under mistake of fact?

    <p>It is void, with no rights or obligations created. (B)</p> Signup and view all the answers

    Which case illustrates the concept of coercion effectively?

    <p>Kesarmal s/o Letchman v Valliappa Chettiar (B)</p> Signup and view all the answers

    What distinguishes misrepresentation from fraud in contract law?

    <p>Fraud requires malicious intent, while misrepresentation may not. (D)</p> Signup and view all the answers

    Which of the following best describes undue influence?

    <p>Exerting pressure through manipulation to alter someone's decision. (D)</p> Signup and view all the answers

    What happens when one party has apparent authority over another in a contractual agreement?

    <p>It can lead to claims of undue influence if consent is not voluntary. (B)</p> Signup and view all the answers

    Which statement about coercion is false?

    <p>Coercion involves threats that comply with the law. (D)</p> Signup and view all the answers

    What occurs when both parties are under a mistake about a fact essential to an agreement?

    <p>The agreement is void. (A)</p> Signup and view all the answers

    In the example provided, what essential fact was mutually mistaken by Mrs. Daisy and Jeffry?

    <p>The identity of the hotel. (D)</p> Signup and view all the answers

    What defines a unilateral mistake of fact, as illustrated in the case of the guest at the resort hotel?

    <p>Only one party is mistaken, and it is not essential to the agreement. (C)</p> Signup and view all the answers

    What can be inferred about the guest's obligation to pay his hotel bill after learning of the mistake?

    <p>He is still required to pay the full bill. (B)</p> Signup and view all the answers

    What type of misrepresentation involves a statement the speaker believes to be true?

    <p>Innocent misrepresentation. (A)</p> Signup and view all the answers

    What defines fraud in a contractual context?

    <p>A defendant causes another party to act on a false representation. (C)</p> Signup and view all the answers

    How did the manager's belief regarding the air-conditioner's function lead to Mr. Lim entering a contract?

    <p>The technician assured the manager that it was working. (B)</p> Signup and view all the answers

    What happens if the maker of a false representation believes it to be true?

    <p>The maker is not liable for fraud. (C)</p> Signup and view all the answers

    In the context of misrepresentation, which of the following would not be considered a misrepresentation?

    <p>An accurate statement about the service quality. (A)</p> Signup and view all the answers

    In the court's decision, what was concluded about the agreement signed by the plaintiff?

    <p>The agreement was voidable at the option of the plaintiff. (B)</p> Signup and view all the answers

    Which element is essential for establishing fraud?

    <p>Deceit intended to induce action based on false information. (A)</p> Signup and view all the answers

    What was the result of Mr. Lim's experience at the hotel with the air-conditioner?

    <p>He was obliged to pay for his room despite the issue. (A)</p> Signup and view all the answers

    What type of agreement was the plaintiff unknowingly involved in due to fraud?

    <p>Sale and purchase agreement relating to her land. (C)</p> Signup and view all the answers

    What is indicated by the case Felthouse v Bindley regarding acceptance?

    <p>Acceptance must always be communicated explicitly. (B)</p> Signup and view all the answers

    According to the Postal Rule, when is acceptance considered complete?

    <p>When the letter of acceptance is placed in the post box. (D)</p> Signup and view all the answers

    What outcome arose from Ignatius v Bell regarding the communication of acceptance?

    <p>Acceptance was completed when notice sent, regardless of delivery. (A)</p> Signup and view all the answers

    In the case of Felthouse v Bindley, which statement is true regarding the nephew's conduct?

    <p>The nephew intended to sell the horse but did not accept. (B)</p> Signup and view all the answers

    What does Section 4(2)(b) of the Contracts Act 1950 state regarding acceptance?

    <p>Acceptance is complete upon sending it through mail. (A)</p> Signup and view all the answers

    What scenario does the Postal Rule create for offerees?

    <p>They are bound by acceptance as soon as it’s posted. (B)</p> Signup and view all the answers

    In the context of acceptance, what is NOT true about implied acceptance?

    <p>It requires a clear and direct communication of intent. (C)</p> Signup and view all the answers

    What was the main issue in the case of Entores v Miles for East Corporation?

    <p>When is acceptance complete in respect to postings. (A)</p> Signup and view all the answers

    Flashcards

    Competent to Contract

    Having the legal ability to enter into a valid contract.

    Age of Majority (Malaysia)

    The Minimum age (18) at which a person is legally considered an adult and able to enter contracts.

    Minor

    A person under the age of majority, typically 18 in Malaysia.

    Void Contract (minor)

    A contract entered into by a minor, generally, is not legally enforceable.

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    Necessaries

    Goods or services essential for the minor's life and well-being.

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    Nash v Inman Case

    Famous court case that explored the concept of 'necessaries' in contract law involving a minor.

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    Section 10(1) of Contracts Act 1950

    Defines an agreement as a valid contract when the parties have free consent, capacity, lawful consideration, and lawful object.

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    Section 11 of Contracts Act 1950

    Specifies who is competent to contract: an adult, of sound mind, and not disqualified by law.

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    Necessaries for a Minor

    Goods or services essential for a minor's basic needs, standard of living and circumstances; what is necessary depends on social position.

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    Beneficial Contract

    A contract that provides education, training, or beneficial experience for a minor's future trade/profession.

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    Minor's Liability in Beneficial Contract

    Minors are "bound" (legally obligated) by beneficial contracts unless terms clearly unfair or unreasonable.

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    Unfair/Unreasonable Contract Terms (Minor)

    Contract terms so harsh or detrimental to a minor that courts won't enforce them.

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    De Francesco v Barnum (1890)

    Court case where contract terms too harsh for a minor, rendering it unenforceable.

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    Roberts v Gray (1913) - Minor

    Court case demonstrating that a beneficial contract does bind a minor if fair terms.

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    Government of Malaysia v Gurcharan Singh (1960s)

    Court case illustrating education as a necessity, therefore the minor is liable for tuition.

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    Contracts (Amendment) Act 1976 - Scholarships

    Legislation that amended or clarified scholarship agreement laws related to governmental institutions. (Details not provided in the content)

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    Mutual Mistake

    Both parties to an agreement are mistaken about a crucial fact, making the agreement void.

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    Mistake of Fact

    A misunderstanding about a key fact, leading to an invalid agreement.

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    Unilateral Mistake

    One party is mistaken about a fact, but the other party is aware of the truth.

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    Misrepresentation

    A false statement made by one party that induces the other party to enter a contract.

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    Innocent Misrepresentation

    A false statement believed to be true by the person making it.

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    Section 18 (Contracts Act 1950)

    Defines misrepresentation as a false statement made innocently, meaning the speaker believes it to be true.

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    Void Agreement

    An agreement that has no legal effect and cannot be enforced.

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    Terminated Contract

    An agreement that is legally ended, releasing both parties from their obligations.

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    Coercion

    Coercion is an agreement entered with the threat of unlawful action (e.g., violence, threats, detention).

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    Voidable contract (Coercion)

    A contract that can be cancelled by the harmed party if coercion was used.

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    Mistake of Fact (Contracts)

    If a contract is made based on a mistaken fact essential to the contract, the contract is void.

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    Void Contract

    A contract with no legal effect; no rights or obligations are created.

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    Undue Influence

    A contract where one party dominates another's will, essentially forcing an agreement.

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    Fraud

    A more serious form of misrepresentation, intending to deceive, making the contract voidable.

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    Dominating Will (Undue Influence)

    One party has significant power or authority over another, influencing the latter's decision.

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    Acceptance by Conduct

    Acceptance of an offer can be shown through actions or behavior, even without explicit words.

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    Felthouse v Bindley

    A landmark case establishing that silence does not equal acceptance. The nephew's inaction did not constitute acceptance of the uncle's offer to buy the horse.

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    Postal Rule

    When an offer is accepted by post, acceptance takes effect as soon as the letter is sent, not when it is received.

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    Entores v Miles Far East Corporation

    This case confirmed the Postal Rule, emphasizing that acceptance occurs when the letter of acceptance is posted.

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    Section 4(2)(a) of Contracts Act 1950

    This section states that acceptance is complete against the proposer when it is sent in a way that is out of the acceptor's control.

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    Ignatius v Bell

    A case where the plaintiff's acceptance was not timely, as it was sent by registered post but not delivered until after the deadline.

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    Section 4(2)(b) of Contracts Act 1950

    This section states that acceptance is complete against the proposer when it is put in the course of transmission to him.

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    Acceptance by Post Rules

    These rules apply to acceptance communicated through postal services, defining when acceptance is complete.

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    What is fraud?

    Intentionally deceiving someone to make them enter a contract by making false representations that the deceiver themselves don't believe to be true.

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    What's a false representation?

    A statement made by one party to another that is untrue, misleading, or not fully accurate, intended to induce the other party to act.

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    What does 'voidable' mean in contract law?

    A contract is voidable when one party has the legal right to cancel or rescind it, typically due to a legal defect like fraud or duress.

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    What happened in the case of the defendant and the plaintiff?

    The defendant fraudulently persuaded the plaintiff to sign a contract by misrepresenting its purpose, leading to a disagreement about the true nature of the agreement.

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    What did the court decide?

    The court ruled that the contract was voidable because the plaintiff was tricked into signing it under false pretenses, making it possible to be rescinded.

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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.
    • 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.
    • 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).
    • 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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