1.0
INTRODUCTION Although Malaysia now has its own contract law, namely the Contracts Act 1950 (Act
136), but basically the principle o !nglish law that was use"# $owe%er, it has been reno%ate" or mo"iie" to suit local con"itions# Contra Contracts cts Act is base" base" on the &n"ian Contract Contract Act, Act, 1', 1', which which also also repres represent entss a co"iication o !nglish common*law# Act 136 is the most important legislation or commercial matters in Malaysia# Apart rom the Contracts Act 1950, the court will also reer to the results o the case or +u"icial prece"ent# $owe%er, the use o case law is sub+ect to the con"itions set out in -ection 5 o the Ci%il .aw Act 1956# /eer to the pre%ious article un"er the hea"ing -ources Act in Malaysia# As in common*law, contract law in Malaysia also outlines the reuirements that must be present in a contract# 2he basic principle in the law o contract is or a contract to eist, it is necessary to orm an agreement %ali" an" enorceable by law in a"%ance# 4or a contract to be %ali" an" enorceable laws, certain elements must be met# 2hese elements are * • • • • • • •
2.0 2.0
ers Acceptance 4ree Consent &ntention Consi"eration Certainty Capacity 2he absence o these elements will result in a contract is %oi" an" unenorceable# ELEM EL EMEN ENTS TS OF A VALID LID CO CONTRA NTRACT CTS S 2he contract is essentially enorce" by the Contracts Act 1950# 2he contract is an
agreement entere" into by two or more in"i%i"uals, both o whom will be boun" by the agreement# 4or eample, contract o sale o goo"s, contract hire an" much more# &n summary, there are se%en () ey elements to be taen into account by each in"i%i"ual beore agreeing to any agreement to oer#
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2his article will "iscuss briely associate" with the se%en ey elements, which must be re%iewe" by in"i%i"uals beore agreeing a legally bin"ing agreement# 7eep in min" that all these elements must be satisie" simultaneously# 2.1
Offer As we all now, beore the Contracts Act 1950, we reer to !nglish .aw# 2he term
oer is use" in !nglish law, whereas the term reser%es is use" or the Contracts Act 1950# -ection (h) o the Contracts Act 1950 ha" "eine" the contract as an agreement, which can be enorce" by law in which this contract will be bin"ing on the parties in%ol%e" legally# Con"itions o an oer is an oer that it must be clear, an" communicate" to the other party will mae acceptance o the oer# & the oer is not clear, or not communicate" to the parties concerne", it is cancele"# 2hereore, the oer or oer is %ery important to mae the contract %ali", an" bin"ing on both parties# 8ithout bi"s, there will be no +oint legal contract between both#
2.2
Acceptance & reerre" to in -ection (b) o the 1950 contract, the acceptance is "eine" as the
appro%al or acceptance o the oer that has been oere" pre%iously# Agree" this means that the oere" will also agree with the con"itions an" terms set# 8ith the acceptance o the oer, then a contract is establishe"#
2.3
Free Consent All parties in%ol%e" must ha%e the consent reely# 2his is because the %ali"ity o
this contract can be "ispute", i the consent o the parties in%ol%e" in the contract is accepte" by orce an" without consent# 4inally, all parties in%ol%e" in any agreement or contract must tae cogniance o the importance o the se%en elements o the legality o this contract# & one element is missing, the contract can be "ispute" an" may be re%oe" later# 2
2.
Intens!on &ntent or the will is "i%i"e" into two or contracts in%ol%ing business agreements
an" "omestic agreements, amily an" social# Assumptions ma"e, where the contract in%ol%es business "ealings, the parties in%ol%e" are sai" to ha%e the intention to enter into an agreement, an" bin" them legally# $owe%er they may be "enie" i the e%i"ence is clear an" strong# 2o "eal in%ol%ing "omestic, amily an" social assumptions also sai" that the parties in%ol%e" are not inten"e" to be bin"ing an" parties are legally bin"ing in law# 4or eample, i the husban" an" the wie promise" %erbally to present holi"ay pacages wie, but the husban" ails to "o so, the wie is not entitle" to claim the law# $owe%er, i the appointment was recor"e" or written on a piece o paper, the agreement can be enorce" because the two si"es are sai" to inten" to pro"uce an agreement that bin"s both legally#
2."
Cons!#erat!on 2he contract is a contract that is %ali" in law, three elements are eually
important# 8ithout consi"eration, the agreements ma"e are cancele"# Consi"eration is meant here is the price pai" by the promise to the maers promise# &n the Contracts Act 1950, -ection (") mentions the rewar" promise# 2hereore, the parties entere" into the contract must ha%e their rewar"#
2.$
Certa!nt% Certainty is one important element in a contract# Agreements which ha%e an
element o uncertainty, uy, %ague, or conusing is cancele" an" will not bin" any o the parties in%ol%e"# & the contract is an element that cannot be ascertaine" whether the terms o the agreement reache" ma+or agreements or not, the contract may also be cancele" as speciie" in -ection 30 o the Contracts Act 1950#
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2.&
Capac!t% &n the Contracts Act 1950, section 11 also touch on matters relate" to the ability or
ualiications# &n act, only those who are mature, o soun" min" an" is not restricte" by any law are entitle" to enter into contracts# A person is "eine" as an a"ult when they reach a"ult age o 1' years# 2hereore, those age" un"er 1' years are not eligible to enter into contracts, ecept in certain cases only# 4or eample, a contract or insurance purposes or scholarships are %ali" an" i the chil"ren who carry out the contract# :ut simply, or the banruptcy, no sane or insane or un"er the age o ma+ority are not eligible an" no right at all to engage in any business contract#
3.0
CONTRACT
INVOLVIN'
T(REE
CONTRACT ACT 1)"0
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FACTORS
UNDER
S.1
OF
T(E
4ree %olition is sai" to eist when there was no such elements as speciie" in -ection 1; o the Contracts Act 1950 which states that
coercion, as "eine" in -ection 15 o this r"inance= or >n"ue inluence as "eine" in -ection 16 o this r"inance# 2he scam (rau"), as "eine" in -ection 1 o this r"inance# A real one, as "eine" in -ection 1' o this r"inance# !rror, sub+ect to the pro%isions o -ections 1, an" 3 o this r"inance#
&n this paper we will "iscuss three (3) elements o i%e (5) o the abo%e in more "etail an" "epth o
3.1
Co*p+,s!on Coercion reers to any orm o %iolence or threats o %iolence or other acts
prohibite" by the penal co"e against a party, or amily property, with the aim o orcing the parties to enter into contracts# -ection 15 o the Contracts Act 1950 "eines that coercion is <"oing any act or threaten to "o any act that is prohibite" by the penal co"e, or illegally "etaine" or threatene" to "etain, any property, an" harm anyone ne%ertheless, with the intention to cause a person to enter into an agreement <# Characteristics o Coercion 2here are se%eral eatures that can be i"entiie" to un"erstan" the concept o coercion namely *
1) @iolence or threats o %iolence Acts o %iolence or threats o %iolence inten"e" or use un"er such coercion is a criminal act which is contrary to the :enal Co"e only# :enal Co"e is written law go%erning criminal law in Malaysia# & an act is against the law ecept the penal co"e, the act is not sub+ect to the threat o coercion or the purpose o -ection 15 o the Contracts Act 1950# -ee the eample case,
un"er !nglish law, an" although -ection 506 o the :enal Co"e is not in orce at the time or place o the act is "one# ) 2he act o 4orce 2he act o orcing contains two () elements that nee" to be pro%en# 2he irst element (1) is to use pressure or coercion to aect someones willingness to mae the consent is not ree# 2he secon" element () is pressure or coercion shall be contrary to the law# !ects an" Conseuences Compulsion 2he eect o a contract that contains an element o coercion is, the contract can be cancele" at the option or the will o the parties be orce" to enter into such contracts# Accor"ing to the 19th -ession o the Contracts Act 1950, <&n the e%ent o orce on an agreement, then the agreement is a contract which may be cancele" at the option o the orce"<# 2hereore, the element o coercion coul" eist in a contract where one party has been in"uce" to enter into an agreement without the ree consent# 2he party was orce" right*han" si"e o the law to apply to the court or canceling the contract he ha" entere" the groun"s that there was coercion, an" the contract is null an" %oi"#
3.2
Effect Not Fa!rness A person can set asi"e a transaction or transactions on the groun"s that he ha"
committe" such transactions as aecte" by someone else on it# /eer to -ection 16 o the Contracts Act 1950 states that a contract has been ma"e, sai" to ha%e been "ri%en by un"ue inluence i the relationship between the two parties that mae such contracts in which one party has the ability to "ominate the will o others an" use position to obtain unair a"%antages (not +ust) the other party or an authority that allows him to tae a"%antage o others# A person can be consi"ere" to be in the situation to "ominate the will o another person when * a)
$e hol"s the real power or apparent power o%er the other person, or where he is in a relationship o trust with others# $ere is an eample to eplain the meaning o
obtain a bon" rom to a larger amount o money to be pai" on the loan, then A b)
is "eeme" to ha%e use" his inluence with un"ue# n the one han" there is a trust relationship with another person as his clients
c)
solicitors, trustees an" beneiciaries, a"%isors an" religion o others# 8hen he contracts with people who are "isable" or mentally impaire", whether "ue to age actor, "isease, suering min" or bo"y permanently or temporarily# 4or eample, a person weaene" by illness or a"%ance" age an" was encourage" by , me"ical assistants an" to agree to pay the unreasonable sum o money or his ser%ices# is alrea"y using the &nappropriate &nluence# &n law, the eistence o inluence alone is not suicient to cancel an agreement# 2he eistence o an un"ue inluence that has been "one by people who ha%e the power to
be pro%en# &n circumstances where the responsibility or pro%ing the absence o un"ue inluence is base" on the "esire to "ominate the other person# 4or eample to -ection 16 o the Contracts Act 1950, a member baner loans to customers with interest rates etraor"inarily high# n the surace, its "esire to capture customers an" managing it seems unreasonable# /esponsibility in pro%ing the absence o un"ue inluence is locate" on the baner# $e may "o so by pro%ing that at the time the loan was gi%en, the situation in the money maret is tight an" interest rates high# !ects An" Conseuences &nluence &nappropriate 2he impact o un"ue inluence reers to -ection 0 o the Contracts Act 1950, any agreement eecute" on un"ue inluence, will mae this agreement can be cancele" by the will o the parties that ha%e been aecte"# :eople who inluence" can get lost again reers to -ection 66 o the Contracts Act 1950, which reuires a person who has recei%e" any beneit rom the contract, beore the cancele" return an" compensate the people who recei%e" the beneit# ut i the parties to cancel ha" been any interest rom other parties in the contract, he was oblige" to return the interest is
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B 00 bon" with an interest rate o 6 percent per month# 2he court may re%oe the bon" an" or"ere" to pay the B 100 it bac with interest that the Court "eems it#
3.3
Fra+# eine" in -ection 1 o the 1950 contract as
or encourage other parties or their agents to enter into contracts<# -ection 1 A7 1950 clearly sets out some speciic actions that are inclu"e" in the category 4rau" such as a) -uggest a act which is not true by a person who "oes not belie%e something as true= b) A person who acti%ely or %igorously hi"e the act rom someone else= c) Mae an appointment without any intent to eep that promise= ") :erorm any other act or the purpose o "ecei%ing an" mislea"ing the Court consi"ers being appropriate to be "eclare" as a hoa= e) :erorm any error or omission is one that is clearly "eine" by law as a hoa# Accor"ing to -ection 1 o the Contracts Act 1950, a person is sai" to "ecei%e the other party i he commits an act with intent to in"uce another person to enter into contracts with it# 2he important wor" to remember is, to "etermine whether the contract contains an element o rau" or "eceit, someones intent to "ecei%e another party in or"er to enter into such contracts shall be taen into account# An agreement %oi"able at the option o the person who was cheate" i it can be pro%e" the eistence o rau"#
2he ierence etween Misrepresentation 2he $oey :oey An" 4rau" i) 8hen a person maes a statement an" a act in reality it is wrong, then he has ma"e a misstatement# ii) 8hen a contract has elements o misrepresentation, it will be a contract %oi"able# iii) &n !nglish law, misstatement "i%i"e" into two () o misstatement elements o intrigue an" outright misstatement# Meanwhile, the Malaysian Contracts Act 1950 "eines a misstatement as a rau" or "eceit "eception reers to -ection 1 o the Contracts Act 1950, an" misstatements sincere as in -ection 1' o the Contracts Act 1950# i%) Accor"ing to !nglish law, in or"er to pro%e misrepresentation by guile things consi"ere" is whether maing a statement there is nowle"ge that the statement is true
8
or alse# & he new that the statement was incorrect, it means it has ma"e a material misstatement in intrigue# %) & on the contrary he really belie%es the statements he ma"e were true but in reality it is a act, then it is sai" to mae sincere misstatement# %i) 2he Contracts Act 1950 also "emonstrate" the circumstances that coul" be categorie" as rau" where it comprises a ruse misstatement un"er !nglish law# Category rau" un"er the Contracts Act 1950 is wi"er than the >7 law# %ii) Among the things that shoul" be gi%en is that un"er !nglish law, to pro%e misrepresentation by guile, nowle"ge o the truth o a statement to be i"entiie"# Meanwhile, the Contracts Act 1950 put an intention to "ecei%e as an important actor that .0
must be pro%e" in the case o rau" or "eception# RECOMMENDATION FOR AMENDMENT OF MALA-SIA LA .1 L!*!tat!ons of t/e Contracts Act 1)"0 T/e Mana!n Users Contract 2his Act pro%i"es less protection or consumers an" a bit limite"# 2he situation gets worse with the emergence o %arious contractual metho"s that aect the etent o sprea" o the use o technology in the course o the present contract# Contract law in Malaysia can be sai" to unction as a single license or each party to eploit the weanesses o others# -uggestion that this act is re%iewe", especially concerning the unction o the Contracts Act itsel which shoul" ser%e as a platorm or "e%eloping relationships built on trust, rather than short*term gains to conirm# :roper law shoul" strengthen contacts an" cooperation en%isions a rather in"i%i"ualistic ethics as applie" to"ay#
.2
Contracts Act !n#!cates !ts scope !s not e/a+st!e 2his has raise" some uestions# 2his Act clearly %isible laws in its pro%isions not
aecting the content o a contract# 2his case was raise" in writing @isu -inna"urai (19')# 2his Act "oes not ha%e or contain any pro%ision speciying in particular about the contents o a contract# :ro%ision was not ma"e on the classiication o the terms in the contract#
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2he Act is silent on whether the parties are strictly boun" by the epress terms o the contract or whether certain terms may be implie"# 2here are no special pro%isions go%erning the content or terms o the contract# Amen"e" proposal an" a""e" that the special pro%isions go%erning the content or terms o the contract are ma"e so that it is clear an" air to all parties %oluntarily contracte"# .3 ress+re 4% T/e /eno*enon Of ',o5a,!6at!on 2here is no "oubt the law o contracts Malaysia currently being sue" by the pressures o globaliation# $e ga%e huge implications in particular the worl" o commerce# &n an age o sophisticate", with the conuest o "igital technology in the worl" an" international tra"e couple" with the sophistication o computer systems, telecommunications an" inormation technology, we see a new electronic maret an" is e%ol%ing worl"wi"e# Deneral contract law, in its present state, it is still not rea"y to ace the challenges that are being an" will be o%ercome# !specially in business or pro%i"ing protection an" care or the interests o consumers in the contract# 2he "rating o the !lectronic Commerce Act is still not suicient an" cannot sol%e the problem o protection reuire" by the user in cyberspace#
".0
CONCLUSION
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As alrea"y "iscusse", the law o contract in Malaysia is base" on the Contracts Act 1950 (Act 136)# A contract is %ali" an" enorceable in law will only be orme" i it contains the necessary elements such as oer, acceptance, consi"eration, intention, willingness, ability an" con"itions# 8hen one o these elements "o not eist, the contract may only eist as a contract %oi"able (%oi"able contract) or the agreement %oi" (%oi" the agreement)# -ection 1; o the Contracts Act 1950 "eines what a
REFERENCES
Ata 7ontra 1950 (Ata 136), &nternational .aw oo -er%ices#
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uang# - E 2or+i, ? (199)# >n"ang*>n"ang 7ontra i Malaysia#
a%i" 7ershaw, Company Law in Context (>:, or" 009)#
Ma+or, 8# 2# (199)# >n"ang*un"ang ontra, 7uala .umpur &nternational .aw oo -er%ices#
Mohame" A et# al (009), usiness .aw, (6th e"#)# -elangor pen >ni%ersity Malaysia#
:aul .# a%ies FC, Dower an" a%ies :rinciples o Mo"ern Company .aw, 'th !"ition, 00', .on"on -weet E Mawell, Chapter 1#
/einer 7raaman, $enry $ansmann, :aul .# a%ies, 7laus $opt, Derar" $ertig, $i"ei 7an"a, The Anatomy of Corporate Law (>: 00;)#
/obbins, -#4#, Gu"ge, 2#A# (00)# rganiational eha%iour# 1th e"ition# :earson !"ucation &nc#, p# 551*55#
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