Contract Law in Malaysia

Question (a): Introduction Contract is an agreement that leads to legally binding and legally enforceable between both parties, as stated by (Latimer, pg275). It is crucial to understand the meaning of “contracts”, without an agreement which legally binds and enforced, there would be no business. In Malaysia, there is contract law in a statute, the Contracts Act, 1950. There are several elements of forming contract, which are offer, acceptance, the intentions to create legal relations, consideration, capacity and certainty. Capacity According to (Abbott, Pendleburry & Wardman, pg112), capacity refers to the power to enter into any contract they wish. In Section 11 of Contracts Act 1950, every person is competent to binding a contract, when that specific person is in the age of majority, of sound mind, and is not disqualified from contracting in law previously. But, for some particular group of individual, there is no capacity of entering into a contract for them, this particular group are minors, mentally ill or drunkenness and also corporations. Minors In Malaysia, a minor refers to anyone who below the age of 18, according to (Lee, pg106). According to Age of Majority Act, 1971 stated that the age of majority is 18 and above. According to the case of Tan He Juan v Teh Boon Keat [1934], the plaintiff, who was an infant, executed the transference of land under the approval of defendant. Then, court held to declare the transference, and contract was void because of the involvement of minors entered into a contract. Based on (Abbott, Pendleburry & Wardman, pg112), there are two principles in law to govern minor’s contract. First, it was formed to protect minors to against their immaturity and lacking of experiences. Second, it is used so that the law will not cause unnecessary hardship to people who deal an agreement with a minor. Therefore, contracts that minor entered into will eventually be void, according to Contracts Act. The law seems to be prejudiced on adults who deal with minors. Therefore, to refuse any unfairness, certain exceptions have been created to avoid minors obtaining benefits with the existence of this law.

1. ‘Contracts’ for necessaries

As stated by (Nabi Baksh and Arjunan, pg173), under section 69 of the Contracts Act, if an individual is supplied by another individual with necessaries that suitable to one’s condition in life, supplies is able to reimbursed from such individual’s property. This section may provide a broader scope of facts. Therefore, according to (Elliott and Quinn, pg57), ‘necessaries’ means goods that is importantly for a minor and it is suitable to the condition in life. Such goods are including foods, shelters and clothes. Court will be deciding whether if a contract is necessaries; therefore, court will first determine whether that specific goods are considered crucial and suitable for minor’s condition in life, then court will observe and understand whether goods are in fact of necessaries for the minor. In Government of Malaysia v Gurcharan Singh & Ors [1971] case, scholarship agreement that involved by an infant has become part of necessaries under virtue of Contracts (Amendment) Act, 1976, and therefore such agreement was valid, based on (Nabi Baksh and Arjunan, pg173).

2. Fraud by Minors

By following the common law, a minor may be sued if one is involve in torts or any unlawful act, this stated by (Nabi Baksh and Arjunan, pg174). Therefore, a minor will eventually be sued without hesitating the age of being in minority. However, there is an indirect enforcement for minor to enter a contract which supposedly to be void which as stated earlier. Therefore, it is unacceptable when a minor misrepresenting one’s age and convinced for any loan agreement and contract will be void. The defendant in R Leslie Ltd v Sheil [1914] 3 KB 607 case had made a loan agreement from plaintiff’s company, defendant was under the age of majority and he lied about his age to enter a contract. In this case, plaintiff failed to claim damages from defendant because such action was indirectly enforcing minor to enter an enforceable contract. Under Contracts Act, it seems to be liberal where contracts which involve the minority will eventually be void even where a minor falsely imitate to be an adult, except of contract for necessaries. Therefore, under section 115 of the Malaysian Evidence Act, when one intentionally made another party to believe the false, it shall not be in any suit.

3. Restitution

If a minor had done torts and the goods were still in such individual’s hand, such individual would be required to make restitution, based on (Nabi Baksh and Arjunan, pg175). There are limitation of remedy since it was only available when minor done a civil act. In Malaysia, Contracts Act and the Specific Relief Act 1950 are responsible to take turn for the attempt of relief.

4. Marriage Contract

As stated by (Nabi Baksh and Arjunan, pg177), there is also an exception when it comes to a marriage contract. Under section 4(a) of the Age of Majority Act 1971, minority will not be influenced the capacity in namely marriage, divorce, etc. In Rajeswary v Balakrishnan (1958) case, court held that a marriage contract that a minor entered was actually valid. To be fair, there is regulation where for those who entered marriage contract below 21 year-olds, it is a must to obtain father’s written consent before marriage. This was seen under section 12 of the Law Reform (Miscellaneous Provisions) Act 1976, based on (Nabi Baksh and Arjunan, pg177). And therefore, for any breach of contract of marriage that involved minors, such minors may also sue or be sued.

5. Employment Contracts

In line with (Nabi Baksh and Arjunan, pg177), for any young person that involved under section 13 of Children and Young Persons (Employment) Act, it is capable for such individuals to enter into contract of service. However, for such group of individuals, there should be no damages if there is any breach of contract. Such people are not required to avail ‘next friend’ or ‘guardian ad litem’ in defending an action. The Mentally Ill and The Intoxicated

1. The Mentally Ill

In Malaysia, a person who is mentally ill is unable to think rationally and has difficulties in making judgment. Under section 12, person who suffers from mental disorder is incompetent to enter a contract, based on (Latimer, pg352). The meaning of mentally ill may leads to people avoiding their contractual obligations, therefore, person who is mentally ill will eventually be bound unless there is evidence to show that such person does not understand what have been happening and other person has already aware of his mental condition. Besides, a person must be of sound mind binding to a contract, as stated in section 11 of the Contracts Act.

2. The Intoxicated

As stated in (Latimer, pg352), if a drunkenness person or whom is on drugs, it is judged similarly as the incapacity of mentally ill. When one has evidence to show that one did not understand about the contract, or other party has known about his mental condition, the contract will be void. Corporations According to (Latimer, pg353), corporation or also known as company, refers to is an artificial creation of legal person and corporation must be differentiated from shareholders. There are two types of company in Malaysia, which are registered companies and listed companies. Registered companies are corporation that registered under the Malaysia Act. Then, listed companies are corporation that issues bonds and securities to the public. Based on Section 124 of the Corporations Act 2001, a company has the capacity to enter contract even though there are limitations to enter a contract. Besides, under section 19(5), companies shall also sue or be sued when there is issue occurs. Question (b) Essentially, the principle issue in this case refers to whether Giri has or has no capacity to enter into a contract with Tobias, then, there should be enough and valid reasons to prove it. In Giri’s case, Giri, who is below the age of 18 years old is considered as an “infant” in law, as referred to the words of Age of Majority Act 1971 in Malaysia. Thus, when there is an involvement of minor in a contract, the contract will automatically be void except if there is any exception. As seen in Government of Malaysia v Gurcharan Singh & Ors [1971] case, first defendant was a minor at that specific period of time. Therefore, court held that the contract was void. Back to Giri’s case, Giri is below 18 years old; still in the age of minority. And therefore, she has no power and capability to enter such contract. As stated earlier, if minors involved in specific cases where there is certain exception that might lead her to the capability to enter a contract. Contracts of Necessaries that under section 69 of the Contracts Act is the only exception that minor can enter into a contract. To define “necessaries”, it is actually referring to goods that are necessarily important to an individual for the condition of life. Once it is proven that Giri’s laptop is not under “necessaries”, she will not be capable to enter into a contract. For instance, after the case of Government of Malaysia v Gurcharan Singh & Ors [1971] was held, contracts which involved education such as scholarship, has become unavoidable since education is ‘necessaries’ under Section 69 of the Act. Thus, minors can enter a contract when it is proven that it is a Contracts of Necessaries. The laptop that Giri wants to buy is not ‘necessaries’ to her condition in life, it is not a crucial good that brings importance to life. Hence, she has no capacity to enter in a contract. As a final point, Giri has no capacity to enter a contract because she is a minor and laptop is not under “necessaries” in the condition in life. Conclusion To conclude the overall law of capacity, it is referring to the power of an individual to enter or competent binding a contract. Then, limitations were created to protect several groups of individuals from entering a contract, which are the minors, the mentally ill and also corporations. In Malaysia, minors are individuals who are below the age of 18 years old. Contracts that minors entered into will be void because of their inexperience. However, there are exceptions for certain minors where they might have the rights to enter into a contract. Besides, mentally ill person is also incompetent to enter a contract due to their disability to think. Lastly, corporation has power to competent into a contract and the contract will be valid.

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