CERTAINTY OF CONTRACT There are two aspects to the issue of uncertainty. (1) The language used may be too vogue in which case, the court is likely to hold that there is no concluded agreement , the contract is void for uncertainty. (2) Failure to reach agreement on a vital or fundamental term of an agreement. SECTION 30 1. Agreements, the meaning of which is not uncertain, or capable of being made certain, are void. * If A agrees to sell to B ‘a hundred tons of oil’ , there is nothing whatever to show what kind of oil was intended and thus , the agreement is void for uncertainty. . Where the meaning is unclear but it is capable of being made certain, the agreement is not void for uncertainty. * A agrees to sell to B ‘one thousand gantangs of rice at a price to be fixed by C’. As the price is capable of being made certain, there is no uncertainty here to make the agreement void. KARUPPAN CHETTY v SUAH THIAN In Karuppan Chetty v. Suah Thian (1916) 1 F. M. S. L. R. 300 , the contract was declared void for uncertainty because the parties agreed to lease of $35 per month ‘for as long as he likes’. The terms are uncertain as the duration of the lease is not specified or capable of being made certain. Free Consent To form a valid contract, it is important that parties agree to contract freely and without any form of force or external influence which clouds a person’s mind. SECTION 10 * All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object are not hereby exspressly declared to be void – Free consent is the basis of a contractual relationship. There must be a meeting of the minds as to the nature and scope of the contract, a consensus ad idem. – The consent of the parties must be given freely and voluntarily. SECTION 13 * Two or more persons are said to consent when they agree upon the same thing in the same sense. SECTION 14 * Consent is said to be free when it is not caused by: – coercion – undue influence – fraud – misrepresentation – mistake EFFECT OF VOID AND VOIDABLE CONTRACT * According to section 2 (g), an agreement not enforceable by law is said to be void. When the agreement is void, no rights are given to the parties, and no obligations are imposed on them. * An agreement which is void has no legal effect ab initio * According to section 2 (i) states that an agreement not enforceable by law at the option of one more of the parties thereto, but not at the option of the other or others, is a voidable contract. * In a voidable contract, one of the parties is given the choice, either to continue the contract or to discontinue the contract. The agreement is valid and binding until the party who is entitled to rescind the contract chooses to do so. * When the party who is entitled to rescind a voidable contract exercises his option to rescind the contract, the consequence is as stated in: SECTION 65 * When a person at whose option a contract is voidable rescinds it, the other party thereto need not perform any promise therein contained in which he is promisor. The party rescinding a voidable contract shall, if he has received any benefit thereunder from another party to such contract, restore he benefit so far as may be, to the person from whom it was received. * On the other hand, the consequence of a void contract is stated in: SECTION 66 * When an agreement is discovered to be void, or when a contract become void, any person who has received any advantage under the agreement or contract is bound to restore it, or to make compensation for it, to the person from whom he received it. * If the contract is void, there is no option to proceed with the contract. The contract must come to an end and whatever benefits received therefrom must be restored to the party who gave the benefits. COERCION * According to the section 15, coercion is the committing, or threatening to commit any act forbidden by the Penal Code, or unlawful detaining or threatening to detain any property. * Examples of an act forbidden by the Penal Code are causing grievous hurt, kidnapping, criminal force and assault, rape. The effect of a contract entered into as a result of coercion is that the contract is voidable. According to the section 19 (1), when consent to an agreement is caused by coercion, fraud, or misrepresentation, the agreement is a contract voidable at the option of the party, whose consent was so caused. KESARMAL/O LETCHMAN DAS v VALIAPPA CHETTIAR A transfer of property which was made under the order of the Sultan, issued in the ominous presence of 2 Japanese officers during the Japanese occupation of Malaysia was held to be not valid. This is because, the consent given was not free and therefore the transfer became voidable at the will of the party whose consent was so caused. UNDUE INFLUENCE * This happens where one of the parties to a contract, entered into such contract by influence of the party who was able to influence him. SECTION 16 (1) A contract is said to be induced by “undue influence” where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other. RAGUNATH PRASAD v SARJU PRASAD In this case, the court held that 3 matters are to be dealt with under: SECTION 16 (3) The relations between the parties to each other must be such that one is in a position to dominate the will of the other * The issue whether the contract has been induced by undue influence * The burden of proving that the contract was not induced by undue influence lies upon the person who was in a position to dominate the will of the other PRESUMPTION OF DOMINATION * In certain circumstances, a party is deemed by law, to be in position to dominate the will of another SECTION 16 (2) (a) and (b) In particular and without prejudice to the generality of the foregoing principle, a person is deemed to be in a position to dominate the will of another: * Where he holds a real or apparent authority over the other, or where he stands in a fiduclary relation to the other * Where he makes a contract with a person whose mental capacity is temporarily or permanently affected by reason of age, illness, or mental or bodily distress * By virtue of section 16 (2) (a) and (b) there are 3 situations in which the law presumes domination of will to exists: * When one party holds a real authority over the other Where one party stands in a fiduclary relationship to the other * Where a party makes a contract with a person whose mental capacity is temporarily or permanently affected by reason of age, illness or mental or body distress * In such situations, the plaintiff does not have to prove the contract being unconscionable * If the dominating party claims that there is no domination of will, the burden to rebut the presumption of domination lies on him by giving evidence to the court * The effect of undue influence in a contract is that the contract is voidable as stated: SECTION 20 * when consent to an agreement is caused by undue influence, the agreement is a contract voidable at the option of the party whose consent was so caused. Any such contract may be set aside either absolutely or, if the party who is entitled to avoid it has received any benefit thereunder, upon such terms and conditions as the court may seem just. SALWATH HANEEM v HADJEE ABDULLAH The plaintiff’s husband made a conveyance of property belonging to himself and the plaintiff to his brother’s B and C. The plaintiff initially agreed to the conveyance but after her husband’s death, she brought an action seeking to set aside the agreement on the ground of undue influence. It was held that a confidential relationship existed between the plaintiff and B and C. Therefore the burden of proof was on B and C to show that the plaintiff fully understood the agreement and had agreed to the conveyance freely and without being subject to undue influence. Since both B and C failed to discharge the burden, the contract of conveyance was set aside. FRAUD * According to the SECTION 17 is includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent, with the intent to deceive another party thereto or his agent, or to induce him to enter to the contract. DERRY v PEEK It was decided by the court in this case that fraud is proven when it is shown that false representation has been made either: * Knowingly * Without belief in its truth * Recklessly, careless whether it be true or false ELEMENTS OF FRAUD * There must be a false representation The representee must have relied on the repsentation WEBER v BROWN Plaintiff sued Defendant for damages in respect of an alleged false and fraudulent misrepresentation relating to the number of rubber tress on an estate which he purchased. The number of trees represented was more than that which actually existed on the estate. It was that the Defendant had made the alleged misrepresentation falsely and fraudulently MISREPRESENTATION * It is a false statement made by the representor, and which such false representation induces the other party to enter into a contract. According to SECTION 18 misrepresentation includes: * The positive assertion, in a manner not warranted by the information of the person making it, of that which is not true, though he believes it to be true * any breach of duty which, without intent to deceive, gives an advantage to the person committing it, or anyone claiming under him, misleading another to his prejudice, or to the prejudice of anyone claiming under him * causing, however innocently, a party to an agreement to make a mistake as to the substance of the thing which is the subject of the agreement ELEMENT OF MISREPRESENTATION * There must be false representation, either through a positive statement or some conduct * The representation must be one of fact, not a mere expression of opinion * The statement was addressed to the party mislead * The representation must induce the mislead party to enter into the contract * The party misled must prove that he was induced by the representation * He cannot be said to have been induced by the representation did not influence his mind at the time of entering into the contract or he was aware hat the statement was untrue. EXPLANATION SECTION 19 A fraud or misrepresentation which did not cause the consent to a contract of the party on whom the fraud was practiced, if the representation to whom the misrepresentation was made, does not render a contract voidable. ILLUSTRATION (b) to SECTION 19 A, by a misrepresentation, leads B erroneously to believe that 500 gantangs of indigo are made annually at A’s factory. B examines the accounts of the factory, which show that only 400 gantangs of indigo have been made. After this, B buys the factory. The contract is not voidable on account of A’s misrepresentation. * The effect of misrepresentation in a contract is that the contract becomes voidable as provided in SECTION 19 (1) * If the mislead party chooses to affirm the contract, he is entitled to damages as provided under SECTION 19 (2): * A party to a contract whose consent was caused by fraud or misrepresentation, may, if he thinks fit, insist that the contract shall be performed, and that he shall be put in the position in which he would have been if the representations made had been true. MISTAKE SECTION 21 * Where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void. For a mistake to be operative under this section, it must be mistake of both parties and it is as to a matter of fact essential to the agreement * The basis for rendering agreements void under SECTION 21 is that there has been no free consent between the parties * Mistake can either be mutual mistake or unilateral mistake * SECTION 21 covers mutual mistake : both parties to an agreement are under a mistake * Mistake of fact essential to the agreement may occur in the following circumstances : a) Mistake as to the existence of the subject matter of the contract * Both parties are unaware that the subject matter of the contract has ceased to exist A agrees to buy from B a certain horse. It turns out that the horse was dead at the time of the bargain, though neither party was aware of the fact. The agreement is void. b) Mistake as to the identity of the subject mistake * Both parties are at cross-purpose, therefore, in fact, there is no agreement on the same thing in the same sense and in other words, no consent RAFFLES v WICHELHAUS 2 parties contracted for a sale of a cargo of cotton arriving in London by a ship called “The Peerless” sailing from Bombay. But unknown to both parties, there were 2 ships of the same name leaving from Bombay at different times. They were both negotiating under a mistake and had in mind different ships, It was held that the contract was void for mutual mistake. c) Mistake as to the possibility of performing the contract BROTHERS LTD v OCHSNER SHEIKH The appellant granted to the respondent, licence and authority to contract and manufactured all sisal growing on 5000 acres of land in Kenya, and to deliver to the appellant 50 tons per month of sisal fibre for sale. Respondent was then unable to do so as the leaf potential of the sisal was not sufficient to produce that much. It was held that there was a mistake as to the possibility of performing the contract. The agreement was void. MISTAKE AS TO DOCUMENT The general rule is that a person is bound by the terms of the contract that he signs as laid down in an English case: L’ESTRANGE v F. GRANCOLS. SUBRAMANIAM V REKNAM The defendant had signed a written acknowledgement in the English language of a loan when he was ignorant of the language. The court applied the general rule that he is bound by what he signed, seeing that there was no fraud or misrepresentation.
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