Law of contract

LAW OF CONTRACT

A coating agreement between two or more persons or parties which is legally enforceable.

Elements of a contracts :

·         Offer = An offer is an invitation to make a contract. Example, Putting price tag on a good in a    

store. In offer it’s contain of bilateral and unilateral. Bilateral contract contain two      promises. Unilateral contract contains a promise by one person.

·         Acceptance = Contract Act 1950 provides that when the person to whom the proposal is made

significant his assent thereto, the proposal is said to have been accepted. The               accepted will become promise.

·         Consideration = Contract Act 1950 provides that, as a general rule, an agreements without                  consideration is void.

Negotiation activity: This requires each side to compromise, so that they can get what they really                                want .

Drafting activity: use specific binding language such as, “shall” not “will.”

Introduction to law:

Law can described as a set of rules, developed over a long period of time that regulates interactions that regulates interactions that people have with each other, and which sets standards of conduct between individual and between individuals and the government and which are enforceable through sanction. Thus, to the layman, law is defined as being a general rule of conduct. In Oxford English Dictionary, law is defined as ‘the body of enacted or customary rules recognized by a community as binding’. In short, law may be defined as a body of rules which are enforced by the state.

LEGAL SYSTEM IN MALAYSIA.

Structure of the government:

Structure of the government is to facilitate the administration of the country, the government administrative structure is divided into 3 major components is The Legislative (Badan Perundangan), The Executive (Badan Pemerintah), and The Judicial (Badan Kehakiman). 

Meaning of ‘source’.

The administration of the Malaysian Government is based on a system of Parliamentary democracy with a Constitutional Monarchy. All qualified citizens have equal rights in determining who shall govern the country through a general election. The main sources of Malaysian Law comprise written and unwritten.

Main sources of Malaysian law are:

Written law

Written law is also referred to as statute law. As studied earlier, this is law made by Parliament and any subordinate bodies to whom Parliament has delegated power to legislate. When hearing cases, the courts are not just performing an act of fact-finding; they also interpret statutes, although they do not make them. In interpreting statutes, the courts are guided by, interpretation Acts, Extrinsic material, Common law rules of statutory interpretation, and Precedent. As studied earlier, written law in Malaysia may be found in, The Federal Constitution, State Constitution, Legislation, and Subsidiary Legislation.

Unwritten law

Unwritten law is mainly comprised of:

·         English law = English common law and rules of equity will be , to some extent applicable in   

                        Malaysia.

·         Judicial law = Unwritten law can also be found in decisions of the courts, “doctrine of binding    

                        precedence”.

·         Customs law = The customs law consists of customs related to family law and Islamic law.

·         Islamic law = This law is only applicable to Muslims and it’s administered in the Shariah Courts.

INTERNATIONAL LAW : International law define as that body of law which is composed for its greater                                   part of the principles and the rules of conduct which states feel themselves                                        bound to observe.

HEIRARCHY OF MALAYSIAN COURTS:

EXPRESS TERMS AND IMPLIED TERMS.

Express Terms:

Specifically mentioned and agreed by both parties at the time contract is made by orally or writing.

Implied Terms:

Terms which will be read into the contract and which were never the subject of express agreement. Terms implied in law is:

 1.Common law : If no price is fixed, a reasonable price is applied.

 2.Statute : i. Sales of Goods Act 1979.

§  Section12 : Seller should have legal rights to sell the items

§  Section13: If a seller use magazine to sell, he should post the actual items           photo.

§  Section14: The selling goods should be “satisfactory quality” and should

                 meet the standard.

§  Section15: The item shown in sample should be same as the original item.

                  ii. Hire Purchase Act 1967 = Implied conditions and warranties.

                  iii. National Land Code 1965. (Tenancy agreements & Leases). Example:

§  S. 230 & 31 – Duties for lessee and, S S32- Duties for lessor.

Express terms & Implied Terms

Statement that govern the rights and obligation of parties concerned. They are the elements of the contract and are binding. If terms are broken there are legal consequences. In order to identify terms of a contract, one must analyse both express & implied terms.

Express Terms

-Terms that are explicitly included in the contract

-Have been specifically mentioned and agreed by both parties at the time the contract is made.

-It can either be oral or writing.

Implied Terms

-Terms that will be read into the contract and which were never the subject of express agreement.

-A term which has not been mentioned by either party will nonetheless be ‘included’ in the contract, often because the contract doesn’t make commercial sense without that term.

-Implied terms aren't written down anywhere, but are understood to exist.

-If there's nothing clearly agreed between you and your employer about a particular matter, then it may be covered by an implied term. Terms are implied into a contract for a number of reasons.

- There are few terms implied in law such as:

·    a).   Common law-Contract of services, if no price is fixed a reasonable price applied.

·    b).  Statute-Sale of Goods Act  1979

·   c).   Hire Purchase Act 1967

·   d).  National Land Code 1965

Conditions & Warranties

Conditions and Warranties:

1.      Conditions:

A term which is essential to contract; breach because of it would allow the other party to treat the contract as repudiated. (s.12(2)SOGA). If the condition is breached, the party not in default entitled the contract because the contract can be deemed to be void.

-A term which is essential to contract; breach of it would allow the other party to treat the contract as repudiated.

-If the condition is breached, the party not in default entitled to repudiate the contract because the contract can be deemed to be VOID.

-A condition is a term  or oral written which goes directly 'to the root of the contract, or is so essential to its very nature that if it is broken,  the innocent party  can treat the contract as discharged.

- That party will not therefore be bound to do anything further under that contract.

2.      Warranties:

A less vital term of a contract, breach of it would give rise to a claim for damages, not a right to reject the goods. (s.12(3)SOGA).-
-a less vital term of a contract (collateral to the main purpose) , breach of it would give rise to a claim for damages, not a right to discharge/reject the goods.

-If the warranty is breached, the party not in default is not entitled to repudiate the contract because it is not voidable.

- A warranty is a term of the contract which is collateral or subsidiary to the main purpose of the contract.

- It is therefore not so vital as to affect a discharge of the contract.

- A breach of warranty only entitles the party to an action for damages; he cannot treat the contract as discharge

Exemption Clause:

·         Contract person “accept no responsibility”.

·         They not responsible or liable for any damages or loss or injuries.

·         Term of contract is modify the principle obligation arises under a contract. Limit or exclude the liability of the party would arise as a result of breach of the contract.

Protect Consumer:

·         Malaysia: SOGA 1957 (S.62) & HPA 1967 (S. 34).

                                  i.            Contract Act 1950 – Nil

                                ii.            Malaysian parliament has passed the Consumer Protection(Amendment) Bill 2010.

                              iii.            Section 1(3) of the Bill provides that the new Part IIIA applies to contracts entered into after the Bill comes into force. But, presently no indication as to when the Bill will come to force.

                              iv.            Malaysia Parliament had opted to amend the existing Consumer Protection Act 1999, by inserting a new Part IIIA entitled “Unfair Contract Term”.

CONSENT OF PARTIES TO THE CONTRACT

CONSENT OF PARTIES TO THE CONTRACT

Vitiating factors:

·         Sometimes human will make a contract under false impressions. Some contracts contain of factors which adversely affect the consent of the parties to the agreement. It is called as vitiating factors. Contracts Act 1950 provides inter alia that all agreements are contracts if they are made by the free consent of parties.

Why a valid contract can be set aside:

1.      Mistake.

                                            i.            Mistake occurs during contract formation, the court may declare the contract void   because contains mistake.
                              Three categories of mistakes are:

Ø  Common mistake = Cases usually related to non-existence of the subject matter.

Ø  Mutual mistake = Occurs when the parties are at “cross-purpose.

Ø  Unilateral mistake = One sided mistake and one party is mistaken, and the other party knows that he is mistake.

CASE STUDY : McRae v Commonwealth Disposals Commission (1950) 84 CLR 377

The defendants sold an oil tanker described as lying on Jourmand Reef off Papua. The plaintiffs incurred considerable expenditure in sending a salvage expedition to look for the tanker. There was in fact no oil tanker, nor any place known as Jourmand Reef. The plaintiffs brought an action for (1) breach of contract, (2) deceit, and (3) negligence. The trial judge gave judgment for the plaintiffs in the action for deceit. He held that Couturier v Hastie obliged him to hold that the contract of sale was void and the claim for breach of contract failed. Both parties appealed. The High Court of Australia stated that it was not decided in Couturier v Hastie that the contract in that case was void. The question whether it was void or not did not arise. If it had arisen, as in an action by the purchaser for damages, it would have turned on the ulterior question whether the contract was subject to an implied condition precedent. In the present case, there was a contract, and the Commission contracted that a tanker existed in the position specified. Since there was no such tanker, there had been a breach of contract, and the plaintiffs were entitled to damages for that breach.

2.      Misrepresentation.

                                           I.            When a false statement cannot be proved to be a term, the misrepresentation possibility must be explored. False statement occurs when negotiations, that induces person hearing it to enter into the contract. 
                              Types of misrepresentation:

Ø  Innocent:
    Easy to prove, requiring only proof of a false statement which includes in contract.

Ø  Fraudulent:
     Difficult to prove, it requires the additional component that the person knew that the statement was false or he couldn’t care less whether its true or false.

Ø  Negligent: 
     Breach of a duty of care. A case where the duty is owed and breached.

3.      Duress.

i.                    Use of violence, or the threat of violence to a person, his good or his assets in order of force him into a contract. The contract can set aside because of the duress.

ii.                  Historically, physical violence or threats to harm the person or immediate family was required. Threats of economic damage will suffice.

4.      Undue Influence.

i.                    The free will of a party is compromised by a person in a dominant situation.

ii.                  Involves a special relationship between two parties. Example, the court presume that the stronger party has unduly influenced the weaker. Dominant party to prove that the weaker party was not unduly influenced. If he fails contract is voidable at the option  of victim.

5.      Unconscionable Conduct.

i.                    Conduct that offends good conscience. 
           There is usually an inequality of bargaining power and the weaker is disadvantages.

ii.    Some inequality can result from ignorance, illness, pressing need, financial desperation.

BONA FIDE PURCHASER.

* INNOCENT BUYER

* A genuine buyer, paying fair value for the goods, and being unaware of any defect in the tittle.

CASE STUDY:

Narayan Chand Shaha v. Dipali Mukherji In the instant case the son transferred the property still in the name of father. This fact was known to the transferee. Father died and son became co-owner of that property. The court had held that there was no evidence on record to show that the son made statement that the property belongs to him. There was no representation regarding the authority to sell. As such buying, such property is a collusive conduct. There are no estoppels when the truth was known to transferee. Hence the transferee’s right is not protected since he was not bona fide. Rajapakse v Fernando the Privy Council applied rule of estoppels as Where a grantor has purported to grant an interest in land which he did not, at the time, possess, but subsequently acquires, the benefit of his subsequent acquisition goes automatically to the earlier grantee, or as it is usually expressed, feeds the estoppels.

CASE STUDY:

In Luchman v Kallicharan, A held out his wife as the owner of the property by taking the sale deed in her name with a recital that the purchase money was paid out- of her stridhan. After the death of A, his wife sold the property to the defendant that purchased it Bonafide and for value. As son, as his heir sued to recover possession of the property from the defendants. It was held, that he could not recover possession. The court observed that there was misrepresentation by the father in allowing the property to be taken by the wife under a deed of sale, representing that the purchase money was her stridhan and in all his acts both public and private during his life-time representing that it was his wife’s property. After such representation his heirs were no more entitled to recover, than the father would have been in his life time. Ramcoomar Koondoo v. John and Maria McQueen The Privy council observed that the principle of the natural equity must be universally applicable that, where one man allows another to hold himself out as owner of an estate, and a third person purchases it, for value from the apparent owner, in the belief that he is the real owner, the man who so allows the other to hold himself out shall be not permitted to recover his secret title, unless he can overthrow that of the purchaser by showing either that he had no bona fide intention to purchase the property or even after knowing about the real title he doesn’t made inquiry.