CHAPTER 2:LAW OF CONTRACT

Subtopic 4:

Illegal contracts

IILEGAL CONTRACTS

• S. 24 CA 1950 CA 1950 spells out the situations wherein the consideration or object of an agreement is unlawful. The consideration or object of an agreement is unlawful if:

a. it is forbidden by lawb. it is of such a nature that, if permitted, it would defeat any lawc. it is fraudulentd. it involves or implies injury to the person or property of another ore. the court regards it as immoral, or apposed to public

policy

• If either the consideration or the object of the agreement comes within any of the above situation, the whole agreement is “VOID”.

The exact scope & differences bet.s. 24(a) & (b) is

Clear.

unlawful consideration

unlawful object

Cont.

Unlawful consideration:

Manang Lim Native Sdn Bhd v. Manang Selaman [1986]

Facts: In this case a non native sought to deal in nativeLand and this was against the Sarawak Land Code unless the dealing was authorized by the Yang di-Pertua Negeri, Sarawak.Held: An agreement made in contravention of a statute (that is the Sarawak Land Code) was entered into for an illegal consideration and was therefore a void agreement within the meaning of section 2(g) of the Contract Act 1950.

Cont.

Unlawful object:

Aroomoogam Chitty v. Lim Ah Hang (1894)

Facts: The plaintiff lent money to the defendant for the purpose of running a brothel. The object of the contract was therefore immoral. When the plaintiff sued for payment.

Held: Plaintiff could not recover his money as no action will arise from a wrong done.

AGREEMENTS FORBIDDEN BY LAW

Haji Hamid bin Ariffin v. Ahmad bin Mahmud [1976]

Facts: A Malay person sold his Malay Reservation land to a Siamese lady. She took possession of the land and the title deed, still registered in the name of the original vendor to the land, was given to her. Subsequently she sold the land to the appellants who were Malays. The original vendor and the Siamese lady died and the appellants were appointed as administrators of her estate. The appellants, as administrators of the estate sued the administrators of the original vendor’s estate, for specific performance.

Cont.

Held: The sale to the Siamese lady was void from the very beginning because s. 6(1) of the Kedah Malay Reservation Enactment (No 63) provides that where any reservation is held under a document of title by a Malay, no right or interest therein shall vest, whether by transfer or otherwise, in any person who is not a Malay.

ATTEMPTS TO DEFEAT LAW

Hee Cheng v. Krishnan [1955]

Facts: By a sale and purchase agreement, the plaintiff sold his house built upon a piece of land in respect of which he was the holder of a Temporary Occupation License to the defendant. The defendant refused to perform the agreement and the plaintiff claimed specific performance of the agreement or alternatively, damages for the defendant’s breach of contract.

Held: The agreement entered into was an attempt to sell and to purchase the plaintiff’s rights under the Temporary Occupation License. This is contrary to rule 41 of the Land Rules 1930 which states that ‘No license for the temporary occupation of state land shall be transferable.’ The agreement was unlawful and void under S.24 of the Contracts Ordinance as being of such a nature that, if permitted, would defeat the provisions of any law.

CONTRACTS INVOLVING FRAUD AND CAUSING INJURY TO PERSON OR PROPERTY OF ANOTHER

Datuk Jagindar Singh v. Tara Rajaratnam [1983]

Facts: The 1st and 2nd appellants, advocates and solicitors in Johore and the 3rd appellant, an advocate and solicitor in Singapore, colluded to obtain possession of the respondent’s property, some 5 acres of land in Kulai, Johore by fraud. The respondent’s brother in law owed the Hongkong and Shanghai Bank $121,819.80 in overdraft facilities, with Jagindar and Suppiah, the 2nd appellant obtained the respondent’s land, paid the Chung Khiaw Bank $ 92,000.00. The land was then transferred to Suppiah and 18 days later, Suppiah transferred it to Arul, the 3rd appellant, in Singapore on 9th August 1975. Later, on instructions from Jagindar, Arul transferred it to a land development company almost wholly owned by Jagindar. The land was eventually subdivided into 70 lots and sold to the public.

Held: The appellants were guilty of fraud, breach of agreement and undue influence and awarded damages to the respondent.

AGREEMENTS THAT ARE IMMORAL

Oh Thevesa v. Sia Hok Chai [1992]

The plaintiff sued the defendant summarily for damages for breach of promise to marry the plaintiff. The

defendant denied that he had promised to marry the plaintiff and even if he had, she knew that he was a married man and thus the agreement is immoral and

against public policy.

CHAPTER 2:LAW OF CONTRACT

Subtopic 5:

Discharge of contract and remedies for breach of contract

DISCHARGE OF CONTRACT

• When contract is brought to an end or dissolved or terminated.

• Obligations under contract can be discharged in 6 ways:

1. Performance

2. Agreement

3. Term of contract

4. Operation of Law

5. Doctrine of Frustration

6. Breach of Contract

1. PERFORMANCE

• As a general rule, performance of a contract must be exact and precise and should be in accordance with what the parties had promised.

• Perform by whom?

> By parties: S 38(1) CA 1950 provides that parties to a contract must either perform or offer to perform their

respective promises, unless such performance has dispensed with any law.

> S. 38(2) CA 1950 - Representative if parties died

• Performance may be from a third party and not necessarily from the promisor:

> S. 42 CA 1950 provides that ‘when a promisee accepts performance of the promise from a third person, he cannot afterwards enforce it against the promisor’.

Cont.

Time and place of performance:

• S. 47-50• GR= at specified time & place• If time X specified- any reasonable time (s.47)• If place X specified- promisee must specify (s. 50 & 51)

Performance of Reciprocal Promise

• S. 52-55• Simultaneous performance• Promisor need not perform his promise unless,• Promisee is ready/willing to perform his promise

2. BREACH

• Occurs when party fails/refuses to perform his contractual obligation

• Defaulted party v. innocent party• Innocent has 2 options:

1. Repudiate - relieved from performance &

- entitled to damages

2. Continue contract – entitled to damages

- but must perform

2 Options to Innocent Party

1. Discharge:– May refuse further performance of his obligation– Resist any action by defaulting party– Recover any money that he has paid– Sue for damages if suffered any– Alternatively, sue on quatum meruit for value of work

done/goods supplied2. X Discharge

– Must perform his contractual obligation– If nature of breach disentitles to discharge (warranty)-

entitled to damages

Cont.

Breach :

• Not all breach enables to terminate contract• Depends on nature of the term breached:

– Condition - root of contract

- entitled to discharge/

terminate

- may claim damages– Warranty - damages only

REMEDIES FOR BREACH

• Normally, in monetary compensation to innocent party• Remedies depend upon severity of breach• 4 main types:

1. DAMAGES

2. QUANTUM MERUIT

3. SPECIFIC PERFORMANCE

4. INJUNCTION

Damages

• To compensate the victim for loss suffered due to breach

• 3 types:

1. Substantial– General/ordinary/compensatory– Pt must prove the loss he actually suffered

Damages

2. Nominal In exceptional situation, Plaintiff may be awarded very

small sum of damages E.g. Plaintiff suffered no loss

- Not merely acknowledge that his rights have been breached

- When Plaintiff prove he is the victim of breach- But unable to prove the loss he claims

Damages

3. Exemplary/Punitive– Tort - as punishment for violating Plaintiff’s rights– Not available in Contract

QUANTUM MERUIT

• Literally: as much as he has earned• Where Plaintiff sues for unspecified amount for his

services• Concept recognized in S. 71 CA 1950• Different from Damages:

– Damages- Claim for compensation for a loss– Quantum Meruit– Claim for reasonable remuneration

Quantum Meruit

• Available when:

1. Express/implied agreement to provide services but no agreement to price

2. Parties not perform obligation under contract, but a new contract inferred from their conduct to have replaced the original- QM for work done

3. Contract terminated by breach after performance of obligation by one party- sue on QM for value of work done

4. Person is prevented from completing his obligation by other party.

SPECIFIC PERFORMANCE

• An order of court requiring a party to perform• To put the parties in position which due performance of

their obligation would have placed them

When Specific Performance available?

1. Breach of S & P of land contract – Damages not adequate to compensate

2. Subject Matter of contract is rare/unique, e.g. antique car – damage not adequate

3. Exceptional case where damages would not be adequate

Limitation of Specific Performance

1. Compensation in money is adequate

2. Performance which requires constant supervision of court

3. Contract of Personal Services

4. Give Plaintiff unfair advantage over Defendant.

5. Causes hardship on Defendant• If not performed, not involve hardship to Plaintiff.

INJUNCTION

• An order of Court to prohibit threatened or continuing illegal conduct of certain kinds

• Conditions:1. Plaintiff must have an interest to protect2. Damages must be shown to be inadequate

- E.g. Plaint will suffer irreparable harm if injunction not granted

3. There is danger that, unless restrained, Defendant will breach the contract or continue with the breach complained- E.g. Custody of children

Questions

1.

End of subtopic 4 & 5: law of contract

Thank you