Question 1:

Can a minor and an insane person enter into a valid contract? Explain.

MINOR• A minor is a person who has not reached the age of majority that below the age

of 18 and is competent to make a contract.• Section 10(1) of the Contracts Act 1950 :• “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, and are not hereby expressly declared to be void.”• Section 11 of the Contracts Act 1950 :• “Every person is competent to contract who is of the age of majority according to

the law to which he is subject, and who is of sound mind, and is not disqualified from contracting by any law to which he is subject.”• Sections 2 of the Age of Majority Act 1971 • that all persons in Malaysia attain the age of majority at 18. Previously the

repealed Age of Majority Act 1961 provided that Muslims attain the age of majority at 18 while non-Muslims attain is at 21.

CASES

•Tan Hee Juan v The Boon Keat•Mohori Bibee v Dhurmodas Ghose•Leha bte Jusoh v Awang Johari bin Hashim

CONCLUSION

•Based on the cases above, any contracts that entered by a minor was void under the Section 10 and 11 in Contracts Act 1950 that stipulates every person is competent to contract who is the age of majority according to law and they have to be controlled under the parent’s guidance.

EXCEPTION TO MINOR-contract is valid• Contract for Necessaries + Scholarship• Case: Nash v Inman• Contract for Services/Apprentice• Case: Clements v London and North Western Rly • Contract for Insurance• Contract for Marriage• Case: Rajeswary & Anor v Balakrishnan & Ors

INSANE/UNSOUND MIND PERSON• An insane or unsound mind person is a person suffering from a mental disability, either

permanently or temporarily, at the time of contract obviously lack of capacity. A meeting of minds and free consent is the basis of a contract.

• Sections 11 of the Contracts Act 1950:

• “every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is of sound mind, and is not disqualified from contracting by any law to which he is subject.”

• Sections 12 of the Contracts Act 1950:

• 12 (1) : The definition of when a person is of sound mind is a person is said to be of sound mind for the purpose of making a contract if, at the time when he makes it, he is capable of understanding it and of forming a rational judgment as to its effect upon his interests.

• 12 (2) : Makes provisions for mental patients who have lucid intervals to make a contract is a person who is usually of unsound mind, but occasionally of sound mind, may make a contract when he is of sound mind.

• 12 (3) : A person who is usually of sound mind, but occasionally of unsound mind, may not make a contract when he is of unsound mind.

CASE: Sim Kon Sang Peter v Datin

Shim Tok Keng

Ian Chin J held that since section 11 of the Contracts Act 1950 covers not only cases relating to the age of majority but also cases of unsoundness of mind. The question when is a person regarded to be of unsound mind finds the answer in section 12(1) of the Contracts Act 1950.

In Sim Kon Sang’s case, the plaintiff claimed in his capacity as the administrator of the estate of the deceased against the defendant. The plaintiff claimed that the deceased when she was alive, transferred to the defendant certain shares of her land when she was, as the defendants well knew, of unsound mind at the same time of executing the transfers and incapable of understanding the same.

The court held that since the transfers took effect before the Contracts Act 1950 came into force in Sabah, the English common law applied. The transfers were not void but voidable if the defendant knew at the time of the transfers that the deceased was of unsound mind. The court found that the deceased had appeared normal to the defendant and therefore, the defendant was not aware that the deceased was of unsound mind.

CONCLUSION

• In conclusion, the contract is void when the person who make the contract in unsound mind such as unconscious or having mental illness for a period of time. But, the contract is valid when the person is competent to contract who is of the age of majority according to law to which he is subject, and who is of sound mind according to Section 11 and 12 of Contracts Act 1950.

Question 2:

The principle of past consideration was applied in Kepong Prospecting Ltd. & S.K. Jagathesan & Ors v A.E

Schmidt & Marjorie Schmidt (1968). Discuss

PAST CONSIDERATION

•One of the part in consideration•Consists of something wholly performed before the making of the promise.•The past act was done or omitted not in respond to the promise• The promise is subsequent to the act or omission and dependent of it

KEPONG PROSPECTING LTD & S.K. JAGATHEESAN & ORS. V. A.E. SCHMIDT &

MARJORIE SCHMIDT (1968).

1953 1954 1955

the company and Tan made an agreement

whereby the company took over Tan

obligations to pay Schmidt 1% of all ore

that might be produced and sold.

the company and Schmidt made an agreement

wherein the company agreed to pay Schmidt 1%

of all ore that might be won from any land comprised in

1954 agreement in ‘consideration of the

services by the consulting engineer for an on behalf of the company (1) prior to its

formation, (2) after incorporation and (3) for

the future services’

After the permit was granted, Tan wrote to Schmidt promising to him 1% of the selling price of all ore that

might be sold in payment for the work

Schmidt had done and might do in starting mining

operations.

Tan applied for a prospecting

permit for iron ore and Schmidt, a

consulting engineer, assisted in negotiation in

1953

Schmidt continued to provide services to

the company.

ISSUED

• September 1955, an argument happened between Schmidt and the company, and Schmidt quit the job as managing director.• SCHIMDT claims the money

under the agreement on 1954 and 1955

COURT HELD

• The services given by Schmidt before the establishment of the company was not a consider as consideration.• The services after incorporation

was consider as consideration. • The privy council ruled that it did

constitute a valid consideration.• Schmidt was entitled to his claim

on the amount.

Question 3:

Question: Explain invitation to treat and support your answer with cases.

Invitation to treat

What Is Invitation to Treat?

Whether Invitation to treat is a contract?

What are the cases that related to the invitation to treat?

Case 1: Pharmaceutical Society of Great Britain v. Boots Cash Chemist Ltd.

Issue: The Issue is that, is putting the drugs from the shelves in the basket is considered as accepting an offer which leads to the binding of the contract? The second issue appeared when the customer went to the cashier to settle up the payment, unfortunately the pharmacist prevent the sales after the drug was supervised. Thus, is there any contract occurs?

Court Held: The court held that the rules for this case is, placing goods on shelves from the retail self-service sales is assumed as an invitation to treat, while the acceptance of the offer can only take place at the cashier when the cashier accept the offer.

Case 2: Fisher v. Bell

Issue: The defendant displayed flick knives in his shop windows which is against the law. He later was prosecuted for criminal offence for offering such knives for sale. The issue is that, is the defendant can be sue for displaying the flip-knives at the shop window?

Court Held: The court held that display of and goods with a price tag in a shop window is not an offer but rather it is an invitation to treat. Lord Parker declared that displaying of an article with a price on it in a shop window is merely an invitation to treat.

Case 3: Carlill v. Carbolic Smoke Ball Company.

Issue: The Issue is that, the defendants advertised to the whole world that they would pay anyone who use their product as prescribed manner and caught influenza, £100 and make safe by saying that they will deposit £1,000 in the bank account as to express their good faith. Therefore, the plaintiff had accept the offer of the company by performing the acts wished by the company. Is there any binding contract between parties?

Court Held: The court of appeal held that, for an offer to be capable of becoming binding on acceptance, the offer must be definite, clear, and final. The statement of CSBC in the ads was clearly shows that there is intention of entering into legal relation by expressing the promise to pay the amount of money. Therefore, the defendant was contractually obliged to pay £100 to any person who performed the requested acts.

Question 3:

Question: Define contract and explain the essential elements of a contract

WHAT IS CONTRACT?

According to Contracts Act 1950, section 2 (h) ,contract refer to an agreement between two or more parties enforceable by law.

• PROPOSAL is when one person signifies to another his willingness to do or to abstain from doing anything with a view to obtaining the assent of that other to the act or abstinence, he is said to make proposal.

• ACCEPTANCE is the person who accepting the offer which

called as offeree or promise

PROPOSAL AND ACCEPTANCE

•Proposal can be made to an individual,class of person,firm,company or public

•through any form like writing,orally , by conduct or combination of these methods.

•According to Contracts Act section 2 (d) when,at the desire of the promisor,the promise or any other person has done or abstained from doing ,or does or abstains from doing,or promises to do or to abstain from doing,something,such act or abstinence or promise is called a CONSIDERATION of the promise.

CONSIDERATION

• CONSIDERATION also may be view as a sort of bargain when a promisor promises to do or to abstain from doing something, the promise must pay a price for it

• CONSIDERATION can be classified into three types which is executory, executed and past consideration.

• Through the Contracts Act 1950 is silent on the question of intention to create legal relations ,there seems to be no doubt that a vital requirement of a valid contract is that the parties must have the intention to enter into such relationship.

INTENTION TO CREATE LEGAL RELATIONS.

• The condition of an offer must be in the condition of CERTAIN and communicated. CERTAIN means clear, complete , final and detail to avoid any doubt

CERTAINTY

Legal Capacity

Legal capacity of human are related

to worship, transaction, family law, criminal law and other fields

section 11 of The Contract Act every is competent to contract who is of the age majority according to the law to which he is

subject, and who is of sound mind, and is not disqualified from contracting by any law to which he is subject

The legality of an ‘ibadah

depends on the state of maturity

of the performances

At common law, it is presumed that a person who enters into a contract has full capacity to do

so

Free Consent

Free consent is the basis of a contractual relationship. Based on the Contact act section 10(1), all ‘agreements are

contracts if they are made by the free consent of parties competent to contract…’.

Mistake

misrepresentation Undue Influence

CoercionFraud

Legality Of The Object

Legality of object is an essential component of a valid contract must be for a legal purpose and

in compliance with public policy

If the object or consideration is unlawful

for one or the other of the reasons mentioned in

section 23, the agreement is illegal and therefore void

Section 10 lays down that all agreements are

contracts if made for lawful consideration

and with a lawful object

Required Formalities

General rule is that a contract can be made orally, in writing or by conduct. Section 10 (2) of the Contract Act provides that ‘Nothing herein contained

shall affect any law by which any contract is required to be made in writing or in the presence of witnesses, or any law relating to the registration of

documents

In section 26(a) ‘Agreements made on account of natural love

and affection between parties standing in near relation’

In section 26(c) ‘Agreement to pay a statute-barred debt’