Chapter 3: Capacity and Terms of Contract REV 01 Chapter 3: Capacity and Terms of Contract Capacity to contract The parties entering into a contract should also be competent to contract, i.e. they must have the legal capacity to do so. Section 11 of the Contract Act reads: Who are competent to contract. 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. Refer to General Principles of Malaysian Law, Lee Mei Pheng, p.106. DDW2263 - BUSINESS LAW

Section 11 Akta Kontrak 1950 (AK 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. .” DDW2263 - BUSINESS LAW

CAPACITY SECTION 11 Is not disqualified by Law Age of Majority Sound Mind DDW2263 - BUSINESS LAW

2. Contract for study under s.4(a) REV 00 Child Contracts Generally a contract entered by a child is void. But there is 3 exceptions. A contract is deemed legal even though entered by parties without capacity, as below; 1. Contract for necessities as provided in s.69. a person, incapable of entering into a contract is supplied by another person with necessaries suited to his condition in life, the person who has furnished such supplies is entitled to be reimbursed from the property of such incapable person. 2. Contract for study under s.4(a) DDW2263 - BUSINESS LAW

Exception to General Principles REV 00 3. Akta Insuran 1963 allowed children over age of 10 years old to engage insurance , but if he/she is below 16, then he had to had written consent from guardian Exception to General Principles Insurance Contract – S. 153 Akta Insurans Necessities Contract – S. 69 Study Contract – S. 4 (a) DDW2263 - BUSINESS LAW

Effect of Contract Privity of contract REV 01 Effect of Contract Privity of contract It is a fundamental principle of common law that, apart from special circumstances, a person who is not a party to a contract has no right to sue on the contract. Thus, if A enters into a contract with B, only A and B can enforce or sue on the contract. C, who is not a party to the contract, cannot do so. DDW2263 - BUSINESS LAW

REV 01 Terms of contract The Malaysian Contracts Act does not contain any provision which deals specifically with the contents of a contract. The contents of a contract are made up of terms which may be expressed and or implied. Terms may be classified as either conditions or warranties. Terms may be implied by Custom and usage pertaining to a particular type of transaction Statutory provisions The courts, based on the intention of the parties DDW2263 - BUSINESS LAW

Conditions and Warranties REV 01 Conditions and Warranties Terms of a contract have been traditionally classified into conditions and warranties. Whether a particular term in a contract is a condition or a warranty depends on the intention of the parties. The mere labelling of a term as a condition or a warranty is not conclusive. Refer to Associated Metal Smelters Ltd v. Tham Cheow Toh case. Refer to The Commercial Law of Malaysia by Beatrix Vohrah & Wu Min Aun, p.71. DDW2263 - BUSINESS LAW

Generally, any statement made in a contract can be classified as two: REV 00 Terms Generally, any statement made in a contract can be classified as two: 1. ‘mere statement’ means that the contents of the statement is not intended to be legal binding Terms Conditions Warranties DDW2263 - BUSINESS LAW

Terms can be categorized into two types: REV 00 2. Terms means that the contents is part of the legal contract and enforceable. Terms can be categorized into two types: 1. ‘Conditions’ that the contents forms the essential part of rules in the contracts. If the conditions being breached then the parties is given rights to terminate/end the contract and entitle for damages DDW2263 - BUSINESS LAW

Besides that, terms also be categorized as : Express Terms REV 00 2. ‘Warranties’ that is supplement rules for the contract. If breach, the parties not entitle to terminate the contract but just to damage. Besides that, terms also be categorized as : Express Terms Implied Terms DDW2263 - BUSINESS LAW

REV 00 Express Terms – terms that written in contract and it clearly stated during formation of contract. Implied Terms is terms that may not be written in contract but parties are still bound to follows as in ordinary sense. Usually like norms, law or facts. DDW2263 - BUSINESS LAW

Implied Terms Customs / Business Norms Law Akta Jual Beli Akta Sewa Beli Akta Konsumer Facts DDW2263 - BUSINESS LAW

REV 00 Exemption Clauses “Syarikat tidak bertanggungjawab atas keselamatan barang-barang yang dibawa oleh penumpang-penumpang” DDW2263 - BUSINESS LAW

Standard Contracts and Exemption Clauses REV 01 Standard Contracts and Exemption Clauses An exemption clause may be defined as a term of a contract that attempts either: To modify the principal obligation or obligations arising under the contract of that particular type or To limit or exclude the liability of a party which would otherwise arise as a result of a breach by that party of his primary obligations to perform the contract in accordance with its terms. In standard form contracts, it has become increasingly common to find exemption clauses which often seriously disadvantage the unsuspecting consumer. The motive for the inclusion of such clauses are many and probably the most compelling one in a capitalist economy is the maximisation of profit by reducing costs and risk. DDW2263 - BUSINESS LAW

Some of the guidance as below: REV 00 Exemption clause is a valid term but it subject to strict guidance to protect the consumers. Some of the guidance as below: 1. Every exemption clause must be clear and simple to be understand 2. Notice must be given before or during the negotiation of contract 3. A strict interpretation by Court as to ensure the exemption clause is not acted as over protective to the party that drafted the contract. DDW2263 - BUSINESS LAW