LAW OF CONTRACT Dr Nur Emma Mustaffa Quantity Surveying Department Faculty of Built Environment UTM

INTENTION TO CREATE LEGAL RELATIONS A contract is an agreement that is intended to have legal consequences Whether or not an agreement is intended to have such consequences is not always easily determined.

INTENTION TO CREATE LEGAL RELATIONS No provision in the CA 1950, but case law dictates the necessity of this requirement Family arrangements :- normally it is not implied to have a legal relation Business transactions :- legal relationships are intended

INTENTION TO CREATE LEGAL RELATIONS Case : Simpkins v Pays (1955) Simpkins agreed with Pays and Pays’s grand-daughter that they would share the prize of a competition they entered into using Pays’ names. Entry fees and postages were equally shared. They won, but Pays refused to give her the prize which she was entitled to. The court decided there was an intention to create legal relations.

Balfour v Balfour [1919] 2KB 571, CA The husband was a civil servant stationed in Ceylon, came back to England with his wife. Later, he sailed back to Ceylon but left his wife. He promised that he would gave her 30 pounds per month until he returned. Later, he wrote to his wife that it would be better if they remained apart. The wife sued him on the promise.

Balfour v Balfour [1919] 2KB 571, CA The Court held that there was no contract as the parties did not intent that the agreement should be attended by legal consequences.

Carlill v Carbolic Smoke Ball [1893] 1 QB 256 CA D made claims in an advertisement about the efficacy of their smoke ball in preventing influenza. 100 pounds would be paid to anybody who use it and yet caught influenza within a given period. They stated that in order to show “their sincerity” they had deposited 1000 pound with their bankers.

Carlill v Carbolic Smoke Ball [1893] 1 QB 256 CA The P bought the smoke ball, used it and caught influenza. The D then contended that the advertisement was a “mere puff” and was not intended to create legal relations. CA rejected this. The fact of the deposit in the bank was strong evidence that the D had contemplated legal liability when they issued their advertisement.

CONSIDERATION S26 CA 1950:- Any agreement without consideration is void S2(d) CA 1950 When at the desire of the promisor or promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or abstain from doing, something, such act or abstinence or promise is called a consideration for a promise.

CONSIDERATION Case: Wong Hon Leong David v Norazman bin Adnan [1995] In return for Norazman’s promise that he would assist in obtaining approval to convert and subdivide land that Wong would pay him RM268,888 for the service, there was an exchange of mutual promise, was a consideration

CONSIDERATION Need not be adequate Eg: Illustration 2 in Section 26 ‘A agrees to sell a horse worth $1,000 for $10’ Case: Phang Swee Kim v Beh I Hock There was adequate consideration in a transfer of land on payment of RM500.

CONSIDERATION Chappell & Co Ltd v Nestle Co Ltd [1960] Nestle offered to sell records of the song “Rocking Shoes” for 1s 6d plus three Nestle chocolate bar wrappers. The Court had to determine whether the three chocolate wrappers accompanied with the payment was a sufficient ‘sale price’ of the records in compliant with s8 of the Copyright Act 1956 (UK).

CONSIDERATION Chappell & Co Ltd v Nestle Co Ltd [1960 It was held that the wrappers did form part of the consideration because they had value to Nestle even though they held no monetary value.

CONSIDERATION Natural love and affection is valid consideration An agreement made on account of love and affection would be held in binding if the requirement of S26(a) are present:- a) in writing b) it is registered c) the parties stand in a near relation to each other

CERTAINTY The terms of the agreement must be certain. An agreement which is uncertain or is not capable of being make certain is void Example : A agrees to sell to B a hundred book D agrees to sell to E a house

CERTAINTY Case : Karuppan Chetty v Suah Thian [1916] FMSLR 300 The requirement of certainty was not met when the parties agreed upon the granting of a lease at “$35.00 per month as long as he likes”

CAPACITY TO CONTRACT The parties must be competent to contract, ie have legal capacity to do so S 11 CA 1950: Must be the age of majority Must be of sound mind Not disqualified from contracting by any law to which he is subject

CAPACITY TO CONTRACT S 2 of the Age of Majority Act 1971 : all persons attain the age of majority at the age of 18. Thus, in Malaysia all contracts entered by minors are generally void and that a minor cannot sue or be sued in contract

CAPACITY TO CONTRACT Exceptions to the rule: which means these are contracts which can be entered into by minor a) contract for necessity b) contracts of scholarship c) contracts of insurance

CAPACITY TO CONTRACT Contract for Necessity What is necessity? Necessity means things which are essential to the existence and reasonable comfort of the infant; eg food and clothing

Nash v Inman [1908] 2KB 1 A Savile Row tailor sued for the price of clothes worth 22 pound (for 11 fancy waistcoats supplied to a minor undergraduate at Cambridge) Held: the action fail because the tailor had not adduced any evidence fit to be left to the jury that the clothes were suitable to the condition in life of the minor and that the minor was not adequately supplied with clothes at the time he ordered the clothes.

CAPACITY TO CONTRACT Contract for scholarship Government of Malaysia v Gurcharan Singh & Ors [1971] 1 MLJ 211 The court was of the view that education was held to be included as necessity.

CAPACITY TO CONTRACT Contract for scholarship A scholarship agreement entered into by an infant is valid when the scholarship, bursary, loan or sponsorship is granted by the Federal or State Government, a statutory authority, or an educational institution such as university.

CAPACITY TO CONTRACT Contract for insurance Under the Insurance Act 1963[Revised 1972], an infant over the age of ten may enter into a contract of insurance.

QUESTION : Are these necessities?

QUESTION: A re these necessities?

QUESTION: Are these necessities?

PRIVITY OF CONTRACT A person who is not a party to the contract has no right to sue on the contract A enters a contract with B Only A & B may enforce the contract, C, an outsider cannot do so