topic 4 Capacity (Berkeupayaan) Prepared By: Norazla Abdul Wahab

General Rule section 10 of Contract Act 1950: in order to enter into legally binding contract, parties to the contract must have the full capacity to do so. He must be competent (layak) or capable person.

the contracts may be invalid or void. General Rule If lack capacity the contracts may be invalid or void.

Section 11: of CA 1950 Person Competent Section 2 of Age of Majority Act 1971 = 18 years and above Sound Mind Is not disqualified (qualified) from contracting

Section 11: of CA 1950 Person incompetent Minor (below age of 18) An unsound mind (mentally disordered or incapacitated through sickness, alcohol or other drugs)

Cont… Agreements entered into by minor : are generally void and a minor cannot be sued under such void contracts.

Cont… If there is a contract between minor & adult: An adult cannot enforce the contract cannot recover property that he had transferred to the minor.

Mohori Bibee v Dharmodas Ghose (1903) ILR 30 Cal 539 The A lent the infant (R) the sum of 20,000 rupees at 12% interest and secured the loan by way of mortgage executed by the infant in favour of the A. Later the mother of the children claim that the mortgage was void for lack of capacity.

Mohori Bibee v Dharmodas Ghose The court held that: the contract was void and so as to the mortgage and the A cannot recover the money from the infant.

If there is a contract between minor & adult: A minor who had transferred his property on receipt of the purchase money, may get the contract declared void and at the same time, have the advantage of not returning the money’s received.

Tan Hee Juan v The Boon Keat [1934] MLJ 96 The P (an infant) executed transfer of land in favour of the D. The transfer were witnessed and subsequently registered. The P later, by his representatives, applied to the court for an order setting aside the transfer.

Tan Hee Juan v The Boon Keat The court rule that : the transactions were void and ordered restoration of the land to the minor and have the advantage of not returning the money’s received

If there is a contract between minor & adult: A minor who paid the money to an adult, can recover the money upon returning the property transferred to him.

Leha Jusoh v Awang Johari [1978] 1 MLJ 202 The R (minor) had entered into an agreement to purchase of land belonging to an estate of which the A was the administratrix.

Leha Jusoh v Awang Johari The court ordered: an adult to refund the purchase price to an infant upon infant vacating the land occupied by him.

Misrepresentation of Age Where a minor has misrepresented his age and thereby induced a person to contract with him.

Effects Malaysian Position The person cannot sue the minor on the contract. The minor can plea minority to avoid the contract.

Indian and England Position Effects Indian and England Position The minor has to return to the adult property which are still in his possession transferred to him. (Restitution). If the property is lost the remedy of restitution is not available.

Mohamed Syedol Ariffin v Yeoh Ooi Gark [1916] 2 AC 575 R, the moneylender sued the A for a sum of RM29,000 that he lent. The A’s defence was that at the time of the loan he was still an infant. But he told the R that he was 21 years old. The court held that R cannot claim from the A.

Exceptions (Pengecualian) Despite of the above rule, there are several exceptions to section 11 where minor can enter into valid contract & liable on that contracts . 1) Contracts for necessaries 2) Contract of scholarship 3) Insurance contract 4) Marriage contract 5) Employment Contract

1. Contracts for Necessaries Minor is liable on contracts for necessaries. What is necessaries??? (Whether the minor is in need of such goods or services or the goods suitable to the condition in life of such infants and to his actual requirements at the date of the sale.) Such as food, shelter, clothing, medical services and even education. However luxurious articles are excluded.

Section 69 of Contracts Act 1950 If a person, incapable of entering into a contract, or anyone whom he is legally bound to support, 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. The supplier of necessaries may claim a price from the minor only if he has the property to do so.

Nash v Inman [1908] 2 KB 1, p. 8 a tailor sued a minor to whom he had supplied clothes including fancy waistcoats which worth 22 pound). the court held that : although the clothes were suitable according to the minor’s life, they were not necessary as he already had sufficient clothing.

2. Promise of Marriage Contracts promise to marry entered into by minor are valid. A minor can sue or be sued in case of breach of promise to marry.

Section 4(a) of the Age of Majority Act 1971 provides that : 2. Promise of Marriage Section 4(a) of the Age of Majority Act 1971 provides that : “nothing in the Act shall effect the capacity of any person to act in the following matters, namely marriage, divorce, dower and adoption. Therefore a minor may sue or be sued for a breach of promise to marry”.

2. Promise of Marriage For Muslims in Malaysia, the various Islamic family law enactments provide for remedies for breach of promise to marry.

Rajeswary & Anor v Balakrishnan & Ors (1958) 3 MC 178 D is a Hindu. He broke a promise to marry P, also a Hindu. D broke contract of marriage which is made under normal practice of their customs. When P claim damages for breach of contract, court granted the claims although P is a minor.

3. Scholarship A scholarship agreement entered into by an infant is valid e.g. loan, sponsorship for the purpose of learning by government or educational institution. No scholarship agreement shall be invalidated on the ground that the scholar entering into such agreement is below than 18 years old

Government of Malaysia v Gucharan Singh [ 1971] 1 MLJ 211 Gurbachan received a scholarship from government to attend trainings, as a teacher and for that he is to serve with government for 5 years after graduated. Unfortunately, Gurbachan left before full term. When sued, he claims that the contract is void. He was lack of capacity during the time. The court held that education is a necessities to a minor. Thus, Gurbachan is in breach of contract.

4. Insurance Contract Under Insurance Act 1963, an infant over the age of ten may enter into a contract of insurance. However, if he or she is below sixteen, the infant can only do so with the written consent of his parents or guardian. It is because it is in a minor best interest to insure himself or his property.

5. Contract of employment (Apprenticeship) Section 13 of Children and Young Person (Employment) Act 1966. Any person below the age of 16 shall be competent to enter into a contract of service and may sue or defend an action against him. However, no damages can be recovered from him for breach.

2) Sound Mind Besides being the age of majority, a person is competent to contract if he is mentally sound. Section 12(1) of Contracts Act 1950 Section 12(2) of Contracts Act 1950 Section 12(3) of Contracts Act 1950. See Illustrations of Section 12 of CA

2) Sound Mind What is a sound mind for the purposes of contracting S. 12. (1) 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. (2) A person who is usually of unsound mind, but occasionally of sound mind, may make a contract when he is of sound mind. (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

See Illustrations of Section 12 of CA 2) Sound Mind See Illustrations of Section 12 of CA (a) A patient in a mental hospital, who is at intervals of sound mind, may contract during those intervals. (b) A sane man, who is delirious from fever, or who is so drunk that he cannot understand the terms of a contract, or form a rational judgment as to its effect on his interests, cannot contract whilst such delirium or drunkenness lasts.

Sim Kon Sang Peter’s v Datin Shim Tok Keng The plaintiff (administrator of the estate of the deceased) claimed that the deceased when she was alive, transferred to the defendant certain share of her land when she was of unsound mind at the time of executing the transfers and incapable of understanding the contract. The court held that the deceased had appeared normal to the D and D was not aware that the deceased was of unsound mind.

Note: This Notes and Copyright therein is the property of Madam Norazla Abdul Wahab and is prepared for the benefit of her students enrolled in the MGM 3351 course for their individual study. Any other use or reproduction by any person WITHOUT CONSENT IS PROHIBITED.