Contract Valid for Minor & Consideration inadequate

(a) Sources of Malaysian Law may be classified into written and unwritten law. State and describe any three of these sources. (4 marks)

(b) State three (3) situations where a contract entered by a minor may be valid. (6 marks)

(c) Section 26 of the Contracts Act, 1950 provides that a contract without consideration is void. Explain with relevant cases the meaning of the expression “consideration need not be adequate”. (5 marks)

(d) What is a proposal/offer under the law of contract? Explain the significance of a proposal in the formation of a contract. (5 marks)

(MIA QE 2011/9 Q1, 20 marks)

(a) Refer earlier postings on written and unwritten Law of Malaysia - D02 2014 Q3.

(b) Refer earlier post on Contract Capacity of an Infant D02 Law 2014 Q1.

The general rule is that, contracts made by minors are void. The Age of Majority Act, 1971: the age of majority in Malaysia is 18 years.

Exception to this rule: (provisions for a valid minor’s contract)

- Contract for necessaries: Govt. of Malaysia v. Gurcharan Singh & Ors.

- Contracts of scholarship: Contracts (Amendment) Act, 1976;

- Contracts of insurance: Insurance Act, 1963: infant over the age of ten may enter into a contract of insurance and if he is below 16 years old, may require the consent of his parents or guardian.

Consideration does not need to be full

1. Under the Malaysian Law, CA 50, consideration need not be adequate. Explanation 2 of the CA 50, Section 26 as below:

An agreement to which the consent of the promisor is freely given is not void merely because the consideration is inadequate; but the inadequacy of of the consideration may be taken into account by the court in determining the question whether the consent of the promisor was freely given.

As a general rule, consideration must be sufficient, i.e. recognized as an acceptable form of consideration by the law. The law is not concerned with the fairness of the bargain. Hence, one can contract to buy a car for RM100 if one can agree to such terms with the promisor (seller).

Phang Swee Kim v Beh I Hock (1964) where transfer of land for RM500 was valid as there was no evidence of fraud or duress.

Proposal/offer were answered in earlier posts MIA QE 2009/9 Q1 (a)(i).

Earlier posts.