English Common Law and Equity in Malaysia

(a) Explain the extent of the application of the English common law and the rules of equity as applied in Malaysia today. (5 marks)

(b) In relation to the law of contract:

(i) Explain the meaning of the terms ‘intention to create legal relations between the parties”. (3 marks)

(ii) Explain the implication of the element of “certainty” to a contract. (3 marks)

(c) Briefly explain ‘damages’ as one of the important remedies available for breach of contract. (4 marks)

(d) N/A sale of goods

(MIA QE 2013/3 Q1, 20 marks)

(a) MIA model answer:

Section 3(1) of the Civil Law Act, 1956 states that the courts in Peninsular Malaysia shall apply the common law of England as well as equity as administered in England on April 7, 1956. [English Common Law and Rule of Equity applies to Malaysia as it was on the dates:

West Malaysia - 7th April, 1956; ... s.3(1)(a) Civil Law Act, 1956
Sabah - 1st Dec, 1951; ... s.3(1)(b) Civil Law Act, 1956
Sarawak - 12 Dec, 1949; ... s.3(1)(c) Civil Law Act, 1956
These are 'Cut Off' dates, and hence after such dates, the English Common Law and Rule of Equity do not become law in Malaysia. Which means common law and equity in England can be used as law in arriving at judgement if the cases are quoted from the dates above and earlier, but not later. In such scenario, if there is a common law case decided in 2010 in the Courts in England, it cannot be used as a reference to arrive at an argument in Malaysian Courts.] - Added from MIA QE 2009/9 Q1

In the states of Sabah and Sarawak, the common law of England and the rules of equity together with the statutes of general application shall be applied. However, the application of English law throughout Malaysia is subject to two limitations:

(i) It is applied only in the absence of local statutes on the particular subject. Local law takes precedent over English law as the latter is meant to fill the gaps (lacuna) in the local system.

(ii) Only that part of the English law that is suited to local circumstances will be applied. The provision to section 3(1) of the Civil Law Act, 1956 is the authority for this. It states that the common law, rules of equity and statutes of general application shall be applied so far only as the circumstances of the states of Malaysia and their respective inhabitants permit, and subject to such qualification as local circumstances render necessary.

(i) Intention to create legal relations had been asked in:

MIA QE 2008/3 Q1(ii) on requirement of law as 'intention to create a legal relationship' here.
LPPEH D02 2012 Q8 Contract - Intention Q8.
MIA QE 2014/9 Q1 (b) explain the circumstances no intention.

(ii) Certainty to a contract is spelled out in S.30 of Contracts Act, 1950 for uncertainty will void the contract.

Agreements void for uncertainty
30. Agreements, the meaning of which is not certain, or capable of being made certain (incapable of certain), are void.

(x) emphasis mine.

(a) A agrees to sell to B “a hundred tons of oil”. There is nothing whatever to show what kind of oil was intended. The agreement is void for uncertainty.

(b) A agrees to sell to B one hundred tons of oil of a specified description, known as an article of commerce. There is no uncertainty here to make the agreement void.

(c) A, who is a dealer in coconut oil only, agrees to sell to B “one hundred tons of oil”. The nature of A’s trade affords an indication of the meaning of the words, and A has entered into a contract for the sale of one hundred tons of coconut oil.

(d) A agrees to sell to B “all the grain in my granary at Ipoh”. There is no uncertainty here to make the agreement void.

[Element of certainty is dependent on the situation of agreement, express or implied. In the above scenarios, a lot of certainty actually being interpreted in the nature of the transaction. In property, high floors signify premium when there is lift, but without lift, high floors are bad investments.]

(c) Almost similar question was asked in:
MIA QE 2012/9 Q1 (c) here.

'Damages’ as one of the important remedies available for breach of contract.


Compensation for loss or damage caused by breach of contract
74. (1) When a contract has been broken, the party who suffers by the breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him
thereby, which naturally arose in the usual course of things from the breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it.

(2) Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach.

Compensation for breach of contract where penalty stipulated for
75. When a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, or if the contract contains any other stipulation by way of penalty, the party
complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not
exceeding the amount so named or, as the case may be, the penalty stipulated for.

MIA model answer:

Remedies for breach of contract:
Damages: Section 74 of the Contracts Act, 1950 provides damages to be granted to a party as compensation for the damage, loss or injury he has suffered through a breach of contract.

The illustrations to Section 74 clearly indicate that the party may recover damages for:

• Other expenses incurred as a result of the breach;
• The loss of profits arising out of the breach; and
• The difference between the price of goods as contracted for and the actual price the
goods were sold for as a result of the breach.

The plaintiff is only allowed to recover a reasonable sum for breach of contract (Section 75, Contracts Act, 1950) and is required to prove the actual damage he has suffered.

(d) Not included in Syllabus.

[X] Own account.