(a) State the enabling Act that allows the application of English common law in Malaysia and the conditions imposed for its application. (5 marks)
(b) Under the law of contract:
(i) Apart from ‘offer’, ‘acceptance’ and ‘consideration’, state any three (3) elements required for the formation of a binding contract. (3 marks)
(ii) Explain the phrase “consideration must be sufficient but need not be adequate”. (3 marks)
(iii) Explain one (1) of the circumstances under which a contract may be classified as “voidable” and state the corresponding provision under the Contracts Act, 1950. (3 marks)
(c) Briefly explain the following, with reference to the Sale of Goods Act, 1957 and decided cases.
(i) Implied condition as to “description”. (3 marks)
(ii) Implied condition as to “merchantable quality”. (3 marks)
(MIA QE 2015/9 Q1, 20 marks)
(i) Elements of contract.
(ii) “consideration must be sufficient but need not be adequate”
MIA QE 2011/3 Q1 Consideration need not be adequate
MIA QE 2011/9 Q1 Cases the meaning of the expression “consideration need not be adequate”
(c) No in syllabus.
MIA Model Answer
(a) Enabling Act: Civil Law Act, 1956: Section 3(1)
Section 3(1) of the Civil Law Act, 1956 provides for the application of English common
laws into Malaysia subject to the following conditions:
- there are no written laws in force in Malaysia to regulate the particular subject matter;
- the local circumstances and their respective inhabitants permit the application of English law;
- The application of English law is subject to such qualifications as the local circumstances render necessary.
The cut-off dates for English laws that can be applied under section 3(1) for the states in West Malaysia differ from those in Sabah and Sarawak. The cut-off dates for West Malaysia is 7th April, 1956, Sabah, 1st December 1951 and Sarawak 2nd December 1949. The Malaysian courts may still refer to decisions of English courts after the cut-off dates mentioned above as persuasive authority. (5 marks)
(b) (i) The elements that are required for the formation of a binding contract are as follows:
- Proposal or offer by a party who may be referred to as “offeror” or “promisor” or “proposer”;
- Acceptance of the proposal by another party who may be referred to as ‘offeree’ or “promise” or “acceptor”;
- Consideration for the promise;
- Intention to create legal relations between both parties; In a business or commercial arrangement, there is a presumption that both parties have intention to create legal relations unless it is expressly specified otherwise;
- Parties have the capacity and are legally competent and qualified to enter into contract; Section 11 of the Contracts Act 1950 defines a person who is competent to contract as one “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 to contract by any law to which he is subject”.
- Parties entered into the contract with free consent. Consent is said to be free when it is not caused by without undue influence, misrepresentation, fraud, mistake or coercion. (3 marks)
(b) (ii) The court will enforce a bargain between the plaintiff and the defendant as long as there is some consideration moving between them. Consideration is said to be sufficient if some consideration moves between the parties. The court will not examine such consideration to determine whether it is fair, equal or adequate; Phang Swee Kin v Beh I Hock (1964).
Thus, an agreement entered into by the free consent of the parties with some consideration is valid even though the promisor did not get a good bargain.
Section 26, Contracts Act, 1950, Illustration (f) reads as follows:
A agrees to sell a horse worth RM1000 for RM10. A’s consent to the agreement was freely given. The agreement is a contract notwithstanding the inadequacy of the consideration.
However, inadequacy of consideration may be an indicator to the court that the promisor or promisee did not enter into the contract with free consent. (3 marks)
(b) (iii) Coercion
- Section 19: when consent to a contract is induced by coercion, the contract is voidable at the option of the party who was coerced. Section 15: coercion is defined as “committing or threatening to commit any act forbidden by the Penal Code, or the unlawful detaining or threatening to detain any property, to the prejudice of any person whatever, with the intention of causing any person to enter into an agreement”.
- Section 16: a contract is said to be induced by undue influence if one party to the contract uses his position to dominate the will of the other party to obtain an unfair advantage over the other. Section 16(2): A person is presumed to be in a dominant position if:
- He holds a real or apparent authority over the other party to the contract;
- He stands in fiduciary relation to the other party to the contract;
- He contracts with a person whose mental capacity is affected due to age, illness or mental or bodily distress.
- Section 17: Fraud is defined as “any of the following acts committed by a party to a contract or with his connivance, or by his agent, with intent to deceive another party thereto or his agent, or to induce him to enter into the contract:
- The suggestion as to a fact, of that which is not true by one who does not believe it to be true;
- The active concealment of a fact by one having knowledge or belief of the fact;
- A promise made without any intention of performing it;
- Any act fitted to deceive; and
- Any such act or omission as the law specially declares to be fraudulent.”
- Section 18: The term “misrepresentation” includes:
- The positive assertion, in a manner not warranted by the information of the person making it, of that which is not true, though he believes it to be true;
- Any breach of duty which, without an intent to deceive, gives an advantage to the person committing it, or anyone claiming under him, by misleading another to his prejudice, or to the prejudice of anyone claiming under him; and
- Causing, however innocently, a party to an agreement to make a mistake, as to the substance of the thing which is the subject of the agreement. (3 marks)