Valid Contract

(a) What is meant by ‘Judicial Precedent’? (5 marks)

(b) Describe the basic elements of a valid contract. (7 marks)

(c) State the main difference between a ‘void contract’ and a ‘voidable contract’? (3 marks)

(d) State any two (2) remedies available to a buyer of goods when a seller is in breach of a sale of goods contract. (5 marks)

MIA QE 2016/3 Q1, 20 marks)


(a) Judicial precedent.

2012 Q2
MIA QE 2014/3 Q1 Binding judicial precedent

(b) Basic elements of a valid contract.

Essential elements of contract
4 elements of a legal contract

(c) Void v Voidable contract.

Below sections are from Contracts Act, 1950.

S.2 (g) an agreement not enforceable by law is said to be void;

S.2 (h) an agreement enforceable by law is a contract;

S.2 (i) an agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of the other or others, is a voidable contract;

2013 Q4 Bad Contracts
Ismail and Ali 2015 Q5

(d) Not in syllabus.

Earlier posts.

MIA Model Answer

(a) What is meant by ‘Judicial Precedent’?

The process of adjudication, whereby after argument before a judge, a decision in a dispute is given; this decision forms one of the important means of creation of laws in Malaysia. In reaching his decision, the judge will formulate and apply a legal principle. This principle becomes a guide (binding or persuasive) for future court decisions.

The judge in arriving at his decision will give reasons for the decision and these reasons lies the ratio decidendi, or the legal principle behind the decision. This ratio decidendi may bind other decisions in similar disputes in the future.

A decision of a superior court (Federal Court or the Court of Appeal), binds the lower courts (High Courts, Session Courts, and Magistrate’s Courts).

Therefore, a binding precedent would depend on a court’s position in the hierarchy of the courts. Persuasive precedents are those that are not binding authorities, unlike binding authorities. Courts are bound to follow binding precedents until they are reversed on appeal or overruled.

(b) Describe the basic elements of a valid contract.

A contract is defined under section 2(h) of the Contracts Act, 1950 as an agreement enforceable by law. Elements of a valid contract are as follows:

(i) Agreement between parties: to constitute an agreement between two parties in a contract, there must be an offer and an acceptance of it;

(ii) Consideration: the word ‘consideration’ is defined under section 2(d) of the said Act as, “when at the desire of the promisor, the promise 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 consideration for the promise.”. Consideration may be executor, executed, or past;

(iii) Intention to create legal relations between the parties: An agreement is not a contract in the strict sense of the word, unless it is the common intention of the parties that it shall be legally enforceable;

(iv) Certainty of terms: agreements, the meaning of which, is not certain, or capable of being made certain, are void. A void contract is no contract;

(v) Capacity to contract: The parties to the contract must have legal capacity to do so. As a general rule, minors (persons below the age of 18 as per the Age of Majority Act), has no capacity to enter into contracts. This may also include persons of unsound mind or insane.

(c) What is the main difference between a ‘void contract’ and a ‘voidable contract’?

A void contract is an agreement which is not enforceable by law, as provided under section 2(g), Contracts Act, 1950.

A voidable contract means an agreement which is voidable at the option of the party to the contract, whose consent was caused by coercion, undue influence, fraud, misrepresentation or mistake.

A void contract cannot be enforced, whereas, a voidable contract may be enforced at the option of the ‘innocent’ party.