Contracts Act 1950 [Act 136] Part III

20 Power to set aside contract induced by undue influence cite [+]

When consent to an agreement is caused by undue influence, the agreement is a contract voidable at the option of the party whose consent was so caused. Any such contract may be set aside either absolutely or, if the party who was entitled to avoid it has received any benefit thereunder, upon such terms and conditions as to the court may seem just.

ILLUSTRATIONS

(a) A's son has forged B's name to a promissory note. B, under threat of prosecuting A's son, obtains a bond from A for the amount of the forged note. If B sues on this bond, the court may set the bond aside.

(b) A, a moneylender, advances RM100 to B, an agriculturist, and, by undue influence, induces B to execute a bond for RM200 with interest at 6 per cent per month. The court may set the bond aside, ordering B to repay the RM100 with such interest as may seem just.

21 Agreement void where both parties are under mistake as to matter of fact cite [+]

Where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void.

Explanation-An erroneous opinion as to the value of the thing which forms the subject-matter of the agreement is not to be deemed a mistake as to a matter of fact.

ILLUSTRATIONS

(a) A agrees to sell B a specific cargo of goods supposed to be on its way from England to Kelang. It turns out that, before the day of the bargain, the ship conveying the cargo had been cast away and the goods lost. Neither party was aware of the facts. The agreement is void.

(b) A agrees to buy from B a certain horse. It turns out that the horse was dead at the time of the bargain, though neither party was aware of the fact. The agreement is void.

(c) A, being entitled to an estate for the life of B, agrees to sell it to C. B was dead at the time of the agreement, but both parties were ignorant of the fact. The agreement is void.

22 Effect of mistake as to law cite [+]

A contract is not voidable because it was caused by a mistake as to any law in force in Malaysia; but a mistake as to a law not in force in Malaysia has the same effect as a mistake of fact.

ILLUSTRATION

A and B make a contract grounded on the erroneous belief that a particular debt is barred by limitation: the contract is not voidable.

23 Contract caused by mistake of one party as to matter of fact cite [+]

A contract is not voidable merely because it was caused by one of the parties to it being under a mistake as to a matter of fact.

24 What considerations and objects are lawful, and what not cite [+]

The consideration or object of an agreement is lawful, unless-

(a) it is forbidden by a law;

(b) it is of such a nature that, if permitted, it would defeat any law;

(d) it involves or implies injury to the person or property of another; or

(e) the court regards it as immoral, or opposed to public policy.

In each of the above cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void.

ILLUSTRATIONS

(a) A agrees to sell his house to B for RM10,000. Here, B's promise to pay the sum of RM10,000 is the consideration for A's promise to sell the house, and A's promise to sell the house is the consideration for B's promise to pay the RM10,000. These are lawful considerations.

(b) A promises to pay B RM1,000 at the end of six months, if C, who owes that sum to B, fails to pay it. B promises to grant time to C accordingly. Here the promise of each party is the consideration for the promise of the other party, and they are lawful considerations.

(c) A promises, for a certain sum paid to him by B, to make good to B the value of his ship if it is wrecked on a certain voyage. Here A's promise is the consideration for B's payment, and B's payment is the consideration for A's promise, and these are lawful considerations.

(d) A promises to maintain B's child, and B promises to pay A RM1,000 yearly for the purpose. Here the promise of each party is the consideration for the promise of the other party. They are lawful considerations.

(e) A, B and C enter into an agreement for the division among them of gains acquired, or to be acquired, by them by fraud. The agreement is void, as its object is unlawful.

(f) A promises to obtain for B an employment in the public service, and B promises to pay RM1,000 to A. The agreement is void, as the consideration for it is unlawful.

(g) A, being agent for a landed proprietor, agrees for money, without the knowledge of his principal, to obtain for B a lease of land belonging to his principal. The agreement between A and B is void, as it implies a fraud by concealment, by A, on his principal.

(h) A promises B to drop a prosecution which he has instituted against B for robbery, and B promises to restore the value of the things taken. The agreement is void, as its object is unlawful.

(i) A's estate is sold for arrears of revenue under a written law, by which the defaulter is prohibited from purchasing the estate. B, upon an understanding with A, becomes the purchaser, and agrees to convey the estate to A upon receiving from him the price which B has paid. The agreement is void, as it renders the transaction, in effect, a purchase by the defaulter, and would so defeat the object of the law.

(j) A, who is B's advocate, promises to exercise his influence, as such, with B in favour of C, and C promises to pay RM1,000 to A. The agreement is void, because it is immoral.

(k) A agrees to let her daughter to hire to B for concubinage. The agreement is void, because it is immoral, though the letting may not be punishable under the Penal Code.

Void Agreements

25 Agreements void if considerations and objects unlawful in part cite [+]

If any part of a single consideration for one or more objects, or any one or any part of any one of several considerations for a single object, is unlawful, the agreement is void.

ILLUSTRATION

A promises to superintend, on behalf of B, a legal manufacture of indigo, and an illegal traffic in other articles. B promises to pay to A a salary of RM10,000 a year. The agreement is void, the object of A's promise and the consideration for B's promise, being in part unlawful.

26 Agreement without consideration, void, unless- cite [+]

An agreement made without consideration is void, unless-

it is in writing and registered

(a) it is expressed in writing and registered under the law (if any) for the time being in force for the registration of such documents, and is made on account of natural love and affection between parties standing in a near relation to each other;

or is a promise to compensate for something done

(b) it is a promise to compensate, wholly or in part, a person who has already voluntarily done something for the promisor, or something which the promisor was legally compellable to do; or

or is a promise to pay a debt barred by limitation law

(c) it is a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorized in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits.

In any of these cases, such an agreement is a contract.

Explanation 1-Nothing in this section shall affect the validity, as between the donor and donee, of any gift actually made.

Explanation 2-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 the consideration may be taken into account by the court in determining the question whether the consent of the promisor was freely given.

ILLUSTRATIONS

(a) A promises, for no consideration, to give to B RM1,000. This is a void agreement.

(b) A, for natural love and affection, promises to give his son, B, RM1,000. A puts his promise to B into writing and registers it under a law for the time being in force for the registration of such documents. This is a contract.

(d) A supports B's infant son. B promises to pay A's expenses in so doing.
This is a contract.

(e) A owes B RM1,000, but the debt is barred by limitation. A signs a written promise to pay B RM500 on account of the debt. This is a contract.

(f) A agrees to sell a horse worth RM1,000 for RM10. A's consent to the agreement was freely given. The agreement is a contract notwithstanding the inadequacy of the consideration.

(g) A agrees to sell a horse worth RM1,000 for RM10. A denies that consent
to the agreement was freely given.

The inadequacy of the consideration is a fact which the court should take
into account in considering whether or not A's consent was freely given.

27 Agreement in restraint of marriage void cite [+]

Every agreement in restraint of the marriage of any person, other than a minor during his or her minority, is void.

28 Agreement in restraint of marriage void cite [+]

Every agreement by which anyone is restrained from exercising a lawful profession, trade, or business of any kind, is to that extent void.

Saving of agreement not to carry on business of which goodwill is sold

Exception 1-One who sells the goodwill of a business may agree with the buyer to refrain carrying on a similar business, within specified local limits, so long as the buyer, or any person deriving title to the goodwill from him, carries on a like business therein:

Provided that such limits appear to the court reasonable, regard being had to the nature of the business.

of agreement between partners prior to dissolution

Exception 2-Partners may, upon or in anticipation of a dissolution of the partnership, agree that some or all of them will not carry on a business similar to that of the partnership within such local limits as are referred to in exception 1.

or during continuance of partnership

Exception 3-Partners may agree that some one or all of them will not carry on any business, other than that of the partnership, during the continuance of the partnership.

29 Agreements in restraint of legal proceedings void cite [+]

Every agreement, by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights, is void to that extent.

Saving of contract to refer to arbitration dispute that may arise

Exception 1-This section shall not render illegal a contract by which two or more persons agree that any dispute which may arise between them in respect of any subject or class of subjects shall be referred to arbitration, and that only the amount awarded in the arbitration shall be recoverable in respect of the dispute so referred.

Saving of contract to refer questions that have already arisen

Exception 2--Nor shall this section render illegal any contract in writing, by which two or more persons agree to refer to arbitration any question between them which has already arisen, or affect any law as to references to arbitration.

*Exception 3-Nor shall this section render illegal any contract in writing between the Government and any person with respect to an award of a scholarship by the Government wherein it is provided that the discretion exercised by the Government under that contract shall be final and conclusive and shall not be questioned by any court.

In this exception, the expression "scholarship" includes any bursary to be awarded or tuition or examination fees to be defrayed by the Government and the expression "Government" includes the Government of a State.

*NOTE-See Contracts (Amendment) Act 1976 [A329] with respect to Scholarship Agreements.

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