Law Principles : Based on English Law 1.The Contracts Act govern the Law of contract a. Principal Statute : Contracts Act 1950 2. However, not all aspects covered by the Act 3. Common law : Cases decided in the court. a. Common law can only be replaced by statutory law b. Common law applies when there's a lacuna in the law. 4. English Law may be used to fill in the gap of the Act. 5. Cases: Bagher Singh v Charan Sing & Anor - English law may only come into operation to rectify a lacuna in the law. i. Gurcharan Singh v Govt of Malaysia - The court are free to adopt the common law ii. What's a contract? S2 (g) an agreement IS enforceable by law S2 (h) an agreement not enforceable by law IS void S2 (j) a contract which ceases to be enforceable by law becomes void when it ceases to be enforceable An AGREEMENT between 2 or more parties, which is legally binding in the eyes of law Good Hard Job What made up a contract? (8) *** Agreement (Offer & Acceptance) 1. Consideration 2. Legality 3. Capacity 4. Intention 5. Certainty 6. Free consent 7. Form 8. Outline of a contract : Law of contract divided to 3 part Is there a contract? These must A. exist. (Formation of contracts) Agreement i. Consideration ii. Intention iii. Capacity iv. Form v. Does the law recognize and is it enforceable? Are there any vitiating factors which may make the contract void / voidable. B. Legality i. Certainty ii. Free consent iii. When do the obligations end? If there's a breach , are there any remedies? C. Formation of Contracts *Vitiating : nullifying, to make ineffective Agreement : Offer @ Proposal @ Promise 1. Offer - An undertaking, certain and definite. It's made with the intention that it shall be legally binding on the person (offeror,proposer, promisor) as soon as it is accepted by the person whom it is made to. a. S2(a) When one person signifies to another his willingness to do/to abstain from doing anything, with a view to obtain the assent(approval) of that other to the act or abstinence, he is said to make a proposal. b. S2(e) Every promise and set of promises , forming the consideration of each other is an agreement. c. Offer/Proposal/Promise must be communicated to the offeree/proposee/promisee. d. S3 Communication of the proposal is deemed to be made by any act or omission of the proposer, by which he intends to communicate the proposal (intention), or which has the effect of communicating it. *(also can be used for acceptance & revocation of proposals pov) e. Therefore, an offer must be communicated. f. S4(1) Communication of a proposal is complete when it comes to the knowledge of the person to whom it is made to. This only applies to instantaneous communication g. Therefore, offeree must have knowledge of it. h. ITT - it's a preliminary stage of negotiations. It's an effort to invite others to make an offer. It is not capable of being accepted. The offer is made by the other party, not the one making the invitation. i. Generally, advertisements, price list, price tags, tenders and circulars are ITT ii. An offer is not an I.T.T *** i. Revocation i. Lapse of time ii. Failure to fulfill a condition iii. Death of a party iv. An offer can be terminated. How? *** i. Tan Geok Khoon & Gerard Robless v Paya Terubong Estate Sdn Bhd - An offer is definite and unequivocal statement of willingness to be bound. i. Gunthing v Lynn - A lucky horse is too vague @ not definite/certain ii. Cases: Tips to answer: as in the case of etcetc Equivocal : leaving no doubt R v Clarke - The person must have knowledge of the offer/reward. i. Case: Coelho v The Public Service Commission (Malay mail issue) - confirming that advertisements are ITT. The applicants are making an offer i. Harvey v Facey - Supply of info Offer ii. Case: Byrne v LeonVan Tienhoven - Revocation can be done directly or indirectly by the proposer. i. Case: *** Examined before Contracts & Offer Friday, 27 July, 2012 6:00 PM Contract Act Page 1 Revocation i. Lapse of time ii. Failure to fulfill a condition iii. Death of a party iv. Rejection v. An offer can be terminated. How? *** i. An offer can be terminated as long as it has not been accepted. j. S5(1) A proposal may be revoked at anytime before the communication of its acceptance is complete as against the proposer. k. S6(a) Deals with the direct revocation, that communication of revocation should be done by the proposer or his agent acting on his behalf. l. S6(b) Deals with lapse of time, where there is time has been prescribed, by lapse of reasonable time, a contract is revoked. m. Where there is no time prescribed, by lapse of reasonable time i. Lapse of time occurring upon the expiration of the time prescribed in the proposal ii. Reasonable time depends on the nature of the subject matter • There are 2 situation for lapse of time : n. S6(c) Deals with the failure to fulfill a necessary condition, where a proposal may be revoked where the acceptor fails to fulfill a condition precedent to its acceptance. o. S6(d) Deals with death or mental disorder of the proposer. This however, must come to the knowledge of the acceptor before the acceptance. As in the case of :- p. Rejection - An offer can be rejected, then it's automatically lapsed. If any variation are made to the offer it'll amount to a counter offer. A counter offer has the effect of rejecting/destroying the original offer. q. Byrne v LeonVan Tienhoven - Revocation can be done directly or indirectly by the proposer. The third party has to be a reliable source. i. Case: Ramsgate Victoria Hotel Co v Montefiore (share applied, no news, suddenly said been allotted and asked to pay) i. Case: Aberfoyle Plantation v Khaw Bian Cheng i. Case: (purchase is conditional on the vendor obtaining a renewal of 7 leases. If unable to fulfill then the agreement is void) ; condition was not fulfilled. Hyde v Wrench - No acceptance by rejecting the original offer. Instead the plaintiff has made a new offer (counter- offer) (farm - counter offer, then wanna accept original price again) i. Case: Case: Bradbury v Morgan Contract Act Page 2 Agreement : Acceptance 2. S2(b) When a person to whom the proposal is made to signifies his assent thereto, the proposal is said to be accepted. a. Acceptance must be in reliance of the offer ( the acceptor must be aware of the offer) b. S7(a) Acceptance must be complete and unqualified ( no further negotiations nor any new terms) c. Conditional acceptance is no acceptance. d. S4(1) - Communication of proposal is complete when it comes to the knowledge of the person whom it is made to. This applies only for instantaneous communication. However for non- instant @ Postal rule, the rules state that when the promisee put the letter into a post box, then the agreement is binding on the promisor. e. The letter has to be adequately stamped, registered, addressed, f. S4(2)(a) Communication of an acceptance is complete against the proposer when it is put in the course of transmission to him, as it to be out of the power for the acceptor. g. S4(2)(b) It is complete against the acceptor when it comes to the knowledge of the proposer. h. S5(2) Acceptance may be revoked at anytime before the communication of the acceptance is complete against the acceptor. i. Revocation must be communicated j. Against proposer : when it comes to his knowledge i. Against the acceptor : When It is out in the course of transmission to whom it was made, as it to be out of the power of the acceptor. ii. S4(3) Communication of revocation of acceptance is complete :- k. Silence does not mean acceptance. l. Case: Felthouse v Bindley (uncle say if I don't hear from you means u accept) Case: Neale V Merrit Case: Entores Ltd v Miles Far East Corp (Postal Rule)*** Acceptance Wednesday, August 29, 2012 2:41 PM Contract Act Page 3 Consideration 3. S2(d) When, at the desire of the promisor, the promisee or any other person has done/abstained from doing something, or does/abstains from doing, or promises to do/ to abstain from going something; such act or abstinence is called consideration of the promise. a. Consideration can be seen from 2 main angles: b. A contract must either beneficial to the proposer or detrimental to the proposee to constitute consideration • The traditional theory - benefit and detriment theory i. The contract is the product of an exchange (price) / bargain • The contemporary theory - the price theory ii. S26 states that an agreement made without consideration is void. ( General rule ) c. There are certain exceptions to the GR. They are:- *** d. S26(a) Natural love and affection i. Def: An agreement made on account of natural love and affection between parties standing in near relation to each other. Such agreement must be expressed in writing and duly registered if the law requires such registration S26(b) Past consideration is good consideration ii. Def: A promise to compensate wholly or in part, a person who has already voluntary done something for the promisor, or something which the promisor was legally compellable to do. S26(c) Statute Barred Debt iii. Def: A promise to pay wholly or in part a statute barred debt, provided that it is made in writing and signed by the person to be charged therewith or by his duly authorized agent. Consideration can be executed or executory e. Adequacy of a consideration is a matter for the parties to decide, not for the courts i. S26 exp 2 - an agreement which the consent of the promisor is freely given is not void merely because the consideration is inadequate; ii. 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. iii. Consideration need not be adequate *** f. Consideration must be of some value i. Consideration is insufficient when the promisee is merely performing a contractual duty/legal duty already imposed upon him. (performing an existing obligation) ii. Must promise to do something more/above then existing duty (perform extra) iii. Subpoena (legal duty) - insufficient - Police gave more protection than what would have been under normal circumstances (extra) - sufficient - Performance of an existing duty (legal duty / public duty) 1. Performance of an existing contractual duty owed to the promisor 2. Depends on case by case basis - Was there a legal obligation? - Did the promisee suffered any detriment? - Performance of an existing duty imposed by a contract with a 3rd party 3. 3 situations to consider :- iv. Consideration must be sufficient *** g. South East Asia Insurance Bhd v Nasir Ibrahim Re Tan Soh Sim (1951) MLJ21 Case: Kepong Prospecting v Schmidt Case: Phang Swee Kim v Beh I Hock Glasbrook Brothers v Glamorgan Country Council Case: Stilk v Myrick (consideration is insufficient) Case: Hartley v Ponsonby (sufficient) Case: Shadwell v Shadwell - suffered detriment (sufficient) Case: Ward v Byham (not a woman's legal duty, sufficient) Case: Collins v Godefroy Consideration Wednesday, August 29, 2012 2:42 PM Contract Act Page 4 Did the promisee suffered any detriment? - …. 'promisee or any other person"- s2(d) A party to an agreement can enforce a promise even though he has given no consideration, so long somebody else has done so. Consideration need not move from the promisee h. only parties to a contract can bring an action against each other 3rd party cannot interfere even if the party is benefiting under the contract However due to S2(d), consideration need not move from the promisee, thus this doctrine does not strictly apply in Malaysia Doctrine of privity of contract i. A debt can be discharged if there is "accord and satisfaction" Accord = an agreement by which the obligation is discharged Satisfaction = the consideration which makes the agreement operative S64 : Every promisee may dispense with or remit, wholly or in part, the performance of the promise made to him, or may extend the time for such performance, or may accept instead of it any satisfaction that he thinks fit. S64 applies as long as there is an acceptance by the creditor / promisee. Waiver of performance j. Case: Shadwell v Shadwell - suffered detriment (sufficient) Case: Ward v Byham (not a woman's legal duty, sufficient) Case: Venkata Chinnaya v Verikata'ma'ya Contract Act Page 5 Intention to create legal relations *** 4. The parties to an agreement intend for it the be legally enforceable. a. Intention can be expressed or implied. b. It is presumed that there is an intention to create legal relations • Commercial/Business contract i. It is presumed that there is no intention to create legal relations • Domestic Contracts ii. The law is silent on this matter, thus common rule apply:- c. Commercial Contracts I. There are exception to the general presumptions - Case: Rose & Frank Co v J.R.Crompton &Bros Ltd : binding in honor only, rebutted by the language used - Case: Jones v Vernons Pools Ltd : the use of subject to contract clause indicates the parties do not intend to enter into a contractual r/s yet. - Domestic Contracts II. 3categories: - Agreement btwn spouses (Bal4 v Bal4); (Meritt v Meritt) • Agreement btwn parent & child (Jones v Padavatton) • Agreements btwn friends, relations etc (Choo Tiong Hin & Ors. v Choo Hock Swee) • Balfour v Balfour Husband and wife was in Ceylon due to husband's occupation. Went back to England during leave. Wife was ill and could not accompany husband back to Ceylon. Husband however agreed to pay maintenance fee to wife. Husband defaulted and wife sues. Court held that there was no enforceable agreement. Merritt v Merritt Agreement made when husband and wife was estranged. They made an agreement and signed, whereby husband would pay wife a monthly maintenance sum and would eventually transfer the house to wife if the wife kept up with the monthly mortgage payments. Husband defaulted after mortgage was paid. The court held that there was an agreement as it was more than a domestic agreement (Signed). Jones v Padavatton A mother, agreed with daughter that if daughter would give up her job and pursue bar in London, the mother would pay maintenance. The mother paid, and then also bought a london house where both of them would stay. However, they had a quarrel and while daughter was completing her bar exams the mother brought an action for possession of the house. The daughter argued they had a binding agreement. The court held otherwise as there was insufficient evidence to rebut the general presumption. Choo Tiong Hin & Ors v Choo Hock Swee The plaintiff has started a farm with his wife. They have 2 daughters and adopted 5 sons. Everyone helped out in the farm and it grew into a successful business. Wife died, and differences arose. Father remarried and moved out of the house. Thereafter, he brought an action claiming possession of the farm from his sons. Sons claimed they were entitled for an equal share as they had helped out in the creation of the family wealth. Decision of the court was in favor of the father, claiming there was no intention to create legal relation. Capacity 5. General presumption : A person who enters into a contract must have the contractual capacity to contract. a. S10 All agreements are contract if they are made by the free consent of parties competent to contract b. Intention + Capacity Wednesday, August 29, 2012 2:43 PM Contract Act Page 6 contract S11 Every person is competent to contract who is of the age of majority according to the law which he is subject, and who is of sound mind and is not disqualified from contracting by any law which he is subject to. c. Minors (below 18) i. Unsound mind (insane) ii. Disqualified from contracting (bankrupt) iii. Minors I. Def: Age of Majority Act 1971 states that a minor is a person who has not reached the age of majortiy (duh?) ie 18 yrs old . • General rule (GR) : All contracts entered by a minor are void • Why? : Minor are presumed to have lack of judgement; thus to protect them from being taken advantage of. • Exceptions to this GR (3) :- Marriage Contracts 1) Marriage contracts entered by minors are not void. - Contracts for Necessities 2) The important thing to note is the term necessities. - Literal i) Implies the bare essentials of life ◊ Legal ii) Covers more than just bare essentials of life. ◊ Includes good s and services reasonably necessary to the minor's actual requirements . These will be tested against the minors' background in life. ◊ Nature of the goods/services a. The minor's actual needs and background in life b. The actual requirements at the time of sale and delivery c. Test of necessities : ◊ 2 main interpretation :- - S69 : If a person, incapable of entering into a contract or anyone whom he is legally bound to support is supplied by another person with necessaries suited his condition in life, the person who has furnished such supplies is entitled to be reimbursed from the property of such incapable person. - (i) The necessaries must be already supplied to the minor (ii)The minor's liability includes necessaries supplie to anyone whom he is legally bound to support ie wife & child (iii) Supplier may only claim a reasonable price ( not contract price); hence the word reimbursed used. (iv) The minor is only obliged to pay if he has the property to do so Thus, limitation to capacity (3) : d. Scholarship agreements (The Act = Contracts (Amendment) Act 1976 ) 3) By virtue of the Contracts (Am……..)76; S4(A) : scholarship agreement between a minor and an appropriate authority cannot be invalidated on the ground of his minority. - Appropriate auth. = The Federal govt, the state govt, statutory auth, educational institution. - Sound Mind *** II. A person suffering from mental disability (permanently/temporarily) lacks the capacity to contract • S12(1) A person is said to be of sound mind for the purpose of making a contract, if at the time when he makes it, he is capable of understanding it and forming a rational judgment as to its effect s upon his interests. • S12(2) A person who is usually of unsound mind, but occasionally of sound mind, may make a contract when he is of sound mind • S12(3) A …. Usually of sound mind…..occasionally of unsound mind, may NOT make a contract when he is of unsound mind. • Case: Tan Hee Juan v Teh Boon Keat Case: Rajeswary & Anor V Balakrishnan and others Literal interpretation :The basic essentials : Air, water , food & shelter Legal : Basic essentials + good, services & education In short: if it's a necessities, then the contract is VALID If it's a luxury, contract is VOID. Case: Nash v Inman Contract Act Page 7 contract when he is of unsound mind. Contracts are avoidable at the option of the person who is of unsound mind. If the facts that the person is unsound is known to the other party The person of the unsound mind carries the burden of proof. (he has to show he is unsound at the point of time of contracting) Can't proof = contract is binding The Act does not specify whether such contracts are void or voidable. Therefore, a lacuna exist. Hence, English law applies:- • Imperial Lone Co v Stone Contract Act Page 8 Forms of contract 6. A contract can be made orally, in writing or by conduct. - There are exceptions to this GR; basically created by the statutes - Therefore, if the statutes emphasize it to be in written form, the contract then has to be in written form. - Ie. S26(a) & S26(c) - Writing a. Oral b. Conduct c. Combinations of above d. Void and Voidable Contracts 7. General presumption :- Once a contract is formed, it is deemed to be valid and recognized by law - Void i. Voidable ii. Illegal iii. However, this can be rebutted due to various reasons. They are classified as :- - Void & Voidable Contracts ( Touch N Go) I. S2(g), S2(h), S10 a. Void contracts b. Forbidden by law - It's nature in such way if permitted , it'd defeat any law - Fraudulent - Involves/Imply injury - Immoral - S24 of CA 1950, consideration /object of an agreement is lawful unless: S25 - if one /part of the consideration is partly unlawful S26 - (check consideration) S27 - agreement restraining marriage (other than a minor) S28 - agreement which restrain trade/profession/business. Certain exceptions apply S29 - agreement restraining legal proceedings S30 - agreements that are uncertain S31 - agreement by way of wager (betting) S21 - agreement is void where both parties are under mistake as to matter of fact Effect of void contracts : c. S66 - When an agreement is discovered to be void, or when a contract becomes void, any person who have received any advantage under the agreement, is bound to restore it /compensate to the person from whom he received it. Voidable contract - s2(i) : An agreement is enforceable by law at the option of one or more of the parties thereto, but not at the option of the other/others, is a voidable contract. d. S15 Coercion 1) S16 Undue Influence 2) S17 Fraud 3) S18 Misrepresentation 4) S23 Unilateral Mistakes 5) Examples of voidable e. Consent Clauses 8. S13 defines consent as : 2 / more persons are said to consent when they agree upon the same thing in the same sense a. Consent must be given freely. It is said to be free when it is not caused by : b. Form & Void and Voidable & Consent Wednesday, August 29, 2012 2:43 PM Contract Act Page 9 Consent must be given freely. It is said to be free when it is not caused by : b. S15 Coercion 1) S16 Undue Influence 2) S17 Fraud 3) S18 Misrepresentation 4) S23 Unilateral Mistake 5) S15 Coercion Coercion is the committing, or threatening to commit any act forbidden by the Penal Code, with the intention of causing any person enter into an agreement. S16 Undue Influence An agreement is said to be induced by undue influence where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other A person is said to be in a position to …….. : He holds a real / apparent authority over the other in a fiduciary relation ( doctor/patient ) - Make a contract with a person where mental capacity is temporarily / permanently affected ( old age, illness, mental / bodily distress ) - S17 Fraud +S18 Misinterprati on There are 3 main types of misinterpretation : Fraudulent misint… (S17) i. Negligent misint… (S18(b)) ii. Innocent misint (S18(a)) iii. S17 Fraud @ Fraudulent misinterpret ation *** Fraud is defined to include certain acts, which are committed with the intent to deceive another party/ to induce him to enter into a contract. When the maker makes a statement knowing it to be false - Does not believe in the truth of his statement - The main intention is to deceive the other contracting party. - In short, fraud is: However, a fraud which did not cause the consent to a contract of the party on whom the fraud was practiced, does not render a contract voidable. A person must have relied on the fraudulent statement and then entered into a contract to actually sought an action based on fraud. S18 Misinterpret ation Innocent Misinterpretation a. There is no element of fraud or negligence present. The maker of the false statement honestly believes that his statements is true on reasonable grounds, however it turns out to be untrue. Negligent Misinterpretation (it is safe to assume negligence and tort are similar) b. There is no intention to deceive the other party, and the maker honestly believes in what he had represented; but he carelessly makes a representation while having no reasonable basis to believe it to be true as in the case of Hedly Byrne v Heller Partners. Undue influence is voidable at the option of the aggrieving party. Such agreement may be void and set aside or, if the aggrieving party has received any benefit there under, then the terms and conditions is adjusted as the court may see fit. Action must be brought within a reasonable period of time. Otherwise, it may be deemed to be a sign of affirmation / waiver. Burden of proof lies with the plaintiff; proving that the representor made a statement either before or at the time of making the contract with the intention of inducing the representee to enter into a contract. S19(1) Voidable at the option of the aggrieving party. Damages a. Rescission (unmaking of a contract between parties) b. Remedies for both S17 & S18: Affirmation (express/implied) i. Lapse of time ii. Rights of third parties iii. Inability of the plaintiff to restore the subject matter of the contract to the original position iv. Bars to rescission S19(1) Voidable at the option of the aggrieving party. Kesarmal v Valiappa Chettiar Chait Singh v Budin Bin Abdullah Weber v Brown Hedley Byrne v Heller Partners Contract Act Page 10 Can be divided into 3 categories : 1. Common mistake a. Mutual mistake b. Unilateral mistake c. Common Mistake A. Where both parties to a contract make a similar mistake as to a fact which is fundamental to the agreement - Eg. Where both parties were unaware of the subject matter of the contract was no longer in existence, but unaware of that fact, the parties enter into a contract. - Mutual Mistake B. Where both parties make a mistake, but it is a different type of mistake which is fundamental to the contract - Eg. A wants to sell Volkwagen TSI but B believes that the offer was related to Volkwagen GTI which also owned by A. - Unilateral Mistake C. Only one party is mistaken, while the other know the truth. - Eg. A wants to buy a painting believing painted by Van Gogh from B, when in truth, it was only painted by an imitator. B knows the truth, that the painting is an imitation while A doesn’t. - General Rule : Mistake does not affect the validity of the contract. Unless it is an operative mistake (condition of the contract) 2. Mutual mistake a. Common mistake b. S21 - Agreement is void when both parties are under mistake as a matter of fact. Covers:- 3. Mistake as to the existence of the subject matter of the contract a. Mistake as to the identity of the subject matter b. Mistake as to a matter of fact essential to the contract c. Mistake of fact examples :- 4. Unilateral mistake a. A contract is not void merely because it was caused by one of the parties to it being under a mistake as to a matter of face. A contract would still regarded to be valid under the law. Covers: 5. Mistake as to the quality of the subject matter (quality = as much as u had bargained for) a. Face 2 face - agreement will be binding i. Not face 2 face - Agreement will be voidable (fraudulent) ii. Mistake as to the identity of the other party b. Mistake as to the natures of the document (not content of documents). ie. You signed a document believing it to be referee when in actual fact u are signing a form of guarantee. (this is nature). On the other hand, if you had signed a document as u had intended, but mistaken the CONTENT of the documents, the law will not assist you. The contract would not be void. (this is content) c. Mistake of fact examples :- 6. Effects of mistake - contract is deemed void (unless unilateral) 7. Remedies :- Rescission, specific performance, rectification 8. Galloway v Galloway Raffles v Wichelhaus Sheikh Bros v Ochsner Consent - Law of Mistake Friday, 5 October, 2012 3:15 PM Contract Act Page 11 Remedies :- Rescission, specific performance, rectification 8. Contract Act Page 12 Illegal Contracts Forbidden by law a. The nature , if permitted would defeat any law b. Fraudulent c. Involves or implies injury to the person or property of another d. Court regard it as immoral e. The consideration or object of an agreement is lawful UNLESS :- Term and Representation (Contracts Act did not provide for this, but the Sales of Goods Act 1957 does) A term ≠ a representation 1. Term refer to the stipulations which give efficacy to the intention of the parties 2. Term is part and parcel of a contract. 3. A breach of term would entitle the inured party to an action for breach of contract 4. A REPESENTATION IS NOT PART OF A CONTRACT. 5. A representation induces the formation of a contract but which does not become the term of the contract. 6. It is important to distinguish as different remedies are available depending on whether a term is broken or if a representation turns out to be untrue. 7. If the law of misrepresentation has been satisfied, then the injured party has a right of action under the law of misrepresentation (S17 & 18) 8. Condition a. Warranty b. Innominate/intermediate terms c. Terms can be classified to: 7. Condition A. S12(2) Sale of Goods Act - A condition to a contract may me referred to be a term of a contract, which is so essential to the main purpose of the contract that it's breach by one party will entitle the other party to terminate the contract. • Ie. A car to be sold for 100,000. However the car comes without a gearbox or a steering. The car therefore could not be used for which it is bought. Thus, the term of the contract has been breached. As this amounts to a serious breach, it is recognized as breach of a condition • A breach of condition can be converted to a breach of warranty - S13(1) Sale of Goods Act 1957 at the option of the aggrieved party; and let the contract be subsisting. • Warranty (S12(3)) B. A warranty may be regarded as a term, which is not essential to the main purpose of the contract as its breach would only give rise to a claim for damages. • The contract would therefore be continuing, but damages are claimable. • IE. You bought a car whereby the contract stated a red car. When in true fact, they have delivered you a white car instead. The contract will be subsisting, but you can claim for damages. • Efficacy - capacity to produce an effect; effectiveness Stipulation - an agreement ; in a p. rocedural manner Poussard v Spiers Tham Cheow Toh v Associated Metal Smelters Ltd Bettini v Gye Certainty of terms Illegal Contracts, Term & Representation, Certainty and Exclusion Clauses Monday, 8 October, 2012 4:02 PM Contract Act Page 13 Subject matter of contract must be certain 1. S30 CA1950 - Agreements, the meaning of which is not certain, or capable of being made certain, are void. 2. Exclusion Clauses One which limits the liability of the party from the usual consequences of breach of any terms of the contract. 1. Exclusion clauses has to be a term of the contract 2. Such clauses are very favorable to the party who inserted the clauses. Therefore the courts play an important role in trying to push the burden of proof to the inserter of the clause. 3. Signature - a person signed a document will be bound by the terms unless there was a misrepresentation a. Notice - Reasonable notice must be given b. Time factor - person relying on the clause has to satisfy req. that notice of the clause was given before the conclusion of the contract c. Previous dealings - there must be an established and regular course of dealings d. Exclusion clauses can only be relied if it forms part and parcel of the contract. This can be done in several ways: 4. The contra proferentum rule - By virtue of this rule, where the exclusion clause is ambiguous, the courts would construe (interpret) the clause against the party for whose benefit it was inserted. a. Fundamental breach - if there is death or personal injury then the exclusion clauses would be deemed to be void. b. Width of the clause / Exclusion clauses in cases of negligent liability- clear and unambiguous words are necessary. If you want to exclude negligence then the person asserting it should make the words very clear. c. Due to the inequality of the bargaining power of the parties, the court developed judicial protection. 5. Playing Cards (M) Sdn Bhd v China Navigation Ltd Contract Act Page 14 When a contract has been discharged, the parties are released of their obligations 1. Aggrieved party will have a right of recourse to the courts 2. Agreement a. Breach b. Frustration / Reason of impossibility of performance c. Performance d. Contract may be discharged in the following ways :- 3. Discharge by agreement A. GR - parties to a contract must perform it in accordance with its terms I. However, the contracting parties may by agreement, decide to terminate the contract. There must be accord and satisfactio II. Such agreement may be made at the time of the making the contract or subsequently III. It also may be done by expressly providing in the contract itself that the contract is to be terminated on the occurrence of a particular event IV. S63 CA1950 - The original contract need not be performed if the parties to the contract agree to substitute a new contract for it (novation); rescind it or alter it. V. S64 CA1950 (refer consideration : waiver of performance) VI. Discharge by breach B. Contracts may be terminated as a result of failure of a party to fulfill his obligation under the contract. I. Breaches may occur at the time when the performance is due, during performance or even before the time of the performance. II. S56(1) CA 1950 - Contracts become voidable at the option of the aggrieving party, if time was of the essence of the contract. ( the aggrieving party can choose to rescind / continue with the contract ) III. S56(2) - If time was not of the essence, the aggrieving party only entitled to compensation. ( compensate and continue with the contract ) IV. Where there exists a breach of condition (as oppose to breach of warranty) this will enable the innocent party the right to repudiate the contract (bring the contract to an end) in addition to claiming damages. A contract cannot be discharged by a breach of warranty. V. To bring an action immediately Hochester v De la Tour Or to wait for time of performance to arrive Avery v Bowden a. A breach also may occur before the time of performance. This is called anticipatory breach. The aggrieving party has 2 option: VI. Discharge by frustration - S57 CA 1950 C. S57(1) - An agreement to do an act which is impossible in itself is void. Ie. A agrees with B to discover treasure by magic. I. S57(2) - A contract to do an act which, after the contract is made, becomes impossible or by reason of some event which the promisor could not prevent, unlawful becomes void when the act becomes impossible or unlawful. (in short : becomes impossible, becomes unlawful or could not be prevented) II. When a contract is discharged by frustration, the contract is void. III. The subject matter of the contract has been TOTALLY DESTROYED (partially does not count, if the subject matter is still available to carry out) a. Where the purpose or object of the contracts has been defeated by a supervening event. (however, if partial of the term can be fulfilled or if there is an alternative way to perform the contract, then the contract is VALID) b. A contract may said to have been discharged by frustration in the following circumstances : IV. Discharged - to release from duty Recourse - the right to demand payment Choo Yin Loo v Visuvalingam Pillay When performance is due During performance Anticipatory breach Taylor v Caldwell Krell v Henry + Herne Bay Steamboat v Hutton Lee Kin v Chuan Suan Eng Discharge of Contracts Monday, 8 October, 2012 4:58 PM Contract Act Page 15 does not count, if the subject matter is still available to carry out) Where the purpose or object of the contracts has been defeated by a supervening event. (however, if partial of the term can be fulfilled or if there is an alternative way to perform the contract, then the contract is VALID) b. Change in the law that made the performance of the contract unlawful c. Where the undertaken party, who has undertaken a personal obligation has died or suffers an incapacity. d. Inability of the promisor to obtain a license e. Grant of an injunction f. It is more difficult or expensive to perform a. Impossibility of performance is the fault of either of the parties b. Where the frustrating event could be foreseen c. Self induced frustration does not amount to cases of frustration ( ie. Shortage of workers, weather conditions; as they amount to bad planning). Eg: V. Consequences of frustration - contract is terminated automatically VI. Compensation if available for the non performance of the frustration a. S57(3) - When one person has promised to do something which he knew, or with reasonable diligence, might have known, and which the promisee did not know to be impossible or unlawful, the promisor must make compensation to the promisee for any of loss which the promisee sustains through the non- performance of his promise. b. S66 applies (refer to void & voidable) c. The party who breaches are not bound to compensate the loss of the profits that could have been made. But he must refund whatever was paid in advance to him to the aggrieving party. d. Discharge by performance D. This is the usual method for the discharge of a contract. I. Parties to the contract has performed what they have agreed in the contract; or II. Parties offered to perform their respective promises, unless the performance is dispensed with or excused under the law III. The promisor must be prepared to perform his obligations at the time and place at which he has undertaken to do. a. If the time is fixed, then it must be perform within tht time, otherwise it amounts to breach. b. When no time is fixed, the promise must be performed within a reasonable time. c. If time is essential refer S56 (discharge by breach) d. Time and place of performance 4. Krell v Henry + Herne Bay Steamboat v Hutton Lee Kin v Chuan Suan Eng Condor v Barron Knights Ong Ung Kai v Enting Contract Act Page 16 In the event of breach, the aggrieving party can claim any or more of the below remedies: 1. Rescission a. Entitles one party to a contract to put an end to it due to the breach or default by other party • S40 - When a party refused to perform or disabled himself from performing his promise, the promisee may choose to put an end to the contract • The aggrieving party which choses to rescind the contract must restore to the other party any benefit received from him. The aggrieving party is rightfully entitled to compensation for any damage sustained as result of the breach • Hsu Seng v Choi Soi Fua • If contract has been tainted by misinterpretation (fraud,common,mutual) then the contract will not be recognize at all in the court. It has to be restored back its pre-contractual position. • Damages b. Reference to S74 - S76 CA1950 • Monetary compensation • Purpose : to compensate the innocent party for loss suffered as a result of breach • Damages must not be too remote ( remote - far in connection or relevance ) i. Special damages will be awarded if the special circumstances were known before the contract (the aggrieving party must show that the other party knew at the time of making the contract that the special loss is likely to result from the breach) ii. Damages may be awarded for emotional suffering iii. Innocent party must mitigate or lessen the loss suffered iv. In assessing how much damages should be awarded, the court takes into account :- • Highlighted in pink = important compared to others In the event of breach, the aggrieving party can claim any or more of the below remedies: (cont'd) 1. Remedies *** Monday, 8 October, 2012 5:00 PM Contract Act Page 17 In the event of breach, the aggrieving party can claim any or more of the below remedies: (cont'd) 1. Specific Performance c. An order from the court requiring the party who is in breach to perform his part of the contract exactly as he promised • Governed by the Specific relief Act 1950 • When the act agreed to be done is in the performance, wholly or partly, of a trust. i. When there exists no standard for ascertaining the actual damage caused by the non-performance of the act agreed to be done. ii. When the act agreed to be done is such that pecuniary (monetary) compensation for its non-performance would not afford adequate relief. iii. S11(1) SRA1950 - specific performance may be granted at the discretion of the court in the following circumstances : • S11(2) SRA1950 - until the contrary (opposite) is approved, the transfer of immovable property cannot be adequately relieved by compensation in money AND that the breach of contract to transfer MOVABLE property can be relieved. • Injunction / Preventive Relief d. Order of the court directing the defendant to refrain from doing something in breach of the contract. • Injunctions can be permanent @perpetual OR temporary @interlocutory@interim • Governed by SRA1950 • S50(1) SRA1950 - Preventive relief is granted at the discretion of the court by injunction, temporary or perpetual. • S51(1) SRA1950 - A temporary injunction is granted at the discretion of the court pending the final outcome of the trial proper. This injunction serves to preserve the status quo of the parties until then (until result) • S51(2) …. - A perpetual injunction is granted only after the case has been heard on its merits at a full trial. This injunction serves to permanently prohibit the defendant from doing something. • A mandatory injunction is to compel the performance of a term of the contract. i. S54(f) provides that an injunction may not be granted if its effect is to enforce a contract that cannot be specifically enforced. Ie. A contract that cannot be enforced by specific performance cannot also be subjected to an injunction. ii. A prohibitory injunction is to restrain the defendant from breaching his obligations under the contract. iii. Noted that a prohibitory injunction may only be granted to enforce a negative promise, e.g. a contract not to sell computers other than that produced by the plaintiff. This is the effect of S55 SRA1950 which applies notwithstanding S54(f) mentioned above. iv. Injunctions may also be classified as either mandatory or prohibitory. • Quantum Meruit e. TO BE INSERTED LAST MINUTE AS THERE HAS BEEN NO QUANTUM MERUIT QUESTIONS SINCE 2007 • American Cynamid Co v Ethicon Contract Act Page 18 No general satisfactory definition 1. Salmond, a well known author on torts defined it as a civil wrong for which the remedy is a common law action for unliquidated damages, and which is not exclusively breach of a contract or the breach of trust or other merely equitable obligations. 2. In short, a tort is a civil wrong which arises by operation of the law, not through the agreement of contracting parties. 3. The basis of liability in tort - no one has a right to injure other persons or cause damage to their property 4. Person suffering has a right to claim compensation from the party who causes such injury 5. Examples : Defamation, trespass, negligence 6. There must be a wrongful act a. The above act must affect the interests of rights of others b. The victim must have a right to the claim of damages c. 3 main features: 7. Function of law of torts : Compensation 8. Unliquidated damages - Sums of money not established in advance by the contracting parties as a compensation for a breach, but determined by a court after such breach occurs. Negligence The failure of a person to do what a reasonable man would do or the doing of something that a reasonable man would not do 1. The defendant owe the plaintiff a duty of care a. The defendant breached that duty of care b. The plaintiff suffered as a result of that duty of care c. To succeed a tort of negligence, these elements must be present : 2. Defendant duty to take reasonable steps to avoid acts or omissions which he can reasonably foresee is likely to injure your neighbour / someone else. ' i. The term neighbour here refers to any person who are so closely and directly affected by the defendant's act or omission that the defendant must have him(the neighbour) in mind when he does the act in question. ii. Ie. a road user owes other road users a duty of care. He has the duty to avoid acts or omissions which he can reasonably foresee will cause injury to other road users. iii. The damage is reasonably foreseeable 1) There is a close and direct r/s of proximity btwn tortfeasor and plaintiff 2) The circumstances as a whole must be such that it's just and equitable for the imposition of duty of care (as in the case of Hedley Byrne v Heller Partners) 3) Duty of care arises if: - iv. Duty of care A. Reasonable man test : What a reasonable man would have done under the circumstances of the given case? i. Breach occur when defendant has failed to do what a reasonable person would have done or has done something which a reasonable person would not have done. ii. This is a test of reasonableness. If defendant falls under that standard then he is said to have breached. Whether or not the defendant has iii. Breach of Duty B. As in the case of Blyth v Birmingham Waterworks Co Donoghue v Stevenson Tort - Negligence, Defences *** Friday, 12 October, 2012 7:23 PM Contract Act Page 19 then he is said to have breached. Whether or not the defendant has breached that duty is a matter of fact to be determined by the court. Professionals and Skills 1) Level of intelligence and knowledge 2) Capacity of defendant 3) Probability of the injury occurring 4) Seriousness of the injury 5) Issues or practicality and cost 6) Factors to take into consideration whether a breach of duty exists @ the standard of care: iv. Person who possess a particular skill shall be judged on what a reasonable person possessing the same skill would do in the particular situation. • Even if a profession takes a different view from another professional in the same profession, he may not be in breach as long as his action is in accordance with that is regarded as proper by a body of the same professionals • Professionals and Skills 1. The standard of care must be based on the current knowledge at the time of the alleged breach and not at the time of the trial • Knowledge and skill 2. Presumed reasonable man take greater precautions when the risk is high • When risk is high, defendant must do more than meet his duty • Probability of the injury occurring 3. Young/old/sickly are more prone to injury • A higher degree of care would be imposed in such cases • Seriousness of the injury 4. Not always reasonable to ensure all possible precautions have been taken • Measures taken must be weighed against the cost and current situation • Issues of practicality and cost 5. Plaintiff has to prove damage or injury was caused by the breach of the defendant i. The damages must be foreseeable and not too remote ii. Damage C. Defences to an action for negligence Defendant may have some defences to a cause of action for negligence 1. Volenti non fit injuria (consent) a. Contributory negligence b. Inevitable accident c. They are : 2. It means no wrong can be done to a person who voluntarily consents to it. i. Consent to the risk 1. Consent to the risk is voluntarily 2. Need to prove 3 elements : ii. Volenti non fit injuria (consent) A. Wagon Mound Case Contract Act Page 20 Consent to the risk is voluntarily 2. The plaintiff must have full knowledge of the risk 3. Consent to the risk 1. The plaintiff must have agreed that if injury befell on him the loss should be on him and not on the defendant • Consent must be voluntarily 2. Plaintiffs consent must be free and voluntary • Full knowledge of the events 3. Mere knowledge of the existence of the risk is not enough • Damage suffered was result of negligence by the plaintiff i. Defendant has to prove that the injury was cause by the failure of the plaintiff to take reasonable precaution to avoid a risk which he could foresee ii. The plaintiff has a duty of care for himself to act reasonably so as to avoid damage to himself 1. The plaintiff had breached this duty by acting unreasonable 2. The act must be the cause of his injury 3. Elements must be present: iii. When the sole reason for the plaintiff's injury is himself, then no compensation shall be awarded. If it was partially, then the plaintiff's claim will be proportionately reduced at the discretion of the court iv. Contributory Negligence B. Defendant has to prove that he has acted reasonably under the circumstance and the accident would have happened anyway as the damage is not one that is foreseeable nor can it be avoided i. Inevitable accident C. Stanley v Powell Contract Act Page 21 Governed by The Defamation Act 1957 1. Defamation may be described as the publication of a statement which tends to lower the reputation of a person in the eyes of right thinking members of society 2. Libel a. Slander b. There are 2 types of defamation:- 3. It is made in writing i. Permanent form made for public exhbition (publication) ie. Film, Radio Broadcasting ii. Actionable per se; therefore no need to prove any damage on the plaintiff iii. Libel A. Typically spoken i. In a temporary form ie. Gestures, Spoken words ii. GR : Not actionable per se, therefore plaintiff need to prove damage ie. Financial losses, or others in monetary term iii. Slander B. The statement complained must be defamatory a. It was understood to refer to the plaintiff b. Was published so that 3rd parties are aware of it c. To succeed a tort of defamation, these elements must be present : 4. What is defamatory? A. Statements that tends to lower the reputation of a person in the eyes of right thinking members of society • Intention of the maker of the statement is irrelevant • The importance are the effect on a reasonable and ordinary reader • Statement must be false • Was it understood to refer to the plaintiff? B. Intention of the maker of the statement is irrelevant • What was understood by the persons to whom the statement was made is important • Ie. Those who know the plaintiff believe that he is the person referred to • The words must be published C. There must be publication • Defences to an action of defamation Volenti non fit injuria 1. if plaintiff consent for publication • Ie. Grants interview for magazine • It may be expressed or implied • Justification 2. Defendant must prove that the statements made were true • Need not prove the whole truth, only need to prove the facts that cause such statement • Ie. Plaintiff is imprisoned for 2 weeks, but the statement stated that he was imprisoned for 4 weeks • Apology 3. The defendant has published the statement w/o malice ○ The defendant has sinced published a full apology ○ Paid a sum of money into court as an offer of compensation ○ May only be raised if :- • Tort - Defamation *** Sunday, 14 October, 2012 8:11 PM Contract Act Page 22