Law of Contract.std Part2 2014

8/9/2019 Law of Contract.std Part2 2014

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Elements of ContractElements of Contract

Seventh Element: Consideration


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Section 2(d) of Contracts Act 1950

when at the desire of the promisor, the promisee or

other person has done or abstained from doing,

or does or abstains from doing or

promises to do or to abstain from doing something,

such act or abstinence or promise is called a

consideration for the promise

past

Present/executed

Future/executory

Consideration


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In Curriev. Misa,

the word consideration is defined as

some right, interest, profit orbenefitaccruing to one party,

or some forbearance, detriment, lossor responsibility given, suffered orundertaken by other.

Consideration-definition!


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Laypersons definition

of consideration?

I scratch your ac! you scratch my ac!"""


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#$% a&rees to &ive ' the

oo! now and B agrees to

ae payent no"$(present/executed))

#$B at As re%&est

ga'e is oo to A

*ast "ee$ *ow %promises to pay for

the oo!$ (past)

+,ec&ted Consideration(present) +,ec&tory+,ec&ted Consideration

(present) +,ec&tory

Consideration(f&t&re) and .ast ConsiderationConsideration

(f&t&re) and .ast Consideration

+$% a&rees to &ive ' the

oo! next wee! when Baes payent ne,t "ee$

(future/executory))


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%n a&reement is void if there is no considerations+- . s+(d)

Consideration

%&reement made on

account of naturallove and affection

Promise to compensate ':

for voluntary acty ' inthepastor

for past act of ' that % was

*ega**y o&nd to do

Promise to pay

statute arred det

S+-(a)

S+-(c)

S+-()


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1) Consideration must be lawful ss. !" and !#

!)In Malaysia, Consideration must move from thepromiseeor someone other than promisee topromisor or someoneother than promisor!

0% promises to pay ' 1234 if ' &ives his 5C6 to %

% promises to pay ' 1234 if C &ives his 5C6 to %

0% promises to pay ' 1234 if ' &ives his 5C6 to C

0% promises to pay ' 1234 if C &ives his 5C6 to 6

Conditions of Consideration(5 conditions)


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% person not a party to the contract cannot enforce it althou&h

he/she &ets a enefit" /"edd*e ' Atinson (11)

I promise to pay

yo&r son7 if he

marries mydau&hter

8f course, my son will

marry your dau&hter and

I accept the incentive off

7 that you are willin& tooffer him"

Father of the ride Father of /&room


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$) Consideration need not be adequate

%&homas v. &homas) widow paying rental of 1' permonth(

Conditions of Consideration

Stallion

worthRM10,000

sold for

RM10!

1ead Explanation +

section +- of

Contracts %ct #94


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") Consideration must be sufficient(

&here are ! situations where consideration may beconsidered as insufficient.


Performance

of existin&

pulic

oli&ation y

promisee

Performance

of existin&

contractual

duty ypromisee to

promisor


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Situation 1Situation 1

;


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Situation 2Situation 2

; performance of an e,isting contract&a* o*igation

o"ed to te proisor

(Stil! v 2yric!)

Captain of a ship had crew memers$ Ship had totravel from ?ondon to the 'altic$ 8n the way, + of

the crew aandoned ship$


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In summationIn summationBB..

Ipromise to pay you

$if you navi&ate ship

to 'altic

Ipromise to divide

wagesof the crewwho umped ship

If ship arrives in 'altic

Is there consideration for the

promise of the captain>

Is there consideration for the

promise of the captain>


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#) In Malaysia, apast act byofferee is a good consideration forsubsequent promisesubsequent promiseof offeror if..


' in the past promoted

%@s product upon %@s

requests+(d)

Situation#

' in the past found %@s

wallet and returned it

voluntarilys+-()

Situation +

' in the past loo!ed

after %@s childs+-()

Situation 3


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In other wordsIn other wordsBB

If ' had done something in the pastand0 6one upon %@s reDuest (situation #)

0 6one for % voluntarily (situation +)

0 6one somethin& % was compellale to do(situation 3)

%nd a promise is subsequentlymade y % tocompensate ' for the past act

%@s promise is enforceale under:0 Section +(d) (situation #)

0 Section +-() (situation + . 3)


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Ei&hth Element: Free Consent


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Consensus ad IdemConsensus ad Idem


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#$coercion

+$undue influence

3$fraud

$misrepresentation

$mista!e

Section #

Contracts %ct

#94


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Coercion

Section 15defines coercion@ as: the committin&, or threatenin& to commit any act

foridden y the Penal Code,

or the unlawful detainin& or threatenin& to detain, anyproperty,

to the preudice of any person whatever,

with the intention of causin& any person to enter into

an a&reement$G( Kesarmal v. Valiappa Chettiar)

Section #also provides if % &ives '

12 #44 owin& to coercion, ' mustreturn amount to him"""


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Barton ' Arstrong (195)

%rmstron& was the chairman of an %ustralian

company$

%rmstron& threatened to kill Barton(26) if

'arton did not surrender his interest in thecompany to him$

Is the a&reement surrenderin&his interest valid>


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contract

'oida*e

#$Can rescind . reinstate

to ori&inal position

+$Can affirm . claim

dama&es

Sections #9 ,- and --

of C%

Coercion

coercion

1escindmeans

to undo thecontract"


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Undue InfluenceUndue Influence

%ctual HndueInfluence

Presumed Hndue

Influence

Section #- Contracts %ct


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Undue Influence -actual undue influence

hat must %

Prove>

1.B in a position to

dominate influence

2.B dominated

influence upon

3$ % entered into

contract with '

$ Contract not in favor of %

contract is unconscionable!


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hat must '

Prove>

% entered into contract willin&ly upon proper

advise and not ecause of undue influence"

3nd&e 4nf*&ence


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Undue Influencepresumed undue influence

hat must %

Prove>

+$% entered into contract

with '

3$ Contract not in favor of

%/contract is

unconscionable!

#$ ' has act&a*6apparent

a&tority o'er% presumed

that ' has exercised undue

influence over '

Fiduciary relationship

with %%@s mental capacity is

affected


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Undue Influence- presumed undue influence.

hen does actual/apparent

authority arise>

#$hen ' has a&tority over %/ in fid&ciary r6sipwith %

+$hen % s mental capacity is affected y

a&e, illness etc$


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3nd&e 4nf*&ence

hat must 'Prove>

% entered into contract willin&ly upon

proper advise and not ecause ofundue influence"


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contract

Hndue influence

'oida*e

#$Can rescind .

reinstate to ori&inal

position

+$Can affirm .

claim dama&es

Section +4,- and --

of C%

3nd&e 4nf*&ence


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Ei&hth Element: Free Consent


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*raud + Misrepresentation

Section 17defines fraudso as to includea)any suggestion, as to a fact, of that which is not true by one whodoes not believe it to be true

b) or the active concealment of a fact by one having knowledge of

belief of the factc)or a promise made without any intention of performing it

d)or any other act fitted to deceive

e)or any such act or omission as the law specially declares to befraudulent-committed by a party to a contract

with intent to induce another to enter into the contract.%heng Chwee /ian v. 0ong &ak &hong)


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Section 18of the Contracts ct defines misrepresentationso asto include

a)the positive assertion, in a manner not warranted by theinformation of the person making it, of that which is not true,though he believes it to be true

b)or any breach of duty which, without an intent to deceive, gives anadvantage to the person committing it, or anyone claiming under him,by misleading another to his pre2udice, or to the pre2udice of anyoneclaiming under him

c)or causing, however innocently, a party to an agreement to make amistake as to the substance of the thing which is the sub2ect of theagreement.


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Fraudulent(s#J):representation with

respect to a fact !nowin& it is untrue

*e&li&ent(s#K):representation

with respect to a fact elievin&

it is true, ut unwarranted y

information

Innocent(s#K):representation with

respect to a fact,

elievin& it to e true

with reasonale &rounds

for elief


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Si*ence can Ao&nt to 7ra&d or 8isrepresentation in tese

Sit&ations$-+,p*anation to section 1 of Contracts Act

1$4f tere e,ists a fid&ciary

re*ationsip

et"een parties to tecontract

2$:en si*ence ao&nts to

speec

Situations of fraudulent silence


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contract

'oida*e

#$Can rescind.reinstate to ori&inal

position

+$Can affirm .

claim dama&es

Section #9,- and --

of C%


Fraud .

2isrepresentation

2ay loose this ri&ht


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:en does one *oose te rigt to rescind a 'oida*e

contract o"ing to section 1 and 1?-*oo at

+,ception and +,p*anation to section 19 of CA

8nly if"egligent

nd

#nnocentisrepresentationexists

8nly if %raudulent silenceexists

#$% could have

discovered the truth

with ordinary

dilli&ence

+$ If the fraud ormisrepresentation

did not cause %

to enter into a

contract


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hat if Fraudulent

isrepresentationexists>

% will not loose the ri&ht torescind even if % could have

discovered the truth with

ordinary dilli&ence

:en does one ;


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'ilateral mista!e

of a matter of fact

%s to a matter of

law

Hnilateralmista!e of a

matter of fact

Mistak

e

Section +#

Section ++ Section +3


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'ilateral 2ista!e as to

% 2atter of Fact

2utual mista!e

Common mista!e

Paul

HS%

Paul

China


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Common mista!e

8istae as to e,istence

of s&=ect atter of agreeent

2ista!e as to title of

land

2ista!e as to suect

matter of a&reement


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*inth Element: Formality


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*34M/I&I567section 18%!) ofContracts ct 19#8

#$Aire Purchase Contracts

&he :ire7;urchase ct,19


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1. &hen considerations and ob'ects of

agreement are unlawful(sections 2) *2+

illegal-

2. &hen there is no consideration for theagreement(section 2 there are /

e0ceptions-

3$ %&reement in restraint of marria&esection

+J(there is an exception)$ %&reement in restraint of tradesection +K

(there are 3 exceptions)


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#$ %&reement in restraint of le&al

proceedin&ssection +9 (there are 3

exceptions)

2. greement that is uncertain in terms(section /

3$ %&reements y way of wa&ersection

3#(there is one exception)


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contract

Section --

of C%

>oid

1$ Loss *ies "ere it

fa**s

+$Can see! return of

enefits if did not knowof illegality

3$ If aware of ille&ality

see! return of enefits

efore a&reementexecuted

Ille&ality present

Agreeent tat is /ainted "it 4**ega*ity and >oid

Documents

Law of Contract.std Part2 2014