FREE CONSENT

Section 10 (1) of the Contracts Act

All agreements are contracts if it is made by free consent of the

parties competent to contract, for a lawful consideration and
with lawful object, and are not hereby expressly declared to be
void.

Consent is when two or more persons are agreeable upon the

same thing in the same sense.
( Section 13 of the Contracts Act 1950)

Free consent means the consent is not caused by coercion,

undue influence, fraud, misrepresentation or mistake.
(Section 14 of the Contracts Act 1950 )

COERCION

What is Coercion?
(Section 15 of the Contracts Act 1950)

Coercion is:
- Committing or threatening to commit any act forbidden by
Penal Code for example A threatens to kill B if B does not
want to enter into a contract with him.
- Unlawful detaining or threatening to detain any property for
example A detained B's car until he is agreeable to enter into
a contract with him..

The person committed the act with the intention of causing any
person to enter into a contract.

What is the effect of Coercion in a contract?

The effect of the contract is voidable - Section 19 of
the Contracts Act 1950

KESARMAL S/O LETCHMAN DAS V VALIAPPA CHETTIAR

A transfer made under the orders of the Sultan, issued in the
ominous presence of 2 Japanese officers during the Japanese
occupation in Malaysia was invalid.
This is because the consent given was not free and therefore the
transfer becomes voidable at the will of the party whose consent
was so caused.
CHIN NAM BEE DEVELOPMENT SDN BHD VTAI KIM CHOO & 4 ORS
Respondents purchased house to be constructed by the appellant. Each of
the Respondents had signed a contract to purchase a house at $ 29,500.

However, the Respondents later were forced to pay an additional $4000

under a threat by the Appelant to cancel the respondents booking for the
houses.
It was held that the payment was not voluntary but had been made under
threat. Thus , there was coercion in the agreement of paying the
additional $4000 to the Appellant.
UNDUE INFLUENCE

What is undue influence?

This happens where one of the parties to a contract, entered into

such a contract by the influence of the other party who was able
to influence him.

Refer to Section 16(1) of The Contracts Act 1950

A contract is said to be induced by undue influence in the

following conditions:
-

There is a relationship between two parties

Where one party is in a position to dominate the will of the
other
The dominant person uses that position to obtain an unfair
advantage over the other.

For example A is the lecturer and B is the student under the

supervision of that A. A insists B to buy a book from him and
indirectly told B if he doesn't buy the book, he will fail his
subject. In addition to that A charges a higher price then the
actual price in the market. B has no choice other then to agree
buying the book from A.

RAGHUNATH PRASAD V SARJU PRASAD

It was held that before one can plea an undue influence he must prove:
1. the relationship must be in such a way that the person who induced
him to enter into the contract is in a position to dominate his will;
2. there must be elements of undue influence that is he had obtained
unfair advantage from the contract;
3. it is up to the dominant person to prove that he is not exercising
undue influence on the party when he entered into the contract.
DATUK JAGINDER SINGH v TARA RAJARATNAM
The Respondent was the owner of the land, claimed that she was induced
by the Appellant to transfer her land to the Appellant.
There was fraud and undue influence on the Appelant to transfer her land
to the Appelant.

It was held that the Appellant and the Respondent were in solicitor client
relationship. The transaction was unconscionable, and therefore the
burden was on the Appelant to rebut the presumption on undue influence .
Since the Appelant had not discharged the burden , the contract of
transferring the Respondents landto the Appelant was set aside.

What is the effect of Undue Influence in a contract ?

Voidable Refer to Section 20 of the Contracts Act 1950

FRAUD

What is Fraud ?
Refer to Section 17 of the Contracts act 1950

It means that where one of the parties to the contract does

an act with the intention to deceive the other party to induce
him to enter into the contract.

Fraud includes the following acts committed by a party to a

contract with intent to deceive another party or to induce him to
enter into the contract :-

For example :
the suggestion, as to fact, which is not true and he himself knows
that it is not true. For example A knows the fact that the earring is
not made of gold but he told B that it is made of gold and sold it to
B according to the price of gold earring;
the active concealment of certain facts. Section 17 further explained
that mere silence likely to affect the willingness of a person to enter
into a contract is not fraud, unless the circumstances of case are
such that there is a duty of a person keeping silence to speak but he
does not speak (his silence amount to speech) then it is fraud.
For example if B says to A "If you do not deny it, I shall
assume that the horse is sound;" A says nothing. Here, A's
silence amount to speech. That means it an active concealment
of certain facts on part of A;

a promise made without any intention of performing it. For example

A sold to B a football ticket cheaper then the ticket sold at the
stadium and told B that it is VIP seat, when he knows that is a black
market ticket and no place is reserved for B ;
any act fitted to deceive. For example A impersonated B and
sold B's car to C. Impersonation is a crime under the criminal
law.
What are the elements of Fraud ?
1. There must be false representation / statement
2. The
representee must have relied on the representation
otherwise the misrepresentation is irrelevant.

What is the effect of fraud in a contract ? Voidable

MISREPRESENTATION

What is a Misrepresentation ?
o

It is a false statement made by the representor, and

which such false representation induces the other party
to enter into the contract. However, such false
representation was not made with the intention to
deceive.

Before any person wants to plea misrepresentation the following must be

fulfilled :
I . there must be a false representation. ;
2. the representation must be representation of facts;
3. the statements was addressed to the party who acted upon it;
4. the representation must induced contract;
5. duty of misled party to exercise ordinary diligence.
What is the effect of Misrepresentation in a contract ?
Voidable Refer Section 19(1) of the Contracts Act 1950
However , if the misled party chooses to affirm the contrac ,he is entitled
for damages.
Refer Section 19(2) of the Contracts Act 1950
MISTAKE
Elements of a Mistake ?
1. The mistake must be made by both parties (mutual mistake )
2. the mistake is relating to a matter of fact essential to the
agreement
What is a mistake of Fact Essential to the Agreement ?
Mistake of fact may occurr in the following circumstances :1. Mistake as to the existence of the subject matter to the contract.
(Refer to illustration a,b & c to Section 21
2. Mistake as to the identity of the subject matter.
3. Mistake as to the possibility of performing the contract
What is the effect of a contract made under mistake ?
According to Section 21 of the Contracts Act 1950 if there is a
mutual mistake in the contract , then the contract is void.

Mistake by one person however will not render the contract

voidable. The contract is still valid. This is stipulated in Section
23 of the Contracts Act 1950.

TYPES OF CONTRACT

Contract can be classified into:

1.
2.
3.

Valid contract;
Void contract; and
Voidable contract.

1. VALID CONTRACT
When all elements of contract are fulfilled the parties can enforce the
contract in the court of law in the event of breach.
2. VOID CONTRACT
Court will not give its assistance for the enforcement of a void contract.
What is void contract? The contract is void when the consideration or
object of the agreement is unlawful or illegal.
Section 24 of the Contracts Act 1950
The circumstances where consideration or object of the agreement is
unlawful are that shall render the contract as void:
a.
it is forbidden by law;
b.
if permitted, it would defeat the law;
C.
it is fraudulent;
d.
involves or implies injury to the person or property of
another; or
e.
it is immoral or against the public policy.
Effects of Void Contract
The court will not enforce a void contract based on the maxim of ex turpi
non oritur action that is the court will not enforce an illegal contract .
Section 24 of the Act provides that an agreement which is unlawful is void
and Section 2 (g) provides that such an agreement is not enforceable by
law.
However , under Section 66 of the Contracts Act provides that when an
agreement is discovered to be void or when a contract becomes void , the
person who receives any advantage under such agreement any person
who has received any advantage under the contract is bound to restore or
make compensation for it to the person from the person whom he
received it.
In other words, Section 66 provides for the right of restitution.

3. VOIDABLE CONTRACT
Section 2(i) of the Contracts Act
Voidable is defined as an agreement which is enforceable by law at the
option of one party but not at the option of the other.
Therefore, one of the parties given a choice either to continue the contract
or to discontinue with the contract.
The agreement is valid and binding , until the party who is entitled to
rescind the contract chooses to rescind it.
hat party choose to rescind , then the contract is no longer valid and
binding upon the parties.

DISCHARGE OF CONTRACT

Once a contract had been formed both parties will be obliged to uphold
what they have promised to do under the contract. The contract shall
come to an end, which is known as discharge of contract. Upon
discharged of contract both parties will be released from further obligation
arising from the contract.
Thus, when a contract is discharged , it is actually terminated. Once a
contract is discharged the contracting parties are free from further
obligations under the contract.
There are four ways to discharge a contract:
1. by performance of the contract ;
2. by consent or mutual agreement between the parties to the
contract;
3. by impossibility of performance / frustration;
4. by breach of contract by one of the parties.
DISCHARGE BY PERFORMANCE
When the parties have performed their contracts, by carrying out their
promises under the contract , there is a complete discharge of the
contract.
If only one of the parties has performed his part under the contract, he
alone will be discharged from the contract. The other party is still bound to
the contract until he performs his promise under the contract.
a ) Time For Performance
What happens to the contract if it is not performed according to the time
and place that have been agreed ? The contract is voidable at the option
of the promisee.

If the time of the performance of the contract is essential/ important , any

delay by one party, however slight, will entitled the other party to free
himself from any obligation of the contract ie to make the contract
voidable - refer to section 56 (1) of the Contracts Act 1950
However , if the time is not essential, the contract does not become
voidable but the promisee is entitled to compensation for any loss
suffered refer to section 56 (2 ) of the Contracts Act 1950
b) Place For Performance
If there is a place being specified for the performance of the contract, the
parties must perform the contract at the place specified
If there is no place specified , the promisor is under a duty to ask the
promisee to specify the place of the performance of the contract.
Refer Section 50 of the Contracts Act 1950
c) Performance By Whom ?
If it is the intention of the parties that the contract should be performed by
the promisor himself then it must be performed by him personally. Refer
Section 41 of the Contracts Act 1950 (illustration b)
However , in some situations , a promisor may employ a competent
person to perform the contract , but the promisor will be personally liable
under the contract Refer Section 41 of the Contracts Act 1950
(illustration a)
d) Performance By Third party
If the promisee accepts performance from a third party, he cannot enforce
it anymore against the promisor.
Refer Section 42 of the Contracts Act 1950
DISCHARGE BY AGREEMENT
Both parties can terminate a contract by mutual agreement if both of
them consented that they need not perform the contract. Agreement not
to go on with the contract can be express or implied. This agreement can
be made during the contract or after the contract has been made. For
example the parties can make an agreement that if certain events occur
the contract between them will be discharged.
Section 63 of the Contracts Act
If the parties to a contract agree to substitute a new contract for it, or to
rescind or alter it, the original contract need not be performed.
However , the consent must be secured from all parties. If any of the
parties does not agree with the substitution / alteration / rescission of the

original contract, then the contract is not discharged

illustration c of Section 63 of the Contracts Act 1950

Refer to

DISCHARGE BY FRUSTRATION
A contract is said to be frustrated, a special case to discharge a contract,
after the formation it is impossible or unlawful to perform the contract.
Thus , it may happen in 2 situations :
1.

The contract is in itself impossible to be performed .

The contract is discharged if either one or both parties aware of
the impossibility. (Section 57 illustration a )
If only one party knew of the impossibility, he must make
compensation to the other party.(Section 57 (3) illustration c )

2.

The contract becomes impossible to be performed after it has

been made.
(Section 57 (2) of the Contracts Act 1950 )
It happens because of supervening impossibility which caused
the contract to become impossible to be performed or radically
difficult.

TAYLOR V CALDWELL
1.
(Destruction of the subject matter of the contract )
KRELL V HENRY
2.
(supervening events defeat the whole purpose of the contract )
LEE KIN V CHAN SUAN ENG
3.
(supervening illegality discharges a contract There is a change in
law which makes the contract becomes unlawful if it is performed )
4.

It may also be frustrated by death or personal incapacity of the

parties in a contract.
(Refer to Section 57 (illustration e)

Effect :
When a contract is discharge by frustration , the contract is automatically
void.
(Refer to Section 66 of the Contracts Act 1950 )
When an agreement or contract is discovered to be void , any person
who has received any advantage under the agreement or contract is
bound to restore it , or to make compensation to it, to the person from
whom he received it.
DISCHARGE BY BREACH
Section 40 of the Contracts Act

When a party to a contract has refused to perform , or disabled himself

from performing, his promise in its entirely , the promisee may put an end
to the contract unless he has signified , by words or conduct , his
acquiescence in its continuance.
The party who is not in breach of contract has 2 options;
1.
2.

to continue with the contract and claim damages

repudiate the contract