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Section 14 of Contracts Act 1950

When someone approaches you, for example a seller, and asks you to sign on a paper, it is
important to go through the contents of agreement because the agreement that you are about
to sign is a contract. Malaysia is known to be bond with law involving all businesses either in
small or huge portion which is called as Contracts Law. This type of law is made to protect
businesses from any threats. This is due to the fact that when people venture in any business,
they are exposed to hindrances internally or externally. Contracts Law 1950 includes two or
three or more parties under a condition. It functions as a guideline or reference in order to
prevent any cheat or fraud to happen when two or more parties making a deal. It is generally
considered that in a commercial transaction, parties that involve in the contract must have the
intention to create a legally binding contract. Meaning to say, if you have signed a contract for
business-related activities, then you have the right to sue the other party if that party does not
fulfil the elements provided in the contract, and same goes to the other party towards you.
Contracts guarantee that your benefits are secured by law and that both sides will fulfil their
obligations as promised. If a party breaks the contract, there will be certain solutions available
to the parties which in law term is called remedies. Possibly, the best way is write down a
contract or agreement. If the parties disagree on the terms of the contract or they are unclear,
it will be up to a court to decide what those terms meant. The court will then have to look at
how the services, promises, and exchanges were carried out in order to identify the parties'
intentions. In this writeup, contracts and elements of Contracts Law will be elaborated
thoroughly in order to draw recommendations and conclusion.

A contract is able to be imposed when the people involved in the agreement agree to certain
things, guarantee the promise in monetary form or something valuable. Both parties should be
aware physically and mentally with the intention to conduct their promise and what they agree
to do is under the law. Most commonly, a contract is written and signed by the parties.
A contract is a written or expressed agreement between two parties to provide a product or
service. There are basically basic elements of a contract that make it a legal and binding
document:

(i) Offer - An offer is a manifestation of readiness to do somewhat which, if followed by the


unconditional acceptance of another person , results in an agreement. For example, if a person
tell you that he or she is going to trade 2 house lots for RM20000, this means that the person
is making offering you a deal.
A deal or an offer is considered valid for a period of time before the offer or the person who
creates the deal can nullify or void it if there is not time specified. The person who makes the
offer should first state the deadline for the offer acceptance to evade any disputes. One
important thing is that to remind the person that silence is not acceptable as an acceptance
form. For example, “If I do not get any news regarding the decision in another 5 days, I will
then assume that you have already agreed with my offer and will make payment for the said
product.”

(ii) Acceptance – For this particular element, contract does not come into account unless or
until an offer or deal is agreed upon by the person the offer is made. Normally, acceptance is
made through verbal or in written form, but if the deal has already stated that the acceptance
and performance of contractual duties are to be done concurrently, then acceptance can be
made by conduct. For instance, when the contributer receives your payment through online
banking and has been notified, that contributer may instantly deliver the said product to you
without any verbal or writing form. As recommendation, both parties should create and scan
through a clear, specified contract before accepting it.

(iii) Consideration – Based on contract law, consideration is defined as a prejudice to the


person who made the promise. The most common instances of consideration include money,
goods and services. Take note that consideration does not have to be adequate, in the sense
that if the seller or person who provides the service is binded to sell a product or service at a
price that is extremely cheap, then the person cannot eventually attend the court to claim the
shortfall. The lack of complementary exchange is due to a promise of gift is not enforceable in
law.

(iv) Intention – in commercial business, it is presumed that contracting parties must have the
purpose to produce a legally binding contract. For example, you have the right to sue the other
party he or she does not abide the said terms or conditions if you have agreed upon a contract
for business-related activities and vice versa. This belief can only be void or rejected if the
parties have expressively declare that making legally binding contract is not their intention.

(v) Capacity – There are 2 types of people who do not have the capacity to enter into dealings
or contracts which are the minors or person under the age of 18 and lunatic or persons who
are mentally disordered on intoxicated. It is considered voidable if contracts are made by
these groups of people in which lack in legal capacity. There is an exception given to this rule
which is when the parties enter the deal for necessaries for example clothes or food.

A contract can be affected or damaged by few factors that occur between parties that are
involved. There are 3 main factors that contribute to the damage.

A falsification is an incorrect declaration of fact or law which influences the other party to
agree with the contact. Specified statements should be said before a person enters into an
agreement. Hence, the necessity of an action for misrepresentation is it must be against the
law of statement or fact and it must be influenced to the other side to agree with the contract
and it must be in incorrect statement. As long as the opinion or intention is real which held at
the time, statements of thoughts are not considered as misrepresentation. If the statement has
been made in to a half truth, silence will not be considered as falsification. It concealed a
relevant change of circumstances. There are available remedies which depend on the nature of
misrepresentation. Falsification may be fake, slack under the Misrepresentation Act 1967. A
deceitful falsification is one that is made with the information of the falseness or with
irresponsible ignore as to its truth (Shavell, 2003). The remedies are revocation of the contract
where this is available and/or damages as for the offence of deceitfulness. All damages rolling
from the falsification can be recovered without any constraint of detachment. A slack
falsification at common law ascends where there is a exceptional connection between the
people involve giving augmentation to a duty of care.

An innocent misrepresentation arises where the person represents can verify that he had
rational reasons for trusting that the statement was thought to be true and the remedies are
revocation if available and/or damages in lieu of recession at the courts discretion. Obligation
for misrepresentation can be excepted from a contract as long as it fulfills the trial of
rationality (Weitzenböck, 2012).

Apart from that, Mistakes can be divided in to those errors which abolish the contract
(common mistake) and those which contradict the agreement (mutual mistake). At common
law, a common mistake will invalidate the agreement where the error is to the existence of the
subject matter, a party purchase assets which he already owns or if there has been a error as to
the quality which reduces the agreement impossible to achieve or if it is reduced completely
different.
Mutual mistake where the parties are at across purposes but neither is ware of this prevents
the contract from ascending as there is no agreement ad idem. One-sided mistake where one
party is aware of the others mistake will render a contract void, if it relates to the terms of the
contract. Individual error as to identity will reduce a contract void if the identity was of
essential importance to the parties and the other party was alert of the error and the
importance of it.

In relation to agreements made in person the courts are not easily persuade that a mistake as to
identity should render the contract void as parties are likely to make rational enquiries as to
identity. Justice no longer delivered the remedy of revocation for mistakes which are not
effective at common law to reduce the contract void, but any interfere via rejection of a grant
of detailed performance or alteration (Singh, 2015). A person who wrongly signs a contract
may beg non-est factum, and have the contract set aside if he verifies that there was a drastic
modification in what was contracted and what he thought he was signing and he was
unconcerned in signing the agreement.

Last but not least, public policy commands that illegitimate agreements are unenforceable and
the courts should be cautious not to impose any agreement with an unlawful objective. So,
agreements such as those tending to fraud in public life, trading with an enemy in war time,
prejudicial to the administration of justice, promoting sexual immorality will all be illegal and
unenforceable. But, the choice of the term unlawfulness is not always clear. Agreements to
commit a felonious act are always unenforceable. Although a contract to oblige a civil
incorrect will only be unenforceable where the commission of the tort or breach of agreement
is cautious or if only side is alert of the wrong by that party.

Limitation of trade these is usually marked themselves as employees constraint, seller of


business constraint and sole agreement and other agreements for exceptionality are perhaps
the most important area in practice contracts (Motto & Schuck, 2012). Primary unenforceable
are stated and if these people shown to protect a legitimate interest and conditions are rational
in accordance scope, length and geographical area, then it may be enforced.

Many commercial agreements contain express provisions for remedies. For example, in a
contract for the sale of goods, the buyer may be eligible to want the supplier to make good or
replace faulty items. There may be a belief that all the terms which are to manage their
pledged relationship have been comprised by the sides in black and white form in the
agreement itself. In doing so they intentional to relocate any rights and remedies provided by
law for example there is the buyer’s right to cancel the contract in case any fundamental
breach which are not stated in the agreement. The objective of accumulative remedies clause
is to guarantee that the parties' rights specifically delivered for in the agreement are in
addition to their rights provided by the general law. Any particular remedy that a party
visualizes it may need should be precisely well-kept in the agreement.

Damages for loss in a breach of agreement are available as of right, unlike the equitable
remedies of specific performance. An innocent side may claim reimbursements from the party
in breach in respect of all breaches of contract. The damages may be in benominal or
substantial form Nominal damages are granted where the innocent side has underwent no loss
as a result of the other's breach and substantial damages are granted in monetary
compensation form for loss suffered as a effect of the other party's breach. For an innocent
side to gain substantial damages the person must display that he has suffered loss as a result of
the breach (remoteness) and the total of his loss. It is up to the party in breach to dispute that
the innocent party has unsuccessful to reduce his loss.

If a party in breach has made advanced disbursements under the agreement his capability to
recover that money depends upon whether that disbursement include a deposit in the sense
that a guarantee by him or her of due performance or merely a payment of the entire or
portion of the price in advance. It will be an exceptional against any damaged granted to the
innocent side if the basic rule cannot be recovered. If they do not want to increase their
amount including penalties, they should take extra care. But, it is likely to cover a deposit if
the party has a lien over it. If the advance payment is not a deposit, the party in breach may
recuperate it, subject to any entitlement for damages by the innocent side with the accordance
to the breach. If there is a total of failure of consideration, an innocent side may then recover
an advance payment. This is generally known as aquasi-contractual remedy. If there is only a
part failure of deliberation, this remedy is unavailable.

If an innocent party could have prevented himself by taking rational cautious, he cannot
recover for any loses. This is sometimes defined as the obligation to diminish (Jankovec,
1997). This cannot be related to actions for the price of good that will be delivered. This type
of actions is considered an action of a decided sum and not damages. The innocent side
should not exaggerate his or her loss even though there is no action to diminish before actual
breach happens. This responsibility is down to the offender to show the appellant has failed to
diminish his or her defeat.

This type of law has been practiced since many decades ago, with as simple as barter system
existed, until now, more complicated business-related activities. As far as Contracts Law is
concerned, there should be differences between the Malaysian and English version of
Contracts Law. Since our country is an Islamic-based country, the recommendation that can
be given is that Contracts Law should be reviewed and to be receptive to recommendations to
make Contracts Law align to the development of Islamic finance and positioning Malaysian
law as the law of reference. Most of the laws in this country have been amended to incline
with the Islamic based conditions.

This way, our country will then be a reference for our Islamic countries in which although the
law is already there for many years, but we still have the initiative to mend the law in
accordance to the current Islamic consent. This law should be looked at the elements whether
it is in contrast to Syariah principles or in contrary. Of course, in Islam, it does not have to be
the same as it was during the Arabic days. Everything should be accordance to the current
things today. The default law might have to be modified to suit the present circumstances.

Thus, doing business either in small or big portion is not only hold with trust. People can
change as well as the circumstances. It is best to hand down a signature on a written
agreement or black and white form, making negotiation because these steps are practical and
would not cost a big amount of money. As the time goes, the contracts should be looked back
or reevaluated in order for the parties to make sure that it still aligns with the objectives of the
parties. It has been a necessity for a contract to involve even in small business transactions
which include dealing with supplier, employees, land or office leases as well as customers.
(2613 words)
References

Weitzenböck, E. M. (2012). English Law of Contract: Terms of contract. Norwegian


Research Center for Computers & Law. Retrieved on 19th July 2018 from
https://www.uio.no/studier/emner/jus/jus/JUS5260/v12/undervisningsmateriale/Terms.
pdf

Motto, M. & Schuck, R. (2012). Australian Contract Law. Consult Australia. Retrieved on
19th July 2018 from https://www.consultaustralia.com.au/docs/default-
source/contracts-
liability/Consult_Australia_Response_to_AGD_Discussion_Paper_on_Contract_Law_
-_July_2012.pdf?sfvrsn=0

Shavell, S. (2003). Economic Analysis of Contracts Law. National Bureau of Economic


Research. Retrieved on 19th July 2018 from http://www.nber.org/papers/w9696.pdf

Jankovec, I. (1997). The Law of Contracts and Torts. Retrieved on 19th July 2018 from
https://www.mpravde.gov.rs/files/The%20Law%20of%20Contract%20and%20Torts_
180411.pdf

Singh, B. (2015). Contracts need not be in Writing. The Star. Retrieved on 19th July 2018
from https://www.thestar.com.my/opinion/columnists/law-for-
everyone/2015/11/05/contracts-need-not-be-in-writing-a-successful-claim-can-still-be-
made-if-there-is-sufficient-evidenc/

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