Business Law (LAW1013) - Elements of Contract (Part 3)
Key Topics
Intention to Create Legal Relations
Legal Capacity
Certainty
Intention to Create Legal Relations
Not explicitly covered by the CA 1950, but supported by case law.
Family Arrangements:
Phiong Khon v Chonh Chai Fah (1970): Agreement terms were vague; no intention to create legal relations.
Choo Tiong Hin & Ors v Choo Hock Swee (1959): Agreements viewed as private family arrangements; no legal intent.
Business Negotiations:
Yap Eng Thong & Anor v Faber Union Ltd (1973): No legally binding contract; P was not prepared to sign S&P agreement.
Certainty
Agreements must have definite terms to be valid.
Example:
Sale of unspecified toys is void; sale is valid if the seller deals only in specific types of toys.
Case: Karuppan Chetty v Suah Thian (1916): Lease terms not certain.
Legal Capacity
Parties must have the capacity to understand contract terms.
Section 11 of CA 1950 defines competency (age of majority, sound mind, not disqualified).
Age of Majority:
Age of Majority Act 1971 sets age at 18.
Mohori Bibee v Dharmodas Ghose (1903): Infants cannot make valid contracts.
Tan Hee Juan v The Boon Keat (1934): Land transfers by infant are void.
Exceptions to General Rule:
Contracts for necessaries.
Contracts of scholarship.
Contracts of insurance.
Necessaries:
Essential for the infant's existence and comfort (e.g., food, clothing).
Scarborough v Sturzaker (1905): Bicycle deemed necessary.
Scholarship Contracts:
Valid if granted by government, statutory authority, or educational institution.
Insurance Contracts:
Over age 10 can contract; below 16 requires parental/guardian consent.
References
Lee Mei Pheng, Ivan Jeron Detta (2022), Business Law, 3rd Edition, Oxford University Press.
Dr. Loganathan Krishnan, Parimaladevi Rajoo, Anne Chrishanthani Vergis (2022), Principles of Business and Corporate Law, Malaysia, 4th Edition, CCH Malaysia.