Title: Business Law (LAW1013)
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BUSINESS LAW
## TOPIC 5:
## ELEMENTS OF CONTRACT
(PART 3)
- INTENTION TO CREATE LEGAL RELATION
- LEGAL CAPACITY
- CERTAINTY
PREPARED BY: ABIGAIL C. CHONG
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BLAW / LAW2013 REV 00
01/08/2017 CA 1950 is silent on the intention to create legal
relations as one of the requirements of valid contract .
However, case -law clearly shows the necessity of this
requirement .
Examples :
1. Where the agreements merely represent family
arrangements .
Phiong Khon v Chonh Chai Fah [1970 ] 2 MLJ 114
Choo Tiong Hin & Ors v Choo Hock Swee [1959 ] MLJ 67
ELEMENTS OF CONTRACT:
4. Intention to Create Legal Relations
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ELEMENTS OF CONTRACT:
4. Intention to Create Legal Relations
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Phiong Khon v Chonh Chai Fah [1970] 2 MLJ 114
Fact of case:
A Chinese woman upon the death of her husband, set up a
home with the appellant until her death .
The appellant alleged that the respondent had executed a
document which transferred the land to him .
Judgment:
The court held the terms of the document to be vague and
uncertain and that it must be seriously be doubted whether
there was any intention to create a legal relationship .
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ELEMENTS OF CONTRACT:
4. Intention to Create Legal Relations
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Choo Tiong Hin & Ors v Choo Hock Swee [1959] MLJ 67
The plaintiff and his wife who in the early part of their lives was
poor and had started a farm .
In due course, two daughters were born and five sons adopted .
Everyone helped in the farm which grew into a successful
business enterprise . Differences arose after the wife died, and the
father remarried, as a result of which, he left the family home .
Thereafter he brought an action claiming possession of the farm
from his sons and a declaration that he was the owner of the
property . The adopted sons claimed that they were entitled to an
equal share as they had helped in the creation of the family
wealth .
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ELEMENTS OF CONTRACT:
4. Intention to Create Legal Relations
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Choo Tiong Hin & Ors v Choo Hock Swee [1959] MLJ 67
Judgment:
Deciding in favour of the father, the court took the view
that there was no intention to create legal relations .
The agreements, thus pleaded, possess all the
characteristics of a private family arrangement .
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ELEMENTS OF CONTRACT:
4. Intention to Create Legal Relations
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2. Concessions were made in the course of business
negotiations .
Yap Eng Thong & Anor v Faber Union Ltd [1973] 1 MLJ 191
Facts:
P agreed to purchase a bungalow to be constructed on a piece of
land, and paid $500 as option money .
It was agreed that within 6 weeks, P should sign Sale & Purchase
Agreement (S&P) with D who owned the land, failing which D
were entitled to re -sell the property and forfeit the option money .
In this case, there was no S&P entered into and D called off the sale
to P. P then claimed damages for breach of contract .
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ELEMENTS OF CONTRACT:
4. Intention to Create Legal Relations
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2. Concessions were made in the course of
business negotiations .
Yap Eng Thong & Anor v Faber Union Ltd
[1973] 1 MLJ 191
Judgment :
There was no legally binding and enforceable contract .
The Court found that the P were not prepared to sign
agreement .
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ELEMENTS OF CONTRACT:
5. Certainty
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The terms of an agreement cannot be vague but must be
certain .
Any agreement which is uncertain or is not capable of
being made certain is void .
Example:
Ali agrees to sell to Mary a hundred boxes of toys without
specifying what kind of they are, such an agreement is void
on the grounds of uncertainty .
If Ali is a dealer in plastic toy soldiers only and he agrees to
sell a hundreds boxes of toys, the agreement will be valid .
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ELEMENTS OF CONTRACT:
5. Certainty
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## Karuppan Chetty v Suah Thian
## [1916] FM SLR 300
The requirement of certainty was not met when
the parties agreed upon the granting of a lease
at RM 35 per month for as long as he likes
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ELEMENTS OF CONTRACT:
6. Legal Capacity
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The parties entering into contract must have legal
capacity to do so .
It refers to the ability of parties to a contract to fully
understand its term and obligations .
Section 11 of the CA 1950
Who are competent to contract
Every person is competent to contract who is of the age of
majority according to the law to which he is subject, and
who is of sound mind , and is not disqualified from
contracting by any law to which he is subject .
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Age of majority
Age of majority Act 1971 18 years old .
Mohori Bibee v Dharmodas Ghose
[1903] 1 LR 30 Col. 539
Privy Council held that an infant cannot make any valid
contracts .
Tan Hee Juan v The Boon Keat [1934] FMSLR 96
The court held that the transfers of land executed by
infant were void .
General rule : contracts made by infants are void .
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6. Legal Capacity
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Exceptions to general rule :
1. Contracts of necessaries
2. Contracts of scholarship
3. Contracts of insurance
Section 69 of the CA
Claim for necessaries supplied to person incapable of
contracting, or on his account
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 to his condition in life, the
person who has furnished such supplies is entitled to be
reimbursed from the property of such incapable person .
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Section 69 of the CA 1950
A supplied B with necessaries
suited to his condition in life
# AB
A is entitled to be reimbursed from
Bs property
Infant incapable of entering into
contract supplied by A, a
wheelchair
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6. Legal Capacity
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Illustrations
A supplies B, a mentally disordered person, with
necessaries suitable to his condition in life . A is entitled to
be reimbursed from Bs property .
A supplies the wife and children of B, a mentally
disordered person, with necessaries suitable to their
condition in life . A is entitled to be reimbursed from Bs
property .
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6. Legal Capacity
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Necessaries
Are things which are essential to the existence and
reasonable comfort of the infant .
Ex : food, clothing, shelter .
Ordinary clothes also will not be considered to be
necessaries if the infant already possess adequate
clothing .
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6. Legal Capacity
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Scarborough v Sturzaker (1905) 1 TAS LR 117
Facts:
Sturzaker , a minor, periodically rode his bike to work for a
distance of about 15 km . He bought a new bike and traded
in his old one as a part payment before the delivery of the
new one . He then attempted to avoid the contract .
Judgment:
The bike was class of goods that could be classified as a
necessary . In this case, it was in fact a necessary .
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ELEMENTS OF CONTRACT:
6. Legal Capacity
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Scholarship
Contracts (Amendment) Act 1976:
A scholarship agreement entered into by an infant is valid
when the scholarship is granted by the Federal
Government, statutory authority, or an educational
institution .
Insurance
Insurance Act 1963:
An infant over age 10 may enter into contract of insurance .
If he is below age of 16 , he can only do so with the written
consent of his parents/guardian .
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REFERENCES
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> 1.
Lee Mei Pheng , Ivan Jeron Detta (2022), Business Law, 3rd Edition, Oxford
University Press.
> 2.
Dr Loganathan Krishnan, Parimaladevi Rajoo , Anne Chrishanthani Vergis
(2022), Principles of Business and Corporate Law, Malaysia, 4th Edition, CCH
Malaysia.
> 3.
Contracts Act 1950 (Act 136)
> 4.
Federal Constitution
> 5.
Civil Law Act 1965 (Act 67)
> 6.
Subordinate Courts Act 1948 (Act 92), Subordinate Courts (Amendment) Act
2010
> 7.
Courts of Judicature Act 1964 (Act 91)