TOPIC 4

CAPACITY
(BERKEUPAYAAN)
Prepared By:
Norazla Abdul Wahab
General Rule
section 10 of Contract Act 1950:

in order to enter into legally binding
contract, parties to the contract must
have the full capacity to do so.
He must be competent (layak) or capable
person.

General Rule

If lack capacity

the contracts may be invalid or void.
Section 11: of CA 1950
Person Competent

Section 2 of Age of Majority Act 1971 =
18 years and above
Sound Mind
Is not disqualified (qualified) from
contracting


Section 11: of CA 1950
Person incompetent

Minor
(below age of 18)

An unsound mind
(mentally disordered or incapacitated
through sickness, alcohol or other drugs)

Cont
Agreements entered into by minor :

are generally void and
a minor cannot be sued under such void
contracts.
Cont
If there is a contract between minor &
adult:

An adult cannot enforce the contract
cannot recover property that he had
transferred to the minor.


Mohori Bibee v Dharmodas
Ghose (1903) ILR 30 Cal 539
The A lent the infant (R) the sum of 20,000
rupees at 12% interest and secured the
loan by way of mortgage executed by the
infant in favour of the A.
Later the mother of the children claim that
the mortgage was void for lack of capacity.
Mohori Bibee v Dharmodas
Ghose
The court held that:
the contract was void and so as to the
mortgage and the A cannot recover the
money from the infant.
Cont
If there is a contract between minor &
adult:

A minor who had transferred his property
on receipt of the purchase money, may
get the contract declared void and at the
same time, have the advantage of not
returning the moneys received.


Tan Hee Juan v The Boon
Keat [1934] MLJ 96
The P (an infant) executed transfer of land
in favour of the D.
The transfer were witnessed and
subsequently registered.
The P later, by his representatives,
applied to the court for an order setting
aside the transfer.

Tan Hee Juan v The Boon
Keat
The court rule that :
the transactions were void and ordered
restoration of the land to the minor and
have the advantage of not returning the
moneys received
Cont
If there is a contract between minor &
adult:

A minor who paid the money to an adult,
can recover the money upon returning
the property transferred to him.


Leha Jusoh v Awang Johari
[1978] 1 MLJ 202
The R (minor) had entered into an
agreement to purchase of land belonging
to an estate of which the A was the
administratrix.
Leha Jusoh v Awang Johari
The court ordered:
an adult to refund the purchase price to an
infant upon infant vacating the land
occupied by him.
Misrepresentation of Age
Where a minor has misrepresented his
age and thereby induced a person to
contract with him.



Effects
Malaysian Position

The person cannot sue the minor on
the contract.
The minor can plea minority to avoid
the contract.
Effects
Indian and England Position

The minor has to return to the adult property
which are still in his possession transferred to
him. (Restitution).
If the property is lost the remedy of restitution
is not available.
Mohamed Syedol Ariffin v
Yeoh Ooi Gark [1916] 2 AC
575

R, the moneylender sued the A for a sum of
RM29,000 that he lent.
The As defence was that at the time of the
loan he was still an infant. But he told the R
that he was 21 years old.
The court held that R cannot claim from the A.
Exceptions (Pengecualian)
Despite of the above rule, there are several
exceptions to section 11 where minor
can enter into valid contract & liable on
that contracts .
1) Contracts for necessaries
2) Contract of scholarship
3) Insurance contract
4) Marriage contract
5) Employment Contract
1. Contracts for Necessaries
Minor is liable on contracts for necessaries.
What is necessaries???
(Whether the minor is in need of such goods or
services or the goods suitable to the condition in
life of such infants and to his actual requirements
at the date of the sale.)
Such as food, shelter, clothing, medical
services and even education. However
luxurious articles are excluded.


Section 69 of Contracts Act 1950

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.

The supplier of necessaries may claim a price
from the minor only if he has the property to
do so.

Nash v Inman [1908] 2 KB 1,
p. 8
a tailor sued a minor to whom he had
supplied clothes including fancy
waistcoats which worth 22 pound).

the court held that :
although the clothes were suitable
according to the minors life, they were not
necessary as he already had sufficient
clothing.
2. Promise of Marriage
Contracts promise to marry entered
into by minor are valid.
A minor can sue or be sued in case of
breach of promise to marry.

2. Promise of Marriage
Section 4(a) of the Age of Majority Act 1971
provides that :

nothing in the Act shall effect the capacity of any
person to act in the following matters, namely
marriage, divorce, dower and adoption.
Therefore a minor may sue or be sued for a
breach of promise to marry.

2. Promise of Marriage
For Muslims in Malaysia, the various Islamic
family law enactments provide for remedies for
breach of promise to marry.

Rajeswary & Anor v
Balakrishnan & Ors (1958) 3
MC 178
D is a Hindu. He broke a promise to marry
P, also a Hindu.
D broke contract of marriage which is
made under normal practice of their
customs.
When P claim damages for breach of
contract, court granted the claims
although P is a minor.
3. Scholarship
A scholarship agreement entered into by
an infant is valid e.g. loan, sponsorship
for the purpose of learning by government
or educational institution.

No scholarship agreement shall be
invalidated on the ground that the scholar
entering into such agreement is below
than 18 years old
Government of Malaysia v
Gucharan Singh [ 1971] 1 MLJ
211
Gurbachan received a scholarship from
government to attend trainings, as a teacher
and for that he is to serve with government for
5 years after graduated.
Unfortunately, Gurbachan left before full term.
When sued, he claims that the contract is void.
He was lack of capacity during the time.
The court held that education is a necessities
to a minor. Thus, Gurbachan is in breach of
contract.
4. Insurance Contract
Under Insurance Act 1963, an infant over the
age of ten may enter into a contract of
insurance. However, if he or she is below
sixteen, the infant can only do so with the
written consent of his parents or guardian.

It is because it is in a minor best interest to
insure himself or his property.
5. Contract of employment
(Apprenticeship)
Section 13 of Children and Young Person
(Employment) Act 1966.
Any person below the age of 16 shall be
competent to enter into a contract of
service and may sue or defend an action
against him.

However, no damages can be recovered
from him for breach.
2) Sound Mind
Besides being the age of majority, a person is
competent to contract if he is mentally sound.
Section 12(1) of Contracts Act 1950
Section 12(2) of Contracts Act 1950
Section 12(3) of Contracts Act 1950.
See Illustrations of Section 12 of CA
2) Sound Mind
What is a sound mind for the purposes of
contracting
S. 12. (1) A person is said to be of sound mind for the
purpose of making a contract if, at the time when he
makes it, he is capable of understanding it and of
forming a rational judgment as to its effect upon his
interests.
(2) A person who is usually of unsound mind, but
occasionally of sound mind, may make a contract when
he is of sound mind.
(3) A person who is usually of sound mind, but
occasionally of unsound mind, may not make a contract
when he is of unsound mind
2) Sound Mind
See Illustrations of Section 12 of CA

(a) A patient in a mental hospital, who is at
intervals of sound mind, may contract during
those intervals.
(b) A sane man, who is delirious from fever, or
who is so drunk that he cannot understand the
terms of a contract, or form a rational judgment
as to its effect on his interests, cannot contract
whilst such delirium or drunkenness lasts.
Sim Kon Sang Peters v Datin
Shim Tok Keng
The plaintiff (administrator of the estate of the
deceased) claimed that the deceased when
she was alive, transferred to the defendant
certain share of her land when she was of
unsound mind at the time of executing the
transfers and incapable of understanding the
contract.
The court held that the deceased had
appeared normal to the D and D was not
aware that the deceased was of unsound
mind.
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Note: This Notes and Copyright therein is the property of
Madam Norazla Abdul Wahab and is prepared for the benefit of
her students enrolled in the MGM 3351 course for their individual
study. Any other use or reproduction by any person WITHOUT
CONSENT IS PROHIBITED.