Programme : Bachelor of Business Administration

Module Title : Commercial Law

Module Code : LAW 2013

NO NAME STUDENT ID

1 AZRUL AMINUL RASHID BIN MARZUKI BBAP18011162

2 SALMI DARINA BINTI OSMAN BBAP18011233

3 AHMAD IZWAN BINTI JUMAHAT BBAP18011157

4 OSMAN SALAHUDDEEN BIS OSMAN BBAP18011232

5 MOHD SHAHFIZZAN BIN KHAMIS BBAP18011209

6 MUHAMAD ZAIRUN BIN JAMAK BBAP18011213

7 MOHD SHAFIQ BIN OMAR BBAP18011312

Elements of Contracts
For a contract to be lawful and enforceable, certain elements
need to be met. The elements are: -
i. Offer and acceptance
ii. Consideration.
iii. Intention
iv. Legal Capacity
v. Certainty
vi. Consent of Parties
vii. Legality of objects
Offer and Acceptance
To create an agreement between 2 or more parties, there must be an offer and
acceptance. A proposal can be made either to a specific person or to the general
public. If the proposal is made to a specific person, then the proposal is only
acceptable to the person. On the other hand, if the proposal is made public,
then anyone can accept it, provided it fulfills the terms of the offer.

Case example: Carlill VS. Carbolic Smoke Ball Co (1893).

• Fact: The defendant advertises that they are willing to offer £ 100 to anyone
who is still infected with flu after taking a medication within a certain period
of time.
• Decision: He is entitled to receive £ 100 because he has accepted the offer
made to the public.
Consideration
• Section 2 (d) of the Contract Act defines the reply as follows: "In
accordance with the undertaking of the plaintiff, when the
plaintiff or anybody who makes or refuses to make something, or
makes or refrain from making something then the act or
detention or promise is called a consideration to the promise."
• The definition in section 2 (d) may be described as 'the price paid
by one party to purchase the promise or act of the other party.'
For example, A has lost its camera while traveling and offers RM
50 prizes to anyone who finds it and returns it to him. B finds it
and returns it. B performs the act which is the price paid by him
for the promise A. This act is a consideration for the promise.
Intention
• Intention can be defines as something that lies in one's heart, and cannot see the
intentions hidden within one's self. In contrast to intentions, one's actions can be seen
through his movements. The question is how to know the intention of the party who
wants to initiate a contract.
• In the case of Carlill VS Carbolic Smoke Ball Co., the defendants have advertised a
drug called "The Carbolic Smoke Ball“, the defendant offered 100 pounds sterling to
anyone who did not recover from the flu after using the medicine in the prescribed
manner and period. They have also deposited 1000 pounds sterling to prove their
honest intentions. The plaintiff has brought a claim against the defendant because the
plaintiff has not recovered from the flu by using the medication in accordance with the
prescribed instructions. In this case, the court also sees "the defendant's act of
depositing 1000 pounds sterling into the bank indicates that there is an intention to
establish a legally binding relationship.
Legal capacity
• Anyone who wishes to enter into a contract must be legally
bound to contract. Elements such as offer and acceptance,
considerations and intentions are not sufficient.

• According to section 11: "Everyone is eligible to make a

contract if he is mature in accordance with the law it is
subject to, and if it has perfect understanding, and is not
disqualified to make a contract in accordance with any law
to which it is subject.
Certainty
• The agreement may still have disabilities or a weakness
which makes it difficult for the court to determine the
exact conditions agreed upon by the parties involved
therefore the meaning of uncertain or indefinite
agreements is invalid.

• For example if A agrees to sell two hundred tons of oil to B,

then nothing can show the type of oil that is intended and
the agreement is nullified because of its uncertainty.
Consent of Parties
• The contract will be valid when it is made with the free
consent of the parties involved. Free consent does not exist
when there are elements such as coercion, improper
influence, mistake, misrepresentation and fraud. However,
a free contract is a contract that can be canceled by the
choice of the party whose work is so.
Legality of objects
• Under the Contract Act 1950 an agreement shall be lawful
except:
a) it is prohibited by law,

b) it is such that if it is allowed, then it will frustrate the provisions

of any law,

c) it is a fraud,

d) it enters or involves a disaster to the person or property of

another person,

e) The court considered it morally or incompatible with public

deception.
Breach of contracts
Void Contracts

• Void contracts are not valid contracts at all. The parties

concerned are not directly bound and have no
responsibility here. The law will assume that there are no
contracts that exist and the parties will be returned to the
original state. A null contract is contracts made without
taking into account the essential elements or elements in
the formation of the contract.
Breach of contracts
Voidable contracts

• A contract is valid until one of the contracting parties

makes an option to cancel it. Contracting parties may
terminate the contract on the ground that there is an
element which may cancel the contract. Property or goods
that have been transferred before the party makes the
option to cancel the contract usually cannot be reclaimed
as it is valid.
Elements of Voidable
Contracts
Coercion
• Section 15 AK 1950 defines the meaning of coercion generally as
any violence or threat to violence against any person, family or
property, for the purpose of contracting a person.

Case Example:

KESARMAL A / L LETTY VS VALIAPPA DAS CHETIAR (1954)

MLJ 119

i. The issue of validity or not the agreement made under the

imposition of 2 Japanese military officers.

ii. Contract is void or invalid.

Undue Influence
Section 16 (1) AK 1950 defines it as,

• One party in a position can dominate the other party and

• Use that position to gain an unfair advantage.

Case Example:

SALWATH HANEEM VS HADJEE ABDULLAH (1894)

• The legal issue or not of a plaintiff's property transfer agreement

to the defendant on improper influence by the defendant.

• Decision: The contract becomes void and the plaintiff chooses to

cancel the contract and regain its right.
Fraud
Section 17 AK 1950 defines fraud as a party contract with the intention of deceiving
others to make contract with him. Those acts are:
a. suggesting a fact,
b. concealing something false,
c. make an appointment without the intention of keeping promise,
d. doing any act to deceive,
e. any act or concealment prescribed by law as a fraud.

Case examples: SENANANYAKE VS ANNIE YEO (1965)

• Issue whether the incorrect statement given by the defendant to the financial position of
the defendant firm is causing the plaintiff suffered losses after investing in the defendant
firm.
• The court ruled that the defendant intends to deceive the plaintiff and the contract is
canceled.
Misrepresentation
Section 18 AK 1950 states that misrepresentation should be a
factual fact. If it's just personal opinion, it can not be a blame even
if the opinion is not true. Misrepresentations can be in two forms of
fraud and misrepresentations that do not have the intention to
deceive.

Case Example: R VS KYLSANT (1932)

• The issue of whether a deceptive fact in a company's prospectus is
considered a fraudulent misrepresentation.

• Decision: Fraud on actual facts about the company's financial

position is considered a fraudulent misrepresentation.
Mistake
Section 21 AK1950 states that when there is a mistake to the
important facts made by the two contracting parties, the
agreement is void.

Case Example: RAFFLES VS WICHELHAUS (1864)

• The issue with regard to the mistakes of two ships carrying

cotton loads - the main thing in the contract is considered as a
mistake in the fact of the fact that the contract is breach.
When the mistake happens to one party, the contract is not
canceled. This is provided by section 23 AK 1950.
Breach of Contract Remedies
Compensatory Specific
Damages Performance

Quatum
Injunctions
Meruit

Rescind the
contract
Compensatory Damages
• The compensation principle of compensation may be referred to in section 74
up to section 76 AK 1950. The compensation provided is usually in two forms
for instance the amount determined in the contract and the damages for the
indefinite amount.
• The indemnity for an indefinite amount is divided into three namely special
damages, nominal damages and exemplary damages.

Case example: HADLEY VS BAXENDALE (1854) 9 EX 341

• The Plaintiff has ordered machinery from Greenwich but due to the delay of
the defendant to send the machinery to the plaintiff's plant causing the
plaintiff to suffer losses.
• The court ruled that the defendant was liable to pay a reasonable sum of
damages to the defendant.
Specific Performance
• Section 20 of the Specific Relief Act outlines the circumstances under which
specific execution will not be provided:
a. if the damages are not sufficient remedies
b. Contract is something that relates to personal qualification.
c. The contract is so detailed in its content, for example construction
contracts.

Case example: CITY INVESTMENT SDN BHD VS COOPERATIVE SERVICE

CUEPACS TERENGGANU BHD (1985) 1 MLJ 285
• In this case a transfer of property has not been realized due to a breach of contract.
• The court provides specific execution orders because immovable property (land)
cannot be redeemed with money compensation
Injunctions
• Injunctions is a court order to correct the wrongdoing which is the cause of a
breach of contract, it may be categorized as prohibited and mandatory
injunction. The prohibited ban prohibits any action from being done.
Mandatory injunctions require certain actions to be taken to maintain the
status quo of the contracting parties.
• In accordance with section 50 of the Special Relief Act 1950, injunctions are
also another remedy subject to the discretion of the court. It can be given
temporarily or permanently.
Case example: NEOH SIEW ENG & ANOR VS TOO CHEE KWANG (1963)
MLJ 272
• Homeowners have cut water supplies to their home tenants.
• The court then issued an injunction order that homeowners did not cut water
supplies to their tenants.
Quatum Meruit
• Quantum meruit means as much as it deserves. It is a claim to
earn a sum or payment or damages for a reasonable amount as it
ought to be received from the services rendered.

Case example: UPTON RDC VSPOWELL (1942) 1 ALL ER 220

• There is an informed contract between the defendant and the
plaintiff for the services rendered by the plaintiff to the
defendant.

• The Court decides which reasonable and reasonable

remuneration shall be paid by the defendant for the services it
has received.
Rescind the Contract
• When one party has breached the contract, the other party with
the loss can choose to terminate the contract. Section 40 of the
1950 Contract Acts provides when a party has breached the
contract, the other party does not have to carry out further
obligations.
• When a contracting party has refused to perform or cause him to
be powerless to execute his promise fully the contractor may
terminate the contract, unless he indicates, in words or conduct,
his consent to continue the contract. If the aggrieved party
chooses to terminate the contract, then the subsequent damages
may be made.
Conclusion
• The remedial requirements in contract management area
positive step in managing the business closely related to
business and legal relations.

• History of contract law development shows that remedial

action is fundamental development of contract law. Theory
of remedies which became the background of theoretical
development contract law has justified that the importance
of the theory of remedies in securing interest contracting
parties.