The objectives: To determine a valid consent according to Contract Act 1950 as one of the essential elements of contract.

Consent of the Parties to the

Contract

The objectives:



_{To determine a valid consent according to}

Contract Act 1950 as one of the essential

elements of contract.

What constitutes consent?

 _{Section 10(1) of the Contracts Act}

‘all agreement are contracts if they are made by free consent of parties competent to contract…’

 _{Section 13 of CA, elaborates it as 'two or more}

person are said to consent when they agree upon the same thing in the same sense‘

Circumstances that would affect

the Validity of the Agreement

 _{S 14 of the Contract Act has listed 5 circumstances} where consent given is to be said not be given

freely:

(a) Coercion (S 15)

(b) undue influence (S16)

(c) Fraud (S 17)

Circumstances that would affect

the Validity of the Agreement

 _{In such cases the contract may be set aside by the}

Void & voidable Contract

 _{Void contract - section2(g)}

Void & voidable Contract

 _{Voidable contract - section 2(i)}

means an agreement which gives the rights to the

1. Coercion (Voidable)

 _{S. 14(a) of CA:}

1. Coercion (Voidable)

What is coercion?

 _{The practice of compelling a person or}

What constitute Coercion?

The coercion include;

_{the committing or threatening to commit any act}

forbidden by penal code,

i.e. “Putting a gun to Abu's head" or putting a "knife under Abu’s throat" to compel Abu to transfer his land

What constitute Coercion?

_{The unlawful detaining or threatening to detain any}

property to the prejudice of any person,

i.e. threat to close down his market stall and to seize his goods if he refuse to enter into agreement (i.e . Pay

What constitute Coercion?

_{with intention of causing any person to enter into an}

Kesarmal a/l Letchumanan Das v

Valiappa Chettiar [1954] MLJ 119

 _{Facts: The sultan transfer of property on the basis} of coercion of two Japanese officer during Japanese

occupation in Malaya.

 _{Held: Consent was not given freely and the} transfer of the property is not a valid transfer

Chin Nam Bee Development Sdn Bhd v Tai

Kim Choo & 4 Ors. [ 1988] 2 MLJ 117

 _{Respondent purchased houses off to be constructed} by the appellant.

 _{Each of the respondents had signed a sale and} purchase agreement to purchase house at RM 29,500.

 _{Subsequently, the Respondent were forced to pay}

Chin Nam Bee Development Sdn Bhd v Tai

Kim Choo & 4 Ors. [ 1988] 2 MLJ 117

Court held:

respondent’s promise to pay extra money

for house-booking is voidable since the

EFFECT



_{i) Rescission (Section 19)- VIODABLE}

_{ii) Restitution (Section 65)}

Maskell v Horner [1915] 3 KB

106

 _{Lord Reading CJ stated that:}

“ if a person pays money, which he is not bound to pay, under a compulsion of urgent and pressing necessity or of seizure, he can

2. Undue Influence



_{S. 14(b) of CA:}

The

consent is not freely

given when the

making of the consent is caused by

undue

2. Undue Influence

It means that influence alone is not sufficient. It

is necessary to establish such

influence is

 _Example:

 _{Ali constantly visits his aunt B while she is ill. She} is alone and her son does not visited her. Ali

always urges her to leave her property to him instead of her son. Failing to do so, he will stop from visiting her. It finally brings over a lawyer to

What is undue influence?

_{One person taking advantage of a position of}

power or influence over another person.

_{He uses his power to persuade someone into}

signing (or not to sign) a contract.

_{Party to the contract had lost the ability to exercise}

What constitute Undue Influence?

Ingredients:-i) Domination of the will by one party over other party; (the other party was in position to dominate

What constitute Undue Influence?

Ingredients:-ii) The use of that position to obtain an unfair advantage in the contract .

What constitute Dominant

Position

 _{S16(2) of CA:}

 _{(a): when party holds a real and apparent}

authority over the other

i.e. father authority over a child, senior officer over junior officer

OR

where he stands in a fiduciary relationship (amanah)

What constitute Dominant

Position

 _{S16(2) of CA:}

 _{(b) Where party makes a contract with a person}

whose mental capacity is affected by reason of age

Salwath Haneem v Hadjee Abdullah

(1894) SSLR 57

 _{The Plaintiff's husband made a}

conveyance of property belonging to

himself and the plaintiff to his brother; B and C.

 _{The Plaintiff initially agreed to the}

conveyance the said property but after her husband’s death, she brought an

Salwath Haneem v Hadjee Abdullah

(1894) SSLR 57

 _Held:

 _{There was a confidential relationship}

existed between plaintiff and the B and C.

 _{Therefore, the burden of proof was on B}

& C to show the plaintiff was fully

understood to the agreement that made and the consent was freely be given.

 _{Since both B &C failed to discharge the}

Datuk Jaginder Singh v Tara

Rajaratnam [1985] MLJ 105

 _Facts:

T was the owner of one piece of land. J as a lawyer to T had used his position to influence T, to transfer his

land to the 3rd party.

 _Held:

Inche Noriah v Shaik Allie Bin

Omar [1929] AC 127

 _{A Malay woman who was great age and wholly}

illiterate, depends wholly on R (her nephew) to get supply of food and cloths. All matters are settled by

R, until she has no idea of how much her own property worth.

Inche Noriah v Shaik Allie Bin

Omar [1929] AC 127

 _Held:

Chait Singh v Budin Bin Abdullah

(1918) 1 FMSLR 348

 _Facts:

P is a Sikh moneylender sued the

Defendant who was an illiterate Malay

agriculturist upon a pro-note.

The note provided for interest at the rate of 36%. Defendant has charge his land

Chait Singh v Budin Bin Abdullah

(1918) 1 FMSLR 348

 _{This circumstance raise in the opinion of}

the court that the said transaction was unconscionable.

 _{The interest rate is too high for a loan}

with security. It shows that the contract

is advantageous to one party only.

Effects of Undue Influence

 _{S. 20 of CA, 1950:}

 _{A party to the contract may rescind a contract on} the ground that he has entered into that agreement

by influence of the other party

Effect of Undue Influence

 _{However, where the complainant has received any} benefit there under, the court may set aside the contract and ordering the complainant to restore

3. Fraud

 _{Section 14(c) of the Contract Act provides that the} consent given caused by fraud is not a valid



_F

_raud

_is

:-

_a

_deception

_{(penipuan) made for personal}

gain or to damage another individual.



_{Certain acts}

_{which are}

_committed

_with



_Examples:



The seller (Kassim) found the necklace on the

street, he then

told the buyer (Sofea

) that it

was new and special edition.



Ah Keong sell a radio for RM500

telling

What constitute Fraud?

 _{Sec 17 of CA; fraud includes:}

 _{a) fraud includes the suggestion as to fact which is}

not true by one who does not believe it to be true.

Kheng Chwee Lian v Wong Tak

Thong [1983]2 MLJ 320

the respondent had been persuaded by the appellant to enter into second contract on the false

representation that the area of land to be

transferred was the same size as the land which the respondent had agreed to buy under a first

Kheng Chwee Lian v Wong Tak

Thong [1983]2 MLJ 320

Court held:

The respondent had been induced by

fraudulent misrepresentation

into signing

the second agreement and that

What constitute Fraud?



_{b) the active concealment of a fact by one}

Letchemy Arumugan v Annamalay

[1982] 2 MLJ 198

the defendant had induced the plaintiff an illiterate Indian woman to enter into sale and purchase

agreement.

The defendant had fraudulently represented to the plaintiff that the document that she was signed was

Letchemy Arumugan v Annamalay

[1982] 2 MLJ 198

In fact the document that she signed was included a sale agreement relating to land, a transfer of the

land and further agreement to purchase three unapproved sub-lots in her own land.

 _Held:

What constitute Fraud?



_{c) a promise made without any intention of}

What constitute Fraud?

For example;

 _{Skim Cepat Kaya and Kad Gores & Menang}

 _{The owner of the house (A) promised to the tenant (B)}

Does Silence Constitute Fraud?

(Explanation of S.17)



_{Mere silence as to facts likely to affect the}

willingness of a person to enter into contract is

not fraud



_{unless the person has the duty to speak or}



_{Gen. Rule: silence does not constitute a}

fraud .

 _{See Illustration (a) of section 17}

 _{A sell by auction to B a horse which A knows to be} unsound. A says nothing to B about the horse’s

unsoundness. This is not fraud in A.

 _{See Illustration (d) of section 17}

 _{A and B , being traders enter upon a contract. A has} private information of a change in prices which would affect B’s willingness to proceed with the

 _{However, in certain circumstances, SILENCE}

MAY CONSTITUTE A FRAUD.

 _{The law puts a duty upon a person in position of}

trust a duty to speak and disclose all relevant information to the person putting trust in him in

any transaction between them.

 _{See Illustration (b) of section 17}

 _{B is the daughter and has just come of age. Here,} the relation between parties would make it A’s duty

to tell B if the horse is unsound. (if A not tell- fraud).

 _{See Illustration (c) of section 17}

 _{B says to A, “If you don not deny it, I shall assume} that the horse is sound”. A says nothing. Here, A’s

4. Misrepresentation

 _{According to Section 14(d) of the Contract Act, the} consent is not freely given when it caused by



_{False statement of fact made by one party}

before or at the time of making the contract

;



_{which is addressed to other party ;}



_{and induces the other party to enter into}



_{Furthermore, the maker believe in the}

truth of the statement



_{( the maker honestly believed that facts of}

such statement is True, in fact the said



_example



_{A (seller) is telling the buyer (B) that a}

radio is "practically new" so that B buy it, it is

in fact 5 years old and heavily been used. So

in the above example, if the seller didn't know

What constitute misrepresentation?



_{S.18 (a) of CA:}



_{Representation of one of the fact which is}

What constitute misrepresentation?

S. 18(b) of CA:

_{There is a duty imposed to a party to disclose}

information to each other but the parties failed to do it or breach of it – Negligent

Misrepresentation.

_{Basically, it means that you did not directly lie} (without intention to deceive), but you made a representation about something while having no

 _{For example:}

 _{A broker tries to sell a house to a buyer, who stresses}

his need for peace and quiet. The broker promises that the house is very quiet. In reality, the house next door

is undergoing a very noisy reconstruction. Although the broker did not know this, his promise of that house

was quiet was made without he having any reason to believe that was the case. he simply assumed that the

Duty of Misled Party to

Exercise Diligence



_{The misrepresentation does not}

make the contract voidable if the

misled party had the opportunity

Caparo Industries v Dickman,

- _{an auditor (Dickman) who had negligently approved an}

overstated account of a company's profitability.

- _{A takeover bidder (Caparo) relied on these statements}

and pursued its takeover on the basis that the company's finances were sound.

- _{Once it had spent its money acquiring the company's}

shares and a company control, it found that the finances were in poorer shape than it had been led to believe.

Caparo Industries v Dickman,

The House of Lords however held:

there was no duty of care between an auditor and a third party pursuing a takeover bid.

The auditor had done the audit for the company.

Conditions for Misrepresentation

(Summary)

 _{There must be false representation}

 _{The Misrepresentation must be one fact (mere}

expression of opinion is not a representation of fact).

 _{The Misrepresentation must be made by a}

party to the contract

 _{The party was acted or induce the contract}

by relying on that misrepresentation

 _{The P must have suffered damage as a result}

Opinion is not Misrepresentation

 _{contract of sale a poultry farm is valid even though}

the seller made a statement that the farm can breed 2000 sheep is not true.

 _{It is because it is an opinion. He never breeds a}

sheep at the farm before.

Silence is not a misrepresentation



_{Generally, a party to a}

contract is not bound to

Silence is not a misrepresentation

Keats v Lord Cardogan,

 _{D lets a house that was in bad condition}

to P.

 _{P however, never ask any information}

from D with regard to the house.

 _{The act of D is not misrepresentation P}

Effect or Remedies of Misrep.

& fraud

 Section 19 (1) of Contract Act

1950.- voidable/ Rescission (S. 34 of the Specific Relief Act 1950.

 Section 65- Restitution / restore

the benefit

 Section 66-compensation/ recover

5. Mistake

 _{When one party to a contract enters into}

it under some misunderstanding.

 _{The contract entered into is invalid/ void}

1) Common Mistake - Mistake of facts by both

parties = VOID

_{Section 21 of CA-}

Elements:

i) both parties to an agreement under mistake (mutual). ii) mistake relating to a “matter of fact essential to the

agreement”.

_{Explanation of S.21}

“An erroneous opinion as to the subject matter of the agreement is not amount to mistake as to a

Illustrations:

A) Mistake as to existence (kewujudan) of subject matter

or where both parties were unaware that the subject matter of the contract of the contract had

already perished at the time of contract was entered into

 Illustration (a) of Section 21

 _{A agrees to sell B a specific cargo of goods supposed to}

be on its way from England to Kelang. Before the day of bargain, the ship that carry the same had been cast away and the goods lost. Neither party aware of the

B) Mistake as to identity of subject matter

Raffles v Wichelhaus

 _Facts:

 _{Raffles agreed to sell cotton to Wichelhaus. The agreement provided}

that the cotton was “to arrive England from Bombay.” However, there were two different ships regularly sailing from Bombay to England,

one leaving in October and the other in December.

 _{Raffles shipped the cotton on the December ship, and defendant}

Wichelhaus refused to accept the cotton. Raffles sued on the alleged contract. Wichelhaus argued that it understood the shipment would

be shipped on the October ship.

B) Mistake as to identity of subject matter

Raffles v Wichelhaus

_Held:

_{The court concluded there was “no binding contract.”} Since the parties meant different ships and there was a

mistake as to identity of the subject matter by both Raffles and Wichelhaus.

C) Mistake as the possibility of

performing the contract

C) Mistake as the possibility of performing the contract

Sheikh Brothers v Ochsner

The appellant granted to the respondent, license and authority to cut and manufacture all sisal

growing on 5,000 acres of land in Kenya, and to deliver to the appellant 50 tons per month

of sisal fiber for sale. Respondent then was unable to do so as the leaf potential of the sisal

was not sufficient to produce that much. Held: it was mistake as to the possibility of performing the contract. The said agreement

2) Mistake of Facts by 1 party

(UNILATERAL MISTAKE)

 _{Section 23 of CA:}

 _{The contract is not voidable or still valid.}

 1) Mistake as to identity of party to the contract

 E.g: A wants to contract with B but instead contracted with C.

 CUNDY V LINDSAY

 Blenkarn offered to buy goods from the Plaintiff by pretending to be “ Belkiron & Co.” a reputable business on the same street. He signed the letter in such a way that it could be read as “Belkiron”. Then,

the Pliantiff dispatched the goods and sold to the defendant who took the property in good faith. The

plaintiff sued defendant because of that mistake.  Held: the offer by the plaintiff was only to “Belkiron

& Co, so it could not be accepted by Blenkern.

 2) Mistake as to quality of subject

matter

 E.g: A agrees to buy from B a picture that

A believe to be genuine Lat’s drawing but which in fact was painted by Leman. B in this case intends to sell a picture by Leman

but A believes that the sale is of a picture painted by Lat.

 What is the effect of the said contract?  A = mistake as to quality of subject

3. Mistake by Law

 A contract is valid in the event of mistake by law.

 _{See ILLUSTRATION of section 22 of CA.}

“ A and B make a contract grounded on the

erroneous belief that a particular debt is barred by limitation ; the contract is not voidable”

78