TOPIC 4
CAPACITY
(BERKEUPAYAAN)
Prepared By:
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.
General Rule
 If lack capacity
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
Section 11: of CA 1950
Person incompetent
 Minor
(below age of 18)
 An unsound mind
(mentally disordered or incapacitated through sickness, alcohol or other
Cont…
 Agreements entered into by minor :
 are generally void and
 a minor cannot be sued under such
Cont…
 If there is a contract between minor &
adult:
 An adult cannot enforce the contract  cannot recover property that he had
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
Mohori Bibee v
Dharmodas Ghose
 The court held that:
the contract was void and so as to the mortgage and the A cannot recover
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
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,
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
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
Leha Jusoh v Awang
Johari [1978] 1 MLJ 202
 The R (minor) had entered into an
agreement to purchase of land
Leha Jusoh v Awang
Johari
 The court ordered:
an adult to refund the purchase price to an infant upon infant vacating the
Misrepresentation of
Age
 Where a minor has misrepresented
Effects

Malaysian Position
The person cannot sue the minor
on 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
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 A’s 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
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
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
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
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 minor’s life, they were not necessary as he already had
2. Promise of Marriage

Contracts promise to marry
entered into by minor are valid.

A minor can sue or be sued in case
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
2. Promise of Marriage
 For Muslims in Malaysia, the various
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
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
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
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
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
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.
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
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
Sim Kon Sang Peter’s 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
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