Contract may be void :
Void illegality
Sect. 2 (d) of CA, 1950:
“ an agreement not enforceable by law is VOID”
Sect. 10 (1) of CA, 1950:
“contract must be made by a free consent of competent parties, for a lawful
Sect. 24 of CA, 1950:
The consideration or object is lawful
unless:
(a) forbidden by law
(b) By nature; if permitted, it would defeat
any law
(c ) fraudulent
(d) injury to person or property
S. 25: consideration for 1 or more objects is in part unlawful
S. 26 : agreement without consideration
S. 27 : agreement in restraint of marriage of a person other than a minor
S. 28 : agreement in restraint of trade, profession or business
S.29 : agreement in restraint of legal proceeding except contracts to a dispute
arbitration or award of scholarship S. 30: agreement that uncertain= void
There was a contract for the purchase of
house built on a land which is temporary occupation license was issued.
This is contrary to rule 41 of Land Rules which states that no license for temporary occupation of land shall be transferrable”.
The court held :
• Menaka was a registered moneylender. She then by using her own name lent a money to the respondent on the security of a charge of certain land belonging to the respondent. However, there was a provision under
Moneylender Ordinance which prohibit a moneylender from entering into contract and taking the security in her own name.
• The court held:
• An object and consideration of a contract is fraudulent.
• This is different with fraudulent
misrepresentation where one is fraudulently induced by another party to enter into
• For example:
Relationship between Principal & agent • if A (the agent) without knowledge of his
Principal agrees to obtain money from B’s lease of the land that belongs to his
Principal.
• The object and consideration of a contract is unlawful if it will injure a person or damage
other person’s property for profit.
• Thus, of two parties conspire for profit to cause physical damage of a third person or
• where the defendant agreed to sell a property to the plaintiff in which an infant had an interest. The dealing was detrimental to the infant’s interest.
• This subsection covers two aspects: immorality and public policy.
• a contract to hire vehicle for the purpose of prostitution have been deemed immoral
• court decided that money lent for the purpose of running a brothel was held not
• Contracts are said to be against public policy when they tend to bring about a state of affairs which is regarded by law as harmful
• The plaintiff had signed an agreement which
committed him to pay to his political party the allowance paid to him as a Member of Parliament.
• Later, he was elected to Parliament and
honoured his agreement. Subsequently, he lost his seat in the Dewan Rakyat and sued to recover the money paid to his party.
The court held:
• Section 28 of the Contracts Act :
• Every agreement by which anyone is
restrained from exercising a lawful
profession, trade, or business of any kind, is to that extend void.
• Thus, as a General Rule, all contracts restraining a person from carrying on a lawful profession, trade or business of any
• the defendant was restrained from practicing as an advocate and solicitor within Kota Bahru for the period of two years from the termination of his services
with his employer.
• Exception 1-
Agreement not to carry on business of which goodwill is sold;
– A buyer may include a term restricting the seller from carrying on a similar business within
specified time and boundary limit.
– It is to protect the buyer by prohibiting the seller from taking away the old customer of the
– the court held that :
if there was no restriction of trade on sale of goodwill it will cause loss to the purchaser of
• Exception
Agreement between partners prior to dissolution
a partner may agree that some or all of them will not carry on a same business similar to that
• Exception 3-
During continuance of partnership.
a partner may agree that some or all of them will not carry on any business that not carried out by
the partnership during the continuance of the partnership.
• Section 29:
• The Contracts Act 1950 provides three exceptions to this general rule:
– contracts to refer dispute which may arise to
arbitration;
– contracts to refer any question which may have already arisen in arbitration;
– contracts in respect of an award of a Government scholarship wherein it is provided that the
discretion exercised by the Government under that contract shall be final and conclusive and
The plaintiff claimed that he was still a
member of the union and sought a declaration from the court.
The court then held that it has no
jurisdiction to hear the matter as the trade union rules provides that any dispute
General rule under the Contracts Act 1950
is that the court will not enforce an illegal contract.
According to legal maxim: Ex turpi causa non oritur Actio, neither party to an illegal
contract can enforce it.
The parties may not be able to recover money or property transferred under the
• The plaintiff bought about 40 acres of rubber land and in order to avoid certain regulations, he transferred this land to his son. The father retained the possession of the land, managed it and received all income from it. Later the son refused to re-transfer the land, the father
brought this action.
• The plaintiff had practiced deceit on the
public administration of the country ; to make personal gained. So he has no right
1) In seeking relief , the plaintiff need not rely on the illegal transaction but
has an independent cause of action (buat tuntutan atas alasan lain).
EG: If A lets his house to B used for a
brothel (rumah pelacuran), he cannot
• 2) Both parties to the contract has no knowledge with regard to the illegality of
the agreement that they entered into.
• Section 66:
lays down that when agreement is discovered to be void or when a contract becomes void, the person who received any advantage under such agreement or contract is bound to restore
• The court held:
that such a contract is void because contravene with Moneylenders Ordinance but permitted RELIEF under
S. 66
Lord Fraser:” neither party aware of the illegality at the time of making the loan transaction and the
documents were prepared and executed on both sides in complete faith. The contract was discovered to be
3) Where only 1 party is unaware of the illegality of the contract that party
The court held that:
The A who had innocently deposited money with another carrying the business in
