(6) Contract -Consent of Parties

8/11/2019 (6) Contract -Consent of Parties

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Void & voidable ContractVoid contract - section2(g)

means an agreement in which no rights orobligations are created at all.


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Void & voidable Contract

Voidable contract - section 2(i)

means an agreement which gives the rights to theparties whether to affirm or reject the contract.


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1. Coercion (Voidable)

What is coercion?

The practice of compell ing a person ormanipulating him to behave in an involuntary way

by use of threats some other form of force.


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1. Coercion (Voidable)

S. 14(a) of CA:

The consent is not freely given when the making ofthe consent is caused by coercion.


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What constitute Coercion?S. 15 of CA,

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

Abus throat" to compel Abu to transfer his land toMinah.


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What constitute Coercion?

The unlawful detaining or threatening to detain anyproperty to the prejudice of any person ,

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

toll).


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What constitute Coercion?

with intention of causing any person to enter into anagreement.


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2. Undue Influence

S. 14(b) of CA:

The consent is not freely given when the

making of the consent is caused by undueinfluence .


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2. Undue Influence

It means that influence alone is not sufficient. Itis necessary to establish such influence is

undue.


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Example:

Ali constantly visits his aunt B while she is ill. Sheis alone and her son does not visited her. Ali always

urges her to leave her property to him instead ofher son. Failing to do so, he will stop fromvisiting her. It finally brings over a lawyer to write

a new will in favor of B.

Isnt it Undue Influence?


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What is undue influence?

One person taking advantage of a position ofpower 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 exercisehis/her judgment.

S l h H H dj Abd ll h


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Salwath Haneem v Hadjee Abdullah(1894) SSLR 57

The Plaintiff's husband made a conveyance ofproperty belonging to himself and the plaintiff to

his brother; B and C.

The Plaintiff initially agreed to the conveyancethe said property but after her husbands death,

she brought an action seeking to set aside theagreement on the ground of Undue Influence.

S l th H H dj Abd ll h


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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 toshow 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 burden,the said contract was set aside.


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Datuk Jaginder Singh v TaraRajaratnam [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 transferhis land to the 3rd party.

Held: The consent given is not freely given and the transfer

become voidable as it was caused by undueinfluence.


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

It leads to the execution of the deed of gift of landed property in Singapore in favour of Respondent.


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Effects of Undue InfluenceS. 20 of CA, 1950:

A party to the contract may rescind a contract onthe ground that he has entered into that agreement

by influence of the other party(Voidable /Rescission + Restitution).


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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 benefits he has obtained under the contract.


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3. Fraud

Section 14(c) of the Contract Act provides that theconsent given caused by fraud is not a valid

consent (not freely given).


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Fraud is :-

a deception (penipuan) made for personalgain or to damage another individual.

Certain acts which are committed with intent to deceive another party

or to induce

him to enter into a contract.


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Examples:The seller (Kassim) found the necklace on thestreet, he then told the buyer (Sofea ) that it

was new and special edition.

Ah Keong sell a radio for RM500 tellingAminah that it is fully functional, when he

knows that it is actually totally broken


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What constitute Fraud?Sec 17 of CA; fraud includes:

a) fraud includes the suggestion as to fact which isnot true by one who does not believe it to be true.

(the maker knows the facts are not true/ false).


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Kheng Chwee Lian v Wong TakThong [1983]2 MLJ 320

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

representation that the area of land to betransferred was the same size as the land which the

respondent had agreed to buy under a firstagreement. In fact, the area even less than that.


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What constitute Fraud?

b) the active concealment of a fact by onehaving knowledge of belief of the fact.

etc emy rumugan v nnama ay


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etc emy rumugan v nnama ay[1982] 2 MLJ 198

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

agreement.

The defendant had fraudulently represented to theplaintiff that the document that she was signed wasfor loan she took and it was to free the land from a

charge .

etc emy rumugan v nnama ay


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etc emy rumugan v nnama ay[1982] 2 MLJ 198

In fact the document that she signed was included asale agreement relating to land, a transfer of the landand further agreement to purchase three unapproved

sub-lots in her own land.

Held:

The agreement was voidable.


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What constitute Fraud?

c) a promise made without any intention ofperforming it


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What constitute Fraud?For example;

Skim Cepat Kaya and Kad Gores & Menang

The owner of the house (A) promised to the tenant(B) that he will repair the defects of the house andhe will disburse the said repairs done by the tenant.However, after the said repairs are completed, theowner of the house refused to pay that. He actually

from the very beginning does not intend to pay forthat. A = a promise made without an intentionto perform it'

Does Silence Constitute Fraud?


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Does Silence Constitute Fraud?(Explanation of S.17)

Mere silence as to facts likely to affect thewillingness of a person to enter into contract is

not fraud

unless the person has the duty to speak orhis silence is equivalent to speech.


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4. Misrepresentation

According to Section 14(d) of the Contract Act , theconsent is not freely given when it caused by

misrepresentation.


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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 intothe contract.


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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

statement is False ).


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What constitute misrepresentation?

S.18 (a) of CA:

Representation of one of the fact which isnot true but he believes it to be true

(Innocent misrepresentation)

Wh t tit t i t ti ?


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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 failedto 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 noreasonable reasons for believing it to be true.

For example :


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For example :

A broker tries to sell a house to a buyer, whostresses 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 knowthis, his promise of that house was quiet was made

without he having any reason to believe that was thecase. he simply assumed that the house is quiet.

The broker in this case is making negligentmisrepresentation.


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D f Mi l d P


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Duty of Misled Party to

Exercise DiligenceThe misrepresentation does not make

the contract voidable if the misled partyhad the opportunity to investigate and

ascertain the truth of the

representation.

Conditions for Misrepresentation


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p(Summary)

There must be false representationThe Misrepresentation must be one fact (mere

expression of opinion is not a representation of fact).

The Misrepresentation must be made by a party tothe contractThe party was acted or induce the contract by

relying on that misrepresentation

The P must have suffered damage as a result ofmisrepresentation


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Silence is not a misrepresentation

Generally, a party to a contract is

not bound to disclose materialsfacts to the other party.


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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 shouldcaution and investigate.

Effect or Remedies of Misrep


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Effect or Remedies of Misrep.

& fraud Section 19 (1) of Contract Act 1950.-

voidable/ Rescission (S. 34 of the SpecificRelief Act 1950.

Section 65- Restitution / restore thebenefit

Section 66-compensation/ recover anybenefit


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5. Mistake When one party to a contract enters into it under

some misunderstanding .The contract entered into is invalid/ void as if

they know the true facts they would never haveentered into the contract.

1) Common Mistake - Mistake of facts by both


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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 theagreement.

Explanation of S.21

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

matter of fact.

Illustrations:


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A) Mistake as to existence (kewujudan) of subjectmatter or where both parties were unawarethat the subject matter of the contract of thecontract 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 dayof bargain, the ship that carry the same had been castaway and the goods lost. Neither party aware of the

facts. The agreement is VOID.

B) Mistake as to identity of subject matter


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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 fromBombay to England, one leaving in October and the other in

December.

Raffles shipped the cotton on the December ship, and defendantWichelhaus refused to accept the cotton. Raffles sued on thealleged contract. Wichelhaus argued that it understood the

shipment would be shipped on the October ship.

B) Mistake as to identity of subject matter


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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 bothRaffles and Wichelhaus.

C) Mistake as the possibility of performing the


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contract

Illustration (c) of Section 21

C) Mistake as the possibility of performing thet t


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contract

Sheikh Brothers v Ochsner

The appellant granted to the respondent, license andauthority to cut and manufacture all sisal growing on

5,000 acres of land in Kenya, and to deliver to theappellant 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 producethat much.

Held: it was mistake as to the possibility of performingthe contract. The said agreement was void.

2) Mistake of Facts by 1 party(UNILATERAL MISTAKE)


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(UNILATERAL MISTAKE)

Section 23 of CA: The contract is not voidable or still valid. But theparty making the mistake would be entitled to an

order of rescission.

1) Mistake as to identity of party to the contractE.g: A wants to contract with B but instead contracted


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g with C.

CUNDY V LINDSAYBlenkarn 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 thatit could be read as Belkiron. Then, the Pliantiffdispatched the goods and sold to the defendant who tookthe 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. Hence, there isno contract between the plaintiff and Blenkern.


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3. Mistake by LawSection 22 of CA:

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

i.E . Debt is already barred by Limitation Law, but still you claim for that.


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Note: This Notes and Copyr ight there in is the pro per ty of MadamNorazla Ab dul Wahab and is prepared for the benef i t of her s tud entsenrol led in the MGM 3351 cou rse for thei r individ ual s tudy. Any otherus e or repro du ctio n by any p erson WITHOUT CONSENT IS PROHIBITED.

(6) Contract -Consent of Parties

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