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LAW OF CONTRACT - Coggle Diagram
LAW OF CONTRACT
Definition Of Contract
- An agreement between two parties creating a legal obligation for both of them to perform specific acts.
- In order for the contract to be enfoceable, each party must exchange something of value.
- Used for various transactions, including the sale of land or goods.
ELEMENT OF CONTRACT
a. Proposal or Offer
- An offer can be oral or written.
- The definite expression or an overtaction which begins the contract.
- Simply what is offered to another for the return of that's person promise to act.
- Cannot be ambiguous or unclear.
- Must be spelled out in terms that are specific and certain, such as the identity and nature of the objective.
b. Acceptance
- The acceptance of the offer made by one party by the other party is what creates the contract.
- As a general rule, this acceptance cannot be withdrawn, nor can it vary the terms of the offer.
- To do so makes the acceptance a counter - offer. Though this proposition may vary from state, the general rule is that there are no conditional acceptances by laws.
c. Consideration
- Consideration for a contract may be money or may be another right, interest and so on.
- It should be noted that consideration has to be expressly agreed upon by both parties to the contractor it must be expressly implied by the terms of the contract.
- A potential of accidental benefit or detriment alone would not be construed as valid consideration.
- The consideration must be explicit and sufficient to support the promise to do or not to do, whatever is applicable.
- It need not to be any particular monetary value. Mutual promises are adequate and valid consideration as to each party as long as they are binding.
- The general rule is that a promise to act which you are already legally bound to do is not a sufficient consideration for a contract.
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e. Capacity to contract
- The general presumption of the law is that all people have a capacity to contract.
- Section 11 of the Contract Act 1950 provides that "Every person is competent to contract, who is the age of majority according to the law to which he is subject and who is of sound mind and is not disqualified from contracting by any law to which he is subjet".
f. Free consent
- A contract is not enforceable if its object is considered to be illegal or against public policy.
- In Section 10(1) "All agreements are contracts if they are made by the free consent of parties competent to contract.."
- Under Section 14, consent must be free and not caused by :
a. coercion, as defined in Section 15 (" the committing or threatening to commit any act for bidden by the Penal Code or the unlawful detaining or threatening to detain, any propertyto the prejudice of any person whatever with the intention of causing any person to enter into an agreement")
b. undue influence, as defined in Section 16 (" the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over to other")c. fraud, as defined in section 17 (explain that fraud refer to act committed by a party to a contract with the intent to deceive the other contracting party)d misrepresentation, as defined in section 18
e. mistake, subject to section 21,22 and 23
LIM YOH V.ASTANA STRATEGI(M) SDN.BHD & ANOR (1998) 3M.L.J 117, HIGH COURT
The Case :
-The plaintiff was one of the 37 co-proprietors of all that piece of land known as Lot 579 held under Grant No.2958 (now Geran No.16359), Mukim Ayer Panas, Daerah Jasin. Malacca.
- By a sale and purchase agreement date 20 January 1996 ('the agreement') she agreed to sell her 11742/335540 divided shares therein to the first defendant for a sum of RM245, 407.80
- Clause 19 of the agreement provides that
- Time whenever mentioned shall in all respects be of the essence of the contract.
- Upon execution of the agreement the first defendant paid the plaintiff a deposit of RM24, 540.78.
- The balance of the purchase price of Ringgit Malaysia TWO HUNDRED
The Verdict
- Section 38(1) of the Act provides that the parties to a contract must either perform, or offer to perform, their respective promises, unless the performance is dispensed with or excused under the Act.
- Section 56 of the Act regulates the position when time is of the essence of a contract
- 56.(1) When a party to a contract promises to do a certain thing at or before a specified time and fails to do any such thing ator before the specified time, the contract or so much of it as has not been performed, becomes voidable at the option of the promisee, if the intention of the parties was time should be of the essence of the contract.
- (2) if it was not the intention of the parties that time should be of the essence of the contract , the contract does not become voidable by the failure to do the thing at or before the specified time, but the promisee is entitled to compensation from the promisor for any loss occasioned to him by the failure.