INTI College Law 2104: Contracts Act 1950 and Capacity to Contract

This report provides a comprehensive overview of the Contracts Act 1950 in Malaysia, focusing on the legal capacity to contract. It begins by defining a contract and its essential elements, emphasizing the importance of capacity. The report then delves into the specifics of capacity, examining the restrictions and exceptions for minors, individuals of unsound mind, and corporations. It explores the legal implications of contracts involving minors, referencing key Malaysian and English case law, including the Mohori Bibee v. Dharmodas Ghose and Tan Hee Juan v. The Boon Keat cases. The report also discusses exceptions to the rule regarding minors, such as contracts for necessaries, scholarship contracts, insurance contracts, and marriage contracts. Finally, the report touches upon the capacity of sound persons and corporations to enter into contracts. The report provides detailed analysis of relevant sections of the Contracts Act 1950 and other related acts and case laws.

Running Head: Contracts Act 1950
Contracts Act 1950
Capacity to Contract
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Contracts Act 1950
Table of Contents
Introduction................................................................................................................................2
Minors........................................................................................................................................2
1. Contracts for Necessaries................................................................................................4
2. Scholarship Contracts......................................................................................................5
3. Insurance Contract..........................................................................................................5
4. Marriage Contract...........................................................................................................6
Sound Person..............................................................................................................................6
Corporations...............................................................................................................................7
Conclusion..................................................................................................................................7
Bibliography...............................................................................................................................8
Introduction
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Contracts Act 1950
A contract is formed when agreement in enforced with the help of law. It is mutual
understanding between the parties and it is legally binding on them. For a valid agreement,
there should be offer and its legal acceptance. In Malaysia, Contracts Act 1950 governs
contract and issues arising out of it (Anon., 2006). When the provisions or section mentioned
in the Contracts Act are absent or when the issue is mentioned but provisions are not present
related to the issue then English Law will be applied through Civil Law Act. If there is
contravention between any provisions in English Law and Contract Act then Contract Act
will prevail over it. To form a valid and legal contract, there should be presence of some legal
elements. There should be presence of at least two parties to perform the contract. Therefore,
there should be an offer through one individual and it should be accepted by the other
individual according to the mode of acceptance prescribed by offeror. These elements are
valid offer, acceptance, consideration, capacity and others. In this article, the legal capacity of
people to form contract will be discussed as per laws of Malaysia.
Each individual is competent to form a contract. Sometimes, law puts some restrictions on the
legal capacity of some specific individuals and persons for forming and entering into
contract. Some people are not competent enough to form a contract and hence they are legally
restricted to form legally enforced contract. To determine legality of a contract, the issue of
capacity is prime concern. To give rise to a legal contract, it is necessary that the individuals
who are going into the contract are mentally eligible and mature in age. It can be inferred that
a person who is minor or an individual of unsound mind is not eligible to form contract. It is
given in Section 11 of Contracts Act 1950 that “every person is competent to enter into
contract who is major in the eyes of law to which he/she is a subject, who is of sound mind
and is not disqualified for making contract by any law to which he/she a subject” (Anon.,
1950).
Minors
An individual who is below eighteen years i.e., adulthood age, is an infant. Age of Majority
Act 1971 provides the age of majority is eighteen years (Anon., 1971). Age of majority can
be changed if it is mentioned specifically any law. A contract where one of the parties is a
minor is void ab initio. This concept was adopted in Malaysia from Indian Case of Mohori
Bibee v. Dharmodas Ghose (Mohori Bibee v. Dharmodas Ghose, 1903) in which court said
that the contract in which one of the party is minor is void and it is not his responsibility to
pay anything for breach of contract. In this case, a minor person entered into the contract with
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Contracts Act 1950
an adult person and mortgaged property in consideration of money. When the minor was not
able to pay the money back, then he went to the court against him and the court said that
minor cannot be ask to refund the money. Minors will not come under the purview of Section
65 of Indian Contract Act (Anon., n.d.). Section 65 is similar to Section 66 of Malaysian
Contract Act (Anon., n.d.). It is applicable on the contract among the competent parties and
where minor is involved, the contract is void ab initio. This judgment was taken into
Malaysian case, Tan Hee Juan v. The Boon Keat (Tan Hee Juan v. The Boon Keat, 1934) in
which the infant was the plaintiff. The infant executed shifting of property to defendant, there
was presence of witnesses, and it was registered. After sometime, the minor appealed in court
to remove the transfer. The tribunal passed the judgment in favour of infant, the transfers
were declared illegal, and the property was given back to infant.
In this manner, if the infant has not crossed the age of 18 years then the interested man or
woman is not capable and ready to enter into the contract and the contract eventually will not
be enforceable. It is a progressive rule subject is required to shield the more energetic who
are believed to be inclined and consequently need additional safeguard and for inspirations
driving picking who ought to be verified the season of prevailing part is held onto as the
isolating line. Regardless, it is no longer persistently that such an individual can keep up a
vital separation from hazard on an understanding that he has gone into. An exceptional case is
an understanding for necessaries, which will tie even on a man or woman who has now not
accomplished the time of lion's offer. The perspective at the back of this is by virtue of
necessaries – be they product or commitments – there is no downside or impediment to the
minor. Clearly, it is never again the entire that gravitates toward this uncommon case (Harun,
et al., 2019).
However, more than just advantage is required. In Cowern v Nield (Cowern v Nield, 1912) it
was held that “It is no doubt right to say, in a general experience that contracts of a sure
persona are enforceable towards an infant if they are for his benefit, but an infant is now
not always in charge on a contract purely because it is for his benefit. The only contracts,
which, if for the infant’s benefit, are enforceable towards him, are contracts referring to the
infant’s person, such as contracts for necessaries, food, clothing, and lodging, contracts of
marriage, and contracts of apprenticeship and service. In my opinion, a buying and
selling contract does not come within that category”. The concern of what are the needs is
a theme that desires to be mentioned through itself. In Section 69 of Contracts Act 1950,
this component of the concern is held as “If a person, incapable of entering into a contract
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Contracts Act 1950
or everyone whom he is legally bound to support, is supplied by every other person with
necessaries ideal to his condition in life, the character who has furnished such supplies is
entitled to be reimbursed from the property of such incapable person” (Anon., 2019). On the
off chance that the measures are selected to authorize the assignments of the individual, who
has never again achieved the period of greater part, were taken when such an individual is in
any case a minor, the situation would be less complex. In any case, there are examples where
the exhibition of the agreement however went into with a minor proceeds past such an
individual's minority. At that point, there is driving forward with obligation and this requires
a revocation or correction relying upon the conditions (Singh, 2006).
There are exceptions to minors-
1. Contracts for Necessaries
Regardless whether the infant needs such things or the things according or suitable to the
situation in presence of these new born children and to their credible requirements at the time
of agreement, for example, nourishment, cover, dress, logical contributions and even
instruction (Smith & Keenan, 2006). Nevertheless, lavish articles are barred.
Section 69 defines “requirements as goods and services moderately necessary to a
minor’s actual requirement. If another individual, materials a person, incapable
of entering into a contract, or everyone whom he is legally sure to support, with
necessaries suited to his condition in life, the character who has furnished such materials is
entitle to be reimbursed from the property of such incapable person”. The supplier can ask for
money for providing necessaries if minor has property. In the case of Nash v Inman (Nash v
Inman, 1908), a tailor was the defendant sued a minor who is plaintiff with whom he
had furnished clothes that incorporate attractive waistcoasts.
The courtroom determined that no matter what, the clothes were normal in accordance to life
of the infant. Nevertheless, the minor was already having sufficient clothes so it was not
necessity. Therefore, the defendant claim was once no longer successful. In case of Doyle vs
White City Stadium Ltd (Doyle v White City Stadium Ltd, 1934) , an infant gave his consent
to endure an education to become a boxer. Therefore, he used to be forced with aid
of the terms of this settlement with stadium.
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Contracts Act 1950
2. Scholarship Contracts
One model in the past used to be grants, when beneficiaries took the likelihood to state that
they had been minors at the time they consented to the grant arrangement and that in this way
the agreement needed legitimacy; because of their absence of competency. The opposite
contention that must be advanced was that the grant added up to what could be known as
necessaries. Where the beneficiary had achieved the time of dominant part and persisted to
get the grant, there would be the what's more contention that the understanding had been
sanctioned and received by the beneficiary. This prompted some vulnerability regarding how
beneficiaries of grants explicitly from the specialists, statutory authorities and others should
followed, despite that few of them had been currently not of time of dominant part by
utilizing the order of Contracts (Amendment) Act, 1976. The change consists of
subsidies controlled and handled by means of the Federal Government or a State Government
which provides that “no scholarship settlement shall be invalidated on the ground that
the pupil getting into such settlement is no longer of the age of majority” (Wu & Vohrah,
2000). A scholarship settlement which is enforced by a baby is legitimate such as credit,
subsidies for the studying by using government or other instructional institution.
Understanding between the expert with the undergrads about grants, prizes, help or advances.
What's more, Section 4(a) of Contracts Act give a clarification to that the settlement does
never again invalid for reason no longer old enough. Segment 5(a) Contract Act clarify that
on the off chance that there is a chance of installment, at that point the understudy or
underwriter will be capable. For the situation, Government of Malaysia v Gucharan Singh
and Ors (Government of Malaysia v. Gurcharan Singh & Ors., 1971), Gurbachan got access
from experts to go for trainings, as an educator and for this purpose, he is to present with
administrators for a long time after graduated. Gurbachan left sooner than full term. When he
was sued, he asserts that the agreement is not legal. He was once missing of capability for the
length of the time. The court has confirmed that preparation is a need to an infant. In this
manner, Gurbachan is in rupture of agreement (C., 2018).
3. Insurance Contract
Under the purview of Insurance Act 1963, a child who has not crossed age of ten years can
get into the insurance contracts but if the child can enter into the contract after attaining the
consent from the guardian when he or she is below sixteen years of age because guardian
knows about the nest interest of minor (Anon., 1996).
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Contracts Act 1950
4. Marriage Contract
In Malaysia, a minor can go into a marriage contract and is bound with the agreement.
Guarantee of marriage went into by method for infant or their folks for their sake are held
legitimate. Section 4(a) of Age of Majority Act 1971, presently shows that notwithstanding
anything in the Majority Act will influence the capability of a person to do something in
contingent issues, explicitly marriage, separation and reception (Anon., 2006). In Rajeswary
& Anor v Balakrishnan & Ors (Rajeswary & Anor v Balakrishnan & Ors., 1958), it was held
that an agreement to wed went into through infants are recognizable from various sources of
agreement and don't come inside the guideline set down in Mohori Bibee's case.
Sound Person
In S12 of the Act, a similarly attempt to provide an explanation for soundness of mind has
been made which is as follows:
(a) “An individual is of sound mind and eligible for understanding the contract and can form
rational judgment for entering into contract”
(b) “when a person is of unsound mind but sometimes he is of sound mind than he can make
contract when he is of sound mind”
In Malaysia, a character who is mentally ailing is unable to believe rationally and has troubles
in doing judgement. Under section 12, man or woman who suffers from mental upset is
unqualified to come in a contract based totally on. The importance of mentally sick may
additionally take to humans averting their contractual duties, hence, man or woman who is
mentally sick will finally be certain unless there is grounds to demo that
such individual does now not understand what have been going and different individual has
already cognizant of his intellectual status. Besides, an individual need to be of sound head
binding to a contract, as cited in Section 11 of Contracts Act, 1950.
If a drunkenness, man, woman, or whom is on drugs, it is judged likewise as the incapacity of
mentally sick. When an individual has grounds to show that he was not aware about the
contract and was not capable to grasp the terms of the contract (Anon., n.d.).
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Contracts Act 1950
Corporations
Corporation or without recognised as company, refers to is an
unreal creative undertaking of prison man or woman and employer have to be differentiated
from stockholders. There are two sorts of organisation in Malaysia, which are
registered companies and listed companies. Registered organizations are organization that
registered beneath the Malaysia Act. Then, listed agencies are corporation that troubles bonds
and securities to the populace. Based on Section 124 of the Corporations Act 2001,
an enterprise has the ability to come in contract even although there are restrictions to come
in a contract. Besides, underneath subdivision 19(5), agencies shall without action or be sued
when there is issue occurs.
Conclusion
The innovation does not alter the requirements of these components to frame a substantial
contract, nevertheless one must be cautious when managing minor's agreement since it can
make an issue and difficulties to an individual who manages them. Each character who is in a
situation to the contract is allowed to the contract on such expressions as he might suspect fit.
So protracted as the thought and purpose of the settlement is legal and never again explicitly
pronounced to be void and he goes into the agreement unreservedly and willfully his
agreement will be authorized by utilizing the courts of equity. For an agreement to be
legitimate, the fundamental elements of an agreement must be available. The basic necessities
to be available in an enforceable contract are offer, acknowledgment, thought and limit. It
accepted that everybody is fit for going into an agreement; however a minor needs lawful
assurance in view of their age unable to value their own behaviour. The guideline then again
situated impediments upon the capacity of specific individuals to tie themselves through a
guarantee or to authorize a guarantee made to them. Regardless of whether an agreement is
satisfying every one of the criteria of a legitimate contract yet is deficient with regards to the
limit of the gatherings then the agreement won't be enforceable.
Bibliography
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Contracts Act 1950
Anon., 1950. Section 11 of Malaysian Contracts Act. [Online]
Available at: https://www.lawnotes.in/Section_11_of_Malaysian_Contracts_Act,_1950
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Anon., 1971. Age of Majority Act. [Online]
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%2021.pdf
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Anon., n.d. Section 65 in The Indian Contract Act, 1872. [Online]
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Anon., n.d. Section 66 of Malaysian Contracts Act, 1950. [Online]
Available at: https://www.lawnotes.in/Section_66_of_Malaysian_Contracts_Act,_1950
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[Accessed 10 June 2019].
C., D., 2018. In the 1960's, this Malaysian scholarship student found a loophole to escape his
bond... [Online]
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Nash v Inman (1908) KB.
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[Accessed 10 June 2019].
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