5 business law

Flashcards covering the legal elements of Capacity and Consideration within Malaysian Contracts Law, including statutory sections and key case law.

Capacity

A person’s legal ability to enter into a contract, requiring parties to be competent to contract as per Section $10$ and Section $11$.

Age of Majority

The legal age in Malaysia to enter a contract, which is $18$ years according to Section $2$ of the Age of Majority Act $1971$.

Void Contract

An agreement that is not enforceable by law as defined under Section $2(g)$ of the Contracts Act.

Section 66 (Contracts Act)

A provision stating that any person who has received an advantage under a void agreement is bound to restore it or make compensation to the person from whom it was received.

Mohori Bibee v Dharmodas Ghose (1903)

A landmark case establishing the principle that a contract entered into by a minor is void.

Necessaries

Things essential to the existence and reasonable comfort of a minor, such as food and clothes, where the supplier is entitled to reimbursement from the minor's property under Section $69$.

Nash v Inman (1908)

A case where a tailor’s claim for supplying clothes (fancy waistcoats) to a minor was rejected because they were not considered necessaries as the minor already had sufficient clothing.

Scholarship Exception

Under Section $4(a)$ of the Contracts (Amendment) Act $1976$, scholarship agreements entered into by infants are valid when granted by government, statutory authorities, or approved educational institutions.

Financial Services Act 2013 (Minor's Insurance)

Allows an infant over the age of $10$ to enter into an insurance contract, though written parental consent is required if the infant is below the age of $16$.

Sound Mind

Defined under Section $12(2)$ as a person who, at the time of making the contract, is capable of understanding it and forming a rational judgment.

Imperial Loan v Stone

Establishes that a contract by a person of unsound mind is prima facie valid unless they prove they did not understand the contract and the other party knew of their disability.

Past Consideration

An action that is performed before the promise was made, which in Malaysia can be valid under Section $26(b)$, unlike general English law.

Executed Consideration

A promise that is enforceable only when the required act is done by the offeree, such as running around a location $10$ times for a reward of $RM100$.

Executory Consideration

A promise to perform an action at a future time, such as a promise to pay $RM100$ if a car is washed later.

Natural Love and Affection (Section 26(a))

An exception where an agreement is valid without consideration if it is in writing, registered, and made between parties standing in a near relation to each other.

Tan Soh Sim v Tan Saw Keow (1951)

A case where a contract between heirs and adopted children was held void because it did not meet the criteria for 'near relation' under natural love and affection.

Statute-Barred Debt (Section 26(c))

A written and signed promise to pay a debt that is otherwise barred by limitation law.

Adequacy of Consideration

According to Explanation $2$ of Section $26$, consideration does not need to be of equal value to the promise to be valid, as illustrated in Phang Swee Kim v Beh I Hock ($1964$).

Performance of an Existing Public Duty

Consideration that generally has no value unless the action goes beyond statutory requirements, as seen in Glassbrook Bros v Glamorgan CC ($1924$).

Accord and Satisfaction (Section 64)

A rule allowing a promisee to dispense with or remit performance, or accept a lesser payment as full satisfaction of a debt, as seen in Kerpa Singh v Bariam Singh ($1966$).