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Nov 12, 2007

Busines Law Tutorial 5

1.(i) Explanation 2 to Section 26 of Contracts Act, 1950 provides that an agreement is not void merely because the consideration is inadequate. E.g. I decide to sell my car for $200 when it is worth $20000. Since my consent was freely given therefore there is a contract.


1.(ii) Under Section 2(d) COntracts Act, 1950, it states that a party to an agreement can enforce the promise even if he himself has given no consideration as long as somebody has done so- Venkata Chinnaya v. Verikatara Ma'ya. In this case, the mother asked the daughter to give money to her two brothers, in return the mother will give some land to the daughter. HOwever, the daughter did not give money to her brothers and the two brothers sued her for breach of contract.


1.(iii) The defination of the word "consideration" in Section 2(d) of Contracts Act, 1950 appears extensive enough to cover past consideration is good consideration. It provides that if the act done was at the desire of the promisor, then such act would constitute consideration, even if the act done was prior to the promise.



1.(iv)Under Section 26(a) of Contracts Act, 1950, an agreement made on account of natural love and affection would be held to be binding in Malaysia if it is expressed in writing; it is registered; or the partires stand in a near relation to each other.


2.(i) Intention to create legal relation is defined as the intention to sue or be sued and other parties cannot carry out the contract. Social and domestic agreement is not usually legally binding unless the words used or the conduct of the parties suggest otherwise - Merritt v. Merritt.


There are three types of agreements under social and domestic agreement, they are:

- Agreement between husband and wife
-when promise is made when the husband and wife are close, there is no intention to sue-
Balfour v. Balfour
-when promise is made when the husband and wife are not close, there is intention to sue -
Merritt v. Merritt

- Agreement between parent and child
-Jones v. Padavatton - The mother promised her daughter to give her the apartment if she
went to London. However they quarrelled and the mother asked her daughter to leave the
house. The daughter wanted to sue the mother but failed to do so because the agreement is
made when they are close, therefore they have no intention to sue.

- Agreement between friends or remote members of the family
- Simpkins v. Pays - when the party provide consideration in expectation of sharing the prize,
the party has the intention to sue.
- Parker v. Clarke - when the party provide consideration for transferring from a city to
another, there is intention to sue.


2.(ii) The parties entering into the agreement intend to create legal relations, except Appleson v. Littlewood Ltd.- where there is a clause in the contract, stating that whenever there is any problem, the party cannot sue.


3. The intention to create legal relation is defined as the intention to sue or be sued and other parties cannot carry on the contract. This is a social and domestic agreement because it is agreement between husband and wife.


Under the principle to social and domestic agreement, if the promise is made when there is close relation, there is no intention to sue - Balfour v. Balfour; if the promise is made when there is no close relation, there is intention to sue - Merritt v. Merritt. Here, Mulder and Scully are in close relation when they made the agreement, therefore they have no intention to create legal relation. In conclusion, Scully cannot sue Mulder.




4. Privity of contract states that only parties to the contract can sue or be sued. Any third party have no right to do so. For example, A and B made a contract, therefore only A and B can sue or be sued, C cannot sue.




5.When Jane inserted an advertisement in a local newspaper to find her cat, Sayang, is it an offer or invitation to treat? Offer is defined in Section 2(a) of COntracts Act, 1950 as an undertaking of the offeror to be contractually bound in the event of a proper acceptance by the offeree. An invitation to treat is defined as inviting the public to make an offer. Here, it is an unilateral advertisement, therefore it is an offer.

Offer must be clear, definite and certain - White v. Bluett. Here, it is clear, definite and certain because it is Sayang which is identified and the reward is RM 5000. Offer must be communicated under Section 4(1) of COntracts Act, 1950 - Taylor v. Laird. According to Gibbons v. Proctor, plaintiff should have knowledge of the reward before he or she can claim for it. Here, Tom does not have knowledge of the reward of RM5000. Therefore the offer is not communicated to him, so Tom cannot claim for the reward as he is not entitled to the RM5000.




6. When Mr. Welloff agrees to sell his watch worth RM33000 to Mr. Miser for a sum of RM500, is there consideration or not? In Section 26 of COntracts Act, 1950, an agreement without consideration is void. In Section 2(d) of Contracts Act, 1950, as when at the desire of the promisor, the promisee or any other person has done or abstained from doing, such act or promise is called a consideration for the promise.

Consideration need not to be adequate as Explanation 2 to Section 26of Contracts Act, 1950 provides that an agreement is not void merely because the consideration is inadequate. When Mr. Miser paid Mr.Welloff RM500 for the watch worth RM33000, can he do so? Here, Mr. Miser can do so, as long as it must have some kind of value.

Consent must be given freely under Section 10 of Contracts Act, 1950, which means the parties do so freely. According to Section 14 of COntracts Act, 1950, consent is said to be free when it is not caused by either one of the vitiating factors. Here, it seemed that the consent is freely given.


7. Privity of Contract states that only parties to the contract can sue or be sued, which means third party have no right under the contract. Here, Connie cannot sue.

In Section 2(d) of Contracts Act, 1950 as when at the desire of the promisor, the promisee or any other person has done or abstained from doing, such act or abstinence or promise is called a consideration for the promise. HOwever, consideration need not to move from promisee as stated in Section 2(d) of Contracts Act, 1950- Venkata Chinnaya v. Verikatara Ma'ya. In this case,the mother asked the daughter to give money to her two brothers, in return the mother will give some land to the daughter. HOwever, the daughter did not give money to her brothers and the two brothers sued her for breach of contract.

If Bernard had transfered the business to Ali, and then he died. Then, Connie can sue Ali for the RM500 every month because consideration need not to move from the promisee, but any third party. But if Bernard had not transfered his business to Ali yet and then he died, Connie cannot sue because nobody provides the consideration.

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