CONTACT PAST YEAR QUESTION PDF

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FACULTY OF LAWBACHELOR OF LAWS (HONOURS)LAW 436: LAW OF CONTRACT ISECOND ASSESSMENT (INDIVIDUAL)PREPARED BY:MUHAMMAD ARIFF AZAM BIN NASIR (2020471086)PREPARED FOR:DR SHEELA JAYABALANSEMESTER 12020/2021 SESSIONQUESTION ONEWhether there is a concluded legally binding contract between Grace and Greg al...

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FACULTY OF LAW BACHELOR OF LAWS (HONOURS)

LAW 436: LAW OF CONTRACT I SECOND ASSESSMENT (INDIVIDUAL)

PREPARED BY: MUHAMMAD ARIFF AZAM BIN NASIR (2020471086) PREPARED FOR: DR SHEELA JAYABALAN

SEMESTER 1 2020/2021 SESSION

QUESTION ONE Whether there is a concluded legally binding contract between Grace and Greg although there is no consideration given by Greg. First and foremost, consideration can be defined as when the promise or any other person has done or abstained from doing something, or promise to do or abstain for doing something, at the desire of the promisor in pursuant to section 2(d) of the Contracts Act 1950. As enshrined in section 2(e) of the Act, which defines an agreement as every promise and every set of promises, forming consideration for each other. This is an indication that consideration can be inferred from the promise given in order to form an agreement. In the light of section 26 of the Contracts Act 1950, when there is an absence of consideration from the parties to the contract, the concluded contract is rendered void unless the contract falls under one of the exceptions laid down in the said provision. Section 26 of the Contracts Act 1950 has stipulated three exceptions where the agreement is still valid although it is formed without the presence of the consideration. Firstly, the contract is formed on the foundation of the natural love and affection. Secondly, the contract is a promise to compensate for something done. Thirdly, the agreement is a promise to pay debt barred by limitation law. It is pertinent to set forth the requirements that must be abide by the parties to contract if they want to conclude the contract without the consideration which alludes the contract falls under the exceptions. Primarily, in pursuant to section 26(a) of the Contracts Act 1950, for the exception of the contract is made on the basis of the natural love and affection, there are few main requirements that must be satisfied which are the agreement is expressed in writing and registered under the law for the time being in force, completed on account of the natural love and affection and finally, the parties stand in a near relation to each other. These pre-requisites are elucidated in the case of Queck Poh Guan (as Administrator of the Estate of Sit Kim Boo, dec) v Quick Awang 1, where the one-third of portion of the land of the deceased who was a mother to the defendant was transferred to the defendant. It is disputed by the plaintiff who was the administrator for the estate of the deceased, that the deceased had failed to satisfy the pre-requisites stipulated in section 26(a) of the Contracts Act 1950. It was ruled by the court that the relationship between a parent and a child will be presumed that there is an essence of natural love and affection, which the modest evidence adduced pertaining to their relationship will buttress this presumption. The defendant who was

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[1998] 3 MLJ 388

the son to the deceased had assumed greater accountability and responsibility by taking care of his deceased mother than the plaintiff and other children, who are not even aware and ignorant in regards with the ailment that was endured by the deceased. Hence, the transfer of the land as a gift from a mother to a son, made for the sake of natural love and affection is valid. The emphasis about this matter can be seen in the case of Kwan Teck Meng & Ors v Liew Sam Lee 2, there is an execution of a memorandum drafted by a father, Kuan Leong Kim who was willing to transfer his title rights and interests in the land to his four sons, daughterin-law and a trustee for his youngest son. Unfortunately, the father had passed away and the registration of the transfer of the land had effectively taken place on 20th September 1957. The evidence advanced by the transferee specifies that the transfer was made on the basis of it being a gift albeit they gave no money. The court had inspected the evidence adduced and had ruled that the transfer of the said land was made on account of natural love and affection between the parties concerned through a gift. The implication that can be derived from this case is that notwithstanding the fact that there is no payment on the behalf of parties to the contract, the contract made on the foundation of the natural love and affection would still be valid. On a further note, the enforceability and validity of family agreements executed on account of natural love and affection have been conferred in the case of Tang Meng Hock v Tang Ming Seng3. In this case, the late father named the defendant as the executor in his will. Subsequently, there was a family agreement drafted and written between the defendant and the plaintiff, his younger brother after the death of their father. By virtue of the written agreement, the sum of RM60,000 cash, an unit apartment and a piece of land would be supposedly granted to the plaintiff on account of natural love and affection if the plaintiff is silent pertaining to the estate of the deceased father with not claiming anything. It is resisted by the defendant to honor the agreement which is to bestow the plaintiff with the cash, apartment and land as the transfer of the land was not executed by the defendant. The defendant in his moot, had contended that the contract was void due to the vagueness and ambiguity of the said contract which was made with the absence of consideration as it was made on the basis of natural love and affection. However, the Court of Appeal expounded that the intention to create legal relation exists because the moot that has been put forth by the defendant can be refuted with the fact that the use of the words in the agreement which was prepared and witnessed by an advocate and solicitor was specific, clear and unambiguous enough. Thus, it is an acclaimed notion that the

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[1963]1 MLJ 333 [2010] 1 CLJ 208

position in Malaysia in regards with the contract made on the account of natural love and affection is affirmed to be valid. Since the parties in this case were biological brothers, it is proved that the parties stand in a near relation to each other conforming to section 26(a) of the Contracts Act 1950. In a nutshell, the contract was valid and enforceable. However, the confusion vis-à-vis the meaning of “near relation” is becoming perplexing if the relationship between parties surpasses the immediate family relationships. This can be depicted in an astounding case of In Re Tan Soh Sim, Deceased; Chan Lam Keong and 4 Others v Tan Saw Keow and 3 Others4, one Tan Soh Sim had no capability to write a will as she was too frail and feeble on the deathbed. Later, one Tan Boey Kee, a second wife of her husband, informed Tan Soh Sim’s legal next-of-kin in respect of the testamentary intention of Tan Soh Sim whereby all claims to Tan Soh Sim’s state should be renounced on the side of her four adopted children and Tan Boey Kee. This was agreed by her legal next-of-kin when the document composed and drafted by a solicitor to renounce the said claim was signed by her legal next-of-kin. The act of rationing out Tan Soh Sim’s estate after her death has caused a turmoil. The issue before the court is whether Tan Soh Sim’s legal next-of-kin are deemed to be the parties who stand in a near relation with Tan Soh Sim’s four adopted children and Tan Boey Kee. The court’s ruling was that the document signed by the Tan Soh Sim’s legal nextof-kin did not constitute any contract as there is no natural love and affection between the parties because the pre-requisite of the parties standing near to each other as enshrined in section 26(a) of the Contracts (Malay) Ordinance 1950 (which is pari materia with the Contracts Act 1950) is not proved. In ascertaining the terms ‘relationship’ and ‘nearness’, the establishment of these two terms must be in alignment with the mores of the groups under which the parties affiliate and in respect of the circumstances of the family involved. The court in this case has divulged that the position of the Tan Soh Sim’s legal next-of-kin is related to the four adopted children, yet it does not make them stand near to those four children due to the fact that the relationship is very limited and special. Not only that, the remoteness of the relationship between them and Tan Boey Kee is also more eminent than the relationship between them and the four adopted children. Thus, it can be deduced here that the mere relationship will not guarantee that the requirement of the section 26(a) of the Contracts Act 1950 to be satisfied.

4

[1951] MLJ 21

By adopting the legal principles from the above relevant authorities to the instant case, as per section 2(d) of the Contracts Act 1950, there is a valid consideration as she promised to grant her son, Greg with a piece of land. As promisee, Greg has obviously failed to fulfill the elements of consideration as he will be paying no money to her mother, Grace. Albeit the general rule is that the contract that is concluded between promisor and promise which is not coupled with consideration from both parties is deemed to be invalid and not enforceable by the court, there are few circumstances that permit the contract to be made without no consideration. In the instant case, it is pivotal to presume that the agreement that can be concluded between Grace and Greg may fall under the contract made on account of natural love and affection as stated in section 26(a) of the Contracts Act 1950. However, there are few pre-requisites that need to be satisfied by Grace if she wants to grant her son a piece of land in pursuant to section 26(a) of the Contracts Act 1950. First and foremost, Grace should have expressed this agreement in writing by perhaps meeting with her counsels to draft an agreement between her and Greg. Not only that, as the law governing the transfer of the land in Malaysia is The National Land Code, she may issue a land title to Greg so Greg can hold legal ownership or proprietary of the said land. This will fulfill the pre-requisite which obliges the parties to register such agreement under the current law. Another pre-requisite that must be given attention by Grace is that there must be an existence of the near relationship between Grace and Greg and it is undoubtedly that Grace and Greg are standing near to each other due to the fact that the relationship between both of them is mother and son kind of relationship. It is imperative here to follow the judicial precedent in the case of Queck Poh Guan (as Administrator of the Estate of Sit Kim Boo, dec) v Quick Awang5 to establish the relationship between both of them. It is conclusive here that the natural love and affection exists between Grace and Greg as Grace as a lovely mother would love Greg wholeheartedly and Grace is not at fault to bestow Greg a piece of land as a gift to express her love and kindness towards her son, Greg. Despite the fact that Greg has not provided any consideration such as no payment is made, the law as ruled in the case of Kwan Teck Meng & Ors v Liew Sam Lee 6 has acknowledged a gift from the parents which in this case, it is obvious that Grace wants to give Greg a piece of land as a gift. Thus, there should be no dispute arises pertaining to the absence of consideration from Greg. It is of view to distinguish the case of In Re Tan Soh Sim,

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[1998] 3 MLJ 388 [1963]1 MLJ 333

Deceased; Chan Lam Keong and 4 Others v Tan Saw Keow and 3 Others7 as the relationship between Grace and Greg which alludes the relationship between a biological mother and a biological son is not just a mere relationship, but it is a relationship which the parties stand near to each other and the mother, without a shadow of doubt, would love her own son more than her own relatives or mere strangers. Last but not least, in demonstrating the intention to create a legal relation, the precedent in the case of Tang Meng Hock v Tang Ming Seng must be upheld. Grace, as a mother must consult with the lawyers to draft an unequivocal and clear terms in the agreement pertaining to the transfer of land as a gift to her son, as the ambiguity and vagueness of the agreement would render the contract invalid. Owing to these reasons, the clear terms that are agreed and made by both parties would indicate that there is an intention from both parties to be legally bound to the agreed contractual obligations. By having said this, although there is no payment provided from Greg, Grace has to honor the said terms. This is due to the fact there should be no consideration on the part of Greg as the agreement is concluded on the basis of natural love and affection. Therefore, even though the transfer of land was made on account of natural love and affection, it is of importance to put the contract in black and white to ascertain the intention of parties which are Greg and Grace. In conclusion, the contract between Grace and Greg can be valid as Malaysian position has authorized the court to enforce the agreement made on the foundation of natural love and affection only if the requirements under section 26(a) of the Contracts Act 1950 are satisfied.

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[1951] MLJ 21

QUESTION TWO The pertinent issue here is whether Rizuan has obligation towards Krishan to pay the balance of RM 2,500 which the original debt was RM 10,000 in spite of the fact the payment of RM 7,500 as complete settlement of the said loan paid by Rizuan has been cashed by Krishan. It is of view that the elements of contract in common law do not only encompass elements of offer, acceptance and consideration as the element of intention to create legal relation is also made compulsory to be proved by the parties in order to make the contract enforceable by the courts. By virtue of an absence of intention of the parties to be legally bound, the court cannot enforce such transaction or agreement. Accordingly, with the presence of the intention of the parties to become legally bounds, this alludes that the party is conscious that he or she intends to be sued or to sue another party if the obligation pertaining to the contract is not attained. In determining the presence of intention to create a legal relation, the court has presumed the presence or absence of the intention by scrutinising the nature of the relationship or in unadorned words, types of the relationship. It is presumed by the court that the intention to create legal relation is absent if the relationship is familial or social or domestic relationship. As exemplified by the relationship between a mother and a son, the court has presumed that both parties did not intend to be legally bound by the existence of the said contract. Another few instances of social or family agreement are relationship between spouses and relationship between acquittances. The rationale behind this presumption is to coax individuals to be more accountable and answerable for their domestic and social affairs. Additionally, as there is an escalation of the number of cases being brought before the court for determination, the focal aim of the presumption is to mitigate this grave issue. Contrarily, there are few circumstances that this presumption cannot be invoked which implies that this presumption is rebuttable. One of them is when the parties undertake a substantial commitment which is huge and serious as illuminated in Wakeling v Ripley 8. A sister and her husband were invited by a wealthy man who was her brother to live in Australia in order to take care of him, and the couple had to migrate from United Kingdom to Australia.

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[1951] 51 SR (NSW)

The promise made that the man would be paying the couple as an income and be surrendering his property to the couple upon death. As falling into the sugar-coated promise, the couple agreed and subsequently, the husband had to resign from his stable job in order to relocate. There is a dispute arose and the couple commenced a civil action for the breach of contract. The court was in the favour of the couple as the agreement was perceived to be ‘more than a mere family or social agreement’ as the parties had turned their hands to substantial commitment. In the instant case, the relationship between Krishan and Rizuan is absolutely a relationship between friends as the facts of the case have expressed that Rizuan obtained a loan RM10,000 from a friend, Krishan. If there is a dispute arising between them, and the court will undoubtedly rule that the element of intention to create legal relation is absent and this enunciates that Rizuan and Krishan do not want to face any legal consequences including to be sued or to sue if there is a breach of contractual obligations. Nevertheless, it is essential to note that the presumption cannot be invoked in this circumstance between Rizuan and Krishan which alludes that the presumption is rebutted. In championing the principle that has been laid down in Wakeling v Ripley9, it is noteworthy to heed the substantial commitment which in this case, it requires Krishan to give up his RM10,000 money in order to aid his friend, Rizuan who wants to build his foundation as a fashion designer. The amount of RM10,000 must be perceived as enormous amount of money which the failure of Rizuan paying the loan would take a toll on Krishan. Thus, the issue in regards with the intention to create a legal relation is irrational to be brawled about. It is imperative here to define the meaning of the consideration as statutorily interpreted in Section 2(d) of the Contracts Act 1950. Section 2(d) of the Contracts Act 1950 has construed consideration as when the promisee or any other person has done or abstained from doing something, or promise to do or abstain for doing something, at the desire of the promisor. In a nutshell, consideration is something that is valuable in the eyes of the law on the behalf of the promisee in the hope of exchange of promise from the promisor. Nevertheless, section 64 of the Contracts Act 1950 has endorsed the notion of waiver of performance to be applied here in our country, Malaysia. This is due, Section 64 of the Contracts Act 1950 is spelled out as follows; ‘Every promisee may dispense with or remit,

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[1951] 51 SR (NSW)

wholly or in part, the performance of the promise made to him, or may extend the time for such performance, or may accept instead of it any satisfaction which he thinks fit.’ Briefly, the lesser amount of payment of the debt executed by the debtor or promisor to the creditor or promisee would suffice to make the creditor or promise unable to claim the balance of the said loan. It can be deduced that albeit that a greater sum was payable at the same time and at the same place, the creditor or promisee may accept a lesser sum paid for the debt in satisfaction of the whole sum of the debt. The acceptance of the payment can made via plethora actions such as accepting the cheque or money given by the creditor or promisee. This matter will be further elucidated in Illustration (b) to Section 64 of the Contracts Act 1950 where the amount of debt owed by A to B is RM 5,000 is only paid with the amount of RM 2,000 and this payment of RM 2,000 is already accepted by B in satisfaction of the whole debt of RM 5,000 paid at the time and place at which the RM 5,000 were payable. Hence, it is inferred here that the whole debt is discharged. There is a connotation from both provision and illustration that the creditor or promisee can waive performance of contractual obligation of the debtor, either partly or wholly. This notion is what we call as the waiver of performance. This waiver of performance can be illuminated in the case of Associated Pan Malaysia Cement Sdn Bhd v Syarikat Teknikal & Kejuruteraan Sdn Bhd10, it is asserted by the respondent that it is a failure on the behalf of the appellant to complete the payments due under the contract. Accordingly, the concept of waiver of performance is propounded by the appellant who is a contractor for quarrying works, which is eventually deemed to be a defence, and all allegations are gainsaid by the appellant. Owing to the failure of the payment, the respondent has persistent...