Unfair Contract Terms In Malaysia

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Unfair Contract Terms In Malaysia

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Unfair Contract Terms In Malaysia

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Question:
With reference to the Malaysian Contracts Act 1950 and case laws, critically discuss the law on capacity to enter into contracts and give your brief opinion on the fairness of such laws in Malaysia.

Answer:

Introduction
Contract law is the branch of law that deals with the legalities concerned with the enforcement and execution of contracts. A contract is an agreement signed between two parties that is enforceable by competent court of law. All contracts are agreements but not every agreement is a contract (Andrews 2015).
The literal meaning of the capacity to contract implies the competency to enter into contract as established by the legal provisions concerned. As imbibed from Section 11 of the Malaysian Contracts Act of 1950, a person is competent to enter into a contract on the basis of having a sound mind and should have attained the age of majority during the time the contract in question is being enforced or executed. The Age of Majority Act of 1971 states that a person in Malaysia below the age of eighteen years is a minor. Section 12 of the Malaysian Contracts Act of 1950 prescribes that a person not having a fitness of mind cannot make a contract.
Minors into contract
Section 11 of the Malaysian Contracts Act of 1950 envisages that a person who is a minor cannot enter into a contract that is enforceable by a court of competent jurisdiction. With reference to the provisions envisaged in Section 2 of the Age of Majority Act of 1971, any person below the age of eighteen years is considered a minor. Sub-section 2 of Section 3 of the Age of Majority Act of 1971 further states that the date of attainment of majority is determined as per the eighteenth birth anniversary of the respective person (Furmston and Philip 2017). In order to lend money to a minor, the welfare of the minor is to be determined (Graw 2012). Such kind of welfare may include creating a trust with an objective to entitle the minor, hereditary rights for the minor with reference to property ownership and possession as per the law. Additionally, making an investment plan in the name of the minor for future benefits and fulfilling any kind of necessity of minor through monetary funding such as education is also a kind of a welfare for a minor(Mousavi et al. 2013). The provisions relating to the welfare of minor are envisaged in Section 69 of the Malaysian Contracts Act of 1950 that state that another person with reference to the enforcement of the contract represents a person who is incompetent to enter into a contract. However, such terms and conditions in the contract should be intended to fulfill the necessities of the incompetent person concerned (Kuak,Ying and Tay 2012). In the case of Mohori Bibee versus Dharmodas Ghose, the Privy Council held that a minor could not be compelled to return money that is lent as a loan and the mortgage was not valid since a minor is not in the capacity to enter into a contract. In the case Government of Malaysia versus Gurcharan Singh and Others, it was held that any contract where a minor enters upon is a void contract. If a minor misrepresents age while making a contract, such contract is not valid since a minor is not a competent person as far as making a contract is concerned with reference to Section 11 of the Malaysian Contracts Act of 1950. In Malaysia, the age of marriage is twenty-one years. However, people at the age of eighteen years are eligible for marriage subject to parental consent. Muslim girls in Malaysia can marry at the age of sixteen years on obtaining approval from the concerned sharia authority (Zainudin et al. 2013).

Majors into contract
In addition to being major by attaining the age of eighteen years with reference to the provisions envisaged in Section 11 of the Malaysian Contracts Act of 1950 and Section 2 of the Age of Majority Act of 1971, soundness of mind is also essential in order to be competent to enter into contract (Poole 2016). Such provision for soundness of mind is envisaged in Section 11 of the Malaysian Contracts Act of 1950. Section 12 of the Malaysian Contracts Act of 1950 implies that a person of unfit mind is not competent to enter into contract due to the possible misjudgments to be made with reference to the rationale behind the said contract (Turner 2013). The essentials of a valid contract include offer and acceptance, consent which is obtained freely, consideration and a purpose to create relations that are legally binding to the parties to the contract. Clause (a) of Section 2 of the Malaysian Contracts Act of 1950 implies that obtaining an approval of a person (known as promisee) by another person (known as promisor) for willingness to perform the act in question is known as offer. Clause (b) of Section 2 of the Malaysian Contracts Act of 1950 implies that sanction of the offer by the promisee is known as acceptance. Clause (b) of Section 2 of the Malaysian Contracts Act of 1950 implies that a consideration in a contract is something that is done by a promisee at the discretion of the promisor for a specific purpose. Section 13 of the Malaysian Contracts Act of 1950 implies that if two or more people being signatories to a contract conclude over the same thing, they are deemed to be consenting with reference to the terms and conditions enshrined in the said contract. Section 13 of the Malaysian Contracts Act of 1950 implies that a consent that is not approved by coercion, undue influence, fraud, misrepresentation or mistake is said to be a free consent. Objective to create legal relations between the parties would be deemed as fit when presumed so by a court of competent jurisdiction established by law.

In the case of Carlill versus Carbolic Smoke Ball Company, the Court of Appeal at England and Wales held that an advertisement in a newspaper with reference to compensation is a unilateral proposal that could be accepted by any relational human being who is a regular reader of the said newspaper.
Limited corporations into contracts
A pre-incorporation contract is a type of contract that is made by a corporation or a representative of the corporation before the incorporation of such a corporation. In Malaysia, a pre-incorporation contract is not valid as per law (Amin 2013). However, such kind of contract can per ratified as per Sub-Section 1 of Section 35 of the Companies Act of 1965. In order to for a pre-incorporation contract with reference to the formation of a company, there should be a promoter who would take all the necessary actions that are required for the formation such a company or a corporation (Jayabalan 2017).

In the case of Twycross versus Grant and Others, the Court of Appeal at England and Wales held that a promoter is a person who makes decisions with reference to formation of companies and corporations as per the allotted project with an objective to fulfill it. In the case of Tengku Abdullah ibni Sultan Abu Bakr versus Mohammed Latiff bin Shah Mohammed, it was held that a promoter is a person who embarks upon a project for the benefit of others and not solely for self-benefit. In the case of Erlanger versus New Sombero Phosphate Company, it was held by the House of Lords that a promoter of a company or a corporation must act in good faith with reference to the formation and functioning of the corporation or company concerned. This implies that a promoter is in a fiduciary relationship with the corporation or company in question. In the case of Bristol and West building Society versus Mothew, the Court of Appeal at England and Wales held that a fiduciary relationship is build with reference to trust and confidence (McKendrick 2014).
Sub-section 1 of Section 4 of the Companies Act of a 1965 implies that a limited corporation is a company that is restricted by shares or guarantees or both. Since a pre-incorporation contract is not valid as per the law of Malaysia, a limited corporation can only make a contract when it is incorporated as per the provisions relating to the incorporation of a company as enshrined in Sections 14 to 18 of the Companies Act of 1965. Sub-Section 1 of Section 35 of the Companies Act of 1965 implies that a corporation or a person as a representative of a corporation making a contract before the formation of the company, such a contract may be ratified by the company upon the formation of the company (Yousoff et al. 2012).

Conclusion
Therefore, from the above discourse, it can be concluded by stating that the legalities involved with reference to capacity to contract in case of minors, majors and limited corporations in Malayasia. The above discourse also deduces the provisions relating to capacity to enter into contract by a minor, major and a limited corporation. Such kinds of provisions are envisaged in legislations such as The Malaysian Contracts Act of 1950, the Age of Majority Act of 1971 and the Companies Act of 1965. Additionally, case laws with reference to the competency of a person to enter into a contract in case of minors, majors and limited corporations have also been analyzed. Furthermore, the above discourse implies that a minor or a person of an unfit mind cannot enter into a contract that is enforceable by law failing which such a contract shall be deemed void.

References
Amin, Naemah. “Protecting consumers against unfair contract terms in Malaysia: the Consumer Protection (Amendment) Act 2010.” Malayan Law Journal 1 (2013): 1-11.
Andrews, Neil. Contract law. Cambridge University Press, 2015.
Furmston, Michael Philip. Cheshire, Fifoot, and Furmston’s Law of Contract. Oxford university press, 2017.
Graw, Stephen. An introduction to the law of contract. Thomson Reuters, 2012.
Jayabalan, Sheela. “The Role of The Modern Contract Law in The Purview of Consumer Protection.” Jurnal Intelek 12, no. 1 (2017).
Kuek, Chee Ying, and Eng Siang Tay. “Unilateral conversion of a child’s religion and parental rights in Malaysia.” (2012).
McKendrick, Ewan. Contract law: text, cases, and materials. Oxford University Press (UK), 2014.
Mousavi, Shohreh, Behnam Rastegari, and Rohaid Nordin. “Improving the Legal Protection of Child in Conflict with the Law: Reintegration and Rehabilitation into society.” (2013).
Poole, Jill. Textbook on contract law. Oxford University Press, 2016.
Turner, Chris. Contract law. Routledge, 2013.
Yusoff, Sakina Shaik Ahmad, Suzanna Mohamed Isa, Azimon Abdul Aziz, and Ong Tze Chin. “Corporate responsibility via Malaysian contract law, a concern for consumer protection.” Pertanika Journal of Social Sciences and Humanities 20, no. 1 (2012): 227-38.
Zainudin, Tengku Noor Azira Tengku, Anita Abdul Rahim, and Mohamad Afiq Taqiudin Roslan. “Legal Status of a Minor in Giving Consent to Treatment from the Perspective of the Malaysian Child Act 2001.” Academic Journal of Interdisciplinary Studies 2, no. 9 (2013): 278.

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