VOID/VOIDABLE CONTRACT (FREE
CONSENT)
Consent
Free consent is the basis of a contractual relationship.
There must be a meetings of the minds as to the nature
and scope of the contract; ‘consensus ad idem’
Section 10(1):
“agreements are contracts if they are made by the free
consent of parties competent to contract, for a lawful
consideration and with a lawful object, and are not hereby
expressly declared to be void”
Section 13:
“two or more persons are said to consent when they agree
upon the same thing in the same sense”
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Legality
- S.10(1) – an agreement must not be illegal
in order to be valid. An agreement where
the consideration or the object is unlawful is
void.
- S.24 – the consideration or object of an
agreement is unlawful if:
It is forbidden by law;
It is of such a nature that, if permitted,
it would defeat any law
It is fraudulent
It involves or implies injury to the
person or property of another
The court regards it as immoral, or
opposed to public policy
FREE CONSENT / VOIDABLE CONTRACTS
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Coercion (S.15) Undue influence (S.16)
-define -define: domination and obtaining
unfair advantage
-effect: S.19 -effect: S.20
-voidable -voidable
-Cases: -Cases: National Westminster
-Kesarmal s/o Letchman Das v Bank v Morgan
Valiappa Chettiar -Saw Gaik Beow v Cheong
- Chin Nam Bee Dev v Yew Weng & Ors
Tai Kim Choo -Chait Singh v Budin bin Abdullah
Fraud (S.17)
-define: 5 different acts
-effect: S.19 (voidable)
-Case:
-Weber v Brown
-mere silence or non-disclosure
would not constitute fraud
except (contract of insurance)
S.14:
Consent is said to be free if it is not caused by:
Misrepresentation (S.18) Mistake
-define -S.21 (mutual mistake)-effect: void
-misrepresentation of facts only -Raffles v Wichelhaus
-effect: S.19 (voidable) -S.22 (mistake as to law)-valid
-Case: -Case: Seck v Wong & Lee
-Bisset v Wilkinson -S.23 (unilateral mistake)-valid
-Case: Tamplin v James
FREE CONSENT / VOIDABLE CONTRACTS
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Section 14, CA 1950:
Consent must be free. It is said not to be free if caused by:
a) coercion (s.15)
b) undue influence (s.16)
c) fraud (s.17)
d) misrepresentation (s.18)
e) mistake (s.21, 22, 23)
Definition of voidable contract:
Section 2(i), CA 1950:
“An agreement, which is enforceable by law at the option of one or more of the
parties, but not at the option of the other or others, is a voidable contract”
Differences between void and voidable contract.
Void Voidable
- (void ab initio) - In the beginning the contract is
No legal rights and obligations valid but due to occurrence of
exists from the very beginning. certain things the contract
becomes voidable.
void void valid voidable void
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Voidable contracts
1) Coercion
Section 15 (refer)
Cases:
Chin Nam Bee Development v Tan Kim Choo
The respondent purchased a house constructed by the appellant at $29,500. The
respondent later was asked to pay additional $4,000. Issue: whether additional
payment was made voluntarily or under threat. Held: There was coercion under
section 15 because the payment was made under threat.
Kesarmal s/o Letchman Das v Valiappa Chettiar
Held: Transfer of land during Japanese occupation by the orders of Sultan was
invalid. The consent was not freely given, thus the transfer was voidable.
Effect: Section 19, contract is voidable
2) Undue influence
Section 16 (refer)
2 elements of undue influence:
a) one of the parties is in a position to dominate the will of another
b) he uses that position to obtain unfair advantage
Who is in a position to dominate?
Section 16(2):
Where one party:
i) Holds a real or apparent authority over the other- ill. (a)
eg. relationship between father and son
ii) Stands in a fiduciary relation to the other- ill. (b)
eg. relationship between husband and wife, lawyer and client, doctor and
patient.
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iii) Makes a contract with a person whose mental capacity is temporarily or
permanently affected by reason of age, illness, or mental / bodily distress-
ill. (b)
Cases:
National Westminster Bank plc v Morgan
For a relationship of confidence, there is a need to show disadvantage of a contract
to the party being dominated.
Saw Gaik beow v Cheong Yew Weng & Ors
The party alleging undue influence must show that:
a) the other party had the capacity to influence him
b) the influence was exercised
c) its exercise was undue
d) its exercise brought about the transaction
Chait Singh v Budin bin Abdullah
Defendant a borrower who was an illiterate man was sued on a loan at 36% interest
which was an excessive rate. Held there was undue influence.
Effect: Section 20, contract is voidable.
3) Fraud
Section 17:
Fraud includes any of the following acts with intent to deceive …
5 different acts which may constitute fraud:
i) Facts which are not true
ii) Concealment of fact by one who knows it
iii) Promise without intention to perform
iv) Act fitted to deceive
v) Any act/omission that the law declares fraudulent
Case:
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Weber v Brown
Plaintiff sued defendant for damages. Defendant made false and fraudulent
misrepresentation relating to the number of rubber trees. The number of trees
represented was in excess of the number that existed on the estate. Held: the
defendant was liable due to fraudulent misrepresentation.
Effect: Section 19, contract is voidable
Issue of silence: Does silence amount to fraud?
Mere silence is not fraud.
Exceptions:
1- Positive duty to disclose facts (uberrimae fidei) e.g contract of insurance
2- Fiduciary relationship e.g lawyer, client
4) Misrepresentation
Section 18, 3 categories of misrepresentation:
a) Positive assertion which is not true but the maker believes to be true
b) Any breach of duty without intent to deceive that give advantage to person
committing it
c) Causing, however innocently a party to a contract to make a mistake to the
substance of thing i.e: subject of agreement
A false statement of fact made unknowingly and without intention to deceive that
had induced a party to give his consent to a contract
- Misrepresentation may have been made
'innocently' (innocent misrepresentation) where the maker of the
statement honestly believe what he said was true and he has
reasonable grounds to believe what he said was true (S.18(a) CA); or
'negligently' (negligent misrepresentation) where though the maker of
the statement honestly believed what he said was true but he had no
reasonable grounds to believe what he said was true (S.18(b) CA)
Silence does not amount to misrepresentation unless
- he was under duty to make a statement; or
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- silence is equivalent speech
Where consent obtained by misrepresentation - contract voidable at the option of
party deceived (S.19(1) CA) unless
If truth could have been discovered by ordinary diligence, contract not voidable
(explanation to S.19 CA)
- remedies for misrepresentation and fraud
S.19(1) CA - avoid the contract by rescinding (terminating) it; or
S.19(2) CA - affirm the contract (continue with the contract)
S.65 & S.66 CA - if contract rescinded, parties must be restored to their
original positions by returning any benefits received and payment of
compensation for any loss suffered
Similar remedies of rescission and compensation are also provided under Ss.34 and
37 of the Specific Relief Act 1950
Misrepresentation refers to misrepresentation of fact only and not
misrepresentation as to opinion.
Case:
Bisset v Wilkinson
- sheep- (only misrepresentation as to opinion. No misrepresentation)
Effect: Section 19, contract is voidable
5) Mistake
i) S.21 CA - mistake will render (make) a contract void where
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it was made by both parties to the contract (bilateral mistake); and
the mistake relates to a matter of fact essential to the contract
RAFFLES v WICHELHAUS
Both parties made a mistake regarding the sale of a cargo of corn arriving in
England on a ship called The Peerless. There were 2 ships by that name that was
arriving in London. Held : contract void since they had made mistakes relating to
the different ships (mutual mistake).
COUTURIER v HASTIE
Both parties made a contract to buy corn they thought was arriving in London on a
ship. Unknown to them, the corn had already been sold off by the ship’s captain.
Held : Contract void since both parties had made a mistake in respect of the
existence of the subject matter of the contract (common mistake).
ii) S.23 CA mistake made by one party only do not affect the contract's validity
(unilateral mistake)
iii) S.22 CA mistake of law in force in Malaysia does not affect a contract's validity
- mistake of the value of a thing which forms the subject matter of a contract does
not affect its validity
LEAF v INTERNATIONAL GALLERIES
The plaintiff bought a painting that he saw in an art gallery thinking that it was a
original. Later he discovered that it was not an original but a copy of the original.
He claimed that he had made a mistake. Held: Mistake as to the value or quality
does not affect the contract’s validity.
Mistake in relation to a signed document
The rule
- where a person having signed a written document, he will be bound to the
document even if he had signed the document under a mistaken belief
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L'ESTRANGE v GRAUCOB
SUBRAMANIAM v RETNAM
The exception
- pleas of 'non est factum' (none of my deed) - mistake caused by illiteracy,
blindness, senility or fraud
FOSTER v MACKINNON
AWANG BIN OMAR v HAJI OMAR & ANOR.
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