ILLEGALITY Case :
Arumugam v Somasundaram
Definition Haji Hamid v Ahmad bin Mahmud
Section 10 of contract Act provides that for Sealdeck Sdn Bhd v Onn Choon Koi
an agreement to be a contract it must be Aroomoogum Chitty v Lim Ah Hang
made out of free consent of the parties of the
contract and the consideration and the object Agreement forbidden by law
of the contract must be lawful and are not 1. Section 24 (a) and (b) of Contract
expressly declared to be void. Further, Act
section 24 lays down situations where the - agreement forbidden by law or if
consideration or the object is considered as permitted would defeat the law
unlawful. - This sections refer to contracts that
are regarded under common law
Lawful consideration - Basically, both subsections refer to
Illustration (a) - (d) section 24 of Contract agreements that are illegal for
Act expressly contravening a statute or
Case : Jurutera Consultant v Eddie Lee Kim any subsidiary legislation or by
Tak implication.
- A court of law will not lend its aid to
Unlawful consideration give effect to such agreements that
Illustration (f) section 24 of Contract Act are forbidden by law
Case : Manang Lim Native v Manang - The word ‘law’ used in S.24(a) and
Selaman (b) is not confined to statutory law
and may include other law, for
Unlawful Object example, principles of Islamic Law,
The word object means design or purpose as illustrated in the following case
Illustration (e) (g) and (h) of section 24 of
Contract Act
Case : i. Section 24 (c ) covers agreements that are
● Nafsiah v Abdul Majid [1969] fraudulent
● Sababumi Sandakan v Datuk Yap - refer Illust (e) and (g)
Pak Leong. Case : Palaniappa Chettiar v Aranusalam
Chettiar
i. Section 24 (a) applies to cases where there
has been an express prohibition against the ii. Section 24 (d) covers agreements that
making of certain contract involve or imply injury to the person or the
Case : property of another.
● Haji Hamid bin Arifin v Ahmad bin 3. S.24 (e) of Contract Act
Mahmud [1976] - Agreement that are immoral/ opposed to
● Foo Say Lee v Ooi Heng Wai [1969] public duty
● Hassan v Ismail [1970] 1 MLJ 20 - Illust (j) & (k) are examples of agreements
● Lim Eng Heng v Lim Sam Keow & that are immoral.
2 Ors [2003] 2 AMR 520 HC - At common law, immorality is confined to
ii. Section 24 (b) applies to cases where the sexual immorality only, but illust (j) seems
object or consideration of an agreement to indicate a wider interpretation of the
would have impliedly contravened certain meaning of immorality in Malaysia.
statutes. Case:
Cases : ● ABDA Air Freight Sdn Bhd v
● Hee Cheng v Krishnan Sistem Penerbangan Malaysia
● Lim Kar Bee v Duofortis Properties ● Oh Thevesa v Sia Hok Chai
Sdn Bhd ● Abdullah Ibni Sultan Abu Bakar v
● Chung Khiaw Bank v Hotel Rasa Mohd Latiff
Sayang
2. Section 24 (c) & (d) of Contract Act
- Agreement involving fraud and causing
injury
Opposed to public duty Case:
The general principle of public policy is that ● SEA Housing Corporation v
no man can lawfully do that which has a Lee Poh Choo
tendency to be injurious to the public ● Hotel Ambassador Sdn Bhd v
welfare Seapower Sdn Bhd
The public policy in one country differs ● Chase Perdana v Md Afendi
from another country - Banque Nationale De bin Hamdan
Paris v Wuan Swee May b. Agreement to stifle prosecution
Case : Theresa Chong v Kin Khoon & Co -illustration (h) section 24 provide an
[1976] example
Case:
Under common law, they recognise five ● Engku Leh v Che Wok
type of agreements that considered void on ● Ooi Kian Inn Charles v
ground of public policy Kukuh Maju Industries
i. The illegal object / (a) illegal by common iv. Injurious to family life [Cover by S.27]
law or by legislation Case: Hamzah bin Musa v Fatimah
- we already have provisions under Zaharah
CA S.24(a) and (b)]
- Case : Amalgamated Steel Mills v v. Economically against the public interest
Ingeback (Malaysia) Sdn Bhd [Cover by S.28]
ii. Injurious to good government - Agreement that defeat the revenue
- Cover by S.31 CA, with regards to laws of the country
agreements by way of wager - Void under section 24 (b) or 24 (e)
- Case : Datuk Ong Kee Hui v Case: Thong Foo Ching v Shinegori Ono
Sinyium AnAK mutit
iii. Interfere with the proper working of the Contracts not affected by illegality
machinery of justice [ Cover by S.29] - when the statute itself saves the
a. Contracting out of statutory contract
provision
- A contract that is prohibited by Remedy
statute does not become void and - S.66 provides the remedy of
unenforceable if the statute itself restitution.
saves the contract or there are i. the agreement is discovered to be void;
contrary intentions and
Case Case : Ahmad bin Udoh v Ng Aik Chong
● Foo Say Lee v Ooi Heng Wai
● Hassan v Ismail ii. the other party has received an advantage
● Rengamah a/p Rengasamy v Tai - The party must restore the advantage
Yoke Lai & Anor [1998] 5 260 HC received or compensate it
Case: NgSiew San v Menaka
Effect of Illegal contract
- an illegal contract is void and Severability
unenforceable under S.24. -Where a contract contains an illegal term,
- The court will not lend it assistance the court may sever* the unlawful part of the
to enforce an illegal contract contract from the lawful part thus leaving
- A court will not show any sympathy the agreement free of any illegality. The
on the party who deliberately make parties can sue on the agreement unaffected
use of a contract to avoid the law by any illegality.
- The contract is still considered void - The general rule is that, where you cannot
even only one part of the sever the illegal from the legal part of a
consideration is void covenant, the contract is altogether void;
Case but, where you can sever them, whether the
● Singma Sawmill v Asian Holding illegality be created by statute or by the
● Chai Sau Yin v Liew Kwee Sum common law, you may reject the bad part
● Ooi Kian Inn Charles v Kukuh Maju and retain the good.
Enterprise -The court may choose to remove the illegal
part and continue the contract
Case : Murugesan v Krishnasamy [1958]
