Privity

Capacity
Factors affecting free consent

PARTIES TO CONTRACT

Privity of Contract
GR-only party to contract can sue and be

sued
3rd party x sue/be sued although for his
benefit
S.2(d) though consideration may move
from 3rd party, he x enforce contract
Except in certain situations causing injustice

Schmidt v. Kepong
Prospecting
Offer
RM100

agree
Cut grass
C
(3rd party)

Capacity to contract

S.10(1) : Agreement are contract if made

-by free consent
-competent party
-for lawful consideration
-with lawful object
-and x declares as void

S.11 : who is competent?

-age of majority
-sound mind
-x disqualified e.g. bankrupt

Age of majority
Person attaining age of majority can affect a

valid contract
S.2 of Age of Majority Act 1971 : 18yrs
Below 18 = minor
Contract made by minor is void

Sound mind
S.12 : defines sound mind

-can understand the nature & effects of

contract
-at the time of contract
Temporary sound mind can make contract

consent

S.13
-2 or more persons
-agree upon same thing
-in the same sense

S.14
-consent is free when x affected by
-coercion
-undue influence
-fraud
-misrepresentation
-mistake

Who can make valid contract?

Adult above 18 years old

Sane
qualified

Indicate that party consents to the contract

Issue of minor

General rule:
Contracts made by minor are void
Mohari Bibee v. Dhurmodas Ghose (1903)
-minor x make a valid contract
Tan Hee Juan v. Teh Boon Keat (1934)
-Transfer of land by minor was void

Exceptions:

-contracts for necessaries

-contract of scholarship
-contract of insurance

Contract for necessaries

Necessaries: essential things to existence and

reasonable comfort, e.g. food, clothes

Luxurious things are excluded
Government of Msia v. Gucharan Singh

-education is included under necessaries

Contract for necessaries

S.69 : allows the supplier to be reimbursed

from minors property

Conditions :
1. Necessaries actually supplied
2. Claim reasonable amount
3. Minor is x personally liable obliged to pay it
If only he has property

Contract of Insurance
16 years above: can make insurance contract
10 years 16 : with guardians consent

Coercion
S.15 do/threat to do any act forbidden by Penal

Code
-unlawful detaining/ threat to detain any property
-with intention to cause him to enter into any
agreement
Applicable where PC is not applied, e.g. threat to kill
on high seas
Kesarmal s/o Letcman Das v. Valiappa Chettiar
-consent x freely given, thus agreement was

voidable

Undue Influence
S.16 influence by one of dominant position

to obtain unfair advantage

Alcard v. Skinner
-gifts of stock & will to spiritual advisor were
voidable

Fraud
S.17 deceitful act which induce person to

make a contract
E.g. selling a vicious horse
Wong Cheong Kong v. Prudential Assurance
-involved alleged fraudulent insurance claim

Misrepresentation
S.18 : causing a person to make contract by

making false representation

Peek v. Gurney
-appellant sued promoter of Co
-purchase shares of Co after relying on false

statement in the prospectus

Fraud v. Misrepresentation
Misrepresentation

-maker believe that representation is true

-no intention to cause misrepresentation
Fraud

-maker himself x believe in the truth

-have intention to cause misrep & cheating

Mistake
When make a contract under some

misunderstanding in certain circumstances

Can allege that the contract is defective coz if
they had known the true facts, would never
entered into the agreement
S.21,22 and 23

1) Common Mistake
Both parties make mistake to a fact which is fundamental

to agreement
E.g. both unaware tt SM had already perished at the time of
contract
Effect there is consent, but because of mistake, consent is
nullified. Mistake nullify consent

Oh Hiam v. Tham Kong

-oral contract for sale of rubber land in Gombak
-written contract include a land and house in Setapak
-held : set aside coz x intention to buy Setapak property

2) Mutual Mistake
Parties misunderstand each other & at a

cross-purpose
E.g.
Ali intends to offer his Proton Saga Sedan for
sale
But Bala believes that the offer relates to
Proton Aeroback also owned by Ali

3) Unilateral Mistake
Only 1 party is mistaken
The other party knows of the mistake
E.g. Ali agrees to buy from Bala a specific

picture which Ali believes to be a genuine Lat.

But in fact, it is painted by an amateur artist,
Cico
If Bala ignorant of Alis erroneous belief = MM
If Bala knows = MM

Effect of Mutual Mistake &

Unilateral Mistake
There is apparent consent

But mistake negatives such consent

In fact, there never is any agreement at all

between the parties

Mistake Of Law
S.22: contract valid

Mistake as to law is no excuse

E.g. Ali and Bala make a contract on

erroneous belief tt a particular debt is barred

by limitation
The contract is not voidable