JUN 2016/ PART B/ Q1

The first issue is whether Pak Busu can be held liable toward Khamis and Sulaiman for
unlawful sell and purchase of land under section 24 (a) of Contract Act 1950?

Section 2(g) of the Contract Acts 1950 provides that “an agreement not enforceable by
law is said to be void” while Section 2(h) provides that “an agreement enforceable by law” is
a contract. Section 10(1) Contract Acts 1950 provides that all 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 not hereby expressly declared to be void”.

Section 24 of the Contracts Act 1950 provides the consideration or object of an

agreement is lawful unless- (a) it is forbidden by a law; (b) it is of such a nature that, if
permitted, it would defeat any law; (c) it is fraudulent; (d) it involves or implies injury to the
person or property of another; or (e) the court regards it as immoral or opposed to public policy.
Therefore, the effect of Section 24 is that agreements which have considerations or objects
which are unlawful are void. Hence, in Pak Busu’s situation, Section 24(a) is the most relevant
provision as it is a question of morality and public policy.

S 24 (a) which is agreements forbidden by law refers to express contraventions of the

law, most commonly provided in statutes. The contract is said to be illegal and unenforceable
under s 24 (a) because it involves consent by both parties to do act prohibited by the statute.
However, it must be ascertained if the statute prohibits/forbids the act which the parties have
contracted to do not whether the statutes prohibits the contract or the making of the contract.

In the case of Haji Hamid Ariffin v Ahmad Mahmud, a case regarding the sale of
Malay Reserve Land. It was held that the sale to the Siamese lady was void ab initio as under
Kedah Malay Reservation Enactment provides that any Reservation land is held under
document of title by Malay. Hence, a transfer towards non-malay cannot be vested. Meanwhile,
in Hee Cheng v Krishnan, it was held that the attempt to sell and purchase the defendant’s
rights under Temporary Occupation Licence is void under s 24 as it is allowed would frustrate
the law.

By applying both of the case into Pak Busu’s situation, under provisions 68 of the
National Land Code provides that TOL (Temporary occupation Licence) is not capable of
transfer or transmission to death. Hence, the act of Pak Busu of selling the land towards Khamis
is illegal as it is contradicted with the provisions 68 of the National Land Code. This is because,
the intent of the parties, to enter into sell and purchase of the defendant’s rights under the
Temporary Occupation Licence is unlawful as if it is allowed would defeat the provisions of
any law. Since, the contract illegal, and the consideration is unlawful, the effect of the contract
is void under section 24 (a).

However, for a contract to be illegal for contravening a statutory provision, there must
be a sufficient nexus between the statutory requirement and the contract as in the Hopewell
Construction Co Ltd v Eastern & Oriental Hotel Sdn Bhd held that, there is nothing in the
Companies Act that prohibits the making of the said contract. However, it is contradicted in
Pak Busu’s situation as it is clearly stated in the provision 68 of the National land Code that
the TOL is not capable of transfer or transmission on death.

In conclusion, Pak Busu may be held liable towards Khamis and Sulaiman for illegal
and unlawful sell and purchase of land under section 24 (a) of Contract Act 1950.

Therefore, can Pak Busu seek relief for void agreements under section 66 of Contract
Acts?

Section 66 gives an advantage under the agreement is bound to restore it or to make

compensation towards whom he received the benefit from. However, the person seeking relief
must not be a party of illegality. The maxim of ex turpi causa non oritur, “he who seeks equity
must come to court with clean hands” is applied here, means, the part seeking relief must not
aware of illegality when the contract was entered to or he subsequently discovered about it.

In the case of Menaka v Lum Kum Chum, it was held that the privy council dismissed
the appeal and confirmed the Federal Court’s decision on the application of s 66 to void
agreements. By applying the case to Pak Busu’s situation, due to the incapability of transferring
the land under provision of s 68 of the national land code, Khamis wants to claim refund of the
full settlement sum. Pak Busu can succeed in obtaining the relief if he can prove that he has no
knowledge about the illegality despite of the said provision or he subsequently knows about
the existence of the provisions that prohibit him from get into sell and purchase agreement of
the land under temporary licence occupation (TOL), however, if Pak Busu knew that the act is
illegal, then he is said to act against the provisions and could not succeed to seeks the relief and
have to pay back the full settlement sum towards Khamis and could not claim back the
commission that he paid to Sulaimans.