L AW OF

CONTRACT
VOID &
VOIDABLE
CONTRACT
 Sec 10 CA “all agreements are contract if they are made
by the free consent of the parties”
 Sec 14(a) CA “there is free consent when it is not
caused by any one or more of the following:
 Coercion
 Undue influence
 Fraud
 Misrepresentation
 Mistake
 Illegality of consideration or object
• Sec 19(1) CA “if consent of the agreement caused by
coercion, fraud or misrepresentation the agreement is
voidable at the option of party suffered
 COERCION
• Definition
Sec 15 CA “coercion is the committing or threatening to commit any act
forbidden by the Penal Code, or the unlawful detaining or threatening to detain,
any property, to the prejudice of any person whatever, with the intention of
causing any person to enter into agreement”
• Effect :Voidable at the option of party effected – Sec 19 CA
• Requirements of coercion
• Case:Teck Guan Trading Sdn Bhd v Hydrotek Engineering (S) Sdn Bhd
• The court held that there are 2 ways in committing coercion
• 1. threatening of an act forbidden by the penal code
• 2. unlawful detention of any property or the threat thereof to the
prejudice of any person
 COERCION
Case: Kanhaya Lal v National Bank of India
Definition of coercion in Sec 15 is limited to unlawful act done “with the
intention of causing the person to enter into an agreement”
Case: Kesarmal s/o Letchaman Das v Valiappa Chettiar
Transfer executed under the orders of the Sultan, issued in the ominous
presence of 2 Japanese officers during Japanese occupation of Malaya was
invalid. The consent was not freely given thus agreement is voidable at the
option of the party suffered.
Economic duress
Case: Pao On v Lau Yin Long
There is nothing contrary to the principle in recognizing economic duress
as a factor which may render the contract voidable, provided always that
the basis of such recognition is that it must always amount to coercion.
 UNDUE INFLUENCE
• Definition
 Sec 16(1)CA “a contract is induced by undue influence where the relations
subsisting between the parties are such that one of the parties in a position to
dominate the will of the other and uses that position to obtain an unfair
advantage over the other”
• Effect : voidable at the option of party effected
• Requirement
• Case: Ragunath Prasad v Sarju Prasad
• 3 matters to be dealt with under section 16(3) CA
• 1. the relations between the parties to each other must be such that
one is in a position to dominate the will of the other
• 2. the issue whether the contract has been induced by undue influence
• 3. the burden of proving that the contract was not induced by undue
influence lies upon the person who was in a position to dominate the will
of the other
 UNDUE INFLUENCE
 To succeed claim for UI, Pltf must show:
 At the time of the contract, there was already a close relationship
between him & the Def. The Def was in a dominant position
 The Def use his dominant position to obtain gift or contract from
the Pltf
 The making of the gift to the Def or the contract entered into was
unfair to the Pltf.
 When it is apparent that a confidential relationship exist between
parties, the law raise the presumption of UI.
 Case: Datuk Jagindar v Tara Rajaratnam
 Since there was a solicitor-client relationship, the law raise the
presumption of UI.
 UNDUE INFLUENCE
Case: Che Som Bte Yip & ors v Maha Pte Ltd & ors
A mortgage deed was set aside in so far as it is affected the Pltf
over whom undue influence was exercised. In this case the
relationship was that of brothers. However, the relationship
does not per se give rise to the presumption of UI. Held: Court
found on the fact that the UI was exercised

Case: Malaysian French Bank Bhd v Abdullah bin Mohd

Yusof
In order to establish UI, the Def have to prove that the Pltf was
in position to dominate their will & thus obtained unfair
advantage by using that position
 UNDUE INFLUENCE
Case: Inche Noriah v Shaik Allie Bin Omar
An old & illiterate malay woman executed a deed of gift of a landed
property in Singapore to her nephew who had been managing her affairs
from day to day.
Held: the law raise the presumption of UI based on the facts relating the
relationship of the nephew & the old woman.
 MISREPRESENTATION
• Definition
• Sec 18 CA define misrep. to include:
The positive assertion in a manner not warranted by the
information of the person making it, of that which is not true,
though he believes it to be true
Any breach of duty which, without an intent to deceive, gives an
advantage to the person committing it, or anyone claiming
under him, by misleading another to his prejudice, or to the
prejudice of anyone claiming under him
Causing, however innocently, a party to an agreement to make a
mistake as to the substance of the thing which is the subject of
the agreement
 MISREPRESENTATION
• Pltf must prove the followings:
A false representation
The representation must be one of fact
The maker addressed the statement to the party
mislead
The maker believes in the truth of the statements
• Effect : voidable at the option of the party effected
 MISREPRESENTATION
• False representation
Positive statement or conduct from which a statement
can be implied
The information must be false
Mere silence of facts is not misrep.
• Doctrine of “caveat emptor” – buyers beware
A party to a contract does not bound to disclose
material facts to the other party
A purchaser must inspect & make inquiries from the
seller about the goods he is proposing to buy
 MISREPRESENTATION
Case: Keates v Lord Cardogan
The Def rent the Pltf a house that the Def knew was in ruinous
conditions. The Def kept silence about that & did not disclose this facts
to the Pltf. Held: Def’s silence does not amount to misrep. Doctrine of
caveat emptor applies

Case: Lau Hee Teah v Hargill Engineering Sdn Bhd

The Appell took a loader on hire-purchase from the Resp. The Appell
purported to rescind the contract alleging that the Resp represented to
him that the loader was a ‘1986 model’ whereas it was manufactured in
1964. Held: the loader was the current model at that time which had
not changed since 1964 & therefore it would not false to say it was of
1968 model. The machine was in fact a new machine.
 MISREPRESENTATION
• Representation must be one of fact
Mere expression of opinion or statement of law is
not fact
Case: Bisset v Wilkinson
Resp agreed to buy from the Appel certain land for
sheep farming. The Resp relied on the Appel statement
that he estimated the land would carry 2000 sheep.
However, the land in fact could carry less than the
said amount. Resp alleged for misrep
Held: the statement was merely an honest opinion and
the sale cannot be set aside for misrep
 MISREPRESENTATION
• Addressed the statement to the party mislead
Case: Peek v Gurney
The Appel purcahsed shares on the faith of false
statements contained in the prospectus issued by the
promoters of the company. The Appel was not the
person to whom the shares had been allotted to.
HOL: the prospectus was addresses to the first
applicants of the shares & it could not be supposed to
extend to others. Since the Appel was not the first
applicants was never allotted with the shares, his claim
for misrep failed.
MISREPRESENTATION
• The maker believes in the truth of the
statement made
The maker believes it to be true although later it
turns out to be false
Basic distinction with fraud
 FRAUD
• Definition
Sec 17 CA defines fraud to include “certain acts that are
committed with intent to deceive another party or to induce him to
enter into contract”
Case: Kheng Chwee Lian v Wong Tak Thong
Where one party induces the other to contract on the face of
representations made to him, anything which untrue, the whole
contract is considered as having been obtained fraudulently
• Effect : voidable at the option of the party effected
 FRAUD
• 5 different acts of defrauder that may
constitute fraud:
Suggestion as to fact of that which is not true by one
who does not believe it to be true
The active concealment of a fact by one having
knowledge of belief of the fact
Promise made without intention of performing it
Any other act fitted to deceive
Any such act or omission as the law specially
declares to be fraudulent
 FRAUD
• Representation as to facts
Similar requirements as to section 18
The difference lies in the state of mind of the maker-he
does not believe it to be true
Case: Kheng Chwee Lian v Wong Tak Thong
Resp bought a half share in apiece of land from the Appel.
The Resp then built a biscuit factory on part of the land
with the knowledge & consent of the Appel. Subsequently,
Appel induced the Resp to sign anor agreement that gave
the Resp smaller share of the land
Held: the Resp had been induced into signing the 2nd
agreement by Appel’s representation which was fraudulent
 FRAUD
• Active concealment of fact
Actively conceals or prevents certain material information from
reaching out the other party to the contract
Case: Horsfall v Thomas
Def bought a canon manufactured for him by the Pltf. The
canon had a defect that made it worthless & the Pltf tried to
conceal the defect inserting metal plug.
Held: there was active concealment done by Pltf with the
intention to deceive the Def
 FRAUD
• Fraudulent promises
Promise made without any intention of performing it
Case: MUI Plaza Sdn Bhd v Hong Leong Bank Bhd
2nd Def was the executive chairman of the bank. He
represented to the Pltf that he would be responsible to
any loss & damage suffered by the Pltf allowing the
bank to remain occupation of the Pltf’s premises.
Held: executive chairman had no actual intention of
fulfilling his representation or was reckless to that at
the time he gave it.
 FRAUD
• Any other act fitted to deceive
Catch-all clause to prevent any fraud escaping from the net
of the law
Case: Loi Hieng Chiong v Kon Tek Shin
Courts could only determine fraud from acts &
circumstances of a particular case. It usually takes the form
of a statement of what is false or a suppression of what is
true. There is a fraud if the design object of a transfer is to
cheat a man
• Act or omission as the law specially declares as
fraud
 MISTAKE
• Definition
Sec 21 CA “when both the parties to an agreement are
under a mistake as to a matter of fact essential to the
agreement, the agreement is void”
Effect : Void & law will not enforce void agreement
• 4 types of mistake
Mistake as to the existence of subject matter
Mistake as to the identity of the subject matter
Mistake as to the quality of the subject matter
Mistake as to the possibility of performing the agreement
MISTAKE
• Mistake as to the existence of subject matter
Subject matter of the agreement had ceased to exist or has
never been in existence all the time
Case: Chop Ngah Seng v Esmail Ahamd Bros
Court held the contract was void as the subject matter of
the contract was never in- existence
 MISTAKE
• Mistake as to the identity of the subject matter
Where one party intends to deal with one thing and
the other party intend to deal with a different one
Case: Chan Yoke Lain v Pacific Orient Insurance
Co. Sdn Bhd
the personal accident insurance contract was void
under Sec 21 CA as the insurers was under mistake as
to the identity of the pro-poser since the signature in
the proposal form was not signed by the proposer
 MISTAKE
• Mistake as to the quality of the subject matter
GR: mistake as to quality will not nullify the consent of the
parties to enter into contract
If the quality is one of the prescribed description in the
agreement, failure to fulfill the prescribed description may
amount to mistake
Case: Bell & anor v Lever Bros Ltd
The compensation contract was valid & enforceable in law
on the ground that the common mistake was not related
to then subject matter but to the quality of the subject
matter i.e quality of the employment contracts of service
 MISTAKE
• Mistake as to the possibility of performing the
agreement
Case: Sheikh Bros Ltd v Ochsner
The Appel and Resp enter into a joint-venture whereby it is
agreed that the Resp need to supply 50 tons of sisal fiber for
sale per month. Resp unable to do so since the leaf potential
for the sisal was insufficient to produce so much monthly
Held: since it was a joint-venture agreement, it was very basis
that the sisal area should be capable of producing 50 tons a
month. There was a mistake as to the possibility performing
the agreement.
 MISTAKE
• Mistake as to law
Sec 22 CA – not voidable
• Mistake made by one party in the agreement
Sec 23 CA – valid
Protect the bona fide purchaser for value without notice
Tamplin v James
Held: There was a valid contract eventhough the defendant had
not look at the plans before making the bid, he knew that the
tenants had enjoyed the use of the gardens.
 ILLEGALITY
• When the consideration of the agreement in unlawful
the agreement is void
• Sect 24 CA spells out the situation of illegal
consideration
 Forbidden by law
 Such of nature, if permitted, would defeat any law
 Fraudulent
 Involves or implies injury to the person/property
 Immoral or opposed public policy
 ILLEGALITY
Case: Chung Khiaw Bank Ltd v Manang Selaman
Supreme court held that an agreement which is a
contract prohibited by statute or contract entered into
to defeat the object of a statute is void (illegal loans
contravening Companies Act).
Case: Aroomoogum Chitty v Lim Ah Hang
Pltf lent money for the Def for the purpose of running a
brothel. The object of the contract is immoral.
Held: Pltf cannot recover the money as no action will arise
from a wrong done
 CONSEQUENCE OF VOID
AGREEMENT

• “ex turpi causa non oritor actio”

The courts will not enforce an illiegal contract