The Basic Fundamentals of How a Contract Works

In the case between Allan and the bus conductor, Allan left his folder in the bus and finally the bus conductor voluntary return the folder to Allan. Allan promised that he will reward the conductor with RM500 but in the end he refuses to hand over the reward due to there was no agreement as there was no consideration to support his promise. The bus conductor can actually sue Allan can get the RM500 according to Section 2 (a) Contracts Act 1950 states that “when one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to the act or abstinence, he is said to make a proposal.” The bus conductor is willingness to contact Allan and return him the folder. Also, Under Section 26 (b) Contracts Act 1950 provides that agreement made without consideration is void unless it is a promise to compensate a person who has already voluntarily done something for the promisor. It is a promise to compensate, wholly or in part, a person who has already voluntarily done something for the promisor, or something which the promisor was legally compellable to do. Allan promised to reward the bus conductor with RM 500. Next, consideration is defined by Section 2 (d) Contracts Act 1950 that “When at desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something ,such act or abstinence or promise is called a consideration for the promise. For example; Currie v Misa(1875) [1] . This means that each party must promise to give or do something for the other. Also, past consideration is where anything which has already been done before a promise in return is given which, as general rule, is sufficient to make the promise binding. However, according to English case of Lampleigh v Brathwait (1615) [2] , where it was held that an act originally done at the request of the promisor, a promise made subsequent to doing of that act, was deemed binding since the act constituted consideration. Lastly, refer to Illustration (c) of s26 gives stronger support that past consideration in the circumstances provided constitutes a valid consideration and it is provided that A finds B`s purse and gives it to him. B promises to give A $50. This is contract. The bus conductor founds the Allan folder and the bus conductor return to Allan. Allan then promise to gives the bus conductor RM 500. Thus, the contract is valid between Allan and the bus conductor.

The next case is related to Allan and Sally. In this case, Allan promised to sell his iphone 4 to Sally for RM200 but in the end he refuses to sell because he thinks that his phone is worth more than RM 200 and there is no contract between both of them. According to the Contracts Act 1950, Section 26 illustration (f), which is written,’ A agrees to sell a horse worth RM1000 for RM10. A’s consent to the agreement was freely given. The agreement is a contract notwithstanding the inadequacy of the consideration. In other words, if a person sell his luxury car that worth RM900,000 to another person for RM1, it is still a valid contract. Also, The consideration need not be adequate under Malaysian law. Explanation 2 to Section 26 Contracts Act 1950 provides that an agreement to which the consent of the promisor is freely given is not void merely because the consideration is inadequate; but the inadequacy of the consideration may be taken into account by the court in determining the question whether the consent of the promisor was freely given. In Malaysia, the issue of adequacy of consideration can refer to the case Phang Swee Kim v Beh I Hock (1964) [3] . The adequacy of consideration is without material form or substance, therefore the question which the courts concerned is whether the promisor is making a good or bad bargain. Thus, the contract is valid between Allan and Sally.

Based on the issue of Allan and Abu, Abu found out that the odometer has been tempered with and the true mileage is actually much higher than what Allan had said. Thus, Allan is conducting fraudulent misrepresentation based on Section 17 Contracts Act 1950. Under Section 17 Contracts Act 1950, “fraud” includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent, with intent to deceive another party thereto or his agent, or to induce him to enter into the contract:

(a) the suggestion, as to fact, of that which is not true by one who does not believe it to be true;

(b) the active concealment of a fact by one having knowledge of belief of the fact;

(c) a promise made without any intention of performing it;

(d) any other act fitted to deceive; and

(e) any such act or omission as the law specially declares to be fraudulent

On other hand, it can be tell that Allan is causing Abu to act on a false representation which Allan himself does not believe to be true. One of the early local cases on fraud was the case Weber v Brown [1908]. [4] In the case of Weber v Brown, the plaintiff-respondent sued the defendant- appellant for damages in respect of an alleged false and fraudulent misrepresentation relating to the number of rubber trees on an estate over which the latter had the right of purchase, which right he transferred for valuable consideration to the former. The number of trees represented was in excess of the number which actually existed on the estate. The Court of Appeal agreed with the finding of the lower court that the defendant-appellant had made the alleged misrepresentation falsely and fraudulently, and that it had caused the plaintiff-respondent to acquire and subsequently to exercise the right of purchase. Due to Allan is conducting a fraud; the contract is voidable under Section 19 (1) Contracts Act 1950. Under Section 19 (1) Contracts Act 1950 which is voidability of agreements without free consent, when consent to an agreement is caused by coercion, fraud, or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused. Therefore, Abu should avoid the contract immediately. After the contract is voidable, according to Section 65 Contracts Act 1950 which is consequences of rescission of voidable contract, when a person at whose option a contract is voidable rescinds it, the other party thereto need not perform any promise therein contained in which he is promisor. The party rescinding a voidable contract shall, if he has received any benefit there under from another party to such contract, restore benefit, so far as may be, to the person from whom it was received, Allan must return the RM, 20,000 to Abu, and Abu must return the car to Allan. However, they may be no fraud under Section 17 Contracts Act 1950 if Abu was not influenced by the false statements to buy the car. This can be proven under Section 19 Contracts Act 1950 that a fraud or misrepresentation which did not cause the consent to a contract of the party on whom the fraud was practiced or to whom the misrepresentation was made, does not render a contract voidable. Therefore, the misrepresentation whether fraudulent or innocent is rendered irrelevant if it has not induced or caused the other party to enter into the contract.