CONTRACTS ACT 1950

Contracts LAWS OF MALAYSIA REPRINT Act 136 CONTRACTS ACT 1950 Incorporating all amendments up to 1 January 2006 PUBLISHED BY THE COMMISSIONER OF LAW REVISION, MALAYSIA UNDER THE AUTHORITY OF THE REVISION OF LAWS ACT 1968 IN COLLABORATION WITH PERCETAKAN NASIONAL MALAYSIA BHD 2006 1 2 CONTRACTS ACT 1950 First enacted … ... ... ... ... … 1950 (F.M. Ordinance No. 14 of 1950) Revised 1974 (Act 136 w.e.f. 1 July 1974) … … … … … ... … PREVIOUS REPRINTS First Reprint ... Second Reprint ... ... ... ... ... ... ... ... ... 1997 2000 3 LAWS OF MALAYSIA Act 136 CONTRACTS ACT 1950 ARRANGEMENT OF SECTIONS PART I PRELIMINARY Section 1. Short title 2. Interpretation PART II OF THE COMMUNICATION, ACCEPTANCE AND REVOCATION OF PROPOSALS 3. Communication, acceptance and revocation of proposals 4. Communication, when complete 5. Revocation of proposals and acceptances 6. Revocation how made 7. Acceptance must be absolute 8. Acceptance by performing conditions, or receiving consideration 9. Promises, express and implied PART III OF CONTRACTS, VOIDABLE CONTRACTS AND VOID AGREEMENTS 10. What agreements are contracts 11. Who are competent to contract Laws of Malaysia 4 ACT 136 Section 12. What is a sound mind for the purposes of contracting 13. “Consent” 14. “Free consent” 15. “Coercion” 16. “Undue influence” 17. “Fraud” 18. “Misrepresentation” 19. Voidability of agreements without free consent 20. Power to set aside contract induced by undue influence 21. Agreement void where both parties are under mistake as to matter of fact 22. Effect of mistake as to law 23. Contract caused by mistake of one party as to matter of fact 24. What considerations and object are lawful, and what not Void Agreements 25. Agreements void if considerations and objects unlawful in part 26. Agreement without consideration, void, unless— (a) it is in writing and registered; (b) or is a promise to compensate for something done; (c) or is a promise to pay a debt barred by limitation law 27. Agreement in restraint of marriage void 28. Agreement in restraint of trade void Exception 1—Saving of agreement not to carry on business of which goodwill is sold; Exception 2—of agreement between partners prior to dissolution; Exception 3—or during continuance of partnership 29. Agreements in restraint of legal proceedings void Exception 1—Saving of contract to refer to arbitration dispute that may arise Exception 2—Saving of contract to refer questions that have already arisen 30. 31. Agreements void for uncertainty (1) Agreements by way of wager void (2) Exception in favour of certain prizes for horse racing Contracts 5 PART IV OF CONTINGENT CONTRACTS Section 32. “Contingent contract” 33. Enforcement of contracts contingent on an event happening 34. Enforcement of contracts contingent on an event not happening 35. When event on which contract is contingent to be deemed impossible, if it is the future conduct of a living person 36. (1) When contracts become void which are contingent on happening of specified event within fixed time (2) When contracts may be enforced which are contigent on specified event not happening within fixed time 37. Agreement contingent on impossible events void PART V OF THE PERFORMANCE OF CONTRACTS Contracts which must be Performed 38. Obligation of parties to contracts 39. Effect of refusal to accept offer of performance 40. Effect of refusal of party to perform promise wholly By whom Contracts must be Performed 41. Person by whom promise is to be performed 42. Effect of accepting performance from third person 43. Devolution of joint liabilities 44. (1) Any one of joint promisors may be compelled to perform (2) Each promisor may compel contribution (3) Sharing of loss by default in contribution 45. Effect of release of one joint promisor 46. Devolution of joint rights Time and Place for Performance 47. Time for performance of promise where no application is to be made and no time is specified 48. Time and place for performance of promise where time is specified and no application to be made Laws of Malaysia 6 ACT 136 Section 49. Application for performance on certain day to be at proper time and place 50. Place for performance of promise where no application to be made and no place fixed 51. Performance in manner of at time prescribed or sanctioned by promisee Performance of Reciprocal Promises 52. Promisor not bound to perform unless reciprocal promisee ready and willing to perform 53. Order of performance of reciprocal promises 54. Liability of party preventing event on which contract is to take effect 55. Effect of defaults as to that promise which should be first performed, in contract consisting of reciprocal promises 56. (1) Effect of failure to perform at fixed time, in contract in which time is essential (2) Effect of failure when time is not essential (3) Effect of acceptance of performance at time other than that agreed upon 57. (1) Agreement to do impossible act (2) Contract to do act afterwards becoming impossible or unlawful (3) Compensation for loss through non-performance of act known to be impossible or unlawful 58. Reciprocal promise to do things legal, and also other things illegal 59. Alternative promise, one branch being illegal Appropriation of Payments 60. Application of payment where debt to be discharged is indicated 61. Application of payment where debt to be discharged is not indicated 62. Application of payment where neither party appropriates Contracts which need not be Performed 63. Effect of novation, rescission and alteration of contract 64. Promisee may dispense with or remit performance of promise 65. Consequences of rescission of voidable contract Contracts 7 Section 66. Obligation of person who has received advantage under void agreement, or contract that becomes void 67. Mode of communicating or revoking rescission of voidable contract 68. Effect of neglect of promisee to afford promisor reasonable facilities for performance PART VI OF CERTAIN RELATIONS RESEMBLING THOSE CREATED BY CONTRACT 69. Claim for necessaries supplied to person incapable of contracting, or on his account 70. Reimbursement of person paying money due by another, in payment of which he is interested 71. Obligation of person enjoying benefit of non-gratuitous act 72. Responsibility or finder of goods 73. Liability of person to whom money is paid, or thing delivered, by mistake or under coercion PART VII OF THE CONSEQUENCES OF BREACH OF CONTRACT 74. (1) Compensation for loss or damage caused by breach of contract (2) Compensation for failure to discharge obligation resembling those created by contract 75. Compensation for breach of contract where penalty stipulated for 76. Party rightfully rescinding contract entitled to compensation PART VIII OF INDEMNITY AND GUARANTEE 77. “Contract of indemnity” 78. Rights of indemnity holder when sued 79. “Contract of guarantee”, “surety”, “principal debtor”, and “creditor” 80. Consideration for guarantee 81. Surety’s liability 82. “Continuing guarantee” 83. Revocation of continuing guarantee Laws of Malaysia 8 ACT 136 Section 84. Revocation of continuing guarantee by surety’s death 85. Liability of two persons, primarily liable, not affected by arrangement between them that one shall be surety on other’s default 86. Discharge of surety by variance in terms of contract 87. Discharge of surety by release or discharge of principal debtor 88. Discharge of surety when creditor compounds with, gives time to, or agrees not to sue principal debtor 89. Surety not discharged when agreement made with third person to give time to principal debtor 90. Creditor’s forbearance to sue does not discharge surety 91. Release of one co-surety does not discharge others 92. Discharge of surety by creditor’s act or omission impairing surety’s eventual remedy 93. Rights of surety on payment or performance 94. Surety’s right to benefit of creditor’s securities 95. Guarantee obtained by misrepresentation invalid 96. Guarantee obtained by concealment invalid 97. Guarantee on contract that creditor shall not act on it until co-surety joins 98. Implied promise to indemnify surety 99. Co-sureties liable to contribute equally 100. Liability of co-sureties bound in different sums PART IX OF BAILMENT 101. “Bailment”, “bailor” and “bailee” 102. Delivery to bailee how made 103. Bailor’s duty to disclose faults in goods bailed 104. Care to be taken by bailee 105. Bailee when not liable for loss, etc., of thing bailed 106. Termination of bailment by bailee’s act inconsistent with conditions 107. Liability of bailee making unauthorized use of goods bailed 108. Effect of mixture, with bailor’s consent, of his goods with bailee’s 109. Effect of mixture, without bailor’s consent, when the goods can be separated Contracts 9 Section 110. Effect of mixture, without bailor’s consent, when the goods cannot be separated 111. Repayment by bailor of necessary expenses 112. Restoration of goods lent gratuitously 113. Return of goods bailed, on expiration of time or accomplishment of purpose 114. Bailee’s responsibility when goods are not duly returned 115. Termination of gratuitous bailment by death 116. Bailor entitled to increase or profit from goods bailed 117. Bailor’s responsibility to bailee 118. Bailment by several joint owners 119. Bailee not responsible on re-delivery to bailor without title 120. Right of third person claiming goods bailed 121. Right of finder of goods; may sue for specific reward offered 122. When finder of thing commonly on sale may sell it 123. Bailee’s particular lien 124. General lien of bankers, factors, wharfingers, advocates and policy brokers Bailments of Pledges 125. “Pledge”, “pawnor” and “pawnee” 126. Pawnee’s right of retainer 127. Pawnee not to retain for debt or promise other than that for which goods pledged. Presumption in case of subsequent advances 128. Pawnee’s right as to extraordinary expenses incurred 129. Pawnee’s right where pawnor makes default 130. Defaulting pawnor’s right to redeem 131. Pledge by possessor of goods, or of documentary title to goods 132. Pledge where pawnor has only a limited interest Suits by Bailees or Bailor againts Wrongdoers 133. Suit by bailor or bailee against wrongdoer 134. Apportionment of relief or compensation obtained by such suits Laws of Malaysia 10 ACT 136 PART X AGENCY Appoinment and Authority of Agents Section 135. “Agent” and “principal” 136. Who may employ agent 137. Who may be an agent 138. Consideration not necessary 139. Agent’s authority may be expressed or implied 140. Definitions of express and implied authority 141. Extent of agent’s authority 142. Agent’s authority in an emergency Sub-agents 143. When agent cannot delegate 144. “Sub-agent” 145. (1) Representation of principal by sub-agent properly appointed (2) Agent’s responsibility for sub-agent (3) Sub-agent’s responsibility 146. Agent’s responsibility for sub-agent appointed without authority 147. Relation between principal and person duly appointed by agent to act in business of agency 148. Agent’s duty in naming such person Ratification 149. Right of person as to acts done for him without his authority. Effect of ratification 150. Ratification may be expressed or implied 151. Knowledge requisite to valid ratification 152. Effect of ratifying unauthorized act forming part of a transaction 153. Ratification of unauthorized act cannot injure third person Contracts 11 Revocation of Authority Section 154. Termination of agency 155. Termination of agency, where agent has an interest in subject-matter 156. When principal may revoke agent’s authority 157. Revocation where authority has been partly exercise