Elements of a valid contract

Introduction ( 125 words )

We bump into contracts about every twenty-four hours. Contracts are normally being made orally e.g. get oning a train, buying java at a store, purchase fabric at an online shop. However on occasion written contracts are sometimes required, such as when purchasing a auto or an flat. A contract were created because that there is an understanding between two parties which is enforceable by jurisprudence. Offer and credence analysis is a common methodological analysis in contract jurisprudence used to find whether an understanding exists amongst the two parties. The others are consideration and purpose to make legal relationship between parties in organizing a contract. The Law of Contract in Malaysia is governed by the Contract Acts 1950. Section 2 ( H ) 1 provinces that an understanding enforceable by jurisprudence is a contract.

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Elementss of valid contract ( 375 )




When a party or a individual signifies his willingness to come in into a contract with another individual. An offer is the get downing point and the formation of a contract.When one individual signifies to another his willingness to make or to abstain from making anything, with a position to obtaining the acquiescence of that other to the act or abstention, he is said to do a proposal –Contract Act 1950.


When a individual to who an offer has been made to another individual and that individual makes an credence to the offer made. The basic regulation on contract credence is that the individual who made the offer and the individual who accepted the offer must match with each other.


It is the monetary value of the promises made. For illustration Ahmad sell his auto for RM80k to Ali. In this instance, auto is the consideration of Ali and RM80k is the consideration of Ahmad.


Each undertaking party must hold the capacity to come in into its contract. Such individual must hold reached the age of bulk harmonizing to the Age of Majority Act 1971 and be of sound head at the clip when the contract is made. When the jurisprudence limits a individual for prosecuting the contract, the contract is rescindable for incapacity.


Two parties which enter into a contract must hold confidant relationship between them to make legal dealingss. If there are no purposes between both parties, so there is no purpose to make the understanding. Agreements of a societal or domestic nature do non contemplate legal relationship ; as such they are non contracts.

Free Consent

A individual is deemed non to freely accept to come in into a contract if he is influenced by coercion, undue influence, fraud, deceit and error when come ining into the contract. “Two or more individuals are set to accept when they agree upon the same thing in the same sense” Indian Contract Act, Section 13.


A contract must incorporate conditions which are clear in intending and non obscure or unsure. Contracts which are obscure can non be enforce by jurisprudence. The content of the contract must be clear an apprehensible in unwritten or in Hagiographas.

Valid Object

A contract made must be for affairs which are non against the jurisprudence. There are certain understandings which have been expressly declared nothingness by the jurisprudence such as illegal activities. Some invalid objects illustrations are unnatural events like conveying life from the decease, immoral events or opposed to the public policies.

First Element of Contract: Offer

The first component to represent a valid contract is offer. Some argue that ‘offer’ and ‘proposal’ have similar significances. Some legal expert indicates that the term ‘offer’ and ‘proposal’ have a little different significance. In fact, the word ‘proposal’ which is used in the Malaysian Contracts Act 1950 could hold a broader significance than the word ‘offer’ ( Dr Adnan Trakic ) .

The get downing point in the formation and constitute of a contract is an offer or a proposal. It is an indispensable and of import component of a contract. Without offer or a proposal, contract would non organize. Agreements which are non enforceable by jurisprudence are void and nothingness. The Contracts Act 1950 is a specific Malaysian statute law which governs contracts. The term ‘offer’ has non been defined in this Act, but the term ‘proposal’ has. At first sight, it seems that the significance of an offer and a proposal is the same, but linguistically, every bit good as from a legal point of position, a difference can be drawn between these two footings. The word ‘proposal’ has a instead general significance compared to the word ‘offer’ which is more specific. However, the definition of ‘proposal’ in s 2 ( a ) of the Contracts Act 1950 implies the definition of an offer under Common jurisprudence.

There are two types of offer, one is one-sided and the other one is supply of information. In a one-sided contract, the party who made an offer that makes promise if other party executing a certain act, the offer is accepted when the act is performed. Unilateral instance is shown in the instance of Carlill v Carbolic Smoke Ball Company. In this instance, Carbolic Smoke Ball Co made an advertizement that anyone who, by utilizing their merchandise, ie carbolic fume balls, contracts influenza will be rewarded with $ 100. In fact, they deposited $ 1000 with Alliance Bank exposing the earnestness of their offer. Mrs Carlill used the carbolic fume balls as prescribed and yet she caught influenza. As a consequence of it, she claimed the $ 100 wages. Carbolic Smoke Ball Co contended that there was no adhering contract between the parties as their statement was addressed to the whole universe, and it is impossible to hold a contract with the whole universe. The Court of Appeal observed that the contract can non be concluded with the whole universe, but that an offer can be made to the whole universe, and the parties who come frontward and accept an offer would be in a contractual relationship with the offerer. ( Carlil v Carbolic Smoke Ball Company, 1892 ) .

The 2nd type of offer is bilateral. In a bilateral contract, both parties are bound by their exchange of promises. For illustration, A sell auto to B for RM50k and B will merely purchase auto from A for RM50k if A sell the auto with upgraded athleticss rim. A agreed to sell auto to B for RM50k with upgraded athleticss rim that B requested.

Second Component: Credence

The 2nd component to organize a contract is acceptance. Harmonizing to Contract Act subdivision 2 ( B ) , credence is the concluding look of acquiescence to the footings of an offer. Acceptance is a concluding and unqualified look to the footings of an offer as reference in subdivision 7 of Contract Act 1950. In an credence, the acceptor is agreed to the offer and its footings from the offerer, unless it is a counter-offer. In Hyde V Wrench instance demonstrate that counter-offer naturals the original offer. Wrench offered to sell his farm in Luddenham to Hyde for ?1000, an offer which Hyde declined. On 6 June 1840 Wrench wrote to Hyde ‘s agent offering to sell the farm for ?1000, saying that it was the concluding offer and that he would non change from it. Hyde offered ?950 in his missive by 8 June, and after analyzing the offer Wrench refused to accept, and informed Hyde of this on 27 June. On the 29th Hyde agreed to purchase the farm for ?1000 without any extra understanding from Wrench, and after Wrench refused to sell the farm to him he sued for breach of contract. Under the fortunes there exists no valid binding contract between the parties for the purchase of this belongings. The suspect offered to sell it for ?1000, and if that had been at one time unconditionally accepted there would doubtless hold been a perfect binding contract ; alternatively of that, the complainant made an offer of his ain, to buy the belongings for ?950, and he thereby rejected the offer antecedently made by the suspect. It was non afterwards competent for Hyde to resuscitate the proposal, by tendering an credence of it and that ; hence, there exists no duty of any kind between the parties ( Hyde v Wrench, 1840 ) .

The credence must be communicated, whereby the communicating of the offer is completed once the credences become cognition to the offeree. The credence must be communicated to the offeree, that the individual who made the offer. If another individual accepts the offer on his behalf without his mandate, the credence is non valid. Silence can non be construed as an credence. Example instance Felthouse V Bindley, the offerer can non compose the words “If I Hear no more from you, it means that you have accepted the offer” ( Felthouse V Bindley, 1862 ) .

Third Component: Purpose

Another component to organize a valid contract is purpose with the purpose to make a legal relationship between both or more parties. In a societal or domestic nature in an understanding, the jurisprudence created a given that the understanding does non hold purpose to make a legal relationship. In this 3rd component, there are two types of understanding that frequently used by people which is foremost ; the societal understanding.

Social understandings are normally made by friends or households, without the purpose being enforceable. For illustration kids and parents, a domestic understanding, does non make a legal relationship. In the illustration instance of Merrit v Merrit, the rule rebutted where two partners who formed an understanding over their marital place were non on good footings. Mr. Merritt and his married woman jointly owned a house. Mr. Merritt left to populate with another adult female. They made an understanding ( signed ) that Mr. Merritt would pay Mrs. Merritt a ?40 monthly amount, and finally reassign the house to her, if Mrs. Merritt kept up the monthly mortgage payments. When the mortgage was paid Mr. Merritt refused to reassign the house ( Merrit v Merrit, 1970 ) .

The other type of understanding for this component is concern understandings. Business understandings are treat otherwise than societal or domestic understanding by the jurisprudence. The understanding revoked if grounds is produced that there was clearly no purpose to make a lawfully binding understanding. For illustration the instance Carlill v Carbolic Smoke Ball Co, where the suspect made an excessive claims in advertizement about the ability of their fume ball in forestalling grippe. The advertizement that they advertised in newspaper is that if anyone who, by utilizing their merchandise, ie carbolic fume balls, contracts influenza will be rewarded with $ 100. In fact, they deposited $ 1000 with Alliance Bank exposing the earnestness of their offer. The suspect contended that the advertizement in the newspaper was “a mere puff” and was non intended to make a legal relationship with the populace. However the tribunal rejected this entreaty as the bank sedimentation was a strong grounds that the suspect had intended a legal answerability when they issued their advertizement ( Carlil v Carbolic Smoke Ball Company, 1892 ) .

Fourth Component: Consideration

The 4th component in an understanding or contract is consideration. Consideration is mentioning the monetary value paid in exchange or monetary value agreed for both parties to execute an act. For an understanding to be considered as a contract, it must either be supported by consideration or be a formal contract. As stated in the Contracts Act 1950, when at the desire of promiser, the promise or any other individual has done abstained from making, or does or obtains of making, or promises to make or to abstain from making something such act or abstention or promise is called a consideration for the promise. The promiser is the individual who set abouting to execute the consideration and the other manus the promisee, is the credence of the consideration. Considerations that have already performed is said to be executed. In this component, a mere promise into a contract that jurisprudence will implement. For illustrations, Amir wants to purchase auto from Abu for RM20k and Abu sold the monetary value with RM20k as considered the monetary value is justifiable. Another illustration, Pian agrees to sell his motorcycle to Lin, who agrees to pay RM 1000. If Lin pays the money in return for the motorcycle and the contract is made, so this is a present consideration. If the payment and the transportation ownership of the motorcycle are to take topographic point at a clip after the contract is made, so the consideration is future consideration. If Lin is to buy Pian’s motorcycle for RM 1000 and Pian is to answer on work that Lin performed for Pian last hebdomad, so it is called past consideration. The act that of consideration is already past.


Offer and proposal should be clearly stated in the Contracts Act 1950, whereby the proposal footings should be define as it coverage is broad chance. Although it has similarity to the footings offer, proposal should hold a separate subdivision as counsel for organizing contract.

Recommendation to amend the Contracts Act 1950 by adding proviso ( s ) on standard form consumer contracts. The job with this option is the general nature of the 1950 Act. It does non hold specific commissariats covering with contents or the footings of a contract. A specific statute law on standard form consumer contracts with specific commissariats on signifier and content of the said contract. This method of modulating standard signifier contracts is regarded as the best method for Malaysia, bearing in head the restrictions of other statute laws.

Improvement of communicating illustrations as reference in Section 2 ( 4 ) as modern universe has different type of communicating illustration online societal media. Suggest that utilizing illustration of communicating via Facebook whereby a promiser promise to offer a gift in return if the promise done an agreed act illustration chink on ‘like’ at the page.

The Contracts Act 1950 should hold a better act on protecting the consumers. Therefore while a consumer can now worry less about whether he or she may claim under a faulty contract, the same might non be said for a notice, for illustration, one notice excepting liability for carelessness when utilizing a swimming pool or auto park, for illustration, is non covered, which clearly limits its range to standard signifier contracts, and does non advert notices.

Children below the age of 16 non competent to come in into a contract of employment. This act should add as an exclusion as at least people of age every bit immature as 14 old ages old should come in the contractual of employment. This is because some household may see troubles to go on their lives and kids every bit immature as 14 old ages are capable to work and assist their households. Scholarship contracts besides should amended to 16 old ages old from 18 old ages old. This is because some pupils who have endowments may leap to universities earlier.


It can be concluded that every enforceable contract is based on a common understanding between the catching parties which would non be possible to accomplish without an offer and credence. The treatment of this paper has been limited merely to one of these indispensable elements for the formation of contracts, ie an offer. Furthermore, in order to hold a binding contract, the parties need to come to an understanding. Whether an understanding has been concluded between the parties is a hard inquiry which needs to be determined by the tribunals. Therefore, the tribunals would use the nonsubjective trial in finding whether an understanding has been achieved on both parties. In decision, our jurisprudence is good plenty but it doesn’t recognized a child for enter into a contract. But with some amendment, it will profit the child.



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