Elements of a valid contract- Business Law


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1.0 Introduction










  1. Introduction

All contracts are understandings but non all understandings are contracts. A contract is a adhering understanding between two or more persons that is enforceable by jurisprudence. The Law of Contract in Malaysia is governed by the Contracts Act 1950. Section 2 ( H ) [ 1 ] provinces that an understanding enforceable by jurisprudence is a contract.

Offer and credence analysis are the traditional attacks used in contract jurisprudence to find whether an understanding exist between two parties. The others are consideration and purpose to make legal relationship between the parties in organizing a contract. Section 10 ( 1 ) [ 2 ] provinces that all understandings 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 are non herewith expressly declared to be null.

  1. Verbal and written contracts

It could be written or even be in unwritten. Contracts can be written by utilizing formal or informal footings, or wholly verbal or spoken. It is a promise made between two or more parties that which allow the tribunals to do opinion.

Some contracts have to be in authorship, for illustration recognition contracts, insurance contracts, understandings to purchase and sell existent estate, and understandings to purchase autos from registered traders.

  1. Standard signifier contracts

Standard signifier contracts are normally used by concerns that provide services to big Numberss of clients. Your traffics with your electricity company, your insurance company, your bank and so on are governed by this type of contract. They are offered on a “ take it or go forth it ” footing – you wo n’t be given the chance to quibble over inside informations you ‘re non happy with. The type of understanding chosen to be elaborated in this assignment is the service understanding which is besides a standard signifier contract.

  1. Elementss of a Valid Contract

The basic elements in the formation of a contract are offer, credence, consideration, capacity, purpose to make legal relation, free consent, certainty and valid object. The relevant commissariats of the Contract Law Act 1950 for the undermentioned elements are as follows:

  1. Offer

Section 2 ( a ) [ 3 ] provinces that 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 ;

  1. Credence

Section 2 ( B ) [ 4 ] provinces when the individual to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted: a proposal, when accepted, becomes a promise ;

  1. Consideration

Section 2 ( vitamin D ) [ 5 ] provinces when, at the desire of the promiser, the promisee or any other individual has done or abstained from making, or does or abstains from making, or promises to make or to abstain from making, something, such act or abstention or promise is called a consideration for the promise ;

  1. Capacity

Section 11 [ 6 ] provinces every individual is competent to contract who is of the age of bulk harmonizing to the jurisprudence to which he is capable, and who is of sound head, and is non disqualified from undertaking by any jurisprudence to which he is capable.

  1. Purpose to make legal relation

Such an component is non denoted compulsory to organize a valid contract in the Malayan context of Contract Act did non. In this regard, the Malayan fundamental law permits the usage of English common jurisprudence which is the Civil Law Act 1956.

  1. Free consent

Section 14 [ 7 ] provinces consent is said to be so caused when it would non hold been given

but for the being of such coercion, undue influence, fraud, deceit, or error.

  1. Certainty

Section 30 [ 8 ] provinces understandings, the significance of which is non certain, or capable of being made certain, are null.

  1. Valid object

Section 24 [ 9 ] states the consideration or object of an understanding is lawful, unless—

( a ) it is forbidden by a jurisprudence ;

( B ) it is of such a nature that, if permitted, it would get the better of any jurisprudence ;

( degree Celsius ) it is deceitful ;

( vitamin D ) it involves or implies injury to the individual or belongings of another ; or

( vitamin E ) the tribunal regards it as immoral, or opposed to public policy.

In each of the above instances, the consideration or object of an understanding is said to be improper. Every understanding of which the object or consideration is improper is null.

I have enclosed an illustration of understanding and the booklet of the programs by the service supplier to this papers. It is a service understanding with P1.Com. A service understanding is a type of understanding that falls under the broader kingdom of contract jurisprudence. It defines the relationship between a client and a service supplier. In short, a service understanding outlines what services are to be provided, when they are to be provided, their costs, and the duties of each party involved in the understanding.

  1. Offer

A show of goods in a store window is an invitation to handle. An invitation to handle is non an offer, it is merely an invitation to do an offer. Ad can amount either to offers or to invitations to handle. If an advertizement is an offer so a individual who accepts the offer makes a contract with the individual who advertised. If an advertizement is merely an invitation to handle so it can non be accepted in such a manner that a contract is thereby formed.

An offer should non be made by a individual who is non to the full prepared to take legal effects of its being accepted. But a response to an invitation to handle can non ensue in a binding contract.

The offer can be seen here when P1.com provides the booklet of the programs presently held ( booklet attached to this papers for mention ) . If a client is interested, client would so be given the enrollment signifier. In here client would be able to read the understanding specifics at the dorsum of the enrollment signifier. Should client hold to these footings, they may continue to make full in their specifics, select the program which they wish to subscribe to and seal the understanding with a signature on the enrollment signifier.

  1. Credence

[ 10 ] A promise or act on the portion of an offeree bespeaking a willingness to be bound by the footings and conditions contained in an offer. Besides, the recognition of the drawee that binds the drawee to the footings of a bill of exchange. There are 3 types of credence. It may be conditional, express, or implied.

Conditional Credence:

A conditional credence, sometimes called a qualified credence, occurs when a individual to whom an offer has been made tells the offerer that he or she is willing to hold to the offer provided that some alterations are made in its footings or that some status or event occurs. This type of credence operates as a counteroffer. A counteroffer must be accepted by the original offerer before a contract can be established between the parties.

Another type of conditional credence occurs when a drawee promises to pay a bill of exchange upon the fulfillment of a status, such as a cargo of goods making its finish on the day of the month specified in the contract.

Express Credence:

An express credence occurs when a individual clearly and explicitly agrees to an offer or agrees to pay a bill of exchange that is presented for payment. Examples of expressly accepting a contract include your signature, orally holding to the offer, agitating custodies, or even interchanging concern cards with the offer and accepted footings. Express credence is the most obvious and leaves no room for uncertainty that the offer was accepted.

Implied Credence:

An implied credence is one that is non straight stated but is demonstrated by any Acts of the Apostless bespeaking a individual ‘s acquiescence to the proposed deal. Implied credence typically does non affect a contract, but instead is unwritten and action-based in nature. For case, if you’ve ever hired the same individual to paint your house every three old ages and you stop by their store and state them that it’s been three old ages, they may merely merely demo up and paint your house, strike hard on the door, and you pay them. This was implied credence of the offer. The client offered to allow the painter paint his house once more, and the painter accepted by traveling over to his house and painting it. Implied credence is typically merely considered valid if you have a old history of this type of credence already with this individual.

The credence context given below from the footings and conditions for P1 4G is of express credence. The context provinces:

[ 11 ] It is of import that you read these Footings carefully before subscribing the credence on the

Registration Form. By subscribing on the Registration Form, you signify your credence to the Footings herein stated and to that posted online at www.p1.com.my.

  1. Consideration

Consideration is where something with pecuniary value exchanged for an act, benefit, patience, involvement, promise, right, or goods or services. I have found the following information from hypertext transfer protocol: //www.nolo.com/legal-encyclopedia/consideration-every-contract-needs-33361.html which helped me understand the different angles to this individual component. The website provinces:

One of the parties was already lawfully obligated to execute.For illustration, a police officer can non claim the wages for capturing a wanted suspect, because the officer is already lawfully obligated to capture and arrest people who break the jurisprudence.

The promise amounts to a gift, non a contract.If your rich uncle promises to give you money to purchase a house, without any strings attached, that is a promise to do a gift. If he changes his head, you ca n’t coerce him to come up with the hard currency because his promise was nonreversible ; you have non done or promised to make anything in exchange.

On the other manus, if you make a down payment on a house in trust on his promise, and your uncle knows about it, a tribunal may implement his original promise. Although it still is n’t a true contract, the jurisprudence recognizes that it ‘s necessary to keep people to their promises once others take action on the premise that the promise will be kept. This legal theory — called “ promissory estoppel ” — treats promises as contracts if the promise was moderately relied upon.

The exchange is for “ past consideration. ”When person promises to give you something in return for something you ‘ve already done — “ I ‘m traveling to pay you $ 500 because you quit smoking last twelvemonth ” — a tribunal will non implement the promise to do the payment because the public presentation ( discontinuing smoke ) was n’t bargained for. You did it without cognizing that person would come along subsequently and offer to pay for it.

The bargained-for promise is illusive.For illustration, the Torahs in Maria ‘s province prohibit firing an employee for declining to subscribe a noncompete understanding. Maria marks one anyhow, under menace of losing her occupation. The understanding is unenforceable because Maria ‘s employer can non make what it promised ( or threatened ) to make. A better attack would hold been to supply Maria with some benefit or compensation if she signed the understanding, instead than endangering to fire her if she did n’t.

In the P1.com understanding, client knows on what to anticipate of the service from the information given under the charges column. The inside informations stated are:

[ 12 ] Charges

7.1. Subscriber will be billed monthly for the Service subscribed. The types of

charges that Subscriber incur will change depending on the selected Service

Package and informations use by Subscriber. Billing for Service will get down on

the Service Activation Date.

7.2. The first measure shall include activation fee, one month progress monthly entree

fee, Device charge ( if applicable ) , pro-rated monthly entree fee and other

applicable charges. Access fee will be pro-rated at the 1st monthly measure if Service Activation Date is after the charge day of the month. All monthly measures will include, but non be limited to, service charges, the applicable revenue enhancements and other applicable charges associated with the Service.

7.3. Monthly measures can be viewed on-line via the Self Care Account portal. An

e-mail presentment will be sent to the Subscriber’s electronic mail reference as stated in the Registration Form one time a new measure is generated and has been placed online in the Self Care Account portal. A fee of Ringgit Malaysia Five ( RM5.00 ) per measure will be charged if physical printed measures are required. Request for physical printed measures must be made straight to P1.

7.4. Payment of monthly measure by Subscriber to P1 can be made via car debit by

recognition card, hard currency and/or other manners of payment acceptable by P1. Payment via car debit by recognition card is capable to blessing of P1 and Subscriber shall supply P1 with the needed information of Subscriber’s recognition card and any other necessary information upon petition. Subscriber shall be responsible for the cogency of its recognition card to guarantee uninterrupted Service. P1 militias the right to suspend Service to Subscriber in the event any payment by Subscriber recognition card is non successful.

7.5. In the event the sum stated in P1’s measure or any portion thereof remains unpaid after the stipulated due day of the month, P1 militias the right to temporarily suspend the history and charge the Subscriber involvement on the amount that remains unpaid at the rate of 1.5 % involvement per month to be calculated from the stipulated due day of the month to the day of the month of full payment, or Ringgit Malaysia Ten ( RM10.00 ) per month whichever is the greater. Acceptance of late or partial payment shall non relinquish P1’s right to roll up the full sum of all charges billed for Service. Notice of any difference must be made by Subscriber in composing to P1 within 30 ( 30 ) yearss from the day of the month of the relevant monthly measure neglecting which Subscriber shall be deemed to hold accepted the measure and no expostulation raised after the said period will be entertained. If the expostulations relate entirely to portion of the sum on the bill, P1 may bespeak that Subscriber pay the unchallenged portion of the bill by the due day of the month. The paid sum will be credited back to Subscriber’s history in the event that after due probe it is found that Subscriber’s difference and expostulation is valid.

7.6. P1 militias the right to suspend or end proviso of the Service when Subscriber fail to pay the sum indicated on the bill nor raised any expostulation to same in authorship by the due day of the month without farther notice nor compensation to Subscriber.

7.7. Subscriber is obligated to do sensible enquiry in the event that Subscriber has non received any given month’s monthly measure within the expected clip period. Subscriber acknowledges that non reception of any statement of history, any monthly measure, statement or any correspondence in relation to the Service subscribed shall non be a valid ground for the Subscriber to keep back or detain payment to P1.

  1. Capacity

Power provided under jurisprudence to a natural individual or a juridical individual to come in into adhering contracts, and to action and be sued in its ain name. Certain category of people are exempted from the class of people who are capable of come ining into contract. They are infants/minors ; insane ; people under the influence of drug ; bankrupt and enemy foreigner.

The capacity subdivision can be seen under 23 of P1.com understanding as follows:

Subscriber’s Warranties and Acknowledgement.[ 13 ]

23.1. Subscriber hereby warrants that:

  1. he/she/it has the legal capacity to come in into these Footings and is 18 old ages of age ( by day of the month ) or above and a occupant of Malaysia ; and
  2. if Subscriber is a organic structure corporate, it has the needed corporate authorization to come in, put to death and be bound by these Footings.

23.2. Subscriber acknowledges that he/she/it has read and to the full understood all the

footings and conditions herein upon accepting these Footings and agrees to be

edge by the same upon P1 accepting its application for the Service.

  1. Drumhead

From this assignment we get to larn the types of contracts and basic elements found in a valid contract. The basic elements were so supported by the commissariats found in our Contracts Law 1950. An understanding was subsequently chosen in which few of the elements are elaborated and applied to the selected understanding. The selected elements are offer, credence, consideration and capacity. Here we learn how every component is applied and seen in our twenty-four hours to twenty-four hours life. Every goods or services obtained is either an understanding or a contract. The obvious now reflects what learnt from this topic and practised it everyplace. From shopping, gym ranks to our assorted activities.


Contracts Act 1950:

hypertext transfer protocol: //www.agc.gov.my/Akta/Vol. % 203/Act % 20136.pdf

P1.com understanding:

hypertext transfer protocol: //www.p1.com.my/images/pdf/4G % 20T & A ; C % 20v5.2.2.pdf

hypertext transfer protocol: //law.freeadvice.com/general_practice/contract_law/kind_acceptance.htm

hypertext transfer protocol: //definitions.uslegal.com/c/capacity-to-contract/

hypertext transfer protocol: //www.nolo.com/legal-encyclopedia/consideration-every-contract-needs-33361.html


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