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In order to form a contract that is enforceable by law, the following six elements must be
Proposal or offer
Section 2. Interpretation
(a) 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;
Section 2. Interpretation
(b) When the person to whom the proposal is made signifies his assent thereto, the proposal
is said to be accepted: a proposal, when accepted, becomes a promise;
Section 7. Acceptance must be absolute
In order to convert a proposal into a promise the acceptance must
(a) be absolute and unqualified;
(b) be expressed in some usual and reasonable manner, unless the proposal prescribes the
manner in which it is to be accepted. If the proposal prescribes a manner in which it is to be
accepted, and the acceptance is not made in that manner, the proposer may, within a
reasonable time after the acceptance is communicated to him, insist that his proposal shall
be accepted in the prescribed manner, and not otherwise; but, if he fails to do so, he accepts
the acceptance.
Section 8. Acceptance by performing conditions, or receiving consideration
Performance of the conditions of a proposal, or the acceptance of any consideration for a
reciprocal promise which may be offered with a proposal, is an acceptance of the proposal.
Intention To Create A Legal Relationship
To determine whether there is an intention to create legal relations, the law looks at the
nature of the agreement.
The House of Lords in the case of Clarke v Earl of Dunraven confirmed in their decision
that the contract and contractual obligations imposed by it could be created by the conduct
of the parties. Lord Herschell observed the following:
I cannot entertain any doubt that there was a contractual relation between the parties to
this litigation. The effect of their entering for the race, and undertaking to be bound by these
rules to the knowledge of each other, is sufficient, I think, where those rules indicate a
liability on the part of the one to the other, to create a contractual obligation to discharge that
liability. That being so, the parties must be taken to have contracted that a breach of any of
these rules would render the party guilty of that breach liable, in the language of rule 24, to
pay all damages, in the language of rule 32, to be liable for all damages arising
In Ayer Hitam Tin Dredging Malaysia Bhd v YC Chin Enterprise Sdn Bhd, learned Edgar
Joseph Jr SCJ in delivering the judgment of the Supreme Court observed as follows:

But, bearing in mind the familiar saying that a persons beliefs or his state of mind are just as
much facts as the state of his digestion or the existence of a tangible object, from what
factors may the existence of an agreement be inferred? The authorities show that such
inference must be drawn from the language the parties have used, their conduct, regard
being had to the surrounding circumstances, and the object of the contract. In other words,
in its task of ascertaining the intention of the parties, the court will, generally speaking, apply
an objective test; more particularly, it will ask itself, what would the intention of
reasonable men be, if they were in the shoes of the parties to the alleged contract.
Section 2. Interpretation CA
(d) when, at the 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
Consideration refers to the price paid in exchange for the promises both parties made. For
an agreement to be regarded as a contract, it must either be supported by consideration or
be a formal contract. The promisor is the person undertaking to perform the consideration;
the promisee is the recipient of the consideration. In contracts where both parties provide
consideration each party will be both a promisor and a promisee. Consideration that is still to
be performed is termed executory. Consideraton that has already been performed is said to
be executed. The element of consideration is essential in any valid contract. It is this
element that turns a mere promise into a contract that the law will enforce.
Capacity to contract
Section 11. Who are competent to contract
Every person is competent to contract who is of the age of majority according to the law to
which he is subject, and who is of sound mind, and is not disqualified from contracting by
any law to which he is subject.
Section 12. What is a sound mind for the purposes of contracting
(1) A person is said to be of sound mind for the purpose of making a contract if, at the time
when he makes it, he is capable of understanding it and of forming a rational judgment as to
its effect upon his interests.
It means that the person who enters into the contract must have the full capacity in terms of
age and mind. The age of majority in Malaysia is 18 years old as per Age of Majority Act.
Free consent
Section 13. Consent
Two or more persons are said to consent when they agree upon the same thing in the same
Section 14. Free consent
Consent is said to be free when it is not caused by
(a) coercion, as defined in section 15;
(b) undue influence, as defined in section 16;
(c) fraud, as defined in section 17;
(d) misrepresentation, as defined in section 18; or

(e) mistake, subject to sections 21, 22 and 23.

Consent is said to be so caused when it would not have been given but for the existence of
such coercion, undue influence, fraud, misrepresentation, or mistake.
When entering into agreement, the parties must be free consent to contract. Coercion is
described in Section 15 of the Contracts Act 1950 as the 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 an agreement. Undue influence in Section 16 of Contract Act 1950
is said to exist when the relations subsisting between the parties are such that one of the
parties is in a position to dominate the will of the other and uses that position to obtain an
unfair advantage over the other. Section 17 of the Contracts Act 1950 explains that fraud
refers to acts committed by a party to a contract with the intent to deceive the other
contracting party. Misrepresentation would refer to untrue statement or information made by
one person that induces the other person to enter into a contract. Mistake under the Contract
Act 1950 includes a mistake as to a matter of fact (by one or both parties) and mistake as to
any law in force or not in force in Malaysia.
Section 2. Interpretation CA
(e) every promise and every set of promises, forming the consideration for each other, is an
(f) promises which form the consideration or part of the consideration for each other are
called reciprocal promises;
Section 2. Interpretation CA
(h) an agreement enforceable by law is a contract;
Section 10. What agreements are contracts
(1) All agreements 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 not hereby expressly
declared to be void.
In Syed Jaafar bin Syed Ibrahim v Maju Mehar Singh Travel & Tours Sdn Bhd High
Court judge Kamalanathan Ratnam J observed that there was a valid oral agreement
concluded by the parties. This is what he said:
All the ingredients necessary to constitute an oral agreement exist in this case. The
defendants contention that such an agreement ought to have been reduced to writing
seems to ignore the existence of oral contracts. It is my finding that both the plaintiff and the
defendant intended to create a binding contract.
In Floral Trends Ltd v. Li Onn Floral Enterpise (M) Sdn. Bhd [2006] 6 CLJ 525 Abdul
Malik Ishak J explained in page 524 that;
A contract is said to be an agreement with undertakings - promises or obligations, on both
sides. It is an agreement that is intended to have legal consequences. There must be a
meeting of the minds between the contracting parties. It I must be borne in mind that the law

takes an objective approach to assess an agreement. The law is not concerned with what is
in the minds of the parties. The law is concerned with what can be inferred from their
conduct. Lord Denning in stoner v. Manchester City Council [1974] 3 All ER 824 at p. 828
remarked that:
In contracts you do not look into the actual intent in a mans mind. You look at what he said
and did. A contract is formed when there is, to all outward appearances a contract.
In Serangoon Garden Estate Ltd v. Marian Chye [1959] MLJ 113 it was held that:
I think it is quite clear that when a party signs a contract knowing it to be a contract which
governs the relations between them, than to use the words of Denning J in the case of
Curtis v. Chemical Cleaning and Dyeing Co. (supra) his signature is irrefragable evidence of
his assent to the whole contract including the exempting clauses unless the signature is
shown to be obtained by fraud or misrepresentation. In LEstrange v. F Graucob Ltd [1934] 2
KB 394 Scrutton LJ said:
When a document containing contractual term is signed then, in the absence of fraud, or I
will add misrepresentation, the party signing it is bound and it is wholly immaterial whether
he has read the document or not.
Teja Singh Mohinder Singh lwn. Saifulnizam Ilias & Yang Lain [2015] 1 LNS 698
(34) Dalam menentukan sama ada wujudnya satu kontrak antara pihak pihak yang terlibat,
penelitian perlu dibuat terhadap dokumen dokumen yang ada yang melibatkan pihak
berkenaan serta tindakan pihak-pihak berkaitan. Pertimbangan bagi menentukan isu ini
hendaklah dibuat secara objektif.
In Teja Singh case, the court observed the testimonies of the witnesses. D5 whom is a party
to the Memorandum Jualan (MJ) agreed that those who signed the MJ did intend to sell the
land to plaintiff. He also agreed that on certain date he and the other defendants went to
plaintiff's office to discuss on the sale and purchase of that land. He did not deny that he can
read and understand the MJ and that the MJ was read to D1 by his son because he was
blind. SD2 whom is wife of one of the purchasers (deceased) agreed that it was his late
husband's signature on the MJ. The Court then came to the decision that all the parties to
the MJ signed the contract on their own volition based on the testimonies.
Applying to the case at hand, there is an offer made by Ariffin to Ghazali where he offered to
purchase Ghazali's share on the land for RM 30K. In return, Ghazali made an acceptance
which he agreed to sell his share on the land for RM 30K and transfer the land to Ariffin's
mother, Selamah. He made an absolute and unqualified acceptance when he accepted the
offer by accepting the purchase money given by Arrifin as evidenced by the Surat
There is a valid and executed consideration in monetary form RM 30K paid to Ghazali for
him to transfer the land as promised earlier. This can be seen in the Surat Pengakuan
signed by Ariffin and Razali where it was stated Ariffin paid RM 3 250 to Razali on 16th July
of 1995 being the balance of purchase price for the land. The Surat Pengakuan shows that
the amount agreed had been paid successfully by Ariffin and he completed his obligation
under their agreement. This declaration was then signed by both parties.

Furthermore, there is mutual assent on both Ariffin's and Ghazali's mind to enter into the
agreement and completed it. This can be seen where Ariffin made payment to Ghazali, both
Ariffin and Ghazali signed the Surat Pengakuan, Form 14A which had been filled in and
witnessed by the Pendaftar, the Duty Stamp paid and that Ghazali had received the money
from Ariffin being balance purchase price of the land. The conducts from both parties shows
there is clear intention from both parties in creating legal relations and completing their part
of obligations under the agreement.
Both parties, Ariffin and Ghazali have the capacity to contract where both were of majority
age and sound mind on the relevant time. Both are capable of understanding and signing
the Surat Pengakuan, filling in the F14A and paying the duty stamps. Both also consented
where they agreed on the same thing, which Ariffin to pay RM30K to Ghazali and Ghazali in
return to transfer his portion of land to Ariffin's mother. There is free consent since there is no
indication of coercion, undue influence, fraud, misrepresentation or mistake in the case at
As per the cases and provisions of law, it is nowhere to be found that a contract has to be
reduced into writing so as to make it valid and enforceable under Malaysian law. Therefore,
an oral agreement is a valid and enforceable contract in Malaysia and bind on the parties to
the contract. Since all the elements of valid contract are established, there is a valid and
enforceable contract between Ariffin and Ghazali.