1.

0 Introduction
In Malaysia, contract law is governed by the Contract Act 1950. The law in Malaysia evolved
from English common law as a natural consequence of British rule. Therefore, many of the
provisions in the Contract Act are the same to UK laws (TA, 2014). Contract Act 1950 must
prevail if certain provisions differ from English law. When there are no provisions in the
Contract Act 1950 in dealing with subjects concerning the law of contract, English law applies
by virtue of Civil Law (Lee & Detta, 2009).
Contracts and agreements are inevitable part in our daily life. The law of contract is a key
element of the learning and practice of business law. Simply said, a business cannot exist without
making contracts be it with their suppliers, customers, and employees and so the list goes on.
Although the terms contract and agreement means the same thing, there is a difference
between these two words. A contract is intentional, voluntary and legally binding agreements
between two or more parties. Every contract contains an element of agreement but not all
agreements are contract. What distinguishes a contract and other form of agreement is a contract
give rise to legal rights and obligations. As the contract are legally binding, individuals is able to
take another party to court if one of them fails in keeping promise made in the contract (About,
2014).
According to law, the term minor is used to describe a person who is under the age in which one
lawfully assumes adulthood and is legally granted rights as an adult in the society. The age may
vary according to jurisdiction and application but it is usually set at either 18 or 21. As the law
stands, it is generally acknowledged that minors cannot make contracts (Lee & Detta, 2009).
However, there are circumstances and exceptions a contract can be legally binding with a minor.
Referring to the assignment question, one must understand the key elements needed to form a
contract beforehand.

2.0 Enforceable contract

As mentioned earlier, not all agreements have the legal rights that legally bind both parties. A
contract without the required component of a legally binding agreement is only an agreement
nothing more than a conversation between the parties. There is a distinction between business
agreement and social or domestic agreement. In business agreement context, the presumptions is
the agreement is said to have legal relations while social or domestic does not considered as
having legal relations (Goldman & Sigismond, 2007). Both are treated differently as friends and
family do not normally expect their agreement to have legal effects and rely on trust instead.
Example of social and domestic agreement is in Balfour v Balfour1 where the agreement made
is not legally binding but its a promise for a husband to pay his wife allowance. However, in the
case of Merritt v Merritt2, the agreement does have legal consequences as both are separated
and no longer rely on trust. Although it may seem easy, it is really hard to prove that there is
agreement by showing a valid offer and valid acceptance (Rush & Ottley, 2006). There are eight
elements needed in a contract. In order to form an enforceable contract, the following basic
elements must be fulfilled which is offer, acceptance, intention to create legal relations,
consideration, certainty, capacity, consent and legality. Some of these elements will be explained
in detail later.
2.1 Offer
An offer is a convinced promise to be bound with specific terms. Offer or proposal is necessary
to initiate an agreement. Section 2(a) Contract Act 1950 states that a proposal is made when an
individual signifies his willingness to do or to refrain from doing anything to another party and
he is aware of what is being offered (Lee & Detta, 2009). For an offer to be valid it must be
accepted by the other person and the offer clearly justified what is being presented and its terms.
In Gunthing v Lynn3, the contract is invalid as the offer is indefinite as the horse is only being
paid if it was lucky. Similarly in Affin Credit (Malaysia) Sdn. Bhd. v Yap Yuen Fui 4, the
court declared the contract as void from the beginning due to lack of offer and acceptance.
Under section 4(1) Contract Act 1950, an offer is in effect once it is communicated by both
parties. An offer is not necessarily to be written down and a contract can even be made orally
provided it contains the element of a legally binding agreement (Blum, 2007).

An offer can be made to particular person, class of person and even to the public at large.
Example of case is Carlill v Carbolic Smoke Ball Co. Ltd 5. The company is a medical firm
which advertises that its product prevented disease with regular use and $100 is being offered if
any buyers did caught the influenza. Unfortunately, Mrs Carlil used the product regularly and
still caught the disease. She then sued the company as they do not want to pay her the money and
the company argues that the claim in the advertisement was not to be taken as a legally binding
offer. The court held that it was a unilateral offer as the company did state that $1,000 had been
placed in case there were any claims. Therefore, it is concluded that it was an offer made to the
whole world and any person who had seen the advertisement and caught the influenza are
eligible for the claim (Pathak, 2013).
2.2 Invitation to treat
There are often situations in which a business is mistakenly regarded as offer but they appear to
be an invitation to treat. An offer and invitation to treat must be distinguished as invitation to
treat is not considered as an enforceable contract. Invitation to treat is simply an invitation to
others to make offers and it is not legally binding. An offer can be converted into a contract by
acceptance however an invitation cannot as its action is just to draw the customers into
negotiation. The person extending the invitation is not bound to accept it. There are certain
situations where it can be seen the act is simply an invitation. For example, in Fisher v Bell6, the
court held that the display of a product in the window was an invitation and not an offer. Similar
held is used in Pharmaceutical Society v Boots Cash Chemist 7. The court held that goods
displayed on the shelf do not mean the customer must purchase it. Most advertisement is
considered as invitation as well. In Partridge v Crittenden8, the court ruled that the
advertisement was not an offer as there is no expression of intention to be assured. A general
advertising of goods for sale is not an offer as in the case of Grainger v Gough. Harrison v
Nickerson9 is an example of advertisement of an auction case. Mr Harris cannot take an action
as Nickerson has withdrawn the items in which he was interested in bidding as there are no
contracts. In the cases examined above, the court ruled that the seller did not intend to be legally
bound. Therefore it rests as invitation as the intention is missing and it is not accepted by the
offeree (Rush & Ottley, 2006).

2.3 Acceptance
In Section 2(b), when the person indicates his approval of the agreement, it is said that the
contract to have been accepted. A person accepting the offer is called a promisee in Section
2(c). The acceptance can be expressed or implied. Once it is been accepted, both parties become
legally bound to each other. Under Section 7, acceptance must be final and unqualified. In Lau
Brothers v China Pacific Navigation10, there is no agreement made as they are still in
negotiating stage. Therefore, the defendants were defensible in withdrawing. When an offer is
accepted, the offeree must do so unconditionally where he would have to agree on all of the
terms. If the acceptance is not unconditional, a new offer can be made which is referred as
counteroffer. The counteroffer eliminates the original offer. In Hyde v Wrench11, it was held that
the counteroffer had disregarded the original offer and it no longer existed (Abbott &
Pendlebury, 1993).
An acceptance is only valid when it is communicated to and received by the offeror. In Fraser v
Everett12, it was held that the contract is void as the offeror did not reply due to oversight. In
Felthouse v Bindley13 the court ruled that the claim did not succeed even though the uncle has
made an offer but the nephew never responded to the letter although he already agreed in his own
mind. An acceptance can be in conduct as in Brogden v Metropolitan Railway14. Although the
parties did not sign the agreement, the contract is still binding as acceptance is communicated by
conduct with the act of continuing the trade. Recent case is by Pickfords v Celestica15 where the
counteroffer is accepted by doing the work. It is true that an acceptance must be communicated.
However, there are exceptions in Carlill v Carbolic, the acceptance need not to be
communicated to individuals as it is unilateral contracts. Other circumstance is in Adams v
Lindsell16 where the postal rule applies in which an acceptance is communicated as soon as the
letter is posted. However, the postal rule cannot be used in modern forms of communications. In
Entores v Miles Far East Corp17 the postal rule cannot be applied as the communication was
practically instantaneous (Rush & Ottley, 2006).
2.4 Consideration
The condition of something for something is referred as consideration. In Section 2(d) the Act
states that a promise is only valid if it is made in return for another promise. Further mentioned

in Section 26, an agreement without consideration is void. Example of the case is Guthrie
Waugh v Malaippan Muthucumaru18. There are three types of consideration which is
executory, executed and past consideration. An executory consideration is a promise to perform
an action in future time while executed consideration is an act that is already done by the offeree.
Both are deliberated as a valid consideration however past consideration is not valid as the action
is done before the promise is made. In Roscorla v Thomas19, the buyer is unable to sue the seller
as the promise was made after the horse is sold. However, there are certain exceptions for past
consideration in the case of Lampleigh v Brathwait20 where consideration is given to an act
initially done at the promisors request. Malaysian Contract Act recognizes love and affection as
valid consideration under Section 26(a). It must be in writing, registered and both parties having
near relation to each other (Lee & Detta, 2009).
A consideration must be sufficient which refers to having value in the eyes of the law. For
example, in White v Bluett21, the court ruled that the promise made by the son had no value and
has been held to be no consideration. However, a consideration is not void just because it is
inadequate. In Chappell v Nestle Co.22, the chocolate wrapper is considered as valuable
consideration even though their value was miniscule. Malaysian case, Phang Swee Kim v Beh I
Hock23, it was ruled that there was adequate consideration even if the transfer was not registered
before the husband died. With no evidence of fraud or duress, the appellant was entitled for the
transfer of the land payment (Gillies, 1988).
2.5 Capacity
For a contract to be valid, both parties must have the legal capacity to do it. This means a person
must have the ability to enter any contract they wish to and fully understand its terms and
obligations. If the other party did not have the capacity, the contract will not be legally binding.
Section 11 states that a person over the age of majority and who is not mentally ill are competent
to a contract. The age of majority in Malaysia is 18 under the Age of Majority Act 1971. Any
contracts made by minor are not considered as a valid contract (Lee & Detta, 2009). The law
governing minors contract is to protect children from being exploited as they are inexperienced.
Another principle is the law should not cause suffering to the parties dealing with minor.
Example of the case is Mohori Bibee v Dharmodas Ghose24 where the court held that kids

cannot make valid contracts. Malaysian case, Tan Hee Juan v The Boon Keat 25 ruled that
contracts made by infants are invalid.
However, there are exceptions to this rule which is necessaries, scholarship and insurance.
However, the validity of the contract only applies if they are old enough to know the nature of
transactions and its terms. A young child who did not understand what he was agreeing is seen as
having the lack of mental capacity. Therefore, any contracts made by them are void. In R v
Oldham Metropolitan Borough Council26, it was held that contracts made by minor are only
valid if they are old enough to understand. Minors do have advantage in contracts as they can
terminate the contract before reaching the age of maturity. In Corpe v Overton27, the court held
that the minor is entitled to have his deposit back even though that he repudiated the agreement
(Elliott & Quinn, 2007).
Under Section 69, a minor will be granted a contract in condition if it was necessaries.
Necessaries are referred to as essentials in which it brings reasonable comfort to the infant.
However, the exceptions are only valid to basics necessities and luxurious items are excluded.
Normal clothing is not considered as necessaries if the infant already own enough herself. In
Scarborough v Sturzaker28, the court held that the purchase of the bike is a necessity as he used
it to work. The classification of necessaries depends on the minors need and condition of his
life. In Nash v Inman29, the minor is being sued for failing to pay eleven fancy suits. The fancy
waistcoats is considered as basic items due to his social standing in which he was expected to be
reasonably dressed as being a Cambridge University student and the son of an architect.
However, it was ruled that he already had enough clothing and he did not actually need them
therefore the contract was not enforceable. It should be noted that necessaries is not confined to
goods only but include services and other necessaries. In Chapple v Cooper30 it was held that
the minor is obliged to pay for the cost of her husbands funeral. However, if the agreement
contains unfair terms, the minor are not to be bound even though it was a necessary in the case of
Fawcett v Smethurst31 (Rush & Ottley, 2006).
The next exception is scholarship. Contracts (Amendment) Act 1976 states that a scholarship
agreement entered by a minor is valid provided that the awards, loans, scholarship is approved
by the Federal or Government State or any educational institutions (Lee & Detta, 2009). In the
case of Government of Malaysia v Gurcharan Singh32, the court held that he is liable for the

repayment of the sum due to the breach of scholarship contract made when he was a minor. The
court will allow businesses to enforce contracts on minor only if it is beneficial to them. In Doyle
v White City Stadium33, the court allowed the contract to be enforced as it was beneficial to
him. However, in De Francesco v Barnum34 the court rejected the contract as it was unfavorable
to her as the agreement contained harsh conditions.
The last exception is insurance. An infant over the age of ten can enter into insurance contract
under the Insurance Act 1963 (Revised 1972). Still, minor below the age of sixteen must have
written consent from parents or guardian (Lee & Detta, 2009). A minor can enter contract and it
is voidable at his option. In Stapleton v Prudential Assurance Co.35 The court held that the
contract made by minor was a continuing contract and the minor can refute it but it was bound to
do so within a reasonable time.

3.0 Conclusion
It is general rule that minor is incapable of making contracts as they cannot make rational
decisions for themselves. The law and statutes preventing minors from making contracts is
relieving children from being taken advantage of as they do not have the legal capacity to enter
enforceable contracts. However, there are certain exceptions which allow businesses to enter into
contract with minors. A minor who signs a contract is given advantage to void the contract in his
wish. This may protect the minor however, what about the other party. As minors can void the
contract any time they want, the other party is left with nothing in return and they do not have
legal effects towards minor. The rules may have created an injustice to businesses.

References
Abbott, K., & Pendlebury, N. (1993). Business Law, 6th Edition. London: DP
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About. (2014). Principles of Contracts and Agreements: About.com. Retrieved from
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http://biztaxlaw.about.com/od/contractsandagreements/a/Principles-OfContracts-And-Agreements.htm
Blum, B. A. (2007). Contracts: Examples & Explanations. Aspen Publishers Online.
Elliott, C., & Quinn, F. (2007). Contract Law, 6th Edition. London: Pearson Longman .
Gillies, P. (1988). Concise Contract Law. Federation Press.
Goldman, A., & Sigismond, W. (2007). Business law: Principles and practices (7th
ed.). Boston: Houghton Mifflin.
Lee, M., & Detta, I. (2009). Business Law. Selangor: Oxford Fajar Sdn. Bhd.
Pathak, A. (2013). Legal Aspects of Business. India: Tata McGraw-Hill Education.
Rush, J., & Ottley, M. (2006). Business Law. London: Thomson Learning.
TA, R. (2014). Professional Business Law Essays. Malaysia: Richard TA.

1 Balfour v Balfour (1919) 2 KB 571

2 Merritt v Merritt (1970) 2 All ER 760
3 Gunthing v Lynn (1831) 65
4 Affin Credit (Malaysia) Sdn. Bhd. v Yap Yuen Fui (1984) 1 MLJ 169
5 Carlill v Carbolic Smoke Ball Company (1893) 1 QB 525
6 Fisher v Bell (1961) 1 QB 394
7 Pharmaceutical Society of Great Britain v Boots Cash Chemist (1953) 1 QB 401
8 Partridge v Crittenden (1968) 2 All ER 421; (1968) 1 WLR 1204
9 Grainger v Gough (1896) 66
10 Lau Brothers & Co. v China Pacific Navigation Co. Ltd. (1965) 1 MLJ 1
11 Hyde v Wrench (1840) 3 Beav 334
12 Fraser v Everett (1889) 4 KY 512
13 Felthouse v Bindley (1863) 69
14 Brogden v Metropolitan Railway Co. (1877) 2 App Cas 666
15 Pickfords Ltd v Celestica Ltd (2003) EWCA CIV 1741
16 Adams v Lindsell (1818) 1 B&Ald 681
17 Entores v Miles Far East Corporation (1955) 2 QB 327
18 Guthrie Waugh Bhd v Malaippan Muthucumaru (1972) 1 MLJ 35
19 Roscorla v Thomas (1842) 3 QB 234
20 Lampleigh v Brathwait (1615) 80 ER 255

21 White v Bluett (1853) 23 LJ EX 36

22 Chappell & Co. Ltd. v Nestle Co. Ltd. (1960) AC 87
23 Phang Swee Kim v Beh I Hock (1964) MLJ 383
24 Mohori Bibee v Dharmodas Ghose (1903) 1 LR 30 Col. 539
25 Tan Hee Juan v The Boon Keat (1934) FMSLR 96
26 Regina v Oldham Metropolitan Borough Council, ex parte Garlick (1993) 2 All ER 65
27 Corpe v Overton (1833) 10 Bing 252
28 Scarborough v Sturzaker (1905) 1 TAS LR 117
29 Nash v Inman (1908) 2 KB 1 CA
30 Chapple v Cooper (1844) 13 M.&W 252
31 Fawcett v Smethurst (1914) 84 LJKB 473
32 Government of Malaysia v Gurcharan Singh & Ors (1971) 1 MLJ 211
33 Doyle v White City Stadium (1935) 1 KB 110
34 De Francesca v Barnum (1890) 45 Ch D430
35 Stapleton v Prudential Assurance Co. Ltd. (1928) 62 I.L.T.R 56 (High Ct. 1929)