A contract means an agreement made by the parties with a valid consideration. The contract must involve more than one party and there must be mutual agreement. A valid contract must be made with a consideration, that is, the thing contracted is accompanied by the intention that the transaction is commercial or for profit.

What are the main elements of a contract?

What are the main elements of a contract?

A contract can only be enforced when it meets the following elements:

Offer or ‘offer’ which is a statement from one party to another party;

Acceptance or ‘acceptance’ to the offer is a statement of willingness to accept the offer

said without any additional conditions;

Consideration or ‘consideration’ is the matter exchanged between the two parties. Example: money or money.

The intention of both parties to bind themselves from a legal point of view and either party can make a claim in court to enforce their contract.

The qualifications of both parties to enter into a contract are adult, sane and not bankrupt. As for the company, it must be validly registered and not wound up.

Contract Without Reciprocation

In principle, all contracts must have a response from both contracting parties. However, Section 26 of the Contract Act 1950 provides an exception where the agreement remains valid even without consideration, namely:

Agreement based on love. Example: Relationships that have family ties.

Past reciprocity agreements. Example: Voluntary help or assistance on the basis of friendship.

Agreement to pay past due debt.

Terms and Warranty

Most contracts do not clearly state whether a term of the contract is a condition or a warranty. However, to distinguish terms and warranties, the court will look at several things such as:

An express provision of the contract that clearly states the terms and warranties.

Looking at the intentions of the parties when making the contract.

Looking at the weight of the breach and its effect on the contracting parties.

TCT v MS Associate [1972] (not a real name) 1 MLJ 171

In this case, the court considered the provisions of the agreement related to the degree of heat of a boiler or ‘boiler’ of iron smelting to be a warranty. The Appellant agreed to sell an iron smelting boiler to the Respondent and promised that the boiler would have a heat of not less than 2,600 degrees Fahrenheit. However, the boiler did not meet this specification and the Respondent claimed that the Appellant was in breach of contract.

The court ruled that there was a breach of the terms of the contract and this allowed the Respondent to rescind the contract and claim damages.

Contracts Preventing Transactions

In principle, a contract that restricts the employee’s freedom to create competition after termination of employment is void and void because it is subject to Section 28 of the Contract Act 1950.

In the case of Polygram Records Sdn Bhd v. The Search [1994] 3 MLJ 127, the rock group Search had entered into a contract with the recording company Polygram, among other things, stipulating that the group could not make any recordings with other parties after the end of the contract between the two parties. The court ruled that this provision was invalid because it was in the form of a business restriction as stated in Section 28.

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