Elements of the law of a contract in Malaysia

Chapter 2 (Part 1) : Law of Contract

The basic principles of contract law

• A legal binding agreement which intends to create a legal obligation between two parties.
• An agreement is normally constituted by one party making an offer and the other party is accepting that offer.
• The legislation in Malaysia governing contract is the Contracts Act 1950 (Act 136) (Revised 1974).

The six essential elements for form a valid contract:

Offer

• Offer is one of the elements that make for a valid contract between two parties, offeror and offeree.
• The offer can be money or another thing of value in exchange for performance by the other party.
• There are two types of contract such as bilateral contract and unilateral contract.
• Bilateral contract is an agreement formed by an exchange of a promise in which the promise of one party is consideration supporting the promise of the other party.
• Unilateral contract is a contract in which only one party makes an express promise, or undertakes a performance without first securing a reciprocal agreement from the other party.

Acceptance

• An express act or implication by conduct that manifests assent to the terms of an offer in a manner invited or required by the offer so that a binding contract is formed.
• In the law of contracts, acceptance is one person's compliance with the terms of an offer made by another.
• There are three types of acceptance; such as conditional acceptance, express acceptance and implied acceptance.

Intention to create a legal relation

• An intention to enter a legally binding agreement or contract.
• Intention to create legal relations is a motion of every contracting party must have the necessary intention to enter into a legally binding contract.
• There are a few concept of intention to create legal relations. Intention to create legal relations also means an intention to be serious about agreement significance:
• The contracting parties mind will be obvious to enter a serious contract
• If there is no intention to create legal relations the contract would not be enforceable, legal and binding

-Without intention to create legal relations, the parties cannot sue each other  
-Without intention to create legal relations the contract may become a mere promise  
-Without intention to create legal relations the contract may lack the binding effect

Consideration

• Consideration is based on an exchange of promises between promisor and promise.
• They must each receive a benefit and each suffer a detriment.
• This benefit or detriment is referred to as consideration.
• There are various rules governing the law of consideration:

            1. The consideration must not be past.    

            2. The consideration must be sufficient but need not be adequate.    

            3. The consideration must move from the promisee.

            4. An existing public duty will not amount to valid consideration.    

5. An existing contractual duty will not amount to valid consideration.

6. Part payment of a debt is not valid consideration for a promise to forego the balance.

Certainty

• A legal requirement of a valid offer to contract; that it must be precise and definite in order to be subject to acceptance.
• For instance, "An agreement may lack contractual force because it is so vague or uncertain that no definite meaning can be given to it without adding further terms."

Capacity

• Capacity means that a person is legally able to enter into a contract.
• There are some essential capacities to make a legal contract, such as age of maturity or minor is eighteen above and mental incapacitation is psychological disabilities.