Contracts in Malaysia
Malaysia’s Contract Act 1950 provides how documents ripen into legally binding contracts, which involves the following elements:
1. There must be an oral or written offer, except in cases where the law requires a written offer.
2. The counterparty must accept this offer or make a counteroffer, which should also be accepted.
3. The contract must have a consideration, which may be in the form of money, right, interest, benefit, or a detriment, loss, or responsibility on account of another.
4. The parties must have a “meeting of the minds”, which would exhibit their mutual decision to conform to a contract and intention to create legal relations.
5. All parties must have the legal capacity to contract.
6. The parties must manifest their free consent to the contract which was not influenced by:
- coercion (Section 15);
- undue influence (Section 16);
- fraud (Section 17);
- misrepresentation (Section 18); or
- mistake (Sections 21-23).
An accepted offer may still be retracted or terminated in any of these situations:
1. Revocation where the offer is taken back by the offeror;
2. Refusal by the offeree; or
3. Lapse of time specified to accept the offer.
In the event of a contractual breach, the following remedies are available for the aggrieved under Malaysian Law:
1. The contract may be rescinded, which will return both parties to their original state prior to entering into the contract, subject to the recovery of any amounts paid, products delivered, or services rendered to prevent unjust enrichment.
2. The innocent party may sue the counterparty for damages, which will be calculated based on the severity of the contractual breach.
3. Specific performance may be ordered by the court, which would compel the party in breach to still perform their obligations under the contract and is usually granted when damages are not sufficient.
4. Injunction is a preventive relief that may not be granted by the court if it would result in a party being compelled to perform something which he or she could not have been ordered to perform under a decree of specific performance.
