2.5 Terms of Contract

Forbidden by law

Manang Lim Native Sdn Bhd v Manang Selaman [1986]

Facts: A non-native sought to deal in native land; and this was against the Sarawak Land Code.

Held: An agreement made in contravention of a statue (Sarawak Land Code) and therefore a void agreement exist within the meaning of Sec 2(g) of the CA 1950. The contact is valid if the dealing was authorized by the Yang di-Pertua Negeri, Sarawak.

If permitted, it would defeat any law

Re Sebastian, ex p Metroplex Leasing & Credit Corporation Sdn. Bhd.

Held: The High Court held that the contract and transactions made in contravention of the Radioactive Substances Act 1968 were illegal and, therefore, void under Section 24 of the Contracts Act 1950.

2.5 TERMS OF CONTRACT

 Parties are normally bound to perform what they have contracted to do.

However, it is important to establish the promises to be included in the contract.  Term is a statement which creates contractual obligations between the parties, breach of which will result in the injured party being able to sue.  In addition to it express terms, a contract may contain a number of terms that the parties or the courts may ‘read’ into the contract. These are called ‘implied terms’

Express Terms Implied Terms

2.5.1 Express Terms

 It is essential requirement for a contract to be legally binding that the parties have reached the agreement.  These term of the agreement which they have set out, in writing, verbally or a mixture of the two are known as express terms.

2.5.2 Implied Terms

 Certain terms of contract are so obvious that it goes without saying that they form part of a contract. These are called as implied terms.  Terms may be implied by: i. Custom and usage pertaining to a particular type of transaction, ii. Statutory provisions, and iii. The courts, based on the intention of the parties  E.g.: A reasonable person would argue that it is implied that when a customer books a room in a hotel, he or she is entitled to be provided with a bed as part of the price, although there is no express term as such stated by the hotel.

Pelly v Royal Exchange Assurance [1757]

Facts: Pelly had insured his ship and tackle during a voyage. On arrival, the tackle, according to the usage of shipmasters, was removed and put into a warehouse where it was accidently lost as a result of fire. The insurers claimed that as the loss had occurred on shore, it was not covered by them because it was not within the scope of the voyage.

Held: The insurer’s claim was rejected on the basis that the placing of the ship’s tackle in a warehouse was normal practice; that is, it was understood to be referred to in every policy.

2.5.3 Classification of Terms

 Terms can be classified into two types, as follows:

Conditions Warranties

Conditions

 This terms that is vital to the contract. It goes to the root of the contract.  Failure to comply the terms, the injured party may repudiate the contract or sue for damages.

Warranties

 Terms that is less importance to the main purpose of the contract. It does not go to the root of the contract.  If it is breached, the injured party may sue for damages only.