VOID AND ILLEGAL CONTRACT
Sec
2 (g) – a void contract is agreement not enforceable by law.
Unlawful
Considerations / Objects
Sec 24 –Contract with unlawful
consideration / object is void if it falls within any of these:
a-
forbidden by law - HEE CHENG v KRISHNAN
b-
of such nature as to defeat the law -TAN BING HOCK
c-
fraudulent - PALANIAPPA CHETTIAR
d-involves
/ implies injury to person / property. - SYED AHAMED ALHABSHEE v PUTEH
e-
immoral / against public policy - PEARCE v BROOKS
HEE CHENG V. KRISHNAN (1955) MLJ 103
The plaintiff and the defendant entered into an agreement for the sale
and purchase of the plaintiff’s house built upon a land in respect of which the
defendant was the holder of a temporary occupation license. The plaintiff
claimed specific performance of the agreement or alternatively damages for the
defendant’s breach of contract. The court held that the contract entered into
was an attempt to sell and to purchase the defendant’s rights under the TOL
license which is contrary to Rule 41 of the Land Rules 1930 which stated that “No
license for the temporary occupation of State land shall be transferable”. As
such the contract was unlawful as it being of such nature to defeat the
provision of any law (Section 24 of Contract Act) and therefore is void.
TAN BING HOCK v. ABU SAMAH (1968) 2 MLJ 221.
The defendant held a logging license in Pahang under the Forest Rules
1935 which prohibited transfer without prior approval in writing of the
District Forest Officer. The defendant agreed to assign his rights under the
license to extract timber to the plaintiff. The High Court found that the
contract on which the action was instituted was illegal as what the parties
attempted to do amount to defeating the provision of the Forest Rules 1935.
PALANIAPPA CHETTIAR V. ARUNASALAM CHETTIAR (1962) AC 294; MLJ 143
The plaintiff bought about 40 acres of rubber land and in order to
avoid certain regulations that prohibits a person from owning more than 100
acres of rubber land transferred the
land to his son as the absolute owner although the funds for the purchase comes
from the plaintiff.. The sole purpose of doing so was to defraud the relevant
authority. Subsequently, the father sought to recover the property from the
son, who resisted the claim. The claim failed. The Privy Council held that upon
the transfer of the property by the father to the son, a presumption of
advancement arose in favour of the son. In seeking to recover the property from
the son, the father had to rebut that presumption and in so doing, he had to
show that his true intent was not to benefit his son but to defraud the
relevant authority. Since he had to rely on an illegality, the court would not
assist him in enforcing the resulting trust.
SYED AHAMED ALHABSHEE V. PUTEH (1922) 5 FMSLR 243
The defendant agreed to sell a property of the plaintiff in which an
infant had an interest. The dealing was detrimental to the infant’s interest
and was consequently struck down by the court.
PEARCE V. BROOKS (1861] All ER
Rep. 102
This case involves a contract of hire of vehicle for purposes of
prostitution and in general way, in the words of Lord Wright, those involving
an immoral promise, such as a promise between a man and a woman to live
together without being married, or to pay a sum of money or give some other
consideration in return for personal association.
There
are also Sec 25 to Sec 31 which provides for other instances that renders a
contract void in law.
Sec 25 - any part of a
single consideration / any part of several consideration unlawful
CHUNG
KHIAW BANK LTD
Sec 26 - agreement made
without consideration.
Sec 27 - agreement in
restraint of marriage.
Restraint Of Trade and Legal
Proceeding
Sec 28 - agreement in
restraint of trade
WRIGGLESWORTH V.
ANTHONY WILSON (1964) MLJ 269
The defendant, an advocate and solicitor, entered into an agreement of
service with the plaintiff’s legal firm. Clause 8 of the said agreement
stipulated that the defendant would not for a period of two years after the
termination of his engagement by the plaintiff practise as or carry on the
business or profession of an advocate and solicitor within a radius of five
miles from Kota Bharu town without first obtaining the written consent of the
plaintiff. Such written consent was not given by plaintiff. On 7 December 1963
the plaintiff agreed to discharge the defendant from the terms and obligations
of the said agreement with effect from 31 December 1963. The plaintiff claimed
an njuction to restrain the defendant from practicing or carrying business or
profession of an advocate and solicitor within a radius of five miles from Kota
Bharu, Kelantan until 31 December 1965.
Held - that the agreement was void under Section 28 of the Contract Act
and the distance and place of the restraint are irrelevant.
Sec
29 - agreement to restraint legal proceeding
CORPORATION ROYAL EXCHANGE V. TECK GUAN (1912) 2 FMSLR 92
A clause in a fire insurance policy stated that “If the claim be made
and rejected, an such action or suit not commenced within three months after
such rejection, all benefits under this policy shall be forfeited’. The court
concluded that this clause reduced the period within which an assured might
bring a suit for compensation to a period less than that sanctioned by the
limitation statute. As such the clause infringed Section 28 of the Contracts
Enactment (now Contract Act) and was therefore to that extent, void.
Sec
30 - agreement void for uncertainty.
Sec
31 - agreement by way of wager.
Consequence
of Void And Illegal Contract.
General rule under CA - ex
turpi causa non oritur actio - no action will arise from a wrong done.
Contracts
under sec 27, 28 and 29 - not void in toto - severable.
Sec 66 - Right of restitution - doctrine of unjust
enrichment
AHMAD B. UDOH v. NG AIK CHONG (1970) 1 MLJ 82
The respondent had entered into an agreement with the appellants for a
lease of paddy land for a period of six years and $1500 was paid in pursuant to
the agreement. The agreement was in fact illegal, contravening section 3(1) of
the Padi Cultivators Ordinance. The appellants subsequently refused to allow
the respondent to till the land and in an action by the respondent for the
recovery of the sum paid, the former pleaded illegality of the agreement. The
Federal Court held that since the parties were ignorant of the fact that they
were executing an illegal agreement, section 66 would apply and accordingly,
the respondent was entitled to recover the deposit paid.
YEEP
MOOI
v. CHU CHIN CHUA – money deposited with a company carrying unlicensed
business is recoverable
YEEP MOOI V. CHU CHIN CHUA (1981) 1 MLJ 14
The Federal Court held that the appellant who had innocently deposited
money with another carrying on business in contravention of the Borrowing
Companies Act 1969 could recover such deposit under Section 66 of the Contract
Act. Thus where only one party is unaware of the illegality of the contract,
that party will be able to recover.
VOID AND ILLEGAL CONTRACT
Reviewed by Kamaruddin Mahmood
on
5:21:00 PG
Rating:

tumpang tanya.....apakah prinsip kes yang digunakan dalam kes hee cheng vs krishnan???
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