In daily activities, without us realizing, we make agreements all time long. A simple example will be when we went to a food stall and ordered our food. On the stall, there is a price list. When the food is served, we pay the hawker the sum stated on the board. This a simple scenario when a contract is made.

Contracts are usually made in business transactions. However, it did not prevent contracts to be made in non-business settings. Contract is made between at least two parties where each will have roles to be performed under the contract.

The law governing contract in Malaysia is Contracts Act 1950. The other act is Specific Relief Act 1950 which provides the remedies for aggrieved party.

Common scenarios faced by You

I have always faced with situations where clients mistakenly assume contract must be made in writing. Although court will be reluctant to give effect to oral contract, it did not mean contract can’t be made orally. It is just that court is more ready to give effect to contract in writing as it is easier to be proved and court is reluctant to disturb intention of contracting parties.

In a transfer of asset between loved ones, usually there is no consideration given by the transferee (party who receives). However, does it make the transfer invalid? It depends on several factors as mentioned which I explain below.

Solutions for You

To constitute a contract, there are 5 main elements to form an agreement. When an agreement is valid and enforceable by law, then it can be called as contract. The five (5) elements are as follow:

  1. offer;
  2. acceptance;
  3. intention;
  4. legal capacity of parties;
  5. consideration

Clause (a) and (b) are self-explanatory. For clause (c), the intention is presumed in a business transaction. As for (d), as long as parties are above 18 years old, they can enter into contract. As for (e), it means each party must give something in return for action/omission given by the other party. When an oral agreement satisfies the 5 elements and not illegal, it constitutes a contract.

As mentioned above, an agreement requires consideration to be a valid. As a general rule, this presupposition is correct. However, in some cases, a contract can be made without consideration. An exception will be the contract is in writing and registered. An example will be transfer of land from a father to his child which has been put into writing in applicable statutory form and has been registered.