Capacity to Contract - Malaysian Jurisdiction

The issue of capacity is relevant to determine the validity of the contract. It is assumed that persons with the relevant capacity enters into a contractual transaction, sometimes, persons with limited capacity are seen to have entered into contractual transactions. Such persons are minors, intoxicated persons and mentally incapacitated.

The question now boils down to how does the law handle such contracts? What is its status legally speaking/

In Malaysia, the issue of capacity in contractual transactions are governed by S10 Contracts Act 1950. The section states that there must be free consent of "parties competent to contract".

Moving on S11 of the Act defines these competent persons. Accordingly the following are the persons who are deemed to be competent in accordance to the Act:
(a) one who has attained the age of majority
(b) sound of mind
(c) not disqualified by any law he/she is subjected to.

In S12 of the Act, a further attempt to explain soundness of mind has been made which is as follows:
(a) for the purposes of entering into a contract a person is deemed to be sound if at the time of making, the person is capable of understanding it and of forming rational judgment as to its effect on his interest.
(b) if a person is usually unsound but occassionally is of sound mind, may make a contract when the person is sound of mind
(c) where a person is usually sound of mind but occassionally of unsound mind, may not make a contract when being in the situation of unsound mind.

MINORS

A person will attain majority when reaching 18 as per Age of Majority Act 1971.

It has been seen that minors are a class of people who require protection from the consequences of being immature. This developed to the common law principle that as a general rule any contract entered into by a minor is not binding unless it falls within the recognised category of exceptions.

Under the Act - contracts entered into by a minor person is void and not merely voidable.
Cases: Tan Hee Juan v Teh Boon Keat (1934) MLJ 96 HC ; Government of Malaysia v Gurcharan Singh & Ors (1971) 1 MLJ 211 HC ; Leha Binte Jusoh v Awang Johari bin Hashim (1978) 1 MLJ 202, FC

EXCEPTIONS

Contracts for necessaries
S69 - suppliers of necessaries are to be reimbursed. Meaning to say if a minor contracted for necessaries (food, lodging, clothes), such contracts are not void. However, the Act does not define necessaries. Hence the judicial pronouncements in Gurcharan's case  could be followed. Necessaries were to be defined broadly and not limited to goods and could include scholarships to pursue studies. Today, l;aw related to scholarships have been amended - S 4a & 5 Contracts (Amendment) Act 1976.

Fraud by Minors

If minor misrepresents as a major, cannot be proceeded under the tort of deceit in common law as it would be a means of indirectly enforcing the contract.

Under the Act, all such contracts except where it is a necessity is void and it is so even if the minor has misrepresented.

Restitution

A minor could be ordered to make restitution or return the goods obtained through his/her fraud.  It is a limited remedy and available only where the minor has acted fraudulently and the goods are still in his/her possession and is identifiable.

Marraige Contracts

Marriage contract is an exception. Section 4(a) of the Age of Majority Act 1971 provides that a minors ability to enter into a marriage, divorce, dower and adoption is not affected.

Nevertheless, a person below the age of 21 though of majority age need to still get the consent of his/her father in a written form before the marriage.

Employment Contracts

Section 13 Children and Yound Persons (Employment) Act 1966 - any child or young person is competent to enter into a contract of service.