Capacity to a Contract

One of the elements constitute a valid contract is the parties entering to the contract are those who have the competentcy of which is based on section 10 (1) of the Contract Act 1950 which stated “ All agreements are contracted if they are made by the free consent of parties competent to contact, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void” Section 10 (1) Contract Act 1950.
A competent person to the contract is explained further to have the capacity of being an adult, having a sound mind and not forbidden to enter any contract by law.
This principle is based to the regulation which state that “Every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is of sound mind, and is not disqualified from contracting by any law to which he is subject”. Section 11 Contract Act 1950.
In Malaysia, the age of majority is recognized as above eighteen years of age as stated in the Age Majority Act 1971, “The minority of all males and females at the age of eighteen years and every such male and female attaining that age shall be of the age of majority.”
As an effect of section 10 and 11 of contract Act 1950, the court held in the case of Mohori Bibee V Dharmodas Ghose (1903), Tan Hee Juan V Teh Boon Kiat (1934) and Government of Malaysia V Gurcharan Singh (1971) that all such agreements are void. Therefore, all contracts entered by a minor is generally void and a minor cannot sue or be sued such void contracts
However, there are some exceptions towards a minor binding a valid contract. Under section 69 of Contract Act 1950, it is said “If a person, incapable of entering into a contract, or anyone whom he is legally bound to support, is supplied by another person with necessaries suited to his condition in life, the person who has furnished such supplies is entitled to be reimbursed from the property of such incapable person.” Under necessaries a minor can enter valid contract if only it is the basic need of the minor and suitable of his station in life or lifestyle.
Contract of Scholarship between a minor and the government or non governmental organizations is also valid under the section 4 (a) Contracts (Amendment) Act 1976 “the scholar entering into such agreement is not of the age of majority”.
Similarly, a minor may enter into a contract of marriage or divorcement as at section 4 (a) Age Majority Act 1971, “Nothing in this Act shall affect the capacity of any person to act in the following matters, namely, marriage, divorce, dower and adoption”.
Lastly, a minor may enter into a contract of insurance, pursuant to the Insurance Act 1966 (Revised 1972).

KL, November 11 2008