Assignment Work

An agreement is not a contract but a

contract is an agreement.

Course code : KXEX2166

Course name : Law and Engineers

Semester : 2

Session : 2016/2017

Group members : Beh Jia Wei KEK 130067

Sng Yee Ching KEK 130048

Lecturer : Mr. Lim Eng Hoe

Date : 30/10/2016
 UNIVERSITY OF MALAYA

ASSIGNMENT COVER PAGE

_____________________________________________________________________________
FACULTY: Engineering

PROGRAMME: Bachelor of Engineering (Hons)

MODULE TITLE: Law and Engineers CODE: KXEX2166

SEMESTER: 2 YEAR: 2016-2017

We, the undersigned students, confirm that this group assignment work is our own work and in
our own words. We authorize the Faculty to verify our work for plagiarism and we are aware that
in the event plagiarism is detected our assignment will not be given any mark and that the Faculty
is at liberty to take appropriate action against us.

No. Name of Student Student No. Signature

4 Wong Yong Jie KEK130062

Date:

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Definition

An agreement, according to Contracts Act 1950 Section 2, consists of a proposal (promise)

offered by a person (promisor) to another person (promisee) which is then accepted by the
concerned person after sufficient consideration. The scope of an agreement covers a wide field
from informal social meetings to commercial contracts.

A contract is defined by an agreement which is enforceable by law is a contract, according

to Contracts Act 1950 Section 2(h). Section 10(1) further states that All agreements are
contracts if they are made by the free consent of parties competent to contract, for a lawful
consideration and with a lawful object, and are of hereby expressly declared to be void. A
voidable contract is defined in Section 2(i) as an agreement which is enforceable by law at the
option of one or more of the parties thereto, but not at the option of the other or others. In
other terms, it means a contract that has legal effect and force when it is made, but is liable to
be subsequently annulled or set aside by the courts through the process of rescission. A contract
is void when it ceases to be enforceable by law, stated in Section 2(j).

For an agreement to be enforceable by law to become a contract, there are at least four elements
that it must fulfil. They are Offer and acceptance, Intention to create legal relations,
Consideration legal and Capacity and consent.

First, a contract is said to be formed when the offer is accepted. An offer is a promise made by
one party to another party in exchange for performance by the latter party. An offer must be
clear, definite and certain. Acceptance occurs when the party answering the offer agrees to the
offer by way of a statement or an act. Section 7(a) of Contracts Act stated that an acceptance
must be absolute and unqualified. Yet, the acceptance must be unequivocal and communicated
to the offeror. This is stated in Section 7(b) where an acceptance must be expressed in some
usual and reasonable manner, unless the proposal prescribed the manner in which it is to be
accepted, and the acceptance is not made in such manner, the proposer may, within a reasonable
time after the acceptance is communicated to him, insist that his proposal shall be acacepted in
the prescribed manner, and not otherwise, but if he fails to do so, he accepts the acceptance.

Secondly, the intension to create legal intention is also one of the necessary elements in
formation of a contract. The intension to create legal intention can be defined as parties
involved denote a court's presumption that parties to an agreement wished it to be enforceable
by a court. It also defined as an intention to enter a legally binding agreement or contract.

Consideration is defined in Section 2(d) as when, at the desire of the promisor, the promisee
or any other person has done or abstained from doing, or does or abstains from doing, or
promises to do or to abstain from doing, something, such act or abstinence or promise. In
simpler terms, consideration is something with value (benefits, interest or rights) that is used
as a return which promised for another party. Under the Section 26 of the Contracts Act 1950,
it stated that an agreement without consideration is void. However, it also states that any
agreement that is made for natural love and affection with the conditions in writing and
registered, or a promise to compensate for the past voluntary act as well as the promise to pay
a debt barred by limitation law are excluded from the consideration element in a contract.

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Capacity means that a person is legally able to enter into a contract. According to Section 11
of Contracts Act, a person is competent to enter a contact only if the individual 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. Consent can be interpreted
as two or more persons are said to consent when they agree upon the same thing in the same
sense. Consent is said to be free when it is not caused by coercion, undue influence, fraud,
misrepresentation and mistake. Lack of free consent would render the contract voidable at the
option of the party not at fault as stated in Section 19(1).

Contract part

To constitute a contract, there must be an agreement between two or more than two parties. No
one can enter a contract with himself. An agreement is composed of two elements offer or
proposal by one party and acceptance thereof by the other party.

According to Section 10 (1) of the Act, all agreements are contracts if they are made with the
free consent of parties who are competent to contract, a lawful consideration and with a lawful
object, and are not hereby expressly declared to be void.

The agreement must be such which is enforceable by law so as to become a contract as stated
in Section 2 (h). Thus, there are certain agreements which do not become contracts as this
element of enforceability by law is absent. Thus, an agreement is a wider term than a contract.

However, there are some exceptions to the general rule of contract, that is domestic contract.
Domestic contract is the agreement between parties in social, domestic and family agreements
that do not have intention to create legal relations but domestic contracts are legally binding.
This law considered any agreement that is made for natural love and affection with the
conditions in writing and registered, or a promise to compensate for the past voluntary act as
well as the promise to pay a debt barred by limitation law that are excluded from the
consideration element in a contract.

Social and domestic agreements which are made between spouses, parents and children need
to be distinguished from other agreements. In Phiong Khon v Chonh Chai Fah1 case which
concerned a dispute between a son (respondent) and his step-father (appellant) after the death

1
Phiong Khon v Chonh Chai Fah
2
Lim Thian Kiat v Teresa Haesook Lim [1988] 2 MLJ 103

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of his mother. The appellant allegedly claimed that the respondent had filed a document of land
transfer to him, yet was denied by the respondent. As the appellant failed to show the proof of
document of transfer of land upon the Federal Court held, therefore the court concluded that
there was no intention between two parties to enter into a contract.

The effectiveness of the agreement has been discussed in the case of Lim Thian Kiat v. Teresa
Haesook Lim2. The court held that the agreement went into was impeccably legitimate as the
terms were landed at willfully, with the advantage of the respondent having sufficient legal
advice. The judge said that:

These terms were performed by the petitioner, and I do not accept the sudden recent change
of heart by the respondent in attempting to vary the terms of the agreement on matrimonial
assets, when she had for the last seven years, quite comfortably and without much complaint,
accepted and lived by the terms stated in the deed of separation.

In this manner, from the above citation clearly an agreement which has been closed
appropriately with sufficient legal advice ought not be dislodged unless there are great
considerable ground s to do as such. The court in this manner, would be disapproved to receive
the terms relating to the division of the marital property expressed in the deed of divorce, as it
is a perfectly valid agreement between the petitioner and the respondent.

Obviously under the common law contract, before the court gives effect or decide on the
disputed issues of the agreement, the court would first talk about the legitimacy of the
agreement as a binding contract. Just when the court applies the rebuttable presumption of
intention to make legitimate relation in domestic agreements that it should have legal effect. In
other words, if the court applies the general presumption, the agreement might have no legal
effect and not binding on the parties.

Comparison Part

In short, an agreement will be enforceable by law by fulfilling all the eight criteria discussed
above. Once being legally enforced, an agreement will become a contract. However, an
agreement that breaches any of the eight criteria above will render it a void contract and not
enforceable legally. Therefore, in accordance to Contracts Act 1950, a contract is necessarily an
agreement but an agreement is not a contract in the absence of any legal enforcement.

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Similarity

Offer

Acceptance

Consideration

An agreement, defined under Contracts Act 1950 Section 2(e), is a promise or sets of
promise that formed between two parties. It has a very wide scoop. An agreement can be
formed regardless it is legal or not. Therefore, an agreement may or may not be enforceable by
law. Furthermore, unlike a contract, an agreement only needs to have an offer and its
acceptance. It needs not have other essentials as in a contract. As such, an agreement does not
arise out of a contract. It does not include a contract.

On the other hand, a contract is defined under Contracts Act 1950 Section 2(h). It is an
agreement between two or more persons to do or abstain from doing an act. However, unlike
an agreement, the scope of a contract is limited. A contract is only valid when it is legal and
enforceable by law. A contract arises out of an agreement. Therefore, a contract includes an
agreement. Last but not least, other than offer and acceptance, a contract also must have all
essentials which include consideration, intention, capacity of persons, legal, certain and
consent.

No contract is required to make an agreement.

But for a contract we always need a legal agreement.