Ille galit y

 Where parties enter into an

agreement wherein the
consideration of the agreement or
the object of the agreement is
unlawful, the agreement is void and
the court will not enforce it.

1
Ex amp le
 Munawwar is an illegal drugs’ dealer
 Munawwir ordered Munawwar to provide him 2 cargo
of heroin and morfin drugs for distribution and sale in
Koding Kedah.
 Munawwar dan Munawwir entered into an agreement,
whereas Munawwar agreed to supply and Munawwir
agreed to buy the drugs at the price of RM 999.999
million.
 Munawwar sent the drugs as agreed to Munawwir.
 However, Munawwir failed to pay any cent to
Munawwar.
 Munawwar could not sue Munawwir because the sale
of drug is illegal
2
Co ntr acts Ac t

 S 10 provides that for an agreement

to be a contract, it must be made by
free consent of the parties
competent to contract and that the
consideration and object of the
agreement must be lawful and not
expressly declared to be void
3
Se ctio n 24
 The consideration or object of an agreement is
unlawful if:
 A) IT IS FORBIDDEN BY LAW;
 B) IT IS OF SUCH A NATURE THAT IF
PERMITTED IT WOULD DEFEAT ANY LAW;
 C) IT IS FRAUDULENT;
 D) IT INVOLVES OR IMPLIES INJURY TO THE
PERSON OR PROPERTY OF ANOTHER; OR
 E) THE COURT REGARDS IT IS IMMORAL OR
OPPOSED TO PUBLIC POLICY.

4
Ex amp le

 See example between Munawwar and

Munawwir above.
 The sale of drugs is forbidden by the
Dangerous Drugs Act (DDA).
 The sale also would defeat DDA.
 The contract was illegal according to
section 24 (a) and (b).

5
Ex amp le
 Ali wanted to sell his BMW car at the price of RM
50,000.00
 However, the market value of the car is only RM
1,000.00
 Ali mentioned to Abu that many people wanted to buy
the car at the price of RM 100,000 but because Abu is
Ali’s friend, Ali does not bother to sell at the very
reduced price ie RM 50,000.00
 Abu thought this is actually a good buy as he could buy
the car at the very cheap price. Abu does not realized
that the car was only priced RM 1,000.00
 Abu and Ali entered into the contract of sale of the car.
 The contract is void as it involved fraudulent practice,
pursuant to section 24 (c).

6
Ex amp le
 Ali is a strong man, came from Kampung Gedohom,
Kodiang.
 He is the champion in the most coveted Muai Thai
(tomoi) national competition held in Tak Bai, Thailand
on 11 January, 2005.
 He needs a lot of money to finance his son’s operation
in Kedah Medical Centre.
 So, he met a secret gangster group called ‘BENGANG
GANG’, operating near Bukit Kayu Hitam asking
certain work for good money.
 ‘BENGANG GANG’ asked him to cause injury and hit
to dead Perlis Menteri Besar for RM 500,000.00
 Ali agreed.
 ‘BENGANG GANG’ and Ali entered into an agreement,
whereas, the ‘BENGANG GANG’ would pay RM
500,000 to Ali if Ali could cause permanent injury and
suffering to the MB until he died slowly. 7
 Ali successfully cause injury to the MB and
after 12 months the MB died of great
suffering caused by the injury due to hard
blow by Ali.
 However, ‘BENGANG GANG’ only paid RM
1,000.00 to Ali, Ali sued ‘BENGANG
GANG’.
 The contract was void as it is INVOLVES
OR IMPLIES INJURY TO THE PERSON
OR PROPERTY OF ANOTHER pursuant
to section 24 (d)

8
Ex amp le
 Bakar interested to enter into UUM studying
law.
 He met Anuar, a law lecturer in UUM, teaching
law of contract II.
 However, the problem for Bakar is that he had
failed in his English in SPM and his MUET only
in band 1.
 His application was rejected.
 However, he entered into agreement with
Anuar that if Anuar would persuade FPAU
dean, to still take Bakar, Bakar would pay RM
20,000 to Anuar.
 Anuar succeeded in persuading the dean to
take Bakar to study law in UUM. 9
 But Bakar only pay Anuar RM 500.00. Anuar was
very angry and sued Bakar.
 The contract was void as it is against public policy
pursuant to section 24(f).

10
Ma nang Lim N ative Sdn Bhd.
v M anang S el aman [1986] 1
ML J 379
 An agreement to transfer Native
Area Land in Sarawak to a non
native is deemed under section 8 of
the Sarawak Land Code to have
been entered into for an illegal
consideration.

11
Ar umugam Ch itt y v Lim
Ah Ha ng
 The plaintiff lent money to the
defendant employed for the purpose
of running a brothel. The object of
the contract was therefore immoral.
When the plaintiff sued for payment,
the court held that plaintiff could not
recover his money.
12
Pe arc e v Br ooks

 The plaintiff agreed to hire a coach

to the defendant a prostitute,
knowing that she shall use it for her
trade.
 The plaintiff’s claim for the hire
charges failed on the ground that the
object of the agreement was
immoral.
13
 In Sahabumi Sdn Bhd. V Datuk Yap Pak
Leong :
 The Federal Court held that an
agreement is only void for illegality if the
statute prohibits the act which the parties
contracted to do and not whether the
statute prohibits the contract or the
making of contract in question by the
parties.

14
At tempts to d efeat t he
la w
 Hee Cheng v Krishanan
 The plaintiff sold his house built on a piece of
land in respect of which he was the holder of a
Temporary Occupation License to the
defendant. The defendant refused to perform
the agreement and the plaintiff claimed specific
performance or alternatively damages for
breach of contract.

15
Th omso n J

 The agreement entered into was an

attempt to sell and to purchase the
plaintiff’s rights under the Temporary
Occupation License.
 This contrary to rule 41 of the Land Rules
1930 which states that no license for the
temporary occupation of state land shall
be transferable.
16
 The agreement was unlawful and void
under section 24 of the Contracts
Ordinance as being of such a nature that
if permitted would defeat the provision of
any law.

17
Re ad

 Lim Kar Bee v Duofortis Properties (M)

Sdn Bhd.

 Chung Khiaw Bank Ltd. V Hotel Rasa

Sayang Sdn Bhd.

18
Nafsia h v Ab dul Ma jid

 The word used in section 24(a) and (b) is

not restricted to statutory law and may
include other law.

19
 Read
Datuk Jagindar Singh v Tara Rajaratnam
 The court held that the appellants who
are advocates and solicitors were guilty
of fraud, breach of agreement and undue
influence.

20
Se ctio n 24(d)
 Contracts injurious to the person or property of
another
 Syed Ahamed Alhabshee v Puteh Sabtu (1922)
5 FMSLR 243
 Where the defendant agreed to sell a property
of the plaintiff in which an infant had an
interest. The court held that the dealing was
detrimental to the infant’s interest.

21
Se ctio n 24(e)

 Agreement that are immoral or opposed

to public injury.
 Illustrations (j) and (k)
 Tengku Abdullah ibni Sultan Abu Bakar v
Mohd Latiff Shah
 Court of Appeal stated that the standard of
sexual morality in Malaysia and England is
different.
22
 At common law immorality is restricted to
sexual immorality only
 However, the Illustration (j) to section 24 point
to a wider interpretation of the meaning of
immorality in Malaysia. It may mean more than
mere ‘sexual immoral’. It’s meaning is much
wider than the meaning as understood in
England.
 A who is B’s advocate, promises to exercise
his influence as such with B in favour of C, and
C promises to pay RM1000 to A. The
agreement is void because it is immoral.

23
Oppose d t o p ubli c
polic y
 5 groups:
 Illegal by common law or by
legislation;
 Injurious to good government,
either in the field of domestic or
foreign affairs;
 Case Datuk Ong Kee Hui v Sinyium
Anak Mutit [1983] 1 MLj 36
24
 Interfere with the proper working of
the machinery of justice;
 Cases: SEA Housing Corp. Sdn. Bhd. v Lee
Poh Choo [1982] 2 MLJ 31
 Engku Leh Engku Dris v Che Wok (1949) 15
MLJ 61
 injurious to family life;
 Hamzah Musa v Fatimah Zaharah [1982] 1
MLJ 361

25
 Economically against the public
interest
 Cases
 Thong Foo Ching v Shigenori Ono
 [1988] 4 MLJ 585
 Aspinal Curzon Ltd Khoo Teng Hock
[1991] 2 MLJ 484

26
Co nse quences o f
il le gality
 The contract is unenforceable
 Maxim ex turpi causa non oritur actio
 The position under the Contracts Act 1950
and English Law are same.
 No person can claim any right or remedy
whatsoever under an illegal transaction in
which he has participated.

27
Chung Kiaw Bank Lt d. V
Hotel Rasa Sayang Sdn Bhd
 It may be stated as a general principle
that a contract the making of which is
prohibited by statute expressly or by
implication shall be void and
unenforceable, unless the statute itself
saves the contract or there are contrary
intentions, which can reasonably be read
from the language of statute itself.
28
 Supreme court found that in the
circumstances the bank who had made
the loans were clearly implicated in the
illegality and was indeed party to an
agreement to defeat the object of a
statute and should accordingly be
precluded from suing upon it-ex turpi
causa non oritur actio.

29
Re ad

 Khau Daw Yau v Kin Nam Realty

Development Sdn Bhd
 Chai Sau Yin v Liew Kwee Sum
 Beca (Malysia) Sdn Bhd v Tan Choong
Kuang

30
Remedy under s ection 66
Cont ract s Act
 When an agreement is discovered to be
void or when a contract becomes void,
any person who has received any
advantage under the agreement or
contract is bound to restore it, or to make
compensation for it, to the person from
whom he received it.

31
 Section 66 provides 2 conditions:
 The agreement is discovered to be
void; and
 Case: Ahmad Udoh V Ng Aik Chong
 The other party has received an
advantage.
 Case: Ng Siew San v Menaka

32
Cont ract s not affected by
illegality
 A contract that is prohibited by statute
does not become void and
unenforceable if the statute itself saves
the contract or there are contrary
intentions, which can reasonably be read
from the language of the statute itself.

33
Foo Sa y Lee v Oo i He ng Wai

 The sale of a Malay Reservation land

with the provision that it is subject to the
approval of the state government and the
Ruler in Council was not contrary to the
provisions of the Kelantan Malay
Reservations Enactment 1930 and not
void.

34
Ex amp le
 Mat is the owner of Malay Reservation land in
Changloon.
 According to the land law, this land (malay
reservation) could not be sold nor transferred
to non-malay.
 However, the land can be sold if the status has
changed (from malay reservation land to an
ordinary land (where every body can buy the
land)), after application made by the owner

35
 Mat finally sold the land to Cheng for RM 10 million.
 Mat and Cheng entered into the agreement of sale,
provided that Mat should apply for change of status of
the land.
 Before Cheng paid the RM 10 million, Mat had applied
to the Jitra Land office for the change of status of the
land to become ordinary land (not Malay reserve land).
 Later, Mat changed his mind, not to sell the land to
Cheng.
 Cheng sued Mat.
 Cheng can succeed as he only would get the land,
after application to change the status of the land by
Mat had been approved by Jitra Land Office, according
to Foo Say Lee v Ooi Heng Wai

36
Severa bili ty

 Where a contract contains an illegal

term, the court may sever the unlawful
part of the contract from the lawful part
thus leaving the agreement free of any
illegality. Thus the parties can sue on the
agreement unaffected by any illegality

37
Ex amp le
 Mat entered into a contract with Man, whereby
Mat agreed to pay RM 1,000 to Man, if Man
agreed to:

 1) teach him additional mathematic;

 2) persuade Mat’s add mathematic teacher to
pass Mat’s examination even though Mat failed
(against public policy).

Later Man succeeded to carry out these terms

and asked Mat to pay that RM 1,000.00

However, Mat refused to pay any. 38

Man can sue Mat only for part of RM
1,000.00 (may be RM 500 being half of RM
1,000) being his wages in teaching add
mathematic, while he could not get any
payment for his effort to persuade Mat’s
teacher to pass Mat’s paper even though
Mat had failed, as this is against the public
policy (section 24 (f)).

39
 Case Murugesan v Krishnasamy
 Section 57(2) a contract to do an act
which after the contract is made, become
impossible, or by reason of some event
which the promisor could not prevent, the
contract becomes void when the act
becomes impossible or unlawful.

40
Cl aims wholly i ndependent
of the alleged illegal
cont ract

 Sajan Singh v Sardara Ali held that

where the plaintiff’s claim is wholly
independent of the alleged contract, the
contract is lawful and enforceable.

 Read Tan Lai v Mohamed bin Mahmud

41