VOID & ILLEGAL

CONTRACT

Business Law & Ethics
 VOID & ILLEGAL CONTRACT

Section 2(g) of the Contracts Act 1950
an agreement not enforceable by law is said to be void.

Section 24 provides that the consideration/object of an

agreement is unlawful if :-
(a) It is forbidden by law
(b) It is of such nature that, if permitted, it would defeat any law;
(c) It is fraudulent;
(d) involves of implies injury to the person or propertyof
another; or
(e) the court regards it as immoral or opposed to public policy.
Section 24 (a) and (b) of the Contracts
1950

Chung Kiaw Bank Ltd v. Hotel Rasa Sayang Sdn Bhd
The Supreme Court held that an agreement which is a
contract prohibited by the statute or a contract entered
into a defeat the object of a statute is void by virtue of
Section 24 of the Contracts Act 1950.

The loans given by the hotel (by way of providing

security) in connection with the purchase of shares in
the company hotel) itself were contravening Section 67
of the Companies Act 1965. The loans were held to be
illegal and void by virtue of Section 24 of the Contracts
Act 1950.
Cases under S. 24(a) & (b)

Tan Bing Hock v. Abu Samah
Hee Cheng & Krishnan
Jalaludeen Abdul Aziz v. Thirumalingam a/l S.
Rajadurai & Anor
Teh Eng Peng @ Teh Joo v. Teh Swee Lian
United Overseas Bank (M) Bhd v. Mok Hue
Huan & Anor
 Section 24(c) & (d)

Section 24 ( c): Refer Illustration (e), Section
24

Section 24 (d): Syed Ahamed Alhabsyee v.

Puteh bte Sabtu
The defendant who was a trustee of a piece of
land belonging to a minor, had agreed to sell it
to the plaintiff. Since the sale of land, if
allowed would affect the interest of the minor,
the Court held that the transaction was void.
 Section 24(e)

Refer Illustration (k), Section 24
(Immoral contracts)

Public Policy:Aroomogum Chitty v.

Lim Ah Hang
Refer also: Illustration (f) and (h)
 Other Void Contracts

Section 25 31 of the Contracts Act, 1950.

Section 28 Contracts in Restraint of Trade

Every agreement by which anyone is
retrained from exercising a lawful profession,
trade or business of any kind, is to that extend
void.

Wrigglesworth v. Anthony Wilson

General Rule: where an agreement which places a
restriction on an employee was held to be void.
Wrigglesworth v. Anthony
Wilson

An advocate and solicitor was restrained from
practising his profession within five miles from
Kota Bahru town for a period of 2 years after
the termination of his contract of service.
The court did not grant an injunction to the
plaintiff to restrain the defendant from
practising as an advocate and solicitor in the
area limited by the agreement.
The court also indicated that the distance and
place in respect of the restraint are irrelevant.
 S. 28 of the Contracts Act
1950

S.28 does not apply to agreements made prior to
dissolution of partnership or an agreement made during
the continuance of a partnership.
It does not apply to one who sells the good will of a
business and agrees to refrain from carrying on a similar
business within a specified location.
Schmidt Scientic Sdn Bhd v. Ong Han Suan
An injunction to restrain ex-employees from using and
disclosing confidential information and/or trade secret of an-
employer was held not to amount to a restraint of trade.
 Exceptions to Section 28

(a) Exception 1
(b)Exception 2
(c) Exception 3