Business Law - George and Kenny

Question 1

George and Kenny are childhood friends. Kenny is 20-year-old business students in a university and George is 3 years younger than him. They are both geniuses and they plan to start a business together.  George is planning to enter into a contract to start an online business with Kenny. Kenny’s main concern is the validity of the contract entered with George. He also wants to know if there are any differences if George enters into a contract for an admission to a university.

Answer:

1.1 Issues

        The issue of this case are what is the validity of the contract entered by Kenny with George and whether there is any difference if George enters into a contract for his admission to a university.

1.2 Related Laws

        In this case for the first issue, it declared that Kenny was entering a contract with a minor since George was only 17 year old which is below 18 year old. A person below the age of 18 years is a minor. According to the Age of Majority Act 1971, people reach the age of majority at 18 years. The general rule is that all contracts entered into by minors are void.

        One of the elements constituting a valid contract is that the parties entering the contract are those who have the competency to contract. This is based on section 10 (1) of the Contract Act 1950 which states: “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” (Miss.P, 2011).

Competency refers to the capacity of being an adult, having a sound mind and not forbidden by law to enter any contract. This principle is based on section 11 of the Contract Act 1950 which provides 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” (Miss.P, 2011).

In Malaysia, the age of majority is recognized as above eighteen years of age as stated in the Age of 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” (Miss.P, 2011).

In effect of section 10 and 11 of contract Act 1950, the courts held in the cases 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 are generally void and a minor cannot sue or be sued on such void contracts (Miss.P, 2011).