Contracts And Agreements Are The Basics Of The Business World

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Contracts and agreements are the basics of the business world. A contract is an agreement, but not all agreements are contracts. “A contract is the voluntary exchange of promises between two or more entities creating a legal obligation that is enforceable,” (Hodge 153). In Malaysia, contract law is governed and enforced by the Contract Act 1950 (CA 1950). According to Section 10 (1) of CA 1950, 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 not hereby expressly declared to be void. In order to form a legally binding contract in Malaysia, the contract must meet six basic elements of a contract. The first element is an offer.…show more content…
Acceptance must be absolute and unqualified, which means the promisee’s intention to accept must be clearly understood; it must also be accepted in some usual and reasonable manner, unless the proposal prescribes the manner in which it is to be accepted (S. 7(a)(b) CA 1950). Both offer and acceptance can be either expressed or implied. In general, acceptance cannot be withdrawn once it has been made. The third element of a valid contract is consideration. According to Section 2 (d) of CA 1950, Consideration for the promise is 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. An agreement without consideration is voidable. Consideration is usually made in order to get something valuable in return, for example, money. However, the consideration must not be unlawful and gratuitous. There are three types of considerations which are executory, executed, and past consideration. Consideration is executory when there is an exchange of promises to perform acts in the future. Meanwhile, when a promise is made in exchange for an act, when that act is performed, it is executed consideration. If a party voluntarily acts and then the other party makes a promise, the act is said to be "past consideration". Intention to create legal relations is the fourth element of a valid contract in Malaysia. As
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