Contracts Resulting from Threats and Unfair Exploitation: The Position under Malaysian Contract Law

Abstract This chapter discusses provisions under the Malaysian Contracts Act 1950 that have the effect of vitiating a party’s free consent to a contract, and sets out the legal consequences of these vitiating factors and the remedies that are available to a contracting party to whom these vitiating factors apply. These vitiating factors are those resulting from ‘abuse or exploitation’, such as coercion, undue influence and unconscionability. Two major themes emerge from this discussion. The first is the extent of the Malaysian courts’ power to receive legal developments occurring elsewhere in the common law world in the absence of express statutory language in the Contracts Act either prohibiting or permitting their adoption. The second is the extent to which the current provisions can be interpreted so as to incorporate these external developments, and the willingness of the Malaysian courts to do so. The chapter notes the dichotomy in the approach taken by the Malaysian courts. While the courts show a keen interest in legal developments occurring elsewhere in the common law world, and have made genuine efforts at applying these developments in order to achieve justice in suitable cases, they have overlooked the potential for accommodating these developments within the Contracts Act’s surprisingly expansive language. The courts have shown a preference for English case law over the literal language of the Contracts Act. As a result, the potential of—for example—section 16 of the Act to cover a much wider range of vitiating factors has remained untapped.