CONTRACT- FORMATION- CONSENSUS AD IDEM

Legal Updates from YHA Law Firm

Developer K Sdn Bhd has entered into a contract with the main contractor J Sdn Bhd. J Sdn Bhd later appointed M to be its subcontractor. A contract was entered between K Sdn Bhd and J Sdn Bhd on 1.4.2019. M has accepted J Sdn Bhd’s request to be their sub-contractor. Later, M set up a new company called M Sdn Bhd on 1.6.2022 to undertake the work. M and M Sdn Bhd were dealing directly with K Sdn Bhd and K’s consultant all along.

Later, it was discovered that M Sdn Bhd both departed from the original specification of the construction contract between K Sdn Bhd and J Sdn Bhd. When the deadline was approaching, K Sdn Bhd confronted both J Sdn Bhd and M Sdn Bhd about the departure from the earlier contract. M Sdn Bhd later asked for an extension of time. Rejected. K Sdn Bhd insisted on the project being completed on time. Can M Sdn Bhd sue K Sdn Bhd for unreasonably refusing an extension of time?

Q: Is there a valid contract between K Sdn Bhd and M Sdn Bhd?

A: No, the contract is formed between K Sdn Bhd and J Sdn Bhd. There will only be a contract between K Sdn Bhd and M Sdn Bhd if there is a novation to M Sdn Bhd.

Q: Can subcontractor M Sdn Bhd claim they are one of the entities as J Sdn Bhd?

A: No, they are two separate corporate entities.

Q: What is a novation?

A: Novation is the transfer of legal obligations from one party to another party. Without novation between J Sdn Bhd and K Sdn Bhd, there is no valid contract between K Sdn Bhd and M Sdn Bhd. Even though M Sdn Bhd has commenced the work and has been dealing directly with K Sdn Bhd and K’s consultant.

Q: What are the elements of novation?

A: The contracting parties in the existing contract must agree that:

One party no longer wants to be bound by contract terms anymore, and a new party will replace him;
The new party takes the burden of the contract; and
Both parties to the existing contract agree that the new contracting party will perform the contract.

Q: Other than legal requirements, what element is needed in order to form a valid contract between K Sdn Bhd and M Sdn Bhd?

A: There must be consensus ad idem i.e. meaning of minds between the parties. Both parties must agree to and accept the terms of the contract.

Q: Can M Sdn Bhd claim that J Snd Bhd is negotiating with K Sdn Bhd on its behalf before it was incorporated on 1.6.2022?

A: No. M Sdn Bhd could not rely on s.35(1) and (2) of the Companies Act 1965. Under s.35(1), a contract entered prior to the formation of a company can only be ratified (validating the contract) if the contract is entered by someone representing the company (an agent). J Sdn Bhd is not an agent of M Sdn Bhd. To be an agent, J Sdn Bhd has to make it clear to K Sdn Bhd that they are representing M Sdn Bhd for negotiation. M Sdn Bhd has no right to ratify the contract since the contract is between K Sdn Bhd and J Sdn Bhd.

EMPLOYMENT – RETRENCHMENT – INDUSTRIAL COURT UPHOLDS GLOBAL RESTRUCTURING: REDUNDANCY VALID DESPITE ONGOING WORK OVERSEAS

In Sin Leong v BT Systems (M) Sdn Bhd [2025] 4 ILJ 221, the Industrial Court upheld the employer’s retrenchment exercise following a global restructuring, ruling that the claimant was lawfully dismissed due to genuine redundancy. Although the claimant’s functions continued in India, the Court held that the abolition of the entire Malaysian team sufficed to establish redundancy. The company’s profitability did not negate the restructuring, and the LIFO principle did not apply since the whole department was closed. The decision reinforces that courts will respect managerial prerogative, provided the retrenchment is bona fide and not tainted by mala fide or victimisation.

30 March ,2026 No Comments

DECREE NISI – ADULTERY AND FRAUD – NOT CONCEAL REMARRIAGE – COLLUSION EVIDENCE

In Kanagasingam a/l Kandiah v Shireen a/p Chelliah Thiruchelvam & Anor [2026] 7 MLJ 494, the High Court set aside spousal maintenance and committal orders after finding that the ex-wife had fraudulently concealed her remarriage, which by law extinguished her entitlement under section 82 of the Law Reform (Marriage and Divorce) Act 1976. The Court held that consent orders obtained through non-disclosure were vitiated by fraud and ordered repayment of RM310,000, together with RM400,000 in aggravated damages and RM300,000 in exemplary damages. The decision underscores that fraud unravels all, even in family proceedings, and that courts will not hesitate to impose punitive consequences for abuse of process.

30 March ,2026 No Comments

FEDERAL COURT SAVES SECTION 233 CMA: ‘OFFENSIVE’ AND ‘ANNOY’ REMAIN CONSTITUTIONAL

In The Government of Malaysia v Heidy Quah Gaik Li [2026] MLJU 384, the Federal Court overturned the Court of Appeal’s ruling that had struck out the words “offensive” and “annoy” from section 233(1)(a) of the Communications and Multimedia Act 1998. The Court held that these terms, when read together with the requirement of intent to annoy, fall within the permissible restrictions on free speech under Article 10(2)(a) of the Federal Constitution. While the impugned words were upheld as constitutional, the respondent’s acquittal was maintained as her Facebook posts criticising immigration detention conditions did not demonstrate the required intent to annoy or harass.

30 March ,2026 No Comments

HIGH COURT ORDERS TIKTOK VIDEO TAKEN DOWN: ADVICE ON SECRET CONVERSION OF MINORS VIOLATES CONSTITUTION

In Karnan a/l Rajanthiran & Ors v Firdaus Wong Wai Hung [2025] 9 MLJ 14, the High Court granted a mandatory interim injunction ordering the immediate removal of a viral TikTok video advising how underaged non-Muslim children could be secretly converted to Islam without their parents’ knowledge. The Court held that the advice prima facie breached Article 12(4) of the Federal Constitution, which provides that a minor’s religion must be determined by their parent or guardian. Given the risk of irreparable harm to constitutional rights, the Court found the case “unusually strong and clear” and concluded that justice and the balance of convenience favoured the urgent removal of the video pending trial.

30 March ,2026 No Comments

MARITIME LAW – CLAUSES 28 AND 29 BARECON 2001 – OWNERS CAN’T PICK ANY PORT: COURT LIMITS ‘CONVENIENCE’ IN VESSEL REPOSSESSION CLAUSE

In Songa Product and Chemical Tankers III AS v Kairos Shipping II LLC [2026] 1 Lloyd’s Rep 100, the Court of Appeal held that a clause allowing owners to repossess a vessel at a location “convenient to them” does not entitle them to demand redelivery at any distant port of their choosing. The Court emphasised that repossession must occur as soon as reasonably practicable, and where the vessel is already at a safe and accessible port, owners cannot require charterers to incur the cost and risk of sailing it across the world. The decision clarifies that charterers, as gratuitous bailees post-termination, are only obliged to preserve the vessel – not to undertake burdensome repositioning for the owners’ convenience.

30 March ,2026 No Comments

MARINE INSURANCE – FRAUD DOESN’T DEFEAT COVER: COURT UPHOLDS MORTGAGEE’S CLAIM UNDER MII POLICY OF MORTGAGEE’S CLAIM

In Oceanus Capital Sarl v Lloyd’s Insurance Co SA (The “Vyssos”) [2026] 1 Lloyd’s Rep 79, the Commercial Court held that a mortgagee was entitled to recover under a Mortgagee’s Interest Insurance (MII) policy despite a forged war risks cover note and a breach of trading warranties by the shipowner. The Court found that the proximate cause of loss was the mine strike, not the forged insurance, and that the mortgagee was not “privy” to the breach, as its consent had been induced by fraud. The decision reinforces that MII policies are designed to protect lenders from owner misconduct and non-recovery under primary insurance, and that fraud will not defeat cover where the mortgagee acted reasonably.

30 March ,2026 No Comments