Why are Written Contracts Important? Is It Safe to have Contract Drafted by Yourself?

What is a Contract?

We enter into contracts every day. Almost everything that we do from buying KFC and McDonald’s to buying clothes in clothing retail stores, to buying a property, is regulated by the law of contracts. A contract, in simple terms, is an agreement between two parties that is enforceable by law. However, how do we know if an agreement is a valid contract? The Law of Contract states that all agreements are contracts if they have the following five key elements:-

Does it have to be in writing?

A contract can be in writing or made orally as long as it is not required to be written by law. Section 10(1) of the Contracts Act 1950 states that “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.”

Section 10(1) of the Contracts Act 1950 provides that all agreements are contracts if they are made by parties competent to contract, for a lawful consideration, and with a lawful object. The section did not go on to state that all contracts must be made in writing before they can be said to be valid and enforceable.

As said by Gunn Chit Tuan J in Diamond Peak Sdn Bhd v. Dr. Tweedie, an oral contract for the sale of immovable property is valid and enforceable under our law.

In Keongco Malaysia Sdn Bhd v Ng Seah Hai, Chew Soo Ho JC said that the law still recognizes an oral contract provided that the party concerned will be able to prove the existence of such a contract and its validity.

However, the law also made it clear that in some situations, a contract must be made in writing. Section 10(2) of the Contract Act 1950 states that some contracts are required to be in writing for the contracts to be enforceable in a court of law. For instance, a promise to pay a debt barred by limitation law should be in writing and signed by the debtor.

Based on the above cases, it is well established that the law allows for a contract to be made orally. Having said that, the issue with oral contracts is that oral contracts are very much difficult to prove and enforce as can be seen in the following case:-

In HARCHARAN SINGH S/O SOHAN SINGH v RANJIT KAUR D/O S GEAN SINGH, the plaintiff was the younger brother of the deceased while the defendant was the wife of the deceased. The property in question was purchased by the plaintiff and the deceased and was registered in both their names. The defendant became the administratrix of the deceased’s estate. The plaintiff alleges that due to the deceased’s family and financial problems, the deceased, by an oral agreement, had sold his half of the share in the land to the plaintiff. The plaintiff applied for a declaration that he is the beneficial owner of the deceased’s half undivided share in the said property and an order that the defendant as administratrix of the deceased’s estate transfers the half undivided share in the said property to the plaintiff. It was held that the plaintiff had failed to prove that there was an agreement between him and the deceased where he alleged that the latter had agreed to sell half of his share to the former. In fact, the plaintiff had not even attempted to transfer the half undivided share of the deceased during the lifetime of the deceased.

Thus, it would be wise to put a contract in writing to avoid future disputes as to the existence of the contract and the actual terms agreed by the parties. Below are several key points to take note of as to why a contract must be set in writing:-

In view of the above, it is strongly recommended for an oral contract to be immediately put in writing to avoid future misunderstandings or disputes between the parties. If a contract is not in writing, it may well be difficult to prove that you have a contract at all. Having a written contract is like having an insurance policy. The hope is you never have to refer to them but you might be relieved if and when you do.

Is it safe to have your contract drafted by yourself?

We have already established the necessity to have your contract to be put in writing in Part 1 of the Article. The next issue arises as to can you draft your own contract? Is it safe to do so?

First of all, any agreement made between two or more parties is a contract if they are made by the free consent of parties competent to contract, for a lawful consideration, and with a lawful object as explained in Section 10(1) of the Contracts Act 1950. This includes any oral contract and even a handwritten contract. So, yes, you can write your own contract and it is totally valid.

Having said that, this doesn’t mean you should write your own contract. You can try, but that doesn’t mean you should. So, what are the dangers of self-drafting a contract?

In conclusion, can you write your own contract? Yes, you can. However, can you write a “good” contract yourself? The answer seems to be “No”. It’s very important to point out that once you have signed the contract, you are legally bound to those terms no matter how badly the self-drafted contract is worded or how ambiguous the contract is. It is worth mentioning that it costs far more to solve problems that could have been prevented by paying a lawyer to draft a contract correctly in the first place.

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