Agreements Forbidden by Law vis-à-vis Agreements to Defeat the Law: How Are They Different?

Abstract

AbstractThis article seeks to ascertain the difference between the agreements forbidden by law under section 24(a) and those intended to defeat the law under section 24(b) of the Malaysian Contracts Act 1950. Even though both subsections (a) and (b) cater to different types of illegality, the courts in Malaysia have often been applying them together without giving reasons why they do so. Their conjoined application prevails perhaps because there has been no convincing explanation of their differences, particularly when considered in the context of the common law doctrine of sham. This article attempts to fill that gap. The article suggests that 24(a) deals with the agreements that are expressly or impliedly forbidden by law, while 24(b) applies to sham contracts. This proposition is based on the analysis of the common law doctrine of sham and recent court decisions.