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Is an Unstamped Agreement Valid in Malaysia?

by | Sep 12, 2021 | Business, Contracts, Featured, Law

Is an Unstamped Agreement Valid in Malaysia?

 

What is a stamped agreement?

 

A contract between a company or another individual, an agreement will arise between both parties also known as consensus ad idem. This agreement here, the contract/instrument of dealing, is what needs to be stamped. It has to be stamped at LHDN (Lembaga Hasil Dalam Negeri/ Inland Revenue Board) and there will be a stamping fee determined by LHDN stated under section 4 of the Stamp Act 1949. The reason why agreements need to be stamped is stated under section 52(1)(a), where only a duly stamped agreement may be admitted as evidence.

 

If an unstamped agreement was to still be admitted to the court as evidence by the parties A penalty would be imposed due to such delay in stamping pursuant to section 47A, since an agreement or instrument must be stamped within 30 days of its execution (signing) if executed within Malaysia and the court will make a consequential order for the agreement to be stamped.

 

You would be relief to know that individual rights will still be protected in an unstamped agreement and will not be affected unless it is proven such agreement was fraudulent or a lack of authenticity existed ab initio.

 

Case laws illustrating such situation:

 

The High Court in the case of North western Services v Chan Yin Leng & Anor. Briefly, the appellants argued that the investment agreement that was unstamped was not admissible. The respondent had argued that the Defs themselves refused to stamp the agreements.

 

It was held that:

 

  1. The law does not impose an absolute prohibition against admitting unstamped documents in evidence.
  2. There is admissibility in evidence of the unstamped Agreement in an application for summary judgement and courts can make a consequential order to impound the document until and after the documents have been stamped.
  3. An unstamped agreement is also not a triable issue for an application of a summary judgement aslong as it does not go to the root or validity of the document itself. .

 

It is also important to note that whether the agreements were stamped or not it doesn’t change the character of the illegal agreements made (Ong Thean Chye & Ors v Tiew Choy Chai & Anor)

 

Another current case, Similarly, in CIMB Bank Berhad v Vacation Asia (MY) Sdn Bhd & Ors, the High Court also held that the non-stamping of the letter of offer is not a triable issue as it did not go to the root or validity of the document itself.

 

In conclusion, in court for the unstamped agreement to be admissible, the court will order for the parties to stamp the agreement first, but it isn’t a triable issue. Whereas the rights of party’s privy in an unstamped agreement won’t be affected unless the agreement itself is not authentic or consists of the element of fraud ab initio. Hence, an unstamped agreement is considered valid in Malaysia.

 

References:

  1. Stamp Act 1949
  2. North Western Services v Chan Yin Leng & Anor (2020)
  3. Ong Thean Chye & Ors v Tiew Choy Chai & Anor [2011] 4 MLJ 616
  4. CIMB Bank Berhad v Vacation Asia (MY) Sdn Bhd & Ors [2020] MLJU 483
Aimi Shahirah binti Muhammad Arif Intern Messrs Amir Khusyairi & Associates

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