Malaysia drafts a new contract bill to recognise third-party rights and modernise commercial law, including AI-related provisions.
KUALA LUMPUR: The government is now drafting a new contract bill to recognise third-party rights and modernise the commercial legal framework, including provisions for artificial intelligence (AI).
Minister in the Prime Minister’s Department (Law and Institutional Reform) Datuk Seri Azalina Othman Said highlighted that the move is part of a proactive push to overhaul the country’s commercial legal landscape, given that the Contracts Act 1950 (Act 136) has remained untouched for five decades.
She said the final report of the Contract Law Reform Study, spanning over 500 pages and containing policy recommendations, comparative analysis and draft legislation, has been completed and presented to Members of Parliament for review.
“This final report brings together three key studies, including a proposed Contracts (Third Party Rights) Bill to recognise the rights of third parties to enforce contract terms drafted for their benefit.
“This is something that has never been explicitly provided for under Act 136 to this day,” she said during a briefing on the Contract Law Reform Study at the Dewan Rakyat today.
Azalina said the study also proposes a new Agency Bill to replace Part 10 of Act 136 with a more modern legal framework, one capable of tackling emerging issues in the digital economy, including the use of AI in commercial transactions.
She noted that Act 136, now over 75 years old, is built on English Common Law principles and has seen only three major amendments, in 1967, 1974, and the last one nearly five decades ago in 1976.
She also pointed out that several statutory illustrations under the Act still rely on outdated language that no longer reflects today’s business landscape.
“Some statutory illustrations still use archaic terms, such as the word ‘gantang’ (bushel) in Sections 19 and 66, a measurement that has long been obsolete in our country,” she said.
To ensure the review is comprehensive, Azalina said the government established the Contract Law Reform Review Committee on Jan 14, 2025, chaired by Federal Court Judge Datuk Seri Vazeer Alam Mydin Meera.
The committee, which comprises 20 experts from the judiciary, legal practitioners, academics and representatives from the Sabah and Sarawak governments, has established eight working groups to examine all 191 provisions of the Act.
Azalina said the Legal Affairs Division will organise a special briefing session soon to provide an opportunity for Members of Parliament to obtain further clarification directly from the committee.
“Subject to Cabinet approval, these proposed Bills are targeted for official tabling in the Dewan Rakyat in the upcoming sitting,” she said.
