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Is Your Agreement Valid if it is Not Stamped? The Answer is Yes.

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INTRODUCTION

A written contract between parties plays an important role in ensuring that agreed terms are documented. Section 4 of the Stamp Act 1949 provides that the instruments specified in the First Schedule shall be chargeable with stamp duties specified in such Schedule. Some contracts or agreements are mandatorily required to be stamped for them to be accepted by various government departments or banks. However, it is not uncommon that private agreements entered between parties remained unstamped.

WHAT IS THE PURPOSE FOR CHARGING STAMP DUTIES?

The Federal Court case of Malayan Banking Bhd v Agencies Service Bureau Sdn Bhd & Ors (1982) 1 MLJ 198 held that:

    “The purpose of the Stamp Ordinance 1949 is to impose and to collect taxes on legal and commercial documents by compelling these documents to be stamped on pain of being inadmissible…

    The duty must be paid within 30 days of execution or even on a later date when the documents are used provided that an appropriate penalty is paid. Failure to pay the duty or the penalty prevents the use of the instrument.”
Under section 52(1) of the Stamp Act 1949, for the agreement to be admissible in court, you will have to stamp the agreement first. The timeline for you to stamp your agreement is within 30 days from its execution or from the date of the agreement, failing which penalty(s) will be incurred.

In Chong Song @ Chong Sum & Anor v Uma Devi a/p V Kandiah [2011] 2 MLJ 585, the Court of Appeal held that:

    [20] That the late payment of stamp duty on the power of attorney and the sale and purchase agreement between the plaintiff and the first defendant does not affect the validity and admissibility of the documents. This is covered by ss 51, 52 and 63 of the Stamp Act 1949. On this point it is sufficient to refer to the case of Malayan Banking Bhd v Agencies Services Bureau Sdn Bhd & Ors [1982] 1 MLJ 198.
In Octville Golf Properties Sdn Bhd v Uniwheels Sdn Bhd [2013] 8 MLJ 558, it was held that:

    “If any authority is needed on the aforesaid proposition, it can be seen in the Federal Court case of Malayan Banking Bhd v Agencies Service Bureau Sdn Bhd & Ors [1982] 1 MLJ 198 (FC), where it was held that an unstamped document could be received in evidence on payment of the penalty provided under s 51(1)(d) of the Stamp Act 1949.”
As such, if you ever missed the stamping period, you could still stamp the agreement at a later stage or when court proceedings are imminent. However, you will have to pay a penalty for late stamping on top of the original duty. The scale of the penalty is as follows:

CONCLUSION

Although unstamped agreements will not affect their validity, it is advisable to stamp your agreement for use in government departments and, more importantly, to ensure that when a dispute arises, your agreements can be properly admitted as evidence in court without having to pay hefty penalties.
Disclaimer: The contents of this write-up is intended for general informational purposes only and does not constitute legal advice.

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