Introduction
The recent Court of Appeal decision in Chia Seong Pow v Alexma Corp Sdn Bhd [2026] MLJU 658 confirms that a binding contract for the sale of land can be formed even where the sale and purchase agreement (SPA) remains in “draft” form and unsigned. Depending on the facts of each case, the crucial question to be determined is whether the parties have reached consensus ad idem on the essential terms of the transaction.
The “Three P” Requirement
For an agreement for the sale and purchase of land to be considered concluded and legally binding, the parties must agree on three essential elements to establish consensus ad idem: –
- 1. Parties : clear identification of the vendor and purchaser
- 2. Property : sufficient description of the land
- 3. Price : agreed consideration
Binding Effect of Unsigned “Draft” Agreements
A common misconception in land transactions is that labelling a document as a “draft” prevents it from being legally binding. However, the Court of Appeal made clear that the description of an agreement as a “draft” is merely a matter of convenience and does not, in itself, negate the fact that the essential terms may already have been negotiated, agreed, and reduced into writing.
Once the “Three Ps” have been agreed upon, a binding contract may be formed even if the draft SPA remains unsigned. Sending the draft SPA for execution is merely to formalise the agreement already concluded between the parties.
Communications As Evidence of a Concluded Contract
WhatsApp messages, emails and all other written confirmations including confirmation such as “Ok proceed”, may constitute evidence that a contract has been concluded. Parties should therefore be aware that such communications can carry legal weight and may be used to demonstrate consensus ad idem. In this case, the Court of Appeal placed weight on the WhatsApp message “Ok proceed” and the solicitors’ subsequent email confirming that the client had agreed to the reduced purchase price.
Effect of Subsequent Drafts or Continued Negotiations
The existence of subsequent drafts or continued negotiations does not necessarily indicate that no contract has been concluded. Instead, such conduct may be construed as proposals to vary a concluded contract. In this case, the Court of Appeal held that the later drafts were merely proposals to vary an already concluded and binding contract, including by splitting the transaction into two SPAs or adding an additional purchaser.
Conclusion
Veiling behind a “draft” label may be insufficient to avoid its binding effect. Where parties do not intend to be bound prior to formal execution, it is prudent to expressly state this intention in writing. Clauses such as “binding only upon formal execution” or “subject to contract” clarify that no binding obligations arise until the SPA is formally executed.
Without such an express statement, courts may infer that the parties intended to be bound, potentially exposing them to unintended legal obligations. As the Court of Appeal observed, whether parties are bound before formal execution depends on the facts and the correspondence between them.
Disclaimer: This article is for general information only and does not constitute legal advice or legal opinion. It should not be relied upon as a substitute for specific legal advice. No person should act (or refrain from acting) based on this article without obtaining advice on the specific facts and circumstances. Halim Hong & Quek does not accept responsibility or liability for any loss or damage arising from reliance on this article. Halim Hong & Quek reserves the right to update, amend or withdraw this article at any time. All rights reserved.
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About the authors
Thoo Yee Huan
Senior Partner
Dispute Resolution
Halim Hong & Quek
yhthoo@hhq.com.my
Meyer Thor Xiao Xin
Senior Partner
Dispute Resolution
Halim Hong & Quek
meyer.thor@hhq.com.my
