Contract - Offer & Acceptance PDF

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Warning: TT: undefined function: 32CONTRACTA contract is legally binding and not simply an “agreement” made by two parties. For a contract to become fully legitimate, it requires such five characteristics: Offer (Tawaran) Acceptance (Penerimaan) Consideration (Balasan) Intention to create legal rela...

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LAW436 - Law of Contract I

CONTRACT A contract is legally binding and not simply an “agreement” made by two parties. For a contract to become fully legitimate, it requires such five characteristics: 1. 2. 3. 4.

Offer (Tawaran) Acceptance (Penerimaan) Consideration (Balasan) Intention to create legal relations (Niat untuk mewujudkan perhubungan undangundang) 5. Capacity (Keupayaan)

Dealing with a normal business contract. It is the basic foundation of any contract. It does not require witnesses, in writing, signature, guarantor, or stamp duty.

Agreement Definition: When two parties have made mutual promises to each other (not legally binding). Section 2(e) of Contract Acts 1950 – every promise and every set of promises forming the consideration for each other. Section 2(g) of Contract Acts 1950 – an agreement not enforceable by law is said to be void. Section 2(h) of Contract Acts 1950 – an agreement enforceable by law is a contract. Agreement is not legally binding. However, an agreement which is enforceable by law is a Contract and thus, legally binding. Agreement (not legally binding)

enforceable by law

contract (legally binding)

Next, what makes an agreement a contract? Section 10 of Contract Acts 1950 – all agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void. Hence, the requirements for a legally, enforceable, and valid contract are as such: • Free consent • Capacity to contract • Lawfulness of consideration and object

LAW436 - Law of Contract I

Offer Introduction to Offer Definition: the willingness of a party to do or to abstain from doing a certain act, provided that the party to whom the proposal is made to is also willing to comply to do or to refrain from doing a particular act. Section 2(a) of Contract Acts 1950 – when one person signifies his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to the act or abstinence, he is said to make a proposal. In this context, the proposal from the Section refers to the Offer. Assent = approval/consent/acceptance/agreement Abstinence = self-restraint

Thus, an Offer is a definite promise to be bound, provided that certain specific terms are accepted. An Offer is capable of being converted to an agreement by its acceptance. Case: Preston Corporation Sdn Bhd v Edward Leong Appellants: a company carrying on a business publishing books (Preston Corp Sdn Bhd) Respondents: the firm of printers Contract: printing of school textbooks Facts of the case Both parties had entered into a business relationship (contract) regarding the printing of school textbooks. There was an exchange of letters which commenced with the respondents submitting quotations for the printing of the books. The appellants issued the printing order. Quotations

orders

confirmation

printing

Issue Whether respondents’ quotations constituted a binding offer in which when accepted by the appellants by issuing the printing orders resulted in a contract between the parties? At which point an Offer was made? Held Quotations were never intended to be a binding offer but rather a supply of information by R in response to A’s inquiry as to the price of books to be printed and their delivery dates. Nothing in the quotations showed “an intimation of willing…to enter into a legally binding contract.” The Offer was constituted by the printing orders issued by the A.

LAW436 - Law of Contract I

The Contract came into existence only at the time when the printing orders were confirmed/accepted by the R. Printing orders by the Appellants (OFFER) + Confirmation by the Respondents (ACCEPTANCE) = CONTRACT

Offer is an intention/intimation (indication/hint) of willingness by an offeror to enter into a legally binding contract. Its terms either expressly or impliedly must indicate that it is to become binding on the offeror as soon as it has been accepted by the offeree. (An offer must indicate a willingness on the part of the offeror to become bound as soon as it has been accepted by the offeree). Federal Court elaborated on the meaning of Offer: binding at law that is, an offer has legal effect (an offer binds the offeror as soon as it is accepted by the offeree).

Requirements of Offer 1. Valid at law. It must not contravene (disobey/breach/infringe/violate) with any provisions (condition/stipulation) of the law otherwise it would amount to a nonexistent offer incapable of acceptance by the offeree. As long as the products sold are legitimate by law. Case: Affin Credit (M) Sdn Bhd v Yap Yuen Fui Appellant: Affin Credit (M) Sdn Bhd (acceptor) Respondents: Yap Yuen Fui (offeror) Facts of the case The A rented a motorcar to the R under a hire-purchase agreement. R fell into arrears (debt/delay) with the payment and the A brought an action to the court for the balance outstanding (unsettled/unpaid/unresolved) under the hire-purchase agreement. The R denied the whole/entire claim by alleging that the A failed to comply with various provisions in Section 4(1) of the Hire-Purchase Act 1967 (Revised 1978), which required the owner of goods (A) to give prospective hirer a written agreement/statement consisting of a summary of the hirer’s financial obligations under the proposed hire-purchase agreement AND also failing to supply him with a copy of the hire-purchase agreement within 14 days of its execution.

LAW436 - Law of Contract I

Issue Whether the R’s offer was a lawful offer capable of acceptance by the A under the Hire-Purchase Act 1967 (Revised Act 1978)? Held: The owner, A, accepted a written offer signed by the hirer, R, without first giving him the required written statement/offer signed by the defendant, R, without the condition precedent (prior/former) being fulfilled, therefore there was not an offer recognized by the Hire-Purchase Act 1967 and as such there could not be acceptance by Plaintiff, A, of a non-existent offer. The Court dismissed the appeal not because the hire-purchase agreement was unforceable. But because the parties had in fact not entered into any agreement (the offer was void ab initio – for lack of offer and acceptance). 2. Must be clear in meaning/made clearly/certain. An Offer that is unclear would be invalid/void for uncertainty. An Offer also must not be vague, indefinite or uncertain. The meaning must be determined with a certain degree of certainty. (If otherwise, not possible for the Court to hold that there was an agreement between them). Case: Ahmad Meah & Anor v Nacodah Merican Plaintiff: Ahmad Meah Nor &Anor Defendant: Nacodah Merican Facts of the case An Agreement was made between the parties whereby, in consideration of the P marrying the D’s daughter, the D promised to build and give to the P and his daughter a “house which must be a suitable building.” Held Cannot be deemed (believed/considered) to be specifically performed because suitability is subjective to a different person/individual. The judgement was entered to the D for the reason of absurdity of the purchase of “house which must be suitable building.” This bears a vague element towards the nature of the building itself and in what way, the house being suitable to whom. There was an absence in clarity and specifications. Case: Ho Ah Kim v Payatrubong Estate Sdn Bhd Plaintiff: Ho Ah Kim Defendant: Payatrubong Estate Sdn Bhd

LAW436 - Law of Contract I

Facts of the case: The deceased entered into a written agreement to purchase a portion of the D’s land in Penang to the maximum extend to about 15 acres of less, and paid a deposit of $18, 000. Held It was a necessary requirement that for an agreement to be binding, it (the agreement) must be sufficiently definite to enable the Court to give it a practical meaning. Its terms (terms of the agreement) must be so definite or capable of being made definite, without further agreement between the parties so that the promises and performances to be rendered by each party are reasonably certain. Agreement for sale between parties stipulated that the purchase price should be at the same price paid by the Government in exercising as option to purchase D’s land. If the Government did not purchase or compulsorily acquire the said land, the price payable by deceased would be $4000 per acre. The agreement of sale satisfied the above requirements and the parties knew what their contractual intentions were thus, agreement for sale was not void for uncertainty but instead enforceable at law. Case: Sou Yong v Yuzin binti Abdullah @ Ho Yuzin Plaintiff: Sou Yong Defendant: Yuzin binti Abdullah @ Ho Yuzin Facts of the case: The P contended that by a letter dated 6th March 1997 signed by both parties, the D agreed to sell a piece of land to the P for RM200, 000. They agreed that the P’s solicitor would draw up a formal sale and purchase agreement pending a search to be done on the land. The D later repudiated (disown/decline/refuse to acknowledge) the sale of the land to the P. The P sued the D for this. Held It was clear that there was uncertainty even regarding the terms of the agreement. Although the letter stated that the P was the purchaser, almost all the other documents drawn up by the P’s solicitors suggested that the actual purchaser was Countryside Home Sdn Bhd. Furthermore, the first draft agreement contained a term that the D would create a power of attorney in favor of the P but the second draft omitted (fail) this term.

LAW436 - Law of Contract I

3. Offer can be made expressly/impliedly (obvious/hidden). Section 9 of Contract Acts 1950 – so far as the proposal or acceptance of any promise is made in words, the promise is said to be expressed. So far as the proposal or acceptance is made otherwise than in words, the promise is said to be implied. Case: Preston Corporation Sdn Bhd v Edward Leong “An offer is an imitation of willingness by an offeror to enter into a legally binding contract. Its terms either expressly or impliedly must indicate that it is to become binding on the offeror as soon as it has been accepted by the offeree. 4. Offer must be communicated (oral conversation/approach). When does the communication of Offer is said to be completed? Section 4(1) of Contract Acts 1950 – the communication of a proposal is complete when it comes to the knowledge of the person to whom it is made. How does the communication of Offer is done? Section 3 of Contract Acts 1950 – the communication of proposals, acceptance of proposals and the revocation of proposals and acceptances, respectively, are deemed to be made by any act or omission of the party proposing, accepting or revoking, by which he intends to communicate the proposal, acceptance or revocation, or which has the effect of communicating it. Case: Tinn v Hoffman & Co. Plaintiff: Tinn Defendant: Hoffman & Co. Facts of the case D wrote a letter to P as a response to an offer to sell 1, 200 tons of steel with a request to purchase 800 tons. P was told that there had been no acceptance of the offer for sale. Instead, there had been a counteroffer to purchase 800 tons, which the sellers were free to accept or reject. On the same day, before the letter reached the knowledge of P, P wrote a letter to buy steel. Both letters crossed at the past. Held Necessity for an offer to reach the knowledge of the promise. In this case, promisee did not know about the offer because the offer had not reached P. (Identical cross-offer is not an offer and acceptance, thus cannot form a contract).

LAW436 - Law of Contract I

The parties having promised in consideration of the promise made by the other is an exchange of promises (two asserting minds). The promise/offer made on each side in ignorance of the promise/offer made on the other side, neither of them can be constructed as an acceptance of the offer. Case: Taylor v Laird Plaintiff: Taylor Defendant: Laird Facts of the case The P was a ship captain who employed to command a steamer ‘for an exploring and trading voyage up the river Niger…at a rate of £50 per month’. The P took this ship for the captain and he claimed his wages for this work. Held: The owners of the vessel were entitled to refuse the payment as the P’s offer to help bringing the ship back to its home port was not communicated to them. In other words, they were given no opportunity to either accept or reject his offer.

Invitation to Treat (ITT) • ITT is an indication/intention/induction of a willingness for an offer to be made. • ITT would be the first step of negotiation process that might end with an offer given by other parties. • Generally, advertisement is a form of ITT to entice/attract offerors to come forward to enter into negotiations • It merely invites interested parties to make an offer. Offer ITT

Acceptance = Contract Offer

Acceptance

Examples of ITT ITT has two examples included display of goods and advertisements. 1. Display of goods Concept: The reasoning behind this rule is that to hold otherwise would require a seller to sell whatever quantity of the item displayed even if he has insufficient supplies, while

LAW436 - Law of Contract I

the buyer cannot also change his mind once an item is chosen and is taken off the display shelf. Case: Fisher v Bell Plaintiff: Fisher Defendant: Bell Facts of the case The D displayed a flick-knife with a price tag in his shop window which was against the law according to Section 1(1) of the Restriction of Offensive Weapons Act 1959: “Any person…who sells…or offers for sale…any knife which has a blade which opens automatically by hand pressure applied to a button, spring or other device in on attached to the handle of the knife, sometimes known as the “flick knife” or “flick gun”…shall be guilty of an offense…” Issue Whether the display of the knife constituted an offer for sale (in which case the D was guilty) or an invitation to treat (in which case he was not guilty). Held The Court held that in accordance with the general principles of contract law, the display of knife was not an offer for sale but merely an invitation to treat, and as such the D had not offered the knife for sale within the meaning of Section 1(1) of the Restriction of Offensive Weapons Act 1959. Although it was acknowledged that in ordinary language a layman might consider the knife to be offered for sale, in legal terms its position in the window was inviting the customers to buy it. The statute must be constructed according to the legal meaning as “…any statute must be looked at in light of the general law of the country, for Parliament must be taken to know the general law.” (per Lord Parker C.J) Hence, it was well established in contract law that the display of an item in a shop window was an invitation to potential customers to treat. The D was not guilty of the offence with which he had been charged. Case: Pharmaceutical Society of Great Britain v Boots Cash Chemist (Southern) Ltd. Plaintiff: Pharmaceutical Society of Great Britain

LAW436 - Law of Contract I

Defendant: Boots Cash Chemist (Southern) Ltd. Facts of the case The D carried on a business in the retail sale of drugs. The D adapted one of their shops into a self-service shop. A customer upon entering was given a wire basket and can select items displayed on the shelves, put them in the basket and took them to the cash counter at the exit, where the cashier would state the total price and receive payment. At the counter, there was a registered pharmacist who was authorized if necessary, to stop a customer from removing any drug from the shop because there were medications on the shelves that were classified as controlled items in the Pharmacy and Poisons Act 1933. The D was charged for selling a listed poison without the supervision of a registered pharmacist according to Section 18(1) of the Pharmacy and Poisons Act 1933. Issue Whether the contract of sale was formed when the customer selected the product from the shelves (in which case the D was in breach of the Act due to lack of supervision at this point) or when the items were paid for (in which case there was no breach due to the presence of the pharmacist at the payment counter). Held The Court of Appeal ruled that the D was not in breach of the Act, as the contract was completed on payment under the supervision of the registered pharmacist. The display of goods on the shelves was not considered an offer. The offer was constituted when the customer brought the goods to the cashier, which was accepted by the registered pharmacist when the transaction of payment was completed between the cashier and the customer.

2. Advertisements Concept: Question of the intention of the party placing the advertisement. In most cases, advertisements are treated as attempts to induce offers. (Carlill’s case – exceptional fact situations). Case: Carlill v Carbolic Smoke Ball Co. Plaintiff: Carlill Defendant: Carbolic Smoke Ball Co. Facts of the case: The D issued a newspaper advertisement in which they stated they would pay £100 to any person who contracted the influenza after using one of their smoke

LAW436 - Law of Contract I

balls in a specified manner for a specified period of time (thrice daily, for two weeks). The D also stated that they had deposited £1, 000 with a named bank, Alliance Bank on Regent Street as a display of their sincerity in the matter. The P, believing the accuracy of the advertisement, purchased one of the balls and used it as per instructions but she caught the flu, nevertheless. Therefore, she sued the P to recover the £100. Issue Was there a binding contract between the parties? Was the advertisement acted as an offer or a mere invitation to treat? Held The binding contract legally existed, and the P’s claim was successful. The Court ruled that the word ‘sincerity’ and the D’s act of deposited £1000 into the bank had shown an “intention to create legal relations”. Therefore, the contract was formed between the parties and materialized when one came forward to buy a smoke ball and had executed the terms on trusting the directions on how to use it. The advertisement itself had acted as the unilateral offer. Case: Partridge v Crittenden Appellants: Patridge Respondents: Crittenden Facts of the case The A inserted in a magazine advertisement in a periodical notice/containing the words “Quality British A.B.C.R…Bramblefinch cocks, Bramblefinch hens, 25s each”. It appeared under the general heading of “Classified Advertisement” and nowhere was there any direct use of words “offers for sale.” Once Mr. Thompson wrote and enclosed a cheque for 30s to the A. P brought the charges against A stating that it was illegal to make an offer for sale of a live bird under the Section 6(1) and Schedule 4 of the Protection of Birds Act 1954. The D was found guilty and then appealed for his conviction. Issue Whether the advertisement he inserted was merely an ITT or an offer for sale? Held

LAW436 - Law of Contract I

Advertisement was inserted under “Classified Advertisements” was simply an ITT, therefore A was cannot be held liable. It can be concluded that advertisement was invitation to treat instead of an offer for sale. Therefore, the D was not guilty. Case: Caelho v The Public Services Commission Appellants: Caelho Respondents: The Public Services Commision Facts of the case R advertised in the Malay Mail inviting applicants for the post of an Assistant Passport Officer. The A made an application and was subsequently accepted. After being posted to the Immigration Office, the applicant was informed that his appointment on probation was to be terminated immediately by payment of one month’s salary instead of a notice due to a misconduct. The A applied for certiorari to invalidate the ruling. Held The Court ruled that the advertisement was an invitation to qualified persons and the applications acted as the offers in this matter. Ong J held that the advertisement was an ITT and ...