THE LAW OF CONTRACT Nur Emma Mustaffa Quantity Surveying Department Faculty of Built Environment UTM

Lecture Plan (a) To explain on the content of the Contract Act 1950 (b) Lecture on Offer and Acceptance

Contract Act 1950 (Act 136) Question : Written or unwritten source? Divided into Parts – 10 parts Sections – 191 sections Illustrations – eg: Section 4, Section 5

The Law of Contract Objectives of the lecture:- (a) To explain the basic elements of contract (b) To explain in detail the meaning of offer and acceptance (c) To discuss on the formation of an offer and acceptance

Contract Have you ever entered into a contract before? How does a contract document look like?

Contract Document

Contract Document

ELEMENTS OF A CONTRACT Offer Acceptance Intention To Create Legal Relations Consideration Certainty Capacity

BASIC PRINCIPLES Section 2 (b) Contracts Act 1950 Contract : an agreement enforceable in law An agreement which is legally binding between the parties Is there any contract which is not enforceable in law?

OFFER Necessary element for the formation of an agreement Section 2(a) CA 1950 : when a person signifies to another his willingness to do or 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

OFFER Person making the proposal is called the ‘promisor’ or ‘offeror’

OFFER Communication of a proposal :- Under S3 CA 1950 : It is COMPLETE when it comes to the knowledge of the person to whom it is made MUST BE COMMUNICATED from the offeror to the offeree.

OFFER Express : made in written words (oral or written) Implied : made other than in words (by conduct)

OFFER Offer v Advertisement Advertisement : an attempt to induce offer

ADVERTISEMENT Case : Majumder v AG of Sarawak An advertisement in the newspaper for the post of doctor was an invitation to treat

ADVERTISEMENT Auctioneer invites a bid, it is an invitation to treat A bidder makes a bid, he is making an offer The sale is made when the auctioneer announces its completion by the fall of the hammer

Case : Pharmaceutical Society of Great Britain v Boots Cash Chemist Ltd (1953)

QUESTION? What about a display of goods in a shop? Case : Pharmaceutical Society of Great Britain v Boots Cash Chemist Ltd (1953) Sale of certain poisons displayed on shelf which were illegal under Pharmacy and Poisons Act 1933

Case : Pharmaceutical Society of Great Britain v Boots Cash Chemist Ltd (1953) The Court held that the display of goods was not an offer. By placing the goods into the basket, it was the customer that made the offer to buy the goods. This offer could be either accepted or rejected by the pharmacist at the cash desk.

Case : Pharmaceutical Society of Great Britain v Boots Cash Chemist Ltd (1953) The moment of the completion of contract was at the cash desk, in the presence of the supervising pharmacist. Therefore, there was no violation of the Act

Catalogue Sale by catalogue is an invitation to treat Argos Co wrongly printed TV price for 3 pounds

TENDER

ACCEPTANCE Section 2 (b) CA 1950 : when the person to whom the proposal is made signifies his assent thereto, the proposal is said to have been accepted.

ACCEPTANCE A proposal, when accepted becomes a promise Promisee : person who accepts the promise

ACCEPTANCE Express : when it is made in words Implied : made other than in words Proposal (offer) to be converted into a promise, the acceptance must be absolute and unqualified. ie; a complete consensus

ACCEPTANCE Negotiating stage : no acceptance is formed Case : Lau Brothers & Co v China Pacific Co Ltd (1965) Negotiating stage of logs selling through telegrams and letters Defendants withdrew. Court held, it was a valid conduct as the parties were still negotiating

ACCEPTANCE Case : Low Kar Yit & Ors v Mohd Isa & Anor (1963) When acceptance is qualified to words such as ‘subject to contract’, ‘subject to a formal contract being drawn up by our solicitors’ – there is no absolute contract yet It is just a “contract to enter a contract”

Acceptance v Counter Offer Acceptance qualified by the introduction of a new term may be considered as a counter offer Counter offer destroy the original offer

Acceptance v Counter Offer Case : Hyde v Wrench [1840] Wrench offered to sell his estate on 6 June for £1000 Hyde – replied on 8th June a counter proposal to purchase at £950 Wrench- refused to accept the offer on 27th June Hyde – made an offer to accept the original sum demanded (950) Court – no contract existed between them as Hyde had rejected the original proposal on 8th June. Hyde was not in a position to accept it later

Acceptance : Reasonable time Acceptance must be made within a reasonable time Depends on the subject matter or the method by which the offer is communicated Case : Fraser v Everett [1889] Sale of shares Other examples: sale of perishable goods such as vegetables, fruits

Acceptance Must be expressed in usual and reasonable manner, unless the proposer describe the manner which is to be accepted. Silence is not a manner of acceptance Case : Felthouse v Bindley [1862]

Felthouse v Bindley (1862) P- discussed with his nephew John the purchase of a horse belonging to John and wrote to him offering to buy his horse and added “ If I hear no more about him, I consider the horse is mine at 30 pounds 15 s” The nephew mistakenly sold the horse. Held : No acceptance by the nephew and that the P had no right to impose upon his nephew a sale of horse by silence.

Acceptance Exception: Case : Weatherby v Banham [1832] Receipt and reading of a periodical after the expiry of a subscription amounted to an acceptance

Acceptance S7(b) CA 1950 The offeree must follow the manner prescribed by the offeror to accept the offer. If the offeree deviates, the offeror must not be in silent. If the offeror fails to insist on the manner and accept, he is bound by it.

Revocation of offer and acceptance An offer may be revoked :- Communication of notice of revocation Time prescribed in the offer lapsed Failure of the offeree to fulfill a condition precedent to the acceptance Death or mental disorder of the offeror Revocation is possible when there is no acceptance.

Revocation of offer and acceptance Communication of notice of revocation Eg : A telephones B and proposes to sell his car, A may revoke his proposal at any time before B telephones or meets A and communicate his acceptance. But after B communicates his acceptance to A, A cannot recall or revoke his proposal.

Revocation of offer and acceptance Time prescribed in the offer elapsed Offer must be accepted within 14 days, no acceptance is made – so the offer lapsed Failure of the offeree to fulfill a condition precedent to the acceptance. A condition precedent requires that an event must happen before an obligation to perform occurs.

Revocation of offer and acceptance Failure to fulfill a condition precedent to the acceptance. A condition precedent requires that an event must happen before an obligation to perform occurs. Example : age limit, group of contractors

QUESTION X enters Just Co supermarket, takes a trolley provided by the supermarket and fills it up with various goods from the shelves. He is about to pay when he realized that he has left his wallet at home. He then started to walk down the aisle and put back the goods on the shelves. The supermarket supervisor stops him, saying that he has bought these goods and therefore must pay for them. Advise X.

QUESTION B Carpet Co the sole agents for Middle Eastern Carpets advised in the Star : “ Super New Year Season Sale! For every Iraqi carpet bought, a Kuwaiti carpet free. HURRY WHILE STOCKS LASTS” Consider the legal situation in the following circumstances :-

QUESTION C asked for an Iraqi carpet but was refused because she owns a carpet company in a shop down the street. D came all the way from Port Dickson but was told that all the carpets have been sold.