ELEMENTS OF A CONTRACT The basic elements constituting a contract are as follows: 1. 2. 3. 4. 5. 6. 7.

. Offer Acceptance of the offer Intention to create legal relations Considerations Certainty Capacity Free Consent

1. OFFER Section 2(a) of the Contracts Act 1950, states that 'when one person signifies to another 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'. Section 2(c) of the Contracts Act 1950, calls the person making the proposal 'promisor'. Under the Contracts Act and English law, a proposal or offer is something which is capable of being converted into an agreement upon its acceptance. Section 3, Contracts Act 1950. The communication of a proposal is complete when it comes to the knowledge of the person to whom it is made. Section 4(1), Contracts Act 1950. This means that an offer or proposal is effective once it is communicated to the offeree by the offeror. A proposal made in words (oral or written) is said to be expressed. If a proposal is made other than in words (example, by conduct), it is said to be implied -Section 9, Contracts Act, 1950. An offer is revoked: Notice of revocation by the offerer to the offeree. Section 6(a) Contract Act 1950 Section 4(3) Contract Act 1950 Illustration (c) Section 4 Contract Act 1950 Section 5(1) Contract Act 1950 See Illustration (c) of section 4 and Illustration of section 5 contract Act 1950. 2. ACCEPTANCE Section 2(b), Contracts Act provides that when the person to whom the proposal is made signifies his assent thereto, the proposal is said to have been accepted. A proposal, when accepted, becomes a promise. Section 2(c), Contracts Act calls the person accepting the proposal the 'promisee'. When a proposal has been made, if the offeree requested for a clarification about the proposal before an absolute acceptance is made, this request for clarification is not an acceptance nor a rejection towards the proposal. Section 9 of the Contract Act 1950 provides that so far as the acceptance of any promise is made in words, the acceptance is said to be expressed. If the acceptance is made other than in words, the acceptance is said to be implied. The acceptance of that proposal must be absolute and unqualified. The way the acceptance is made. Acceptance must be made within the time stated in the proposal, if not, based on reasonable time. The communication of the acceptance. (A) For a proposal to be converted into a promise, the acceptance of that proposal must be absolute and unqualified. (B) Where acceptance is qualified by words such as 'subject to contract' or 'subject to a formal contract being drawn up by our solicitors', the courts would be inclined to hold in the absence of strong and exceptional circumstances to the contrary that there is, but a mere conditional contract. It must be noted that the mere use of the words 'subject to contract' does not necessarily mean that the contract is not yet binding.

(C) Acceptance made without knowing the proposal may cause the acceptance to be void The way the acceptance is made. Acceptance must be expressed in some usual and reasonable manner Section 7(b) Contracts Acts 1950. The proposal may prescribes the manner in which it is to be accepted, and the acceptance is not made in that manner, the proposal may, within a reasonable time after the acceptance is communicated to him, insist that his proposal shall be accepted in the prescribed manner, and not otherwise; but if he fails to do so, he accepts the acceptance - Section 7(b) Contracts Acts 1950; Acceptance must be made within a reasonable time Section 6(b) Contract Act 1950: Section 3 of the Contracts Act 1950 provides inter alia that the acceptance of proposals is deemed to be made by any act or omission of the party accepting by which he intends to communicate the acceptance or which has the effect of communicating it. Section 4(2) of the Contracts Act 1950 provides that the communication of an acceptance is complete(a) as against the proposer, when it is put in a course of transmission to him, so as to be out of the power of the acceptor, and (b) as against the acceptor, when it comes to the knowledge of the proposer. Section 5(2) Contract Act 1950 provides that an acceptance maybe revoke at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards. Section 4(2)(b) Contract Act 1950 provides that the communication of an acceptance is complete as against the acceptor, when it comes to the knowledge of the proposer. Sections 4(3)(a) and 4(3)(b) Contract Act 1950 provides that the communication of a revocation is complete (a) as against the person who makes it, when it is put into a course of transmission to the person to whom it is made, so as to be out of the power of the person who makes it; and (b) as against the person to whom it is made, when it comes to his knowledge. 3. INTENTION TO CREATE LEGAL RELATION The third element of Contact Act 1950 is intention to create legal relation. It is not an agreement that create a binding contract but it just a nearly agreement only. Intention to create legal relations as an essential element forming a valid contract of Contract Act 1950 4. CONSIDERATION For the fourth element is consideration. Refer to Section 26 of Contract Act 1950 states that agreement without consideration is void. Consideration is something value to either promise or promisor that is usually cash or property which is will be exchange between the promise and the promisor as the performance. For the contract to be legally binding, the consideration must be something that the promise is giving up or something that give benefits to the promise. 5. CAPACITY Capacity is the next element of Contract Act 1950. Section 11 of Contract Act states that; Every person is competent to contract who is of the age of majority and who is of sound of mind and is not disqualified from contracting by any law. The age of majority in Malaysia is 18 years old. 6. CERTAINTY Besides that, certainty is also one of the elements of Contract Act 1950. Certainty is the understood of a clear and distinct statement of the fact which is constitute the cause of an action. The terms of an agreement must be certain so an agreement that is unclear and vague cannot be

legally binding by referring to Section 30 of Contract Act 1950 states that an agreement which is uncertain or is not capable of being made certain is void. 7.FREE CONSENT The word consent defined by Section 13 Contract Act 1950 as two or more persons are said to consent when they agreed upon the same thing in the same sense. Section 10 Contract Act 1950 states that All agreements are contracts if they are made by the free consent of the parties. Hence, both parties must be willing to respond to the agreement made in order to make an agreement as a legally binding contract.