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Formation of Contract

OFFER AND INVITATION TO TREAT All section will refer to Contract Act1950 Vital question - when was the contract made? The answer depend whether the display amounted to an offer or a case of invitation to treat. Offer An offer is an undertaking which is certain and definite, made with the intention that is shall become binding on the person making it as soon as it is accepted by the person to whom it is addressed. In the case of Tan Geok Khoon v Paya Terubong Estate Sdn. Bhd- An offer has define as a definite and unequivocal statement of willingness to be bound; Section 2(a) state that when one person is signifies to another his willingness to do or abstain from doing anything, with a view of obtaining the assent of that other to the act or abstinence, he is said make a proposal. An offer must be clear cannot be vague. In the case of Gunthing v Lynn, the court held that an offer to pay an additional amount if the horse proves lucky was too vague. Offer must be communicate; Section 3. The offeree must knowledge of it; section 4. Illustration of Sec 4 asA proposes by letter, to sell a house to B at a certain price. The communication of the proposal is complete when B receives the letter. An offer must distinguished from an invitation to treat. Itt is only a preliminary negotiation stage. Itt is an effort to invite others to make an offer. It is not capable of being accepted to form a binding agreement, In other words, the offer is made by the other party, not the one who is making the invitation; Pharmaceutical of Society Great Britain v Boots Cash Chemist, the court held that an offer to buy was made when the customer picks the bottle of drug from the shelf and there would be no sale until it was approved or accepted by the registered pharmacist. Others Law Cases Hart v MillsSAMINE NG COPYRIGHT

Harvey v Facey TERMINATION OF AN OFFER Section 5(1) of Contract Act 1950 A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards. Section 6 of Contract Act 1950 A proposal can be revoked:(a) By the communication of notice of revocation by the proposer to the other party Illustration Sec 5- A proposes, by a letter sent by post, to sell his house to B. B accepts the proposal by a letter sent by post. A may revoke his proposal at any time before or at the moment when B posts his letter of acceptance, but not afterwards; Byrne v LeonVan Tienhoven (b) By the lapse of the time prescribed in the proposal for its acceptance, or, if no time is so prescribed, by the lapse of a reasonable time, without communication of the acceptance; Ramsgate Victoria Hotel Co. Ltd v Montefiare (the plaintiff had not accepted within a reasonable time, the refusal was justified.) (c) By the failure of the acceptor to fulfil a condition precedent to acceptance Financings Ltd v Stimson The court held that the condition had not been fulfilled (d) By the death or mental disorder of the proposer, if the fact of his death or mental disorder comes to the knowledge of the acceptor before acceptance. Bradbury v Morgan B may revoke his acceptance at any time before or at the moment when the letter communicating it reaches A, but not afterwards.

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ACCEPTANCE Section 2(b) states that when the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted: a proposal, when accepted, becomes a promise. Section 7(a) states that acceptance must be absolutes and unqualified Acceptance must be in reliance of the offer: R v Clarke Where the postal rule applies: Section 4(2) CA50 an exception to the general rule where the parties have contemplated the use of the post as a means of communication. (Post adequately stamped; registered; addressed; and deposited in the post box) Section 4(2) (a) CA50 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 Section 4(2) (b) CA50 as against the acceptor, when it comes to the knowledge of the proposer. Entores Ltd v Miles Far East Corporation Illustrations Sec 4 A proposes, by letter, to sell a house to B at a certain price. The communication of the proposal is complete when B receives the letter. B accepts As proposal by a letter sent by post. The communication of the acceptance is complete:As against A, when the letter is posted; As against B, when the letter is received by A. Revocation of acceptance Sec 5(2) an acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards. Mental acceptance is no acceptance. Silence will not amount to acceptance. Proposer cannot, without the promisees consent, put a condition in his proposal that the promisees silence shall amount to acceptance. See also; Felthouse v Bindley SAMINE NG COPYRIGHT

All of section will refer to Contract Act 1950 Consideration is defined in s 2(d) of the Contracts Act 1950 as follows: When at the desire of the promisor, the promisee or any other person has done or abstained from doing or promises to do or abstain from doing, something, such act or abstinence or promise is called consideration of the promise. In other words, consideration refers to the price paid by one party to another in order to obtain the others consent to the agreement. Dunlop v Selfridge Consideration need not be in the form of money. It may be in the form of an act done or even an abstinence or forbearance from doing something. See; Osmain bin Abdul Ghani & Others v United Asian Bank Section 26 states that an agreement without consideration is void. However, there are several exceptions to this rule provided for by s.26 itself as follows: (a) Agreements made on account of natural love and affection between parties standing in near relation to each other. Such agreements must be made in writing and must be registered under the law (if any) for the time being in force for the registration of such documents. The following example is provided in s.26 as an illustration of this exception: A, for natural love and affection, promises to give his son, B $1,000. A puts his promise to B in writing and registers it under a law for the time being in force for the registration of such documents. This is a contract. However, the phrase near relation is not defined. Thus, it would be left to the courts to decide on the facts of a particular case whether the parties were in near relation. In Re Tan Soh Sim (1951) 1 MLJ 21, it was held by the Court of Appeal that Chinese adopted children could not be regarded as being in near relation to the uncles and aunts of thei r adoptive mother. (b) An agreement to compensate wholly or in part a person who has already voluntarily done something for the promisor. The following illustration is provided by the section: SAMINE NG COPYRIGHT

A finds Bs purse and gives it to her. B promises to give A $50. This is a contract. (c) An agreement to compensate wholly or in part a person who has done something which the promisor was legally compellable to do. The following illustration is provided by the section; A supports Bs infant son. B promises to pay As expenses in so doing. This is a contract. (d) An agreement to pay wholly or in part a statute-barred debt. The agreement must be in writing and signed by the person to be charged therewith or his lawfully authorised agent. The following illustration is provided by the section: A owes B $1,000 but the debt is barred by limitation. A signs a written promise to pay B $500 on account of the debt. This is a contract.

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INTENTION TO CREATE LEGAL RELATION


Two presumption have been develop by the court to assist determined whether such intention exist between the parties. 1) Business/ Commercial Contract-have intention to create legal relation, However this presumption is a rebuttable on and will not be applied where one other party can prove that there was in fact no such intention, for an example that the contract itself states that there is no intention to create legal relation: Rose and Frank Co v Crompton Bros 2) Social/ Domestic Contract- have no intention to create legal relation. However, th

Case Law
OFFER TAN GEOK KHOON V PAYA TERUBONG ESTATE SDN BHD GUNTHING V LYNN-OFFER IS MUST BE CLEAR INVITATION TO TREAT PHARMACEUTICAL OF SOCIETY OF GREAT BRITAIN V BOOTS CASH CHEMIST HART V MILLS FISHER V BELL TERMINATION OF AN OFFER SECTION 6 (A) BRYNE V VAN TIENHOVEN 6 (B) RAMSGATE VICTORIA HOTEL CO. LTD V MONTEFIARE 6 (C) FINANCINGS LTD V STIMSON 6 (D) BRADURY V MORGAN COUNTER-OFFER/ REJECTION HYDE V WRENCH MENTAL ACCEPTANCE-FELTHOUSE V BINDLEY CONSIDERATION TAN SOH SIM NEAR RELATION KEPONG PROSECTING LTS & ORS V SCHMIDT

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Judicial Protections - Contra Proferentum Rule - As contracting parties do not always have equal bargaining power, the weaker party may be at the mercy of the stronger party who has included in the contract, exemption clauses much in his favour. - The courts have played an important role in the interpretation of such clauses. - The contra proferentum rule was developed by the common law courts with a view to assisting the weaker party. - By virtue of this rule, where the exclusion clause is ambiguous or capable of more than on meaning, the courts would construe the clause against the party for whose benefit it was inserted. Wallis Son & Wells v Pratt & Haynes (In this case, there was a contract for the sale of seeds referred to in the implied as tot growth, description or any other matters. The seeds supplied were of inferior quality. The seller sought to avid liability relying on the exclusion clause. The court, applying the contra proferentum rule, interpreted the clause against the seller, stating that the clause only referred to warranties and not to conditions. The promise to supply common English Sanfoin was a condition which was not excluded by the clause in question.) - In cases involving negligence, courts are also rather strict in the interpretation of exclusion clauses. Clear and unambiguous words are necessary to provide protection to the party relying upon the clause. Hollier v Rambler Motors Ltd. (In this case, a garage sought to avoid liability for damage to a customers car relying on an exemption clause which provided that the garage was not responsible for damage caused by fire to customers cars. The court ruled that the exclusion clause was only effective in the SAMINE NG COPYRIGHT

absence of negligence on the part of the garage. The clause did not exclude liability for damage arising out of negligence.) Bell Houses Ltd v City Wall Properties Ltd 1966 In this case the first object was to carry on the business of builders and developers. Further into the object clause said to carry on any other trade or business whatsoever". The company entered into an agreement with another company and in return for a fee agreed to introduce the other company to some Swiss bankers. The other company refused to pay the introduction fee on the grounds that the contract was outside of the objects clause. HELD: The act of introduction was held to be within the objects clause and was intra vires and not ultra vires.

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