FACULTY OF BUSINESS, ECONOMIES AND ACCOUNTANCY

UNIVERSITI MALAYSIA SABAH

COMMERCIAL LAW
(BT20403)
SEMESTER 2, 2013/2014
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1. NUR SHA3WANI NA4LAA BT
5HAIRUDIN (BB12110436)
2. NUR QAMARIYAH 5HAN BT
A5HTAR 5HAN (BB12110434)
3. TION- MEE AI (BB12110722)
D'" $8 Su20#!!#$%+ 14 MAY 2014
D'" $8 )*!%"'"#$%+ 14 MAY 2014
QUESTION
1
On Monday 1
st
June, Alex placed an advertisement in 9F$$"2',, C*':/ Bu,,"#%; offering for
sale the 2010 orld !up "inal foot#all programme at $M 2000. On %uesday 2
nd
June,
&ec'ham sa( the advertisement and telephoned Alex stating that he (as very interested in
#uying the 2010 foot#all programme. Alex said that as &ec'ham (as a good friends of his,
he (ould have let him have the programme for $m 1)00. &ec'ham said that he (ould li'e
to thin' a#out it. Alex said he (ould 'eep the offer open until *.00 am "riday )
th
June.
%he next day, Alex changed his mind a#out selling the programme. +e immediately
telephoned &ec'ham. +o(ever, &ec'ham had left his officer for the day, so Alex left a
message on the ans(er phone telling him that he no longer interested to sell his foot#all
programme to &ec'ham. &ec'ham did not chec' his ans(er phone messages until 2 pm,
#y (hich the time he had already sent a letter of acceptance to Alex. Advice Alex on the
legal implications in the a#ove situation.
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According to !ontract Act 1*)0,!A 1*)0- an offer or proposal is made one of the
parties involved in the negotiations states the term on (hich (ithout further alteration, he is
2
ready to #e #ound into legally #inding, enforcea#le agreement (ith other party once other
part accepts the offer.
According to .ection 2,a- an offer is (hen one signifies to another his (illingness to
do or to a#stain from doing anything from doing anything, (ith a vie( to o#taining the assent
of that other to such act or a#stinence, thus the promisor is actually presenting to other party
certain terms that can either #e accepted or re/ected, #ut (hich is not open to further
negotiations. 0n .ection 2,c- the person (hom the proposal or offer is #eing made to its
'no(n as the promise ,offeree-. 0f this person accepts the offer, then he or she also called
the acceptor. .ection 1,1- stated that for an offer is to #e valid, it must #e communicated so
2the communication of a proposal is completed (hen it comes to 'no(ledge of the person to
(hom it made3.
"or this case, according to .ection 2,a-, there is an offer. &ec'ham sa( the
advertisement and Alex (illingness to sell the programmed to him. 0n .ection 2,c-, Alex is
the offeror that ma'es an offer #y promised &ec'ham to 'eep the offer till *am, )
th
June.
&ec'ham is the offeree that accepts the offer. .ection 1,1- an offer is effective (here
&ec'ham 'ne( Alex (ill 'eep the offer for him till *am, )
th
June.
%herefore, as a conclusion &ec'ham an Alex have valid offer.
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An invitation to treat is not an offer #ut may #e regarded as mere communication
passed at the negotiations stage. 0t is invitation to receive offers. %he crucial factors to
differentiate #et(een an offer and an invitation to treat is the intentions of the parties.
hether an advertisement is an offer or an invitation to treat it depend on the intention of the
parties. 0n this case example of 0%% is an advertisement (hich Alex advertise.
Alex had made an invitation to treat to enter negotiations (ith the pu#lic #y place an
advertisement in 4"oot#all !ra5y &ulletin6 offering sale the 2010 orld !up "inal foot#all
programme at $M 2000. %here is an offer (hen &ec'ham sa( the advertisement and
telephoned Alex stating that he (as very interested and Alex signifies to &ec'ham the
(illingness to sell the programmed to him. &oth parties are definite, communicated and
present intent to contract (here Alex promised to hold the programmed till * am "riday )
th
June.
%herefore, as a conclusion &ec'ham an Alex have valid offer.
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&esides, (hether there has a contract #et(een Alex and &ec'ham. %he principle of
contract is a mutual agreement #et(een t(o or more persons to do something or not to do.
Other(ise, the contract must #e made #y parties that are competent to enter into contract
and enforcea#le against #oth parties and the promise of each party must have a
consideration. %here has a mutual agreement #et(een Alex and &ec'ham (hen Alex give a
consideration to &ec'ham to 'eep the foot#all programmed until *.00am on )
th
June
other(ise Alex also give time to &ec'ham to thin' a#out the offer. &ec'ham accepted the
offer that provided #y Alex. %herefore, Alex and &ec'ham have competent to enter into
contract and the promise is supported #y consideration.
According to .ection 2,h- of !ontract Act 1*)0, a contract is a legally enforcea#le
agreement creating rights and o#ligation for the parties to it. %he contract #et(een Alex and
&ec'ham are legally enforcea#le agreement. &ec'ham sa( the advertisement of foot#all
programmed and he told to Alex that he (as very interested in #uying the programmed. Alex
reduced the price of programmed from $m2000 to $M1)00 to the &ec'ham as he (as a
good friend to Alex. &ec'ham accepted the offer that made #y Alex. 0n .ection 10 of
!ontract Act 1*)0, all agreements are contracts if they are made #y the free consent of
3
parties competent to contract, for a la(ful consideration and (ith a la(ful o#/ect, and are not
here#y expressly declared to #e avoid. %here is a contract (here is a free consent of Alex
and &ec'ham and #oth of them are competent to contract. &ec'ham telephoned Alex that
he (as interested to #uy the 2010 foot#all programmed (hile Alex ma'e his offer for
$m1)00 #ecause &ec'ham is his friend.
As a conclusion, Alex and &ec'ham have a contract.
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According to !ontract Act 1*)0,!A 1*)0-, .ection ),1- provides that acceptance
may #e revo'ed at any time #efore communication of the acceptance is complete as against
the offeree #ut not after(ards. On ednesday, 3
rd
of June, Alex has changed his mind a#out
selling the 2010 orld !up "inal foot#all programme to &ec'ham. Although he had
immediately called &ec'ham, unfortunately &ec'ham had left his office for the day. .o Alex
decided to leave a message on the ans(er7phone telling &ec'ham that he has no longer
interested to sell his foot#all programme to him. &ut &ec'ham did not chec' his ans(er
phone messages until after 2pm (here#y he had already sent a letter of acceptance to Alex.
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Acceptance is effectively communicated only (hen the offeror has received notice of it.
+o(ever, if the parties cannot see each other this may #e more pro#lematic8 acceptance #y
telephone is held to #e effective only on #eing heard #y the offeror. %he courts have
extended this principle to telex transmissions. 0n Entores Ltd v Miles Far East Corp. ,1*)),
!A- the !ourt of Appeal made it clear that acceptance #y telex should #e treated li'e
acceptance #y telephone9 instantaneous and effective on #eing received.
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As yet there are no reported cases involving communication via fax, or ans(er phone. :sing
the reasona#le expectations approach, faxes are li'ely to #e treated li'e telex messages. 0t
can pro#a#ly #e successfully argued that messages left on ans(ering machines are not
communicated until, li'e any telephone message, the recipient actually hears them. 0t is,
after all, immediately evident to the sender that the message is not going to #e transmitted at
once.
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%he communication of a revocation is dealt (ith under ..1 ,3-9
%he communication of a revocation is complete9
a- as against the person (ho ma'es it (hen it is put into a course of transmission to the
person to (hom it is made, so as to #e out of the po(er of the person (ho ma'es it8
and
#- as against the person to (hom it is made, (hen it comes to his 'no(ledge.
.ection ) of !ontract Act 1*)0 provides that acceptance may #e revo'ed at any time #efore
communication of the acceptance is complete as against the offeree #ut not after(ards.
&elo( is an example to illustrate .ection ) of !ontract Act 1*)09
Alex proposes to &ec'ham offering for sale the 2010 orld !up "inal foot#all
programme. &ec'ham accepts the proposal (ithin the lapse of time given #y Alex (hich is
the offer open until *.00 am "riday )
th
of June. &ut the next day (hich is 3
rd
of June Alex has
changed his mind a#out selling the programme to &ec'am (here#y he cannot get through
4
#y ans(er phone to inform &ec'ham much earlier. ;ue to this, &ec'ham had already sent a
letter of acceptance to Alex. .o, Alex may revo'e his proposal at any time #efore or at the
moment (hen &ec'ham posts his letter of acceptance.
&y right, due to the instantaneous communication used #y Alex to inform &ec'ham
that he decided not to sell the programme, it does not reach to &ec'ham. .o, it can #e said
that Alex cannot revo'e due to the revocation has not reach to &ec'ham #ecause of the
instantaneous communication using the ans(er7phone messages.
As a conclusion, there is a proper acceptance #et(een Alex and &ec'ham thus lead
to the agreement is regarded as complete. %herefore, there is a valid contract (hich cannot
#e revo'ed #y Alex.
%here (as no contract of sale as the terms of the offer, on true construction, re<uired
acceptance to #e communicated.
a- %he letter of acceptance must #e properly addressed and properly posted9 Re
London and Northern Bank =1*00> 1 !h 220. hat if the letter of acceptance is (rongly
addressed? %here is no @nglish decision on the point, #ut it has #een suggested, obiter that
the postal acceptance rule should not apply9 Getreide-Import Gesellschaft v Contimar
Contimar!s case" =1*)3> 1 A$ 20B.
#- %he postal acceptance rule applies to letters and telegramsCtelemessages, #ut not
to telephone acceptances or acceptances #y telexes (hich are regarded as e<uivalent to
instantaneous communication. hich rule is li'ely to apply to an acceptance made #y (ay of
fax? Dresuma#ly an acceptance #y fax is li'ely to #e effective (hen communicated
,although the point as yet has not #een decided- as fax is virtually an instantaneous
communication, and the postal acceptance rule is unli'ely to apply. +o(ever, (ith regard to
the difficulties of determining (hen a telexCfax is communicated, read the speeches of Lord
#ilberforce and Lord Fraser in the Brinkibon case ,#elo(-
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%he general rule, it is hardly necessary to
state, is that a contract is formed (hen
acceptance of an offer is communicated #y
the offeree to the offerorEat the place (here
acceptance is communicated to the offeror
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%he posting rule is #ased on considerations
of practical convenience, arising from the
delay that is inevita#le in delivering a letterE
0t has #een extended to apply to telegrams
5
A telex is to #e assimilated to other methods
of instantaneous communication ,referring to
Entores Ltd$ v$ Miles Far East Corp$ =1*))> 2
All @.$. 1*3. =1*))> 2 F.&. 32B-. here the
condition of simultaneity is met, and (here it
appears to #e (ithin the mutual intention of
the parties that contractual exchanges
should ta'e place in this (ay, 0 thin' it is a
sound rule, #ut not necessarily a universal
rule
0n the case ,very common- of communication
at a distanceE the so7called 4postal r%le6 has
developed ,referring to &dams v$ Lindsell
,1G1G- 1&. H Ald. IG1, 10I @.$.2)0- and
'o%sehold Fire and Carria(e &ccident
Ins%rance Co$ Ltd$ v$ Grant ,1GB*- 1 @x. ;.
21I9E in these cases tooE 0t seems logical
to say that the place, as (ell as the time, of
acceptance should #e (here ,as (hen- the
acceptance is put into the charge of the post
office
%he message may not reach, or #e intended
to reach, the designated recipient
immediately9 message may #e sent out of
office hours, or at night, (ith the intention, or
on the assumption, that they (ill #e read at a
later time. %here may #e some error or
default at the recipient6s end (hich prevents
receipt at the time contemplated and
#elieved in #y the sender. %he message may
have #een sent andCor received through
machines operated #y third personsE Jo
universal rule can cover all such cases8 they
must #e resolved #y reference to the
intentions of the parties, #y sound #usiness
practice and in some cases #y /udgment as
to (here the ris' should lie.
sent through the Dost Office
An acceptance sent #y telex directly from the
acceptor6s office to the offeror6s office should
#e treated as if it (ere an instantaneous
communication #et(een principals, li'e a
telephone conversation. One reason is that
the decision to that effect in Entores Ltd$ v$
Miles Far East Corp$ seems to have (or'ed
(ithout leading to serious difficulty or
complaint from the #usiness community.
.econdly, once the message has #een
received on the offeror6s telex machine, it is
not unreasona#le to treat it as delivered to
the principal offeror, #ecause it is his
responsi#ility to arrange for prompt handling
of messages (ithin his o(n office.
%hirdly, a party (ho tries to send a message
#y telex can generally tell if his message has
not #een received on the other party6s
machine, (hereas the offerorE(ill not 'no(
if an unsuccessful attempt has #een made to
send an acceptance to him. 0t is therefore
convenient that the acceptor, #eing in #etter
position, should have the responsi#ility of
ensuring that his message is received.
L$*( B*'%($%+
%he cases on acceptance #y letter and
telegram constitute an exception to the
general principle of the la( of contract that
the acceptance of the offer #y the offeree
must #e notified to the offeror #efore a
contract can #e regarded as concluded
, referring to !arlill v. !ar#olic .mo'e &all
!o. =1G*3> 1 F.&. 2)I-
6