QUESTION 1 (PAGE 248) Every acceptance must be communicated. Discuss the statement in view of the rules on a valid acceptance.

Introduction Element of a contract is include under law of contract. One of the elements of a contract is acceptance. Theories According to Section 2(b) of the Contract Act, acceptance is 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. Supporting Case Regarding Carlill versus Carbolic Smoke Ball Co. case, the defendant (Carbolic Smoke Ball Co.) advertised that they would pay 100 to anyone who still suffer influenza after using their product. The plaintiff (Carlill) used the medicine advertised but still suffered from the influenza. She sued the defendant for the reward. In this case, it was contended, inter alia, by defendants that the plaintiff should have notified them of her acceptance of their proposal. Their argument was rejected by the court. It held that performance was sufficient to constitute acceptance if that was the intention of the proposer. Bowen L.J. said that one cannot doubt that, as an ordinary rule of law, an acceptance of an offer made ought to be notified to the person who makes the offer, in order that the two minds may come together. but there is this clear gloss to be made upon that doctrine, that as notification of acceptance is required for the benefit of the person who makes the offer may dispense with notice to himself if he thinks it desirable to do so and if the person making the offer, expressly or impliedly intimates in his offer that it will be sufficient to act on the proposal without communication acceptance of

it to himself, performance of the condition is sufficient acceptance without notification (pp. 269-270).

Application Acceptance of a proposal must be communicates to the proposer for there to be a binding contract between the parties. If the proposal prescribes a manner in which it is to be accepted, and the acceptance is not made in such manner, the proposer 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.

Conclusion The acceptance must be absolute and qualified. I t also must be expressed in some usual and reasonable manner, unless the proposer prescribes the manner in which it is to be accepted.

QUESTION 1 (PAGE 264) a) Kaya a rich but bed-ridden man, employed Paulina, a trained nurse, to take care of him. During her employment, Paulina managed to convince Kaya to sell to her his luxurious Jaguar car. Although the market price for the car was RM180 000, Paulina paid Kaya RM47 000 only for it. After recovering from his illness, Kaya realized his mistake and he wanted to invalidate the sale. Issue To determine whether the agreement between Kaya and Paulina is enforceable or not. Theories According to Section 16 (1) of the Contracts Act, a contract is said to be induced by undue influence where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other. Supporting case As stated for illustration (b) to Section 16, A, a man enfeebled by disease or age, is induced, by Bs influence over him as his medical attendant, to agree to pay B an reasonable sum for his professional services. B employs undue influence. Another case for undue influence is Chait Singh versus Budin bin Abdullah (1918) case, it is held that a presumption of undue influence on the grounds of unconscionable bargain was upheld when a money lender sued a borrower on a loan at 36% interest, which was an excessive rate and in the light of the fact that the defendant was an illiterate man. Based on Salwath Haneem versus Hadjee Abdullah (1894) 2 S.S.L.R. 57, the plaintiffs husband executed a conveyance of property belonging to himself and the plaintiff to B and C, his brothers. The plaintiff agreed to the conveyance but after her husbands death, she brought an action seeking to set aside the agreement and the conveyance. The Straits Settlements Court of Appeal held that a confidential

relationship existed between the plaintiff B and C. The burden of proof therefore lay on B and C to show that the plaintiff fully understood the transaction and executed conveyance freely and without being subject to undue influence. Since both B and C failed to discharge the burden, the transaction was set aside. Application Therefore, in Kayas case there was the domination of the will by one party over the other hand and obtaining unfair advantage that have been done by Paulina. Kaya employs undue influence. Conclusion An agreement that caused by undue influence is a contract voidable at the option of the party whose consent was so caused. Any such contract, may be set aside either absolutely or, if the party who was entitled to avoid it has received any benefit thereunder, upon such terms and conditions as to the court may seem just.

b) Write on about the following :

iii) Coercion

Introduction Coercion is one of the types of free consent (consent of parties) that falls under elements of contract in law of contract. Theories According to Section 15 of the Contract Act, coercion is the committing or threatening to commit any act forbidden by the Penal Code, or the unlawful detaining or threatening to detain any property, to the prejudice of any person whatever, with the intention of causing any person to enter into an agreement. Supporting case Based on Kesarmal versus Valiappa Chettiar case, it was held that a transfer executed under the orders of Sultan and in the presence of Japanese Officers was voidable at the will of the party whose consent was caused as the consent was not free. Another case for coercion is Chin Nam Bee Development versus Tan Kim Choo & 4 Ors. (1988).Regarding the case stated, the respondents had signed a sale and purchase agreement to buy a house at $29,500. However, they have to pay additional $4,000. It was held that additional payment was not voluntary but had been made under threat. Agreement to pay additional payment is invalid purchaser have to pay original $29,500. Application It seems that coercion covers duress at common law which has traditionally meant actual violence or threats of violence to the person of the contracting party or someone close to that person. In any case, its importance is greatly

diminished in light of the wide definition of coercion under Contracts Act which includes the unlawful detaining or threatening to detain any property, to the prejudice of any person whatever. Conclusion Coercion consists of two elements. First, the exertion pressure amounting to compulsion the will of the victim that is effective lack of choice which maybe evidenced by protest, by lack of independent advice or by resort to legal process, though none of these is essential to prove compulsion. Second, the illegitimacy of the pressure exerted that is viewed with reference to the lawfulness of the pressure, so that if the latter is unlawful, the pressure is illegitimate.

iv) Discharge by frustration

Introduction According to Section 57 of the Contracts Act, discharge by frustration is an agreement to do an act impossible in itself is void.

Theories A contract to do an act which, after the contract is made, becomes impossible, or by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.

Supporting case Based on illustration (e) to Section 57 of the Contracts Act, a contacts to act at a theatre for 6 months in consideration of a sum paid in advance by B. On several occasions A is too ill to act. The contract to act on those occasions becomes void. Another illustration for discharge by frustration is in consideration of a sum of money payable by B, A contracts to grant an annuity to B for Bs life. The day after the contract has been made, B is thrown from his horse and killed. Bs representative may be compelled to pay the purchase money. In Khau Daw Yau versus Kim Nam Realty Development Sdn Bhd (1984) 1 MLJ 256, the Federal Court considered whether there was frustration when a vendor found it difficult to fulfill his obligations in a contract for the purchase of land because the state authority imposed certain conditions in the conversion of

agricultural land into building lots. The vendor who was a developer had sold all the proposed lots prior to approval.

Applications In Section 12 of the Specific Relief Act 1950 which says as that notwithstanding anything contained in Section 57 of the Contracts Act, 1950, a contract is not wholly impossible of performance because a portion of its subject matter, existing, at its date, has ceased to exist at the time of the performance.

Conclusion Frustrations occurs whenever the law recognizes without default of either party a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract.

QUESTION 11 (PAGE 278) Poh entered into a contract with Jones Publisher to produce a new book on business law. Poh recently found out that his book agent, Tan, had received a personal commission of RM10, 000 from Jones Publisher while negotiating the publishing contract on his behalf. As a result, Poh will suffer a loss of RM30, 000. Poh is very angry. Advise Poh as to his rights arising from this incident.

Issue To determine whether the agreement between Poh and Tan is enforceable or not. Theories According to section 164 178, to obey the principals instructions, an agent must follow the instruction of the Principal. If agent does not follow, it is a breach of agency contract. An agent also only has to follow the instruction if it is lawful. Section 168 in Contracts Act says that an agent cannot make any secret profit out of the performance of his duty. Supporting case

In Tan Kiong Hwa versus Andrew S.H Chong case, the plaintiff (P) bought a flat house from a company. The defendant (D) (agent) was a director of that company. P ordered the D to resell the flat house at the price of RM45,000. However D managed to sell it at RM54,000 and the extra of RM9,000 was credited into Ds account. It was held that P was entitled to claim the extra RM9,000 from D for breach of duty. It means that the principal can recover the amount from the agent. The principal also may refuse to bay the agent his commission or other remuneration as in the case of Andrews versus Ramsays and Co. (1903) 2 KB 635, where the principal succeeded in recovering both the commission paid to the agent plus the secret commission received by him from a third party. In that case, the plaintiff instructed the defendant to sell property and agreed to pay him 50 pounds as commission. The defendant received 100 pounds from a purchaser as deposit for the property. The defendant paid 50 pounds to the plaintiff and kept the other 50 pounds in payment of his commission with the plaintiffs consent. The plaintiff later learnt that the defendant had also received 20 pounds as commission from the purchaser. He sued to recover 20 pounds and also the 50 pounds he had paid the defendant. It was held that he could recover both sums.

Application As stated in Contract Act under duties of an agent to his principal Section 164 178, Andrews versus Ramsays and Co. (1903) 2 KB 635 case is similar to Pohs case, the principal( Poh) may repudiate the contract, particularly if he feels that it is disadvantages to him. The principal also may dismiss the agent (Tan) for breach of duty and the principal may sue the agent and the third party for damages, for any loss he suffered due to entering the contract.

Conclusion

An agent must account to his principal any secret profit that he received even if there is no bribe or corruption or fraud with the third party.