Beruflich Dokumente
Kultur Dokumente
The legislation in Malaysia governing contracts is the Contract Act, 1950 (Act 136) (Revised 1974).
However, when there are provisions in the Contracts Act to deal with a particular subject concerning the law of contract or if a particular subject is covered the Act but the provisions relating to that subject are not exhaustive, English law applies by virtue of the Civil Law Act, 1956. Where the Contracts Act makes certain provisions which differ from English law, the provisions of the Contracts Act must prevail- Song Bok Yoong v. Ho Kim Poui.[196811 M.L.J. 56.
DEFINITIONS
Section 2 (h) Contract Act, 1950 An agreement enforceable by law is a contract Section 10(1) Contract Act, 1950 All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void. Note: All contracts are agreements but not all agreements are contracts Section 10(2) Contract Act, 1950 Contract need not be: - In writing - In presence of witnesses - registered
TYPES OF CONTRACTS
Unilateral Contract
Collateral Contract
Bilateral Contract
UNILATERAL CONTRACT
A unilateral contract is a one-sided contract, in the sense that one party binds himself by a conditional promise leaving the other party free to perform the condition or not, as he pleases. In a unilateral contract the offeror will not know whether the contract is on until the other party has performed his part.
See Case: Carlill v. Carbolic Smoke Ball co. Ltd(1892) 2 QB 484; (1893) 1 QB 256 Errington v. Errington (1952) 1 KB 290,CA
Bilateral Contract
Bilateral contract usually is formed by an exchange of agreements between parties which resulted in reciprocal undertakings. Example: Ali promised to pay RM 150.00 to Baba if Baba repair his car. Baba then promised to repair Alis car. The exchange of agreements between Ali and Baba creates a Bilateral Contract.
Collateral Contract
In cases where the courts have found difficulty in allowing any evidence to vary a written contract, the courts have held that any such assurance given by one party may amount to a collateral contract. Where the courts have felt that the parties had intended an assurance given by one of them to be binding, the courts have treated such assurance as a separate contract, collateral to the main contract. Courts have usually found the existence of a collateral contract in situations where it is clear that one party enters into or refuses to enter into a contract unless the other party gives an assurance as to an important term of the contract. Case: Tan Swee Hoe Co Ltd v Ali Hussain Bros. (1980) 2 MLJ 16 (FC)
Appellant had orally agreed to allow the respondent to occupy certain premises for so long as they wished on payment of $14,000 as tea money. Subsequent to this, the parties entered into two agreements. Both agreements made provisions for increase in rental and no mention about earlier oral assurance. Dispute arose and appellant served on the respondent a notice to quit. Held: In consideration of the oral undertaking, respondent could occupy the premises for as long as they wish provided they pay the rent regularly.
PRIVITY OF CONTRACT
It is a fundamental principle of common law that, apart from special circumstances (cases of agency trusts, assignments or by statues), a person who is not a party to a contract has no right to sue on the contract. Thus, if A enters into a contract with B, only A and B can enforce or sue on the contract. C, who is not a party to the contract, cannot do so.
FORMATION OF A CONTRACT
The main Elements of a Contract
Offer
Certainty Capacity
ELEMENTS OF A CONTRACT
The basic elements constituting a contract are as follows: 1. Offer 2. Acceptance of the offer 3. Intention to create legal relations 4 Considerations 5. Certainty 6. Capacity. 7. 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'.
The first limb of 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. A proposal must be a definite promise to be bound provided certain specified terms are accepted. The promisor (some times also known as 'offeror') must have declared his readiness undertake an obligation upon certain terms, leaving the option of its acceptance or refusal to the offeree.
In the Federal Court case of Affin Credit (Malaysia) Sdn. Bhd. v. Yap Yuen Fui [1984]1 M.L.J. 169 where there was a lack of offer and acceptance, purported hire-purchase agreement was declared void ab initio, that is, the agreement was void from the beginning.
The communication of an offer or a proposal is deemed to have been made by any act or omission of the party proposing by which he intends to communicate the proposal or which has the effect of communicating it. - 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.
Example of implied proposal: See: Thornton v. Shoe Lane Parking (1971) 1 All ER 686
Whether an advertisement is an offer or an invitation to treat depends on the intention of the parties in each case. The courts have held that advertisements of bilateral contracts are not offers whereas advertisements of unilateral contracts are construed to be offers. -Carlill v. Carbolic Smoke Ball Co. Ltd. [1893]1 Q.B. 256
In the case of Majumder v. Attorney-General of Sarawak [1967]1 M.L.J. 101, the Federal Court held that an advertisement in the newspaper for the post of a doctor was an invitation to treat.
The display of goods in a shop is an invitation to treat. An offer to buy is made when the customer puts the articles in a basket or take the item off the shelf. The contract is only made at the cashier's desk when the customer pays for the itemsPharmaceutical Society of Great Britain v. Boots Cash Chemist Ltd. [1953]1 Q.B. 401. The defendants were charged under the Pharmacy and Poisons Act 1933 which made it unlawful to sell certain poisons unless such sale was supervised by a registered pharmacist. The court held that the display was only an invitation to treat. A proposal to buy was made when the customer put the articles in the basket. Hence the contract would only be made at the cashier's desk. As such, the shop owners had not made an unlawful sale.
In the English cases of Partridge v. Crittenden [1968]1 W.L.R. 1204, advertisements of bilateral contracts are held not to be offers. In this case, Mr Partridge was charged with unlawfully offering for sale a certain wildlife bird contrary to section 6(1) of the Protection of Birds Act 1954.He had inserted in a periodical an advertisement which read Bramblefinch cocks, Bramblefinch hens, 25s. each Court held that the advertisement was an invitation to treat, not an offer for sale, and therefore the offence charged was not established. See also: Fisher v. Bell (1961) 1 QB 394
When an auctioneer invites bids, he is merely making an 'invitation to treat', and when a bidder makes a bid, he is making an offer. The contract, i.e. the sale, is only made when the auction announces its completion by the fall of the hammer.
In Harris v Nickerson (1873) L.R 8 Q.B.286, court held that the advertising of an auction sale to be held at a particular time and place is not an offer. But in an advertisement that a sale will be held without reserve is a definite offer, if once the sale starts, that the auctioneer will accept the highest bid. See: Warlow v Harrison (1859) 1E.&E. 309 where the auctioneer in such circumstances makes a contract with each bidder that he will sell to the higest bidder.
How about Tenders and Negotiations for sale of land? Are they offers?
If X ask a number of tradesmen to put in tenders for supplying him with some particular goods or services he is not, in so doing, making an offer. Consequently, he is not bound to accept the lowest, or any other, tender. The position is similar where X asks one tradesman to put in an estimate for supplying particular goods or services. It is not X who makes the offer; the offer comes from the tradesman in the form of the tender or estimate. See: Spencer v. Harding (1970) L.R. 5 C.P.561
In Harvey v. Facey (1893) A.C. 552, P.C., The plaintiffs telegraphed to the defendants: Will you sell us Bumper Hall Pen? Telegraphed lowest lowest cash price. The defendents replied by telegraph: Lowest price for Bumper Hall Pen 900 pounds. The plaintiffs telegraphed: We agree to buy Bumper Hall Pen for 900 pounds asked by you. Please sen us your title deed It was held by the privy council that there was no contract. The second telegram was not an offer but merely an indication of the price the defendants would want if they eventually decided to sell.
2.
3.
4.
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, be comes a promise. Section 2(c), Contracts Act calls the person accepting the proposal the 'promisee'.
ACCEPTANCE DISTINGUISH
COUNTER OFFER CROSS OFFER REQUEST FOR EXPLAINATION
COUNTER OFFER
Acceptance is distinguish from a counter offer. Counter Offer is a rejection made by the offeree towards the original proposal by the offeror. If the offeree create any qualification in the original proposal, therefore the offeree has created a Counter Offer to the offeror and subsequently gives the authority of acceptance to the offeror.
See: Hyde v. Wrench (1840) 3 Beav 334 Tan Geok Khoon & Gerard Francis Robless v. Paya Terubong Estate Sdn Bhd (1988) 2 MLJ 672
CROSS OFFER
Cross Offer is distinguish with acceptance. Cross Offer is a situation where the offeror makes proposal to the offeree without the knowledge that at the same the offeree too has made the same proposal to the offeror. Therefore both parties requires the acceptance to their proposal, but this acceptance only created a cross offer in between them and not an acceptance. See: Tinn v. Hoffman (1988) 2 MLJ 672
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.
METHODS OF ACCEPTANCE
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.
- Section 7(a), Contracts Act 1950
Acceptance must be absolute and unqualified so that there is complete consensus. If the parties are still negotiating, an agreement is not yet formedSee: Lau Brothers & Co. v. China Pacific Navigation Co. Ltd. [1965]1 M.L.J. 1. Jones v. Daniel (1894) 2 CH 332 Tan Geok Khoon & Gerard Francis Robless v. Paya Terubong Estate Sdn Bhd (1988) 2 MLJ 672
(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. Whether the parties contemplated a binding contract to take immediate effect or whether they were postponing their rights and obligations under the proposed contract until formalization is a question of fact and depends on the circumstances of each case.
See:
Low Kar Yit & Ors. v. Mohd Isa & Anor. (1963) M.L.J. 165, Tai Tong Realty Co. (Pte.) Ltd. v. Galstaun & Anor.[1973]2 M.L.J. 95, Tan Yew Lai v. S. Shadique [1978] 1 M.L.J. 139, Esso Standard Malaya Bhd. v. Southern Cross Airways (Msia) Bhd[1972]1 MLJ 168. Air Hitam Tin Dredging Malaysia Sdn Bhd v. YC Chin Enterprises Sdn Bhd (1994) 2 SCR 90 Daiman Development v. Mathew Lui Chin Teck (1981) 1 MLJ 56 See also: Ng Bros Construction v. Kaolin (M) Sdn Bhd (1985) 1MLJ 245 Kam Mah Theatre Sdn Bhd v. Tan Lay Soon (1994) 1 SCR 113 New Selangor Plantations Sdn Bhd v. Talam Management Services Sdn Bhd (1996) 4 CLJ 94
(C) Acceptance made without knowing the proposal may cause the acceptance to be void. See: R v. Clarke(1927) 40 CLR 227 William v. Carwardine (1833) 4 B & Ald. 621
Acceptance must be made within a reasonable time Section 6(b) Contract Act 1950: A proposal is revoked 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 See: Macon Works & Trading Sdn. Bhd. v. Phang Hon Chin & Anor.[1976]2 M.L.J. 177
Question.: How about email? The acceptance via Email is sent trough the internet via some service providers or texts messaging agents before it reached its destinations. Should the postal rule be applicable?
Revocation of Acceptance
Section 5(2) Contract Act 1950 provides that an acceptance my be 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. See: Illustration (d) of section 4 Contract Act 1950.