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Past Years Questions

Past Years Questions

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Published by Ara Ridzuan
Business Law
Business Law

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Published by: Ara Ridzuan on May 28, 2013
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OCTOBER 2012PART BQUESTION 1Explain the various ways in which acceptance of proposal may be communicated. Support youranswer with reference to the Contracts Act 1950 and relevant cases.(25 marks)Section 2(b) of the Contracts Act 1950 provides that when the person to whom the proposal ismade signifies his assent thereto, the proposal has been accepted. A proposal when accepted,become a promise.Section 2(c) of the Contracts Act 1950 refers to the person accepting the proposal as the
‘promisee’.
 Acceptance is only effective when it is communicated. The communication can be throughwords or mouth. For example, the communication can be over the telephone, by letter, telex,facsimile or recorder messages. The law recognizes that acceptance may be implied fromconduct.Section 3 of the Contracts Act 1950 provides inter alia that the acceptance of proposals isdeemed to be made by any act or omission of the party accepting by which he intends tocommunicate the acceptance or in which has the effect of communicating it.Section 9 provides that there is an expressed acceptance if the acceptance of any promise ismade in words and an implied acceptance if the acceptance is made other than in words.One of the rules of acceptance under Section 7(b) of the Contracts Act 1950 stated that theacceptance must be expressed in some usual and reasonable manner, unless the proposalprescribes the manner in which it is to be accepted. Simply speaking, if there is a mode of acceptance prescribed by the offeror it must be followed by the offeree in order to make a validacceptance. There could be no acceptance by silence i.e. the offeror cannot impose acceptancemerely because the offeree does not reject the offer. There must be some act on the part of the promisee to indicate acceptance.In the case of Felthouse v. Bindley whereby the plaintiff which is Felthouse offered by letter to
buy his nephew’s horse and said “If I heard no more about him, I shall consider the horse ismine”. His nephew did give any answer, but the ne
phew told Bindley which is the auctioner to
 
keep the horse out of the auction sale as he intended to reserve it for his uncle, the Plaintiff.However Bindley had sold the horse by mistake. Felthouse sued Bindley claiming thatdefendant should not sell the horse to other person because there was already a contractbetween him and his nephew. The court held that there was no contract between Felthouseand his nephew because the nephew had never signified to Felthouse his acceptance of theoffer before the auction sale took place. Silence does not constitute acceptance.A rule governing acceptance is through the postal rule. It is provided in Section 4(2) of theContracts Act. It is important to determine the communication of acceptance because it willaffect the validity of the revocation either by the proposer or the acceptor.Acceptance through post is complete when the letter of acceptance is posted, even though it isnot yet received by the proposer. It is to be said that the proposer has bound to the contractwhen the acceptor posts the letter of acceptance, even though the proposer has no knowledgeof the acceptance.The contract is binding on the acceptor, irrespective of any delay or disappearance of the letterof acceptance. Section 4(2)(a) of the Contracts Act 1950 provides that the communication iscomplete as against the proposer when it is put in a course of transmission to him as to be outof the power of the acceptor, however in subsection 4(2)(b) of the same Act provides that thecommunication of acceptance is complete as against the acceptor when it comes to theknowledge of the proposer.This can be seen through the Illustration (b) of Section 4 Contracts Act 1950 whereby B accept
A’s proposal by a letter sent by post. Thus, the communication is
complete as against A, whenthe letter is posted and the communication is complete as against B when the letter received byA.This can be seen through the case of Ignatius v. Bell. The Defendant had offered to sell his landto the Plaintiff on condition that if the Plaintiff would like to accept the offer, he must make theacceptance on or before 20
th
of August 1912. The Plaintiff sent an acceptance by registeredpost on 16
th
August but the letter did not reach the Defendant until 25
th
August because theDefendant was away. It was held that the acceptance was exercised by the Plaintiff when hisletter was posted on 16
th
August. Therefore the Defendant was bound to the contract.To conclude, one can generally say that in cases of acceptance through the post, acceptance iscomplete upon posting. However, this rule that acceptance is complete upon posting may beexcluded by the express terms of the offer.
 
OCTOBER 2012PART BQUESTION 2(a)
 
Milli proposed to sell his piano to Vanilla for RM8, 000 to be accepted within one week.Vanilla agreed to buy the piano for RM6,
000. Immediately after receiving Vanilla’s reply,
Mili sold the piano to Tim. Vanilla wishes to sue Milli for breach of contract.Advice Milli.(10 marks)The first issue is whether Vanilla may take legal action against Milli for breach of contract. The second issue is whether there is a contract binding between Vanilla andMilli on the grounds that Vanilla has made a counter proposal.The word contract may be define as an agreement enforceable by law. Thus, a contractis an agreement which is legally binding between the parties.An offer or proposal is necessary for the formation of an agreement. Section 2 (a) of theContracts Act 1950 provides that when one person signifies to another his willingness todo or to abstain from doing anything, with a view to obtain the assent of that other tothe act or abstinence, he is said to make a proposal. Section 2(b) of the Contracts Act1950 provides that when a person to whom the proposal is made signifies his assentthereto, the proposal has been accepted. Section 2(c) of the same Act refers to theperson who made a proposal is called the promisor whereas the person who acceptingproposal known as the promise.For a proposal to be converted into a promise, the acceptance of the proposal must beabsolute and unqualified which stated under Section 7(a) of the Contracts Act 1950.Acceptance must be absolute and unqualified so that there is a complete consensus. If the parties are still negotiating, an agreement is not yet formed. If however, acceptanceis not absolute and unqualified, that is, it does not complied with the conditions statedby the offeror, it will amount to a counter offer. A conditional assent is not anacceptance.

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