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On February 1st, Ford wrote to Honda offering to sell a car for RM34,000; the offer
was to remain open for a week from today. On February 2nd, Honda posted a letter
saying RM34,000 is too much but I offer you RM30,000. Later the same day Honda
posted a second letter saying I have reconsidered the matter; RM34,000 is reasonable
and I accept your offer. Ford, having received Hondas first letter on February 5th, at
once entered into a contract to sell the car to Mitsubishi. Hondas second letter arrived
on February 6th. Advise Honda.
In advising whether Honda can enforce the contract, there must be a valid contract between
Honda and Ford.
Firstly, there was a specific offer when Ford wrote to Honda on 1st February to sell his car for
This is because there is willingness to be bound on this specific offer according to S. 2 (a)
Contracts Act 1950.
But when Honda replied, he changed the price to RM30, 000. Acceptance, according to S.
7(a) of Contracts Act 1950 must be absolute and unqualified.
Since Honda changed the price according to Hyde v Wrench (1840), this is a counter offer
and it will terminate the original offer. But however this will only be valid when it reaches
Ford. Thus the counter offer is only valid on 5th.
Therefore when Honda sent another letter on the same day it amounted to acceptance
according to Section 4(2)(a) Contracts Act 1950 which provides that communication of
acceptance is complete as against the proposer when it is put in a course of transmission to
him. (POSTAL RULE once the letter goes to the post box, there is valid acceptance)
Thus when Ford entered into contract with Mitsubishi to sell it off, he is in breach of contract.
Therefore Honda will be able to claim for breach of contract from Ford.

2. Grammar Legibility
Gigi was jogging along the pavement & fell into a drain. Panjang, who was passing by,
heard Gigis cries for help, found Gigi in the drain which was full of dirt and water. He
pulled him out and saved him. Gigi promised to pay RM5000 to Panjang for saving his
life but later refused to do so. Advise Panjang whether he can enforce the promise made
by Gigi.
Answer :
P wants to claim for the promise made by G.
But first he must prove that there is a valid contract between himself and G. G made an offer
to pay RM5000 to P for saving him. The offer is certain. This was accepted by P since he did
not object when G told him that he will give him RM5000. The acceptance here in definitely
unqualified and unambiguous. This is a situation of past consideration is when a
consideration is performed before a promise is made. The promise here is subsequent to the
act and independent to it.
In Malaysia, past consideration is good consideration. S. 2(d) of the Contracts Act 1950,
has done or abstained from doing implies that even if the act is prior to the promise, such an
act would constitute consideration. In the case of Kepong Prospecting Ltd. V Schmidt
(1968)1 M.L.J 170 it was stated that past consideration is good consideration in Malaysia so
long as it is the desire of the promisor is made known to the promisee.
Since all the elements of a valid contract are satisfied, P will be able to claim the RM5000.

3. Stone and his wife, Sandy, went on a holiday to visit Sandys mum in Australia.
There, Sandy became ill and was bedridden. Stone, with a heavy heart, had to come
back to Malaysia due to work on 3rd May 2010. He promised Sandy that he will send her
RM1000 every month for her maintenance. He did it for two months, after which he
stopped due to his involvement with Mandy, his weekend mistress. Sandy came to know
of the situation and she became very upset. She is now seeking your advise if she could
successfully claim the monthly allowance promised by her husband.

Answer :
In advising Sandy, her intention to claim from her husband will only be valid provided there
is a valid agreement between the two of them.
On the facts there seems to be a valid agreement but the issue is of course whether there is an
intent to create legal relationship.
According to the case of Balfour v Balfour (1919) which is directly on point here, it seems
that the presumption of no intention to create legal relationship will be applicable here.
There is nothing on the facts to suggest that their marriage was broken down when Stone
promised that he will give the allowance to his wife, so that the presumption is not rebutted.
Thus, as a conclusion it could be submitted that Sandy may not be able to claim against Stone
based on the facts given.
The key issue to be debated, is when acceptance takes place, because as long as an offeree is
aware that an offer has been made at that time, acceptance brings about a binding contract.
Bun had not seen the advertisement himself, so would a court recognise communication
through a reliable third party? The answer is YES.
The offer intimates that acceptance should be by post. Chocolate posted his letter before Bun,
so provided that the letter has been properly stamped and addressed, posted in the proper
manner and proof of posting exists, the postal rule would dictate that Chocolates acceptance
took place before Bun could accept, even if both letters arrived at the same time.

4. The car is found abandoned by Chocolate & Bun, two friends who are walking their
Chocolate has seen the advertisement in the newspaper, but Bun has not. Chocolate
writes a letter claiming the reward. A few days later, Chocolate & Bun are drinking
together in a bar, when Chocolate tells Bun about the reward notice, so Bun also writes
to Jenson to claim the reward.
Both letters arrive before the 20 March 2012 deadline.
Discuss Chocolate and Buns respective legal entitlement to the reward advertised by

Guideline :
Focus on the formation of contract and in particular of the rules relating to offers.
The advertisement in question appears to amount to a unilateral offer rather than an invitation
to treat.
Distinguish between these two terms and illustrate the legal principles (e.g. Partridge v
Crittenden, Carlill v Carbolic Smoke Ball Company).
Contracts are only valid and enforceable if there has been a firm offer that has been
unconditionally accepted.
The key issue to be debated, is when acceptance takes place, because as long as an offeree is
aware that an offer has been made at that time, acceptance brings about a binding contract.
Bun had not seen the advertisement himself, so would a court recognize communication
through a reliable third party? The answer is YES.
The offer intimates that acceptance should be by post. Chocolate posted his letter before Bun,
so provided that the letter has been properly stamped and addressed, posted in the proper
manner and proof of posting exists, the postal rule would dictate that Chocolates acceptance
took place before Bun could accept, even if both letters arrived at the same time.

5. Explain, with examples, the differences between :

A) Executed
B) Executory
C) Past consideration

If one party makes a promise in exchange for an act by the other party, when that act is
completed, it is executed consideration, eg in a unilateral contract where A offers 50 reward
for the return of her lost handbag, if B finds the bag and returns it, B's consideration is
executed. Executed consideration is where there is no more on the part of the promisee to do,
his act or duty has been completed.

The Carbolic Smoke Ball Company made a product called the "smoke ball". It claimed to be
a cure for influenza and a number of other diseases. The Company published advertisements
in the press claiming that it would pay 100 to anyone who became sick with influenza after
using its product according to the instructions set out in the advertisement.
100 reward will be paid by the Carbolic Smoke Ball Company to any person who contracts
the increasing epidemic influenza colds, or any disease caused by taking cold, after having
used the ball three times daily for two weeks, according to the printed directions supplied
with each ball.
1000 is deposited with the Alliance Bank showing our sincerity in the matter.
Mrs Carlill saw the advertisement, bought one of the balls and used it in accordance with the
instructions. l She contracted the flu She claimed 100 from the Carbolic Smoke Ball
Company. Mrs Carlill brought a claim to court. She contended that the advertisement and her
reliance on it was a contract between her and the company, and so they ought to pay. The
company argued it was not a serious contract.
The Court of Appeal held that there was a fully binding contract for 100 with Mrs Carlill.
Consideration is called "executory" where there is an exchange of promises to perform acts in
the future, eg a bilateral contract for the supply of goods whereby A promises to deliver
goods to B at a future date and B promises to pay on delivery. If A does not deliver them, this
is a breach of contract and B can sue. If A delivers the goods his consideration then becomes
executed. This normally involves a hire purchase contract.

If one party voluntarily performs an act, and the other party then makes a promise, the
consideration for the promise is said to be in the past. For example, A gives B a lift home
in his car. On arrival B promises to give A 5 towards the petrol. A can enforce this

Lampleigh v Braithwait (1615)
Immediately after the defendant killed a third party, Patrick, he requested the plaintiff to
help him in getting a pardon from the King. The plaintiff agreed to perform the labour for
the defendant, and took it upon himself to travel at his own expense to meet the King to
obtain the pardon. After he had done so, the defendant promised the plaintiff a
consideration of 100. The defendant never delivered the said money, and the plaintiff is









The plaintiff is allowed to claim for the labour since it was upon the request of the
defendant that the plaintiff obtained the Royal Pardon.

6. What are the 3 elements of a valid acceptance?

Answer :
S. 7 (a) Contracts Act 1950 acceptance to a proposal must be absolute and unqualified. A
negotiation will be a counter offer (Hyde v Wrench (1840)).S. 6 (b) Contracts Act 1950 acceptance must be made within a reasonable time. Reasonable time is gauged from case to
case. S. 7 (b) Contracts Act 1950 acceptance must be expressed in some usual and
reasonable manner, unless proposer prescribe the manner of acceptance.

7. In family and social agreements we presume the parties do not intend to be legally
bound but this presumption is rebuttable. Explain.
Answer :
General Rule there is a presumption that no legal relationship is created when there is a
family relationship between the parties.
Balfour v Balfour (1919) arrangement was entered into by husband and wife.
Husband later refused to comply with the agreement. Wifes claim was unsuccessful.
Exception Formal agreement between parties in a family relationship. This is where parties
comply with the basic requirements to form a valid contract i.e. S. 2 (a) Contracts Act 1950
where there is a valid offer;
S. 7 Contracts Act 1950 there is a valid acceptance and according to S. 2 (d)
Contracts Act 1950 there is valid consideration. Evidence of a contract. Merritt v Merritt
where the husband promised to transfer the house under the wifes name if she pays the
remaining mortgage installment and she asked him to just write that down in her note book
and he did so. But later he refused to transfer. She sued and succeeded because there was
evidence of a broken relationship.

8. A1 Wines in Malaysia receive a fax from Down Winery in Singapore offering to sell
500 cases of red wine at a discount of 30% off the usual price of RM20 per case. It states
that orders must be placed without delay as stocks are selling quickly. A1 Wines send a
fax immediately, ordering all 500 cases. However, the fax arrives at Down Winery after
the office is closed. When the office re-opens the following morning the fax gets
mistakenly thrown away. By the time the mistake is discovered, all the special price
wine has been sold to other buyers. Advise the parties concerned whether a valid
contract was formed.
In advising the parties, binding contract only comes into existence if there has been a firm
offer made which has been unconditionally accepted. Section 2(a) of the Contracts Act
1950 provides that when a 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 proposal must also be clear and certain. On the facts, there is
clearly an unequivocal offer made on very definite terms, the sale of 500 cases of wine at
RM20 less 30% per case, which appears to have been communicated by an offeror to an
The issue of contract, therefore, is whether or not the offer gets unconditionally accepted. In
this case, the terms of the offer do not seem to stipulate how any acceptance should be
communicated, only that the offer will only last as long as stocks do, thus implying that
however it is done, it should be done quickly.

A1 Wines decide to accept by fax, sending a fax message immediately that they are aware of
the offer. The issue here is whether an acceptance is deemed effective from the time that it is
sent or from the time that it is received and the offeror is aware that the offer has been
The general rule of acceptance according to Section 7 (a) the Contracts Act 1950 that
acceptance is effective once it has been communicated to the offeror (Entores Ltd v Miles Far
East Corporation) and it must unqualified.
As fax is, like telephone and telex, an effectively instantaneous means of communication,
with no inevitable delay between transmission and receipt, the postal rule is unlikely to apply,
so any acceptance made by this means would not be effective until the offeree is aware of it
(Entores Ltd v Miles Far East Corporation). There is no case law on when an acceptance

by fax is binding, but even if deemed effective from the time that the offices in Singapore
opened, it would appear that a contact was made between offeror and offeree. The fact that
the fax was erroneously destroyed would appear to be of no importance and it is the fault of
the Singapore officer.
However, as the special price wine has all gone by the time the error is discovered, there
would be little that A1 Wines can do except to claim damages.

9. Last month, Oldo attended an antique exhibition, where he saw a rare rosewood
rocking chair made in 1825. It was in an excellent condition considering its age. He
offered to buy the chair from its owner, Mr Kah Yu, for RM 5,000. Mr Kah Yu agreed to
that price and said that it would be delivered to Oldo at his home in one weeks time,
when the exhibition ended. Oldo offered to pay him a deposit of RM 500 but Kah Yu
refused saying that a deposit was not necessary and that the full purchase price could be
paid upon delivery. However, Oldo did not hear from Kah Yu and therefore last week he
telephoned Kah Yu to enquire about the delay in delivery. Kah Yu replied that he had
made a mistake as to the true value of the rocking chair. He said that the market value
of the chair was RM 50,000 and that the price offered by Oldo was too low. Further, he
had already sold and delivered the chair to another person, Poh Tong, who had offered
RM 55,000 for it.
Advise Oldo:
(a) whether Kah Yu can avoid liability for breach of the contract for the sale and
purchase of the rocking chair
on the ground that the consideration was inadequate; and
(b) whether the court is likely to grant an order of specific performance in favour of
Oldo, presuming that there
has been a breach of contract by Kah Yu.