Tutorial 2 (Proposal Acceptance)

1. Bakar is the President of a mountain climbing association situated in Kampar. To

encourage and promote the sport of mountain climbing in Kampar, he inserted an
advertisement in the local newspapers dated 15th April 2012. In it, he promised that
he would pay a sum of RM 5,000 to the first person who reaches the summit of
Mount Kampar. The race was scheduled to commence on 1st May 2012 at 8.00 a.m.
On the day of the race, the participants gathered in the morning at the foot of
Mount Kampar. The race began at 8.00 a.m. Simon Lee was the first person to reach
the summit. Thereafter, he approached Bakar to claim the winning price money of
RM 5,000 but Bakar refused to pay him stating that it was merely an advertisement
and that there was also no acceptance of participation from Simon Lee.
Advise Simon Lee.

Would your advice differ if Bakar had used a loudspeaker to inform the climbers
that the mountain climbing event is cancelled after the climbers had already started
climbing the mountain?
(20 marks)

The issues are: Comment [ER1]: State the issues.

i. Whether the advertisement inserted in the newspapers by Bakar constituted an invitation
to treat or a proposal.
ii. Whether Simon Lee needed to communicate his acceptance of Bakar’s proposal.
iii. Whether Bakar was entitled to revoke the proposal once the race had commenced.

A proposal is defined in Section 2(a) Contracts Act 1950 (CA 1950) as where a person Comment [ER2]: You are explaining
the law on proposal.
signifies to another (offeree) his willingness to do or to abstain from doing anything, to
obtaining the assent of the offeree.

Clear and unambiguous words must be used to evince such a contractual intention on the part
of the proposer. Preston Corporation Sdn Bhd v. Edward Leong, Ho Ah Kim v. Paya
Trubong Estate Sdn Bhd.

An invitation to treat (ITT) is an invitation to receive offers or to negotiate. It is a sort of Comment [ER3]: You are explaining
ITT.
preliminary communication which occurs between the parties at the stage of negotiation.

The distinction between a proposal and an ITT depends primarily on the intention of the
parties i.e. did the maker of the statement intend to be bound by the acceptance of his terms
of proposal without further negotiations or did he intend his statement to be part of the
continuing negotiation process.

Advertisements are generally an invitation to treat – Coelho v. Public Service Commission, Comment [ER4]: You are explaining
the law on advertisement
Syarikat Gunung Sejahtera Sdn Bhd v Lim Sze On & Ors.

However, an advertisement for the payment of a reward for the return of lost property is
construed as a proposal – Carlill v Carbolic Smoke Ball.

An acceptance is defined under S.2(b) as when the person to whom the proposal is made Comment [ER5]: You are explaining
the law on acceptance
(offeree) signifies his assent to the proposal.
Generally, acceptance must be communicated to the proposer. The position is different in the Comment [ER6]: You are stating the
general rule that acceptance must be
case of unilateral contracts. “Unilateral contract” is where a promise is made in return for the communicated to the proposer, and then
performance of an act. Under s. 8, acceptance by performing the conditions stipulated in the comparing it to a unilateral contract.
proposal. Carlill v. Carbolic Smoke Ball. The acceptor needs to complete the performance of
the act to claim the reward.

Generally too, revocation can be done any time before acceptance, following S. 5(1) and S. Comment [ER7]: You are explaining
revocation.
6(1). However, in case of unilateral contracts, the proposer cannot revoke his proposal once
it has been accepted. Errington v. Errington, Soulsbury v. Soulsbury.

On the facts, the advertisement was a proposal, leading to a unilateral contract. This was Comment [ER8]: You are applying the
law to the facts. Use words like “On the
Bakar’s promise to pay RM5,000 in return for the completion of an act i.e. being the first facts”, or “Applying the law to the facts”.
person to reach the summit of Mount Sg Panjang.
Simon Lee has fulfilled the conditions stated in the advertisement being the first to reach the
summit.
He is not required to communicate acceptance because in unilateral contracts the proposer,
Bakar has impliedly waived the need for communication of acceptance.
Bakar could not revoke his proposal because once the participants had begun climbing the
mountain, it was too late for him to do so.

In conclusion, Simon Lee is advised that:

i. The advertisement constituted a proposal to the world at large.
ii. Simon Lee needed not communicate his acceptance of the proposal. However, he needed
to complete the performance of the act by being the first person to reach the summit.
iii. Bakar is not entitled to revoke his proposal once a participant like Simon Lee had begun
the act of acceptance.
iv. Therefore, there is a valid contract between Simon Lee and Bakar. Simon can
successfully enforce the promise of RM 5,000 made by Bakar.
2. Babu resides in Kuala Lumpur. His father has left him a house which is located in Penang.
Babu has decided to sell the house and use the proceeds from the sale to purchase a house in
Kuala Lumpur.

On 19 November 2012, Babu wrote to his good friend Joe offering to sell his house for RM
250,000. Joe received this letter by post on 21 November 2012. On 26 November 2012, Joe
posted his reply accepting Babu’s offer.

In the meantime, Babu’s neighbor, Beng, who was aware of Babu’s intention to sell his house,
offered to buy the house for RM 300,000. Babu decided not to accept Beng’s offer for the
time being since he wanted to first revoke the offer he had made to Joe. Babu then
immediately wrote and posted a letter to Joe on 25 November 2012, revoking his offer.

On 27 November, Joe’s wife, Sandra, noticed a beautiful house next to Babu’s house which
was being offered for sale at only RM 200,000. Sandra asked Joe to revoke his acceptance of
Babu’s offer. Joe tried telephoning Babu on 27 November but he was unable to contact Babu.
Later, on the same day, Joe wrote and posted a letter to Babu revoking his acceptance.

Beng revoked his offer made to Babu on 27 November 2012 and instead bought the house
situated next to Babu’s house for RM 200,000. Babu now wants Joe to buy his house. Babu
received Joe’s letter of acceptance on 27 November 2012. Joe received Babu’s letter revoking
his offer on 27 November 2012. Babu received Joe’s letter revoking his acceptance on 29
November 2012.

Advise Babu whether there exists a valid contract with Joe or Beng for the sale and purchase
of his house.
(20 marks)

The issues here are:

i. Whether there has been a valid proposal by Babu and a valid acceptance by Joe
ii. Whether there has been a valid revocation of proposal by Babu.
iii. Whether there has been a valid revocation of acceptance by Joe.
iv. Whether there has been a valid revocation of proposal by Beng.
v. Whether there has been a valid contract between Babu and Joe.
vi. Whether there has been a valid contract between Babu and Beng.

Explanation of Law

A proposal is defined in Section 2(a) Contracts Act 1950 (CA 1950) as where a person Comment [ER9]: Explain proposal
signifies to another (offeree) his willingness to do or to abstain from doing anything, to
obtaining the assent of the offeree.
Under S.4(1) - Communication of the proposal is complete when it comes to the knowledge
of the offeree. There cannot be acceptance in ignorance of an offer - R v. Clarke.

An acceptance is defined under S.2(b) as when the person to whom the proposal is made Comment [ER10]: Explain acceptance
(offeree) signifies his assent to the proposal.

Under S.7(a) - Acceptance must be absolute and unqualified, accepted in exactly the same
terms of the proposal.
The general rule is that acceptance of the proposal must be communicated to the proposer.
Under S.7(b) - Acceptance must be expressed in some usual and reasonable manner unless
the proposer prescribes a particular mode/manner for communication of the acceptance.

Communication of acceptance is complete only when the proposer actually knows about the
acceptance.

When the parties contemplate the use of post as a means of communicating acceptance, the
postal rule of acceptance shall apply. It must be reasonable to use the post. The letter must
have been properly addressed and given to a proper postal authority.

Under s. 4(2), the communication of an acceptance is complete –

(a) as against the proposer, when it is put in a course of transmission to him, so as to be out
of the power of the acceptor; and
(b) as against the acceptor, when it comes to the knowledge of the proposer.

The Proposer is bound when the letter of acceptance has been posted, regardless of whether it
has been delayed or lost in the course of transit. Once the letter has been posted, he can no
longer withdraw his proposal. Supporting cases for this proposition can be seen in Entores v.
Miles Far East Corporation, Ignatius v. Bell and Henthorn v. Fraser.

Under S. 5(1), a revocation of proposal is effective only if it is made before acceptance is Comment [ER11]: Explain revocation
of proposal
complete as against the proposer. Byrne v. Van Tienhoven.
Under S.6(a), the proposer must communicate his notice of revocation to the other party
before acceptance.

Under S. 5(2), a revocation of acceptance may made at any time before the communication of Comment [ER12]: Explain revocation
of acceptance.
the acceptance is complete as against the acceptor, but not afterwards.

Applying the law to the facts

Whether there exist a valid contract between Babu and Joe?

Whether there is proposal and communication of proposal

On the facts, Babu’s letter offering to sell the house was a proposal as it appeared on the facts Comment [ER13]: Use this term when
you are applying the law.
that he had the intention to be bound by the terms of his proposal.
The proposal was communicated on 21/11 when Joe received Babu’s letter containing the
offer. Thus, there is a valid proposal by Babu.

Whether Joe has made an acceptance of Babu’s offer?

Joe posted a letter accepting Babu’s offer on 26/11. Assuming that his letter was properly
addressed and posted, Joe’s acceptance is binding on Babu on 26/11.
But Joe is only bound by his own acceptance when Babu received Joe’s letter of acceptance,
i.e. 27/11.

Whether there has been a valid acceptance will depend on whether there has been a valid
revocation of proposal by Baby and revocation of acceptance by Joe.
Whether there has been a valid revocation of proposal by Babu

To be effective, Babu’s letter of revocation must reach Joe before 26/11 i.e. the date Joe had
posted his letter of acceptance. However, here, Babu’s letter of revocation was posted on
25/11 but only reached Joe on 27/11.

However, this was after Joe had posted his letter of acceptance on 26/11. Communication of
acceptance has already been complete as against Babu.

Therefore, there is no valid revocation of Babu’s proposal. His proposal remains to be

accepted by Joe.

Whether there has been a valid revocation of acceptance by Joe

When Joe posted his letter of acceptance on 26/11, the communication of acceptance is
complete as against Babu.
However, Joe will only be bound by his own acceptance when Babu received Joe’s letter of
acceptance on 27/11.
Although Joe posted his revocation of acceptance on 27/11, Babu only received this
revocation letter on 29/11.
It was too late for Joe to revoke his acceptance, because his letter of acceptance has already
reached Babu on 27/11.

There is thus a valid contract between Babu and Joe.

Whether there exist a valid contract between Babu and Beng.

Beng’s offer to buy the house was a proposal as it appeared on the facts that he had the
intention to be bound by the terms of his proposal. There was no acceptance by Babu as yet.
Beng revoked his buy offer on 27/11, before Babu could accept it.
There was a thus valid revocation of the proposal by Beng, applying s. 5(1) and s. 6(a)
There is thus no contract between Babu and Beng.

Concluding advice:

Babu is advised that:

i. Babu has made a valid proposal and Joe has accepted Babu’s proposal.
ii. There was no a valid revocation of proposal by Babu.
iii. There was no valid revocation of acceptance by Joe.
iv. There was a valid revocation of proposal by Beng.
v. There is a valid contract between Babu and Joe.
vi. There is no contract between Babu and Beng.