Kam Mah Theatre Sdn Bhd v Tan Lay Soon [1994] 1 MLJ 108

Facts: Resp claimed to have entered into a binding agreement with the App for the sale of
certain lands, relying on a letter addressed from the App (vendor) to the Resp (purchaser).
The terms of the letter contained a proviso, ‘that the sale and purchase agreement shall
incorporate all the terms and conditions herein and other usual terms and conditions and
shall be signed on or before 18 March 1989’, otherwise the deposit was to be refunded to
the Resp. A sale and purchase agreement was subsequently prepared and signed by the
Resp only and sent to the App’s solicitors. The agreement included 2 new conditions to
which App did not agree and therefore refunded the deposit. App contended that there was
no binding contract and that it was still then negotiating with the Resp. The trial judge found
that there was a binding and concluded agreement and ordered specific performance. His
Lordship held that the additional new term was a usual term and condition (see pg 115 para
D).
App appealed.
Held:
- There was no concluded and binding agreement. The letter was dependent on the
signing of a formal contract to be further negotiated and approved by both parties.
Proviso in the letter was very similar to the phrase or formula of ‘subject to contract’.
- The formula gives rise to a strong presumption of the necessity of a further formal
contract. (see pg 116 para I) There was evidence (pg 117 para C onwards) to show that
negotiations were still ongoing btw the parties, including (i) provision of return of deposit
on the failure of parties signing the contract, (ii) agreement which was signed by the
Resp only containing 2 new conditions, (iii) there could have been a further amended
draft of the ultimate agreement to take account of withdrawal of the compulsory
acquisition over part of the land, and (iv) the correspondence after the date of the letter.
- The words ‘usual terms and conditions’ failed to reveal certainty and were too
ambiguous. What would be the usual terms and conditions remained largely a matter of
conjecture, thus the words would create uncertainty unless a contract containing these
agreed ‘usual terms and conditions’ had been signed by the parties. (see pg 116 para H)
- S91 and 92 of Evidence Act 1950 merely strike at evidence to contradict, for in that
event, such evidence would be unacceptable …. (see pg 115 para I)
Amalgamated Steel Mills Bhd v Ingeback (Malaysia) Sdn Bhd [1990] 2 MLJ 374
Facts: P brought action for SP of 3 agreements in respect of sale and purchase of 3 pieces
of land. P’s cause of action was pegged to 3 letters all dated 7 September 1989 which were
alleged to have offered 3 pieces of land for sale. P alleged that the offers were accepted and
initial moneys tendered according to the said letters of offer. D, however, informed the P by
letter that it could not accept the P’s agreement and directed its agent to return the cheques.
P contended that the letters constituted binding contracts and D had no right in law to
repudiate them. D alleged that the purported contracts were tainted with illegality but the
court observed that the complaints were directed to the letter of offer for one of the pieces of
land only. D alleged that it was agreed not to reflect the true purchase price in the SPA yet to
be formulated. This is so as to defeat the Stamp Ordinance 1949 and to defraud 2 third
parties to whom the land was encumbered. P however denied any evasion of the Ordinance
and alleged that such an alleged breach would not render the agreement void. Further, any
fraud in the 2 third partied were perpetrated by the D.
Held:
1. S92 Evidence Act 1950 prohibits the admission of oral evidence for the purpose of
contradicting, varying, adding to or subtracting from the expressed terms of a contract.
However, the language of proviso (a) allows parol evidence to show that a contract in
writing was really made for objects forbidden either by statute or common law. (pg 376
para C right) P had not denied D’s allegations regarding the matters discussed. P’s only
contention was that even if the matters were discussed and even if they had reached an
agreement at all, they were irrelevant and inadmissible in view of the finality of the letters
of offer. As the P has failed to deny or contradict the D’s allegations, it must be held that
the allegations have been admitted. As such, both parties had agreed that the sale price
was $14.157m; that the agreement should not reflect the actual price; and there would
be a supplementary agreement showing a work contract by which the D was entitled to
$2.157m. (pg 376 para I right -onwards) The arrangements of the 2 parties amounted to
nothing less than a dubious means of evading the Ordinance 1949 and an attempted
fraud on public revenue as well as the third parties. The mention of such a fictitious price
in the letter of offer relating to the 50 acres of land and purportedly accepted by the P
amounted to overt steps in carrying out the fraud.
2. Under s24(a) of CA1950, only contracts that are unlawful are those forbidden by law.
The object of the Ordinance 1949 however is not to vitiate the contract but to impose a
penalty upon the party offending. (pg 377 para H left) However, s24(e) of CA1950 directs
a court to hold the consideration or object of an agreement as unlawful and void if the
court regards such consideration or object as immoral or opposed to public policy. (pg
378 para A left)
3. In respect of the remaining 2 pieces of land, the letter had set out the essential terms
and thereafter it said ‘subject to signing of formal contract’. There was nothing in that
letter to show that it was the intention of the parties not to make a concluded bargain at
all. In using the formula ‘subject to signing of formal contract’, it merely proposed to have
the terms restated in a form which would be fuller and more precise but not different in
form. 2 subsequent letters of offer also clearly manifested the intention of parties. (pg
381 para B left)
4. No indication in the letter that there was to be a block sale of the 3 pieces of land. The
S&P of the 50 acres land was not made condition of the S&P of the other 2 smaller
lands. The 3 pieces of land were offered for sale under 3 separate letter of offer. (pg 381
para A right)