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with decided cases. “
By Redhuan Index No. 0010/ADLM77/06 LAW OF BUSINESS AND CARRIAGE
Table of Contents
Page 1.5 Certainty 3.3 Consideration 3.0 Introduction 2.0 Introduction .4 Intention to create legal relationship 3.1 Offer 3.0 Elements essential for a Valid Binding Agreement 3.0 References Attachments 1.6 Capacity 4.2 Acceptance 3.0 The Contract Act 1950 3.
Thus. by which rights are acquired by one or more to acts or forebearances on the part of the other or others. but not every agreement is a contract. if Khairul and Fatimah agree to meet for dinner and Khairul fails to turn up. such as domestic and social arrangements. shipping . as such. Shortly it may be defined as an agreement between two or more parties which is intended to have legal consequences. called in law consensus ad idem. In other words. transportation. The word 'contract' may be defined as 'an agreement enforceable by law'. 2. Unless the law recognizes this and enforces the agreements of parties. For this reason the law of contract plays a significant role in logistics . The agreement referred to in the definition means a meeting of minds. Sir William Anson defined a contract as a legally binding agreement made between two or more parties. it is not a contract in law. it would be impossible to carry on commercial or business life. the Advance Diploma in Logistics and in almost everything we do in our daily life. signifying that the parties are agreed together about the same thing. the law will do nothing in the matter. and. Every contract is an agreement.In his book Principles of the Law of Contracts. The agreement was not intended to create legal rights and duties. The definition also emphasizes that the parties to the contract must intend that their agreement shall be legally enforceable. are not intended by the parties lo be legally binding. a contract is an agreement which is legally binding between the parties.0 The Contract Act 1950 . But certain agreements.. areas emphasized in this course . These contractual agreements give rise to rights and obligations which the law recognizes and enforces. The law allows for this.
To the purpose of simplifying the above. This is seen in the case of Song Bok Yoong v. the distinction between Subsections 5(1) and 5(2. Melaka. However. Ho Kim Poui . the provisions of the Contracts Act must prevail and takes precedence. when English law is applied in any dispute arising in Peninsular Malaysia other than in the States of Melaka and Penang. English law applies by virtue of the Civil Law Act. . 1950 (Act 136) (Revised 1974). Civil Law Act. Sabah and Sarawak. whereas such changes would apply in the States of Penang.The Law of Contract in Malaysia is found principally in the Contracts Act . 'the law to be administered shall be the same as would be administered in England in the like case' at the date of coming into force of the Civil Law Act. if the same matter were to arise in the States of Melaka. 1956 must be noted.) of the Civil Law Act. Under Subsection 5(1). if such question or issue had arisen or had to he decided in England'. On the other hand.e. Where the Contracts Act makes certain provisions which differ from English law. Penang. ____________________________________________________________ (1)  1 Malaysian Law Journal . when there are no provisions in the Contracts Act to deal with a particular subject concerning the law of contract or if a particular subject is covered by the Act but the provisions relating to that subject are not exhaustive. Sabah or Sarawak.56. (1) In applying English law. on 7 April 1956. any development in the English law after 7 April 1956 would not be applicable to the States of Peninsular Malaysia (Penang and Malacca excluded). i. 1956. 'the law to be administered shall be the same as would be administered in England in the like case at the corresponding period.
they are not contracts.3. published by Made Simple Books. For example. Barker in their book LAW Made Simple . Capacity.F. that is.e a valid contract. Certainty and lastly Capacity. Similarly. Intention to Create Legal Relationship. Void Contracts are destitute of legal effect. Padfield and D. Ms. notable a Malaysia author for the applicability in the Malaysian context as the basis of my findings. Therefore for an agreement to be valid and binding in the light of the Contract Act 1950. All the above elements must be present for an agreement to be binding i. Consent.A. They are Offer. a contract by an infant to buy goods other than 'necessaries'. Legality of Object and finally Possibility of Performance. reprinted 1988. For example. Published by Fajar Bakti in 1990 advocated six basic elements that is essential for a valid binding agreement or otherwise known as a ‘contract’. C. Acceptance.0 Elements Essential for a Valid Binding Agreement As mentioned earlier .00. If one or more is absent the contract will be (i) void. Neither party can recover from the other on a void contract.L. some basic elements need to be present . As this book was published in England and is meant for the application of English Law. Intention. a contract which is induced by fraud can be avoided by the party deceived. every contract is an agreement. or (iii) unenforceable. but not every agreement is a contract. Voidable Contracts are those which may be made void at the instance of one of the parties. the contract is void for it is illegal. I have decided to advocate a different author . the author of General Principles of Malaysian Law. . Lee Mei Pheng. (ii) -voidable. Consideration. and agreements of this kind do not confer legal rights on the parties thereto. if A agrees with B to break into Cs house and steal if B pays A RM1000. but goods delivered may be recovered by an action in tort because no property (ownership) passes. Consideration. they advocated seven essentials namely Offer and Acceptance.
The case depended on whether there was a sale when a customer selected items he wished to buy and placed them in his basket. 1953). For example. 3. the defendants were charged under the Pharmacy and Poisons Act. In this case. Payment was to be made at the exit where a cashier was stationed and. Another term used is Offeror.Unenforceable Contracts are those which are valid but are unenforceable at law because of the absence of (i) evidence of the contract or (ii) the form required by law. An offer must be distinguished from an 'Invitation to Treat'. Section 2(a) of the Contracts Act states that 'when one person signifies to another his willingness to do or to abstain from doing anything. An offer must be communicated to the offeree. a pharmacist supervised the transaction and was authorized to prevent a sale. An 'invitation to treat' means an invitation to make offers. with a view to obtaining the assent of that other to the act or abstinence.1 Offer An offer or proposal is necessary for the formation of an agreement. in every case involving drugs.. he is said to make a proposal'. When a customer picks up an article in a self-service store and takes it to the cashier's desk to pay. It is for the cashier/shopkeeper to accept and take the purchase money in payment (Pharmaceutical Society of Gt. a display of price-marked goods in a shop window or on the shelves in a supermarket. . the taker's action is an offer to buy. some contracts which are not 'evidenced in writing' are unenforceable at law. For example. The first part of Section 2(c| of the Contracts Act calls the person making the proposal the 'promisor'. 1953 which made it unlawful to sell certain poisons unless such sale was supervised by a registered pharmacist. Britain v Boots Cash Chemists (Southern) Ltd.
Dawson. a proposal or offer is something which is capable of being. Gough. A proposal to buy was made when the customer put the articles in the basket. The com- . CARBOLIC SMOKE BALL CO. In Carlill v. the advertisement of an unilateral contract was held to be an offer.  1 Q.The court held that the display was only an invitation to treat.000 to anyone who still succumbed to influenza after using a certain remedy for a fixed period. Contracts Act. Carbolic Smoke Ball Co. LTD. leaving the option of its acceptance or refusal to the offeree. Ltd. The promisor (sometimes also known as 'offeror') must have declared his readiness to undertake an obligation upon certain terms. CARLILL v. contracted influenza. advertised that they would offer £1. Under the Contracts Act and English Law. 256 Carbolic Smoke Ball Co. This means that an offer or proposal is effective once it is communicated to the offeree by the offeror. Crittenden.B. advertisements of bilateral contracts are held not to be offers.000 as she had accepted the offer made to the world at large. As such. and Grainger & Sons v. The Court of Appeal held that the plaintiff was entitled to the £1. converted into an agreement by its acceptance.. The plaintiff duly used it but nevertheless. A proposal must be a definite promise to be bound provided certain specified terms are accepted. The communication of a proposal is complete when it comes to the knowledge of the person to whom it is made—Section 4(1). Hence the contract would only be made at the cashier's desk. Ltd. the shop owners had not made an unlawful sale. In the English cases of Partridge v. The plaintiff then sued for the money. Rooke v.
a Health Inspector under the Town Board.munication 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. If a proposal is made other than in words (example. Tanjong Malim. An offer should be contrasted with an option and an advertisement. THE PUBLIC SERVICES COMMISSION [1964) M. 12 Facts: The applicant. Contracts Act. COELHO v. An option is merely an undertaking to keep the offer open for a certain period of time while an advertisement is an attempt to induce offers. applied for the post of Assistant Passport Officer in the Federation of Malaya Government Oversea Missions advertised in the Malay Mail dated 19 February 1957 as follows: Applicants will be selected according to the following order of preference: (i) Serving Assistant Passport Officer and serving Junior Assistant Passport Officer in the Immigration Department who have had not less than 5 years' service and possess School Certificate.Applications (those from serving Officers to be submitted through Heads of Department with Confidential Reports and Record of Service) to reach the . The Public Services Commission and Guha Majumder v. by conduct). it is said to be implied—Section 9. (ii) All serving Government Officers who have had 5 years' service and who possess School Certificate .LJ. A proposal made in words (oral or written) is said to he expressed. This is seen in the case of Coelho v. Donough. Contracts Act.
(An order of certiorari is an order of the court directing that something be done. where he remained until December 1958 when he was transferred to the Immigration Office at Johore Bahru. the Secretary to the Public Services Commission in a letter addressed to the applicant as 'Assistant Passport Officer on Probation' informed him that. 28 February 1957. the applicant was informed that the respondent had decided that he should not be dismissed but that his appointment on probation be terminated forthwith by payment of one month's salary in lieu of notice. after undergoing training. the court order applied for was one directing that the decision of the respondents be overturned. The order was granted. Young Road. The applicant now moved the court for an order of certiorari to quash the decision of the respondents on the grounds of error in law. Public Service Commission (Designate). disciplinary action was being taken against him with a view to his dismissal.) Held : 1. Kuala Lumpur. on 24 December 1959. in this case. On 5 November 1959. want of jurisdiction. the information conveyed to the applicant was an unqualified acceptance to join the overseas mission and he so understood it. following a report from the Controller of Immigration concerning his conduct in the irregular issue of certain passports. Kuala Lumpur. 2. and failure to observe the principles of natural justice. The applicant made representations as invited by the said letter and. Consequently. the applicant was informed that he was accepted and. he was posted to the Immigration Office. that the Malay Mail advertisement was an invitation to qualified persons to apply and the resulting applications were offers. .Secretary.
Revocation may be communicated either by the offeror or any third who is a sufficiently reliable informant.' 'We agree to buy Bumper Hall Pen for £900 asked by you.m. since Y had revoked his offer and the revocation had been communicated to Y by A.A statement of price is not necessarily an offer .m. that there was a contract between himself and F.' To this F made no reply. Held: There was no contract between X and Y. Revocation of offer Withdrawal/revocation of an offer must be communicated to the offeree directly or indirectly before acceptance. . On Friday at 7 a. The second telegram was not an offer in the nature of an invitation to treat ie.' 'Lowest price for Bumper Hall Pen £900. Y heard from A that X had sold the house to Z. Harvey v Facey (1893) The following telegraph messages were exchanged between the parties H: F: H: 'Will you sell us Bumper Hall Pen? Telegraph lowest price. the lowest price if it decided to sell. Y handed to X his acceptance of the offer. Held: There was no contract. "This offer to be left over until Friday 9 a. The final message could not be looked upon acceptance.On Thursday.". Dickinson v Dodds (1876) X wrote to Y offering to sell a house. H claimed.
the acceptance is said to be expressed.2 Acceptance Section 2( b ). the proposal is said to have been accepted. the acceptance of that proposal must be absolute and unqualified. Contracts Act provides that when the person to whom the proposal is made signifies his assent thereto. 3. (b) be expressed in some usual and reasonable manner. unless the proposal prescribes the manner in which it is to be accepted. Lastly is when the offer is rejected by the offeree. Firstly is on the death of either the offeror or offeree. Thirdly when the offer is revoked before acceptance. For a proposal to be converted into a promise.Termination of an offer An offer can be terminated in four ways. Section 9 of the said Act provides that so far as the acceptance of any promise is made in words. If the . A proposal when accepted . Contracts Act which reads: Acceptance must be absolute In order to convert a proposal into a promise the acceptance must— (a) be absolute and unqualified. the acceptance is said to be implied. becomes a promise. If the acceptance is made other than in words. Section 2(c) Contracts Act calls the person accepting the proposal the 'promisee'. Secondly is by non-acceptance within the time stipulated or within a reasonable time. This is provided for in Section 7.
Whilst still in the negotiating stage. insist that his proposal shall be accepted in the prescribed manner. (Pte. it follows that any person may accept provided the finder knows of the offer. within a reasonable time after the acceptance is communicated to him. Where acceptance is qualified by words such as 'subject to contract' or 'subject to a formal contract being drawn up by our solicitors'. find a lost dog. negotiations for the delivery of logs were conducted through a series of telegrams and letters. he accepts the acceptance. an agreement is not yet formed—Lau Brothers & Co. Was there a binding contract between the two parties? The court held that the parties were still in a state of negotiation and no agreement was formed. Mohd Isa & Anor . the defendants were justified in withdrawing. v. the defendants withdrew. an acceptance has no effect unless and until it is communicated to the offeror or to an agent authorised by him. Therefore. there \s no contract. 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—LowKar Yit & Ors. and the acceptance is not made in that manner. Acceptance must be absolute and unqualified so that there is complete consensus. For example. but. This is in the case where a reward is offered to any person who does a certain thing eg. China Pacific Navigation Co.} Ltd. Ltd. if he fails to do so. v. if the words of acceptance are 'drowned' by aircraft flying overhead or spoken into a telephone which has gone dead. Galstaun & Anor As a general rule.proposal prescribes a manner in which it is to be accepted. . the proposer may. and not otherwise. In this case. v.Tai Tong Realty Co. There are however exceptions to the rule. If the parties are still negotiating.
sold the horse mistakenly and F sued B. The facts surrounding the case is as follows:F offered by letter to buy his nephew's horse for £30. However. it takes effect only when it reaches the offeree.  1 Q. B. acceptance takes effect as soon as the letter is posted." The nephew did not reply but he asked the auctioneer to keep the horse out of the sale. Held: F had no claim since his offer to buy had only been mentally accepted by the nephew. I shall consider the horse is mine at £30. LTD. It had not been communicated to the offeror Method of acceptance prescribed by offer Where the offeror prescribes a particular method of acceptance. The auctioneer. The plaintiff accepted by complying with the conditions of the offer and it did not matter that the plaintiff did not communicate her acceptance to the offeror. CARBOLIC SMOKE BALL CO. In the case of Felthouse v Bindley (1862) it was determined that an offeror cannot impose a contract on an offeree against his wishes by deeming that his silence tantamount to an acceptance. This is evidenced in the case of Adam v Lindsell (1818) .B.CARLILL v. 256 It was held in the above mentioned case quoted earlier that this was an offer capable of acceptance by all who used the smoke ball. not when the letter is posted. Acceptance by post When an offer is made by post. that method should normally be followed. He wrote: " If I hear no more about him.
the contract is complete only when the acceptance is received by the offeror at his end of the line. It is executed when a promise is made in return for the performance of an act.3 Consideration Section 26 of the Contracts Act provides that. as a general rule. Firstly under Malaysian law. or does or abstains from doing.Where an offer is made and accepted by letters sent through post. at the desire of the promisor. an agreement without consideration is void. the contract is made the moment the letter accepting the is posted. the promisee or any other person has done or abstained from doing. If a promise is made in return for an act that has already been performed. In cases of instantaneous communication such as telephone and telex. The case in question is Household Fire Insurance Co. Explanation 2 to Section 26 of the Contracts Act provides that an agreement is not void merely because the consideration is inadequate. It is executory when one promise is made in return for another . something. 3. or promises to do or to abstain from doing. v Grant (1879). executed or past. The word 'consideration7 is defined in Section 2(d) of the said Act as follows: When. Illustration (f) to Section 26 shows the application of the rule: 'A agrees to sell a horse . There are a number of rules of consideration . it is past consideration. Consideration may be executory. consideration need not be adequate. such act or abstinence or promise is called a consideration for the promise. even though it never reaches its destination.
. The agreement is a contract notwithstanding the inadequacy of the consideration. The appellant. extracted grant of letters of administration in 1951 and she continued to be in possession. The appellant was therefore entitled to the declaration sought . 383.. The learned trial judge accepted her evidence. the land was subdivided into two lots and the respondent became the sole proprietor of the lot occupied by the appellant. Sometime in 1963. The appellant counter-claimed for a declaration that she was entitled to the said land.LJ. but held that the agreement was void due to inadequacy of consideration. The appellant appealed and the respondent cross-appealed. the respondent executed a memorandum of transfer of his half-share of the land in question to the appellant's husband.' The issue of adequacy of consideration was dealt with by the Federal Court in Phang Swee Kim v.. the widow of the deceased. The transfer was not registered but the deceased obtained possession of the land.000 in Japanese currency. the respondent instituted an action against her claiming the relief stated. and in 1946 he died intestate.000 for $10 .worth $1. At the hearing in the court below. the respondent's solicitor notified the appellant that she had trespassed on the said land and asked for vacant possession and also for an account of all income received by her from the land.37 PHANG SWEE KIM v. Subsequently on 21 January 1963. In May 1963. now deceased. Facts: In 1944 in consideration of $20. It was eventually held that there was adequate consideration in this case (there being no evidence of fraud or duress) because the respondent agreed to transfer the land to the appellant on payment of $500 when the land was subdivided. the appellant contended that the basis of her claim was an oral agreement made between her and the respondent in 1958. Beh I Hock. BEH I HOCK (1964} M.
On the same day their mother had given the sister some land. and Guha Majumderv. 3. in cases where the agreements merely represent family arrangements —Choo Tiong Hin & Ors. She was sued by her brothers. Held:. There are. Donough. it was held that there were no valid contracts. stipulating that she must pay the annuity to her brothers.4 Intention to Create legal relationship Although the Contracts Act is silent on the intention to create legal relations as one of the requirements of a valid contract. Chonh Chai Fah and in a case where concessions were made in the course of business negotiations— Yap Eng Thong & Anoi. e. consideration need not move from promisee. Faber Union Ltd. case-law clearly dictates the necessity of this requirement. however. Circumstances and conduct of parties may also indicate lack of intention—Yap Eng Thong & Anor.g. Secondly. In domestic arrangements there is a presumption against the existence of an intention to create legal relations whilst in commercial . v. v. Faber Union Ltd.arrangements the rebuttable . v. The sister subsequently failed to fulfill her obligations. The case in question is as follows:A sister agreed to pay an annuity of Rs 653 to her brothers who provided no consideration for the promise.by her. This in seen in the case of Venkata Chinnaya v Verikatara'ma'ya (1881). There was good consideration for the promise even though it did not move from her brothers. Choo Hock Swee and Phiong Khon v. She was liable to pay. (where there was a 'subject to contract' clause in the agreement). cases where no intention to enter into legal relations can be imputed.
Social & Domestic Agreements This group covers agreements between family members.presumption is that legal relationships are intended—Esso Petroleum Cc. Ths can be seen in the case of Lens v Devonshire Club (1914) The Times. social do me s t ic a gr ee me n ts an d b us i ne s s a gr ee me nt s . The cases show it is a difficult task to rebute such a presumption. In general. it is up to the courts to ascertain the intentions of the parties from the language used and the context in which they are used. Agreements between a husband and wife living together as one household are presumed not to be intended to be legally binding. The law divides agreements into two groups.the parties must intend the agreement to be legally binding. Customs & Exercise Commissioner. However. unless the agreement states to the contrary. Ltd. the court may be prepared to rebute the presumption and to find the necessary intention for a contract. The law presumes that social agreements are not intended to be legally binding. The case in question is Merritt v Merritt ( 1970 ). Generally. This is seen in the case of Balfour v Balfour ( 1919 ). The presumption against a contractual intention will not apply where the spouses are not living together in amity at the time of the agreement. v. friends and workmates. . if it can be shown that the transaction had the opposite intention. But how can the court find out what is in the parties' minds? The nearest the courts can get to discovering this intention is to apply an objective test and judge the situation by what was said and done.
such an agreement is also void. Suah Thian. Similarly.5 Certainty The terms of an agreement cannot be vague but must be certain. such an agreement is void on the grounds of uncertainty.e. On the other hand. the type of toys dealt with by Ali indicates the meaning of the word 'toys'. For example.00 per month for as long as he likes'. Section 11 of the Contracts Act reads: Every person is competent to contract who is of the age of majority according to the law to which he is subject. Similarly if Ali agrees to sell to Mary his house for $200.3.000 or $300. if Ali is a dealer in plastic toy soldiers only and he agrees to sell 'a hundred crates of toys'. they must have the legal capacity to do so. 3. the requirement of certainty was not met when the parties agreed upon the granting of a lease 'at $35. . if AH agrees to sell to Mary a hundred crates of toys without specifying what kind they are. In Kamppan Chetty v. and is not disqualified from contracting by any law to which he is subject. An agreement which is uncertain or is not capable of being made certain is void.6 Capacity The parties entering into a contract should also be competent to contract. and who is of sound mind. i.000. if Ali agrees to sell to Mary his house at a price to be fixed by his wife. there is no uncertainty as the price is capable of being made certain.
These are the following namely contracts for necessaries. the age o£ majority is eighteen years—Age of Majority Act. the court held that the transfers of land executed by an infant were void. This is covered under section 69 of the Contracts Act . the general rule in Malaysia is that contracts made by infants are void. Teh Boon Keat. In Tan Hee ]uan v. . Thus. 1971. In. Mohori Bibee v.In Malaysia. there are some exceptions to this rule. contracts of scholarship and contracts of insurance. However. the Privy Council held that an infant cannot make any valid contracts. Dharmodas Ghose.
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