ANSWER GUIDES: CONTRACT LAW

QUESTION 1
Sally went into Rose florist and picked up a few bunches of lilies from the display vases for her friend’s
party.As she was about to pay, she noticed that the lilies were wilting, so she decided not to buy them.The
florist insisted that Sally pay or she will sue for breach of contract.
(25 marks)

ISSUE:
The issue in the case study is an invitation to treat.

INTRODUCTION:
The law applicable are Contract Act 1950 and English law.According to section 2(h) of CA 1950,
contract is an agreement enforceable by law.The parties in this case study are Sally(Offeror) and The
Florist(Offeree).

EXPLANATION OF PRINCIPLES OF LAW

Definition of proposal
S 2 (a) CA : when one 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 act or abstinence, he is said to make a
proposal.

Proposal must be distinguish from an invitation to treat.Invitation to treat is not a proposal. It is

important to draw a line between the two. Invitation to treat is a preliminary communication which
passes between the parties at the stage of negotiation. Examples of invitation to treat are display of goods
on the shelves with price tags, advertisement, auction sale and tender.

The one who is responding to the invitation to treat is the one who is making the proposal.

Display of Goods
When goods are displayed on the shelves with price tags on in a self service shop or at the shop window
display , the offer is made when customers select the desired goods and bring them to the counter for
payment.Hence, the offer comes from the customers and not from the shop/supermarket.

CASE:PHARMACEUTICAL SOCIETY OF GREAT BRITAIN V BOOTS CASH CHEMIST

LTD (1953).
The defendant was charged under the Pharmacy and Poisons Act (UK).Under the Act, it is provided that
it is unlawful to sell certain poisons unless such sale was supervised by a registered pharmacists.They
had stationed a registered pharmacists at the cashier’s desk where payment was to be made.A customer
went into Boots and picked up drugs without supervision. Before the customer is able to purchase, his
action was being prevented by the chemist. The customer was angry with the situation and reported the
matter to the Pharmaceutical Society stating that Boots was selling drugs without supervision.The issue
was whether a sale had occurred when a customer put the displayed item into his basket .
It was held that the display of goods on shelf was an invitation to treat.Proposal was made by
the buyer when he placed the items into the shopping basket.Thus,agreement or contract
was formed once the cashier accepted payment from the buyer.In this case since there was
a registered pharmacists at the cashier,the defendant was not liable.

wansal/law299/uitms Page 1
CASE:FISHER V BELL
The defendant displayed a flick knife with the price attached.He was charged with an offence under the
Restriction of Offensive Weapons Act 1959 for offering for sale a flick knife.It was held that no offence
was being committed because the display of the knife was an invitation to treat not an offer.

APPLICATION
When Sally went into Rose florist and picked up a few bunches of lilies from the display vases she is
actually making a proposal as the display of goods on shelf was an invitation to
treat( Pharmaceutical Society v Boots) Proposal was made by Sally when she picked up a few
bunches of lilies from the display vases . As she was about to pay, she noticed that the lilies were wilting,
so she decided not to buy them. Thus,agreement or contract was formed once the cashier accepted
payment from the buyer.In this case since Sally has terminate her proposal.

CONCLUSION
There is no contract between Sally and the florist as the display of goods on shelf was an
invitation to treat.Therefore,the florist could not sue Sally for breach of contract.

QUESTION 2
Farah offered to sell her car to Normala on 16 th December 2003 for RM25 000.On 18th December 2003, in
reply Normala wrote to Farah to buy the car for RM15 000.When Farah refused to accept this offer on
27th December 2003, Normala wrote again that she was prepared to pay the original sum
demanded.Unfortunately, Farah has changed her mind and refused to sell.

Advise Normala whether she could successfully sue Farah for breach of contract.
( 25 marks)

ISSUE:
Counter offer
Section 7(a): acceptance must be absolute and unqualified

INTRODUCTION:
The law applicable are Contract Act 1950 and English law.According to section 2(h) of CA 1950,
contract is an agreement enforceable by law.The parties in this case study are Farah(Offeror) and
Normala(Offeree).

EXPLANATION OF PRINCIPLES OF LAW

Definition of proposal
S 2 (a) CA : when one 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 act or abstinence, he is said to make a
proposal.

Proposal must be distinguish from a counter offer.Counter Proposal is a situation whereby after a
proposal has been made, suddenly either one of the party make a new proposal.If any changes have been
made to the proposal, this is also a counter proposal.A counter proposal is treated as a rejection of the
original proposal.

wansal/law299/uitms Page 2
CASE:HYDE v WRENCH(1840)
The defendant offered to sell a farm to the P for £1000. The Plaintiff said that he would give
£950for the farm.The defendant refused and later the plaintiff wrote again and agreed with £1000.The D
refused to maintain his original offer and the Plaintiff tried to obtain specific performance for the alleged
breach of contact.It was held that the Plaintiff’s response to the offer was a counter offer which
rejected the original offer.Therefore there was no contract created.

APPLICATION
Farah offered to sell her car to Normala for RM25 000 but Normala wrote to Farah to buy the car for
RM15 000.Here, Normala has made a counter offer which rejected the original offer.Her acceptance was
not absolute and unqualified as required under section 7(a) because she has change the original
price.Refer to Hyde v Wrench.

CONCLUSION
Normala could not sue Farah for breach of contract because Farah had made counter offer which rejected
the original offer.

QUESTION 3
Rahul promised to transfer his right of ownership in his bungalow to his first wife, Tina,if Tina completed
the payment of installments due.When Tina completed the payments, Rahul refuses to fulfill his
promise.Tina wishes to take action against her husband for breach of contract.

Advise Tina whether she can bring any action against her husband,Rahul.State whether your answer
would be different if the agreement between Tina and Rahul were made in writing.

(25 marks)

ISSUE
The issue in the case study is intention to create legal relation

INTRODUCTION
The law applicable are Contract Act 1950 and English law.According to section 2(h) of CA 1950,
contract is an agreement enforceable by law.The parties in this case study are Rahul(Offeror) and
Tina(Offeree).

EXPLANATION OF PRINCIPLES OF LAW

Law requires that for an agreement to be legally enforceable, the parties should have an intention
either express or implied from the circumstances.

There are two situations whereby intention of parties is great importance.

1. Commercial/Business agreement
2. Social/domestic & Family agreement

In businees agreement the presumption of law is both parties has an intention to create legal
relation.

wansal/law299/uitms Page 3
CASE:Low Kar Yit & Ors V Mohd Isa & Anor (1963)
It involved sale of land. Agreement between the parties was subject to a ‘formal contract’ to be
drawn up and agreed upon by the parties. The defendant failed to sign the document for sale. The
plaintiff sued for specific performance.It was held that the option was conditional upon and
subject to a “formal contract” to be made later and agreed upon between the parties.The exercise
of the option by the P’ amounted to nothing more than an agreement to enter into another
agreement.

In social domestic and family agreement the presumption pf law is both parties has no intention
to create legal relation.

CASE:Balfour V Balfour (1919)

D was a civil servant stationed in Sri Lanka.He had promised to pay his wife a monthly
allowance as maintenance. His wife had to stay in England and unable to follow the D in Sri
Lanka because of her poor health.later the D failed to keep his promise and therefore the wife
sued the D for breach of contract.It was held that the agreement was unenforceable as there was
no intention to create legal relation.

However there was a rebuttable presumption in the case of Merrit V Merrit (1970).
The husband left the matrimonial home which in the joint names of husband and wife. The house
is subject to the mortgage. Later they come to an agreement that the husband was to pay the wife
$40 a month for maintenance and paying the mortgage. He promised that after the wife has
completed the payment, he would transfer the house to the wife. An agreement was put into
writing and signed by the husband. However the husband refused to transfer the house.
It was held that there was a binding contract.

APPLICATION
In the case study the agreement was between Rahul, the husband and Tina,the wife.This
agreement fall under domestic agreement where the law presumed that the parties has no
intention to create legal relation(Balfour v Balfour)Therefore, Tina could not enforce the
agreement.

However, if the agreement between Rahul and Tina is made in writing then the parties are
presumed to have an intention to create legal relation( Meritt v Meritt)

CONCLUSION
In conclusion,Tina could not sue her husband Rahul as the agreement between husband and wife
is a domestic agreement where the law presumed that the parties has no intention to create legal
relation.

wansal/law299/uitms Page 4
QUESTION 4
Orange International Hotel engaged the services of Merah, a traditional dancer to perform at its Grand
Hall.Orange International Hotel paid Merah an advance of RM5000 and agreed to pay another RM5000
on the day of the performance.
A day before the show, there was a short circuit electricity on the roof of the stage. A fire broke out which
destroyed the Grand Hall as well as the hotel.
Discuss the liabilities of Merah and Orange International Hotel.

ISSUE
The issue in the case study is discharge of contract by frustration under section 57(2) .

INTRODUCTION
The law applicable are Contract Act 1950 and English law.According to section 2(h) of CA 1950,
contract is an agreement enforceable by law.The parties in this case study are Orange Merah
International(Offeror) and Merah(Offeree).

EXPLANATION OF PRINCIPLES OF LAW

A contract is terminated if the things that the parties agreed to do is impossible to perform.It can either
be at the time the contract was made or when the contract has been made that the obligation became
impossible to perform.

Under Section 57 two situations of impossibility of performance are:

i. Sec 57(1 )- an agreement to do an act impossible in itself is void
( A agrees with B to discover treasure magic.The agreement is void)
ii. Section 57 (2) provides that performance which becomes impossible, or
unlawful by reason of some event that could not be prevented ( doctrine of
frustration)

Impossibility of performance will affect the contract to be frustrated or becomes impossible to

be performed.Frustration can occurs due to the destruction of the subject matter of the contract.

CASE:TAYLOR v CCALDWELL (1863) taylor v cadwell

A music hall hired by the defendant from the plaintiff for a series of concert was burnt down
before the date of the concert.It was held that the contract was discharged due to frustration.

APPLICATION
In the case study, Orange International Hotel engaged the services of Merah, a traditional dancer to
perform at its Grand Hall but a day before the show a fire broke out which destroyed the Grand Hall as
well as the hotel.Here,the contract become impossible to perform as the Grand hall was destroyed by the
fire ie destruction of the subject matter(Taylor v Caldwell)

CONCLUSION
As the contract become impossible to perform due to the destruction of the subject matter ie
Grand Hall,the parties are therefore discharge from performing the contract.Since Orange International
Hotelhad paid Merah an advance of RM5000 under section 66 of Merah must refund the money.

wansal/law299/uitms Page 5