LAW 446 – INTRODUCTION TO COMMERCIAL LAW

TUTORIAL 2

1. Upon arriving from Malaysia to Italy, Laura found a “golden ring” next to her seat. She took it with her since she knew it belonged to her friend,

Aurora. Laura quickly ran to get Aurora but failed.

Later, Laura manages to meet Aurora and return to Aurora’s ring. After 3 days, Laura discovered that Aurora had advertised a reward of RM 1000 for the return

of her ring. Laura tries to claim the reward from Aurora, but Aurora refuses to do so.

With reference to decided cases and the Contract Act 1950, advise Laura whether she could sue Aurora and claim the reward.

ISSUE:

The issue in this situation is whether Laura can claim the reward from Aurora.

LAW:

Based on section 2(a) of the Contract Act provides that offer/proposal is made when one signifies to another his willingness to do so or abstain from doing anything,

with a view to obtaining the assent of that other to such act or abstinence.

Laura found a “golden ring” next to her seat. She took it with her since she knew it belonged to her friend, Aurora. Laura quickly ran to get Aurora but failed. Laura

manages to meet Aurora and return to Aurora’s ring. After 3 days, Laura discovered that Aurora had advertised a reward of RM 1000 for the return of her ring. Laura

tries to claim the reward from Aurora, but Aurora refuses to do so. This can be seen in Rv Clarke (1940) 40 CLR227. Clarke failed to claimed the reward as the

information he gave was to release himself and not in response of the offer. The offer was not present in his mind when he gave the information to the police. Ignorance

of offer is akin to never hearing it or forgetting the offer after hearing it.

APPLICATION:

A proposal must be communicated to the acceptor before it can be accepted. Based on section 4(1) of the Contract Act 1950, the communication of offer is complete

when it comes to the knowledge of the person to whom it is made. In this situation, Laura discovered that aurora had advertise a reward for the return of her ring.

However, Laura try to claim the reward but Aurora refuse to do so. Therefore, the offer is not been accepted because an offer or proposal is effective once it is

communicated to the offeree by the efferor.

CONCLUSION:

The conclusion, Laura cannot claim the reward because Laura has no knowledge about the advertisement as the proposal said it should have communicated only if the

party who accept it knew about the proposal so that offer has not been accepted.
2. Jefry sold his car which cost RM50,000 to Janice for only RM20,000. On the next day, Jefry refused to perform the contract as the contract price was

far below the market value of the car.

Advise the parties whether the contract is binding between them.

ISSUE:

The issue in this situation is whether the contract is binding between them.

LAW:

Based on Section 26 of the contract act 1950, agreement without consideration is void.

Section 2(d) of the contract act 1950, when, at the desire of the promisor, the promise or any other person has done or abstain from doing or does from doing or

promises to do so to abtain from doing something such act or abstinence or promises is called consideration of the promises.

Jeffey as a promisor gives something to Janice, Janice must reciprocate. One of the elements of consideration is the consideration need not be adequate. An agreement

to which the consent of the promiser is freely given is not void merely because the consideration is inadequate, but the adequacy of the consideration may be taken into

account by the court in determined the question whether the consent of the promisor was freely given.

The rule must be illustrated in the case of Phang Swee Kim v Beh I Hock (1964) MLJ 383. The court held that the consideration was adequate because the respondent

has agreed to transfer the land to the appellant for $500. There was a valid contract.

APPLICATION:

Applying in section 2(d).

Pertaining the case, referring to the case of Phang Swee Kim V Beh I Hock, Janice agreed to buy a car from Jefrey for the price RM 20000 although the car was worth

of RM50000. Jefrey kater refused to honor the promises arguing that the promise was unenforceable because of the inadequacy of consideration. Therefore, there is an

agreement exist between both parties because the consideration is occurred. The agreement become the contract.

CONCLUSION:

It’s mean the contract is legally binding between them as the consideration is occurred and they can legally enforced their rights under the contract.

3. With reference to the relevant section of the Contract Act 1950 and the decided case, discuss how a contract can be discharged.

In the context of the Contract Act 1950, the discharge of a contract refers to the termination of the contractual obligations between parties. There are several ways in

which a contract can be terminated. A contract can be discharged by performance, by consent between parties, frustration and breach of contract.

Firstly, a contract can be discharged by performance. According Section 38(1) of Contract Act 1950, when both parties fulfill their contractual obligations, the

contract is discharge by performance. This means that once the parties have done what they were required to do under contract, their obligations are considered

fulfilled.
Secondly, a contract can be discharged by agreement when both parties agree that the contract will be discharged. This agreement can be made during the contract or

after the contract has been made.

Thirdly, a contract can be discharge by frustration. Frustration refers to things that are beyond the control of either parties that makes it impossible to perform. This can

be either at the time the contract was made or when the contract has been made. As in case Taylor v Caldwell, the plaintiff hired the defendant hall for a concert

performance. However, the hall accidently burnt down before the day of the concert. It was held that the concert may be discharged by frustration. As the result, the

contract will be terminated and void.

Fourthly, contract is discharged by breach of contract. This happen when one party of the contract did not do what they have agreed in the contract. As in Section 40 of

the Contract Act, when a party to a contract refused to perform or disable himself from performing his promises, the promises may put to an end to the contract unless

he has signified by word or conduct that he wants to continue. The party who did not breach his duty towards the contract can continue with the contract and claim

damages or can repudiate the contract. Thus, the contract is voidable.

In conclusion, the four ways in which a contract is discharged is by performance, by consentof both parties, by frustration and by breach of contract.