FACULTY OF ADMINISTRATIVE SCIENCE AND POLICY STUDIES

BACHELOR OF ADMINISTRATIVE SCIENCE

SEM MARCH 2023 – AUGUST 2023

LAW439

COMMERCIAL LAW

GROUP – N4AM22822A

GROUP MEMBERS

NAME MATRICULATION
NO

(1) NUR IZREEN SYAZMIN BINTI NASRUDIN 2022664124

(2) NUR AZLIN BINTI JAMIL 2022835674

(3) NUR ALIA SHUHADA BINTI ZULKARNAIN 2022605096

(4) WAN NURSYAWALINDA BINTI WAN LOKMAN 2022868016

QUESTION 1

ISSUE

The issue in this case is whether there is an invitation to treat at the moment Mr.
Aaron inviting bids to auction for the sale of antique goods?

LAW

According to the Section 2 (h) of the Contract Act 1950, a contract is an agreement
between two or more parties that is legally binding between them. It is referred to as ‘an
agreement enforceable by law’. In order for an agreement to become a contract, there are
several elements that need to be fulfilled by the parties. The elements are proposal,
acceptance, consideration, capacity to enter intro contract, intention to create legal relation
and certainty. However, the relevant one in this question relates to the first element which is
proposal or offer.

Based on Section 2(a) of the Contract Act, offer is made when one person signifies
to another his willingness to do or abstain from doing anything, with a view of obtaining the
assent of that other to such act or abstinence. However, not all statements amount as offer,
some of it was termed as Invitation to treat.

Invitation to treat is not a proposal but a sort of preliminary communication, which

passes between the parties at the stage of negotiation. The rationales of having invitation to
treat is based on common sense and the practicalities and realities of commercial transactions.
The example of invitation to treat is an auction and display of goods.

In an auction, articles are listed to be auctioned to the highest bidder. For illustration,
once an auctioneer considered making a proposal when inviting bids and a bidder makes a
bid, then the bidder is considered accepting the proposal, and an agreement comes into being
at that stage. This defeat the very purpose of an auction which is to get the highest bid for a
particular article. If the auctioneer is making a proposal when he invites bid to auction an
article, then the first person to bid is considered accepting the proposal to buy that article,
regardless of whether the bidder is bidding the highest price or not. In other words, once that
happens, there is an agreement and the auctioneer can no longer call for another bidder to bid.
Hence, the auctioneer is only making an invitation to treat or invitation of offers of the
highest price from the bidder.
 In the case of Payne v Cave (1789), Mr Cave was made the highest bid for a good in
an auction. But then, Mr Cave changed his mind and withdrew his bid before the auctioneer
brought down his hammer. It was held that, Mr. Cave is the defendant and he was not bound
to purchase the goods. His bid amounted to an offer which entitled to withdraw at any time
before the auctioneer signified acceptance by knocking down the hammer. The court held that
Mr. Cave was entitled to withdraw his offer at any time before the auctioneer accepted it. The
auctioneer’s request for bids was an invitation to treat, and each bid constituted an offer
which could be withdrawn at any time until it’s accepted, and finally, the fall off the
auctioneer’s hammer constituted acceptance of the highest bid.

For the second rationales of invitation to treat, the same state of law also applies for
display of goods in a shop. If selecting an article from the shelf constitutes a sale agreement,
ownership will have passed to the customer at the point of selection, that is by putting the
goods in the basket or trolley, even though he or she has not paid for it. It is worst when the
customer would not be able to change his or her mind about the purchase. Hence, display of
goods in a shop is only an invitation to treat as decided by the following case.

In the case of Pharmaceutical Society of Great Britain v Boots Cash Chemist Ltd,
the defendant was charged under the Pharmacy and Poisons Act 1933. It is provided that it
was unlawful to sell certain poisons unless such sale was supervised by a registered
pharmacist. The case depended on whether a sale had occurred in the self-service shop when
a customer selected articles, which he desired to purchased and placed them in a wire basket.
Payment was to be made at the exit where a cashier was stationed and in every case involving
drugs, a pharmacist supervised the transaction and was authorized to prevent a sale. The court
held that the display was only invitation to treat. A proposal to buy was made when the
customer placed the articles in the basket. Hence, the contract of sale would only be made at
the cashier’s desk. Regarding to this, the business owners had not engaged in an illegal
transaction. In essence, an invitation to treat refers to situations in which you offer to bargain
or in which you advertise that you have a stack of books to sell, a house to rent, or both, with
no intention of committing to a contract.

APPLICATION OF LAW

By applying the above law to the current situation, Mr. Aaron has to fulfil the
elements of invitation to treat for him to bring an action under a binding contract which is
auction. In this situation, Mr. Aaron conducted a public auction that sell antique goods, which
included the lamp that Kirana was considering to purchase at the reserved price of RM5
000.00. She then drafted a cheque for RM500.00 to be delivered to Mr. Aaron as a deposit.
However, the lamp was sold to Ameera for RM10 000.00 after she successfully outbid Kirana
at the auction. According to Kirana, the payment of her deposit that results in the formation
of a valid contract between her and Mr. Aaron. In general, invitation to treat can be viewed at
the moment when bidders make bids at public auctions by taking part in the event.
Apparently, the contract is formed when the auctioneer accepts the highest bid. So, it is
improbable that Kirana and Mr. Aaron came to an agreement that would be enforceable.
Instead of being an acceptance of an offer, the payment of the deposit could be viewed as a
declaration of interest. Additionally, the reserved price and Ameera’s later winning bid
suggested that the light was actually sold to a different buyer at a greater price.

Based on the principles of contract law, not all statements are amounted to an offer
but instead it counted as an invitation to treat such as auction. As an illustration, the
auctioneer is only soliciting bids from prospective purchasers rather than offering a proposal.
In this public auction that was attended by Kirana, we can see that the auctioneer is issuing an
invitation to treat. Afterward, the bid may be approved or rejected by the auctioneer at his or
her discretion. This is because the contract between the auctioneer and the highest bidder is
often created when the highest bid is accepted. So, when Kirana paid the deposit to Mr.
Aaron, it was likely a sign that she intended to buy the antique lamp at the set price. The
deposit payment, though, was probably a component of the auction process rather than a
legally enforceable agreement on its own. One may claim that no agreement was made
between Kirana and Mr. Aaron because the lamp was ultimately sold to Ameera, who placed
a larger offer at a greater price that Kirana.

Regarding to this, it would be wise for Mr. Aaron to inform Kirana that her payment
of the deposit was not a legally binding agreement but rather a necessary step in the auction
process. Mr. Aaron is able to make it clear that the auctioneer's job is to solicit offers and that
Ameera, the top bidder in this case, entered into a legally binding agreement to buy the
antique lamp at her offered price. However, as a show of goodwill to keep a strong
relationship with Kirana, he may think about providing some sort of compensation or
refunding the money as he could not meet Kirana’s expectation.

CONCLUSION
 In conclusion, Mr. Aaron should tell Kirana that there is no contract between them as
it was void. Therefore, the lamp was unfortunately vending to Ameera who successfully
managed to beat Kirana by placing the highest price as a bidder.

SECOND QUESTION

ISSUE

The issue in this situation is whether Rozita has right to bring an action against Mr.
Arumugam or not pursuant to the Sale of Goods Act 1957 due to the bad quality of the spices
that she ordered from Mr. Arumugam?

LAW

According to Section 2 of the Sale of Goods Act 1957, word ‘goods’ can be defined
as every kind of movable property other than actionable claims and money, and includes
stock and shares, growing crops, grass and things that attached to or forming part of the land
which are agreed to be severed before sale or under the contract of sale. Therefore, land is
excluded from the Sale of Goods Act by virtue of this definition as it is an immovable
property.

The rationale of the Sale of Goods Act 1957 is aiming to protect the rights of
consumers when they purchase goods. This is to ensure that the consumers receive goods that
meet certain standards of quality, fit for their intended purpose, and as described by the seller.
If the goods are defective and do not meet the standards which have been agreed, the act
provides remedies for consumers, such as the right to seek a refund, replacement or terminate
the contract. Besides that, the Sale of Goods Act 1957 is also to establish fair and transparent
transactions. As the act requires sellers to be accurate that represent the goods they are
selling, both including quality and quantity, this can help to promote fairness and transparent
in commercial transactions other than prevent fraudulent practices and misleading
advertising. Moreover, this act also balancing the rights of buyers and sellers as it provides
legal remedies for both parties and aims to ensure a fair and equitable outcome in case of
disputes.

Goods which form the subject of a contract of sale may be divided into two types of
goods, either it is existing goods or future goods. Existing goods are goods that are already
owned or possessed by the seller, and may be either specified or agreed upon at the time a
contract of sale is made. In other words, specific or ascertained goods means goods identified
and agreed upon at the time a contract of sale is made. By this means, the goods have to be
existed and physically present at the time when a contract is made. On the other hand, future
goods are those goods to be manufactured or produced or acquired by the seller after the
making of the contract of sale. This means that it can be custom made where in future, the
goods become yours. However, the types of goods in this question is classified as future
goods.

There are two terms of the contract of sale which is condition and warranty. Section
12(1) of the Sale of Goods Act 1957 stated that a stipulation in a contract of sale with
reference to goods which are the subject thereof may be a condition or a warranty. In spite of
that, this question relates to the first terms of the contract of sale, condition. Based on
Section 12(2) of the Sale of Goods Act, condition is a stipulation essential to the main
purpose of the contract, the breach of which gives rise to a right to treat the contract as
repudiated. As a general rule, a breach of condition entitles the innocent party to repudiate the
contract. Nonetheless, not all situations that can enable the victim party to repudiate or
terminate the contract. In some set of circumstances, they only can merely claim damages as
an exception where the buyer waives the condition, elects to treat the breach of condition as a
breach of warranty and claim damages only, the contract of sale is not severable and the
buyer has accepted the goods or part thereof, or the contract is for specific goods the property
in which has passed to the buyer, the breach of any condition must be accepted as a breach of
warranty unless otherwise provided in the contract.

Sale of Goods Act implies a number of stipulations in every contract for the sale of
goods. However, these implied terms apply only when the parties to the contract of sale have
not excluded or modified them. These implied terms laid down in Section 14 to 17 of the Sale
of Goods Act 1957. The implied terms are implied condition as to title, implied warranty that
buyer shall have quiet possession of the goods, implied warranty that the goods are
unencumbered, implied condition that in a sale of goods by description, the goods must
correspond with the description, the goods must be reasonably fit for purposes for which the
buyer wants them and the goods must be of merchantable quality, and in contract for the sale
of goods by sample, implied condition which the bulk shall correspond with the sample in
quality and the goods are free from the defect rendering them unmerchantable which would
not be apparent on reasonable examination of the sample. However, implied condition in a
sale by sample is the only relevant element for this case.

In Section 17, Sale of Goods Act 1957 explains the implied condition in a sale by
sample where a contract of sale is a contract for sale by sample where there is a term the
contracts express or implied to that effect. In the case of a contract for sale by sample there is
an implied condition where that the bulk shall correspond with the sample in quality; as
stated in Section 17(2)(a), that the buyer shall have a reasonable opportunity of comparing
the bulk with the sample as mentioned in Section 17(2)(b), and that the goods shall be free
from any defect rendering them unmerchantable which would not be apparent on reasonable
examination of the sample as referred in Section 17(2)(c) In other words, the bulk of goods
must correspond with the sample but if the bulk is totally inferior to the sample, the buyer
may elect to reject all the goods. However, if the bulk is only partly inferior to the sample, the
buyer may either elect to accept all the goods and claim damages for those which are inferior
or reject all the goods and sue for damages. The buyer does not have the alternative to accept
part of the bulk and reject the resit if the contract of sale is not severable.

An English case on sale by sample which is Godley v. Perry (1960) was about the
situation where a boy bought a catapult. While using it, the catapult broke and he lost the
sight of an eye. The shopkeeper had bought it from a wholesaler by sample and tested it by
pulling back the elastic. The shopkeeper was sued and the court held that the catapult was not
fit for the purpose for which the buyer wanted it and that it was of unmerchantable quality.
The shopkeeper then filled an action against the wholesaler. The court was held that, although
the shopkeeper had made reasonable examination, the defect was not one which was apparent
on such examination. Thus, he had an action against the wholesaler.

Meanwhile, in another case that related to this implied condition in a sale by sample is
Drummond v Van Ingen (1887). In this instance, the supplier supplied a textile sample, and
the customer accepted it. The buyer planned to resell the fabric to a number of tailors as a
source of fabric for their business, which the seller was aware of. Despite being close to an
equivalent to the buyer-approved sample, the bulk of the cloth was discovered to be
unmerchantable for tailoring purposes upon delivery. The buyer was not required to pay for
the bulk because, according to the court, the faults in the material could not have been found
by inspecting the sample. The buyer would therefore be entitled to refuse to pay for the
products if the flaw had not been latent.
APPLICATION OF LAW

By applying the above law to the current situation, there is one element or implied
terms of the contract in Sales of Goods Act 1956 that must be fulfilled; which is the element
of implied condition in a sale by sample that laid down in Section 17. This is where Rozita
found out that half spices of 100 packets that she has ordered were not in a good condition.
Supposedly, the bulk shall correspond with the sample in quality which stated in Section
17(2)(a). However, in this situation, it shows that the packets that she ordered are not the
same as the sample that was shown by Mr. Arumugam. This means that Mr. Arumugam
failed as a seller to ensure that the quality of spices that he sell meet the standard quality of
his sample. Furthermore, as mentioned in Section 17(2)(c) of Sale of Goods Act 1957, the
goods shall be free from any defect rendering them unmerchantable. But unfortunately,
Rozita’s business was spoiled since the spices order that she has been received was found
destroyed and smelly. It is unpleasant for her to use it as the owner of the Curry Café
business because those ruined spices will harm the customers’ health and would make her
business into failure. So, Rozita has the right either to get all the goods and claim damages, or
reject all goods and sue for damages because as a buyer, she has the reasonable opportunity
of comparing the bulk with the sample as what has been told in Section 17(2)(b). Therefore,
Rozita may elect to accept a portion of the bulk and reject the rest unless the selling contract
is severable.

Based on the explanation of the case above, Rozita should take the following actions.
In order for Rozita to get remedies or claim her rights under the Sale of Goods Act 1957, she
could posted pictures of the spices as a proof that she received her order in a bad condition as
evidence of their inferior quality. She has to make it clear that she is not pleased with the
quality of the spices and intends to utilise her legal options, such as returning the products or
suing for damages.

CONCLUSION

As a conclusion, this element is fulfilled in this case which means that Rozita has
right to bring an action against Mr. Arumugam under the Sale of Goods Act 1957. This
means that Rozita may be qualified to claim for damages which would represent the loss she
suffered as a result of getting the subpar spices from Mr. Arumugam.