What is contract law?

- Basic law that governs and relates to most

aspects of human life.
- Governs human daily activities in almost all
aspects vary from simple contracts to
complicated one.
- Contracts provide the means for individuals
and businesses to sell, or transfer property,
services and other rights.

What is a contract?

- Oxford Concise Dictionary :

A written or spoken agreement between two
or more parties, intended to be enforceable
by law.
-

S. 2(h) Contracts Act 1950

An agreement enforceable by law is a
contract.

2 elements :
1) There must be agreement

S. 2(e) Contracts Act 1950

- every promise and every set of promises,
forming the consideration for each other, is
an agreement.
- - A promise is formed when a proposal is
accepted.

Offer + Acceptance = Agreement

2) The agreement must be enforceable by law.

-

Not all agreements are contracts although all

contracts must be based on agreement.
Any agreements which are not enforceable
by law, are not considered as valid contracts.
Example :
See illustration S. 58 Contracts Act

Who are the parties to the contract?

Every contract must involve at least 2 parties

that is the person who proposes the contract
(offerer/promisor), and the parties to whom
the proposal is made (offeree/promisee).
See S. 2 (c) Contracts Act

S. 2(h) Contracts Act :

- a contract is an agreement enforceable by
law.

- Therefore, MUST BE AN AGREEMENT & MUST

BE ENFORCEABLE BY LAW

S.10(1) Contracts Act :

All agreements are contracts if they are
made by the free consent of parties
competent to contract, for a lawful
consideration and with a lawful object, and
are not hereby expressly declared to be
void.

S.10(2) Contracts Act :

Nothing herein contained shall affect any
law by which any contract is required to be
made in writing or in the presence of
witnesses, or any law relating to the
registration of documents.

Important !!!!
Valid agreement s. 2(e)
Offer s. 2(a)
Acceptance s. 2(b)
Certainty of terms s. 30

Considerations - s. 2(d), s. 26
Intention to create legal relations
Capacities of parties s. 11 & 12

Free consent s. 13 & 14

No coercion s. 15
No undue influence s. 16
No fraud s. 17
No misrepresentation s. 18
No mistake of facts s. 21

Formalities

S. 2(a) Contracts Act :

Offer / proposal is an expression of willingness
to do or to abstain from doing anything with
a view to obtaining the assent of that other
to the act or abstinence.

A person is said to make an offer when he

proposes a set of terms with intention that
these terms will form a legally binding
agreement when the offeree accepts them.

An offer can be made either orally or in

writing or implied by the conduct of the
person making the offer.

Example :
When a person puts an item for auction with
express provision that he will sell the item to
whomever places the highest bid, his
conduct is offer to sell.
When a person takes an item from a shops
shelf, puts it in the shopping basket before
presenting it for payment at the cashier, it is
said that by his conduct the person is making
an offer.

Two types of offer :

1. Bilateral Offer
- made to a specific person or group of
persons.
2. Unilateral Offer
- made to the world at large.

Generally, an offer should be made to a

specific target as no contract can be made
with the world at large.

However, if an offer is made to the whole

world, and any member of public in certain
manners can accept this, such offer will be
considered as an effective offer.

When the offeree performs the act in question

or fulfils the stipulated requirements.

Carlill v. The Carbolic Smoke Ball Company

[1893] 1 QB 525
Facts :
The D alleged that their smoke balls cured
many illnesses and made it impossible to
catch flu. They made an advertisement
stating that whoever used the balls according
to prescription yet still caught flu would be
compensated the amount of 100 and to
show their sincerity about the offer, they had
deposited the amount of 1000 in one bank.
The P bought one of the balls and used it
according to the prescription and still caught
the flu. She claimed for the 100 reward and
the D refused to pay on several grounds.

Argument:
- The advertisement was a mere sales puff
rather than an offer, there was no valid offer
as a contract cannot be made to the whole
world ; and the advertisement was too vague
to be an offer.
Held :
- The offer was a valid offer of unilateral
contract. The offer stipulated that
acceptance could be made by anyone who
used a smoke ball properly and yet the
person caught flu.

The words used were plain and were not

vague. The P by her conduct had accepted
the offer by fulfilling these requirements.
Hence, there was a valid contract and the D
was bound by their offer. The fact that they
deposited the amount of 1000 in one bank
further indicated the seriousness of their
offer and hence the advertisement was not a
mere sales puff.

Merely an invitation to negotiate or to

bargain so, the acceptance to a mere
invitation to treat is the offer.
There is not yet any acceptance to any offer
at that point of time.
Meaning that, the person who makes an
invitation to treat has the option either to
accept the proposal or to reject it.

Some circumstances :
1. Display of Goods in Shops
Fisher v. Bell [1961] 1 QB 394
-- The D was found not guilty of the criminal
offence of offering the knife for sale merely
by displaying a flick knife in his shop window.
-- Lord Parker :
the display of an article with a price on it
in a shop window is merely an invitation to
treat. It is in no sense an offer for the sale
the acceptance of which constitutes a
contract.

Pharmaceutical Society of Great Britain v.

Boots Cash Chemists (Southern) Ltd. [1953] 1
QB 401
Facts:
The D were charges with the criminal offence
of selling a listed drug other than by or under
supervision of a registered pharmacist. The D
displayed the goods, including the listed
drugs, wrapped in packages with the prices
marked on them in their supermarket.

Argument :
The sale was completed the moment any buyer
put any goods they picked into their baskets.

Held :
The Court reject the argument and held that
the display of goods on supermarket shelves
amounted to an invitation to treat rather
than an offer to sell. The mere fact that the
customer picks up a bottle of medicine from
the shelves in this case does not amount to
an acceptance of an offer to sell.
It is an offer by the customer to buy and no
sale is effected until the buyers offer to buy
is accepted by the acceptance of the price.

2. Advertisements and other notices

Partridge v. Crittenden [1968] 1 WLR 1204
Held :
The D escaped liability for unlawfully offering
for sale a bramblefinch because the
advertisement he placed in the classified
section of a magazine was held as mere
invitation to treat and not an offer.

3. Auction
- Generally, any calls for bids are merely
invitation to treat. When A places his bid, he
is regarded as making an offer and hence the
auctioneer is free to accept or reject.
-

Payne v. Cane (1789) 3 TR 148

Held :
The D, who made the highest bid for the Ps
goods and withdrew the bid before the fall of
the auctioneers hammer, was not bound by
any contract. The bid was an offer.

- Therefore, as long as it has not been

accepted by knocking down the hammer, the
bidder has all the right to withdraw the
offer.
- This is also incorporated in s. 10 Auction
Sales Act which provides that :
- A sale by public auction shall be complete
when the auctioneer announces its
completion by the fall of the hammer.

4. Tenders
- Usually presumed as mere invitations to
treat.
- Case : Spencer v. Harding (1870) LR 5 CP 561
- Held :
- an announcement inviting tenders is not
normally an offer; unless accompanied by
words indicating that the highest or lowest
tender will be accepted, it is a mere attempt
to ascertain whether an acceptable offer can
be obtained.

However, in certain circumstances an

invitation to submit tenders may held to be
an offer.
When it is expressly stated that the tenders
will be given to whoever offers the highest
price for the tendered items or services or
whoever offers the lowest price to supply the
required items or services and meets the
conditions prescribed.

- Case : Blackpool and Fydle Aero Club Ltd. V.

Blackpool Borough Council [1990] 3 All ER 25
Held :
In certain circumstances, an invitation to
tender could give rise to binding obligations.
This was such an instance since the tenders
had been sought from a number of parties,
all of them known to be D, who had also
imposed strict rules of compliance on them.

5. Reply to enquiry
- An offer, being a proposal is transformed into
a binding promise once it is accepted.
- However, when a person supplies an answer
to any enquiry, there is no presumption that
in supplying the answer the person has the
intention to be bound by his word.

Case : Harvey v. Facey [1893] AC 552

Facts : The Appellant sent a telegram to the
Respondent asking the price of Bumper Hall
Pen to which the Respondent replied Lowest
cash price for Bumper Hall Pen $900.
Held :
The Respondent was not bound by the
subsequent telegram from the Appellant,
stating that we agree to buy Bumper Hall
Pen for $900 asked by you because the
respondents telegram was merely a supply
of information and not an offer.

Case:
Preston Corp. Sdn. Bhd. V. Edsward Leong &
Ors [1982] MLJ 22
- Fed Ct of Malaysia applied this principle,
holding that when the appellants placed
printing orders based on the quotations
supplied by the respondents, the conduct
was merely a supply of information, which in
nature was merely an invitation to treat.

It is important to note that an offer must be

communicated.

An offer is effective when, and not until, it is

communicated to the offeree.

Case : Fitch v. Snedaker (1868) 38 NY 248

- A reward cannot be claimed by one who did
not know that it had been offered.

If he knows about the offer, but is inspired to

performance by a motive other than that of
claiming the reward, such motive is
immaterial.
Case : Williams v. Carwardine (1833)
- The P, with knowledge of the reward,
supplied information leading to the
conviction of an assailant for murder, but
only did this to ease her conscience, and in
hopes of forgiveness hereafter, she was held
entitled to claim the sum offered.

Cross-offers.
The offeree must know about the proposal
before he can accept it.
Case : Tinn v. Hoffman & Co. (1873)
Facts :
On 28/11/1871, the D wrote to the P
offering to sell him 800 tons of iron at 69s.
Per ton, together with a further quantity at
the same price. On the same day, the P
wrote to the D offering to buy 800 tons at
69s., together with a further quantity at a
lower price. The letters crossed in the post.
The P contended that there was, at all
events, a good contract for 800 tons at 69s.
Per ton.

Hence, two manifestations of a willingness to

make the same bargain do not constitute a
contract unless one is made with reference
to the other.

Silence does not give consent where offer

not communicated.

If A does work for B without the request or

knowledge of B, can he sue for the value of
his work?

A person cannot be forced to accept and pay

for that which he has had no opportunity of
rejecting.

Case : Taylor v. Laird (1856)

Facts :
The P was engaged to command the Ds ship
and to conduct explorers upon an expedition
up the River Niger. He threw up his command
in the course of the expedition, but helped
to work the vessel home, though without the
knowledge of the D. He then claimed to be
remunerated for the services thus rendered.

Held : Cannot recover! The D never had the

option of accepting or refusing the services
while they were being rendered.
- The Ps offer, being uncommunicated, did not
admit of acceptance and could not give him
any rights against the party to whom it was
addressed.

There are 4 ways to terminate :

Revocation
Lapse of time
Failure to meet condition of offer
Lose of capacity to contract death
- insanity
Common Law of England
Offer is terminated by rejection either
express or implied
Hyde v. Wrench (1840)

May be done anytime before the offeree

accepts the offer, provided the revocation is
communicated to the offeree. (s.5 (1))
S. 6(a) notice done by the offerer/proposer
But, Common Law provides a legal authority
that accepted communication of a reliable
3rd party as an effective revocation.

Dickinson v. Dodds (1840)

Held :
The offer was effectively revoked when the
offeree was informed by a 3rd party that the
property, which was initially offered for sale
to him, was sold to another few days before
the offer lapsed.

However, when the offeror promises to keep

an offer for a period of time and
consideration is given to the offeror to keep
the offer open for the duration of time, the
the offeror cannot withdraw his offer within
the stipulated period.

This is known as OPTION.

Case : Voo Syun Mui v. Yap Mooi Mooi [1984]

2 MLJ 48

Facts :
The D had allowed 2 weeks option period to
the P upon receiving the payment of RM300
from the P. The P had exercised the option
by sending a letter accepting the offer
coupled with the cheque for the payment of
10% of the purchase price being deposit for
the contract. Despite this, the D refused to
proceed with the agreement.

Held :
Since the option was exercised within the
stipulated period and the conditions required
were met, the offeror by her promise.
-- meaning that the offeror cannot sell the
property until expiration of option period.

Occurs either upon the expiry of the period

prescribed in the offer, or..
Of no such period prescribed, upon the
expiry of reasonable period.
s.6(b)

- If no acceptance has been communicated

within this period, the offer will
automatically lapse, and the offeror is not
bound by any agreement if his offer is
accepted outside the prescribed period or
not within reasonable time.

Case : Macon Works & Trading Sdn Bhd v.

Phang Hon Chin & Anor [1976] 2 MLJ 177

Held : (Hashim Yeop A Sani J)

an offer lapses after a reasonable time not
because this must be implied in the offer but
because such failure to accept within a
reasonable time implies rejection by the
offeree.
- It was also held that where no time was
fixed, an offer would lapse after the
expiration of reasonable time, which
depends on the actual circumstances of each
case and the nature of business.

S. 6 (c) by the failure of the acceptor to fill a

condition precedent to acceptance.

Case : Aberfoyle Plantations Ltd. V. Khaw Bian

Cheng [1960] MLJ 47
Held:
When conditions were made as conditions
precedent to the contract, formation of contract
depended on the fulfilment of such conditions.
Therefore, R was entitled to the return of his
deposit for no contract had been validly created
due to failure on the part of the appellant to
meet the conditions.

Case : Malayan Flour Mills Bhd v. Saw Eng

Chee & Anor [2000] 3 MLJ 68
CoA Held :
Dismissed the appeal.
It was held although in their letter they
accepted the offer and indicated that they
were willing to satisfy all the conditions of
the offer, in reality the appellants failed to
meet these conditions. Hence there was no
valid contract.

Death & mental disorder

s. 6(d) expressly provides that death &
mental disorder will operates as ground of
termination of offer if this fact is known to
the offeree before he accepts the offer.
So, impliedly, if offeree does not know, he
can effectively accept the offer and hence
the offeror is bound by the particular
contract.

Not stated in Contracts Act as a method to

terminate an offer.
Case : Hyde v. Wrench (1840)
Facts :
D agreed to sell his farm at certain price. P
tried to negotiate by asking for lower price.
D refused. Few days later, the offeree sent a
letter accepting the original offer but the D
refused this.

Held :
Ps action for specific performance failed as
it was found that there was no valid contract
as the counter offer amounted to rejection
of the offer. The rejection terminated the
offer and therefore the P could not accept an
offer which was no longer in existence.