LAW OF CONTRACT

BY :PUAN YUHANZA BINTI OTHMAN

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CONTENTS

Elements Elements Remedies Remedies Discharge Discharge

•Offer•Acceptance •Consideration •Capacity•Intention•Certainty•Free consent•Lawful object

•PERFORMANCE•AGREEMENT•FRUSTRATION•BREACH

RESCISSIONDAMAGESSPECIFIC PERFORMANCEINJUNCTIONQUANTUM MERUIT

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WHAT IS CONTRACT?

CONTRACT = AGREEMENT CONTRACT = AGREEMENT

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GH TreitalGH Treital

An agreement which is either enforced by the law or recognized by law as affecting the legal rights or duties of the parties

SECTION 2(H) of the Contract Act 1950SECTION 2(H) of the Contract Act 1950

an agreement enforceable by law is a contractNot all agreements are contract but all contracts are agreement

PROPOSAL (OFFER) ACCEPTANCE CONSIDERATION LEGAL CAPACITY INTENTION TO CREATE LEGAL

RELATION CERTAINTY FREE CONSENT LAWFUL OBJECT

PROPOSAL (OFFER) ACCEPTANCE CONSIDERATION LEGAL CAPACITY INTENTION TO CREATE LEGAL

RELATION CERTAINTY FREE CONSENT LAWFUL OBJECT

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OFFEROFFER + ACCEPTANCEACCEPTANCECONTRACTCONTRACT =

CONSIDERATIONLEGAL CAPACITY

INTENTION TO CREATE LEGAL RELATIONCERTAINTY

FREE CONSENTLAWFUL OBJECT

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OFFEROFFER

Definition Definition

Revocation Revocation

Condiiton Condiiton

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PROPOSAL/OFFER

Auth: Sec. 2(a) CA 1950 one person one person signifiessignifies willingness to do or abstain from doingwillingness to do or abstain from doing with a view to obtaining assent of that otherwith a view to obtaining assent of that other

An offer is a promise by a person to another person with the INTENTION to create a LEGALLY BINDING RELATIONSHIP

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HOW A PROPOSAL CAN BE MADE?

SECTION 9 CA 1950 SECTION 9 CA 1950

So far as the proposal or acceptance of any promise is made in

words, the promise is said to be express. So far as the proposal or

acceptance is made otherwise than in words, the promise is said to

be implied.

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To whom a proposal can be made?

To whom a proposal can be made?

One personOne person(specific offer)(specific offer)

One personOne person(specific offer)(specific offer)

To the world at largeTo the world at large(general offer)(general offer)

To the world at largeTo the world at large(general offer)(general offer)

BOULTON v JONESBOULTON v JONES CARLILLCARLILL v CARBOLIC SMOKE BALL v CARBOLIC SMOKE BALL COCO..CARLILLCARLILL v CARBOLIC SMOKE BALL v CARBOLIC SMOKE BALL COCO..

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BOULTON v JONES

Boulton had taken over the business of one Broklehurst.

Jones sent an order for goods to Broklehurst. Jones had no knowledge that the business had changed hands.

Boulton supplied the good to Jones. Jones refused to pay because the good was not from Brocklehurst. Boulton sued Jones for the price.

Court held that: Jones is not liable to pay for the good because he intends to make a contract only with Brocklehurst not Boulton.

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• The Defendant (Df) manufactured a smoke ball and published advertisement at the time of influenza epidemic that their smoke ball could cure all kinds of ailments. And stated that, anyone who bought one of their smoke ball, used it as directed and still suffer from influenza would be paid l100.

• Plaintiff(pf) bought the smoke ball but still had influenza. She claimed l100 from df.

• The df argued that, there was no contract because the advertisement was an invitation to treat not an offer.

• The court held that: it was an offer addressed to public at large which could be accepted by anyone who fulfills the conditions attached o the offer.

CARLILLCARLILL v CARBOLIC SMOKE BALL COv CARBOLIC SMOKE BALL CO

From this case:a)An advertisement to give reward for the return of lost goods would be considered as an offer to public at large. b)it was an offer addressed to public at large which could be accepted by anyone who fulfills the conditions attached o the offer

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CONDITION OF AN OFFERCONDITION OF AN OFFER

Clear communicated

Acceptor must aware

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CLEAR

clear = final, definite

GUTHING v LYNNLynn offered to buy a horse from Guthing on condition that if the horse brings luck to him, he will pay another L50A dispute arose and the issue is whether there was a valid offer.The court held that, the offer was not final and complete and hence, it was not valid.

Lynn offered to buy a horse from Guthing on condition that if the horse brings luck to him, he will pay another L50A dispute arose and the issue is whether there was a valid offer.The court held that, the offer was not final and complete and hence, it was not valid.

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COMMUNICATED

S.2(a), when one person signifies to another his willingness

S.2(a), when one person signifies to another his willingness

S.4. (1) The communication of a proposal is complete when it comes to the knowledge of the person to whom it is made

S.4. (1) The communication of a proposal is complete when it comes to the knowledge of the person to whom it is made

•An proposal must come to the knowledge of the acceptor.•TAYLOR v LAIRD

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•TAYLOR v LAIRD

T was engaged to command L’s Ship and to conduct certain explorers on an expedition up to River Niger.

T quit but helped to work at the vessel home without L’s knowledge

T claimed to be paid for the service rendered.

The court held that, he cannot recover as his offer to work at the vessel home was not communicated to L, thus it would not amount to a contract between T and L.

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ACCEPTOR MUST AWARE

• R v CLARKE

• The Australian Government made an offer to pay a reward for any information leading to the arrest and conviction of persons responsible for the murder of 2 police officers.

• Mr.A and Mr. Clerk were arrested for the crime. Clerk without knowledge of the reward, gave an information which led to the arrest of Mr.B.

• Clerk was released as he was not guilty for the offence.• Clerk then found that, there was a reward from Australian Government and

claimed the reward.• The court held that, Clerk failed to claim because at the time he gave the

information, the reward was not present in his mind, he gave the information only to release himself not because of the reward. He was not aware of the reawrd.

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INVITATION TO TREAT

DEFINITION RULE FOR ITT COURT

GUIDELINE

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INVITATION TO TREAT

Preliminary communications, negotiations, invitation to make an offer.

Must differentiate offer from invitation to treat because response to invitation to treat would not form a binding contract

DEFINITION DEFINITION

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RULEs FOR ITTRULEs FOR ITT

• The offeree merely invites the readers to respond with an offer

• When a person respond to ITT, that person make an offer• It is entirely up to the offeree whether to accept or to reject

the offer made by the public. • If the offeree accept there will be a contract between the

offeree and the offeror. If not, there will be no contract between them.

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EXAMPLE OF INVITATION TO TREAT

EXAMPLE OF INVITATION TO TREAT

ADVERTISEMENT DISPLAY OF GOODS IN A SELF SERVICE SHOP

TENDER

AUCTION SALE

QUOTATION

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ADVERTISEMENT

The advertiser merely invites the readers to respond with an offer

When a person respond to ITT, that person make an offer

It is entirely up to the advertiser whether to accept or to reject the offer made by the public.

If the advertiser accept the offer the contract is concluded

RULE

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ADVERTISEMENT

ADVERTISER PLACES ANADVERTISEMENT

ADVERTISER IS NOT MAKINGAN OFFER

PERSON WHORESPONDS TOADVERTISEMENTIS MAKING AN OFFER

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RELEVANT CASES

HARRIS v NICKERSONHARRIS v NICKERSON PARTRIDGE v CRITTENDENPARTRIDGE v CRITTENDEN

EXCEPTIONREADER RESPONSE TO ADVERTISEMENTAND WAS ACCEPTED = CONTRACT

COELHO v PUBLIC SERVICES COMMISSION

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HARRIS v NICKERSON

Df made an advertisement for a sale of certain goods at a particular place.

The Pf. Traveled to the location specified and discovered that the goods had been withdrawn from the sale.

The Pf sued the Df to claim damages.

The court held that, the advertisement was not an offer but it was only ITT.

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CONTINUE….

EXCEPTION:-

Anyone who fulfils the conditions in the advertisement = contract

CARLILL v CARBOLIC SMOKE BALL COCARLILL v CARBOLIC SMOKE BALL CO

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DISPLAY OF GOODS IN A SELF-SERVICE SHOP WITH PRICE TAGS ON

Legal aspect: not amount to an offer The shop owner is making an ITT The shop owner invites customers to make an

offer for him The offer comes from the customer If the shop owner/cashier accept the aoffer

made by the customer= contract Pharmaceutical Society of Great

Britain v Boots Cash Chemist (1953)

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NOTICE OF TENDER

Co or organizationput work out to tender

=INVITATIONTO TREAT& NOT OFFER

CASE : SPENCER v HARDING

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PRICE LIST / QUOTATION

• EARLY INFORMATION WHICH INVITES PROSPECTIVE BUYERS TO MAKE AN OFFER

• HARVEY v FACEY• PRESTON CORPORATION SDN BHD v EDWARD

LEONG

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AUCTION

AUCTIONEER (HE IS NOT MAKING AN OFFER BUT AN INVITATIONTO TREAT)

OFFER IS MADEBY THEBIDDER(S)

OFFER IS MADEBY THEBIDDER(S)

AUCTIONEER IS FREE TO ACCEPTOR REJECT THE OFFER MADE BYTHE BIDDERThe auctioneer is deemed to make an acceptance at the fall of the hammeryuhanza/2014

Introduction

Sect. 2(a) Sect. 2(a)

Specific offer and general offerSpecific offer and general offer

Condition

Clear Clear

Communicated s.4(1)Communicated s.4(1)

Acceptor awareAcceptor aware

Revocation

Sect. 5(1) Sect. 5(1)

Effective revocation sect.4(3)(a) &(b)Effective revocation sect.4(3)(a) &(b)

Types of revocationTypes of revocation

•Notice•Lapse of time•Not fulfill condition•Unsound mind/death

•Notice•Lapse of time•Not fulfill condition•Unsound mind/death

ITT

Rule of ITTRule of ITT

Guideline Guideline

•Advertisement•Display of goods•Tender•Quotation•auction

•Advertisement•Display of goods•Tender•Quotation•auctionyuhanza/2014

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Acceptance Acceptance

Definition Definition

Revocation Revocation

Condition Condition

Exceptions to communicationExceptions to

communication

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ACCEPTANCE

Key words in section 2(b) :when the person to whom the offer was made signifies his assent thereto

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Conditions for acceptance to be valid

Section 7 (a)Acceptance must be absolute &

unqualifiedAbsolute = acceptance in totality,

accept the whole offerUnqualified = no restrictions, no

conditions attached to the acceptanceNo counter-offer

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COUNTER-OFFER• When the offeree responds with another

offer or when the offeree changes the nature of the offer

• E.g. ask for reduction of price, introduce new terms which change the offer or which are not included in the offer

• Effect : original offer is destroyed & no contract is created

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Hyde v WrenchFARM£1,000

OFFEROR

£950 Lah..

OFFER

NOT ACCEPTANCE- COUNTER OFFER

NO ACCEPTANCE BY OFFEREENO CONTRACT CREATED

SOLD TO ANOTHER

OFFEREE

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DISTINGUISH THESE CASES :

STEVENSON JACQUES & CO v MCLEAN

Mere inquiry / request for further information is not a counter-offer

JONES v DANIELIntroducing terms which are not in

the contract = counter-offer

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OFFER ACCEPTANCE REMARKS

Sell: RM15 Buy :RM15 contract

Sell: RM15 Buy : RM10 X contract. Counter offer

Sell :RM15 Buy :RM 10 with a condition

X contract. Counter offer

Sell :RM15 Buy:RM10 The seller agreed with RM10. contract

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HOW AND WHEN AN ACCEPTANCE CAN BE MADES. 7(b) CA 1950

Acceptance must be expressed in some usual and reasonable manner unless the proposal prescribes the manner in which it is be accepted…

Concern with: mode of acceptance & time of acceptanceIf a particular mode of acceptance is prescribed + the

Offeree must followIf not prescribed + use a usual and reasonable manner

depending on the caseELIASON v HENSHAW

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CONTINUE….Offer + prescribed mode of acceptance and Offeree

not follow the mode but the Offeror accept the acceptance = contract

WESTERN ELECTRIC v WELSH DEVELOPMENT A

If there is prescribed time = Offeror must accept withinthe time limitIf no time prescribed = must be reasonable time

FRASER v EVERETT

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COMMUNICATION OF ACCEPTANCE:GENERAL RULE:Acceptance must be communicatedSection 2(b) = “signifies”The Offeror must known of the acceptancereceives information of the acceptance

Mere intention to accept = not contractSilence does not amount to an acceptanceFRASER v EVERETTPOWEL v LEE

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• Pf applied for post of headmaster of a school.• The board of managers passed a resolution

selecting the pf for the post. The resolution was not communicated to the pf .

• The manager acting under his individual capacity informed the pf regarding the appointment. but the pf did not receive any appointment letter.

• Court held that: no contract in the absence of authorized communication of acceptance

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POWEL v LEE

EXCEPTIONS

OFFEROR SAYS

NO NEED

OFFERORALLOWSOFFEREE

TO FULFILLCONDITIONS

RECIPROCALPROMISES

ACCEPTANCEBY POST

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EXCEPTIONS

OFFEROR SAYS

NO NEED

OFFERORALLOWS

OFFEREETO FULFILL

CONDITIONS

RECIPROCALPROMISES

ACCEPTANCEBY POST

Section

Offer Sect.2(a) When one person signifies his willingness

Communication of offer(offer is effective/complete…)

Sect.4(1) When offer come to the knowledge of an acceptor

Acceptance Sect.2(b) When one person accept the offer

Communication of acceptance (effective./complete.)

Sect.4(20(a)(b)

When the acceptor post letter of acceptance

Postal RulePostal Rule

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• The court held that: when the contract is made by post, the acceptance is complete as soon as the letter is put into the post box.

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ENTORES v MILES FAR EAST CORPORATION

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IGNATIUS v BELL

The df offered to sell his land to the pf on the condition that the acceptance must be made on or before 20/8/1912

pf sent an acceptance by registered post

16/8/191216/8/1912 25/8/191225/8/1912

Df received letter of acceptance from pf

Pf must accept the offer

20/8/191220/8/1912

The court held that: the acceptance was complete when the pf post on 16/8/1912. there was a contract between pf and df.

Postal RulePostal Rule

Offer

Revocation of offer

acceptance

Revocation of acceptance

Sect.2(a)Sect.2(a)

Sect.4(1)Sect.4(1)

Sect.2(b)Sect.2(b)

Sect.4(2)(a)(b)Sect.4(2)(a)(b)

Sect.5(1)Sect.5(1)

Sect.4(3)(a)(b)Sect.4(3)(a)(b)

Sect.5(2)Sect.5(2)

Sect.4(3)(a)(b)Sect.4(3)(a)(b)

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REVOCATION OF OFFER

• WHO CAN REVOKE

OFFEROROFFERORREPRESENTATIVE

ACTING ON HIS BEHALFREPRESENTATIVE

ACTING ON HIS BEHALF

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WHEN CAN OFFER BE REVOKED?

• S. 5(1) a proposal may be revoked at any time • Before the communication of its acceptance is

complete as against the proposer but not afterwards…

PAYNE v CAVE• Df made the highest bid for the pf’s good at an

aution sale but revoked his bid before the fall of the hammer.

• The court held that: the offer could be revoked at any time before the fall of hammer. The revocation was effective. yuhanza/2014

HOW AN OFER CAN BE REVOKED?

BY NOTICEWHICH MUST

BE COMMUNICATED

s. 6(a)

BY NOTICEWHICH MUST

BE COMMUNICATED

s. 6(a)

LAPSE OFTIME

S. 6(b)

LAPSE OFTIME

S. 6(b)

OFFEREEDOES NOT

FULFILLCONDITIONS

S. 6(c)

OFFEREEDOES NOT

FULFILLCONDITIONS

S. 6(c)

OFFERORDIES OR

BECOMESINSANES. 6(d)

OFFERORDIES OR

BECOMESINSANES. 6(d)

BYRNE v VAN TIENHOVEN

BYRNE v VAN TIENHOVEN

FRASER v EVERETTFRASER v EVERETT PYM v CAMPBELLPYM v CAMPBELL

BRADBURY v MORGAN

BRADBURY v MORGAN

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BY NOTICE

6. A proposal is revoked—(a) by the communication of notice of revocation by the proposer to the other party;

(3) The communication of a revocation is complete—(a) as against the person who makes it, when it is put into a course of transmission to the person to whom it is made, so as to be out of the power of the person who makes it; and(b) as against the person to whom it is made, when it comes to his knowledge

5. (1) A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards

BYRNE CO v VAN TIENHOVEN & CO

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BYRNE CO.v VAN TIENHOVEN

1/10

Df post letter of offer to pf in New York

8/108/10

Df post a letter revoking the offer

11/10

Pf received the letter of offer and sent letter of acceptance

20/10

Pf received the df’s letter of revoaction of offer

The court held that: there was a contract between df and pf. The revocation of offer was not effective since the contract was created on 11/10 because the pf had already accepted the offer on 11/10

LAPSE OF TIMES. 6(b)

a) by the lapse of the time prescribed in the proposal for its acceptance, or,

b) if no time is so prescribed, by the lapse of a reasonable time, without communication of the acceptance;

FRASER v EVERETT

An offer may expire by lapse of time in 2 situation :

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OFFEREE DOES NOT FULFILL CONDITIONSS. 6(c)

(c) by the failure of the acceptor to fulfill a condition precedent to acceptance;

PYM v CAMPBELL

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OFFEROR DIES OR BECOMES INSANES. 6(d)

(d) by the death or mental disorder of the proposer, if the fact of his death or mental disorder comes to the knowledge of the acceptor before acceptance.

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REVOCATION OF ACCEPTANCE

• Section 5(2) : “…at any time before the communication of the acceptance is complete as against the acceptor…”

• Section 4(3) (a) & (b) – revocation of acceptance must be communicated & it is effective when offeror gets knowledge of acceptance

• DUNMORE v ALEXANDERyuhanza/2014