LAW OF CONTRACT
TOPIC OUTLINE
1)
2)
3)
4)
Definition
Elements of a valid contract
Discharge of contract
Remedies for breach of contract
LEARNING OUTCOME
▪ Students shall be able to:
1) Explain the basic elements of valid contract
2) Explain factors which render a contract void or
voidable
3) Discuss when a contract can be discharged
4) Describe the remedies for breach of contract
CONTRACT LAW IN MALAYSIA
▪ Contract law in Malaysia is governed by the Contract Act 1950
▪ Thus it is important for a non-law students to have the basic
knowledge on the sections from the Act and cases.
What is contract?
▪ Contract means an agreement between 2 parties that is legally
binding between them. 合同是指两方之间具有法律约束力的协议
▪ Section 2 (h) CA 1950:
Contract is an agreement enforceable by law.
▪ This section shows that not all agreements are contract, some
agreements are not contract because they lack of certain
essential elements.
4
ELEMENTS OF VALID CONTRACT
▪ An agreement becomes a contract there are
certain elements that need to be fulfills:
1. Proposal
2. Acceptance
3. Consideration
4. Intention to create legal relation
5. Certainty
1.提议
2.验收
6. Legal Capacity
3.考虑
7. Free Consent
4.建立法律关系的意图
5.肯定
6.法律行为能力
7.自由同意
5
1. PROPOSAL / OFFER
6
A) PROPOSAL
▪ For a contract to exist, there must be one party
who make a proposal (offer) and another party
who make the acceptance.
▪ Section 2(a): 当一个人向另一个人表示他愿意做或不做
任何事情时...所以他提出提议
‘when one person signifies to another
his
willingness to do or abstain from doing
anything……..he is said to make a proposal’
Means:
An offer is a promise/proposal by one person
(offeror/promisor) to another person (offeree/promisee)
with the intention to cretae a legally binding relationship.
Offer是一个人（承诺人）对另一个人（被承诺人）的承诺/提议
，旨在建立具有法律约束力的关系。
7
▪ Section2(b):
when the person to whom the proposal is
made, signifies his assent thereto, the
proposal is said to be accepted. 当被提议人表示同意时
，该提议被认为被接受
B 表示同意以规定的价格购买
Means:- 如果
汽车，则表示接受 A 提出的要约。
Example: if B indicate his assent to buy a car at
stated price, then the acceptance to the offer made
by A.as a result, an agreement is concluded
between A and B, Now A can be called the
Promisor and B is called the Promisee
于是，A和B达成了协议，现在A可以称为提议人，B称为接受提议的人
8
Types of Offer/Proposal
Unilateral Proposal 单方面提案
❖This contract is one sided where only one party makes a promise to offer
payment in exchange of an act.
❖Example: Advertisement of a lost cat.
❑ Under this contract, one party is obligated to reward the other party on
performing an agreed duty.
❑When this agreed duty is performed as agreed upon on the contract, the
other party is required to fulfill their part by making the agreed payment.
❑Not bind the person who read the advertisement
~根据本合同，一方有义务奖励另一方履行约定的义务。
~当按照合同约定履行该约定义务时，另一方必须通过支付约定的款项来履行其职责。
~不约束阅读广告的人
Bilateral Proposal 双方
❖A contract or agreement involving two or more parties ~涉及两方或多方的合同或协议
❖which binds all parties to bound with their obligations. ~约束各方履行其义务。
How an Offer can be made?
• Section 9 CA
“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.”
就任何承诺的提议或接受是用文字作出的，该承诺被认为是明示的。如果提议或接受不是用文字
做出的，则该承诺被认为是默示的。
• Offer can either be made expressly or
impliedly. 要约可以是明示的，也可以是暗示的
10
Communication of Proposal
▪ General Rule: Proposal must be communicated & complete
一般规则：提案必须传达和完整
▪ Section 4(1) stated that;
A communication of a proposal is only complete when it
comes to the knowledge of the person to whom it is made
(offeree). 提案的沟通只有在涉及到它的人的知识时才完成(受邀者）。
▪ A proposal is said to have been communicated only if the
party who accepts it knew about the proposal.
据说只有在接受提案的一方知道提案的情况下，提案才被传达。（双方接受提议的情况下，下方案）
▪ Communicated from the proposer to another person to get
the assent of that person. 从提议者传达给另一个人以获得该人的同意。
• S. 4 Illustration (a):
A proposes, by letter, to sell a house to B at a certain price.
The communication of the proposal is complete when B
receives the letter. 以书面形式提议以一定价格将房屋出售给 B。
当 B 收到信件时，提案的沟通就完成了。
11
▪ Section 2(a): word ‘signifies’ which means:
Conveys, expresses or communicated
▪ E.G: you found your neighbor's lost cat and returns
it to him, unaware of the fact that your neighbor
had advertised in the newspaper that reward will
be given to those who found his cat.
In this situation, you cannot claim for the reward
because there is no contract between two of you.
您找到了邻居丢失的猫并将其归还给了他，却不知道您的邻居在报纸上登广告说会奖励
那些找到他的猫的人。在这种情况下，您不能领取奖励，因为你们两人之间没有合同。
Case R v Clarke (1927)
R V Clarke (1927) 40 CLR 227
An Australian Government offered a reward for information
in regards of a murder of two police officers.
X and Clarke were later arrested and charged with the
murders. clarke later gave some information to the police
which resulted in the arrest of another person y. clarke was
later found not guilty. Clarke later claimed for the reward.
Held; his claimed failed because he has no knowledge of the
offer therefore he cannot make an acceptance
澳大利亚政府提供信息奖励关于谋杀两名警察。X 和克拉克后来被捕并
被指控犯有谋杀。克拉克后来向警方提供了一些信息。这导致另一个人
y 被捕。克拉克是后来被判无罪。克拉克后来要求获得奖励。握住;他
声称失败，因为他不知道要约，因此他不能接受
Agreement
The first essential elements of a binding contract is agreement. To
determine whether or not an agreement has been reached, the
courts will consider whether one party has made a firm offer
which the other party has accepted
具有约束力的合同的第一个基本要素是协议。为了确定是否已
达成协议，法院将考虑一方是否提出了另一方已接受的实盘。
The particular significance of offer and acceptance is that a binding
contract is thereby formed, 要约和承诺的特殊意义在于由此形成具有约束力的合同
a) new terms cannot thereafter be introduced into the contract
unless both parties agree; and 除非双方同意，否则此后不得在合同中引入新条款
b) the terms of the contract appear from the offer and acceptance
rather than from the unexpressed intention of the parties.
合同条款来自要约和接受，而不是来自双方未表达的意图
Particular person
• When the offer is made specifically to a person to whom it is addressed, only that person
can accept the offer and no one else can take his/her place to accept the offer.
如果要约是专门针对对象的，只有该人可以接受要约，其他人不能代替他/她接受要约。
• EG: Fattah offer to sell his car, a Proton Saga, to Neelofa for RM20,000
Fattah 提出以 20,000 令吉的价格将他的汽车 Proton Saga 出售给Neelofa
• Case: Boulton v Jones
The D normally had some business deal with one Brocklehurst. D offered to buy some
goods from B but on the day the order was sent, B had sold his company to the P. There
was no contract between the P & the D. The P had no right to accept the offer as it was not
addressed to him. The P then accepted the offer by sending the goods which were ordered
通常和Brocklehurst 有一些商业交易。 D 提出要买一些来自 B 的货
by the D. The D, however, refused to pay. D物，但在发送订单的当天，B
已将他的公司卖给了 P。P 和 D 之间没有
合同。 P 无权接受要约，因为它不是写给他。 P然后通过发送订购的商
General public
品接受了报价由 D。然而，D 拒绝付款。
• The offer is made to the public at large and is addressed to anyone who can and
would satisfy all the terms or conditions of the offer stipulated by the offeror.
该优惠面向广大公众，面向任何能够并且将满足要约人规定的要约的所有条款或条件。
• EG: Ali advertised in the Berita Harian that he will reward RM500 to anyone who
finds his pet, ostrich.
• Carlill v Carbolic Smoke Ball Co
The proposal /offer was made to the world at large which is to all customers of
their smoke ball.
Case: Carlill v Carbolic Smoke Ball Co.
Fact:
The defendants had made an advertisement about a medicine,
smoke ball that was used to cure influenza. They mentioned
that they would pay £100 to anyone who still suffer influenza
after taking the medicine according to its prescription.
To show their true intention, defendants had deposited £1000
into a bank account for this particular purpose.
Mrs Carlill bought and used the smoke ball but still caught
influenza. She claimed the £100 from the defendants but was
denied by them. 被告制作了有关药物、用于治疗流感的烟球的广告。他们提到他们将向
仍然患有流感的任何人支付 100 英镑以按规定服药。为表明其真实意图
，被告已将1000英镑存入用于该项目的银行账户。Carrier 夫人购买和
使用了烟弹，但仍然感染了流感。她向被告索要100英镑，但他们拒绝了
Issue: Whether the contract has been accepted by Mrs Carlill and
whether the contract is valid?
• Held: The advertisement was made to the whole
world and constituted an offer. Anyone who
consumed the medicine as prescribed was said to
have accepted the offer.
Case: Taylor v Laird
P 在航程中辞去 D 拥有的一
艘船的船长职务。 P 然后协
助将船开回，并向 Laird 索
取报酬以完成所做的工作
Fact: P resigned from being the captain of a ship owned by
the D during a voyage. P then assisted to sail the ship back and
claimed remuneration from Laird for the work done.
Issue: Whether P has completely communicated to D about his
intention to sail the Ship back? P 是否已与 D 完全沟通他打算将船驶回？
Held: P did not communicate his offer to give his service to
sail the ship back. Therefore, the D did not know about the
offer and did not have the opportunity either to accept / reject
the offer. P 没有传达他提供服务的提议把船开回去。因此，D 不知道
offer并且没有机会接受/拒绝报价
Hence, D is not liable to pay the
remuneration to the P.
因此，D 没有责任向 P 支付报酬
18
Invitation to Treat (ITT)
Proposal need to be distinguish with ITT
It is not a proposal
It just a mere invitation by one party to the other to make an
offer 只是一方邀请另一方提出要约
Person making an ITT does not intend to be bound by the
person as soon as it is accepted by a person to whom the
statement is addressed 作出 ITT 的人不打算在被该声明所针对的人接受后立即受
该人的约束
It is a preliminary communication- Expression of willingness
to negotiate 初步沟通-谈判意愿的表达
19
Example of Invitation To Treat
1.
2.
3.
4.
5.
Advertisement
Brochure 宣传册
Display of goods in shop
Tender
Auction 拍卖
DISPLAY OF GOODS
• The act of the seller displaying the goods with the price tags,
in a self service shop is an ITT.
• The customer would make the offer when they selected
what they want and bring them to the counter for payment.
• The cashier will make the acceptance.
Refer to case
Pharmaceutical society of Great Britain v Boots Cash chemist
Ltd
Fisher v Bell
CASE: PHARMACEUTICAL SOCIETY OF GB V BOOTS CASH
CHEMIST LTD Boots Cash Chemist (BCC) 被指控非法提供或在没有合格药剂师监督的情
况下销售某些药物。BCC的商品是在自助服务系统下销售的。客户选择他们
从陈列商品的货架上购买并将他们带到收银台，在那里他们支付了价格。
FACT: Boots Cash Chemist (BCC) was charged with illegal offering or
selling certain drug without supervision of qualifies chemist.
Goods in BCC were sold under self service system. Customer selected
their purchases from the shelves on which the goods were displayed
and took them to the cash counter where they paid for the price.
ISSUE: where the contract concluded. Is it in the self-service shop or at
the cashier desk? 合同签订的地方。是在自助商店还是在收银台？
HELD: the display of good on shelves are only ITT. Customer made an
offer when he selected the goods and put it in the basket. Acceptance
will be made at the cash counter after the qualified pharmacist is
satisfied. 货架上陈列的商品只有 ITT。客户在选择商品并将其放入购物篮时提出了报价。
合格药剂师满意后到收银台受理。
Therefore the contract is made at the cash counter, not in the shop.
22
CASE: FISHER V BELL
It was held that the display of several kinds of pen-knives in
a glass shop windows is not an offer but an invitation to
the customers to make an offer to buy. Whether the offer
is accepted or not depends on the discretion of the shop
owner.
玻璃橱窗陈列的几种钢笔刀不是offer，而是
对顾客提出要约购买的ITT
是否保价是否接受取决于商店的判断所有者
23
Advertisement
▪ Only an invitation to attract people’s interest to
make an offer 只是为了吸引人们的兴趣而提出要约的邀请
▪ The person who read the advertisement and make
an offer to buy or get whatever being advertised is
the offeror. 阅读广告并提出要约购买或获得广告中任何内容的人是
offeror
▪ Acceptance would be made by the advertiser.
▪ Note: For advertisement for reward, the
advertisement is regarded as an offer. Other than
advertisement for reward, the advertisement is
treated as ITT.
Refer to case Coelho v Public Services Commission
24
Advertisement
An advertisement of goods for sale is an attempt to induce
offers and is therefore classified as invitation to treat.
Partridge v Crittenden 1968
Mr Patridge placed an advertisement in Cage and Aviary Birds
magazine’s ‘classified’ columns containing the words
‘Bramblefinch hens, 25 s each’ one person who’ in response
to the advertisement, purchased a bird, reported Partridge to
the RSPCA’ Who brought a prosecution against him for
offering for sale a brambling in contravention of the
protection of birds Act 1954.The judge convicted Partridge.
He appealed.
Held ‘ The conviction was quashed, the judge held that the
Prosecution could not rely on ‘offering for sale, as the
advertisement constituted an invitation to treat.
Case: Coelho v Public Services Commission
Fact: The P had applied for a position in response to a
newspaper advertisement. He was informed that his
application had been accepted. Later the commission
attempted to terminate his employment on the basis
that he was appointed on probation.
Held: the advertisement was an ITT. Application made by
the P was an offer.
Acceptance was made by the Commission and the letter of
acceptance did not stated any conditions (therefore
valid contract exist)
Thus, the termination was invalid.
Invitation To tenders
A tender is an estimate submitted in response to
a prior request. When a person tenders for a
contract he is making an offer to the person who
has advertised a contract as being available. An
invitation for tenders does not amount to an
offer to contract with the person quotation the
lowest price.
投标是为响应先前的请求而提交的估算值。当一个人投标合同时，
他是在向宣传合同可用的人提供报价。投标邀请不构成与报价人签
订合同的要约最低价格
An Auction Sales
拍卖销售
An auctioner’s request for bids is not a definite
offer to sell to the highest bidder, it is rather an
invitation to treat. The bid itself is the offer,
which the auctioneer is then free to accept or
reject. Payne v Cave 1789
拍卖师的出价请求并不是向出价最高者出售的明确要约，而是
一种请客的邀请。出价本身就是出价，然后拍卖师可以自由地
接受或拒绝出价。
REVOCATION/TERMINATION OF CONTRACT
合同的撤销/终止
▪ General Rule: When acceptance is complete, contract is made. No
more revocation.
▪ Section 5(1) CA- A proposal may be revoked at any time before
the communication of its acceptance is complete as against the
proposer, but not afterwards. 第 5(1) 条 CA- 提案可以在对提案人的接
受通知完成之前的任何时间被撤销，但不能
在此之后撤销。
Case: Payne v Cave
D made the highest bid for the P’s goods at an auction sale,
but the D revoked his bid before the fall of the hammer. P argued
that the D was bound by the contract.
It was held that the bid by the D was an offer which can be revoked
at any time before the fall of the hammer. Hence, there was an
effective revocation by the D.
29
Case: Routledge v Grant
FACT: D offered to sell a house to the P. The acceptance was to be
made within 6 weeks.
ISSUE: whether the D could revoke his offer before the 6 weeks
lapses.
HELD: that the D may revoke his offer at any time within that
6 week on condition that no acceptance had been made by the P.
30
撤销
Modes of revocation of
proposal
1. Section 6)a)
Notice of revocation by the proposer to the other party
2. Section 6(b)
lapse of time or lapse of reasonable time
3. Section 6(c)
Failure of the acceptor to fulfill a condition precedent to
the acceptance
4. section 6(d)
ordeath mental disorder
5. Counter proposal
31
1) Section 6 (a) CA – by giving notice of revocation
▪ Proposal may be revoked by the communication of
notice of revocation
▪ Section 5 (1) CA – proposal may be revoked at any
time before acceptance.
▪ The holiday maker may withdraw an offer to book
the room at anytime before the booking has been
confirmed by the hotel.
▪ The revocation must be made before the hotel sent
out a confirmation
32
Case: Bryne v Van Tien Haven
1.10 – defendant posted a letter of offer to the plaintiff
8.10 – defendant posted a letter revoking the offer
11.10 – plaintiff received the letter of offer & sent an
acceptance by telegram on the same day
15.10 – plaintiff also sent a letter of acceptance
20.10 – plaintiff received the defendant’s letter of
revocation
Held: The revocation of offer was not effective because
the plaintiff received the revocation notice AFTER
he already accepted the offer.
Q: When the communication of offer is effective?
Section 4 (3)(a) and (b)
(a) As against the person who makes it (promisor), 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.
Example:
▪ A revokes his proposal by telegram. The revocation is
complete as against A when the telegram is dispatched. It is
complete as against B when B receives it.
34
CASE: HENTHORN V FRASER
D represented an association of developers offered in
writing to sell several houses to the P. The following events
took place on the following day:
- 12.00 noon: D posted a letter of revocation to the P
- 3.50 pm: The P posted his letter of acceptance to the D.
- 5.00 pm: The P received the letter of revocation of offer
from the D.
It was held that the contract occurred at 3.50 pm, when
the P posted his letter of acceptance to D.
35
2) Section 6 (b) – Revocation by lapse of time
▪ A proposal may be terminated by lapse of time
▪ If the proposal expressly stated to last for a period
of time, it cannot be accepted after that time.
▪ If no time prescribe in the proposal, then it lapses
after reasonable time.
36
CASE: RAMSGATE VICTORIA HOTEL V
MONTEFIORE
The D offered to buy shares in the P’s company in
June and paid a deposit into the company’s bank.
It was only in November that P informed D that
the shares had been allotted to him (i.e. D’s offer
been accepted) and that the balance of the
purchase price should be paid.
The D refused to accept the shares.
It was held that the refusal by the D was justified
because such offer should have been accepted
within a reasonable time. The period between June
and November was clearly unreasonable.
3) Section 6 (c) – Failure of accept to fulfill condition
▪ If the offeror put a condition to be fulfilled by the offeree before
making an acceptance, the offeree must fulfil it. If not, the offer is
automatically revoked.
Case: Pyn v Campbell
The parties entered into a contract for the sale and purchase of
an invention on condition that the invention must be approved by
a 3rd party.
It was held that since there was no approval from a 3rd party,
contract does not exists because condition precedent to
acceptance was not fulfilled.
38
Case: Financing Ltd v Stimson
The D offered to buy a car from the P’s company. There was a
condition that the contract was to become binding only upon
acceptance by P provided that the car remains in the same good
condition. However before P accepted the offer, the car was stolen
and was subsequently recovered in a damaged condition.
It was held the D’s offer was only able to be accepted if the car
remained in the same condition as it was when the offer was
made. Since this condition was not fulfilled, the offer had lapsed/
revoked and therefore, there was no binding contract.
39
4)
▪
▪
Section 6 (d) – by death or mental disorder of the proposer
The offer is only revoked if the offeree is aware of the fact
before he makes any acceptance.
If offeree has no knowledge about it, his acceptance is valid and
binding.
Case: Bradbury v Morgan
It was held that the death of the offeror will not terminate the
offer if the acceptance has been made in ignorance of his death.
40
5)
▪
▪
Counter Offer
It is an attempt to accept a proposal on a new term not
contained in the proposal.
The effect of counter proposal is it will terminate the original
offer.
Case: Hyde v Wrench
D agreed to sell his farm to the plaintiff for 1000 pound. The P
agreed but asked D to reduce the price to 950 pounds. The D
refused. 2 days later, the P wrote to the defendant saying that he
was prepared to pay 1000 pounds. D refused and P sued.
It was held that there was no binding contract. The P had
rejected the original proposal of 1000 pounds by counter offer
950 pounds. The D rejected the counter offer, thus no contract
exist between them.
41
Request for information
It is possible, however, to respond to an offer without accepting or rejecting
it by making a request for information. Such a request may ne a request as
to whether or not other terms would be acceptable. This does not
necessarily amount to an acceptance on these terms.
Stevenson v McLean 1880
The defendant offered to sell iron at 40 s nett cash per ton, open till
Monday’. The plaintiff enquired whether he would agree to a contact, at
the same price, by which delivery would be spread over two months. The
defendant did not reply and (within the time limit fixed by the offer), The
plaintiff then accepted the offer as made originally. Meanwhile the
defendant had sold the iron to a third party.
Held: there was a contract since the plaintiff had merely enquired as to a
variation of terms which was not a rejection.
42
ACCEPTANCE
• Section 2(b): when the person to whom the proposal
is made signifies his assent, the proposal is said to be
accepted; a proposal, when accepted, becomes a
promise.
• Section 2(c):The person accepting the proposal is
called ‘promisee’.
• A acceptance may be by express words or by action
(as in Carlill’s case)
• Silence cannot amount to an acceptance as there is
no positive act signifying acceptance/consent.
ELEMENTS OF ACCEPTANCE
1. Acceptance must be absolute and unqualified
2. Section 6(b) – An acceptance must be made
within a reasonable time
3. Section 7(b) - Acceptance may be expressed
in some usual and reasonable manner unless
proposal prescribes a manner in which it is to
be accepted.
Elements of Acceptance:
• 1. Acceptance must be absolute and unqualified.
• Section 7(a): To become a promise, an acceptance must be
absolute & unqualified.
• If parties are still negotiating, an agreement is not yet formed.
There must be complete consensus.
• The promisee must accept the exact terms proposed by the
promisor without any modifications or variations.
Lau Bros v China Pacific Navigation Ltd
• Facts: The parties were negotiating through several
letters and telegrams on the delivery of logs. While
still in the midst of negotiation, the defendant
withdrew. Plaintiff being unsatisfied, sued the
defendant for breach of contract.
• Held: There was no contract to begin with, only
stages of negotiation.
When is an acceptance is not
absolute?
• Acceptance must be unqualified agreement to the
terms of the offer. Acceptance which introduces
any new terms is a counter offer. A counter offer is
a final rejection of the original offer if a counter
offer is made, the original offeror may accept it, but
if he rejects it his original offer is no longer available
for acceptance.If the promisee introduces a new
term, he is said to make a counter-offer:
Modification/variation to an offer by the person to
whom an offer is made.
• Effect of counter offer is a rejection of the original
offer.
Case: Hyde v Wrench
• D offered to sell a piece of land to the P for £1000 on
6th of June. P then made a counter-offer to purchase
at £950 on 8TH of June. However, D refused to
accept the new price. P then immediately wrote to D
accepting the original offer of £1000 on 27th of June.
• Held: There was no acceptance because the
plaintiff’s letter on 8th of June had rejected the
original offer and not to be revived. Therefore, there
was no valid contract
• 2. Section 6(b) – An acceptance must be made within
a reasonable time.
• 3. Section 7(b) - Acceptance may be expressed in
some usual and reasonable manner unless proposal
prescribes a manner in which it is to be accepted.
• If there is a mode of acceptance prescribed by the
offeror, it must be followed by the offeree in order to
make a valid acceptance. (Carlill’s Case)
• However the proposer cannot prescribe silence as a
manner of acceptance.
COMMUNICATION OF AN ACCEPTANCE
• General Rule:
• An acceptance is completely communicated
when it is actually brought to the notice or
comes to the actual knowledge of the offeror.
Acceptance
Acceptance may be by express words or by
action
Case: Felthouse v Bindley
• Plaintiff wrote a letter to his nephew offered to buy
his nephew’s horse at $40.
• The plaintiff wrote “If I hear no more from you, I shall
consider the horse as mine”.
• His nephew actually intended to sell but did not reply
the letter. Nephew arranged for an auction and told
the defendant (assistant) not to auction off the horse
as the horse is already sold to his uncle.
• Defendant accidentally sold the horse to someone
else. Hence, plaintiff sued the defendant.
• Held: there was no contract as acceptance was never
expressed nor communicated by his nephew. Silence
does not constitute acceptance.
Exception: Acceptance by postPostal rule
• S.4(2)(a): As against the proposer, the
communication of an acceptance is complete when it
is put in a course of transmission to him so as to be
out of the power of the acceptor.
• S.4(2)(b):
As
against
the
acceptor,
the
communication of an acceptance is complete when it
comes to the knowledge of the proposer.
• `Acceptance through post is complete when the letter of
acceptance is posted, even though it has not come to the
actual knowledge/received by the proposer; the proposer is
bound to the contract when the acceptor posts the letter of
acceptance, even though the proposer has no knowledge of
the acceptance.
• Nevertheless, the acceptor is only bound by the contract if the
acceptance has came to proposer’s knowledge.
• It is important to determine the when communication of
acceptance is complete because it will affect the validity of
revocation either by the proposer or by the acceptor in the
event they decide to do so.
Case: Ignatius v Bell
Fact:
• The D offered to sell his land to the P on condition
that if the P would like to accept the offer, he must
make the acceptance on or before 20th August 1912
by letter.
• The P sent an acceptance by registered post on 16th
August but the letter did not reach the D until 25th
August, because the D was away.
• Held: The acceptance was exercised by the P when
the letter was posted on 16th of August. Therefore
the D was bound to the contract.
Case: Adams v Lindsell
• The defendant wrote to the plaintiff offering to sell
wool on certain terms. The defendant however,
misdirected the letter and it reached the plaintiff
later than usual.
• Upon receiving the letter of offer, the plaintiff
immediately posted his acceptance.
• Meanwhile, the defendant (thinking that the plaintiff
was not interested in the offer) had already sold the
wool to a third party.
• Held:
It was held by the court that acceptance was
complete upon posting.
REVOCATION OF ACCEPTANCE
• S. 5(2): An acceptance may be revoked at
anytime before the communication of the
acceptance is complete as against the
acceptor, but not afterwards.
CONSIDERATION
3. CONSIDERATION
• The ‘price’ one party pays for the other’s promise.
• General Rule- both parties must give consideration!
• S. 26: An agreement without consideration is VOID.
• S. 2(d): When, at the desire of the promisor, the promisee or
any other person:i. Has done or abstained from doing; or
ii. Does or abstains from doing; or
iii. Promises to do or to abstain from doing;
something, such act or abstinence or promise is called a
consideration for the promise
Types of Consideration
1. Executory
2. Executed
3. Past consideration
i) Executory consideration
• Executory Consideration is a promise in return
for a promise
Illustration (a) to S.24:
• A agrees to sell his house to B for
RM100,000.00. Here, B’s promise to pay the
sum of RM100,000.00 is the consideration for
A’s promise to sell the house and A’s promise
to sell the house is the consideration for B’s
promise to pay the RM100,000.00. These are
lawful considerations.
• Case: K. Murugesu v Nadarajah
The appellant agreed to sell a house to the respondent for RM26,000
within three months from the date of the agreement. The agreement was
written on a piece of paper.
Later, the appellant refused to sell the house because it was contended
that there was no consideration leading to a valid agreement.
The respondent sued for specific performance. The trial judge granted
specific performance and the appellant appealed.
Held- The agreement was a case of executory consideration. Where there
is a promise against a promise, each promise is the consideration for the
other.
ii) Executed consideration
❖ Executed consideration is a promise for an act
❖ A consideration is executed when an act is
performed in return to a promise.
❖ Eg: An offer of a reward for an act.
❖ Refer case: Carlill v Carbolic Smoke Ball Co.
iii) Past consideration
• Is a promise made subsequent to & in
return for an act that has already been
performed.
• Illustration (c) to S.26:
A finds B’s purse and gives it to him. B
promises to give A RM50.00. This is a
contract.
ELEMENTS OF CONSIDERATION
• Consideration need not be adequate
a) Past consideration is a good consideration-
ELEMENTS OF CONSIDERATION
a) Consideration need not be adequate
Section 26 explanation 2 : An agreement to
which the consent of the promisor is freely
given is not void merely because of the
consideration is inadequate, but the adequacy
of consideration may be taken into account by
the court in determining the question whether
the consent of the promisor was freely given.
Illustration (f)
• A agrees to sell his horse worth RM1000 for
RM10. A’s consent to the agreement was freely
given. The agreement is a contract
notwithstanding the inadequacy of consideration.
Case: Phang Swee Kim v Beh I Hock
• The respondent agreed to sell to the appellant a land
for RM500 although the land was worth much more.
The respondent later refused to honour the promise
contending that the promise was unenforceable.
• Held: The agreement was valid even though
consideration was inadequate.
b) Past consideration is a good consideration.
Section 26 explanation 2 :
A finds B;s purse and gives it to him. B
promise to give A RM50. This is contract.
EXCEPTIONS TO THE GENERAL RULE
• Agreement without consideration is NOT VOID
when:1) It is made out of natural love & affection.
2) It is to compensate for past voluntary act.
3) It is to compensate for an act the promisor was
legally compelled to do.
4) It is to pay a statute-barred debt.
1) SECTION 26(A)- AGREEMENTS
NATURAL LOVE & AFFECTION
RELATED
TO
• S. 26(a): The agreement must fulfill the
following conditions:i. made in writing
ii. registered
iii. made due to natural love & affection
between parties standing in near relation to
each other
• Near relation = members of immediate
family/other related persons
Case: Re Tan Soh Sim [1951]
A woman on her deathbed expressed her intention to leave
all her properties to her four adopted children.
The court held that the claims of the adopted children were
not effective as it was contrary to Section 26(a) i.e. it was
not in writing and there was no natural love and affection
between parties standing in near relation to each other
2) SECTION 26(B)- AGREEMENT TO COMPENSATE FOR
A PAST VOLUNTARY ACT
• S. 26(b): The promisor promises to give
something to the promisee because the
promisee has done something voluntarily
before the promise was made.
• 2 conditionsi. A promise to compensate either wholly or
partly to promisee;
ii. Promisee did the act voluntarily.
Example• Ali, your neighbour had taken care of your cat while you
were away.
• When you returned, you promised to give Ali RM200. in the
event that you fail to give Ali the said RM200, Ali can bring
an action against you.
• The promise that you gave is valid, eventhough Ali did not
give any consideration after you have made the promise.
3) AN AGREEMENT TO COMPENSATE AN
ACT THE PROMISOR WAS LEGALLY
COMPELLED TO DO
• S. 26(b): 3 conditionsi. The promisee has voluntarily done an act.
ii. The act was an act the promisor was
bound/compelled to do.
iii. It must be to compensate, wholly/partly the
promisee for the act.
• Illustration (d) to S.26:
✔ A supports B’s infant son. B promises to pay
A’s expenses in so doing.
✔ If X pays a fine imposed by the court on Y
who promises to compensate X, that promise is
binding.
4) AN AGREEMENT TO PAY A
STATUTE-BARRED DEBT
• Statute-barred debt = a debt which cannot be
recovered through legal action because of a lapse of
time fixed by law.
• The time limit for an action in contract under the
Limitation Act is 6 years from the cause of action.
• S. 26 (c): Although a debt cannot be recovered
because of statute-barred, it can be recovered if:i. There is a fresh promise by the debtor to pay
ii. The promise is made in writing & signed
• Illustration (e) to S.26:
• A owes B RM1,000.00 but the debt is barred
by limitation. A signs a written promise to pay
B RM500.00 on account of the debt. This is a
contract.
LEGAL CAPACITY TO CONTRACT
▪ Section 10 CA – “All agreements are contracts if they are made by
the free consent of parties competent to contract…..”
▪ Section 11 CA - Every person is competent to contract if:
i) who is of the age of majority according to the law to which
he is subject, and
ii) sound mind, and
iii) not disqualified from contracting by any law to which he is
subject.
Age of Majority
▪ Age of Majority Act 1971 – 18 years old
▪ Thus, a major of 18 years old can enter into a valid contract.
▪ Effect if the contract entered by minor – void ab-initio (from
beginning)
Case: Mohari Bibee v Dharmose Ghaose
82
EXCEPTIONS
▪ Not all contracts entered by minor are void.
▪ There are exceptions to this rule:
1) Contract or necessaries
2) Contract of scholarship
3) Contract of Insurance
1) Contract or necessaries
▪ Section 69 CA
“ If a person, incapable of entering into a contract, or anyone
whom he is legally bound to support, is supplied by another
person with necessaries suited to his condition in life, the person
who has furnished such supplies is entitled to be reimbursed
from the property of such incapable person”
83
▪ To determine whether it is a contract of necessaries or not there
are 2 requirements that need to be fulfill:
a) the condition of the life of the infant
b) his actual requirement at the time of sale and delivery
Case: Elkington v Amery
It was held that a holiday is a necessary if it were for
convalescence after an illness, or the minor’s condition of life is
such that holidays spent in hotels were inevitable part of it.
84
2)
▪
▪
Contract of scholarship
Section 4(a) CA- no scholarship agreement shall be invalidated on
the ground that the scholar is a minor.
When the scholarship is granted by the Federal or State
Government, statutory authority or an educational institutions
Case: The Govt. of Msia v Gurcharan Singh & Ors.
Issue: Whether the contract between the parties was void
because the defendant was a minor at the time the
contract was entered?
Held: It was a void contract, but since education was
necessaries, the first Defendant was liable for the repayment
of the monies spent on him.
3) Contract of insurance
▪ Insurance Act 1963 - an infant over the age of 1 may enter into a
contract of insurance.
▪ However if he is below the age 16, he can only do so with the
written consent of his parent or guardian
86
5. INTENTION TO CREATE
LEGAL RELATIONS
87
▪ Though the CA is silent on the issue of intention, there seems no
doubt that this is the vital requirement.
▪ It is important to show that the parties do intend to enter into a
contract.
▪ For the purpose of determining intention of the parties involved in
the agreement two presumptions apply namely:
i) Social and domestic arrangement
ii) Commercial arrangement
i) Social and domestic arrangement
▪ There is a presumption that the parties do not intend to create
legal relation.
Case: Balfour v Balfour
It was held that, in an agreement made between members of a
family in the course of a family life, the law will ordinarily imply
from the circumstances of the case that the parties did not intend
their agreement to have legal consequences.
88
ii)
▪
Commercial arrangement
In commercial agreement there is strong presumption that the
parties do intend to create legally binding contract UNLESS
otherwise stated.
Case: Rose Frank v Crompton Bros.
It was held that, for commercial agreement, the court will
presume that there is intention to create legal relation. However
this presumption may be rebutted by the clear wording in the
clause that the agreement was not entered as formal or legal
agreement.
89
6. CERTAINTY OF CONTRACT
90
• The GR of certainty is that uncertainty destroys or frustrates an
agreement.
• Section 30 Contracts Act – Agreement, the meaning of which is
not certain, or capable of being made certain, are void.
• Issues of uncertainty:
i.
Language used is too vague where normally it will be no
concluded agreement
ii.
Fail for incompleteness/failure to reach agreement on a
vital or fundamental term of an agreement.
Case: Karuppan Chetty v Suah Thian
The contract was declared void for uncertainty because the
parties agreed to a lease of $35 per month ‘for as long as
he likes’.
91
• NEXT CLASS TO CONTINUE WITH:
FREE CONSENT ( final element of
contract)
VOID & VOIDABLE CONTRACT
DISCHARGE OF CHARGE
REMEDIES