LAW OF CONTRACT:
ELEMENTS OF CONTRACT
(OFFER)
PREPARED BY:
NURUL NASIHIN ARIFFIN
KPMBP
Definition
• Sec 2(a) Contract Act 1950- ‘when one person
signifies to another his willingness to do or to
abstain from doing anything, with a view to
obtaining the assent of that other to the act or
abstinence, he is said to make a proposal’
• Eg: A says to B, ‘I promise to pay you RM50 if you
agree to let me park my car in front of your house
for 3 days starting tomorrow morning’.
• The principle is that, an offer is a situation when a
proposal is made from one person to another with
an intention to create legal relations.
Offer must be certain
• An offer must be certain, complete and final to avoid
misunderstanding.
• Because, when an offer is accepted, terms in that offer will
become the terms of contract.
• If an offer is uncertain, the acceptance will definitely void.
As a result, a contract is void.
case: Guthing v Lynn
- D in this case bought a horse from P under a terms
that if the horse brings good fortune, the D will pay P
another 5 pounds. The D broke his promise.
held: the term ‘ bring good fortune’ is too vague. Thus
the contract is void
Types of offer
• An offer may be:
1) express
made verbally or in writing.
2) implied
offer comes from one’s act or behavior
*however, there is situation where an offer can be a combination of
both
case: Western Electric v Welsh Dev. Agency
D offers to rent his premise to P. If P agrees, P is to fill a form
as requested by D. P fails to fill in the form but moves in and
starts operation in D premise. P then moved out after finding
that the premise is not safe to be occupied. P claims damages
for breach of contract from D. In his defense, D claims that P
cannot claim damages as there is no contract between them.
The contract is void as the acceptance is void.
Held: however, valid contract exist impliedly. D is not making
an offer, he is making an invitation. Offer made by P when he
moves into the premise and acceptance by the D when he
lets operates and receive rents.
To whom an offer can be made?
• An offer can be made to one person, a group or to the whole world.
• But every offer can be only accepted by certain people.
Case: Boulton v Jones
The D does business with one particular trade. On the day when D’s order
arrives, the trader has sold his business to P. P send to D goods as ordered.
When D knows that the goods were send by new owner, he refused to pay
for the goods. P then takes an action against D for breach of contract.
held: P cannot take action against D because there is no contract between
them. P has no right to accept an offer which was not directed to him.
If an offer is made to a group of people, then only individuals within the
group can make an acceptance.
But, if an offer is made to the whole world as in the case Carlill v Carbolic
Smoke Ball, then anyone who knows about the offer capable to accept.
1) unilateral
offer made to the whole world
2) bilateral
offer been made to 1 or 2 or a group but already
identified which person
Communication of an offer
• Sec 4(1) provides that the communication of a proposal
complete when it comes to the knowledge of the person to
whom it is made.
• Eg: A send a letter to B that reads ‘ I would like to sell to u
my house in Kelang for the price of 500,000’.
• Case: Taylor v Laird
P works as captain on a ship owns by D. During a voyage, he
made an offer to resign. The offer is communicate to D and
D agrees to the resignation. Later, P still serves until the
ship arrive to the destination. When P claim wages for
maneuvered the ship back to the destination, defendant
refuse to pay.
held: no valid contract between them. P has no right to
claim wages. P’s offer to continue his duty has not been
communicate to D, thus D has no choice of either to accept
or reject.
Cont…
• An offeree must know about the offer before making an acceptance.
• If the offeree has no knowledge of the offer when he is making an
action that look similar to an acceptance, it cannot be treated as an
acceptance.
• Case: R v Clarke
Clarke’s action by giving information to the police that leads to the
catch of a wanted criminal is not an acceptance. This is because at the
time he gives the information, he forgot about the offer of reward.
Held: Thus, he has no right to claim for the reward. He is at that time as
a person who has no knowledge about the offer.
• What if the offeree knew of the offer, did not forget about it but has a
different motives while making the acceptance?
case: Williams v Cawardine
held: court decided that P’s action by giving information that leads to
the catch of a wanted criminal is a valid acceptance even his motives at
that time is to calm himself.
Revocation of an offer and
communication of revocation
• Sec 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.
• Four ways of revocation provided under sec 6:
1) sec 6(a)- offer is revoked by communication of
notice of revocation by the proposer to the other
party. But as provided under sec 5(1),
communication of revocation must complete
before offeree made an acceptance.
case: Byrne v Van Tienhoven
a revocation letter send by the D to P is void
because it arrives after P made an acceptance
Cont…
2) Sec 6(b)- offer is revoked by the lapse of
time prescribed in the proposal for its
acceptance, or, if no time is so prescribed,
by the lapse of a resonable time, without
communication of the acceptance.
case: Ramsgate Victoria Hotel Co. Ltd v
Montefiore.
held: the offer is revoked since lapse of
reasonable time. P in this case agrees to
accept D’s offer after 5 months.
Cont…
3) Sec 6(c)- offer is revoked if an offeree fails
to fulfil a condition precedent to acceptance.
case: Pyrn v Campbell
an agreement to sell an intellectual property is
made but with a condition that the property
gains approval from a 3rd party. No contract
exists if approval fails. In this case, offer and
acceptance depends on term of getting third
party’s approval.
Cont…
4) sec 6(d) offer is revoked if offeree before
the acceptance knows that the offeror is dead
or experience mental disorder.
Difference between offer and
invitation to treat
• When an offer is accepted, it will render an
agreement to be a valid contract.
• BUT, when exist an invitation to treat is
accepted, the acceptance does not create any
legal relationship.
• Eg: if X agrees with Y’s invitation to do some
business together, a contract does not exist. If
X agrees with Y’s invitation to some business,
X will make an offer. It is up to Y whether to
accept or reject the offer.
Cont…
• There are few situations that could cause
some confusion between two parties, as
either there is a valid contract or not.
1) TENDER
- T is a situation where X invites a supplier or few
suppliers to tender a quotation for goods or
services.
- An action taken by X is not an offer; therefore, X
is not bind to accept the lowest bid or any bid.
An offer is actually made by the supplier to X.
Cont…
- Case: Harvela Investment Ltd v Royal Trust of
Canada
D invites 2 parties to buy the company’s shares.
D has made an announcement to accept the
highest bid. P bids 2.175 million dollar while Y
bids 2.1 million dollar or 101 thousand dollar
higher from highest bid. D accept Y’s offer. P files
claim against D and Y for breach of contract.
held: there is a breach of contract. D is not
merely making an invitation, but is actually
making an offer. D announcement has changed
the status of an invitation to an offer.
Cont…
2) AUCTION
- person who bids for the price is the offeror.
- an offer to buy can make verbally or by action such as
waiving a catalogue.
- acceptance to the offer by the auctioneer is by knock
of hammer.
- in an action, earlier offer and acceptance
automatically void when a higher bid is made.
- since an auction is only an invitation to treat,
auctioneer has right to pull away any goods from
auction at any time before any offer is accepted.
- case: Harris v Nickerson
Cont…
3) ADVERTISEMENT
- is not an offer.
- is only a step taken to induce offer
case: Partridge v Crittenden
P advertise to illegally sell a protected bird
species. Mr T interested to buy after reads the
advertisement. Mr T sends money through post. P
send the bird to Mr T. P was accused for offer to
sell a protected species.
held: P was found not guilty. The accusation was
not valid. P did not offer to sell, he invites an offer
Cont…
- Advertisement of a vacancy in a newspaper
is not an offer that can be accepted. It is
merely an invitation to treat
case: Coelho v The Public Services
Commission
- however, as exceptions in case of a tender
and an auction, there is an exception where
advertisement is considered to be a valid offer.
Normally it happens in a unilateral contract.
The situation is when one party bind himself
with a conditional promise and let the other
party to either fulfils or not the condition
Cont…
case: Carlill v Carbolic Smoke Ball
D is a company that produces a flu medicine named
‘Carbolic Smoke Ball’ . D advertises in a newspaper that
they would pay 100 pound to who experience influenza
after using the medicine as prescribed. To show their
earnestly, D deposited 1000 pound Sterling in to a bank
account. The P duly used it, nevertheless, contracted
influenza. Then P sued for the money after the D
refused to pay with reason that the advertisement is
merely an invitation to treat.
held: the advertisement is indeed an offer. D action
depositing 1000 pound in the bank account show D
earnestly to bind himself with the contract
Cont…
4) Display of goods
- nowadays, many shops use the concept of
self service.
- the customers enter and choose goods and
then take to the counter to pay.
- law has approved that sale in a self service
shop take place at the payment counter.
- case: Pharmaceutical Society of Great
Britain v Boots Cash Chemists
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