CHAPTER 2:
LAW OF
CONTRACT
What is a contract?
An agreement which can be
enforced by law (S.2(h) CA 1950).
Offer
Acceptance
Formalities
Legality of
object
Elements
of
contract
Consideration
Intention
Free
consent
Capacity
Certainty
Offer
Definition
How an
offer could
be made
Types
Of
offer
Condition of
an offer
Offer
distinguished
from
invitation to
treat
Termination
of Offer
Definition of offer
When a person (offeror) promises something to
another party (offeree) with the intention that his
promise would be accepted by the offeree, the person
(offeror) is said to make an offer (S.2(a) CA 1950).
The comunication of a proposal is complete when
It comes to the knowledge of the
person to whom it is made
Example:
Beni wrote a letter offering to sell his car, a Pero3
Maivi, to Wada for RM35,000.
Offeror /
Promisor /
Offeree /
Promisee
Beni
Wada
Express
A proposal made in
words
(oral or written)
How an offer
could be made
Implied
A proposal made
other than in words
(by conduct)
Specific
Types of offer
General
Types of offer
Specific
• An offer made to a definate
person or group of person
• Only that person/group can
accept the proposal
General
• An offer is made to the whole
world, anyone may accept by
complying with the terms of the
offer.
CASES
CARLILL V
CARBOLIC
SMOKE BALL CO
LTD
BOULTON V JONES
An offer must be
certain
Conditions of an
offer
An offer must be
communicated
An offer must be certain
• Case:
Guthing v Lynn
An offer must be communicated
• Section 3, 9, 4(1) Contract Act
• Case:
Taylor v Laid
R v Clarke
Offer distinguished from invitation to treat
Offer
(S.2(a) CA
1950
Invitation to treat = An invitation from one party to
another party to make an offer.
Examples:
• Advertisement
• Display of goods with tags in a self-service shop
• Tender
• Price-list
• An auctioneer inviting bids in an auction sale
Advertisement/ Price-list
• The reasoning behind the rule that
advertisement are not to be treated as
offers is that further bargaining between
the parties is still possible or even
necessary.
• If a person sees a price-list and places an
order, the seller is not normally bound to
supply the goods.
Display of goods with tags in a self-service shop
• It was decided that the contract was concluded
at the cash-desk.
• The customer made the offer and this could be
accepted or accepted or rejected by the
defendants.
An auctioneer inviting bids in an auction sale
• Where an auctioneer asks for bids, he is
not making an offer to sell the goods to the
highest bidder.
• A sale by auction is complete when the
auctioneer announces its completion by
the fall of the hammer and until the
announcement is made any bidder may
retract his bid.
CASES
• PHARMACEUTICAL SOCIETY OF GREAT BRITAIN V
BOOTS CASH CHEMIST LTD
• FISHER V BELL
• HARRISON V NICKERSON
A statement of price is not necessarily an offer
• Harvey v Facey
Facts:
The following telegraph messages were exchanged between the parties. H:
“Will you sell Bumper Hall Pen? Telegraph lowest price.
F: “ Lowest price for Bumper Hall Pen #900. H:” We agree to buy Bumper
Hall Pen for #900 asked by you. To this last telegram F made no reply. H
claimed that there was a contract between himself and F,
Held:
There was no contract. The second telegram was not an offer but in the
nature of an invitation to treat. The final message could not be looked upon
as an acceptance/
Revocation of
Offer
An offer terminates
when revoked
before acceptance
Must be
communicated to the
offeree before
acceptance
The revocation
may be directly by
the offeror himself
or indirectly
The important point to note
is that revocation is of no
effect until is actually
brought to the notice of the
offeree.
When the offeree
communicates his rejection
to the offeror
Rejection of
offer
Where the offeree makes a
counter- offer
By non-acceptance within
the time stipulated for
acceptance or reasonable
time
Lapse of offer
The death or mental
disorder of the proposer if
the fact of the proposer’s
death or mental disorder
comes to the knowledge of
the acceptor before
acceptance
CASES
• Ramsgate Victoria Hotel Co. Ltd v
Montifiore
• Byrne v Van Tienhoven
VIDEO
• Dickinson v Dodds
• Hyde v Wrench
Let’s do some
exercises!
QUESTION 1
• Define a contract and describe the basic
elements of a valid contract.
ANSWER 1
• Contract:
• An agreement which can be enforced by
law (S.2(h) CA 1950).
• Basic elements of a contract law:
Offer,acceptance,intention to create
legal relations, consideration, certainty,
capacity.
QUESTION 2
• Distinguish between an offer and an
invitation to treat.
ANSWER 2
An
offer/proposal
Invitation to
Treat
• When a person (offeror) promises
something to another party (offeree)
with the intention that his promise
would be accepted by the offeree, the
person (offeror) is said to make an
offer .
• An invitation to make offers.eg:
• Advertisement
• Display of goods with tags in a
self-service shop
• Tender
• Price-list
• An auctioneer inviting bids in an
auction sale