Law 416

• Contract


  An agreement between two or more parties which is legally binding
• The legislation in Malaysia that governs the law of contract is the Contracts Act 1950 (Act 136) (Revised 1974)
• If there is a lacuna in the Contracts Act 1950, then English common law applies (Civil Law Act 1956)
• If there is a clash between the provisions of the Contracts Act and the English common law, then the provisions of the Contracts Act prevail
• Contract


  (as defined in Section 2(h) of the Contracts Act 1950) an agreement enforceable by law
• Essential elements of a contract

  • Offer/Proposal
  • Acceptance
  • Consideration
  • Intention to create legal relations
  • Certainty
  • Capacity to contract
  • Legality of the objects
  • Free consent
• Offer/Proposal


  (as defined in Section 2(a) of the Contracts 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
• Offeror


  The person making the proposal
• Offeree


  The person/party accepting the proposal
• Manner of making an offer


  • Expressly (in words, verbal or written)
  • Impliedly (by conduct)
• To whom is a proposal made

  • To the Specific/Particular Person
  • To the General Public
• Offer made to a specific person

  • En. Ali offers to sell his boat to En. Bakar for RM 15,000
• Offer made to the general public

  • Carbolic Smoke Ball Co. Ltd. advertised that they would pay a sum of 1,000 pounds to anyone who took their product for a certain duration and succumbed to influenza
• Characteristics of a valid offer

  • Clear and unambiguous
  • Communicated
• Offer not valid due to lack of clarity

  • Lynn offered to buy a horse from Guthing on condition that if the horse brings luck to him, he will pay another $5 extra
• A party accepting a proposal must be aware of its existence
• Lack of awareness of offer


  • R v Clarke: Clarke gave information to the government leading to the arrest of a criminal, but was not aware of the reward offered by the government
  • Taylor v Laird: The captain of a ship offered navigation service but did not communicate it to the owner of the ship
• Invitation to treat


  A preliminary communication between the parties, not an offer that can be accepted
• Examples of invitation to treat

  • Display of goods in a self-service outlet
  • Advertisements
  • Supply of information
  • Tenders
  • Auctions
• Display of goods in a self-service outlet


  • The shop displays goods as an invitation to the public
  • Customers select an item and bring it to the payment counter
  • The offer is made at the counter
  • The cashier accepts the offer when he/she rings the sale or writes the bill
• The customer is not bound to purchase anything until acceptance is made at the payment counter
• Advertisements as invitation to treat


  • Partridge v Crittenden: The defendant's advertisement for 'Quality Bramblefinch cocks, Bramblefinch hens, 25s each' was held to be an invitation to treat, not an offer
  • Coelho v The Public Services Commission: The advertisement for the post of Assistant Passport Officer was an invitation to qualified persons to apply, the applications were offers
• An advertisement can become an offer when it offers a reward, contains conditions to be fulfilled, or is for sale of goods by the manufacturers
• Advertisement as offer


  • Carlill v Carbolic Smoke Ball Co: The advertisement offering £100 to anyone who still caught influenza after using the smoke ball was held to be an offer
• Supply of information


  A mere supply of information is not an offer and thus, no acceptance can be made
• Supply of information not an offer

  • Harvey v Facey: Facey's telegram stating the lowest price for Bumper Hall Pen was held to be a mere response to a request for information, not an offer
• Tenders


  Notice inviting tenders is an invitation to treat, the party submitting the tender is making the offer
• Tenders as invitation to treat

  • Spencer v Harding: The defendant's announcement inviting tenders for the sale of certain goods was held to be an invitation to treat
• Auctions


  Where an auctioneer invites bids, it is an invitation to treat. When a bidder makes a bid, it is an offer. The sale is complete when the auctioneer announces it by the fall of the hammer.
• Auctions


  • Payne v Cave: The defendant withdrew his bid before the fall of the auctioneer's hammer, which was held to be valid as every bidding is an offer that is not binding until assented to
• An offer can be revoked at any time before acceptance (Section 5(1) of the Contracts Act 1950)
• Offer for tender


  Highest bid made by plaintiff, but defendant did not accept it
• The court held that the defendant had the right to reject the offer as there was no valid contract
• Announcement inviting tender


  Invitation to treat
• Auction


  1. Auctioneer invites bids

  2. Bidder makes a bid

  3. Fall of the hammer completes the sale
• A sale by auction is complete when the auctioneer announces its completion by the fall of the hammer
• Until the fall of the hammer, any bidder may retract his bid
• Every bidding is nothing more than an offer on one side which is not binding on either side till it is assented to
• Offer


  Can be revoked at any time before acceptance is made
• The offeror is not required to wait until the offeree responds to his offer