(J96

Q3; D07 Q5a; J09 Q3)

Oer

Section 2(a) CA50 - when one person signies to another his willingness to do or to abstain from doing, with a view to obtaining the assent of that other to act or abstinence he is said to make a proposal.

1. Can be made in any form.

- Oral - Writing - Conduct or a combination of these forms.

2. An oer must be clear.

- If it is vague it is not a valid oer. Gunthing v Lynn (An oer to pay an
additional amount if the horse proved lucky was held to be too vague)

3. An oer can be made to

Individual World at large - Carlill v Carbolic Smoke Ball Co.

4. An oer must be distinguished from an invitation to treat.

- The ITT in law only amounts to an invitation to others to make an oer. - An ITT is not capable of being accepted so as to form a binding agreement - It is merely an invitation to another to make an oer. Examples: Display of goods for sale in a shop - Pharmaceutical Society of Great Britain v Boots Cash Chemists Fisher v Bell (A shopkeeper accused of oering a knife for sale contrary to law was acquitted on the basis that there was no oer in displaying the knife) Advertisements - The general rule is that an advertisement will only amount to an ITT and not an oer. Coelho v The Public Services Commission (A newspaper ad in relation to a job vacancy was only an ITT) Partridge v Crittenden An invitation for tenders - An invitation for tenders is also an ITT. - The person making the tender is merely giving his estimate in response to a request. - This in fact will amount to an oer by him which the party calling for the tender may accept or reject. Great Northern Railway v Witham An auctioneers request for bids - Section 10 of the Auction Sales Act a sale by public auction shall be complete when the auctioneer announces its completion by the fall of the hammer... - Thus when an auctioneer calls upon bidders to bid, he is not making an oer but merely an ITT, inviting them to make oers which he may accept or reject. Payne v Cave (the bid itself is the oer which the auctioneer is free to accept or reject) Harris v Nickerson (Advertisement is just a statement of intention) Price list or supply of Information - Harvey v Facey - Granger v Gough (the circulation of price list by a wine merchant was only an ITT)

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Revocation of an Oer
(D07 Q5b)

- A proposer (oeror) is not legally bound to keep his proposal open indenitely. Therefore, a proposal (oer) will remain valid until it is revoked by they proposer. - Section 5 CA50 a proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer.
Section 6 CA50 provides that a proposal may be revoked in the following ways.

1. By the communication of notice of revocation by the proposer to the other party. - Section 6(a) CA50 Dickinson v Dodds - by post
Illustration to s.5 - A proposes, by letter sent by post, to sell his house to B. B accepts the proposal by a letter sent by post. A may revoke his proposal at any time before or at the moment when B post his letter of acceptance, but not afterwards.

Byrne v Van Tienhoven 2. By the lapse of time prescribed in the proposal for its acceptance, or if no time is prescribed, by the lapse of a reasonable time, without communication of the acceptance. - Section 6(b) CA50 - Ramsgate Victoria Hotel Co. Ltd v Monteare (the plainti had not accepted within a reasonable time, the refusal was justied.) - Macon works and Trading Sdn Bhd v Phang Hon Chin & Anor 3. By the failure of the acceptor to fulll a condition precedent to acceptance - Section 6(c) CA50
- Illustration - if A oers to buy Bs car on condition that B provides a roadworthiness certicate issued by the Rod Transport Department, the oer will be revoked if B fails to provide such a certicate.

Financings Ltd v Stimson 4. 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. - Section 6(d) CA50 - Death or mental disorder of the proposer does not automatically result in the revocation of the oer. Knowledge of the acceptor is a crucial factor. Thus if the acceptor, in ignorance of the death or mental disorder of the oeror, accepts the oer such acceptance would be valid. Bradbury v Morgan 5. Rejection Rejection - Where the party to whom the oer is made rejects the oer, it would naturally result in the oer being terminated. Fong v Cilli Counter-oer - There will only be a valid acceptance if the oeree accepts the terms of the oer without any conditions or modications. If the oeree purportedly accepts if some modication is made to the oer, then it would only amount to a counter-proposal. A counter-proposal has the eect of rejecting the original proposal. Hyde v Wrench

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Acceptance
(D95 Q5)

- Section 2(b) CA50 - when the person to whom the proposal is made signies his assent thereto the proposal is said to be accepted. A proposal, when accepted, becomes a promise. - Section 7(a) CA50 - the acceptance must be absolute and unqualied.

General Rule
- To constitute an agreement, there must be an acceptance of the proposal, but also an eective communication of it to the proposer. - Section 7(b) CA50, be expressed in some usual and reasonable manner, unless the proposal prescribes the manner in which it is to be accepted.If the proposal prescribes a manner in which it is to be accepted, and the acceptance is not done in the prescribed manner, the proposer may, within a reasonable time after the acceptance is communicated to him insist that his proposal shall be accepted in the manner prescribed. However, if the proposer does not do so within a reasonable time he is deemed to have accepted.

Exceptions
1. Where the proposer has waived or dispensed with the need for such communication of acceptance. 2.Where the promisee has performed the conditions of the proposal. Carlill v Carbolic Smoke Ball Co - Further, Section 8 CA50 expressly states that performance of the conditions of a proposal is an acceptance of the proposal. 3.Where the promisee accepts any consideration for a reciprocal promise, which may be oered with a proposal - Section 8 CA50. - For example, if the proposer attaches a cheque for a certain amount together with his proposal for the purchase of an item from the promisee, then if the promisee chases the cheque, it would be regarded as an acceptance of the proposal. 4.Where the postal rule applies. - Section 4(2) CA50 - An exception to the general rule where the parties have contemplated the use of the post as a means of communication. (post - adequately stamped; registered; addressed; and deposited in the post box) - Section 4(2)(a) CA50 - As against the proposer, when it is put in a course of transmission to him, so as to be out of the power of the acceptor; and - Section 4(2)(b) CA50 - As against the acceptor, when it comes to the knowledge of the proposer. Entores Ltd v Miles Far East Corporation Mental acceptance is no acceptance - Silence will not amount to acceptance - The proposer cannot, without the promisees/ acceptors consent, put a condition in his proposal that the promisees silence shall amount to acceptance. Felthouse v Bindley Acceptance must be in reliance of oer - A person who wants to accept the oer must be aware of the oer. There must be the necessary connection between the oer and acceptance. R v Clarke Conditional acceptance is no acceptance - Winn v Bull

Revocation of Acceptance
- The communication of a revocation is dealt with under Section 4(3) CA50 (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. - Section 5(2) CA50 An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards
- Illustration to s.5 A proposes by a letter sent by post, to sell his house to B. B accepts the proposal by letter sent by post. B may revoke his acceptance at any time before or at the moment when the letter communicating it reaches A, but not afterwards.

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Consideration
(D00 Q3; J06 Q4)

Section 2(d) CA50 - When at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something,, such act or abstinence or promise is called a consideration for the promise.

General Rule
Section 26 CA50 - An agreement without consideration is void.
Illustration (a) to s.26 - A promises, for no consideration, to give to B $1000. This is a void agreement.

Exceptions (An agreement without consideration is void unless...)

1. Natural Love and Aection - Section 26(a) CA50 - it is expressed in writing and registered under the law (if any) for the time being in force for the registration of such documents, and is made on account of natural love and aection between parties standing in near relation to each other. Tan Soh Sim 2.Past Consideration is Good Consideration - Section 26(b) CA50 - it is a promise to compensate a person who has already voluntarily done something for the promisor, or something which the promisor was legally compellable to do.
- Illustration (c) to s.26 - A nds Bs purse and gives it to him. B promises to give A RM50. This is a contract. - Illustration (d) to s.26 - A supports Bs infant son. B promises to pay As expenses in so doing. This is a contract.

Kepong Prosecting Ltd & Ors v Schmidt 3.Statute Barred Debts - Section 26(c) CA50 - It is a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorized in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits.
- Illustration (e) to s.26 - A owes B $1000 but the debt is barred by limitation. A signs a written promise to pay B $500 on account of the debt. This is a contract.

4.Consideration need to be sucient but need not be adequate - Explanation 2 to Section 26 CA50 - An agreement to which the consent of the promisor is freely given is not void merely because the consideration is inadequate; but the inadequacy of the consideration may be taken into account by the court in determining the question whether the consent of the promisor was freely given.
- Illustration (f) to s.26 - A agrees to sell a horse worth $1000 for $10. As consent to the agreement was freely given. The agreement is a contract notwithstanding the inadequacy of the consideration.

Phang Swee Kim v Beh I Hock 5.Accord and Satisfaction - Part Payment may Discharge an Obligation - English Law (Pinnels case), it is a general rule that payment of a smaller sum is not a satisfaction of an obligation to pay a large sum. However, the general rule established in Pinnels Case does not apply in Malaysia. - Section 64 CA50 - Every promisee may dispense with or remit, wholly or in part, the performance of the promise made to him, or may extend the time for such performance, or may accept instead of it any satisfaction which he thinks t.
Illustration to s.64 (a)A promises to paint a picture for B. B afterwards forbids him to do so. A is no longer bound to perform the promise.

(b)A owes B $5000. A pays to B, and B accepts, in satisfaction of the whole debt, $2000 paid at the time and place at which the $5000 were payable. The whole debt is discharged. (c)A owes B $5000. C pays to B $1000 and B accepts them in satisfaction of his claim on A. This payment is a discharge of the whole claim. (d)A owes B under a contract, a sum of money, the amount of which has not been ascertained. A, without ascertaining the amount, gives to B, and B, in satisfaction thereof, accepts the sum of $2000. This is a discharge of the whole debt, whatever may be its amount. (e)A owes B $2000, and is also indebted to other creditors. A makes an arrangement with his creditors, including B, to pay them a composition of fty cents in the dollar upon their respective demands. Payment to B of $1000 is a discharge of Bs demand.

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6.Consideration need not move from the Promisee - A party to an agreement can enforce the promise even if he him self has given no consideration as long as somebody has done so. Venkata Chinnaya v Verikatara MaYa (She was liable to pay the annuity to her brothers. There was good consideration for the promise even though it
did not move from her brothers.)

7.Consideration may be Executed or Executory Executory - When neither party has yet to performed his part of the bargain.
- Illustration (a) to s.24 - A agrees to sell his house to B for RM10,000. Here Bs promise to pay the sum of RM10,000 is the consideration for As promise to sell the house and As promise to sell the house is the consideration for Bs promise to pay the RM10,000

K. Murugesu v Nadarajah Executed - Refers to a situation where one party to a contract has performed an act in return for a promise. The party making the promise is not bound to pay anything until the prescribed act is done.
- For example, if A oers RM100 to anyone who nds and returns his lost pet cat and B nds and returns it, the consideration is said to be executed.

Carlill v Carbolic Smoke Ball Co.

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Intention to Create Legal Relations

(J07 Q4)

- Although the CA50 is silent on the intention to create legal relations as one of the requirements of a valid contract, case-law clearly dictates the necessity of this requirement. - Intention to create legal relations essentially means that parties to a contract must have had the intention that the contract should have legal consequences in the event of breach by either party.

- It has been said that, to create a contract there must be a common intention of the parties to enter into legal obligations mutually communicated expressly or impliedly. Rose and Frank Co v Crompton Bros - However, sometimes the contracting parties do not clearly indicate their intention. In such situations the courts will encounter serious problems in determining whether the parties did in fact have the intention to create legal relations.

Two Presumptions
have been developed by the courts to assist in determining whether such intention existed between the parties.

Commercial and Business Agreements

HAVE the intention to create legal relations Edwards v Skyways
(In this case the plaintis employer had promised him an ex- gratia payment in view of his redundancy. The employer contended that there was no intention to create legal relations because of the word ex-gratia. The court, applying the presumption, held that there was the necessary intention to create legal relations.)

Social and Domestic Agreements

NO intention to create legal relations Balfour v Balfour
(In this case, the husband who was stationed in Sri Lanka had promised to pay his wife a monthly allowance as she could not accompany him to Sri Lanka due to poor health. The court held that she could no enforce the agreement as the parties had not intended that it should have legal consequences.)

Rebuttable

However, this presumption is a rebuttable on and will not be applied where one party can prove that there was in fact no such intention, for example where the agreement itself expressly states that no legal relations was intended.

This presumption is also a rebuttable one. Thus, where circumstances do in fact show such intention the agreement will be binding.

Merritt v Merritt
(Where an agreement was made between a husband and a wife upon their separation that he would pay her a monthly allowance. The agreement was recorded in writing and signed by the husband. The court held that there was an intention to create legal relations)

Rose and Frank Co v Crompton Bros

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Capacity to Contract
(D09 Q3)

Section 11 CA50 every person is competent to contract who is of the age of majority according to the law which he is subject, and who is of sound mind, and is not disqualied from contracting by any law to which he is subject.

General Rule

Minors

Sound Mind
- Section 12(1) CA50 - A person is said to be of sound mind for the purpose of contracting if at the time when he makes it, he is capable of being understanding it and of forming a rational judgment as to its eect upon his interest. - Section 12(2) CA50 - A person who is usually of unsound mind, but occasionally of sound mind may make a contract when he is of sound mind. - Section 12(3) CA50 - A person who is usually of sound mind, but occasionally of unsound mind may not make a contract when he is of unsound mind. - Illustrations to s.12 (a) A patient in a mental hospital, who is at intervals of sound mind, may contract during those intervals. (b) A sane man, who is delirious from fever, or who is so drunk that he cannot understand the terms of a contract, or form a rational judgment as to its eect on his interest, cannot contract whilst such delirium or drunkenness lasts.

- A contract entered into by a minor (i.e. person who has not attained the age of 18 years - Age of Majority Act 1971) is void. Tan Hee Juan v Teh Boon Keat

Exceptions
1. Marriage Contracts - Minors have been held capable of entering into marriage contracts, and are therefor liable for breach of such a contract. Rajeswary & Anor v Balakrishnan & Others
(The court held that the contract was valid and that marriage contracts diered from other classes of contracts)

2.Contracts for Necessaries - Section 69 CA50 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. - There is no statutory denition of what amounts to necessaries. While it certainly would include bare essentials such as food, clothing, shelter and medical attention, what constitutes necessaries would vary from case to case depending on the minors station in life. Nash v Inman - Education has also been held to be included in the term, necessaries Government of Malaysia v Gurcharan Singh 3.Scholarship Agreements - By virtue of the Contracts (Amendment) Act 1976, scholarship agreements between a minor and an appropriate authority cannot be invalidated on the ground of his minority. - Appropriate authority refers to the Federal Government, State Government, statutory authority or an educational institution, e.g. university. Government of Malaysia v Gurcharan Singh 4.Contracts of Insurance - Section 153(1) Insurance Act 1996, a minor may enter into a contract of insurance, if he is aged above 10 years. However, if he is below 16 years, he has to have the consent of his parent or guardian. 5.Contracts of Service - Under the Children & Young Persons (Employment) Act 1966 minors are permitted to enter into contracts of service, otherwise than as employers.

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Void and Voidable Contracts

(J95 Q10a)

Void Contracts

- Section 2(g) CA50 - A void contract is an agreement not enforceable by law. *** - Section 21 CA50 - Where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void.

- A void contract may be said to be one which is devoid of any legal eect, while a voidable contract is one which can be made void at the option of one or other parties to a contract.

- Section 24 CA50 - The consideration or object of an agreement is unlawful if it falls within any of the subsections of the section. (a) It is forbidden by law; (b) It is of such a nature that, if permitted, it would defeat any law; (c) It is fraudulent; (d) It involves or implies injury to the person or property of another; or (e) The court regards it as immoral, or opposed to public policy. In each of the above cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void. - Section 25 CA50 - If any part of a single consideration of one or more objects, or any one or any part of any one of several considerations for a single object, is unlawful, the agreement is void. - Section 26 CA50 - Agreements without consideration is void (subject to exceptions) - Section 27 CA50 - Every agreement in restraint of the marriage of any person, other than a minor during his or her minority, is void. - Section 28 CA50 - An agreement in restraint of trade, profession or business is void.(subject to exceptions) - Section 29 CA50 - An agreement in restraint of legal proceedings except for a contract agreeing to refer disputes to arbitration or a contract relating to scholarships is void. - Section 30 CA50 - Agreements, the meaning of which is not certain, or capable of being made certain, are void - Section 31 CA50 - Agreements by way of wager are void. - Section 66 CA50 - When an agreement is discovered to be void or when a contract becomes void, any person who has received any advantage under the agreement or contract is bound to restore it, or to make compensation for it, to the person from whom he received it.

Voidable Contracts
- Section 2(i) CA50 - An agreement which is enforceable by law at the option of one or more of the parties thereto but not at the option of the other or others. *** - Section 10 CA50 - All agreements are contracts if they are made by the free consent of parties. - Section 14 CA50 - Consent is said to be free when it is not caused by one or more of the following: 1. Coercion - Section 15 CA50 2. Undue Inuence - Section 16 CA50 3. Fraud - Section 17 CA50 4. Misrepresentation - Section 18 CA50 5. Mistake - Section 21,22,23 CA50 - Section 19(1) CA50 - When consent to an agreement is caused by coercion, fraud or misrepresentation, the agreement is voidable at the option of the party whose consent was so caused.
Illustration to s.19 (a) A, intending to deceive B, falsely represents that ve hundred gantangs of indigo are made annually at As factory, and thereby induces B to buy the factory. The contract is voidable at the option of B.

- Section 19(2) CA50 - A party to a contract, whose consent was caused by fraud or misrepresentation, may, if he thinks t, insist that the contract shall be performed, and that he shall be put in the position in which he would have been if the representation made had been true.
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Consent Clauses
(J95 Q10bc)

Coercion
(D98 Q12c; D03 Q12d)

- Section 15 CA50 - Coercion is the committing, or threatening to commit any act forbidden by the Penal Code, or the unlawful detaining or threatening to detain, any property, tot he prejudice of any person whatever, with the intention of causing any person to enter into an agreement.
- Explanation - It is immaterial whether the Penal Code is or is not in force in the place where the coercion is employed. Illustration to s.15 A, on board an English ship on the high seas, causes B to enter into an agreement by an act amounting to criminal intimidation under the Penal Code. A afterwards sues B for beach of contract at Taiping. A has employed coercion, although his act is not an oense by the law of England, and although Section 506 of the Penal Code was not in force at the time when or place where the act was done.

- Section 14 CA50 - Consent is said to be free when it is not caused by one or more of the following: 1. Coercion - Section 15 CA50 2. Undue Inuence - Section 16 CA50 3. Fraud - Section 17 CA50 4. Misrepresentation - Section 18 CA50 5. Mistake - Section 21,22,23 CA50

Undue Inuence
(D02 Q5)

Chin Nam Bee Development SB v Tai Kim Choo & 4 Ors

Fraud
(J05 Q3)

- Section 17 CA50 - Fraud includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent with intent to deceive another party thereto or his agent, or to induce him to enter into the contract (a) the suggestion, as to a fact, of that which is not true by one who does not believe it to be true; (b) the active concealment of a fact by one having knowledge or belief of the fact; (c) a promise made without any intention of performing it; (d) any other act tted to deceive; and (e) any such act or omission as the law specially declares to be fraudulent.
- Explanation - Mere silence as tot facts likely to aect the willingness of a person to enter into a contract is not fraud, unless the circumstances of the case are such that, regard being had to them, it is the duty of the person keeping silence to speak, or unless his silence is, in itself, equivalent to speech.

- Section 16(1) CA50 - A contract is said to be induced by undue inuence where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other. - Section 16(2) CA50 - In particular and without prejudice to the generality of the foregoing principle, a person is deemed to be in a position to dominative then will of another; (a) Where he holds a real or apparent authority over the other or where he stands in duciary relation to the other; or (b) Where he makes a contract with a person whose mental capacity is temporarily or permanently aected by reason of age, illness, or mental or bodily distress. Datuk Jaginder Singh & Ors v Tara Rajaratnam (Presumptions
of undue inuence have been held to exist between persons who were in a solicitor-client relationship)

Misrepresentation
- Section 18 CA50 - Misrepresentation includes (a) the positive assertion, in a manner not warranted by the information of the person making it, of that which is not true though he believes it to be true. (b) any breach of duty which, without an intent to deceive, gives an advantage to the person committing it , or anyone claiming under him. (c) by misleading another to his prejudice, or to the prejudice of anyone claiming under him; and (d) causing however innocently, a party to an agreement to make a mistake as to the substance of the thing which is the subject of the agreement.

Wong Cheong Kong SB v Prudential Assurance SB

Mistake
(J01 Q4)

- Section 21 CA50 - Where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void. - Section 22 CA50 - A contract is not voidable because it was caused by a mistake as to any law in force in malaysia; but a mistake as to a law not in force in Malaysia has the same eect as a mistake of fact.
Illustration to s.22 - A and B make a contract grounded on the erroneous belief that a particular debt is barred by limitation; the contract is not voidable.

- Section 23 CA50 - A contract is not voidable merely because it was caused by one of the parties to it being under a mistake as to a matter of fact ...
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