Kopeks Holdings Sdn Bhd v.

Bank Islam Malaysia Bhd [2009] 1 LNS 785

Nature of the Case

A suit claiming breach of contract for which damages are being sought.

Facts

The plaintiff is an investment subsidiary company of the Koperasi Pekerja-Pekerja Kerajaan

Berhad. The defendant is a commercial bank operating under Islamic principles.

The plaintiff received an offer of banking facilities from the defendant. The defendant offered
a RM9 million short-term loan to the plaintiff known as Facility I. RM3 million is offered for
the purpose of redeeming 2 charged land titles from a mortgage company and the remaining,
RM6 million is to part finance the development of mixed residential buildings on the said
lands. Facility II is a performance guarantee of RM1.5 million which is 5% of the costs of
phase I development, RM29, 759,010.00. The plaintiff accepted the offer.

The plaintiff requested the defendant to amend the Facility I offer, RM4 million for the
redemption of the 2 charged titles and RM5 million for the part financing of the residential
development. A new offer was offered and the plaintiff duly accepted the amended offer. In
the offer letter, the defendant stated that All other terms and conditions shall remain
unchanged, referring to the previous offer.

Later, the defendant requested to vary the development cost for Facility II as well from
RM29, 759,010.00 to RM28, 000,000.00.The defendant later found that one of the landed
properties had been charged to Maybank instead of the said mortgage company which was
never revealed.

On the basis that the offer has been accepted, the plaintiff carried out preliminary works on
the site despite the fact that formal written agreement and legal documents had not been
executed between the parties.

The plaintiff then informed the defendant that the vendors of the said lands intended to sell
the lands to other parties and had thus requested the plaintiff to expedite drawdown of the
facility as they requested.

The defendant withdrawn and cancelled the facilities offered to the plaintiff. Resulting from
this, the plaintiff claims that they suffered loss of RM12, 986,746.05.
Issue

Whether there is a breach of contract by the defendant when the facilities are withdrawn and
cancelled?

Rule of Law

Section 6 (c) of the Contracts Act 1950 stated that a proposal is revoked by the failure of the
acceptor to fulfil a condition precedent to acceptance. The contract is considered void if the
acceptor fails to do so. Section 7 (a) stated that in order to convert a proposal into a promise
the acceptance must be absolute and unqualified.

Judgement

The court decided that the offer letter received by the plaintiff from the defendant is only an
expression of willingness by the defendant to offer banking facilities to the plaintiff. This is
because the parties expressed intention was that the agreement was subject to the execution
of the legal documents. It would only bind both parties if and when the conditions precedent
have been fulfilled as stated in Section 6 (c) of the Contracts Act 1950. As a bank institution,
the defendant should finalise the legal documentations before agreeing to enter into
agreement. Both parties are still in negotiation phase despite the fact that the two letters of
offer had been accepted by the plaintiff. This is because no final agreement had been reached
between them as the plaintiff asked for a variation of the development costs under Facility II
from RM29, 759,010.00 to RM28, 000,000.00. It proves that the plaintiff must be taken to
intend that the offer was still open for negotiation. According to section 7 (a) of the Contracts
Act 1950 the plaintiff acceptance of the offer was therefore not absolute and unqualified to
convert the defendants proposal into a promise.

Holding

The claim with costs by the plaintiff was dismissed the plaintiff failed to prove his case
against the defendant.

Conclusion

The plaintiff claim was dismissed as there was no contract made between the parties because
the legal documentations required was not finalised proving that there was no agreement
between the parties.