contract law.ppt

8/14/2019 Contract Law.ppt

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LAW OF

CONTRACT

What is Contract?Parties to a Contract

Elements of Contract


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WHAT IS CONTRACT?continued

Section 2(h) of the Contracts Act 1950 providesthat;

Contract is an agreementenforceable by law

All agreements are notcontracts although all

contracts are

agreements.


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WHAT IS CONTRACT?continued

ELEMENTS

THERE MUST

BE AN AGREEMENT

THE AGREEMENT MUST

BE ENFORCEABLEBY LAW

Examples ofcontracts not

enforceable by law;

contract for killing

someone, contract

for theft and others

There must be an

offer and a complete

acceptance;A offered and B

accepted the offer.


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PARTIES TO A CONTRACT

Has the power

either to

accept or toreject the offer

Makes an offerto the offerree

Offeree

Offeror


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ELEMENTS OF A VALIDCONTRACT

1. Offer

2. Acceptance

3. Consideration

4. Intention to create legal intention

5. Certainty

6. Capacity


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1. OFFER

When one person signifies to another his

willingness to do or to abstain from doing

anything, with a view to obtaining theassent of that other to the act or

abstinence, he is said to make a

proposal.

[Section 2(a) of the Contracts Act ]


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OFFERcontinued

In other words, under the Contracts Act1950 and English Law, a proposal or offer

is something which is capable of beingconverted into an agreement by itsacceptance.


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OFFERcontinued

It is very important to

differentiate an OFFER

from a mere

INVITATION

TO TREAT

What is

INVITATIONTO TREAT?


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INVITATION TO TREAT

Invitation to treat is not an offer. It is justan invitation to make an offer.

It is a sort of preliminary negotiationbefore any contract is entered into

Examples:

Goods displayed in the shop with price tag.

Advertisement in the newspaper.

Auction sale.


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Display Of Goods In Shop

PHARMACEUTICAL SOCIETY OF GREAT BRITAIN VBOOTS CASH CHEMIST

Fact: The defendant was prosecuted for sellingdrugs (poison) without the presence of aqualified pharmacist. The customer selected thedrug and put in the basket and has not paid yetto the cashier.

Held: Display of goods on the shelf is merely aninvitation to treat and not an offer.

CASE


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Display Of Goods In Shop

FISHER v BELL Fact: The defendant displayed flick knives

in his shop windows. He was thenconvicted of a criminal offence of offeringsuch knives for sale.

Held: Display of any goods with a pricetag on it in a shop window was not anoffer but rather it was an invitation totreat.

CASE


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Advertisements in theNewspaper

Referring to Oxford

Advanced Learners

Dictionary,

advertisement heremeans a notice, picture

or film telling people

about a product, job or

service.


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Advertisements in theNewspaper

MAZUMDER V. ATTORNEY GENERAL OF SARAWAK

The Federal Court of Malaysia held that anadvertisement in the newspaper for the

post of a doctor was an invitation to treat.

CASE


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Auction Salecontinued

OFFER;

places a bid

ACCEPTANCE;

accepts the bidCOMPLETION;Fall of hammer

INVITATION

TO TREAT

AN OFFERAGREEMENT


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Auction Sale

PAYNE v CAVE

Held:Court held that the auctioneersrequest for bids is an invitation to treat

and each bid is an offer.

CASE


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Tenders

When tenders are invited from the publicfor the highest price for the tendereditems/ services or lowest price to supply

the required items/ services it is regardedas mere invitation to threat.

In Spencer v Harding, the Court held

that tenders are mere invitation to treatlike auction sale.


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Offer Made to the World at Largecontinued

The plaintiff used the medicine for a fixedperiod as prescribed, but still contractedinfluenza. The plaintiff then sued thedefendant for the money.

Held: The Court of Appeal held that theplaintiff was entitled to the 100 as theadvertisement is an offer to the world atlarge and she had accepted the offer.

CASE continued...


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2. ACCEPTANCE

When the person to whom the proposal ismade signifies his assent thereto, the

proposal is said to be accepted: aproposal, when accepted, becomes apromise.

[Section 2 (b) of the Contract Act]


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ACCEPTANCEcontinued

According to Oxford Dictionary of Law,acceptance means agreements to the

terms of an offer that, provided certainother requirements are fulfilled, convertsthe offer into a legally binding contract.


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Acceptance Must Be Absolute andUnqualified

In order to convert a proposal into a

promise the acceptance must be absoluteand unqualified.

[Section 7(a)]


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Acceptance Must Be Absolute andUnqualified continued

According to Oxford Advanced LearnersDictionary, absolute means definite andwithout any doubt or confusion, while

unqualified means having the rightknowledge.


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Acceptance Must Be Absolute andUnqualified - continued

HYDE v WRENCH Facts: The defendant on 6 June offered to sell

his farm to the plaintiff for 1000 and on 8 Junethe plaintiff replied that he was willing to buythe farm for 950. The defendant refused to sellthe farm for 950. Then on 29 June the plaintiffwas willing to buy the farm for 1000.

Held: No contract was made between thembecause the plaintiff made a counter-offer.

CASE


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Communication of Proposalcontinued

Has the power

either to

accept or to

reject the offer

Makes an offer

to the offerree

Offeree

Offeror

The proposal is

completely

Communicated when

It comes to his knowledge


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3. Intention to Create Legal Relations

The parties in the contract should haveintention to create legal relations. If thereis no intention to create legal relation

between the parties, no valid and bindingcontract could be made.

The court may ascertain the intention ofthe parties to create legal relation fromthe language and context of theagreement and conduct of the parties.


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Intention to Create Legal Relationscontinued

When business agreement is made it isgenerally understood that the parties areserious in creating contractual relation.

However, when social, domestic or familyagreement is made it is generallypresumed that the parties did not haveintention to create legal relation. Thisgeneral rule might be rebutted if theparties may show the required intention tocreate legal relation.


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BALFOUR v BALFOUR The defendant promised to give his wife,

the plaintiff 30 per month asmaintenance.

Held: The Court of Appeal held that this

promise was not enforceable because theparties did not intend to create legalrelation.

CASE


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MERRIT v MERRIT There was a document providing that in

consideration of the wife paying all charges inconnection with the matrimonial home until themortgage repayments had been completed, thehusband would agree to transfer the property

to her sole ownership. The Court held that the agreement was

enforceable since the parties intended theagreement to be legally binding.

CASE


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4. CONSIDERATION

When, at the desire of the promisor, thepromisee or any other person has done orabstained from doing, or does or abstain from

doing, or promises to do or to abstain fromdoing something, such act or abstinence orpromise called a consideration for the promise.

[Section 2(d) of Contracts Act 1950]

It is the element of exchange and reciprocity incontracts


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CONSIDERATIONcontinued

CONSIDERATION

EXECUTORY EXECUTED PAST

HOW ABOUT

WITHOUT THE

CONSIDERATION?


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Executory Consideration

It is a consideration where the partiesexchange promises to perform acts in thefuture.

For example, A promised to sell his houseto B and B promised to pay RM100,000 to

A.


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Past Consideration

It is where one party has voluntarilyperformed an act and the other party later

promises to reward for the voluntary act. In past consideration the voluntary act is

done first and the promise is made later.

This voluntary act is called pastconsideration.


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Past Considerationcontinued

Example: As little son was drowning atthe lake and B rescued the son voluntarily.

Later A promised to pay B RM1,000 as Bsaved his sons life. Here, As rescue workwas past consideration and was a goodconsideration.


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Past Considerationcontinued

It should be noted that past considerationis not recognised in the UK.

Past consideration is

recognised in

Malaysia but not in

UK


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Inadequacy of Consideration

An agreement without consideration is void.. [Section 26,Contract Act 1950]

An agreement is not void merely because theconsideration is inadequate.

[Explanation 2 of section 26]

Consideration must be sufficient but need not beadequate.


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Purpose and Consideration should beLegal and Enforceable by Law

The purpose or consideration of thecontract should be legal. If the purpose of

the contract is illegal, then the contractwould be invalid and would not beenforceable by law.

Example: Selling of dangerous drugs,narcotic drugs, heroine etc.


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5. CERTAINTY

Agreements, the meaning of which is notcertain, or capable of being made certain,are void.

[Section 30, Contracts Act]

Example: A agrees to sell to B 50 crates of

toys, but the kind and type of the toys arenot specifically mentioned. Here thecontract is uncertain and therefore void.


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CERTAINTYcontinued

KARUPPAN CHETTY v SUAH THIAN Fact: The parties agreed for a lease at RM

35.00 per month for as long as the leaseelikes.

Held: The contract is void since the termas long as the leasee likes is uncertain.

CASE


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6. Capacity to Make a Contract

Every person is competent to contract who is ofthe age of majority according to the law towhich he is subject, and who is of sound mind

and is not disqualified from contracting by anylaw to which he is subject.

[Section 11, Contracts Act]

Under Malaysian law, the age of majority is 18years old (Age of Majority Act).

C M k C


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Capacity to Make a Contractcontinued

MOHORI BIBEE V. DHARMODAS GHOSE Fact: Privy Council held that an infant

could not make any valid contracts.

Exceptions;a) Contracts for necessaries

b) Contracts of scholarshipc) Contracts of insurance


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