Contact Law I

Contract according to Merriam Webster – an agreement between two or more parties that
creates a duty to do or not to do something and a right to performance of the other’s duty or
a remedy for the breach of the other’s duty
Section 2(h) of the Contracts Act 1950 – an agreement enforceable by law is a contract
It means that once a contract has been made, the law will recognize the duties of the parties
that arise from the agreement.

Agreement Contract
Definition An informal agreement between A formal agreement between
two or more parties that is not two or more parties that is
enforceable by law enforceable by law
Contracts Act Section 2(e) – every promise and Section 2(h) – an agreement is
1950 every set of promises, forming the enforceable by law is a contract
consideration for each other, is an
agreement
Legal effect An agreement that lacks any of A contract is legally binding and
the elements in the contract does its terms may be enforceable by
not have a legal effect the court of law
2.4 The Form of Proposal

 Generally, a person may make a proposal in any form whether it is orally, in writing,
by conduct, or by a combination of these methods.
 Where the proposal or acceptance of any promise is made in words, the promise is
said to be express.
 Where the proposal or acceptance is made otherwise than in words, the promise is
said to be implied.
 Thus, contracts can be made orally. There is no requirement of law in Malaysia that
parties to a contract must reduce their contract in writing to be legally binding. Even
in contracts pertaining to land, an oral contract is enforceable.

2.5 Proof of Oral Contract

 A party who alleges that there is an oral contract must prove it. However, oral
contracts are difficult to prove. In the case of contract to sell a landed property, the
burden of proof is even heavier.
 Thus, it would be wise to put it in writing to avoid future disputes as to the existence
of the contract and the actual terms agreed by the parties.
 Case: T Gopala Krishnan v Datuk Nurjazlan bin Tan Sri Mohamed
 The High Court held that the plaintiff had produced the best evidence through
the telephone recording of the phone conversation he had with the first
defendant. The telephone conversation and the transcript of the audio
recording showed that there was a contract between them.
 Case: Harcharan Singh s/o Sohan Singh v Ranjit Kaur d/o S Gean Singh
 Facts: The plaintiff and his elder brother purchased a piece of property, which
was registered in both their names. The elder brother died and his estranged
 widow became the administratrix of the deceased’s estate. She claimed the
deceased’s half undivided share of the property as part of the deceased’s
estate. The plaintiff alleges that due to the deceased’s family financial
problems, the deceased by oral agreement, had sold his half share of the
property to him.
 Held: The HC held that he who alleges must prove. This is the basic tenet of
the rule of law. The plaintiff had merely alleged but had not proven the
allegations. The facts showed that the plaintiff had not even attempted to
transfer the half-undivided share of the deceased to himself during the
deceased’s lifetime. The court dismissed the plaintiff’s claim.

2.5 Contract by Conduct or By Inference

 Section 3 provides that a contract may be made by any act or omission of the parties
 Section 9 provides that so far as the proposal or acceptance of any promise made
otherwise than in words, the promise is implied.
 Case: Clarke v Earl of Dunraven and Mount Earl, The Satanita
 Facts: A and B the owner of the two yachts, the Satanita and Valkyrie,
entered them for club race and agreed to be bound by club rule. While
maneuvering for the start, Satanita fouled Valkyrie and sank her.
 Held: House of Lords held that there was a contract by entering into race club
and agree to be bound by the rule. Thus, Satanita liable to pay damages.
 Case: Parimala d/o Muthusamy & Ors v Projek Lebuhraya Utara Selatan
 Facts: The first Plaintiff is the wife of the deceased. The First Pltf. and a few
minors were passengers in a motorcar driven by the deceased. On 6
November 1991, the car entered the highway through the Pagoh Tol gate and
was travelling through the northbound lane towards Ayer Keroh at the time of
the accident. The deceased died on the spot after hitting a cow which had
strayed onto northbound North-South Highway at km 138.5. The court held
that there is an implied contract between the highway user and the highway
operator.
 Held: Suriyadi J held that the moment a ticket is extracted at the tol gate, as
in this case, and the highway is used; a contract is thus struck between the
parties, making the plaintiff a lawful user of the road and the highway owner
would have to provide safest way to be used by the user.

2.0 Proposal/ Offer

2.1 Definition Section 2(a) –

 A person is said to make an offer/proposal when the offeror/ promisor promises

something to the offeree/ promisee, with the intention that his proposal/offer would
be accepted
 A person is said to make an offer when the promisor had signified his willingness to
do an act with a view of obtaining the other’s assent to the act and ready to be bound
by his promise. But if the promisor make a statement without any intention to obtain
the assent of the promisee, that cannot be termed as proposal.
 Section 2(c) states that the one who is making the proposal is the “promisor”
 A mere statement without any respond from the promisee will not conclude a
contract. There must be a positive respond from the promisee signifying the
acceptance.
 Harvey v Facey
 Facts: A send a telegraph to B saying that "Can You sell to us Bumper Hall
Pen Hall? Answer for the lowest cash price by telegraph. B replied by
telegraph "the lowest price for Bumper Hall Pen is 900 pounds”. A send
telegraph, “we agree to buy Bumper Hall Pen at 900 pounds, as requested by
you.” A claim that this telegraph exchange was a valid offer and acceptance.
 Held: Privy Council decided that a statement of fact which has been made
only to provide information should not be construed as an offer. B should
have agreed to A’s word by saying, we agree with your offer, then it’s a
contract. In this case no respond from B.

2.2 Specific & General Proposals

 When the proposal is made to a specific person it is known as specific proposal, but
when the same is made to the public at large, it is known as general proposal.

2.3 A Proposal Can Be Made To Anyone & Everyone

 Case: Carlill v Carbolic Smoke Ball Co. (offer can be made to the public)
 Facts: The defendants made an advertisement in which they offered €100 to
any person who found the carbolic smoke ball did not work, that is, they
caught influenza even after using the smoke ball in a specific manner for a
specific period. The plaintiff, Mrs. Carlill still got influenza after using the
smoke ball. The plaintiff then sued the defendants for breach of contract. The
defendants argued that the contract cannot be made to the entire world.
 Held: An offer/proposal could be made to the entire world because the
contract will be made to the public who came forward and performed the
condition of the faith of the advertisement.
 Held: Suriyadi J held that the moment a ticket is extracted at the tol gate, as
in this case, and the highway is used; a contract is thus struck between the
parties, making the plaintiff a lawful user of the road and the highway owner
would have to provide safest way to be used by the user.
2.4 A Proposal Can Be Made to a Specific Person

 Boulton v Jones
 Facts: Defendant had a transaction with a dealer named Brocklehurst. It was
an order to buy goods from Brocklehurst, but on the day the order is sent,
Brocklehurst has already sold his company to the Plaintiff. Plaintiff then send
the ordered goods without notifying the Defendant that the ownership of the
company has been owned by Plaintiff. Defendant refused to pay to the
plaintiff.
 Held: The court decided that the Plaintiff is not entitled to receive an offer that
is not directed to him. Its actually a contract between Brocklehurst and
defendant and not the Plaintiff.

2.5 The Proposal Must Be Clear and Certain (elements of proposals)

 The proposal or agreement entered into between the parties must not be vague,
indefinite, or uncertain.
 The parties must express themselves so that their meaning can be determined with a
reasonable degree of certainty.
 Otherwise, it would not be possible for the court to hold that there was an agreement
between them.
 Section 30 provides that agreements that are not certain are void.
 Case: Guha Majumder v Re Donough
 The HC held that it is a well-established rule that the parties must make their
own contract, and this means that they must agree to its terms with sufficient
certainty. If the terms are unsettled or indefinite, there will be no contract.

2.6 The Communication of the Proposal is Necessary (elements of proposals)

 Section 4(1) provides that a proposal can be accepted only after it has come to the
knowledge of the promisee
 It means that the proposal must be communicated to the promisee in order that the
promisee can accept it.
 If a proposal has not yet been communicate, even if somebody acts according to the
terms of the proposal, he cannot be deemed to be the acceptor of that proposal.
 Case: R v. Clarke
 Facts: The Australian Government offered a reward leading to the arrest and
conviction of persons responsible for the murder of 2 police officers. X and
Clarke were arrested with murder but shortly after, Clarke gave information
which led to the arrest of Y. X and Y were later convicted, and Clarke claimed
the reward.
 Held: His claim failed because the reward was not in his knowledge when
he gave the information to the police. He gave the information solely to
clear himself of the murder charge and not due to reliance on the offer of
reward.
2.7 The Proposal Must Be Legally Capable of Acceptance (element of proposal)

 If there is a condition, then it must be fulfilled before a proposal can be accepted.

 Non-compliance with that condition will result in no contract.
 Case: Affin Credit (M) Sdn Bhd v Yap Yuen Fui
 Facts: The appellant owned a car and rented it to the respondent. The
respondent falls into arrears, thus the appellant brought an action. The
appellant failed to supply information relating hire purchase agreement
entered by the respondent. Thus, the appellant failed to take action against
the respondent. Hire purchase is the procedural law, thus all procedures must
be followed.

2.8 Invitation to Treat (ITT)

 An invitation to another person to make an offer is not intended to be binding
 An expression of willingness to negotiate
 It is not an offer
 It is an early stage before an offer can be made
 ITT is a proposal to negotiate, a proposal to receive proposals, or a proposal to
chaffer.
 Examples: an auction, job advertisement, display of goods in a shop by a
shopkeeper, an advertisement, tender, and a supply of information
 An option is merely an undertaking to keep the offer open for a certain period of time.
 Advertisement is an attempt to induce offer.

2.9 Display of Goods in a Shop Window with Price Tags

 ITT happen where the goods been displayed on the rack or shelves. An offer is made
when the customer bring and puts the goods/articles in the cashier’s desk. If the
cashier accept the offer then its contract, if not accept then no contract.
 Case: Pharmaceutical Society of Great Britain v. Boots Cash Chemist Ltd
(Southern) Ltd.
 Facts: The defendants were being prosecuted under the Pharmacy and
Poisons Act 1933 in that they had allowed the sale of list poison to be
affected without the supervision of a registered pharmacist. The arrangement
in the shop was that a customer was given a basket and free to walk around
the shop selecting items from the shelves. Near the cashier desk was a
registered pharmacist who was authorized to prevent customers from
removing any drug from the shop. The Pharmaceutical Society alleged that
the goods on the shelves were offers to sell, which the customer accepted by
placing the goods in the basket, and thus, the sale took place at the point and
not at the cash desk under the supervision of the registered pharmacist.
 Held: The goods on the shelves were only invitations to treat and it was the
customer who made the offer to buy when he presented the goods for
payment at the cash desk. At this point, the person at the cash desk could
accept or reject the offer. The effect of this reasoning was that the sale had
taken place under the supervision of the registered pharmacist and no
criminal offence had been committed.
2.10 Advertisement
 An expression of willingness to negotiate, inviting the reader to request the service or
goods prescribed.
 Case: Partridge v Crittenden
 Facts: Partridge inserted an advertisement in a periodical a notice ‘bramble
fish cocks and hens for 25s each’. It appeared under the general heading
‘classified advertisement’ and the words offer for sale was not used. He was
charged with unlawfully offering for sale a wildlife bird contrary to the
provision of the Protection of Birds Act 1954.
 Held: The advertisement was only an invitation to treat because nowhere was
there any indication of an expression of intention to be bound or the intention
to really sell the bird.
 Case: Majumder v Attorney-General of Sarawak
 The Federal Court held that an advertisement in the newspaper for the post of
a doctor was an ITT. The advertisement was in fact merely an invitation to
treat which could not be regarded as a contract.
2.11 Auction Sales
 Auctioneer’s request for bids is only an ITT. The bid by customer constituted the
proposal. The auctioneer is free to accept it by the fall of the hammer or to reject it.
Nobody is bound to accept a proposal.
 Since an invitation by the auctioneer to sell goods is an ITT rather than a proposal,
he does not incur any liability by not accepting the proposal which in the form of bid.
An auctioneer, therefore, may not accept even the highest bid.
 Section 10 of Auction Sales Enactment (Straits Settlement) provides that the contract
concluded once the auctioneer hit the hammer three times onto the table for
accepting the offer from the bidder.
2.12 Booking Form
 Normally appended to the brochure is the booking form to be completed by the
reader.
 The document that will form the first stage in the contractual process. It does not
constitute an offer, its just an ITT.
 So, when you fill up the form and submit, you are actually making an offer and t
depends on the owner either to accept your offer or not. If accepted the contract is
concluded.

2.13 Revocation of Offer

 Section 5(1) provides that a proposal may be revoked at any time before acceptance
has been made against the proposer, but not afterwards.
  Section 5 applied to fast communication, sms, telephone, whatsapp, telex, telegram.
 Section 6 provides that a proposal may be revoked
 By the communication of notice of revocation by the proposer to the other
party
 By the lapse of the time prescribed in the proposal for its acceptance, or, if no
time is so prescribed, by the lapse of a reasonable time, without
communication of the acceptance;
 By the failure of the acceptor to fulfil a condition precedent to acceptance; or
 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.
2.14 Rejection and Counter Offer
 When a proposal is made, the promisee has the right to reject it. Once a proposal is
rejected, the proposal is terminated. It comes to an end and cannot be accepted
afterwards.
 Acceptance must be unqualified and unconditional. If there is modification or asking
for discount, its not qualified thus rejecting the first proposal. It’s a counter offer.
Under the law, counter proposal rejects the original offer.
 Case: Hyde v Wrench
 Facts: The defendant offered to sell his farm to the plaintiff for €1000. The
plaintiff made a counter offer of €950 but the defendant refused to sell. The
plaintiff then wrote again offering to pay €1000 but the defendant refused to
sell again. The plaintiff sued for specific performance.
 Held: By making the counter offer, the plaintiff had rejected the original offer.
It was held that there was no valid binding contract.
 If request for further information, then it is not a counter offer
 Merely seeking or requesting for further information on the original proposal does not
necessarily mean a rejection of the original proposal
 Case: Stevenson Jaques & Co v Mclean
 Facts: A and B were negotiating about the sale of a quantity of iron for which
A held warrants. A wrote to B offering to sell the iron at 40s per tonne nett
cash, open till Monday. On Monday morning, B telegraphed A requesting to
know whether A would accept 40s to be paid over two months or if not, the
longest limit A would give. After receiving B’s telegram, A sold the iron to a
third party. B having had no reply from A, telegraphed again that afternoon
accepting A’s offer at 40s cash. B sued A for breach of contract.
 Held:The court held that in the circumstances of the case, B’s telegram on
Monday morning was meant only as an inquiry and was not a counter offer.
There was no rejection of the offer and therefore a valid binding contract
between A and B came into existence when B accepted the offer in the
afternoon.

2.15 Lapse of Time

 A proposal may lapse by the passage of time. Obviously, a proposal that is expressly
stated to last for a period of time cannot be accepted after that time.
  If no time is stated in the proposal, then the proposal lapses after a reasonable time
 Section 47 provides that reasonable time is a question of fact ie depending on actual
circumstances of the case and the nature of business
 Case: Macon Works Trading v Pang Hong Chin
 The HC held that where no time is fixed, a proposal would lapse after the
expiration of a reasonable time. What is reasonable is a question of fact
depending on the actual circumstances of each case and the nature of the
business. Failure to accept within a reasonable time implies rejection by the
promisee.
 Case: Ramsgate Vistoria v Montefiore
 Facts: A applied for shares in B’s company on 8 June, and had paid the
deposit. A received no further news until 23 November when B’s company
informed A that the shares had been allotted to him and that A should pay the
balance due on them.
 Held: The court held that there was no valid binding contract because B
company did not accept within a reasonable time. The interval between June
and November was too excessive and the proposal had lapsed.

2.16 Failure of Acceptor to Fulfill Condition Precedent to Acceptance

 Section 6(c) provides that a proposal is revoked by the failure of the acceptor to fulfill
a condition precedent to acceptance
 A condition precedent is a condition which must be fulfilled before any contract is
concluded
 A contract is subject to a condition precedent when the contract is not binding unless
or until a specified event occurs. Thus, where the condition is precedent, the
agreement is not fully binding until the event occurs. The non-fulfilment of a condition
precedent will result in the contract being discharged.
 Case: Jaafar Ibrahim v Gan Kim Kin
 Facts: The respondent agreed to transfer her half share of land to the
appellant if she could get approval of conversion and subdivision by State
Authority Negeri Sembilan by 1977 otherwise the agreement would be null
and void. The appellant got the approval by 1980 and the respondent refused,
thus the appellant claim for specific performance.
 Held: The appellant did not succeed as he failed to accept the condition
precedent which the approval was not obtained by the deadline given.

2.17 Death or Mental Disorder of a Party

 Section 6(d) provides that a proposal is revoked by the death or mental disorder of a
proposer, if the fact of his death or mental disorder comes to the knowledge of the
acceptor before acceptance.

3.0 Acceptance
3.1 Definition Section 2(b)
 Contract comes into existence after the promisee unconditionally accepts the offer. A
proposal when accepted, become a promise.
 Section 2(c) provides that the person accepting the proposal is called the promisee.
 Section 9 provides that if the proposal or the acceptance is made in words, the
promise is said to be express. If the proposal or the acceptance is made other than in
words, the promise is said to be implied.

3.2 Acceptance Must Be Absolute and Unqualified (elements of acceptance)

 Section 7(a) provides that in order to convert a proposal into a promise, the
acceptance must be absolute and unqualified.
 Absolute and unqualified means that the acceptance must be made without any
condition or qualification.
 The acceptance is valid if the product or service rendered is exactly what was
contained in the offer
 There should not be any modification to the offer
 There should not be any conditions to the acceptance
 If the offer was modified, there will be a counter offer
 The counter offer is the new proposal and destroyed the first offer
 Case: Hyde v. Wrench
 Facts: The defendant offered to sell his farm to the plaintiff for €1000. The
plaintiff made a counter offer of €950 but the defendant refused to sell. The
plaintiff then wrote again offering to pay €1000 but the defendant refused to
sell again. The plaintiff sued for specific performance.
 Held: By making the counter offer, the plaintiff had rejected the original offer.
It was held that there was no valid binding contract.
 Case: Lau Brothers & Co v China Pacific Navigation Co. Ltd
 Facts: Negotiations for the delivery of logs were conduct through a series of
telegrams and letters. Whilst still in the negotiating stage, the defendant
withdrew. Was there a binding contract between the two parties.
 Held: The Court held that the parties were still in a state of negotiation and no
agreement was formed. Therefore the defendant were justified in
withdrawing.

3.3 Acceptance Must Be Expressed in a Usual and Reasonable Manner

 Section 7(b) provides that if the proposal describes a manner in which it is to be
accepted, and the acceptance is not made in such manner, if he fails to do so, he is
considered to accepts the acceptance
 Unless the proposal prescribes the manner in which it is to be accepted
 Can use whatever mode of acceptance as long it is in a usual and reasonable
manner
 When the manner of acceptance has not been prescribed, it must be made in some
usual and reasonable manner.
 Acceptance by post, telegram, telephone, fax, email, or through personal messenger
may be considered to be a usual manner of acceptance.
  Section 8 provides that performance of the conditions of a proposal, or the
acceptance of any consideration for a reciprocal (two parties) promise which may be
offered with a proposal, is an acceptance of the proposal.
 Once you perform the condition of the proposal, you’re actually making an
acceptance.
 Case: Carlill v Carbolic Smoke Ball Co
 The court held that though the advert is an ITT but by accepting the condition in the
advert, Mrs Carlill had made an acceptance, thus there is a contract between the
parties.
3.4 Silence Does Not Amount to an Acceptance
 General rule: acceptance must be communicated
 Mere intention to accept without communicating the acceptance does not give rise to
a valid and binding contract
 The promisor cannot, without the consent of the promisee, impose or put a condition
that the promisee’s silence shall amount to acceptance
 The acceptance would only be valid if there is positive conduct signifying the
acceptance by the promisee
 Case: Felthouse v. Bindley
 Facts: The plaintiff wrote to his nephew, John on the purchase of the
nephew’s horse and added ‘If I hear no more about him, I consider the horse
is mine at €30 15s’. However, John did not reply. Six weeks later, whilst
selling his farming stock, the nephew told the auctioneer to keep the horse
out of the sale. The auctioneer sold it by mistake and the plaintiff sued the
auctioneer.
 Held: There was no acceptance of the plaintiff’s proposal by John. Therefore,
the plaintiff had no right to impose upon his nephew the sale of his horse
through silence.
3.5 Acceptance Must Be Made Within Time or Within Reasonable Period (section 6(b))
3.6 Acceptance Must Be Communicated and Complete
 Section 3 provides that communication of the acceptance of proposals is deemed to
be made by any act of the accepting party by which he intends to communicate the
acceptance and has the effect of communicating it
 Like the proposal, an acceptance can be made in writing, orally, by conduct or by
combination of these methods.
 It means that the promisee must have done something in order to signify his
acceptance
 Section 4(2)(a) provides that the communication complete as against the proposer,
when it is put in a course of transmission to him, to be out of the power of the
acceptor
 Section 4(2)(b) provides that the communication is complete as against the acceptor,
when it comes to the knowledge of the proposer.
 Acceptance is only effective when it has been made and communicated to the offeror
(u said u agree and the offeror heard your agreed word).
 Then its considered communicated and completed. Once completed the contract
exists.
 Communication of acceptance happens in two ways ie fast/instant communication
and post communication. It’s can be made by f2f, word or mouth, letter, telex,
facsimile or recorded message.
  The law is different as to that two situations. (instantaneous and post)
 In Malaysia the Contract Act stipulates different times when the communication of an
acceptance is complete.
 Instant Case: Entores Ltd v Miles Far East Corporation
 Facts: The complainants, Entores, were a company that was based in London. They
had sent an offer to purchase 100 tons of copper cathodes to the defendants, Miles
Far East Corp. Their company was based in Amsterdam and this offer was
communicated by Telex, a form of instantaneous communication. The Dutch
company sent an acceptance of this offer by Telex to the complainants. When the
contract was not fulfilled, the complainants tried to sue the defendants for damages.
In order to decide whether the action for damages should arise in English or Dutch
law, the court had to decide the moment of acceptance of the contract. If it was when
the contract acceptance was sent, damages would be dealt with under Dutch law. If
acceptance was when it was received, then it would be under English law.
 Held: The court held that the contract and damages were to be decided by English
law. It was stated that the postal rule did not apply for instantaneous
communications. Since Telex was a form of instant messaging, the normal postal
rule of acceptance would not apply and instead, acceptance would be when the
message by Telex was received. Thus, the contract was created in London. This
general principle on acceptance was held to apply to all forms of instantaneous
communication methods. Acceptance via these forms of communication had to be
clear before any contract is created.
 Postal Rule:
 Section 4(2)(a) - To Offeror when it is put in a course of transmission to him.
 Section 4(2)(b) - To Offeree when it comes to the knowledge of the Offeror.

3.7 Postal Rule
 Acceptance by letter
 General rule – acceptance must come to the knowledge of the promisor
 This rule protects the promisee’s interest and give less protection to the promisor’s
interest
 It is an exception that acceptance is only complete when it is communicated
 Promisor is bound when the acceptor posts the letter even though the proposer has
no knowledge of the acceptance or even if the letter is delayed or has disappeared in
the course of transit.
 The offeror is bound by a contract made through post even though he does not know
about the acceptance.
 The offeree is bound by the contract only when the acceptance letter has reached
the knowledge of the offeror.
 Illustration: Ali sent letter offer to Ahmad on 20 Jan 2021. Ahmad receive the letter
and on 21 Jan write the acceptance letter and posted it on the same day. The
contract exist once the letter been put in the letter box as the communication of
acceptence is completed once the letter been put in the transmission to the offeror.
So Ali cannot breach the contract. And Ahmad only bound by the contract after Ali
has receive his acceptance letter.

 Case: Ignatius v. Bell

  Facts: The defendant gave an option to the plaintiff to purchase a piece of
land on the condition that the option must be exercised on or before 20
August 1912 by notice in writing. The plaintiff exercised the option by
posting a letter on 16 August. The defendant only received the letter on
25 August. The plaintiff sued the defendant for specific performance.
 Held: The parties contemplated the use of post as means of communication
and thus section 4 applies. The acceptance was complete as against the
proposer when it was put in a course of transmission to him so as to be out of
the power of the acceptor.
 However, the rule of acceptance by post may be excluded by the express terms of
the offer.
 Case: Holliwell Securities Ltd v Hughes
 The offer prescribe that the acceptance must be by notice in writing to the
intending vendor, thus mere posting the letter of acceptance was not
sufficient to create a binding contract.
 It means that if you want to protect the interest of the promisor, put an exception
‘pengeposan tidak bermakna penerimaan/ mere posting the letter of acceptance was
not sufficient to create a binding contract’.
 Thus, in today business world, if we use post as communication, we should put
exemption clause in order to exclude the application of the principle.
3.8 Revocation of Offer and Acceptance

 Section 4(3)(a) provides that communication of a revocation is complete as against

the person who makes it, when it is put into a course of transmission to the person to
whom it is made, to be out of the power of the person who makes it
 Section 4(3)(b) provides that communication of a revocation is complete as against
the person to whom it is made, when it comes to his knowledge.
 Section 4 Illustration (a) - A proposes, by letter, to sell a house to B at a certain price.
The communication of the proposal is complete when B receives the letter.
 Section 4 Illustration (b) - B accepts A’s proposal by a letter sent by post. The
communication of the acceptance is complete as against A, when the letter is posted;
as against B, when the letter is received by A.
 Section 4 Illustration (c) - A revokes his proposal by telegram. The revocation is
complete as against A when the telegram is despatched. It is complete as against B
when B receives it.
 Section 4 Illustration (d) - B revokes his acceptance by telegram. B’s revocation is
complete as against B when the telegram is despatched, and as against A when it
reaches him.
 Section 5(1) provides that a proposal must be revoked at any time before the
communication of its acceptance is complete as against the proposer, but not
afterward
 Must be followed by section 4(2)(a) and Ignatius v. Bell’s case
 Modes of revocation of offer – section 6 (a) to (d)
 Section 5(2) provides that an acceptance may be revoked at any time before the
communication of the acceptance is complete as against the acceptor, but not
afterward
 Must be followed by section 4(2)(b) and Ignatius v. Bell’s case
 Case: Bryne v Van Tienhoven
  Facts: The defendants wrote a letter, on October 1, to the plaintiffs offering
the sale of 1000 boxes of tin plates. The defendant was based in Cardiff and
the plaintiff was based in New York, and letters took around 10-11 days to be
delivered. The plaintiffs received this letter on October 11 and accepted it on
the same day by telegram, as well as by letter on October 15. However, on
October 8, the defendant sent a letter to the plaintiffs which withdrew their
offer and this arrived with the plaintiff on October 20. The plaintiffs claimed for
damages for the non-delivery of the tin plates.
 Issue: The court was required to establish whether the withdrawal of the offer
for the sale of goods was acceptable. The court would have to consider
whether the contract had been agreed by the acceptance by the plaintiffs of
the letter of October 1, or whether the defendants had successfully withdrawn
their offer by issuing the withdrawal by letter on October 8.
 Held: The Court held that the withdrawal of the offer was ineffective as a
contract had been constructed between the parties on October 11 when the
plaintiffs accepted the offer in the letter dated October 1. On this basis, it was
held that secondary letter which does not arrive until after the first letter had
been responded to and accepted. The court gave judgement for the plaintiff
and awarded that the defendant paid their costs.

4.0 Consideration

Definition Section 2(d) – when at the desire of the promisor, promisee or any other person
has done or abstained from doing or promises to do or to abstain from doing something,
such act, abstinence or promise is called a consideration for the promise
Explanation – an act or abstinence or promise by the promisor or any other person as
required by the promisor in return for his promise
- the promisee must give something in return for the promise by the promisor
- it is a price which is paid by one party in return for a promise
- if there is no consideration, there is no contract
3.1 Rules governing consideration
Consideration must be lawful – section 24
a) unless it is forbidden by a 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
e) the court regards it as immoral or opposed to public policy
-the effect is void
Consideration may move from the promisee or any other person
- the consideration may be provided by a person other than the promisee
Case: Venkata Chinnaya v. Verikatara’ma’ya’
Facts: A sister agreed to pay an annuity to her brothers who provided no consideration for
the promise. However, on the same day, their mother had given the sister some land,
stipulating that she must pay the annuity to her brothers. The sister subsequently failed to
pay the annuity and she was sued by her brothers.
Held: She was liable to pay the annuity. A party to an agreement can enforce the promise,
even if he himself has given no consideration, as long as somebody has done so. There was
a good consideration for the promise even though it has moved from her mother and not her
brothers.
3.2 Consideration need not be adequate but must be sufficient sec 26
- as long the consideration has value in the eyes of the law
-there must be something rather than nothing
- a contract is not void merely because the consideration is inadequate
- consideration need not be at market value or the original price so long as the promisee
gives something in value as agreed between the promisor and the promisee in return for the
promisor’s promise.
Case: Phang Swee Kim v. Beh I Hock
Facts: The respondent alleged that the appellant had trespassed on his land. He instituted
an action claiming for possession. The appellant counterclaimed for a declaration that she
was entitled to the said land. The appellant argued that there was an oral agreement
between her and the respondent in which the respondent agreed to transfer the land to her
for the payment of rm500.
Held: The inadequacy of the consideration was immaterial and the agreement between them
is valid
3.3 General rule – section 26
- an agreement without valid consideration is void unless it comes under one of its
exceptions

4. Capacity
Definition Section 10 – All agreements are contracts if they are made by the free consent of
parties competent to contract, for a lawful consideration and with a lawful object, and are
not hereby expressly declared to be void
Definition Section 11 – A person is competent to contract “who are the age of majority
according to law which they are subject, and who is of sound mind, and not disqualified from
contracting by any law to which he is subject”.
Section 2 of the Age of Majority Act 1971 – All persons attain the age of majority at the
age of 18 years. Those who have not yet to attain the age of 18 are considered as minors.
Meaning – Ability of the parties to enter to a contract to fully understand its terms and
obligations. The parties entering into a contract should also be competent to contract that is
they must have legal capacity to do so.
4.1 Effects of a contract entered with a minor
- The contract will be generally void and he/she cannot be sued under such void contracts
Case: Tan Hee Juan v The Boon Keat
Facts: Plaintiff (a minor) contracted to transfer his land to the defendant. Later, the plaintiff
applied to the court for an order setting aside the contract
Held: The contract was void. The court ordered the restoration of the land to the minor
4.2 Exceptions
The contract is valid if it is entered by a minor :
a) Necessaries (section 69) Contract for necessary
Necessary – things which are essential or necessary to the existence and reasonable
comfort of the infant
-luxuries do not fall under the category of necessary
To determine whether the goods or services are necessary, it depends on
i) the nature of the goods/ services supplied
ii) the minor’s actual needs
iii) the minor’s condition of life
Case: Nash v Inman (if the contract is not valid)
Facts: A Cambridge undergraduate, the son of an architect, was supplied with clothes,
including 11 ‘fancy waistcoats’, to the value of $122
Held: The cloth could be considered appropriate to the undergraduate’s station of life, but
the contract was not enforceable because the minor was already adequately supplied with
clothes. Therefore, clothes supplied by the tailor could not be classified as necessaries.
Section 69 – A person who has supplied necessaries to a minor to receive reimbursement
from the property of the minor

Case: Government of Malaysia v. Gurcharan Singh (if the contract is valid)

Facts: The plaintiff sued the defendant for breach of contract. The claim was $11,500 which
was alleged to be the sum spent by the Government in educating the first defendant. At the
time of the contract, the defendant was a minor. The defendant had served the government
for 3 years and 10 months out of the contractual period of 5 years.
Issue: Whether education supplied by the Government was considered a necessary in order
to be reimbursed under section 69
Held: Education was necessary, thus the first defendant was liable for the repayment of a
reasonable sum spent on him. The plaintiff was, however, awarded RM2,683 as the amount
of damages payable based on the defendant’s completed months of service.
b) Scholarship agreement
Section 4 (a) (Amendment) (was amended because of the government’s case)
A scholarship agreement entered into by an infant is valid when the scholarship, award,
bursary, loan, or scholarship is granted by the federal or state government or an educational
institution such as a university
-If it is granted by other than these, they are not bound by section 4(a) but section 69
-Hence if they referred to section 69, then they need to prove if the things or services
provided was an necessary
4.3 Unsound Mind – section 12
Section 12(1) – A person is said to be of sound mind for the purpose of making a contract if,
at the time when he makes it, he is capable of understanding it and forming a rational
judgment as to the contract’s effect on his interest
Section 12(2) – 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) – A person who is usually of sound mind, but occasionally of unsound mind,
may not make a contract when he is of unsound mind
6. Certainty
-Section 30 – Agreements, the meaning of which is not certain, or capable of being made
certain, are void
-Meaning: the terms of the contract must be certain, clear, and definite
- If the terms are vague or uncertain, the contract is invalid and cannot be enforced
-Example
a) Clear in terms of its conditions (period/pricing)
b) Both parties understand the intention and object of agreement
c) Language can be understood by both parties
6.1 Categories of uncertainty
a) Language used may be too vague
-The language or terms used are ambiguous and indefinite, which cannot be ascertained
with reasonable certainty
b) Failed due to incompleteness
- Failure to reach an agreement on a vital or fundamental term of an agreement, such as
price, quantity, and others
Illustration (a) to sec 30 – If A agrees to sell to B “100 tons of oil” there is nothing
whatsoever to show what kind of oil was intended and thus the agreement is void due to
uncertainty
Illustration (c) to sec 30 – But if A, a dealer of coconut oil only, agrees to sell to B “100 tons
of oil” the agreement is not void for uncertainty because the nature of A’s trade affords an
indication of the meaning of the words. The contract will be construed as one for the sale of
100 tons of coconut oil
Case: Karuppan Chetty v Suah Thian
Facts: The parties agreed upon the granting of a lease ‘at Rm35’ per month for as long as he
likes
Held: The court held that the requirement of certainty had not been satisfied as the duration
of one of the most important terms of the lease was undefined or uncertain. The court held
the argument to be void
7. Free Consent
Sec 13 – consent is when two or more persons are said to consent when they agree upon
the same thing in the same sense
Sec 14 – consent is said to be free when it is not caused by coercion, undue influence,
fraud, misinterpretation and mistake
7.1 Void contract
- an agreement not enforceable by law according to sec 2(g)
- no rights are given to the parties and no obligations are imposed on them
- the contract is unenforceable and cannot be enforced even by the court
7.2 Voidable contract
- an agreement which is enforceable by law at the option of one of the parties under sec 2(i)
- one of the parties is given a choice to either continue the contract or to discontinue the
contract
- the agreement is valid and binding until the party who is entitled to rescind (batalkan) the
contract chooses to rescind it
7.3 Elements that may affect free consent
a) Coercion
definition sec 15 – “committing or threatening to commit any act forbidden by the Penal
Code, or the unlawful detaining or threatening to detain, any property to the prejudice of any
person whatsoever, with the intention of causing any person to enter into an agreement.”
Two ways of committing coercion –
(i) the commission, or the threat to commit any act forbidden by the Penal Code
(ii) the unlawful detention or threat of unlawful detention of any property
Effect of coercion – the contract is voidable at the option of the party – sec 19 (1)
- the party coerced has a choice.
- he may affirm the contract and continue with it or he may ask the court to rescind the
contract
Case: Kesarmal s/o Letchman Das v Valiappa Chettiar
Facts: A transfer of property was made under ‘the orders of the Sultan’, issued in the
ominous (tidak menyenangkan) presence of 2 Japanese officers during the Japanese
occupation in Malaysia
Held: the agreement was not valid because the consent given was not free and therefore the
transfer become voidable at the will of the party whose consent was so caused
(b) Undue Influence
- not the same as force
- undue here means inappropriate
- action of change your belief
- have a dominant position ( the court will infer based on the relationship ) (doctor and
patient)
Definition sec 16(1) – “a contract is said to be induced by undue influence 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 an unfair advantage over the other
Necessary elements to establish undue influence –
(i) one of the parties is in a position to dominate the will of the other
(ii) use that position to obtain an unfair advantage of other
Effect of undue influence – the contract is voidable at the option of the party – sec 20
Case: Inche Noriah v Shaik Allie bin Omar
Facts: An old and illiterate (unhealthy) Malay woman executed a deed of gift of a landed
property to her nephew, the respondent, who had been managing her affairs. The court
found that she was a feeble (lemah) old woman unable to leave the house, relying entirely
upon the respondent for everything. She had no knowledge of her own affairs or the value of
her properties
Held: When the appellant executed a deed (melaksanakan surat ikatan), her relationship
with the respondent was sufficient to raise presumption of the influence over the
appellant(memadai untuk menimbulkan anggapan pengaruh terhadap appellant). The gift
should be set aside as the presumption which arose was not rebutted. (hadiah tersebut
hendaklah diketepikan kerana anggapan yang timbul tidak disangkal).
-the one who shoul rebut (sangkal) is the respondent
(c) Fraud
Definition sec 17 – “… certain acts which are committed with intent to induce another party
to enter into a contract.”
- maker of the presentation does not believe in his statement, but still proceed with his
statement
- the statement made with the intent to deceive another party or to induce him to enter into a
contract
Effect of fraud – the contract is voidable at the option of the party – sec 19 (1)
Case: Kheng Chwee Lian v Wong Tak Thong
Facts: The respondent bought a half share in a piece of land from the appellant.
Subsequently, the respondent had been persuaded to enter into a second contract on the
false representation that the area of the land to be transferred was of the same size as the
land which the respondent had agreed to buy under the first contract. Actually the area was
less.
Held: The respondent was induced by misinterpretation into signing the second agreement.
Therefore, the respondent had the right to repudiate (menyangkal) the agreement by
claiming it was induced by fraudulent misinterpretation.
(d) Misinterpretation
Definition sec 18 – (a) the positive assertation in a manner not warranted by the information
of the person making it, that of 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, by misleading another
- it is a false misinterpretation made by one party, before or at the time of making the
contract, addressed to the other party to the contract, and the maker of the statement
believe that what he said is true
- no intention
- makers believe the statement but it turns out to be false statement due to his mistake
- innocent
Effect of misinterpretation – the contract is voidable at the option of the party – sec 19(1)

Case: Bisset v Wilkinson

Facts: The defendant sold some land to the plaintiff and said that the land could
accommodate up to 2000 sheep. Relying on this statement, the plaintiff bought the land but
later discovered that the land could not accommodate up to 2000 sheep as represented by
the defendant.
Held: The contract was not voidable because the statement was only an honest opinion of
the defendant. He never carried on sheep-farming on that land but poultry-farming.
(e) Mistake
Definition sec 21 – “… where both parties to an agreement are under a mistake as to a
matter of fact essential to the agreement, the agreement is void.”
A mistake renders an agreement void if
(i) It is made by both parties
(ii) Mistakes as to a matter of fact essential to the agreement
Circumstances
(i) mistake as to the existence of the subject matter of the agreement
(ii) mistake as to identity of the subject matter
(iii) mistake as to the quality of the subject matter
(iv) mistake as to the possibility of performing the agreement
Case: Raffles v Wichelhaus
Facts: Raffles agreed to sell cotton to Wichelhaus. The agreement provided that the cotton
was to arrive in England from Bombay. However, there were two different ships regularly
sailing from Bombay to England, one leaving in October and the other in December. Raffles
shipped the cotton on the December ship, and the defendant Wichelhaus refused to accept
the cotton. Raffles sued on the alleged contract. Wichelhaus argued that he understood the
shipment would be on the October ship.
Held: The court concluded that there was no binding contract since the parties meant
different ships and there was a mistake by both Raffles and Wichelhaus.