CHAPTER 2: LAW OF CONTRACT
CLO 1: Describe the basic legal requirements of business law in Malaysia
LEARNING OUTCOME
LO1: INTRODUCTION TO LAW OF CONTRACT
LO2: ELEMENT OF A VALID CONTRACT
LO3: FREE CONSENT
LO4: DISCHARGE OF CONTRACT
LO5: REMEDIES OF BREACH OF CONTRACT
2.1)INTRODUCTION.
- Contract can be defined as a legally enforceable agreement betweentwo or more
person
WHAT IS CONTRACT
Section 2 (h) of the Contract Act 1950:
A contract is an agreement enforceable by law
All contract are agreement but not all agreements are contract
OFFER
DEFINITION :
S. 2 (a) of the Contracts Act
1950 :
“when one person signifies to
another his willingness to do …
anything, with a view to obtaining
the assent of that other…he is said
to make a proposal.”
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Offer…
RM30k
Zaid Adam
Signifies…
Offeror
Promisor
Proposer
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HOW TO MAKE AN OFFER?
S.9 :
a) Express – in words
verbal / writing
b) Implied – from the conduct of
the parties
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TYPES OF OFFER :
1) Specific Offer
Address to a particular
person
Only that particular person
can accept
s.2 (b)
Boulton v Jones 7
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Section 2 (b) provides :
“ when the person to whom
the proposal is made
signifies his assent…the
proposal is said to be
accepted…”
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For specific offer, only the addressee may
accept…
RM30k
Zaid Adam
CONTRACT
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However, if accepted by someone who is not
the addressee…
RM30k
Zaid
Adam
Abu
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2) General Offer
Address to the public at large.
Any one who satisfies
/meets the conditions of the
offer, is making an
acceptance.
Carlill v Carbolic Smoke
Ball Co
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General Offer
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CONDITION OF AN OFFER
1) Must be certain
Guthing v Lynn
2) Must be communicated
s.2 (a), s.4 (1)
No communication, no
valid offer.
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Section 4 (1) of the Contracts
Act 1950 provides :
“The communication of a
proposal is complete when it
comes to the knowledge of the
person to whom it is made.”
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Thus, if the offeree did not
know about the offer, the offer
itself is not valid.
Therefore, there would be no
binding contract.
Taylor v Laird
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Hence, although a person has
done something, which
coincides with the requirement
of the offer, that is not an
acceptance, if he was not
aware of the offer at that time.
R v Clarke
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OFFER vs INVITATION TO TREAT
ITT : preliminary communication
between the parties that might lead
to an offer.
It is not an offer but inviting the
other party to make an offer.
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Examples :
1) advertisement
2) display of goods with price
tags in a self service shop
3) tender
4) price-list / quotation
5) auctioneer inviting bids in
an auction sale
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a) Advertisement
• Advertisement = ITT
• The advertiser / seller = makes ITT
• The person who responds = offeror
• The seller / service provider = offeree
• If the seller agreed to sell = acceptance
contract
• If no agreement to sell no contract
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Exception :
Advertisement may become a general offer if it comes
together with another promise e.g. reward
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b) Display of Goods
• Display of goods = ITT
• The buyer selects and brings the goods to the counter for
payment = offeror
• The seller / cashier = offeree
• Once the cashier agreed to sell & accepted the money =
acceptance contract
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c) Tender
• Notice calling for tenders = ITT
• Any person who submits the tender = offeror
• The person who issues the notice = offeree
• Once the tender is accepted
by the offeree acceptance contract
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d) Price-list / quotation
• The price-list / quotation = ITT
• The prospective buyer = offeror
• The seller = offeree
• Once the seller agreed to sell
acceptance contract
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e) Auctioneer inviting bids
• Auctioneer inviting bids = ITT
• The bidders = offeror
• Auctioneer = offeree
• Once the auctioneer knock the hammer acceptance
contract
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