Lecture 1 - Contract Law

8/17/2019 Lecture 1 - Contract Law

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What is contract law?

- Basic law that governs and relates to mostaspects of human life.

- Governs human daily activities in almost allaspects – vary from simple contracts tocomplicated one.

- Contracts provide the means for individuals

and businesses to sell, or transfer property,services and other rights.


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What is a contract?

- !ford Concise "ictionary #

$ % written or spo&en agreement between two

or more parties, intended to be enforceableby law'.

- (. )*h+ Contracts %ct /

- $ %n agreement enforceable by law is acontract'.


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) elements #

+ 0here must be agreement

(. )*e+ Contracts %ct /

- $every promise and every set of promises,

forming the consideration for each other, isan agreement.'

- - % promise is formed when a proposal isaccepted.

ffer 1 %cceptance 2 %greement


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)+ 0he agreement must be enforceable by law.

- 3ot all agreements are contracts although allcontracts must be based on agreement.

- %ny agreements which are not enforceableby law, are not considered as valid contracts.

- 4!ample #

- (ee illustration (. 5 Contracts %ct


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Who are the parties to the contract?

- 4very contract must involve at least ) partiesthat is the person who proposes the contract*offerer6promisor+, and the parties to whom

the proposal is made *offeree6promisee+.

(ee (. ) *c+ Contracts %ct


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(. )*h+ Contracts %ct #

- a contract is an agreement enforceable bylaw.

- 0herefore, 78(0 B4 %3 %G9447430 : 78(0B4 43;9C4%B


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(./*+ Contracts %ct #

$ %ll agreements are contracts if they are

made by the free consent of partiescompetent to contract, for a lawfulconsideration and with a lawful ob>ect, andare not hereby e!pressly declared to bevoid'.

(./*)+ Contracts %ct #

$ 3othing herein contained shall affect anylaw by which any contract is reuired to bemade in writing or in the presence ofwitnesses, or any law relating to theregistration of documents'.


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@mportant AAAA alid agreement – s. )*e+

ffer – s. )*a+ %cceptance – s. )*b+ Certainty of terms – s. /

Considerations - s. )*d+, s. )D @ntention to create legal relations Capacities of parties – s. : )


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;ree consent – s. : E 3o coercion – s. 3o undue influence – s. D 3o fraud – s. F

3o misrepresentation – s. 5 3o mista&e of facts – s. )

;ormalities


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(. )*a+ Contracts %ct #

ffer 6 proposal is an e!pression of willingnessto do or to abstain from doing anything with

a view to obtaining the assent of that otherto the act or abstinence.

% person is said to ma&e an offer when he

proposes a set of terms with intention thatthese terms will form a legally bindingagreement when the offeree accepts them.


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%n offer can be made either orally or inwriting or implied by the conduct of the

person ma&ing the offer.

4!ample #• When a person puts an item for auction with

e!press provision that he will sell the item towhomever places the highest bid, hisconduct is offer to sell.

• When a person ta&es an item from a shopsshelf, puts it in the shopping bas&et beforepresenting it for payment at the cashier, it issaid that by his conduct the person is ma&ingan offer.


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0wo types of offer #

. Bilateral ffer

- made to a specific person or group ofpersons.

). 8nilateral ffer

- made to the world at large.


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Generally, an offer should be made to aspecific target as no contract can be made

with the world at large.

However, if an offer is made to the wholeworld, and any member of public in certainmanners can accept this, such offer will beconsidered as an effective offer.

When the offeree performs the act in uestionor fulfils the stipulated reuirements.


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Carlill v. The Carbolic Smoke Ball Company[1893] 1 QB 525

;acts #0he " alleged that their smo&e balls cured

many illnesses and made it impossible tocatch flu. 0hey made an advertisement

stating that whoever used the balls accordingto prescription yet still caught flu would becompensated the amount of I// and toshow their sincerity about the offer, they haddeposited the amount of I/// in one ban&.0he J bought one of the balls and used itaccording to the prescription and still caughtthe flu. (he claimed for the I// reward andthe " refused to pay on several grounds.


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%rgument#

- 0he advertisement was a mere sales puff

rather than an offer, there was no valid offeras a contract cannot be made to the wholeworld K and the advertisement was too vagueto be an offer.

Held #

- 0he offer was a valid offer of unilateralcontract. 0he offer stipulated that

acceptance could be made by anyone whoused a smo&e ball properly and yet theperson caught flu.


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- 0he words used were plain and were not

vague. 0he J by her conduct had acceptedthe offer by fulfilling these reuirements.

- Hence, there was a valid contract and the "was bound by their offer. 0he fact that they

deposited the amount of I/// in one ban&further indicated the seriousness of theiroffer and hence the advertisement was not amere sales puff.


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7erely an invitation to negotiate or tobargain – so, the acceptance to a mereinvitation to treat is the offer.

0here is not yet any acceptance to any offer

at that point of time. 7eaning that, the person who ma&es an

invitation to treat has the option either toaccept the proposal or to re>ect it.


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(ome circumstances #

. "isplay of Goods in (hops

Fiher v. Bell [19!1] 1 QB 39" -- 0he " was found not guilty of the criminal

offence of offering the &nife for sale merelyby displaying a flic& &nife in his shop window.

--


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Jharmaceutical (ociety of Great Britain v.Boots Cash Chemists *(outhern+


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Held #

0he Court re>ect the argument and held that

the display of goods on supermar&et shelvesamounted to an invitation to treat ratherthan an offer to sell. 0he mere fact that thecustomer pic&s up a bottle of medicine from

the shelves in this case does not amount toan acceptance of an offer to sell.

@t is an offer by the customer to buy and nosale is effected until the buyers offer to buy

is accepted by the acceptance of the price.


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). %dvertisements and other notices

#ar$ri%&e v. Cri$$en%en [19!8] 1 '() 12*"

Held #

0he " escaped liability for unlawfully offeringfor sale a bramblefinch because theadvertisement he placed in the classifiedsection of a magaPine was held as mereinvitation to treat and not an offer.


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. %uction

- Generally, any calls for bids are merely

invitation to treat. When % places his bid, heis regarded as ma&ing an offer and hence theauctioneer is free to accept or re>ect.

- #ayne v. Cane +1,89- 3 T) 1"8

Held #

0he ", who made the highest bid for the Jsgoods and withdrew the bid before the fall ofthe auctioneers hammer, was not bound byany contract. 0he bid was an offer.


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- 0herefore, as long as it has not beenaccepted by &noc&ing down the hammer, the

bidder has all the right to withdraw theoffer.

- 0his is also incorporated in s. / %uction(ales %ct which provides that #

- $ % sale by public auction shall be completewhen the auctioneer announces itscompletion by the fall of the hammer.'


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E. 0enders

- 8sually presumed as mere invitations to

treat.- Case # Spencer v. ar%in& +18,*- () 5 C# 5!1

- Held #

- $L an announcement inviting tenders is not

normally an offerK unless accompanied bywords indicating that the highest or lowesttender will be accepted, it is a mere attemptto ascertain whether an acceptable offer can

be obtained.'


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- However, in certain circumstances aninvitation to submit tenders may held to bean offer.

- When it is e!pressly stated that the tenderswill be given to whoever offers the highestprice for the tendered items or services orwhoever offers the lowest price to supply thereuired items or services and meets theconditions prescribed.


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- Case # Blackpool an% Fy%le /ero Cl0b ($%. .Blackpool Boro0&h Co0ncil [199*] 3 /ll ) 25

Held #

@n certain circumstances, an invitation to

tender could give rise to binding obligations.0his was such an instance since the tendershad been sought from a number of parties,all of them &nown to be ", who had alsoimposed strict rules of compliance on them.


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. 9eply to enuiry

- %n offer, being a proposal is transformed intoa binding promise once it is accepted.

- However, when a person supplies an answer

to any enuiry, there is no presumption thatin supplying the answer the person has theintention to be bound by his word.


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- Case # arvey v. Facey [1893] /C 552

- ;acts # 0he %ppellant sent a telegram to the

9espondent as&ing the price of Bumper HallJen to which the 9espondent replied $


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Case#

Jreston Corp. (dn. Bhd. . 4dsward


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@t is important to note that an offer must becommunicated.

%n offer is effective when, and not until, it iscommunicated to the offeree.

Case # ;itch v. (neda&er *5D5+ 5 3= )E5

- % reward cannot be claimed by one who didnot &now that it had been offered.


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@f he &nows about the offer, but is inspired toperformance by a motive other than that of

claiming the reward, such motive isimmaterial.

Case # Williams v. Carwardine *5+

- 0he J, with &nowledge of the reward,

supplied information leading to theconviction of an assailant for murder, butonly did this Sto ease her conscience, and inhopes of forgiveness hereafter, she was held

entitled to claim the sum offered.


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Cross-offers.- 0he offeree must &now about the proposal

before he can accept it.- Case # Tinn v. oman 4 Co. +18,3-- ;acts #

n )5665F, the " wrote to the J

offering to sell him 5// tons of iron at Ds.Jer ton, together with a further uantity atthe same price. n the same day, the Jwrote to the " offering to buy 5// tons atDs., together with a further uantity at a

lower price. 0he letters crossed in the post.0he J contended that there was, at allevents, a good contract for 5// tons at Ds.Jer ton.


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Hence, two manifestations of a willingness toma&e the same bargain do not constitute acontract unless one is made with referenceto the other.


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(ilence does not give consent where offernot communicated.

- @f % does wor& for B without the reuest or&nowledge of B, can he sue for the value ofhis wor&?

- % person cannot be forced to accept and payfor that which he has had no opportunity of

re>ecting.


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Case # Taylor v. (air% +185!-

- ;acts #

- 0he J was engaged to command the "s shipand to conduct e!plorers upon an e!peditionup the 9iver 3iger. He threw up his commandin the course of the e!pedition, but helpedto wor& the vessel home, though without the&nowledge of the ". He then claimed to beremunerated for the services thus rendered.


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Held # Cannot recoverA 0he " never had theoption of accepting or refusing the serviceswhile they were being rendered.

- 0he Js offer, being uncommunicated, did notadmit of acceptance and could not give himany rights against the party to whom it wasaddressed.


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0here are E ways to terminate #9evocation


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7ay be done anytime before the offereeaccepts the offer, provided the revocation iscommunicated to the offeree. *s. *++

(. D*a+ – notice done by the offerer6proposer

But, Common


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ickinon v. o%% +18"*-

Held #0he offer was effectively revo&ed when the

offeree was informed by a rd party that theproperty, which was initially offered for sale

to him, was sold to another few days beforethe offer lapsed.


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However, when the offeror promises to &eepan offer for a period of time andconsideration is given to the offeror to &eepthe offer open for the duration of time, thethe offeror cannot withdraw his offer within

the stipulated period.

0his is &nown as J0@3.


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Case # oo Sy0n 60i v. 7ap 6ooi 6ooi [198"]2 6( "8

;acts #

0he " had allowed ) wee&s option period tothe J upon receiving the payment of 97//

from the J. 0he J had e!ercised the optionby sending a letter accepting the offercoupled with the cheue for the payment of/T of the purchase price being deposit for

the contract. "espite this, the " refused toproceed with the agreement.


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Held #(ince the option was e!ercised within thestipulated period and the conditions reuiredwere met, the offeror by her promise.

-- meaning that the offeror cannot sell theproperty until e!piration of option period.


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ccurs either upon the e!piry of the periodprescribed in the offer, or..

f no such period prescribed, upon thee!piry of reasonable period.

s.D*b+

- @f no acceptance has been communicatedwithin this period, the offer will

automatically lapse, and the offeror is notbound by any agreement if his offer isaccepted outside the prescribed period ornot within reasonable time.


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Case # 7acon Wor&s : 0rading (dn Bhd v.Jhang Hon Chin : %nor MFDN ) 7ection by theofferee'.

- @t was also held that where no time was

fi!ed, an offer would lapse after thee!piration of reasonable time, whichdepends on the actual circumstances of eachcase and the nature of business.


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(. D *c+ – $ by the failure of the acceptor to fill acondition precedent to acceptance'.

- Case # /beroyle #lan$a$ion ($%. . ha: BianChen& [19!*] 6( ",

- Held#- When conditions were made as conditions

precedent to the contract, formation of contractdepended on the fulfilment of such conditions.0herefore, 9 was entitled to the return of hisdeposit for no contract had been validly createddue to failure on the part of the appellant tomeet the conditions.


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- Case # 6alayan Flo0r 6ill Bh% v. Sa: n&Chee 4 /nor [2***] 3 6( !8

- Co% Held #

"ismissed the appeal.

@t was held although in their letter they

accepted the offer and indicated that theywere willing to satisfy all the conditions ofthe offer, in reality the appellants failed tomeet these conditions. Hence there was no

valid contract.


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"eath : mental disorder

- s. D*d+ – e!pressly provides that death :mental disorder will operates as ground oftermination of offer if this fact is &nown tothe offeree before he accepts the offer.

- (o, impliedly, if offeree does not &now, hecan effectively accept the offer and hencethe offeror is bound by the particularcontract.


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- 3ot stated in Contracts %ct as a method toterminate an offer.

-

Case # Hyde v. Wrench *5E/+- ;acts #

" agreed to sell his farm at certain price. Jtried to negotiate by as&ing for lower price.

" refused. ;ew days later, the offeree sent aletter accepting the original offer but the "refused this.


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Held # Js action for specific performance failed as

it was found that there was no valid contractas the counter offer amounted to re>ection

of the offer. 0he re>ection terminated theoffer and therefore the J could not accept anoffer which was no longer in e!istence.


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Lecture 1 - Contract Law

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