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Transcript of 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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Intention to Create Legal Relationscontinued
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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Intention to Create Legal Relationscontinued
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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THE ENDPlease email your queries [email protected]
Thanks
mailto:[email protected]:[email protected]