CONTRACT LAW (M)

AGREEMENT
(1)
Paradigm Edge Sdn Bhd advertises in the Star newspaper that there is a vacancy for the post of
Company Secretary. Denise, who recently graduated with the ICSA qualification, intends to
apply for the post. Together with her boyfriend she went shopping for stationery at Pick N Pay
Supermarket Sdn Bhd at Mid Station District. She selects a pen, eraser, envelope, writing pas and
a do-it-yourself book bearing the title Effective Letter Writing for a Job authored by Cathy
Viktor. She puts these items into her shopping trolley.
Answer the following questions:
(a) Does the advertisement in the Star newspaper constitute an offer to contract? Give reasons for
your answer.
(b) Has a contract been made between Pick N Pay Supermarket Sdn Bhd and Denise when
Denise puts the selected items into her shopping trolley? Support your answer with reasons and
case law.
Answer
(a) Where an advertisement is concerned, it could be either an offer or invitation to treat. The
intention of the parties is the main consideration. In Carlill v Carbolic Smoke Ball Co Ltd an
advertisement offering a sum of money to anyone who still contracted influenza despite using the
remedy sold by the company was held to be an offer made to the world at large. This was
because the company exhibited a willingness to be bound as it had deposited a sum of money
with a bank to show its sincerity.
However, in Coelho v The Public Services Commission the plaintiff had applied for a position in
response to a news paper advertisement. He was later informed that his application had been
accepted. Later, the defendant attempted to terminate his employment on the ground that he was
appointed on probation. The plaintiff then challenged the termination by suing the defendant. It

was held that the advertisement was an invitation to qualified persons to apply and the resulting
applications were offers. This principle was applied in Majumder v A-G of Sarawak where an
advertisement in the newspaper for the position of a doctor was an invitation to suitable persons
to apply for the position of company secretary. It is not an offer to contract.
(b) A display of goods is an invitation t treat and an offer. This principle was stated in
Pharmaceutical Society of Great Britain v Boots Cash Chemist. The customer makes an offer to
buy the goods when he proceeds to the cashier to pay for them. The cashier usually accepts the
offer, on behalf of the owner, by accepting the money from the customer is thus free to change or
put back any goods he does not want to buy back on the shelf, before he reaches the cashier.
When Denise puts the selected items into her shopping trolley, she is intending to make an offer t
buy at the cashier. The acceptance of her offer by the cashier will then result in an agreement and
thus contract. So before then, no contract exists. A contract has not been made between the
supermarket and Denise when she puts the selected items into her shopping trolley.

(2)
On 1 May 2001 Abu wrote to Bakar as follows:
I offer my Banzai car to you for a reasonable price. Please reply stating your price.
On 4 May 2001 Bakar wrote to Abu as follows:
I consider RM50, 000 as a reasonable price for your Banzai car. I enclose herewith a bank draft
for the said amount. Please deliver the car to my house as soon as possible.
On 6 May 2001 Abu returned Bakars bank draft stating that he had changes his mind about
selling the car.
Bakar seeks your advice on this matter. Advise Bakar.
On 15 May 2001 Chan sent a fax to Doh as follows:

I oofer my Ming vase to you for RM25,000. Ipromised to keep the offer open for your
acceptance until 25 May 2001.
Doh decided to accept Chans offer. However, before he could fax his acceptance he received
another fax from Chan on 18 May 2001 as follows,
I have sold and delivered the Ming vase to Ee Ee for RM27, 000. I hope you are not
disappointed.
Doh is unhappy with Chans conduct. He wishes to sue Chan for damages for breach of contract.
Advise Doh.
Answer:
Abus letter dated 1 May 2001 was an invitation to Bakar to state a price for his Banzai car.
When on 4 May 2001 Bakar wrote and enclose bank draft to Ali, it was an offer or proposal to
buy the Banzai car RM50, 000 within the meaning of S.2 (a) Contracts Act 1950.
When on 6 May 2001 by Abu returning the bank draft stating that he had changed his mind about
selling the car it was a rejection of the offer made by Bakar to Ali by letter dated 4 May 2001.
As such there is no contract between Abu and Bakar.
When Chan sent the fax to Doh on 15 May 2001 it is an offer or proposal to sell the Ming vase
for RM25, 000 according to S.2 (a) Contracts Act 1950.
Before Doh could fax the decision of his acceptance Chan has faxed on 18 May 2001 that he has
sold and delivered the vase to Ee Ee for RM27, 000. This would be revocation of the offer dated
15 May 2001 made by Chan to Doh, according to S.5 (1) and S.6 (a).
The mere fact that Doh decided to accept the offer is not sufficient as it is required by S.4 (2)
(a & b) it must be communicated. However the revocation has been communicated in
compliance withS.4 (3) (a & b) by Chan.
Therefore we need to advise Doh that he may not sue Chan for any damages as there is no
contract between them.

(3)
(a) An offer or proposal to enter into an agreement may lapse or come to an end under certain
circumstances.
(b) ABC Bhd is the manufacturer of a bottled soft drink called Gogo. On 16 July 2001 the
company inserted an advertisement in the Good News newspaper as follows:
ABC Bhd promises to pay RM5, 000 to any person who collects and delivers 10, 000
Gogo bottle caps to ABC Bhds head office before 30 November 2001.

Ali saw the advertisement on 178 July 2001. On 18 July 2001 he started collecting Gogo bottle
caps. On 15 November 2001 he arrived at ABC Bhds head office to deliver 10, 000 Gogo
bottle caps and to claim the promised reward. ABC Bhd refused to accept the bottle caps stating
that:
(i) ABC Bhd had to intention to create legal relations when it inserted the advertisement;
(ii) Ali had not communicated to ABC Bhd his acceptance of its offer before he had started
collecting the bottle caps;
(iii) ABC Bhd had in fact withdrawn its offer by inserting another advertisement in the Good
News newspaper on 8 November 2001.
Ali claims that he did not see the advertisement withdrawing the offer.
Ali intends to sue ABC Bhd. Advise him.

Answer
(a) Under S.6 Contracts Act 1950 a proposal may lapse or come to an end in any of the following
circumstances.

1. Communicating the notice of revocation by the proposer to the party to whom the proposal
was made;
2. The time prescribed in the proposal for its acceptance lapses, or if no time is prescribed for
acceptance by the lapse of a reasonable time (Ramsgate Victoria Hotel Co. Ltd. V Montefiare
and Macon Works @ Trading Sdn. Bhd. v. Phang Hon Chin @ Anor;
3. The failure of the acceptor to fulfil a condition precedent to acceptance; Aberfoyle Plantation
Ltd v Khaw Bian Cheng
4. The death or mental disorder of the proposer if the fact of the proposers death or mental
disorder comes to the knowledge of the acceptor before acceptance.
(b) In advising Ali as he intends to sue ABC Bhd, we need to highlight to him that there must
have been an agreement between ABC Bhd and himself. In order for there to be a contract it
must be proven that there is an offer (proposal) and acceptance, and also the other elements
necessary as provided under S.10(1) Contracts Act 1950.
On the facts when ABC Bhd inserted an advertisement in the Good News newspaper on 16
Julai 2001 it falls as the exception to the general rule of advertisement being an invitation to treat
and as such it amounts to a proposal or offer of an unilateral nature, which is made to the whole
world and can be accepted by anyone, (Carlill v Carbolic Smokeball Co Ltd) satisfying the
meaning provided under S.2 (a) Contracts Act 1950, ehich provides, when one signifies to
another his willingness to do or to abstain from doing anything, with a view to obtaining the
assent of that other to the act or abstinence, he is said to make a proposal.
Since Ali upon seeing the advertisement on 17 Julai 2011 started collecting Gogo bottle caps
that indicated that it (the proposal) has been accepted within the meaning of S.2 (b) Contracts
Act 1950, which provides that when the person to whom the proposal is made signifies his assent
there to, the proposal is said to be accepted.
However ABC Bhd in refusing to accept the bottle caps stated that they had no intention to create
legal relation. They could not say so, as although the Contracts Act 1950 is silent when an
agreement is entered on a commercial arrangement there is a rebuttable presumption that a legal
relationship is intended. Esso Petroleum Co. Ltd v Customs & Excise Commissioner.

They also argue that Ali had not communicated the acceptance before he started collecting the
bottle caps, since on the facts it is an offer of unilateral nature one has to just satisfy the
condition of the offer i.e. perform the act of acceptance. This is supported by S.8 Contracts Act
1950, which provides performance of the conditions of a proposal, is an acceptance of the
proposal. Carlill v Carbolic Smokeball Co Ltd
As to the argument that ABC Bhd has withdrawn the offer by inserting advertisement on 8
November 2001 for it to be effective it must have been communicated before the offer is
accepted, [S.5 (1)]. However on the facts Ali has already accepted the offer on 17 Julai 2001 and
S.4 (3) (b) Contracts Act 1950, provides that the communication of revocation is complte as
against the person to whom it is made, when it comes to his knowledge and here Ali claims that
he never see the advertisement.
Further on the facts since it is an unilateral offer the revocation has to be communicated before
the commencement or performance of the act of acceptance. Errinton v Errington Woods.
Looking at the discussions above Ali may sue ABC Bhd for breach of a contract.

(4)
In relation to contract law, distinguish the following, clearly explaining the importance of such
distinction:
(a) An offer (proposal) from an invitation to treat;
(b) An acceptance (proposal) from a counter-offer (counter proposal).

Answer:
(a) The offer or proposal is one of the essential elements for the formation of a contract. By S.2
(a) of the Contracts Act 1950, a proposal is said to be made when one party signifies to the other
his willingness to do or abstain from doing anything, with a view to obtaining the assent of that
other to the act or abstinence. When the offer is unconditionally accepted a binding agreement

arises. Thus, for example, A may make an offer to B in the following terms: I offer to sell you
my house, Lingavilla, for the proce of RM 1 million.
If B unconditionally accepts the offer, there is a binding agreement. The offer must be clear. If it
is vague it is not a valid offer. For example, in Gunthing v Lynn (1831), an offer to pay an
additional amount if the horse proved lucky, was held to be too vague.
It is important to distinguish an offer (proposal) from an invitation to treat. The invitation to treat
is in law only an effort to invite others to make an offer. An invitation to treat is not capable of
being accepted so as to form a binding agreement. A common example of an invitation to treat is
a display of goods for sale in a shop. Where a price tag is put on an item, it does not amount to an
offer by the shopkeeper to sell it at that price or to sell it at all.
The case Pharmaceutical Society of Great Britain v Boots Cash Chemists (1957) is illustrative.
In this case, the issue was whether a display of drugs on the shelves of a pharmacy amounted to
an offer which was accepted when the customer took it and placed it in a wire basket. The court
held that it did not amount to an offer. It was a mere invitation to treat.
Other examples of invitation to treat are advertisements and invitation for tenders.
Thus the importance of the distinction between an offer and an invitation to treat is that the
former is legally capable of being accepted and thereby giving rise to a binding agreement
whereas the latter is not.
(b) It is also very important to distinguish between an acceptance and a counter-proposal. As
stated in (a) above, there must be a valid acceptance of an offer in order to create a binding
agreement. By S.2 (b) of the Contract Act 1950, a proposal is said to be accepted when the
person to whom the proposal is made signifies his assent thereto. Further, by S.7 (a) of the
Contracts Act 1950, such acceptance must be absolute and unqualified.
Thus, there will only be a valid acceptance if the offeree accepts the terms of the offer without
any conditions or modification. If the offeree purportedly accepts if some modification is made
to the offer, them it would only amount to a counter-proposal. A counter-proposal has the effect
of rejecting the original proposal.

The English case of Hyde v Wrench (1840) 3 Beav 334 provides a good example. The brief facts
are as follows:
The defendant offered to sell his property to the plaintiff for a price of 1, 000 pounds sterling.
The plaintiff replied stating his willingness to purchase at a price of 950 pounds sterling. When
this price was not acceptable to the defendant, the plaintiff wrote to the defendant accepting the
original offer.
The court held that the first letter of the plaintiff indicating his willingness to purchase at 950
pounds amounted to a counter-offer (counter-proposal) which had the effect of destroying the
original offer. Thus when the plaintiff purportedly accepted the original price, the offer itself was
no longer valid.
(5)
Cindy read an advertisement in a local newspaper, which stated that a well- known department
store was selling branded shoes at half-price. She decided to take advantage of the sale. Upon
arriving at the store, she saw a window display of several brands of shoes. Beside he display was
a large card which stated, Special Offer. Half price. Today Only. Cindy went into the shop and
chose two pairs of shoed and took them to the payment counted. The salesgirl told her that she
would have to pay the full price as all half-priced items had been sold out. Cindy wishes to know
whether is she could legally insist on buying the shoes at half-price.

Answer:
In order for a valid agreement to arise there must be a proposal (offer) is said to be made when
one person signifies to another his willingness to do or abstain from doing anything, with a view
of obtaining the assent of that other to the act or abstinence. See: S.2 (a) Contracts Act 1950.
An offer must be distinguished from an invitation to treat. While an offer may be accepted giving
rise to an agreement, an invitation to treat is only an offer to receive an offer, i.e. it is an
invitation to others to make an offer. Examples of invitations to treat are advertisements and
displays in shop windows.

A case in point is Pharmaceutical Society of Great Britain v Boots Cash Chemist Ltd (1953) 1
QB 401. In this case the defendants were charged with selling certain poisons in contravention of
the Pharmacy and Poisons Act 1933. The question was whether a sale had occurred when a
customer in a self-service shop selected certain items which he desired to purchase and placed
them in a wire basket. The court held that the display in the shop only amounted to an invitation
to treat. A proposal to purchase was made when the customer selected the items he wanted to
purchase. A sale would occur only when the cashier accepted the customers money.
Applying the above law to the given facts, Cindy may be advised that is no binding agreement
for the purchase of the shoes at half-price. The display in the shop was only an invitation to treat.
When Cindy selected the items and brought it to the cashiers counter to pay, she was in law
making proposal to purchase the shoes that the shop assistant was free not to accept.