Question 1

A. Section 7(b) of the Contracts Act 1950 lays down the rule that acceptance of a
proposal must be communicated. Explain the exceptions to this provision.

Answer:

Section 7 (b) Contracts Act 1950

Be expressed in some usual and reasonable manner unless the proposal prescribes the manner
in which it is to be accepted. If the proposal prescribes a manner which it is to be accepted,
and the acceptance is not made in that manner, the proposal may within a reasonable time
after the acceptance is communicated to him insist that his proposal shall be accepted in the
prescribed manner, and not otherwise; but if he fails to do so, he accepts the acceptance.

Acceptance must ordinarily be communicated and made in some usual and reasonable
manner if no method of acceptance is prescribed. However, if the proposal specifies a
particular mode of acceptance and it is not followed, the proposer is entitled to insist on it. It
is essential that the proposer act within a reasonable time after the communication of
acceptance. If he does nothing, he would have been deemed to have accepted. The duty to
object lies with the proposer. Note that the English law differs from our position, as it does
not require such positive objection.

Eliason v Henshaw (1819) 4 Wheaton 225

E offered to purchase flour from H. E specified that acceptance of offer be made by mail
coach to Harper’s Ferry. H sent the acceptance by post to Georgetown on the assumption that
it would reach E faster. Unfortunately the mail was late and the Court held E was justified to
refuse H’s acceptance.

The exceptions to the rule that acceptance must be communicated are as follows:-

i. The proposer has dispensed with the need for it.

ii. The proposer allows the party to whom the proposal is made to perform the condition of a
proposal i.e acceptance taking the form of performance of an act stated in the proposal. A
common sense approach to the law.

E.g. Carlil v Carbolic Smoke Ball

D argued that the P should have communicated acceptance to them. This was rejected by the
court. Performance was sufficient to constitute acceptance if that was the intention of the
proposer.
iii. The proposer allows ‘ the acceptance of any consideration for a reciprocal promise which
may be offered with a proposal.

What is reciprocal promise? Section 2(f) CA defines it as promise which form the
consideration or part of the consideration for each other.

E.g. A sends B a cheque for RM 1000/- with the proposal that it will the consideration for B’s
agreement to sell his motorbike. If B cashes the cheque even though he has yet to
communicate to A of his acceptance. B is deemed to have accepted the proposal. B has
accepted a consideration for a reciprocal promise offered with a proposal.

Postal Rule is a rule of contract law that makes an exception to the general rule that an
acceptance is only created when communicated directly to the offeror. An acceptance is
binding and the contract is said to be perfected when the acceptor places this acceptance in
the mail box for return mail even if, in fact, it never reaches the offeror. An acceptance is
binding and the contract is said to be perfected when the acceptor places this acceptance in
the mail box for return mail even if, in fact, it never reaches the offeror. Many jurisdictions
refer to this as the mailbox rule but even in Canada, there is disagreement: Waddams, in The
Law of Contracts refers to it as the "mailbox rule; but Fridman, in The Law of Contract, to
the "postal acceptance rule".

E.g Holwell Securities v. Hughes, [1974]

The postal rule does not apply if (1) the express terms of the offer specify that the acceptance
must reach the offeror and (2) if, having regard to all the circumstances, including the nature
of the subject-matter under consideration, the negotiating parties cannot have intended that
there should be a binding agreement until the party accepting an offer ... had in fact
communicated the acceptance or exercise to the other."
Question 1

B. Abu was a member of a religious group known as "Kerajaan Bumi". One evening,
Abu was told by his spiritual adviser Ayah Din that their religious group urgently
needed a new meeting place and Ayah Din reminds Abu in a friendly way of the large
bungalow which Abu owns in Klang. On being told to pray for guidance, Abu
announces that he has been inspired to sell the said bungalow to Ayah Din for
RM50.000. The market value of the bungalow at that time was RM600.000. Three
days later, Abu met his solicitors and executed the transfer of his said bungalow to
Ayah Din at the said value. Two months later Abu was expelled from his religious
group by Ayah Din. He now wants to set aside the sale of his bungalow.

Answer:

Issue:

Whether Abu can set aside his offered or not.

Contracts act 1950. In section 15, “Coercion” is the 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 whatever, with the intention of causing any person to
enter into an agreement.

Contract Act, 1950. In Section 2 (h), An agreement enforceable by law is a contract.

Contract Act, 1950. In Section 16 (1) is 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 obtain an unfair advantage
over the other.

According to the case , Abu wanted to sell a bungalow below market price which is
RM50,000 from RM600,000 . After Abu transfer the money to Ayah Din at the said that Abu
been expelled from the group then want set aside the sale of this bungalow , This case can be
referred in contract act 1950 . Contract known as an agreement between two (2) or more
persons that is legally binding between them , in section 2(h) of contract act written an
agreement enforceable by law is a contract by virtue of section 2(h) a valid contract must
contain the seven essential element if the agreement lack of essential or missing a contract
would be not valid , below is the essential of contract act

- Offer-referred as a promise or proposal made by two person or party .

- Acceptance-Agree with the offer
- Consideration-return of each promise
 - Capacity- person or parties need have legal capacity to enter into a contract .
- Intention-the contracting parties must have intention to create legal relationship
- Certainly- The term of contract must be certain , definite clear and detailed
- Free Consent-person or parties entered the contract with his own free will or consent

Example of case that has been related with this case Salwath Haneem v Hadjee
Abdullah (1894) The plaintiffs husband executed a conveyance of property belonging
to himself and the plaintiff to his brothers, B and C. The plaintiff agreed to the conveyance
but after her husbands death, she brought an action seeking to set aside the agreement and
the conveyance.The Court held that a confidential relationship existed between the
plaintiffand B and C. The burden of proof therefore lay on B and C to show that
theplaintiff fully understood the transaction and executed the conveyance freelyand
without being subject to undue influence. Since B and C failed todischarge the
burden, the transaction was set aside.

Another example of case that has been related with this case Datuk Jaginder Singh &
Ors. v. Tara Rajaratnam 1983. The respondent was the registered proprietor of a piece of
land. She claimed that she was induced by fraud and undue influence of the first and
second appellant to transfer her land to the second appellant.The Federal Court held that the
appellants and respondent were in a solicitor-client relationship and the transaction was
unconscionable. Therefore, theburden was on the appellants to rebut the presumption of
undue influence. Inthis case, the appellants had not discharged that burden and thus
thetransaction was set aside.

From virtue , Abu was been told by his spiritual adviser Ayah Din that their religious
group urgently needed a new meeting place and Ayah Din reminds Abu in a friendly way of
the large bungalow which own Abu , that scenario shows that Abu selling his bungalow not
with his will but been pressure or undue influence, according to Section 16(1) contract act,
1950. What constitutes ‘consent’ Section 14 provided that consent is said to be free when it
is not cause by coercion , undue influence , fraud and mistake. Ali can set a side the sale of
bungalow because there is coercion between the sale of the bungalow according to Section 15
of the Contacts Acts 1950.

Conclusion is the contract is not valid so Abu has authority to set aside the sale of the
bungalow by use the law listed above .
Question 2

Zain appointed Loh as his agent to buy a piece of land at Cyberjaya at a price not exceeding
RM500.000 for him. Jega, a land broker, agreed to sell a piece of land to Loh at RM450.000.
Loh made an arrangement with Jega that the purchase price of the land is stated as
RM500.000 in the Sale and Purchase Agreement. Upon payment of the purchase price, Loh
kept RM40.000 for himself and gave the remaining RM 10,000 to Jega, without Zain's
knowledge. Two months later, Zain discovered the deal between Loh and Jega.

Advise Zain.

Answer :

Issue:

i) Whether Loh made any secret profit out of the performance of his duty?

ii) Whether Loh breach the law of agency?

Agent In Section 135:

- Agent is a person employed to do any act for another ot to represent another in
dealings with 3rd party .
- Loh represent as the agent who authority to deal a purchase of the piece of land on
Cyberjaya

Principle In Section 135:

- The person for whom such act is done , or who is so represented , is called the
principle
- Zain represent as a person who authorize an agent Loh to deal the purchase piece of
land on cyberjaya

Main duties of an agent toward the principle :

In section 164 CA 1950 under Obey the principle instruction duties of agent state that
an agent is bound to conduct the business of his principle according to the directions given by
the principle when agent act otherwise , if any loss to sustained, he must make it good to his
principle and if any profit sccrues , he must account it .

According to the issue , Zain ask Loh to buy piece of land at Cyberjaya at price not
exceed RM500.000 but Loh and Jega making a secret agreement which is Loh making secret
profit at RM50.000 . We want to identify whether Loh making any secret profit from the
purchase of piece of land and is it Loh breach the law of agency.
 An agent cannot make any ‘secret profit’ include any kind of bribe/secret
commission/any financial advantage which is above and beyond the commission agreed
under the agency contract for example , Loh get an offer for the land for RM450.000 from
RM500.000 but Loh take RM 50.000 as personal profit . However if the principle know of
the profit gained by the agent , and the principle consent to it , it is no longer ‘secret’ it means
the agent will not be liable for breach of duty .

Law the can been referred :

- Section 168 contract act 1950 : if an agent deal with his account , without first
obtaining the consent of his principal , principal may repudiate the transaction

- Section 169 Contract act 1950 :Principle may recover the amount of the bribe .

‘Tan Kiong Hwa & Andrew S.H. Chong’

held:the plaintiff is entitled to claim the extra RM9000 from the defendant who has breach
ye duty of an agent
- Principle may refuse to pay the agent commission
- Principle can terminated the agent authority :

‘Boston Deep Sea Fishing & Ice Co V Ansel’

held:An agent had been dismissed by the principal for receiving bribe.
- The principal can sue both the agent and the 3rd party who gave the bribe.
-
‘Mahesan V Malaysian Government Officers Co-Operative housing Society’
held: Principal could recover either the bribe or the amount of the actual loss suffered by the
respondent as a consequence of entering into the contract with the vendor
- Agent or 3rd party can been charge under criminal offence under section 11 Anti-
Corruption 1997.

Zain found that Loh took his money as secret profit without Zain consent and the
profit was not included inside contract means Loh could been charge as breach of duty and
Zain also can refuse to not pay commission or any reward .

By reference law , Firstly the principal may repudiate the contract, particularly if Zain
feels that it is disadvantageous to him. With reference to S168 Contract Act 1950, Loh deals
on his own account in the business of the agency. Zain may repudiate the transaction. It has
to be provided with the case which shows either any material facts has been dishonestly
concealed from Zain by the agent, or that the dealings of the agent have been
disadvantageous to Zain.

Secondly, the principal can terminated the agent authority if principal recover the
amount of the bribe from the agent. According to S169 Contract Act 1950, if an agent deals
in the business of the agency on his own account instead of on account of his principal and at
the same time without the knowledge of his principal, the principal is entitled to claim from
the agent any benefit which may have resulted to him from the transaction . In the case of
Zain and Loh , Loh had purchased a land
 Thirdly , the principal may refuse to pay the agent’s commission. In connection with
S173 Contract Act 1950, an agent who is guilty of bad controlling in the business of the
agency is not entitled to any remuneration in respect of that part of the business which he has
misconducted of behaviour . In the case of Zain and Loh , Zain can refuse to pay commission
to loh due Loh breach his duty by taking secret commission .

Furthermore, Zain also can sue both the agent Loh and Jega as 3rd party because
conspired about the sale of piece of land and also there is corruption element in the purchase
and Zain also can charge his 3rd party under section 11 of the Anti Corruption Act 1997 .

End of this case clearly , with the strong point that been given Loh was guilty because
break the authority and not honest and 3rd party conspire receive a bribe. Thus, Zain can
make an action to terminate even not give any commission to Loh. Plus, Zain shall bring
cases to court for relevancy punishment.