LAW OF

CONTRACT
PREPARED BY:
NORAZLA ABDUL WAHAB
What is Contract?
• Agreement between 2 or more parties
that legally binding between them.
• S.2 (h) of the Contracts Act 1950-….
“An agreement enforceable by law”
• Essential Elements of the Contract:
1. Offer & Acceptance
2. Consideration
3. Intention to create legal relation
4. Certainty
5. Legal capacity
6. Free Consent
7. Legality of the Objects
8. Required Formalities.
1. OFFER
 Offer

Definition s2(a) CA
Communication of offer
s. 4 (1) of CA

ITT
Revocation of offer
 • An offer is a proposal

• Once it is accepted, it creates a legally

binding agreement

• A person who makes an offer is called

an offeror or promisor

• A person to whom the offer is made is

called an offeree or promisee
 Definition of an offer
• Section 2 (a) of CA 1950

S.2(a) – when one person 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.
 Definition of an offer
• Example:

A, by offering to buy B’s car for RM

20,000 in the hope that B will accept

MAKING OFFER/ PROPOSAL

 Types of Offer
• An offer maybe:

 express
(verbally or in writing i.e. : agreement).

 implied
(one's act or behaviour).
 Types of Offer

• Section 9 of CA:

• If an offer is made in word or writing it is

said to express.
• If an offer is made by one act or
behavoiur it is said to be implied.
To Whom Offer can be made ?

1) Specific

2) General/ Public
 1) Specific

Addressed to specific person

Only the addressee may accept the
offer
Who is not addressee, cannot make
the acceptance
 Boulton v Jones
• Jones (D) normally had some business deal
with Brocklehurst. D offered to buy some
goods from Brocklehurst, but on the day the
order was sent, Brocklehurst had sold his
company to P.
• The P did not inform the D that the business
had changed hands. When the D knew the
goods had not come from Brocklehurst , he
refused to pay for the goods.
 • Held:

• D was not liable to pay for the goods.

• No contract between the P and the D.
Because the P had no right to accept the
offer which is not addressed to him.
 1) Public/General

Addressed generally to any one who may

satisfy all the terms or conditions
stipulated by the offeror.
One who satisfies all the terms of the
offer is considered as making acceptance.
Then, the offeror is bound to the
contract.
 Carlill v Carbolic Smoke Ball
 the D issued an advertisement in which they
offered to pay 100 pound to any person who
suffered from influenza after having used one of
their smoke balls.
 The P bought and used the smoke ball and
caught influenza. She sued the company for the
promised reward.
 The D refused to pay because he argued that
one cannot make an offer with entire world.
  The court held that:

the D has to pay the reward to P as an offer can

be made to the entire world.
Condition of an offer

• 1. certain
• 2. communicated
 • 1. certain

• Certain, clear, complete, final and

detail to avoid any doubt
 • Guthing v Lynn (1831)

• Lynn offered to buy a horse from

Guthing on condition that if the
horse brings luck to him. Then only
he pay another 5 pound extra.
Held:
• The offer was not final &
incomplete.
Therefore, NOT VALID.
 • 2. communicated

• S. 2 (a)
“ when one person signifies to
another
 Communication of an Proposal

• S. 4(1) – the communication of

proposal is complete when it comes to
the knowledge of the person to whom it
is made
 R v Clarke
Australian government offered a reward for information
leading arrest of persons responsible for the murder of
two policeman. X and Clarke were arrested and charged
with murder. During investigation, Clarke gave information
which lead to the arrest of Y (the real culprit).
X and Y later convicted for murder and Clarke was
discharged.
 R v Clarke
Clarke then Claimed for the reward.
Clarke’s claim was rejected by the court because he
has no knowledge with regard to the offer by
Australian government. He gave the info not
because he knows about the reward but to release
himself.
DISTINCTION BETWEEN
OFFER & INVITATION TO
TREAT (ITT)
 ITT
• Can’t form a contract
• Thus, NO BINDING
• It merely invitation from 1 party to
another party to make an offer.
• No element of offer as S.2(a)
….with a view of obtaining the assents of
act/ abstinent
 Display of
advertisement
goods

Price List/
tender
Quotations

Auction
 a. Advertisement
• An advertisement is only an invitation to
applicants to make an offer.
 Harris v Nickerson (1873)

The D advertised a sale of certain goods including

certain office accessories of a certain date at a
particular place.
The P then travelled to the said location and he
discovered that the office accessories had been
withdrawn from the sale.
 Harris v Nickerson (1873)

The P sought damages because the D had

breached the contract based on the argument that
the advertisement was an offer and his presence at
the sale was an acceptance.

Court :
Rejected his claim
Advertisement= ITT
 However,

Coelho v The Public Services Commission

[ 1964] MLJ 12
The R advertised in the Malay Mail inviting
applications for the post of an assistant Passport
Officer. (ITT)
The applicant made an application and was
subsequently accepted for permanent post and
letter of appointment is given based on the
unconditional condition.
.
Coelho v The Public Services Commission
[ 1964] MLJ 12

Subsequently, the R tried to terminate the A

based on the reason that the A was appointed on
probation.

Then A sued R for breach of the contract.

 The court held that:

 the advertisement was an invitation to treat.

 But
 The application made by the applicant was
considered as an offer.
 And the appointment of the applicant was considered
as an acceptance
 Thus, there was a valid contract of employment.
 The termination of the applicant on probation is
illegal.(unconditional offer)
 However,

Coelho v The Public Services Commission

[ 1964] MLJ 12
The R advertised in the Malay Mail inviting
applications for the post of an assistant Passport
Officer. {ITT}
The applicant made an application { offer} and was
subsequently accepted for permanent post {
acceptance} and letter of appointment is given
based on the unconditional condition.
.
 B. Display of Goods
• Self service shop/ shop window display
• Do not constitute a proposal to sell=ITT
• The proposal /OFFER:

• when the customer selects the desired

goods for payments at the counter..
• Offer comes from the customer, not from
the shop/supermarket
 B. Display of Goods
When the offer is made by the customer

• It is entirely up to the cashier at the counter

to make acceptance (scan the goods) or to
refuse the offer.
 Fisher v Bell
• The D displayed a flick knife in the window of
his shop.
• Under the Restrictive Weapon Act, it was
illegal to manufacture, sell, hire or offer for
sale or hire or lend to any other person any
flick knife.
• Because of that display act, the D then was
charged for contravened the Act by offering
the flick knife for sale.
• The D submitted that this was not sufficient
to constitute an offer.
 Fisher v Bell

• The court held that

• displaying the knife was merely an ITT,

not an offer
• thus no liability arose.
 Pharmaceutical Society of Great
Britain v Boots Cash Chemist.
• The D displayed a poison drugs on the
shelves of self service system. Customers
selected their purchases from the shelves,
put them into basket and took them to the
cashier desk.
• However, the selling of poison drugs by
using the above method is contravened the
law.
• The D then was charged for offering to sell
poison drug without pharmacist
supervision. (S.18(1) of the Pharmacy &
Poison Act 1933.
Pharmaceutical Society of Great
Britain v Boots Cash Chemist.

• Argument was made.

Issue: whether Contract is complete at the
moment customer took an article from the
shelves and put in the basket?
 Pharmaceutical Society of Great
Britain v Boots Cash Chemist.

• COA laid down the principle:

• Sale /contract complete at the cashier desk

(when the payment has been made/the
cashier scan )
not only by putting the things in the basket {
OFFER}
Pharmaceutical Society of Great
Britain v Boots Cash Chemist.
• COA laid down the principle:

The cashier has the right to accept/ reject.

• Thus, The display of goods=ITT
• The shop owner HAD NOT MADE an
unlawful sale.
(Payment was to be made at the exit where a
cashier was stationed and in every case
involving drugs, a pharmacist supervised
the transaction and was authorised to
prevent a sale).
 C. Tender
• A tender is only ITT.
• X invites a supplier to tender a quotation for
goods or services.
• An action taken by X is not an offer,
therefore X is not bind to accept the bid.
 C. Tender

• An offer is actually made by the supplier to X.

• A person who make a notice of
tender/announcement all FREE to
ACCEPT/REJECT.
 Spencer v Harding
• The D made announcement inviting
tenders for sale of certain goods.
• The offer made by the P is the highest
but the D did not accepted that.
• The P alleged that the D had breached
the contract.
 Spencer v Harding
• The Court:

• A circular offering stock for sale by tender

was simply a proclamation that the D were
already to negotiate for sale of goods and it
merely ITT.
• No obligation to sell to the highest bidder
 Spencer v Harding
• The Court:

• HOWEVER…
• It is different if stated that “ the highest
bid/low quotation will be definitely be
accepted.
 D. Auction

• An auction is only ITT.

• The auctioneer is merely inviting the people
present to make proposals which the auctioneer
may accept or decline to accept.
• Person who bids the price is the offerror.
 D. Auction
• Acceptance to the offer by the auctioneer is by
knock of hammer
(S.10 of the Auction Sale Act).
 E. Price List/ Quotation
• Not an offer= only ITT.
• As early information to invite the prospective
buyer to make an offer.
 E. Price List/ Quotation
• Given opportunity to the buyers to choose the
best price.

• Seller – entitled to reject/accept as well as to

make counter offer with a new price.
Preston Corporation Sdn Bhd v
Edward Leong & Others [1982]
2 MLJ 22

• The Publisher asked for quotation from the

Printers
• The (R ) gave quotation to the A.
• A then made some printing orders based on
the quotation given.
• The Court laid down the principles:

• The quotation were only supply of

information which was an invitation to the A
to make an offer /ITT in order to get the R’s
service.
• The printing orders made by the A=Offer
which was subject to the acceptance by the
R.
 • Explanation :
The printing orders made by the A=Offer which
was subject to the acceptance by the R.

Date of order { offer}

& date of confirmation { acceptance}
i.e. confirm- invoice.
 • Salleh Abas F.J

“in our view, the date of confirmation

was the date on which contractual
relationship between the parties began
because the offer in the context of offer
& acceptance necessary for the
formation of a contract was the printing
order and not the quotation.”
REVOCATION OF OFFER
 REVOCATION OF OFFER

A proposal, once communicated, remains

open

until it is withdrawn, cancelled, retracted

or lapsed.
 REVOCATION OF OFFER

• S.5(1) of the CA :
“ a proposal may be revoked at any time
before the communication of its
acceptance is complete as against the
proposer, but not afterwards”
 Communication of Acceptance

s. 4(2) of the Contracts Act 1950

(a) against the OFFEROR : put in the

course of transmission to him.
• i.e.: Offeree post the LOA to Offeror.
 Communication of Acceptance

• Illustration (b) of s4 stated :

– B accepts A’s proposal by a letter sent by
post. The communication of the
acceptance is complete as against A, when
the letter is posted.

62
 REVOCATION OF OFFER

• S.5(1) of the CA :

“ a proposal may be revoked at any time

before the acceptor send letter of
acceptance, but not afterwards”
 Routledge v Grant
• The D offered to sell a house to P and the
acceptance was to be made within 6 weeks.
• Issue:
Whether the D could revoke the offer before 6
weeks is lapsed?
 Routledge v Grant
• Court laid down the principle :
“the Offeror can revoke his offer at any time
provided that NO acceptance be made by the
Offerree during that time “.
 HOW Revocation can be made

Section 6 of CA:
A Proposal is revoked:
(a) Communication of notice of revocation by
the proposer to the acceptor;
(b) Lapse of time prescribed in the proposal or if
no time prescribed, by of lapse of a
reasonable time;
(c) Failure of the acceptor fulfill a condition of
an acceptance;
(d) Death or mental disorder of the proposer.
how Revocation can be made – S6

By communication
Death, mental
of
Disorder (d)
notice of revocation (a)

Failure of the
Lapse of the time
acceptor
Prescribed (b)
to fulfil the
(Ramsgate’s Case)
condition (c )
 Revocation :

Section 6 of CA:
(a) Communication of notice of revocation by the
proposer to the acceptor;
When communication of revocation of
proposal is complete?
 Section 4(3)(a) of CA:

on the part of the offeror, when it is put

into a course of transmission to the
offeree. (A sent the LORO to B)

 Section 4(3)(b) of CA:

on the part of the offeree when it
comes to his knowledge. (B received
the LORO from A)
 Byrne v Van Tienhoven
(1880) 5 CPD 344
• The D offered to sell 1000 boxes of tinplate to
the P.
• 1/10= D posted a LO from Cardiff to the P in
New York
• 8/10= D posted a LOR to the P revoking the
offer
• 11/10= P received the D's offer letter and at
once posted his acceptance via telegram.
 Byrne v Van Tienhoven
(1880) 5 CPD 344
• 15/10= P sent again the LOA to reconfirm his
acceptance that made on 11/10
• 20/10= P received the D's letter of revocation
which is posted on 8/10.
 Byrne v Van Tienhoven
(1880) 5 CPD 344
The court held:
There was a contract.
Revocation of offer posted on 8/10 was not
effective till 20/10 ( when the P received
the said LORO)
At the meantime, P had already accepted the
offer on 11/10 (telegram).
 Byrne v Van Tienhoven
(1880) 5 CPD 344
The court held:
There was a contract.
Revocation of offer posted on 8/10 was not
effective till 20/10 ( when the P received
the said LORO)
At the meantime, P had already accepted the
offer on 11/10 (telegram).
 Example:
 A offers by letter to sell a house to B. The
communication of offer complete when B
receives the letter.
 A then revokes his offer by telegram.(S.6(a)
of CA.
 The revocation is complete (S. 4(3)(a) (b) of
CA.
 on the part of A when the telegram
is despatched.
 On the part of B when B receives it.
 Revocation :

Section 6 of CA:
(b) Lapse of time prescribed in the proposal or if
no time prescribed, by of lapse of a
reasonable time;
Macon Works & Trading Sdn Bhd v
Phang Hon Chin (1976) 2 MLJ 177
 Court laid down the principles:
 An offer lapses after a reasonable time.
Failure to accept the offer within
reasonable time shows rejection by
the offeree.
 Ramsgate Victoria Hotel Co v
Montefiore (1866)LR Ex Ch 109
 The D applied for shares in the P
company on 8 June, and had paid a
deposit.
 He received no further news until 23
November when he was informed that
the shares had been alloted to him and
that he should pay the balance due on
them.
 D refused to pay the balance.
 Ramsgate Victoria Hotel Co v
Montefiore (1866)LR Ex Ch 109
 The court held:
that there was no valid binding contract
bacause acceptance was not made within
reasonable time.
 Revocation :

Section 6 of CA:
( c) Failure of the acceptor fulfill a condition of
an acceptance;
 Example:

A company offers to employ Iskandar

on condition that he passes a skill test.
If the applicant fails the test, the
proposal is revoked because Iskandar
does not fulfill a condition
 Financing Ltd v Stimson

The D offered to buy a car from P’

company if the car remain in the same
conditions.
However, before the D accepted the
offer, the said car was stolen and was
subsequently recovered in damaged
condition.
 Financing Ltd v Stimson

The court held:

The D’s offer to buy the car is only
accepted if the car remained in the
same condition when the offer was
made.
Since, the offerree fails to fulfill the
condition, offer is automatically
revoked.
 Revocation :

Section 6 of CA:
(d) Death or mental disorder of the proposer;
 Example
 the offer only revoked if the offeree aware
the facts that before he makes acceptance ,
the offeror is death/mental disorder.
The acceptance without prior knowledge
of the death or mental disorder of the
proposer is a good acceptance.

acceptance is valid and binding.

 Bradbury v Mogan
 Court laid down the principle:

The death of the offeror WILL NOT

TERMINATE the offer if the acceptance is
made in IGNORANCE of his death.
Note: This Notes and Copyright therein is the property
of Madam Norazla Abdul Wahab and is prepared for the
benefit of her students enrolled in the MGM 3351
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