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LECTURE 1 - LAW OF CONTRACT INTRODUCTION The law of contract is found in case law & statutes Contract Act 1950 principal statute dealing with Contract Act 1950 (Revised 1974)

 Sources
Contract Act 1950 (Revised 1974) originated

from England, closer to Indian Contract Act 1872, which was modeled on English Law but varied in several provisions. Common law & local cases Principle of law/Common Law & Rules of equity applied where there is a lacuna (gap) in local statutes.
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 English law on contracts may be used

to fill the gaps in the Acts subject to the restrictions imposed by S 3 & 5 CLA 1956. Where there is a conflict between the Act & English law, the former will prevail. Decisions of Indian Ct Decisions by Indian Ct also can be used as reference but not binding.
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 DEFINITION: CONTRACT

What is contract? S 2(h) contract is an agreement enforceable by law. S 2 (g) an agreement which is not enforceable by law is considered void.

 Not all agreement can be enforced by

law. Examples: Agreement which does not intent to be bound by law i.e domestic/social agreement.

 S. 10(1) an agreement is a contract

IF: made by free consent of parties competent to contract, for a lawful consideration, with a lawful object, Not expressly stated as void by the Act.

 ELEMENT OF CONTRACT
a. agreement offer & acceptance b. consideration c. intention to create legal relation d. legal capacity

e. certainty
f. Free consent g. legality of the objects h. required formality
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 TYPES OF CONTRACT
a. Bilateral contract b. Unilateral contract FORMS OF CONTRACT

Oral or in writing.

 OFFER
Definition S 2(a) CA 1950 when a person

signifies to another his willingness to do or to abstain from doing anything, with a view of abstaining his ascent(,,) of that other to the act of abstinence.

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 Forms of Offer a. Express in writing/verbal b. Implied act/manner Offer once accepted, formed

agreement. S. 2(c) person who makes offer is called offeror. Person who accept the offer is called promisee.
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an

 CASE:PRESTON CORP. SDN. BHD V.

EDWARD LEONG DLL. (1982) Fed ct: an offer is an intimation (indication) of willingness by an offeree to enter into a legally binding contract. Its terms, either expressly or impliedly must indicate that it is to become binding on the offeror as soon as it has been accepted by the offeree.

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 To Whom Offer Can Be Made?

a. particular person i.e only that

person can accept the offer. b. group of people i.e any person from that group can accept the offer. c. general public i.e any person who meets all the terms of the offer can accept. CASE: CARLILL V. CARBOLIC SMOKE BALL CO.

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 INVITATION TO TREAT
An attempt to induce another party to

make an offer. Not an offer. Not capable of acceptance An invitation to attract offer

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 Examples of ITT

a. Display of goods on the shelf i.e shop-owner displays the goods with price tag in a self service supermarket.

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 CASE:

PHAMACEUTICAL SOCIETY OF GREAT BRITAIN V. BOOTS CASH CHEMIST LTD (1953) Facts:Def,Bootsowner of pharmacy) displayed medicine which contained drug on the rack. Payment was to be made at the counter. Transaction was supervised by a pharmacist who was authorized to prevent a sale if the medicine contained drug which only could be sold by prescription. Def were charged under the Pharmacy & Poison Act 1933 (U.K) which forbid the sales of such without pharmacist supervision.
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 Issue: Whether a sale occurred when a

customer selected articles which he desired to purchase & placed them in a basket; or, at the payment counter? Ct The display was only an ITT. Shop owners had not made an unlawful sale. An offer was made when the customer placed the articles in the basket.

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 FISHER V. BELL [1960]

CT Display of jack knife was not in

contravention ( breach) of Controlled Dangerous Weapon Act as it was an ITT to customers.

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 b.

An auctioneer inviting bids for a particular article Auctioneer only making an ITT. Bidder makes a bid making an offer. S 10 Auction Sale Act, Cap. 81 of the Federated Malay States: a sale by public auction shall be complete when the auctioneer announces its completion by the fall of the hammer CASE: SPENCER V. HARDING (1870) Ct: Announcement for tender is ITT.
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 b. Advertisement
CASE:

COELHO V. THE PUBLIC SERVICE COMMISSION (1964) Ct: An advertisement for a job vacancy made by the Public Service Commission in the Malay Mail was an ITT and an offer came from the applicant for that advertisement. EXCEPTION: CARLILL V CARBOLIC SMOKE BALL CO (1893) 1 QB 256
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CARLILL V. CARBOLIC SMOKE BALL CO (1983)

Smoke ball can cure flue, Still not recover? 100 pounds sterling Will be returned!!! 1000 pounds sterling is deposited in the Bank as preparation

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Better try, hopefully my flue will be recovered

Sssss Sssss ssssss

Mrs Carlill read the advertisement & Interested to buy

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Flue became worse Mrs Carlill claimed 100 pounds sterling CSB refused to honour the claim
Reason : its just an advertisement..

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Mrs Carlill brought the action before the ct

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 CT: The

deposit of 1000 pounds sterling is considered as the intention of the CSM to be bound by their offer. CSB have made an offer through their advertisement, i.e an offer made to the world at large. Any person can accept the offer by following the terms stated in that advertisement & the acceptance need not be communicated to offeror. Gen rule advertisement is an ITT, but this case is an exception.
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 COMMUNICATION OF OFFER
S. 4(1) communication of offer is

complete

the acceptance communicated to the offeror.

when

is

REVOCATION OF OFFER
S. 5(1) an offer can be revoked at

any time before the communication of acceptance completed to the offeror, but not afterwards.
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 How offer can be revoked?

S. 6 CA a. Offeror communicates notice of revocation to offeree; b. by lapse of time prescribed in the offer, if no prescribed time, by lapse of reasonable time;

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 CASE: RAMSGATE VICTORIA HOTEL V.

MONTEFIORE 8 Jun Def sent a letter, offer to buy shares from the co. 23 Nov. Co accepted the offer and shares had been allotted to def & the balance of purchase price should be paid. Def refused to accept. Ct: Def. entitle to refuse because the co should accept defs offer within a reasonable time. The period between June & November was clearly not reasonable.

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 c. Failure of offeree to fulfill a condition

precedent to acceptance; d. By the death or mental disorder of the offeror, if the offeree knows the offerors death or mental disorder before acceptance. CASE: BRADBURY V. MORGAN (1862) Acceptance without prior knowledge of the death or mental disorder of the offeror is a good acceptance and enforceable.

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 COUNTER-OFFER

Any modification or variation of the offer does not constitute an acceptance but amount to counter-offer by the offeree. Treated as rejection of the original offer.

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 CASE: HYDE V. WRENCH (1840) Facts: Def offered to sell his estate for 1000

pounds sterling.

Ptf agreed to buy but only for 950

pounds sterling.

A few days later, ptf agreed to buy with the

original price, i.e 1000 pounds sterling. Def refused to sell & ptf apply for specific performance from the ct. Ct: No acceptance occurred, because ptf had rejected the original offer which could not be revived.
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