Presentation Transcript

1. COMMERCIAL LAWMGM 3351

   LECTURER Dr. ZahiraMohdIshan FakultiEkonomi & Pengurusan Universiti Putra Malaysia
2. LAW OF CONTRACT Definition An agreement giving rise to obligations which are enforced or recognised by law The American Restatement of the Law of Contracts: “A contract is a promise or set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognises as a duty” Dr. Zahira MI, FEP,UPM
3. Formation of Contract Elements: In writing / Oral / inference from conduct, subject to the requirement of specific laws Dr. Zahira MI, FEP,UPM
4. Student’s individual task Find the legal meaning of remedy. How can breach of contract occur? If a contract is entered into orally, will be of lesser strength in effect than a written contract? What kind of contract must be in writing (meaning, it is void if orally made)? Dr. Zahira MI, FEP,UPM
5. 1. Offer and Acceptance Without an offer, there can be no valid acceptance. Therefore, no agreement exists. Dr. Zahira MI, FEP,UPM
6. OFFER: 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 An intimation, by words or conduct, of a willingness to enter into a legally binding contract, and which in its terms expressly or impliedly indicates that it is to become binding on the offeror as soon as it has been accepted by an act, forbearance or return promise on part of the person to whom it is addressed. (Anson, p.25) Dr. Zahira MI, FEP,UPM
7. Characteristics of valid offer An offer must be certain The terms : not vague, uncertain ~ Dr. Satwant Singh Gill v Hospital Assunta(1998) 4 CLJ 47: ‘as long as he wishes’ ~ KamMah Theatre Sdn. Bhd. v Tan Lay Soon (1994) 1 MLJ 108: ‘usual terms & conditions’ Dr. Zahira MI, FEP,UPM
8. Characteristics… Party addressed ~ Specific Offer: Boulton v Jones (1857) ~ General Offer : Carlillvs Carbolic Smoke Ball Co. (1893) Unilateral contract: an offer of an act for a promise, or a promise for an act. Bilateral contract: the offer of a promise for a promise. Dr. Zahira MI, FEP,UPM
9. 3. An Offer is Not an invitation to treat (ITT) Display of goods on shelf: a. Pharmaceutical Society of Great Britain v Boots Cash Chemist (1953) b. Fisher v Bell (1961): with price tags in a shop window? Auctioneers a. Payne vs Cave (1789): offer can be retracted before the fall of the hammer. b. Harris vs Nickerson (1873): ad. by auctioneer that a sale of certain articles will take place on a certain day does not bind the auctioneer to sell the goods, nor does it make him liable upon a contract to indemnify persons who have been put to expense in order to attend the sale. Dr. Zahira MI, FEP,UPM
10. Advertisement and circular a. Coelho v The Public Services Comm.(1964) b. Majumderlwn Att. Gen. of Sarawak (1967) c. Patridge v Crittenden (1968) ~Carlill v Carbolic Smoke Ball Co. ~ Lefkowitz v Great Minneapolis Surplus Store (1957) ~ O’Brien v MGN Ltd [2001] **The John Leonard Saga (2000) Tender a. Kanagasabailwn State of Selangor (1935) b. Cheng Keng Hong lwn Govt. of The Federal of Malaya (1966) Dr. Zahira MI, FEP,UPM
11. Student’s individual task: Can you list the legal principles for Offer? Name the source of the legal principles. Why should there be ‘invitation to treat’ in law of contract? (meaning: what is the importance of this topic?) Is law of contract sufficient to protect a business person from being sued for selling prohibited items – say that Danny advertises ecstasy pills (send flyers to neighbours / using his Facebook or blog). What law will control his doing? Dr. Zahira MI, FEP,UPM
12. Acceptance S. 2(b): when the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted: a proposal, when accepted, becomes a promise; Characteristics: Only the person to whom the proposal is made can make the acceptance Dr. Zahira MI, FEP,UPM
13. Absolute and unqualified If not: Counter-offer counter-offer itself is an offer on the revised terms being made by the offeree; Counter-offer caused the original offer to lapse. Hyde v Wrench (1840) No counter-offer if: Requesting further information Stevenson Jacques & Co. v McLean Parties still in process of negotiation Lau Brothers & Co. v China Pacific Navigation Co. Ltd. Dr. Zahira MI, FEP,UPM
14. The battle of forms: when each party to a sale /supply contract send its own terms. Butler Machine Tool Co. Ltd. v Ex-Cell-O-Corpn. (England) Ltd [1979] Sellers sent quotation for supply of machine to buyers. This quotation was issued on the basis of the sellers’ conditions which were to ‘prevail over any terms & conditions in the buyer’s order’, & which included a price variation clause. Buyers placed an order, & their letter contained conflicting conditions (no price variation clause). At the bottom of the order was a tear-off confirmation slip expressly subject to the buyers’ terms, which the seller completed & returned. Seller then claimed to be entitled to vary the contract price. Held: Rejected sellers’ claim. Sellers had expressly accepted the buyers’ terms when they completed & returned the acknowledgement slip. Dr. Zahira MI, FEP,UPM
15. Within reasonable time: Fraser v Everett “Failure to accept within reasonable time implies rejection by the offeree” per HashimYeop A Sani in Macon Works & Trading Sdn. Bhd case. Follow the prescribed method of acceptance. s.7(b) If the proposal prescribes a manner in which it is to be accepted, and the acceptance is not made in that manner, the proposer 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 Manchester Diocesan Council of Edu v Commercial & Gnrl Investments Ltd [1970]:when there was no clear method stipulated, any equally efficacious method of acceptance is valid if it fulfils the purpose in prescribing the method. Dr. Zahira MI, FEP,UPM
16. Eliason v Henshaw: P prescribes the mode of acceptance, but D use another mode, thinking that this would reach P more speeedily. D was wrong, & his letter arrived after the time that the reply might have been expected. Held: P can refuse to purchase. Acceptance must be communicated “Silence/ mental assent is no acceptance” : Felthouse v Bindley ~waiver of communication: Carlill’s case Dr. Zahira MI, FEP,UPM
17. ~Acceptance is effective/complete when it is communicated to the offeror. - Inter praesentes (face to face), telephone conversation, fax & telex : Instantaneous communication Entores v Miles Far East Corp.: “…the parties are to all intent & purposes in each other’s presence just as if they were in telephonic conversation…” ~telex message (acceptence) took effect where it was received. Brinkibon v Stahag Stahl und StahlWarenhandelsgesellschaftmbH [1983] “ telex machines frequently send messages out of business hours, leaving messages stored until the following day” (similarly to fax communications & e-mail) Dr. Zahira MI, FEP,UPM
18. Mailbox Rule / Postal Rule Adams v Lindsell 1/1/03 3/2/03 10/2/03 7/2/03 OfferorOfferee :Acceptance is complete as soon as the letter is put into the post box, even though the letter delayed or lost Dr. Zahira MI, FEP,UPM
19. s. 4(2) The communication of an acceptance is complete: (a) as against the proposer, when it is put in a course of transmission to him, so as to be out of the power of the acceptor; and   (b) as against the acceptor, when it comes to the knowledge of the proposer. The communication of the acceptance is complete as against A, when the letter is posted; as against B, when the letter is received by A. Dr. Zahira MI, FEP,UPM
20. Acceptance without knowledge of the offer: a. R. vs Clarke: reward for info leading to arrest & conviction of murderer. D forgotten the offer = ignorance b. William vsCarwardine : motive is irrelevant c. Fitch vsSnedeker (1868) c.f Neville v Kelly Gibbons v Proctor Dr. Zahira MI, FEP,UPM
21. Student’s individual task: Can you list the legal principles for Acceptance? Name the source of the legal principles. What does communication of acceptance means? Does it share the same principle as communication of offer? Dr. Zahira MI, FEP,UPM
22. Revocation of Offer No obligation on the offeror to open his offer indefinitely Offer cannot be revoked after acceptance is made Option contract: a contract whereby the offeror, after receiving a consideration, promise to open the offer for an agreed period. Dr. Zahira MI, FEP,UPM
23. Ways of revocation (a) by the communication of notice of revocation by the proposer to the other party;Byrne v Van Tienhoven (b) by the lapse of the time prescribed in the proposal for its acceptance, or, if no time is so prescribed, by the lapse of a reasonable time, without communication of the acceptance;Ramsgate Victoria Hotel Co. Ltd v Montefiore (c) by the failure of the acceptor to fulfil a condition precedent to acceptance; or (d) by the death or mental disorder of the proposer, if the fact of his death or mental disorder comes to the knowledge of the acceptor before acceptance. Dr. Zahira MI, FEP,UPM
24. Revocation of Acceptance An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards. e.g: A may revoke his proposal at any time before or at the moment when B posts his letter of acceptance, but not afterwards. B may revoke his acceptance at any time before or at the moment when the letter communicating it reaches A, but not afterwards . Refer to s. 4 (3) (a), (b) Dr. Zahira MI, FEP,UPM

25. CONSIDERATION

    Chapter 3
26. Definition Lush J. in Currie v Misa: “A valuable consideration, in the sense of the law, may consist in some right, interest, profit, or benefit accruing to one party, or some forbearance, detriment , loss, or responsibility given, suffered, or undertaken by the other.” Forbearance: Osman b. Abd. Ghani & Ors v UABB Pollock: Detriment is the price for which the promise of the other is bought. Gratuitous promise is unenforceable, generally. Dr. Zahira MI, FEP,UPM
27. Statutory definition s. 2 (d): when, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise; An agreement made without consideration is void Dr. Zahira MI, FEP,UPM
28. Types of Consideration Executory: A promise given for a promise, i.e mutual promise, e.g, a promise to do a work in return for a promise of payment Executed:An act or forbearance given for a promise,i.e when one of the 2 parties has, either in the act which constitutes an offer or an acceptance, done all that he is bound to do under the contract, leaving an outstanding liability on one side only. Past: The promise is subsequent to the act , e.g A saves B from drowning, and B later promises A a reward. Dr. Zahira MI, FEP,UPM
29. Consideration At the request of promisor Lampleigh v Braithwaite Kepong Prospecting Ltd. v Schmidt Move from the promisee or any other person Venkata Chinnaya v Verikataramayya Compare: Common law’s Price v Easton Need not be adequate Explanation 2 of s.26 Sturlyn v Albany Chappel v Nestle Phang Swee Kim v Beh I Hock Dr. Zahira MI, FEP,UPM
30. Exceptions to requirement of consideration S. 26: An agreement is void if without consideration, unless: Written + registered (if required) + natural love & affection + in near relation Re Tan SohSim; Tang Meng Hock v Tang Ming Seng [2010] 1 CLJ 208 Compensate wholly/in part + promisee voluntarily done something for promisor J.M. Wotherspoon Written + signature by debtor * In any of these cases, such an agreement is a contract. Dr. Zahira MI, FEP,UPM
31. Past Consideration The promise is subsequent to the act Common law : Past consideration is no consideration Re Mc Ardle, Roscorla Lampleigh v Braithwaite Section 26 (b) : Promise to compensate wholly/in part + promisee voluntarily done something for promisor J.M. Wotherspoon Raja of Venkatagiri v Sri Krishnayya Dr. Zahira MI, FEP,UPM
32. Performance of duty An express promise to perform/performance of an existing public duty will not amount to consideration. Collins v Godefroy: A person who receives subpeona is bound to attend & give evidence, so D’s promise to give P $ for his trouble is not binding. Glasbrook Brothers, Ltd. v. Glamorgan CountyCouncil : a police authority sued for the sum £2,200 promised to them by a colliery company for whose mine they had provided a stronger guard during a strike than was in their opinion necessary. It was held that they were entitled to maintain an action on the promise Dr. Zahira MI, FEP,UPM
33. Promisee merely undertakes to fulfil the conditions of existing contract with the promisor Stilk v Myrick: In the course of voyage from London to Baltic and back 2 seamen deserted, and the captain, being unable to supply their place, promised the rest of the crew that, if they would work the vessel home, the wages of the two deserters should be divided amongst them. Held: the promise not binding. Unless the existing contract is terminated and a new agreement substituted at a higher rate of pay.or if the promise had been made to compromise a dispute or if uncontemplated risks had arisen Dr. Zahira MI, FEP,UPM
34. Student’s group discussion Is Malaysian legal principles on consideration the same as Common law? If yes, list the difference(s)? Must consideration exist in every contract? Why? How do you know the act or abstinence is indeed a valid consideration? Explain. Dr. Zahira MI, FEP,UPM

35. INTENTION TO CREATE LEGAL RELATION

    Chapter 4
36. Intention to create legal relation Intangibility: you cannot see what other people think. A’s promise + B’s Promise = Valid agreement/Contract? } presumption of promise among family members (husband- wife, brother/sister, parent-son/daughter) or among friends. Promise is not merely made for business transactions. Dr. Zahira MI, FEP,UPM
37. Therefore, When the promise is made, do the parties contemplate any legal consequences } can A claims that B is liable before the law, by suing him/ claiming damages? Dr. Zahira MI, FEP,UPM
38. Determining the existence of an agreement By ascertaining the category of agreement & the rebuttable presumption: Domestic and Social agreement ~ The presumption: No intention to create legal relation in the promise unless proven otherwise Business agreement ~ The presumption: There is intention to create legal relation in the promise unless proven otherwise Dr. Zahira MI, FEP,UPM
39. Cases for domestic & social a’m Balfour v Balfour Hoddinott v Hoddinott Merritt v Merritt Jones v Padavatton Choo Tiong Hin v Choo Hock Swee Simpkins v Pays Parker v Clark Coward v Motors Ins. Bureau Dr. Zahira MI, FEP,UPM
40. Cases for business a’m Rose & Frank Co v Crompton Bros., Ltd.: “This arrangement is not entered into, nor is this memorandum written , as a formal or legal agreement, and shall not be subject to legal jurisdiction in the Law Courts…” Appleson v Littlewoods : everything done in connection therewith was not to be ‘attended by or give rise to any legal relationship whatsoever’. Carlill v Carbolic Smoke Ball Co. Ltd. Edwards v Skyways : the words “ex gratia” did not negative contractual intention but only meant that the employers did not admit any pre-existing liability to make the payment. Dr. Zahira MI, FEP,UPM
41. Group task: How would a mere promise entered into by mother/father/parent and daughter/son becomes a contract? In what circumstances would a business agreement becomes a mere agreement? If the contract you signed contain a clause providing that ‘any dispute shall be brought to an arbitration or mediation” would that clause turns your contract into a mere agreement? Dr. Zahira MI, FEP,UPM