LAW OF CONTRACT: ELEMENTS OF CONTRACT (OFFER)

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LAW OF CONTRACTELEMENTS OF CONTRACT(OFFER)

• PREPARED BY
• NURUL NASIHIN ARIFFIN
• KPMBP

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Definition

• Sec 2(a) Contract Act 1950- 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
• Eg A says to B, I promise to pay you RM50 if
  you agree to let me park my car in front of your
  house for 3 days starting tomorrow morning.
• The principle is that, an offer is a situation
  when a proposal is made from one person to
  another with an intention to create legal
  relations.

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Offer must be certain

• An offer must be certain, complete and final to
  avoid misunderstanding.
• Because, when an offer is accepted, terms in that
  offer will become the terms of contract.
• If an offer is uncertain, the acceptance will
  definitely void. As a result, a contract is void.
• case Guthing v Lynn
• - D in this case bought a horse from P under a
  terms that if the horse brings good fortune,
  the D will pay P another 5 pounds. The D broke
  his promise.
• held the term bring good fortune is too
  vague. Thus the contract is void

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Types of offer

• An offer may be
• 1) express made verbally or in writing.
• 2) implied offer comes from ones act or
  behavior
• however, there is situation where an offer can
  be a combination of both
• case Western Electric v Welsh Dev. Agency
• D offers to rent his premise to P. If P agrees,
  P is to fill a form as requested by D. P fails
  to fill in the form but moves in and starts
  operation in D premise. P then moved out after
  finding that the premise is not safe to be
  occupied. P claims damages for breach of
  contract from D. In his defense, D claims that P
  cannot claim damages as there is no contract
  between them. The contract is void as the
  acceptance is void.
• Held however, valid contract exist impliedly.
  D is not making an offer, he is making an
  invitation. Offer made by P when he moves into
  the premise and acceptance by the D when he
  lets operates and receive rents.

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To whom an offer can be made?

• An offer can be made to one person, a group or to
  the whole world.
• But every offer can be only accepted by certain
  people.
• Case Boulton v Jones
• The D does business with one particular trade.
  On the day when Ds order arrives, the trader has
  sold his business to P. P send to D goods as
  ordered. When D knows that the goods were send by
  new owner, he refused to pay for the goods. P
  then takes an action against D for breach of
  contract.
• held P cannot take action against D because
  there is no contract between them. P has no right
  to accept an offer which was not directed to him.
• If an offer is made to a group of people, then
  only individuals within the group can make an
  acceptance.
• But, if an offer is made to the whole world as in
  the case Carlill v Carbolic Smoke Ball, then
  anyone who knows about the offer capable to
  accept.
• 1) unilateral offer made to the whole world
• 2) bilateral offer been made to 1 or 2 or a
  group but already identified which person

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Communication of an offer

• Sec 4(1) provides that the communication of a
  proposal complete when it comes to the knowledge
  of the person to whom it is made.
• Eg A send a letter to B that reads I would
  like to sell to u my house in Kelang for the
  price of 500,000.
• Case Taylor v Laird
• P works as captain on a ship owns by D. During a
  voyage, he made an offer to resign. The offer is
  communicate to D and D agrees to the resignation.
  Later, P still serves until the ship arrive to
  the destination. When P claim wages for
  maneuvered the ship back to the destination,
  defendant refuse to pay.
• held no valid contract between them. P has no
  right to claim wages. Ps offer to continue his
  duty has not been communicate to D, thus D has
  no choice of either to accept or reject.

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Cont

• An offeree must know about the offer before
  making an acceptance.
• If the offeree has no knowledge of the offer
  when he is making an action that look similar to
  an acceptance, it cannot be treated as an
  acceptance.
• Case R v Clarke
• Clarkes action by giving information to the
  police that leads to the catch of a wanted
  criminal is not an acceptance. This is because at
  the time he gives the information, he forgot
  about the offer of reward. Held Thus, he has no
  right to claim for the reward. He is at that time
  as a person who has no knowledge about the offer.
• What if the offeree knew of the offer, did not
  forget about it but has a different motives while
  making the acceptance?
• case Williams v Cawardine
• held court decided that Ps action by giving
  information that leads to the catch of a wanted
  criminal is a valid acceptance even his motives
  at that time is to calm himself.

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Revocation of an offer and communication of
revocation

• Sec 5(1)- A proposal may be revoked at any time
  before the communication of its acceptance is
  complete as against the proposer, but not
  afterwards.
• Four ways of revocation provided under sec 6
• 1) sec 6(a)- offer is revoked by communication
  of notice of revocation by the proposer to the
  other party. But as provided under sec 5(1),
  communication of revocation must complete
  before offeree made an acceptance.
• case Byrne v Van Tienhoven
• a revocation letter send by the D to P is void
  because it arrives after P made an acceptance

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Cont

• 2) Sec 6(b)- offer is revoked by the lapse of
  time prescribed in the proposal for its
  acceptance, or, if no time is so prescribed, by
  the lapse of a resonable time, without
  communication of the acceptance.
• case Ramsgate Victoria Hotel Co. Ltd v
  Montefiore.
• held the offer is revoked since lapse of
  reasonable time. P in this case agrees to
  accept Ds offer after 5 months.

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Cont

• 3) Sec 6(c)- offer is revoked if an offeree
  fails to fulfil a condition precedent to
  acceptance.
• case Pyrn v Campbell
• an agreement to sell an intellectual property is
  made but with a condition that the property gains
  approval from a 3rd party. No contract exists if
  approval fails. In this case, offer and
  acceptance depends on term of getting third
  partys approval.

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Cont

• 4) sec 6(d) offer is revoked if offeree before
  the acceptance knows that the offeror is dead or
  experience mental disorder.

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Difference between offer and invitation to treat

• When an offer is accepted, it will render an
  agreement to be a valid contract.
• BUT, when exist an invitation to treat is
  accepted, the acceptance does not create any
  legal relationship.
• Eg if X agrees with Ys invitation to do some
  business together, a contract does not exist. If
  X agrees with Ys invitation to some business, X
  will make an offer. It is up to Y whether to
  accept or reject the offer.

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Cont

• There are few situations that could cause some
  confusion between two parties, as either there is
  a valid contract or not.
• TENDER
• T is a situation where X invites a supplier or
  few suppliers 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 lowest bid or any
  bid. An offer is actually made by the supplier to
  X.

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Cont

• - Case Harvela Investment Ltd v Royal Trust of
  Canada
• D invites 2 parties to buy the companys
  shares. D has made an announcement to accept the
  highest bid. P bids 2.175 million dollar while Y
  bids 2.1 million dollar or 101 thousand dollar
  higher from highest bid. D accept Ys offer. P
  files claim against D and Y for breach of
  contract.
• held there is a breach of contract. D is not
  merely making an invitation, but is actually
  making an offer. D announcement has changed the
  status of an invitation to an offer.

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Cont

• 2) AUCTION
• - person who bids for the price is the offeror.
• - an offer to buy can make verbally or by
  action such as waiving a catalogue.
• - acceptance to the offer by the auctioneer is
  by knock of hammer.
• - in an action, earlier offer and acceptance
  automatically void when a higher bid is made.
• - since an auction is only an invitation to
  treat, auctioneer has right to pull away any
  goods from auction at any time before any offer
  is accepted.
• - case Harris v Nickerson

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Cont

• 3) ADVERTISEMENT
• - is not an offer.
• - is only a step taken to induce offer
• case Partridge v Crittenden
• P advertise to illegally sell a protected bird
  species. Mr T interested to buy after reads the
  advertisement. Mr T sends money through post. P
  send the bird to Mr T. P was accused for offer
  to sell a protected species.
• held P was found not guilty. The accusation
  was not valid. P did not offer to sell, he
  invites an offer

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Cont

• - Advertisement of a vacancy in a newspaper is
  not an offer that can be accepted. It is merely
  an invitation to treat
• case Coelho v The Public Services Commission
• - however, as exceptions in case of a tender and
  an auction, there is an exception where
  advertisement is considered to be a valid offer.
  Normally it happens in a unilateral contract. The
  situation is when one party bind himself with a
  conditional promise and let the other party to
  either fulfils or not the condition

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Cont

• case Carlill v Carbolic Smoke Ball
• D is a company that produces a flu medicine
  named Carbolic Smoke Ball . D advertises in a
  newspaper that they would pay 100 pound to who
  experience influenza after using the medicine as
  prescribed. To show their earnestly, D deposited
  1000 pound Sterling in to a bank account. The P
  duly used it, nevertheless, contracted influenza.
  Then P sued for the money after the D refused to
  pay with reason that the advertisement is merely
  an invitation to treat.
• held the advertisement is indeed an offer. D
  action depositing 1000 pound in the bank account
  show D earnestly to bind himself with the contract

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Cont

• 4) Display of goods
• - nowadays, many shops use the concept of self
  service.
• - the customers enter and choose goods and then
  take to the counter to pay.
• - law has approved that sale in a self service
  shop take place at the payment counter.
• - case Pharmaceutical Society of Great Britain
  v Boots Cash Chemists

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• Thank you for cooperation