Title: BUSINESS LAW
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BLAW / LAW2013 REV 00
01/08/2017 What is contract?
Section 2(h) of the Contract Act 1950 (CA 1950 ):
An agreement enforceable by law is a contract .
A contract is a legally binding agreement
enforceable in a court of law .
However, not every agreement between two
parties is a legally binding contract or legally
enforceable .
Legally enforceable means that a court will say
that an agreement is a contract .
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# CONTRACT
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> BLAW / LAW2013 REV 00
> 01/08/2017
Some agreements are not contract because they lack
certain essential elements .
In order to create a valid contract, there must be :
1. Offer
2. Acceptance
3. Consideration
4. Intention to create legal relation
5. Certainty
6. Legal capacity
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## ELEMENTS OF CONTRACT
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> BLAW / LAW2013 REV 00
> 01/08/2017
ELEMENTS OF CONTRACT:
1. Offer
Section 38(1) of CA 1950
The parties to a contract must either perform, or offer to
perform , their respective promises , unless the performance
is dispensed with or excused under this Act, or of any other
law .
Section 2(a) of CA 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 .
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> BLAW / LAW2013 REV 00
> 01/08/2017
An offer is a promise by the offeror to be bound in a contract on
particular terms if there is a proper acceptance of the offer by the
offeree .
Offeror : Person making the offer .
Offeree : Person who accepts the offer .
Simple Example
John : I will sell you this book for 10.
Hana : I agree .
We have an offer and an acceptance .
John is the offeror . Hana is the offeree .
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Offeror Offeree
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ELEMENTS OF CONTRACT:
1. Offer
> BLAW / LAW2013 REV 00
> 01/08/2017
It cannot be ambiguous or unclear .
It must be spelled out in terms that are
specific and certain, such as the identity
and nature of the object which is being
offered and under what conditions
and/or terms it is offered .
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ELEMENTS OF CONTRACT:
1. Offer
> BLAW / LAW2013 REV 00
> 01/08/2017
HOWEVER some types of statement are NOT
offer.
Statement of intention
Supply of Information
Invitation to treat
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ELEMENTS OF CONTRACT:
1. Offer
BLAW / LAW2013 REV 00
01/08/2017 INVITATION TO TREAT
This is an invitation to others to make offers .
In other words, you are asking other people to make an offer to
you . Some common examples of invitations to treat :-
1. Goods displayed in a shop window ;
2. Goods displayed on the shelf of a self -service shop ;
3. A public advertisement
4. A share prospectus
5. Auction
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ELEMENTS OF CONTRACT:
1. Offer
> BLAW / LAW2013 REV 00
> 01/08/2017
INVITATION TO TREAT
Display on goods in a shop as in advertisement generally DOES
NOT constitute offer to sell .
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ELEMENTS OF CONTRACT:
1. Offer
BLAW / LAW2013 REV 00
01/08/2017 10
INVITATION TO TREAT
The shop -owner merely holds himself prepared to consider offer made to
him at the suggested prices . The invitation is not capable of being accepted
as it is not a proposal .
The offer is in fact made by the customer when he or she selects the desired
goods for payment at the counter .
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ELEMENTS OF CONTRACT:
1. Offer
Shop owner Buyer
OFFEROR?
OFFEREE?
> BLAW / LAW2013 REV 00
> 01/08/2017
INVITATION TO TREAT
Pharmaceutical Society of Great Britain v. Booth Cash
Chemist Ltd [1953]1 QB 401
Issue:
Whether Boots has committed an offence under a law
that prohibits the sale of medicine without the
presence of a pharmacist .
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ELEMENTS OF CONTRACT:
1. Offer
> BLAW / LAW2013 REV 00
> 01/08/2017
INVITATION TO TREAT
Pharmaceutical Society of Great Britain v. Booth Cash Chemist
Ltd [1953]1 QB 401
Fact of case:
Boots operates a self -service system . Customers select
items from the shelves and bring them to the cashier . At
the cashiers desk there was a pharmacist on duty .
If the sale is considered to have taken place when a
customer picks up an item form the shelves, then Boots
has committed the offence .
BUT if the sale only took place at the cashiers counter,
then Boots would not be liable .
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ELEMENTS OF CONTRACT:
1. Offer
> BLAW / LAW2013 REV 00
> 01/08/2017
INVITATION TO TREAT
Pharmaceutical Society of Great Britain v. Booth Cash Chemist
Ltd [1953]1 QB 401
Judgment:
A display of goods on the shelves is an invitation to treat .
A customer who brings an item to the cashier makes an
offer to buy the item .
Therefore sale only takes place at the cashiers counter
when the cashier accepts the customers offer to buy the
item .
Since there was a pharmacist at the cashiers counter,
Boots had not committed an offence .
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ELEMENTS OF CONTRACT:
1. Offer
> BLAW / LAW2013 REV 00
> 01/08/2017
1 ELEMENTS OF CONTRACT
OFFER
Placing the goods on the
cashiers counter
The cashier takes the goods
and scans the barcode
Paying for the goods.
You offer to buy the goods. This
makes you the offeror .
The cashier takes the goods and
scans the barcode.
The shop is the offeree .
You give consideration or value for
the contract of purchase
> 14
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BLAW / LAW2013 REV 00
01/08/2017 TO WHOM CAN OFFER BE MADE?
A proposal can either be made to a particular person or to
the general public .
Where it is made to a particular person, it appears that only
the addressee may accept the offer .
Section 2(b) CA 1950
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
On the other hand, where it is made to the general public,
then anyone who meets all the terms of proposal may
accept .
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ELEMENTS OF CONTRACT:
1. Offer
> BLAW / LAW2013 REV 00
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TO WHO CAN OFFER BE MADE?
Carlill v. Smoke Ball Co. [1983]1 QB 256,
Fact of case:
The defendant advertised that they would offer a sum of money
to anyone who would still succumb to influenza after using
certain product according to the instructions for a fixed period .
The plaintiff duly used the product advertised but, nevertheless,
became ill .
The plaintiff, upon refusal of the defendants to honour their
promise, proceeds to sue them .
Judgment:
The plaintiff has accepted the offer of the company made to the
world at large and is, therefore, entitled to the money .
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ELEMENTS OF CONTRACT:
1. Offer
> BLAW / LAW2013 REV 00
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KNOWLEDGE OF THE OFFER
You have to know about the offer before you can
accept it .
If you find my lost dog and return it without
knowing that I had offered to pay 100 to the
person who found it, then you cannot later claim
the reward when a friend tells you about it .
> 17
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ELEMENTS OF CONTRACT:
1. Offer
> BLAW / LAW2013 REV 00
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1. What is Contract?
2. List down the elements of a contract.
3. Offer is a ________ by the offeror .
4. i) Offeror is the person who __________.
ii) Offeree is the person who ___________.
5. Offer must not be ___________ and ambiguous.
6. What is an invitation to treat?
7. List down some of the common example of invitation to treat.
> 18 Copyright of Almacrest International College. All rights reserved.
> BLAW / LAW2013 REV 00
> 01/08/2017
Section 2(b) of the Contracts Act 1950 :When the person to whom the proposal is made
signifies his assent thereto, the proposal is said to
have been accepted
A proposal when accepted, becomes a promise .
Section 9 of the Contracts Act 1950 :
So far as the acceptance of any promise is made in
words , the acceptance is said to be expressed .
If the acceptance is made other than in words, the
acceptance is said to be implied .
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ELEMENTS OF CONTRACT:
2. Acceptance
> BLAW / LAW2013 REV 00
> 01/08/2017
ACCEPTANCE MUST BE ABSOLUTE
Section 7of the Contracts Act 1950:
In order to convert a proposal into a promise the acceptance must
a) be absolute and unqualified ;
b) 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 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 .
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ELEMENTS OF CONTRACT:
2. Acceptance
> BLAW / LAW2013 REV 00
> 01/08/2017
Section 7(a) - Acceptance must be absolute
Lau Brothers & Co v China Pacific Navigation Co. Ltd
[1965] 1 MLJ 1
Negotiations for the delivery of logs were conducted through a
series of telegram and letters .
Whilst still in the negotiating stage, the defendants withdrew .
Issue:
Was there a binding contract between the two parties .
Judgment:
The parties were still in a state of negotiation and no agreement
was formed . Therefore, the defendants were justified in
withdrawing . 21
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ELEMENTS OF CONTRACT:
2. Acceptance
> BLAW / LAW2013 REV 00
> 01/08/2017
Acceptance must be expressed in some usual and reasonable manner
Section 7(b) of the CA1950:
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Manner of acceptance:
Down payment of RM50k
B only pay RM30k to
accept the offer
A
B
A may insist B to pay the rest of
RM 20 k. BUT if A failed to insist, A
accepted the acceptance of RM 30 k
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ELEMENTS OF CONTRACT:
2. Acceptance
> BLAW / LAW2013 REV 00
> 01/08/2017
ELEMENTS OF CONTRACT:
2. Acceptance
Once the offeree accepts the offer the contract is
made . After that, the offeror CANNOT withdraw
the offer and the offeree CANNOT withdraw the
acceptance .
The acceptance must agree to the terms of the
contract . The acceptance cannot try to introduce
new terms .
If the offeree tries to change the terms of the
offer in the acceptance, then this is not an
acceptance, it is a counter -offer .
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> BLAW / LAW2013 REV 00
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ELEMENTS OF CONTRACT:
2. Acceptance
COUNTER -OFFER
A counter -offer rejects the offer . The position of the two parties is
reversed . The offeree becomes the offeror and the offeror becomes
the offeree .
Hyde v. Wrench, [1840] 3 Bea 334; 49 ER 132 .
Fact of case:
Wrench offered to sell his farm for 1,000 .Hyde offered
950 .Wrench rejected this . Hyde then told Wrench he would
accept Wrenchs original offer .
However, the court said there was not contract . The counter -
offer of 950 ended the offer of 1,000 so it could no longer be
accepted .
That meant Hyde was now making a new offer to buy the farm
for 1,000 .Wrench could choose to accept or reject this .
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> BLAW / LAW2013 REV 00
> 01/08/2017
COUNTER -OFFER
Hyde v. Wrench, [1840] 3 Bea 334; 49 ER 132 .
Issue :
If one party makes an offer and the offeree makes a
counter offer, does the original offer remain open?
Judgment:
No . A counteroffer negates the original offer .
To constitute a valid contract there must be a simple
acceptance of the terms proposed . Hyde rejected the
defendants offer to sell and made a counter proposal
which terminated the offer . The offer was never
accepted and cannot be revived later .
> 25
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ELEMENTS OF CONTRACT:
2. Acceptance
> BLAW / LAW2013 REV 00
> 01/08/2017
A proposal may be withdrawn in any of the following
ways :
1. Communicating the notice of revocation by the offeror
to the offeree .
2. The time prescribed in the proposal for its acceptance
elapses .
3. Failure of the offeree to fulfill a condition in the offer
4. The death or mental disorder of the offerror IF the fact
that the offerors death or mental disorder comes to
the knowledge of the offeree before acceptance .
> 26
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ELEMENTS OF CONTRACT:
Revocation of Offer and Acceptance
> BLAW / LAW2013 REV 00
> 01/08/2017
Revocation must be communicated in
order to be effective.
Section 6(a) of the CA 1950 :
A proposal is revoked by the communication of notice
of revocation by the proposer to the other party .
Section 4(3)(b) of the CA 1950 :
The communication of a revocation is complete as
against the person to whom it is made, when it comes
to his knowledge .
> 27
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ELEMENTS OF CONTRACT:
Revocation of Offer and Acceptance
> BLAW / LAW2013 REV 00
> 01/08/2017
Revocation must be communicated in
order to be effective.
Section 5(1) of the CA 1950 :
A proposal may be revoked at any time before the
communication of its acceptance is complete as
against the proposer, but not afterwards .
Section 5(2) of the CA 1950 :
An acceptance may be revoked at any time before the
communication of the acceptance is complete as
against the acceptor, but not afterwards .
> 28
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ELEMENTS OF CONTRACT:
Revocation of Offer and Acceptance
> BLAW / LAW2013 REV 00
> 01/08/2017
ELEMENTS OF CONTRACT:
Revocation of Offer and Acceptance
A proposes to sell his house to B by a letter sent by post .
B accepts the proposal by a letter sent by post .
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 his letter reaches A, but not afterwards .
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# B
# A
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> BLAW / LAW2013 REV 00
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1. A ________ when accepted, becomes a promise.
2. If acceptance of any promise is made ________, the
acceptance is said to be expressed.
3. Acceptance must be expressed in some usual and
_________.
4. If one party makes an offer and the offeree makes a
counter offer, does the original offer remain open?
5. List down 4 ways a proposal can be withdrawn.
> 30 Copyright of Almacrest International College. All rights reserved.
> BLAW / LAW2013 REV 00
> 01/08/2017 1.
Lee Mei Pheng , Ivan Jeron Detta (2022), Business Law, 3rd Edition,
Oxford University Press.
> 2.
Dr Loganathan Krishnan, Parimaladevi Rajoo , Anne Chrishanthani Vergis
(2022), Principles of Business and Corporate Law, Malaysia, 4th Edition,
CCH Malaysia.
> 3.
Contracts Act 1950 (Act 136)
> 4.
Federal Constitution
> 5.
Civil Law Act 1965 (Act 67)
> 6.
Subordinate Courts Act 1948 (Act 92), Subordinate Courts (Amendment)
Act 2010
> 7.
Courts of Judicature Act 1964 (Act 91)