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LAW OF CONTRACT: ELEMENTS OF CONTRACT (OFFER). PREPARED BY: NURUL NASIHIN ARIFFIN KPMBP. Definition.
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LAW OF CONTRACT:ELEMENTS OF CONTRACT(OFFER) PREPARED BY: NURUL NASIHIN ARIFFIN KPMBP
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.
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
Types of offer • An offer may be: 1) express made verbally or in writing. 2) implied offer comes from one’s 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.
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 D’s 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
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. P’s offer to continue his duty has not been communicate to D, thus D has no choice of either to accept or reject.
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 Clarke’s 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 P’s 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.
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
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 D’s offer after 5 months.
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 party’s approval.
Cont… 4) sec 6(d) offer is revoked if offeree before the acceptance knows that the offeror is dead or experience mental disorder.
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 Y’s invitation to do some business together, a contract does not exist. If X agrees with Y’s invitation to some business, X will make an offer. It is up to Y whether to accept or reject the offer.
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.
Cont… - Case: Harvela Investment Ltd v Royal Trust of Canada D invites 2 parties to buy the company’s 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 Y’s 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.
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
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
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
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
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
