Agreement May Not Be Necessary

Every contract is an agreement but agreement may not necessary to be considered as contracts if the agreement does not made in lawful way. A binding contract consists of these four essentials which consist, an offer s.2(a) CA1950, an acceptance s.2(b) CA 1950, consideration s.2(d) CA1950, as well as intention to create legal relations (Adams 2010). On the other hand, (Ayus, 2009,page 197) defined an offer as “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 the person to whom it is addressed”. However, based on the opinion given by Duxbury (1991), an acceptance may be defined as an unconditional assent, which communicated by the offeree to the offeror, to all terms of the offer, made with the intention of accepting. It should be noted here that a contract will not be binding unless the parties have expressed themselves with reasonable certainty.

1.0 Issue

The issue of this question is about a sale of car for RM30, 000 that advertised in the local newspaper by Ah Chong, whether or not he has a contract with any of the three parties. This question is regarding offer and acceptance whereby offeror signifies his willingness to do something or not to do, with a view to obtaining the consent given from the offeree.

2.0 Law

S.2(a) CA1950 defined offeror/proposal as stated in appendix. In unilateral contracts, the party who offers something to offeree/acceptor may not necessary to be an offeror, but an offeree which is stated in s.2(b) CA1950.

A contract binds between offeror and offeree by completing communication of proposal, acceptance, and revocation that stated in s.4(1), s.4(2), and s.4(3) of CA1950 respectively. According to s.4(1) CA1950, it stated that: “the communication of a proposal is complete when it comes to the knowledge of offeree”. In other word, proposal is effective upon its communication has been communicated to the offeree. When offeree reply his/her acceptance (by email, by post, by hand) to the offeror, there is an official contract exists between the both parties – s.4(2)(b) CA1950. In postal rule, the moment offeree posted his/her acceptance letter into postbox, the contract binds offeror provided that the letter has been placed into the hand of the relevant postal authorities – s.4(2)(a) CA1950.

Acceptance must be made within a reasonable time embodied in s.6(b) CA1950. On the other hand, in situation whereby offeree posted an acceptance, it must be certain and fixed based on the condition given by the offeror since the offer contained the element of consideration [s.2(d) CA1950] by offeror and shall not be in the midst of negotiating or bargaining s.7(a) CA1950. Hence, a purported acceptance that is different from the stipulated in the offer would not be an acceptance in law and may end up to a counter-offer. (Nabi Baksh & Arujunan 2005)

3.0 Cases

An offer may be considered as an invitation to treat depending on offeor’s intention. An invitation to treat is an action to induce someone to make offer, negotiate or deal and, therefore, has no legal consequences and cannot be ‘accepted’ to bring about a contract. Invitation to treat appears in several examples such as display of goods in a shop, advertisement, auctions, catalogues, and tender. In this case, it is an advertisement and the relevant case of advertisement: Partridge v Crittenden [1968] 2 All ER 421; 1 WLR 1204. The fact of this case reads: “Partridge advertised live wild birds for sale in a periodical bird magazine as ‘Quality British ABCR … Bramblefinch hens, 25/- each’. The advertisement appeared in the classified advertisements section of the magazine. Partridge was charged with offering live wild birds for sale. The issue was whether the advertisement was an invitation to treat or an offer. However, the court held that the advertisement was only an invitation to treat because nowhere was there any indication of an expression of intention to be bound”. (Lee & Detta, 2009)

In Ramsgate Victoria Hotel Co. Ltd v Montefiore [1866] LR 1 EXCH 109, that fact of this case reads: “Montefiore applied for shares on 8 June but he was not told until 23 November that his offer had been accepted and that the shares had been allotted to him and that the balance owing on the shares was now due. Montefiore refused to pay and the company threatened to sue, alleging breach of contract. The issue was whether the offer lapsed through passage of time. The issue was whether the offer to purchase shares had not been accepted within a reasonable time and the offer had therefore lapsed. There was no contract created”. (Lee & Detta, 2009)

The case of Felthouse v Bindley [1862] 142 ER 1037, the fact reads: “Felthouse wrote to his nephew offering to buy his horse, adding ‘If I hear no more about him I shall consider the horse mine at £40’. His nephew intended to sell the horse to his uncle but did not reply to the letter. He told Bindley, who was auctioning his farm, not to include the horse in the auction as it was already sold. Bindley sold the horse by mistake and Felthouse tried to sue Bindley for conversion of his property. The issue was whether the offer could have been accepted by the offeror stating that silence by the offeree would be deemed to be consent. The court held that the nephew’s acceptance had not been communicated to the uncle. The horse did not therefore belong to him”. (Lee & Detta, 2009)

The case of Hyde v Wrench [1840] 3 BEAV 344-49 ER 132, the fact reads: “The defendant offered to sell his estate to the plaintiff on 6 June for £1000. On 8 June, in reply, the plaintiff made a counter-proposal to purchase at £950. When the defendant refused to accept this offer on 27 June, the plaintiff wrote again that he was prepared to pay the original sum demanded. The court held that the no contract existed between them. The plaintiff had rejected the original proposal on 8 June so that he was no longer capable of accepting it later”. (Lee & Detta, 2009)

4.0 Application

By adopting the principal given from the case of Felthouse v Bindley [1862] 142 ER 1037, the court held that the nephew’s acceptance had not been communicated to the uncle. S.7(b) CA 1950 provides that acceptance must be expressed in some usual and reasonable manner, unless the proposer prescribes the manner in which it is to be accepted. The proposer cannot prescribe silence as a manner of acceptance. Thus, Muthu cannot prescribe silence as a manner of acceptance given by Ah Chong regarding the one week time. On the other hand, a proposal is revoked 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 – Section 6(b) of (CA 1950). In other word, the proposal of Muthu is revoked by the lapse of the one week time if Ah Chong disagrees with the duration requested by Muthu. The question mentioned that Muthu believe that he has contract with Ah Chong for the sales of car. Since Ah Chong did not give Muthu any feedback about the offer, Muthu cannot assume that silent is amount to acceptance. Thus, no contract exists between Ah Chong and Muthu.

Every contract must be absolute and unqualified without any negotiations between both offeror and offeree or else it will be consider as counter-offer pursuant S.7(a) CA1950. Since Ali has been replied counter offer on condition that the car must be given a new coat of paintwork despite Ah Chong lower the cost of the car at RM28,000. Undoubtedly, there is no contract exists between Ah Chong and Ali since the counter-offer destroyed the original offer which happened in the case: Hyde v Wrench [1840] 49 ER132. Since Ah Chong sent his offer to Ali by mail, Ah Chong has become the offeror, and Ali has only reply his acceptance by saying yes or no, and the question mentioned that Ali countered the offer which is made by Ah Chong. Therefore, no contract exists between both Ah Chong and Ali as a result of counter-offer happened in between.

Whether an advertisement is an offer or an invitation to treat depends on the intention of the parties. By adopting the principal provided from Partridge v Crittenden [1968] 1 All ER 421, the court held that the advertisement was only an invitation to treat because nowhere was there any indication of an expression of intention to be bound. In relation to this scenario, there is no contract existed between John and Ah Chong as well; due to the advertisement was only an invitation to treat. However, John has contract with Ah Chong for the sale of car provided that Ah Chong accepted his offer. John believe that he has contract with Ah Chong for the sale of car, whether it is an offer or merely an invitation to treat is very hard to decide since all the circumstances of the case have to be considered to see whether there is an absolute intention to contract.

5.0 Conclusion

Since all of the three parties believed that they have contract with Ah Chong. Whether each of them has contract with Ah Chong is shown in detail:

i) Muthu

For Muthu’s case, although he declare his offer to Ah Chong, but he has not receive the communication made by Ah Chong pursuant to s.4(2)(b) CA1950. In addition, his offer is lapse by reasonable time stated in s.6(b) CA1950 and Ah Chong need not inform Muthu about the lapsed of offer. No contract exists between Ah Chong and Muthu.

ii) Ali

Though Ali received the e-mail sent by Ah Chong for the sale of car at RM28,000. It is worth to buy at cheaper price, but Ali did not have to opportunity to buy it since he has posted his acceptance contained the element of counter-offer. By the way, if Ali later posted another e-mail to agree with the offer, the result will be the same since the counter-offer ruined the original offer. The principal of Hyde v Wrench [1840] 49 ER13 said that, the counter offer has destroyed the original offer; therefore, no contract exists between Ah Chong and Ali.

iii) John

Although John’s offer may be treated as invitation to treat, but he is the one who can enter contract with Ah Chong without any interventions since he has not done anything which is prohibited in law. The answer is, yes, John has contract with Ah Chong provided that Ah Chong has decide to sell the car to John.

References

Adams, A. (2010), Law for Business Studenys – 6th Edition, Pearson Education Limited, Endland

Ayus, A.M., (2009), Law of Contract in Malaysia – Vol. I, Sweet & Maxwell Asia, Selangor

Duxbury, R. (1991), Contract in a Nutshell – 2nd Edition, Sweet & Maxwell, London

Lee, M.P. & Detta, I.J., (2009), Business Law, Oxford University Press, Selangor

Nabi Baksh, A.M. & Arujunan, K., (2005), Business Law in Malaysia, LexisNexis Malayan Law Journal, Selangor