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Contracts law in Malaysia
The purpose of this assignment is to outline the involvement of 4 different parties and been given with advice and jurisdiction based on the Malaysian Contracts Act 1950. Here, the elements of contracts are examined, studied and defined for every possible circumstance and scenarios that had happen.
Hence, the parties that involved respectively are Itua the businessman which intend to expand his business hereinafter referred to as Itua. Baju Murah the costumes supplier hereinafter referred to as BM. Baju Lagi Murah the second costumes supplier hereinafter referred to as BLM and lastly Wong the potential competitors hereinafter referred to as Wong.
In between, Itua had intention to make a purchase of costumes from two of the mentioned suppliers which is BM and BLM. He then also came across with Wong the potential competitor from his friend Sunil. Out of several circumstances and gossip, he wanted to revoke all the promises, and on the absence of Law knowledge, Itua is seeking for professional legal advice to justify his current obligation.
Itua is advised by the lawyer that before the promisor and promisee reached into a contractual relationship, there must be adequate involvement of the mentioned elements of contract. For this reason, Itua is advised under the Malaysian context law governed by the CA 1950.
Elements Of Contract Law
The constitutions of contracts in Malaysia are governed under the Malaysian CA 1950 (Act 136 - Revised 1974). Whereby, the word, contract itself exhibits a series of essential constituents, was named with - The element of contracts. Notably, in order to makes two party binding under an official contracts, it must satisfy at least an element of contracts which namely Offer, Acceptance of Offer, Intention to Create Legal Relations, Consideration, Certainty and Capacity. [Textbook page 77]
A successful agreement started from a successive offer. As stated respectively in the Section 2 (a) & (b) of CA 1950, offer was a signification of willingness for an individual to become binding with another under certain contract terms, and with the awareness of the intention of such offering shall become contract as soon as acceptance are present. [The contract law 1950 - section 2]
Furthermore, an offer made must be clearly identified as an offer or merely an invitation to treat. An invitation to treat is an invitation to offer, therefore, no elements of contracts are satisfied. Also stated in Section 4 (1) of CA 1950, the proposal are ought to be solely acknowledged by whom it is made to address and it can be either by expressed or implied. [The contract law 1950 - section 4]
In conjunction to converting an offer into a legally bind contract, acceptance of offer must present and it must be absolute, final and unqualified. [Section 7 (a) of CA 1950] Most notably, in Section 7 (b) of CA 1950, acceptance of offer must be distinguished whether of a counter-offer has been made. As it equally stand for the rejection of the initial offer and induces the modification of initial's offer prescribes manner, the alteration of such an offer are not just to first offer, thus, acceptance can be revoke within a reasonable time or otherwise.
Whereby for the revocation to be effective, it must be communicated to whom it is to be address and let another party acknowledged such notice to complete the cancelation of an offer as stated in Section 6 (a) of CA 1950. [The contract law 1950 - section 4 & 6] Furthermore, in Ignatiues vs. Bell a postal rule has been applied. So far as postal rule concern, it determined whether or not the acceptance are intended to be done in writing, and if only the promisor and promisee agreed on using such method in forming a legal agreement. However, the postal rule applied only if any parties posting a registered mail through a recognized post office and had dropped the mail into the mail box. If otherwise, postal rule are void.
Another element of contracts is the Intention to create legal relations. Although, in the Malaysian context of CA did not denote such an element is compulsory to formed a valid contract, somehow, in the case of Guha Majumder vs. Donough, such element are being held as a strong indication for lack of intention and therefore no legal relationships are intended. For an instance, both parties must have intention to create legal relations with each other and dictating the obligatory requirements. [Textbook page 94-95]
Follow by is the Consideration of a contract, stated that an agreement without consideration is void. [Section 26 of CA 1950] Further into clarification, in Section 2 (d) of CA 1950 says that, consideration are to be given to promisee to have alternative choices for do or abstains from it and are not suppose to be or feel like bounded to an obligation on the beginning of agreement.
On top of that, Certainty is another important element of contracts. For an instance, one should provide a lawful consideration and with a lawful object to ensure the conversion of agreement into contract. Therefore, certainty to such an object must be specific, exact and unqualified at the first point in order to foster a contract to be legally bounded at later consideration. [The contract law - section 30]
The last elements of contracts speak as a mean of Capacity. It implies the competent of a person to be bounded with a contract. The contract law implies, one that is an adult, who is physic and mental fit, and is ready to be bound under a contract via any law to which he is subject. [Section 11 of CA 1950]
Advice Of Contractual Relationships With Wong
Being notice that Wong is a potential competitor from Itua's friend - Sunil, saying that Wong are providing the services that likely the same with Itua business expansion's field which is costumes hire. On top of that, Wong providing make-up and hair salon in Miri, furthermore, he also equipped with fancy desserts and as well party decorations.
Itua is questioned if there is any contractual relationship with Wong. Hence, the fact of which it shown is merely communication of information and a normal conversation with Sunil. Thus, the information provided in the scenario is insufficient to conclude any contractual obligation between Wong and Itua.
Further justification proved that there is no presence of elements dictating contracts in this case. There is no promise being made in the form of implied or express. As defined in Section 9 of CA 1950, if there is no offer or acceptance of any promise either by words or other than words, then it does not satisfy the legal requirements of CA. [The contract law - section 9]
Besides that, Itua and Wong are classified into unilateral relationship. As far as the scenario shown, there isn't any bilateral formation among both of them. The inexistence of any form of communication and interaction with Wong concluded that there is no establishment of contractual relationship with Itua but only as a potential competitor and industrial relationship with him unilaterally.
Advice Of Contractual Relationships With BM
One the facts, Itua are held with sending a fax to BM which he clearly stating that “I am interested in buying the collection of costumes in your back closet. The highest price I pay would be RM5000.00 for the lot”. In such a scenario, Itua are engaging himself with the first element of contract. Offer, as prescribed in the Section 2 (a) & (b) of CA 1950 is a signification of willingness for an individual to become binding with another under certain contract terms, and with the awareness of the intention of such offering shall become contract as soon as acceptance are present
However, such engagement is subject to further justification of whether a firm offer or an invitation to treat has been made. From the fax statement, we come to know that Itua is meant that he would like to buy the costumes and the highest promise he want or he likely to pay would be RM5000.00. Thus, it is not concluded as an offer, but it is an invitation to treat for BM. The statement speaks itself and it appeared to be an inverted invitation for BM in making consideration for the desired selling price.
Again, an invitation to treat is merely an invitation to making an offer. So an invitation to treat is not an essential elements of contract, but it act as a measurement of whether the potentiality of Itua's fax constitutes a valid offer, thus, at this point concluded that Itua did not satisfy the first element of contract - offer.
Second element of contracts which is acceptance of offer, from the facts signifies that there is no offer and acceptance from BM when Itua sent his fax. BM did not make any acceptance immediately after such an invitation to treat is given. Thus, in Section 7 (a) of CA 1950 defined that acceptance of offer must present to conclude a contractual agreement when it appears to be absolute and unqualified to the consent of the promisor. Therefore, BM failed to fulfill the second elements of contract.
Itua are then advised with his revocation prospect. He did slip a piece of note under the door at BM and stating that “he no longer interested in their costumes” during the night after he being told by his friend Sunil regarding Wong's costumes hire shop. Later, Sunil also told the manager of BM and saying that Itua wants to cancel the purchase.
In this stage, the facts shown that there has been no postal rule involvement in this scenario as defined in Section 4 of CA 1950, as postal rule requiring a proper registered mail and being dropped into a mailbox. Nevertheless, the aforesaid rule will show no harm to Itua because it doesn't constitute any essential elements of contracts, yet, no offer or acceptance been made since the very beginning.
On the other hand, after BM manager learned Itua revoke's intention from Sunil, he quickly telephoned and left Itua a voicemail saying that “they accept his offer to purchase the costumes for RM5000.00 and will delivering it on Friday”. At this instance, BM manager is more likely to sounds like making Itua an offer of the desired selling price than to be said as an acceptance of Itua's offer.
Additionally, [B.T.H. Lee J, page 81 of textbook] said a “casual conversation whether on the telephone or otherwise is very much difficult to infer that the parties are really contemplating entering into any legal relationships”. It proved that, the voicemail are to lean to be assumed as acceptance of offer.
Besides that, another revocation point is as stated in Section 4 (3B) of CA 1950; the communication of revocation is complete when it comes to the knowledge of the offeree. It was solely due to Sunil has already told Itua intention to BM and however, BM still insist of doing business with Itua by looking forward to be legally bind with Itua. Thus, this section told us about the third party rules which happen in blablabla vs. hohoho [Bernard books about third party]
Therefore, Itua held no contractual relationship with BM but only a potential business relationship and revocation is possible in this scenario as no element of contracts are satisfied.
Advice Of Contractual Relationships With BLM
In this case, Itua visited to another costumes collection which is BLM and this is where his good friend Sylvester, is the manager. He made an offer to Sylvester saying that if BLM will accept RM3000.00 for their costumes collection, and whether they will deliver the costumes on following Monday. As defined in Section 2 (a) & (b) of CA 1950, offer was a signification of willingness for an individual to become binding with another party when acceptance are present.
However, Sylvester replied immediately that he would need to check with his Board of Directors if they wanted to let go of the costumes collection. However, Sylvester are certain to eliminate a condition, which BLM will not deliver the costumes. The facts show that Sylvester are altering Itua first offer, therefore defined in Section 7 (a) & (b) of CA 1950, the acceptance must be absolute and unqualified, be executed as in the original prescribed manner and if otherwise, unless it is well communicate between reciprocal and reached a consensus or it shall be void.
Moreover, Itua again making a second offer which he agrees to pay to have the costumes delivered. For this instance, Sylvester remain silent until further confirmation from his Board of Directors. The aforesaid had shown that there is no acceptance been made for the offer but further acceptance is subject to consideration. In Section 8 of CA 1950 reads, should there is “performance of the conditions of a proposal, or acceptance of any consideration for a reciprocal promise which offered with a proposal, is an acceptance of the proposal”. For this reason, the acceptance did not take place, because Sylvester need to further the discussion with his Board of Directors, hence, it did not satisfy the element of contracts namely offer and acceptance of offer.
Advancing into the case, Itua was told by his another friend Sunil about Wong, which currently doing the costumes hire business and in mean time providing a lot more services which likely will outwit what Itua planning to do. As a result, Itua quickly drop a note stating that “he does not want to purchase the costumes” into the post-box outside the door. Itua is advised that there is no postal rule being applied in this scenario, because there isn't any agreement for both party for applying posting as a channel for acceptance or revocation. [The contract law - Section 4 (2) & (3)]
However, by referring to a case “from Bernard's book, about the office hour are accepted for proper postal rule” says that postal rule are valid only if the mail are posted with a registered mail and yet during an official office hours, if otherwise, then it is assume voidable.
The scenario had shown no effect of whether Itua had or hasn't posted such a piece of revocation note to BLM. On the next day, Itua received a fax from BLM stating that they accept his offer of the purchase, but they still insist on not delivering it and expecting Itua to arrange the delivery on his own. At this juncture, acceptance from BLM had taken place, so as to say acceptance of offer is established.
However, the arguable revocation fact is certain, which BLM did not fulfill Itua originated request to have delivered or arrange the delivery of costumes. Such disparity as defined in Section 7 (b) of CA 1950, if the acceptance is not made in the initial way the offerer want, he may, within a reasonable time communicate with the offeree that the offer shall be accepted in the original prescribed manner, subsequently, if the offeree refused to proceed with the agreement then it shall be void.
In addition, Section 5 (2) of CA 1950 also says that revocation can happen before acceptance is completed. Consequently, Itua is firmly possessing the revocation right due to insufficient elements of contract has been satisfied by BLM. Concluded that, Itua does not obliged to any legal responsibility with BLM and there is no establishment of any contractual relationship with BLM.
All the abovementioned principles had lead to finalize that Wong, BM and BLM are incapable to have any legal contractual relationship with Itua. The cases signifies the circumstances that are likely to happen when one is about to go into a contract, yet, it display the encouraging statements for revocation and held no unjustifiable relationships with each others. In accordance with the jurisdictions discussed, there might not be sufficed to render to damages that can be claim by neither of them.
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