UNIVERSITI KUALA LUMPUR

MALAYSIAN INSTITUTE OF MARINE ENGINEERING TECHNOLOGY

GROUP ASSIGNMENT 1
BUSINESS LAW
LGB 31303
JULY 2020

Student 1. MUHAMMAD AFIQ BIN ADANAN (56212118093)

Name 2. MOHAMAD FAKHRUL SYAKIRIN BIN MOHD
SHOLHAN (56212118101)
3. CHE AMIRUL ALIM BIN CHE KAMARUZAMAN
(56212118097)
Lecturer
MADAM HAJAH ISMILA BINTI HAJI CHE ISHAK
Name
TITLE
THE LAW OF CONTRACT
REPORT
Table of Contents
1.0 Introduction .............................................................................................................................. 1
2.0 Formation of Contract ............................................................................................................... 2
2.1 Offer .......................................................................................................................................... 2
2.1.1 Example of offers .................................................................................................................. 4
2.2 Invitation to treat ...................................................................................................................... 5
2.2.1 Examples of invitation to treat .............................................................................................. 5
3.0 Types of contract on the basis of Formation ............................................................................. 6
4.0 Discharge by Frustration, Performance and Breach .................................................................. 7
5.0 Remedies .................................................................................................................................. 8
6.0 Conclusion............................................................................................................................... 11
7.0 References .............................................................................................................................. 11

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1.0 Introduction

A contract may be defined as legally binding agreement made by 2 or more parties. It

has also been defined as a promise or set of promises a breach of which the law provides a
remedy and the performances of which the law recognizes as an obligation.

The most important characteristics of a contract is that it is enforceable. The genesis

of a contract is an agreement between the parties hence a contract is an enforceable
agreement. However, whereas all contracts are agreements, all agreements are not contracts.

In short, an oral or written agreement that shares any combination of products,

services, money or property can be represented as legally binding. It is a common
misunderstanding that a contract can be written only because, during contract formation, oral
or conduct agreements may be equally valid. If such exceptions are valid, a contract is special
in that the Parties can agree to whatever terms they wish to be known as "contract of
freedom"

For example if purchase food from an outlet unknowingly concluded a contract for
money exchange in return of products, hundreds of contracts a year are concluded. This is a
very basic example of a contract but contracts can be very complicated due to the right of the
parties to agree to whatever terms and conditions they deem acceptable.

In order to settle their conflicts and to control their contract responsibilities, contract
legislation attempts to establish an appropriate legal structure for contracting parties. Contract
law is largely independent and does not require interference for the majority of contracts. If
the arrangement was fair or not, the courts may not consider it, but should be applied in the
event it was decided. Nevertheless, the courts freely turn away from the concept of
contractual liberty on many occasions. This is also where one negotiating side abuses
bargaining power.

In this chapter will explain about the formation of contract, type of contract,
discharge, and remedies. This will include the example of scene that happen in contract of
law. This happen in daily basis among two individuals to make a deal or contract.

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2.0 Formation of Contract

A contract comes into existence when an offer by one party is unequivocally accepted by
another and both parties have the requisite capacity. Some consideration must pass and the
parties must have intended their dealings to give rise to a legally binding agreement. The
purpose of the agreement must be legal and any necessary formalities must have been
complied with.

2.1 Offer

The offer is the first fundamental requirement for contract formation. Despite the
obvious simple term 'offer' an offer is not necessarily straightforward, and it is at this stage
the duty of the courts to decide what constitutes an offer and what does not.

If there is no offer, it will not function in the other sections of the contract, so it is so
important that can understand the offer. After completing the segment, people should be
comfortable in recognizing offers and understanding how they connect with contract
formation.

An offer has been defined as an unequivocal manifestation by one party of its

intention to contract with another. The party manifesting the intention is the offeror and the
party to whom it is manifested is the offeree. Section 2(a) of the Contracts Act 1950 provides
that ‘ 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, said to
make a proposal’.

A proposal must be definite promise to be bound provided certain specified terms are
accepted. The promisor ( also known as the offeror) must have declared his readiness to
undertake and obligation upon certain terms, leaving the option of its acceptance or refusal to
the offeree, the person to whom the offer is made.

A proposal made in words oral or written is said to be expressed. If a proposal is made

other than in words, it is said to be implied (section 9 of the Contracts Acts 1950).

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The case of Storer v Manchester City Council [1974] 1 WLR 1403 outlines that an offer is:

1) An expression of willingness to contract on specified terms

2) With the intention that it is to be binding once accepted

Storer v Manchester City Council confirmed that the courts will take an objective approach in
considering when something constitutes an offer; the intentions of the offeror are not
considered, only what a reasonable person would judge objectively.

Facts

The defendant City Council refused to proceed with the sale of a council property to the
claimant under an arrangement which had been agreed with its predecessor. All of the terms
of the contract had been agreed but for the date on which the lease was to end and the
mortgage payments were to begin, which had been left blank on the form returned to the
defendant by the claimant. The claimant alleged that the contract was completely concluded
and sought specific performance of the agreement.

Issue

The question was whether the contract had been concluded, despite the fact that the date on
which the claimant became a purchaser rather than a tenant was still to be determined.

Held

The Court of Appeal held that the contract was complete despite the absence of this term. In
distinguishing between an offer and an invitation to treat, it is necessary to look. not to the
subjective intentions or beliefs of the parties, but rather on what their words and conduct
might reasonably and objectively be understood to mean. In this case the defendant had made
clear by their conduct and language that they intended to be bound upon the acceptance of the
offer despite the fact that some terms remained to be agreed.

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2.1.1 Example of offers

1. Cross offers

This is a situation where a party dispatches an offer to another who has sent a similar offer
and the two offers cross in the course of communication. No agreement arises from cross
offers for lack of consensus between the parties. The parties are not at ad idem.

2. Counter offer

This is a change, variation or modification of the terms of the offer by the offeree. It is
conditional acceptance. A counter offer is an offer in its own right and if accepted an
agreement arises between the parties.

Its legal effect is to terminate the original offer as in Hyde v Wrench (1840), the defendant
made an offer on June 6th to sell a farm to the plaintiff for 1,000 Euro. On 8 th June, the
plaintiff wrote to the defendant accepting to pay 950 Euro for the farm. On 27 th June, the
defendant wrote rejecting the 950 Euro. On 29th June the plaintiff wrote to the defendant
accepting to pay 1,000 Euro for the farm.

The defendant declined and the plaintiff sued for specific performance of the contract. It was
held that the defendant was not liable as the plaintiff’s counter offer of 950 Euro terminated
the original offer which was therefore not available for acceptance by the plaintiff on 29 th
June as the defendant had not revived it.

A counter offer must however be distinguished from a request for information or inquiry.

In the scene movie ‘Just go with it’ (2011), in this scene Danny are negotiating with Magie to
act like his daughter. Only this way he will able to marry with he loves. Danny are inviting
Magie to act. Magie are offering for USD 600 at the first price with additional if more than 8
hours a day including her acting class for 6 weeks. Danny counter against Magie with USD
50 a day with 2 weeks acting class. Maggie was accept the Danny last offer the deal are
made.

Another scene movie that related to the counter offer, ‘House of Games’ (1987). From the
beginning, before the scene start the women having a gamble between her and Jt in playing
pool, if one of them lose he or her need to paid 200 Dollar. (unilateral contract between
paties) (become acceptance/promised when both of them start played the pool). Second Jt

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lose the games and he doesn’t want to paid 200 Dollar (fraud). The woman bring her lawyer
to get he money back from Jt., her lawyer asked the money from Jt and he doesn’t wanted to
paid beside he counter offer with some rude talk, to kick the lawyer out. Third, the lawyer
make a counter offer back with give Jt two option: a) do he will be kicked, b) or do he need to
fight to get the money (terms and condition).

2.2 Invitation to treat

This is a mere invitation by a party to another or others to make offer or bargain. The invitee
becomes the offeror and the inviter becomes the offeree. A positive response to an invitation
to treat is an offer.

2.2.1 Examples of invitation to treat

1. Advertisement of sale by auction: At common law, an advertisement to sell goods or

other property by public auction is an invitation to treat. The prospective buyer makes
the offer by bidding at the auction and the auctioneer may accept or reject the offer.
It was so held in Harris v Nickerson where a commission agent had sued as auctioneer
for failure to display furniture he had advertised for sale by auction. It was held that
there was no contractual relationship between the parties as the advertisement was
merely an invitation to treat and as such, the auctioneer was not liable.
2. Sale by display: At common law, the display of goods with cash price tags is an
invitation to treat. The prospective buyer makes the offer to buy the items at the stated
or other price which the shop owner may accept or reject. In Fisher v Bell, the
defendant was sued for ‘offering for sale’ a flick knife contrary to the provision of the
Offensive Weapons Act. The defendant had displayed the knife in a shop with a cash
price tag. Question was whether he had offered the knife for sale. It was held that he
had not violated the Act as the display of the knife was an invitation to prospective
buyers to make offers.
3. Sale by self-services: At common law, a sale by self service is an invitation to treat.
Prospective buyers make offers by conduct by picking the goods from the shelves and

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 the offer may be accepted or rejected at the cashier’s desk. The offeror is free to
revoke his offer to buy the goods at any time before reaching the cashiers desk. In
Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd
(1952). The defendant owned and operated a self-services store which stocked among
their things, drugs which under the provisions of the Pharmacy and Poisons Act
(1933) could only be sold with the supervision of the registered pharmacist. The
defendant’s pharmacist was stationed next to the cashier’s deck. The plaintiff society
argued that the defendant had violated the Act as the pharmacist was not stationed
next to the shelves where the drugs were displayed. Question was at what point a sale
took place. It was held that the defendant had not violated the provisions of the Act as
its pharmacist was stationed next to the cashier’s desk where the actual sale took
place.
This case is authority for the proposition that in a sale by self-service, a sale takes
place at the cashier’s deck. A similar holding was made in Lasky v Economy Grocers
Ltd.

3.0 Types of contract on the basis of Formation

On this base Contracts can be classified into three groups, namely Express, Implied, Quasi
Contracts.

Express Contracts: Express contracts are called contracts for the purposes of expression or
conversation. For instance, A offered his house to sell and B accepted it. The contract is
express.

Implied Contract: In the absence of speech, contracts are referred to as implied contracts.
Examples are sitting on a bus, which is a clear arrangement between the passenger and the
owner of the vehicle.

Quasi Contract: In case of Quasi Contract there will be no offer and acceptance so, actually
there will be no Contractual relations between the partners. Such a Contract which is created
by Virtue of law is called Quasi Contract. Sections 68 to 72 of Contract Act read about the
situations where court can create Quasi Contract.

Sec. 68: When necessaries are supplied

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Sec. 69: When expenses of one person are paid by another person.

Sec. 70: When one party is benefited by the activity of another party.

Sec. 71: In case of finder of lost tools.

Sec. 72: When payment is made by mistake or goods are delivered by mistake.

4.0 Discharge by Frustration, Performance and Breach

i. Discharge by Frustration
On the off chance that a party guarantees to carry out a specific act, the law will hold
them to their guarantee. This rule is commonly known as the convention of supreme
obligation. The cruelty of this convention was illustrated in Cutter v Powell [1795]
ii. Effect of Frustration
The impact of a disappointing occasion is to release a contract instantly, but as it were
as to long term. The contract isn't void ab initio, but as it were void from the time of
the baffling occasion. For the period that the contract is substantial, any commitments
that emerge must be satisfied. Cash paid beneath the terms of the contract; for
illustration, by way of a store, sometime recently the baffling occasion happens
cannot be recuperated, since at the time the cash was paid the contract was substantial.
A add up to disappointment of thought would have to be built up in arrange that the
money be recuperated.
iii. Discharge by Performance
As a common run the show, execution of a contract must be correct and exact and
ought to be in understanding with what the parties had guaranteed. Area 38(1) of the
Contracts Act 1950 gives that parties to a contract must either perform or offer to
perform their particular guarantees, unless such execution has been apportioned with
by any law. Execution may be from a third party and not essentially from the
promisor. Area 42 of the Contracts Act 1950 gives that ‘when a guarantee
acknowledges execution of the guarantee from a third individual, he cannot a short
time later implement it against the promisor’. In Re Krishnan Rengasamy example,
Middle easterner Malaysian Credit Bhd [2001] for segment 42 of the said Act to
apply, an assention must have been accomplished between the guarantee and
promisor, and there must have been total execution by the third party.

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 iv. Discharge by Breach
Where a party comes up short to perform their commitments as concurred, they are in
breach of contract. A breach can happen in a few ways including:
- A disappointment to comply with a term of the contract;
- By a party declaring to the other party that they are now not fascinated by carrying
out their commitments earlier to the time for execution (expectant breach); and
- A delay within the execution where time is of the pith within the contract.
v. Effect of Breach
On the off chance that one party falls flat to perform their commitments beneath the
contract or breaches a condition, the blameless party is entitled to treat the contract as
finished from the time of the ending occasion and may be able to recoup harms. The
contract isn't treated as void ab initio. Any rights and commitments that have as of
now emerged from the fractional execution of the contract will stay unaffected. The
parties are as it were calmed of the commitment to perform after the date on which the
contract was released.

5.0 Remedies

i. Rescission
Rescission is an impartial cure, which permits an blameless party to cancel the
contract by cancelling it or, on the off chance that there has been deception by the
other party, raising that deception as a guard in case sued for harms or particular
execution by the other party. Its reason is to invert the contract and reestablish the
parties to as close as practicable to their unique pre-contractual positions, diminishing
each party of their commitments and allowing recuperation of any benefits conferred
on each other. In Berjaya Times Square Sdn Bhd (once known as Berjaya Ditan Sdn
Bhd) v M Concept Sdn Bhd [2010], the Government Court denied the buyer the
correct to cancel in spite of extended delay in completion. This Government Court
case was recognized on the actualities by a afterward Government Court case,
Damansara Realty Bhd v Bungsar Slope Possessions Sdn Bhd [2011]. In any case, the
cure of rescission is smaller than damages for breach of contract because it will not
cover harms which might stream common.

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 ii. Restitution
Restitution (or rebuilding) is now and then alluded to as quasi-contract. It isn't legally
binding and does not depend on the offended party enduring misfortune or harms. Its
premise is unjust enhancement; that's , those circumstances where it would be
exceptionally unjustifiable in case the respondent was to be permitted to hold the
money, or the merchandise or administrations, without installment.
iii. Damages
The most reason of harms is to enable the blameless party to get financial stipend
from the party mindful for the breach of contract. Harms are not granted to rebuff a
transgressor, but or maybe to put the harmed party back in position that they would
have involved in the event that the contract had been performed as initially planning.
In this manner, harms are calculated on the premise of looking at what the position
ought to have been in the event that the contract had been appropriately performed.
Harms are allowed to a party as remuneration for the harms, misfortune or damage he
has endured through a breach of contract. Segment 74 of the Contracts Act 1950 sets
out the arrangement for such recompense. In arrange words, the common guideline
for the appraisal of harms is compensatory.
iv. Specific Performance
Particular performance may be optional arrange allowed by the courts coordinating a
individual to carry out their commitments beneath the contract. It isn't for the most
part utilized in breach of contract activities unless harms demonstrate to be
inadequate. In cases where common law harms are not an satisfactory cure, especially
contracts including arrive or where the subject matter is special, like a uncommon
craftsmanship, particular execution may be allowed by court where on the off chance
that finds that harms would be lacking remuneration. Where the court cannot oversee
the usage of a contract, it'll not by and large allow particular execution. In this way,
contract including individual administrations make issues of supervision since the
courts cannot decide whether the concurred guarantee is being legitimately
performed. The courts will too deny to allow particular execution where the contract
would require consistent supervision by the court.
v. Injunction
An injunction could be a discretionary court arrange. Not at all like particular
performance, this can be a court arrange controlling a party from breaking their
contract or from committing a wrongful act (an arrange disallowing performance) and
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 will not be granted on the off chance that harms are an satisfactory remedy. An order
may be :
-Prohibitory, avoiding the breach of a contract;
-Mandatory, requiring a individual to perform a few legally binding commitment; or
-Interlocutory, where it solidifies the status quo between the parties until the debate
can be heard by the court. The cure of an interlocutory directive is utilized by a party
to preserve the status quo to the subject-matter in a pending suit. A required order
may be a court arrange requiring something to be done Neoh Siew Eng v As well
Chee Kwang [1963]. An directive may too be within the shape of a limiting arrange,
halting something from being done. This sort of order is called the prohibitory order
Broome (Selangor) Elastic Ranches v R H Whitley [1919].
vi. Anton Piller Order
An Antom Piller arrange may be made accessible in remarkable circumstances where
it can be appeared that litigant has implicating prove in its ownership, which is
fundamental to the plaintiff’s case and which could be devastated some time recently
a court arrange for disclosure can be made.
vii. Quantum meruit
Quantum meruit implies is ‘as much as he has earned’ and as it were emerges in cases
of portion execution. The contract may be released by breach, but where the contract
is for merchandise or administrations, there's a unused inferred contract forced by law
on the party taking the benefit that it'll pay a sensible sum for the quantum or parcel
given. It isn't accessible to the party in breach. Quantum meruit can emerge where:
-A litigant has avoided a offended party from carrying out the leftover portion of the
legally binding duties;
-The parties cannot concur on installment; and
-The parties concur on installment for the part-performance but not the real amount.
The court can make an grant on the premise of what is merited. In case the contract
was whole and the offended party was not anticipated from performing, or there was
no free and willing acknowledgment of halfway exhibitions by the respondent, the
respondent may take the benefit.

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6.0 Conclusion

Conclusion of law is a determination by a judge or ruling authority regarding the law that
applies in a particular case. It is opposed to a finding of fact, which interprets the factual
circumstances to which the law is to be applied. For example, a conclusion of law may
determine that evidence cannot be introduced in a trial, based on evidentiary rules excluding
illegally obtained evidence. The choice to believe a certain party's testimony regarding the
circumstances about how the evidence was obtained is truthful is a finding of fact.

7.0 References

Ryan, Fergus (2006). Round Hall nutshells Contract Law. Thomson Round Hall.

p. 1. ISBN 9781858001715.

Case Note - Contract Law - Rule of Law Institute of Australia. Rule of Law Institute of Australia. 2018-05-

31. Retrieved 2018-09-14.

"Contracts". www.lawhandbook.sa.gov.au. Retrieved 2018-09-14.

In England, contracts of employment must be in writing (Employment Rights Act 1996), and contracts for

the sale of land, and most leases, must be completed by deed (Law of Property Act 1925).

This category of "obligations" is essentially a fusion of contract and tort, and while cases such as Junior

Books Ltd v Veitchi Co Ltd promoted this idea, it has fallen out of favour in English legal circles.

Rose & Frank Co. v JR Crompton & Bros Ltd. [1923] 2 K.B. 261, 273 (Bailhache J). Westlaw

Appleson v Littlewoods 1939 & Jones v Vernons Pools 1938.

Enright, Máiréad (2007). Principles of Irish Contract Law. Clarus Press.

DiMatteo L. (1997). The Counterpoise of Contracts: The Reasonable Person Standard and the Subjectivity

of Judgment. South Carolina Law Review.

George Hudson Holdings Ltd v Rudder (1973) 128 CLR 387 [1973] HCA 10, High Court(Australia).

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promise legal definition of promise. promise synonyms by the Free Online Law Dictionary

Feinman JM, Brill SR. (2006). Is an Advertisement an Offer? Why it is, and Why it Matters. Hastings Law

Journal.

Carlill v Carbolic Smoke Ball Co [1892] EWCA Civ 1, [1893] 2 QB 256, Court of Appeal(England and

Wales).

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