Chapter 1 - Elements of Contract

Question 1

ELEMENTS OF CONTRACT

Overview

Answer 1

1) General offer & acceptance
2) Subject to contract
3) Condition precedent
4) Intention to create legal relation
5) Consideration
6) Privity of contracts

Question 2

GENERAL OFFER & ACCEPTANCE

Overview

Answer 2

1) Scope of offer
2) Revocation of offer
3) Revocation of acceptance

Question 3

GENERAL OFFER & ACCEPTANCE

Scope of offer

Answer 3

Preston Corporation Sdn Bhd v Edward Leong & Ors:

• terms must be expressly or impliedly indicate it to be binding;
• statement made containing no terms cannot amount to offer.

Question 4

GENERAL OFFER & ACCEPTANCE

Revocation of offer

Answer 4

1) S.6(a)
2) S.4(3)(a)
3) S.4(3)(b)

Question 5

GENERAL OFFER & ACCEPTANCE

Revocation of acceptance

Answer 5

1) S.5(2)
2) S.4(3)(a)
3) S.4(3)(b)

Question 6

SUBJECT TO CONTRACT

Overview

Answer 6

1) General test
2) No binding contract cases
3) Binding contract cases

Question 7

SUBJECT TO CONTRACT

General test

Answer 7

• whether essential terms have been agreed upon;

- whether there is a payment of deposit whatsoever in between the correspondence.

Question 8

SUBJECT TO CONTRACT

No binding contract cases

Answer 8

1) Ayer Hitam Tin Dredging Malaysia Bhd v YC Chin Enterprise:
- omission of important details - no binding contract.
2) Lim Chia Min v Cheah Sang Ngeow:
- “vital element to be prepared” - no binding contract.
3) Kam Mah Theatre Sdn Bhd v Tan Lay Soon:
- “SPA shall incorporate all terms & conditions” - no binding contract.

Question 9

SUBJECT TO CONTRACT

Binding contract cases

Answer 9

1) Charles Grenier Sdn Bhd v Lau Wing Hong:

• all essential terms have been agreed upon;
• There is payment of deposit;
• there is binding contract.

2) Lim Keng Siong & Anor v Yeoh Ah Tee:

• relevant terms are set out & deposit is paid;
• there is binding contract.

Question 10

CONDITION PRECEDENT

Overview

Answer 10

1) Effect of condition precedent
2) Distinction between promissory & contingent condition
3) Express undertaking to fulfil condition

Question 11

CONDITION PRECEDENT

Effect of condition precedent

Answer 11

Aberfoyle Plantations Ltd Khaw Bian Cheng:

• Condition must be fulfilled by the date specified;
• Otherwise the agreement will not become binding.

Question 12

CONDITION PRECEDENT

Distinction between promissory & contingent condition

Answer 12

National Land Finance v Sharidal Sdn Bhd:

1) Contingent condition:

• Affects formation of contract;
• Contract will not take effect unless condition is fulfilled;
• Non-fulfilment: no claims for damages.

2) Promissory condition:

• Essential terms of the performance of the contract;
• Non-fulfilment - amount to breach, can claim for damages.

Question 13

CONDITION PRECEDENT

Express undertaking to fulfil condition

Answer 13

Silver Concept Sdn Bhd v Brisdale Rasa Development Sdn Bhd:

• Express undertaking = promissory condition;
• Non-fulfilment = breach = can claim for damages.

Question 14

INTENTION TO CREATE LEGAL RELATION

Existence of “subject to contract”

Answer 14

Charles Grenier v Lau Wing Hong:

• Whether the parties have been identified with sufficient clarity;
• Whether all essential terms have been agreed.
• these two indicate that there is intention to create legal relation.

Question 15

CONSIDERATION

Overview

Answer 15

1) Inadequacy of consideration
2) Mutual promise
3) Past consideration
4) Forbearance to sue
5) Unlawful consideration

Question 16

CONSIDERATION

Inadequacy of consideration

Answer 16

1) Whether of a concern - Guthrie Waugh Bhd v Malaippan Muthuchumaru:
- Court is not concern with inadequacy of consideration.
2) Whether is a good consideration - Phang Swee Kem v Beh I Hock:
- Inadequate consideration in absence of vitiating elements is a good consideration.
3) Specific performance & inadequacy of consideration - Sandrifarm Sdn Bhd v Pegawai Pemegang Harta Malaysia:
- SP cannot be enforced where consideration is grossly inadequate.

Question 17

CONSIDERATION

Mutual promise

Answer 17

1) What - Murugesu v Nadarajah:

• Ill. (a) S.24;
• Promise against a promise;
• one promise is a consideration of the other.

2) Executed & executory consideration - David Wong Hon Leong v Noorazman bin Adnan:
- Exchange of mutual promise equals to executory consideration.

Question 18

CONSIDERATION

Past consideration

Answer 18

1) The law:
- S.2(d) + S.26(b)
2) Application - South East Insurance Bhd v Nasir Ibrahim:

• Essence of consideration is the promisee has taken some kind of burden.
• Detriment taken as a past performance should be sufficient consideration.

Question 19

CONSIDERATION

Forbearance to sue

Answer 19

1) What - Tan Chiew Thoo v Tee Kim Kuay:

• Consideration for compromise agreements to refrain from litigating a claim;
• In exchange for a promise to give up a bit or part of claim.

2) Whether a good consideration - Guthrie Waugh Bhd v Malaippan Muthucumaru:
- Forbearance to sue is a good consideration.

Question 20

CONSIDERATION

Unlawful consideration

Answer 20

S.24:

• agreement is void if the consideration is unlawful.

Question 21

PRIVITY OF CONTRACTS

Overview

Answer 21

1) General principles
2) Privity & S.66
3) Privity & S.74
4) Contract for guarantee exception
5) Trust exception

Question 22

PRIVITY OF CONTRACTS

General principles

Answer 22

Kepong Prospecting Ltd v Schmidt:

• 3rd party cannot enforce a contract.

Question 23

PRIVITY OF CONTRACTS

Privity & S.66

Answer 23

Badiaddin bin Mohd Mahiddin & Anor v Arab-Malaysian Finance:

• “any person” = exclude 3rd party;
• i.e. 3rd party cannot claim for restitution.

Question 24

PRIVITY OF CONTRACTS

Privity & S.74

Answer 24

Lim Foo Yong & Sons Realty Sdn Bhd v Datuk Eric Taylor:

• “party” - exclude 3rd party;
• i.e. only party to the contract or his estate can claim for damages.

Question 25

PRIVITY OF CONTRACTS

Contract for guarantee exception

Answer 25

Ambank (M) Sdn Bhd v Razshah Enterprise Sdn Bhd:

• contract of warranty envisage tripartite relationship between lender, borrower & guarantor.

Question 26

PRIVITY OF CONTRACTS

Trust exception

Answer 26

Ramli Shahdan v Motor Insurer’s Bureau of West Malaysia:

• Beneficiaries have locus to sue for contract entered by trustee for the benefit of beneficiaries.