Chapter 1 - Elements of Contract Flashcards
ELEMENTS OF CONTRACT
Overview
1) General offer & acceptance
2) Subject to contract
3) Condition precedent
4) Intention to create legal relation
5) Consideration
6) Privity of contracts
GENERAL OFFER & ACCEPTANCE
Overview
1) Scope of offer
2) Revocation of offer
3) Revocation of acceptance
GENERAL OFFER & ACCEPTANCE
Scope of offer
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.
GENERAL OFFER & ACCEPTANCE
Revocation of offer
1) S.6(a)
2) S.4(3)(a)
3) S.4(3)(b)
GENERAL OFFER & ACCEPTANCE
Revocation of acceptance
1) S.5(2)
2) S.4(3)(a)
3) S.4(3)(b)
SUBJECT TO CONTRACT
Overview
1) General test
2) No binding contract cases
3) Binding contract cases
SUBJECT TO CONTRACT
General test
- whether essential terms have been agreed upon;
- whether there is a payment of deposit whatsoever in between the correspondence.
SUBJECT TO CONTRACT
No binding contract cases
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.
SUBJECT TO CONTRACT
Binding contract cases
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.
CONDITION PRECEDENT
Overview
1) Effect of condition precedent
2) Distinction between promissory & contingent condition
3) Express undertaking to fulfil condition
CONDITION PRECEDENT
Effect of condition precedent
Aberfoyle Plantations Ltd Khaw Bian Cheng:
- Condition must be fulfilled by the date specified;
- Otherwise the agreement will not become binding.
CONDITION PRECEDENT
Distinction between promissory & contingent condition
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.
CONDITION PRECEDENT
Express undertaking to fulfil condition
Silver Concept Sdn Bhd v Brisdale Rasa Development Sdn Bhd:
- Express undertaking = promissory condition;
- Non-fulfilment = breach = can claim for damages.
INTENTION TO CREATE LEGAL RELATION
Existence of “subject to contract”
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.
CONSIDERATION
Overview
1) Inadequacy of consideration
2) Mutual promise
3) Past consideration
4) Forbearance to sue
5) Unlawful consideration
CONSIDERATION
Inadequacy of consideration
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.
CONSIDERATION
Mutual promise
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.
CONSIDERATION
Past consideration
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.
CONSIDERATION
Forbearance to sue
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.
CONSIDERATION
Unlawful consideration
S.24:
- agreement is void if the consideration is unlawful.
PRIVITY OF CONTRACTS
Overview
1) General principles
2) Privity & S.66
3) Privity & S.74
4) Contract for guarantee exception
5) Trust exception
PRIVITY OF CONTRACTS
General principles
Kepong Prospecting Ltd v Schmidt:
- 3rd party cannot enforce a contract.
PRIVITY OF CONTRACTS
Privity & S.66
Badiaddin bin Mohd Mahiddin & Anor v Arab-Malaysian Finance:
- “any person” = exclude 3rd party;
- i.e. 3rd party cannot claim for restitution.
PRIVITY OF CONTRACTS
Privity & S.74
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.
