CONTRACT LAW Flashcards
What is a CONTRACT?
An agreement enforceable by law
A valid and enforceable agreement must fulfill these 8 elements.
What is the 8 element?
OACCCCIL
- Offer/proposal
- Acceptance
- Consideration
- Consent
- Certainty
- Capacity
- Intention to create legal relation
- Legal (lawful)
What is a PROPOSAL/OFFER?
When one person show his willingness to do or abstain from doing anything. to obtaining the assent of that other to such act of abstinence
The person involved when doing proposal
- Promisor/ Offerer/ Proposer
- Offeree/ Acceptor
Offer + Acceptance
= promise/contract
What is INVITATION TO TREAT (ITT)?
It is a statement inviting others to make proposal/offer
Example of ITT
(6 answers)
- ADVERTISEMENT
- except when the advertiser intended it to be so (conduct) - DISPLAY OF GOODS
- display in shop window
- display on shelves
- exhibition of goods - ADVERTISEMENT FOR TENDERS
- ADVERTISEMENT FOR JOB VACANCY
- CATALOGUES ETC
- AUCTIONS
Preliminary statement for quotation/ negotiation/
supply of information
Read this
This is not an offer.
It is just statement of quotation of his offer
Sale through vending machine
Read this
It is an offer if the machine is ready to accept money/coin
Who can the proposal be made to?
(2 answers)
- A SPECIFIC PERSON
- if proposal if made to a specific person, no one can else can accept it unless that persob - PUBLIC AT LARGE
- anyone who has the knowledge of the offer may accept the offer
2 types of proposal
- EXPRESSED
- in writing or oral - IMPLIED
- conducted
BUT THESE MUST BE IN WRITING
- sale or disposition of land
- bills of exchange or cheques for payment
- consumer credit contracts
Proposal must clear and not be ambiguous for it to be valid
What are the exception?
Vague offers may be made certain by referring to previous dealings between the parties or the customs of trade
What is CROSS OFFERS?
When 2 offers which were identical in terms, crossed in the post
There is no contract
3 Types of Contract
UBC
- UNILATERAL
- BILATERAL
- COLLATERAL
UNILATERAL CONTRACT
When one party make an offer to another person or to the public to do or provide something
The offeree is not bound to act, but once the offeree acted, the offeror is bound to comply
BILATERAL CONTRACT
Contain a promise by each party to fulfill certain obligations to complete the deal.
A reciprocal obligations.
Most unilateral contract will turn into bilateral contract once the promisee begin performing his part of the offer
COLLATERAL CONTRACT
No formalities of offer and acceptance between parties
Involved more than 2 parties to concerted obligations (ada 3rd party)
Proposal must be communicated
Proposal must be communicated to the person who is meant to accept it
Communication is complete when it comes to the knowledge of the person to whom it is made
REVOCATION OF PROPOSAL
A proposal will remain valid until it is revoked by the proposer as there is no legal obligation to keep his proposal open indefinitely
Can only be revoked BEFORE the acceptance
Revocation is complete when the revocation is despatched and received.
How is a proposal revoked?
(6 answers)
- NOTICE OF REVOCATION
- the proposer is required to communicate the revocation - LAPSE OF TIME
- is revoked after the expiry of the time prescribed in the proposal for its acceptance
- or reasonable time - FAILURE TO MEET CONDITION PRECEDENT
- when the acceptor failed to fulfill a condition precedent to acceptance - DEATH OF THE PROMISOR
- after knowledge, is revoked - COUNTER OFFER
- introduction of a new term ( revoke the original offer ) - REJECTION OF THE OFFERBY THE OFFEREE
ACCEPTANCE OF PROPOSAL
When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted
Rules for acceptance:
(4 answer)
1) Acceptance must be absolute and unqualified
- no more additional condition
- if the parties are still negotiating, an agreement is not yet formed
2) Acceptance that is qualified (not an acceptance to contract)
a) An acceptance which is qualified by the introduction of new term (counter offer) cannot be accepted
b) Where acceptance is qualified by words “subject to contract” or “subject to a formal contract”, not yet an acceptance and no contract. This is just a conditional/provisional contract (draft contract)
Method of acceptance
Acceptance must be expressed in usual and reasonable manner.
Unless if the proposer specifies a particular mode of acceptance, then the acceptance must be in that mode or manner (silence is not valid mode)
CONSIDERATION
What is the definition and the general rules?
When at the desire of any person
- has done or abstained from doing o
- does or abstains from doing or
- promise to do or abstain from doing something
such act is called consideration for the promise
Consideration must have commercial value.
An agreement without consideration is VOID
Basically, it is the price (not necessarily be in form of money) paid by one party to another in order to obtain the other’s consent to the agreement.
What is the adequacy of consideration?
It does not need to be adequate, so long as it is SUFFICIENT.
The inadequacy of consideration may be taken into account in determining whether the consent was given freely.
3 TYPES OF CONSIDERATION
1) EXECUTORY CONSIDERATION (FUTURE)
- Future act.
- A promise made in return of another promise (agreement).
2) EXECUTED CONSIDERATION (NOW)
- When one party has fulfilled his obligation
- A promise made in return for the performance
3) PAST CONSIDERATION (MENGUNGKIT)
- Promise made after the act was done
- A promise for something that had been performed
EXECPTION TO requirement for a consideration
Whereby an agreement without consideration can still be valid.
(3 execption)
1) NATURAL LOVE AND AFFECTION BETWEEN RELATED PARTY
Agreement on account of natural love and affection between parties standing in near relation (spouse, siblings, parent-child). Such agreement must be made in writing and must be registered under the law. (usually for land matter)
2) REWARD/TIPS
Agreement to compensate wholly or in part a person who has already voluntarily done (no knowledge of the rewards) something for the promisor
3) STATUTE-BARRED DEBT
Agreement to pay wholly or part a statute-barred debt. An agreement must be in writing and signed by the person to be charged therewith or his lawfully authorized agent.
STATUTE-BARRED DEBT
What is statute-barred debt?
According to LIMITATION ACT 1953,
When there is a breach of contract to pay debt, the creditor may file a suit in court within 6 years to claim the debt. If the creditor fails to file suit within 6 years period, he could not file the suit anymore. His action had been statute barred. The debt has become a statute barred debt.
However, in the event the debtor made a fresh promise to pay the statute barred debt, although this fresh promise is without consideration, this fresh promise formed a contract that is enforceable.
summary:
- debtor must made a fresh promise to pay the debt
- the promise is made in writing and signed by the debtor
DOCTRINE OF PRIVITY OF CONTRACT
Only person who are parties to the contract can acquire rights under the contract and incur liabilities under it. Apart a person who is not a party to the contract has no right to sue on the contract.
Exceptions:
(6 answers)
1) Collateral contract (3 or more parties in the contract)
2) Agency (principle, agent, 3rd party)
3) Assignment/ Novation
- can only be transferred to 3rd party if all parties consented
- must make a new agreement (written and signed by all party)
4) Insurance contract
5) Bills of Exchange ( cheque )
6) Trust (eg; pentadbir harta etc)
- beneficiary can take action if trustee act beyond the power
CAPACITY TO CONTRACT (who can enter a contract)
“All agreement are contract if they are mare by the free consent parties competent to contract, for lawful consideration and with a lawful object and not hereby declared to be void”
Who is a competent person?
(2 answers)
1) SOUND MIND
- capable of understanding it
- capable of forming a rational judgement as to its effects upon his interest
2) AGE OF MAJORITY
- 18 years old
- minor is not competent to contract
- contract entered by a minor is null and void
Exception when a contract is entered by minor is valid and enforceable:
(5 answers)
1) Contract for necessaries
- goods/services was supplied or rendered to the minor
- it is a necessaries for the minor
- the necessaries is suitable to the condition of life of the minor
2) Contract for scholarship
- from Federal Government, State Government, Statutory Authority, or any approved educational institution
3) Contract of service/ apprenticeship
- children (14), young person (16), covered by the Children and Young Person Act 1966
- light work only (14)
- must not pose threat to life, limb or health
- no damages or indemnity shall be recovered if they breach a contract
4) Insurance contract
5) Marriage contract
INTENTION TO CREATE LEGAL RELATION
The parties need evidence of intention to make the agreement legal (enforceable).
Intention my be expressed or implied.
2 PRESUMPTION:
A) SOCIAL/ DOMESTIC/ FAMILY AGREEMENT
- rebuttable presumption that parties do not have the intention to be legally bound by their agreement.
- unless have evidence
B) BUSSINESS AGREEMENT
- rebuttable presumption that partied have the intention to be legally bound by their agreement
- unless have evidence
- put a clause in their agreement to ‘negative their contractual intention’.
eg: i) no rights and responsibilities shall arise under the agreement
ii) the agreement is subject to formal contract
CERTAINTY
Agreement, the meaning of which is not certain, or not capable of being made certain are VOID.
FREE CONSENT
All agreement are contract if they are made by the free consent of parties competent to contract for a lawful consideration and with lawful object and are not hereby expressly declared to be void.
If consent was not given freely, the contract could either be void or voidable.
Consent is said not given freely when it was caused by:
(5 answer)
- COERCION
- UNDUE INFLUENCE
- FRAUD
- MISREPRESENTATION
- MISTAKES
- COERCION (FREE CONSENT)
Coercion is the
- committing or threatening to commit any act forbidden by the Penal Code or
- unlawful detaining or threatening to detain any property of any person
- with the intention to cause the person to enter into an agreement
The contract was voidable under s.15 CA
- UNDUE INFLUENCES (FREE CONSENT)
A contract is induced by undue influence where
- relationship subsiding between the parties
- one of the party is in the position to dominate the will of the others
- use that position to obtain an unfair advantage over the other
“Position of dominating the will of another”:
a) holds a real or apparent authority over the other person
b) stands in a fiduciary relation (trust relationship) to the other
c) mental capacity is temporary or permanently affected by illness etc
- FRAUD (FREE CONSENT)
Fraud is an act committed by a party to an agreement to induce another person to enter into a contract.
- Does or says something with the intention to deceive the other party and to induce him to enter into the contract.
- Suggestion of a fact which is not true by one who does not believe it to be true (purposely)
- MISREPRESENTATION (FREE CONSENT)
Misrepresentation is a false statement made by a representor that induces another party to enter into a contract.
Under s.18 CA:
i) false statement is made by person who knows and believes the statement was true (innocent misrepresentation)
ii) it is a breach of duty without intent by misleading another person (negligent misrepresentation)
iii) making false statement however innocent, causing another party to make a mistake as to subject matter of the agreement (fraudulent misrepresentation)
- MISTAKE (FREE CONSENT)
A contract is not voidable if it is caused by ONE OF THE PARTIES to it being under a mistake as to a matter of fact.
Where BOTH PARTIES to an agreement are under a mistakes as to a matter of fact essential to the agreement, the contract is void.
NOT UNLAWFUL (LEGAL)
The whole agreement will become void and unenforceable.
Under s.24 CA, the contract becomes unlawful when consideration or object of the contract is :
(5 answer)
1) Forbidden by law
2) of such a nature that, if permitted, it would defeat the law
3) Fraudulent
4) Involves or implies injury to the person or property of another
5) The court regard it as immoral or opposed to public policy
