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Elements of a contract - Coggle Diagram
Elements of a contract
Offer:
Definition
-Section 2(a) of Contracts Act
‘When one person signifies to another his willingness to do or abstain from doing anything with view to obtaining the assent of the other to the act or abstain is said to make a proposal.’
"When a person promise or proposes something to another party with the
intention that his promise or proposal would be accepted by that other party."
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REVOCATION OF OFFER
Definition
(to retract/cancel or withdraw)
Section 5 of Contracts Act
‘A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards’
Once acceptance is made, offeror no longer entitled to revoke his offer.
Case: Payne v Cave (1879) – D make highest bid in auction but revoke before fall of hammer. Held: can revoke offer
Modes of revocation
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S 6 (c) of Contracts Act Revocation by failure of offeree to fulfill condition precedent to the acceptance
-CASE: PYM v CAMPBELL (1856)
S 6 (a) of Contracts Act
Revocation by notice - Revocation is effective after the notice of revocation had come to the actual knowledge of the offeree
-Revocation of offer under the postal rule
-CASE: HENTHORN v FRASER (1892)
S 6 (d) of Contracts Act
Revocation by death or mental disorder of the offeror
-CASE: BRADBURY v MORGAN (1862)
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Type of offers
Example: Alia makes an offer to Mei Ling. However, Samatha accepts the offer. In this scenario, the offer made by Alia is only addressed to Mei Ling. As such, only Mei Ling can accept the offer
Offer made to public at large
-An offer can be made to the public at large.
-This type of offer if accepted, it becomes a unilateral contract.
Specific person/ a class of persons
-Addressed to specific person
-Only the addressee may accept the offer
-Who is not addressee cannot accept the offer.
Example: The person who makes offer at large is the offeror and the person who return the cat to the offeror is the offeree.
Case:Carlill v Carbolic Smoke Ball Co. (1892)
An offer may be made to an individual or to a large number of people。
How to make an offer
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Section 9 states that: ‘So far as the proposal or acceptance of any promise is made in words, the promise is said to be express. So far as the proposal or acceptance is made otherwise than in words, the promise is said to be implied.’
Consideration:
Definition
-Section 2 (d) of Contracts Act
Consideration is the price of which one party pays to buy the promise or act of the other.
-Section 26 of Contracts Act
An agreement without consideration is void.
Exceptions:
- Agreement made on account of natural love and affection between immediate family members?
standing in near relation to each other (Immediate family members.)
- Case: Re Tan Soh Sim (1951)
Under common law “natural love and affection” is good consideration.
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Classification of consideration:
i.Executory Consideration
ii.Executed Consideration
iii.Past consideration
Elements of consideration:
1.Consideration need to be adequate
- It must be sufficent and must have consent to the promiser.Freely given.
2.Consideration may move from the promisee or any other person.
- Case : Venkata Chinnaya v Verikata Ma’ya.
- Facts:
A sister agreed to pay an annuity of Rs653 to her brothers who provided no consideration for the promise. But on the same day, their mother had given the sister her estate. Subsequently, the sister failed to fulfill her promise to pay the annuity, her brother sued her on the promise.
- Held:
She was liable on the promise on the ground that there was a valid consideration for the promise even though it did not move from the brother.
3.Part payment may discharge an obligation.
- Section 64 of CA, 1950
“Every promise may dispense with or remit, wholly or in part, the performance of the promise made to him, or may extend the time for such performance, or may accept instead of it any satisfaction which he thinks fit”.
- General rule is that payment of a smaller sum is a satisfaction of an obligation to pay a larger sum.
4.Past consideration is good consideration
- Something which wholly performed before the promise was made. It was made or given not in response to the promise. Promise is subsequent to the act and independent of it.
- English law: Past consideration is not a good consideration.
-Malaysian law: Past consideration is a good consideration.
Formalities
Definition:
- Some agreement must be made in writing in order to be valid.
Example:
- Section 26 (a) Natural love and affection ; near relation.
- Section 26 (c) Contract promise to pay a debt barred by limitation of law.
Intention to create legal relation
Definition:
- Agreement must intended to be legally enforceable
- Presumption for business/ commercial agreements is intended to be legally enforceable unless specify otherwise.
- Although every contract is an agreement , there are many agreements which are not contract.
Example:
- If A and B agree to meet at 8 o'clock to have dinner together, the agreement is made without intending that there will be legal consequences if either A or B in the end, does not turn up. It is merely a social agreement, and not a contract.
Acceptance
Definition:
- Section 2 (b) of Contracts Act
When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted: A proposal, when accepted becomes a promise’
- Acceptance can be expressed or implied
- Acceptance must be distinguished with counter offer
Communication of Acceptance
- The acceptance must be communicated to the offeror.
- Offeree approves of the offer and agrees to the terms of the offer.
- Section 7 (a) of Contracts Act
Acceptance must be absolute and unqualified
- Section 6 (b) of Contracts Act
Acceptance must be accepted within a reasonable time
- Acceptance in the case of silence
Case: Felthouse v. Bindley (1862)
Postal Rule
- Section 4(2) of Contracts Act provides that the acceptance is complete as against the offeror when it is put in the course of transmission to him
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- With regard to postal communication, acceptance is complete upon posting. This is known as the postal rule, which states that the acceptance is complete, when the letter of acceptance is posted irregardless of whether the letter is delayed or lost in mail – Ignatious v Bell
- Case: Adams v Lidsell (1818)
Revocation of Acceptance
- Section 5 (2) of Contracts Act
‘An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards’
- Offeree may revoke his acceptance at any time before or at the moment the letter of acceptance reaches the offeror.
Example of illustration
- Section 4 Contracts Act
‘B (Offeree) revokes his acceptance by telegram. B’s revocation is complete as against B when the telegram is dispatched and as against A (offeror) when it reaches him.’
CERTAINTY OF TERMS
- Definition
Section 30 of Contracts Act
‘Agreement, the meaning of which is not certain, or capable of being made certain, are
void.’
- Example: Language used too vague
- Case: Karuppan Chetty v Suah Thian (1916)
Capacity
Definition:
- Ability of a person to effect a legal transaction.
Example:
- Section 10 of Contract Act
( "All agreements are free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void.")
- Capacity to enter into a contract
Example:
- Section 11 of Contract Act
( "Every person is competent to contract who is the age of majority according to the law which he is subject, and who is the sound mind, and is not disqualified from contracting by any law to which he is subject.")
Privity of Contract
Definition:
- Anyone is not a party to a contract cannot seek to enforce it or made liable under it.