Sample Questions
Question 1
Distinguish between a proposal (offer) and an invitation to treat in the law of contract. Use relevant examples and decided cases to illustrate the difference.
Question 2
With reference to examples and decided cases, explain the legal significance of the following in relation to the law of contract.
An invitation to treat as distinguished from a proposal.
…………………………………………………………………………………………
Most contractual transactions in Malaysia re governed by the Contracts Act 1950. There are also other legislation regulating contractual legislation in the Specific Relief Act 1950.The Civil Law Act 1956 also provides for certain remedies in situations where the contract is frustrated.
Contracts entered into by the Federal Government and other State Goverments are governed by the Government Contracts Act 1949.In all business activities, the law of Contract plays a fundamental role. Everyday many contracts are made and many are breached. The aim of this module is to present the law of contract in its simplest terms so that anyone (students sitting for exams can benefit from this module) can grasp the fundamentals in this area of the law.
An offer is an undertaking which is certain and definite made with the intention that it shall become binding on the person making it as soon as it is accepted by the person to who it is addressed to.(Tan Geok Khoon v Gerald Francis Robless v Paya Terubong Estate Sdn. Bhd)
The statutory definition of an offer is found in Sect 2(a) CA 1950 which states,
“.. when one person signifies to another his willingness to do or abstain from doing anything, with a view to obtaining the assent of that other to the act or abstinence, he is said to make a proposal.”
Types of offers
In the field of Contract law there are 2 types of offers covering 2 different kinds of situations.
Bilateral Offers- in this scenario both parties make promises one another. It is a mutual exchange of promises.
Unilateral offers – In this situation, one party makes the offer and a contract comes into existence when the other party performs a specified act. A classic example of a unilateral offer can be found in the case of Carlill v Carbolic Smoke Ball Co.
Carlill v Smoke Ball Company - This is a classic case of a unilateral offer. The defendants placed an advertisement in the newspapers in which they offered 100 pounds to anyone who used their medicine and still contracted influenza. The Plaintiff bought the medicine, used it and still contracted influenza. The Court held that the Defendants were liable.
However under the Law of Contract, offrers must be distinguished from an Invitation to Treat. Let me illustrate this point. In the first situation A makes the offer and B is invited to consider the offer, and if the terms are acceptable to B , B accepts the offer. This creates a legally binding contract. In the second situation, A does not make any offer , but invites B to make the offer. When B makes the offer, A has a discretion whether to accept or reject the offer.There is no contract until B decides to accept the offer of A.
An offer has legal consequences in the sense that when it is accepted there is a legally binding contract at law whereas in the case of an ITT it does not give rise any legal consequences.
The following relates to situations where offers are distinguished from ITT.
In Hart v Mills –
“ you offer to negotiate, or you issue an advertisement that you have got a stock of books to sell, or houses to let, in which case there is no offer to be bound by any contract, such advertisements are offers to negotiate- offers to receive- offers to chaffer….”
The case of Maju Mujumder v Donough was an issue related to an advertisement. A piece of property was advertised for sale and written offers to purchase were invited. The Plaintiff who was interested in purchasing the house inspected it on two different occasions.,ie on 24 May 1969 and 2 June 1969. Numerous telephone conversations took place between the Plaintiff and the Defendant between these two visits.
The Plaintiff alleged that the Defendant had thereby accepted their offer to purchase the house, the furniture and orchids therein for RM70,000 and that a contract to that effect was already in existence before 2 June 1969.Held: There was no contract between the Plaintiff and the Defendants. It was still in the stage of negotiations.
Coelho v The Public Services Commission
This case affirms the general rule that an advertisement is only an invitation to applicants to make an offer and not an offer by itself. The facts of this case can briefly be stated as follows:-The applicant had applied for a position in response to a newspaper advertisement in the Malay Mail.He was later informed that his application had been accepted. Subsequently, The Public Service Commission attempted to terminate his appointment on the basis that he was only appointed on probation.
Mr. Coelho then challenged the decision of the Public Services Commission and applied to quash the decision. The High Court held that the advertisement was an invitation to qualified persons to apply and the resulting applications were offers. Such offers could either be accepted simply or with the imposition of conditions as terms of the contract additional to those set out in the advertisement.The letter to the particular applicant was in fact an unqualified acceptance of the first category and there was no question of his appointment being on probation.Therefore the purported termination applicable to officers was invalid. Mr. Coelho was successful.
Pharmaceutical Society of Great Britain v Boots Cash Chemists
The brief facts of the case are as follows. The defendants were charged for selling a listed poison without the supervision of a registered pharmacist.( This was in contravention of the Pharmacy and Poisons Act 1933).The most important question in this situation was " When was the contact made?" When the poison was removed from the shelf or when payment was made at the counter? The answer depended on whether the display was an offer or an an invitation to treat.Held: The Court held that when the customer took the posion from the shelf, it was an offer by the customer and there would be no sale until the pharmacist had approved or accepted the offer. In the circumstances there was no contract.
Auctions
It has to be stated at the onset that there are no specific provisions in the Contracts Act relating to Auctions. This is due to the fact there the Contracts Act is not a comprehensive code covering all aspects of Contract Law. As to the nature of bids at an auction, reference has to be made to English cases.
Harris v Nickerson (1873) LR 8 QB 286-
An Auctioneer who puts his property up for sale is not making an offer but merely an invitation to request for bids.
However the above case must be contrasted with the following case law where the Court held that although auctions are ITT but the auctioneer may be liable in certain situations.
Warlow v Harrison (1859) 1 E&E 309 ; Barry & Heathcote Ball & Co (Commercial Auctions Ltd.) 120 ER 925 Ex Ch.
In the above cases it was held that the auctioneer was liable for damages to the bidder when the auctioneer had put up for auction certain machinery 'without reserve' and refused to accept the highest and only bid.
M & J Frozen Food Sdn .Bhd v Siland Sdn. Bhd & Anor [1994] 1 MLJ 294 SC
The facts of this case reloved around whether a sale was concluded at the fall of the auctioneers hammer relating to a sale of land at a public auction.
Options
Low Kar Yit & Ors v Mohamed Isa & Anor [1963] 165, FC
Circular of Price List
Spencer v Harding (1870) LR 5 CP 561
Advertisements
An advertisement generally is only an attempt to induce offers and not an offer itself. Howver this is only the general rule as ther are exceptions to any major proposition of law. The case of Carlill v Carbolic Smoke Ball Co. illustrated this point.
Club Membership
Abdul Rashid Abdul Majid v Island Golf Properties Sdn. Bhd.
The Court held that a person making an application to become a member of a social club was not making an offer . The club made the offer for membership only after the club had considered the application.
An offer has legal consequences in the sense that when it is accepted, a legally binding contract comes into existence. In the case of an ITT , there is no contract when B makes the offer , that is A is not legally obliged to accept B's offer. A can accept or decline B's offer. There is no contract until A accepts B's offer.
Posts
No comments:
Post a Comment