QUESTION:

Azul agreed to sell a piece of land to Zuli and the

transaction was completed through an exchange of letters
culminating in the letter from Azul stating that he was
delighted that Zuli was buying the land and that he would
leave the ‘technical details’ to the lawyers to work out.
Azul subsequently refused to sell the land to Zuli who
commenced proceedings for an order of specific
performance. Azul said that there was no valid binding
contract between them until ‘the technical details’ had
been incorporated into a written agreement and was duly
signed by both parties.
Decide whether there is a valid contract or not between
them.
ANSWER:
The issue in this case is whether there is a valid contract or not
between the Azul and Zuli.
A contract in a Nutshell meaning an agreement between two
or more parties that is binding in law. This means that the
agreement generates rights and obligations that may be
enforced in the court. With regard to Treitel, a contract is an
agreement giving rise to obligations which are enforced or
recognized by law. There are three elements must be presents
in order to create a contract. First, an intention to contarct
where the parties must intends that their promises create
legally enforceable obligations. Second, agreement between
the parties where an offer by a party and acceptance by other
party. Then, consideration where something of value passing
from one party to another in return for the promise to do
something.
Sec.2(a) of the Contract Act 1950 (CA) provides that, an offer
signifies a person’s willingness to another to do or abstain
from doing anything. According to Chitty, the offer is an
expression of willingness to contract made with the intention
that it is to become binding on the person to whom it is
addressed. Sec. 2(c) of CA provides that, a contract must be
involved two parties at least, which are promisor and promise.
The proposal may be in the form of express or implied, refer
to Sec 9 of CA.
An acceptance is the final expression of the assent to the terms
of a proposal. Sec 2(b) of CA provides:
When a person to whom the proposal is made signifies his
assent thereto, the proposal is said to be accepted; a proposal,
when acceptance becomes a promise. The person accepting
the proposal is called the ‘promisee’ or the ‘acceptor’.
The Supreme Court in Ayer Hitam Tin Dredging Malaysia
Bhd v YC Chin Enterprise Sdn Bhd held that the existence of
an agreement depends upon the intention of the parties and
there must be consensus between them. The court may infer
this from the language used, the parties’ conduct in the
surrounding circumstances and the subject of the contract.
Sec 7(a) of CA provides that in order to convert a proposal
into a promise, the acceptance must be absolute and
unqualified.
In this case, Azul agreed to sell a piece of land to Zuli and the
transaction was completed through an exchange of letters
culminating in the letter from Azul stating that he would leave
the ‘technical details’ to the lawyers to work out. The issue
arise whether there is valid contract between them. General
rule, acceptance ‘subject to contract’ creates a strong inference
that the parties do not intend to be bound until the execution of
a formal contract. Acceptance ‘subject to contract’ prima
facie, is not binding. It does not create a contract for two
reasons; where it negatives the intention to create legal
relation and it is an acceptance which does not correspond
with the terms of the proposal because it implies a further
condition. In the case of Commercial Bank Of Australia Ltd v
GH Dean & Co. Pty Ltd ; it was held that if an agreement is
made ‘subject to contract’, a presumption will arise that no
contract then exists, merely an agreement upon matters that
may subsequently be embodied in contract.
The Supreme Court in Ayer Hitam Tin Dredging Malaysia
Bhd v YC Chin Enterprise Sdn Bhd, stated that when an
arrangement is made ‘subject to contract’ or subject to the
preparation and approval of a formal contract, the court will
generally construe it to mean that the parties are still
negotiating and do not intend to be bound until the exchange
of a formal contract.
In Chillingworth v Esche ; the parties agreed on the sale of
certain property, ‘subject to proper contract to be prepared by
the vendor’s solicitors. It was held that there was no contract
between the parties.
In Winn v Bull, the Defendant agreed in writing with that
Plaintiff take a lease for certain terms at a certain rent ‘subject
to the preparation and approval of a formal contract’. No
formal contract was ever entered into between the parties and
the Plaintiff brought an action for specific for specific
performance. Held: there was no binding contract.
The leading case in the area of ‘subject to contract’ is Low
Kar Yit v Mohd Isa ; the Defendant gave an option to the
agent of the Plaintiffs to purchase a parcel of land subject
among others, a formal contract being drawn up and agreed
upon by the parties and the approval of the sale and of the said
contract by the High Court Kuala Lumpur. The Plaintiff’s
agent exercised the option but the Defendant failed to sign the
sale agreement. The Plaintiff then commenced legal
proceedings for breach of contract. It was held that that there
was no concluded contract between the parties.
Gill J:-
“The option on the face of it was clearly conditional upon and
subject to a formal contract to be drawn up and agreed upon
between the parties, so that the exercise of the option
amounted to nothing more than an agreement which of course,
has no legal effects”
According to the cases given above, I agreed that general rule,
‘subject to contract’ become no concluded contract and
amounted to nothing more than an agreement which of course
has no legal effect i.e; there was no valid binding contract
between the parties entered into. Thus, in interpreting the
words ‘subject to contract’, the paramount consideration
should be the intention of the parties. The court should
interpret the contract determine whether the parties intended to
suspends their rights and obligations until the entry into a
formal contractor that they had already entered into a legally
binding contract of which the execution of the written contract
was merely a formality.
But, there are cases where there is a contract between the
parties and the execution of a formal contract was a mere
expression of the desire of the parties as to the manner in
which the contract already agreed to will in fact go through.
In the leading case is the case of Diamond Peak Sdn Bhd v DR
Tweedie, where the Defendant agreed to sell a piece of land to
the Plaintiff and the transaction was completed through an
exchange of letters culminating in the letter from the
Defendant stating that he was delighted that the Plaintiff was
buying the land and that he would leave the ‘technical details’
to the lawyers to work out. The Defendant subsequently
refused to sell the land to the Plaintiff who commenced
proceedings for an order of specific performance. The
Defendant’s main defence was that there was no binding
contract between the parties until ‘the technical details’ had
been incorporated into a written agreement and was duly
signed by both parties. Gun Chit Tuan J held that the parties
had been intended and concluded an oral agreement for the
sale of the land. The use of the words ‘the technical details I
leave to my lawyers’ did not make the contract binding only
when the solicitors had drawn up a formal agreement. There
was already a binding oral agreement.
In Voo Mui v Yap Mooi Mooi,The former Federal Court
dismissed the appeal and Syed Agil Barakbah FJ (Salleh Abas
Ag LP and Abdul Hamid FJ with him) held that it was the
intention of the parties to come to a definite and complete
agreement on the subject of the sale. The mere fact that it was
subject to an agreement to be signed did not necessarily mean
that there was no legal binding and enforceable contract.
Azul and Zuli’s case, Azul already agreed to sell a piece of
land to Zuli. The transaction was completed through an
exchange letters culminating in the letter from Azul stating
that he was delighted that Zuli was buying the land. In this
case the execution of a formal contract was a mere expression
of the desire of the parties as to the manner in which the
contract already agreed to be proceed or binding each other.
The parties contemplated the preparation of a formal contract,
that by itself will not prevent a binding contract from coming
into existence before the signing of the formal contract.
As the conclusion, it seems that the parties that had intended
and concluded an oral agreement for the sale of the land. The
word use ‘the technical details I leave to my lawyers’ did not
make the contract binding only when their solicitors had
drawn up a formal agreement. There was already a binding
oral agreement. Thus, the contract was valid.

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tutorial MLS
October 18th, 2006 by aisma-902
QUESTION:
“The introduction of the King’s Charters into these
settlements had introduced the existing law of England
also, except in some cases where it was modified by express
provision and had abrogated any law previously existing”
Per Malkin J. in the case of IN THE GOODS OF
ABDULLAH.
Discuss.
ANSWER:
In The Goods of Abdullah, where the view was expressed that
Muslim Law could not be applied ‘unless by the expressed
provisions of the Charter. Recorder Malkin continued:-
It would be a very dangerous way of construing a document to
loose in its expression as the Charter, to attribute all casual
variations of phrase to a definite intention of affixing a
different meaning. But in the general expression, the Charter
seems to have intended to give a certain degree of protection
and indulgence to the various nations resorting here; not very
clearly defined, yet perhaps, easily enough applied in
particular cases, but not generally, to sanction or recognize
their law.
With regard to this case, due to the Charter of Justice 1807,
English Law was accepted as the lex loci or territorial law of
Penang. But such acceptance did not have the effect of
abolishing the application of various native laws or customs, it
did diminish the significance of these laws.
In the Straits Settlements and the Malay States, English judges
applied principles of English Common Law & Rules of Equity
in cases pertaining to commerce generally, property, including
the devolution of property by will or upon intestacy, tort,
criminal matters and even certain aspects of the family such as
guardianship and custody of infants.
The courts at that time were guided by two basic principles.
First, the law of England that was to be applied must be of
general, and not merely local, policy, that is must be capable
of devolving upon alien races in aliens lands and not be of
such a nature that it was peculiar only to the English or to
England. Secondly, that law must be subject in its application
to the various alien races to such modifications as were
necessary to prevent it from operating unjustly and
oppressively on them;
The question how far the general rules of the law of England
are applicable to races having religions and social institutions
differing from our own, is of occasional recurrence in this
court, and it is seldom free from difficulty. It has been
repeatedly laid down as the doctrine of our law that its rules
are not applicable to such races, when intolerable injustice and
oppression would be the consequences of their application.
The Second Charter of Justice was granted in 1826 when
Singapore and Malacca were united with Penang, forming the
Straits Settlements. The effect of Second Charter was
addressed by Sir Benjamin Malkin in the Malacca case of
Rodyk v Williamson, where it was stated that the Charter had
introduced the law of England as it stood in 1826 so as to
supersede Dutch Law in Malacca. By parity of reasoning,
Recorder Maxwell interpreted the Second Charter as
introducing the law of England as it stood in 1826, not only to
Penang, but every part of the Straits Settlements;
To treat the Charter quo ad one station, as merely reorganizing
a court, while quo ad the other two it was treated as
introducing new law, would be to give to the same instrument
different meanings in different localities; a construction which
would have neither convenience nor good sense to recommend
it.
The introduction of Kings Charter into these settlements had
introduced the
existing law of England also, except in some cases where it
was modified by express
provision and had abrogated any law previously existing.
While it was generally agreed that the Charters of Justice
(COJ) introduced
English Law received , and the modifications necessary
because of the various races,
religious , and custom of the local inhabitants and the theorical
basis for such
modification.The first Charter of Justice 1807 marked the
beginning of statutory
introduction of English law to replace the chaos that prevailed
until COJ granted
in1807.COJ 1807 introduced English law to Penang as it stood
in 1807 subject to local
condition , inhabitant and situations. It also establish court of
judicature of Prince of
Wales island in Penang. There have a two jurisdiction .First as
superior court in England
to decided civil and criminal cases. Second as an ecclesiastical
court to ecclesiastical
matters. These establish courts subject to local conditions and
inhabitants.
Under COJ 1807, English Law not only applied to future cases
but also to cases
occurred before 1807 pending trial. In KAMOO V BASSET,
the court held that : it was
uniformly accepted that the charter introduced the law of
England as it existed in1807
into Penang. The Charter applied retrospectively to civil
injuries which have been
sustained and crimes which have been committed before the
charter come into force. The
object of the charter was to protect local inhabitants from
oppression and injustice.
To introduced the suit applicable to the circumstances, it must
be modified in its
application as regards to be taken to be the law of the land.
Affirmed by Privy council in
ONG CHENG NEO V YEAP CHEAH NEO . In holding that
English law was to be
applied to Penang , the Privy council held that the island was
‘a deserted’ territory and
that being so the law of the English ‘settlers’ must be applied.
Its continued that its really
immaterial to consider whether Penang was territory or any
establish law before British
acquisition. In FATIMAH V LOGAN , the position that
previous to the charter of 1807
Islamic law was in force in Penang and that the charter made
no alteration in the law
cannot be accepted .The charter of justice of 1807 seems to
have set at rest this raced
question of the lex loci of Penang .The question has been re-
opened by the Attorney –
General and he has maintained in oppositions to the views it
follows from what I have
said that inasmuch as English law has prevailed in Penang
certainly ever since the
publication at the first Charters in 1807 and Mahomad Nordin
was domiciled here at the
time of making his will made up to the lex loci , which here is
the law of England as it
has been modified by the India and Colonial Legislatures.
The common law of England was in force in Singapore in
1937 except in so far as
it was necessary to modify it to prevent hardship upon the
local inhabitants who were
entitled by the terms of the Charters of Justice to exercise their
own respective religious
custom an practices .The question before the court was
whether a marriage celebrated in
Singapore between a Jew and non-Christian Chinese in a
modified form constituted a
valid marriage according to the law of Singapore .The court
held applying the common
law of England , that the marriage was valid.
The second Charter of Justice 1826 is granted to the Straits
Settlements ,
contained the same provision as COJ 1807. The introduction
of English Law as it existed
in 1826 to the three states subject to certain modification to
suit local conditions. It also
extended jurisdiction of court to cover Malacca and
Singapore .New court was named “
The Court of Judicature of Prince of Wales Island, Singapore
and Malacca.
The Law of England was introduced into this settlement
(Penang) immediately of
possession being taken in the name of the King of England by
and by the used to the late
east India Company and law if any previously existing
thereupon immediately ceased
.British obtained permanent possessions in 1824 under Anglo-
Dutch Treaty. At time the law
applicable was Malay Adat, Muslim law ,Customary law of
other inhabitant as the same
Dutch Laws.
Sir Benson Maxwell CJ commented that Portuguese and
Dutch had left
Malay customary law enforce and this law was still enforce
when Malacca was to ceeded
to British. In case of RODYK V WILLIAMSON by the
charter 1826 so as to
superseded the law of Holland. Dutch law was abrogated and
replaced by English Law.
The position of others existing laws, IN THE GOODS OF
ABDULLAH the
court held that the law of England introduced into Straits
Settlements by COJ 1826 had
supersedes previous law. Thus any local people who wish to
leave their property by will
in according with personal laws must expressly indicate their
intention to construe their
wills according to their personal laws. Here since English Law
was applied, the will to
dispose of the whole property of a Muslim was valid although
its prohibited to Muslim to
do that.
As the conclusion, the introduction of English Law through
COJ into settlements
had modified and abrogated some existing law even not all but
at least had , and already
discuss above with support cases. Such modifications are
needed to suit the law to the
local conditions.