Vous êtes sur la page 1sur 42

ELEMENT OF CONTRACT

OFFER
 There are 3 main aspects of the law governing offers:
(i) meaning and requirements of offer;
(ii) distinction between offer and invitation to treat; and
(iii) communication and revocation of offers.

 Offer
 An offer is a definite promise to be bound provided that certain specified
terms are accepted.
 An offer is capable of being converted to an agreement by its acceptance.
 The Contracts Act uses the term "proposal", but it has the same meaning as an
"offer".
 Section 2(a) of the Contracts Act defines a "proposal" as follows:
 When one person signifies to another his willingness to do or to 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.
 The meaning of an offer is explained in Preston Corpn Sdn Bhd v Edward
Leong 1982] 2 MLJ 22, FC.
Preston Corpn Sdn Bhd v Edward Leong 1982] 2 MLJ 22, FC.

 In this case, the appellants were a company carrying on the business of


publishing books. The respondents were a firm of printers. The parties
entered into a business relationship regarding the printing of school
textbooks. There was an exchange of letters which commenced with the
respondents submitting quotations for the printing of the books. This was
followed by the appellants issuing the printing orders.
 The question before the Federal Court was whether the respondents'
quotations constituted a binding offer which when accepted by the
appellants by the issuing of the relevant printing orders, resulted in a
contract between them.
 The Court held that the quotations were never intended to be a binding
offer but was a mere supply of information. The offer in this case was
actually constituted by the printing offers issued by the appellants.
Continue…
 Salleh Abas FJ stated as follow:
“An offer is an intimation of willingness by an offeror to enter into a
legally binding contract. Its terms either expressly or impliedly must
indicate that it is to become binding on the offeror as soon as it has
been accepted by the offeree. An examination of all the quotations in
case did not seem to express such intention. They were nothing more
than a mere supply of information by the respondents in response to
the appellants' inquiry as to the price of books to be printed and their
delivery dates.”
Requirements of offer
 A valid offer must satisfy certain requirements:
(i) it may be made specific person or to the world;
(ii) it may be made expressly or impliedly;
(iii) its meaning must be clear; and
(iv) it must be valid at law.
 Offer made to specific person or to the world
– An offer may be made to a specific person or persons, or it may be made to the world or
the public at large.
– In the classic case of Carlill v Carbolic Smoke Ball Co. [1892] 2 QB 484, QB; [18931 1 QB
256, CA., the defendants, proprietors of a medical preparation called "The Carbolic
Smoke Ball", issued an advertisement offering to pay £100 to any person who contracted
influenza after using the smoke ball in a specified manner for a specified period. The
advertisement stated that the defendants had deposited £1,000 with bankers to show
their sincerity. The plaintiff after seeing advertisement, bought and used the ball in the
manner prescribed caught influenza. The plaintiff sued the defendants for £100.
– In their defence, the defendants contended that the advertisement was a mere puff and
was not intended to create any binding obligation. There was no offer to any particular
person and the plaintiff had failed to notify them of her acceptance.
– The Court of Appeal held that an offer can be made to the world. It becomes a contract
when anybody comes forward and performs the conditions. In this case, there was an
acceptance of the offer by the plaintiff's conduct.
• Offer may be express or implied
– An offer may be express or implied.
– Section 9 of the Contracts Act provides as follows:
– 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.
– In Preston Corpn Sdn Bhd v Edward Leong 1982] 2 MLJ 22, FC., the Federal
Court had also referred to an offer made either expressly or impliedly.
• Offer must be clear in meaning
– An offer which is not clear may be held to be invalid for uncertainty (s.30 CA) .
– In an old case, Ahmed Meah & Anor v Nacodah Merican (1890) 4Ky 583 an
agreement was made between the parties whereby, in consideration of the
plaintiff marrying the defendant's daughter, the defendant promised to build
and the plaintiff and his daughter a "house which must be a suitable
buillding”.The plaintiff sought specific performance of the agreement.
– Pellereau J held that it was too vague to be enforced:
• There must be certainty as to the subject of the contract. If it is uncertain as to the
nature of the house to be built, if uncertain as to value, it would be difficult for the
Court to enforce it. The house is said to be a 'suitable house.' Suitable to whom? To
the bridegroom or father of the bride? The Court is left in doubt as to what way it is
to be suitable …I therefore hold the promise is void fix uncertainty, and cannot be
deemed to be specifically performed. I can give no damages for the same reason.
– Wisma Sime Darby Sdn Bhd v Wilson Parking (M) Sdn Bhd (1996) 2 MLJ 81.
• Offer must be valid at law
– An offer must not contravene any provisions of the law otherwise it amount to
a non-existent offer not capable of acceptance by the offeree.
– In Affin Credit (Malaysia) Sdn Bhd v Yap Yuen Fui [1984] 1 MLJ 169, FC. the
appellant let a motor-car to the respondent under a hire-purchase agreement.
The respondent fell into arrears with the payment and the appellant brought
an action for the balance outstanding under the hire-purchase agreement.
– The respondent alleged that the appellant had failed to comply with various
provisions of the Hire-Purchase Act 1967 (Rev 1978) Act 212. The issue which
arose was whether non-compliance with s4(1) of the Hire-Purchase Act, which
requires the owner of the goods to the prospective hirer a written agreement
consisting of a summary of the hirer's financial obligations under the proposed
hire-purchase agreement, would render a the hire-purchase agreement void
ab initio.
– The Federal Court held that the fulfilment of the condition set out in s 4(1) of
the Hire-Purchase Act was a condition precedent for the hire-purchase
agreement :
“… the plaintiff's claim was rightly dismissed by the lower court, not
because the hire-purchase agreement was unenforceable, but because no
agreement had in fact been entered into by the parties. “
OFFER AND INVITATION TO TREAT
• An offer should be distinguished from an invitation to treat.
• Unlike an offer, an invitation to treat is a statement which is not intended
to be binding at law. An invitation to treat merely invites in parties to
make an offer.
• Invitations to treat often appear in the advertisements, display of goods
and tenders. Other aspects considered are auctions and applications for
club membership.
• Gibson v Manchester City Council (1979) 1 ALL ER 972
• Abdul Rashid Abdul Majid v Island Golf Properties Sdn Bhd (1989) 3 MLJ
376
Continue…
• Advertisements
– Whether an advertisement is an offer or an invitation to treat is a question of
the intention of the party placing the advertisement.
– In most cases, advertisements are treated as attempts to induce offers unless
on exceptional fact situations as in Carlill's case.
– Carlill’s case is an example of advertisements of unilateral contracts which will
usually be held as offers. In this case, the advertisement promising reward of
£100 if a person contracted influenza after using the smoke was a promise in
return for an act.
– Such a contract, when made, is called a unilateral contract. The outstanding obligation is
on one side only.
– In this case, the plaintiff having performed (used the smoke ball and contracted
influenza), the only outstanding obligation was on the defendants to perform their
promise to pay the £100.
• Section 8 of the Contracts Act is a statutory recognition of acceptance by
conduct and of the concept of a unilateral contract.
Continue…
• Advertisements of bilateral contracts are not usually offers.
– A bilateral contract is one where the outstanding obligations remain on both
sides. In this situation, an offeror makes a promise in return for a promise by
the offeree.
– The case of Partridge v Crittenden [1968] 1 WLR 1204 illustrates the general
rule that advertisements are normally regarded as an invitation to treat. In this
case, the appellant inserted in a magazine an advertisement containing the
words "Quality British A.B.C.R. ... bramblefinch cocks, bramblefinch hens, 25s.
each". The advertisement was inserted under the general heading of
"Classified Advertisements" and nowhere was any direct use of the words
"offers for sale". One Mr Thompson answered the advertisement, wrote and
enclosed a cheque for 30s to the appellant.
– On the appellant's appeal against his conviction for unlawfully offering sale a
bramblefinch hen contrary to s 6(1) of the Protection of Birds 1954, the issue
arose whether the advertisement he inserted was merely an invitation to treat
or an offer for sale. The Court allowed the appeal and held that the
advertisement was not an offer, but only an invitation to treat.
Continue…
• Ashworth J stated:
– “…in my judgment the law of the country is equally plain as it was in regard to articles in
a shop window, namely that the insertion of an advertisement in the form adopted here
under the title "Classified Advertisements" is simply an invitation to treat.”

• The Malaysian position is similar to advertisements amounts to an invitation to


treat only.

• In Coelho v The Public Services Commission [1964]MLJ 12, the appellant applied
for the post of Assistant Passport Officer advertised in the Malay mail newspaper.
Subsequently, he was informed that he was accepted. After being posted to the
Immigration Office, he was informed that his appointment (on probation) was
terminated forthwith by payment of one month’s salary in lieu of notice. He
applied for a certiorari to quash the decision. The Court held that the resulting
applications was an invitation to qualified persons. The resulting applications were
offers. The information conveyed to the appellant was an unqualified acceptance.
Therefore, the respondent had acted ultra vires in purporting to terminate his
appointment in a manner for officers on probation.

Continue…
• In a Malaysian case of MN Guha Majumder v RE Donough [1974] 2 MLJ
114 an advertisement appeared in the Sarawak Tribune (headed
"Property for Quick Sale") for the sale by the defendant of his house.
• The plaintiff, desiring to purchase the property inspected the house twice
and a number of telephone conversations took place between the plaintiff
and the defendant's agent.
• The plaintiff alleged that the defendant had accepted his offer to
purchase the house, but the defendant denied it. In this case, the High
Court did not discuss advertisement.
• On the facts, the Court held that there was no contract in existence
between the parties at the material time as there was no clear intention
of the parties to enter into a formal legal relationship from the evidence
adduced.
Continue…
• Display of Goods
– A display of goods is also generally regarded as an invitation to treat.
– The reason behind this rule is that to hold otherwise would require a seller to sell
whatever quantity of the item displayed even if he has insufficient supplies; while the
buyer cannot also change his mind once an item is chosen and is taken off the display
shelf.
– In Pharmaceutical Society of Great Britain v Boots [1953] 1QB401, CA, the defendants
carried business in the retail sale of drugs. The sale premises comprised a single room
adapted to the self-service system. On entering the shop, the customer was provided
with a wire basket; and having selected the items which he wished to buy, would put
them in the basket and take them to the cashier's desk at the exit, where the cashier
would state total price and receive payment. The Court of Appeal held that the play of
goods on the shelves was only an invitation to treat. It was for the customer to offer to
buy the goods. The contract of sale was completed when the customer's offer to buy was
accepted by the seller in receiving the payment at the cashier's desk.
Continue…
• In Fisher v Bell [1961] 1QB 394, the Court held that the act of displaying a
knife in a shop window did not amount to an offer for sale. The issue in
this case whether- the shopkeeper's display in his shop window of a "flick
knife amounted to an offer of the knife for sale contrary to s 1(1) of the
Restriction of Offensive Weapons Act 1959.
• The Court held that it is perfectly clear that according to the ordinary law
of contract the display of an article with a price on it in a shop window is
merely an invitation to treat. It is in no sense an offer for sale the
acceptance of which constitutes a contract ... In those circumstances I am
driven to the conclusion, although I confess reluctantly, that no offence
was here committed!
• Tenders
– Invitations to tender are not normally considered to be offers unless
accompanied by words that the highest tender will be accepted. The
general rule relating to tenders can be found in Spencer & Ors v Han &
Ors (1869-4870) LR 5 CP 561.
– In this case, the defendants issued to the plaintiffs and other persons
in the wholesale trade a circular in the following words: “We are
instructed to offer to the wholesale trade for sale by tender the stock
in trade of Messrs G. Eilbeck & Co ... which will be sold at a discount in
one lot. Payment to be made in cash ...". The plaintiffs sent in a tender
which turned out to be the highest tender; but it was not accepted.
The plaintiffs insisted that the circular amounted to a promise to sell to
highest bidder.
– The Court held that the circular was only an attempt to ascertain
whether an offer could be obtained. Further, there was a total absence
of any words to the effect that the highest bidder would be the
purchaser.
• However, there are exceptional situations where an invitation to make a
tender is not treated as an invitation to treat but bears legal consequences
as occurred in Blackpool and Fylde Aero Club v Blackpool BC [1990] 3 All
ER 25, CA.
– In this case the defendant council owned an airport. It granted concessions to operate
flights. It sent an invitation to tender to the plaintiff and six other parties all of whom
were connected to the airport. The plaintiff had been granted similar concessions in
1975, 1978 and 1980. The invitation to tender stated that the tenders were to be
submitted in the envelope provided and before the deadline and that late tender would
not be considered. The plaintiff sent the tender in time to the post box but the post box
was not cleared. The tender was marked late when it reached the defendant was not
considered. The plaintiff brought an action against the defendant for breach of contract
as the defendant had warranted that tenders sent before deadline would be considered.
The issue was whether there ' contract between the parties.
Continue…
• The judge held that the defendant was liable to the plaintiff for damages
for breach of contract. The defendant appealed. The appeal was dismissed
by the Court of Appeal. The Court of Appeal held that in the
circumstances, an invitation to tender can give rise to a binding obligation
to consider tenders which conform with the conditions of the tender. In
the present case, the tender was solicited by the council from selected
parties, all of whom were known to the council. The invitation to tender
set out a clear, orderly and familiar procedure. It was only right that the
tenderer who submitted a tender conforming to the deadline should have
it considered.
Continue..
• A Malaysian case involving tenders is Cheng Keng Hong v Govern of the
Federation of Malaya [1966] 2 MLJ 33.
– In this case, the respondent issued a notice inviting tenders to build a school. The
appellant tendered for the work and his tender was accepted and a contract was entered
into. In this case, the High Court held that the unconditional acceptance of the tender by
the respondent bound both parties and a contract was formed. Raja Azlan J states:
– “The law with regard to acceptance of a tender is perfectly clear. The unconditional
acceptance of a tender by the employer binds the parties, and a contract is thereby
formed, the terms of which ascertainable from the invitation to tender, the tender, the
acceptance, and any other relevant documents: see 3 Halsbury's Laws of England (3rd
Ed) at page 423.”
• Auction
– The principles concerning auctions can be drawn from the cases. First,
an auctioneer’s request for bids is only an invitation to treat.
– Second, a notice that an auction will take place at a certain date is also
an invitation to treat and no claim can be made to recover for loss of
time and expenses incurred.
– Third, while an auctioneer's request for bids and notice of auction are
only invitations to treat, if an advertisement states that the sale by
auction is "without reserve", then such sale will be treated as an offer.
– The first principle is that an auctioneer's request for bids is considered
to be an invitation to treat. The bid itself is an offer which the vendor
is free to accept or reject."
Continue…
• In Payne v Cave 1789) 3 Term Rep 148, Lord Kenyon CJ explained as
follows:
• “The auctioneer is the agent of the vendor and the assent of both parties
is necessary to make the contract binding. That is signified on the part of
the seller by knocking down the hammer which was not done here till the
defendant had retracted ... Every bidding is nothing more than an offer on
one side which is not binding on either side till it is assented to”
• The general rule that in an auction, the sale is concluded at the fall of the
hammer is also applied in the Malaysia.
• In M & J Frozen Food Sdn Bhd & Anor v Siland Sdn Bhd & Anor[1994] 1
MLJ 294, SC, in a case involving a sale of land in a public auction, the
Supreme Court held that at the fall of the hammer, an agreement is
concluded between the vendor and the highest bidder. Thereafter, the
vendor cannot offer the goods to other prospective buyers and the bidder
cannot retract his acceptance.
Continue…
• Notice of auction
– The second principle that a notice that an auction will take place at a
certain date is only an invitation to treat is derived from Harris v
Nickerson (1873) LR 8 QB 286.
– In this case, the defendant, an auctioneer, advertised in the London
papers that certain brewing materials, plant and furniture would be
sold by him at Bury St Edmunds on a certain day and the following two
days. The plaintiff attended the sale but on the third day, on which the
furniture was advertised for sale, all the furniture were withdrawn.
The plaintiff brought an action against the defendant to recover for his
loss of time and expenses on the ground that the advertisement
amounted to a contract by the defendant the things advertised would
be actually put up for sale.
Continue…
• The Court rejected the plaintiff's claim and held that an advertisement
that goods will be sold on auction on a certain day does not constitute a
promise to potential bidders that the sale will be actually held. To hold
otherwise or to require an auctioneer to give notice of withdrawal of
the sale would be excessively inconvenient and costly.
• The Court also distinguished the instant case with the situation in
Warlow v Harrison (1873) LR 8 QB 286.
• Auction "without reserve"
– The third principle that an advertisement stating a sale by "without reserve" is
an offer can be seen in Warlow v Harrison (1859) 1 E & E 309, the defendant
and a Mr Bretherton were auctioneers in a partnership who advertised a sale
by auction which contained the following: “three following horses, the
property of a gentleman, without reserve”.
– The plaintiff attended the sale and made a bid of 60 guineas for one of the
horses. A Mr Henderson, the owner of the horse, immediately made bid of 61
guineas. The defendant therefore entered Mr Henderson's name as purchaser
in the sale book and refused to receive the money or deliver the horse to the
plaintiff, stating that he had knocked it down to highest bidder and could not
interfere in the matter.
– The Court held that the sale should be without reserve: the auctioneer in his
advertisement had made a definite offer to this effect, and the plaintiff, by
making his bid in reliance upon it had accepted the offer. In this case, the
Court also ruled that in a sale by auction "without reserve", the vendor cannot
bid at the auction.
• Application for club membership
– In Abdul Rashid v Island Golf Properties Sdn Bhd [1989] 3 MLJ 376, the issue
was whether application for club membership was an offer, or was the offer
made by the club after considering the application. In this case, the plaintiff
applied to become a member of the golf club owned, managed and operated
by the defendants. Here, the High Court did not use the language of an
invitation to treat but used the term "preliminary step".
– Wan Adnan J stated as follows:
“In my view the plaintiff's application for membership was merely a
preliminary step. The offer for membership came from the defendants after
the defendants had considered the plaintiff's application. The contract
between the plaintiff and the defendants was formed only when the plaintiff
accepted the offer by making the payment of the entrance fee and the first
subscription” at 378.
COMMUNICATION OF OFFER
 To have legal effect, an offer must be communicated.
 Section 3 Contracts Act is the general provision on the communication of
acceptance of offers as well as the revocation of offers and acceptances.
Section 3 provides as follows:
 The communication of proposals, the acceptance of proposals, revocation
of proposals and acceptances, respectively, are deemed to be made by
any act or omission of the party proposing, accepting, or revoking, by
which he intends to communicate the proposal, acceptance, or
revocation, or which has the effect of communicating it.
 It should be noted that s 3 allows communication through any act a well
as omission.
• Section 4(1) of the Contracts Act sets out the time when the
communication of an offer is complete:
– The communication of a proposal is complete when it comes knowledge of the
person to whom it is made.
– This section is further explained through Illustration (a): A proposes by letter,
to sell a house to B at a certain price. The communication of proposal is
complete when B receives the letter.
– There can be no valid offer if there are two cross offers or counter offers.
– In Tinn v Hoffman & Co, (1873) 29 LT 271, HL , the House of Lords discussed
the effect of two offers, identical in terms, which had crossed in the post. It
was held by five judges against two that on the facts of that case no contract
had been concluded.
REVOCATION OF OFFER
• There may be situations where an offeror who has communicated his offer
changes his mind and wishes to withdraw his offer.
• The Contracts Act provides for the rules as to (i) when an offer may be
revoked and when the communication of the revocation is complete; and
(ii) the different modes to revoke an offer.
• When offer may be revoked and when communication complete
– Section 5(1) of the Contracts Act sets out when an offer may be revoked.
A proposal may be revoked at any time before the communication of its acceptance is
complete as against the proposer, but not afterwards.
– This section must be read with s 4(2)(a) of the Contracts Act (on communication of
acceptance as against the proposer) which states that:
The communication of an acceptance is complete –
(a) as against the proposer, when it is put in a course of transmission to him, so as to
be out of the power of the acceptor;
• Reading both sections together, thus, an offer may be revoked at any
before the acceptance has been sent to the proposer. Therefore, even the
proposer has put his proposal in a course of transmission to the acceptor,
the proposer is still free to revoke it as long as the acceptor's acceptance
has not been put in a course of transmission to the proposer, so as to be
out of the power of the acceptor.
• This rule is explained in the illustration to s5 of the Contracts Act that "A
may revoke his proposal at any time before or at the moment when B
posts his letter of acceptance, but not afterwards".
• It is, however, still necessary to determine when the communication of
revocation of the proposal is complete. Section 4(3) of the Contracts
provides that the communication of a revocation is complete:
(a) as against the person who makes it, when it is put into a course of transmission to the
person to whom it is made, so as to be out of the power of the person who makes it; and
(b) as against the person to whom it is made, when it comes to his knowledge.
• Thus, the communication of revocation of a proposal is complete as
against the proposer who revokes, when he has sent out the notice of his
revocation.
• However, it will only be complete as against the person to whom it is
made when the said person receives the notice of revocation of the
proposal.
• In Byrne & Co v Leon Van Tienhoven & Co. [1874-1880] All ER 1432, the
defendants posted a letter in Cardiff on October 1, addressed to the plaintiffs in
New York, offering to sell 1,000 boxes of tinplates. It should be noted that it takes
10 or 11 days for a letter posted at either place to reach the other.
– On October 8, the defendants posted a letter revoking the offer. The plaintiffs telegraphed their
acceptance on October 11 and confirmed it in a letter posted on October 15. The letter of revocation
reached the plaintiffs October 20.
– It was held that the revocation was inoperative until October 20, that the offer, therefore, continued
to be open up to that date, and that it had been accepted by the plaintiffs in the interim. Lindley J
stated:
• It may be taken as now settled that where an offer is made and accept by
letters sent through the post, the contract is completed the moment the
letter accepting the offer is posted (Harris's Case (1872) 26 LT 78L Ch App
587; Dunlop v. Higgins (1848) 1 HL Cas 381), even although it never
reaches its destination ... they are based upon the principle that the writer
of the offer has expressly or impliedly assented to treat an assented to him
by a letter duly posted as a sufficient acceptance and notification to
himself, or, in other words, he has made the post office his agent receive
the acceptance and notification of it; but this principle appears to me to
be inapplicable to the case of the withdrawal of an offer.
– In this particular case I can find no evidence of any authority in fact given by the
plaintiffs to the defendants to notify a withdrawal of their offer by merely posting a
letter; and there is no legal principle or decision which compels me to hold, contrary to
the fact, that the letter of the 8 October is to be treated as communicated to the
plaintiffs on that day or on day before the 20th, when the letter reached them.
• But before that letter had reached the plaintiffs they had accepted the
offer, both by telegram and by post; and they had themselves resold the
tin plates at a profit. In my opinion the withdrawal by the defendants on
the 8 October of their offer of the 1st was inoperative; and a complete
contract bind on both parties was entered into on the 11 October, when
the plaintiff accepted the offer of the 1st, which they had no reason to
suppose had been withdrawn.
Modes of revoking offer
• The Contracts Act also sets out various modes to revoke an offer.
• Section 7(a) of the Contracts Act 1950 provides that:
– In order In order to convert a proposal into a promise, the acceptance must be
absolute and unqualified.
– The word ‘absolute’ is not defined by the Contracts Act 1950, but the Oxford
Dictionary of Law, defines it to mean “complete, unconditional.”
– A counter proposal is a rejection of the original proposal. The original proposal
is thus terminated or comes to the end.
– Hyde v Wrench (1840) EWCH Ch J90
– Mahabuilders Bhd v Hotel Rasa Sayang Sdn Bhd (2014) 10 MLJ 593
– Request for further information
• Merely seeking or requesting for further information does not reject a
proposal.
• Stevenson Jaques & Co v McLean (1880) 5 QBD 346
• Transwater Tenaga Sdn Bhd v APS Technologies Sdn Bhd (2007) 1 MLJ 301,
CA
• Section 6 of the Contracts Act provides:
– A proposal is revoked -
a) by the communication of notice of revocation by the proposer to the other
party;
b) by the lapse of the time prescribed in the proposal for its acceptance, or, if no
time is so prescribed, by the lapse of a reasonable time, without
communication of the acceptance;
c) (c) by the failure of the acceptor to fulfil a condition precedent to acceptance;
or
d) d) by the death or mental disorder of the proposer, if the fact of his death or
mental disorder comes to the knowledge of the acceptor before acceptance.
• Notice of revocation
– The most common mode of revoking an offer is to give notice revoking the
offer. The rules explained above as to when an offer may be revoked and its
communication is complete applies to this mode of revoking.
– In Offord v Davies & Anor, (1862) CBNS 748; 142 ER 1336 the Court explained
why the promisor has not to revoke a promise made. Erie CJ stated:
“… the demurrer raises the question whether the defendants had a right to
revoke the promise. We are of opinion that they had… This promise by itself
creates no obligation. It is in effect conditioned to be binding if the plaintiff acts
upon it, either to the benefit of the defendants, or to the detriment of himself.
But, until the condition has been at least in part fulfilled, the defendants have the
power of revoking it.”
• Section 6(a) of the Contracts Act provides that the notice must be given
for the proposer to the other party. However, the English courts have held
that a revocation is valid even though the notice or knowledge concerning
the revocation was derived from a third party.
• In Dickinson v Dodds (1876) 2 Ch D 463, CA. the defendant, on
Wednesday, June 10, gave the plaintiff a written offer to sell a house for
£800, "to be left over until Friday, June 12, 9.00 a.m.". On Thursday, June
11, the defendant sold the house to a third party; Allan, for £800. On that
evening the plaintiff was told that the property was sold to Allan by a
fourth man, Berry. Before 9.00 a.m. on June 12, the plaintiff handed to the
defendant a formal letter of acceptance.
• The question arose whether the plaintiff who had received notice in some
way that the property has been sold to a third party, can after that make a
binding contract by the acceptance of the offer. The Court of Appeal held
that the plaintiff could not as it cannot be said thereafter that there was in
existence the same mind between the plaintiff and the defendant to make
a contract.
• Lapse of time
– An offer once received, must be accepted within the time prescribed in the
offer or if no time is prescribed, within a reasonable time. Failure to do so may
deem the said offer to be revoked as provided in s 6(b) of if Contracts Act.
– In Macon Works & Trading Sdn Bhd v Phang Hon Chin& Anor [1976] 2 MLJ
177, in relation to an option to purchase land, the Court stated that an offer
lapses after a reasonable time not because this must be implied in the offer
but because failure to accept within a reasonable time implied rejection by the
offeree. As a consequence, the Court can take into account the conduct of the
parties after the offer was made in deciding whether the offeree has allowed
too long a time lapse before accepting. In the case, based on the facts, the
option was in fact revoked well before if purported intention to exercise the
option.
Continue…
• What is a reasonable time is a question of fact in each case. An offer to
take up shares in a company was held to be revoked by the lapse of six
months without hearing anything from the company.
• In Ramsgate Victoria Co v Montefiore (1866) LR 1 Ex 109, the defendant
applied for shares in the plaintiff company in June and paid a deposit into
the company's bank. He did not hear from the company until the end of
November, when he was asked to pay for the balance due for the shares
that had been allotted to him. His refusal to take up the shares was upheld
by the Court on the ground that the interval between June and November
was excessive. The defendant's offer should have been accepted, if at all,
within a reasonable time.
• Failure of acceptor to fulfil condition precedent to acceptance
– Under s 6(c) of the Contracts Act, where there are condition precedents to be fulfilled
prior to acceptance, the failure to do so will cause the offer to be revoked.
– In Aberfoyle Plantations Ltd v Khaw Bian Cheng [1960] MLJ 47, PC (Appeal from
Malaysia) the vendor failed to fulfil a condition precedent specified in
the contract, namely to obtain the renewal of several leases relating to
the land which was the subject matter of the contract. The condition
being unfulfilled, the purchaser was entitled to the return of his
deposits paid.
– In Am Financings Ltd v Stimson,51 [1962]1WLR1184,CA., the Court of Appeal held that
there was no concluded contract as the offer made by the defendant to purchase the car
was conditional upon the car remaining in substantially the same condition until the
moment of acceptance. In this case, the car was stolen and recovered in a badly
damaged condition.
• Death or mental disorder of offeror
– Under s 6(d) of the Contracts Act, if a proposer has died or has become mentally
disordered and this fact is known by the acceptor before acceptance, the acceptor
cannot thereafter accept the offer which is thus considered revoked.
– The reasoning is the same as in Dickinson v Dodds (1876) 2 Ch D 463, CA. of a potential
acceptor who wished to purchase property and was informed by a third party that the
seller had already sold the land to another. In such a situation, there cannot be said to
be a consensus of mind between the parties.
– In Dickinson v Dodds, Mellish LJ referred to situations of offers to sell property and
further stated as follows:
– It is admitted law that, if a man who makes an offer dies, the offer cannot be accepted
after he is dead, and parting with the property has very much the same effect as the
death of the owner, for it makes performance the offer impossible, at 475.
– A different view was adopted in Bradbury v Morgan 55 (1862) 1 H & C 249; 158 ER 877,
where Channell B stated:
I am of the opinion that it is a contract, and if so, it is not revoked by death of the guarantor. A mere authority is
determined by death, but in the case of a contract, death does not in general operate as revocation but only in
exceptional cases, and this is not within them, at 881.
• Section 6(d) provides for the effect of death on the revocation of offers.
A general provision in the Contracts Act on the effect of death contractual
obligations is s 38(2) which states:
– Promises bind the representatives of the promisors in case of death the promisors before
performance, unless a contrary intention appears from the contract.
– Thus, the general rule is that death does not revoke all contractual obligations entered
into unless a contrary intention appears from contract.
– For example, in situations where the performance of the contract requires the personal
volition of the parties. This is seen in the illustrations to this section. In the illustration (a)
the representatives of the deceased are bound to deliver the goods promised by the
deceased while in Illustration (b) the deceased's promise to paint a picture for B cannot
be enforced either by the deceased's representatives or by B as the performance of this
contract requires the personal volition of the deceased.
– Section 6(d) of the Contracts Act also provides that a proposal is revoked by the mental
disorder of the proposer. The Contracts Act requires that persons who enter into
contract must be competent to contract, that is, they have reached the age of majority
and are of sound mind (ss 10,11 and 12 of Contracts Act).