LAW OF CONTRACTS 1 (LAW436)

FINAL ASSESSMENT ANSWER

Name: Muhammad Amar Fitri Bin Mohd Khalid

Matrix No.: 2020989263
Class: LWB01E
QUESTION ONE

Suhaila is the youngest daughter of Dato Sulaiman, she recently obtained her
degree in Early Childhood Education. With encouragement from her parents,
Suhaila decided to operate her own kindergarden.

She began by searching for an appropriate premise. She found a new corner
terrace house with a large compound. The advertisement at the house stated that
the selling price was RM650,000.00 (negotiable). Interested buyers may contact the
owner, Eric Chew. After viewing the house, Suhaila offered Eric Chew
RM600,000.00 for the house. The owner, Eric Chew, however firmly stated that he
cannot accept RM600,000.00. Instead he will consider, and he offered Suhaila
RM625,000.00.

Suhaila was sceptical about the offer and continued to view another property. She
subsequently found a suitable house and purchased it.

Meanwhile, Suhaila decided to advertise in the local newspaper for the position of an
assistant and a cook for her new kindergarden. Suddenly Suhaila was afraid if she
will receive too many applications and wants to confirm if she is obliged to accept the
first application received.

Eric Chew has been calling Suhaila, demanding that she proceed with the purchase
of his house.

With reference to relevant authorities, advise Suhaila on the following:-

i) Whether Suhaila is obliged to proceed with the purchase of Eric Chew’s

house?
(20marks)
ISSUE

The issue is whether Suhaila is obliged to proceed with the purchase of Eric
Chew’s house.

LAW

Section 2(h) of the Contract Act 1950 provides that an agreement enforceable
by law is a contract. Furthermore, Section 10(1) of the Contract Act 1950 states that
all agreements are contracts if they are made by the 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. There are 8 elements that must be fulfilled to
form a valid contract. They are, offer, acceptance, consideration, intention to create
legal relations, certainty, formalities, legal capacity, and free consent.

Section 2(b) of the Contract Act 1950 talks about the definition of acceptance.
It states 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.
Before there can be acceptance in law, there must be the fact of acceptance as well
as communication of acceptance. In order to convert a proposal into a promise the
acceptance must be absolute and unqualified and also be expressed in some usual
& reasonable manner. An acceptance is a final and unqualified expression of assent
to the terms of the offer. However, if the reply is qualified or attempts to vary the
terms or attempts to accept the offer on new terms, there is no communication of
acceptance but only a rejection accompanied by a counteroffer. This can be seen in
the case of Hyde v Wrench. In said case, the defendant offered to sell his estate to
the plaintiff on June 6 for 1000 pounds. On June 8 in reply, the plaintiff made a
counter proposal to purchase the estate at 950 pounds. On June 27, the defendant
refused to accept this offer. Two days later, the plaintiff wrote to the defendant that
he was prepared to pay 1000 pounds. The defendant refused and the plaintiff sued
for specific performance. The court held that there was no acceptance because the
plaintiff’s letter on 8 June had rejected the original proposal, which could not be
revived.

There are three situations where the acceptance is not absolute and
unqualified. The first one is counter offers by the offeree. The second one is the
terms of the offer were amended at the time of acceptance. The third is when
acceptance made is subject to contract. Acceptance must also correspond to the
offer. This includes cross offer, knowledge of offer before acceptance and the motive
of acceptor at the time of acceptance.

The acceptance must be communicated clearly between the two parties.

Silence is not considered an acceptance. This can be seen in the case of Felthouse
v Bindley. In that case, the plaintiff wrote to his nephew offering to buy the nephew’s
horse and adding that “if I hear no more about him, I consider the horse mine at 30l.
15s.” The nephew did not reply, and no money was paid. The horse remained the
nephew’s possession. Six weeks later, the defendant, an auctioneer who was
employed by the nephew to sell his farming stock, was directed by the nephew to
reserve the horse in question. As it had already been sold. But by mistake had put it
up with the rest of the stock and sold it. The plaintiff sued for conversion of the horse.
The court held that there was no contract between the plaintiff and his nephew. This
is because there was never any clear acceptance and silence on one side does not
equate to acceptance.

An Invitation to treat is not an offer, but a sort of preliminary communication

which passes between the parties at the stage of negotiation for example, display of
goods in a shop window, advertisements or also an auction. This can be seen in the
case of Fisher v Bell where the defendant had displayed in his shop window a flick
knife which was a ticket bearing the “Ejector Knife-4s”. he was charged with offering
for sale a flick knife contrary to the regulations. The court held that the displaying of
the flick knife was merely an invitation to treat hence there was no offer for sale and
the defendant could not be guilty of an offence.

APPLICATION

In this present case, Suhaila was searching for a house and came across one
being sold by Eric for the price of RM650,000. This price is said to be negotiable by
Eric and any interested buyers can contact him. This is an invitation to treat by Eric
to attract buyers. As such, Suhaila made an offer to buy the house at RM600,000 to
which Eric rejected outright. Eric made a counteroffer to Suhaila to sell the house for
RM625,000. Suhaila was sceptical about this and never responded back to Eric. In
applying the principle in the case of Hyde v Wrench, Eric made a counteroffer which
made the original offer by Suhaila no longer acceptable. It is up to Suhaila whether
or not she wants to accept the counteroffer by Eric. Suhaila kept silent about the
matter and moved on to view other properties. Suhaila’s silence is not an acceptance
as evidenced in Felthouse v Bindley. Therefore, Suhaila never accepted Eric’s
counteroffer to purchase the house for RM625,000 and there is no contract between
them since there was no acceptance.

CONCLUSION

In conclusion, Suhaila is not obliged to proceed with the purchase of Eric

Chew’s house. This is because she never accepted Eric’s counteroffer in the first
place.
 ii) Whether Suhaila is obliged to accept the first application she receives.
(20marks)

ISSUE

The issue is whether Suhaila is obliged to accept the first application she
receives.

LAW

Section 2(a) of the Contract Act 1950 states that a proposal is made when
one person signifies to another his willingness to do or abstain from doing anything,
with a view of obtaining the assent of that other to such act or abstinence. This
means that the willingness of someone means an offer. Section 2(h) of the Contract
Act 1950 provides that an agreement enforceable by law is a contract. Furthermore,
Section 10(1) of the Contract Act 1950 states that all agreements are contracts if
they are made by the 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. There are 8 elements that must be fulfilled to form a valid contract. They are,
offer, acceptance, consideration, intention to create legal relations, certainty,
formalities, legal capacity, and free consent.

An Invitation to treat is not an offer, but a sort of preliminary communication

which passes between the parties at the stage of negotiation for example, display of
goods in a shop window, advertisements or also an auction. This can be seen in the
case of Fisher v Bell where the defendant had displayed in his shop window a flick
knife which was a ticket bearing the “Ejector Knife-4s”. he was charged with offering
for sale a flick knife contrary to the regulations. The court held that the displaying of
the flick knife was merely an invitation to treat hence there was no offer for sale and
the defendant could not be guilty of an offence. Also, in the case of Harris v
Nickerson, the defendant made an advertisement for a sale of certain goods,
including certain office accessories on a certain date at a particular place. When the
plaintiff knew so he traveled to the location and discovered that the office
accessories had been withdrawn from the sale. So, he brought an action to claim for
damages and argues that the defendant had breached the contract since the
advertisement was an offer and his presence at the sale was an acceptance to the
offer. The court held that the advertisement was an invitation to treat and rejected his
claim.
 An offer can be made to a specific person or the general public. If made a
specific person, only that person may accept the proposal. If the offer is made to the
general public, anyone who meets the all the terms of the proposal may accept it.
This can be seen in the case of Carlill v Carbolic Smoke Ball Co. In said case, the
defendants company advertised they would offer 1000 pounds to anyone who still
succumbs to the influenza after using the company’s medicine according to the
instructions for a fixed period. The plaintiff duly used the product, but nevertheless
still contracted the influenza. The plaintiff then sued for money. The Court of Appeal
held that the plaintiff had accepted the offer of the company made the whole world at
large and is therefore entitled to the money. Whether an advertisement is a proposal
or an invitation to treat depends on the intention of the parties in each case.

APPLICATION

In this present case, Suhaila decided to advertise in the local newspaper for
the position of an assistant and a cook for her new kindergarden she wants to open.
Suhaila was afraid if she will receive too many applications and wants to confirm if
she is obliged to accept the first application received. Suhaila can accept the first
application received, she is not however, obliged to accept it. Applying the principle
in the case of Harris v Nickerson, it is because her advertisement was an invitation
to treat. Anyone can come up to Suhaila regarding the job advertisement since it is
open to anyone who is qualified for the role. It is then up to Suhaila to decide among
all the applicants who is the best suited. Suhaila may choose whoever she likes, and
the applicants cannot claim that Suhaila must choose them since they were the first
to apply for example.

CONCLUSION

In conclusion, Suhaila is not obliged to accept the first application she

receives. This is because it is only an invitation to treat and she can choose which
ever applicant she wants regardless of when they applied.