1

Contract - Offer

29/02/2024
Starting a business
Contents:
1. Introduction
2. Contracts and Agreements
3. Offer/Proposal
Objectives
Successful students should be able to:-
1. Explain the general idea of law of contract;
2. Distinguish between a contract and an agreement;
3. Outline the elements of a contract;
4. Distinguish the proposal and invitation to treat;
5. Describe the elements of a valid offer; and
6. Explain how an offer may be revoked.
1. INTRODUCTION
An understanding of the law of contract is of
fundamental importance in the context of business
practices.
In fact, even in everyday life we enter into
contracts. Throughout this course students will be
exposed with the law of contracts in Malaysia.
1. INTRODUCTION (cont)
What is a contract?
Think of contracts that you may have entered into!!!
What is a contract?
Sir Frederick Pollock:-
promise or set of promises

An agreement, which legally

binds the parties to it. Each
party is bound to it because
they have agreed to be so

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1. INTRODUCTION (cont)
What are contracts and contract law for?
Contracts

allow businesses to make

long-term plans
create certainty in the
commercial arena
provide parties with
confirmation of their
rights/ obligations

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provides security for the recipient of a promise who has
given something in return for that promise.
enforces bargains and thereby induces parties to
conclude contracts in the first place.
facilitates the operation of the market economy.
2. Contract and Agreement
Definition of contract
In simple words, contract is bargain, a deal from which
both parties expect to benefit.
Definition of contract
Legal Definition
The term in a legal sense refers to an
agreement between two or more parties that is
legally binding between them.
Definition of contract
s. 2 (h) of the Contracts Act 1950, it has been
defined as an agreement enforceable by the law .
i.e. a contract is an agreement which is legally
binding between the parties.
The effect is that the parties in the contract can
enforce the contract, which means that if in the event
when one of the parties breaches the contract the
other party can bring the case to the court of law.
Brief history of law of contracts in Malaysia

Historically, prior to 1974, English Common Law was

applied in Penang, Malacca, Sabah and Sarawak.
Meanwhile, the Contracts Ordinance applied to the
other 9 remaining states.
In present, law of contract in Malaysia is governed
by the Contracts Act, 1950 (CA, 1950).
Contracts and agreement
It is essential to distinguish between the contract and
agreement because not all agreement is considered
as a contract. Some agreements are less serious.
Contracts and agreement (cont)
Agreement Contract

s. 2 (e) of CA, 1950:- s. 2 (h) of CA, 1950:-

every promise and an agreement
every set of promises enforceable by law is a
forming the contract .
consideration for each s. 2 (g) of CA, 1950:
other, is an agreement . an agreement not
enforceable by law is
said to be void .
Contracts and agreement (cont)
As may be obvious from the above definition, the notion
of lies at the heart of all contracts and is
their essential basis.

However although is an integral part of a

contract, it is not, by itself sufficient and would fall short
of a contract. Before an agreement becomes a
contract, certain other elements must also be satisfied.
Relationship between agreement and
contract

Agreement

Contract
3. Basic elements of valid contracts

Basic
elements
of
valid
contracts

Intention
To Certainty
Free
Offer Acceptance Capacity Consideration Create Of the
consent
Legal Contract
relation
 Agreement

Two Separate
elements:

1. Offer
2. Acceptance

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3. OFFER/PROPOSAL
Definition
Offer or better known as proposal in the CA, 1950
bears a same meaning and is one of the necessary
elements in the contract.
A proposal is a statement by one party that he is
willing to do or abstain from doing something.
Definition of offer/proposal
s. 2 (a) of CA, 1950:-

to do or to abstain from doing anything with a view

to obtaining the assent of that other to the act or

There are two (2) key points to be noted from this

definition:-
expression of willingness to do or not to do; and

abstinence.
Example:
X, offers to sell his car
to Y the act of X
offering Y showing his
willingness to sell the
car to Y. X makes the
offer in order to get
consent (acceptance)
from Y to buy the car.
3. OFFER/PROPOSAL (cont)
Who?
The person who makes the proposal is called the
promisor or offeror.

s. 2 (c) of CA, 1950:-

Promisor
Offer
X Y
Forms of offer/proposal
An offer is not required to be in particular form.
It can be:-
Written;
verbal (expressed proposal); or
made by action (implied proposal)
Types of offer
Offer can be either specific or general.
Types of offer
(a) Specific offer (b) General offer
It is referred when It refers when the offer makes to people
at large.
the offer makes to a Case: Carlill v. Carbollic Smoke Ball
specific person or Co. Ltd [1893] 1 Q.B. 256
specific group of It was held in this case that an offer
(proposal) can be made to all the world
people. because the contract will only be made
with that limited portion of the public who
came forward and performed the
condition on the faith of the
advertisement.
28

An offer does not have

to be made to a
particular person it
can be made to a
particular class of
persons or the world
at large
Carlill v Carbolic
Smokeball

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 Offer and Invitation To Treat (ITT)
29

An offer needs to be distinguished from;

invitation to treat (an invitation to make an offer)

What is an ITT?
An ITT invites people to make offers. It is not a proposal
but a sort of preliminary communication which passes
between the parties at the stage of negotiation and not
capable of being turned into a contract.

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Offer real case 2
Gibson v Manchester City Council [1979]
Gibson intended to buy the city council unit house that he
had rent for 16 years
1970 the council started to distribute information about
their policy of selling the house and how to do about it i.e.
fill up application form etc
Tenant filled up the form
February, 1971 replied by council indicated the purchase
price and brief information about mortgage . Use the term

application form if agreed to purchase

Gibson was excited, fill up the formal form and also
wrote a message asking the discount considering the
defects in the building
Council reply no
Gibson replied agreed with the price asked to
proceed with purchase
May 1971, changed political control. New winning
party decided not to proceed with the sale unless
the contract had properly entered.
Gibson argued contract was concluded, the council
made the offer and he accepted.
Held: Court decided there was no offer, therefore
no acceptance.
Why?
Invitation to treat
1. Mere statements of
price - Harvey v Facey
[1893] AC 552
Preston Corp. Sdn. Bhd.
V. Edward Leong & Ors
[1982] 2 MLJ 22

A statement of minimum
price at which a party
may be willing to sell will
not amount to an offer.
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 Harvey v Facey [1893] AC 552
35

Facts:
The Plaintiff telegraphed to the Defendants stating: you sell us
Bumper Hall Pen? Telegraphed lowest cash . The Defendants
telegraphed in reply stating: price for Bumper Hall Pen is
nd
$900 . (2 telegraph). The Plaintiff then telegraphed stating:
agree to buy Bumper Hall Pen for $900 asked by you. Please send us
your title . (3rd telegraph)

Issue:Whether the exchange of telegraph between the parties

constitute a valid Offer and Acceptance (Contract).

Held:There was no contract. The 2nd telegraph was not an offer but
only an indication of the minimum price if the Defendants ultimately
resolved to sell. The 3rd telegraph therefore was not an acceptance.

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 Land
(BHP)

Harvey Facey

We want BHP. Quote the best price 900 pounds

We agree

SEE U IN COURT!!!
 Preston Corp. Sdn. Bhd. V. Edward Leong
37
& Ors [1982] 2 MLJ 22
Facts:
The appellant publishers asked for quotations from the respondent
printers which were duly given to them. The appellants then placed
printing orders based on the quote.

Issue:Whether printing orders made by the appellants were an

acceptance of a binding offer or merely offers in response to an
invitation by the respondents.

Held:
The Federal Court decided that the quotations were merely a supply
of information which was really an invitation to enter into a contract
in response to the inquiry. The printing orders were
offers subject to acceptance by the respondents.

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 Send us your
quotation

Preston
Edward
Leong

Court:
the quotations were merely a supply of
information which was really an
invitation to enter into a contract Quotation of price.
 Invitation to Treat
2. Adverts - Partridge v Crittenden
[1968] 2 All ER 421
Coelho v The Public Services
Commission [1964] MLJ 12

Advertisements are normally

interpreted as ITT.

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 Partridge v Crittenden [1968] 2 All ER
40
421
Facts:
In this case the appellant had inserted an advertisement to sell
protected bird under the general heading of Classified
Advertisements and the words for were not used.
He was charged with unlawfully offering for sale of wild live
bird contrary to the provisions of the Protection of Birds Act
1954, and he was convicted. However the court quashed the
conviction.

Held:
A classified advertisement in a magazine or newspaper did
not amount to an offer to contract. There is no sufficient
amount to contract.
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 Advertisement:

Bramblefinch
cocks and hens

appellant
Respondent

Court:
A classified advertisement in a magazine Your act is an offer -
or newspaper did not amount to an unlawfully offering for
offer to contract. There is no sufficient sale of wild live bird. This
amount to contract is contrary to the provisions
of the Protection of Birds
Act 1954.
 Coelho v The Public Services Commission
42
[1964] MLJ 12
Facts:
The applicant had applied for a position in response to a newspaper
advertisement. He was later informed that his application had been accepted.
Subsequently, the Public Service Commission attempted to terminate his
employment on the basis that he was appointed on probation. The applicant
then applied to the court for an order to quash the decision.

Held:
The High Court ruled that 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
and thus there was no question of his appointment being on probation.
Therefore the purported termination applicable to officers on probation was
invalid.

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 2. Adverts (cont)
43

However, advertisement may also be construed as

offer.
In order to determine whether an advertisement is
an offer or ITT is depends on the intention of
parties.

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 Carlill v. Carbolic Smoke Ball Co. Ltd
44
[1893] 1 Q.B. 256
Facts:
An advert was placed for to prevent influenza. The advert
offered to pay 100 if anyone contracted influenza after using the ball.
The company deposited 1000 with the Alliance Bank to show their
sincerity in the matter. The Plaintiff bought one of the balls but contracted
influenza.

Held: The Plaintiff was entitled to recover 100.

The court further held:
The deposit of money showed an intention to be bound, therefore an
advert was offer
It was possible to make an offer to the world at large, which as
accepted by anyone who buys a smoke ball
The buying and using of the smoke ball amounted to acceptance.

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 Carlill v. Carbolic Smoke Ball Co. Ltd
45
[1893] 1 Q.B. 256 (cont)
As a conclusion:
Advertisement is merely an attempt induce offers or ITT.
It usually silence on matters which are valid to the
contract.
It is an expression of willingness to negotiate, inviting
the reader to request the services or goods prescribed.

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 Invitation to treat
46

3. Brochure
Not an offer because it is silent as to the availability of
the services or goods.

4. Booking form
Not an offer from advertiser but merely as ITT. The
reader may fill the form and allow the advertiser
process the form.

In this situation the reader is considered to make an

offer to the advertiser.

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 Invitation to treat
47

5. Auction Payne v Cave 100

ER 502

The legal position is that the

auctioneer is only making an
ITT.
The auctioneer is merely
inviting the people to
present to make proposals
which the auctioneer may
accept or decline to accept.

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 Payne v Cave 100 ER 502
48

Facts: The defendant bid £40 for goods being

auctioned, but before they were knocked down to him,
he withdrew his bid. The question was whether he could
withdraw the bid in this fashion.

Held: A bid is merely an offer and it may be revoked

at any time prior to acceptance. Acceptance at auctions
occurs on the fall of the hammer, and as the defendant
had withdrawn his bid before that happened, his offer
had terminated and the auctioneer could not accept.
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Bidder

Initial price is...

ITT

Auctioneer
 Invitation to treat
50

6. Display of goods Fisher v Bell

[1960] 3 All ER 731 or P.S.G.B.
v Boots Chemists [1953] 1 All ER
482

Generally it does not constitute a

proposal.

Rule:
An offer is made by a customer
when he or she selects the desired
goods for payment at the counter.

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 Pharmaceutical Society of Great Britain (PSGB) v.
Boots Cash Chemist Ltd. [1953] 1 Q.B. 401
51

Facts:
The defendants were charged under the
Pharmacy and Poisons Act 1933 which
made it unlawful to sell certain poisons
unless such sale were supervised by
registered pharmacist.
The case depended on whether there was
a sale when a customer selected items he
wished to buy and placed them in his
basket. Payment was to be made at the
exit where a cashier was stationed and, in
every case involving drugs, a pharmacist
supervised the transaction and was
authorized to prevent a sale.

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52

Held:
The display was only an ITT. A proposal to buy was made
when the customer put the articles in the basket. Hence the
contract would only be made at the desk. As such, the
shop owner had not made an unlawful sale.
A sale was not completed until the customer's offer to buy had
been accepted by the defendants by their acceptance of the
purchase price, which acceptance took place under the
supervision of a registered pharmacist as required by the
Pharmacy and Poisons Act 1933 s.18(1)(a)(iii).

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 Fisher v. Bell [1961] 1 Q.B. 394 at 399
53

Facts: A shopkeeper
displayed a flick knife for
sale in his shop window.
The offering for sale of
such weapons was
prohibited by the
Offensive Weapons Act
1939 (UK). He was
charged with for
the offending
weapon under the Act. 29/02/2024
 Fisher v. Bell [1961] 1 Q.B. 394 at
54 399

Held: He was not guilty as he had not offered

the knife for sale as the display was merely
an invitation to treat and not an offer.

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 Elements of offer
55

There are certain rules pertaining to the operation

of law include the followings:
i) terms of offer must be certain; and
ii) offer must be communicated.

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 (i) Certainty of Offer
56

A proposal must be clear, certain, definite and

absolute which is completed in all terms condition
and consequence and no doubt.
The offer must be firm. There must be definite
intention to adhere to the offer.

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 (ii) Communication of Offer
57

A proposal must be communicated.

s. 4 (1) of CA, 1950 reads as follows:

communication of a proposal is complete when it
comes to the knowledge of the person to whom it is
.
A proposal is said to have been communicated only
if the party who accepts it knew about the
proposal.

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 Carlill v. Carbollic Smoke Ball Co. Ltd
58
[1893] 1 Q.B. 256

Held:
The communication of offer was completed when
the offer came to the knowledge of the Plaintiff.

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59

Therefore if a party accepting a proposal is not

aware about the proposal, then there is no
contract.
It includes a situation when a claimant or person
knew of the reward but had forgotten it at the time
he supplied the information or performed the act,
is in the same position as a person who had not
known of the reward at all.

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 R v. Clarke (1927) 40 CLR 227
60

Facts: The Western Australian Government offered a

reward for information leading to the arrest and
conviction of persons responsible for the murder of 2
police officers. X and Clarke were later arrested and
charged with the murders. Clarke later gave some
information to the police which resulted to the arrest of
another person Y. Clarke was later found not guilty. He
later claimed for the reward.

Held: His claim failed because although he has seen the

offer, it was not present to his mind when he gave the
information to the police.
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 Types of proposal
61

By virtue of s. 9 of CA, 1950, proposal can be

divided into 2 (two):-

i) Expressed proposal a proposal made in words (i.e.

written, oral)

ii) Implied proposal a proposal which is made by

other than words (i.e. by conduct)

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 Termination of an offer
62

There are several ways in which a proposal may

come to an end. If an offer is terminated, there is
no longer anything left to accept and a contract will
not be formed.
Revocation s. 5(1) of the CA 1950
Lapse of time
Failure to fulfil a condition precedent to acceptance
Death or mental disorder of a party
Rejection

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 Termination of an offer (offer)
63

By virtue of s. 6 of CA, 1950, proposal may be withdrawn

in any of the following circumstances:-
a) By communication of notice of revocation (s. 6 (a) of CA,
1950);
b) By lapse of the time prescribed in the proposal or if no
time prescribed by the lapse of a reasonable time (s. 6 (b)
of CA, 1950);
c) By the failure of the acceptor to fulfill a condition
precedent to acceptance (s. 6 (c) of CA, 1950); and
d) By the death or mental disorder of the proposer, if the fact
of the death or mental disorder comes to the
knowledge of the acceptor before acceptance (s. 6 (d) of
CA, 1950).
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 Revocation of proposal
64

s. 5 (1) of CA, 1950 states as follows:-

communication of its acceptance is complete as against

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 Rejection
65

Once proposal is rejected, the proposal is

terminated. Rejection can be either express or
implied.
Express rejection takes place when the
offeree/promisee directly indicate his/her refusal
to take up the offer. Once it is rejected, it is
destroyed and cannot be revived.
Example: A offers to sell the Blackberry to B for
RM900. B indicates to A he does not want to buy
the item.
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66

Implied rejection
There are some occasions when an offeree accepts a
proposal on new terms not contained in the proposal, then
this situation will be classified as implied rejection.
This is also known as a counter offer.
The legal consequence is that the original offer ceases to
exist.
Case: Hyde v Wrench (1840) 49 ER 132

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 Counter-offer
67

Case: Hyde v Wrench [1840]

Facts: W offered to sell his farm for £1,000. H offered to pay £950

farm to H and H sued.

Held: The courts held that H could not enforce the acceptance and
agreement as his counter-offer of £950 was an implied rejection of the
original offer to sell at £1,000.

2/29/2024
 Request for further information
68

A counter-offer must be distinguished with a request for

further information.
Case: Stevenson v McLean (1880) 4 QBD 346
Facts: Defendant offered to sell iron at 40s a ton to
Plaintiff for cash. Plaintiff wrote and asked for 4 months
credit. Defendant did not respond and had sold the iron to
a third party. Plaintiff however, sent a telegram accepted
the original offer.
Held: This inquiry was not held to be a counter-offer, but a

offer.
2/29/2024
 Recap
69

Agreement vs
contract
Basic elements of
contract
Offer
Invitation to treat
Elements of offer
Types of offer
Revocation of
offer 29/02/2024
 Tutorial questions
70

1. Describe the basic elements to make a valid

contract.

2. How to explain the relationship between a contract

and an agreement in the context of Malaysian
Contracts Act 1950?

3.Explain the concept of an invitation to treat.

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 Tutorial questions (cont)
71

4. Does an offer exist in the following circumstances?

a) Peter puts a teddy bear wearing a price tag in his shop
window.
b)

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 Tutorial questions (cont)
72

5. Joshua found his lost cat and returns it

to him, unaware of the fact that his neighbour had
advertised in the newspaper that reward will be
given to those who found the cat. Advise Joshua
whether he can claim the reward from the
neighbour.

6. Discuss the ways in which the termination of an

offer may take place.

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 Tutorial questions (cont)
73

7. Damon advertised his car for sale in the Sun

newspaper for RM35,000. Molly wrote offering to
buy the car for RM30,000. Damon replied by post
stating that he would accept RM32,000. Having
received no reply from Molly, Damon wrote again
saying he would accept her offer for RM30,000.
Advise both parties.

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