Topic Outline F Definition of contract; F 8 elements required to form a vaiid contract; ') The operation of a contract; and

F Ending

a contract.

DEFINATION OF' A CONTRACT Section 2(h) of the Contracts Act 1950 - it is "an agreement enforceable by law".
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F Offer F Acceptance F Intention to Create Legal. Relations F Consideration '''^-. F Legal Capacity F Legality of Object F Certainty of Object F Free Consent
1. OFFER

ELEMENTS OF A VALID CONTRACT

Offer
1950 - an offer is a proposal from one person to another. to an identifiable group of people/ person. E.g. Reservation by a guest for a hotel stay of 3 days and 2 nights.

> s.z(a) of cA
F It is aimed

Invitation to treat > An invitation to treat is a preliminary communication of negotiations i.e. an invitation to rnake / /. -to anoffer. 4.. ^+tqa",f+ l-Jwe a gtn:or.4-o ua?e a* o{4qn .-}-- i't-;;-;;f--A- Zfiec, > An advertisements in the newspaper for a promotional package holiday to Langkawi. I
2.

acceptance. E.g. when a hotel accepts the reservation by a guest to stay in the hotel

> S.2(b) CA 1950 -

F A proposal may be revoked at any time before

ACCEPTANCE

^t'+*r^ ctt-rl. nLr-. pot-e,naHort When a proposal is made to a person and the other person signities his

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,^^* cap*Lfs ae-f +- oflq"cf acceptance. u\. "i

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What happens if an Offer is altered/ varied?

COUNTER OFFER F An alteration or modification of an original offer amounts to a counter off,er and will not mean
an acceptance.

E.g. Taylor's International Hotel offer accommodation in a deluxe room (inclusive breakfast) at RMl5Cr.00 nett per night. Mr. Bean replies he wants to accept the offer at RM120.00 nett per night. Therefore Mr. Bean's reply would be a COUNTER OFFER.
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Fdr a valid contract, acceptance must be communicated. Acceptance by telephone acceptance is only complete when the words of acceptance are transmitted to the other personE.g. Communication when the conversation is disconnected?

F Acceptance bv post-

S.4 (2) (a) CA 1950 acceptance is said to be communicated when the letter is posted into the post box even if the proposer has no knowledge of the acceptance or the letter ig Iost or delayed.

if

3.

F An agreement is not a contract unless the parties intend to have a legal relationship. F Intention to create legal relationship is the common intention between the parties that
agreement shall be legally enforceable

INTENTION TO CREATE LEGAL RELATIONS (ICLR)

the

F Presurnption:
ICLR; and b. SociaVfamily anangements there is no ICLR.
a. Commerciai /business contracts there is

4. CONSIDERATION > S. 2(d) CA 1950 - The value one party pays in exchange for the promise of another. E.g. In exchange for the booking of the holiday package to France, the tourist will pay the price forthepackage.

'

5.

who can enter into a contract parties the to a contract must have the capacity i.e. must be competent otherwise the contract would be invalid. ts General rule all persons have the power to enter into a contract EXCEPT:

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LEGAL CAPACITY S.11 CA 1950

A.
B.
C.

Minors Intoxicated people Mentally disordered people.

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J.yir.i.\lrr\D_ psupre

oclow

ir-Ie age

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years

F Exception

a' b. c.

to 3 fypes of contract: Contract of necessaries - food, shelter, medical services, clothing (properly evaluated); Contract of Insurance; and Contract of Education.

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MENTALLY DISORDERED & INTOXICATED PEOPLE > S'11.CA 1950 - Everyone is competent, who is of sound mind is not disqualified from entering
when he is capable of understanding and forming a rational judgment to its effects. Therefore a mentally disordered and intoxicated person can enter into a contract when they are of sound mind.. E.g. During intervals of sound mind.

> s'12 (1) CA 1950 - A person is of sound mind

into a contract.

6.

>

LEGALITY OF OBJECT S'24 OF'CA 1950 - the object of the agreement must be iar,vful. If the object is unlawfiri the agreement would
invalid and unenforceable. Arumugam vs Somasundram - a driver was employed to drive a private car for public The object of the agreement (to drive the car) *as ,rrrtuwfut.
use.

E'g. Making a reseryation for a room without rpr"i-rying the type of room.

> S'30 CA 1950, an agreement where the meaning is not certain is not valid.

7. CERTAINTY OF OBJECT

8. FREE CONSENT > S.10(1) CA 1950 - all agreements are contracts if it is mad.e with free consenr. > S'14 CA 1950 - an agreement is said to be of free consent when it is not caused
a. Coercion;

by: -

b. Undue Influence; c. Fraud; d, Misrepresentation; and

e. Mistake.

FORMALITIES

F There are no requirements

A contract can be made: a. Orally; b. Writing; and c. By conduct.

that a contract must be in a particular form.

TERMS OF A CONTRACT ) Statements made by parties in the course of negotiations that leads to a contract. which is incorporated into the contract.

F 2 types of terms:

a. Express Terms;and b. Implied Terms.

EXPRESS & IMPLIED TERMS ) Express Terms' Terms which have been specifically agreed between the parties. It may be oral or in writing (better to be put in writing) E.g. Type of room, date of travel.

Terms that are not expressly stated but can be presrulled and understood to exist. E.g. In a hotel booking, room is fit for the purpose.

EXCLUSTON CLAUSE (EC) F An exclusion clause is a term of a contract which purports to limit or exclude the iiabiiity of one of the parties of the contract. F Reason - to maximize profit by reducing costs and risk.
3 RULES OF EC F 3 rules of an exclusion clause a. An EC must be a term of the contract -must be notified before entering into the contract (OLLEY vs MARBOROUGH COURT- EC not valid if displayed in a hotel bedroorn.); b. EC applies to loss/damage which has occurred; and c. EC which limits or excludes liability for personai injury or death is not valid.

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DISCIIARGE OF CONTRACT
contract.

F Discharge of contract means the parties to a contract

are freed from their obligations under the

F 4 ways to discharge a contract

a. b. c. d.

Discharge Discharge Discharge Discharge

by performance; by agreement between the parties; by impossibiiify/frustration of contract; and by breach of contract.

Discharge bv performance - when both parties have performed their contractual obligation, the contract comes to an end. E.g. A guest who checks out of a hoteV person who retums after the package holiday.

F Discharge bv agreement

between the parties

the mutual agreement of the parties to the contract. E.g.A guest who changes a reservation date or room type.

- a contract

may be brought to an end through

F Discharge bv impossibilitv/ frustration of contract -The contract is not possible to be

performed due to no fault of either parfy. E.LI\fter the reservations were made the hotel was destroyed (Tsunami)

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F Remedies

Discharge bv breach of contract - one party performs the obiigation under the contract and @e other party fails to perform their obligation. E.gfWhen a hotel overbooks the guest.

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a.

FOR BREACH OF CONTRACT available: - '

Damages

- money -

compensation;

b. c.

Injunction

order of the court to restrain from doing something; and

specific Performance

order of the court compelling to do something.

DAMAGES

F Damages

are commonly referred to as money compensation granted to put the injuredi innocent party in a position as if the breach had not occurred.

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