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KXEX 2166 LAW AND ENGINEER

COURSEWORK 1

An agreement is not a contract but a contract is an agreement.

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.
This is stated in the Contracts Acts 1950, Section 2(b). A contract is defined as an
agreement between two or more persons to do or abstain from doing an act and it is
intended to create a legally binding relation.

Yet, not all agreements can be used as a contract. These two terms have the
different meaning. As been stated in the Contracts Acts 1950, Section 2(g), an
agreement not enforceable by law is said to be void. In order to create a valid
contract, there are at least four essential elements needed, which are, Offer and
acceptance, Intention to create legal relations, Consideration Legal, Capacity and
Consent. In this assignment, we will focus on offer and acceptance, intention to create
legal relation, consideration and consent. Now we shall discuss the offer and
acceptance.

A contract is said to be formed when the offer is accepted. Under the Section
2(c) of the Contract Act 1950, the person making the proposal is called the
promisor and the person accepting the proposal is called the promisee. An offer
must be clear, definite and certain. Reffering to the case White v Bluett(1853) LJ Ex
36, Mr Bluett had lent his son some money. Mr Bluett died. The executor of Mr
Bluett's estate was Mr White. He sued the son to pay back the money. In his defense,
the son argued that his father had said the son need not repay if the son would stop
complaining about how Mr Bluett would distribute his property in his will among the
children. This is also stated in Section 30 in Contract Act where agreements, the
meaning of which is not certain, or capable of made certain, are void. Besides that,
an offer must be distinguished from mere willingness to deal or negotiate. For
example, X offers to make and sell to Y calendars featuring Australian paintings.
Before any agreement is reached on size, quality, style or price, Y decides not to
continue. At this stage, there is no legally binding contract between X and Y because
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there is no definite offer for Y to accept until the essential terms of the bargain has
been decided.

Acceptance occurs when the party answering the offer agrees to the offer by
way of a statement or an act. As been stated in Contract Act Section 7(a), an
acceptance must be absolute and unqualified. Yet, the acceptance must be
unequivocal and communicated to the offeror. This is stated in Section 7(b) where
an acceptance must be expressed in some usual and reasonable manner, unless the
proposal prescribed the manner in which it is to be accepted, and the acceptance is not
made in such manner, the proposer may, within a reasonable time after the acceptance
is communicated to him, insist that his proposal shall be accepted in the prescribed
manner, and not otherwise, but if he fails to do so, he accepts the acceptance.

Other than offer and acceptance, the intension to create

legal intention is also playing a vital role in making a contract.
The intension to create legal intention can be defined as parties
involved denote a court's presumption that parties to an
agreement wished it to be enforceable by a court. It also
defined as an intention to enter a legally binding agreement or
contract. Intention to create legal relations is one of the
necessary elements in formation of a contract. Under the case
Merritt v Merritt [1970] EWCA Civ 6, the judgment of court
stated that the paper which the husband signed dealt with the
beneficial ownership of the house. It was intended to belong
entirely to the wife. The intension to create legal intention is the
paper signed when Mr. Merritt left to live with another woman
and it is no longer belongs to neither social agreement nor
domestic agreement. Thus, there are contract appear in this
case and Mr. Merritt should perform his obligation stated in the
contract.

Next , we would like to discuss on the consent .The consent can be interpreted
as two or more persons are said to consent when they agree upon the same thing in the
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same sense which must not including of coercion ,undue influence , fraud
,misrepresentation and mistake . Section 10 of the Contracts Act 1950 provides inter
alia that all contracts if they are made by the free consent of parties. By virtue of
section 14, consent is said to be free when it is not caused by one or all those criteria
are assumed as free consent and the contract would be voidable and is said to be free.
In section 19(1), of the stated Act, an agreement is caused by coercion ,fraud, or
misrepresentation , the agreement is a contract voidable at the option of the party
whose consent was so caused. However, the section 19(2) goes on to say that a party
to contract , whose consent was caused by fraud, or misrepresentation , may , if he
thinks fit, insist that the contract shall be performed , and that he shall be put in the
position in which he would have been if the representation made had been true. Here
we give an illustration on this. If A is threaten by B to sell him a property such as land
worth RM150, 000.00 at price of RM100, 000.00, although the contract is signed , but
it is still voidable as A is under coercion . But, suddenly come with economy crisis
and the price of the land had dropped stiffly from RM150,000.00 to RM 50,000.00 ,
thus under section 19(2) , A may has a decision of the contract shall be performed.

Also, mistake of a contract will be also caused void of contract. Under section 21 of
Contract Act, mistake as to a matter of fact essential to the agreement , the agreement
is void. For example, in the case Raffles v. Wichelhaus, (1864) the plaintiff offered to
sell the defendant a certain amount of cotton arriving from Bombay on a ship called
the "Peerless". The defendant accepted the offer to take shipment and pay within a
certain time after arrival of the ship in England. Unfortunately, there were two ships
named "Peerless". The one which arrived in October had the cotton, and the defendant
refused delivery claiming that when they accepted the offer, they meant that the other
ship "Peerless" which was to arrive in December. The plaintiff brought action for
breach. The nature of the risk for this case is Standard sale of goods risks and the
judgment is due to mistake of material fact, there is no binding contract.

Finally, we shall discuss about consideration. Under the section 26 of the

Contracts Act 1950, it stated that an agreement without consideration is void and the
word consideration is defined in Section 2(d) of the said Act as when , at the desire
of the promisor , the promisee or any other person has done or abstained from
doing,or does or abstains from doing, or promises to do or to abstain from doing,
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something, such act or abstinence or promise is called a consideration for the promise.
Consideration also is something that is used as a return which promised for another
party. The something, although not necessary must be in terms of money, it has to
have something of value (benefits, interest or rights). Consideration can be classified
into 3 types: executory, executed, and past consideration. Executory consideration is
where a contract is made in return for an offer, which means it is a mutual exchange
of a mutual promise. For example, A offers to sell a car at a price of RM20, 000, and
B wants to buy it. This means that As promise to sell the car is the consideration for
Bs promise to pay RM20, 000 for the car. For executed consideration, it is when a
promise is made in return for the performance of an act. For example, M lost his pen
and offered RM 200/- to anyone who finds and returns the documents to him. K found
Ms pen in response to the offer and returns them to M. By returning the pen, K has
given consideration to Ms promise to pay. Should M refuse to pay, K may take an
legal action against him. Lastly, we will touch on the past consideration. It is known
as a promise is made subsequent to and in return for an act that has already been
performed. In English law, past consideration is insufficient to support a contract. Yet,
under Contract Act 1950, Section 2(d) stated that when, at the desire of the promisor,
the promise or any other person has done or abstained from doing, or does or abstains
from doing, or promises to do or to abstain from doing, something, such act or
abstinence or promise is called a consideration for the promise. Refer to the case,
KEPONG PROSPECTING LTD v A.E.SCHMIDT & MARJORIESCHMIDT. In this
case, Schmidt, a consulting engineer, had assisted Mr. X in obtaining a prospectus
permit for mining iron ore in the state of Johor. Schmidt also helped in the formation
of a company; Kepong Prospecting Ltd. Schmidt was appointed as the Managing
Director of the company. After the company was formed, a contract was entered into
between Schmidt and the company under which the company promised to pay Schmidt
1% of the value of all ore sold from the mining land. This promise was in
consideration of the services given by Schmidt and on behalf of the company before
its formation, after incorporation and for future services However the company
failed to pay S and he claimed the amount. The issue was whether there was valid
consideration even though those services were clearly past The service given by S
before the promise was made were sufficient to constitute valid consideration even
though the service were past.
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As a conclusion, an agreement is not a contract but a contract is an agreement

is a correct statement. In our life, we shall make a lot of agreement, which maybe not
have the intention to be bonded by law, or due to certain circumstances such as
parents encouragement to their children, or a social agreement to friends. However,
once the agreement contains four of the criteria of Offer and acceptance, Intention to
create legal relations, Consideration Legal, Capacity and Consent, it may be a legal
contract, and the promisor and promisee should perform their duty base on the
contract as the contract is enforced by law.

References:
1. M.P.Lee &Ivan, J.D.2009. Business Law. Oxford University Press.

2. THE COMMISSIONER OF LAW REVISION, MALAYSIA.2006. LAWS OF

MALAYSIA: ACT 136: CONTRACTS ACT 1950.PERCETAKAN
NASIONAL MALAYSIA BHD.

3. Intention to create legal relation.[online].Available:

http://en.wikipedia.org/wiki/Creation_of_legal_relations_in_English_la
w. [6November 2013].

4. Offer and acceptance.[online].Available:

http://en.wikipedia.org/wiki/Offer_and_acceptance. [5November
2013]