What is a Contract?
In legal sense :
An agreement between 2 or more parties that is legally binding between them.
Section 2(h) of the Contracts Act: -" an agreement enforceable by law is a contract”.
In short, all contracts are agreements.
But not all agreements are automatically contracts and enforceable by law.
An agreement can only be a contract if it fulfills the required elements.
Elements of a Contract
1. Proposal (offer).
4. Intention to create legal relations.
6. Legal Capacity.
7. Free consent.
8. Legality of the objects.
Section 2(a) of the CA :-
“ 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”.
A offers to sell his house to B for RM 10,000.
Thus, A by offering to sell his house to B for RM 10,000 in the hope that B will accept it, A is said to have made a proposal.
Section 2(b) of the CA :-
“ 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”.
If B accepts A’s proposal, then an agreement is
created between the parties.
Section 2(c) of the CA :-
“ the person making the proposal is called the “promisor” and the person accepting the proposal is called the “promisee”.
Thus, in the example stated above:
A is the promisor;
B is the promisee
Is not a proposal and have no binding effects.
It is preliminary communication between the parties during negotiations.
In Hart v. Mills, it was held that ITT refers to: -
“… you offer to negotiate, or you issue advertisement that you have got a stock of books to sell, or houses to let, in which case there is no offer to be bound by any contract. Such advertisements are offers to negotiate – offers to receive offers – offers to chaffer ..”
Invitation to Treat
1. Display of goods in a shop window.
Case : Pharmaceutical Society of G.B v. Boots Cash
Case : Coelho vs. The Public Services Commission
Case : Harris vs. Nickerson
Pharmaceutical Society of G.B v. Boots Cash Chemist Ltd
The defendants were charged under the Pharmacy and Poisons Act 1933 which made
it unlawful to sell certain poisons unless such sale was supervised by registered pharmacist.
Whether there was a sale when a customer selected
items he wished to buy and placed them in his basket?
The display was only an ITT. A proposal to buy was made when the customer put the articles in the basket. Payment was to be made at the cashier’s desk and a pharmacist was stationed to supervise the transaction. Hence, the contract was only concluded at the cashier’s desk.
Coelho vs. The Public Services Commission
The applicant had applied for a post advertised in a newspaper by the respondent. He was later informed that his application had been accepted.
After sometimes, the respondent decided to terminate the applicant assuming that he was on probation.
1. The advertisement was an ITT and the application from the applicant was a proposal.
2. The letter of acceptance by the respondent was an unqualified acceptance of the proposal.Therefore, the termination was invalid.
Harris vs. Nickerson
The Def, an auctioneer, made an advertisement stating that he ‘will be going to make an auction on a number of items including office’s furniture on a specified date and place. The Ptf went to the auction but the Def had withdrawn the office’s furniture
from the auction.
The advertisement was an ITT to invite public to make proposal. Therefore, by withdrawing the office’s furniture the Def. did not breach any contract with the Ptf.
TO BE CONTINUED....