EUT442 Professional Engineers – December 2018

LAW OF CONTRACT

1. List seven basic elements of a contract.

Solution

a) Offer
b) Acceptance
c) Consideration
d) Certainty
e) Capacity
f) Intention to create legal relations
g) Free consent

2. Two most basic elements of a contract are “offer” and “acceptance”. Explain the meaning of
both terms.

Solution

The term “offer” (or proposal) as explained in Contract Act 1950 is “when a 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”.

An offer may be expressed or implied. The communication of an offer is complete when it

comes to the knowledge of the person to whom it is made.

An offer when accepted become a promise. According to Contract Act 1950, “when a person
to whom the proposal is made signifies his assent thereto, the proposal is said to have been
accepted”.

Acceptance may be expressed or implied. Acceptance must be absolute and unqualified.

Acceptance must be unconditional and must be made within a reasonable time.

3. Explain the term “counter offer” in relation to contracts.

Solution

Where a purported acceptance is qualified by the introduction of a new term, this may be
considered by the courts to be a “counter-offer” which destroy the original offer. By making
a “counter-offer” the original offer may be considered rejected and cannot be accepted later.

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EUT442 Professional Engineers – December 2018

4. Pasaraya Tesco advertises in local newspaper that there is vacancy for the post of cashier. Is
this advertisement an offer to contract? Explain your answer.

Solution

According to Contract Act 1950, an offer is “when a 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”.

An advertisement is not an offer but is merely an attempt to induce offer. Therefore the
advertisement by Pasaraya Tesco in in the local newspaper is not an offer to contract but is
only invitation to treat.

5. Explain what is meant by “capacity to contract”.

Solution

Parties entering into a contract must have the legal capacity to do so. According to Contract
Act 1950, persons who have the capacity to contract must be

a) The age of majority (18 years of age)

b) Be of sound mind (not mentally insane)
c) Not disqualified by any law to which his is subject (example: must not be bankrupt)

6. Azizah, a 15 years old girl, what to know whether she can enter into commercial contract.
Advise her as to what type of contracts she may enter into legally.

Solution

Azizah as a general rule has no legal capacity to enter into commercial contracts since she is
a minor. The age of majority is eighteen years. Contracts made by minors are in general void.

However there are contracts that Azizah could enter into which are:

a) Contracts for necessaries

“Necessaries” are things which are essential to the existence and reasonable comfort of
the infant such as food and clothes. Education was held to be “necessaries”.

b) Contracts of scholarship
The Contracts (Amendment) Act 1976 provides that a scholarship agreement enter into
by an infant is valid when the scholarship, award, bursary, load or sponsorship is granted

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by Federal or State Government, a statutory authority or an educational institution such

as university.

c) Contracts of insurance
Under Financial Services Act 2013, an infant over the age of ten may enter into a contract
of insurance. However, if she is below the age of sixteen, she can only do with the written
consent of her parent or guardian.

7. Haji Lah wants to give his land to his daughter, Timah, for her 23rd birthday. As Timah will not
be paying any money to her father, Haji Lah is worried that since there is no consideration for
the transfer of his land to Timah, the transfer may be void by virtue of section 26 of the
Contracts Act 1950. Advise Haji Lah.

Solution

Contracts Act 1950 provides that as a general rule, an agreement without consideration is
void.

However, agreement made on account of natural love and affection is binding if the following
requirements are presents:
a) It is express in writing;
b) It is registered (if applicable); and
c) The parties stand in a near relation to each other.

Applying the above principles, Haji Lah need not be worried because the transfer of his land
will be in writing and be registered; and as he is Timah’s father, the transfer for love and
affection will be valid even though Timah does not pay anything for the land.

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