BAEB 301: BASIC LAW FOR E-BUSINESS

CHAPTER 2:TERMS AND FORMS OF CONTRACT

© 2010 Cosmopoint
Chapter 2: Terms and Form of Contract
Topic Outlines

2.1 The Form and Contents of Contract

2.1.1 The Form of an Electronic Contract

2.2 Certainty of Terms of Contract

2.2.1 Certainty of Terms in Electronic Contract

2.3 Distinction of Term and Representation

2.3.1 Express Terms in A Traditional Contract

2.3.2 Express Terms in An Electronic Contract
2.3.3 Implied Terms
2.3.4 Condition and Warranty

Slide 2 of
[Count you
total slide and
change the
© 2010 Cosmopoint number here]
Chapter 2: Terms and Form of Contract
Topic Outlines

2.4 Incorporating Terms into a Written Contract

2.4.1 Incorporating Terms into an Electronic Contract

2.5 Incorporating Terms into An Unsigned Document

2.6 Exclusion Clause

2.6.1 Incorporating An Exclusion Clause Into A Signed Contract

2.6.2 Incorporating An Exclusion Clause into An Electronic Contract
2.6.3 Incorporating An Exclusion Clause Into An Unsigned Document
2.6.4 Legal Effect of An Exclusion Clause

Slide 3 of
[Count you
total slide and
change the
© 2010 Cosmopoint number here]
Chapter 2: Terms and Form of Contract
Learning Outcomes

At the end of this chapter, students should be able to:

 Understand the fundamental principles regarding certainty of terms and the
meaning of terms as opposed to representation.
 Understand the difference between express and implied terms and also
condition and warranty.
 Appreciate the implication of an exclusion clause and the importance of
incorporation of an exclusion clause into a contract before such a term is
treated as a term of a contract

Slide 4 of
[Count you
total slide and
change the
© 2010 Cosmopoint number here] Topics
Chapter 2: Terms and Form of Contract

2.1 The Form and Contents of Contract

1. There is no requirement that

a contract should be in a
particular form.
2. The general rule is that a
contract can be made orally,
in writing or by conduct.

Slide 5 of
[Count you
total slide and
change the
number here] Topics
Chapter 2: Terms and Form of Contract
2.1 The Form and Contents of Contract
2.1.1 The Form of an Electronic Contract

1. It is not stated in the Contracts Act 1950 whether

electronic message can amount to “writing”
requirement.
2. The Contracts Act 1950 does not tell us how to
handle the problem of electronic signature.

Slide 6 of
[Count you
total slide and
change the
number here] Topics
Chapter 2: Terms and Form of Contract
2.2 Certainty of Terms of Contract

Under s.30 of the Contracts Act ‘Agreements, the

meaning of which is not certain, or capable of being
made certain, are void.

Slide 7 of
[Count you
total slide and
change the
number here] Topics
Chapter 2: Terms and Form of Contract
2.2 Certainty of Terms of Contract
2.2.1 Certainty of Terms in Electronic Contracts

1. Under s.30 of the Contracts Act ‘Agreements, the

meaning of which is not certain, or capable of being
made certain, are void.
2. This principle above applies to electronically concluded
contract as well. That means all terms and conditions
of online contracts whether in emails or web based
contracts should be clearly and easily identified before
parties contemplating contracts accept or make offers.

Slide 8 of
[Count you
total slide and
change the
number here] Topics
Chapter 2: Terms and Form of Contract

2.3 Distinction of Term and Representation

 Terms are contractually
binding and in the event of
breach, the injured party
can claim compensation
and may also terminate the
performance of the contract
 A representation if untrue,
the party that is mislead
may only rescind the
contract, i.e. treat the
contract as if it never
existed.
Slide 9 of
[Count you
total slide and
change the
number here] Topics
Chapter 2: Terms and Form of Contract

2.3 Express and Implied Terms

2.3.1 Express Terms in a traditional contract

Express terms are terms

specifically agreed upon by
both parties and they can be
oral or written.

Slide 10 of
[Count you
total slide and
change the
number here] Topics
Chapter 2: Terms and Form of Contract

2.3 Express and Implied Terms

2.3.2 Express Terms in an Electronic Contract

It is quite normal for terms

and conditions to be found in
separate web pages only to
be accessible through a
hypertext link.

Slide 11 of
[Count you
total slide and
change the
number here] Topics
Chapter 2: Terms and Form of Contract

2.3 Express and Implied Terms

2.3.3 Implied Terms

1. An implied term is not

expressly decided but is
read into the agreement.
2. Terms are implied by :

i. the courts to give effect to

the intention of the parties
ii. The courts to recognise a
local custom and usage.
iii. The Parliament such as
the Sale of Goods Act
1957.
Slide 12 of
[Count you
total slide and
change the
number here] Topics
Chapter 2: Terms and Form of Contract

2.3 Express and Implied Terms

2.3.4 Condition and Warranty

1. A condition is a contractual
term, if breached gives the
injured party the right to
rescind the contract. He can
affirm instead of rescinding
and he can also claim
damages whether he
affirms or rescinds.

2. A warranty is a term if
breached gives the injured
party only the right to
damages and not a right to
terminate the further
performance of the contract.
Slide 13 of
[Count you
total slide and
change the
number here] Topics
Chapter 2: Terms and Form of Contract

2.4 Incorporating Terms Into A Written Contract

 The general rule is a person

is bound by the terms of a
written contract that he
signs.
 He is still bound by the terms
even if he did not read them
before signing the contract.
 L'Estrange v. Graucob Ltd

Slide 14 of
[Count you
total slide and
change the
number here] Topics
Chapter 2: Terms and Form of Contract

2.4 Incorporating Terms Into A Written Contract

2.4.1 Incorporating Terms into an Electronic Contract

1. It is quite normal for terms and conditions of electronic

contract to be incorporated through hyperlink web pages.
2. It is not sufficient if parties are just given the
opportunities to view and read the terms.
3. Steps must be taken to ensure that they cannot proceed
further into the contract until they have read the terms
and conditions and such terms have been accepted by
the purchaser when he clicks on the “accept” icon.
4. If the above measure is implemented, then it does not
matter whether the parties have chosen to read or not to
read the terms before the ‘accept’ icon is clicked on.

Slide 15 of
[Count you
total slide and
change the
number here] Topics
Chapter 2: Terms and Form of Contract

2.5 Incorporating Terms Into An Unsigned Document

 A term can be found in
unsigned documents:

(i) Tickets
(ii) Public notices
(iii) Receipts

 A term in these documents

binds the customer if:
(i) reasonable notice of the term
is given to the customer
before the contract is made.
(ii) The term must be in clear,
precise and legible writings.
Slide 16 of
[Count you
total slide and
change the
number here] Topics
Chapter 2: Terms and Form of Contract

2.6 Exclusion Clause

1. An exclusion clause is a
term of a contract which is
included in the contract by
one party of the contract to
exclude or modify his
liability in the event of a
breach of a term of contract
on his part.
For example :
 ‘This car park excepts no
liability for any damage,
theft, or loss suffered when
parking your car here.’
Slide 17 of
[Count you
total slide and
change the
number here] Topics
Chapter 2: Terms and Form of Contract

2.6 Exclusion Clause

3. Exclusion clause can be

found in:
 Ticket
 Receipt
 Public notice
 Signed written
document

Slide 18 of
[Count you
total slide and
change the
number here] Topics
Chapter 2: Terms and Form of Contract
2.6 Exclusion Clause
2.6.1 Incorporating An Exclusion Clause Into A Signed Contract

1. The general rule is if the

exclusion clause is in a
signed and written contract,
a person is bound by the
terms of the written contract
that he signs.
2. He is still bound by the
exclusion clause even if he
did not read them before
signing the contract. See L’s
Estrange v Graucob
Slide 19 of
[Count you
total slide and
change the
number here] Topics
Chapter 2: Terms and Form of Contract
2.6 Exclusion Clause
2.6.1 Incorporation of Exclusion Clause In A Signed Contract

3. The exclusion clause must be in clear and legible writings.

Under the Contra Proferentem rule unclear exclusion
clause will be construed in the least advantage way against
the person relying on such a clause.

Slide 20 of
[Count you
total slide and
change the
number here] Topics
Chapter 2: Terms and Form of Contract
2.6 Exclusion Clause
2.6.2 Incorporation of Exclusion Clause In An Electronic Contract

1. The exclusion clause together with other terms and

conditions of electronic contract can be incorporated
through hyperlink web pages.
2. It is not sufficient if parties are just given the opportunities
to view and read the terms.
3. Steps must be taken to ensure that they cannot proceed
further into the contract until they have read the terms and
conditions and such terms have been accepted by the
purchaser when he clicks on the “accept” icon.
4. If the above measure is implemented, then it does not
matter whether the parties have chosen to read or not to
read the terms before the ‘accept’ icon is clicked on.

Slide 21 of
[Count you
total slide and
change the
number here] Topics
Chapter 2: Terms and Form of Contract
2.6 Exclusion Clause
2.6.3 Incorporation of Exclusion Clause In Unsigned Contract

1. General Rule: An exclusion clause in

these unsigned documents only binds the
customer provided:

(i) The seller has given reasonable notice of

the term to the customer before the
contract is made.
(ii) The term must be in clear, precise and
legible writings

Slide 22 of
[Count you
total slide and
change the
number here] Topics
Chapter 2: Terms and Form of Contract
2.6 Exclusion Clause
2.6.4 Legal Effect of an Exclusion Clause

An exclusion clause,
if it is incorporated
into a contract, will
bind the customer.

Slide 23 of
[Count you
total slide and
change the
number here] Topics
Chapter 2: Terms and Form of Contract
2.6 Exclusion Clause
2.6.4 Legal Effect of an Exclusion Clause

Example: Malaysian AirIines System Bhd v. Malini Nathan

Facts: A MAS flight was overbooked and Plaintiff was not
able to get on the plane. She sued MAS who relied on the
exclusion clause that MAS was not responsible if for some
reasons MAS was not able to make connection flights for
passengers which was printed in the air ticket. Held: this
exclusion clause contained in the air ticket is a term of the
contract and therefore MAS can rely on it. Plaintiff’s claim
against MAS for breach of contract failed.

Slide 24 of
[Count you
total slide and
change the
number here] Topics
Chapter 2: Terms and Form of Contract
Class Discussion

Last Sunday, Ahmad drove into a parking complex owned

by EasyPark Sdn Bhd. There was a sign outside the
parking complex, which stated, "All cars parked at owners'
risk." Ahmad pushed a button; grabbed the parking ticket
and saw that the ticket contained some words but he put
the ticket into his pocket without reading them.

Later when Ahmad came back to claim his car he was

knocked by another car and was injured. He sued
EasyPark.

Slide 25 of
[Count you
total slide and
change the
number here] Topics
Chapter 2: Terms and Form of Contract
Steps To Answer A Case Study

1. Identity the issue. (Ask yourself the nature of the legal

issue)
2. If it is to do with an exclusion clause define the effect of an
exclusion clause.
3. Next identify where the exclusion clause was located.
4. If the exclusion clause is contained in an unsigned
document what are the rules of incorporation of an
exclusion clause in an unsigned document?
5. Conclude if Ahmad is bound by the exclusion clause.

Slide 26 of
[Count you
total slide and
change the
number here] Topics