CHAPTER 2:

LAW OF
CONTRACT
 What is a contract?

An agreement which can be

enforced by law (S.2(h) CA 1950).
 Offer
Acceptance

Formalities

Consideration
Elements
Legality of of
object contract

Intention

Free
consent
Capacity Certainty
 Offer

Offer
How an Types distinguished
Condition of Termination
Definition offer could Of from
an offer of Offer
be made offer invitation to
treat
 Definition of offer

When a person (offeror) promises something to

another party (offeree) with the intention that his
promise would be accepted by the offeree, the person
(offeror) is said to make an offer (S.2(a) CA 1950).
Example:

Beni wrote a letter offering to sell his car, a Pero3

Maivi, to Wada for RM35,000.

Offeror / Offeree /
Promisor / Promisee

Beni Wada
Types of offer
CASES
 An offer must be certain

• Case:
Guthing v Lynn
An offer must be communicated

• Section 3, 9, 4(1) Contract Act

• Case:
Taylor v Laid
R v Clarke
 Offer distinguished from invitation to treat

Offer Invitation to treat = An invitation from one party to

(S.2(a) CA another party to make an offer.
1950
Examples:
• Advertisement
• Display of goods with tags in a self-service shop
• Tender
• Price-list
• An auctioneer inviting bids in an auction sale
 Advertisement/ Price-list
• The reasoning behind the rule that
advertisement are not to be treated as
offers is that further bargaining between
the parties is still possible or even
necessary.
• If a person sees a price-list and places an
order, the seller is not normally bound to
supply the goods.
 Display of goods with tags in a self-service shop

• It was decided that the contract was concluded

at the cash-desk.
• The customer made the offer and this could be
accepted or accepted or rejected by the
defendants.
An auctioneer inviting bids in an auction sale

• Where an auctioneer asks for bids, he is

not making an offer to sell the goods to the
highest bidder.
• A sale by auction is complete when the
auctioneer announces its completion by
the fall of the hammer and until the
announcement is made any bidder may
retract his bid.
 CASES
• PHARMACEUTICAL SOCIETY OF GREAT BRITAIN V
BOOTS CASH CHEMIST LTD

• FISHER V BELL

• HARRISON V NICKERSON
 A statement of price is not necessarily an offer
• Harvey v Facey

Facts:
The following telegraph messages were exchanged between the parties. H:
“Will you sell Bumper Hall Pen? Telegraph lowest price.
F: “ Lowest price for Bumper Hall Pen #900. H:” We agree to buy Bumper
Hall Pen for #900 asked by you. To this last telegram F made no reply. H
claimed that there was a contract between himself and F,
Held:
There was no contract. The second telegram was not an offer but in the
nature of an invitation to treat. The final message could not be looked upon
as an acceptance/
 Revocation of
Offer

An offer terminates
when revoked
before acceptance The revocation
may be directly by
the offeror himself
or indirectly

The important point to note

Must be
is that revocation is of no
communicated to the
effect until is actually
offeree before
brought to the notice of the
acceptance
offeree.
 When the offeree
communicates his rejection
to the offeror

Rejection of
offer

Where the offeree makes a

counter- offer
 By non-acceptance within
the time stipulated for
acceptance or reasonable
time

Lapse of offer

The death or mental

disorder of the proposer if
the fact of the proposer’s
death or mental disorder
comes to the knowledge of
the acceptor before
acceptance
 CASES
• Ramsgate Victoria Hotel Co. Ltd v
Montifiore
• Byrne v Van Tienhoven
• Dickinson v Dodds VIDEO

• Hyde v Wrench
Let’s do some
exercises!
 QUESTION 1
• Define a contract and describe the basic
elements of a valid contract.
 ANSWER 1
• Contract:
• An agreement which can be enforced by
law (S.2(h) CA 1950).
• Basic elements of a contract law:
Offer,acceptance,intention to create
legal relations, consideration, certainty,
capacity.
 QUESTION 2
• Distinguish between an offer and an
invitation to treat.
ANSWER 2