2. Chapter 2. Law of contract (Dis2020) [Autosaved].pptx

Chapter 2. Law of contract

1. DPB30073 BUSINESS LAW COMMERCE DEPARTMENT AZILAH BT ISMAIL

2. Law of Contract 2 CHAPTER 2

3. Introduction Law of Contract 1 Governed by Contracts Act 1950 Definition: “Contract” may be defined as an agreement enforceable by law. Contract is an agreement which is legally binding between the parties.

4. Valid Contract Law of Contract A valid contract is awritten or expressed agreement between two parties to provide a product or service. . There are essentially six elements of a contract that make it a legal and binding document. In order for a contract to be enforceable, it must contain: An offer that specifically details exactly what will be provided Acceptance , or the agreement by the other party to the offer presented Consideration , or the money or something of interest being exchanged between the parties Capacity of the parties in `their promise Object of a contract is legal and not against public policy or in violation of law

5. Void, Voidable, Unenforceable and Illegal Contracts Law of Contract

6. Void, Voidable, Unenforceable and Illegal Contracts Law of Contract

7. Elements of a Valid Contract Law of Contract 2 The basic elements of a contract are : Offer Acceptance of the offer Intention to create legal relations Consideration Certainty Capacity

8. 1. Offer/Proposal: Law of Contract Definition: When one person signifies to another his willingness to do or abstain from doing anything , with a view of obtaining the assent of that other to the act or abstinence, he said to make a proposal - Section 2(a) An offer or proposal is necessary for the formation of an agreement The promisor must have declared his readiness to undertake an obligation upon certain terms and it is up to the other person to accept or reject it. An offer is complete when it comes to the knowledge of the person to whom it is made - Section 4(1) Section 4(1) Contracts Act 1950 The communication of a proposal is complete when it come to the knowledge of the person to whom it is made.

9. 1. Offer/Proposal Law of Contract Offer can be: Expressed - in words (oral or written) Implied - by conduct Offer should be contrasted with an option and an advertisement . Option -- only an undertaking to keep the offer open for a certain period – to give time to offeree to consider. Advertisement – an attempt to induce an offer or an invitation to treat. Ex: Auctions:. Advertisement of tenders; Catalogues: Price lists; and Goods displayed in shop windows and shelves. Whether an advertisement is an invitation to treat depends on the intention of parties. Related Cases: Pharmaceutical Society Of Great Britain V Boots Cash Chemist Ltd [1953] (Page 35) Partridge V Crittenden [1968] (Page 35) Carlill V Carbolic Smoke Ball Co. Ltd [1893] (Page 36) Harrison V Nickerson [1873] (Page 36)

10. 1. Offer/Proposal Law of Contract However, if it is clear in the circumstances that a party intends their words or conduct to constitute an offer, then the courts will be prepared to construe it as such. For example, in the case of Carlill v Carbolic Smoke Ball Co. (1893) the advertisement of a unilateral contract was held to be an offer.

11. 2. Acceptance Law of Contract Definition: When the person to whom the proposal is made signifies his/her acceptance to the proposal: Section 2(b) Person accepting the proposal is called the promisee : Section 2(c) Section 7(a) : The acceptance of that proposal must be absolute and unqualified . If parties are still negotiating, no agreement is formed yet. Acceptance that is not absolute or unconditional; which does not comply with the offer will amount to a counter offer and will revoke the original offer. Hyde v Wrench (1840) Section 7(b) : Acceptance must be made in usual and reasonable manner , unless the offeror prescribed the manner of acceptance Felthouse v Bindley (1862)-section 7b Ramsgate Victoria Hotel Co ltd v Montefiore (1866)-section 6b

12. Revocation Offer and Acceptance: s6 Law of Contract S6(a) : Communication of the notice of revocation by the proposer to the party to whom the proposal was made. Case: Bryne V Van Tienhoven S6(b) : The time prescribed in the proposal for its acceptance elapses. S6(c) : The failure of the acceptor to fulfill A condition precedent to an acceptance. S6(d) : The death or mental disorder of the proposer if the fact of the proposer death or mental disorder comes to knowledge of the acceptor before acceptance. Section 5(1) provides that a proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards.

13. Law of Contract

14. Exercise Lily offered to sell her car to Billy. Billy accepted the offer on condition that Lily will repair the air condition. Lily disagreed. Later Billy said he was willing to accept Lily’s offer without condition. Lily said that she was no longer interested to sell her car to Billy. Based on the above situation: 1. Write the issue relevant to the situation. whether there was a valid contract between the lilly and billy /whether the lily sold the car to billy / 2. Write the relevant provisions of law . Section 7 A, it is because The acceptance of that proposal must be absolute and unqualified. If parties are still negotiating, no agreement is formed yet. Acceptance that is not absolute or unconditional; which does not comply with the offer will amount to a counter offer and will revoke the original offer.

15. 3. Write one (1) case relevant to the above. (Hyde vs Wrench) 3marks - fact:The defendant offered to sell his estate to the plaintiff on 6 June for £1000. On 8 June, in reply, the plaintiff made a counter-proposal to purchase at £950. When the defendant refused to accept this offer on 27 June, the plaintiff wrote again that he was prepared to pay the original sum demanded. The court held that no contract existed between them. The plaintiff had rejected the original proposal on 8 June so that he was no longer capable of accepting it later.Besides the aforementioned requirement that acceptance must be unconditional, it is also essential that acceptance must be made within a reasonable time. Issue: whether there was a valid contract between the parties if a counter offer was made in discussions, whether the original offer would still remain open. Held:The court dismissed the claims and held that there was no binding contract for the farm between Mr Hyde and Mr Wrench. It was stated that when a counter offer is made, this supersedes and destroys the original offer. This original offer is no longer available or on the table. In this case, when Mr Hyde offered £950, he cancelled the £1,000 offer and could not back track and accept. 4. Is there a valid contract between Lily and Billy? Explain./ Interperate the conclusion There was no valid contract between Lily & Billy because when Billy made a counter offer, it destroys the original offer. The original offer is no longer available in the table. In this case when Billy offered to buy the car with the aircond fixed, he cancelled the original offer which is the car with no air conditioner fixed. So he could not go back to the original offer and lost track.

16. QNA: On the 3rd February, Kenanga offered to buy some silverware from Hassan. On the 6th February, Hassan sent his letter of acceptance to Kenanga by post. Unfortunately, the letter was delayed by Pos Malaysia. The acceptance letter reached Kenanga on the 28th February. However, before that, Kenanga had psoted her letter of revocation on the 13 th February and it reached Hassan on the 18th February. Correct answer State an issue on the situation above. 2 m * 1.} Whether there is a valid contract between Kenanga and Hassan? Q2: Discuss the relevant provisions of the Contracts Act 1950. 3 m (Give 1 relevant provisions -section) * 1. Section 4(2) (a): 'Complete as against the offeror' means that the time when the letter of acceptance was posted by the offeree. Once the offeree posted his letter of acceptance to the offeror, the offeror is already bound to the contract. Therefore if the notice of revocation of offer is only complete and effective by the time such notice is received by the offeror. OR 2. Section 5 (1) : An offeror may revoke the offer at any time before the acceptance is made

17. Sambungan Q3: State the relevant case to support your answers. 2m * ··· Case: Byrne & Co V Van Tienhoven & Co (1880) Conclude your answers. 1. There was a contract between the parties 2. The revocation of offer posted on 13th February 3. Revocation was not effective until 18th Feb when Hassan received it. 4. Meantime, Hassan had already accepted the offer on 6th Feb when the letter was sent

18. 3. Intention to create legal relation Law of Contract A1950 did not specify the requirement of intention to create a valid contract . Intention is inferred from: S2(a): When one person signifies to another his willingness to do or abstain from doing anything , with a view of ……..” S2(d) : “……. when, at the desire of the promisor………………” Case law – clearly states the necessity of intention to create legal relations is one of the requirement of a valid contract. Choo Tiong Hin & Orc v Choo Hock Swee [1959] (Page 43) Yap Eng Thong & Anor v Faber Union Ltd [1973] (Page 43) The court ascertain ( verify /confirm) the intention of the parties from: the language used and the context in which it was used .

19. 3. Intention to create legal relation Law of Contract In order to create a legally binding contract, the law has divided an agreement into 2 categories : 1. Domestic( private)/family/social arrangements Intention to create legal relations is not necessary. The presumption is that the parties in the contract do not intend their agreement to have legal relations. Example: A husband who promises to give allowance to his wife every month. Balfour Vs. Balfour ( 1919) Merrit Vs. Merrit ( 1970) 2. Commercial/business arrangements Intention to create legal relations is necessary. In business, the presumption is that the parties in the contract have the intention to create a legal relations. Example: a sale and purchase agreement of land/loan agreement/sale of goods/hire-purchase

20. 4. Consideration (something of interest in exchange) Law of Contract s2(d) : “……. 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 something , such act or abstinence or promise is called a consideration for the promise. Consideration has been defined as either some detriment(damage) to the promisee or some benefit to the promisor in Currie Vs. Misa ( 1875) the meaning of it is that the promisor gives a promise or performs an act and receives value . The promisee may give value upon the delivery of the promise or execution of the act by the promisor.

21. 4. Consideration Law of Contract Example ; Bob promise to sell his book for RM200 to Lily. Upon receiving the book (delivery of the promise) Bob receives RM200 from Lily (receives value). (seller) (buyer) (consideration)

22. 4. Consideration Law of Contract Consideration is concerned with the exchange of promises or the doing of an act, in a unilateral contract, in return for the promise. The promises must have value/benefit/interest , which the law recognises. S26 : An agreement without consideration is void(agreement which is not enforceable by law) .

23. 4. Consideration Law of Contract Consideration Need Not Be Adequate ( sufficient) Explanation 2 S26 Example: Ben offered to sell his land to Joe for RM10,000. Actually, the market price for the land is RM100,000. Joe accepted the offer and paid RM10,000. Later, Ben demanded Joe to pay RM100,000 because that is the market price for the land. Under the law, Ben cannot demand Joe to pay RM100,000 because the price DOES NOT NEED TO BE the same value as the land, as long as both parties mutually agreed at the same price. This contract is valid. Case: Phang Swee Kim v Beh I Hock

24. 4. Consideration Law of Contract Past consideration is Good Consideration s2(d) : If the act done was at the desire of the promisor, then such an act would constitute a consideration. Thus, even if the act was done before the promise, such act would constitute a consideration as long as done at the wish of the promisor/offeror. Example: Lola lost her purse. Ben found the purse and return it to Lola. She offered a reward of rm100 to Ben. This is a valid contract. Lola must pay Ben as Ben’s act of returning the purse (past) is a good consideration even though Lola’s promise was made after Ben return the purse.

25. 4. Consideration Law of Contract Natural Love and Affection is Valid Consideration An agreement made based on natural love and affection is binding if it fulfills the requirements of S26(a) : 1. It is expressed in writing ; 2. It is registered (if applicable); 3. the parties stand in a near relation to each other. Example: En Lee, out of his love and affection, promises to give his son, Jason a car. Mr Lee puts his promise in writing and registered the car in his son name. This contract is valid. What is a ‘near relation’ varies from one social group, customs and practices – Re Tan Soh Sim

26. 4. Consideration Law of Contract Accord and Satisfaction – Part Payment may Discharge an Obligation S64 – Payment of a smaller sum may satisfy an obligation to pay a larger sum. Example: Papa Zola owed RM5000 from Adudu . Papa Zola offered to pay RM3000 as payment in full in order to discharge papa zola from his debt. Adudu accepted the amount RM3000 as full and final settlement of the debt. This contract is valid. Papa Zola is discharged from his debt. Case: Kerpa Singh v Bariam Singh

27. 4. Consideration Law of Contract Consideration Need Not Move From The Promisee S2(d) – “…….the promisee or any other person has done or abstained from doing…………” Even though the promisee /acceptor does not give any consideration for a promise made by the promisor, he can still claim for the promise if the consideration is given by some other persons. Example: Joe agreed to have his house repaired by Alan for RM2000. However when Alan completed the job, Joe failed to pay him. Sue, his friend can pay the amount RM2000 even though Sue does not provide consideration (house) for Alan’s promise, because consideration need not move from Sue. Sue’s payment is valid. Venkata Chinnaya v Verikataramaya

28. 5. Certainty Law of Contract Terms of an agreement cannot be vague or uncertain . S30 : An agreement which is uncertain or not capable of being made certain is void . Example: Mina agreed to sell her car to Muna without specifying the model and price. The agreement is void because of uncertainty .

29. 6. Capacity to Contract Law of Contract Parties entering into a contract must be competent to contract; i.e they must have the legal capacity to enter into a contract . S11 – Every person is competent to contract who is of the age of majority according to the law which he is subject, and who is of sound mind , and is not disqualified from contracting by any law which he is subject. Minors A minor or infant is a person below the age of majority. Under the Age of Majority Act 1971 – age of majority is 18 years old . All contracts entered into by a minor is VOID – Tan Hee Juan v Teh Boon Keat (1934)

30. 6. Capacity to Contract Law of Contract Exceptions to minors (valid contracts) There are exceptions where certain contracts can be entered into by a minor. These exceptions are: 1. Contracts for Necessaries – S69 Contracts Act 1950 Scarborough v Sturzaker (1905) and Government of Malaysia v Gurcharan Singh (1971). Examples: food, shelter, clothing, medical services and education. 2. Contracts of Scholarship – Contracts (Amendment) Act 1976 Section 4 (a)- Not withstanding anything to the contrary contained in the principal Act, no scholarship agreement shall be invalidated on the ground that (a) the scholar entering into such agreement is not of the age of majority; 3. Contracts of Insurance – Insurance Act 1963 4. Others -

31. 6. Capacity to Contract Law of Contract Persons of sound mind S12(1) : a person is said to be of sound mind for the purpose of making a contract, if at the time he makes it he is capable of understanding it and forming a rational judgment as to its effect ….. S12(2) (3) : a person who is usually unsound mind, but occasionally of sound mind, may make a contract when he is sound mind. If he is usually sound mind but occasionally of unsound mind, he may not make a contract when he is unsound mind. Examples: mental disorder, drunk/intoxicated

32. Exercise Law of Contract Anakin, a 17 year old boy was offered to further his study in the field of engineering at UKM. He was offered a scholarship by JPA. Among the conditions of the scholarship agreement is Anakin was required to serve with the government upon completion of his study. After completing his study, Anakin opened his own engineering firm in KL with his friend. Recently, Anakin received a letter of claim from JPA for breach of scholarship contract. Discuss: The meaning of capacity to contract. S11 – Every person is competent to contract who is of the age of majority according to the law which he is subject, and who is of sound mind, and is not disqualified from contracting by any law which he is subject. THREE (3) exceptions where certain contracts can be entered into by a minor. Contracts for Necessaries (food, clothes, shelter, medical, education) S69 Contracts Act 1950 . Contracts of Scholarship Contracts (Amendment) Act 1976 Contract of insurance – Insurance Act 1963

33. Exercise Law of Contract Write one case name relating to the above issue. Government of Malaysia V. Gurcharan Singh FACTS This case is about the government of Malaysia as the plaintiff whom had sued Gurcharan Singh the first defendant whom is a promisor of a contract and ORS as the second and third defendant whom act as the sureties of the contract for breaching the contract made between them. The contract is about the government of Malaysia providing the first defendant a scholarship for his study at Malayan Teacher’s Training Institution with an agreement that the first defendant will serve the government in consideration for being trained as a teacher. The duration of the contract is 5 years while the first defendant only served the government for 3 years 10 months only. However during the time the contract was made, the first defendant was in a minor state. The claim for the compensation for this case is $11,500. ISSUES There are three issues evolved in this case, these are: 1) Whether the contract made between them is a valid contract? 2) Whether the first defendant is liable on the claim for necessaries? 3) Whether the amount claimed or payable for compensation is reasonable and accepted regarding the case? DECISIONS The contract entered into by the first defendant was a void contract as he was an infant at the relevant time. Thus the principal debtor was not held liable and consequently the second and third defendants whom were the sureties of the contract also were not held liable. However, due to the exception on necessaries claim, the first defendant was therefore liable for the repayment of the sum expended for his education and training as being expended on necessaries. The amount of damages payable in this case must be based on repayment of the proportion of the actual sum expended based on the completed months of service and in the circumstances judgment would be given for the plaintiff against the defendants for $2,683. PRINCIPLES VALIDITY OF CONTRACT... Conclude whether Anakin is liable to pay the compensation to JPA. Provide your reasons.

34. Another answer frm teacher Issue:- ii.)Whether Anakin has breached the JPA scholarship? Weather Anakin have to pay compensation to JPA or not? (still acceptable) Whether the contract between JPA and Anakin is a valid contract under exception of minor? iii.)Whether the education is the necessaries in life ? occur between JPA and Anakin is a valid contract? Issue : i .)whether Anakin a minor can enter into a contract Whether Anakin has commited breah in the

35. Legal Principle i .) Section 11 - for issue: whether a minor can enter into a contract i .) Section 10- for issue: whether a minor can enter into a contract i .) Both related to this case– Tan Hee Juan v Teh Boon Keat (1934) ii.) Section 4- An offer is complete when it comes to the knowledge of the person to whom it is made - ii.)Whether Anakin has breached the JPA scholarship? ii.) section 5 a.) - ii.)Whether Anakin has breached the JPA scholarship?

36. Coclusion - ii.) The was a breach in contract. Even though Anakin is a minor , Due to exception on Contracts of Scholarship, the defendant (Anakin) was therefore will be liable for the repayment in the future for the sum expended for his education in the form of scholarship given by JPA . i .) The contract entered into by Anakin was a void contract as he was an minor at the relevant time. Thus the debtor(Anakin) was not held liable for the contract. iii.) Due to the exception on necessaries claim, the defendant (Anakin) was therefore will be liable for the repayment in the future for the sum expended for his education in the form of scholarship given by JPA.

37. Exercise Law of Contract Conclude whether Anakin is liable to pay the compensation to JPA. Provide your reasons. -Yes, because breaching the contract made between JPA. The contract was void.

38. 3. Voidable Contract Law of Contract Meaning of Voidable Contract Suppose A and B enters into a contract, and it is found that the contract is voidable at A’s option. This means A can force B to perform the contract but B cannot force A to perform it. A has a choice: (a) He can affirm(confirm) the contract by performing his obligations (*act) under the contract; or (b) He can repudiate (i.e. refuse to perform) the contract, but must pay for whatever benefit he has received under the contract. S10 : All agreements are contract if they are made by the free consent of parties. Free consent- refers  to an agreement when both parties knowingly and willingly enter into a contract of their own will.  S14 : Consent is free when it is not caused by one or more of the following factors : a) Coercion b) Undue Influence c) Fraud d) Misrepresentation e) Mistake

39. 3. Voidable Contracts Law of Contract a) Coercion S15 defines the term ‘Coercion’ - It refers to unlawful act done or threatened violence to the person or his family or to his property see Kesarmal s/o Letchman Das v Valiappa Chettiar Example: James threatened to burn down Mike’s shop if Mike refused to enter into contract to sell his shop to James. S19 : If consent to an agreement is caused by coercion, fraud or misrepresentation , the contract is voidable at the option of the affected party.

40. 3. Voidable Contracts Law of Contract b) Undue Influence S16 : defines the term ‘undue influence’. In simple terms, ‘undue influence’ arises when one of the parties to a contract uses his special relationship with the other party to influence that other party into making the contract. S16(1) : Two important aspects of undue influence are: a) the domination of the will by one party over the other a person is said to be in a position to dominate the will of another if: i ) he holds a real or apparent authority (parents – children, husband-wife) over the other, or if he stands in a fiduciary relationship (lawyer-client, doctor-patient, employer-employee); or ii) if he makes a contract with a person whose mental cap acity is temporarily or permanently affected because of age, illness or mental or bodily stress. b) obtaining an unfair advantage . See Inche Noriah v Shaik Allie b Omar / Salwath Haneem v Hadjee Abdullah S20 : If consent to an agreement is caused by undue influence, the agreement is a contract voidable at the option of the affected party.

41. 3. Voidable Contracts Law of Contract Real or apparent authority A relationship between parents – children, husband-wife Example: Mr Lee, used his money to pay for his son, Alan study fees in Sunway College for 3 years. The total cost was RM30,000. Mr Lee, misusing his parental influence, made an agreement with his son to pay back RM40,000. Mr Lee has used undue influence. Fiduciary relation The relationship between solicitor-client, doctor-patient, trustee-beneficiary, employer-employee, banker-customer. Example: Mak tok , suffering from old age and disease, is induced by her nurse, Nelly to pay unreasonable sum for her service as a nurse. Nelly uses undue influence.

42. 3 . Voidable Contracts Law of Contract C) Fraud S17 : Refers to act committed by the party to a contract with the intention/motive to induce or deceive the other contracting parties. There are five (5) different acts which may constitute fraud: a. a suggestion of untrue fact by a person who knows that it’s not true; b. the active concealment of fact ; Hidding the fact. c. a promise made without intention to perform it; d. any other act fitted to deceive;(mislead) e. Any such act or omission which the law declares to be fraudulent. In general, silence or non-disclosure would not constitute fraud , except if it is the duty of the person keeping silence to speak. Example: Ben, a banker entered into a contract to sell his house to Joe, his client which he knows has defects(lacks). Ben says nothing to Joe about the defects. Ben has committed fraud by being silence.

43. 3. Voidable Contracts Law of Contract d) Misrepresentation S18 : refers to untrue statement made by representor which induces other party to enter into a contract. (incomplete statement) The difference between fraud and misrepresentation is that misrepresentation is made without intent to deceive . No intention Thus, misrepresentation can be both fraudulent and honest misrepresentation.

44. 3. Voidable Contracts Law of Contract d) Mistake The mistake has to be essential to the agreement. Includes: - a mistake of fact (by one or both parties); or - a mistake of law S21 : refers to mistake of fact made by both parties . Contract is void . S23 : refers to mistake of fact made by one party . Contract is valid . S22 : mistake of law in force in Malaysia . Contract is valid . But mistake of law not in force in Malaysia – contract is void. Example: Mimi agreed to buy a Sony 40 inch LCD tv from Seng Heng . Alan, an employee at Seng Heng mistakenly thought that Mimi wanted a Toshiba 40 inch LCD tv . The agreement is voidable / valid at Mimi’s option .

45. Exercise Law of Contract Raven had misused his company’s money for a trip to Europe with his family. Robin threatened to report the matter to the police unless if Julia, Raven’s wife was willing to pay back the money to the company. To protect her husband’s good name, Julia promised to settle the money. Based on the above situation: i . Write the 2 issue relevant to the situation. i - Whether Robin threatened Julia ? -ii. Whether the contract between Robin and Julia is valid/voidable? iii. Whether there was a domination of will between Robin and Julia? optional ii. Explain the 4 2section and 2 explanation principle of law appropriate to the above situation. i . S15 defines the term ‘Coercion’ - It refers to unlawful act done or threatened violence to the person or his family or to his property ii. S19 : If consent to an agreement is caused by coercion, fraud or misrepresentation , the contract is voidable at the option of the affected party.

46. Exercise Law of Contract iii.Conclude whether there is a valid contract between Robin and Julia. State your reasons. i .) There is a valid contract between Robin and Julia because consent to an agreement is caused by coercion, the contract is voidable at the option of the affected party which is Julia. This because Robin threatened violence to Julia or her husband Raven by reporting to the police if Julia refused to pay back the money taken from the comnpany . ii.)The contract is voidable at Julia option .It is because Julia is the affected party Case related:i ./ii) Kesarmal s/o Letchman Das v Valiappa Chettiar

47. Terms of a Contract Law of Contract 4 Contracts will always contain different types of terms (oral or written), some more important than others. The more important terms are called conditions , the less important terms are called warranties . Conditions Very important / crucial terms that without them one or other of the parties would not enter into the contract. The effect of a false condition , or breach a condition - the wronged party will be entitled to treat the contract as void or voidable or rescinded(cancel) and claim for damages Example: quality of goods/sample similar to description of goods Warranty Less important terms. The wronged party can only seek monetary damages for any loss suffered. The contract itself will remain binding on both parties. Example : goods must be free from charges .

48. 4. Terms of a contract Law of Contract Contracts will always contain different types of terms (oral or written), some more important than others. The more important terms are called conditions, the less important terms are called warranties. Conditions Very important terms that without them one or other of the parties would not enter into the contract. The effect of a false condition , or breach a condition - the wronged party will be entitled to treat the contract as void or voidable or rescinded . Example: quality of goods/sample similar to description of goods Warranty Less important terms. The wronged party can only seek monetary damages for any loss suffered. The contract itself will remain binding on both parties. Example: goods must be free from charges.

49. 4. Terms of a Contract Law of Contract Explicit(stated clearly)/Express term: Terms that have been specifically mentioned and agreed by both parties at the time the contract is made . They can either be oral or in writing. Example: the price paid , goods or services provided, quantity of goods Implicit(not directly expressed)/Implied terms : A term which has not been mentioned by either party but still ‘included’ in the contract , often because the contract doesn’t make commercial sense without that term. Example : goods must be of ‘satisfactorily quality ’, person selling goods must have legal rights to sell

50. 5. Exemption Clause Law of Contract A term in the contract which excludes one of the parties from responsibility for something that may go wrong in the performance of the contract or limits that responsibility. It is called an exclusion clause or an exemption clause. For example, an exclusion from liability for damage done to the lawn by a builder's backhoe might be included in a contract between the builder and a home owner who is having an extension built to their home. If a contract is a document signed by the parties, they will generally be bound by the exclusion clause in it.

51. 5. Exemption Clauses Law of Contract If the contract is an unsigned document e.g. Tickets, receipts and dockets(coupon/voucher ), the court will look at what a reasonable person would assume the document to be. If a reasonable person assume the document to be part of the contract between the parties , then the exclusion clause in the document will be able to be relied on. Also, the exclusion clause was brought to the notice of the other party. For example, if an automatic ticket machine in a car park had printed on it "issued subject to the conditions displayed in car park" and these conditions, or exclusion clauses, were on a pillar opposite the ticket machine, then this could potentially be held to be unreasonable notice. The driver may then be entitled to sue despite the exclusion clause in the conditions.

52. Exemption Clauses Law of Contract

53. Exercise Law of Contract Compare and contrast between: - Conditions - Warranties - Exemption Clauses

54. 6. Discharge of Contract Law of Contract 1. Discharge by Frustration If a party promises carry out a particular act, the law will hold them to their promise – doctrine of absolute liability.( boleh dilepaskan ) The doctrine of frustration applies where there is: the frusted happen after the contract was Physical impossibility because of destruction of subject matter ; Physical impossibility under contract of personal service ; A change in the law rendering performance impossible; Impossibility due to non-occurrence of event basic to contract; and A particular state of affairs which ceases to exist . A contract is frustrated when there is a change in the circumstance which renders a contract legally or physically impossible of performance- S57(2) CA 1950 H A Berney V Tronoh Mines Ltd [1949]

55. 6. Discharge of Contract Law of Contract 1. Discharge by Frustration Example: PUO agreed to let a band ‘ Hujan ’ to rent Dewan Jubli Perak to perform a music concert on the 1 st August 2012. However, before the concert can be held, on the 25 th Sept DJP was destroyed by fire. Hujan cannot sue PUO because the contract was impossible to be performed as DJP is destroyed due to the fire. What if Hujan has paid a deposit of RM1000 prior to 25 th Sept? Can Hujan claimed the deposit from PUO? Yes can

56. 6. Discharge of Contract Law of Contract Circumstances where frustration is not available such as: The parties have made specific provision in the contract for what might otherwise have been a frustrating event; It should have been foreseen( dijangka ) , but for some reason it was not; The frustrating event was self-induced by party making the plea (petition); Hardship; Inconvenience; or Expense in performance.

57. 6. Discharge of Contract Law of Contract Frustration can only arise where : An unforeseen event outside the control of the contracting parties (a supervening event) has significantly or radically changed the obligations of the parties from their original intentions; Neither party caused the supervening event; Neither contemplated the supervening event, so there was no provision in the contract for it, and The new circumstances would make it unjust to hold the parties to their original contract.

58. 6. Discharge of Contract Law of Contract Effect of Frustration Contract is discharged but only to the future . The contract is not void( valid) ab initio ( from beginning), but only void(not enforceable) from the time of the frustrating event . When a contract is discharged by frustration , the contract does not become merely voidable but is brought to an end immediately and automatically - S57(2), CA1950 states that such a contract ‘become void’.

59. 6. Discharge of Contract Law of Contract 2. Discharge by Performance Performance of a contract must be exact and precise and should be in accordance with what the parties had promised- S38(1) CA 1950. The effect of both section 51 and 56 is that a promise must be performed at the time agreed by the parties.

60. 6. Discharge of Contract Law of Contract 3. Discharge by Breach Where a party fails to perform their obligation s as agreed , they are in breach of contract. A breach can occur in some ways including: failure to comply with in term of the contract by a party announcing to the other party that they are no longer interested in carrying out their obligation prior to the time for performance (anticipatory breach) delay in the performance where time is of the essence, the party is said to have or renounced(reject) the contract.

61. 6. Discharge of Contract Law of Contract Discharge by Breach….. contd Where one of the parties indicates to the other either by conduct or in clear terms an intention not to go on with the contract, the party is said to have repudiated or renounced( reject) the contract. A refusal to perform a contract may occur before the time for performance is due ( anticipatory breach), or during the time of performance itself. A refusal to perform a contract when performance is due would amount to a discharge.

62. 6. Discharge of Contract Law of Contract Example: Lady Gaga, a singer enters into a contract with Sony Music to record 10 songs for her new album. However, after recording 5 songs, LG refuses to continue and decides to record with Warner Music. Sony Music can terminate the contract, and claim for damages from LG .

63. 6. Discharge of Contract Law of Contract Effect of breach If one party fails to perform their obligations under the contract or breaches a condition , the innocent party is entitled to treat the contract as ended from the time of terminating event and may be able to recover damages . If a party breaches a less important term ( warranty ), then there is a partial breach and while the innocent party is still going to have to carry out their obligation under the contract, they may sue for damages. The party at fault cannot terminate the contract which he himself had broken.

64. 7. Remedies Law of Contract Remedy is the method by which an injured party enforces a right or corrects a loss . The remedies available to the injured party will depend on the nature of the breach and the result will differ between the parties. The remedies available for breach of contract are : Rescission Restitution Damages Specific Performance Injunction Anton Piller Order Quantum meruit

65. Remedies Law of Contract 65 Rescission ( pembatalan ) It is an equitable remedy. Rescission allows an innocent party to cancel the contract by rescinding.(cancel) Its purpose is to reverse the contract and restore the parties to as near as practicable to their original pre-contractual positions , relieving each party of their obligations and permitting recovery of any benefits conferred(presented) on each other.

66. 7. Remedies Law of Contract 2. Restitution ( mengembalikan ) Restitution (or restoration) is sometimes referred to as quasi-contract.( sebahagian daripada contract) To avoid one party gaining from the other party It is not contractual (not agreed in a contract) and does not rely on the plaintiff suffering loss or damages. It would be very unfair to let the contract continued and the defendant was to be allowed to retain the money, or the goods or services, without payment.

67. 7. Remedies Law of Contract 3. Damages (S74-76) The main purpose of damages is to enable the innocent party to receive monetary compensation from the party responsible for the breach of contract. Damages are granted to a party as compensation for damage, loss or injury suffered from breach of contract – e.g loss of profit, difference between cost price and sale price. Section 74: when a contract is broken , the party suffers from the breach is entitled to receive a reasonable compensation for any loss or damage from the breach . Section 75 prevents the plaintiff from recovering simply the sum fixed in the contract whether as penalty or liquidated damages unless he can prove that the damages suffered by him is a genuine pre-estimate of the sum named in the contract. Peizu vs chamundes 1990 Hadley v Baxendale (1854) Tham Cheaw Toh v Associated Metal Smelters (1972) unjust enrichment 

68. 7. Remedies Law of Contract DAMAGES CASE:Hadley v Baxendale (1854)  Facts: The crankshaft broke in the Claimant’s mill. He engaged the services of the Defendant to deliver the crankshaft to the place where it was to be repaired and to subsequently return it after it had been repaired. Due to neglect of the Defendant, the crankshaft was returned 7 days late. The Claimant was unable to use the mill during this time and claimed for loss of profit. The Defendant argued that he was unaware that the mill would have to be closed during the delay and therefore the loss of profit was too remote.

69. 7. Remedies Law of Contract DAMAGES CASE:Hadley v Baxendale (1854)  Held: The damages available for breach of contract include: 1. Those which may fairly and reasonably be considered arising naturally from the breach of contract or 2. Such damages as may reasonably be supposed to have been in the contemplation of both the parties at the time the contract was made.

70. 7. Remedies Law of Contract 4. Specific Performance It is a discretionary order granted by the courts directing a person to carry out their obligations under the contract. It is used where damages is not an adequate remedy. Example: contracts involving land, unique or rare artwork. Section 11 (2) of the Specific Relief Act 1950 provides that specific performance may be granted in respect of agreement relating to land transaction. Section 20 (1) (c) of the Specific Relief Act 1950 also provides that specific performance will also be refused in these situations: The terms of the contract are uncertain There are evidence of fraud Contracts of personal service Contract requires constant supervision by the court e.g construction of building

71. 7. Remedies Law of Contract 5. Injunction An injunction is a discretionary court order and an equitable remedy. An injunction may be: Prohibitory - preventing the breach of contact Mandatory - requiring a person to perform some contractual obligation Interlocutory (temporary) - where it freezes the status quo between the parties until the dispute can be heard by the court Example: Lady Gaga, a singer enter into a contract with Sony Music to record 10 songs for her new album within 3 months. During this period, LG sign a contract with EMI. Sony Music can apply for injunction to stop LG from recording with EMI.

72. 7. Remedies Law of Contract 6 . Quantum Meruit Quantum meruit means as much as he has earned ‘ the amount he deserves" ( selayak mana )and only arises in cases of part performance. It is used to recover a reasonable price or remuneration if there is a contract is for good or services but the parties have not fixed any exact price to be paid. Quantum meruit can arise where: a defendant has prevented a plaintiff from carrying out the remainder of the contractual duties the parties cannot agree on payment the parties agree on payment for the part-performance but not the actual amount. Sumpter v Hedges (1898)

73. 7. Remedies Law of Contract 7. Mareva Injunction Mareva injunction prevents the defendant removing or disposing of any assets in the jurisdiction until the court makes decision the defendant has assets that are in the court jurisdiction there is a real risk that the defendant will remove or get rid of any assets before judgment the plaintiff can establish a substantive cause of action as a claim for damages

74. 7. Remedies Law of Contract 8. Anton Piller Order An Anton Piller order may be made available in exceptional circumstances where it can be shown that the for defendant has incriminating evidence/documents in its possession, which is necessary to the plaintiff’s case and which may well be destroyed before a court order for discovery can be made.

75. Exercise Law of Contract State the type of remedies for the following breach of contract: Paul owns Fast & Furious Workshop in Penang. He intends to sell his business to Parker and had entered into a contract of sale with Parker. Suddenly, Paul passed away and his wife refused to continue with the agreement . recission Lady Gaga, a singer entered into a contract with Sony Music to record 10 songs for her new album. However, after recording 5 songs , LG refused to continue and decided to record with Warner Music. Injunction Lola agreed to sell a rare antique vase to Bobby for RM100,000. Later, she changed her mind and refused to sell it to Bobby. Specific performance.