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1 OFFER/PROPOSAL S.2(a) of the Contract Act 1950 provides that: S.2(a) of the Contract Act 1950 provides that: When one person signifies to another his.

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Presentation on theme: "1 OFFER/PROPOSAL S.2(a) of the Contract Act 1950 provides that: S.2(a) of the Contract Act 1950 provides that: When one person signifies to another his."— Presentation transcript:

1 1 OFFER/PROPOSAL S.2(a) of the Contract Act 1950 provides that: S.2(a) of the Contract Act 1950 provides that: 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. 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. Something which is capable of being converted into an agreement by its acceptance. Something which is capable of being converted into an agreement by its acceptance.

2 2 The person making the proposal is called the offeror/promisor/proposer. The party accepting the proposal is referred to as the offeree/promisee. The person making the proposal is called the offeror/promisor/proposer. The party accepting the proposal is referred to as the offeree/promisee. Example: Mr. Squidward wrote offering to sell his car to Mr. Crab for RM50,000. Example: Mr. Squidward wrote offering to sell his car to Mr. Crab for RM50,000. Based on the above example, Mr. Crab acceptance of Mr. Squidward’s proposal to buy the car establishes an agreement. Based on the above example, Mr. Crab acceptance of Mr. Squidward’s proposal to buy the car establishes an agreement.

3 3 A proposal can be made to an individual, a class of persons, a firm, a company or to the public at large. A proposal can be made to an individual, a class of persons, a firm, a company or to the public at large.

4 4 Carlill v Carbolic Smoke Ball Co. (1893) IQB 256

5 5 Carlill v Carbolic Smoke Ball Co. (1893) IQB 256, is a good illustration of an offer made to the public. Carlill v Carbolic Smoke Ball Co. (1893) IQB 256, is a good illustration of an offer made to the public. The defendant issued an advertisement in which they offered to pay 100 to any person who succumbed to influenza after having used one of their smoke balls in a specified period. The plaintiff Mrs. Carlill bought and used the smokes ball as prescribed and caught influenza. The defendant issued an advertisement in which they offered to pay 100 to any person who succumbed to influenza after having used one of their smoke balls in a specified period. The plaintiff Mrs. Carlill bought and used the smokes ball as prescribed and caught influenza.

6 6 She sued the company for the promised reward. The defendants contended that the contract was made with the entire world, that is with everybody, and that one can’t contract with everybody. It was held that an offer could be made to the entire world because the contract will only be made with that limited portion of that public who came forward and performed the condition on the faith of the advertisement. She sued the company for the promised reward. The defendants contended that the contract was made with the entire world, that is with everybody, and that one can’t contract with everybody. It was held that an offer could be made to the entire world because the contract will only be made with that limited portion of that public who came forward and performed the condition on the faith of the advertisement.

7 7 A proposal can be made in any form; it can be made in writing, orally, by conduct or by combination of these. A proposal can be made in any form; it can be made in writing, orally, by conduct or by combination of these. FORMS OF PROPOSAL

8 The communication of the proposal is complete when it comes to the knowledge of the person to whom it is made. The communication of the proposal is complete when it comes to the knowledge of the person to whom it is made. 8 “I’ll pay you RM50 to design a backdrop for our Open Day” The offer is complete when the offeree knows about the offer

9 9 COMMUNICATION OF OFFER Rule: Only an addressee may accept the proposal Rule: Only an addressee may accept the proposal A party accepting a proposal must be aware of its existence. A party accepting a proposal must be aware of its existence. A party who casually returns a lost property to its owner cannot legally claim a reward if he is unaware of it at the time but subsequently discovers the existence of an offer of rewards for its return. A party who casually returns a lost property to its owner cannot legally claim a reward if he is unaware of it at the time but subsequently discovers the existence of an offer of rewards for its return.

10 Case: R v Clarke Clarke gave information upon certain murderers. Clarke gave information upon certain murderers. At the time of doing so, he was unaware of the existence of a £1000 reward for such information. At the time of doing so, he was unaware of the existence of a £1000 reward for such information. Clarke brought the case to the court to claim for the reward. Clarke brought the case to the court to claim for the reward. Held: he could not claim because a person cannot be deemed to accept an offer of which he is not aware at the relevant time. Held: he could not claim because a person cannot be deemed to accept an offer of which he is not aware at the relevant time. 10

11 11 Invitation to Treat Invitation to treat is not a proposal but a sort of preliminary communication which passes between the parties at the stage of negotiation. Examples of invitation to treat: Invitation to treat is not a proposal but a sort of preliminary communication which passes between the parties at the stage of negotiation. Examples of invitation to treat: 1)The display of goods with a price ticket attached in a shop window or on a supermarket. This is not an offer to sell but an invitation for customers to make an offer to buy. This is not an offer to sell but an invitation for customers to make an offer to buy.

12 12 FISHER v BELL [1960] Shopkeeper- flick knife on display in his shop window-charged with offering weapon contrary to the provisions of the Restriction of Offensive Weapon Act Shopkeeper- flick knife on display in his shop window-charged with offering weapon contrary to the provisions of the Restriction of Offensive Weapon Act Held: the display of goods with a price ticket attached in a shop window is an ITT ( not an offer to sell) Held: the display of goods with a price ticket attached in a shop window is an ITT ( not an offer to sell)

13 13 PHARMACEUTICAL SOCIETY OF GREAT BRITAIN v BOOTS CASH CHEMISTS Ltd [1953] Defendant – charged under Pharmacy and Poisons Act 1933-unlawful to sell certain poisons unless such sale was supervised by a registered pharmacist. Defendant – charged under Pharmacy and Poisons Act 1933-unlawful to sell certain poisons unless such sale was supervised by a registered pharmacist. Held: the display was only and ITT (Payment was to be made at the exit where a cashier was stationed and in every case involving drugs, a pharmacist supervised the transaction and authorized to prevent a sale.) Held: the display was only and ITT (Payment was to be made at the exit where a cashier was stationed and in every case involving drugs, a pharmacist supervised the transaction and authorized to prevent a sale.)

14 14 2)Advertisements, catalogues and brochures. PARTRIDGE v CRITTENDEN [1968] PARTRIDGE v CRITTENDEN [1968] Advertisement-”Bramblefinch cocks, Bramblefinch hen, 25s each.” Advertisement-”Bramblefinch cocks, Bramblefinch hen, 25s each.” Held: the advertisement was an ITT ( the word ’offer’ did not appear in the advertisement.) Held: the advertisement was an ITT ( the word ’offer’ did not appear in the advertisement.) However, there are some situations where an advertisement may be regarded as a definite offer: Carlill’s case However, there are some situations where an advertisement may be regarded as a definite offer: Carlill’s case

15 15 3)Auctions PAYNE v CAVE [1789] -Df made the highest bid (offer) at an auction sale but withdrew his bid before the fall of the auctioneer’s hammer (acceptance). -Df was not bound to purchase the goods. HARRIS v NICKERSON [1873] -Advertisement a forthcoming auction sale does not amount to an offer to hold it. -Advertisement a forthcoming auction sale does not amount to an offer to hold it. 4)Tender 5)Company prospectus

16 16 5)Statements of price in negotiations for the sale of land. HARVEY v FARCEY [1893] H sent telegram to F: Will u sell us Bumper Hall Pen? Telegraph lowest cash price… H telegraphed his response: We agree to buy BHP for £900 asked by u. Held: there was no contract

17 17 R v CLARKE [1927] The Western Australian Gov. offered a reward for information leading to the arrest and conviction of persons responsible for the murder of two police officers. The Western Australian Gov. offered a reward for information leading to the arrest and conviction of persons responsible for the murder of two police officers. Held: The claimed failed on the grounds that the information was given to clear himself and not in reliance on the offer of rewards. Held: The claimed failed on the grounds that the information was given to clear himself and not in reliance on the offer of rewards.

18 18 2.ACCEPTANCE S.2 (b) CA provides that S.2 (b) CA provides that “when a person to whom the proposal is made signifies his assert thereto, the proposal is said to be accepted, a proposal when accepted becomes a promise.” “when a person to whom the proposal is made signifies his assert thereto, the proposal is said to be accepted, a proposal when accepted becomes a promise.” S.9 CA provides that, ”where the acceptance is made in words, the acceptance is expressed, where the acceptance is made other than in words, it is implied.” S.9 CA provides that, ”where the acceptance is made in words, the acceptance is expressed, where the acceptance is made other than in words, it is implied.”

19 19 S.7(a) CA provides that, ” acceptance must be absolute and unqualified.” S.7(a) CA provides that, ” acceptance must be absolute and unqualified.” The acceptance must be made on exactly the same terms as proposed without modifications or variations. Any modifications or variations of the proposal does not constitute an acceptance but amounts to a counter-offer. It is treated as a rejection of the offer.

20 20 In the case of Hyde v Wrench (1840): In the case of Hyde v Wrench (1840): June 6-defendant offered to sell his estate to the Plaintiff for 1,000. June 8–plaintiff replied stating he was willing to buy at 950, defendant refused to sell. June 27 –plaintiff wrote again offering to pay 1,000 as there was no contract formed. By making the counter offer the plaintiff had rejected the original offer on June 8, and is no longer able to accept it later.

21 21 However, a distinction needs to be drawn between a counter-offer and a request for further information. However, a distinction needs to be drawn between a counter-offer and a request for further information. STEVENSON JAQUES & CO v MCLEAN [1880] STEVENSON JAQUES & CO v MCLEAN [1880] HELD: there is no counter-offer but a mere inquiry which should have been answered and not treated as a rejection of the offer.

22 22 Acceptance-Subject to Contract Acceptance-Subject to Contract it often happen that acceptance may be qualified by such common term as” subject to contract” or “subject to a formal contract being drawn up by our solicitors.” Under such circumstances the court is inclined to determine that there is no binding agreement until the contract as stipulated LOW KAR YIT v MOHD ISA [1963]

23 23 COMMUNICATION OF ACCEPTANCE S.7 (b) CA: The acceptance may S.7 (b) CA: The acceptance may “ be expressed in some usual and reasonable manner, unless the proposal prescribes a manner in which it is to be accepted. If the proposal prescribes a manner in which it is to be accepted, and the acceptance is not made in such manner, the proposer may within a reasonable time after the acceptance is communicated to him, insist that his proposal shall be accepted in the prescribed manner, and not otherwise, but if he fails to do so, he accepts the acceptance.” “ be expressed in some usual and reasonable manner, unless the proposal prescribes a manner in which it is to be accepted. If the proposal prescribes a manner in which it is to be accepted, and the acceptance is not made in such manner, the proposer may within a reasonable time after the acceptance is communicated to him, insist that his proposal shall be accepted in the prescribed manner, and not otherwise, but if he fails to do so, he accepts the acceptance.”

24 24 Silence, absence of response or just total disregard of the proposal is not acceptance as there is no positive act that can be related to the proposal. Silence, absence of response or just total disregard of the proposal is not acceptance as there is no positive act that can be related to the proposal. The proposer may not throw the burden on the addressee to a positive act of rejection by saying for instance: “ if I do not hear from U within a week, I shall assume that U have accepted my proposal.” The proposer may not throw the burden on the addressee to a positive act of rejection by saying for instance: “ if I do not hear from U within a week, I shall assume that U have accepted my proposal.”

25 25 FRASER v EVERETT [1889] Held: there was no rule of law saying that “silence gives consent” applicable to mercantile contracts.” Held: there was no rule of law saying that “silence gives consent” applicable to mercantile contracts.” FELTHOUSE v BINDLEY [1862] “If I hear no more about him, I shall consider the horse is mine at £30.”

26 26 ACCEPTANCE THROUGH POST General Rule: acceptance is effective or complete only when it is communicated to the proposer. General Rule: acceptance is effective or complete only when it is communicated to the proposer. ( comes to the actual knowledge of the proposer) ( comes to the actual knowledge of the proposer) Exception: S.4(2) CA, where the parties have contemplated the used of the post as means of communication : Exception: S.4(2) CA, where the parties have contemplated the used of the post as means of communication :

27 27 The communication of an acceptance is complete: a)As against the proposer, when it is put in a course of transmission him, so as to be out of the power of the acceptor; and b)As against the acceptor, when it comes to the knowledge of the proposer.

28 28 Illustration (b) of s.4 B accepts A’s proposal by a letter sent by post. B accepts A’s proposal by a letter sent by post. The communication of the acceptance is complete: The communication of the acceptance is complete: As against A, when the letter is posted; As against B, when the letter is received by A

29 29 CASE LAW 1.ADAMS v LINDSELL [1818] 2.HOUSEHOLD FIRE INSURANCE CO v GRANT (1879) 3.ENTORES LTD v MILES FAR EAST CORPORATION [1955] CORPORATION [1955] 4.IGNATIUS v BELL (1913) 5.BRINKIBON v STAHAG STAHL UND STAHLWARENHANDELSGESELLSCHAFT [1983]

30 30 ADAMS v LINDSELL 2 Sept- Df wrote to the claimants-offering to sell them some wool and asking for an answer ‘in course of post’. The letter was wrongly addressed & reached the claimant on 5 Sept. 2 Sept- Df wrote to the claimants-offering to sell them some wool and asking for an answer ‘in course of post’. The letter was wrongly addressed & reached the claimant on 5 Sept. 5 Sept-the claimants posted a letter of acceptance-reached the Df on 9 Sept. 5 Sept-the claimants posted a letter of acceptance-reached the Df on 9 Sept. 8 Sept-the Df sold the wool to someone else 8 Sept-the Df sold the wool to someone else Held: There was a contract between the Df and the claimants. Held: There was a contract between the Df and the claimants.

31 31 HOUSEHOLD FIRE INSURANCE CO v GRANT (1879) Grant applied for shares in the claimant company. Grant applied for shares in the claimant company. A letter of allotment was posted but Grant never received it. A letter of allotment was posted but Grant never received it. When the company went into liquidation, Grant was asked as a shareholder, to contribute the amount still outstanding on the shares he held. When the company went into liquidation, Grant was asked as a shareholder, to contribute the amount still outstanding on the shares he held. Held: Grant was a shareholder of the company. The contract to buy shares was formed when the letter of allotment ( acceptance) was posted. Held: Grant was a shareholder of the company. The contract to buy shares was formed when the letter of allotment ( acceptance) was posted.

32 32 ENTORES LTD v MILES FAR EAST CORPORATION [1955] Denning LJ stated as follows: “ when a contract is made by post it is clear law throughout the common law countries that acceptance is complete as soon as the letter is put into the post box, and that is the place where the contract is made.”

33 33 IGNATIUS v BELL (1913) In the case, the parties had contemplated the use of the post as a means of communication. The plaintiff sent a notice of acceptance by registered post in Klang on August 16, 1912 but it was not delivered till the evening of August 25 because the Plaintiff was away. The letter had remained in the post office at Kuala Selangor until picked up by the Defendant. Held: the option was duly exercised by the Pf when the letter was posted on August 16 In the case, the parties had contemplated the use of the post as a means of communication. The plaintiff sent a notice of acceptance by registered post in Klang on August 16, 1912 but it was not delivered till the evening of August 25 because the Plaintiff was away. The letter had remained in the post office at Kuala Selangor until picked up by the Defendant. Held: the option was duly exercised by the Pf when the letter was posted on August 16

34 34 BRINKIBON v STAHAG STAHL UND STAHLWARENHANDELSGESELLSCHAFT [1983] The House of Lords affirmed the rule with Respect to communications by telex established in the Entores case. According to the court no universal rule can cover all such cases and they must be resolved by reference to the intentions of the parties, by sound business practice and in some instances, by a judgement where the risks should lie.

35 35 Notes: 1. Where there is a delay in the post or the letter of acceptance is misplaced by the postal authority, the proposer is bound irrespective of his knowledge of the acceptance, while on the other hand, the acceptor remains free till actual receipt by the proposer. This implies that in the meantime, the acceptor may also withdraw his acceptance.

36 36 2. Therefore, a proposer should stipulate in a proposal that acceptance is complete only upon receipt. That would exclude the postal rule by express terms of the proposal. 3. The postal rule also applies to telegram sent through the post office but not to more instantaneous methods of communication such as telex and telephone.

37 37 TERMINATION OF PROPOSAL S.5(1) CA: “A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards.”

38 38 S. 6 states that a proposal is revoked: a.By notice of revocation b.By the lapse of time c.By the failure of acceptor to fulfil a condition precedent d.By the death or mental disorder of the party

39 39 REJECTION An offer is rejected if: An offer is rejected if: 1.The offeree notifies the offeror to that he does not wish to accept the offer; 2.The offer attempts to accept subject to certain conditions; 3.The offeree makes a counter-offer.

40 40 HYDE v WRENCH Wrench-offered to sell his farm to Hyde for £1,000. Wrench-offered to sell his farm to Hyde for £1,000. Hyde replied with a counter-offer of £950 which was refused. Hyde replied with a counter-offer of £950 which was refused. Then Hyde was prepared to meet the original of offer of £1,000. Then Hyde was prepared to meet the original of offer of £1,000. Held: No contract had been formed Held: No contract had been formed

41 41 Illustration- S. 5 A proposes by a letter sent by post to sell his house to B A proposes by a letter sent by post to sell his house to B B accepts the proposal by a letter sent by post B accepts the proposal by a letter sent by post A may revoke his proposal at any time before or at the moment when B posts his letter of acceptance, but not afterwards A may revoke his proposal at any time before or at the moment when B posts his letter of acceptance, but not afterwards

42 42 BYRNE v TIENHOVEN [1880] The Df offered to sell 1,000 boxes of tinplates to the Pf. The following communication took place: 1 Oct: Df posted letter of offer in Cardiff to the Pf in New York. 1 Oct: Df posted letter of offer in Cardiff to the Pf in New York. 8 Oct: Df posted a letter revoking the offer of 8 Oct: Df posted a letter revoking the offer of Oct Oct: Pf received the letter of offer posted on 11 Oct: Pf received the letter of offer posted on Oct 1 and sent acceptance by telegram the same day. It also followed up with letter of acceptance on 15 Oct. 20 Oct: Df’s letter of revocation received by the Pf. 20 Oct: Df’s letter of revocation received by the Pf.

43 43 The court ruled that : There was a contract between the parties because the revocation of the offer posted on 8 October was not effective till 20 October when it was received by the Pf but in the meantime, the latter had already accepted the offer on 11 October when the telegram was sent.

44 44 REVOCATION OF ACCEPTANCE  S.5(2) states: “ An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards.” “ An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards.”  Illustration to S.5: on Revocation of acceptance made by post: made by post: A proposes by a letter sent by post to sell his house to B A proposes by a letter sent by post to sell his house to B B accepts the proposal by a letter sent by post B accepts the proposal by a letter sent by post B may revoke his acceptance at any time before or at the moment when the letter communicating it reaches A, but not afterwards. B may revoke his acceptance at any time before or at the moment when the letter communicating it reaches A, but not afterwards.


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