Bbun2103 Business Law-Elements Of Valid Assessment Answers
elucidate on the principles regarding void and voidable contracts. You shall be shown the main differences between these two types of contracts which have been affected by certain elements which could affect the validity of a contract.
Topic 4 gives attention to the sale of goods. This topic will focus on the terms applicable, concept of transfer of ownership, performance of contract for sale of goods, rights of unpaid seller and remedies available in case of breach.
the procedures involved for repossession by owner.
Topic 6 moves on to explain concepts involved in insurance law. Among the principles of insurance contract which will be discussed are principles of subrogation, the concept of insurable interests, material facts in the contract, basis of contract clause as well as conditions and exception clauses.covers the topic on negotiable instruments. In this topic the discussions shall focus on the salient points regarding bills of exchange, concept of negotiability, acceptance,endorsements and bill delivery. You shall then be familiarised with rules governing payments, forms of cheques, crossing and alteration of cheques, provisions protecting paying and collecting banker and procedures for termination of bankÊs authority to make payments.
involves a discussion on agency. You will look at how an agency is created and the duties and obligations of an agent. Further, you will study the process involved in the termination of an agency.provides a detailed discussion on partnership. It will focus on factors which will determine the existence of a partnership, liabilities and duties of the partners and the process of dissolution of a partnership.
Answer:
Elements of valid contract: contract may be defined as a legal agreement between two parties which is enforceable by law. In other words, contract is an agreement which is legally binding on two parties. Section2 (h) of Contract Act 1950 states that if an agreement is enforceable by law then it is considered as contract (Contract Act, 1950).
Section 2 (g) of Contract Act 1950 states, that if an agreement is not enforceable by law then such agreement is not valid and considered as void. In other words, for valid contract agreement between parties must be enforceable by law and if agreement is not enforceable then party cannot claim any legal remedy from Court (Contract Act, 1950).
Section 10 (1) of the Act states all agreements contract if free consent of the competent parties involved, there is lawful consideration and object, and contract is not expressly declared to be void.
Section 10 (1) of the Act state the factors of valid contract such as offer, acceptance, consideration, capacity, free consent, intention, certainty, and valid object (Contract Act, 1950). Following are the essential elements of valid contract:
Offer- Section 2 (a) of the Act states, when one person shows his willingness to do something or to abstain from doing something, for the purpose of obtaining assent of other person to do something or abstain from doing something then it is considered as offer. Offer is the first and essential element of contract. In other words, when offeror show his willingness to be bound by the contract if other person accepts the proposal made by him (law teacher, n.d.).
Acceptance- Section 2 (b) of the Act states,when offeree to whom offer is made provide his acceptance to the offer then it is considered as acceptance. Proposal becomes promise when accepted by offeree.
Consideration-Section 2 (d) of the Act states, when on the will of the offeror, the offeree or any other person do something or not do something, or promise to do something or not do something then such act, abstinence or promise is known as consideration. Consideration is the most important element of valid contract.
Capacity- Section 11 of the act states that if any person who reach the majority age stated by law under which he falls, person of sound mind, and any person who is not disqualified from law is considered as competent person. In other words, any person who is of minor age, unsound mind, and disqualified from any law is not considered as capable to enter into contract (contract Act, 1950).
Intention- the next and important element of valid contract is intention. For legal enforcement of contract intention of parties to enter into contract must be present. For deciding any case, Court first consider the presence of intention. Contract is legally binding on parties only if partiesintend to enter into contract. Malaysian contract law is silent on this element, and refer to English law for the purpose of determining intention of parties.
Certainty- it is necessary for the contract to be binding that terms and provisions stated in the contract must be clear and easily understood by the parties. In case agreement is not certain then it is not legally binding on the parties. For example, in case if any person wants to stay in hotel then it is necessary that he states the number of days he want to stay in hotel, type of room, and also date on which he arrived in the hotel.
Free consent- this element is also an important element of the valid contract which states that contract must involve the free consent of the parties and parties must clearly understand the effect of contract before signing it. In other words, it is necessary that parties must provide genuine consent to the contract (Law handbook, 2016; law teacher, n.d.).
The main issue in this case is whether Adam is liable to sell piano to Hanna, or this will be considered as valid revocation of contract
Section 4 (2) of the act states in case of offeror, communication of acceptance is complete when it is put in the course of transmission to him. In other words, communication is complete when it is out of the power of offeree.
Section further stated that in case of acceptor, communication in case of acceptance is complete when it is comes to the knowledge of offeror.
Section 4 (3) states in case of offeror, Communication in case of Revocation is complete when it is put in the course of transmission to him. In other words, communication is complete when it is out of the power of offeror.
Section further stated that in case of acceptor, communication of revocation of offer is complete when it is comes to the knowledge of acceptor (Contract Act, 1950).
Section 5 (1) states proposer can revoke the offer any time before the communication of acceptance is complete against the proposer, but offer cannot be revoked after the completion of communication of acceptance against proposer (Contract Act, 1950).
In other words, if proposer wants to revoke the proposal then it is necessary that he must satisfied section 5 (1) of the Act.Communication of acceptance is complete under instantaneous principle such as by telephone, telex, and orally when it is reaches to the proposer. Therefore, proposal can be revoked by proposer before offeree accept the proposal.
Section 4(2) states different times for the completion of communication of acceptance in case of both the parties that is offeror and offeree. If we refer section 4(2) it is clear that offeror bind himself under the contract as soon as offeree communicate the acceptance, even offeror does not have knowledge of acceptance.
For understanding the communication of revocation, here we stated important case that is Bryne v. Van Tienhoven (1880). In this case, defendant made offer to sell 1000 boxes of tin plates to plaintiff on 1st October but on 8th October he posted letter of revocation of offer. Plaintiff received offer letter on 11th October and immediately telegraphed their acceptance, and on 20th October he received letter of revocation.
In this case, Court stated that defendant was bound by the contract because acceptance made by plaintiff on 11tth October and this fact cannot be denied just because letter of revocation was on its way.
Applicability:
In the present case, on 5th September telex was send by Hanna to Adam for the purpose of selling the piano at RM3,000, and Adam received this telex at 4pm. Later, Adam posted letter of acceptance to Hanna on Friday. Letter of acceptance was reached by Hanna on Monday in evening but she already made telex to Adam for the revocation of offer on Monday morning.
In this case, there is valid contract between the Adam and Hanna because as per section 4 (2) communication in case of acceptance is completed against offeror when it is put in the course of transmission to him. In other words, when it is out of the power of acceptor. In other words, offeror bind himself under the contract as soon as offeree communicate the acceptance, even offeror does not have knowledge of acceptance.
In this case, acceptance is already posted by letter on Friday. Therefore, Hanna is bound under the contract to sell piano to Adam.
Conclusion:
In this case, there is legally bindingcontract between parties, and Hanna is bound to sell piano to Adam.
Whether jack can set aside the contract on the basis of grounds stated in Voidablecontract, or there is valid contract between jack and Susan
Section 2 (I) of the contract states that a contract is considered as voidable if it is enforceable by law on the desire of one party but not on the desire of other party to the contract. In other words, if any agreement consist elements which make that agreement voidable then innocent party to the contract has option from which they can make the contract void, and he has right to set aside his duties stated under the contract. This option is not available to the party of the contract which is guilty.
In case, innocent party denied to use the option for making the contract void then such contract is enforceable by law and binding on both the parties to the contract.
Section 10 (1) of the Act states all agreements contract if free consent of the competent parties involved, there is lawful consideration and object, and contract is not expressly declared to be void.
Contract is valid only if competent parties give free consent to the contract, and consent is not free if it is affected by any of these elements that is coercion, fraud, mistake, undue influence, and miss presentation.
Section 16 (1) of the Act states a contract is induced by undue influence if relation between the parties to the contract is of such nature that one party dominates the will of other party,and he also use his dominance to obtain unfair advantage over the other.
Section 16 (2) of the Act statesthat person is in the dominance position to effect the will of another person if that person hold real or apparent authority over the other person, or where that person stands in fiduciary relationship of another person. A person is also considered in dominance position if he enter into contract with person who mental capacity is temporarily or permanently affected because of the reason of age, illness, body stress.
Section 16 (3) of the Act states that if any person is in the position to dominate the will of other person making contract with that other person, and such contract shows that contract does not contain free consent then burden to prove that contract is not influenced by undue influence is on the party who is the position of dominance.
This can be understand with the help of case law that is Raghunath Prasad v. Sarju Prasad AIR (1924), and in this case when it was proved that contract is induced by undue influence, then burden to prove that consent in contract was not affected by undue influence is upon the person who is in the dominance position over other.
Applicability:
In this case, jack required amount of RM 100,000 for the purpose of paying off the debt of Adam, and he disclosed this issue to Susan. Susan suggested that jack should sell his bungalow to Susan for the amount of RM 100,000 so that Jack can pay his debt to Adam. Jack accepted this offer immediately because of his love towards Susan. Jack always listen the advice of Susan and try to fulfill her wish. Contract was made between jack and Susan, but after six months Susan leave jack and marry her friend. Jack was frustrated and found that at the time of transfer his bungalow was worth RM300,000.
In the present case, contract between jack and Susan is voidable because as perSection 16 (1) of the Act states a contract is induced by undue influence if relation between the parties to the contract is of such nature that one party dominates the will of other party, and he also use his dominance to obtain unfair advantage over the other.
Therefore, contract made between Jack and Susan is influenced by undue influence, Susan is in the dominant position of jack because of his love towards Susan. Therefore, contract does not involve free consent and jack has option to make the contract void.
Conclusion:
In this case, jack has option to rescind the contract on the basis of undue influence.
References:
Bryne v. Van Tienhoven (1880).
Case brief. Byrne v. Van Tienhoven (1880) C.P.D. 344. Retrieved on 16th March 2017 from: https://casebrief.me/casebriefs/byrne-v-van-tienhoven/.
Contract Act 1950- sect 10.
Contract Act 1950- sect 11.
Contract Act 1950- sect 16.
Contract Act 1950- sect 2.
Contract Act 1950- sect 4.
Contract Act 1950- sect 5.
Law handbook, (2016). Elements of a contract. Retrieved on 16th March 2017 from: https://www.lawhandbook.org.au/07_01_02_elements_of_a_contract/.
Law teacher. Case Study of The Contracts Act 1950. Retrieved on 16th March 2017 from: https://www.lawteacher.net/free-law-essays/contract-law/case-study-of-the-contracts-act-1950-contract-law-essay.php.
Law Teacher. Main Elements Constituting a Valid Contract. Retrieved on 16th March 217 from: https://www.lawteacher.net/free-law-essays/contract-law/main-elements-constituting-a-valid-contract-contract-law-essay.php.
Raghunath Prasad v. Sarju Prasad AIR (1924).
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