Btw1042 Malaysian Business Law: Contract Assessment Answers

Answer:

Advise B who is still in possession of the collection.

On the basis of the facts that have been provided for this assignment, the issue arises if a contract has been created between A and B or if the contract for the collection of crest ware china had been created between B and C. for this purpose, the rules related with the formation of the contract and also the effect of postal rule, as well as the application of this rule in case of instantaneous modes of communication also needs to be discussed. The first requirement related with a valid contract is that of an agreement. Generally there is an offer and the acceptance of the offer in case of an agreement even with these terms has not been used by the parties. Similarly, there is a consensus or a meeting of the minds of the parties. In this context, the issue of the presence of consensus between the parties needs to be decided objectively. 

The law does not require any particular form to make an offer. In this regard, an offer can be illustrated as a statement which is a promise for doing or not doing something in case the other party to whom the offer has been made does something or desists from doing something in return, or makes a promise to do so. It is worth mentioning at this point that under the law of contract, an offer could be directed to a single person or to a group of persons or even to the world.  

A difference exists between offer and the invitation to deal. Therefore it is necessary to distinguish an offer from an invitation to deal. However, this is not a simple process in all the cases. For this purpose, the test is related with the intention of the parties. Therefore it has to be seen if the party that has made the statement also intended that an affirmative response by the other party may result in the creation of an agreement or in such a case. Only additional negotiation will take place. A leading English case related with this issue is that of Pharmaceutical Society of Great Britain v Boots. In this case, the Court of Appeal had positioned significant stress on the commercial impact of the categorization of the behavior of the parties. Therefore, it was held in this case, if it will be commercially inconvenient that a particular statement other conduct should be treated as an offer, then probably the courts will arrive at the conclusion that such statements or conduct was only an invitation to treat.  

There are certain means to terminate an offer. Therefore offer made by a party can be terminated by revocation, rejection, failure to accept the offer on time, death or the failure of a condition. According to the universal rule, an offer can be terminated by the party making the offer at any time before the same has been accepted by the other party. This is the position even if a promise was made by the offeror that it will be kept open for specific time (unless consideration has been supplied by the other party to support such a promise). In order to be effective, it is necessary that the revocation of the offer to be communicated, directly or in directly to the other party and it will be sufficient to use any form of words or conduct which can convey the intention that the party is no longer bound by the offer made by it. 

The law provides that in case of the rejection of offer, such party is not permitted to accept the same offer afterwards. The rejection can be in the form of the absolute rejection of the offer or by a counteroffer. A counteroffer is said to have been made by the other party if the party has proposed to accept the offer at different terms. Therefore, even if the different terms are immaterial, the fact of making a counteroffer will be considered as the denial of the offer and the counteroffer is considered as a new offer. Due to this reason, it is very significant that a counteroffer should be distinguished from mere requests made by the other party for further information. The law provides that in order to be effective, the rejection of the offer should be communicated to the party making the offer. In the same way, the postal rule is not applicable in case of the letters of rejection.

When a particular time has been stipulated by the offeror, it will terminate after the lapse of that time. If no time limit has been prescribed by the party making the offer, the law requires that the offer should be accepted in a reasonable time otherwise the offer will be considered one of the lapsed. According to the general rule, in case of the death of the offeror, it is considered that the offer has been terminated.

This will be the case when the offeree is aware regarding the death of the offeror. On the other hand, when the offeree does not know regarding the death of the other party, then in most of the cases, the law of contract allows the offeree looks at the offer and in this way, result in the formation of a obligatory contract. But this is not the case if the contract is related with providing services that can only be individually provided by the deceased, for example, the painting of a portrait by renowned artist.  

If it has been mentioned in the offer itself that the offer will be terminated in case a particular condition is (or is not) satisfied. For example, an offer may be made to sell a particular product only if the party is able to acquire the required amount from a particular supplier at a particular date.

Acceptance of the offer: The acceptance of the offer is an unequivocal statement made by the offeree in writing or orally or by conduct thereby the offeree agrees to the offer. The law of contract provides that an offer can be accepted only by the offeree. In order to amount to a valid acceptance, the conduct or the statement of acceptance should be made in response to the offer. In this context, it is enough that the offer was one of the reasons due to which the other party has acted in that way even if it was not the main reason.  

Generally, a particular form is not required for acceptance. The test that can be used in this regard is to see if the conduct of the offeree, including his silence, can be considered as providing a signal to the offeror that the other party has accepted the offer. The law provides that it cannot be stipulated by the offeror that the silence of the offeree will be considered as acceptance and in this way, impose a positive obligation to reject the offer expressly. However there are certain cases were the requirement for the notification of acceptance can be waived. This takes place generally when requiring the communication of the acceptance can be described as commercially impractical, for example, and home when the median 1,000,001 in reward cases.  

Acceptance and postal rule: The general rule provides that for being effective, it is necessary that the acceptance should be communicated. Hence, merely a psychological resolution to accept it is not treated as adequate. The rule provides that the accord is treated as concluded when and where the communication of acceptance has taken place. In case of instantaneous modes of communication, the acceptance is received when it was given to the offeror (even if the offeror does not read it). On the other, in case of the use of post as the method of communicating acceptance, a special rule is applicable. This rule is known as the postal rule and according to this rule, when is contemplated for conveying acceptance, the acceptance takes place when and where the letter containing the acceptance of the offer is posted.  On the other hand, if a particular method has been decided by the parties for communicating acceptance, then the acceptance will be effective only when it has been made in that particular method. The courts may be slow in arriving at the conclusion that the stipulated form is necessary unless clear language has been used by the parties to that effect. If clear language has not been used, any equally fast and effective mode of communication will generally be considered as sufficient. 

The postal role was created for the first time by the court in Adam v Lindsell. In this case, the Court was required to decide if a valid contract has been formed between the parties through mail. In this case, the parties to the contract have communicated through mail, and as a result the exact time of the acceptance of the offer would not be decided. Generally mail takes a few days to deliver and during such a period, the parties cannot be aware of the communication at the same time. However, this resulted in a number of problems and as a result, the court had to come up with the postal rule. Therefore, the rules provided in this case, states that when the circumstances are such that it can be said that post can be contemplative by the parties as the means of sending acceptance of the offer, in such a case, the acceptance of the offer is complete as soon as the letter containing the acceptance of the offer has been posted. While in case of face-to-face communication, the business parties can communicate with each other in case a question arises. On the other hand, in case of indirect business or distant contracting, the instantaneous modes of communication are not available. Therefore in such a case, it is difficult for the parties to remain aware of the acceptance or the refusal of the offer. As a result, in such cases, the postal route is used for solving the problem questions like the delay in the communication of acceptance. 

Special rule for electronic transactions: It needs to be noted that special rules are applicable regarding electronic transactions. These rules have been provided by the Electronic Transactions Act, 1999 (Cth).

The postal rule and instantaneous communications: With the developments made in science and technology, the courts have to deal with the issue if the postal rule is applicable in case of the modern developments in communication like the instantaneous modes of communication. With the developments in electronic methods, the dispatch and the receipt of the message coincides with each other. Any law that deals with the delay between these two, like the postal rule, appears to have become obsolete. It has been stated that a telephone conversation is similar to the conversation between two persons face to face and as a result, the 'receipt rule' is applicable in such a case. Consequently, the offeror is required to receive the communication of acceptance before establishing the contract. Such a position is obviously different from the application of the postal rule as in this case the receipt needs to be acknowledged by the offeror. But in some cases, the dispatch of the acceptance does not automatically means that the acceptance is communicated.

In Entores Ltd v Miles Far East Corporation the issue was related with telex. Different examples were given by Lord Denning regarding the situation, where acceptance can be considered to be communicated or not. He stated that the rule relating to the instantaneous communication is different from the rule related with post. In such a case the contract is included only when the acceptance has been received by the party making the offer. Similarly, the contract is created, where the acceptance has been received. Therefore it appears that in this case, the responsibility is of the offeree to effectively communicate acceptance before the contract has been concluded. This is against the situation under the postal rule as in this case the law does not favor the consumer but appears to be more practical as both the parties are aware of their respective position. The justification behind this position is that in case of instantaneous communication, it should be knowledge while not in case of post.

At the same time, an assumption is present that if the acceptance has been sent during normal business hours through instantaneous modes of communication, it can be assumed that the acceptance has been received by the other party whereas case of post, such an assumption is not present. Similarly a problem may arise if an instantaneous mode is used, but the message is not really instantaneous. This problem was faced by the court in Brinkibon Ltd v Stahag Stahl when Lord Fraser stated that the responsibility and the risk can be attributed to the person who has received the message if they have decided not to man their machines.

This rule was further reconfirmed and the application was limited within business hours in Mondial Shipping and Chartering BV v Astarte Shipping Ltd. In this case the message was sent later on a Friday and it was stated by the court that it can be considered to be communicated on the next working day, which was Monday. It appears to be fair as it will not be practical to consider all the messages sent at all times as being different from face-to-face communication. The law related with instantaneous modes of communications appears to be more concise and fairer as compared to the postal rule. The instantaneous methods of communication are being used by the parties for several years.

In the present case, a letter has been written by A to B. in this letter, A had asked if B wanted to sell a collection of 1000 pieces of crest ware China. It was suggested in this letter that A was ready to purchase at a price of £5 per item. As a result of a delay in the postal system, this letter could not be delivered to B until Wednesday. At the same time, on the same Monday, an advertisement was issued by B in the local newspaper. In this advertisement, it was mentioned that B was ready to sell 1000 items of crest ware. This advertisement was seen by A on Tuesday. In reply, A made a phone call to B and left a message on the answering machine of B in which it was stated that A decrease to purchase the items at the price of £5 per item. Along with this message, B also sends an e-mail to B on the same day. At the same time, C also made an offer to purchase the items at a price of item per item and this offer was accepted by B. However, when B returned home, she listened to the message on the answering machine and also read her e-mails. She contacted A and informed him that the items were already sold to C. Later on, it was found that the real price of these items was £5 per item. Under these circumstances, both A and C claim to have entered into a contract with B for the purchase of these items. At the same time, A also claims damages for disappointment. 

In view of the legal position mentioned above, it needs to be noted that the letter written by A was an offer made to B. As this was delayed, B did not have a chance to reply to this letter. On the other hand, the advertisement issued by B in the local newspaper does not amount to an awful but it is merely an invitation to deal. The law provides that the other party cannot accept the invitation to deal for the purpose of creating a valid contract. An invitation to deal is made merely with a view to invite offers from the other party. Consequently, in this case, an invitation to deal was made by B. and in reply A had offered to purchase the items. However, this offer made by A was not accepted by B as she was away overnight and could not listen to the message left on her answering machine and her e-mails.

But in comparison, C had made an offer to B and this offer was direct away accepted by B. as a result, a contract has been created between C and B. This contract was created at the moment when B had decided to set the offer made by C. under these circumstances a valid contract is present between C and B. On the other hand, there is no contract between A and B and in the same way, A cannot claim any damages from B.

Bibliography

Baxt, R, Fletcher, K &Fridman, S 2008, Corporations and associations: cases and materials, 10th edn, LexisNexis, Butterworths, Sydney, New South Wales

Harris, J, Hargovan, A & Adams, M, 2013, Australian corporate law, 4^thedn, LexisNexis Butterworths, Chatswood, New South Wales

Sweeney, B, O’Reilly, J & Coleman, A, 2013, Law in Commerce, 6^thedn.2015, Australian Corporations Legislation, LexisNexis Butterworths/CCH

Adams v Lindsell (1818) 1 B & Ald 681

Bressan v Squires Supreme Court of New South Wales [1974] 2 NSWLR 460

Carlill v Carbolic Smoke Ball Co Court of Appeal [1893] 1 QB 256

Carlill v Carbolic Smoke Ball Co. Court of Appeal [1893] 1 QB 256

Crown v Clarke (1927) 40 CLR 227

Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 527

Entorres v Miles Far East [1955] 2 QB 327

Felthouse v Bindley (1862) 142 ER 1037

Hyde v Wrench (1840) Beav 334

Manchester Diocesan Council for Education v Commercial & General Investments Ltd [1969] 3 All ER 1593

Mondial Shipping and Chartering BV v Astarte Shipping Ltd [1995] CLC 1011

Pharmaceutical Society of Great Britain v Boots [1953] 1 QB 401

Smith v Hughes Court of Queen's Bench [1871] LR 6 QB 597