Home Free Lab ReportsQuestion 1 An invitation to treat

Question 1 An invitation to treat

Question 1
An invitation to treat (ITT) is an invitation to induce other party to make an offer. It is not, by itself, capable of being accepted as to form a binding agreement. In the case of Hart v Mills, the court held that ITT is an offer to negotiate. Advertisements of selling books or houses to let are not offers to be bound by any contract. Such advertisements are offers to negotiate, offers to receive or offers to bargain/negotiate on the price. There are four examples of ITT which are display of goods or display of goods with price tags in shops or on shelves, supply of information or request for price quotes, advertisements, catalogues or circulars and auctions.
For this question, the situation is an auction under ITT. Anthony is no bound to buy the painting because he had withdrawn the offer before the fall of the auction hammer. He also not liable on the $450 million as there was no contract between Anthony with action house.
For example, there is a court case about auction under ITT which is Payne v Cave. It was happened when D made the highest bid and withdrew it before the fall of hammer. The court held that the auctioneer’s request for bids is only an ITT. The bid by the customer constituted the offer. Since the bid was withdrawn before the fall of the hammer, there was no contract between the parties.
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The display of goods on the supermarket shelves is an ITT. An invitation to treat (ITT) is an invitation to induce other party to make an offer. It is not, by itself, capable of being accepted as to form a binding agreement. In the case of Hart v Mills, the court held that ITT is an offer to negotiate. Advertisements of selling books or houses to let are not an offer to be bound by any contract. Such advertisements are offers to negotiate, offers to receive or offers to bargain/negotiate on the price.
There are two case laws under the display of goods. The first case law is Pharmaceutical Society of Great Britain v Boots Cash Chemist Ltd. In this case, the defendant, Boots, operates a chain of self-service stores and its goods were all displayed on the shelves. A customer was entering the store would take a basket to put in the items he had chose and place them in the basket to be brought to the counter. A registered pharmacist would be stationed at the cashier’s counter. The defendant was charged for selling a listed poison without the supervision of a registered pharmacist. Finally, the court held that the display of the goods was merely an ITT. A proposal is made when the customer place the item at the cashier. When the cashier “rings the till” such as enters into the cash register, there is an acceptance. Hence, there was no sale between the plaintiff and defendant.
The second case law is Fisher v Bell. This case stated that the authorities sued the defendant with offering for sale a flick knife in his shop-window, which was against the law. The court held that the display of an article such as flick knife with a price on it in a shop window is merely an ITT. It is no sense an offer for sale.
Question 2
Judicial precedent can be defined as a “previous judgment or decision of a superior court” which is binding on the lower courts.
There are some advantages of judicial precedent. One of the advantages is certainty. It means that if the legal problem has been solved before, the court is bound to adopt the same solution. Precision is also the advantage, for instance the court decision is consistent with other similar cases. Since the judges may make similar decision in similar cases, the judicial precedent can also save the time.
The disadvantages of judicial system are rigid, unfairness and complexity. It is rigid because the court decision could not be changed; create injustice as every case is different from one to another lead to unfairness. Due to the judges must keep themselves updated with the increasing bulk of new reported cases and not able to apply the law in the Acts.
The courts have cover the years developed four basic methods to help them to interpret statutes. These methods are the Literal Rule, Golden Rule, Mischief Rule and the Purposive Rule/Approach.
The Literal Rule is the most often used rule. The duty of the court is to interpret the words in the statute by giving its ordinary or literal meaning. The judges are not supposed to change or modify the words but to give meaning to the words even if the meaning leads to unfairness or absurdity. It is not the duty of the court to fill in the gaps or modify the words used in the statute.
The case related to the Literal Rule is Sussex v Peerage. In this case, Tindall court justice said: ‘…If the words of the statute are in themselves precise and unambiguous, then no more can be necessary than to explain those words in their natural and ordinary sense. The words themselves alone do, in such case, best declare the intention of the law giver.’
For the Golden Rule, the judge may modify the language used in the statute to overcome the defects/mistake of the wordings in the Acts which have resulted in absurdity. This happens when the court uses the literal rule and the word or words interpreted gives rise to an absurd meaning, so the judge will modify it to overcome the absurdity.
For example, in the case of Grey v Pearson, the judge held that ‘…that in construing wills and indeed statutes, and all written instruments, the grammatical and ordinary sense of the words is to be adhered to, unless that would lead to some absurdity, or inconsistency with the rest of the instrument, in which case the grammatical and ordinary sense of the words may be modified, so as to avoid that absurdity and inconsistency, but no farther.’
Mischief Rule is where the words in the statute are ambiguous. For example, it has more than one meaning. The judge must look at the Act or statute to see what the ‘mischief’ or defect was in the Act/statute. Thus, the judge is required to interpret the law to meet the intention of the legislature. The Malaysian case that adopted the mischief rule is Lim Moh Joo v P.P. where Wan Suleiman J. in interpreting Section 39(1) of the Criminal Procedure code said: “This is, in my judgment, a case where the court must modify the language of the law to meet what must be the intention of the legislature.” ‘
The last is the Purposive Rule/Approach which is where the statute did not give a clear meaning and intention of the law. In this way the judge may be able to find out the purpose of the legislature and interpret the law to meet that purpose. The Malaysian case on this rule is United Hokkien Cemeteries, Penang v Majlis Perbandaran Pulau Pinang. The issue in this case was whether a columbarium, a place where urns of cremated ashes of the deceased are kept, could be interpreted as a place of worship. This requires the interpretation of the Municipal Ordinance on the phrase ‘all buildings used exclusively as places of worship are exempted from the payment of rates’. The Federal Court, Chang Min Tat FJ, using the purposive approach concluded – ‘We see no reason why the same interpretations should be extended to a columbarium and the repose of the ashes of the departed kept in their honour and in memory of them should not be regarded as a religious worship…’
Question 3
There is a valid contract between Jack and Roberto even though Roberto sells his house to Jack only for RM100. In this scenario, the contract is valid because it has the fundamental elements that must be presented in an agreement which is consideration. If the agreement does not have consideration, the agreement is void and this is stated in Section 26- that ‘an agreement made without consideration is void’. The reason is the law enforces bargains to which both parties contributes, not gratuitous promises given by one party.
Let me take a case law as example, Curie v Misa. The court defines consideration as ‘some right, interest, profit or benefit to other party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other (the promisee)’.
There is some of the adequacy of consideration. Firstly, consideration need not be adequate but must be of some value. It is immaterial that the promisor gets more valuable than the price he asked for. Adequacy of consideration is a matter for the parties in the agreement to decide. It is sufficient if the consideration has some value in the eye of law.
For example, the agreement between Jack and Roberto, Roberto agrees to sell his house worth RM500,000 for only RM100 to Jack, the agreement is a contract notwithstanding the inadequacy of the consideration. Section 26- An agreement to which the consent of the promisor is freely given is not void merely because consideration is inadequate, however, the inadequacy of the consideration may be taken into account by the court in determining the question whether the consent of the promisor was freely given.
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Secondly, the amount of RM1.00 also consider as consideration. The sum of RM1.00 would seem unfair for his promise but the court will not assess whether the promisor has received adequate consideration as long as both parties enter into the bargain freely. It is immaterial if his promise is far more valuable than the price asked for. The legal views are that parties to a contract are capable of appreciating their own interest as long as it is freely given and there is no fraud, misrepresentation or other vitiating factors. For instance, if the Roberto wants to sell his house for RM1.00 to Jack, this agreement is also considering as valid contract.
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The part payment of RM200,000 from Cindy to Roberto is considering as valid contract. Based on Section 64 of CA 1950, creditor may accept a lesser sum paid by the debtor in satisfaction of the whole debt. Every promise may dispense with or remit, wholly or in part, the performance of the promise made to him, or may extend the time for such performance, or may accept instead of it any satisfaction which he thinks fit. We can refer to the similar court case which is Kerpa Singh v Bariam Singh. In this case, Bariam Singh (BS) owed Kerpa Singh (KS) RM8869.94. BS’son wrote a letter to KS, offering RM4000 in full satisfaction of his father’s debt and endorsed a cheque for the amount, stipulating that should KS refuse to accept his proposal, he must return the cheque. KS’s legal advisors cashed the cheque and proceeded by issuing a bankruptcy notice to BS for the balance of the debt of RM4869.94. The court held that the acceptance of the cheque from the debtor’s son in full satisfaction precluded them from claiming the balance.?
Question 4
Emily is a minor. A minor is a person who has reaches the age of majority. In Malaysia, Section 2 of Age of Majority Act 1971 states the age of majority is 18 years old. It means that anyone under 18-year old is considered as a minor. For example, in Mohori Bibee v Dhurmodas Ghose, it was held that an infant (age below 18) cannot make a valid contract.
The general rule is all contracts entered into by a minor are void and a minor cannot sue or be sued under such void contracts. Thus is a protection given to minors as it is presumed that minors may lack judgement and may be exploited. But there are exceptions to this rule and that is when the minor contracts for necessaries.
Tan Hee Juan v The Boon Keat 1934, the court agreed that in a case where a minor had transferred land, the contracts entered by minors shall be void by adopting the Privy council decision in Mohori Bibee v Dhurmodas Ghose?
i. Contracts for Necessaries
‘Necessaries’ are things which are essential to the existence and reasonable comfort of the infant such as food, shelter, clothing, medical services and even education, but luxurious items are excluded. Necessaries are not statutorily defined. It varies from case to case depending on the minor’s station in life. The test for necessaries depends on the nature of the goods or services supplied and the minor’s actual needs and his station in life.
Government of Malaysia v Gucharan Singh ; Ors where the court said: ‘An infant … is incapable of making a contract of purchase in the strict sense of the words, but if a man satisfies the needs of the infant or lunatic by supplying to him necessaries, the law will imply an obligation against the estate of the infant or lunatic.’
Nash v Inman, a tailor sued for the prices of the clothes, including 11 fancy waist coats, supplied to an infant undergraduate. The court held that since the father was able to bring evidence that the son, a minor, was already adequately stocked with the goods in question, the clothes were no longer a necessity.
Section 69 of CA 1950 – which deals with necessaries, states that if a person, incapable of entering into a contract … is supplied by another person with necessaries suited to his condition in life, the person who has furnished such supplied is entitled to be reimbursed from the property of such incapable person.
ii. Contract for Scholarship
A scholarship agreement between a minor and an appropriate authority (Federal Gov, State Gov or education institution) cannot be invalidated on the ground of his minority.
Section 4(a) of CA 1950 Contracts (Amendment) Act 1976 – provides that no scholarship agreement shall be invalidated on the ground that the scholar entering into such an agreement is not of the age of minority.
In Government of Malaysia v Gurcharan Singh, the government has spent a substantial amount of money in educating the defendant and is now suing the defendant for breach of contract. The claim was for $11,500, the sum actually spent by the government in educating the defendant. The defendant’s defense was that he was a minor at the time of making the contract and as such the agreement was deemed to be void. The court applied the above test and rules that education agreement could not be invalidate and thus, the defendant was liable to pay a reasonable sum to the government.
iii. Contract of Insurance
Section 4 of Financial Services Act 2013 (FSA) provides that a minor who has attained the age of 16 years is competent and may enter into a contract of insurance.
Section 4(2) FSA states that if the minor has attached the age of 10years but is below 16 years old, he has to have the consent of his parent or guardian to enter into contract of insurance.

iv. Contracts of Services or Apprenticeship
Under Section 13 of Children & Young Persons (Employment) Act 1966– minors are permitted to enter into contracts of services as employees. Child is defined as below age 15, young person is below 18 years old.

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v. Contracts of Marriage
The courts recognized that contract of marriage by a minor is an exception to the general rule. Therefore, a minor may sue and can be sued for breach of promise to marry.
In Rajeswary v Balakrishma, the court held that a contract to marry did not fall within the principle laid down in Mohori Bibbee v Dharmodas Ghose.
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The contract between Emily and University of California falls under the exceptions to the general rules on minor which is Contract for scholarship. the scholarship agreement between Emily and University of California cannot be invalidated on the ground of his minority. Since Section 4(a) Contracts (Amendment) Act 1976 – provides that no scholarship agreement shall be invalidated on the ground that the scholar entering into such an agreement is not of the age of minority.
In Government of Malaysia v Gurcharan Singh, the government has spent a substantial amount of money in educating the defendant and is now suing the defendant for breach of contract. The claim was for $11,500, the sum actually spent by the government in educating the defendant.
The defendant’s defense was that he was a minor at the time of making the contract and as such the agreement was deemed to be void. The court applied the above test and rules that education agreement could not be invalidate and thus, the defendant was liable to pay a reasonable sum to the government.
Question 5
Terms in a contract are the clauses that appear in a written contract. It defined as the rights and duties of the parties, a breach of which would entitle the injured party to an action for damages for breach of contract.
A condition is a term in the contract which is so vital or essential to the main purpose of the contract that is breach by one party will entitle the innocent party to repudiate or terminate the contract. It must be so fundamental to the contract without which the contract would collapse.
Section 12(2) Sales of Goods Act 1957(SOGA) states that a condition is stipulation essential to the main purpose of the contract, the breach of which gives rise to treat the contract a repudiated.
A warranty is a minor term and the breach of warranty will not repudiate the whole contract. It gives rise to an action for damages but not repudiation of the whole contract. It is because warranty is only secondary or collateral to the main term of contract and its breach will not affect the efficacy of the whole contract.
Section 12(3) SOGA states that a warranty is a stipulation collateral to the main purpose of the contract, the breach of which give rise to a claim for damages but not the right to reject the goods and treat the contract as repudiated.
Innominate Terms is a term is neither a condition nor a warranty. It much more depends on the circumstances and effect of the breach. If the effect of breach is substantial then the innocent party may repudiate the contract, but if the effect of breach is minor then it would be treated as a breach of warranty. Innominate or intermediate terms are terms which cannot be classified as conditions or warranties and they fall in between them. The court would have to look into the seriousness of the breach and determine whether the plaintiff would be entitled to terminate the contract or only be entitled to damages only. If there is no substantial loss, then the innocent part would not be allowed to repudiate the contract but only claim for damage.
In this case, the contract has been breached in law and would be termed as a breach of condition. The car that Benny ordered from Alan is lack of engine and it cannot be used for the purpose it was bought. Engine is a very vital or essential term in car which is so fundamental to the contract. Without engine, Benny could not start up the car.
It shows that there is a breach of condition under this contract because it is stipulation to the main purpose which is for the car to start, therefore Benny has the right to cancel the contract and also sue for compensation from Alan. However, this situation is not falling under breach of warranty due to warranty is only secondary to the main term of contract and the breach will not affect the efficacy of whole contract.
For example, in the case of Tan Chong ; Sons Motors Co Sdn Bhd v Alan McKnight, the court held that effect of breach of condition and warranty. Firstly, the effect of breach of condition in a contract is the innocent party has the right to repudiate or terminate the contract and claim damages. While the effect of breach of warranty is the innocent party cannot repudiate or terminate the contract and entitled to claim damages only.

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