1606R COURT OF APPEAL, MALAYSIA 2016 FANN WOW GALLERY (APPELLANT… · 2016-11-29 · 1606R COURT...
Transcript of 1606R COURT OF APPEAL, MALAYSIA 2016 FANN WOW GALLERY (APPELLANT… · 2016-11-29 · 1606R COURT...
1606R
COURT OF APPEAL, MALAYSIA
2016
FANN WOW GALLERY
(APPELLANT)
V.
DATO’ RASHID
(RESPONDENT)
MEMORIAL FOR THE RESPONDENT
___________________________________________________________________________
1
TABLE OF CONTENT
TABLE OF CONTENTS …………………………………………………………………….1
INDEX …………………………………………………………………………………..…….2
SUMMARY OF FACTS ………………………………………………………………….….3
SUMMARY OF PLEADING………………………………………………………………..4
1. THERE WAS A VALID CONTRACT SINCE BOTH PARTIES HAVE
AGREED TO TERMS OF PAYMENT AND DELIVERY OF MAJESTIC
DAWN………………………………………………………………………………....5
A. Dato’ Rashid has made an offer to Fann Wow Gallery………………………...….5
B. The offer has been accepted by Fann Wow Gallery…………………………….....7
2. THE REVOCATION OF ACCEPTANCE BY FANN WOW GALLERY WAS
NOT EFFECTIVE BECAUSE IT HAS NOT BEEN COMMUNICATED TO
DATO’ RASHID…………………………………………………………………….10
A. There is no revocation of the acceptance took place from Fann Wow Gallery since
the revocation never been communicated to Dato’ Rashid…………………….…10
3. THE COURT ORDER FOR SPECIFIC PERFORMANCE IS
APPROPRIATE……………………………………………………………………..13
4. CONCLUSION AND PRAYER FOR RELIEF…………………………………...15
2
INDEX
CASES
Carlill v Carbolic Smoke Ball Company [1893] 1 QB 256, CA.
Fisher v Bell [1893] AC 552.
Ayer Hutam Tin Dredging Malaysia Bhd v YC Chin Enterprise Sdn Bhd [1994] 2 MLJ 754
Ho Kam Phaw v Fan Sin Nin [2000] 2 MLJ 529, FC.
STATUTE
Contract Act 1950 (Act 136)
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SUMMARY OF FACT
Fann Wow Gallery is an art dealer of traditional Chinese paintings from different
artists. This year, Dong Ying produces five walls –sized paintings which are described as rare
and exquisite paintings by various art dealers’ website due to the Chinese birds and flowers
theme had drawn using “great freehand style”. Fifty types of dye used for the paintings are
prepared by the Dong Ying herself using variety of colorful raw stones found in Changliang
Mountain, in northern Tibet, China. Fann Wow Gallery managed to buy all these paintings at
RM1 million each.
On Monday, 15 February 2016, Dato’ Rashid, a private collector of Chinese Art,
visited the gallery and impressed with the Majestic Dawn. He immediately placed the order at
the price of RM1.5 million. The painting will be delivered to his house in three working days.
However, the painting also attracts Dr Lawrence’s interest, an art collector. Dr Lawrence
contacted Fann Wow Gallery to buy it at the price of RM2 million and the offer had changed
Mr Kenny’s mind, the owner of the gallery, which he instructed the delivery of the Majestic
Dawn to Dato’ Rashid to be withhold. Mr Kenny offered Dato’ Rashid another Dong Ying’s
painting, Serene Ocean which is done with similar painting technique but of somber blend of
colour.
Dato’ Rashid commenced proceedings against the gallery for breach of contract and
won. The judge ordered for rescission of the contract and specific performance due to the
failure of the gallery to deliver Majestic Dawn.
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SUMMARY OF PLEADING
The counsel for Respondent will submit on three issues which are:
1. THERE WAS A VALID CONTRACT BETWEEN DATO’ RASHID AND
FANN WOW GALLERY.
Both parties have agreed to terms of payment and delivery of Majestic Dawn.
2. THE REVOCATION OF ACCEPTANCE BY FANN WOW GALLERY
WAS NOT EFFECTIVE.
This is because the revocation of acceptance has not been communicated to Dato’
Rashid.
3. THE COURT ORDER FOR SPECIFIC PERFORMANCE IS
APPROPRIATE.
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1. THERE WAS A VALID CONTRACT SINCE BOTH PARTIES HAVE
AGREED TO TERMS OF PAYMENT AND DELIVERY OF MAJESTIC
DAWN
Contract is an agreement between two parties which is enforceable by law. There
are four fundamental elements to create a valid contract, which are; offer,
acceptance, intention to create legal relation and consideration. The Law of
Contract in Malaysia is governed by the Contracts Act 1950. Section 2(h)1 states
that an agreement enforceable by law is a contract.
A. Dato’ Rashid has made an offer to Fann Wow Gallery.
The first element to constitute a valid contract is offer or in other word,
proposal. By virtue of Section 2 (a)2 and Section 2 (b)
3 of Contracts Act 1950,
an offer is an expression of willingness to contract on certain terms, made with
the intention that it shall become binding as soon as it is accepted by the
person whom it is addressed. An agreement must happen between two or more
parties when there is an expression of willingness to enter into a contract and
when it made with legal intention that it shall be binding. Thus, from that the
contract will be legally enforceable by law.
In the present case, Dato’ Rashid has fulfilled the first element of a valid
contract which is the element of offer or proposal as he immediately placed an
order for the Majestic Dawn at a price of RM1.5 million on 15 February 2016
during his visit to the Fann Wow Gallery. The act of Dato’ Rashid placing
order for the piece is an obvious conduct of offer or proposal in order to buy
the painting. In this situation, Dato’ Rashid’s conduct of placing order is an
actual conduct of offering towards the Appellant, Fann Wow Gallery. His
conduct of placing order upon the painting also competent with Section 2 (a)4
1 Contracts Act 1950, s 2 (h)
2 Contracts Act 1950, s 2 (a)
3 Contracts Act 1950, s 2 (b)
4 Contracts Act 1950, s 2 (a)
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that provides, “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 the person to
whom the proposal is made signifies his assent thereto, the proposal is said to
be accepted. Thus, Dato’ Rashid is the offeror who made the proposal to buy
the Majestic Dawn from Fann Wow Gallery.
An offer is portrayed in the case of Carlill v Carbolic Smoke Ball Company5.
The Carbolic Smoke Ball Company made a product called a smoke ball that it
claimed could protect the user from getting influenza which is flu. The
company published advertisement claiming that it would pay £100 to anyone
who still got sick with influenza after using its product. The company even
deposited £1000 to the Bank, to show their genuine intention in the matter.
Mrs. Carlill bought one of the balls and used it in the specified manner, yet still
managed to get influenza. When she asked for the reward, the Carbolic
Company claimed that there was no acceptance of the offer, because Mrs.
Carlill had never notified the company that she accepted the offer, nor
furnished any consideration.
The court held that in unilateral offers, the advertisement is an offer which was
accepted by Mrs. Carlill. The court also looked at the party’s intention which
the fact that £1000 were deposited to the Bank showed a genuine intention to
create legal relationship. Hence there was a binding contract. Meanwhile, a
bilateral contract is an agreement in which both parties make a promise to each
other. For example, A offers to sell his house to B for RM250,000. B accepts
the offer by promising to pay A.
On the other hand, offer could be mistaken as invitation to treat since many
people could not differentiate between both offer and invitation to treat.
Invitation to treat is not an offer. It is the willingness to negotiate a contract. If
the negotiation are successful then it becomes an offer hence an agreement
enforceable by law. However, in the present case, the display of Majestic
Dawn by the Fann Wow Gallery was an offer since the gallery, which is one of
5 [1893] 1 QB 256, CA.
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the pioneering art dealers in Malaysia, buys works of traditional Chinese
paintings and typically resells those painting those paintings through their
gallery exhibitions in Shah Alam. Since, the Majestic Dawn was displayed in
the gallery, hence it was an offer to sell it from the gallery to whoever visited
the gallery. There are many ways come into the situation of invitation to treat.
However, one of those many ways is display of goods which related to the
present case.
In Fisher v Bell6, where goods are displayed in a shop together with a price
label, such display is treated as an invitation to treat by the seller, and not an
offer. The offer is made when the customer presents the item to the cashier
together with payment. Acceptance occurs at the point the cashier takes
payment.
Therefore, it could relate to the present case, as at the moment Dato’ Rashid
placed an order for the Majestic Dawn which been displayed, it became an
offer and no longer an invitation to treat. Furthermore, the piece will be
delivered to the Dato’ Rashid’s house in three working days. The statement
indicates that the Fann Wow Gallery had accepted the offer made by Dato’
Rashid on that day.
B. The offer has been accepted by Fann Wow Gallery.
The second element to constitute a valid contract is accceptance. By virtue of
Section 2 (b)7 of Contracts Act 1950 provides that, “when a person to whom
the proposal is made signifies his assent thereto, the proposal is said to be
accepted, becomes a promise. When there is a proposal and acceptance, there is
an agreement made between these parties as well as when the offeree accepted
it becomes a promise.
In order to constitute an acceptance, there are some principles had been
outlined and one of them that should be noted is the principle that stated,
6 [1893] AC 552.
7 Contracts Act 1950, s 2 (b)
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acceptance must be communicated for there to be biding contract between the
parties. According to Section 4(1)8, “the communication of a proposal is
complete when it comes to the knowledge of the person to whom it is made”.
The communication of an acceptance is complete firstly, as against the
proposer, when it is put in a course of transmission to him, so as to be out of
the power of the acceptor and secondly, as against the acceptor, when it comes
to the knowledge of the proposer. Depending on the construction the contract,
the acceptance may not have to come untill the notification of the performance
of the condition in the offer in the offer as in Carlill’s case, but nonetheless the
acceptance must be communicated.
The existence of an agreement depends upon the intention of the parties. There
must be the existence of consensus which means a meeting of minds between
them. Then, it could be inferred that the consensus by the language used, the
parties’ conduct in the surrounding circumstances and the object of the
contract.9 Commonly, an objective test will be applied such as; what would be
the intention of a reasonable men if they were in the shoes of the parties to the
alleged contract.10
Therefore, in the present case, it could be the acceptance on the behalf of the
Fann Wow Gallery towards Dato’ Rashid took place at the moment when the
fact that the wall-sized painting will be delivered to Dato’ Rashid’s house in
three working days. Inter alia, the conduct of Mr Kenny, the gallery’s owner
instructed his delivery team to withhold the delivery of Majestic Dawn to
Dato’ Rashid means that the painting was originally were going to be delivered
to Dato’ Rashid at the first place and originally, it could be presumed that Fann
Wow Gallery had already accepted the offer by Dato’ Rashid way before the
offer from Dr Lawrence came up.In addition, the act of Mr Kenny offered
another Dong Ying’s art which is Serene Ocean to Dato’ Rashid signify that
8Contracts Act 1950, s 4(1)
9 Syed Ahmad Alsagoff, Principle of the Law of Contract in Malaysia, 2003, Lexis Nexis, Singapore.
p 67.
10 Ayer Hutam Tin Dredging Malaysia Bhd v YC Chin Enterprise Sdn Bhd [1994] 2 MLJ 754, SC, per
Edgar Joseph Jr SCJ.
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the appellant had already the knowledge upon the offer by the Dato’ Rashid
and it also showed the communication of acceptance in order to bind a valid
contract.
In conclusion, offer and acceptance analysis is a traditional approach in law of
contract that been used to determine whether an agreement exist between two
parties. Therefore, by observation11
, it should be noted that agreement is
usually, reached by the process of offer and acceptance and, when this is so,
the law requires that there be an offer on ascertainable terms which receives an
unqualified acceptance from the person to whom it is made.12
11
Sinnadurai. V. (2011) Law of Contract (fourth Edition) Selangor, Malaysia : Lexis Nexis
12 9(1) Halsbury’s Law of England (4th Edn Reissue) para 631.
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2. THE REVOCATION OF ACCEPTANCE BY FANN WOW GALLERY WAS
NOT EFFECTIVE BECAUSE IT HAS NOT BEEN COMMUNICATED TO
DATO’ RASHID.
By virtue of Section 5(2)13
of Contracts Act 1950, an acceptance may be revoked at
any time before the communication of the acceptance is complete as against the
acceptor, however not afterwards which means after the acceptance had already
been communicated.
There are four ways for the revocation to take place which are, firstly, by
communication of notice of revocation by the proposer to the other party and
secondly, revocation by lapse of time or if there is no time provided, lapse of
reasonable time applied which none of them been communicated to Dato’ Rashid.
A. There is no revocation of the acceptance took place from Fann Wow Gallery
since the revocation never been communicated to Dato’ Rashid.
Not only in acceptance, a revocation as well need for a communication. For a
revocation to be effective, it must be communicated according to Section 6(a)14
.
The communication of a revocation is complete, firstly, as against the person who
makes it, when it is put into a course of transmission to the person whom it is made,
so as to be out of the power of the person who makes it and secondly, as against the
person to whom it is made, when it comes to his knowledge15
. Hence, a revocation
will be ineffective unless it is communicated to the offerer before the acceptance
has been made.
It could be understood based on the provision that it is not enough to constitute a
revocation by the change of mind and does not tell or communicated it to the other
party. Therefore, related to the present case, the act of Mr Kenny who withhold the
delivery of Majestic Dawn to Dato’ Rashid after had a change of mind, is not
13
Contracts Act 1950, s 5(2)
14 Contracts Act 1950, s 6(a)
15 Contracts Act 1950, s 4(a) &(b)
11
acceptable to be amount as a revocation without communicated it properly to Dato’
Rashid at the first place.
Based on the relevant case, in Ho Kam Phaw v Fan Sin Nin16
, the appellant and the
respondent were partners of a firm of solicitors. They entered into negotiations to
dissolve the partnership. The respondent instructed Mr X, a solicitor, to draft a deed
of settlement for them. Then, the respondent wrote to the appellant on 24 June
1996, that as the outstanding dispute is the service of notice’, he had instructed Mr
X to amend the relevant clause and attached a copy of the amended clause with the
letter, requesting the appellant to fix the time of the execution of the agreement
which is the first draft. The appellant then responded by sending a draft of the
agreement duly executed by him with minor amendments which is the second draft.
The respondent rejected it on the grounds that the changes were not agreed to and
that any proposed changes should be referred to and discussed with Mr X.
On 8 July 1996, Mr X faxed a copy of the deed of settlement to the appellant which
was the same with the first draft. On the next day, the appellant executed four
pieces of the faxed draft and sent them to the respondent, who rejected it, on the
ground, that it was different from the second draft. The High Court held that there
was no contract between the parties as the faxed draft was different from the second
draft. The Court Appeal, by a majority decision, upheld the decision of the High
Court.
The Federal Court however held that there was a valid contract between the parties.
The court disagreed with the majority decision of the Court of Appeal and upheld
the dissenting judgement of Mokhtar Sidin JCA. Zakaria Yatim FCJ held that the
second draft was no longer an issue since the respondent had rejected it. The court
found that both of the partieshad agreed to the first draft. The letter dated on 24
June 1996 showed that the respondent was ready to execute it. Thus, there was a
valid contract between parties on the day when the appellant executed the copies of
the faxed draft agreenment that was the same with the first draft agreement, which
the parties had agreed to earlier. Further, in rejecting the faxed draft, the respondent
did not dispute the content of the faxed draft but instead raised other issue.
16
[2000] 2 MLJ 529, FC.
12
The said case relevant and related to the present case as there is a valid contract
between Fann Wow Gallery and Dato’ Rashid as the Majestic Dawn is the painting
that been first ordered by Dato’ Rashid and already been promised to be delivered
to him. However, the act of Mr Kenny who did not communicate the revocation but
instead change the Majestic Dawn to Serene Ocean is unacceptable and reasonable
for the breach of contract. Further, the conduct of the delivery team of Fann Wow
Gallery which was ready to deliver the Majestic Dawn to Dato’ Rashid before they
were withheld by Mr Kenny showed that the appellant was ready to execute the
contract and it typically to pressumed that the payment worth RM 1.5 million
already paid by Dato’ Rashid as he insisting for the painting to be delivered to his
door at once and not the other way around.
In conclusion, the revocation of acceptance made by Fann Wow Gallery was not
effective because it has never been communicated to Dato’ Rashid.
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3. THE COURT ORDER WAS APPROPRIATE AS BOTH PARTIES HAVE
CLOSED THE DEAL AND THE RESPONDENT REQUEST FOR THE
DELIVERY OF MAJESTIC DAWN ACCORDING TO THE TERMS OF
CONTRACT.
The plaintiff commenced proceedings against the defendant for breach of contract. At
the first instance, the judge ordered for rescission of the contract and specific
performance due to the failure of the defendant to meet its obligation by way of
delivery of Majestic Dawn. Both the plaintiff and the defendant have been given leave
to appeal to the Court of Appeal.
i. The court order for rescission of the contract was appropriate.
Rescission is when a party breaches his promise under a contract, the party not in
breach has the right to rescind/terminate the contract.17
Based on illustration (a) A,
a singer enters into a contract with B, the manager of a theatre to sing at his theatre
for two nights every week during the next two months and B engages to pay her
RM 100.00 for each night’s performance. On the 6th
night, A willfully absents
herself from the theatre. B is at liberty to put an end to the contract.
If the party not in default chose to rescind the contract, any benefit which he has
received from the defaulted party must be restored.18
In a present case, 19
the court
held that the false representations by A entitled B to rescind the contract and to the
return of the money paid by B. So here, by applying rescission, when Dato Rashid
rescind the contract, the Fann Wow Gallery have to return the money paid by Dsto
Rashid, which is RM 1.5 million.
17
Section 40 of Contracts Act 1950
Illustrations (a)
See also Chitty on Contracts, Volume 1, General Principles by Thomson, page 1293
18 Section 65 of Contracts Act 1950
19 Senanayake v Annie Yeo (1965)
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ii. The court order for specific performance was appropriate
Specific performance is refers to the remedy available in equity to compel a person
actually to perform a contractual obligation. Where a person has under a contract
becomes liable to pay a fixed sum of money, the actual performance of that
obligation can be enforced by bringing an action for that sum.20
Specific performance is a decree of the court directing that the contract shall be
performed specifically.21
The rule is, the specific performance will not be granted
where monetary compensation is adequate. In this case, specific performance is
appropriate because monetary compensation is not adequate.
Specific performance may be granted by the court when (1) there exists no
standard for ascertaining the actual damage caused by the non performance of the
act agreed to be done (2) when the act agreed to be performed is such that its non
performance would not afford adequate relief.22
According to the illustration, A
agrees to buy and B agrees to sell a picture by a dead painter and two rare china
vases. A may compel B specifically to perform this contract because there is no
standard for ascertaining the actual damage which would be caused by its non
performance.
By applying this rules to this case, Dato’ Rashid may compel Fann Wow Gallery
specifically to perform this contract, which is to deliver the Majestic Dawn to him
as there is no standard for ascertaining the actual damage which would be caused
by its non performance. Therefore, the court order for specific performance was
appropriate.
20
Chitty on Contracts, Volume 1, General Principles by Thomson, page 1522 and 1523
21 Specific Relief Act 1950
22 Section 11(1)(b) and (c) of Specific Relief Act 1950 see also, Gan Realty Sdn Bhd & Orz v
Nicholas & Ors (1969) and Duncuft v Albrecht (1841)
15
CONCLUSION AND PRAYER FOR RELIEF
Based on the foregoing reasons, Dato’ Rashid respectfully requests this honourable
court l to ADJUDGE and DECLARE that:
1. There was a valid contract since both parties have agreed to terms of payment and
delivery of Majestic Dawn.
2. The revocation of acceptance by Fann Wow Gallery was not effective because it
has not been communicated to Dato’ Rashid.
3. The High Court order for specific performance is appropriate and Fann Wow
Gallery must meet the obligation by delivering Majestic Dawn to Dato’ Rashid.