EDBFM4 Contract Law

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Topic Outline F Definition of contract; F 8 elements required to form a vaiid contract; ') The operation of a contract; and F Ending a contract. DEFINATION OF' A CONTRACT Section 2(h) of the Contracts Act 1950 - it is "an agreement enforceable by law". 8 ELEMENTS OF A VALID CONTRACT F Offer F Acceptance F Intention to Create Legal. Relations F Consideration F Legal Capacity '''^-. F Legality of Object F Certainty of Object F Free Consent 1. OFFER Offer > s.z(a) of cA 1950 - an offer is a proposal from one person to another. F It is aimed to an identifiable group of people/ person. E.g. Reservation by a guest for a hotel stay of 3 days and Invitation to treat > An invitation to treat is a preliminary communication of negotiations i.e. an invitation to rnake / /. anoffer. 4.. ^+tqa",f+ -to l-Jwe a gtn:or.4-o ua?e a* o{4qn .-}-- i't-;;-;;f--A- Zfiec, > An advertisements in the newspaper for a promotional package holiday to Langkawi. I a,-.s( ,^^* cap*Lfs "flrrL41--"-,tte. I 2. ACCEPTANCE + A* ae-f +- oflq"cf .{-{1.{- ^t'+*r^ .h1o,-, 4J F A proposal may be revoked at any time before acceptance. u\. "i pot-e,naHort ctt-rl. nLr-. > S.2(b) CA 1950 - When a proposal is made to a person and the other person signities his acceptance. E.g. when a hotel accepts the reservation by a guest to stay in the hotel What happens if an Offer is altered/ varied? 4

Transcript of EDBFM4 Contract Law

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Topic OutlineF Definition of contract;

F 8 elements required to form a vaiid contract;') The operation of a contract; and

F Ending a contract.

DEFINATION OF' A CONTRACTSection 2(h) of the Contracts Act 1950 - it is "an agreement enforceable by law".

8 ELEMENTS OF A VALID CONTRACTF OfferF Acceptance

F Intention to Create Legal. RelationsF Consideration

F Legal Capacity'''^-.

F Legality of ObjectF Certainty of Object

F Free Consent

1. OFFER

Offer> s.z(a) of cA 1950 - an offer is a proposal from one person to another.F It is aimed to an identifiable group of people/ person.E.g. Reservation by a guest for a hotel stay of 3 days and 2 nights.

Invitation to treat> An invitation to treat is a preliminary communication of negotiations i.e. an invitation to rnake / /.

anoffer. 4.. ^+tqa",f+-to

l-Jwe a gtn:or.4-o ua?e a* o{4qn .-}-- i't-;;-;;f--A- Zfiec,> An advertisements in the newspaper for a promotional package holiday to Langkawi.

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a,-.s( ,^^* cap*Lfs "flrrL41--"-,tte. I

2. ACCEPTANCE + A* ae-f +- oflq"cf .{-{1.{-

^t'+*r^.h1o,-, 4J

F A proposal may be revoked at any time before acceptance.u\. "i pot-e,naHort ctt-rl. nLr-.

> S.2(b) CA 1950 - When a proposal is made to a person and the other person signities hisacceptance.

E.g. when a hotel accepts the reservation by a guest to stay in the hotel

What happens if an Offer is altered/ varied?

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COUNTER OFFERF An alteration or modification of an original offer amounts to a counter off,er and will not mean

an acceptance.

E.g. Taylor's International Hotel offer accommodation in a deluxe room (inclusive breakfast)at RMl5Cr.00 nett per night.Mr. Bean replies he wants to accept the offer at RM120.00 nett per night. Therefore Mr.Bean's reply would be a COUNTER OFFER.

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Fdr a valid contract, acceptance must be communicated.

) Acceptance by telephone - acceptance is only complete when the words of acceptance aretransmitted to the other person-

E.g. Communication when the conversation is disconnected?

F Acceptance bv post- S.4 (2) (a) CA 1950 acceptance is said to be communicated when theletter is posted into the post box even if the proposer has no knowledge of the acceptance or ifthe letter ig Iost or delayed.

3. INTENTION TO CREATE LEGAL RELATIONS (ICLR)F An agreement is not a contract unless the parties

intend to have a legal relationship.F Intention to create legal relationship is the common intention between the parties that theagreement shall be legally enforceable

F Presurnption:

a. Commerciai /business contracts there is ICLR; and

b. SociaVfamily anangements there is no ICLR.

4. CONSIDERATION> S. 2(d) CA 1950 - The value one party pays in exchange for the promise of another.

E.g. In exchange for the booking of the holiday package to France, the tourist will pay the price' forthepackage.

5. LEGAL CAPACITY - who can enter into a contract> S.11 CA 1950 - the parties to a contract must have the capacity i.e. must be competent

otherwise the contract would be invalid.ts General rule all persons have the power to enter into a contract EXCEPT:

Minors

Intoxicated people

Mentally disordered people.

A.

B.

C.

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J.yir.i.\lrr\D_ psupre oclow ir-Ie age oI i6 years

F Exception to 3 fypes of contract: -a' Contract of necessaries - food, shelter, medical services, clothing (properly evaluated);b. Contract of Insurance; andc. Contract of Education.

MENTALLY DISORDERED & INTOXICATED PEOPLE

> S'11.CA 1950 - Everyone is competent, who is of sound mind is not disqualified fromentering into a contract.> s'12 (1) CA 1950 - A person is of sound mind when he is capable of understanding and

forming a rational judgment to its effects.) Therefore a mentally disordered and intoxicated person can enter into a contract when they are

of sound mind..

E.g. During intervals of sound mind.

6. LEGALITY OF OBJECT> S'24 OF'CA 1950 - the object of the agreement must be iar,vful. If the object is unlawfiri the

agreement would invalid and unenforceable.) Arumugam vs Somasundram - a driver was employed to drive a private car for public use.The object of the agreement (to drive the car) *as ,rrrtuwfut.

7. CERTAINTY OF OBJECT> S'30 CA 1950, an agreement where the meaning is not certain is not valid.E'g. Making a reseryation for a room without rpr"i-rying the type of room.

8. FREE CONSENT

> S.10(1) CA 1950 - all agreements are contracts if it is mad.e with free consenr.> S'14 CA 1950 - an agreement is said to be of free consent when it is not caused by: -

a. Coercion;

b. Undue Influence;c. Fraud;

d, Misrepresentation; ande. Mistake.

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FORMALITIESF There are no requirements that a contract must be in a particular form.) A contract can be made: -

a. Orally;

b. Writing; and

c. By conduct.

TERMS OF A CONTRACT) Statements made by parties in the course of negotiations that leads to a contract. which isincorporated into the contract.

F 2 types of terms: -

. a. Express Terms;andb. Implied Terms.

EXPRESS & IMPLIED TERMS) Express Terms'

Terms which have been specifically agreed between the parties. It may be oral or in writing(better to be put in writing)

E.g. Type of room, date of travel.

Terms that are not expressly stated but can be presrulled and understood to exist.E.g. In a hotel booking, room is fit for the purpose.

EXCLUSTON CLAUSE (EC)F An exclusion clause is a term of a contract which purports to limit or exclude the iiabiiity of

one of the parties of the contract.F Reason - to maximize profit by reducing costs and risk.

3 RULES OF ECF 3 rules of an exclusion clause

a. An EC must be a term of the contract -must be notified before entering into the contract(OLLEY vs MARBOROUGH COURT- EC not valid if displayed in a hotel bedroorn.);

b. EC applies to loss/damage which has occurred; and

c. EC which limits or excludes liability for personai injury or death is not valid.

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DISCIIARGE OF CONTRACTF Discharge of contract means the parties to a contract are freed from their obligations under the

contract.

F 4 ways to discharge a contracta. Discharge by performance;

b. Discharge by agreement between the parties;c. Discharge by impossibiiify/frustration

of contract; andd. Discharge by breach of contract.

F Discharge bv performance - when both parties have performed their contractual obligation,the contract comes to an end.

E.g. A guest who checks out of a hoteV person who retums after the package holiday.

F Discharge bv agreement between the parties - a contract may be brought to an end throughthe mutual agreement of the parties to the contract.

E.g.A guest who changes a reservation date or room type.

F Discharge bv impossibilitv/ frustration of contract -The contract is not possible to beperformed due to no fault of either parfy.

E.LI\fter the reservations were made the hotel was destroyed (Tsunami)

F Discharge bv breach of contract - one party performs the obiigation under the contract and

@e other party fails to perform their obligation.E.gfWhen a hotel overbooks the guest.

?ro,Uy ,Wr-'---a 'Llt^ L<- ''-tv '-[^ t ) 'l ''r,'\) {.4/REMEDIES FOR BREACH OF CONTRACTF Remedies available: - '

a. Damages - money compensation;

b. Injunction - order of the court to restrain from doing something; and

c. specific Performance - order of the court compelling to do something.

DAMAGESF Damages are commonly referred to as money compensation granted to put the injuredi

innocent party in a position as if the breach had not occurred.

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