LAW3201 Foundations of Business Law
Topic 2: LAW OF CONTRACT (Offer)
Lee Mei Ping, General Principles of Malaysian Law, 5th Edition, 2005, Oxford Fajar Sdn Bhd
Abdul Majid, Krishnan Arjunan, Business Law in Malaysia, 2005, Lexis Nexis Malayan Law Journal
Beatrix Vohrah, Wu Min Aun, The Commercial Law of Malaysia, 2nd ed., Longman, 2000
Malaysian Contracts Act 1950 (http://www.agc.gov.my/) law of Malaysia/numerical table of laws/Act 1136
2. Contracts and Agreements
Successful students should be able to:-
1. Explain the general idea of law of contract;
2. Distinguish between a contract and an agreement;
3. Outline the elements of a contract;
4. Distinguish the proposal and invitation to treat;
5. Describe the elements of a valid offer; and
6. Explain how an offer may be revoked.
An understanding of the law of contract is of fundamental importance in the context of business practices. In fact, even in everyday life we enter into contracts. Throughout this course students will be exposed with the law of contracts in Malaysia. What are contracts and contract law for?
- allow businesses to make long-term plans
- create certainty in the commercial arena
- provide parties with confirmation of their rights/obligations
- provides security for the recipient of a promise who has given something in return for that promise. - provides security for those who act in reliance on the deals struck. - enforces bargains and thereby induces parties to conclude contracts in the first place. - facilitates the operation of the market economy
Without law to back up promises and provide sanctions for reneging, deals would be short-term only. Firms would not be able to plan ahead, aware that default by their contracting parties will be remedied. In the commercial world, contract law can be seen as the glue which keeps holds the whole structure together.
2. Contract and Agreement
In simple words, contract is bargain, a deal from which both parties expect to benefit.
The term “contract” in a legal sense refers to an agreement between two or more parties that is legally binding between them.
s. 2 (h) of the Contracts Act 1950, it has been defined as “an agreement enforceable by the law”.
• i.e. a contract is an agreement which is legally binding between the parties. • The effect is that is the parties in the contract can enforce the contract which means that if in event when one of the parties breach the contract the other party can bring the case to the court of law.
• The agreement will create rights and obligations that may be enforced in the courts. The normal method of enforcement is an action for damages for breach of contract, though in some cases the court may order performance by the party in default. Think of contracts that you may have entered into:-
Have you bought a house? If so, you will have signed a contract of purchase. Have you worked? In which case, you may have signed a contract of employment. Think about when you signed up to this course; you will have signed a contract.
2.2. The Law of Contracts in Malaysia
Historically, prior to 1974, English Common Law was applied in Penang, Malacca, Sabah and Sarawak. Meanwhile, the Contracts Ordinance applied to the other 9 remaining states.
In present, law of contract in Malaysia is governed by the Contracts Act, 1950 (CA, 1950).
2.3. Contracts and Agreements
It is essential to distinguish between the contract and agreement because not all agreement is considered as a contract. Some agreements are less serious.
|Agreement |Contracts | |s. 2 (e) of CA, 1950:-...
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