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The strongest contract, in term of enforceability, has an offer, acceptance, consideration for the exchange, clearly sets out the term of the agreement without ambiguity, and is signed by the involved parties with proper capacity to enter into the contract. An agreement enforceable by the law between two or more parties to do or to abstain from doing some act, their intention being too create legal relation and not merely to exchange mutual promise both having given something or having promised to give something of value as consideration for any benefit derived from the agreement.
Agreement, comprising offer and acceptance. The existence of an offer and acceptance are a means of analyzing the process of negotiation to decide whether a contract has been made and if so, when it was made. Mutual assent of the parties is the basis of agreement. The parties must agree on the right and obligations to be created under the contract. Agreement that is reached through a process of offer and acceptance is fundamental part of any contract because it requires consensus ad idem.
Examples: in affin credit (Malaysia) sdn bhd v yap yuen fui (1984) the federal court held that where there was no offer and acceptance, the purported hire- purchase agreement was declared void ab initio, that is the agreement was void from the beginning. Thus it can be seen that agreement forms the basis of contract, if there is no valid agreement to begin with, there can be no valid contract at all.
For a contract to be valid, there must be a proper acceptance by the offered. Section 2 (b) of CA 1950 provides that when the offered signifies his assent to the offer, the offer is said to be accepted. Acceptance may be made in writing, orally or implied by conduce, but if method of acceptance has been prescribed by the offer or, then acceptance must be according to the manner prescribed. Acceptance must be made within a reasonable time. What amount to reasonable time would depend on the circumstances of each case.
Example: In Taylor v Allan (1966), the court held that the offer of a motor insurance was deemed accepted by conduct when the offered drove his car in reliance on the insurance.
Intention to create legal relations
An agreement reached between an offer or an of free will be legally binding contract only if the parties intended that they should be legally bound. The parties intention to be bound can be expressly stated or be implied from their action. Where intentions are expressly stated, the court would not impute otherwise unless there is strong evidence to prove the contrary. The intentions are to be implied from the conduct of the parties, there are certain presumptions that would be considered depending on the relationship between the parties to the agreement.
Examples: In balfour v (1919), the husband went to work in ceyloon and agreed to pay his wife £30 per month. He did not pay the money and his wife sued. It was held that there was no contract because the parties did not intend to create a legal relationship.
Section 26 of CA 9150 provides that an agreement without consideration is void. Thus, consideration is an essential element to the formation of valid contract. Where no consideration is given by the promise, the promissory merely owes a moral obligation to perform the contract. A simplistic definition may be the price paid for the purchase of a promise. However recent decisions have taken a more practical approach to the definition by recognizing a broader range of objects that can now constitute consideration.
Example: If Jenny promise to give Susie RM700 as a gift on her birthday, this promise cannot be enforced by court because Suisse has not provided any consideration for the promise.
Capacity to contract
In order to have a valid contract all parties to a contract must have capacity to enter into a contract. Capacity refers to the legal ability to enter into a contract and the law generally presumes that everyone has capacity to contract except certain categories of person.
Section 11 of CA 9150 provides that every person is competent to contract who is of the age of majority according to the law to which he is subject. The sound minds and not disqualified from contracting by any law to which he is subject. A person who has been disqualified from contracting by any law is regarded as incompetent to enter into a contract.
Example: a bankrupt or an enemy alien cannot enter into a valid contract.
Agreement that are not certain in meaning or which the meaning is not capable of being made certain, are void. For example Agrees to sell to B a hundred tons of oil. There is nothing whatever to show what kind of oils was intended the agreement is void for uncertainty. The term of an agreement must be clear, preside and certain.
Even where all the requirements of valid contract discussed above are present, a contract may be illegal and thus unenforceable. Agreement are contract if inter alia they are made for lawful consideration and with lawful object. Section 24 CA 1950 further provides that the following consideration and object are unlawful. It is forbidden by law, it is of the nature as to defeat any law, it is fraudulent, it involves or implies injury to person or property of another, the court regards it as immoral, or opposed to public policy.
A contract is an agreement enforceable by law between two or more parties to do or to abstain from doing some act(s), their intention being to create legal relation and not merely to exchange mutual promise both having given something or having promised to give something of value as consideration for any benefit derived from the agreement. Remedies that are available for breach of contract would depend on the gravity of the effect and impact of the breach. The types of remedies that are available are firstly is rescission of contract. The contract is annulled and both sides are excused from further performance and any money advanced is returned. Secondly are damages. It's an equitable quantum of money is paid to the plaintiff to compensate for any loss. Next is specific performance. A court order requiring performance exactly as specified in the contract. This remedy is rare, except in real estate transactions and other unique property, as the courts do not want to get involved with monitoring performance. Lastly is injunction. A court order directing one party to perform or to refrain from doing a certain act. It is used especially in situations where a monetary award for damages would not satisfy a plaintiff's claim or would not protect personal or property right from irreparable harm.
Write notes with examples on the three most important remedies available for breach of contract.
When one party has refused to perform or disabled himself from performing his promise, the other (innocent) party may put an end contract: s40, CA 1950. Therefore, the innocent party may treat the contract as being discharged. This depends on whether the breach is breach of a condition or a warranty. If it is a breach of a condition, the innocent party can treat the contract as being discharged.
The aim of damages is put the innocent party into position he would have been, had the contract been performed. The types of damages are such as.
Compensatory or ordinary damages
These are damages that are given to the party who has suffered loss caused by the breach of contract. The general position with regard to damages for breach of contract is that damages may be recovered as long as they are not too remote.
This damages requested and awarded by the court when the defendant's willful acts were malicious, violent, oppressive, fraudulent, wanton, grossly reckless. These damages are awarded both as a punishment and to set a public example. Although often requested, exemplary damages are seldom awarded.
These are the damages monetary compensation whose amount the parties agree upon during the formation of a contract for the injured party to collect as compensation if a specific breach occurs. Damages can be liquidated in a contract only if the injury is either uncertain or difficult to quality, or it would be difficult to prove the loss, or it would be difficult to find another adequate remedy. The amount is reasonable and is considered the actual or anticipated harm caused by the contract breach and structured to function as damages, not as a penalty.
Nominal damages are damages which consist of a small amount of cash payment which the court orders to be paid to the plaintiff who has suffered no quantifiable pecuniary loss. The award serves as a token of honor to the right of the plaintiff. Nominal damages is often sought to obtain a legal record of who was at fault.
Rescission of Contract
On a breach of condition of a contract, the injured party may treat the contract as at an end or rescinded and refuse to perform or fulfill his part of the contract. When one party to a contract has refused to perform, or disabled himself from performing his promise in its entirety, the promise may put an end to the contract, unless he has signified, by words or conduct, his acquiescence in its continuance s 40, CA 1950. A person who rightly rescinds a contract is also entitled to damages under s 76, CA 1950. An example is provided in the illustration to s 76 as:
A, a singer, contracts with B, the manager of a theatre, to sing at his theatre for two nights in every week during the next two months, and B engages to pay her RM 100 for each night's performance. On the sixth night A willfully absents herself from the theatre, and B, in consequence, rescinds the contract. B is entitled to claim compensation for the damage which he has sustained through the non-fulfillment of the contract.
Specific performance is an equitable remedy. It is specialized remedy used by the court when no other remedy, such as money will adequately compensate the injured party. Specific performance is a discretionary remedy and not an arbitrary remedy, an injured party may ask for an order of specific performance but it is up to the court whether or not to grant it. The most common reason courts grants specific performance is that the subject of the contract is unique. Specific performance is most commonly granted for contracts connected with land, it is not ordinarily granted in sales of good unless it is for the purchase of a rare or unique product. Example, Roslyn offers to sell Azmin his beachfront house and Azmin accepts. Roslan subsequently decides to keep the house. Since there in no other exactly like Roslan's, Azmin may be entitled to specific performance of the contract and the court may compel Roslan to sell the house.
An injunction is an order of the court restraining a person from doing a specific act in the future. It is granted only when it is just and equitable to do so having regard to all the circumstances of the case. In respect of contracts, an injunction may be sought to pervent a party from committing a breach of contract. For example, the court may order that a seller be restrained from selling land to anyone else when the seller has contracted to sell that land to the plaintiff.