Tort Law in Malaysia

INTRODUCTION


Torts are legal wrongs that one party suffers at the hands of another. Negligence is a form of tort which evolved because some types of loss or damage occur between parties that have no contract between them, and therefore there is nothing for one party to sue the other over.

In the 1932 case of Donoghue v Stevenson, the House of Lords decided that a person should be able to sue another who caused them loss or damage even if there is no contractual relationship. Donoghue was given a bottle of ginger beer by a friend, who had purchased it for her. After drinking half the contents, she noticed that the bottle contained a decomposing snail and suffered nervous shock as a result. Under contract law, Donoghue was unable to sue the manufacturer because her friend was party to the contract, not her.

However, the House of Lords decided to create a new principle of law that stated everyone has a duty of care to their neighbour, and this enabled Donoghue to successfully sue the manufacturer for damages.

In order to prove negligence and claim damages, a claimant has to prove a number of elements to the court.These are:

• the defendant owed them a duty of care
• the defendant breached that duty of care, and
• they suffered loss or damage as a direct consequence of the breach.

Even if negligence is proved, the defendant may have a defense that protects them from liability, or reduces the amount of damages they are liable for.

Duty of Care

The concept of a duty of care was created in the Donoghue case. The House of Lords stated that every person owes a duty of care to their neighbour. The Lords went on to explain that ‘neighbour’ actually means ‘persons so closely and directly affected by my act that I ought reasonably to have them in contemplation as being so affected’. The later cases of Anns v Merton London Borough Council (1977) and Caparo Industries plc v Dickman (1990) restricted the definition a little by introducing ‘proximity’ and ‘fairness’.

Proximity simply means that the parties must be ‘sufficiently close’ so that it is ‘reasonably foreseeable’ that one party’s negligence would cause loss or damage to the other. Fairness means that it is ‘fair, just and reasonable’ for one party to owe the duty to another.

Breach of Duty of Care

In many cases brought before the courts it is evident that a duty of care exists between the defendant and the claimant. The real issue is whether or not the actions of the defendant were sufficient to meet their duty. To determine this, the court will set the standard of care that they should have met.  This ‘reasonable’ standard may be adjusted given the actual circumstances of the case.

Circumstances which may be taken into account include whether:

• The actions the defendant took are in line with common practice or industry recommendations.
• There was some social benefit to the defendant’s actions.
• There were practical issues that prevented reasonable precautions being taken, or unreasonable cost would have been involved in taking them ; and many more.

Loss or damage as a result of the breach

In this element the claimant simply has to prove that the loss or damage was a direct consequence of the defendant’s breach of duty of care. In other words that there is a chain of causality from the defendant’s actions to the claimant’s loss or damage.   A simple test, called the ‘but for’ test is applied. All the claimant has to prove is that if it were not ‘but for’ the actions of the defendant then they would not have suffered the loss or damage. Where there is more than one possible cause of the loss or damage, the defendant will only be liable if it can be proved that their actions are the most likely cause.

The loss itself must not be ‘too remote’. It is an important principle that people should only be liable for losses which they should have reasonably foreseen as a potential outcome of their actions. The Wagon Mound (1961) is a case often cited in explanation of this principle.

Defences

There are two defences a defendant can use where they are found liable for negligence. One will exonerate them completely while the other reduces the level of damages they are liable for. 

Volenti non fit injuria simply means the voluntary acceptance of the risk of injury. If a defendant can prove the claimant accepted the risk of loss or damage, they will not be liable. Acceptance can be express (usually by a consent form being signed) or implied through the claimant’s conduct.

Contributory negligence takes part of the blame away from the defendant if it can be proved the claimant contributed in some way to their loss or damage. The defendant is still liable, but will face a reduced damages payout.

Sale of Goods and Services

The Sale of Good Act 1957 (SOGA herein forth) was enacted in 1957 and the statue was applicable to sale of goods in peninsular Malaysia (East Malaysia), excluding the states of Penang and Malacca. The Act was later revised in 1990 and it includes both states together. The states of Sabah and Sarawak (West Malaysia) are not governed by this act instead they are governed by section 5(2) of the Civil Law Act of 1956, which provides, among others, that the law to be administered in England in the like case at the correspondent period.The general principles that relate to contracts, for example, offer, acceptance, consideration and many more where it apply to a contract of sale of goods and the parties are free to agree on the terms which will govern their relationship.


The Act contains definitions or interpretations which clarify what the wording used in it refers to and the context. Below are some of the definitions of key terms in the SOGA :


(a) What is contract for the sale of goods?


Section 4(1) of SOGA 1957 stated that “A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price.” Price here means the money consideration for a sale of goods. Section 4 also states that the contract of sale may be absolute or conditional. The difference between the two is that an absolute contract of sale entails a seller transferring property in goods to the buyer, and the contract is known as a sale, where as in a conditional contract of sale the seller consents to transfer the property in goods to the buyer for a price pending the fulfillment of certain conditions and according to section 4 of SOGA the contract is known as, agreement to sell.


(b) Definition of Goods


Section 2 of SOGA 1957 explain “Goods” means every kind of movable property other than actionable claims and money; and includes stock and shares, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale. Goods can be classified into specific goods, future goods and contingent goods.


(c) Formation of the concept


Section 5 of the SOGA deals with the formation of, the contract of sale of goods. For the contract of sale of goods to exist, there has to be an offer to buy or an offer to sell for a price. Furthermore an acceptance of the offer has to follow and ultimately the contract may provide for immediate delivery or immediate payment or both or installments delivery or installments payment or both. The agreement to form a contract between the buyer and the seller may be in writing or partly in writing and partly by word of mouth or by word of mouth or may be implied from the conduct of the parties.


(d) Terms of a contract of Sale of Goods


The terms of a contract of sale of goods are based on section 12 of the SOGA and can be split into two parts which includes condition and warranty. Condition is the fundamental term of the contract, and the breach of the condition gives the injured party the right to reject the contract. Warranty refers to stipulation collateral to the main purpose of the contract, the breach of which gives the injured party the right to claim for damages but not to reject the goods and treat the contract as repudiated. According to section 13 of SOGA, the injured party can treat a breach of condition as a breach of warranty, which means that the injured party is entitled to claim for damages but not reject the contract. The case in point is the case of Associated Metal Smelters Ltd v. Tham Cheow Toh(1972)


(e) Implied terms of the Sale of Goods Act 1957


The main function of the statutory of implied terms is to protect the rights the buyer. These statutory implied terms are in Section 14 - 17 of the Sales of Goods Act 1957 as below :


Section 14 of the SOGA is divided into three parts :


(a) an implied condition to the seller to ensure that the buyer will enjoy the ownership as well as possession and use of the goods, failure to do so gives the buyer the right to reject the contract as the issue constitutes an implied condition
(b) states that there is an implied warranty that the buyer shall enjoy quit possession of the goods, and if the seller fails to comply, the buyer is entitled to claim for damages since the matter is being constituted as an implied warranty.
(c) an implied warranty that the goods shall be free from any charge or encumbrance in favor of any third party not declared or known to the buyer before or at the time when the contract is made

Section 15 of the SOGA is on the sale of goods by description. It states that where there is a contract for the sale of goods by description there is an implied condition that the goods shall correspond with the description; and, if the sale is by sample as well as by description, it is not sufficient that the bulk of the goods corresponds with the sample if the goods do not also correspond with the description as expressed in Purshotumdas and Co. v Mitsui Bussan Kaisha Ltd. (1911).

Section 16 of SOGA says that there is no implied condition or warranty as to the quality or fitness for any particular purpose of goods, unless the buyer requests the goods be reasonable for a purpose and the goods be of merchantable quality.


Based on Section 17 of SOGA, when dealing with goods by sample, it is required by the seller to ensure that the bulk of the goods must correspond with the sample.


(f) Nemo dat quod non habet Rule

Section 27 of the sale of goods Act 1957 codifies the ‘nemo dat quod non habet’ which means ‘no one can give a better title than he has himself’. This means that if goods are bought from a person who is not owner’s authority, the buyer does not acquire any title as put forward in the case of Lim Chui Lai v. Zeno Ltd and Ng Ngat Siang v. Arab Malaysian Finance BHD & Anor. However there exception for this rule where it is exempted when :

• estoppel 
• sale by a mercantile agents 
• sale by one of joint owners 
• sale under a voidable title 
• sale by a smaller in possession after sale 
• sale by a buyer in possession 

Transfer of Ownership

A contract of sale of goods involves transfer of ownership from the seller to the buyer. Transfer of ownership or property in goods is in fact the main object of making a contract of sale. It is important to know the precise moment of time at which the property in goods passes from the seller to the buyer because In case of destruction of or damage to the goods, it is the owner who has to bear the loss because the general rule is ‘res perit domino’ risk follows ownership or whosoever is the owner must bear the loss.


Rules regarding transfer of ownership :

• Goods must be ascertained 
• Property passes when intended to pass 

Remedies of the buyer and seller


The Sale of Goods Act gives the following remedies to aseller and buyer for a breach of a contract of sale:

Seller’s suits :

• Suit for price(Sec. 55) 
• Suit for damages for non-acceptance of the goods(Sec.56) 
• Suit for interest 

Buyer's suits :

• Suit for damages for non-delivery of the goods(Sec.57) 
• Suit for specific performance(Sec.58) 
• Suit for breach of warranty(Sec.59) 
• Suit for interest 

Discussion : Offer & Acceptance (Problem Question)

Question One :

Alan is a tenant of a home unit owned by Bill. Ten days ago Alan received a letter from Bill in which Bill stated that he (Bill) was ‘interested in selling’ his flat and asking Alan to ‘let him know’ if he (Alan) was willing to buy the home unit for the price of $450,000. Three days later Alan posted a letter to Bill in which he agreed to buy the home unit for the price set out in Bill’s letter. After receiving Alan’s letter, Bill telephoned Alan and told him that he had decided that he did not want sell the home unit.


Alan seeks your advice as to whether he has a contract with Bill for the sale of the home unit.

Answer :

(i) Introduction

For a contract to arise in the circumstances of the question, one of the parties has to make and offer which is duly accepted by the other. If there is an offer followed by an acceptance there will be a contract between the parties.

(ii) Issues

The issue raised by the question is whether Bill’s letter constitutes an offer. If it does, Alan’s reply is an acceptance of the offer, with the consequence that a contract exists between the parties. However, if Bill’s letter is only an invitation to treat, no contract exists between the parties because Alan’s reply will not be the acceptance of an offer. In fact, Alan’s reply would constitute the making of an offer to purchase the unit from Bill, and it is clear that Bill rejected that offer, given that he told Alan that he had decided not to sell the unit.

(iii) The Law

An offer has been defined as follows:

An offer is a statement of the terms upon which the offeror is prepared to be bound if acceptance is communicated while the offer remains alive as laid down in Nielsen v Dysart Timbers Limited [2009].

The critical aspect of the definition of an offer is the will or intent of the offeror to be bound in contract by the terms of the offer. A statement that lacks such will or intent is not an offer. Such a statement will often be what is termed an invitation to treat. An invitation to treat has been defined as ‘a request to others to make offers or to engage in negotiations with a sale in mind’. On other occasions the statement may simply be the supply of information, as was the case in Harvey v Facey.

(iv) Application of the Law to the Facts of the Problem

The significant fact in the problem is the statement in Bill’s letter that he is ‘interested in selling’ his unit. This raises the question of whether the letter displays the will or intent to bound in contract by the terms otherwise stated in his letter. 

In Gibson v Manchester City Council,[ [1979] 1 All ER 972.] the House of Lords was faced with a case whose facts were essentially identical to those in this problem. In that case the wording of the owner’s letter to the prospective buyer stated that the owner ‘may be prepared’ to sell the property to the prospective purchaser. The House of Lords ruled that the letter was not an offer, but rather, an invitation to treat. Lord Diplock observed that the relevant words in the owner’s letter were crucial in coming to the conclusion that the letter was ‘but a step in the negotiations for a contract which … never reached fruition’.[ Gibson v Manchester City Council [1979] 1 All ER 972, at 974.]

Although the wording in Bill’s letter is different to that in Gibson’s case, it is suggested that the result is the same in both cases. In saying that he was ‘interested in selling’ his unit, Bill did not display a will or intention to be bound in contract. Bill’s letter is not a firm indication that he would sell the unit to Alan. It effectively means that he is contemplating whether or not to sell, and as such is merely an invitation to treat. It is only following receipt of Alan’s reply, which is in fact an offer by Alan to purchase Bill’s unit, that Bill unequivocally decides whether or not he wants to sell his unit. His telephone call to Alan is a clear statement of his decision not to sell, and thus amount to a rejection of the offer.

(v) Conclusion

On the basis of the meaning of the words in Bill’s letter, as informed by the guiding authority of Gibson’s case, Bill’s letter is not an offer. This means that Alan’s reply is an offer. This offer has been rejected. The advice to Alan is that there is no contract between himself and Bill.

Sources

Damages / Remedies

Damages are intended to compensate the injured party for the loss that he has suffered as a result of the breach of contract. In order to establish an entitlement to substantial damages for breach of contract, the injured party must show that:

• actual loss has been caused by the breach
• the type of loss is recognised as giving an entitlement to compensation
• the loss is not too remote

There are several remedies for breach of contract, such as award of damages, specific performance, rescission, injunction. The mot common remedy for breach of contract is damages. There are three types of compensation available at common law as listed below :

• A sum of unliquidated damages based on the precise loss
• A liquidated sum fixed by the parties at the time the contract was formed
• A quantum mercuit for a party performed contract of service based on an amount representing the work already done

The End of A Contract

A contract can be terminated if there is elements such as vitiating factors namely misrepresentation, mistakes or either a breach in a contract or frustration.

(i) Vitiating Factors

Misrepresentation :

Representation is a statement of truth where else a promise is the statement by which the maker of the statement o do something or not to as presented in Kleinwood Benson v Malaysia Mining Co. Thus, misrepresentation is a misleading statement that had induced a person to enter into a contract. Usually misrepresentation causes the the contract to be voidable. The issues here are what sort of statement or conduct will amount to a misrepresentation and what redress does a plaintiff have in these circumstances? Misrepresentation can be discussed in four element which consists of the nature of misrepresentation, silence as to misrepresentation, types of misrepresentation and remedies. 

Not all false statements are misrepresentation. Before deciding whether a representation is actionable, it is imperative to begin distinguishing statements which are mere representations and statements which become terms of the contract. It is also important to identify which type of misrepresentation committed, in order to know which available remedies to claim. The nature of misrepresentation could defined as to check whether  the representation is a misstatement. The misstatement can be misstatement of a fact or a misstatement of opinion or intention. 

Besides identifying tat there must be an actionable misstatement, it must also be proven that the misstatement had induced the addressee to make a contract. A representation does not render a contract voidable unless it was intended to cause and as a matter of fact did caused the representee to enter into a contract. It mut have produced a misunderstanding must have been one of the reason which induced him to make the contract.

When we look into whether silence can amount to a misrepresentation or not, there answer is silence on the part of the representor will not amount to a misrepresentation unless it is distort truth by words, conduct or either by Uberrimae Fidei. This Latin maxim means ‘of the fullest confidence’ or ‘of he utmost good faith’. A contract is said to be uberrimae fidei when the promise is bound to communicate to the promisor every fact and circumstances which may influence him in deciding to enter into the contrac or not.

There are four categories of misrepresentation, which relate principally to the state of mind of the representor making the statement. Types of misrepresentation as below :

• Fraudulent - “Fraud means a false statement made by the maker either he knowingly or deliberately without belief in its truth or recklessly, carelessly whether it be true or false. If it is proven that it is a fraudulent, then the defendant liable for all actual damages.
• Innocent - A statement mae in the genuine belief that it is true and with reasonable grounds for the belief. The maker did not made the statement negligently.
• Negligent (at common law) - A statement made i the belief that it is true but without grounds for that belief. Usually, the maker of that type of statement had a special relationship with the person relying on that statement. This will give rise to a duty under the principles of Hedley Byrne v Heller (1964)
• Negligent (under statute) - S.2 (1) Misrepresentation Act 1967 interpret that the maker of the statement had NO reasonable grounds for believing it to be true. Thus, the defendant is liable for all actual damage flowing from misrepresentation under statute. The advantages of statutory misrepresentation i it do not require that there be a Hedley Byrne relationship between the parties and the measure of damages recoverable under s.2(1) is the measure of damages for the tort of deceit.

If misrepresentation is proven at court, then the defendant is eligible to either claim damages and/or rescission. Rescission has the effect either retrospectively (from the beginning the contract is void) and/or prospectively. However, misrepresentation renders a contract voidable, for instance, the representee can elect to continue with (affirm) the contract or terminate the contract. If he decides to rescind, he must give notice to the representor. 

Mistakes :

There is much disagreement concerning the effect of mistake on a contract. There are many reasons for this such as confusion as to which terms to use, a large number of cases which can be interpreted in different ways, no recent decisive House of Lords decisions on the subject and intervention of equity. The general rule is that a mistake has no effect on a contract, but certain mistakes of a fundamental nature, sometimes called operative mistakes, may render a contract void at common law. If the contract is rendered void, then the parties will be returned to their original position, and this may defeat the rights of innocent third parties who may have acquired an interest in the contract. The reluctant of the courts to develop the common law doctrine of mistakes is probably due to the unfortunate consequences for third parties that can result from holding a contract void. Equity has, however, intervened to produce more flexibility.

Operative mistakes are divided into :

• Common mistakes - it occur when both parties are agreed, but they are both under the same misapprehension. If this misapprehension is sufficiently fundamental, it may nullify the agreement. At common law, this may render the contract void, that is the contract has no legal effect.
• Mutual mistakes - these mistakes negate consent, that is, they prevent the formation of an agreement. The court adopt an objective test in deciding whether agreement had been reached. It is not enough for one of the parties to allege that he was mistaken
• Mistake in equity - the narrow approach taken by the common law towards remedies for mistake (that is it renders that contract void) is supplemented by the more flexible approach of equity. Remedies such as rectification, necessary conditions and refusal of specific performance available in equity as to mistakes.

(ii) Frustration

Frustration occurs where it is established that due to a subsequent change in circumstances, the contract has become impossible to perform, or it has been deprived of its commercial purpose. A good example is Avery v Bowden, in which a ship was supposed to pick up some cargo at Odessa. With the outbreak of the Crimean War, the government made it illegal to load cargo at an enemy port, so the ship could not perform its contract without breaking the law. The contract was therefore frustrated. The legal consequence of a contract which is found to have been frustrated is that the contract is automatically terminated at the point of frustration. The contract is not void ab initio ("from the beginning"); only future obligations are discharged. At common law, obligations which fell due for performance before the frustrating event are still in operation. 

(iii) Termination of contract

Breach

A breach of contract is committed when a party, without lawful excuse, fails or refuses to perform what is due from him under the contract, or performs defectively, or incapacitates himself from performing.

Anticipatory Breach

A anticipatory breach occurs when, before performing is due, a party either repudiates the contract or disables himself from performing it. If the injured party does not accept the breach, he remains liable to perform and retains the right to enforce the other party's primary obligations. acceptance must be complete and unequivocal and he should make it plain that he is treating the contract as at an end. A breach can be accepted by bringing an action for damages, or by giving notice of intention to accept it to the party in breach. 

Termination for breach

A breach gives the injured party the option to terminate the contract or to affirm it and claim further performance. At law, the right to terminate for breach arises in three situations:

• repudiation – where a party evinces a clear and absolute refusal to perform
• impossibility – where a party disables himself from performing
• substantial failure to perform - A failure in performance is "substantial" when it deprives the party of what he bargained for or when it "goes to the root" of the contract. For less serious breaches, a right to damages may arise, but not a right to terminate. 

Content of Contract

Terms of Contract :

Terms of the contract are those promises that will become binding on the parties. A term of the contract does not have to be set down in a written agreement, it may have been agreed orally, it may contained in another document or it may be implied either by the court or by statute. The terms of a contract can be divided into express terms and implied terms.

Express terms

Express terms are ones that the parties have set out in their agreement. The parties may record their agreement, and hence the terms of their contract, in more than one document. Those terms may be incorporated by references into the contract. Once the express terms have been identified, there is the question of interpretation. The document setting out the parties’ agreement must be interpreted objectively. It is not a question of what one party actually intended or what the other party actually understood to have been intended but of what a reasonable person in the position of the parties would have understood the words to mean. The ‘parol evidence’ rule provides that evidence cannot be admitted to add to, vary or contradict a written document. Therefore, where a contract has been put in writing, there is a presumption that the writing was intended to include all the terms of the contract. The parol evidence rile prevents a party from relying on extrinsic evidence only about the content of a contract, and not about its validity.

Implied terms

A contract may contain terms which are not expressly stated but which are implied, either because the parties intended this, or by operation of law, or by custom or usage.The courts have adopted two tests governing whether a term may be implied The first is the “officious bystander” test, if it can be established that both parties regarded the term as obvious and would have accepted it, had it been put to them at the time of contracting, that should suffice to support the implication of the term in fact.

Terms implied in law are terms imported by operation of law, whether the parties intended to include them or not. For example, in a contract for the sale of goods, it is an implied term that the goods will be of a certain quality and, if sold for a particular purpose, will be fit for that purpose. For certain contracts the law seeks to impose a standardized set of terms as a form of regulation. Many terms which are implied in law have been put into statutory form. For instance, a number of important terms are implied into contracts for the sale of goods by ss 12 to 15 of the Sale of Goods Act 1979.

Terms implied by custom or usage is the evidence of custom is admissible to add to, bu not to contradict, a written contract. Terms may also be implied by trade usage or locality.

Formation of Contract

Under the formation of contract, there are few element to be considered as listed below :

• Offer
• Invitation to Treat
• Acceptance
• Considerations
• Intention to Create Legal Relations
• Exclusion Clause

Offer :

In the content of Malaysia Law, an offer in the context of the Contract Act 1950 is known as a ‘proposal’, which is defined in S. 2(a) of the Act and a contract is made when there is an acceptance, this had been stated in S. 2(b) the Act. When both offer and acceptance obtained, a promise had formed. The person making an offer is called the offeror, and the person to whom the offer is called the offeree. An offer is a definite promise to be bound provided that certain specified terms are accepted. 

For instance in the case of Gibson v Manchester City Council(1978), Lord Denning found that the contract was concluded between these two parties due to the agreement of the parties on all materials points although the precise formalities had not been completed. However, later in the House of Lords, it was held that there is no binding contract as the letter from the treasurer which stated that the council “may be” willing to sell was not an offer, it was simply a willingness to enter negotiations and not an offer that was capable of being accepted. Hence, the requirement for an offer to exist not only focuses the promise made but also the certainty of term here both parties will have to make their intention clear and precise.

For an offer to be valid, it must be communicated so that the offeree will have the choice to accept or reject the offer been made. The mode of the communication can be in written, orally or by conduct. As we discussed earlier, the offer may be made to a particular person which we known as bilateral offer and to a group of persons or to the whole world which described as unilateral offer. In Carlill v Carbolic Smokeball (1893), a variety of arguments were put forward to distinguish whether this case fall under an unilateral offer or either an invitation to treat. The Court of Appeal however held that where an offer takes the form of payment or reward in exchange for a particular act - in what is known as a unilateral offer and there is no need for notification of acceptance.

Invitation to Treat :

If an offer is not an offer then it is consider to be an invitation to treat. An invitation to treat is an indication that the party is willing to enter into negotiations but is not prepared to be bound immediately. The distinction between an offer and an invitation to treat depends on the reasonable expectations of the parties. The courts have establishes that there is no intention to be bound in the following elements :

(a) Display of goods for sale in a shop

In Pharmaceutical Society of GB v Boots Cash Chemist Ltd (1952), the Court of Appeal held that , in a self-service shop, the sale takes place when the assistant accepts the customer’s offer to buy the goods. Hence the display of goods is a mere invitation to treat. On the other hand, Lord denning in Thornton v Shoe Lane Parking (1971) said that vending machines and automatic machines are making offers, because, once the money had been inserted, the transaction is irrevocable. 

(b) Advertisement

In Partridge v Crittenden (1968), an advertisement which said ‘Bramble finch cocks and hens - 25s’ was held to be an invitation to treat. The court pointed out that, if the advertisement was treated as an offer, this could lead to many actions for breach of contract against the advertiser, as his stock of birds was limited. He could nott have intended the advertisement to be an offer. However, if the advertisement is unilateral in nature, and there is no problem of limited stock, then it may be an offer as demonstrated in Carlill v Carbolic Smokeball Co Ltd.

(c) Auctions

An auctioneer’s request for bids in Payne v Cave (1789) was held to be an invitation to treat as the offer was made by the bidder. In Harris v Nickerson (1873), it was held that a notice that an auction would be held on a certain date was not an offer which then could be accepted by turning up at the stated time. It was a statement of intention. If the auction is stated to be ‘without reserve’, then there is still no necessity to hold an auction, but, if the auction is held, lots must be sold to the highest bidder as shown Barry v Heathcote Ball (2001), which was later confirm in Warlow v Harrison (1859).

(d) Tenders

A request for tender is normally an invitation to treat. However, it was held in Harvela Ltd v Royal Trust of Canada (1985) that if the request is made to specified parties and it is stated that the contract will be awarded to the lowest or the highest bidder, then this will be binding as an implied unilateral offer. It was also held in Blackpool and Fylde Aero Club v Blackpool BC (1990) that, if the request is addressed to specified parties, this amounts to a unilateral offer that considerations will b given to each tender which is property submitted.

Acceptance :

An acceptance is a final an unqualified assent to all the terms of the offer. A valid acceptance must be made under four important conditions as below :

• Be made while he offer is still in force 
• Be made by the offeree
• Be written, oral or implied from conduct
• Exactly match the term of the offer - Lord Denning emphasized the ‘mirror image’ principle where the offer and acceptance must match precisely as discussed in the case of Hyde v Wrench (1840).

In Brogden v Metropolitan Railway (1877), the returned document was held to be a counter offer which the defendants then accepted either by ordering coal or by accepting delivery of the coal. Here we certainly must take note that counter offer ‘kills off’ the original offer because when the offeree introduce new terms in an agreement, then there is new elements included where it need an acceptance for the new agreement not the old one. However, the offeror may require the acceptance to be made in certain way:

• If the requirement is mandatory, it must be followed
• If the requirement is not mandatory, then another equally effective method will suffice.

Moreover, alike offer an acceptance must be communicated by the offeree or his agent to the offeror. In Powell v Lee (1908), an unauthorized communication by one f the managers had selected a particular candidate fro a headship was held not to be a valid acceptance. Besides that, silence as communication would not be considered to be an acceptance. However it been suggested that this doesn not mean that silence can never amount to acceptance, for example, in Felthouse v Bindley, the offeree had relied on the offeror’s statement that he need not communicate his acceptance, and wished to claim acceptance on that basis, the court could decide that the need for acceptance had ben waived by the offeror. 

Another element where it only applies for an acceptance is the postal rule. The rule is that where acceptance by post has been requested or where it is an appropriate and reasonable means of communication between the parties. Additionally, the acceptance is completed immediately the letter of acceptance is posted even if the letter is delayed, destroyed or lost in the post so that it never reaches the offeror as demonstrated in Adam v Lindsell (1818). However there are differences between acceptance and revocation of an offer by post which is acceptance of an offer takes place when a letter is poted while the revocation of an offer takes place when the letter is received. Adding with modern technologies, communication can even made through electronic means such as emails, telex, fax and many more. Here, however, acceptance takes place when and where the message is received. The rules on telephones and telex were laid down in Entores v Miles and then were confirmed in Brinkibon Ltd v Stahag Stahl (1983). 

Consideration :

In addition to offer and acceptance and contractual intent, consideration is an essential element in the formation of any contract not by deed. Consideration in it simple definition is the benefits to one party or a detriment to the other party. Mostly the legal system will only enforce promises when there is something to indicate that the promisor intended to b bound, that is, there are some forms, ‘badge of enforceability and reciprocity consideration which was suggested in Currie v Misa (1875). Hence, consideration is something of value that each party must give to support the promises that they made in the contract. 

Consideration can be categories into two category which is executory consideration and executed consideration. Executory consideration is a promise to do something in the future.  Other than that, there are rules in relation to considerations as below :

• Consideration must move from the promisee
• Consideration must not be past
• Consideration need not be adequate
• Consideration must be sufficient 
• Part payment of a debt is not consideration; and
• Promissory estoppel

Intention to Create Legal Relation (ITCLR) :

An agreement will not constitute a binding contract unless it is one which can reasonably be regarded as having been in contemplation of legal consequences. A mere statement of intention made in the course of conversation will not constitute binding promises, though acted upon the party to whom it was made. Basically, ITCLR can be divided into express statement an implied intention.

Express statement is where even though the agreement was made expressly, due to the surrounding circumstances, it is not necessary there is an ITCLR. This is because express statement is based on objective not based on subjective, meaning to say it is on how the majority of the society would perceive. The question here is would a reasonable man have done the same thing? On the other hand, implied intention is the indirect intention and usually it is hard to proof the party was actually intended into a legal relationship. Under the implied intention, there are two different elements which covers social and domestic agreements while the other one is commercial and business agreements.

In commercial and business agreements, there is a presumption that the parties intend to create legal relations. This presumption may be rebutted but the onus at proof is on the party seeking to exclude legal relations. The onus of rebutting contractual intent must be a heavy one as expressed in Edward v Skyways Ltd (1964) where a redundancy agreement providing for an ex gratia payment to be made to an employee was held to be a binding contract as the expression used was insufficient to rebut the contractual intention. However, collective agreements are declared not to be legally binding by the Trade Unions and Labour Relations (Consolidation) Act 1992 unless expressly stated in writing to be so. 

In social and domestic agreements, there is presumption against legal relations. This can be rebutted by evidence to the contrary, for example, agreements between family members as illustrated in Jones v Padavatton (1969). However, when members of family have a business relationship with each other, there will be contractual intention in relation to contracts of a business, as opposed to a domestic nature as demonstrated in Snelling v John G.Snelling. To summarized, an intention to be legally bound may be inferred where:

• One party has acted to his detriment on the agreement
• A business arrangement is involved 
• There is mutuality
• The agreement must be clear

An intention to be legally bound may not be inferred where:

• To offer a friend a meal is not to invite litigation
• An arrangement for a golf competition
• An arrangement for sharing petrol costs where a person is given a lift to work

Exclusion Clause :

It is common to find a party trying to limit or exclude their liability in certain situations by including an exception, exemption or exclusion clause (expressly or impliedly) in the contract. Such clauses are frequently found in ‘standard form’ contracts. An exclusion clause is generally defined as any term in a contract excluding, restricting or modifying wholly or in part a remedy or liability arises out of a breach of a contractual obligation. 

These are clauses, usually written down, that say that one party to the contract will not be responsible for certain happenings. For instance, if you got to gym, it is common for the contract to say that the gym owner will not be responsible if you are injured while exercising. Such limitation of or n exclusion from liability may be a perfectly reasonable business practice, but is subject to control, both by the courts and statute, to prevent abuses. Considering the fact that limitations imposed on the recipient by the contractual framework, the courts nevertheless endeavored to alleviate the position  of the recipient of the documents by requiring certain standard of notice in respect of onerous terms, and by construing the documents whenever possible in that person’s favour.

Basically, exclusion clauses can be valid if they are not contrary to law, the clauses had been properly incorporated in the contract and it must ne clear an unambiguous. Thus, the general principle when party seeking to rely on an exclusion clause or limitation clause must prov to the court that it was incorporated into the contract and that as a matter of construction it covers the loss of damage suffered. To determine the validity of exclusion clause, it can be done through incorporation to see whether the clause is part of the contract by previous course of dealing, with a reasonable notice and also signature. Also we can determine by interpretation where we follow the contra-preferentum rules. Lastly its by legal control, either trough statute or common law.