QUESTION 1

According to the law, consideration for a contract must be sufficient but it need not be adequate.
First of all, in order to make a contract, there have four elements that compulsory. They will be
offer, acceptance, consideration and intention. Consideration is one of the important elements that
must be present with the purpose of making a contract binding. Consideration can be defined as
payment or money and it is also a fundamental element into a contract. The principle of
consideration is to ensure that promises are enforced to the parties that promised to exchange
something of value in the viewpoint of the law. Consideration is only present when the parties mean
to have an exchange.

However, consideration must be sufficient but need not be adequate. It means consideration must be
having some values, whether it appropriates in order to meet the return of the agreement. The things
that they agree to make an agreement are not just simply in oral promises but also in exchange of
some value of the exchange. They would probably not need to have the same value or equal value
of the exchange in an agreement but the law will take it as a consideration as adequate if the parties
are agreed to the exchange. The conditions of a legally consideration is simply that the parties agree
into an exchange and respect to each other, the subjects exchanged or promised in exchange.

In White v Bluett (1853), Bluett sued his father’s will for an outstanding debt to his father and he
claimed that his father had promised him to return it for him. But his father asked him to stop
complaining in return for him. The court held that the promise does not counted as real
consideration, because to stop complaining was not have any economic value. So Bluett was still
liable for the debt. In this case, we can see that in consideration, the exchange of the promise must
be tangible. Not stop grumbling or complaining, these are no economic value to have an exchange
with the other parties.
QUESTION 2

a) Privity of Contract: The general rule is that only the person entitled to the benefits or bound by
the obligations of a contract are entitled to sue or be used upon it. Thus, a stranger to contract,
cannot file a suit to enforce any of the rights arising out of the contract. Therefore, if A for good
consideration agrees with B that he will not sue for C’s negligence, the latter will not be able to
set up the promise of A to be as defense. So, Fauziah implies this as Sherry's brother involve in
this offer. This can be proof from Dunlop Tyre Co. V. Selfridge Ltd. (1915). In this case, D
supplied tyres to a wholeseller X, on the condition that any retailer to whom X resupplied the
tyre should promise X, not to sell to the public below D’s list price. X supplied the tyres to S, a
sub-dealer, S sold two tyres at less than the list price, and thereupon, the Dunlop Co., sued him
for breach of the contract. Held, Dunlop Co., could not claim the benefit of the contract as
against S, a sub-dealer, There was no privity of contract between the two.

b) Invitation to treat is cannot consider as offer. An invitation to treat is different to an offer as it

only invites the party to make an offer and it is not intended to be binding. An offer may be
made to definite person or persons or to the world at large. When it is made to some specific
person or persons it is called a specific offer. When it is made to the world at large it is called a
General offer. A specific offer can be accepted only by the person to whom the offer has been
made and in the manner, if any specified in the terms of the offer. But a general offer can be
accepted by any persons having notice of the offer by doing what is required under the offer. The
most obvious example of such an offer is where a reward is publicity offered to any about that
object, who will recover a lost object or wll give some information, there the party claiming the
reward has not to prove anything more than that he has performed the conditions on which the
reward was offered. The time table of railways is a general proposal to run trains according to
the table, which is accepted by an intending passenger tendering the price of the ticket. Carlill V.
Carbolic Smoke Ball Co. (1983). In this case, the Company advertised that a reward of ￡ 100
would be given to any person who contracted influenza after having used the smoke-balls of the
Company as directed. Mrs. Carlill used the smoke-balls according to the directions of the
company. but contracted influenza. It was held, that the offer was a general one, and Mrs. Carlill
had accepted it by acting in accordance with the advertisement, and therefore, the company
could not get away from its responsibility by saying that they had not meant it seriously. She
was entitled to the reward.
QUESTION 3

A person will attain majority when reaching 18 as per Age of Majority Act 1971. It has been seen
that minors are a class of people who require protection from the consequences of being immature.
This developed to the common law principle that as a general rule any contract entered into by a
minor is not binding unless it falls within the recognized category of exceptions.

Under the Act - contracts entered into by a minor person is void and not merely voidable.
Cases: Tan Hee Juan v Teh Boon Keat (1934) MLJ 96 HC ; Government of Malaysia v Gurcharan
Singh & Ors (1971) 1 MLJ 211 HC ; Leha Binte Jusoh v Awang Johari bin Hashim (1978) 1 MLJ
202, FC.

EXCEPTIONS

Contracts for necessaries Section 69 - suppliers of necessaries are to be reimbursed. Meaning to say
if a minor contracted for necessaries (food, lodging, clothes), such contracts are not void. However,
the Act does not define necessaries. Hence the judicial pronouncements in Gurcharan's case could
be followed. Necessaries were to be defined broadly and not limited to goods and could include
scholarships to pursue studies. Today, l;aw related to scholarships have been amended - Section 4a
& 5 Contracts (Amendment) Act 1976.

Fraud by Minors
If minor misrepresents as a major, cannot be proceeded under the tort of deceit in common law as it
would be a means of indirectly enforcing the contract. Under the Act, all such contracts except
where it is a necessity is void and it is so even if the minor has misrepresented.

Restitution

A minor could be ordered to make restitution or return the goods obtained through his/her fraud. It
is a limited remedy and available only where the minor has acted fraudulently and the goods are
still in his/her possession and is identifiable.

Marriage Contracts
Marriage contract is an exception. Section 4(a) of the Age of Majority Act 1971 provides that a
minors ability to enter into a marriage, divorce, dower and adoption is not affected.
Nevertheless, a person below the age of 21 though of majority age need to still get the consent of
his/her father in a written form before the marriage.

Employment Contracts
Section 13 Children and Young Persons (Employment) Act 1966 - any child or young person is
competent to enter into a contract of service.
QUESTION 4

Invitation to treat is cannot consider as offer. An offer is a statement of the terms which the client
(the offeror) is prepared to be contractually bound. The offer must be complete, specific and capable
of being accepted. It must include the fundamental terms of the agreement with the intention that no
further negotiations are to take place. Client offer contractor the work and therefore the contractor
must carry out the work under the client’s terms and conditions. It is possible to make a conditional
offer. The effect of this is that an offer cannot be accepted if the condition has not been satisfied.
For example the client requires the contractor to have a specific tool or machine before an offer can
be made.

An invitation to treat is different to an offer as it only invites the party to make an offer and it is not
intended to be binding. The contractors are invited to bid on the job, by calculating the total work
cost and to have the tenders submitted in a specified time. The main difference between this
situation and an auction is that person submitted the tender, does so in ignorance of other’s bids
because the final decision is up to the client. An invitation to treat is when a client invites
contractors to make him/her an offer. For example, when the client advertises a job on internet or
newspaper, it is usually an invitation to treat rather than an offer. The offer only comes into
existence after the client reviews the tenders handed in by the contractors and accept the offer.

An offer on the other hand is when the client offers the job to one contractor without advertising the
job or having contractors to submit in the tender. Making an invitation to treat, rather than an offer,
protects the client from finding him/her self agreed into a contract he/she cannot fulfill. Instead the
client can refuse the contractor’s offer for many different reasons. For example under case Carlill v
Carbolic Smoke Ball Co [1892]. The company made a product called “Smoke Ball". It claimed to b
e a cure to influenza and many other diseases, in the context 1889-1890: Flu pandemic which is esti
mated to have killed 1 million people. The smoke ball was a rubber ball with a tube fixed to its open
ing. The ball is filled with Carbolic acid (Phenol). The tube is supposed to be inserted in one of your
nostrils and the bottom part of the rubber ball is to be pressed. The gas enters your respiratory tract
and flushes out al the viruses.

The Company published advertisements in the Pall Mall Gazette and other newspapers on

November 13, 1891, claiming that it would pay ￡100 to anyone who got sick with influenza after
using its product according to the instructions set out in the advertisement.
“￡100 reward will be paid by the Carbolic Smoke Ball Company to any person who contracts the
increasing epidemic influenza colds, or any disease caused by taking cold, after having used the ball
three times daily for two weeks, according to the printed directions supplied with each ball. ￡1000
is deposited with the Alliance Bank, Regent Street, showing our sincerity in the matter. During the
last epidemic of influenza many thousand carbolic smoke balls were sold as preventives against this
disease, and in no ascertained case was the disease contracted by those using the carbolic smoke
ball. One carbolic smoke ball will last a family several months, making it the cheapest remedy in
the world at the price, 10s post free. The ball can be refilled at a cost of 5s. Address: “Carbolic
Smoke Ball Company, “27, Princes Street, Hanover Square, London."

Louisa Carlill believing in the accuracy of the statement made in the advertisement with respect to e
fficacy of the smoke ball in cases of influenza, purchased one packet and used it thrice everyday fro
m mid November, 1891 until 17th Jan, 1892, at which latter date she had an attack of influenza.

Thereupon, her husband wrote a letter for her to the defendants, stating what had happened, and
asking for £100 as promised in the advertisement. They refused and this action was brought in court
before Hawkins J. and a special jury. Arguments were heard on both the sides and finally the verdict
was given in favor of Mrs. Carlill. The defendants appealed.

The Court of Appeal unanimously rejected the company's arguments and held that there was a fully
binding contract for £100 with Mrs. Carlill. Among the reasons given by the judges were:

(1) That the advertisement was a unilateral offer to the entire world

(2) The satisfying conditions for using the smoke ball constituted acceptance of the offer.

(3) That purchasing or merely using the smoke ball constituted good consideration, because it was a
distinct detriment incurred at the behest of the company and, furthermore, more people buying
smoke balls by relying on the advert was a clear benefit to Carbolic

(4) That the company's claim that £1000 was deposited at the Alliance Bank showed the serious
intention to be legally bound.

QUESTION 5
Unpaid Seller is the seller who has not received price of goods sold or the seller who has got his
negotiable instrument dishonored as per sale of goods act, 1930 from Section 45 to 55. This can be
classified to two groups:
a) Rights against Goods
b) Rights against Buyer

Below explanation for rights against buyer

At times it becomes inevitable choice to exercise rights on buyer for non-payment of price. The
unpaid seller can file suits against the buyer as below:

i) Right to sue for price

It is fundamental right of buyer to file a suit for recovery of unpaid price. In the case of sale. Suit
will be made for price balance, but not for compensation.

ii) Right to sue to interest

If the buyer makes unreasonable delay for making payment, the seller has right to claim interest
also.

iii) Right to sue for compensation

When an agreement to sell is breached, the seller can see only for compensation for the breach of
Contract. Under such circumstances he cannot sue for price.

iv) Right to sue for anticipatory contract

When an agreement to sell is breached by buyer before date of performance. It is called anticipatory
breach. Then also seller can sue for compensation.

QUESTION 6

Agency is a relationship between two people where one is called the principal and the other is
called the agent. As per section 135 Contract Act 1950, agent is a person employed to do any act for
another in dealing with third person whereas principal is the person to whom such act is done or
who is so represented. For example, Ali appoints Muthu to buy some goods on his behalf, Ali is
called the principal while Muthu is his agent. The seller of the goods is called as third person.

Diagram 1 – Agency Relationship

There are different various types of kind agents are as follows.

(a.) Sub-Agent:
Sub-agency denotes delegation of power by an agent to a person appointed by him as sub-agent.
Incidentally the agent himself is delegate of his principal. The principal is that ‘a delegate cannot
delegate’. According to this, a person to whom powers have been delegate cannot delegate them to
another as per section 190. Generally, an agent cannot lawfully employ another to perform acts,
which he has expressly. But, if by the ordinary custom of trade, a sub-agent may be employed, the
agent may to do so. A sub-agent, according to section 191, is a person whom the original agent
employs in the business of the agency and who under the control of the original agent. Thus the
relation of the sub-agent to the original agent is, as between themselves, that of the agent and the
principal. The impact of the appointment of a sub-agent from the following two angles:-

In case of proper appointment: The agent is responsible to the principal for the acts of the sub
agent. Thus, a commission agent for the sale of goods who makes a proper employment of a sub-
agent for selling his principal’s goods is liable to the principal for the fraudulent disposition of the
goods by sub-agent within the course of his employment.

In the case of appointment without authority: In term of Section 193, the principal is not bound by
the acts of the sub-agent, nor is the sub-agent liable to the principal. The agent is the principal of the
sub-agent both to the principal and the third party.
(b.) Substituted Agent:
Substituted agents are different from sub-agents. Section 194 provides that substituted agents are
not sub-agents but are in fact agents of the principal. Suppose an agent has an implied authority to
name another person to act for the principal in the business of the agency, and he has named another
person accordingly. In the circumstances, such a named person is not a sub-agent he is an agent of
the principal for such part of the business of the agency as has been entrusted to him.

For Example: A directs B who is a solicitor to sell his estate by auction and to employ an
auctioneer for the purpose. B names C, an auctioneer, to conduct the sale. In such a situation, C is
not sub-agent, but is A’s agent for the sale.

(c.) Special Agents:

A special agent is also known as a specific or particular agent. Such agent appointed to perform a
particular work or to represents his principal in particular transaction only. As soon as the said
period lapses, the agency stands terminated. Specific agents have a limited authority and as soon as
the entrusted to him is performed, his authority also comes to an end. A special agent cannot bind
his principal in any act other than for which he is specially appointed. If he dose anything outside
his authority, his principal cannot be bound by it. The third parties that deal with a special agent
must ascertain the extent of the authority he has.

(d.) General agents:

This type of agents has a general authority to do everything in the course of his agency and he has
to perform all the acts in the interest of his principal. Thus, a general agent is one that ahs authority
to do all acts connected with the business of his principal. A manager of a branch shop of a firm or a
commission agent is instances of general agents. General agents have an implied authority to bind
his principal by doing various acts necessary for carrying on the business of his principal.
Sufficiently wide powers are vested in him to affect the business deals, enter into trade bargains, to
make purchases and also payments of the purchases, to receive money on behalf of his principal.
(e.) Universal Agent:
A universal agent has a universal or an unlimited power to act on behalf of his principal. A universal
agent is one whose authority is unlimited and who can do any act on behalf of his principal provide
such act is legal and is agreeable to the law of land. A universal agent is practically substituted for
his principal for all those transactions wherein his principal cannot participate.
For Example: When a person leaves his country for a long time, he may appoint his son, wife or
friend as his universal agent to act on his behalf in his absence.

(f.) Co-Agents:
When a principal appoints two or more persons a agents jointly or severally, such agents are known
as co-agents. Their authority is joint when nothing is mentioned about the exercise of their
authority. It implies that all co-agents concur in the exercise of their authority unless their authority
is fixed. But when their authority is several, any one of the co-agents can act without the
concurrence of other.

(g.) Auctioneers:
An auctioneers is a mercantile agent who is appointed to sell goods on behalf of the principal i.e.,
seller and for this function, an auctioneer get a reward in the form of a commission. An auctioneer
conducts auction on behalf of a seller, as he is primarily the agent of the seller. However, after the
sale, he also becomes of the purchaser who gives the highest bid. An auctioneer has no authority to
self-the goods of his principal by private contract or contracts.

Besides the above mentioned agents, there are other types of agents also such as brokers, bankers,
clearing agents, forwarding agents, underwriter, estate agents, etc. They also play an important role
and perform various functions for and on behalf of their principals.

QUESTION 7

i) The law of partnership is governed by the Partnership Act 1961 (Revised 1974).

ii) The statement is incorrect. When a partner retires from the firm, he remains liable for the
partnership debts incurred before his retirement. This is clearly stated in Section 19(2),
which says that ‘a partner who retires from the firm, he remains liable for the partnership
debts incurred or obligations incurred before retirement’. However a ‘retiring partner may
be discharged from any existing liabilities by an agreement to that effect between himself
and the members of the firm as newly constituted and the creditors, and this agreement may
be either express or inferred as a fact from the course of dealing between the creditors and
the firm as newly constituted as per Section 19. Where the debts incurred after a partner’s
retirement, he is still liable to persons who deal with the firm after a change in its
constitution unless he has given express notice to such persons that he is no longer a partner.

For example under case Phillips Singapore Private ltd versus Han Jong Kwang and Anor
[1989] 2 MLJ 323, it was held that the mere fact of registration of retirement in the Registry
of Business will not give notice to a third party of that party.