Contract defined as an agreement between two or more parties which is intended to have legal consequences.

The objectivity of law of contract is to identify those agreements which it will enforce and those which it will not. The law of Contract in Malaysia is govern by the Contracts Act 1950(Act 136)(Revised 1974).Under section 2(h) of the Act, the word contract may be defined as an agreement enforceable by law. The basic elements constituting a valid contract are as follows: offer, acceptance of the offer, intention to create legal relations, consideration, certainty and capacity. OFFER. It is necessary for the information of an agreement. The first limb of Section 2(c) of the Contract Acts calls the person making the proposal the promisor and it capable of being converted into an agreement when it is accepted by the other parties. It is divided into four which is; Offer must be firm or it must be a definite promise. The promisor must declare his readiness to undertake an obligation upon certain terms and leaving the option whether to accept or refuse the offer. For example the case of GUNTHING V LYNN (1831). Next, it may be made to an individual or to a large number of people. An offer can be made to an individual or to the whole world and the court will look into the firmness of the offer and the intention of the party making the offer. For the example in this case CARLILL V CARBOLIC SMOKE BALL CO. (1892). Forth, it may be made in writing, by words or by conduct. An offer or proposal made in word (oral or written) is said to be expressed and if the offer of proposal is made other than by words (example by conduct), it is said to be implied. It must be communicate to the offeree. Section 4(1) mean that an offer is effective once it is communicated to the offeree by the offeror. Section 3(1) provides that the communication of the offer is deemed to have been made by any act or omission of the party proposing by which he intends to communicate the proposal or which have the effect of communicating it. For example in this case TAYLOR V LAIRD (1856) An offer distinguished by counter offer. It should by noted that beside revocation an offer can also be considered as terminated when the offeree makes his counter offer to the original offer. This can be seen in the case of HYDE V WRENCH (1890). However, counter offer may be accepted by the original offeror and this situation will be effect of creating a binding contract. For example in this case BUTLER TOOL CO V EX-CELL-O CORP (1979). Further in some cases the offeree may reply to the offeror in terms which leave it uncertain whether he is making a counter offer or merely seeking further information before making up his mind. A mere request for information obviously does not destroy the offer. For example in the case of STEVENSON V McLEAN (1880).

An offer also can be distinguished by invitation to treat. An offer can be converted into an agreement by acceptance, an invitation to treat occurs where a party is said to be initiating negotiations or inviting another party to make an offer, Therefore an invitation to treat cannot be accepted to form a binding contract. There are four types of invitation to treat which are advertisements, displays of goods in a shop windows or on the open shelves, auction sales and invitation for tenders. Advertisements. It is merely to attempt to induce offers and therefore classified as an invitation to treat. This can be seen in the case of COELHO V THE PUBLIC COMMISSION (1964) MLJ 12. Displays of goods. In the case of goods on display in a shop, it has long be decided that it is the customer who makes an offer and the shopkeeper who accepts the offer. For example in the case of FISHER V BELL (1961). Next is auction sales. An auctioneers request for bids is not a definite offer to sell to the highest bidder, it is rather an invitation to treat. The bid itself is the offer, which the auctioneer is then free to accept or reject. For example in the case of PAYNE V CAVE (1789). Lastly invitation for tenders. When a person tender for a contract he is making an offer to the person who has advertised a contract as being available. But when the tender is accepted, the tender becomes an offer where the tender is a standing offer to supply goods and services as required by the buyer, a separate acceptance is made each time an order is placed. For example in the case of G.N RAILWAY CO. WITHAM (1873). An offer may be withdrawn at any time before acceptance. Section 6 of the contract act 1950 states the proposal is revoked by communication of notice of revocation by the proposer to the other party, by the lapse of time prescribed in the proposal for its acceptance, or if no time is so prescribed, by the failure of the acceptor to fulfill a condition precedent to acceptance and by the death or mental disorder of the proposer. Communication of revocation. It must be communicated to the offeree. Section 3 provides that the communication of the revocation of proposals are deemed to be made by any act or omission of the party revoking, by which he intends to communicate the revocation, or which has the effect of communicating it. For example in the case of DICKENSON V DOODS (1876). Revocation by lapse of time. An offer may be expressed to last for a specified time and it expires at the end of that times. However there is no express tome time set, it is expires after a reasonable time. For example in the case of RAMSGATE VICTORIA HOTEL CO V MONTEFIORE (1866). Revocation by failure to fulfill a condition precedent. An offer may be conditional. If the condition is not satisfied, the offer is not capable of acceptance and therefore revoked by way of section 6(c) of the Contract act 1950. For the example in the case of FINANCINGS LTD V STIMSON (1962).

Next is acceptance. Section 9 of the Act provides that so far as the acceptance of any promise is made in words, the acceptance is said to be expressed. If the acceptance is made than in words, the acceptance is said to be implied. First, acceptance must be absolute and unqualified. For a proposal to be converted into a promise, the acceptance of that proposal must be absolute and unqualified that is provided in section 7(a). If the parties are still negotiate, an agreement is not yet formed. For example in the case LAU BROHERS & CO. V CHINA PACIFIC NAVIGATION CPO. LTD (19651) MLJ 1. Acceptance must be expressed in some usual and reasonable manner. When the acceptor deviates from the prescribed manner, the offeror must not keep silent. If he does so and fails in insists upon the prescribed manner, he is consider as having accepted the acceptance in the modified manner. Acceptance must be made within reasonable time. What amount to reasonable time is a question of fact depending on the circumstances of each cases, for example the nature of the subject matter or the method by which the offer is communicate. The rationale for this rules is given by Hashim Yeop A Sani J in the case of MACON WORKS & TRADING SDN BHD V PHANG HON CHIN & ANOR (1976) 2 MLJ 177. Acceptance must be communicated. Section 3 of the Contract Act provides inter alia that the communication of acceptance are deemed to be made by any act or omission of the party accepting. Example in the case of HOUSEHOLD FIRE AND CARRIAGE ACCIDENT INSURANCE CO. V GRANT (1879). Acceptance by performing conditions, or receiving consideration. Section 8 of the Contracts Act provides that Performance of the condition of a proposal, or acceptance of any consideration for a reciprocal which may be offered with a proposal, is an acceptance of the proposal. Therefore if the acceptor perform the act required under the offer, the acceptor can be said as accepting the offer. This is illustrate by the English case of HOLIWELL SECURITIES LTD V HUGHES (1974). INTENTION TO CREATE LEGAL RELATIONS. Under the common laws, a contract is an agreement that is intended to have legal consequences. Whether or not an agreement is intended to have such consequences is not always easy to determine. For example in the cases of SIMPKINS V PAYS (1955). CONSIDERATION. One of fundamental rules of the law of contract is that consideration is a necessary element in the formation of a valid simple contract. There are four type of consideration which are; Consideration need not be adequate. Section 26 of Contract Act provides that an agreement to which the consent of the promisor is freely given not void merely because the consideration is inadequate. For example in the issue of PHANG SWEE KIM V BEH I HOCK (1964) MLJ 383.

Consideration need not move from the promise. Under the Contract Act, the party to an agreement can enforce the promise even if he himself has given no consideration as long as somebody has done so. This principle was applied in the Indian case of VENKATA CHINNAYA V VERIKATAR MAYA (1881). Past consideration is good consideration. In section 2(d), when, at the desire of the promisor, the promise or any other person has done or abstained from doing, or does or abstains from doing or promises to do or abstain from doing, something, such act or abstinence or promise is called consideration for the promise. For example in the case of KELONG PROSPECTING LTD & ORS V SCHMIDT (1968) 1 MLJ 170. Natural love and affection is a valid consideration. An agreement made on account of natural love and affection would be valid if the requirement of section 26(a) are present like it is expressed in writing, it is registered and the parties stand in a near relation to each other. For example in RE TAN SOH SIM (1951) MLJ 21. VALID AGREEMENT WITHOUT CONSIDERATION. Section 26 provides for 3 types of agreement which can be valid even without consideration which are; An agreement is in writing and registered. In section 26(a), it will be valid if it is expressed in writing and registered under the law for the time being in enforce of the registration such as document, and is made of account of natural love and affection between parties standing in a near relation to each other. Promise to compensate for something done. Section 26(b) provides that an agreement made without consideration is valid if it is promise to compensate, wholly or in part, a person who has already voluntarily done something for the promisor, or something which the promisor was legally compellable to do. Promise to pay a debt barred by limitation law. It also had been valid when it is a promise, made in writing and signed by a person to be charged therewith, or by his agent generally or specially authorized in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation is suits. CERTAINTY. The term of agreement cannot be vague but must be certain. An agreement which is uncertain or is not capable of being made certain is void. For example in the issue of KARUPPAN CHETTY V SUAH THIAN (1916) CAPACITY. The parties entering into a contract must have the capacity to enter into a contract or competent to contract. They must have legal capacity to do so. There are some exception to this general rules. They are; Contract for necessaries. These things which are essential to the existence and reasonable comfort of an infant. Luxurious articles are, however, included. For example in NASH V INMAN (1908).

Next is contract of scholarship. Section 4 provides that Notwithstanding anything to the contrary contained in the principal Act, no scholarship agreement shall be invalidated on the ground that the scholar entering into such agreement is not of the age of majority. Contract of insurance. Under the Insurance Act 1963 an infant over the age of ten may enter into a contract of insurance. However if he is below the age of sixteen, he only can do so with the written consent of his parent or guardian. VOID AND ILLEGAL CONTRACT. It is an agreement NOT enforcement by law. From the legal stand point, a void contract is a contract which not in existence from the beginning. There are few types of void that are; Mutual mistake as to the fact. Under section 21 provides that an agreement is void where both parties are under mistake as to matter of fact. This can be illustrated in the case of FREEMAN V KIAMESHA CONCORD INC (1974). Unlawful consideration or object. Section 24 on the Contract Act provides that the consideration or object of an agreement is unlawful if it fall within any subsection of the section, unless it is forbidden by a law, such a nature that, if permitted, it would defeat any law, it is fraudulent, it involves or implies injury to the person or property of another and court regards it as immortal. Part of consideration or object is unlawful. In section 25, agreement can be void if any part of their consideration or object is unlawful. Then, an agreement without consideration. Section 26 of the Contract Act provides that An agreement without consideration is void unless.. Next, agreement in restraint of marriage. In section 27, every agreement in restraint of marriage of any person, other than a minor during his or her minority, is void. Uncertainty. Agreements, the meaning of which is not certain, or capable of being made certain, are void. Lastly, agreement by way of wager. Section 31(3) provides that nothing in this section shall be deemed to legalize any transaction connected with horse-racing forbidden by any written law. VOIDABLE CONTRACT. Section 10 of the Contract Act provides inter alia that all agreements are contracts if they are made by the free consent of parties competent to contract. Section 14 further provides that consent is free it is not caused by coercion, undue influence, fraud, misrepresentation. Firstly, voidable contract because of coercion. Under section 15, coercion is the committing or threatening to commit any act forbidden by the Penal Code, or the unlawful detaining or threatening to detain, any property, to the prejudice of any person whatever, with the intention of causing any person to enter into an agreement. Voidable contract because of undue influence. Under section 16(3)(a) provides for the burden of proving that the contract was entered into was not induced by undue influence lies upon the person who was in a position to dominate the will of another. Voidable contract because of fraud. The general principle is that whenever a person causes another to act on a false representation which the maker himself does not believe the truth, he is said to have committed a fraud.

Voidable contract because of misrepresentation. Misrepresentation includes the positive assertion, in a manner not warranted by the information of the person making it, of that which is not true, though he believes it to be true. DISCHARGE OF CONTRACT. A party who is a subject to the obligations of a contract may be discharged from those obligations in one of four ways. The agreement is then at the end the four ways are; Discharge by performance. This is the normal method of discharged. It occurs when each party to a contract have fully fulfils or performs their respective contractual obligations under the contract. Performance of a contract must be exact and precise and should be in accordance with what the parties had promised. For example in the case of BOLTON V MAHADEVA (1972). Discharge by agreement. Since a contract is created by agreement, it may be discharged by agreement and so the parties may agree to cancel the contract before it has been completely performed on both sides. But agreement to cancel is itself a new contract which must be made under seal or for which consideration must be given. For example in ABERFOYLE PALNTATION LTD V CHENG (1960). Discharge by frustration.it occurs when there is a change in the circumstances which renders a contract legally or physically impossible of performance. Section 57 of the Contract Act 1950 provides agreement to do impossible act, contract to do act afterwards becoming impossible or unlawful and compensation for loss through non-performance of act known to be impossible or unlawful. There are following instances example of the contracts which have been discharged by frustration at common law; Firstly, destruction of the subject matter. In the case which give rise to the doctrine of frustration, the subject matter of the contract was destroyed before performance fell due. For example in the case of TAYLOR V CALDWELL (1863). Government intervention. It is common cause of frustration, particularly in time of war. If maintenance of contract would impose upon the parties a contract fundamentally different from which they made, the contract is discharged. For example METROPOLITAN WATER BOARD V DICK, KERR & CO (1918). Supervening illegality. For example owing to an outbreak of war the government intervention to restrain or suspend performance of contract, is a common cause of frustration. For example in the case of Re SHIPTON, ANDERSON & CO AND HARRISON BROTHERS & CO (1915). Lastly, non-occurrence of an event if it is the sole purpose of the contract. For example in the case of KRELL V HENRY (1903). Discharge by breach. When a parties fails to fulfill his obligations under a contract, the party is said to have committed a breach of his contractual obligations and the innocent party has certain remedies. Example of the issue of SUMPTER V HEDGES (1898).

REMEDIES FOR BREACH OF CONTRACT. There are seven type remedies which are damages, specific performance, injunction, quantum meruit, rescission, restitution and mareva or anton piller order. Firstly, damages are granted to a party as compensation for the damage, loss or injury he has suffered through a breach of contract. In section 74 compensation for loss or damage caused by breach of contract when a contract has been broken, the party who suffers by the breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of thing from the breach, or which the parties knew, when they made the contract to be likely to result from the breach of it. For example, ARNE BROTHERS (M) LTD V JACKSON (1966) where the case was an appeal against the award of damages for breach of contract in respect of hire-purchase relating to a motor car. Specific performance is a decree issued by the court as a form of relief that is purely equitable in origin. In section 21 of the specific relief act, the jurisdiction to decree specific performance is discretionary, and the court is not bound to grant any such relief merely because is lawful to do so; but the discretion of the court is not arbitrary but sound and reasonable, guide by judicial principle and capable of correction by a court appeal. Injunctions is another remedy in contract which depends on the discretion of the court and order court to refrain from doing a particular act. For example, NEOH SIEW ENG & ANOR V TOO CHEE KWANG (1963) where an injunction granted requiring the landlord to water supply open for his tenants. Quantum meruit basis as an alternative to an action for damage for breach of contract. For example, DE BENARDY V HARDING (1853) where the plaintiff agreed to advertise and sell ticket for the defendant, who was erecting stands for spectators to view the funeral of the Duke of Wellington. Rescission. On a breach of a condition of a contract, the injured party may treat the contract as rescinded and refused to perform his obligation under the contract unless he has signified by words or conduct, his acquiescence when the other party continue with the contract. For example in case of LEAF V INTERNATIONAL GALLERIES (1950). Last but not least, restitution. It basis is unjust enrichment. This occur in situation where the courts are of the opinion that it would be very unfair if the defendant was to be allowed to retain the money or goods or services without payment. Lastly, mareva injunction and anton piller order. Mareva restrains a defendant from removing out of jurisdiction or in any way disposing of the jurisdiction or in any is assets within jurisdiction further order. This remedy is originated from the case of MAREVA COMPANIA NAVIERA SA V INTERNATIONAL BULK CARRIERS SA, THE MAREVA (1975) 1 ALL ER 213.

Meanwhile, anton piller injunction is available only in an exceptional circumstances where the plaintiff must prove that the defendant, having in their possession an incriminating evidence which is necessary to the plaintiff and which may be destroyed before the court order for discovery can be made. This remedy is originated from ANTON PILLER V MANUFACTURING PROCESSES LTD (1976).