QUESTION 1(2 marks)

What are the principles under the doctrine of binding precedent?

Answer :
In a judicial process, among the things that form the basis of decision-making
among the judges is the use of Binding Precedent Doctrine. Binding Precedent
Doctrinal works through two ways , Upright (vertical) and Transverse (horizontal).
Upright (vertical) is a Higher Court binding court below ourt under the above bound.
Transverse (horizontal) is a court-one bound by its own decisions previously made.
In short, a binding precedent means when determining a dispute before the
courts, judges will follow what their predecessors had decided earlier in a similar
situation. If the judge fails to follow a binding precedent, the decision of the said judge
will be legally wrong and it may be reversed on appeal or overruled in a later case.

QUESTION 2(7 marks)

Does silence amount to acceptance? Kindly support your answer with evidence.
Answer :
Acceptance is one of the fundamental elements for making a binding contract. It
is essential to determine when anacceptance is complete and a binding contract
emerges. At the beginning of a business contract, the parties negotiateamong
themselves to buy certain goods or real property. When this negotiation takws a long
time, it becomesdifficult to determine when an effective acceptance has taken place
(Mulcahy and Tillotson, 2004; Ball, 1983).
The general rule is that silence cannot amount to acceptance. However, there
are exceptional instances where by silence may amount to acceptance itself. The
rationale behind this general rule is based on the idea that acceptance must take some
form of objective manifestation of the offerees intention though some form of positive
action. This is to ensure that no one should be able to enforce a contract upon an
unwilling party.
Silence cannot constitute an acceptance on the part of the offeror. For example,
the offeree says: I want to buy your Proton Perdana car for RM50,000 and if you are
silent on this proposal, I will presume that you have accepted my offer. If the seller is
silent, can the offeree say that there has been an effective acceptance by the silence of
theofferor and a binding contract has emerged? The answer is no, the law clearly states
that silence cannot constitute aneffective acceptance. The acceptance must be express
and clear (OSullivan and Hilliard, 2006; Mulcahy andTillotson, 2004).
Silence does not necessarily indicate that there is acceptance. A common phrase
in the law is that "Silence is compliance." This refers to very specific contexts, usually in
litigation. For instance, if a party is sued, and it fails to contest any of the specific
allegations in its reply, it is considered to have admitted that allegation as true. In other

contexts, silence is not acceptance. For instance, in making contracts, silence is almost
never considered acceptance.

QUESTION 3(9 marks)

A consideration must be adequate. Do you agree with the statement? Is a contract

without adequate consideration void? Support your answer with cases and statutes
whenever necessary.
Answer :
Consideration need not be adequate, but must be sufficient. There is no
requirement that the consideration must be at market value, as long as the promise
provides something in value i.e. 2 for an exchange of a car would be valid. The courts
are not concerned the adequacy.
Under the Malaysian Law, explanation 2 to Section 26 of Contracts Act 1950
provides that an agreement to which the consent of the promisor is not void merely
because the consideration is inadequate; but the inadequacy will be question by the
court whether the consent of the promisor is freely given. The illustration (f) to Section
26 of Contracts Act 1950 clearly states the application of the rule:
A agrees to sell a horse worth RM 1,000 for RM 10. A's consent to the
agreement was freely given. The agreement is a contract notwithstanding the
inadequacy of the consideration.
This was illustrated in the case of PhangSwee Kim v Beh I Hock (1964), the
respondent's solicitor notified the appellant that she had trespassed on the said land
and claimed for vacant possession and for an account of all income received by her
from the land. In May 1963, the respondent instituted an action against her claiming the
relief stated. The appellant counter-claimed for a declaration that she was entitled to the
said land. At the hearing, the appellant contended that there was an oral agreement
made between her and the respondent in which the respondent agreed to transfer the
land to her on payment of $500 in 1958. The learned trial judge accepted her evidence,
but held that the agreement is void due to inadequacy of consideration. However, on
appeal the Federal Court held that by virtue of explanation 2 to Section 26 of Contracts
Act 1950, there was adequate consideration as being no evidence of misrepresentation
or fraud. The appellant was therefore entitled to the declaration sought by her.

QUESTION 4(15 marks)

Is an invitation to treat an offer? Support your answer with eases, whenever necessary.

Answer :
An invitation to treat is where a person or business invites people to make an offer
to form a contract. It can be confused with an offer in that accepting an offer creates a
binding contract, whereas accepting an invitation to treat only constitutes making an
offer. An example of an invitation to treat is a store's ad in the Sunday paper. Conditional
auctions (those where the winning bid is subject to the seller's approval) are also
invitations to treat, but a traditional auction is an offer.
In the case of Majumder v Attorney General of Sarawak (1967) 1 MLJ 101, the
Federal Court held that an advertisement in the newspaper for the post of a doctor was
not an offer but merely an invitation to treat.
The clearest example of an invitation to treat is a tender (or bidding in the U.S.)
process. This was illustrated in the case of Spencer v Harding (1870) LR 5 CP 561,
where the defendants offered to sell by tender their stock and the court held that they
had not undertaken to sell to the person who made the highest tender, but
were inviting offers which they could then accept or reject as they saw appropriate. In
certain circumstances though, an invitation for tenders may be an offer. The clearest
example of this was seen inHarvela Investments Ltd v Royal Trust of Canada (CI)
Ltd [1986] AC 207, where the defendants had made it clear that they were going to
accept the highest tender; the court held that this was an offer which was accepted by
the person who made the highest tender and that the defendants were in breach of
contract by not doing so.
An auction may be more ambiguous. Generally an auction may be seen as an
invitation to treat, with the property owner asking for offers of a certain amount and then
selecting which to accept as illustrated in Payne v Cave (1789) 3 TR 148. However, if it
is stated by the owner that there is no reserve price or that there is a reserve price
beyond which offers will be accepted then the auction is most likely a contractual offer

which is accepted by the highest bidder; this was affirmed in the Court of
Appeal in Barry v Davies [2000] 1 WLR 1962.
A shop owner displaying their goods for sale is generally making an invitation to
treat (Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern)
Ltd [1953] 1 QB 401). They are not obliged to sell the goods to anyone who is willing to
pay for them, even if additional signage such as "special offer" accompanies the display
of the goods. (But see bait and switch.) This distinction was legally relevant in Fisher v
Bell [1961] 1 QB 394, where it was held that displaying a flick knife for sale in a shop did
not contravene legislation which prohibited offering for sale such a weapon. The
distinction also means that if a shop mistakenly displays an item for sale at a very low
price it is not obliged to sell it for that amount.
Generally, advertisements are invitations to treat, so the person advertising is not
compelled to sell to every customer. In Partridge v Crittenden [1968] 1 WLR 1204, it
was held that where the appellant advertised to sell wild birds, was not offering to sell
them. Lord Parker CJ commented that it did not make "business sense" for
advertisements to be offers, as the person making the advertisement may find himself in
a situation where he would be contractually obliged to sell more goods than he actually
owned. In certain circumstances however, an advertisement can be an offer, a well
known example being the case of Carlill v Carbolic Smoke Ball Company [1893] 1 QB
256, where it was held that the defendants, who advertised that they would pay anyone
who used their product in the prescribed manner and caught influenza 100 and said
that they had deposited 1,000 in the bank to show their good faith, has made an offer
to the whole world and were contractually obliged to pay 100 to whoever accepted it by
performing the requested acts.
For an offer to be capable of becoming binding on acceptance, the offer must be
definite, clear, and final. If it is a mere preliminary move into negotiation which may lead
to a contract, it is not an offer but an invitation to treat. The offerer must have been
initiating negotiations from which an agreement may or may not in time result. The

important point to note is that, since an invitation to treat is not an offer, but rather a
phenomenal preliminary to an offer, an invitation to treat is not capable of an
acceptance which will result in a contract.

QUESTION 5(2 marks)

What is the definition of contract of sale of goods under the law?

Answer :
Section 4(1) of the Sale of Goods Act defines a contract of sale of goods as a
contract whereby the seller transfers or agrees to transfer the property in goods to the
buyer for a price. Thus, a sale occurs when the ownership or property in goods passes
to the buyer.
Section 5(1) of the Sale of Goods Act defines a contract of sale is made by an offer
to buy or sell goods at a price and by the acceptance of such an offer.
A contract of sale may be absolute or conditional.
Where under a contract of sale the property in goods is transferred from the seller
to the buyer the contract is called a sale ;but where the transfer of the property in the
goods is to take place at a future time or subject to some conditionthereafter to be
fulfilled the contract is called an agreement to sell.
An agreement to sell becomes a sale when the time elapses or the conditions are
fulfilled subject to which the property in the goods is to be transferred.

QUESTION 6(2 marks)

Does the Hire Purchase Act cover all hire purchase transactions?

Answer :

Hire

purchases

agreement

are

commonly

known

as

H.P

agreement

in Malaysia and it is used by financial institutions in Malaysia to fund the purchase of

consumer goods, vehicles and other business equipment and industrial machinery.

In Malaysia, The legislation governing hire purchase transactions is the Hire

Purchase Act 1967, which came into force on 11 April 1968 after hire purchase became
popular in the acquisition of expensive consumer goods such as cars, business
equipment and industrial machinery. Purchasing cars is the most common type of hire
purchase agreement in Malaysia and the repayment could served up to 9 years from
the date of agreement been executed.

The Hire Purchase Act does not, in actuality, cover all hire purchase transactions.
The hire-purchase transactions falling outside the scope of the said Act is governed by
other general laws, such as the Contracts Act 1950. The Act only regulates hirepurchase agreements relating to goods specified in the First Schedule. However, thus
Schedule may be amended by the Minister concerned from time to time.

QUESTION 7(3 marks)

i.

What is the main legislation governing partnership in Malaysia?

Answer :
In Malaysia the governing law that addresses partnership matters is provided in
the Partnership Act 1961 (Act 135). With regards to the extent of liabilities to be borne
by an incoming partner it is best to refer to the judgment made by Suriyadi J (as he then
was) in Leong Sing (sue as a firm) v. Perusahaan Kuari (Melaka Pindah) Sdn.Bhd
(formerly known as Malacca LianHwaSdn.Bhd [1997] 5 MLJ 657. In this case the court
referred to sections 11 and section 19(1) of the Partnership Act 1961.
ii.

What is the statutory definition of partnership as provided under the Malaysian

Law?
Partnership is defined by Section 3(1) of the Partnership Act 1961 as the relation,

which subsists between persons carrying on a business in common with a view of

profit. No person may be a partner with himself. There must be at least two or more
persons to form a partnership. Section 3(2) excludes from statutory definition of
partnership.

REFERENCES
Mulcahy, Linda and Tillotson, John. (2004). Contract Law in Perspective, London:
Cavendish Publishing.
OSullivan, Janet and Hilliard, Jonathan. (2006). The Law of Contract, New York: Oxford
University Press.
http://www.lawteacher.net/consideration-law/essays/consideration-in-contractformation.php#ixzz2FwUMjQRw
http://en.wikipedia.org/wiki/Hire/purchase