Chapter 2 Contract Pt 1 Offer & Acceptance PDF

BBBL2023 Commercial Law Law of Contract Part 1: Offer & Acceptance GENERAL PRINCIPLES OF CONTRACT LAW INTRODUCTION & GENERAL OVERVIEW In our daily business dealings, an understanding of the law of contract is inevitable. Almo...

BBBL2023 Commercial Law Law of Contract Part 1: Offer & Acceptance GENERAL PRINCIPLES OF CONTRACT LAW INTRODUCTION & GENERAL OVERVIEW In our daily business dealings, an understanding of the law of contract is inevitable. Almost every aspect of business activities would culminate in an agreement i.e. a contract. It governs the rights and obligations of parties involved in business transactions. The basis of Malaysian contract law is in the Contracts Act 1950 (hereinafter referred to as ‘CA 1950’). What is a ‘contract’? A contract is an agreement between two or more parties that is legally binding between them. S. 2(h) CA 1950 states that ‘an agreement enforceable by law is a contract’. Types of Contracts (a) Bilateral contracts – both parties make promises to one another. This is mutual exchange of promises e.g. A promises to supply goods to B, and B promises to pay A for them. (b) Unilateral contracts – A promises or undertakes to do something if B performs some specific acts required in A’s proposal. Here one party is making the promise whilst the other party accepts by merely performing the act. E.g: X lost his dog and promised to reward RM100 to anyone who can find and return his dog. Form of Contract – A contract can be made in writing, orally, by conduct or a combination of it. What are the elements of a contract? 1. Proposal or Offer – see definition in S. 2(a) CA 1950. A bilateral offer is where the offer is made to a particular person or group of persons. The identity of the offeror or proposer and the identity of the offeree or proposee (acceptor) are known to the parties. A unilateral offer is where the offer is made ‘to the world at large’. Only the identity of the offeror is known. (Carlill v Carbolic Smokeball Co. Ltd. (1893)) 2. Acceptance – for a contract to be valid there must be proper acceptance i.e. the offeree must comply with the rules of acceptance. See definition in S. 2(b) CA 1950. 3. Consideration – this is the value given by the parties for the promise that is being made. Consideration is usually in the form of money, property or services. © 2023 Hisham Hanapi & TARUMT, All Rights Reserved. Any reproduction of this note without consent is prohibited. Page 1 BBBL2023 Commercial Law Law of Contract Part 1: Offer & Acceptance 4. Intention to create legal relations – where both parties have intention to be legally bound once offer has been accepted. 5. Certainty – clarity of terms i.e. the terms of the contract must be clear and precise so that the parties know what they are agreeing to – S. 30 CA 1950. 6. Capacity – only parties who have the capacity can enter into valid contracts. People who are underage e.g. minors or persons who suffer from mental disability i.e. persons of unsound mind cannot enter into a valid contract – Ss. 12 & 69 CA 1950. 7. Consent – The parties must have entered into the agreement willingly. The presence of undue influence, mistake, misrepresentation, fraud or coercion will void the contract for lack of consent. 8. Legality – The agreement must be lawful. Any agreement that violates the law or forbidden by law is illegal and unenforceable. ELEMENT 1: PROPOSAL / OFFER DEFINITION OF PROPOSAL OR OFFER S. 2(a) CA 1950 defines a proposal to mean ‘when one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to the act or abstinence, he is said to make a proposal / an offer.’ The person making the proposal is called ‘the proposer or offeror’ and the other party is called ‘the proposee or offeree’. An offer, once accepted, becomes a ‘promise’ (an agreement or contract) and the proposee or offeree becomes ‘the acceptor’. Example: M offers to buy B’s car for RM10k – here M is making a proposal, if B accepts M’s offer, there will be an agreement. M is a proposer / offeror, B is a proposee / offeree and after he accepts, B becomes an acceptor. Therefore, an offer is an undertaking which is certain and definite, made with the intention that it shall become binding on the party as soon as it is accepted by the party to whom it is addressed to. TYPES OF OFFER (a) A bilateral offer is where the offer is made to a particular person or group of persons. The identity of the offeror or proposer and the identity of the offeree or proposee (acceptor) are known to the parties. © 2023 Hisham Hanapi & TARUMT, All Rights Reserved. Any reproduction of this note without consent is prohibited. Page 2 BBBL2023 Commercial Law Law of Contract Part 1: Offer & Acceptance (b) A unilateral offer is where the offer is made ‘to the world at large’. Only the identity of the offeror is known as in Carlill v Carbolic Smokeball Co. Ltd. (1893) In what form should a proposal be made? S. 9 CA 1950 – if a proposal made in words (oral or written) it is expressed. Otherwise, it is implied. REQUIREMENTS OF PROPOSAL / OFFER (a) The subject matter of the proposal / offer must be certain E.g. an offer to sell a particular car for RM10k is definite and certain and capable of being executed, but if the offer is ‘to sell one of my cars for RM10k’ this would not amount to an offer as it is uncertain and vague and not capable of being executed. How do you know which car is for sale? (b) The proposal must be communicated to the offeree The offeror must make sure that his offer is communicated to the offeree. Otherwise, the offer is not complete. S. 4(1) CA 1950 – The communication of a proposal is complete when it comes to the knowledge of the person to whom it is made. Illustration (a) A proposes, by letter, to sell a house to B at a certain price. The communication of the proposal is complete when B receives the letter. To whom a proposal / offer can be made? (a) It can be made to an individual/party – then only that individual/party can accept, as in a bilateral contract. (b) It can be made to the general public – so anyone can accept if the conditions prescribed in the offer are fulfilled as in the case of Carlill v Carbolic Smoke Ball Co. (1893) This is a unilateral contract. The above showed that there can be 2 types of offer – an offer to an individual/party or an ‘offer to the world at large’ i.e. to the general public. © 2023 Hisham Hanapi & TARUMT, All Rights Reserved. Any reproduction of this note without consent is prohibited. Page 3 BBBL2023 Commercial Law Law of Contract Part 1: Offer & Acceptance PROPOSAL AND INVITATION TO TREAT What is the difference between an ‘offer’ and an ‘invitation to treat’? Students’ attention is drawn to the issue of advertisements. An advertisement could either be an offer or an invitation to treat. It very much depends on the intention of the parties in the case. An advertisement that is actually an offer – a unilateral offer In Carlill v Carbolic Smoke Ball Co. Ltd. - the advertisement to buy and use its product was held to be a unilateral offer because the offer was ‘made to the world at large.’ Defendant Co. advertised they would offer £100 to anyone who would get influenza after using their smoke ball, a drug, in a prescribed manner and for a specified time period. To show their sincerity the Co. deposited £1000.00 into a bank for such purpose. Mrs. Carlill bought and used the smoke balls as prescribed but nevertheless became ill with influenza. She sued the Co. for the promised reward. The court held that the advertisement was an offer to the world at large (a unilateral contract) and any person can come forward and fulfill the conditions on the faith of the advertisement to ‘accept’ the offer. In this case, the Smokeball Co. had advertised an offer for anyone to use their medication in a prescribed manner and guaranteed a certain amount of compensation if the person continues to catch flu after using the medication. Mrs. C took up the offer and claimed for the compensation when her flu could not be cured. Carbolic Smokeball Co defended itself by claiming that the advertisement was an invitation to treat and not capable of being accepted. The Court found that it was a unilateral contract and Mrs. C received her rightful compensation. A statement that looks like a proposal The fact that the word ‘offer’ is used must not be taken as conclusive that an offer is made. It depends on the construction of the contract – Biggs v Boyd Gibbons (1971) Invitation to treat Sometimes a party may make a statement that looks like a proposal/offer but it is not. It is an invitation to treat. An invitation to treat is not an offer. These two elements must be distinguished. Our CA 1950 does not contain any provisions for this principle. This principle was adopted from the English common law by our Malaysian judges and has become part of Malaysian contract law. © 2023 Hisham Hanapi & TARUMT, All Rights Reserved. Any reproduction of this note without consent is prohibited. Page 4 BBBL2023 Commercial Law Law of Contract Part 1: Offer & Acceptance What is an invitation to treat? An invitation to treat is a preliminary communication. It is an effort to invite or induce others to make an offer. It is not, by itself, capable of being accepted so as to form a binding agreement. One party is making the invitation. It is for the person interested to come forward to make an offer. Hart v Mills (1846) ‘…you offer to negotiate, or you issue advertisement that you have got a stock of books to sell, or houses to let, in which case there is no offer to be bound by any contract, such advertisements are offers to negotiate, offers to received, - offers to chaffer…’ Note: This is an invitation to induce you to come and make an offer. The offer must come from the other party having been made aware of the advertisement. Examples of an invitation to treat:- 1. Display of goods / Display of goods with price tags – in shops/ on shelves. Pharmaceutical Society of Great Britain v Boots Cash Chemist Ltd. The defendant, Boots were charged for selling unlawful drugs that were scheduled poison unless such sale is supervised by a registered pharmacist. The case depended on whether a sale has occurred. Question – By displaying the goods for sale, has a sale taken place? Boots operates a chain of self-service stores and its goods were all displayed on the shelves. A customer entering the store would take a basket to put in the items he had selected, place them in the basket to be brought to the cashier. A registered pharmacist would be stationed at the cashier’s counter. Court held: The display of the goods was merely an invitation to treat. A proposal is made when the customer place the item before the cashier. When the cashier “rings the till’ i.e. enters into the cash register, there is acceptance. Hence the contract of sale would only be made at the cashier’s desk. That being the principle, the shop owner had not made any unlawful sale. This is said to be a good principle, otherwise by selecting any article from the shelves would constitute a sale, and you cannot put it back even if you change your mind and have not paid for it. Fischer v Bell Lord Parker - It is clear that, according to the ordinary law of contract, the display of an article with a price on it in a shop window is merely an invitation to treat. It is in no sense an offer for sale the acceptance of which constitutes a contract. © 2023 Hisham Hanapi & TARUMT, All Rights Reserved. Any reproduction of this note without consent is prohibited. Page 5 BBBL2023 Commercial Law Law of Contract Part 1: Offer & Acceptance 2. Price list / Request for Price Quotes/ Supply of information Is asking for information or price an offer? Harvey v Facey P: Will you sell us Bumper Hall Pen? Telegraph lowest cash price. (ITT) D: Lowest price for Bumper Hall Pen, £900. (ITT) P: We agree to buy Bumper Hall Pen for £900 asked by you. Please send us your title deeds. (offer) After this, the rest was silence. It was held that there was no contract. The second telegraph was not an offer, but only an indication of the minimum price if the defendants ultimately resolved to sell, and the third telegram was therefore not an acceptance. The 3rd telegram is an offer which was capable of acceptance, but was never accepted. Also the reply by D was not an offer but merely a supply of information as to what is the minimum price. Is asking for a price quotation an offer? Preston Corp. Sdn Bhd. v Edward Leong & Ors. The issue here was whether price quotations for printing orders made by the appellant constitute acceptance of a binding offer. The appellant publisher asked for price quotations from the respondent printers. Later the appellant publisher then placed printing orders based on the quotes. Federal Court held: The quotations were merely a supply of information and were really an invitation to treat to enter into a contract in response to the appellant’s inquiry. Therefore the printing orders were offers made to the respondents, and it is for the appellant to accept the offers. 3. Advertisements, catalogues & circulars Generally holding out goods for sale in this manner is a mere attempt to induce offers. It is not an offer itself but an invitation to treat. Partridge v Crittenden The appellant had inserted an advertisement in an aviary periodical ‘Bramble Finch cocks and hens, 25s each”. This appeared under the general heading of ‘Classified Advertisements’ and the words ‘offer for sale’ were not used. He was charged for unlawfully offering for sale a wild live bird contrary to the Protection of Birds Act 1954. © 2023 Hisham Hanapi & TARUMT, All Rights Reserved. Any reproduction of this note without consent is prohibited. Page 6 BBBL2023 Commercial Law Law of Contract Part 1: Offer & Acceptance It was held that there had been no offer for sale. When one is dealing with advertisements, there is a business sense in their being construed as invitation to treat and not an offer for sale, Parker LJ. Majumder v AG of Sarawak – It was held that an advertisement in the newspaper for the post of a doctor was merely an invitation to treat and not an offer. 4. Auctions Does the auctioneer’s request for bids amounts to a definite offer which can be converted into an agreement with the highest bid or is it merely an attempt to induce offers? Payne v Cave (1789) D made the highest bid and withdrew it before the fall of the hammer. The court held that the bid itself constituted the proposal or the offer which the auctioneer was free to accept by the fall of the hammer or reject it. Since the bid was withdrawn before the fall of the hammer, there was no contract between the parties. Harris v Nickerson (1873) The auctioneer advertised that certain goods, including office furniture would be sold at a certain place on a certain date. The plaintiff went for the sale and all those furniture which he was interested in were withdrawn. He sued for the loss or time and expenses. It was held that the advertisement for sale was a mere statement of intention to hold a sale and not an offer which could be accepted to form a binding contract. 5. Tenders The party inviting for bids or tenders for the supply of goods or services is not making an offer but an invitation. The party who submits his bids or tenders is the one making the offer. It is now for the other party to accept of reject the offer. If the offer is accepted then there will be a binding contract. ELEMENT 2: ACCEPTANCE The general rule is that acceptance of a proposal must be communicated to the proposer for there to be a binding contract between the parties. Rules of acceptance: What must the proposee or offeree do in order to accept a proposal? 1. The offeree must signify his acceptance © 2023 Hisham Hanapi & TARUMT, All Rights Reserved. Any reproduction of this note without consent is prohibited. Page 7 BBBL2023 Commercial Law Law of Contract Part 1: Offer & Acceptance S. 2(b) CA 1950 defines acceptance to mean ‘when the person to whom the proposal is made signifies his assent…the proposal is said to be accepted’. This means in order for there to be a valid contract, the offeree must convey his acceptance to the offeror. Example: A offers to buy B’s car for RM10k. If B said yes to A (B signifies his assent), then B has accepted A’s proposal. A and B has now established an agreement. In what form should an acceptance be made? S. 9 CA 1950 – If the acceptance is made in words, the acceptance is ‘expressed’. If the acceptance is made other than in words, the acceptance is implied. When the proposal is accepted then under S. 2(c) CA 1950 - ‘the person making the proposal is now called the ‘promisor’ and the person accepting the proposal is called the “promisee”. As in the above example, the offeror A is now the ‘promisor’, and offeree B is the ‘promisee’. 2. Acceptance in only complete when it is communicated to the offeror. This means the acceptance is only effective when it is communicated or brought to the notice of the offeror. In the case of acceptance under the Postal Rule: (a) What if the acceptance is by a letter sent by post? (b) What happens if the letter of acceptance does not reach the Proposer, e.g. where the letter goes astray or is lost? S. 4(2)(a) CA 1950 – states that the communication of an acceptance is complete as against the proposer (offeror) when it is put in a course of transmission to him (the offeror), so as to be out of the power of the acceptor (offeree). When the letter is posted the acceptor has put it ‘in the course of transmission’ in such a way that he no longer has any control over it. The transaction becomes binding on the proposer irrespective of any delay or disappearance of the letter of acceptance in the course of transit. In Henthorn v Fraser (1892) it was held that ‘when a contract is made by post it is clear law … that acceptance is complete as soon as the letter is put into the post box, and that is the place where the contract is made’. © 2023 Hisham Hanapi & TARUMT, All Rights Reserved. Any reproduction of this note without consent is prohibited. Page 8 BBBL2023 Commercial Law Law of Contract Part 1: Offer & Acceptance The local authority for the above postal rule principle is Ignatius v Bell (1913) – i.e. acceptance is complete upon posting where communication by post is the method contemplated by the parties. But the postal rule may be excluded by the express terms of the offer. In the case of Holiwell Securities v Hughes the offer prescribed that the acceptance must be by notice in writing to the intending vendor (promisee). It was held that mere posting of the letter of acceptance is not sufficient. It may also be excluded in cases of instantaneous circumstances e.g. telephone, telex, telefax or in today’s case using sms. Using the instantaneous mode and jurisdiction as to where the contract was made Entores v Miles Far East Corporation P in London made an offer by telex to D in Amsterdam. D accepted by telex message transmitted to London. Later, D were in breach of contract. P tried to establish that the contract by telex was made in London where the acceptance took place so that legal action could be decided in London by the English courts. Held: The contract was made in London since D accepted P's offer was not complete until it was actually received by P in London. This principle was confirmed in Brinkibon Ltd. v Stahag Stahl (1982). Entores case is about jurisdiction i.e. where the contract was actually made so that the case can be heard by the courts in that country. It is also about instantaneous communication e.g. by telephone or telex, where the contract is complete when acceptance is received by the offeror at his end of the line. Exception – where acceptance need not be communicated: The general rule that acceptance must be communicated can be dispensed with if: (a) the proposer has dispensed with or waived the need for acceptance, or (b) the proposer allows the ‘conditions of the proposal’ to be performed without acceptance being communicated i.e. by action or by conduct as in a unilateral contracts e.g. Carlill v Carbolic Smokeball Co. where the mode of acceptance is by performance of the conditions stated in the offer. (This principle is incorporated in S. 8 CA 1950 – ‘Performance of the conditions of a proposal …is an acceptance of the proposal). 3. Acceptance must be in reliance on the offer The person who wants to accept the offer must be aware of the offer. This is the necessary nexus between offer and acceptance. © 2023 Hisham Hanapi & TARUMT, All Rights Reserved. Any reproduction of this note without consent is prohibited. Page 9 BBBL2023 Commercial Law Law of Contract Part 1: Offer & Acceptance R v Clarke The Australian govt. offered a reward for information leading to the arrest and conviction of persons responsible for the murder of 2 police officers. X and Clarke gave information which lead to the arrest of Y. X and Y were convicted. Clarke did not commit the murder but claimed the reward. His claimed failed on grounds the information he gave was to clear himself and not in reliance on the offer of reward. He was not aware of the reward at the time he gave the information but was trying to clear himself from the charged of murder. 4. Acceptance must be absolute and unqualified S. 7 CA 1950 states, to convert a proposal into a promise the acceptance must - (a) be absolute and unqualified; and (b) be expressed in some usual and reasonable manner, unless the proposal prescribes the manner in which it is to be accepted. If the proposal describe a manner in which it is to be accepted and the acceptance is not made in that manner, the proposer may, within a reasonable time after the acceptance is communicated to him, insist that his proposal shall be accepted in the prescribed manner, and not otherwise; but, if he fails to do so, he accepts the acceptance. S. 7(a) CA 1950 means the acceptance must be absolute and unqualified so that there is complete consensus. If the parties are still negotiating, there is no agreement yet or if any new terms or conditions are brought into the picture then there would be no acceptance. Here are two situations where acceptance is not absolute and is qualified: (a) Counter-offer An acceptance which is qualified by the introduction of a new term or condition may be seen as a ‘counter-offer’ – see Hyde v Wrench. A counter offer is no acceptance. The effect of a counter offer is that it rejects or destroys the original offer and replaced it with a new offer, this time, from the other party who was offered originally. Hyde v Wrench 6 June – D offered to sell his estate to P for £1000. 8 June – P replied that he will pay £950 – here P made a counter offer. 7 June – D refused to accept P’s proposal. When D refused, P wrote again this time agreeing to pay £1000 – this is an attempt to revive the original proposal. © 2023 Hisham Hanapi & TARUMT, All Rights Reserved. Any reproduction of this note without consent is prohibited. Page 10 BBBL2023 Commercial Law Law of Contract Part 1: Offer & Acceptance It was held that no acceptance had taken placed because P’s letter of 8 June amounts to a rejection of the original proposal which could not be revived. (b) ‘Subject to contract’ In cases where the parties agreed but the acceptance is qualified with the term ‘subject to contract’ or ‘subject to a formal contract’. Here the acceptance is subject to a condition. Conditional acceptance is no acceptance until the offeror agrees to the condition. Therefore the condition would have to be fulfilled before there can be a contract. This is because the intention of the parties is not to make a concluded bargain as yet, unless and until they have executed a formal contract. Low Kar Yit & Ors v Mohd Isa & Anor D gave the option to P’s agent to purchase a parcel of land subject to a formal contract being drawn up and agreed by the parties. P’s agent exercised the option but D failed to sign the agreement. P sued for breach of contract. The High Court held there was no binding contract. ‘The option on the face of it was clearly conditional upon and subject to ‘a formal contract to be drawn up and agreed upon’ between the parties. 5. Acceptance must be within reasonable time S. 6(b) CA 1950 states - A proposal is revoked by the lapse of time prescribed in the proposal for its acceptance, or, if no time is so prescribed, by the lapse of a reasonable time, without communication of the acceptance. What is ‘reasonable time’ depends on the circumstances of the case in question. 6. Acceptance must be in the prescribed manner S. 7(b) CA 1950 provides that acceptance must be expressed in some usual and reasonable manner, unless the proposal prescribes the manner in which it is to be accepted. Prescribed manner of acceptance If the proposer prescribes a particular method of acceptance, e.g., acceptance must be in writing, the promisee must comply with the manner prescribed in order to accept the proposal. © 2023 Hisham Hanapi & TARUMT, All Rights Reserved. Any reproduction of this note without consent is prohibited. Page 11 BBBL2023 Commercial Law Law of Contract Part 1: Offer & Acceptance If the promisee does not accept in the manner prescribed, the proposer must not keep quiet but insist that acceptance be made in the manner prescribed and not otherwise. The proposer must do this within a reasonable time after acceptance has been communicated. If he fails to do so it shall be deemed that he has waived his right and accepted the acceptance. Offeror cannot prescribe silence as a manner of acceptance It has been held that the offeror cannot prescribe ‘silence’ as a manner of acceptance. Felthouse v Bindley P’s uncle offered to buy a horse from P for £30 adding, “...if I hear no more about him, I consider the horse mine at that price’. P did not reply to the letter and the question arose as to whether the uncle’s letter made good acceptance. It was held that P’s silence did not amount to acceptance of the offer to buy the horse at £30. Note: But the offeree may stipulate that his silence would constitute acceptance. REVOCATION OF OFFER & ACCEPTANCE There are 2 types of revocation i.e. revocation of offer and revocation of acceptance. The questions students should ask are: (a) When can a proposer revoke his proposal? (b) When can an acceptor revoke his acceptance? REVOCATION OF PROPOSAL (OFFER) When can a proposer revoke his proposal? A proposal can be revoked at any time before it is accepted. The rule is until a proposal is accepted, no legal rights arise and the proposer is free to withdraw, terminate or revoke his offer at any time by giving notice of the revocation to the other party. This is found in S. 5(1) CA 1950 which states that a proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer but not afterwards – meaning the revocation of a proposal must be communicated to the offeree before it is accepted by the offeree. Illustration under S. 5 A proposes, by a letter sent by post, to sell his house to B. B accepts the proposal by a letter sent by post. A may revoke his proposal at any time before or at the moment when B posts his letter of acceptance, but not afterwards. © 2023 Hisham Hanapi & TARUMT, All Rights Reserved. Any reproduction of this note without consent is prohibited. Page 12 BBBL2023 Commercial Law Law of Contract Part 1: Offer & Acceptance Keeping offer opened for a specified time The rule that an offer can be revoked at any time before acceptance applies even though the offeror has stated that he will keep the offer open for a specified time. Routledge v Grant (1828) Grant offered to buy Routledge’ horse and gave him 6 weeks to decide whether to accept the offer. Before the 6 weeks had lapsed, Grant withdrew his offer. It was held that in absence of Routledge having accepted, Grant was entitled to revoke his offer. How can a proposal be revoked? S. 6 CA 1950 provides 4 ways by which an offer is revoked. 1. By notice – S. 6(a) CA 1950 states that an offer can be revoked by the communication of the notice of revocation by the proposer to the other party. This means the offeror must communicate his notice of revocation to the offeree E.g. In order to revoke his offer, X must communicate the notice of revocation of his offer to Y before Y accepts. 2. By lapse of time – S. 6(b) CA 1950 states that an offer can be revoked by the lapse of time prescribed in the proposal for its acceptance, or, if no time is so prescribed, by the lapse of a reasonable time, without communication of the acceptance. 3. By failure to fulfill certain conditions – S. 6(c) CA 1950 states that an offer can be revoked by the failure of the acceptor to fulfill a condition precedent to acceptance. What is the meaning of ‘failure to fulfill a condition precedent to acceptance’? E.g. If a company offers to employ an applicant on condition that he passes a health test, if the applicant fails his health test, he has failed to fulfill the condition. Financing Ltd. v Stimson A car was to be delivered in the same condition (with the steering wheel, tyres and in a good state) as it was seen at the time of the agreement. But at the time of delivery the car was in a very poor state. The court held that the conditions had not been fulfilled. 4. By death or mental disorder – S. 6(d) CA 1950 states that an offer can be revoked by the death or mental disorder of the proposer, if the fact of his death or mental disorder comes to the knowledge of the acceptor before acceptance. © 2023 Hisham Hanapi & TARUMT, All Rights Reserved. Any reproduction of this note without consent is prohibited. Page 13 BBBL2023 Commercial Law Law of Contract Part 1: Offer & Acceptance REVOCATION OF ACCEPTANCE When an acceptor may revoke his acceptance? S. 5(2) CA 1950 states that an acceptance may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards. The above means that the acceptor after having accepted an offer and now wants to revoke his acceptance, he must do so before his notice of acceptance reaches the offeror. Illustration under S. 5 A proposes, by a letter sent by post, to sell his house to B. B accepts the proposal by a letter sent by post. B may revoke his acceptance at any time before or at the moment when the letter communicating it reaches A, but not afterwards. COMMUNICATION OF REVOCATION OF OFFER / ACCEPTANCE When is the communication of revocation complete? S. 4(3) CA 1950 – The communication of a revocation by the offeror / acceptor is complete:- (a) as against the person who makes it, when it is put into a course of transmission to the person to whom it is made, so as to be out of the power of the person who makes it; and (b) as against the person to whom it is made, when it comes to his knowledge. Illustration (c) – Communication of revocation of offer by offeror A makes a proposal to B. A (offeror) revokes his proposal by telegram. The revocation is complete as against A when the telegram is dispatched. It is complete as against B (offeree) when B receives it. Illustration (d) – Communication of revocation of acceptance by acceptor A makes a proposal to B and B accepts A’s (offeror) proposal by a letter sent by post. B (acceptor) revokes his acceptance by telegram. B’s revocation is complete as against B when the telegram is dispatched, and as against A when it reaches him. Explanation: Once the acceptor B puts his revocation of acceptance ‘in a course of transmission’, it is binding on him, he cannot withdraw the revocation because it is beyond his control. But the communication of B’s revocation is not binding on the offeror A until it comes to A’s knowledge. What does it mean by ‘but not afterwards’ in S. 5? – If A, the offeror, receives B’s letter of acceptance on Tuesday and B’s telegram revoking his acceptance on Wednesday, the telegram revoking the acceptance is ineffective because B’s acceptance has already come to the A’s knowledge. © 2023 Hisham Hanapi & TARUMT, All Rights Reserved. Any reproduction of this note without consent is prohibited. Page 14