Contract Law Exam Notes PDF

## Comprehensive Notes on Contract Law ### **I. Formation of a Contract** For a contract to be valid, certain elements must exist: #### **A. Offer** - **Definition**: A definite proposal made by one party (the offeror) to another (the offeree), intending to create legal relations once accepted....

## Comprehensive Notes on Contract Law ### **I. Formation of a Contract** For a contract to be valid, certain elements must exist: #### **A. Offer** - **Definition**: A definite proposal made by one party (the offeror) to another (the offeree), intending to create legal relations once accepted. - **Key Points**: 1. An offer must be clear and specific. 2. It can be made to a person, a group, or even the world (*Carlill v Carbolic Smoke Ball Co*). 3. An offer differs from an **invitation to treat (ITT)**, which is an invitation to negotiate, not an offer (e.g., advertisements, shop displays: *Pharmaceutical Society v Boots*). - **Termination of an Offer**: An offer can end through revocation, rejection, lapse of time, or a counter-offer (*Hyde v Wrench*). #### **B. Acceptance** - **Definition**: An unqualified agreement to the terms of the offer. It must mirror the offer exactly (the “mirror image” rule). - **Key Points**: 1. Acceptance must be **communicated** (exceptions exist for unilateral offers). 2. Silence cannot be acceptance (*Felthouse v Bindley*). 3. **Postal Rule**: Acceptance is complete when a letter of acceptance is posted, not when received (*Adams v Lindsell*). This rule does not apply to modern communication like email (*Entores v Miles Far East*). #### **C. Consideration** - **Definition**: Something of value given by each party to support a contract. - **Rules**: 1. Consideration must be sufficient but need not be adequate (*Thomas v Thomas*). 2. Past consideration is not valid unless requested and understood to be paid later (*Lampleigh v Braithwaite*). 3. **Promissory Estoppel**: A promise made without consideration can be binding if the other party relied on it (*Central London Property Trust v High Trees House*). #### **D. Contractual Intention** - **Definition**: Both parties must intend to create legal relations for a contract to exist. - **Key Points**: 1. In **social or domestic agreements**, there is a presumption against legal intent (*Balfour v Balfour*). 2. In **commercial agreements**, there is a presumption of legal intent (*Esso Petroleum v Commissioners*). #### **E. Form** - **Definition**: Some contracts must meet formal requirements (e.g., written, signed) to be valid. - **Examples**: - Contracts for the sale of land must be in writing. - Contracts under the Statute of Frauds (e.g., guarantees) require certain formalities. --- ### **II. Contents of a Contract** #### **A. Express Terms** - **Definition**: Terms specifically stated by the parties, either orally or in writing. - **Key Points**: - Courts will enforce express terms as agreed, provided they are clear and not illegal. - Clauses like exclusion or limitation clauses must be incorporated into the contract properly. #### **B. Implied Terms** - **Definition**: Terms not expressly stated but included by law, custom, or necessity. - **Key Examples**: 1. **By Law**: Under the Sale of Goods Act 1979, goods must be of satisfactory quality and fit for purpose. 2. **By Custom**: Industry practices can imply terms. 3. **By Fact**: Terms necessary to give business efficacy to a contract (*The Moorcock*). --- ### **III. The End of a Contract – Expiration, Termination, Vitiation, Frustration** #### **A. Expiration** - **Definition**: A contract ends naturally when all obligations are performed, or the contract duration expires. - **Example**: A lease agreement that ends after 12 months. #### **B. Termination** - **Definition**: A contract can be terminated before completion due to specific reasons:  1. **Breach**: A serious breach (repudiatory breach) allows the innocent party to terminate (*Hong Kong Fir Shipping*). 2. **Agreement**: Both parties agree to end the contract. 3. **Performance**: Complete performance discharges the contract. #### **C. Vitiation** - **Definition**: A contract may be void or voidable due to issues like: 1. **Misrepresentation**: False statements inducing entry into a contract (*Misrepresentation Act 1967*). 2. **Mistake**: A fundamental error about the contract (*Great Peace Shipping*). 3. **Duress/Undue Influence**: Pressure or unfair advantage that forces agreement. #### **D. Frustration** - **Definition**: When an unforeseen event makes the contract impossible or radically different (*Taylor v Caldwell*). - **Examples**: 1. Destruction of the subject matter (e.g., a fire destroys a rented venue). 2. Legal impossibility (e.g., a change in law prohibits performance). --- ### **IV. Remedies for Breach of Contract** #### **A. Damages** - **Definition**: Monetary compensation for loss caused by a breach. - **Types**:  1. **Compensatory Damages**: Restore the injured party to the position they would be in if the contract was performed (*Hadley v Baxendale*). 2. **Consequential Damages**: For losses caused by special circumstances known to both parties. 3. **Nominal Damages**: A small sum for a breach with no actual loss. 4. **Liquidated Damages**: A pre-agreed sum stated in the contract. #### **B. Specific Performance** - **Definition**: A court order requiring the party to perform their obligations. - **Limitations**: Usually applied for unique items or property but not for personal services. #### **C. Injunctions** - **Definition**: A court order to stop a party from doing something. - **Example**: Preventing a business from breaching a non-compete clause. #### **D. Rescission** - **Definition**: Cancelling the contract and restoring the parties to their original positions (common in cases of misrepresentation). --- ### **V. Malaysian Contract Law** #### **A. Overview** - **Malaysian contract law** is based on **English common law** but shaped by the **Contracts Act 1950**. - **Key Features**: 1. The **Contracts Act 1950** codifies rules on **offer**, **acceptance**, **consideration**, and **intention to create legal relations**. 2. Specific provisions unique to Malaysia include **natural love and affection** as valid consideration (Section 26). #### **B. Differences Between UK and Malaysian Contract Law** - **Offer and ITT**: - **UK law** distinguishes offers from ITTs through case law (*Pharmaceutical Society v Boots*). - **Malaysian law** follows UK precedents but lacks specific codification. - **Consideration**: - UK law does not accept past consideration, while Malaysian law recognizes it under certain conditions. - **Natural love and affection** is valid consideration in Malaysia but not in the UK. - **Frustration**: - Malaysian law codifies frustration under Section 57 of the Contracts Act 1950. - UK law relies on common law principles (*Taylor v Caldwell*). - **Third-Party Rights**: - UK law allows third-party enforcement under the **Contracts (Rights of Third Parties) Act 1999**. - Malaysian law follows the doctrine of privity, restricting rights to the contracting parties. --- ### **VI. Performance of a Contract** #### **A. Complete and Substantial Performance** - **Complete Performance**: Strict requirement that all terms are fully met. - **Substantial Performance**: Allows payment if most obligations are fulfilled (*Hoenig v Isaacs*). #### **B. Partial Performance** - Payment may be due if partial work is accepted voluntarily (*Sumpter v Hedges*). #### **C. Time of Performance** - **Time of the Essence**: Deadlines are critical; missing them can terminate the contract (*Union Eagle Ltd v Golden Achievement Ltd*). #### **D. Force Majeure** - Frees parties from duties due to uncontrollable events (e.g., natural disasters). --- ### **VII. Discharge of Contract** #### **A. Discharge by Performance** - Complete or substantial performance ends the contract. #### **B. Discharge by Breach** - **Repudiatory Breach**: Failure to perform essential obligations allows the innocent party to terminate the contract. - **Anticipatory Breach**: When a party indicates they will not perform before the due date, the other party may terminate immediately (*Hochster v De La Tour*). #### **C. Discharge by Agreement** - **Mutual Rescission**: Both parties agree to cancel the contract. - **Substituted Agreement**: Replacing the existing contract with a new one. - **Accord and Satisfaction**: A new agreement resolving disputes under the original contract. #### **D. Discharge by Frustration** - **Definition**: When an unforeseen event renders performance impossible or fundamentally different. - Examples include: - **Destruction of the Subject Matter**: (*Taylor v Caldwell*). - **Supervening Illegality**: A new law prohibits the agreed act. - **Personal Incapacity**: Death or illness in personal service contracts. --- ### **VIII. Special Topics in Contract Law** #### **A. Third-Party Rights** - **UK Law**: The **Contracts (Rights of Third Parties) Act 1999** allows third parties to enforce contractual terms if expressly stated or implied. - **Malaysian Law**: Adheres strictly to the doctrine of privity, barring third-party enforcement unless exceptions apply. #### **B. Exclusion Clauses** - **Definition**: Terms excluding or limiting liability for breach. - **Requirements for Validity**: 1. Must be incorporated into the contract before or at the time of formation (*Olley v Marlborough Court Hotel*). 2. Must cover the breach in question (*Canada Steamship Lines v The King*). 3. Subject to statutory controls like the **Unfair Contract Terms Act 1977** (UK). --- ### **IX. Exam Tips for Problem Questions** 1. **Identify Key Issues**: Break down the facts and identify the relevant legal principles. 2. **Apply the IRAC Method**: Issue, Rule, Application, Conclusion. 3. **Use Case Law**: Cite leading cases to support arguments. 4. **Consider Jurisdiction**: Pay attention to differences between UK and Malaysian law. 5. **Be Structured and Clear**: Write logically and address all parts of the question.