How to Go about Answering Problem-based Question In Law
(Question 2)
Question on determination of existence of a contract.
• Most of the time, questions on contract formation will focus on :
▪ Finding whether there exist a valid offer (look whether the
elements are presents i.e. was it seriously made with intention to enter a contract, was it certain and definite and has it been communicated?)
➢At this point, please make sure what was being said (oral or written) is indeed an offer and not an invitation to
treat.
➢Remember, ITT cannot be accepted, instead people who
receives the ITT will be making their offer to the issuer of
ITT.
Question on determination of existence of a contract.
• Once it has been determined that a valid offer exist, the next step is to determine whether this offer has been validly accepted (again, look at whether the response from the other party fulfills the requirement of a valid acceptance – absolute and unqualified, communicated in some way, within reasonable time and before the offer is revoked or expires.
• Students must careful not to treat all response as ‘acceptance’ –
sometimes they are counter-offer, additional inquiry, or no response at all
• Once it has been satisfied that there is a valid offer that is validly
accepted – at this stage a valid contract exist (assuming that the other elements – intention, consideration, certainty and capacity are present)
• UNLESS there are facts in the questions that justify discussing about the other elements at length, students can safely conclude in a brief
paragraph that the other elements do exist.
Sample Question on Contract
• Jen and Ben Affleck submitted an offer for RM680, 000 to Bank Utama to purchase a house in Mont Kiara, which Bank Utama had taken back through foreclosure. At 9 a.m. on the morning of December 6, 2019, the Afflecks received a response to their offer from Bank Utama containing several additional terms and conditions, but with no mention of purchase price.
According to Jen, she immediately drove to her husband's office where she and her husband signed this response at 9:50 a.m. that day. She then drove to her office, typed an envelope with the proper address, placed the response in the envelope, and before 10.45 a.m. that same morning, she handed it to the dispatch clerk at her office, instructing him to mail it for her. The clerk placed the letter in the mailroom together with all the other office mail. It sat there until 9 a.m. the following day, when the mail clerk took the letters and deposited them into a mailbox at the nearby post office. Meanwhile, at approximately 11.15 a.m. on 6 December 2019, Jen received a telephone call from Bank Utama informing her that the bank’s response is not valid as the bank intended to increase the selling price to RM750, 000. The bank also claims that in any event there could be no contract between the parties due to the mistake in the price. Advise the Afflecks whether they have a contract to buy the house at RM 680, 000 or not.
Answer Outline
RULE:
• Start your answer by explaining the relevant rules relating to offer, ITT, acceptance, counter-offer + supporting case laws.
APPLICATION
• The existence of a contract between Afflecks and Bank Utama is dependent upon whether there has been an effective acceptance the offer.
• Bank Utama does not make offer – but ITT – case of Boots or Gibson
• An offer is a manifestation of willingness to enter into a bargain. Must be communicated – R v. Clarke
• An acceptance is a manifestation of willingness to be bound by the terms of the offer made in a manner invited or required by the offer.
• Once an effective acceptance is made a contract is formed and neither party can withdraw from the bargain without incurring liability to the other.
Answer Outline
• Here, the Afflecks’ were the original offerors having made an offer to Bank Utama to purchase the home for RM680,000.
• Bank Utama responded to this offer with a counteroffer.
• That is a response that contained additional or different terms. At common law, a counteroffer has the same effect as a rejection, and the original offeror becomes the offeree. – case of Hyde v. Wrench.
Answer Outline
• The Afflecks’ could accept the counter-offer as long as it remained opened. The offer would remain open until it was withdrawn or revoked or lapsed due to the passage of time. If nothing was said about how long the offer would remain open, it would remain open for a reasonable time.
• The fact that the counteroffer contained a mistake with respect to the purchase price would not affect the power of acceptance as the mistake would not have been known to the offerees, the Afflecks’.
• Furthermore, in order for mistake to prevent contract formation, it must be mutual mistake. Unless the opposing party knew or should have known of the mistake, it will not prevent formation of a contract.
Answer Outline
• Since the counter-offer contained no divergence from the original purchase price of 680,000, there would be no reason for the Afflecks’
to know that it was mistaken. Acceptance is effective upon dispatch.
• That is, when the acceptance is placed in the course of transmission and beyond the control of the offeree. This is known as the “mailbox rule.” - Adams v. Lindsell.
• Here, the letter was not placed beyond the control of the offeree until after notice that it had been withdrawn was received. Although she handed the acceptance to the mail clerk at 10.45 a.m. on the sixth. The acceptance was still sitting in her office’s mailroom at 11 a.m. that same day when she received notice of revocation.
• No contract was formed because Bank Utama withdrew or revoked their offer prior to the Afflecks’ accepting it
• Furthermore, their revocation has been effectively communicated – Byrne v. Van Tienhoven
End of Slides
