Introduction to Business Law – Malaysian Contract Law

Question

Rumi sends a message in a WhatsApp group consisting of several business owners, informing them that she wants to sell her printing machine for RM8,000 and asking anyone interested to contact her before Friday. Cathy contacts Rumi privately and states that she will buy the machine for RM7,000. Rumi replies, “RM7,000 is too low. I could let it go for RM7,800.” Cathy responds, “Would you consider RM7,500 if I collect it myself?” Rumi reads the message but does not respond. On Thursday, Cathy informs Rumi that she will pay the original RM7,800 and transfers RM1,000 as part payment. However, Rumi already agreed to sell the machine to Melo on Wednesday for RM8,500. Cathy claims that a binding contract exists because she already accepted the offer.

Separately, Rumi sees some of Kero’s design work and mentions that she hopes Kero might one day help her recreate the logo for her business. Kero takes Rumi’s comment seriously and, without any further discussion, designs a new logo for Rumi’s business. Upon seeing the completed design, Rumi agrees to pay Kero RM5,000 for his work. Rumi later refuses to pay, arguing that no payment was discussed before Kero completed the design.

Advise Cathy and Kero on their respective legal positions using the ILAC method, supported by relevant statutory provisions and case authorities under Malaysian law.

(a) Advise Cathy whether she has a contract with Rumi in relation to offer and acceptance.

(b) Advise Kero on whether he has a contract with Rumi in relation to consideration.

Guidelines:

Students should have the following structures in the written report:

1. Decide issue(s) that involve in the case study,
2. Describe the relevant principles of business law,
3. Support the principles with relevant sections of legislation(s)/statutes(s) and cases
4. Apply the said laws to the particular business scenario; and
5. Advise the client accordingly.

Experts Answer on Above Contract Law Questions

Cathy – offer and acceptance

Issue – the issue to analyse is to evaluate whether Cathy and Rumi formed a binding contract for the printing machine.
Law – according to section 2(a) of the contracts act 1950, a proposal takes place when a person indicates the willingness to do or abstain from doing something in order to obtain assent of others. The acceptance needs to be absolute and unqualified as per section 2(b), and the proposal can be revoked by communication of notice of revocation as per section 6(a).
Application – in the given scenario, the message to sell the machine for RM8000 was an offer, and the initial response given by Cathy of RM7000 was not acceptance, rather it was a counter offer aimed at rejecting the initial RM8000 offer. The response of Rumi for RM7800 is a new offer but the counter offer of Cathy is RM7500. In response to this proposal of RM7500, Rumi’s silence did not constitute an acceptance. The statement given by Cathy to pay RM7800 was an attempt to accept Rumi’s earlier RM7800 proposal. But Rumi had already agreed to sell the machine to Mello on Wednesday. Since the original RM7800 offer was not available for Cathy to accept, Cathy’s RM1000 payment did not create a contract with Rumi.
Conclusion – it is completed that there is no binding contract being entered into by Cathy with Rumi. Her RM7500 proposal was never accepted and Rumi’s subsequent sales to Mello does not breach a contract with Cathy.

Kero – Consideration

Issue – the main issue is whether it is possible to enforce Rumi’s promise to pay RM5000 when payment was not agreed before designing the logo.
Law – Section 2(d) of the Contracts Act 1950 states that consideration involves an act, abstinence or promise done at the desire of the promisor. Section 26 needs an agreement without consideration to be void on the basis of certain exceptions.
The most important requirement is the act that forms the consideration must have been performed at the desire of the promisor. In Kepong Prospecting Ltd v Schmidt [1968]1 MLJ170, the importance of statutory requirements governing consideration is clearly identified by the Malaysian courts.
Application
In the given scenario, Rumi said that she hoped Kero might one day help recreate the logo. This is not a kind of clear request or a contractual promise for Kero to design the logo. The independent decision of the Kero to design the logo is not an agreement, and this implies that the design work was not performed at Rumi’s desire within section 2(d). The later promise made by Rumi to pay RM5000 was made only after Kero had completed the work. The completed design cannot be considered as a valid consideration for Rumi’s later promise because the work was already completed by Kero without acting pursuant to a contractual request.
Conclusion – Kero is not likely to have any kind of enforceable contract for RM5000. The original statement given by Rumi was too vague and Kero acted independently. The necessary consideration needed for the later promise was clearly absent, and the work was carried out without any request of Rumi’s desire.

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