Communicating Acceptance & Legal Capacity of Minor – Estate Agent's Examination Part 1&2

Q.
(a) Answer questions (i) and (ii) based on the Contracts Act, 1950.

(i) With reference to the provisions of the Contracts Act, 1950 explain the conditions of accepting an offer. (3 marks)

(ii) 16 year old Felix made the following transactions and failed to pay;

• Bought a digital camera for RM1,100.00; (3 marks)

• One semester’s tuition fees at May College for the sum of RM2,500.00. (3 marks)

Discuss the validity of the two contracts above.

(b) N/A Sale of Goods Act, 1957.

(c) Explain how the English Common Law and Equity may form part of the Malaysian Law as provided by the Civil Law Act, 1956. (5 marks)

(MIA QE 2009/9 Q1, 20 marks)

A.
(a) Based on Contracts Act, 1950 (hereafter 'CA50'):

(i) Condition of Offer and Acceptance

CA50 Section 2 Interpretation

(a) 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;

(b) when the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted: a proposal, when accepted, becomes a promise;

Thus, a proposal - which is an offer, when accepted, is a promise. This is offer and acceptance.

Ways by which acceptance may be made:

CA50 S.7 Acceptance must be absolute.
In order to convert a proposal into a promise the acceptance must-

(a) be absolute and unqualified;
[If qualified, it becomes a negotiation, and not ready as acceptance - "Subject to..."
Low Kar Yit & Ors v Mohamed Isa & Anor [1963]

(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 prescribes 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.

[For example, if the proposal indicates that the acceptance must be by payment of deposit, and it was paid, then the acceptance is complete. And, if the amount of deposit was paid differently from the required sum without the proposer insisting the amount remaining unpaid, the acceptance is considered valid - deposit of 50% is considered acceptable. Consideration need not be in full, see explanation 2 of S.26 CA50. See also earlier post on 'Without consideration a valid contract' here.]

CA50 S.3 Communication, acceptance and revocation of proposals.
The communication of proposals, the acceptance of proposals, and the revocation of proposals and acceptances, respectively, are deemed to be made by any act or omission of the party proposing, accepting, or revoking, by which he intends to communicate the proposal, acceptance, or revocation, or which has the effect of communicating it.

CA50 S.4 Communication, when complete.
(2) The communication of an acceptance is complete-

(a) as against the proposer, when it is put in a course of transmission to him, so as to be out of the power of the acceptor; and

(b) as against the acceptor, when it comes to the knowledge of the proposer.

[For example, Ali is offering the sale of house to Zamri, Ali is proposer, Zamri is acceptor.

Scenario:

Ali told Zamri that he would consider the deal sealed when Zamri makes payment of earnest deposit of RM5,000 to his account at Maybank A/C No. 12345678 for his house at offer price of RM250,000.

Acceptance against Ali 'Proposer' - when Zamri deposited the money at Ali's Maybank A/C. At this stage, Zamri has not more control of the RM5,000 deposited. However, Ali may not have known when the money is deposited. He might be traveling or inaccessible to his A/C. But the acceptance is sealed when Zamri transfers money RM5k to his account. The focus is that Zamri has agreed and accepted the offer, with money transferred 'out of his control'.

Acceptance against Zamri 'Acceptor' - when Ali received his money and told him so - which means Zamri has to call Ali and confirm that the deposit in Maybank A/C has been received. If Zamri has wrongly deposited the money, acceptance is not against Zamri, but already against Ali. Ali cannot offer the house to another third party. However, Zamri may turn away - as the deposit was to someone else - and not to buy the house. Until he confirms with Ali that the money is received, at this stage, he cannot turn away. If he turns away, he has breach the contract, and damage claimable - forfeiture of deposit or fine of penalty.]

Revocation - Communication here.

S.8 Acceptance by performing conditions, or receiving consideration.
Performance of the conditions of a proposal, or the acceptance of any consideration for a reciprocal promise which may be offered with a proposal, is an acceptance of the proposal.

[For example, Goldsborough Mort & Co Ltd v Quinn (1910), an option was granted with payment of consideration, hence it cannot be revoked till the time has lapsed. In this case, an option was granted by Quinn to the plaintiff that within a specific time, the land is offered to the plaintiff for sale. Quinn could not revoke his offer when the option was paid with a consideration.]

(ii) Minor (<18 years old) in a contract -

Read simplified notes from Miss P at her blog 'It's Law' here.

Felix bought a digital camera RM1,100 and not paid.

S.11 CA50 Who are competent to contract.

Every person is competent to contract who is of the age of majority according to the law which he is subject, and who is of sound mind, and is not disqualified from contracting by any law to which he is subject.

Here, it means age of 18 or above, sound mind, not bankrupt or restricted by any law.

In Malaysia, the Age of Majority is 18 years old - Age of Majority Act, 1971.

Age of majority

Section 2. Subject to section 4, the minority of all males and females shall cease and determine within Malaysia at the age of eighteen years and every such male and female attaining that age shall be of the age of majority.

Therefore, Felix is below the Age of Majority, and is not competent to contract, or in other words, does not have the legal capacity to contract. In such context, whatever contract made is void, and void ab initio (void from the very inception). Thus, Felix is not bound to pay the digital camera costing RM1,100.

A case to support this judgment is Mohori Bibee v Dhumordas Chose (1903), where a minor, despite disclosing his age, was able to borrow money from Mohori Bibee - an attorney to Brahmo Dutt - the money lender. Being unable to settle the debt, Dhumordas who was accompanied by his mother went to Court.

Below is narration of the case:

Agent of defendant (Mohori) advanced money to plaintiff (Dhumordas), an infant, fully knowing his incompetency to contract, against mortgage of property belonging to latter. Plaintiff commenced this action to get the mortgage declared as void. A minor is deemed as incompetent to contract and is not to be personally liable for any necessaries supplied to him, albeit a statutory claim is created against his property.

See here for earlier post on 'Age of Majority'. Similar question came out in 2014 Q1b: Describe the circumstances in which an infant is contractually bound.

Ref:

Vishrut Kansal (National University of Juridical Sciences, Kolkata), Mohori Bibee v Dharmodas Ghose, 2013, available at
https://indiancaselaws.wordpress.com/2013/01/17/mohori-bibee-v-dharmodas-ghose/

Felix owes one semester tuition fee.

When it comes to EDUCATION, the law is binding to the minor. That is probably due to the fact that Education is a basic necessity of minor, and it has to ensure education is extended to the minor. Imagine, if there is no capacity to contract education to the minor, how many children would be deprived of education?

S.69 CA50 Claim for necessaries supplied to person incapable of contracting, or on his account.

If a person, incapable of entering into a contract, or anyone whom he is legally bound to support, is supplied by another person with necessaries suited to his condition in life, the person who has furnished such supplies is entitled to be reimbursed from the property of such incapable person.

Based on this provision and a landmark case on Malaysia Government v Gurcharan Singh (1971) (see below), Felix is bound to the contract and liable to pay back RM2,500 for the semester tuition fee at May College. In his inability to pay for the fees, his guardian or parents need to pay up for him.

A case on Scholarship is relevant to this scenario in earlier post on 'Case law on capacity of an Infant to a Contract' here.

Malaysia Government vs Gurcharan Singh [1971] 1MLJ 211

FACTS
This case is about the government of Malaysia as the plaintiff whom had sued Gurcharan Singh the first defendant whom is a promisor of a contract and ORS as the second and third defendant whom act as the sureties of the contract for breaching the contract made between them. The contract is about the government of Malaysia providing the first defendant a scholarship for his study at Malayan Teacher’s Training Institution with an agreement that the first defendant will serve the government inconsideration for being trained as a teacher. The duration of the contract is 5 years while the first defendant only served the government for 3 years 10 months only. However during the time the contract was made, the first defendant was in a minor state. The claim for the compensation for this case is $11,500.

ISSUES
There are three issues evolved in this case, these are:

1) Whether the contract made between them is a valid contract?

2) Whether the first defendant is liable on the claim for necessaries?

3) Whether the amount claimed or payable for compensation is reasonable and accepted regarding the case?

DECISIONS
The contract entered into by the first defendant was a void contract as he was an infant at the relevant time. Thus the principal debtor was not held liable and consequently the second and third defendants whom were the sureties of the contract also were not held liable. However, due to the exception on necessaries claim, the first defendant was therefore liable for the repayment of the sum expended [emphasis mine] for his education and training as being expended on necessaries. The amount of damages payable in this case must be based on repayment of the proportion of the actual sum expended based on the completed months of service and in the circumstances judgment would be given for the plaintiff against the defendants for $2,683.

PRINCIPLES VALIDITY OF CONTRACT (MINOR)
In order for a contract to be valid, the participants of the contracts must possess the legal capacity as governed by S10 Contracts Act 1950.

The section states that there must be free consent of "parties competent to contract ". Moving on S11 of the Act defines these competent persons. Accordingly the following are the persons who are deemed to be competent in accordance to the Act:

(a) one who has attained the age of majority

(b) sound of mind

A minor is a person who has not reached the age of majority which is 18 as per Age of Majority Act, 1971. Thus, under the Act, contracts entered into by a minor person are void, or void ab initio.

NECESSARIES
Under common law, a minor is liable on contracts for ‘necessaries’.

S69 of the Contracts Act merely embodied the common law of England regarding liability for necessaries supplied to a minor. In this case the necessaries term has been broadly defined to include scholarship supplies as one of necessaries. Thus, it means that if a minor contracted for any kind of necessaries including scholarship to pursue studies, such contracts are not void. Thus, the minor in this case is liable to pay the reimbursement to the government for breaching out the contract under necessaries exception.

AMOUNT PAYABLE:
All the decisions on the payment for necessaries have referred to the payment not of the stipulated prices but of a reasonable price for them. However learned federal counsel relied on the case of Government of Malaysia v. Thelma Fernandez and Anor in which Raja Azlan Shah J. Held that the provision for repayment for breach was not a penalty but a genuine and reasonable estimate of the damages suffered following the breach.

COMMENT
After reviewing this case, I found myself agreed to the decisions of this case. This is because the decisions protected the government from incurring more losses from the breaching of the contract. Even the government did not receive the full amount of their claim but still they received the amount reasonable to the damages they incurred. The decisions also protect the defendants as they do not need to pay the whole amount of the scholarship as the defendant had served the government almost 4 years out of 5 years. Thus, as for me the amount payable is reasonable for both parties.

In respect of Islamic perspective or shari’ah views in this case I found that the decisions made are seemed to be fair and protective as both parties received reasonable consequences. The main concepts in Islamic law are justice and fairness and the decisions in this case seemed to be compliance with Islamic concepts.

Ref:
Malaysian Government vs Gurcharan Singh, available at
http://www.academia.edu/4104877/CASE_REVIEW_ASSIGNMENT

(c) Civil Law Act, 1956 specifies that:

English Common Law and Rule of Equity applies to Malaysia as it was on the dates:

West Malaysia - 7th April, 1956

Sabah - 1st Dec, 1951

Sarawak - 12 Dec, 1949

These are 'Cut Off' dates, and hence after such dates, the English Common Law and Rule of Equity do not become law in Malaysia. Which means common law and equity in England can be used as law in arriving at judgement if the cases are quoted from the dates above and earlier, but not later. In such scenario, if there is a common law case decided in 2010 in the Courts in England, it cannot be used as a reference to arrive at an argument in Malaysian Courts.

Many of the landmark cases quoted are in the early 1900's or even 1850's. Such as:

Contract - Invitation to treat, Carlill v Carbolic Smoke Ball Co. Ltd (1893); Pharmaceutical Society of Great Britain v Boots Cash Chemist Ltd (1953)

Contract - Frustration, Taylor v Caldwell 1863

Employment Contract - Dismissal, Boston Deep Sea Fishing & Ice Co v Ansell (1888)

Ref:
MIA QE Answers, available at
http://mia.org.my/new/education_candidate_examQnA.asp

(i) Condition of Offer and Acceptance

(ii) Minor (<18 years old) in a contract -

(c) Civil Law Act, 1956 specifies that:

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