Legal Analysis of Contract Formation in Business Law Assignment

2018
Business Law Assignment

Issue
The key issue, in this case, is whether Emily can legally demand from Kleencare Sdn Bhd an
RM500 as promised by them in the advertisement and whether a valid contract has
established between parties?
Rule
The Contract Law 1950 (the Act) governs the contractual relationships in Malaysia. Section
38 (1) provides that partiers have to perform their legal obligations given under the contract
unless such performance is illegal or against the law (AGC, 2018). There are a number of
elements which are necessary to be established between parties in order to form a contract.
Section 2 (a) provides that a proposal or offer is made by a party, promisor, when such party
signifies to another person, promisee, regarding his/her willingness to do or not do anything
in order to obtain his/her approval. Subsection (b) provides that when the person to whom
a proposal is made signifies his/her assent, a promise is made between parties. A proposal
must have an intention to bind the promisor into a legal relationship after receiving the
acceptance from the promisee (Harvey v Facey [1893] UKPC 1) (Hough and Kuhnel-Fitchen,
2017). Section 7 provides that the acceptance of the promisee must be absolute it should be
unqualified (a) and expressed in a reasonable manner and within a reasonable time (b).
In case the acceptance is not given in reasonable time, or the terms are changed then an
offer cannot be considered as valid (Hyde v Wrench [1840] 49 ER 132). Generally,
advertisements are considered as an invitation to treat rather than a proposal based on
which a contract cannot be formed between parties (Partridge v Crittenden [1968] 2 All ER
425) (Denoncourt, 2009). However, an exception is given in the case of Carlill v Carbolic
Smoke Ball Co [1893] 1 QB 256 in which the court held that in some instances an advert
could be considered as a valid offer. In this case, a company published an advert in the
paper by stating that it will pay a reward of £100 to anyone who contracts influenza after
using their product. The advertisement also provided a number of instructions which are
required to be followed by parties. The company also deposited £1000 in the bank to show
its sincerity. Mrs Carlill used the product and caught flu after which she demanded £100 for