The question stated on hand requires one to identify whether the defendant, Benny is liable to any possible claims by the plaintiff, Caryn by determining whether the advertisement made by Benny is an offer or an invitation to treat and whether there is a breach of contract.
First of all, it is noted that an offer or invitation to treat usually is an essence of a legally binding contract. A legally binding contract is defined as the mutual agreement between two or more competent parties that consists of an offer and invitation to treat with the intention to create a legal relationship between the legal parties through consideration. Hence, a contract cannot be formed or enforced under the law if one of these elements is absent.
According to this case, can Caryn assert that the advertisement made by Benny suffice to be an offer? Benny has advertised during a pre-GST sale in April 2015 that he would supply and install fully imported laminated wood flooring at a special rate of RM1000 per room regardless of the size of the room. According to Partridge v Crittenden case, newspaper advertisement on selling goods is an invitation to treat because nowhere was there any indication of an expression of intention to be bound. Under Fisher v Bell’s case, invitation to treat is not an offer but it is a statement inducing another person to come and negotiate or to make an offer. An offer is different from an invitation to treat, according to Section 2(a) of Contracts Act 1950, an offer is defined as the act of a person to agree to another his willingness to perform or to abstain from doing anything, with a view to obtaining the consent of that other to the act or restrain. Invitation to treat is further defined as an attempt to induce an offer during the preliminary communication between two parties at the stage of negotiation. Hence, Benny’s advertisement on supplying and installing the imported laminated wood flooring is an invitation to treat in accordance to the previous case laws. However, whether an advertisement is an attempt to induce offer or an invitation to treat depends solely on the intentions of the legal parties. It is noted that invitation to treat cannot be accepted to form a contract. Under the the case of Ayer Hitam Tin Dredging Malaysia Bhd V Y.C. Chin Enterprises Sdn Bhd, the establishment of a legally binding contract depends upon the intention of the legal parties and there must be a consensus between them.
In contrary, Caryn’s response to purchase a Burmese teak laminated wood from Benny is an offer. According to Carlil v Carbolic Smoke Ball case, an advertisement made to public at large is an offer rather than invitation to treat because the contract is made with that limited portion of the public who come forward and complies with the terms of offer. Caryn has accepted Benny’s terms of supplying and installing 5 rooms at RM1000 a room that is RM5000 altogether and offered to purchase the Burmese teak laminated wood at a special rate of RM1000 per room regardless of the size of the room. Then, Benny accepted Caryn’s offer and agreed to supply and install it for the advertised price. According to Section (7) of Contracts Act, the acceptance must be absolute and unqualified. Moreover, the communication of a proposal is complete when it comes to the knowledge of the person to whom it is made, in accordance to Section 4(1) of Contracts Act 1950. Benny, as the acceptor, is aware of Caryn’s offer and the terms of installing 5 rooms at RM1000 a room that is RM5000 in total and accepted it by performance. Under Section 8 of Contracts Act, it is stated that 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. Hence, there is a contract formed between Benny and Caryn as all the elements of a legally binding contract are present.
Later on, Benny installed the 3 rooms flooring and discovered he could not get further supplies of Caryn’s style as they have stopped production of Burmese teak. He notified her he could not finish the job and submits a bill for RM3000. It is worth to highlight that it was an oral agreement between both of the parties as there was not any written agreement signed. However, an oral agreement is deemed valid because according to Section 10(1) of Contacts Act 1950, all agreements are contracts, written or verbal, if they are made by the free consent of parties competent to contract with consideration. According to Section 9 of Contracts Act 1950, an offer may be expressed or implied. Although Caryn’s offer to purchase the Burmese laminated wood flooring is made in words, it is said to be implied to Benny as he is aware of the offer. It is worth to highlight that if a proposal or acceptance of any promise is made in words, the promise is said to be expressed. If it is made otherwise than in words, the promise is said to be implied. In this case, there is a legal contract formed between the defendant, Benny, and the plaintiff who is Caryn. The terms expressed by Benny in his advertisement saying that 5 rooms are for RM5000 altogether are conditions because the terms will be regarded as a condition where stipulation is so important that breach would destroy main object of contract, according to Chong Yik Development Sdn Bhd v Setapak Development Sdn Bhd 1996. Whether expressed or implied, a term may take any one of the three natures. It may be a condition or warranty or an innominate term.
Since it is stated above that the terms expressed by Benny are conditions, hence the breach of these conditions would terminate the contract formed between Benny and Caryn. According to Chong Yik Development Sdn Bhd v Setapak Development Sdn Bhd case, if the conditions of a legally binding contract are not fulfilled or breached, the aggrieved party is entitled to terminate the contract and sue for damages. Hence, Benny has breached the contract of not fulfilling the conditions of the contract and he is liable to any claims from Caryn as the plaintiff of this case.
Caryn, as the plaintiff of this case can refuse to pay the amount billed by Benny which is RM3000 for the flooring installed in 3 rooms. The reason is because, under Section 74(1) of Contracts Act 1950, when a contract has been broken, the party who suffers by the breach is entitled to receive compensation for any loss caused by the party who has broken the contract. Hence, Caryn can refuse to pay the money since Benny has breached the conditions of the contract. It is worth to highlight that if Benny ever defends himself and raise the issue to dismiss the claim made by Caryn, Caryn can easily sue back by using the neighborhood principle laid down in Donoghue v Stevenson case. Caryn can sue Benny for the breach of contract as the conditions expressed are not fulfilled. As such, even if Caryn has not formed any legal relations and contract with Benny, the court still can hold that Benny would owe a legal obligation towards Caryn and she is entitled for damages. As for the damages, Caryn can sue for specific performance. Specific performance is defined as an equitable and discretionary remedy. It is a court order requiring defendant to perform contract or directing defendant to fulfill his obligations under contract where it is not done. Specific performance is usually ordered where damages are not adequate. Caryn could not only refuse to pay the amount billed by Benny, she could also direct Benny to complete the remaining 2 rooms as a compensation to her loss.
As for the second part of the question, if the special offer was to do the flooring at RM1000 each, there was no breach of contract. Benny advertised during a pre-GST sale in April 2015 that he would supply and install fully imported laminated wood flooring at a special rate of RM1000 per room regardless of the size of the room. This is an invitation treat in accordance to Partridge v Crittenden case as newspaper advertisement on selling goods is an invitation to treat because nowhere was there any indication of an expression of intention to be bound. However, Caryn’s response to purchase a Burmese teak laminated wood from Benny is an offer. According to Carlil v Carbolic Smoke Ball case, an advertisement made to public at large is an offer rather than invitation to treat because the contract is made with anyone who comes forward and complies with the terms of offer. Since Benny has agreed to supply and install it for the advertised price of RM1000 each, it shows that Benny has accepted Caryn’s offer by performance. According to Section 8 of Contracts Act 1950, performance of the conditions of a proposal, is an acceptance of the proposal. Hence, there is a contract formed between Caryn and Benny although it was a verbal agreement. A verbal contract is deemed valid because as stated in Section 10(1) of Contacts Act 1950, all agreements are contracts, written or verbal, if they are made by the free consent of parties competent to contract with consideration. So, there is a legal contract formed between the two parties.
Later on, Benny installed the 3 rooms flooring and discovered he could not get further supplies of Caryn’s style as they have stopped production of Burmese teak. He notified her he could not finish the job and submits a bill for RM3000. However, since both of Caryn and Benny have agreed that the special offer to do the flooring is at RM1000 each, there was no breach of contract. It is different from the first question as the term stated by Benny now is to do the flooring at RM1000 each room regardless of the size in the beginning of the acceptance. Benny has not stated the term 5 rooms for RM5000 altogether. Hence, although Benny failed to complete the other 2 rooms, Benny did not breach the contract as he did not state to complete the 5 rooms. There is no breach of condition in this contract. The contract between Caryn and Benny is still valid and Caryn has to pay the billed amount of RM3000 because she has agreed to install the flooring at RM1000 each room, which now has 3 rooms in total. Caryn is unable to sue for damages.
In conclusion, it is most likely that Caryn would be able to file claims for specific performance from Benny through a legal action under the Contracts Act 1950 as there is a breach of conditions in the contract when Benny has expressed the term 5 rooms for RM5000 altogether. If the term is to do the floorings at RM1000 each room, there is no breach of contract and Caryn has to pay for the bill to Benny at RM3000 for 3 rooms.