Offer / proposal

It is typical that from the onset of a transaction, there would be an offer or a proposal from one party to another. In Preston Corporation Sdn Bhd v Edward Leong & Ors [1982] 2 MLJ 22, Salleh Abbas FJ delivering the judgment in the Federal Court states:

“An offer is an intimation of willingness by an offeror to enter into a legally binding contract. Its terms either expressly or impliedly indicate that it is to become binding on the offeror as soon as it is been accepted by the offeree”.

It should be noted however that under the Contracts Act 1950 (Malaysia)  an offer is referred to as a proposal and it does not use the term offeror and offeree but instead respectively uses the term promisor and promisee. Consequently Contracts Act 1950 (Malaysia) s 2(a) defines the terms proposal as follows:

“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”

The communication of a proposal or offer is complete when it comes to the knowledge of the person to whom it is made-Contracts Act 1950 (Malaysia) s 4(1) . (See Ignatius v. Bell [1913] 2 FMSLR 115]. A proposal or offer made in words (oral or written) is said to be express and where it is made by conduct it is said to be implied - Contracts Act 1950 (Malaysia) s 9.

Of course an offer or proposal must be distinguished from an option or an advertisement which amounts to an invitation to treat. In Nai Yau Juu v Pasdec Corp Sdn Bhd & Anor [2005] 5 CLJ, the plaintiff registered himself as an interested buyer of a property being developed by the defendant company. Subsequently a letter was issued by the defendant company stating the following:

• Requesting the plaintiff to go to their sales and promotion counter to select a property;
• Place a booking fee for the purchase of that property; and.
• That the booking fee would be considered as part of the purchase price once the sale and purchase agreement was executed on a date to be fixed later.

This letter was accompanied by a brochure, a layout plan and a price list. The plaintiff paid the booking fee for a shop lot and was issued a receipt by the defendant company. A second letter was later issued by the defendant company to the plaintiff stipulating a higher price for the lot he selected. The letter set a deadline within which the “offer” to purchase the new price must be accepted. The plaintiff refused and sought to enforce the initial price based on the price list.

The High Court held that the payment of a booking fee did not constitute a concluded contract. The payment of a booking fee was merely an invitation to treat in the form of a continuing option to purchase the property. It was held that the second letter by the defendant company for the increased price amounted to an offer and that the plaintiff’s insistence of purchasing the property at the initial price resulted in a counter offer. As such the booking fee was refundable to the plaintiff.

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