Offer and acceptance
For the contract to be valid, there must be a clear agreement between the contracting parties. One party requirement make a proposal, and the other party must assent the offer. A contract is not valid until the offer is accepted (Bayern, 2015).
In the above cases, there is an agreement between the executive director of Adam Farquhar Berhad and Madaam Farina Corporation (MFC) for consultancy work. AFB does not have internal competence to conduct a project worth 5 million and above. They make agreement with MFC to do the project for Octoberim Danzel Holding through out-sourcing and they have to share of ratio 7:3
For the agreement to be successful, the two parties need to agree on terms and conditions which should not be broken. Some of the condition in MFC agreement were
- MFC will be treated as the outsourcing firm and the entire project liability will be under the purview of AFB. The work of MFC will be only to advise with limited liability on the limited project
- She proposed that the project be registered and termed as se rather than to named MFC at the outsourcing party. This is because MFC had the ability to transact more than 5 million. So MFC name was to appear on the the list of the official registry as third party so as formalize the tendering consideration.
- The third condition for the agreement was that the IZ was to deposit the amount of MY 30,670.80 by AFB confirmation and to be paid on professional basis undisclosed to MFC as consideration before 01/10/2014 before 12.00 PM and a fine 0f 15% was to be incurred as a remedy of non-conformance in the event that the deposit is not made.
- The final proposal was that SD was to be named as principal consultant and the consultancy work was to be maintained under personal capacity rather than MFC as registered domain.
For a contract to be valid the proposed offer must be accepted by the other party. In our case, MFC were to sign the offer as per the term offered by ODH before 1/10/2014. IZ concurred with the terms provided they were to be reviewed and by 3/10/2014. IZ agreed to accept the proposal and shared the project in lieu to ODH. ODH also accepted the proposal and this made the contract to be valid.
A contract cannot exist without consideration except in very limited circumstances (Davies, 2016). Consideration is the process where the contracting parties change promises. Consideration can either be through payment of cash, delivery of service, and a pledge to do work among others. In the above cases, we have seen the different type of consideration. One consideration has been made, and the party should not breach the agreement.
In this case, when technical consideration is considered, the contract seems to be void due to the amount different in a breach of the contract. Nevertheless, weighting the generalities of the consideration, there is adequate to ratify the above based on the substantial payment via specific performance, hence, the contract shall not be classified as void and voidable. The parties should be granted relief to mitigate the differences.
Consideration is also seen in the contract made between AFB and MFC. They agree that they will share the cost in ratio 70:30. The service which will be offered to Octoberim DanzelHolding (ODH) by MFC and AFB is also a form of consideration because in return, ODH will pay for service inform of money. In addition to this, the Company shall reimburse Consultant for reasonable travel and other expenses Consultant incurs in connection with performing the Services
Each party, on joining a contract, must show an intention to be bound by it (Taylor, 2015). A person can be bound to a contract by seriously creating a legal obligation and planned to have intended the contract to have legal significances. In the case of MFC, Legal actions and remedies may be enforced by MFC as the name of the company had been capitalized in the previous contact without prior indication. MFC shall get into the legal process to apply for Anton Pillar order /Mareva injunction to recover all the documentation and contract which has been processed to estop the parties from pursuing the contract execution (Ishan and Abdullah, 2015).
MFC has the right to take legal action against SD for improper dealings and breach trust managing the above contracts
The legal defence submitted by AFB did not diminish/incapacitate his liabilities to invalidate the contract as the contract is presumed to be entered with a valid consent (O’Sullivan and Hilliard, 2016).
In a contract, both parties must appreciate what they are undertaking (Manap, et al, 2014). Under common law, everyone is allowed to enter into contract provided there is a necessary capacity to understand what the contract entails. However, there is a group of people considered by the law to lack necessary capacity to enter the contract, they include:
- People who have impaired judgment or are under the influence of drug
- Person under the age of 18
- People with mental disability
A person can avoid the contract on the excuse of their incapacity only if the condition is clearly shown. And the other party should also be aware that they cannot enter into the contract due to their incapacity (Davies, 2016).
The contract can be voidable if a party who, as a consequence of psychological disorder or drunkenness, is incapable to recognise the agreement being made provided that the other party was aware or was supposed to be aware of the disability. The party willing to withdraw must prove that they had a disability and the other party was supposed to be aware of their condition. In above case, FNB did not provide a valid reason to illustrate their incapability.
In the cases above, it is analysed that SD was unauthorized to conclude the dealing for the commercial agreement although she was licensed as a professional consultant. The preliminary indication (T&C) that the agreement shall be in a personal capacity is not a valid consideration that can be termed in for contract formalization.
Secondly, the parties in the contract are wrongly termed out in the contract instrument, and in fact, SD did have any capacity to forward her legal contention to enforce her legal liabilities. The contract is void and voidable.
And finally, the contract is valid because there is no party which signed the contract under influence of drug or any other substance which could be proven.
For the contract to valid, no party should be forced to be involved in the contract. Instead, the parties should agree to the contract on their free will (Yihan, et al, 2015).
Genuine consent can be affected with many issues, they include:
- Undue influence. Under the influence exist, there is unbalanced power between the contracting parties. This may force the weaker party to enter the contract involuntarily. The contract can be set aside by the court because the influence is undue (Ibrahim, et al., 2015). The instance of undue influence is witnessed in the case when MFC realized that their license had been capitalized to secure the interest of AFB. There is unbalance power between AFB and MFC.
- In a mistake, the two parties contradict about the deal they signed. This illustrates that there was no clear understanding between the two parties. The contract may be announced void (Turner, 2013). From the cases, Adam Farquharber had felt that the details of the term of reference is not comprehensive to secure his interest and prejudice in nature. He just discovered there a few mistakes and misrepresented information which diminish his capacity in performing the above contract.
- Misrepresentation is whereby one party gives falls information at the time the contract is being signed. The false information are used to make the contract, and in the event, a loss is made by the other party, the contract can be cancelled, and damages be claimed (Adriaanse, 2016). In our case above, The T&C shall unfold should the parties is not certain about the terms and condition. His action as a result of this has proven that he is act/omission is material governing the liabilities of the contracting parties.
- Duress is a condition when one of the parties receives threatened or actual violence to an individual to obtain a contractual promise. When realized that the consent was obtained under duress, then the party may opt to avoid the contract (Ho, 2015). In the above cases, AFB dissatisfied with the ODH terms of reference and claim that the agreement was signed of under duress since he is not familiar with the legal contents and terms. He has appointed a lawyer to repudiate the contract in reference to the terms and execution.
- Unconscionable conduct. According to Arvind (2017), unconscionable conduct also deal with business between weaker parties and dominant parties; it, therefore, intersections with duress and undue influence
A contract may be illegal because it infringes a rule of public policy or because its subject matter is illegal. A contract with an illegal acts, promises or objects would violate this condition hence it should be void (Goh and Lee, 2014). In the case above, the agreement was signed without a valid limit of authority whereby Sean Delilah is actually a contract consultant in her professional capacity which is not allowed to represent the company by any form without permission of Madaam Farina Corporation (MFC). Her contract is has already expired on the 07/10/2014.
There was also violation and breach of contract, Sean only received the amount of MYR30, 670.00. At 12.01 a.m. 02/10/2014.She has claimed against AFB that there is a fundamental breach of terms in the contract as that is not the exact amount that he requested AS a consideration for the consultancy undertaking. The date and time of payment is not accurate yet no 15% compensation is made.
Based on the review of those mentioned above, the below conditional clauses is suggested to be incorporated in the above contract:
Effect of Breach on Risk of Loss.
Instances, where tender fail to confirm to the contract whether the offer is accepted or rejected the risk, should remain on the AFB until acceptance
In cases where the contracting cancel acceptance to the point of any deficiency, then the risk of loss should be treated by the insurance company as having rested on AFB from the start of the implementation of project (Aryind, 2017)
Where the contract disclaims or is otherwise in break before the risk of their damage has passed, AFB may treat the risk of loss as resting on commercially reasonable time.
Tender of Payment
Tender of payment is a circumstance to tender and whole any delivery unless there is an agreement between the parties
When tender of payment, when made by any, means present in the normal course of the transaction then it is sufficient, but when the demand payment in permitted tender and gives any adjustment in time reasonably to produce it then it is not sufficient (Poole, 2013)
Subject to delivery, the effect of a device on responsibility, payment by check is provisional and is conquered as between the groups by dishonour of the paid on due presentment.
Referring to the case of Octoberim Danzelholding, the parties should reconcile the above defect by reviewing the main structure and objective of contract. No party should be exempted from entering the above contract provided they have all the formalities. The contract should then be construed in the line of objective specified and nature.
In the case of Debora Ivanis, McKendrick (2014), purports that in a contract when the principal is being presented by an agent, a valid authorization should be obtained by the agent before any action can be performed. The parties in the contract should be termed well and this could have given SD to forward her legal contention to enforce her legal liabilities.
Finally, in the case of Madaam Farina Corporation trust is an important aspect in signing a contract and maintaining the project moving. When trust is achieved, SD will not be doing backdoor businesses on the behalf of the company and also ODH will not be sued for naming MFC as partner without prior knowledge but instead they will inform them and agree on contract. If all this is done, the 9 billion loss made by ODH due to the project not performing will be avoided.
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