The Legal Issues Report: Yacht's Case

The legal context surrounding the offer made by Johari to sell his yacht, Thunder, to Ben for RM2 million raises significant questions about contract formation and the implications of revocation. This essay will explore the elements necessary for a binding contract, the communication of offers and acceptances, and the implications of revocation in accordance with the Contracts Act 1950.

Understanding Offer and Acceptance

An offer is a clear expression of willingness by one party (the offeror) to enter into a contract with another party (the offeree) on specific terms. According to Section 2(a) of the Contracts Act 1950, a proposal is made when one party signifies their willingness to either perform an act or refrain from doing so to obtain the assent of the other party. Offers can be communicated verbally or in writing, and they can be directed at specific individuals or the general public (Lee & Detta, 2011).

In this case, Johari is the offeror who expressed his intention to sell the yacht to Ben, the offeree, for RM2 million. The yacht, being a tangible asset, constitutes something of value within the context of their negotiation.

Communication of Offers

For an offer to be valid, it must be communicated to the offeree, who must have actual knowledge of the offer for it to be binding. Section 4(1) of the Contracts Act states that the communication of a proposal is complete when it reaches the knowledge of the person to whom it is made (Krishnan, Rajoo & Vergis, 2009). This is illustrated in the case of Taylor v Laird (1856), where the plaintiff could not claim wages because he did not inform the defendant of his change in status while working aboard a ship.

In our scenario, Johari communicated his offer to Ben through a letter, which is a recognized method of communication. The effective communication occurs when Ben receives the letter, establishing the parameters for a potential contract.

Acceptance of the Offer

For a contract to be valid, acceptance must occur. Section 2(b) of the Contracts Act states that an offer is accepted when the offeree signifies their assent to it, turning the proposal into a promise (Krishnan, Rajoo & Vergis, 2009). Furthermore, acceptance must be “absolute” and “unqualified” as specified in Section 7(a). If the offeree introduces new terms, this constitutes a counteroffer rather than acceptance.

Ben's acceptance of Johari's offer was communicated through a letter sent on 10 March, which was received by Johari on 12 March. According to the Postal Rule established in Section 4(2)(a), acceptance is deemed effective when the letter is properly addressed, stamped, and posted (Lee & Detta, 2011). Therefore, Ben's acceptance is effective as of 10 March.

Revocation of the Offer

Revocation refers to the withdrawal of an offer before it has been accepted. According to Section 5(1) of the Contracts Act, an offer can be revoked at any time before acceptance is communicated (Krishnan, Rajoo & Vergis, 2009). To effectively revoke an offer, the offeror must communicate this revocation to the offeree, ensuring that the offeree is aware that the offer has been withdrawn.

In our case, Johari attempted to revoke his offer by posting a letter on 9 March, which Ben received on 11 March. The effective date of revocation is 11 March, as that is when Ben gained actual knowledge of the revocation. However, since Ben accepted the offer on 10 March, prior to the effective revocation date, the revocation is invalid.

Legal Implications and Conclusion

Based on the analysis of offer, acceptance, and revocation, it is clear that a binding contract exists between Johari and Ben for the sale of the yacht. The key elements that establish this binding contract include:

• Johari's clear offer to sell the yacht.
• Ben's unequivocal acceptance of the offer prior to the revocation.
• The communication of acceptance via a letter, in line with the Postal Rule.

In conclusion, despite Johari's attempt to revoke his offer, the timing of Ben's acceptance solidifies a legally binding contract. Ben is advised to take legal action against Johari should he refuse to proceed with the sale of the yacht, as the contractual obligations remain enforceable.

References

Card, R. & James, H. (2002). Contract Law. London: Routledge.

Keenan, D. (2000). The Law of Contract. Oxford: Oxford University Press.

Keenan, D. (2006). Contract Law: Text, Cases, and Materials. London: Routledge.

Lee, D. & Detta, G. (2011). Principles of Contract Law. Singapore: LexisNexis.

Krishnan, J., Rajoo, D. & Vergis, N. (2009). Contract Law in Malaysia. Kuala Lumpur: Pearson Malaysia.

Richards, R. (1995). Contract Law: A Comprehensive Guide. London: Longman.