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LAW60104 Business Law

Individual Assignment (30%)

Benny runs a company which imports laminated wood flooring from the USA. He 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. Caryn felt that it was a very good deal since her bungalow has huge rooms, so she immediately went to the showroom and selected a Burmese teak laminated wood and Benny agreed to supply and install it for the advertised price saying, "that is 5 rooms at RM1000 a room — RM5000 altogether". 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.
Can Caryn refuse to pay? Would your answer be different if the special offer was to do the flooring at RM1000 each?

1) Issue
2) Law
3) Application and analysis

Answer

Introduction 

Malaysian Contract Act, 1950 is largely based on the English Common law of contract and has also derived the chief elements of a valid contract. It is important to note in regard to the provided scenario, the element of IIT or invitation to treat that is considered to be different to the offer of a contract. The current study, attempts to critically analyze the provided legal scenario, in order to identify the nature of contract between Benny and Caryn and whether Caryn can refuse to pay. In case of difference in the offer, whether the application could have been different, is another subject of the study.

Issue

Issue 1


Benny’s company advertised that his company would supply and install fully imported laminated wood flooring at a special rate of RM 1000 per room where the size of the room is not to be taken into consideration. Caryn responded to the advertisement and entered into a contract with Benny that indicated Benny would supply and install five rooms of Caryn with laminated Burmese teak wood. However, Benny could not get further supply of the required wood after finishing 3 rooms and notified Caryn with a bill of RM3000. The first issue is to identify whether it is possible for Caryn to refuse paying Benny. 

Issue 2

If the Benny had only offered RM 1000 per room would the consequences have been different?

Law 

The Contract Act 1950 defines contract to be a legally binding agreement that can be enforceable between two or more than two parties that are capable of making a contract. It is important or the agreement to contain a promise of performing or refrain of performing certain specific acts in return of consideration. Offer and acceptance are the necessary elements of making a valid contract and thus, it is significant that the offer and acceptance have validity thus they are free from ambiguity in order to form a valid and legally enforceable contract. The parties involved in the agreement need to reflect the intention in order to be obligated to a legally binding contract[1]

Section 2(a) of Contract Act has defined the offer and Invitation to Treat is not considered to be an offer[2]. ITT can be display of goods for sale or an advertisement as per Partridge vs Crittenden (1968) in which plaintiff was not found guilty as advertisement was an IIT and not an offer of sale. However, in accordance with the case Carlill vs Carbolic Smoke ball (1893)[3]there are advertisements that are offers. 

Section 38 of Malaysian Contracts Act, 1950 indicates the obligations of the parties to contract. The act also denotes that the parties who are involved in the legally binding contract need to either perform or offer to perform the promises[4].

Section 40 of Malaysian Contract Act is associated with the Effect of refusal of an involved party to perform the promise wholly. The section further illustrates that when an involved party of the contract refuses to perform the promises or disables him from performing the promise completely, the promise can be put to an end of the contract[5]. In this regard, it is important to note that in order to end the contract it is considered that the alleged party needs not have signified by words or by conduct his acquiescence in its continuance. 

In Malaysia a party can terminate the current employment of another party under the common law or the Contract. Termination is expressly provisioned and a party can also choose to terminate the employment of the default party where the other party has repudiated the contract before complete performance of the contract to its entirety. The contract can be ended as the innocent party can not gain anything by continuing with the contract.

 

Application and analysis 

Benny runs a company that imports laminated woods flooring from USA and Caryn has selected Burmese teak laminated wood for installing the floors of five rooms. The scenario indicates that the contract that has been established between Benny and Caryn is in accordance with Section 6 (1) of Sale of Goods Act of 1957 that indicates that goods may be existing goods or can be future goods as well. This suggests, that the goods that are referred here are future goods[6]. As per the denotation of future goods implies the future goods to be the goods that are produced or acquired by the involved seller only after the sale of contract has been made which indicates Benny has only acquired the wood after Caryn has made her selection. 

Another important facet of the case that needs to be mentioned that Benny as advertised a pre-GST sale in April 2015 under the Contract Act 1950 that he is capable of supplying and installing the fully imported laminated wood flooring at the special rate of RM 1000 for each room and any room size. Therefore, the advertisement seems like an offer that Caryn could not refuse as she immediately availed the offer by selecting the wood flooring. As previously mentioned that IIT can not be considered as an offer rather than it is used in order to induce the customers to make an offer[7]. As Benny has openly stated that he is unable to perform the promise of installing five floors due to his inability of getting supply of the selected wood, it is considered as Benny is unable to perform his obligation under the contract. 

The acceptance of the repudiation under the enforcement of Common Law states the entitlement of the innocent party for damages that is different from termination under contract.

In this case, the advertisement that Benny made was to provide laminated wood flooring at RM 1000 per room that he has performed. Therefore, Caryn can not complaint against the advertisement. As far as the performance of the contract is concerned, Benny agreed to offer 5 rooms at 1000 RM per room that is 5000 RM altogether. As Benny has repudiated the contract and only charged Caryn for 3000RM as per the charges of total 3 rooms that he could provide flooring for, it can not not considered as the breach of terms or conditions of the contract. The repudiation is due to the style of flooring that Caryn demanded and unavailability of the required material[8]. Thus, as the contract is repudiated, Caryn could ask for compensation in case of any loss under the remedies of breach of contract by failure of performance. But she has not made any payment of 5000RM and thus, considering the fact that Benny has asked for RM 3000 he has not delivered the state to Caren to pay for the uncompleted rooms as well[9]. However, considering the implied term of the contract that indicates payment of RM 5000 on the completion of five rooms indicates that Caryn can refuse to pay and terminate the contract as a result of repudiator breach. 

In case of the second issue that indicates the special offer to be different and was to provide flooring RM 1000 each the application would be different considering the absence of any complex legal issue. The complication of the contract issue lied in the fact that Benny offered RM 5000 for installation and supply of the Burmese tick wood for five rooms to Caryn. Caryn has specifically selected the Burmese tick laminated wood that Benny agreed to supply and install. However, Benny could not complete the promise due to unavailability of that particular wood. In case of Caryn agrees to another type of laminated wood flooring that Benny can offer at the same price the performance of the contract could achieve entirety[10]. In this case Benny would have performed the promise as it only suggests installation of each floor with laminated wood at RM 1000. Here, no repudiation of promised performance would have been encountered. 

The problem hence, reverts to the original agreement of installing laminated wooden flooring of five rooms at RM 1000 for each room. This also opens a scope for establishing a new agreement with Benny in accordance with Section 58 of Sale of Goods Act that implies being subject to chapter II of Specific Relief Act 1950 any suit for breach of contract regarding delivering particular or ascertain goods, it is possible for the court after testing the performance and the scope of performance of the contract, on the application of plaintiff can order the contract to be performed specifically[11]. It indicates that the defendant in the case is not given the chance of retaining the goods on payment of damages. 

The offer being the supply and installation of each room at RM 1000 does not invoke any chance of breaching the contract and it does not put any legal obligation on Benny of finishing five rooms. In case of the current scenario, where the offer is to provide supply and installation for five rooms at RM 5000 gives rise to the provision of ambiguity in the offer. As Benny summed up the total billing to be RM 5000 only at RM 1000 each room that Caryn considered RM 5000 for five rooms. The offer that Caryn accepted indicates the possibility of legal complications as Benny failed to perform the contract entirely. It is also possible for the court to consider the external impact on the contract that indicates Benny could not perform the contract entirely as he did not get the supply of the particular laminated wood that Caryn selected. In that case, the contract would be considered to be frustrated and both Caryn and Benny would be free from any legal obligation to perform the promises of the contract. Caryn could not refuse to pay in case Benny only promised to install the laminated wooden flooring at RM 1000 each as it would not invoke any scope of specific performance. 

Conclusion 

In the light of the above analysis, it can be stated that the court is likely to decide that Caryn can not refuse to pay the bill that Benny has charged as he charged the condition of the performance that he could deliver. As he has installed and supplied the required wood for three rooms and charged the bill accordingly as RM 3000 he has not breached the condition or term of the contract. Refusing to pay Benny under the circumstances of the second issue would only indicate the scope of breaching the contract at Caryn’s part. To further srgue section 31 of the sale of Goods Act can be mentioned that indicates the duty of the seller is to deliver the goods and it is the duty of the buyer to pay for the goods that have been delivered. Thus, as Benny completed installation and supply of the woods for three rooms and asked for the payment of the same, Caryn can not refuse to pay. However, the contract being offering installation and delivery of laminated woods for five rooms, Benny has unable to finish the promised performance and hence, it is possible for Caryn to refuse paying considering the provision of the contract. As the contract has not fully performed as promised by Benny, it could be considered as repudiation and Benny can be liable to the remedy of damages caused due to repudiation. The court is likely to not consider the termination of the contract if only Caryn agrees to acquire services from Benny at the same price with any other laminated wood for installation at the other rooms. 


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