The duration of the performance will be one hour from 8. 0 to 9. 30 pm on each night. 3. For each performance, Miss Singapore would be paid $4,000. 4. In the event Miss Singapore fails to appear and give concert on the stipulated dates and time at the studio, she shall liable for the loss in the amount of RMI 2,000 plus the incidental charges for making all the arrangement for the programmer. 5. A formal agreement would be drawn up with the approval of the managers of the said parties to this agreement.
Later, the Director sent three copies of the formal agreement for signature to Miss Singapore.
Miss Singapore refused to sign the agreement. The Director sued Miss Singapore for damages. Miss Singapore contended that there was no enforceable contract between her and the Director.
Discuss and decide. Issues: 1) Whether there is an enforceable contract between Miss Singapore and the Director as they are subject to formal agreement? There is no enforceable contract between Miss Singapore and the Director. This is because they do not fulfill the basic element of contract. 4 basic element of contract are offer, acceptance, intention to create legal relations and consideration.
The first element is offer which the Director of TV Taiga had offered Miss Singapore to cake performances relating to musical concert to be staged during the three- day Dependable holidays in November 1987. According to section 2(a) of Contract Act 1950, where offer means when someone signifies to someone else to do something or abstain from doing something. In the case of Preston Corporation Sad Bad v Edward Leone, Sealed Baas FIX stated that, “an offer is an intimation of willingness by an offer to enter into a legally binding contract.
Its terms either expressly or impliedly must indicate that it is to become binding on the offer as soon as it has been accepted by the offered. Section 2(c) of Contract Act 1950 provides that, a contract must be involved two parties at least, which are promissory and promise. Therefore, in this case, the element of contract which is offer is fulfill. The second element is acceptance. An acceptance is the final expression of the assent to the terms of a proposal. By virtue of section 2(b) of Contract Act 1950, acceptance is when the person to whom the proposal is made accepted the offer.
When a person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted, a proposal, when acceptance becomes a promise. The person accepting the proposal is called the promise or the acceptor. Section 7(a) of the Contract Act 1950 provides that in order for a proposal to be converted into a promise, the acceptance of that proposal must be absolute and unqualified. Absolute and unqualified acceptance means the terms of the offer has not been modified or changed by the offered.
Acceptance must be absolute and unqualified so that there is complete consensus between the offer and the offered. In this case, Miss Singapore and the Director of TV Taiga entered into a written agreement relating to a musical concert to e staged during the three-day Dependable holidays in November 1987 and a formal agreement would be drawn up with the approval of the managers of the said parties. In general rule, acceptance ‘subject to contract’ creates a strong inference that the parties do not intend to be bound until the execution of a formal contract but they are still in negotiating stage.
If the parties are still negotiating, an agreement has not yet formed. In the case of Luau Bother & Co. V Chin Pacific Navigation Co. Ltd, negotiations for the delivery of logs were conducted through a series of telegrams and letters. While the parties still were in the negotiating stage, the defendants withdrew the offer. When this matter was referred to the court, the court held that the parties were still in a state of negotiation and no agreement was formed. Therefore, the defendants were justified in withdrawing the offer.
In the case of George Trollope & Sons v Martyr Brothers, Managua LLC stated that offer ‘subject to contract,’ means that the matter remains in negotiation until a formal contract is executed, that is, if the contract is recorded in two parts, until the formal contracts are exchanged. In he case of Are HITA Tin Dredging Malaysia Bad v YES Chin Enterprise Sad Bad, the Supreme Court in reversing the High Court’s judgment observed that the appellant’s acceptance of the respondent’s offer to build for the appellant’s workers low-cost houses and shop houses was conditional.
The appellant’s acceptance of the offer was subject to the preparation and approval of the formal contract which would incorporate terms and conditions mentioned in the letter, as well as certain indemnity clauses in favor of the appellant. The Supreme Court held as follows, “But it is now well settled that when an arrangement s made ‘subject to contract’ or ‘subject to the preparation and approval of a formal contract’ and similar expressions, it will generally be construed to mean that the parties are still in a state of negotiation and do not intend to be bound unless and until a formal contract is exchanged.
We say ‘generally’ because in exceptional circumstances, the ‘subject to contract’ formula will not be so intractable as always and necessarily, to prevent the formation of a contract. ” In the case of Low Kara Hit & or. V. Mood Sis & Nor, the defendant intended to sell a piece of land to the plaintiff. He said that the sale of the land should be subject to few conditions such as i) a formal contract to be drawn up and agreed upon by the parties and ii) the sale contract should be approved by the High Court at Koala Lump.
The plaintiff duly exercised all the conditions but the defendant refused to sign the contract. Gill J at the High Court in Malaysia held that no binding contract was made between the parties as the defendant did not sign the contract. Therefore, ‘subject to contract’ become no concluded contract and amounted to nothing more than an agreement which of course has no legal effect. There is no enforceable contract between Miss Singapore and the Director as they are “subject to contract”. Next, the third element of a valid contract is consideration.
An agreement without a valid consideration is void unless they belong to one of those categories of agreement listed in the same section as being exempted from the rule. Section 2(d) Contact Act 1950, “When, at the desire of the promissory, the promises or any other person has done or abstained from doing, or does or abstains from doing, or promises to do so or to abstain from doing something, such act or abstinence or promise is called consideration of he promise” In the case between Miss Singapore and the Director, the Director agree to pay Miss Singapore $4,000 if she perform in the musical concert.
The fourth element is intention to create legal relations. The Contracts Act 1950 does not contain any provision relating to intention of the parties to a contract to be bound in law. Nevertheless, intention is an essential element of an enforceable contract. In this case, it is well said that a formal agreement would be drawn up with the approval of the managers of the said parties to this agreement which means they are ‘subject to contract’. So, it is clear that the intention to create legal relation is absent here.
In conclusion, there is no enforceable contract between Miss Singapore and the Director as they do not fulfill the basic element of contract as they are subjected to formal agreement would be drawn up with the approval of the managers of the said parties. It is reluctant to recognize them as binding contracts because of primarily two reasons, the lack of the intention by the contracting parties to enter into a legally binding contract and the requirement under s 7(a) of the Contracts Act 1950 for an acceptance to be absolute and unqualified.
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