TEPAT INTAN SDN BHD V. MEGA FIRST CORPORATION SDN BHD [2014] 1 MLJ 571

Court of Appeal (Putrajaya)

Communication of Acceptance

2.    The Respondent asserted that the acceptance of the proposal had been communicated to the Appellant; however, the Appellant did not execute the sale and purchase agreement within the specified time as required.

3.    The learned trial judge found that the acceptance had been communicated to the Appellant on 31 May 2003, and the Appellant failed to execute the sale and purchase agreement within the specified time.

4.    Consequently, the Respondent filed an action against the Appellant, whereas the Appellant made a counterclaim seeking the return of the deposit that was paid to the Respondent.

5.    The trial judge decided that the Respondent had communicated the acceptance to the Appellant.  Therefore, the trial judge allowed the Respondent’s claim and dismissed the Appellant’s counterclaim.

6.    On appeal, the Appellant submitted that the trial judge had wrongfully decided that the acceptance was communicated to the Respondent and accordingly misconstrued the law on the communication of the acceptance.

2.    Whether the trial judge had erred when deciding that communication of the acceptance of the contract had taken place?

(a) Section 3 of the Contracts Act 1950 (Act 136) provides that-

“Communication, acceptance and revocation of proposals

 

3.    The communication of proposals, the acceptance of proposals, and the revocation of proposals and acceptances, respectively, are deemed to be made by any act or omission of the party proposing, accepting, or revoking, by which he intends to communicate the proposal, acceptance, or revocation, or which has the effect of communicating it.”

(b) Section 3 of Act 136 explains that the communication of a proposal is complete when it is brought to the knowledge of the intended acceptor.  It means that the offeror must ensure that the proposal is effectively convey to the offeree, either by directly communicating it or using a reliable method of communication.

(c)  However, the communication of acceptance follows a ‘postal rule’ principle.  Generally, the acceptance of a proposal is considered complete when the acceptor sends it to the offeror.  This means that once the acceptor dispatches the acceptance, the acceptance is legally binding even if the offeror has not yet received or become aware of the acceptance.

(d) Nevertheless, there are exceptions to the postal rule, such as when the offeror specifies a particular mode of acceptance that must be followed.

(e)  The Appellant’s counsel contended that the Respondent did not provide sufficient evidence to demonstrate that the acceptance was ‘clear, precise, and explicit acceptance without room for negotiation’, and was effectively communicated to the Appellant. In addition, the Appellant’s counsel argued that the Respondent had not met their burden of proof in establishing the existence of a binding contract.

(f)   However, the Court found that the parties did not suggest any specific mode of acceptance in the contract. The Court further decided that it is a well-established legal principle that an offer must be accepted in accordance with its specified terms, hence if a particular method of acceptance was intended, it should be specifically stated in the contract.

2.    Whether the trial judge had erred when deciding that communication of the acceptance of the contract had taken place

(a) Section 7 of Act 136 provides that-

“ Acceptance must be absolute

 

7. In order to convert a proposal into a promise the acceptance must—

(a) be absolute and unqualified;

(b) be expressed in some usual and reasonable manner, unless the proposal prescribes the manner in which it is to be accepted. If the proposal prescribes a manner in which it is to be accepted, and the acceptance is not made in that manner, the proposer may, within a reasonable time after the acceptance is communicated to him, insist that his proposal shall be accepted in the prescribed manner, and not otherwise; but, if he fails to do so, he accepts the acceptance.”

(b) Section 7 of Act 136 explains that effective communication of acceptance must depend on the case’s circumstances.  Hence, the circumstances of the case are essential to determine what constitutes a valid acceptance.

(c)  In the present case, the Court of Appeal decided that the trial judge did not make any error in his decision as argued by the Appellant.

(d)  It is also a settled law that what constituted effective communication would depend on the circumstances of the case.  After analysing the factual background of the current case, the trial judge determined that acceptance had been communicated.

(e)  Thus, the trial judge had considered the important aspects and acted in accordance with legal principles, hence his verdict was reasonable and rational.  Consequently, there was no necessity for the appellate Court to intervene in the decision by the High Court.

2.    Therefore, in evaluating contract formation, the Court examines the communications between the parties, relevant contractual terms, and applicable contract law principles to determine the validity and enforceability of the contract.