Mekar Building Construction Case

1.0 Question 1

On 1st February 2013 Mekar Building Construction Sdn Bhd sent a letter to Jaya Jati Machinery & Services Sdn Bhd, with whom they had been negotiating, offering them a contract to service all Mekar's building construction equipments each month for the next five years at cost of RM5 million per annum. The letter said that Jaya Jati should reply by return of post. Unfortunately, the letter contained an error in the address and was not delivered to Jaya Jati until 6th February 2013. Jaya Jati replied at once accepting. This letter was posted at 11am on 6th February. In the meantime, on 4th February, Mekar had received an offer from Binaria Service Works Sdn Bhd to do the servicing work for RM4.5 million per annum. Mekar, having heard nothing from Jaya Jati, telephoned Binaria on 5th February and offered them the contract at RM4 million. Binaria accepted. Mekar sent a fax to Jaya Jati on the 6th February telling them that the offer of 1st February was withdrawn. This fax was received on Jaya Jati's fax machine at 10.45am on 6th February, but not read by anyone until 5pm on the same day.

Advise Mekar, Jaya Jati and Binaria.

1.1 Issue

1. Whether the offer made by Mekar Building Construction Sdn Bhd can constitute as a contract?

2. Whether there has been a valid offer posted by Mekar Building Construction Sdn Bhd ?

3. Whether there has been a valid acceptance of the offer made by Jaya Jati Machinery & Services Sdn Bhd ?

4. Whether there has been a valid revocation made by Mekar Building Construction Sdn Bhd ?

5. Whether the postal rule can be applied in the revocation made by Mekar Building Construction?

6. Whether there has been a valid contract between Mekar Building Construction Sdn Bhd and Jaya Jati Machinery & Services Sdn Bhd ?

7. Whether there has been a valid contract between Mekar Building Construction Sdn Bhd and Binaria Service Works Sdn Bhd?

1.2 Explanation of Law

The first essential of a contract is that the parties should have reached agreement. Generally speaking, an agreement is made when one party accepts an offer made by the other party. An agreement enforceable by law is a contract stated in Section 2 (h) Contract Act 1950. An agreement, to be enforceable by law, must possess the essential elements of a valid contract.

According to Section 10 Contract Act 1950, "All agreements are contract if they are made by the free consent of the parties, competent to contract, for a lawful consideration and with a lawful object and are not expressly declared to be void".