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The Law of contract can defines as ‘an agreement rise to obligation which are enforced or recognized by law’.The factors which distinguish contractual from other legal obligations is that they are based on the agreement of contracting parties.
“In book of Sir William Anson’s Law of contract, his definition it is: A legally binding agreement made between two or more persons, by which rights are acquired by one or more to acts or forbearances on the part of the other or other”.
Shortly it may be defined as an agreement between two or more parties which is intended to have legally enforceable consequences. The agreement referred to in the definition means a meeting of minds, called in law consensus ad idem, signifying that the parties are agreed together about the same thing. The definition also emphasizes that the parties to the contract must intend that their agreement shall be legally enforceable. Unless the law recognizes this and enforces the agreements of parties, it would be impossible to carry on commercial or business life. For this reason the law of contract plays a leading role in courses on business studies. These contractual agreements give rise to rights and obligations which the law recognizes and enforces. But certain agreements, such as domestic and social arrangements, are not intended by the parties to be legally binding. The legislation in Malaysia governing contract is the Contract Act 1950 (Act136) (Revised 1974)
The term ‘offer’ or proposal is formation of an agreement. In section 2(a) of the Contract Act 1950, starts that “when one person signifies to another his willingness to do or to obtain from doing anything with a view to obtaining the assent of that other to the act or abstinence, he is said to make a proposal”. The first limb of section 2(c), Contract Act 1950 calls the person making proposal is ‘promisor’ and under act a proposal or offer is capable of being converted into an agreement by is acceptance. A proposal must be a definite promise to be bound provided certain specified terms are the promisor or offeror must declare his readiness to undertake an obligation upon certain terms, leaving the option of its acceptance or refusal to the offeree. An offer when accepted becomes a promise, section 2(b) of contract Act,1950 provides that when the person to whom the proposal is made signifies his assent thereto, the proposal accepted may be expressed or implied.
“The communication of a proposal is completed when it comes to the knowledge of person to whom it is made, section4 (1) Act 1950”. This mean the offer is effective once it is communicated to the offeree by offerror.
In section 3, Contract Act 1950,, a proposal made in word (oral or written) is said to be ‘expressed’ and in section 9, if proposal made other than word is to be ‘implied’ an offer contrast with ‘option’ and ‘advertisement’. An option merley an undertaking to keep the offer open for a certain period of time while an advertisement ai an attempt to induce offer.
Coelho v. The public service commission (1964) M.L.J.12
Case: The applicant a health inspector under the town board, tanjong malim applied for the post of assistant passport officer in the federation of Malaya government overseas missions advertised in the Malay mail dated 19 Feb. 1957 as follow; Held:1. That the Malay mail advertisement was an invitation to qualified person to apply and the resulting application were offers. 2. The information conveyed to the applicant was an unqualified acceptance to join the overseas mission and he so understood it.
Hyde v. Wrench  3 Beav. 344-49 E.R.132
Case: The defendant offered to sell his estate to the plaintiff on 6 Jun for £1000. On 8 jun, in reply the plaintiff made a counter-proposal to purchase at £950. Whwn the defendant refused to accept this offer on 27 jun, the plaintiff wrote again thath he was prepared to pay the original sum demanded. Held; The court held that no contract existed between them. Theplaintiff had rejected the original proposal on 8jun so that he was no longer capable of accepting it later. Besides the aforementioned requirement that acceptance must be unconditional, it ai also essential that acceptance must be made within a reasonable time (Fraser v. Everestt)
Section 2(b) of the Contract Act 1950 (Malaysia) provides that when the person to whom the proposal is made signifies his assent thereto, the proposal is said to have been accepted.. A proposal, when accepted becomes a ‘promise’. Section 2(c), call person accepting a proposal becomes a ‘promisee’ In section 9, of the said Act provides that so far as the acceptance of any promise is made in words, the acceptance is said to be ‘expressed’. If the acceptance is made other than words, the acceptance is said to be ‘implied’. For proposal to be convert into promise, the acceptance of that proposal must be absolute and unqualified, this provided in section 7, Contract Act 1950.
Lau Brothers & co v. China Pasific Navigation Co. Ltd (1965).M.L.J.1 Case: negotiation for the delivery of logs were conducted through a series of telegrams and letters. While still in the negotiationg state, the defendant withdrew. Was there a binding contract between the two parties. Held: the parties were still in a state of negotiation an no agreement was formed, therefore the defendant were justified in withdrawing.
Consideration is distinguished a bargain or contract from gift. Consideration may be seen as the reason for the promise. Under section 26, contract Act 1950 as general rule, an agreement without consideration is void. The word ‘consideration’ is defined in section 2(d) of the act said “when, at the desire of the promisor, the promisee or anyother person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise”
Guthrie Waugh Bhd v. Malaipan Muthucumaru (1972)1 M.L.J.35
Case: there was no cause of action in the statement of claim as the claim was based on a deed of arrangement for which there was no consideration. Held: the deed was executed by the defendant neither for any past consideration, nor in respect of any forbearance to sue him for the supplies made to the estates, nor in consideration of any promise to supply him goods on credit in future.
1.5Intention to create legal relations
Although the contract Act 1950 is requirement of valid contract, case-law clearly dictates the necessity of this requirement. However cases no intention to enter legal relations can be imputed. For the purpose of establishing the intention of the parties, agreements are divided into two categories; i. Business / commercial
ii. Domestic agreement
Choo Tiong Hin & Ors v. Choo Hock Swee(1959.M.L.J.67
Case: where concessions were made in the course of business negotiations Held: there were no valid contracts. Circumstances and conduct of parties may also indicates lack of intention.
The parties entering into a contract should also be ‘competent to contract’, they must have the legal capacity to do so. Section 11 Contract Act 1950. In Malaysia, the age of majority I eighteen years, thus general rule in Malaysia the contract made by infants are void.
Mohori Bibee v. Dharmodas Ghose(1903) 1L.R. 30 Cal.539
Case: that an infant cannot make any valid contract.
Held: the transfers of land executed by an infant were void. However those are some exception to this rule; i. Contracts for necessary (section 69, contract Act 1950) ii. Contracts of scholarship (contract (Amendment) Act
1976) iii. Contracts of insurance (Insurance Act (revised 1972)
The term of an agreement cannot be vague but must be certain. An agreement which is uncertain or is not capable of being made certain is void. In general; a contract is legally binding only if its terms are sufficiently defined to enable a court to understand the parties’ obligations. The rules regarding indefiniteness of material terms of a contract are based on the concept that a party cannot accept an offer so as to form a contract unless the terms of that contract are reasonably certain. Thus, the material terms of a contract must be agreed upon before a court can enforce the contract. Each contract should be considered separately to determine its material terms. As a general rule, an agreement simply to enter into negotiations for a contract later also does not create an enforceable contract.
Is a contract that must be written in a special way and no need for consideration. Two type of contract; i. Contract required to be made by deed. Certain transaction involving land require the execution of a deed. ii. Contract require to be in writing
The law of property (Miscellaneuos Provision) Act 1989 provides that a contract for the or other disposition of land can only be made in writing and parties had agreed in one document. iii. Contract require to be evidenced in writing
Contract is deed promises in writing, signing both parties, witness by at least one or not a party of contract, sealed and delivered without any condition attached.
2.0WHETHER VERYSIMPLE COSMETIC SDN BHD HAS THE RIGHT TO TERMINATE THE CONTRACT SHERYN MILIA
2.1Verysimple Cosmetics Sdn Bhd v. Sheryn Milia
Issue :One night, while Sheryn Milia was walking to her car after supper in Kuala Lumpur, she was robbed. She refused to hand over her bag and the criminals dragged her for about 5 meters. She was badly injured, her face suffered massive bruises, which took a few weeks to heal, and she also broke a leg.As a consequence of the incident, Verysimple Cosmetics Sdn. Bhd. terminated their offer.
The question is: Verysimple Cosmetics Sdn. Bhd has the right to terminate the contract with Sheryn Milia?
Law: Yes, the Verysimple Cosmetics Sdn. Bhd has the right to terminate the contract with Sheryn Milia by using act;
Section 57(2) of contract Act 1950.Contract to do act afterwards becoming impossible or unlawful(2) A contract to do an act which, after the contract is made,becomes impossible, or by reason of some event which the promisorcould not prevent, unlawful, becomes void when the act becomesimpossible or unlawful.
From wording in section 57(2), clear that there are two instance of frustration, when a contract to do an act becomes impossible or lawful. The Verysimple Cosmetics Sdn. Bhd as (plaintiff) right to terminated contract or discharge by frustration the parties of Sheryn Milia (defendant) discharged from their obligations. As section 57(2), that such a contract does not become voidable due to defendant has absence for several week and unavailable to perform because of an accident and illness it happen, thus doctrine of frustration clearly will applies. The doctrine will apply in the circumstances as;
i. Physical impossibilitybecause of destruction an unavailability of subject matter This is where something or someone necessary to carry out the contract ceases to be available. If the presence of a particular person is necessary for the execution of the contract, illness of person will clearly discharge the contract. Frustration may also apply to person who unavailable to perform caused by reason of an accident, illness, internment or imprisonment, sickness of promisor. As Sheryn Milia was badly injured, her face suffered massive bruises, and she also broke a leg, which took a few weeks to recover. So the Verysimple Cosmetics Sdn. Bhd will discharge contract by frustration.
Taylor v Caldwell (1863) 122 ER 309
Case: the claimed had hired the surrey gardens and music hall for series of concerts. However, after making the agreement and before the date of the performance, the hall was destroyed by fire. Held: The Court of Queen’s Bench formulated the general rule of discharge which is known as “Doctrine of Frustration”. the contract in which the performance depends on the continued existence of a given person or thing, a condition is implied that the impossibility of performance arising from the perishing of the person or thing, shall excuse the performance.
ii. Impossibility owing to non-occurrence of event basic to contract. The parties may have their contract on the basis of some forthcoming event. if the event fails to take place and as a result the main purpose cannot be achieved, the doctrine of frustration will apply.
Krell v Henry (1903) 2KB 740
Case: Henry hired th. The procession room overlooking the route of Edward VII’s coronation procession was cancel owing to the king serious illness. Although it would have been possible to come and sit in the room, the main purpose of contract, to view the procession had been destroyed. Held: The contract was frustrated by non-occurrence the event.
Frustration of a contract excuses non-performance and automaticallydischarges the contract except where the terms of contract override this implied legal provision. However, frustration is not acceptable as an excuse where the circumstance was foreseeable, and is not applicable to certain types of contracts such as insurance policies. When a contract is found to be frustrated, each party is discharged from future obligations under the contract and neither party may sue for breach. Frustration occurs whenever the law recognizes that without default of either party a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract.
A contract is said to be “frustrated” if it becomes impossible to perform or if circumstances change to the extent that performance would be substantially different from what was anticipated by the parties. (Kevin’s English Law Glossary) (2002). Furthermore, the defining characteristics of the doctrine of frustration that have emerged from the case law have been summarized by Bingham L.J. in the following terms: “The doctrine of frustration was evolved to mitigate the rigor of the common laws insistence onliteral performance of absolute promises. The object of the doctrine was to give effect to the demands of justice, to achieve a just and reasonable result, to do what is reasonable and fair, as an expedient to escape from injustice where such would result from enforcement of a contract in its literal terms after a significant change in circumstances’’
Application : The court shall intervene and declarethe contract to be frustrated when it would be quite unreasonable to expect the parties, or one ofthem, to perform under the changed circumstances.She was badly injured, her face suffered massive bruises, which took a few weeks to heal, and she also broke a leg. She may cannot work and perform well during that time and also will give a bad reputation to the company. Court had the power to release the parties from their obligations whenever it was just and reasonable to do so.Ehlert (2001) stated that the consequences of termination of frustration are based on the principles of the common laws. The common law stipulates that when frustration occurs, it discharges the parties from performing their contracted duties in future. In short, frustration brings a contract to an end, almost automatically. In elaborating the ways to avoid or minimize the risk of frustration, one respondent presented his opinion that the risk of frustration isunpredictable. As such, it is difficult to avoid or immune their risk.
Conclusion: In such a case both parties are freed from any further obligations under the contract. As for any lossesalready incurred, these will be allocated between the parties in accordance with principles in the Law Reform (Frustrated Contracts) Act 1943.If this happens through the fault of neither party, and the contract itself makes no sufficient provision for what was occurred, it is possible that the law may treat the contract as terminated. According to Ehlert (2003), the current concept of frustration was defined by LordRadcliffe in Davis Contractors Ltd vs. Fareham Urban District Council (1956) AC 696 at pg. 729 [and adopted by the High Court of Australia in Codelfa Construction Pty. Ltd.vs State Rail Authority of NSW (1982) 149 CLR 337 at (1956) A.C.]. The common law stipulates that when frustration occurs, it discharges the parties from performing their contracted duties in future.
Condor v The Barron Knights Ltd
Case: A 16 year old agreed by contract to play the drums for the defendant band for 7 nights per week for 5 years. The claimant suffered a mental breakdown and was told by his doctor that he should not perform more than 4 nights per week. The band dismissed him. He brought a claim for wrongful dismissal. Held: The claimant’s action was unsuccessful as his medical condition made it impossible for him to perform his contractual obligations and the contract was thus frustrated.
3.0WHETHER TV10 HAS THE RIGHT TO CANCEL THE TALK SHOW AND DEMAND UPFRONT MONEY FROM SHERYN MILIA
3.1TV10 v. Sheryn Milia
Issue: Sheryn Milia was offered to host a talk show on TV10, “Glamour and Glamour”. She was offered a great deal of money from the TV10 station, and an upfront of RM50,000 has been paid to her. When TV10 learned that Sheryn Milia had signed a contract with Fabulous TV, they quickly terminated her contract and demanded the upfront money back RM50,000. But Sheryn Milia refused to entertain them, and instead replied, “See you in court!”.
The question is: TV10 has the right to terminate the talk show, and demand the upfront money from Sheryn Milia?
Law: ‘No right’, The TV10 (plaintiff) cannot to terminate the contract and demanded the upfront money back from Sheryn Milia (defendant). Because of TV10 has breach of contract. On the other hand, TV10 only can take prohibitory injunction to restraining Sheryn Milia from breaking contract.
While Sheryn Milia become parties who suffers by breach contract is entitled by TV10, but she still meet the contractual obligation and will proceed action to sue for damages to receive compensation have made by TV10, by using act;
Section 74.(1) of contract Act 1950. Compensation for loss or damage caused by breach of contract. When a contract has been broken, the party who suffers bythe breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to himthereby, which naturally arose in the usual course of things from thebreach, or which the parties knew, when they made the contract, tobe likely to result from the breach of it. (2) Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach. As section 74(1) where once of party fails to perform their obligation as agreed, they are in breath contract. Breach of contract occur when TV10 announce to Sheryn Milia they are no longer interested to in carrying out obligation due to Sheryn Milia had signed a contract with Fabulous TV. But the TV10 can’t execution the breach of contract and claim for upfront money has pay to Sheryn Milia, only can perform in prohibitory injunction.
Byprohibitinjunction commands isdiscretionary to court order, the court order restraining a party Sheryn Milia from breaking their contract or from committing a wrongful act. Application: An injunction is equitable remedy. Thus, it can be varied or dissolved if the court discovers that the application for injunction was made on suppressed facts or that the facts upon which the order was granted no longer exist. The courts exercise their power to issue injunctions judiciously, and only when necessity exists. An injunction is usually issued only in cases where irreparable injury to the rights of an individual would result otherwise. It must be readily apparent to the court that some act has been performed, or is threatened, that will produce irreparable injury to the party seeking the injunction.
An injury is considered irreparable when it cannot be adequately compensated by an award of damages. The pecuniary damage that would be incurred from the threatened action need not be great, however. If a loss can be calculated in terms of money, there is no irreparable injury. The consequent refusal by a court to grant an injunction is, therefore, proper. Loss of profits alone is insufficient to establish irreparable injury. The potential destruction of property is sufficient.Injunctive relief is not a remedy that is liberally granted, and, therefore, a court will always consider any hardship that the parties will sustain by the granting or refusal of an injunction. The court that issues an injunction may, in exercise of its discretion, modify or dissolve it at a later date if the circumstances so warrant.
Kabatasan Timber Extarction Co v. Chong Fah Shing(1969) 2 M.L.J.6 Case: This case appellants had contract to supply timber to respondent to deliver at site sawmill to erected by respondent. Timber was deliver in three lots, the second lot of 198 logs and 4 of 22 logs in third lot not deliver to sawmill but dumped at distance more than 500 feet from site. The learned trial judge gave judgment for appellant for RM9892.41 being balance due under contract and also awards damages to respondent on counter claim for breach of contract for RM13192.40 Held: Dismissing the appeal in respect of claim and following the appeal in respect of counters claim by reducing the amount; it was the duty of respondent to take reasonable step to mitigate of damage. There was no need respondent have gone expense buying logs from elsewhere when logs were lying a few hundred feet away from sawmill and that was require additional expense for hauling log to sawmill. To appropriate damages to be awrd on counter claim which amount RM1000
Tiger Powerhitz Sdn Bhd v Guinness Anchor Marketing Sdn Bhd (1994)3.M.L.J.569 Case: The court granted an ex parte injunction order (‘the injuction order’) prohibiting the defendant, its agents or servants from using the name ‘Tiger Powerhitz’ in concerts sponsored and carried out by the defendant or in any charity show, event, presentation in any manner carried out by the defendant using the name ‘Tiger Powerhitz’. The plaintiff obtained an ex parte order (‘the order’) for leave to institute contempt proceedings against one of the directors of the defendant (‘the alleged contemnor’), for breach of the injunction order. The defendant and the alleged contemnor filed an application to set aside the order. Held: The court proceed with striking out the plaintiff’s motion and allowing the defendant’s application for injuction
4.0REMEDIES FOR SHERYN MILIA
4.1Remedies that Sheryn Milia could claim from TV10
Sheryn Milia v. TV10
Issue: Earlier, SherynMilia become parties who suffers by breach contract is entitled by TV10, but she still meet the contractual obligation and will proceed action to sue for damages to receive compensation have made by TV10. As illustration in section 74 provide when a contract has been broken, the party who suffers by the breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from the breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it.
Law: Sheryn Milia entitle to claim for her suffer by breach of contract had been made by TV10, while she still meet contractual obligation will sue for damages to receive compensation made by TV10 under act;
Section 74.(1) of contract Act 1950. Compensation for loss or damage caused by breach of contract. When a contract has been broken, the party who suffers bythe breach is entitled to receive, from the party who has broken thecontract, compensation for any loss or damage caused to himthereby, which naturally arose in the usual course of things from thebreach, or which the parties knew, when they made the contract, tobe likely to result from the breach of it. (2) Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach.
Lumley v. Wagner (1852) 42 ER 687
Cast: Wagner contracted to sing at Lumley theatre for a fixed period time during she was not sing elsewhere, she has broke this promise and Lumley sought to restrain her from singing for other employer. Held: While it could not grant a decree of specific performance to compel Wagner to sing at Lumley theatre, the court would enforce the negative promise ‘not sing elsewhere’ by granting an injunction against Lumley. This prevent her to singing anaywhere during term of contract.
If a sum is named in the contract as the amount to be paid in case of such breach, or if the contract contains any other stipulation by way of penalty, the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or, as the case may be, the penalty stipulated for such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach. * When an obligation resembling those created by contract has been incurred and has not been discharged, any person injured by the failure to discharge it is entitled to receive the same compensation from the party in default as if the person had contracted to discharge it and had broken his contract.
H.A Berney v Tronoh Mines Ltd (1949)
Case: Plaintiff sued for breach of contract of service on invasion Malaya by Japanese force the European staff the defendant company was evacuated from tronoh to other place, but plaintiff elected to remain Tronoh, tanjung tualang. The defendant contended consequences on Japanese occupy at Perak, the contract of employment between them and plaintiff was discharged by frustration. Held: That invasion of Malaya by Japanese frustration the performance of contract and therefore was no breach of contract by defendant.
4.2Remedies that Sheryn Milia could claim from Verysimple Cosmetics Sdn. Bhd
Sheryn Milia v. Verysimple Cosmetics Sdn. Bhd
Issue: Sheryn Milia counter claim for compensation for loss under section 57(2) and section 66, entitle to Sheryn Milia to claim after the agreement has void by discharge frustration. When a contact is discharged by frustration, the contract become merely voidable but is brought to an end forthwith and automatically under Section 57(2), of contract 1950. The remedies involved under section:
Section 57(2), of contract 1950, Compensation for loss through non-performance of act known to be impossible or unlawful. Where one person has promised to do something which he knew, or, with reasonable diligence, might have known, and which the promisee did not know, to be impossible or unlawful, the promisor must make compensation to the promisee for any loss which the promisee sustains through the non-performance of the promise.
Section 66, of contract 1950, Obligation of person who has received advantage under voidagreement, or contract that becomes void When an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under the agreement or contract is bound to restore it, or to make compensation for it, to the person from whom he received it.
Fall under section above, Sheryn Milia can claim from Verysimple Cosmetics Sdn. Bhd because the contract becomes void under section 57(2), when under section 57(3), Sheryn Milia can claim compensation paid by promisor to promise for loss through non-performance of act known to be impossible or lawful. In addition, under section 66, Sheryn Milia received advantage to restore contract to make compensation from Verysimple Cosmetics Sdn. Bhd.
Fibrosa Spolka Akcyjna v. Fairbairn Lawson Combe Barbour Ltd(1943) AC332 Case:an English firm agreed to sell and deliver machinery to polish company, who paid a considearable sum of money in advance. Because of outbreak of war and the German occupation of Poland, the contract was frustrated. The frustrated not the issue; the polish company claimed the right to recover the deposit they had paid prior to the frustrating event. Held:As the machinery had not been delivered, there was a total failure of consideration, accordingly, the polish company was entitled to deposit back.
Remedies Contract of indemnity
But if the contract was providing the contract of indemnity, the claim would be valid. According to Contract of indemnity she has the rights of indemnity-holder when sued if the promisee in the contract of indemnity acting within the scope of his authority, is entitled to recover from the promisor : * all damages which he may be compelled to pay in any suit in respect of any matter to which the promise to indemnify applies * all costs which he may be compelled to pay in any such suit if, in bringing or defending it, he did not contravene the orders of the promisor, and acted as it would have been prudent for him to act in the absence of any contract of indemnity, or if the promisor authorized him to bring or defend the suit * all sums which he may have paid under the terms of any compromise of any such suit, if the compromise was not contrary to the orders of the promisor, and was one which it would have been prudent for the promisee to make in the absence of any contract of indemnity, or if the promisor authorized him to compromise the suit. It occur when which one party promises to save the other from loss caused to her by the conduct of the promisor itself, or by the conduct of any other person
With the availability of contract act 1950 has facilitated us in carrying out all activities related to the economy and business. Besides it also resolve all disputes or conflicts there. Even with the contract act 1950 has defended and determine the rights of each party in resolving disputes between Sheryn Milia, TV10 and Verycosmetic sdn bhd fairly without favor any party. As above, initially Sheryn Milia had an accident which resulted in her not able to meet all the requirements of obligation the contract agreement between Very Cosmetic and TV10. Meanwhile, the Verycosmetic has decided to cancel its contracts with Sheryn Milia because discharge by frustration under section 57 (2) Act contract 1950. But based on section 57 (2), and section 66, the contract act 1950, Sheryn Milia can restore the contract for right to claim on compensation for loss through non-performance of act known to be impossible or unlawful to Verycosmetic when they had been cancel the contract. Meanwhile, the TV10 also take similar steps to cancel the contract Sheryn Milia which are already bound. But the TV10 continued violation of contract agreement has been made, then the direct TV10 clause violated section 74 (1) of the contract, so Sheryn Milia has taken action to sue TV10 ten to claim compensation for damages suffered on suffering. besides that, the TV10 has failed to pursue cancellation of the contract together with Sheryn Milia then it was canceled.
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