1606R

COURT OF APPEAL, MALAYSIA

2016

FANN WOW GALLERY

(APPELLANT)

V.

DATO’ RASHID

(RESPONDENT)

MEMORIAL FOR THE RESPONDENT

___________________________________________________________________________

1

TABLE OF CONTENT

TABLE OF CONTENTS …………………………………………………………………….1

INDEX …………………………………………………………………………………..…….2

SUMMARY OF FACTS ………………………………………………………………….….3

SUMMARY OF PLEADING………………………………………………………………..4

1. THERE WAS A VALID CONTRACT SINCE BOTH PARTIES HAVE

AGREED TO TERMS OF PAYMENT AND DELIVERY OF MAJESTIC

DAWN………………………………………………………………………………....5

A. Dato’ Rashid has made an offer to Fann Wow Gallery………………………...….5

B. The offer has been accepted by Fann Wow Gallery…………………………….....7

2. THE REVOCATION OF ACCEPTANCE BY FANN WOW GALLERY WAS

NOT EFFECTIVE BECAUSE IT HAS NOT BEEN COMMUNICATED TO

DATO’ RASHID…………………………………………………………………….10

A. There is no revocation of the acceptance took place from Fann Wow Gallery since

the revocation never been communicated to Dato’ Rashid…………………….…10

3. THE COURT ORDER FOR SPECIFIC PERFORMANCE IS

APPROPRIATE……………………………………………………………………..13

4. CONCLUSION AND PRAYER FOR RELIEF…………………………………...15

2

INDEX

CASES

Carlill v Carbolic Smoke Ball Company [1893] 1 QB 256, CA.

Fisher v Bell [1893] AC 552.

Ayer Hutam Tin Dredging Malaysia Bhd v YC Chin Enterprise Sdn Bhd [1994] 2 MLJ 754

Ho Kam Phaw v Fan Sin Nin [2000] 2 MLJ 529, FC.

STATUTE

Contract Act 1950 (Act 136)

3

SUMMARY OF FACT

Fann Wow Gallery is an art dealer of traditional Chinese paintings from different

artists. This year, Dong Ying produces five walls –sized paintings which are described as rare

and exquisite paintings by various art dealers’ website due to the Chinese birds and flowers

theme had drawn using “great freehand style”. Fifty types of dye used for the paintings are

prepared by the Dong Ying herself using variety of colorful raw stones found in Changliang

Mountain, in northern Tibet, China. Fann Wow Gallery managed to buy all these paintings at

RM1 million each.

On Monday, 15 February 2016, Dato’ Rashid, a private collector of Chinese Art,

visited the gallery and impressed with the Majestic Dawn. He immediately placed the order at

the price of RM1.5 million. The painting will be delivered to his house in three working days.

However, the painting also attracts Dr Lawrence’s interest, an art collector. Dr Lawrence

contacted Fann Wow Gallery to buy it at the price of RM2 million and the offer had changed

Mr Kenny’s mind, the owner of the gallery, which he instructed the delivery of the Majestic

Dawn to Dato’ Rashid to be withhold. Mr Kenny offered Dato’ Rashid another Dong Ying’s

painting, Serene Ocean which is done with similar painting technique but of somber blend of

colour.

Dato’ Rashid commenced proceedings against the gallery for breach of contract and

won. The judge ordered for rescission of the contract and specific performance due to the

failure of the gallery to deliver Majestic Dawn.

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SUMMARY OF PLEADING

The counsel for Respondent will submit on three issues which are:

1. THERE WAS A VALID CONTRACT BETWEEN DATO’ RASHID AND

FANN WOW GALLERY.

Both parties have agreed to terms of payment and delivery of Majestic Dawn.

2. THE REVOCATION OF ACCEPTANCE BY FANN WOW GALLERY

WAS NOT EFFECTIVE.

This is because the revocation of acceptance has not been communicated to Dato’

Rashid.

3. THE COURT ORDER FOR SPECIFIC PERFORMANCE IS

APPROPRIATE.

5

1. THERE WAS A VALID CONTRACT SINCE BOTH PARTIES HAVE

AGREED TO TERMS OF PAYMENT AND DELIVERY OF MAJESTIC

DAWN

Contract is an agreement between two parties which is enforceable by law. There

are four fundamental elements to create a valid contract, which are; offer,

acceptance, intention to create legal relation and consideration. The Law of

Contract in Malaysia is governed by the Contracts Act 1950. Section 2(h)1 states

that an agreement enforceable by law is a contract.

A. Dato’ Rashid has made an offer to Fann Wow Gallery.

The first element to constitute a valid contract is offer or in other word,

proposal. By virtue of Section 2 (a)2 and Section 2 (b)

3 of Contracts Act 1950,

an offer is an expression of willingness to contract on certain terms, made with

the intention that it shall become binding as soon as it is accepted by the

person whom it is addressed. An agreement must happen between two or more

parties when there is an expression of willingness to enter into a contract and

when it made with legal intention that it shall be binding. Thus, from that the

contract will be legally enforceable by law.

In the present case, Dato’ Rashid has fulfilled the first element of a valid

contract which is the element of offer or proposal as he immediately placed an

order for the Majestic Dawn at a price of RM1.5 million on 15 February 2016

during his visit to the Fann Wow Gallery. The act of Dato’ Rashid placing

order for the piece is an obvious conduct of offer or proposal in order to buy

the painting. In this situation, Dato’ Rashid’s conduct of placing order is an

actual conduct of offering towards the Appellant, Fann Wow Gallery. His

conduct of placing order upon the painting also competent with Section 2 (a)4

1 Contracts Act 1950, s 2 (h)

2 Contracts Act 1950, s 2 (a)

3 Contracts Act 1950, s 2 (b)

4 Contracts Act 1950, s 2 (a)

6

that provides, “when one person signifies to another his willingness to do or to

abstain 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”. When the person to

whom the proposal is made signifies his assent thereto, the proposal is said to

be accepted. Thus, Dato’ Rashid is the offeror who made the proposal to buy

the Majestic Dawn from Fann Wow Gallery.

An offer is portrayed in the case of Carlill v Carbolic Smoke Ball Company5.

The Carbolic Smoke Ball Company made a product called a smoke ball that it

claimed could protect the user from getting influenza which is flu. The

company published advertisement claiming that it would pay £100 to anyone

who still got sick with influenza after using its product. The company even

deposited £1000 to the Bank, to show their genuine intention in the matter.

Mrs. Carlill bought one of the balls and used it in the specified manner, yet still

managed to get influenza. When she asked for the reward, the Carbolic

Company claimed that there was no acceptance of the offer, because Mrs.

Carlill had never notified the company that she accepted the offer, nor

furnished any consideration.

The court held that in unilateral offers, the advertisement is an offer which was

accepted by Mrs. Carlill. The court also looked at the party’s intention which

the fact that £1000 were deposited to the Bank showed a genuine intention to

create legal relationship. Hence there was a binding contract. Meanwhile, a

bilateral contract is an agreement in which both parties make a promise to each

other. For example, A offers to sell his house to B for RM250,000. B accepts

the offer by promising to pay A.

On the other hand, offer could be mistaken as invitation to treat since many

people could not differentiate between both offer and invitation to treat.

Invitation to treat is not an offer. It is the willingness to negotiate a contract. If

the negotiation are successful then it becomes an offer hence an agreement

enforceable by law. However, in the present case, the display of Majestic

Dawn by the Fann Wow Gallery was an offer since the gallery, which is one of

5 [1893] 1 QB 256, CA.

7

the pioneering art dealers in Malaysia, buys works of traditional Chinese

paintings and typically resells those painting those paintings through their

gallery exhibitions in Shah Alam. Since, the Majestic Dawn was displayed in

the gallery, hence it was an offer to sell it from the gallery to whoever visited

the gallery. There are many ways come into the situation of invitation to treat.

However, one of those many ways is display of goods which related to the

present case.

In Fisher v Bell6, where goods are displayed in a shop together with a price

label, such display is treated as an invitation to treat by the seller, and not an

offer. The offer is made when the customer presents the item to the cashier

together with payment. Acceptance occurs at the point the cashier takes

payment.

Therefore, it could relate to the present case, as at the moment Dato’ Rashid

placed an order for the Majestic Dawn which been displayed, it became an

offer and no longer an invitation to treat. Furthermore, the piece will be

delivered to the Dato’ Rashid’s house in three working days. The statement

indicates that the Fann Wow Gallery had accepted the offer made by Dato’

Rashid on that day.

B. The offer has been accepted by Fann Wow Gallery.

The second element to constitute a valid contract is accceptance. By virtue of

Section 2 (b)7 of Contracts Act 1950 provides that, “when a person to whom

the proposal is made signifies his assent thereto, the proposal is said to be

accepted, becomes a promise. When there is a proposal and acceptance, there is

an agreement made between these parties as well as when the offeree accepted

it becomes a promise.

In order to constitute an acceptance, there are some principles had been

outlined and one of them that should be noted is the principle that stated,

6 [1893] AC 552.

7 Contracts Act 1950, s 2 (b)

8

acceptance must be communicated for there to be biding contract between the

parties. According to Section 4(1)8, “the communication of a proposal is

complete when it comes to the knowledge of the person to whom it is made”.

The communication of an acceptance is complete firstly, as against the

proposer, when it is put in a course of transmission to him, so as to be out of

the power of the acceptor and secondly, as against the acceptor, when it comes

to the knowledge of the proposer. Depending on the construction the contract,

the acceptance may not have to come untill the notification of the performance

of the condition in the offer in the offer as in Carlill’s case, but nonetheless the

acceptance must be communicated.

The existence of an agreement depends upon the intention of the parties. There

must be the existence of consensus which means a meeting of minds between

them. Then, it could be inferred that the consensus by the language used, the

parties’ conduct in the surrounding circumstances and the object of the

contract.9 Commonly, an objective test will be applied such as; what would be

the intention of a reasonable men if they were in the shoes of the parties to the

alleged contract.10

Therefore, in the present case, it could be the acceptance on the behalf of the

Fann Wow Gallery towards Dato’ Rashid took place at the moment when the

fact that the wall-sized painting will be delivered to Dato’ Rashid’s house in

three working days. Inter alia, the conduct of Mr Kenny, the gallery’s owner

instructed his delivery team to withhold the delivery of Majestic Dawn to

Dato’ Rashid means that the painting was originally were going to be delivered

to Dato’ Rashid at the first place and originally, it could be presumed that Fann

Wow Gallery had already accepted the offer by Dato’ Rashid way before the

offer from Dr Lawrence came up.In addition, the act of Mr Kenny offered

another Dong Ying’s art which is Serene Ocean to Dato’ Rashid signify that

8Contracts Act 1950, s 4(1)

9 Syed Ahmad Alsagoff, Principle of the Law of Contract in Malaysia, 2003, Lexis Nexis, Singapore.

p 67.

10 Ayer Hutam Tin Dredging Malaysia Bhd v YC Chin Enterprise Sdn Bhd [1994] 2 MLJ 754, SC, per

Edgar Joseph Jr SCJ.

9

the appellant had already the knowledge upon the offer by the Dato’ Rashid

and it also showed the communication of acceptance in order to bind a valid

contract.

In conclusion, offer and acceptance analysis is a traditional approach in law of

contract that been used to determine whether an agreement exist between two

parties. Therefore, by observation11

, it should be noted that agreement is

usually, reached by the process of offer and acceptance and, when this is so,

the law requires that there be an offer on ascertainable terms which receives an

unqualified acceptance from the person to whom it is made.12

11

Sinnadurai. V. (2011) Law of Contract (fourth Edition) Selangor, Malaysia : Lexis Nexis

12 9(1) Halsbury’s Law of England (4th Edn Reissue) para 631.

10

2. THE REVOCATION OF ACCEPTANCE BY FANN WOW GALLERY WAS

NOT EFFECTIVE BECAUSE IT HAS NOT BEEN COMMUNICATED TO

DATO’ RASHID.

By virtue of Section 5(2)13

of Contracts Act 1950, an acceptance may be revoked at

any time before the communication of the acceptance is complete as against the

acceptor, however not afterwards which means after the acceptance had already

been communicated.

There are four ways for the revocation to take place which are, firstly, by

communication of notice of revocation by the proposer to the other party and

secondly, revocation by lapse of time or if there is no time provided, lapse of

reasonable time applied which none of them been communicated to Dato’ Rashid.

A. There is no revocation of the acceptance took place from Fann Wow Gallery

since the revocation never been communicated to Dato’ Rashid.

Not only in acceptance, a revocation as well need for a communication. For a

revocation to be effective, it must be communicated according to Section 6(a)14

.

The communication of a revocation is complete, firstly, as against the person who

makes it, when it is put into a course of transmission to the person whom it is made,

so as to be out of the power of the person who makes it and secondly, as against the

person to whom it is made, when it comes to his knowledge15

. Hence, a revocation

will be ineffective unless it is communicated to the offerer before the acceptance

has been made.

It could be understood based on the provision that it is not enough to constitute a

revocation by the change of mind and does not tell or communicated it to the other

party. Therefore, related to the present case, the act of Mr Kenny who withhold the

delivery of Majestic Dawn to Dato’ Rashid after had a change of mind, is not

13

Contracts Act 1950, s 5(2)

14 Contracts Act 1950, s 6(a)

15 Contracts Act 1950, s 4(a) &(b)

11

acceptable to be amount as a revocation without communicated it properly to Dato’

Rashid at the first place.

Based on the relevant case, in Ho Kam Phaw v Fan Sin Nin16

, the appellant and the

respondent were partners of a firm of solicitors. They entered into negotiations to

dissolve the partnership. The respondent instructed Mr X, a solicitor, to draft a deed

of settlement for them. Then, the respondent wrote to the appellant on 24 June

1996, that as the outstanding dispute is the service of notice’, he had instructed Mr

X to amend the relevant clause and attached a copy of the amended clause with the

letter, requesting the appellant to fix the time of the execution of the agreement

which is the first draft. The appellant then responded by sending a draft of the

agreement duly executed by him with minor amendments which is the second draft.

The respondent rejected it on the grounds that the changes were not agreed to and

that any proposed changes should be referred to and discussed with Mr X.

On 8 July 1996, Mr X faxed a copy of the deed of settlement to the appellant which

was the same with the first draft. On the next day, the appellant executed four

pieces of the faxed draft and sent them to the respondent, who rejected it, on the

ground, that it was different from the second draft. The High Court held that there

was no contract between the parties as the faxed draft was different from the second

draft. The Court Appeal, by a majority decision, upheld the decision of the High

Court.

The Federal Court however held that there was a valid contract between the parties.

The court disagreed with the majority decision of the Court of Appeal and upheld

the dissenting judgement of Mokhtar Sidin JCA. Zakaria Yatim FCJ held that the

second draft was no longer an issue since the respondent had rejected it. The court

found that both of the partieshad agreed to the first draft. The letter dated on 24

June 1996 showed that the respondent was ready to execute it. Thus, there was a

valid contract between parties on the day when the appellant executed the copies of

the faxed draft agreenment that was the same with the first draft agreement, which

the parties had agreed to earlier. Further, in rejecting the faxed draft, the respondent

did not dispute the content of the faxed draft but instead raised other issue.

16

[2000] 2 MLJ 529, FC.

12

The said case relevant and related to the present case as there is a valid contract

between Fann Wow Gallery and Dato’ Rashid as the Majestic Dawn is the painting

that been first ordered by Dato’ Rashid and already been promised to be delivered

to him. However, the act of Mr Kenny who did not communicate the revocation but

instead change the Majestic Dawn to Serene Ocean is unacceptable and reasonable

for the breach of contract. Further, the conduct of the delivery team of Fann Wow

Gallery which was ready to deliver the Majestic Dawn to Dato’ Rashid before they

were withheld by Mr Kenny showed that the appellant was ready to execute the

contract and it typically to pressumed that the payment worth RM 1.5 million

already paid by Dato’ Rashid as he insisting for the painting to be delivered to his

door at once and not the other way around.

In conclusion, the revocation of acceptance made by Fann Wow Gallery was not

effective because it has never been communicated to Dato’ Rashid.

13

3. THE COURT ORDER WAS APPROPRIATE AS BOTH PARTIES HAVE

CLOSED THE DEAL AND THE RESPONDENT REQUEST FOR THE

DELIVERY OF MAJESTIC DAWN ACCORDING TO THE TERMS OF

CONTRACT.

The plaintiff commenced proceedings against the defendant for breach of contract. At

the first instance, the judge ordered for rescission of the contract and specific

performance due to the failure of the defendant to meet its obligation by way of

delivery of Majestic Dawn. Both the plaintiff and the defendant have been given leave

to appeal to the Court of Appeal.

i. The court order for rescission of the contract was appropriate.

Rescission is when a party breaches his promise under a contract, the party not in

breach has the right to rescind/terminate the contract.17

Based on illustration (a) A,

a singer enters into a contract with B, the manager of a theatre to sing at his theatre

for two nights every week during the next two months and B engages to pay her

RM 100.00 for each night’s performance. On the 6th

night, A willfully absents

herself from the theatre. B is at liberty to put an end to the contract.

If the party not in default chose to rescind the contract, any benefit which he has

received from the defaulted party must be restored.18

In a present case, 19

the court

held that the false representations by A entitled B to rescind the contract and to the

return of the money paid by B. So here, by applying rescission, when Dato Rashid

rescind the contract, the Fann Wow Gallery have to return the money paid by Dsto

Rashid, which is RM 1.5 million.

17

Section 40 of Contracts Act 1950

Illustrations (a)

See also Chitty on Contracts, Volume 1, General Principles by Thomson, page 1293

18 Section 65 of Contracts Act 1950

19 Senanayake v Annie Yeo (1965)

14

ii. The court order for specific performance was appropriate

Specific performance is refers to the remedy available in equity to compel a person

actually to perform a contractual obligation. Where a person has under a contract

becomes liable to pay a fixed sum of money, the actual performance of that

obligation can be enforced by bringing an action for that sum.20

Specific performance is a decree of the court directing that the contract shall be

performed specifically.21

The rule is, the specific performance will not be granted

where monetary compensation is adequate. In this case, specific performance is

appropriate because monetary compensation is not adequate.

Specific performance may be granted by the court when (1) there exists no

standard for ascertaining the actual damage caused by the non performance of the

act agreed to be done (2) when the act agreed to be performed is such that its non

performance would not afford adequate relief.22

According to the illustration, A

agrees to buy and B agrees to sell a picture by a dead painter and two rare china

vases. A may compel B specifically to perform this contract because there is no

standard for ascertaining the actual damage which would be caused by its non

performance.

By applying this rules to this case, Dato’ Rashid may compel Fann Wow Gallery

specifically to perform this contract, which is to deliver the Majestic Dawn to him

as there is no standard for ascertaining the actual damage which would be caused

by its non performance. Therefore, the court order for specific performance was

appropriate.

20

Chitty on Contracts, Volume 1, General Principles by Thomson, page 1522 and 1523

21 Specific Relief Act 1950

22 Section 11(1)(b) and (c) of Specific Relief Act 1950 see also, Gan Realty Sdn Bhd & Orz v

Nicholas & Ors (1969) and Duncuft v Albrecht (1841)

15

CONCLUSION AND PRAYER FOR RELIEF

Based on the foregoing reasons, Dato’ Rashid respectfully requests this honourable

court l to ADJUDGE and DECLARE that:

1. There was a valid contract since both parties have agreed to terms of payment and

delivery of Majestic Dawn.

2. The revocation of acceptance by Fann Wow Gallery was not effective because it

has not been communicated to Dato’ Rashid.

3. The High Court order for specific performance is appropriate and Fann Wow

Gallery must meet the obligation by delivering Majestic Dawn to Dato’ Rashid.