Contract, Tort & Crimes PI007K15 Business Agreement Ariff Zikri (2023829534) Hannan Zulaikha (2023856854) Nur Alisya Qistina (2023460704) To create legal relation INTENTION LAW083
Table of Contents Illustration of client counselling session STORYBOARD 01 Definition of business agreements and the presumption of law DEFINITION 02 Tai Boon Tatt v Kuwait Finance House (Malaysia) BHD [2022] MLJU 3623 CASE 1 03 Baldah Toyyibah (Prasarana) Kelantan Sdn Bhd v Dae Hanguru Infra Sdn Bhd and another appeal [2020] 5 MLJ 630 CASE 2 05 REFERENCES 07
Story Board C L I E N T C O U N S E L L I N G Issue : Was there an intention to form a legally binding agr M ee e m ga en t t a between Dato’ nd Intan? LAWS In commercial dealings, it's generally presumed that parties intend to create legally enforceable contracts. This presumption extends to agreements made between businesses in the ordinary course of business. The case of Edwards v. Skyways Ltd [1964] 1 All ER 494 exemplifies that promises made by employers to employees, such as redundancy payments, can be legally enforceable. APPLICATION In the situation between Dato’ Megat and Intan, Dato’ Megat promised to pay Intan a 50% bonus if she successfully secured an interest shares contract with another company. Intan fulfilled her part, but Dato’ Megat refused to honor his promise. Notably, Dato’ Megat even signed an agreement with Intan. Since this agreement pertains to an employer-employee relationship and involves compensation, Dato’ Megat is obligated to fulfill his promise to Intan. CONCLUSION The agreement between Dato’ Megat and Intan is legally binding due to the presumption of an intention to create legal relations. 01 Intan, who works as a clerk at Hajima Construction Company, was given a task by CEO Dato Megat to secure a contract with another construction company. She hesitated initially, concerned about the tight deadline set by Dato Megat. However, he persuaded her by offering a 50% increase in her bonus. Intan agreed and even signed a contract for the bonus increase, prepared by Dato Megat's legal team. Intan managed to get the contract signed on time, but she didn't receive the promised bonus increase after a month. When she confronted Dato Megat about it, he denied any binding agreement, leaving Intan feeling deceived and disappointed. Background facts!
02 A legally binding agreement between two or more persons or entities. The agreement establishes the terms under which the parties agree to cooperate or exchange goods, services, or other forms of value. The intention of a party to be bound by a contract with legal consequences to sue and be sued. Legal relations are those that create rights and obligations recognized by law, enabling a person to enforce those rights by claiming remedies provided by law. There are two classification of presumption which are parties do intend to create legal relations and parties that do not create legal relations. Commercial agreements fall under parties that do intend to create legal relations. DEFINITIONS Business Agreement Intention to Create Legal Relations Presumption of Law
7. Subsequently, the Defendant, through another letter dated 14.7.2017, expressed its agreement to accept the Plaintiff's offer to purchase the properties for RM26,500,000. However, this acceptance was explicitly subject to CSR agreeing to enter into the proposed sale and purchase agreement (SPA) with the Plaintiff. 8. The Plaintiff accepted the Defendant's offer, but CSR ultimately refused to enter into the SPA with the Plaintiff. 9. Consequently, the Defendant refunded the earnest deposit to the Plaintiff via a banker's cheque dated 29.6.2018. 10. Dissatisfied with this outcome, the Plaintiff initiated the present lawsuit against the Defendant, seeking declarations that there is an open contract between the Plaintiff and the Defendant. 1. Whether an open agreement existed between the parties or the sale and purchase arrangement was subject to the execution of a formal contract ? 2. Whether the document is a binding contract or only conditional contract or a ‘subject to’ contract ? TAI BOON TATT V KUWAIT FINANCE HOUSE (MALAYSIA) BHD [2022] MLJU 3623 1. The Defendant, an Islamic bank, provided a Mudharabah facility to Corner Side Realty Sdn Bhd (CSR) through a Mudharabah Agreement. 2. The Mudharabah Facility was utilized by CSR to invest in the purchase of 30 bungalow units by BU Development Sdn Bhd (BU Development). 3. A settlement agreement was later executed between the Defendant and CSR, whereby CSR was to facilitate the transfer of ownership of 12 unsold bungalow units to the Defendant. 4. The Plaintiff expressed interest in purchasing the aforementioned 12 bungalow units by sending a letter dated 2.6.2017 to the Defendant, offering to buy the properties for RM24,000,000. The Plaintiff enclosed a cheque of RM480,000 as a 2% earnest deposit. 5. The Plaintiff explicitly stated in the letter that the earnest deposit was refundable if the proposed sale and purchase did not proceed, otherwise, it would be set off against 10% of the purchase price upon the execution of the sale and purchase agreement. 6. In response, the Defendant acknowledged receipt of the earnest deposit and indicated in a letter dated 20.6.2017 that it was assessing the Plaintiff's offer at an increased amount of RM26,500,000. ISSUES Facts of the Case 03
The core issue revolves around whether there was a binding contract between the parties or if the sale and purchase arrangement was contingent upon the execution of a formal contract. The Defendant argues that no binding contract exists because the counterparty to the SPA, CSR, refused to engage in the agreement with the Plaintiff. The Court finds that the Bank's Letter dated 14.7.2017 indicates a "subject to contract" arrangement, as explicitly stated in bold and capitalized letters within the document. Referring to legal precedents such as Deutsche Bank (Malaysia) Bhd v MBF Holdings Berhad & Anor [2015] 6 MLJ 310, the Court underscores that parties may not be bound until the execution of a formal contract, especially if the formality of an executed contract is by choice. Citing the case of Soo Lip Hong v Tee Kim Huan [2006] 2 MLJ 49, the Court emphasizes that if essential terms are yet to be agreed upon and there is no provision for their resolution, there is no binding contract. Additionally, arrangements made "subject to contract" imply ongoing negotiation without binding intentions until a formal contract is exchanged. The Defendant's argument aligns with common conveyancing practices in Malaysia, where parties are typically not bound until a formal contract is executed, as demonstrated in Baldah Toyyibah (Prasarana) Kelantan Sdn Bhd v. Dae Hanguru Infra Sdn Bhd and Another Appeal [2020] 5 MLJ 630. The Court concludes that there was no binding contract, particularly when one party, CSR, refused to proceed with the agreement, emphasizing the principle that no valid contract can be formed under coercion. The laws surrounding agreements "subject to contract" should be appropriately arranged to reflect the necessity for formal contract execution. LAW 04 Application In this case, the appropriate legal application revolves around contract law principles, specifically concerning the nature of agreements and the distinction between binding contracts, conditional contracts, and agreements "subject to contract.” Hence, it is the finding of this Court that Plaintiff has failed to prove that there was an open contract between the Plaintiff and the Defendant. The Plaintiff has also failed to convince this Court that it has any basis for any of the reliefs claimed against the Defendant. In conclusion, there was no binding contract formed between the plaintiff and the defendants as the contract was not formed due to rebut the presumption of the intention to create legal relation agreements “subject to contract”. Thus the agreement is not binding until the execution of a final agreement. Conclusion
Baldah Toyyibah (Prasarana) Kelantan Sdn Bhd v Dae Hanguru Infra Sdn Bhd and another appeal [2020] 5 MLJ 630 Issue WHETHER THERE WAS A CONTRACT ESTABLISHED BETWEEN THE PLAINTIFF AND THE FIRST DEFENDANT ? Facts of the Case 1. In 2012, The Kelantan State Government was interested to construct, finance, design and building a highway road from Kota Bharu to Kuala Krai (“the Project”). 2. Dae Hanguru Infra Sdn Bhd (the plaintiff) sued Baldah Toyyibah (Prasarana) Kelantan Sdn Bhd (the first defendant) and Perbadanan Menteri Besar Kelantan (the second defendant) for breach of contract regarding the Kota Bharu-Kuala Krai Highway Project (KBKK Project). 3. The High Court ruled in favor of the plaintiff against the first defendant and dismissed the claim against the second defendant. 4. The court found that there was a contract between the parties and that the plaintiff's incorporation as the turnkey contractor for the KBKK project on behalf of Consortium Daelim JV (CDJV) was acceptable to the first defendant. 5. Both the plaintiff and the first defendant filed separate appeals against the High Court's decision. 6. The appeals were made in response to the court's ruling on the breach of contract and the acceptance of the plaintiff's role as the turnkey contractor. 05
The court of the opinion that there was a contract between parties based on following reason relevant correspondences in which the language used, conduct of parties, etc showed the existence of the contract: In the letter of intent dated October 8, 2012, the first defendant expressed a clear intention to work with the plaintiff's company. The language used, like "appoint you as the turnkey contractor," showed they intended to have a legal relationship. The letter of acceptance dated October 31, 2012, by the first defendant further solidified this intent. By accepting CDJV's offer, the first defendant demonstrated an intention to be legally bound. The language used in this letter, such as "hereby accepted" and "is part of a binding contract," emphasized this intention. The court saw the execution of the conditions of contract (COC) as a formality, as the agreement between the parties was already established from the start. The court concluded there was a valid and binding contract between the plaintiff and the first defendant. LAWS Based on the court's assessment of the communications and legal principles surrounding the intention to create legal relations in commercial agreements, it's evident that a valid and binding contract existed between the plaintiff and the first defendant. The language used in the letter of intent and subsequent acceptance letter clearly indicated the parties' desire to form a legally enforceable contract. Additionally, the court's view that the execution of contract conditions was merely a formality further supports the conclusion that the agreement was established from the beginning. The plaintiff has a strong legal foundation for claiming the existence of a contract with the first defendant. The plaintiff can argue that the explicit intention expressed by the first defendant in their communications, coupled with the formal acceptance of terms, constitutes a valid and binding agreement. Therefore, the plaintiff may pursue remedies for breach of contract against the first defendant, seeking damages or specific performance as warranted by the court. APPLICATION The court of the opinion that there was a contract between parties based on following reason relevant correspondences in which the language used, conduct of parties, etc showed the existence of the contract: In the letter of intent dated October 8, 2012, the first defendant expressed a clear intention to work with the plaintiff's company. The language used, like "appoint you as the turnkey contractor," showed they intended to have a legal relationship. The letter of acceptance dated October 31, 2012, by the first defendant further solidified this intent. By accepting CDJV's offer, the first defendant demonstrated an intention to be legally bound. The language used in this letter, such as "hereby accepted" and "is part of a binding contract," emphasized this intention. The court saw the execution of the conditions of contract (COC) as a formality, as the agreement between the parties was already established from the start. The court concluded there was a valid and binding contract between the plaintiff and the first defendant. CONCLUSION 06
Contracts and agreements | Small Business Development Corporation. (n.d.). REFERENCES TAI BOON TATT v KUWAIT FINANCE HOUSE (MALAYSIA) BHD [2022] MLJU 3623 https://www.smallbusiness.wa.gov.au/legal-risk/contracts agreements#:~:text=A%20business%20contract%20is%20a,legal%20and%20professi onal%20advice%20first. BALDAH TOYYIBAH (PRASARANA) KELANTAN SDN BHD v DAE HANGURU INFRA SDN BHD AND ANOTHER APPEAL [2020] MLJU 295; [2020] 5 MLJ 630 07