GLUP 1053

CONTRACT LAW I
GROUP B

LECTURERS NAME: ROOS NIZA MOHD SHARIFF

SUBMITTED BY:

CHONG ROU YI

244094

NURANASOHA BT MAT SUKRI

244227

LEE MIN YAU

244095

NUR AFIFA BT MOHD ZAMRI

244130

THAM JIE YING

244097

GLUP 1053 CONTRACT LAW I

DIRECT QUESTION
QUESTION:
What is the difference between an agreement and a contract?

ANSWER:
An agreement is a less formal creation of an obligation between the two parties. It refers to
any understanding or arrangement reached between two or more parties. It usually lacks one
or more of the essential elements that is required in order to form a valid contract that is
considered legally enforceable by the court of law.

On the other hand, a contract is a legally binding agreement reached between two parties, the
terms of which the courts have the authority and obligation to enforce. There are some
essential elements in the formation of contract which were offer, acceptance, consideration,
intention to be bound, certainty, mutuality and legality.

According to the section 2(e) of Contracts Act 1950 (Act 136), an agreement is every
promises and every sets of promises which form the consideration for each other. In section
2(h) of Contracts Act 1950 (Act 136), a contract is an agreement enforceable by law.

In case Karuppan Chetty v Suah Thian (1916) FM SLR 300, the requirement of certainty was
not met when the parties agreed upon the granting of a lease at RM35.00 per month for as
long as he likes. The court held that there was no binding contract because of the lack of an

GLUP 1053 CONTRACT LAW I

element that is required in a valid contract. This shows that it was just an agreement which
has no legal binding since it did not fulfil all the element that is required.

In conclusion, only the agreement which consists of all the essential elements can be legally
enforceable by the court of law and becomes a contract. It means that all of the contracts are
agreements but not all of the agreements are contracts, unless it is enforceable by law.

PROBLEMATIC QUESTION
QUESTION:
Jamie decides to start up a restaurant called Anything-in-a-Sandwich. Bosworth Bank lends
him the money he needs to do so. Jamie must repay the money by monthly instalments over
two years. The restaurant soon gets into financial difficulties due to the fact that it just was
not possible to hold the stock needed to put anything in a sandwich. Customer's requests
could not be fulfilled and word spread that Jamie's restaurant was not living up to its name.
This dramatically reduced the number of Jamie's customers.

Jamie went back to Bosworth Bank and explained that he could not make the repayments he
owed. He also made it clear that Anything-in-a-Sandwich was in danger of closing. Bosworth
Bank therefore agreed that Jamie could have an eight-month period during which he need
make no repayments so as to give him time to sort out his business plan, and he could then
make the rest of the repayments over six years, with no extra interest to pay.

GLUP 1053 CONTRACT LAW I

Three months later, Desia Adriano, a top Premiership football player, contacted Jamie and
explained that he would like to have exclusive use of Anything-in-a-Sandwich that Friday
night to celebrate his wife's birthday. Jamie realized this publicity would have a useful impact
on his business. He told his staff that if they did their job well on the night and the event was
a success he would pay each of them an additional 60 in wages for that shift. Jamie also
asked his sister Georgina to help out on the night.

The evening was a huge success and Jamie was so pleased he promised his sister Georgina
100 for her efforts. The publicity resulted in a dramatic increase in business and five months
later Anything-in-a-Sandwich is a huge success; stocking a whole array of ingredients to fill
the sandwiches, and the restaurant is busy every day of the week.

Bosworth Bank is now demanding that Jamie reverts to repaying the loan under its original
terms. That from next month Jamie must make monthly payments over two years and must
repay the bank in one lump sum the last five monthly instalments that were due. Jamie does
not wish to do this as he intends to open a second restaurant under the "Anything-in-aSandwich" franchise very shortly and wishes to invest as much of his own capital as he can.

Relations between Jamie and his staff have deteriorated. His sister Georgina has fallen out
with Jamie after a major row and Jamie is not speaking to her. He no longer wishes to pay the
staff the 60 bonus nor does he want to pay Georgina the 100.

Advise Jamie.

GLUP 1053 CONTRACT LAW I

ANSWER:
Issue
There are two strands to this issue:
(i)

Can the bank reinstate the original agreement?

(ii)

Does Jamie need to pay back the last 5 instalments in one lump sum?

To answer these questions, it is necessary to establish the enforceability of the new agreement
with Bosworth Bank.

Rule
The general rule is that a promise will not be enforceable unless it is supported with
consideration. Foakes v Beer (1884) UKHL 1 establishes that part payment of a debt is not
good consideration as the promisee is doing no more than that which is already required of
them at law. This is a seemingly harsh and much criticized rule however it remains good
authority.

Lord Denning offered some relief to this through his judgement in Central London Properties
v High Trees House [1947] KB 130. This case concerned a lease for a block of flats during
WWII. The lease was signed in 1937 with rent payable at 2500 a year. Following the
outbreak of the War, it was not possible to get tenants for all of the flats and the defendants
were struggling financially. The plaintiffs agreed to accept a lesser payment of 1250 rent a
year while the difficulties continued. The end of the war, the flats were once again all let out
and the plaintiffs wished to reinstate the original higher rent and claim the difference for the

GLUP 1053 CONTRACT LAW I

reduced rent during the war years. Denning stated that the original agreement could be
reinstated as the promise was only intended to be binding whilst the difficulties in letting the
flats remained.

In relation to the arrears, Denning opted not to follow the harsh authority of Foakes v
Beer and instead stated that in certain situations where a promise had been made that was
intended to be binding, and acted upon and was indeed acted upon, it will be binding so far as
its terms properly apply. The plaintiffs would, therefore, be estopped from claiming back the
arrears. This decision formed what is known as the equitable doctrine of promissory estoppel,
and it can be used as a defense to claims in cases in similar circumstances to the above facts.

Application
The material facts here are, Jamie has an agreement with Bosworth Bank where he must
repay the money they lent to him by monthly instalments over two years. Anything-in-aSandwich then got into difficulty and Jamie had to inform the Bank that he would not be able
to meet the repayments which Bosworth Bank agreed Jamie could have an eight-month
period during which he need make no repayments and he could then make the rest of the
repayments over six years with no extra interest to pay.

Applying the law in this area to the present case as Jamie has provided no additional
consideration for Bosworth Bank's promise other than which his loan agreement required of
him following Foakes v Beer, prima facie, Bosworth Bank's promise is not enforceable.
Therefore, they are within their rights to revert to the original terms of the agreement. Jamie

GLUP 1053 CONTRACT LAW I

will be subject to the reinstated agreement and be liable to pay back the instalments in the
lump sum demanded.

However, applying the very factually similar case of Central London Properties v High Trees
House would provide Jamie with some relief. It would seem that promissory estoppel will
prevent Bosworth Bank from claiming back the five instalments. It is evident from the
scenario that they made a promise to Jamie, that they intended to be both binding and
enforceable, and that Jamie acted on reliance of this promise and did as he was obliged to
under the new terms.

Conclusion
In a nutshell, it is suggested that Jamie will be bound by the original terms of the agreement
following Bosworth Bank's statement that they wish to reinstate it. However,
applying Central London Properties, Jamie will not need to pay back the five instalments of
arrears to Bosworth Bank.

GLUP 1053 CONTRACT LAW I

REFERENCES
The Law Essay Professionals. (2003). Problem Question Help Guide: Answering a
Problem Question. Retrieved October 13, 2016, from Law Teacher:
http://www.lawteacher.net/problem-question-help-guide.php
Scott J. Burnham. (2014). Questions & Answers: Contracts (2nd edition). Matthew
Bender & Company, Inc.
The Commisioner of Law Revision, Malaysia. (2006). Contracts Act 1950 (Act
136). Malaysia: Pencetakan Nasional Malaysia Bhd.

GLUP 1053 CONTRACT LAW I

APPENDIX

GLUP 1053 CONTRACT LAW I

Appendix 1

GLUP 1053 CONTRACT LAW I

Appendix 2

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GLUP 1053 CONTRACT LAW I

Appendix 3

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GLUP 1053 CONTRACT LAW I

CENTRAL LONDON PROPERTY TRUST, LTD. v. HIGH TREES HOUSE,

LTD.
KING'S BENCH DIVISION
[1947] KB 130, [1956] 1 All ER 256, [1946] WN 175
HEARING-DATES: 18 July 1946
18 July 1946
CATCHWORDS:
Estoppel -- Estoppel in pais -- Estoppel by conduct -- Lease of flats -- Written promise to reduce rent owing to wartime conditions -- No consideration -- Reduced rent paid -- Binding effect of promise -- Effect of ending of war-time
conditions.
Landlord and Tenant -- Rent -- Reduction of rent -- Lease of flats -- Written promise to reduce rent owing to wartime conditions -- No consideration -- Reduced rent paid -- Binding effect of promise -- Effect of ending of war-time
conditions.
HEADNOTE:
Landlords let a new block of flats in 1937 to H. Ltd. (called "the tenants"), on a ninety-nine years' lease at a ground
rent of 2,500 a year. Few of the flats had been let at the outbreak of war in 1939, and, in view of the tenants'
difficulty in paying the rent out of profits in prevailing conditions, the landlords agreed in writing in 1940 to reduce the
rent to 1,250. No duration of the reduction of rent was specified and there was no consideration for it. The tenants
paid the reduced rent. By early in 1945 the whole block of flats was let. On Sept. 21, 1945, the landlords wrote asking
that the full rent of 2,500 should be paid and claiming arrears of 7,916. They subsequently brought a test action to
recover the balance of rent for the quarters ending Sept. 29 and Dec. 25, 1945.
Held: (i) the promise of a reduction of rent, being intended to be legally binding and to be acted on, and having
been acted on by the tenants, was binding on the landlords to the extent that they would not be allowed to act
inconsistently with it, although it was not the subject of estoppel at common law; but
(ii) the promise was for a reduction of rent which was temporary and was to endure so long only as the block of
flats was not substantially let, and, since the block of flats was substantially let early in 1945, the landlords were entitled
to the full rent for the quarters ending Sept. 29 and Dec. 25, 1945.
INTRODUCTION:
Action. The landlords let a block of flats to the tenants on a ninety-nine years' lease under seal in 1937 at a ground
rent of 2,500, which in view of war-time conditions and without consideration they agreed in writing in 1940 to
reduce to 1,250. Early in 1945 the flats became fully occupied and in September, 1945, the landlords claimed that
rent was payable at the full rate of 2,500 and they also claimed arrears in respect of earlier years. They brought a test
action for the recovery of the full rent for the two quarters ending on Sept. 29, 1945, and Dec. 25, 1945. The tenants
contended that the reduced rent was payable for the whole term of the lease, or alternatively that it was payable up to
September, 1945, on the ground that the landlords were estopped from now claiming the additional rent or alternatively
that they were bound by their promise of a reduction in the rent, which was made with the intention that it should be
binding and should be acted on and which was, in fact, acted on by the tenants.
COUNSEL:
Robert Fortune for the landlords. Ronald Hopkins for the tenants.

Appendix 4

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