Is there a valid contract between Danny and Rahul?

Body An offer can be defined in Section 2(a) Contract Act 1950 (here in after referred to as CA 1950) as “When one person signifies to another his willingness to do or abstain from doing, with the view to obtaining the assent of that to the act or abstinence, he is said to make a proposal”. Under the CA 1950 and English Law, an offer is something which is capable of being converted into an agreement by its acceptance. Rahul wishes to go to Serdang so that he offers the money for the taxi service.

Acceptance is defined in Section 2(b) CA 1950 as “when a person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted: a proposal, when accepted, becomes a promise”. As a taxi driver, Danny accepts the offer of Rahul and picks him to the Serdang. According to the Section 2(d) CA 1950, consideration is defined as “when, at the desire of the promisor, the promise or any other 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”.

Consideration must exist in every contracts and it must have monetary value. Consideration can also be defined as a detriment suffered in exchange for a benefit received. This means that each party must promise to give or do something for the other. Rahul exchanges money for taxi service and Danny provides taxi service to earn the money so that there is a valid contract between Danny and Rahul. Danny starts off his journey and soon encounters traffic congestion after completing 12 kilometers of the journey. Because of the traffic congestion, Danny refuses to move and switches off the air condition.

But Rahul wishes to go to Serdang, a town 15 kilometers away. According to the Section 40 CA 1950, “when a party to a contract has refused to perform or disable himself from performing, his promise in its entirety the promise may put an end to the contract, unless he has signified, by words or conduct, his acquiescence in its continuance. ” . There is a breach of contract between Danny and Rahul. The breach of contract between Danny and Rahul is a repudiatory breach. A repudiatory breach occurs where a party indicates, either by words or by conduct, that he does not intend to honour his contractual obligations, e.g. refusal to perform or failure to perform an entire obligation.

Due to the breach of the contract, Rahul is able to sue Danny. According to the Section 65 CA 1950, “when a person at whose option a contract is voidable rescinds it, the other party thereto need not perform any promise therein contained in which he is promisor. The party rescinding a voidable contract shall, if he has received any benefit thereunder from another party to such contract, restore the benefit, so far as may be , to the person from whom it was received”.

The effect of an innocent party putting an end to the contract is that the innocent party must restore any benefits which he may have received from the other party. Rahul gets out of the car and refuses to pay Danny. Danny had completed 12 kilometers of the journey and Rahul didn’t pay any fee. As the innocent party, Rahul was putting an end to the contract so that he must restore any benefits which he may have received from the other party. This means that Rahul have to pay the fee about 12 kilometers of the journey which Danny had completed. Danny encounters traffic congestion after completing 12 kilometers of the journey.

A contract is frustrated where there is a change in the circumstances which renders a contract legally or physically impossible of performance. Due to the traffic congestion is foreseeable, the contract is not discharged by frustration. In the case Jackson v Union Marine Insurance Co (1874), the contract was discharged by frustration because the ship was re-floated and it was unforeseen. As a general rule, performance of a contract must be exact and precise and should be in accordance with what the parties had promised. The contract can still be performed because journey haven’t completed.

Damages are granted to a party as compensation for the damage, loss or injury he has suffered through a breach of contract. According to the Section 74(1) CA 1950, “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”. Unliquidated damages are sum of money that cannot be foreseen or assessed by a fixed formula.

It is established by a judge or jury. Damages may be categorized as unliquidatable when the amount of damages is unidentifiable or subject to an unforeseen event that makes the amount not calculable. This mean that Rahul can only claim the losses. According to the Section 76 CA 1950, “a person who rightly rescinds a contract is entitled to compensation for any damage which he has sustained through the non-fulfilment of the contract. ” Hence Rahul is entitled to claim compensation for the damage which he has sustained through the non-fulfilment of the contract.

Conclusion There is a valid contract between Danny and Rahul about exchange money for taxi service. Danny refuses to move and switches off the air condition because of the traffic congestion so that there is a breach in their contract. The contract is not frustrated due to the traffic congestion is foreseeable. Rahul need to pay the fee about 12 kilometers of the journey. At last, Rahul can sue Danny and claim the compensation. ( 1032 words ) Reference 1. Lee Mei Pheng, 2005, General Principle of Malaysian Law, 5th edn, Oxford Fajar Sdn. Bhd. , Malaysia.