Visu Sinnadurai J:

Introduction

[1] This Court is called upon to construe a document, commonly referred to amongst estate agents in this country as a memorandum of understanding. I am given to understand that the true legal nature and effect of such a document has not been determined by the Malaysian Courts in any earlier case.

[2] This so-called memorandum of understanding is a document usually prepared by an estate agent by way of a standard form contract and is executed by a potential purchaser on the one part, and by a vendor on the second part. On viewing a property which has been advertised for sale, and a purchaser in expressing an interest to purchase the property, estate agents who have the mandate of a vendor to sell the vendor's property, generally request a prospective purchaser to sign this document. Such was the position in the present case.

Facts

[3] In the main civil suit, the plaintiff (the purchaser) brought an action against the defendant, the vendor for specific performance of a contract for the sale and purchase of a house. Based on the so-called memorandum of understanding (MOU) mentioned above, the plaintiff claims that a legally binding contract came into force whereby the defendant agreed to sell the property to the plaintiff.

[4] In pursuance of this so-called agreement, the plaintiff entered a private caveat over the said land. In the originating summons commenced by the defendant, as applicant, which matter was consolidated with the main civil suit, the defendant applied to this Court for the removal of the said caveat entered into by the plaintiff.

[5] As will be seen subsequently, the defendant did not complete the sale to the plaintiff, but instead sold the said property to a third party who are now the interveners in the main civil suit.

[6] The salient facts of the present case are as follows: The defendant (the vendor), who is the owner of a piece of property known as Lot 45284, Mukim Kuala Lumpur, Daerah Wilayah Persekutuan, No 23, Jalan Setia Bakti, Bukit Damansara, Kuala Lumpur, gave a mandate to a housing agent to sell the property. On the introduction of the agent, the plaintiff, who is the prospective purchaser (for convenience I shall refer to the plaintiff as the purchaser), on viewing, the said property, expressed an interest in purchasing the property. The purchase price was said to be RM550,000. About a week later, the purchaser was asked to sign the memorandum of understanding and the purchaser agreed to pay an earnest deposit of 1% of the purchase price on 27 September 1993, and further agreed to pay 9% of the purchase price upon the signing of a formal sale and purchase agreement on or before 8 October 1993.

[7] It was further stated in the memorandum of understanding that the purchaser will pay the balance of the 90% of the price within 90 days of the signing of the formal sale and purchase agreement. It was also provided for in the memorandum of understanding that the purchaser would be given a further grace period of 30 days from the said 90 days period to pay the remaining 90% of the purchase price. In other words, the purchaser was to pay the balance of the 90% of the purchase price within a period of 120 days from the signing of the formal sale and purchase agreement.

[8] In accordance with the MOU, the so-called deposit of 1% of the purchase price amounting to RM5,500 was paid by the purchaser to the vendor on 27 September 1993. However, the purchaser did not sign the formal sale and purchase agreement on 8 October 1993 as stated in the memorandum of understanding, but on 11 October 1993. On 11 October 1993, the purchaser also deposited the balance of the 9% of the deposit with his solicitors, as stakeholders, but gave no notice of it to the vendor.

[9] The defendant, the vendor, however, did not sign the formal sale and purchase agreement on the ground that it was not signed by the purchaser within the time period stipulated in the memorandum of understanding. The vendor the