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2020 MarsdenLR 361
COURT OF APPEAL PUTRAJAYA
BALDAH TOYYIBAH (PRASARANA) KELANTAN SDN BHD – Appellant
Versus
DAE HANGURU INFRA SDN BHD & ANOTHER APPEAL – Respondent
[Civil Appeal Nos: D-02(NCVC)(W)-431-03-2017 & D-02(NCVC)(W)-499-03-2017]
A binding contract requires clear consensus ad idem; absence of key contractual elements renders agreements unenforceable, resulting in dismissal of breach claims.
Headnote:(A) Contracts Act 1950 – Enforceable contracts and breach of contract – The court ruled that to establish a binding contract, there must be consensus ad idem, and if this is lacking, any agreement may only attract limited relief. The plaintiff's claim for compensation for the breach was dismissed, while the first defendant's appeal was allowed due to the absence of an enforceable contract. (Paras 3, 22, 26-27)
Facts of the case: The case involves a breach of contract claim related to a substantial construction project. The plaintiff claimed damages and costs for work done based on the alleged contract with the first defendant, which was a state-owned agency. The first defendant contended no binding contract existed.
Findings of Court: The court found no consensus ad idem necessary for a binding contract, leading to the dismissal of the plaintiff's claim. It held that the earlier agreements could not establish an enforceable contract as the plaintiff was not part of the consortium at the time of initial agreement and lacked necessary elements for contract formation.
Issues: The main legal question centered on whether an enforceable contract existed between the plaintiff and the first defendant despite the complexities in negotiations and representations made.
Ratio Decidendi: The court reaffirmed that a clear offer and acceptance with the identical agreement of terms is essential for a contract's validity. The court noted that incomplete or ambiguous agreements do not meet the statutory requirements under the Contracts Act.
Result: The first defendant's appeal was allowed; plaintiff's appeal dismissed.
JUDGMENT
[1] There are two appeals before us. One is by the 1st defendant in the High Court (Appeal No 431) and the other by the plaintiff (Appeal No 499).
[2] The appeals relate to the construction agreement and/or contract. The focus of the dispute essentially was whether there was an enforceable contract and whether the plaintiff is entitled to compensation for breach of contract. The quantum involved related to the project was in billions.
Preliminary Jurisprudence To Appreciate The Issues In This Case
[3] It is now well established that the Contracts Act 1950 ( CA 1950) only recognises an enforceable contract to provide the reliefs as to compensation, damages, etc under various provisions of the Act. Specific performance and other reliefs can be obtained under the Specific Relief Act 1950. In case of agreements, some reliefs are mentioned in the in the 1950. However, if elements of uncertainty, duress or those which lack consensus ad idem exist, the contract will not be recognised at all by the courts. [See Janabs Key To Law Practice and Legal Remedies, 2nd edn pp 1 to 18].
[4] Under the common law, the courts at times will struggle to give effect to an oral agreement and in some case contracts. That is not the position in our Contract Act, though Court recognises that oral contracts subject to credible oral evidence between the parties supported by strong corroborative evidence and/or circumstances. Oral agreements or part with corporate organisation are not easily recognised by courts. [See Merong Mahawangsa Sdn Bhd & Anor v. Dato Shazryl Eskay Abdullah, [2015] 5 MLJ 619].
[5] The distinction between an agreement and contract are many. In essence, all contracts are agreements but not all agreements are contracts. Anything less than a contract may need the support of the provision of the Specific Relief Act 1950 to provide relief for breach of an agreement. If it is a contractual breach, the right to relief is of right. However, if it is an agreement not capable of being construed as a prima facie contract, the reliefs for breach become precarious as well as limited. For example, under a breach of agreement one may only recover money paid or advance in a limited sense as opposed to breach of contract.
[6] To put it mildly, incohate agreements or what can be called as coffee shop agreements have a chance to be enforced at common law but may fail under the Contracts Act. In addition, coffee shop agreements involving multiple parties and companies will not succeed even at common law because of the strict requirement of consensus ad idem. When it comes to a proper construction agreements and/or contracts, it is now a practice to include arbitration clause. This is so because of the technicalities involved in construction disputes and the jurisprudence that has been developed which is now specifically called "construction law".
[7] Coffee shop agreements will not have arbitration provision and when it relates to millions or billions without proper written agreements and/or contract with arbitration clause as per the industry practice, it would at this time and era means there was no intention to create legal obligations at that stage and the agreements are subject to other terms and condition to be approved not only by the parties but also all relevant authorities.
Contracts And Contract Documents
[8] As a general rule, the law of contract strictly applies to contract documents. However, it is not unusual to find judicial decisions in construction cases to pave way for jurisprudence related to construction practice and procedure.
Letter Of Intent
[9] A letter of intent in construction contract may create legal obligation for any acts done in relation to the letter of intent, notwithstanding the contract has not been finalised. [See Hall & Towse South Ltd v. Ivory Gate Ltd [1997] 62 ConLR 117 at 118]. In Turriff Construction v. Regalia Knitting Mills Ltd [1972] EGD 257, it was held on the facts that the
