Judgment

Shaik Daud Md Ismail, JCA

(delivering the judgment of the court)

1. This is an appeal against the decision of the High Court Seremban given on April 29, 1998 whereby the learned Judge dismissed the originating summons dated November 7, 1997 ("the OS"). The OS was filed by the appellant for a declaration that, the appellant had accepted the respondent's offer to purchase a piece of land and for an order that the respondent do sign the sale and purchase agreement and complete the sale.

2. The facts of the case which are not in dispute are that by a letter dated September 13, 1997, the respondent informed the appellant that the respondent's head office had approved the sale of  9,461.107/10,000 shares in a piece of land held under Geran No 17268 Lot No 4034, Mukim of Port Dickson ("the said land"). This sale was to be by private treaty to the appellant subject to the terms and conditions contained therein. They are:-

   1. Sale price shall be RM1.9 million.

   2. The sale is subject to all existing incumbrances.

   3. The Official Assignee shall not be responsible should the purchaser fail to effect a transfer of the title.

   4. The Official Assignee shall be absolved from any costs incurred in the sale.

   5. Payment of 10% of the purchase price shall be made within seven days from the receipt of the letter of offer and to pay the balance within a period of three months, thereafter.

3. The terms appeared to be quite normal and the appellant duly accepted the offer and on September 15, 1997, paid a sum of RM190,000 being 10% of the purchase price. The respondent issued a receipt for the same.

4. Thereafter the appellant forwarded a draft copy of the sale and purchase agreement for the attention and approval of the respondent. The respondent made several amendments to the draft and returned the same to the appellant. The appellant agreed to the amendments and fair copies of the agreement were forwarded to the respondent for execution.

5. The respondent did not execute the agreement. One month later the respondent requested the government valuer to value the said land. The government value in his report dated October 27, 1997, valued the said land to be RM3.765 million. Based on this report the respondent refused to conclude the sale, and filed a summons-in-chambers for an order to cancel the sale and purchase agreement under s 85(3) of the Bankruptcy Act 1967. This was later withdrawn.

6. The appellant then filed the originating summons for a declaration that the respondent had accepted the offer to purchase the said land and for an order that the respondent do execute the sale and purchase agreement and complete the sale. There are two issues to be decided.

   • First and more importantly, whether a valid contract has been formed between the parties even though a valid sale and purchase agreement had not been executed yet.

   • Secondly whether it is justifiable to refuse the appellant the reliefs sought.

7. In the circumstances of this case we find no difficulty in holding that a valid enforceable contract had materialised between the parties. The offer to sell was made by the respondent and this offer was accepted by the appellant. In accordance with the terms of the sale, the appellant remitted the 10% deposit amounting to RM190,000 which amount was duly received by the respondent and they issued a receipt for it. Therefore, a valid enforceable contract had been formed. The parties have been identified, the property, the price and the terms too have been identified with sufficient certainty.

8. Such an agreement is enforceable as if it was embodied in a sale and purchase agreement. Our finding is fortified by the decision in Charles Grenier Sdn Bhd v Lau Wing Hong [1996] 3 AMR 3533.

9. After the respondent had accepted the RM190,000 they appeared to have a change of heart. They then requested the government valuer to value the said land and the government valuers came out with a report that the said land was worth RM3.765 million.

10. The learned Judge accepted this and held that there was inadequacy of consideration as the purchase price was grossly under-valued and the agreement was void. We are of the view that the learned Judge went off tangent when he considered ss 21 and 26 of the Contracts Act 1950. The learned Judge held that the inadequacy of the consideration may be taken into account in determining the question of whether the consent of the promisor was freely given. He held that the respondent did not freely consent to sell the said land to the appellant at the agreed price. Therefore he held that the agreement is void. He thereby concluded that since the value of the said land as agreed by the respondent was grossly under valued, the respondent is at liberty to refuse to complete the contract.

11. We are of the view that the second valuation given after the contract had been formed is irrelevant and ought not to be considered. The respondent ought to have the value of the said land determined before they made the offer to sell. Having accepted the value to be RM1.9 million, they made the offer to the appellant who accepted the offer. Once the respondent accepted the deposit of RM190,000 a valid and enforceable contract had materialised. Had the appellant failed to pay the balance of the purchase price within the stipulated period of three months the respondent would be entitled to forfeit the deposit and the contract would come to an end. Therefore the question of the consent of the promisor not given freely does not arise. The learned Federal Counsel conceded that it is not in issue that the consent was not freely given.

12. We held that the learned Judge erred when he concluded that the difference in the value of the said land was bordering on misrepresentation at its lowest and fraud at its highest. There was no evidence of any misrepresentation or fraud. The respondent openly entered into this agreement without any misrepresentation by any party. Their omission or neglect to obtain an independent opinion on the value of the said land before they made the offer to the appellant ought not to be blamed on the appellant. We would conclude by quoting what was said in Charles Grenier (supra) at p 3543:-

    Unless the approach we have stated is adopted, a party to a contract who after having concluded his bargain - entertains doubts as to the wisdom of the transaction, may be in the unfairly advantageous position to invent all sorts of imaginary terms upon which disagreement may be expressed when the more formal document is being prepared in order to escape from his solemn promise. Businessmen would find the law to be a huge loophole and commerce would come to a virtual standstill.

13. We hold that the learned Judge erred in dismissing the appellant's OS. We allowed the appeal with costs here and below and entered judgment for the appellant in terms of prayers 1 and 2 of the OS and ordered that the deposit be refunded.

Cases

Charles Grenier Sdn Bhd v Lau Wing Hong [1996] 3 AMR 3533

Legislations

Bankruptcy Act 1967: s.85(3)

Contracts Act 1950: s.21, s.26

Representations

M Pathmanathan (Yee Teck Fah & Co) for Appellant

Zaliha Mohd Janis (Official Asignee's Office, Seremban) for Respondent

Notes:-

This decision is also reported at [2000] 2 AMR 1556