Question

DUE TODAY, PLEASE HELP. GHB Sdn Bhd, a construction company, wanted to buy a piece of land. The company promised to pay Sandhu a 3% commission if Sandhu could assist the company to purchase a 10-acre plot of land in Damansara. The land has been eyed by the company as a potential location for the next housing project. Sandhu told Ahmad, the managing director of the company, that the land was in high demand and that other potential buyers were also interested. Ahmad told Sandhu that if he was successtul in acquiring the land through his negotiation skills and by olering an increased price, Sandhu would be paid 0.5% as an extra commission. 1his promise was made when both were playing golt. Sandhu did the works and completed the purchase of the land for GHB Sdn Bhd. The 3% commission was duly paid to Sandhu but the company refused to pay the additional 0.5% commission. sandhu alleged that Ahmad had made him an ofter to pay the extra commission with an intention to be bound by legal relations and that Sandhu had accepted that offer Intormation from Ahmad' s secretary indicated that Ahmad did not remember that he ever made the promise of the extra commission. He suffered from an occasional memory lapse where he received treatment tor an early dementia. Ahmad said even if he made the promise, he had not intended to be legally bound by such an extravagant promise in which 0.5%% was equivalent to RM2 Million in the deal. Ahmad also asserted that the promise would have beerh made in the company's meeting room and in writing if it was meant as a serious legal undertaking. Based on the three elements of contract which are intention to create legal relation, capacity and consideration, advise Sandhu if there is any prospect for him to recover the extra commission as promised. (15 marks)​

Answer 1

Answer:

GHB Sdn Bhd and Sandhu

The prospect for Sandhu to recover the extra commission negotiated with Ahmad during golf is very remote.

1. It was made under undue influence, when Ahmad could have lacked the capacity to make a binding contract. In addition, at that time, Sandhu disclosed that the land was being sought after by many other parties as a way of piling unnecessary pressure on Ahmad.

2. There was no intention to create a legal relation because the additional commission represents a counter-offer.  Since the earlier offer was fully documented, this additional offer should have also followed the same process if the company intended to be legally bound.

3. There is lack of consideration to back this additional contract. In the first place, the main contract with Sandhu was made in view of his negotiation skills. So what is Sandhu expected to offer the company in exchange for the extra commission? Nothing.

Explanation:

GHB cannot be expected to promise 0.5% extra commission on a deal, which was equivalent to RM2 million, when an already executed contract for 3% commission had been reached.  One can also claim that Ahmad, who suffered from occasional dementia, could have made the promise without the intention for it to be binding on his company but as a way of encouraging Sandhu to close the deal in favor of GHB.  Was the deal closed because of the extra commission?  No.