Petron Malaysia Refining & Marketing Bhd v Magna Enigma Sdn Bhd

Appellant(s): Petron Malaysia Refining & Marketing Bhd

Respondent(s): Magna Enigma Sdn Bhd

• YA Datuk Supang Lian
• YA Datuk Dr Shahnaz Binti Sulaiman
• YA Dato' Amarjeet Singh a/l Serjit Singh

• The appellant, an oil company, and the respondent entered into a Letter of Offer (LOO) dated 7 January 2019 for the respondent to construct and operate a Petron-branded petrol station under "Option 2" of a Dealer Owned Dealer Operated arrangement, contemplating a subsequent 15-year Retail Trading Agreement (RTA).
• Nearly 11 months after signing the LOO, the respondent requested to switch to "Option 3" and a different operating model due to higher-than-expected costs, which the appellant rejected, insisting the parties proceed with the original Option 2 terms.
• Despite continuing to take steps consistent with building the Petron station (site preparation, exclusivity undertakings, tank installation), the respondent ultimately withdrew from the arrangement in October 2020 and subsequently contracted with a competitor to operate a rival-branded station on the same land.

• Whether the LOO constituted a binding contract, or whether the absence of consensus ad idem on the "Option 2 vs Option 3" issue, and the non-execution of the subsequent RTA, meant no concluded agreement existed.
• Whether the respondent's post-acceptance request to change options amounted to a "counter-offer" under section 7 of the Contracts Act 1950 (thereby preventing contract formation), or was merely a proposed variation of an already-binding contract.
• If a binding contract existed, whether the respondent's withdrawal amounted to a repudiatory breach, and if so, the correct measure of damages under section 74 of the Contracts Act 1950, particularly whether a claim for loss of future profits was too speculative to be recoverable.

• The Court of Appeal held that the LOO was a valid and binding contract, finding that it contained all essential terms, lacked any "subject to contract" clause, and that the parties' conduct (execution of a non-disclosure agreement, exclusivity undertakings, construction preparations) objectively demonstrated an intention to be bound from the date of acceptance.
• The Court held that the respondent's request for Option 3, made 11 months after acceptance of the LOO, could not in law be a counter-offer negating the contract; at most it was a proposed variation of an existing binding contract, which failed for lack of fresh consideration and left the original terms intact, and the High Court had erred in applying the "knock-out rule".
• The Court found the respondent's 26 October 2020 withdrawal constituted a repudiatory breach, and reversing the High Court, awarded the appellant RM2,314,440.00 in damages (based on a reliable 3-year replacement-period income projection using comparable station data), with 5% interest from the date of the High Court judgment, allowing the appeal with costs.