Objectives of the Firm Essay Example for Free

Objectives of the Firm Essay The standard economic assumption underlying the analysis of firms is profit maximization. Real world firms, however, might not, and many times do not, make decisions based on the profit-maximization objective, or at least exclusively on the profit-maximization objective. Other objectives include: (1) sales maximization, (2) pursuit of personal welfare, and (3) pursuit of social welfare. Although firms are assumed to make decisions that increase profit in standard economic analysis, real world firms often pursue other objectives on a day-to-day basis. Some firms set their sights on maximizing sales. For other firms the owners or employees are inclined to enhance personal living standards. And more than a few firms take steps that promote the overall welfare of society. In some cases, these other objectives help a firm pursue profit maximization. In other cases, they prevent a firm from maximizing profit. Profit Maximization Profit maximization is the process of obtaining the highest possible level of profit through the production and sale of goods and services. This is the guiding principle underlying the analysis of short-run production by a firm. In particular, economic analysis is assumed that firms undertake actions and make the decisions that increase profit. Profit is the difference between the total revenue a firm receives from selling output and the total cost of producing that output. Profit-maximization means that a firm seeks the production level that generates the greatest difference between total revenue and total cost. Consider how profit maximization might work for The Wacky Willy Company. Suppose that The Wacky Willy Company generates $100,000 of profit by producing 100,000 Stuffed Amigos, the difference between $1,000,000 of revenue and $900,000 of cost. * If profit falls from this $100,000 level when The Wacky Willy Company produces more (100,001) or fewer (99,999) Stuffed Amigos, then it is maximizing profit at 100,000. Alternatively, if profit can be increased by producing more or less, then The Wacky Willy Company is NOT maximizing profit at the current level of production. Suppose, for example, that producing 100,001 Stuffed Amigos adds an extra $11 to revenue but only $9 to cost. In this case, profit can be increased by $2, reaching $100,002, by producing one more Stuffed Amigo. As such 100,000 is NOT the profit maximizing level of production. * In contrast, suppose that producing 99,999 Stuffed Amigos reduces cost by $11 but only reduces revenue by only $9. In this case, profit can also be increased by $2, reaching $100,002, by producing one fewer Stuffed Amigo. As such 100,000 is NOT the profit maximizing level of production. Sales Maximization A reasonable, and often pursued objective of firms is to maximize sales, that is, to sell as much output as possible. Clearly sales lead to revenue, meaning that maximizing sales is also bound to maximize revenue. But as the analysis of short-run production indicates, maximizing sales does NOT necessarily maximize profit. So why do firms do it? Are firms unreasonable? Are they irrational? Do they NOT understand the basic economic principles of short-run production? For some firms, the answers to these questions could be yes. But for other firms, sales maximization is actually a reasonable, even better, alternative to profit maximization. Consider, the day-to-day production of Wacky Willy Stuffed Amigos. Suppose the President of The Wacky Willy Company, William J. Wackowski, issues a corporate directive to sell as many Stuffed Amigos as possible, to maximize sales. Is Willy Wackowski wacky? It might be that Mr. Wackowski has no knowledge of basic economic principles. Alternatively Wacky William might have more business sense than it appears. In particular, if the price received from selling Stuffed Amigos is greater than the cost of producing each one, and looks to remain that way regardless of the quantity produced, then a reasonable goal is to maximize sales. If sales are greater, then so too is profit. Wacky Willy does NOT maximize profit under these circumstances. That is, it does not produce the quantity that achieves the highest possible profit. However, with each Stuffed Amigo produced, profit increases. In fact, Wacky Willy might not KNOW the profit-maximizing production level. All it knows is that selling more Stuffed Amigos, increases profit. While sales maximization can serve as a means of pursing profit maximization, it can also prevent a firm from maximizing profit. The reason, of course, is that if sales become so large that the cost of production increases such that marginal cost exceeds marginal revenue, the maximizing sales does not maximize profit. Pursuit of Personal Welfare The people who make decisions for a business are, in fact, people. They have likes and dislikes. They have personal goals and aspirations just like people who do not make decisions for firms. On occasion these people use the firm to pursue their own personal welfare. When they do, their actions could enhance the firms profit maximization or, in many cases, prevent profit maximization. How about a few examples? Once again, consider William J. Wackowski, the president of The Wacky Willy Company. Perhaps Willy enjoys the finer things in lifea large house, fancy cars, and expensive vacationswhich require a hefty income. As the primary stockholder of The Wacky Willy Company, when the business maximizes profit, then William J. Wackowski benefits with more income. In this case, the pursuit of personal welfare coincides with profit maximization. Alternatively, suppose that the Mr. Wackowski hates the color purple. He simply refuse to produce ANY purple Stuffed Amigos. However, market studies clearly indicate that buyers want purple Stuffed Amigos. Moreover, the purple fabric that would be used to produce purple Stuffed Amigos is significantly less expensive than other colors. Mr. Willy clearly is wacky in this case. His purple-phobia prevents profit maximization. William the Wackster might also decide to enhance his corporate lifestyle at the expense of corporate profit. He could, for example, give himself a bigger, more luxurious (but unneeded) office, a higher (but unneeded) salary, a company jet (also unneeded), season tickets to Shady Valley Primadonnas baseball team (clearly unneeded) and other (unneeded) amenities that are NOT needed to profitably produce Stuffed Amigos. These improve Williams personal welfare, but at the expense of corporate profit. Pursuit of Social Welfare The people who make decisions for firms also have social consciences. Part of their likes and dislikes might be related to the overall state of society. As such, they might use the firm to pursue social welfare, which could enhance or prevent the firms profit maximization. How might William J. Wackowskis pursuit of social welfare enhance or prevent profit maximization of The Wacky Willy Company? Suppose that William wants a cleaner environment. As such, he might implement more costly environmentally friendly production techniques and materials. He does his part to clean the environment, but at the expense of company profit. Then again, Mr. Wackowski might feel that government environmental quality regulations restrict capital investment and economic growth. As such, William might have The Wacky Willy Company use part of its advertising budget to promote this view point. He might even use company revenue to set up the Wackowski Foundation for Policy Studies that is both a scientific think tank and a special interest lobbying organization with the goal of reducing environmental quality regulations. While the pursuit of social welfare is likely to reduce company profit, it could have the opposite effect as well. Such activities could give The Wacky Willy Company a likeable public image that motivates people to buy more Stuffed Amigos than they would otherwise. In fact, some firms use the pursuit of social welfare as one aspect of their overall advertising efforts. They enhance their public image at the same time they do something good for society. Natural Selection Whichever objective a firm pursues on a day-to-day basis, the notion of natural selection suggests that successful firms intentionally or unintentionally maximize profit. That is, the firms best suited to the economic environment, and thus generate the most profit, are the ones that tend to survive. The natural selection of business firms is an adaptation of the biological process of natural selection, in which biological entities best suited to the natural environment are the ones that survive. The concept of economic natural selection means that those firms that generate the greatest profit are the ones that avoid bankruptcy and survive to produce another day. While firms might pursue sales maximization, personal welfare, or social welfare, only those firms that also maximize profit remain in business. 2) The following   is from chapter one in the text   Financial Management and Policy, by James C. Van Horne, Copyright 1974 by Prentice-Hall. It is classic finance. THE OBJECTIVE OF THE FIRM In this [course], we assume that the objective of the firm is to maximize its value to its shareholders. Value is represented by the market price of the company’s common stock, which, in turn, is a reflection of the firm’s investment, financing, and dividend decisions. Profit Maximization vs. Wealth Maximization Frequently, maximization of profits is regarded as the proper objective of the firm, but it is not as inclusive a goal as that of maximizing shareholder wealth. For one thing, total profits are not as important as earnings per share. A firm could always raise total profits by issuing stock and using the proceeds to invest in Treasury bills. Even maximization of earnings per share, however, is not a fully appropriate objective, partly because it does not specify the timing or duration of expected returns. Is the investment project that will produce $100,000 return 5 years from now more valuable than the project that will produce annual returns of $15,000 in each of the next 5 years? An answer to this question depends upon the time value of money to the firm and to investors at the margin. Few existing stockholders would think favorably of a project that promised its first return in 100 years. We must take into account the time pattern of returns in our analysis. Another shortcoming of the objective of maximizing earnings per share is that it does not consider the risk or uncertainty of the prospective earnings stream. Some investment projects are far more risky than others. As a result, the prospective stream of earnings per share would be more uncertain if these projects were undertaken. In addition, a company will be more or less risky depending upon the amount of debt in relation to equity in its capital structure. This risk is known as financial risk; and it, too, contributes to the uncertainty of the prospective stream of earnings per share. Two companies may have the same expected future earnings per share, but if the earnings stream of one is subject to considerably more uncertainty than the earnings stream of the other, the market price per share of its stock may be less. For the reasons above, an objective of maximizing earnings per share may not be the same as maximizing market price per share. The market price of a firm’s stock represents the focal judgment of all market participants as to what the value is of the particular firm. It takes into account present and prospective future earnings per share, the timing, duration, and risk of these earnings, and any other factors that bear upon the market price of stock. The market price serves as a performance index or report card of the firm’s progress; it indicates how well management is doing in behalf of its stockholders. Management vs. Stockholders In certain situations the objectives of management may differ from those of the firms stockholders. In a large corporation whose stock is widely held, stockholders exert very little control or influence over the operations of the company. When the control of a company is separate from its ownership, management may not always act in the best interests of the stockholders [Agency Theory]. [Managers] sometimes are said to be satisficers rather than maximizers; they may be content to play it safe and seek an acceptable level of growth, being more concerned with perpetuating their own existence than with maximizing the value of the firm to its shareholders. The most important goal to a management [team]of this sort may be its own survival. As a result, it may be unwilling to take reasonable risks for fear of making a mistake, thereby becoming conspicuous to the outside suppliers of capital. In turn, these suppliers may pose a threat to management’s survival. It is true that in order to survive over the long run, management may have to behave in a manner that is reasonably consistent with maximizing shareholder wealth. Nevertheless, the goals of the two parties do not necessarily have to be the same. Maximization of shareholder wealth, then, is an appropriate guide for how a firm should act. When management does not act in a manner consistent with this objective, we must recognize this as a constraint and determine the opportunity cost. This cost is measurable only if we determine what the outcome would have been had the firm attempted to maximize shareholder wealth. A Normative Goal Because the principal of maximization of shareholder wealth provides a rational guide for running a business and for the efficient allocation of resources in society, we use it as our assumed objective in considering how financial decisions should be made. The purpose of capital markets is to efficiently allocate savings in an economy from ultimate savers to ultimate users of funds who invest in real assets. If savings are to be channeled to the most promising investment opportunities, a rational economic criteria must exist that governs their flow. By and large, the allocation of savings in an economy occurs on the basis of expected return and risk. The market value of a firm’s stock embodies both of these factors. It therefore reflects the market’s tradeoff between risk and return. If decisions are made in keeping with the likely effect upon the market value of its stock, a firm will attract capital only when its investment opportunities justify the use of that capital in the overall economy. Put another way, the equilibration process by which savings are allocated in an economy occurs on the basis of expected return and risk. Holding risk constant, those economic units (business firms, households, financial institutions, or governments) willing to pay the highest yield are the ones entitled to the use of funds. If rationality prevails, the economic units bidding the highest yields will be the ones with the most promising investment opportunities. As a result, savings will tend to be allocated to the most efficient users. Maximization of shareholder wealth then embodies the risk-return tradeoff of the market and is the focal point by which funds should be allocated within and among business firms. Any other objective is likely to result in the suboptimal allocation of funds and therefore lead to less than optimal level of economic want satisfaction. This is not to say that management should ignore the question of social responsibility. As related to business firms, social responsibility concerns such things as protecting the consumer, paying fair wages to employees, maintaining fair hiring practices, supporting education, and becoming actively involved in environmental issues like clean air and water. Many people feel that a firm has no choice but to act in socially responsible ways; they argue that shareholder wealth and, perhaps, the corporations vary existence depends upon its being socially responsible. However, the criteria for social responsibility are not clearly defined, making formulation of a consistent objective function difficult. Moreover, social responsibility creates certain problems for the firm. One is that it falls unevenly on different corporations. Another is that it sometimes conflicts with the objective of wealth maximization. Certain social actions, from a long-range point of view, unmistakably are in the best interests of stockholders, and there is little question that they should be undertaken. Other actions are less clear, and to engage in them may result in a decline of profits and in shareholder wealth in the long run. From the standpoint of society, this decline may produce a conflict. What is gained in having a socially desirable goal achieved may be offset in whole or part by an accompanying less efficient allocation of resources in society. The latter will result in a less than optimal growth of the economy and a lower total level of economic want satisfaction. In an era of unfilled wants and scarcity, the allocation process is extremely important. Many people feel that management should not be called upon to resolve the conflict posed above. Rather, society, with its broad general perspective, should make the decisions necessary in this area. Only society, acting through Congress and other representative governmental bodies, can judge the relative tradeoff between the achievement of a social goal and the sacrifice in the efficiency of apportioning resources that may accompany realization of the goal. With these decisions made, corporations can engage in wealth maximization and thereby efficiently allocate resources, subject, of course, to certain governmental constraints. Under such a system, corporations can be viewed as producing both private and social goods, and the maximization of shareholder wealth remains a viable corporate objective.

Divine Comedy †Pagans in Paradise Essay -- Divine Comedy

Divine Comedy – Pagans in Paradise In the beginning when God created humanity, it was said that He created all humans in His image of goodness (Genesis 1:27). Dante then adds in his Divine Comedy that God has instilled a certain predetermined capacity of goodness in each human being as He wills, which should be utilized fully during life (Paradise 3:84). It would then be assumed, in Dantean thought, that all humans have the choice to live fully to this capacity and assume a place in heaven upon death, to fail to utilize this capacity and suffer in Hell for eternity, or to sin and seek repentance at some point in their lives, allowing them to enter Purgatory. Yet, this statement seems to have certain restrictions when we first look at Dante’s Divine Comedy. Dante’s Inferno shows virtuous pagans in the first circle of Hell and has the reader believe that one must be a Christian to enter Heaven, or Purgatory. As the reader continues into Paradise, he discovers that there are indeed some pagans who have rise n to Heaven, but only because they were allowed the mercy to be baptized after death. This idea seems unjust to those who have lived sinless lives without being given the choice to embrace Christ. It is understood that direct refusal of Christianity would result in an eternity in Hell, but for those sinless and virtuous people who lived before Christ or beyond the reaches of Christian teachings, it seems absurd to deny them entrance into Heaven. With careful examination of the Divine Comedy, it can be understood that the actual act of baptism and the embracing of Jesus Christ symbolize the ideas and significance each act represents and are not intended for the reader to take these acts for their literal meanings. The presence ... ...l salvation. Throughout the entire work of Dante’s Divine Comedy, pagans play an integral role. Pagans are present in each of the three parts of Dante’s afterlife and a pagan is even chosen to be Dante’s guide. The prevalence of these individuals suggests the idea that God loves all people and rewards those who have embraced the ideas and morals of the Christian religion and lived virtuously and without sin. Dante’s Divine Comedy provides enough basis to form the argument that one does not necessarily have to be Christian to enter Heaven, but only needs to embrace the ideals that Christ and baptism represent. Also, through using Emperor Trajan as an example of a virtuous pagan’s successful entrance to Heaven, it is seen that possession of these ideals along with the virtue of humility is what allowed certain pagans into Paradise and excluded others for eternity.

MHS Reflection

The most impressive part is having interview with one of the employees-Yin Pong. She is an ex-mentally ill person but she is confident and cheerful. During the interview, she repeatedly expresses that she enjoys working in bakery and feels an immense gratitude that she can be employed. At that moment, I think the role of social enterprises is essential in Hong Kong society as they can provide opportunities of self-reliance to the disadvantaged. In Hong Kong, many disadvantaged are seeking for these helps and it can also decrease the ruder of the families and society.I find that their products are valuable although the prices of the products are quite expensive as they use high quality of ingredients for their baking to achieve quality assurance. It is also an essential element helping them to compete in the market. Besides, I appreciate the spirit of bakery. They hope their customers keep patronizing are because of the appreciation of their baked product, but not the sympathy for the employees with disabilities or the support to their organization (Ting Way Group of Hospitals).The employees completely get good senses of fulfillment from successful work. It is no doubt that training employees with disabilities is a difficult job as they need to give much patience, care and time for their employees. To help bakery to survive in the market, it is not just their well-handled management, but also their selflessness to employees. The role of social enterprises is one of the steps to lead Hong Kong to be a caring socio ¶y'. Our supports are dispensable.

Management Of The High Court - Free Essay Example

Sample details Pages: 8 Words: 2525 Downloads: 7 Date added: 2017/06/26 Category Law Essay Type Research paper Did you like this example? The High Court is staffed mainly by High Court Judges, assisted as necessary by experienced barristers sitting temporarily as Deputy High Court Judges.  [1]  The High Court consists of two Chief Judges, one in Penisular Malaysia and one in Sabah and Sarawak. The High Court is split into three Divisions, which are Queens Bench Division, Family Division, and Chancery Division. Although High Court Judges are appointed to just one the three Divisions, any High Court Judge has the same powers. Don’t waste time! Our writers will create an original "Management Of The High Court" essay for you Create order The jurisdiction of the High Court is original, appellate and supervisory. It containing unlimited criminal and civil powers in the exercise of the original jurisdiction .Any civil matter which cannot be determined in the subordinate court is heard before the High Court.  [2] The Court of Appeal constitutes the President of the Court of Appeal and up to ten Court of Appeal Judges. The Court of Appeal has jurisdiction to hear and determine any appeal against by High Court decision on criminal matters. Where an appeal has been heard and disposed of by the Court of Appeal, the Court of Appeal has no power to review the case. In the other words, Court of Appeal has no power to re-open, re-hear nor to re-examine its decision for whatever purpose. This principle found in Lye Thai Sang Anor.v.Faber Merlin (M) Sdn.Bhd. Ors.19A. Judicial Precedent refers to a judgment which is in a court of law cited as the authority for deciding a similar set of facts which happened previously.   [3]  The legal principle that serves as an authority in a case is embodied in its decision. From precedent to precedent, the common law has developed by broadening down. Judicial precedent is a decision of the court which is often used as a source to support the fact for the future decision making. This is also known as stare decisis (to stand upon decisions) by which the precedents are authoritative, binding and must be followed. As for Mr. Justice Peters case, it is involved under the judicial precedent. When Mr Justice Peter refers to cases, he must be able to differentiate between parts of the case that is binding and not binding. There are two cases whereby Mr. Justice Peter can choose to not apply precendents in his judgement. If the earlier precedent is arrived at per incuriam, which means that made in an ignorance of a stature or a binding precedent. Besides, where the case can be distinguished when he finds there are material differences in facts between his case and t he case that laying down the precedent. If Mr Justice Peter did not find any material differences in the case, it means he is bound to the original precedent. However, if the decision made by the judge in the court of appeal is made under ignorance then Mr Justice Peter may not be able to apply the original precedent. There are two circumstances whereby he can choose to not apply precendents in his judgement. First, a stature or a binding precedent will be ignored if the earlier precedent is arrived at per incuriam. Second, Mr Justice Peter can distinguish the case when he able to find there are material differences in facts between the case before him and case the laying down the precedent. If he did not find any material differences in the case, then he will just bound to the original precedent. However, Mr Justice Peter may be able to ignore the original precedent if the decision made by the judges in the courts of appeal is made under ignorance. According to the hierarchy of the court, Mr. Justice Peter is bound with the decision that has been made by the other judge like Federal Court and Court of Appeal. This is because Mr. Justice Peter is a high court judge. The decision made by Federal Court and Court of Appeal must be followed because Mr. Justice Peter is in the lower court. He will be bound with the decision that has been made by the judge in the Court of Appeal since both cases have similar material facts. If he applies the existing law, he is practising declaratory precedent. Hierarchy of the Courts Federal Court Court of Appeal Court of Appeal Court of Appeal High Court (Malaysia) High Court (Sabah Sarawak) Syariah Court Syariah Court Native Court Sessions Court Juvenile Court Sessions Court Magistrates court Juvenile Court Magistrates Court Penghulus Court Question 1(b) Definition of Case Law: Case law which means reported the decisions for selected appellate and other courts, which named courts of first impression. It can make new interpretations of the law, therefore, it can be cited as precedents in a process known as stare decisis.  [4]  Courts decided the law applicable to case by interpreting statutes and applying certain precedents which record how and why prior cases have been decided in the tradition of common law. For example, both of the High Court and Court of Appeal are bound each other based on the previous decisions that was made by their own, but neither the County Courts nor the Supreme Court. Case law is the most often that created by the all judges in their rulings, when they are write for their own decisions. It also gives some reasoning behind of them, as well as can citing those precedents in other cases and statutes that they had bearing on their decision.  [5] How to make case law? The different ways that court render decisions made are created by the difference roles between the case law that it is in civil and common law traditions. The legal rationale behind the decisions, with citations of both legislation and previous relevant judgments, it often an exegesis of the wider legal principles will be explained in details by common law courts. An analysis called ratio decidend, will then constitutes a precedent binding on other courts. However, decisions which in civil law jurisdictions are generally very short and referring only to statutes. The reason for this difference is about that these civil law jurisdictions adhere to a tradition that the reader should be able to deduce the logic from the decision and the statutes, so that, in some cases, it is somewhat difficult to apply previous decisions to the facts presented in future cases. Strengths and Weaknesses of Case Law Strengths Flexible There are no two cases are exactly the same. If the difference between the instant case and the precedent are material, the court in the instant case can distinguish the previous case. Judges can develop law without waiting for parliament to enact legislation. To prevent precedents and enables the system to alter and to adapt into new situations, there is quite a number of ways to make it. In the other words, it is flexible to change society. Due to the reason of the difference in facts, the ratio decidend that was applied in the previous case is inapplicable to the instant case. Therefore, lawyers can predict outcome of case and advice clients. Save cost and time Judges may proceed faster while waiting for the Parliament to remedy or enact law in that certain area. The old and established issues do not have to be re-argued. This is because if the Parliament were to remedy or enact a law it might take months or even years which will increase the cost. In addition, it also save the expenses of court and reduces the Parliaments burden in dealing with all matters regarding law as most cases are argued on the facts but not the law. Consistent Case law is the law developed through appellate courts decisions of how the law applies to some certain facts and whether a set of the facts constitutes some kind of legal wrong.  [6]  Courts may try to follow the previous case or similar case, which called stasis decidend or precedent and will only change when they see the facts which different requiring different outcomes. Therefore, consistency will be provided in the legal system, so if have any one of the situation that is like others, it will be always viewed by the courts in the same way. The society is treated equally because when a case law is used, everyone that is involved in the same case but at different time will have the same treatment as long as the original precedent is not overruled. This is important to give the system a sense of justice and to make the system acceptable to the public.  [7] Weaknesses Low effectiveness As judges will have to deal with many different types of cases where the volume of cases is constantly increasing, there will be too many case laws which make this very bulky and complex. Therefore, the judges and lawyers are compelled to engage in greater research which makes things very slow and expensive. Restriction of law development A case law is binding to lower courts and courts of the same level. Judges are bound to the law once created by a higher court until it is overruled by a higher court. It will create rigidity. It can be difficult to get the law change once courts establish a precedent. For example, it took over 50 years for the courts to change the law and decide that the idea of separate but equal laws regarding the races was wrong because things were never really equal and therefore were discriminatory  [8]  . Injustice Over-ruling is a higher court which can overrule a decision that made in an earlier case by a lower court e.g., the Court of Appeal can overrule an earlier High Court decision. The overruling of an earlier case may cause the injustice to those who have ordered their affairs in reliance on it.  [9]  However, the decision in the previous case is not actually changed itself. Precedent may produce justice in the individual case but injustice in the generality of cases. It would be undesirable to treat a number of claimants unjustly simply because one binding case had laid down an unjust rule.  [10] Unconstitionality At most of the time, judiciary are making law but not applying it. This is because there are too many similar cases reported in each year, making it difficult to match the precedent case that should be followed. Judiciary is lack of innovation because they must begin in common law at some point judges. Question 2 This is a case about offer, acceptance, revocation, withdrawal and counter offer between Steven and Tanny. In this case, there was mentioned about an owner of instrument shop who named Steven, he was the offeror when he advertised on newspaper. Based on his action, it is known as invitation to treat. The offeree, Tanny was decided to reject Stevens invitation to treat and make a new offer to Steven. However Steven rejected the offer, at the same time he had give Tanny a new offer with a time frame, and this known as counter offer. Although Tanny wish to accept the offer from Steven but he was too late due to the time frame given by Steven. This is known as revocation. A letter of acceptance was made by Tanny to Steven to propose a new offer. After a few days, Steven had received the offer letter from Tanny and he can decide whether accept or reject. On the 29 October 2010, Steven advertised in the New Focus Paper, Yamaha Piano latest model, excellent condition, RM 15,000, int erested please call 016 1234567. An advertistisement is usually an invitation to treat but it can be an offer, depending on its wording and on the circumstances this can refer to case Majunder v. Attorney- General of sarawak  [11]  , the Federal Court held that and advertisement in the newspaper for the post of a doctor was an invitation to treat. The advertisement was an invitation to treat, not an offer to sell: with limited stock the advertiser could not reasonably intend to be bound to sell to all those who might accept. In detail, invitations to treat (ITT)  [12]  is not a proposal but could be regarded as mere communication passed at the stage of negotiation. The court can held that advertisement of bilateral and unilateral contracts. Bilateral contract is defined as offer something directly to a particular person such as cases like Boulton v. Jones  [13]  ,Partridge v Crittenden  [14]  and Rooke v. Dawson  [15]  . Whereas the unilateral contract is know n as offer to anybody who are interested and the case of Carlil v. Carbolic Smoke Ball Company  [16]  is example unilateral contract. By refer to case of Carlil v. Carbolic Smoke Ball Company  [17]  , our case is classify as an unilateral contract because it offer to anybody who are interested. Under Malaysia law, the price tag which located on an item that was displayed in a shop window (or advertised through public media) is an invitation-to-treat but then not an offer to sale (the acceptance of which comprise a contract). Moreover, it means an invitation to receive offers and the crucial factor to determine whether it is an offer or an ITT is the intention of the parties. An offer is an undertaking by the offeror to be contractually bound in the event of a proper acceptance by the offeree. Based on section 2 (a) of the Contract Act 1950 states that when one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the as sent of that other to the act or acceptance  [18]  , he is said to make a proposal. On the 1st November 2010, after Tanny test the piano, he offered RM 10,000 to buy the piano. Based on section 4(1) of the Contracts Act 1950, it stated that an offer must be communicated. The offer is made by Tanny when it is clear by words or actions, which he is prepared to be bound as soon as the offer is accepted by the person to whom it is made. An offer is quite different from invitation to treat, thought it is not always easy to distinguish the two. This can refer to case Taylor v Laird  [19]  . Based on section 2(c), the person who making the proposal is called promisor or offeror which is refer to Tanny and the other party Steven which involved is an offeree. Then Steven said I will not sell it below RM 14,000, counter-offers occurs. Counter offer  [20]  is an offer made in response to a previous offer by the other party during negotiations for a final contract. Making a count er offer automatically rejects the prior offer, and requires an acceptance under the terms of the counter offer or there is no contract. Base on case study of Hyde v Wrench  [21]  . A counter offer is not an acceptance and actually kills the original offer RM10,000 which offered by Tanny. Hence, the offer for piano with RM 10,000 no more exists and replaced by RM 14,000. Steven spoke out that I will not sell it to anyone else before 7th November 2010 but Tanny remains silence because of exception that are mean silence cannot assume as acceptance and Steven is giving time frame. After 7th November 2010, Steven can sell the piano to his potential customers. In this situation, postal rule occurred, this is a postal rule and can refer to Adams