Business Law

Question 1 Base on the case presented in this question, there is a valid promise between Tina and Yatie. According to Section 2a of Contract Act, when one person signifies to another his willingness to do or abstain from doing anything, with a view to obtain assent of the other to such act or abstinence, he is said to make a proposal. Apparently in the case that Yatie had made an offer or proposal to her business partner, Tina to supply handcrafts by sending an offer letter to Tina.

Tina had received the offer letter in the next day and she had accepted the offer by asking her staff, Anis to fax a letter of acceptance as soon as possible to Yatie. According to Section 2b of Contract Act, a proposal when accepted becomes a promise. Therefore, when Tina had accepted the offer made by Yatie, a promise or agreement had begun between them. According to Section 2c of Contract Act, it says that a person making the proposal is called the promisor (offeror) and the person accepting the proposal is called the promisee (offeree).

Thus, in the case above, the promisor or offeror was Yatie and the promisee or offeree was Tina. However, there is no appropriate communication of acceptance between Yatie and Tina as the general rule states that acceptance of a proposal must be communicated to the proposer in the prescribed manner. The offer letter was clearly stated that a written acceptance has to be given. If the acceptance made does not follow as per letter of offer, the proposer is entitled to insist on it, where Yatie had actually insisted to Tina that the acceptance to be made in writing.

If Tina’s staff fails to follow the prescribed manner of acceptance, then there will not be a binding contract between them. However, Yatie had accepted the offer earlier from Tina verbally, before Anis made the call to confirm on the acceptance. The promise between the business partners is valid. The general rule for acceptance states that acceptance is effective or complete only when it is communicated to the proposer. However, section 4(2) of the Contract Act gives exclusion to the general rule, whereby the mean of communications used is through post.

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The communication of an acceptance by post is complete; as against the proposer, Yatie, when it is put in a course of transmission to her. As to be out of the power of the acceptor, Tina and as against Tina communication of an acceptance by post is complete, when it comes to the knowledge of Yatie. The proposer, Yatie is bound when Tina had posted the letter even though Yatie has no knowledge of the acceptance. When the letter of acceptance is posted by Anis, Tina’s staff, Tina no longer has any control over the transmission of the letter.

The contract becomes obligatory regardless of any delay or disappearance in the process of transmission of the letter. According to Denning L. J in Entores Ltd v. Miles Far East Corporation [1955], states that when a contract is made by post the acceptance is complete as soon as the letter of acceptance is put into the post box and the contract will be made at the place the letter was posted. In similarity case happened to this question, there is a valid promise between Yatie and Tina where Yatie had sent the proposal and had been accepted by Tina. As a conclusion, contract is formed between them.

In further of this case, the action taken by Yatie on withdrawing the proposal by sending a SMS to Tina, after received the information that her suppliers could not deliver the handcrafts is not valid. According to Section 5(1) of the act provides that a proposal may be revoked at any time before the communications of its acceptance is complete as against the proposer, but not afterwards. In the above case, the acceptance is already completed against Yatie as the written acceptance had been sent through post. Therefore, the withdrawal of the proposal is not valid.

Referring to the case above, Section 6 states that a proposal is revoked by the communication of notice of revocation by the proposer to the other party. Yatie can only withdraw the offer or the proposal by communicating to Tina before Tina accepts the offer. Case in England, Byrne v. Tienhoven (1880) 5 C. P. D. 344, explains one of the statement in Section 6 which also has some relation to the case above. Therefore, contract had been established between Yatie and Tina. In order not to breach the contract, Yatie might extent the period of delivery of the handcrafts. If she fails to do so, she’s considered had breached the promise.

Question 2 According to e-law resources, the requirement of intention to create legal relations in contract law is aimed at sifting out cases which are not really appropriate for court action. It is not every agreement leads to a binding contract which can be enforced through the courts. For instance, if there is an agreement to meet a friend at a pub. It is a moral duty to honour that agreement but not a legal duty to do so. This is because in general the parties to such agreements do not intend to be legally bound and the law seeks to mirror the party’s wishes. The law has draws a distinction between social and domestic agreements.

The agreements made in a commercial context in order to determine which agreements are legally binding and have an intention to create legal relations. The law raises a presumption that the parties do intend to create legal relations by the agreement whenever agreements has made in a commercial context. However, the presumption can also be denied. Cases where the parties have expressly denied any intention to create legal relations are Jones v Vernon’s Pools Ltd [1938] and Rose & Frank v Crompton (1925). 1) Case: Jones v Vernon’s Pools Ltd [1938] Facts: VP ran a football pools operation in the UK.

During a dispute the court had to determine whether a contractual relationship existed between VP and each entrant. The following appeared on each coupon: “It is a basic condition of the sending-in and acceptance of this coupon that it is intended and agreed that the conduct of the pools and everything done in connection therewith and all arrangements relating thereto (whether mentioned in these rules or to be implied) and this coupon and any agreement or transaction entered into or payment made by or under it shall not be attended by or give rise to any legal relationship, rights, duties or onsequences whatsoever or be legally enforceable on the subject of litigation, but all such arrangements, agreements and transactions are binding in honour only. ” (Jones v Vernon’s Pools Ltd) In the case of Jones v Vernon’s Pools Ltd [1938], because the relationship is clearly commercial there is a presumption that the relationship is binding. However, the court held that the clause in the coupon was sufficient to rebut the presumption. Therefore, there was no contract between VP and the entrants. ) Case: Frank v Crompton (1925) Facts: The claimants and defendants entered an agreement for the supply of some carbonized tissue paper. Under the agreement the claimants were to be the defendant’s sole agents in the US until March 1920. The contract contained an honorable pledge clause which stated the agreement was not a formal or legal agreement and shall not be subject to the jurisdiction of the courts in neither England nor the US. The defendants terminated the agreement early and the claimants brought an action for breach.

In the case of Frank v Crompton, the honorable pledge clause rebutted the presumption which normally exists in commercial agreements that the parties intend to be legally bound by their agreements. The agreement therefore had no legal affect and was not enforceable by the courts. (Rose & Frank Co v Crompton Bros) Question 3 (a) In reference to the Sale of Goods Act 1957, there are two elements that applied. Firstly, a contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price.

There may be a contract of sale between one part owner and another. Secondly, a contract of sale may be absolute or conditional (Centre, 2012). According to Maria’s case, in generally that the contract of sale happened and valid between Maria (buyer) and Benny (seller) whereby she has paid cash RM5000 for the Kancil. This is a crucial element which the application of a monetary value to the goods so traded. The situation is also called as contract of sale when Benny agreed verbally to give her the title of ownership once he finalised all the required formalities.

Under SGA, a contract can be made in writing, by word of mouth or partly writing and partly by word of mouth (Beatrix Vohrah, 2008). However, in this case, assuming that Maria not clear and aware of the validity of the sale when she encountered problem after one month using the car. Further explanation on above, the common law rule expressed in phrase caveat emptor, “the buyer are expects to exercise care in making purchases” (Beatrix Vohrah, 2008). If Maria does not, she must bear with the consequences. The validity of sales that possible into this case is implied condition as to merchantable quality.

Base on the case, Maria was blindly trust on Benny’s guarantee of the car because she trust and rely base on Benny’s skills and judgement of his car. Unfortunately, the car broke down in a month of used after sales and did not meet Benny’s guarantee during negotiation process when the foreman informed Maria that the car had been involved in accident as there are signs of major repair on both the car’s body and engine. This is was explained in Section 16(1) breakdown that the purpose for which the goods are required is made known to the seller unless t is implied (Section 16(1)(a)) , but where a buyer purchases goods without saying anything, the situation may be covered in merchantable quality (Section 16(1)(b)). Merchantable quality which is Section 16(1)(b), that Maria case can be applied to. If Maria discloses the fit of purpose and Benny offer goods of that description, the car is merchantable quality. If the car is defective for the purpose, it will be not merchantable. In this case, Maria did not examined the car during contract of sale which make her valid under Section 16(1)(b).

This is proven when Section 16(1)(b) has proviso to the effect that it does not apply when the buyer has examined the goods which Maria did not do. Maria can only be invalid to this act if proper examination such as get foreman to check the car before or during contract of sale that would reveal the latent defect. Therefore, Maria has right to complain to Benny about the defective and claim necessary warranty since Benny has verbally guaranteed during negotiation. Question 3 (b) In Sales of Good Act, it is a fundamental rule that no one can give what he has not got. This is under section 27; general rule has been set out that: “ … here goods are sold by a person who is not the owner thereof, and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had.. ” (Beatrix Vohrah, 2008). It also include in the nemo dat quod non habet which means that no one can transfer a better title that the person him/herself. Even though if goods are bought from a person who is not the owner and who does not sell the goods without owner’s authority, the buyer does not get the ownership in regardless the buyer has paid value in good faith.

Base on this general rule, Maria has no right acquire the car as Benny’s mother claimed that she is the owner of the car and has no idea of the contract of sale. However, common law has modified above general rule as clearly concern the need for exceptions to account for commercial needs. The exceptions to the nemo dat rule are found in several provisions of the Act and base on this case, Maria could be elgible for Estoppel. According Section 27, Estoppel may arise when “the owner of the goods is by conduct precluded from denying the seller’s authority to sell” (Beatrix Vohrah, 2008).

From the question, we can see that Benny is preparing formalities to make Maria as owner of the car after trade happen. Benny could be one of the owner or former legal owner to the car but validity is only can be judge if Maria gets to see Benny before she hand back the car to his mother. In Section 27 also includes that mere carelessness of the owner until the third party can take and disposed of her property to innocent buyer will cause the owner deprived from his ownership of the goods. This is clearly shown that Benny’s mother statement in a question claimed that she had no idea to make sale of the car are proven that she is careless. The owner of the property is entitled to be careless with it if he likes, and even extreme carelessness with his own property will not preclude him from recovering it from a person sell it” (p. 925) which according to the words of Lord Fraser in Moorgate Merchantile Co. Ltd v. Twitchings [1977] AC 890 (Beatrix Vohrah, 2008). Therefore, Maria still has right as not to give back the car to Benny’s mother when Benny’s mother are careless and Maria is innocent buyer who give faith to Benny during contract of sale.

Question 4 According to section 3(1), partnership is defined as the relation which persons carrying on a business in common with a view of profit. The partnership must be under registered company or association under Companies Act, 1965 or any written law relating to co-operative societies (PARTNERSHIP ACT 1961). Base on Ghani’s case, he has created a different type of relationship and deals between Farid, Mala and Rani but the common element among them is they will receive 20% of the business profit. Commonly, it is often that partnership is difficult to determine whether the partnership is exists or not exists.

Even though Ghani is going to share his 20% to each of them, the sharing of gross returns are not simply can be considered as partnership because the sharing can be determined into various type of purpose. The relationship can be considered as partnerships when there are evidence the members are sharing the loss as well. As to conclude, since there is no statement that any three of these person (Farid, Rani and Mala) will sharing loss with Ghani and no agreement to be a partner under Partnership law among them, they cannot be claimed as partner.

Following are the explanation relationship between Ghani with 3 of them: 1) Relation Ghani and Farid Ghani has rented premises from Farid where the premises became the place of his running business. Due to financial constraints, Ghani agreed to share 20% of his profit with Farid as return for allowing him to use the premises. Therefore, the situation called as payment of debt by instalments out of profits and that does not make Farid as partner of Ghani’s business. 2) Relation Ghani and Rani Ghani has invited Rani to work with condition that Rani should invest RM20000 in the business.

She also had given a promise to receive 20% of the profits. Even though Rani is working with Ghani, the situation shows that Rani gives loan to Ghani by his condition of “invest” RM20000. According to section 4(c), “Payment of interest which varies with the profits on a loan advanced for use in the business under written contract” had explained for Rani’s condition. It has been stated in law; a person who pays money to a business firm for the purpose of buying goods for the business in a fixed rate and shares the profits is not a partner.

Term of “buying goods for the business” applied to Rani where she will be working with Ghani to run the business. Therefore, Rani is not a partner to Ghani. 3) Relation Ghani and Mala Mala has joined Ghani’s firm with agreement that she will be paid salary of RM5000 a month and 20% share of profits. Mala’s condition is clearly shows that she is serving for Ghani and become agent of the business. The situation also called as remuneration to a servant or agent when Mala are paid with salary every month and this does not make Mala a partner of the business.

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