Law of Contract (Case Studies)

Due to a rampant robbery in which the robbers used ski masks to cover their faces. The Cyberjaya Authority issued a regulation that makes it illegal to sell ski masks as a safety measure, the rule also makes it illegal for anyone to offer for sale the ski masks. In spite of this, Messy has not cleard the ski masks from the shelves of his sport equipment shop in Cyberia. The authority officials came to know about thsi and later on charged Messy under the new regulation. Advise Messy according to Contract Act 1950 and relevant decided cases.

Opinion:

In this case, Messy have been charged sue to the display of item which is ski mask in his shop. By the way, the authority cannot charged messy under the new regulation because it may consider as "invitation to treat" act. This is because in the first place which is under the Contract Act 1950, it requires offer and acceptance and consideration for a contract exist. In this case, by selling the ski mask only amount to an offer due to lack of the trade, there are no acceptance and consideration for the buyer part. The case of Pharmaceutical Society of Great britain v Boots Cash Chemists and Fisher v. Bell may be a reference. In the case of Fisher v Bell, display of any goods with a price tag on it in a shop was not as offer but rather was an invitation to treat, the Contract might not applicable ti this case since it just an invitation to treat.

Nemo dat quod non habet

Nemo dat quod non havet meaning that "no one can give what he not have" is a legal rule, sometimes called the nemo dat rule, that states that the purchses of a pressession from someone who has no ownership right to is also denies the purchaser any ownership title. This rule usually stays valid even of the purchaser does not know that seller has no right to claim ownership of the object of the transaction. However, it is often difficult for courts to make judgement as in may cases there is more than one innocent party. On top of that, this term also can be defined that if you are not the legitimate owner of an item you are not justified to despatch it to anybody else as you cannot give something that does not belong to you. This is designed to protect the true owners. If anybody is trying to sell an item without that legitimate owner's permission.
This principle is clarified in Section 27 of the Sale of Goods Act which explains that anybody purchasing something without the consent of the legitimate owner only attains the same rights to an item as the dishonest seller. An unauthorized vendor only obtains the capacity to sell this item if the rightful owner is disallowed, by some behavior from giving permission to this unauthorized sale.

Sections 26(1) of Sale of Goods Act states that a buyer from non-owner obtains no better title than the seller had, epitomizing the meaning under the nemo dat no habet. The Mercantile Law Amendment Act specified that 'document of title' includes a Bill of Lading or a Warehouse Receipt or any delivery docket for goods as proof. The Sale of Goods Act 1994 also specifies that a seller has certain responsibilities which must be fulfilled before goods may be sold legally.

Following rule can be varied by a number of exceptions, all of which will be discussed in this essay and are listed below for ease of reference:

1. Mercantile Agent
2. Joint Owner
3. Voidable Contract
4. Possession of Goods after Sale
5. Buyer in Possession
6. Unpaid Seller
7. Permission by Partner
8. termination of Offer
9. Valid, quasi contracts
10. Condition: warranty

Hire-Purchase

Hire Purchase is a system of acquiring goods on credit whereby the seller of the goods re regarded as the dealer, the purchaser is regarded as the hirer and the finance company as the owner. The ownership of the goods bought on hire purchase does not pass to hirer at the time purchase agreement or upon delivery of the goods. The ownership of the goods remains in the finance company until the hirer has fully settle the price agreed upon in the hire purchase agreement. A hire purchase agreement, commonly known as H.P agreement, in respect of the goods must be in writting and printed in type of a size not smaller than the type known as 10-point Times. Any oral agreeemnet is not a valid hire purchase agreement. The main legislation governing the hire purchases transaction in Malaysia is the hire Purchase Act 1967, which came into force on 11 April 1986 after hire purchase became an increasingly popular method of acquisition. Only the following goods can be bought on hire purchase in Malaysia:

1. all consumer goods

2. motor vehicles namely

- invalid carriages

- motor cycles

- motor cars including taxi cabs and hire cars

- goods vehicles where the maximum permissible laden does not exceed 2540 kilograms

- buses, including stage buses

What are the details that must be stated in a hire purchase agreement?

Under the Hire Purchase Act 1967, a hire purchase agreement must:

i. specify a date on which the hiring shall be deemed to have commenced

ii. specify the number of installments to be paid under the agreement by the hirer

iii. specify the amount of each of installments are the person whom and the place at which the payment of these installment are to be made

iv. specify the time for the payment of each of those installments

v. contain a description of the goods sufficient to identity them

vi. specify the address where the goods under th hire purchase agreement are.

Income tax

When tax is levied on the income of a person, it is called income tax. If there is no income, there is no income tax. There are different types of income types of income upon which tax is imposed such as business income, employment income, rental income, dividends, interest, royalties. In Malaysia, income tax is imposed, assessed and collected under the Income Tax Act (ITA) 1967. Under section 3 of ITA 1967, a tax known as income tax shall be charged foe each year of assessment upon the income of any person accruing in or derived from Malaysia or received in Malaysia from outside Malaysia. What does it mean "income"? In the Webster Dictionary, income has been defined as "a gain or recurrent benefit that is measured in money and for a given period of time derived from capital, labour, or combination of both. Furthermore, in the absence of statutory definition meaning. In the oxford advanced Learer's Dictionary, income means " money which comes in as the periodical produce of one;s work, business, land or investments" Next, the characteristic of "income", going to repetitive from sources of income and received in the ordinary course of business. Periodical return "coming in" with some sort of regularity or expected regularity from defined sources. Nature of gains or profis has to fall into any of the sub-paragraphs under section 4 and 4A of ITA 1967.

Different Classes of Income Subjected to Income Tax

Sec 4 of ITA 1967:

- Profits or gains of a trade, business, profession or vocation

-Profits or gains from personal services - employment

- Dividends, interest and discounts

- Rents, royalties or premiums

- Pension, charges or annuity or other periodical payment

- Gains or profits not falling under any of the foregoing paragraphs

Workplace Productivity - Inland Revenue

Inland Revenue recognised that many owners of small and medium sized enterprises (SMEs), were not meeting their tax responsibilities. Often unintentionally, some customers would be incorrectly registered or producing incorrect returns.

Malaysian Tax Information

1.) Any income derived from Malaysia is subject to Malaysia income tax each year.

2.) Income from source outside Malaysia is exempted from tax, e.g. pension & dividend.

3.) Types if income subject to tax:

a. Business, trade or profession

b. Employment

c. Dividend , interest or discounts

d. Rents , royalties or premiums

e. Pensions , annuities or periodical payments

f. Gains or profits not falling under any of the foregoing paragraph

g. Income of a non resident in respect of technical advice , assistance or service rendered in connection with any technical management or administration of any scientific, industrial or commercial undertaking, venture, project or scheme.

4.) Tax rate:

a. The tax rate for an individual will depend on his/her residence status. Generally, a non resident individual is taxed at a flat of 27% without any personal deductions. Income under (g) above is taxed at 10% on gross income.

b. A resident is taxed at a scale rate of tax from 0%-27& on chargeable income after personal deductions.

5.) Residence status of an individual for tax purposes is determined not by nationality but by the length of stay in Malaysia. The status is determined for each calendar year. Foe example, the individual will be considered as a resident if he or she stay:

a. in a year amounting to 182 days or more in Malaysia; OR

b. if less than 182 days in a year but that period is linked to another period of more than 182 consecutive days:

e.g. from 01/03/2003 to 31/12/2003 = more than 182 days

from 01/01/2004 to 31/01/2004 = 31 days

therefore he is tax resident for 2003 and 2004 ; OR

c. if 90 days or more in a year and stayed 90 days or more / resident for three out of four preceding years of assessment.

e.g. 2000 , 2001 , 2002 – stayed 90 days or resident 2003 – stayed 90 days or more, Therefore he is tax resident for year of assessment 2003, OR

d. is stayed less than 90 days or did not stay in Malaysia at all in a year but stayed as resident for three year preceding years and the following year

e.g. 2000 , 2001 , 2002 - resident

Therefore he is tax resident in the year 2003

6. The individual who does not carry on a business will need to submit the tax return by 30 April of the following year.

The individual who carries on a business such as a sole proprietor or a partnership will need to submit the tax return form by 30 June of the following year.

Functions and Powers of the Board (IRB)

Functions of IRB:

1.) Act as an of the Malaysian Government and to provide services in administering, assessing, collecting and enforcing payment of taxes under the IRB.

2.) Advice the Malaysian Government on matters relating to taxation and to liaise with the appropriate Ministries and statutory bodies on such matters.

3.) Participate such other functions as are conferred on the Board by any other written law.

4.) Act as a collection agent for and on behalf of any body fir the recovery of loans due for repayment to that body under any written law.

5.) To participate in outside Malaysian in respect of matters relating to taxation.

Powers of the Board:

1.) To enter into contracts

2.) To utilize all property of the Board, movable and immovable, in such manner as the Board may think expedient including the raising of loans by mortgaging such property.

3.) To engage in any activity, either alone or in conjunction with other organisations or international agencies to promote better understanding of taxation.

4.) To provide technical advise or assistance, including training facilities to tax authorities of other countries.

5.) To impose fees or charges for services rendered by the Board.

6.) To grant loans to employees of the Board for any purpose specifically approved by the Board.

7.) To provide recreational facilities and promote recreational activities for and activities conductive to the welfare of employees of the Board.

8.) To provides training for employees of the Board and to award scholarships or otehrwise pay for such training.

9.) To do anything incidental to any of its powers.

The Inland Revenue Board (IRB)

Prior to March 1996, known as the Department of Inland Revenue Malaysia which is under the Ministry of Finance currently. Besides that, it became a Statutory Board on the 1st of March, 1996. Generally speaking the Inland Revenue Board (IRB) is responsible for formulation of new tax policies for both the private and public sectors, tax collection, and compliance enforcement. Inland Revenue Board Malaysia (IRBM) was established in accordance with the Inland Revenue Board of Malaysia Act 1995 to give it more autonomy especially in financial and personnel management as well as to improve the quality and effectiveness of tax administration. The agency is responsible for the overall administration of direct taxes under the following Acts:

a. Income Tax Act 1967

b. Petroleum (Income Tax) Act 1967

c. Real Property Gains Tax Act 1967

d. Promotion of Investments Act 1986

e. Stamp Act 1949

f. Labuan Offshore Business Activity Tax Act 1990

Is there any difference between contingency and indemnity insurance policy?

From above the topic mentioned, all insurance policies are policies of indemnification, whereby the insurer agrees to compensate the insured for a loss covered by the policy. A contingency policy is a specialty policy that is used in the entertainment business that covers a promoter, production company. For instance, should a show or event be canceled by certain perils. Basically is a fancy form of business interruption coverage that includes perils that usually aren't covered by normal business interruption coverage. A Contingency Endorsement is also used on Marine insurance policies to cover a seller in the event the purchaser refuses a shipment that is received at the buyer's destination and refuses to place a claim on the buyer's insurance.

Uberrimae Fidei

The term of uberrimae fidei describes that a class of contracts whereby one party has a duty to disclose material facts relevant to the subject matter of the contract to other party. This is term applied in insurance contracts such that the insured legal person must disclose any relevant particular that may affect the insurer's decision to grant the insured a policy of insurance. In the event that a relevant disclosure does not take place, the contract is voidable at the option of the insurer. The duty may also apply to contracts for the shares, land and partnership. The terms is also used in the context of fiduciary duties. By the way, the uberrimae fidei on Latin terms is defined as of the utmost good faith.

Uberrimae Fidei of Chitty on Contracts

"Mere non-disclosure of fact, material or not, does not ordinarily amount to misrepresentation, and the general rule is that in order to be actionable a representation must take an active form". But in certain cases a stricter rule is enforced.

"The most important of these are the contracts uberrimae fidei, in which knowledge og the material facts generally lies with one party alone, that party is under a duty to make a full disclosure of these facts, and failure to do so makes the contract voidable...The duty varies in its extent from one type of contract to another.

Contracts of insurance of every kind form the main group of contracts uberrimae fidei. Other examples generally included, though these are probably not all uberrimae fidei in the strict sense, are contracts to subcribe for shares in a company, family settlements, contract, for the sale of the land, contracts of suretyship, and partnerships. Contracts of service are not uberrimae fidei, are not contracts of sale of goods.

Doctrine of Utmost good Faith

According to the notes of business law, the Doctrine of Utmost Good Faith under the insurance law refers to each party to a proposed contracts is under a duty to disclose to the other all information which would influence his decision to enter into the contract, whether such information is requested or not.

Insurance is a contract governed by the doctrine of utmost good faith

Most contracts are governed by the maxim 'caveat emptor' or 'let the buyer beware'. However, insurance is governed by the doctrine of utmost good faith, both at common law and by reason of section. 17 of the Marine Insurance Ordinance which applies both to marine and non-marine insurance policies.

One of the reasons for this is the natural imbalance between the insurer and the insured in terms of knowledge. For example, before the pre-contractual process of disclosure is commenced, the proposer for insurance is in position to know all about his state of health, family history and his habit such as smoking. If that person is not obliged to make full disclosure, insurance could not work from either insured's point of view. The insurer initially would only consider offering a policy based on an average person's life expectation, the premium for which would tend to be too high for the healthy person to contemplate.

Caveat emptor

According from wikipedia, caveat emptor refers to the property law doctrine that controls the sale of real property after the date closing.Furthermore, under the doctrine of caveat emptor, the buyer could not recover from the seller for defects on the property that rendered the property unfit for ordinary perposes. The only exception was id the seller actively concealed latent defects or otherwise made material misrepresentations amounting to fraud. Before statury law, the buyer had no warranty of the quality of goods. In many jurisdictions now, the law requires that goods must be of 'merchantable quality'. However, this applied warranty can be difficult to enforce and may not apply to all products. Hence, buyers are still advised to be cautious.

Case study - Insurance Law

Car stolen from driveway - whether firm was right to reject complaint on the grounds of customer's 'carelessness'

Scenario:

Micky's car was stolen from the driveway of her home while she was inside the house. She neither saw nor heard the theft. When she put in a claim to the firm, it asked her to send it her car keys. However, she was only able to produce the spare ignition key. Taking this as evidence that the key had been in the car when it was stolen. She had lost the key a month earlier and had been using the spare. She was adamant that she had not been 'careless', as the firm had suggested. After the firm rejected her complaint, she came to us.

Opinion:

I agreed with Micky that she had not been 'reckless'. Someone is reckless if they recognize a risk, but deliberately 'court' it. Micky had not done this, so the firm was wrong to say that she had breached the 'reasonable care' condition. However, the firm had specifically highlighted this clause when it sold Micky the policy. And as i not satisfied with Micky's explanation that she had lost the original car key, i concluded on balance that it was likely that she had left the key in the car. I satisfied that circumstances of this theft did fall within the scope of that exclusion. She could be said to have 'left' the keys in the car because she had gone into the house, and was too far from the car to be able to prevent it being stolen. Furthermore, the fact that the car was parked so close to the road meant it was relatively vulnerable to an opportunistic thief. Therefore, in my opinion, i rejected the complaint.

Case study - Sale of Goods Law

Case Question:

The case under consideration today concerns Micky, who is a self-employed painter and decoraot and a painting firm known as "Paintplus". Micky had bought a cottage in a coastal area and had bought help from an assistant at the Paintplus store in recommending a heavy duty masonry paint that would withstand the harsh climate changes evident on a coastal area, and a brand of wipe-clean paint that would be suitable for interior use in a wet area (the bathroom). The assistant at Paintplus recommended their own brand of masonry paint (Everlast) because it was the cheapest available. Micky checked the description on the tin and agrees that the paint appeared to be suited to her requirements. When asked about the bathroom paint the sales assistant told Micky that internal paints were not his speciality, but he had heard other customers comment favourably about a product known as "Cleaneasy". The store had some tins of Cleaneasy going at half price because the written description about the product had become detached from the tins some time previously so the tins were being sold without this documentation. Micky that might have been written on the leaflet and the sales assistant said, [quote] "its standard paint so just slap it on". Over time Micky had problems with both paint types she had purchased from Paintplus. The masonry paint was easy to apply and withstood the harsh climate of winter, but over the summer months the temperatures were "unprecedented" and the paint stated peel from the walls. The render under the paint was damaged through this and Micky had to employ a building professional to knock of the remaining render and paint, and then renderer and repaint the entire outside of the cottage. Micky did not have much luck with the Cleaneasy paint either. While she was applying the apint some of it dropped on her skin and she suffered an allergic reaction to the paint. She needed medical treatment and was off work for three weeks because of this reaction. She also lost a major decorating contract because of her illness. Later investigations about the description that should have been on the tin when she bought it declared that if [quote] "any person suffering from skin complaints or sensitivities should refrain from using this product".

Opinion:

The first question considered is whether or not Micky could claim a breach of contract against Paintplus, and if so on what grounds. Briefly a contract can be said to occur when an offer is made to one party by another, and that offer is accepted. Having goods for sale in a shop is not considered an offer as such, but rather an invitation to treat although a bilateral contract can be said to occur in that the buyer agrees to pay a certain price for goods, which the seller promises to deliver. The essential parts of a contract include the offer and acceptance, the consideration elements of the contract (sellers gets the money, buyer gets the paint), the acceptance that the contract concerned a business rather than social or domestic matter, capacity for both parties had to be able to enter a contractual agreement, an the contract has to be based on a legal transaction legality.

Relevant cases: Display of Goods in shops

Fisher v. Bell

Fact: The defendant displayed flick knives in his shop windows. He was then convicted of a criminal offence of offering such knives for sale.

Held: Display of any goods with a price tag on it in s shop window was not an offer but rather it was an invitation to treat.

Case of Company Law

Salomon v A Salomon and Co Ltd [1897] AC 22: Corporate separate personality

Salomon conducted his business as a sole trader. he sold it to a company incorporated for the purpose called A Salomon and Co Ltd. The only members were Mr Salomon, his wife, and their five children. Each member took one pound share each. The company bought the business for 40, 000 pound. Mr Salomon subscribed for 20, 000 pound further shares. However, 10, 000 pound was not paid by the company, which instead issued Salomon with series of debentures and gave him a floating charge on its assets. When the company failed the company's liquidator contended that the floating charge should not be honored, and Salomon should be made responsible for the company's debts.

Lord Halsbury LC stated (at 30-31):

"...it seems to me impossible to dispute that once the company is legally incorporated it must be treated like any other independent person with its rights and liabilities appropriate to itself, and that the motives of those who look part in the promotion of the company are absolutely irrelevant in discussing what those rights and liabilities are."

From this case, comes the fundamental concept that a company has a legal personality or identity separate from its members. A company is thus a legal 'person'.

Intro law of contract Part2

Difference between void and voidable contract

A void contract is an invalid contract which is not enforceable in the court. However, a voidable contract is not invalid but it is avoidable by the affected party by taking the legal action and asking the court to terminate. if no action is taken at a material point of time, it will be deemed as confirmed and the contract becomes valid and enforceable.

Difference between fraud and misrepresentation

In case of fraud the party making a false statement does not himself believe in its truth, whereas, in case of misrepresentation the party believes the false statement to be true. Moreover, is case of fraud a high standard proof is required to set aside a contract, but is case of misrepresentation a lower standard of proof is required.

Discharge by performance: If the parties perform their respective promises in accordance with the terns of the agreement.

Discharge by frustration: a contract is frustrated if the contract legally or physically becomes impossible to perform for subsequent change of circumstances.

Discharge by breach of contract: There are 4 remedies of this contract which is damages, specific performance, injunction, quantum meruit.

Intro law of contract Part1

The meaning of "contract" in business law refers to an agreement between two or more parties that is legally binding between them. It is also enforceable in a court of law under section 2(h) of Contract Acts. Of course, the gist of all contracts is an agreement, for instance, all contracts must be build upon an agreement although not all agreements are automatically contracts.

The are 7 essential elements of contact, which are free consent, offer and acceptance, legal capacity, legality, certainty, consideration and intention to create legal relations.

1.) Offer, meaning that when one person signifies to another his willingness to do or to abstain from doing anything with a view to obtaining the assent of that other to the act or abstinence under section 2 (a) of the contracts act.

2.) Acceptance, meaning that when a person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted a proposal when accepted becomes a promise, under section 2 (b) of the contracts act.

3.) Consideration, meaning that when at the desire of the promiser the promisee or any other person has done or abstained from doing, or does or abstain from doing, or promises to do or to abstain from doing something, such act or promise called a consideration for the promise, under section 2 (d) contact act 1950.

4.) Certainty, meaning that an agreements is not certain or capable of being made certain are void, under section 30, contacts act.

5.) Free consent, refers to every contract there must be a free consent. The free consents is said to be missing due to existence of 5 factors, which is fraud, coercion,misrepresentation, undue influence and mistake.