BT204034/TN40603 COMMERCIAL LAW SEMESTER 2, 2010/2011 TUTORIAL SHEET NO 4 LAW OF CONTRACT AND LAW OF AGENCY Topic 3: Law of Contract

t 1 2 3 All contracts must be built upon an agreement, but not all agreements are contracts. Explain. What is the main difference between a void contract and a voidable contract? Explain the following terms: a. Invitation to treat b. Counter offer c. Exclusion clause d. Frustration of contract e. Specific performance ABC Bhd is a manufacturer of patented pharmaceutical products. In March 2010 it published an advertisement in a newspaper as follows: "ABC Bhd will give a reward of RM20,000 for information that leads to the arrest and conviction of any person making imitations of its products." In April 2010, Sam wrote to ABC Bhd that Mr Fraud was manufacturing imitations of its products. At the time Sam wrote to ABC Bhd he had not seen ABC Bhd's advertisement and had no knowledge of the reward. Sam's letter to ABC Bhd led to the arrest and conviction of Mr Fraud but ABC Bhd has refused to pay the reward. Sam intends to sue ABC Bhd. Advise Sam. Peter Potter went to Smile Supermarket. He selected few items from the shelf and put it in the trolley. While waiting for payment at the counter he received a phone call from his wife telling him that their son was involved in an accident at school. Peter Potter leaved the queue and pushed aside the trolley. On seeing this, one of the salesmen approached him and asked him to make payment for all the goods that he had put in his trolley. Advise Peter Potter whether he should make the payment? Explain whether a contract has been concluded in the above situation and give reasons for your answer. Jennys Persian cat goes missing and she places an advertisement in New Straits Times newspaper offering a reward of RM500 to anyone providing her with information about her missing cat. Zali, his neighbour, hears from Jill, Jennys son about the reward. Zali later finds the missing cat near the drain and picks it up. When he returns Jennys cat to her, she is delighted but says nothing about the reward. The next day, Zali has been informed by Chong that there was an advertisement in the newspaper about the reward. Zali then makes inquiries about the reward. Jenny now refuses to pay the reward saying that she has changed her mind about paying the reward. Advise Zali. On 1 April 2010, Delilah wrote to Samson offering to sell her shares in Sepanggar Holding to Samson for RM150,000. On 5 April 2010, Samson wrote to Delilah inquiring whether she would accept payment for the shares in four instalments. Delilah did not reply to Samson's letter. On 25 April 2010 Samson sent a cheque for RM150,000 to Delilah. A note attached to the cheque stated that he wished to accept Delilah's offer. On 28 April 2010 Delilah returned the cheque to Samson

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stating that she no longer wished to sell her shares. Samson seeks your advice whether he may sue Delilah for breach of contract. Advise Samson. 8 About two weeks ago Sam sent a fax to Bob offering to sell his Ming vase to Bob for RM50,000. A day later Bob replied by fax, as follows, My son, Jim, has decided to buy your Ming vase for RM50,000. Jim will send you his cheque for RM50,000 within 21 days. If you change your mind about selling the vase please contact me immediately. After receiving Bobs fax, Sam decided not to sell the Ming vase. Due to an oversight, he did not inform Bob or Jim about this. Yesterday Sam received Jims cheque for RM50,000 with a note from Jim, which read as follows, I have enclosed herewith my payment for the Ming vase. I will collect the vase from you next week. Sam now seeks your advice whether he is bound to sell the vase to Jim. Advise Sam. The window of James, Spencers neighbour, was damaged while he was away taking care of his sick mother, and Spencer got it repaired. When James returned, he told Spencer that he was very grateful for this kind act and that after he had been to the bank, he would pay him (Spencer) RM100 for his concern and effort. Spencer thanked him, but never received the money and when he subsequently asked James about it, James told him that he had changed his mind and was not going to pay him any money. Advise Spencer. A, aged 17, borrowed a sum of RM3,000 from B by executing a promissory note. He spent RM500 to buy a watch and comfortable shoes. He spent the balance of RM2,500 on a sight-seeing tour with G, his girl friend, in Hong Kong. G followed him to Hong Kong because of As promise that he would be marrying her after they returned to Malaysia. A also obtained a scholarship from the Government of Malaysia to study economics at Kent University. He signed a written contract that he shall complete his studies and after obtaining suitable employment shall return the whole amount spent on his education, to the Malaysian Government. Later, A did not pay the loan to B, refused to marry G and failed to honour his scholarship agreement with the Government of Malaysia. B, G and the Government of Malaysia threatened to take legal actions against A. What would you advise him? Ali and Abu were negotiating for the sale of a car. Ali appeared unwilling to sell it. Abu then told Ali that he knew Alis past history as a drug addict and would tell his employer if Ali does not sell the car to him. Ali reluctantly sold the car to Abu. Ali now wants to rescind the contract. Advise Ali. Rick is a home designer. He owns a shop at 1Borneo. He has many collections for home dcor item from all over the world. Among others are 5 hand paintings that he purchased from a dealer in Belgium. Recently he discovered that 2 of those paintings are not original as he had been told. In the above situation what is the implied rights that he has under the Malaysian statute? Consider whether he will be able to rescind the contract. Miley had been told that antique jewellery was a good investment and she liked to wear it. Two years ago she saw a piece in Rubys shop which she liked the look of and she thought it looked very good on her when she tried it on. She asked Ruby if she was sure it was genuine, stating that she would not even bother to ask the price if it was not. Ruby assured her that, in her opinion, it was and so Miley bought it. She has just discovered that it is a modern copy. It is worth only half of what she paid for it, and had it been genuine, it would have doubled in price in the

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intervening period. Advise Miley. 14 Elaborate three (3) ways in which a contract may be discharged.

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Jason Morris entered into an agreement with MZ Recording Sdn. Bhd. to perform at a live concert at 1Borneo Shopping Complex for a sum of RM15,000/-. It was agreed that he should perform 6 songs. However at the end of the 5th song, he collapsed. It was found that he was electrocuted when his finger touched some bare electric wires left by the band that accompanied his performance. He has been hospitalized. His father goes to see the Managing Director of MZ Recording Sdn. Bhd. and asks him to pay the RM15,000/-. He tells him he needs the money urgently to pay the hospital bills for Jason Morris. The Managing Director refuses. Can Jason Morris sue MZ Recording Sdn. Bhd.? Edward agreed to let Bella have a room for RM550 for the purpose of viewing the Parade for Visit Malaysia Year 2011 on 1 January 2011. The contract provided that the money would be payable immediately. The procession did not take place because of heavy rain and flood. Bella, who had paid RM300 on account, left the balance unpaid. Bella sued to recover the RM300 and Edward counter-claimed for RM250. Advise the parties on their rights in the above contract. Maria went shopping at Sunshine Supermarket. Since Maria bought lot of things, she decided to leave them at the counter that offered storage service while she continued her shopping. She has been charged RM5.00 for the service. The attendant at the counter issued the ticket to Maria to enable her to reclaim her things later. On the ticket it was written: Missing or damage of the things stored is at own risk. When Maria returned to collect her things, she found that her things were missing. Advise Maria as to her legal rights in the above situation.

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Barbara is in business. All businesses of her type are doing well as what they supply is greatly in demand. She decided to purchase a new piece of machinery to increase the capacity of her plant and increase the productivity of her business. She contracted with Steven for its supply. Steven was a month late in delivering the machinery. Barbara is seeking to recover for the additional profit she could have made during that month with the new machine. Her claim includes the loss of an unusually profitable order which she was unable to take on because she did not have the increased capacity which the new machinery would have given her. Advise Barbara. Mr. X and Mr. Y have entered into a contract. Advise Mr. Y as to 3 remedies available to him in the event Mr. X breaches the contract. Where there is a breach of contract, the party seeking damages is under a duty to mitigate the loss. Explain the phrase mitigate the loss'.

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Topic 4: Law of Agency 1 2 3 Mr W, who is setting up a business in Kota Kinabalu, would like to know how an agency may arise or be created in Malaysia. Advise Mr W. In relation to agency, distinguish between actual authority and apparent or ostensible authority. Mickey is the owner of Chicken Delicious and was leaving for France for a business trip. While he was abroad, he has appointed Donald to manage his business. One day, Donald discovered that one of the refrigerators that were used to store all the fresh chicken was not functioning. In order to prevent the chicken from deteriorate; Donald bought a new refrigerator on credit from SengHup Co. with the purchase price of RM5000.00. Prior to this, Donald has tried to contact Mickey to get his further instruction but of no avail. When Mickey returned from France, he took over the management of his business from Donald. SengHup Co. came to see Mickey to claim for the price of the refrigerator but Mickey refused to pay with the reason that he has never instructed Donald to buy the refrigerator. Mickey has also intended not to pay Donalds commission because he has not satisfied with what Donald has done. Advise Mickey on his liability to Donald and SengHup Co. John is the agent of Mr Wan. Recently Mr Wan had instructed John to sell only two out of the five shop lots he (Mr Wan) owned in Bandar Sierra. Instead John sold all five shop lots since he received such a good price for them. When Mr Wan was told of the deal and the price John received, Mr Wan was very pleased. Explain the following to Mr Wan, a. The meaning and effect of ratification; b. How Mr Wan may ratify the act of John; c. The conditions necessary before ratification is possible; d. The consequences, if Mr Wan decides not to ratify Johns act. Mr Tan has appointed Mark as his agent to sell his MPV. It has been agreed between them that the car should be sold at the market value and Mark will receive RM15,000 commissions. Mark asked his wife to buy the car at a price lower than the market value, i.e. RM155,000 and resell the car at RM185,000, without disclosing the fact to Mr Tan. Mark then gave RM155,000 to Mr Tan for the price of the car and received his RM15,000 commissions. Mr Tan later discovered the fact when he met the new owner of the car. Advise Mr Tan as to the possibilities of repudiating the contract of agency and claiming the profit earned by Mark. Jim appointed Yu-hee as his agent to sell his (Jims) goods. Without Jims knowledge, Yu-hee appointed Don as her (Yu-hees) sub-agent to sell the same goods. Don sold some of the goods to Khaw. Khaw was induced to buy the goods because of certain false statements made by Don. Khaw has threatened to sue Jim. Advise Jim on the legal position.

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