BT20403 COMMERCIAL LAW SEMESTER 2, 2011/2012 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 Farahs 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. Mike, her neighbour, hears from Jojo, Farahs son about the reward. Mike later finds the missing cat near the drain and picks it up. When he returns Farahs cat to her, she is delighted but says nothing about the reward. The next day, Mike was informed by Chong that there was an advertisement in the newspaper about the reward. Mike then makes inquiries about the reward. Farah now refuses to pay the reward saying that she has changed her mind about paying the reward. Advise Mike. 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. On Monday 1st June, Alex placed an advertisement in Football Crazy Bulletin offering for sale the 1966 World Cup Final football programme at RM4000. On Tuesday 2nd June, Beckham saw the advertisement and telephoned Alex stating that he was very interested in buying the 1966 football programme. Alex said that as Beckham was a good friend of his, he would let him have the programme for RM3500. Beckham said that he would like to think about it. Alex said he would keep the offer open until 9.00 am Friday 5th June. The next day, Alex changed his mind about selling the programme. He immediately telephoned Beckham. However, Beckham had left his office for the day, so Alex left a message on the answer-phone telling him that he no longer interested to sell his football programme to Beckham. Beckham did not check his answer-phone messages until after 2 pm, by which time he had already sent a letter of acceptance to Alex. Advise Alex on the legal implications in the above situation.

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Maher is one of the owners of Pro Sdn Bhd, a golf shop. Recently during the Mega Sales all golf clubs were marked 20 percent off. Hannah, a golf enthusiast, wanted to get herself two golf clubs to improve her game. She entered Mahers shop and seeing the discount, picked up and put two golf clubs in her shopping trolley. When she reached the cashier she had a change of mind and decided that to improve her game she should invest in a good trainer rather than the golf clubs. Hannah left the golf clubs and was about to leave the shop when Maher stopped her. Maher said to Hannah, Once youve picked up the golf clubs, there is a binding contract and you have to pay for them. Hannah does not want to pay for the golf clubs. Advise Hannah. Sabah Jaya Bhd wrote to Mr Chan. on 1 February 2012 offering to sell various items of machinery for RM200,000. The letter included the following statement: Notice in writing of your acceptance of this offer must be received by our Sales Director, Mr Wan by 14 February 2012. Upon receiving the offer letter from Sabah Jaya Bhd, Mr Chan was very keen in purchasing those machinery. However, Mr Chan felt that the price was above the market price. Mr Chan faxed to Sabah Jaya Bhd that the price is reduced to RM190,000. Upon receiving the fax from Mr Chan, the sales director of Sabah Jaya Bhd, Mr Wan, replied that they were prepared to sell at the price of not lower than RM195,000.00 and the above due date is applicable. Mr Chan. decided to accept the offer and posted its acceptance on 10 February 2012. In addition, the managing director of Mr Chan telephoned Sabah Jaya Bhd and asked to speak to Mr Wan. Unfortunately, he was out of the office, so a message was left with his secretary confirming that Mr Chan accepted the offer. Mr Chan has since discovered that Mr Wan had never received the letter of acceptance, and that the secretary forgot to inform him of the telephone call from Mr Chan. Consequently the machinery has been sold to Star Sdn Bhd on 16 February 2012. Advise Mr Chan. Two weeks ago, Robert Rogue entered Sallys Jewellery Shop and announced himself to be Cristiano Ronaldo, the well-known football star. Although Sally had only a vague idea of what Cristiano Ronaldo looked like, she had heard of him and was delighted at the thought of a celebrity making a purchase in her shop. Robert selected a number of items of jewellery and Sally allowed him to pay for them with a cheque in the name of Cristiano Ronaldo, and to take them away. Before doing this, she had asked for proof of identity and had been shown a drivers licence in Ronaldos name. Immediately on leaving Sallys shop with the jewellery, Robert sold it to Brian who was a dealer in second hand jewellery. Brian had no reason to suspect that Robert had acquired the jewellery improperly. Sally has now discovered that the bank has declined to accept the cheque and that it was not Cristiano Ronaldo who came into her shop. Robert has disappeared. Sally wishes to recover the jewellery from Brian. Advise Sally. Tim is a wealthy businessman. He owns three cars, a Mercedes, a BMW and a Proton Perdana. Tim wants to buy another new car and decides to sell one of his cars. Tim meets Alan and says, I offer to sell you my car for RM100,000/-. Alan immediately accepts the offer. Tim has now changed his mind and does not want to sell any of his cars to Alan. Advise Tim whether he can challenge the contract. Would your answer differ if Tim had instead stated, I offer to sell you my car, the type will be decided by my wife, at RM100,000/-. Explain your answer. 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.

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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? Mimi had been told that antique jewellery was a good investment and she liked to wear it. Two weeks 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 Mimi 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 intervening period. Advise Mimi. On 15 February 2010, Hana Montana signed into a contract with Bright Entertainment & Co. to perform at the City Music Hall where Bright Entertainment & Co. has agreed to pay Hana Montana RM15,000 for her performance. The contract stated that Hana Montana will perform at the hall for a period of five days starting from 1 March 2010. She will be paid RM3,000 on the first day of her performance and the remaining balance of RM12,000 on the last day of her performance. Hana Montana was very excited about the performance and she later spent RM5,000 on her apparel for the performance. A day prior to the performance day, the hall was destroyed in a fire. Bright Entertainment & Co. then told Hana Montana that her performance had been cancelled. Hana Montana was really annoyed and angry as she has spent a lot of money for the performance. She then filed a suit against Bright Entertainment & Co. to recover her money that was spent and RM15,000 that she was supposed to get had the performance not cancelled. Advise both parties. Julie went shopping at Sunshine Supermarket. Since Julie 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 Julie 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 Julie returned to collect her things, she found that her things were missing. Advise Julie as to her legal rights in the above situation.

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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. 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. Chong is a lorry driver from Cameron Highlands, carrying fresh flowers to be delivered to Pretty Florist in Bangsar. Due to heavy rain, the road from Cameron Highlands to tapah was closed where there were landslides in many places. Chong could not continue with the journey. Chong tried to reach his principal, Chua to inform him of the mishap and to get further instruction on what he must do, but failed. His handphone also was out of battery. Chong decided to sell some of the flowers to the other road users who were also stranded on the road. Advise Chua as to whether he is bound by the acts of Chong in selling the flowers. Ramoo and Santhi employed Ryder and Co., a firm of merchants to buy goods for them. Ryder & Co. bought the goods in their own names from Mr Kye. Mr Kye did not inquire whether they were acting as agents or principals, and supplied the goods on credit. Ramoo and Santhi paid Ryder & Co. for the goods in the ordinary course of business. A fortnight later, Ryder & Co. stopped payment and did not settle the payment to Mr Kye. Upon discovering the agency, Mr Kye sued Ramoo and Santhi for the price. Could Mr Kye succeed? Richard has just sold his share in one company amounting to RM100,000 and decided to buy a new car for his wife. On 15 June 2007, Richard appointed Gary as his agent to buy a car at the price not exceeding RM70,000. The next day, Gary went to see Tan Chong, a car dealer and booked a car at the price of RM75,000 and paid the deposit of RM7,500. Gary told Tan Chong that the car was meant for Richards personal use. One month after the booking date, Tan Chong sent the car to Richard and claimed for the balance purchase price of the car. Richard told Tan Chong that he has never authorised Gary to purchase the car at that price and refused to accept the car. Advise Richard. Raja, an agent, was instructed by his principal, Mr Kaya, to look for a buyer for the house that the principal intended to sell with the commission of 10% of the price of the house. Mr Kaya clearly stated that the selling price must not be less than RM300,000. A offered to buy the house at the price of RM305,000 while B offered to buy it at RM310,000. In ensuring that the house would be his, A offered Raja a commission. Raja accepted As offer without informing Mr Kaya about Bs offer. Advise Mr Kaya.

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