LAW 503 ADVANCED BUSINESS LAW

ASSIGNMENT PAST YEAR QUESTION: JAN 2013 [3(a)]

GROUP BC3A

PREPARED BY: ASIERA BINTI MOHD RIDZUAN 2011968545

PAST YEAR JANUARY 2013 QUESTION 3(A) Mr. Walls sold to his best friend, Mr. Magnum, a Ferrari for RM1.5 million and Mr. Magnum paid for the full purchase price on April 2011. However, since Mr. Walls had a set of the car keys, he used the car whenever he liked. After almost one year, Mr. Magnum has now discovered that the car belongs to Mr. Cometto. It turns out that, Mr. Walls was looking after Mr. Cornetto's possessions, including his Ferrari while he was overseas. Advise Mr. Magnum as to his legal rights under the Sale of Goods Act 1957 with reference to relevant statutory provisions and decided cases. (15marks)

The issue is whether Mr. Magnum entitled to his legal right under the Sale of Good Act 1957. Sec 2 SOGA defines the word GOODS as meaning every kind of movable property includes stock and shares, growing crops, grass and any detachable things from land. This would mean land is excluded from the definition of goods therefore it is not governed by SOGA. According to Section 4(1) of SOGA provide that a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. It is fundamental rule that no one can give what he has not got. Section 27 of the SOGA sets out the general rule as follows: where goods are sold by a person who is not the owner, and who does not sell them under the authority or with the consent of the owner, the buyer will not get a better title to the goods than the seller had The rule is enshrined in the maxim nemo dat quod non habet, meaning that no one can transfer a better title than he has himself. Thus, if goods are purchased from a person who is not the owner, and who are not sell them under the owners authority, the buyer does not acquire a title even if he has paid value in good faith. Therefore, if As computer stolen by B, B has possession of the computer but has no title to it. If B sells the computer to C, C will get the possession of the computer but that is no title because B had no title. If A can trace the computer to C, A will able to repossess it because C

has no right of ownership.C would be able to sue B for damages (if B could be found) .Both the unauthorized seller, B and the innocent purchaser, C may be sued for the tort of conversion which is a civil action against a person for dealing with goods of another in consistent with that person ownership. This rule is to protect the right of ownership. If not, the rule of interest of the true owner of the goods would be lost if the good were stolen. This general rule, is illustrated in cases such as Lim Chui Lai V Zeno Ltd (1964)3 MLJ 314 and Ng Ngat Siang v Arab Malaysia-Malaysia Finance Berhad & Anors [1988] 3 MLJ 319. The first cases states that in January 1961, Zeno Ltd contracted with Ahmad for the construction of culverts with Petaling Jaya Local Authority. Zeno supplied all the materials at the site but later the contract was cancelled. Zeno Ltd informed PJ Authority that the materials at the site belonged to them. In September 1961, the respondent discovered that the materials had been sold by Ahmad to Lim Chui Lai for RM 14,000 of which Ahmad had received RM 7,000 as part payment. The court held that, Ahmad was not the owner of the materials at the time he sold them to Lim Chui Lai. Therefore Ahmad has no title to the goods and he cannot pass the title to Lim Chui Lai. Thus Lim Chui Lai does not have the title upon the materials bought from Ahmad. However there are exceptions to Nemo Dat quod non habet are found in several provisions of the act and they may be categorized into different heading: Estoppel; Sale by merchantile agent; Sale by one of joint owners; Sale under a voidable title; Sale by a seller in possession after sale; and Sale by a buyer in possession. So, under the issue of Mr. Magnum is related to sale under voidable title. Under Sec 29 of SOGA provides that when seller obtained goods through a voidable contract, buyer acquires good title to the goods provided he buys in good faith and without notice of the sellers defect in title. According to Section 10 of Contracts Act 1950 provides inter alia that all agreements are contracts if they are made the free consents of parties. By virtue of Section 14 of Contracts Act, consent is said to be free when it is not cause by one or more of the following; coercion, undue influence, fraud, misrepresentation and mistake.

Section 19(1) of the said Act provides that when consent to an agreement is caused by coercion, fraud or misrepresentation and Section 20 deals with undue influence, the agreement is a voidable at the option of the party whose consent was so caused. The illustration to section 19 may be seen through the, A, intending to deceive B, false represents that 500 gantangs of indigo are made annually at As factory, and thereby induces B to buy the factory. The contract is voidable at the option B.Section 19 (2) goes to say that a party to a contract, whose the consent was caused by the fraud or misrepresentation, may if he thinks fit, insist that the contract shall be performed, and that he shall be put in the position in which he would have been if the representation made have been true. So by referring to the circumstances, fraud is happen. Fraud is defined in Section 17 of the Contract Act 1950, to include certain acts which are committed with intent to induce another party to enter a contact. It lay down five different acts which may constitute fraud which are: (a) The suggestion, as to a fact, of that which is not true by one who does not believe it to be true; (b) The active concealment of fact by one having knowledge or belief of the fact; (c) A promise made without any intention of performing it; (d) Any other act fitted to deceive; and (e) Any such act or omission as the law specially declares to be fraudulent. By applying to the case, Mr. Walls who is in the position was looking after Mr. Cornettos possessions, a Ferrari. However Mr. Wall made a promise sold to his best friend, Mr. Magnum, a Ferrari for RM1.5 million and Mr. Magnum paid for the full purchase price on April 2011. At this stages, stated that the true owner of goods (Ferrari), is owned by Mr. Cornettos.So that the good that bought from Mr. Walls, who is not the owner, and who does not sell them under the owners authority(Mr. Cornetto), the buyer, Mr. Magnum, does not acquire any title. So that, Mr. Cornetto is entitled to recover his goods from those who have no title to them, by refer to Latin maxim Nemo Dat quod non habet. However the exception to the general rule involves under the sale by the voidable title, which is stated under Section 29 of Sale of Good Act 1957. Therefore, under the issue of Mr. Magnum is related to sale under voidable title. Under Sec 29 of SOGA provides that when seller obtained goods or possession through a voidable contract, but the contract has not been rescinded at the time of sale, the buyer acquires good title to the goods provided he buys in good faith and without notice of the sellers defect in title. At this time fraud happen indirectly by refer element (a) act by Mr. Walls.

In conclusion, Mr. Magnum is entitle to his good which is the Ferrari car, provided he buys in good faith and without notice of the sellers defect, and Mr. Cornetto may ask specific performance given by the court to claim money compensation from Mr. Walls.

Lee Mei Pheng, Business Law, Oxford University Press (2009) p.324-331 Beatrix Vohran, The Commercial Law of Malaysia, Person Malaysia Sdn Bhd. (2010), 2nd ED. P.220-228. Sara Hawker, Little Oxford English, Dictionary, Oxford University. Press (2006), 9th ED. P.534-535.