LABUAN INTERNATIONAL CAMPUS

INDIVIDUAL ASSIGNMENT
BUSINESS LAW (GT01103)
SEMESTER 2 SESSION 2017/2018

LECTURE: YANTI BINTI AHMAD SHAFIEE

NAME: NORATIKAH HUSNA BINTI MD.ADIL SHUKRI

MATRIC NO.: BG17160524

COURSE: HE21

1) Volvo Motor Sdn Bhd advertised in the newspaper that they are selling a new 2003 model
of Honda City. Upon seeing the advertisement, Awang immediately call Volvo Motor Sdn
Bhd to make an appointment to view and test the car. The next day after having satisfied
with the said car, Awang decides to buy it. After making payment and upon delivery of
the said car to Awang, Awang discovered that the rear half of the car was part of a 2002
model. Discuss whether Awang could take action against Volvo Motor Sdn Bhd and why?

1 mark

About this cases, Awang should take action against Volvo Motor Sdn Bhd
because the sale of goods by description also covers certain cases where the buyer has
seen the goods. It covers the situation where the buyer has actually seen and examined
the goods but the goods have been bought as corresponding to a description. In such
cases, the defect may be concealed from the buyer. For examples, this situation also
might be same with the cases in Beale v Taylor. In Beale v Taylor, the seller of a car
advertised it as a ‘Herald Convertible, white, 1961…’. The buyer viewed the car before
agreeing to buy it, believing that it was a 1961 model. Later, he discovered that while the
rear half of the car was part of a 1961 Herald Convertible, the front part was part of an
earlier model. The court held that he was entitled to damages for breach of condition.
Although the buyer had examined the car, he had relied on the description in the
advertisement stating the type of car he was buying. As a result, the sale was a sale by
description and as the car did not correspond with the description, he was entitled to
damages assessed at the purchase price less scrap value.

In addition, Associated Metal Smelters Ltd v Tham Cheow Toh, it was held that
the failure by the defendants to supply a furnace which would have a temperature not
lower than 2,600 degrees Fahrenheit constituted a breach of the condition of the contract
entitling the plaintiffs to treat such as a breach of warranty.

However, one must bear in mind that description is about identity, not quality of
the goods. Thus, if the goods are not of the expected quality but conform to the contract
description, there is no remedy under this section.

The SOGA 1957 implies a number of stipulations in every contract for the sale of
goods. However, these implied terms apply only when the parties to the contract of sale
have not excluded or modified them. These implied terms, laid down in sections 15 of the
 SOGA 1957, especially in Awang cases, it will be implied condition that in a sale of
goods by description, the goods must correspond with the description. Thus, where goods
are sold by reference to a sample as well as description, the goods must correspond with
both the sample and the description. For example, if a seller offers carpet for sale by
reference to a sample, and the manufacturer’s advertisement material states that the
carpet is wool, if the carpet is not all wool then it is not in accordance with the
description, even though the bulk of the goods may correspond with the description.

In conclusion, the Sale of Goods Acts 1979 section 15 show the relationship
between the buyer and seller and covers such issue as the correct and duties of the parties
and their remedies in the result of a breach. For the Sales of Goods Acts 1979, it help a
lot for the customer to protect them self from getting cheated. From this the seller also
has a difficulty to cheat their customer for their own use (profit).

2) Describe the ways in which a contract can be discharged. 1 mark

 Discharge of a contract implies termination of contractual obligations. This is
because when the parties originally entered into the contract, the rights and duties in
terms of contractual obligations were set up. Consequently, when those rights and duties
are put out then the contract is said to have been discharged. Once a contract stands
discharged, parties to it are no more liable even though the obligations under the contract
remain incomplete. A contract is deemed to be discharged, that is, concluded and no
longer binding, in the following circumstances, that it, discharge by frustration,
performance and breach.

a) Discharge by frustration

A contract may be discharged by frustration. A contract may be frustrated where

there exists a change in circumstances, after the contract was made, which is not the fault
of either of the parties, which renders the contract either impossible to perform or
deprives the contract of its commercial purpose. Where a contract is found to be
frustrated, each party is discharged from future obligations under the contract and neither
party may sue for breach. The allocation of loss is decided by the Law Reform Act 1943.

If a party promises to carry out a particular act, the law will hold them to their
promise. This principle is commonly known as the doctrine of absolute liability. There
are, however, some exceptions to this rule of frustration. For example, it would be
unreasonable to hold S to a promise to sell P a house if, unknown to either party, the
house had burnt to the ground. This contract would be impossible perform, it is frustrated
because its object is no longer attainable owing to something beyond the control of either
party.

Generally, the doctrine of frustration applies when the situation occur in physical
impossibility because of destruction of subject matter, Taylor v Caldwell (1863) 3 B & S
826. The claimant hired out a music hall in Surrey for the purpose of holding four grand
concerts. The claimant went to great expense and effort in organizing the concerts.
However, a week before the first concert was due to take place the music hall was
destroyed by an accidental fire. The claimant sought to bring an action for breach of
contract for failing to provide the hall and claiming damages for the expenses incurred.
So, the claimant's action for breach of contract failed. The contract had been frustrated as
the fire meant the contract was impossible to perform. In addition it also can be occur
when the physically impossibility under contract of personal service, the change in the
law rendering performance impossibilities by Harlock v Beal, the impossibility due to
non- occurrence of event basic to contract by Krell v Henry and where the particular state
of affairs ceases to exist by Codelfa Construction Pty Ltd v State Rail Authority (NSW).

By the way, there are some circumstances where frustration is not available, such
as the parties have made specific provision in the contract for what might otherwise have
been a frustrating event. It should have been foreseen, but for some reason or other was
not. The frustrating event was self- induced by the party making the plea, hardship,
inconvenience or expense in performance. In short, frustration only arises where there is
an unforeseen and radical change in surrounding circumstances. So, frustration can only
arise where an unforeseen event outside the control of the contracting parties like a
supervening event has significantly or radically changed the obligations of the parties fro
their original intentions. Neither party caused the supervening event, and neither
contemplated the supervening event, so there was no provision in the contract for it and
the new circumstances would make it unjust to hold the parties to their original contract.

The effect of a frustrating event is to discharge a contract immediately, but only

as to the future. The contract is not void ab initio, but only void from the time of the
frustrating event. For the period that the contract is valid, any obligations that arise must
be fulfilled. Money paid under the terms of the contract, for example, by the way of a
deposit, before the frustrating event occurs cannot be recovered, because at the time the
money was paid the contract was valid. A total failure of consideration would need to be
established in order that the money be recovered.

b) Discharge by performance

Where both the parties have either carried out or tendered (attempted) to carry
out their obligations under the contract, is referred to as discharge of the contract by
performance. Because performance by one party constitutes the occurrence of a
constructive condition, the other party’s duty to perform is also triggered, and the person
who has performed has the right to receive the other party’ s performance. The
overwhelming majority of contracts are discharged in this way.

Section 38 (1) the obligation of parties to contracts shows that the parties to a
contract must either perform, or offer to perform, their respective promises, unless the
performance is dispensed with or excused under this Act, or of any other law. Majority of
contracts are discharged by performance. It takes place when both parties to the contract
have precisely performed their respective promises and does not give any legal problems
that need to be adjudicated to the formal judgment on a disputed matter. It becomes an
issue for determination only when a party argues that the other party's performance is not
precise or incomplete.

The elements of performance it must be exact, precise, in accordance with what

the parties have promised and performance may come from a third party. In section 42,
the performance from third party or effect of accepting performance from third party
shows that performance may come from a third party. When a promisee accepts
performance of the promise from a third person, he cannot afterwards enforce it against
the promisor. Such as example, Krishnan Rengasamy, Ex P Arab Malaysian Credit Bhd
(2001) 4CLJ 797 the effect of accepting performance from third party shows if
performance is not done within stipulated timeline, Section 42 does not apply.

Furthermore, in Section 56 its effect of failure to perform at fixed time, in

contract in which time is essential. When a party to a contract promises to do a certain
thing before a specified time, or certain things at or before specified times, and fails to do
any such thing at or before the specified time, the contract, or so much of it as has not
been performed, and becomes voidable at the option of the promisee, if the intention of
the parties was that time should be of the essence of the contract. In Gan Hwa Kian &
Anor v Shencourt Son Bhd (2007) 3 CLJ 538. Section 56 states that the positions where
time is of the essence and performance within time by the facts developer failed to
deliver vacant possession of the property to the Plaintiff within the stipulated time and the
Plaintiffs are entitled to rescind contract and claim for damages for non-performance
under Section 76.

Section 76 shows that the party rightfully rescinding contract entitled to

compensation. A person who rightly rescinds a contract is entitled to compensation for
any damage which he has sustained through the non-fulfilment of the contract. Sim Chio
Hv Wong Ted Fui (1983) 1 MLJ 151 [Effect of failure to perform at fixed time, in
contract in which time is essential]. Salleh Abbas FJ says "in a contract in which time is
the essence of the contract, a party fails to perform it by the stipulated time, the innocent
party has the right either to rescind the contract or to treat it as still subsisting...".
 Discharge by Agreement may occur by way of Novation (Section 63) and Waiver
(Section 64). Novation (Section 63) shows that the effect of novation, rescission and
alteration of contract means if the parties to a contract agree to substitute a new contract
for it, or to rescind or alter it, the original contract need not be performed. A novation is a
mechanism whereby one party can transfer all its obligations under a contract and all its
benefits arising from that contract to a 3rd party. The 3rd arty effectively replaces the
original party as a party to the contract. the old contract ceases to exist. When a contract
is novated, the other contracting party must be left in the same position as he was in prior
to the novation being made. A novation required the consent of all three parties involved.

While, Waiver (Section 64) shows that the every promisee may dispense with or
remit by wholly or in part, the performance of the promise made to him or may extend
the time for such performance or may accept instead of it any satisfaction which he thinks
fit. So based of the illustration, a promise to paint for B. B afterwards forbids him to do
so. A is no longer bound to perform the promise or the illustration about the payment of
lesser sum in satisfaction of a larger sum is binding on the promisee if he accepts it (part
payment of debt). A owes B RM 5,000. A pays to B RM2,000, and B accepts in
satisfaction of the whole debt at the time and place at which RM5,000 were payable. The
whole debt is discharged.

c) Discharge by breach

When a promisor fails to perform his obligations or to render performance, there

is a breach of contract. A breach of contract occurs when one party (defaulting party)
does not perform his obligations under the contract and the other party (non-defaulting
party) is considered injured (generally financially). The party not in breach (non-
defaulting party) is entitled to take appropriate action including repudiation (rejection of a
proposal or idea.) or rescission of contract.
A breach of contract may be as actual Breach of Contract or anticipatory Breach
of Contract. With under the circumstances of failure to comply with a term of a contract
or a party notifying the other that he is no longer interested to perform his contractual
obligations prior to performance (Anticipatory breach) or the delay in performance where
time is of the essence.
 Section 40 of CA 1950 [Discharge by Breach of Contract or Effect of refusal of
party to perform promise wholly]: "When a party to a contract has refused to perform, or
disabled himself from performing, his promise in its entirety. The promisee may put an
end to the contract, unless he signifies by word or conduct his acquiescence in its
continuance".
Tan Hock Chan v Kho Teck Sang (1980) 1 MLJ 308 show the failure of appellant
to give effective possession of land to respondent constituted a breach of contract which
entitles respondent to rescind the contract. The respondent was a building contractor
employed by appellant to build certain shop houses and payment was to be made as
progress payment. The respondent could not complete work on the final lot because of a
claim by the occupier of the land to tenancy rights. So, the failure of the appellant to give
effective possession of the land to the respondent constituted a breach of contract which
entitled the respondent to rescind the contract.

3) Ahmad enters K-mart and selects some canned food, soap, shampoo, eggs, vegetables
and fish. He puts these items into his shopping trolley. Has contract been made between
K-mart and Ahmad at that point of time? Discuss. 1 mark
 An offer or proposal is necessary for the formation of an agreement. Section 2(a)
of the Contract Act 1950 state that when one person signifies to another his willingness to
do or abstain from doing anything. Acceptance in section 2(b) of the Contract Act 1950
provides that when the person to whom the proposal is made signifies his assent thereto,
the proposal is said to have been accepted. The contract has not been made between K-
mart and Ahmad at this point of time. That is because this display of goods in K-mart is
only an invitation to treat. When Ahmad selects the items or articles he is merely making
an offer to buy those items. The contract is only made at the cashier’s desk when the
customer (Ahmad) pays for the items. When Ahmad does payment on the items, contract
will be set up. Then, offer and acceptance will in this contract.

Such in cases, Pharmaceutical Society of Great Britain v Boots Cash Chemist

LTD (1953) 1 QB 401. Boots introduced the new self- service system into their shops
where by customers would pick up goods from the shelf, put them in their basket and
take them to the cashier’s desk to pay. The Pharmaceutical Society of Great Britain
brought an action to determine the legality of the system with reward to the sale of
pharmaceutical products which were required by law to be sold in the presence of a
pharmacist. The court thus needed to determine where the contract came into existence. It
was held that goods on the shelf constitute an invitation to treat not an offer. It was for the
customer to offer to buy the goods. The contract of sale was completed when the
customer’s offer to buy was accepted by the seller in receiving the payment at the
cashier’s desk.

4) Abu wants to make an agreement to give his land to his daughter, Rina for her 21 st
birthday. Will such transaction constitute a valid contract? 1 mark
 Section 26 of the Contracts Act 1950 provides that as a general rule, an
agreement without consideration is void. In order to form a valid and binding contract,
his daughter, Rina must have the capacity to enter the contract of the age of majority. So,
Abu can make an agreement by consideration to give his land to his daughter because
Rina already enter 21 years old. In addition, “consideration” is defined in section 2(d) of
the said Act as: ‘When, at the desire of the promisor, the promisee or any other person
has done or abstained from doing, or does or abstains from, or promises to do or to
abstain from doing, something, such act or abstinence or promise is called a consideration
for the promise.’

Section 26(a) of the said Act provides that an agreement made without
consideration is void unless it is expressed in writing and registered under the law if any
for the time being in force for the registration of such document, and is made on account
of natural love and affection between parties standing in a near relation to each other. In
other words, an agreement made on Account of Natural Love and Affection, Section
26(a). The validity of this agreement is dependent upon the following conditions, viz. it is
expressed in writing which may be in any reasonable form, it must be registered where a
law exists requiring such registration and it is made on account of love and affection
between parties standing in near relation to each other.

Natural love and affection are not recognized as valid consideration under
English law. Under subsection 29(a), it is a valid consideration provided the condition of
‘near relation’ between the parties is also met. Unfortunately, ‘near relation’ is not defined
in Act. While members of the immediate family will ordinarily constitute ‘near relation’,
there will be exceptions and any extension outside that group presents some real
difficulties. Personal law with respect to family matters are still applicable to various
ethnic groups and consequently, what constitutes near relation can vary with each social
group, depending on its customs and social organization. So, Abu need not to worried
because the transfer of his land will be writing and be registered, and the transfer for love
and affection will be valid even though Rina does not pay anything for the land.

5) Siti agrees to sell her land to Ali on payment of RM10,000.00. Later on she found out
from the land office that her land is worth about RM100,000.00. She then disagrees to
transfer the land to Ali. Discuss whether she could sell her land to Ali for RM10,000.00.
Can Ali take action against her when she refused to sell her land to him? 1 mark

Although it may seem like stating the obvious, an essential element of a valid
contract is that all parties must agree on all major issues. In real life, there are plenty of
situations that blur the line between a full agreement and a preliminary discussion about
the possibility of making an agreement. To help clarify these borderline cases, the law has
developed some rules defining when an agreement legally exists.

The most basic rule of contract law is that a legal contract exists when one party
makes an offer and the other party accepts it. For most types of contracts, this can be
done either orally or in writing. So, in this cases, at first Siti agrees to sell her land to Ali
on payment of RM10,000.00 and Ali accept it. This constitutes is her offer. So, in the
eyes of the law, when Ali accept the offer, it means they already create a contract, which
means they are liable for their side of the bargain. But when Siti tell Ali that she not sure
to continue sell her land or don not even respond, for that matter, and clearly have not
accepted the offer, and no agreement has been reached. But Ali was unsatisfied because
he wanted that land. So, since they have not accepted all of the important terms of the
offer. They have actually changed one term of the offer. Depending on their wording,
they have probably made a counteroffer.

In day-to-day business, the seemingly simple steps of offer and acceptance can
become quite convoluted. For instance, sometimes when you make an offer it isn't
quickly and unequivocally accepted; the other party may want to think about it for a
while or try to get a better deal. And before the other party accepts your offer, you might
change your mind and want to withdraw or amend your offer. Delaying acceptance of an
offer and revoking an offer, as well as making a counteroffer, are common situations that
may lead to confusion and conflict. To minimize the potential for a dispute, here are some
general rules we should understand and follow. So, in this cases, Ali cannot against Siti
because the offer already revoked and Siti did not need to sell her land to Ali because she
also had the power against her own decision.
6) Labuan Sdn Bhd and Mr. Chin have entered in to a sale and purchase agreement. What
are the three remedies available to Mr. Chin in the event that Labuan Sdn Bhd breaches
the agreement? 1 mark

Breach of contract occurs when any party to the contract fails to perform his part
of the contract and any party to the contract makes it impossible for the other party to
perform his obligation under the contract. Breach of contract may occur in two ways that
its anticipatory breach of contract and actual breach of contract. Anticipatory breach of
contract includes a party declares his intention of not performing the contract before the
performance is due. While the breach of contract actual includes on due date of
performance and during the course of performance.

Protection of contractual expectations is the primary purpose of law of contract.

These expectations are met where parties perform their respective promises, but if any
one party fails to perform his obligations and breach the contract, the law provides certain
remedies to the promise.

Remedy means a legal remedy is a court order that seeks to uphold a person’s
rights or to redress a breach of the law. When one party breaches a contract, the other
party may ask a court to provide a remedy for the breach. The court may order the
breaching party to pay money to the non-breaching party. So, if Labuan Sdn Bhd
breaches the agreement between Mr. Chin, they will faced the three remedies that protect
a community from law, includes damages, specific performance and injunction.

The damages are granted to a party as compensation for the damages, loss or
injury he has suffered through a breach of contract-section 74, Contract Act 1950. While
specific performance means the actual carrying out of the contract as agreed. Under
certain circumstances an aggrieved party may file a suit for specific performance, that its
for a decree by the court directing the defendant to actually perform the promise that he
has made. Such a suit may be filled either instead of or in addition to a suit for damages.
Lastly, an injunction which is an equitable remedy may be interlocutory, or mandatory. It
may even be prohibitory or restraining in nature. An interlocutory injunction is used to
maintain the status quo of the subject-matter in a pending suit whilst a mandatory
injunction is a court order requiring something to be done. A prohibitory injunction stops
something from being done.
7) Explain the conditions and warranties which are implied for sale of goods under the Sale
of Goods Act 1957. 1 mark

The condition it is defined in the following words, “A condition is stipulation

essential breach to the main purpose of the contract, the breach of which give rise to a
right to treat the contract as repudiated.” So according the above definition it is clear that
condition is very essential for the performance of a contract. The breach of condition will
be regarded as the breach of the whole contract.

While the warranty sales act defines, the warranty in the following words, “A
warranty is a stipulation collateral to the main purpose of the contract the breach of which
gives rise to a claim for damages but not to a right to reject the goods and treat the
contrast as repudiated.” So. the definition above shows that for the implementation of a
contract warranty is not essential. For the breach of warranty only damages can be
claimed.

8) Define the word “law”? 1 mark

Law can generally be described as a set of rules, developed over a long period of
time that regulates interactions that people have with each other, and which sets standards
of conduct between individuals and between individuals and the governments and which
are enforceable through sanction. Thus, to the layman, law is understood as being a
general rule of conduct. In the Oxford English Dictionary, law is defined as ‘the body of
enacted or customary rules recognized by a community as binding’. However, the word
‘law’ has been given many different definitions by lawyers.

Sir John Salmond in his book, Jurisprudence, defines law as ‘the body of
principles recognized and applied by the state in the administration of justice … In other
words, law consists of the rules recognized and acted on by justice.’ In short, law may be
defined as a body of rules which enforced by the state.

The term ‘law’ is defined both by article 160(2) of the Federal Constitution 1957
and Item (43C) of section 2(1) of the Interpretation and General Clauses Ordinance 1948
to include the written law, the common law in so far as it is in operation in the Federation
or any part thereof and any custom or usage having the force of law in the Federation or
in any part thereof.
9) What is the meaning of consideration under the Malaysia Contract Act 1950 and in what
circumstances would a contract be valid without any consideration? 1 mark

Consideration is one of the essential element for an agreement to become a

Contract. It is a requisite for all contracts other than those made by deed. Section 2(d)
defined that when, at the desire of the promisor, the promisee or any other person has
done or abstained from doing, or does or abstains from doing, or promises to do or to
abstain from doing, something, such act or abstinence or promise is called a consideration
for the promise.

An agreement made without consideration is void, unless it is expressed in

writing and registered under the law for the time being in force for the registration of
documents, and is made on account of natural love and affection between parties standing
in a near relation to each other or unless it is a promise to compensate, wholly or in part,
a person who has already voluntarily done something for the promisor, or something
which the promisor was legally compellable to do, or unless it is a promise, made in
writing and signed by the person to be charged therewith, or by his agent generally or
specially authorized in that behalf, to pay wholly or in part a debt of which the creditor
might have enforced payment but for the law for the limitation of suits.

In any of these cases, such an agreement is a contract. Nothing in this section

shall affect the validity, as between the donor and donee, of any gift actually made or it an
agreement to which the consent of the promisor is freely given is not void merely because
the consideration is inadequate; but the inadequacy of the consideration may be taken
into account by the Court in determining the question whether the consent of the
promisor was freely given.
10) What makes a contract different from an ordinary agreement? 1 mark

A contract is a written or verbal agreement, especially one concerning

employment, sales or tenancy that is intended to be enforceable by law. An agreement is
the same, however it is typically not enforced by the law. Other than that, a contract is a
formal agreement which is legally binding, usually created for business purposes, or to
ensure the safety of one’s assets and the agreements is informally made with family and
friends, they are similar to promises.

Especially, in business binding, a contract is a legally binding agreement reached

between two parties, the terms of which the courts have the authority and obligation to
enforce. An agreement is a less formal creation of an obligation between the two parties.

An agreement usually lacks one or more of the essential elements that are
required to be present in order to form a valid contract that will be considered legally
enforceable by a court of law.

Contracts outline the terms of the relationship that should be formed between the
two parties to the contract. An agreement also outlines the terms of the relationship
between the two. However, the difference is that the contract’s outline is far more rigid
than that of a contract.

The essential difference between an agreement and a contract is that typically an

agreement will only modify a contract that is already in place but does not place an
obligation on either one of the parties to provide consideration to the other party, which a
contract requires. A contract can involve the exchange of promises between the parties to
the contract, while an agreement may simply involve one party accepting the offer from
another party.