END-OF-SEMESTER EXAMINATION

SEMESTER II, 2006/2007 SESSION

AHMAD IBRAHIM KULLIYYAH OF LAWS

Programme : Bachelor of Laws Level of : First

Study

Reading Time : 2.30 p.m. – 2.45 p.m. Date : 3.4.2007

Duration : ( 15 minutes )

Answering Time : 2.45 p.m. – 5.45 p.m. Section(s) : All Sections

Duration ( 3 hours )

Course Title : Law of Contract II Course Code : LAW 1211

This Question Paper Consists of 8 Printed Pages With 6 Questions.

INSTRUCTIONS TO CANDIDATES
DO NOT OPEN UNTIL YOU ARE ASKED TO DO SO.
Answer FOUR (4) Questions Only.

REFERENCE ALLOWED
Contracts Act 1950

Any form of cheating or attempt to cheat is a serious

offence which may lead to dismissal
Statutes should be free from any form of annotation.

APPROVED BY
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QUESTION 1

(a) Under section 73 of the Contracts Act 1950 an easy and speedy remedy has been

provided for claiming back the goods or money delivered to a person under

coercion. This remedy differs from the one under section 15 under which a

transaction has to be proved to fall within the definition of coercion under that

section.

With the help of decided cases draw out the differences between coercion as stated

under section 15 and that envisaged under section 73.

(7 marks)

(b) On 5th April 2006 Roslan applied for a loan of RM 200,000 from Standard Bank for

injecting more money into his business. The bank agreed to lend the money but

asked Roslan to get someone until 10th April 2006 to stand as surety. Roslan asked

Suriyati, his wife, to stand as surety for the loan, which she declined. Roslan did not

loose heart and requested the bank to extend the time for obtaining the surety. The

bank extended the time until 15th April but Roslan still could not get his wife to sign

the document. At Roslan’s request the bank gave him another 5 days to obtain the

surety. Finally after great persuasion for 20 days Roslan succeeded in obtaining

Suriyati’s signature as a surety for the loan. The loan was released but Roslan could

not improve his business, instead he suffered further losses. When Roslan failed to

repay the loan, the bank proceeded against Suriyati to recover the money by

auctioning her house, which was charged as a collateral security for the loan.
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Suriyati has come to seek your advice whether she could take the defence of undue

influence against the bank, as her husband had influenced her mind in signing the

surety. She could not resist signing the surety because she did not want to spoil the

family relations. She was also scared that if she persisted in her refusal to sign the

surety their children would suffer educationally and emotionally.

Advise Suriyati

(8 marks)

QUESTION 2

(a) Exception to section 19 of the Contracts Act 1950 imposes a duty on the misled

party to exercise ordinary diligence provided he has the means of discovering the

truth.

Discuss the above statement. Support your answer with relevant decided cases.

(7 marks)

(b) Jinie, a well-known opera singer, is searching for a suitable hall to be used as the

first venue in her “Round Asia Tour”. During negotiations with Jod, the manager of

Loosy Concert Hall (LCS), he informs Jinie that the hall will hold 5,000 people and

the built-in speaker and sound system is suitable for her opera performance. They

signed a contract to confirm that Jinie’s first concert will be held in LCS.
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Jinie’s concert is sold out. However, only 4,000 are admitted on the instruction of

the local police, and the sound system is so bad that a large percentage of the

audience demands its money back. Jinie wishes to sue Jod for misrepresentation.

Advise Jinie.

(8 marks)

QUESTION 3

(a) Phang, after having repeatedly failed to pay back his creditors, was declared a

bankrupt by the court. The creditors applied for the auction of his bungalow at

Pantai Hills so that their claims could be met. The court fixed January 5th as the date

of the auction. In the meantime, Phang persuaded his old time friend Tapah into an

agreement. Under the agreement, Tapah would participate in the auction, purchase

the property and afterwards transfer it to Phang on receiving from him the price

paid for the house. Eventually, Tapah purchased the property in the auction. As the

prices of real property had gone up after the auction, Tapah refused to transfer it to

Phang.

Advise Phang

(9 marks)
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(b) Explain with reference to statutory provisions and judicial decisions the rule that

every agreement by which anyone is restrained from exercising a lawful profession,

trade or business of any kind is to that extent void.

(6 marks)

QUESTION 4

(a) “….it has been suggested that while a mistake as to quality (or attributes) will not

avoid the contract, a mistake as to substance (or essence) will.”

J. Beatson in Anson’s Law of Contract, 28th Edition, at p. 317

Elaborate the above statement. Support your answer with relevant decided cases

and provisions from the Contracts Act 1950 (if any).

(7 marks)

(b) Baba owns three Volkswagen cars manufactured in 1955, 1965 and 1970

respectively. He wants to sell the 1970 model but ensure that the buyer should be a

private car collector. He put up a written advertisement in front of his house. Gaga,

a car dealer, wishes to acquire the 1965 model and was informed incorrectly by his

clerk that Baba has the 1965 model advertised for sale. Gaga knows that Baba

would not sell the car to him as he is a car dealer. He therefore telephoned Baba and

said : “Hello, I am Mr Yaya. I am keen to buy the car that you have advertised and

will give the full asking price for it.” Baba replied: “I am pleased to sell the car to

you Mr Yaya and I am glad that it will have a good home.”

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When Baba delivers the 1970 model, he discovers the buyer’s identity and refuses

to complete the sale but Gaga wishes to enforce the contract even though the car

was not the 1965 model.

Discuss the legal position of the parties.

(8 marks)

QUESTION 5

(a) “The doctrine of frustration obviously does not protect a party whose own breach of

contract …brings about …the frustrating event.”

G.H. Treitel in Treitel The Law of Contract, 7th Edition, at p. 699

In the light of the above statement, discuss the application of the doctrine of self-

induced frustration in Malaysia. Support your answer with relevant decided cases.

(7 marks)
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(b) Zoy is a manufacturer of frozen food. He entered into an agreement with Cin to lay

the floor in his newly constructed factory, at a cost of RM 50,000. Zoy intends to

commence production of frozen food by 1st January 2007.

On 30th November 2006, Cin claimed that he has completed his work in accordance

with the agreement. However, upon Zoy’s inspection of the completed works, he

found that the flooring was defective and not to his satisfaction.

Because of Cin’s refusal to carry out repairs on the alleged defective work Zoy has

to engage other contractors at a cost of RM 20,000 to carry out the necessary repairs

on works which had been unsatisfactorily completed.

Advise Zoy.

(8 marks)
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QUESTION 6

(a) Explain the rules for the allowance of damages to the party suffering in the event of

a breach of contract by the other party to the contract.

(8 marks)

(b) Saiful bought 10,000 shares in Amanah Saham Tiga on 3rd December 2006 from

Nuri, a stockbroker at the rate of RM 10 per share. Saiful tried his best to arrange

RM 100,000 to pay the price of the shares but failed. Saiful then asked Nuri to sell

the shares on 7th December, when the share price was RM 10.50. Nuri did not sell

the shares on 7th December but waited for four days and sold them on 11th

December 2006. By then the share price had dropped to RM 8.50 per share.

Nuri has suffered a loss of RM15,000, which he wants to claim from Saiful as being

the result of breach of his contract.

Advise Saiful.

(7 marks)