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On 3 March 2008, Azman wrote to Benny offering to sell to Benny his yacht, Lightning, for RM1 million.

The letter expressly stated that if Benny did not reply by 10 March 2008, he would be deemed to have accepted the offer. On 9 March 2008, Azman sent a letter to Benny revoking his offer. On 10 March 2008 Benny posted a letter to Azman accepting Azmans offer. Azmans letter of revocation reached Benny on 11 March 2008. Bennys letter of acceptance reached Azman on 12 March 2008. Benny wishes to know whether there is a valid contract between him and Azman for the sale and purchase of the yacht, Lightning. Required: Advise Benny under the law of contract.

This question, on contract law, tests the candidates ability to identify and apply the law relating to the postal rule in relation to offer and acceptance. The issue in this case is whether there has been a valid acceptance by Benny of Azmans proposal (offer) so as to create a binding contract between them. According to s.2(a) of the Contracts Act 1950, a proposal (offer) is said to be made when one person signifies to another his willingness to do or abstain from doing anything with a view to obtaining the assent of that other to the act or abstinence.

Section 2(b) states that an acceptance takes place when the person to whom the proposal is made signifies his assent thereto. Mere silence or inaction on the part of the offeree is not acceptance. See: Felthouse v Bindley (1862) 11 CBNS 869. Therefore the statement in Azmans letter that Benny would be bound if he does not reply by 10 March 2008 can be ignored.

The general rule is that the acceptance must be communicated to the proposer. The acceptance will only be complete upon such communication. By s.7, the acceptance must be expressed in some usual and reasonable manner unless the proposal itself prescribes the manner in which it is to be accepted. However, there is an exception to this rule. By s.4(2) of the Contracts Act 1950, where the parties have contemplated the use of the post as a means of communication, the communication of the acceptance is complete as against the proposer when it is put in a course of transmission to him so as to be out of the power of the acceptor. In the present problem, Benny accepted Azmans offer by a letter posted on 10 March 2008. Thus, though the letter of acceptance reached Azman only on 12 March 2008, it was effective as against Azman from the date of posting, i.e. 10 March 2008

However, the facts indicate that Azman had revoked his offer by a letter to Benny on 9 March 2008. The question then arises whether the revocation will be effective as against Benny. By s.5(1), a proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer but not afterwards. Further, by s.4(3)(b), the communication of a revocation is complete as against the person to whom it is made when it comes to his knowledge. Applying the law to the given facts, Bennys acceptance was complete as against Azman on 10 March 2008 whereas Azmans revocation, even though it was sent before Benny posted his letter of acceptance, was effective only on 11 March 2008 i.e. the date on which the revocation came to the knowledge of Benny

Benny may therefore be advised that there is a valid contract between him and Azman and he may successfully sue Azman for breach of contract

(a) In relation to employment law, explain what is a contract of service. (b) With reference to the Employment Act 1955, explain: (i) whether a contract of service can be made orally; and (ii) whether an employer can, under the contract of service, restrict an employee from being involved in a trade union or in trade union related activities.

A contract of service is basically a contract between an employer and an employee under which the employee agrees to work for the employer. The Employment Act 1955 defines a contract of service as, any agreement whether oral or in writing and whether express or implied, whereby one person agrees to employ another as his employee and that other agrees to serve his employer as employee and includes an apprenticeship contract.

The Industrial Relations Act 1967 also defines such a contract but refers to it as a contract of employment. Under this Act, a contract of employment is defined as, any agreement whether oral or in writing and whether express or implied whereby one person agrees to employ another as a workman and that other agrees to serve his employer as a workman. Despite the differences in wording, it has generally been accepted that there is no distinction between the two phrases.

American International Assurance Co Ltd and Dato Lam Peng Chong & Others (b) (i) The Employment Act 1955 requires contracts of service exceeding one month to be in writing. This is evident from s.10(1) which states as follows: A contract of service for a specific period of time exceeding one month or for the performance of a specified piece of work, where the time reasonably required for the completion of the work exceeds or may exceed one month, shall be in writing. Thus, only contracts of service for a period of only one month or less can be made orally. Others must be in writing.

(ii) Further, an employer cannot restrict an employee from being involved in a trade union or trade union-related activities. This is provided for in s.8 as follows: Nothing in any contract of service shall in any manner restrict the right of any employee who is a party to such contract: (i) to join a registered trade union; (ii) to participate in the activities of a registered trade union, whether as an officer of such union or otherwise; or (iii) to associate with any other persons for the purpose of organising a trade union in accordance with the Trade Unions Act 1959.

In the context of the law of agency, explain FIVE duties owed by an agent to his principal under the Contracts Act 1950. The Contracts Act 1950 imposes several duties upon an agent towards his principal. These may be explained as follows: (a) Section 164 imposes a duty upon an agent to obey the principals instructions or, in the absence of such instructions, to act according to the custom which prevails in doing business of the same kind at the place where the agent conducts the business. When the agent acts otherwise, he must make good any losses or account to the principal for any profits made by him. (b) Section 165 imposes upon the agent a duty to exercise care and diligence in carrying out his work and to use such skill as he possesses. The agent is expected to conduct the business of the agency with as much skill as is generally possessed by persons engaged in similar business unless the principal has notice of his
lack of skill. He will have to compensate the principal for the consequences of his own neglect, want of skill or misconduct.

(c) Section 166 imposes upon the agent a duty to render proper accounts when required. The agent has a duty to account for all the monies and property handled by him. Such accounts must be produced by the agent when demanded by the principal (d) Section 167 imposes upon the agent a duty, in cases of difficulty, to use all reasonable diligence in communicating with his principal and in seeking to obtain his instructions.

(e) Section 168 imposes upon the agent a duty to act solely for the benefit of his principal. If he deals on his own account in the business of the agency without the consent of the principal, the principal has a right to repudiate the transaction. Further, by s.169 the principal also has the right to claim from the agent any benefit received by him from the transaction. (f) Section 171 imposes upon the agent a duty to pay to the principal all sums received on his behalf. This duty is, however, by virtue of s.170, subject to the right of the agent to retain or deduct from such sums received, advances made or expenses incurred by him in carrying out his duty, commission and other remuneration payable to him for acting as agent. s.174 allows him to retain his principals property in his possession until his remuneration is paid

(g) The agent also has a duty not to make a secret profit out of his position as agent. Secret profit refers to a bribe or other financial advantage obtained by the agent in the course of carrying out his duties, without the knowledge of the principal. When the principal discovers it, he may recover the secret profit from the agent. He may also repudiate the transaction concerned: ss.168 and 169.

Ali entered into the following contracts with Syarikat Buildwell & Co (Buildwell), a firm dealing in realty and construction: (a) A contract to purchase a piece of land from Buildwell at a price of RM10,000, a price very much below the market price. (b) A contract for the lease of an office building at a price of RM1,500 per month, a price which reflects the current market rate. The term of the lease is stated as for as long as the lessee wishes. Buildwell now refuses to complete the contract for the sale of the land on the ground that the price is too low. Further it refuses to proceed with the grant of the lease claiming that the contract is not valid. Required: Advise Ali on the legal position in respect of the aforementioned contracts, (a) and (b).

Ali may be advised as follows: (a) In relation to the contract to purchase the piece of land from Buildwell at a price of RM10,000, which is well below the market price, the issue is whether the contract can be invalidated due to insufficiency of consideration. By s.10(1) of the Contracts Act 1950, all agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object and are not hereby expressly declared to be void. Further, explanation two of s.26 states that 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. This may be further explained by reference to illustration (f) of s.26, which provides the following example: A agrees to sell a horse worth $1000 for $10. As consent was freely given. The agreement is a contract notwithstanding the inadequacy of the consideration.

In the given problem, Syarikat Buildwell & Co had agreed to sell to Ali the piece of land for RM10,000. Though the price is well below the market value, there is no indication in the question that there was no free consent on the part of Syarikat Buildwell & Co. Thus, applying the law to the given problem, Ali may be advised that the contract is legally binding and he may sue Buildwel to enforce the sale of the land
(b) In relation to the contract for the lease of the office building, the legal issue is whether it is void for uncertainty. One of the requirements for a valid contract is that there must be certainty of subject matter. This is provided for in s.30 of the Contracts Act 1950, which provides that agreements, the meaning of which is not certain, or capable of being made certain, are void.

A case in point, which is relevant to the given problem is Karuppan Chetty v Suah Thiam (1916) 1 FMSLR 300. In this case, the parties had agreed to a lease at a rent of $35 per month, for as long as he likes. As the period of the lease was uncertain, the court held that the agreement was void. Applying the law to the present problem, Ali may be advised that he will not be able to enforce the lease agreement against Buildwell as it contains a similar clause and is therefore void for uncertainty.

Explain the ways in which an offer may be revoked as provided under the Contracts Act 1950. A proposer (offeror) is not legally bound to keep his proposal open indefinitely. Therefore, a proposal (offer) will remain valid until it is revoked by the proposer. By s.5(1) of the Contracts Act 1950, a proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer. Further, s.6 provides that a proposal may be revoked in the following ways:

(i) By the communication of notice of revocation by the proposer to the other party.Under this section the proposer is required to communicate the revocation. Communication by third parties not authorised by the proposer will probably not be valid. Thus, the English case of Dickinson v Dodds (1876), which held that revocation would be effective so long as the offeree becomes aware of the revocation, irrespective of who conveys the information to the offeree, may not apply in Malaysia.

(ii) By the lapse of time prescribed in the proposal for its acceptance, or if no time is prescribed, by the lapse of a reasonable time, without communication of the acceptance.What amounts to a lapse of a reasonable time depends on the facts of each case. In Ramsgate Victoria Hotel Co v Montefiore (1866) LR 1 Ex Ch 109, the defendant had applied for shares in the plaintiff company in June and was informed by the plaintiff company in November that he was allotted the shares applied for. The defendant refused to accept the shares. The court held that as the plaintiff had not accepted within a reasonable time, the refusal was justified. See also: Macon Works and Trading Sdn Bhd v Phang Hon Chin & Anor [1976] 2 M.L.J. 177

(iii) By the failure of the acceptor to fulfil a condition precedent to acceptance. For example, if A offers to buy Bs car on condition that B provides a roadworthiness certificate issued by the Road Transport Department, the offer will be revoked if B fails to provide such a certificate. (iv) By the death or mental disorder of the proposer, if the fact of his death or mental disorder comes to the knowledge of the acceptor before acceptance. Death or mental disorder of the proposer (offeror) does not automatically result in the revocation of the offer. Knowledge of the acceptor is a crucial factor. Thus if the acceptor, in ignorance of the death or mental disorder of the offeror, accepts the offer such acceptance would be valid.

In relation to employment law, explain the remedies available to an employee who has been unjustifiably dismissed. The following are the remedies available to an employee who has been unjustifiably dismissed: (i) Reinstatement and backpay This is the remedy that the Industrial Court is likely to award in normal cases of unfair or unjustified dismissal. Reinstatement basically means that the employee, who has been unjustifiably dismissed, is put back into the position he would have been in had he not been so dismissed. In the words of Tucker J. in Hodge v Ultra Electric Ltd (1943) 1 KB 462, reinstatement involves putting the specified person back, in law and in fact in the same position as he occupied in the undertaking before the employer terminated his employment. Again, in Western India Automobile Association Industrial (1949) LLJ 256 it was stated that reinstatement requires that the employee should be restored to his previous position so far as his capacity, status and emoluments are concerned. Upon reinstatement therefore, the employee will be entitled to receive backpay i.e. arrears of salary from the time of dismissal to the time of reinstatement

(ii) Compensation in lieu of reinstatement and backpay.Sometimes it is not possible or advisable to order reinstatement. As was stated in the case of KFC Holdings Sdn Bhd v Lim Seng Yang (Award 348 of 1987), the relief of reinstatement may be refused in exceptional circumstances like the employer losing confidence in the workman, or the retention of the workman leading to an apprehension of breach of industrial peace. Reinstatement will also be impossible where the claimants have died after the proceedings in respect of which their claims had begun. In such exceptional circumstances the court is likely to order compensation in lieu of reinstatement. The compensation payable is normally at the rate of one months pay for each year of service subject to a maximum of 24 months. However it must be noted there is no hard and fast rule, and the court may take into account various factors such as the duty of the employee to mitigate loss by seeking alternative employment and the conduct of the employee contributing to the dismissal, before making an order for compensation in lieu of reinstatement

(iii) Re-engagement/Re-employment In some cases the employee is merely reemployed. This means that the employee is merely offered the chance to come back. No arrears are payable and he will lose his past service with the employer. This is illustrated in the case of Restu Motor Sdn Bhd v Nazaruddin bin Abdul Samad (Award 267 of 1985). In this case following conciliation efforts by the Industrial Relations Department, the company agreed to employ the claimant anew in the same post with the same salary. However, he was not given backpay and he also lost his past service.

In relation to employment law, (a) explain what is meant by redundancy and state, with reference to the Employment Act 1955, the situations in which such redundancy is said to occur. (b) An employer may dismiss an employee for misconduct but he may only do so after due inquiry. Explain what constitutes due inquiry for this purpose.

(a) Redundancy refers to a situation where an employer has surplus of labour and has to downsize his labour force. Section 12(3)(a)(d) of the Employment Act 1955 stipulates that redundancy occurs where: (i) The employer has ceased, or intends to cease to carry on the business for the purposes of which the employee was employed; (ii) The employer has ceased or intends to cease to carry on the business in the place at which the employee was contracted to work; (iii) The requirements of that business for the employee to carry out work of a particular kind have ceased or diminished or are expected to cease or diminish; (iv) The requirements of that business for the employee to carry out work of a particular kind in the place at which he was contracted to work have ceased or diminished or are expected to cease or diminish. See also: Food Specialities Sdn Bhd and Esa bin Mohamad (Award 74 of 1989)

(b) Section 14 of the Employment Act 1955 provides, among others, that the employer may dismiss the employee without notice on the ground of misconduct by an employee. However, the employer may only do so after due inquiry. The Act also permits the employer to suspend the employee for a maximum of two weeks on half pay for the purpose of holding such an inquiry. Unfortunately the Act does not state what constitutes due inquiry. However, the Industrial Court in the case of KJJ Cleetusand Unipamol (M) Sdn Bhd (IC Award 66 of 1975) laid down the following guidelines to be observed:

(i) the inquiry is to be instituted as early as possible after the suspension of the complainant; (ii) the complainant is to be given particulars of the misconduct, preferably in writing; and a reasonable time is to be given him before the inquiry to enable him to prepare his case; (iii) where applicable, the complainant is to be accompanied by his Union or Committee Representative, if any, at the inquiry; (iv) the inquiry is to be conducted, as far as possible, by such officer(s) as not directly connected with the investigation of the misconduct, so as to give the hearing impartiality

(v) examination of relevant witnesses is to be allowed at the reasonable discretion of the officer-in-charge of the inquiry; and (vi) notes in the form of questions and answers and the final decision are to be recorded to show that the inquiry was proper and that the decision arrived at was fair.

Distinguish between conditions and warranties clearly explaining the importance of such distinction. Terms of a contract are those matters which have been agreed between the parties to a contract and which have been incorporated into the contract. These terms are usually classified into two main categories, viz, conditions and warranties depending on the intention of the parties. These may be explained as follows: A condition may be said to be a term of a contract which is so important to the main purpose of the contract that the breachof it by one party will entitle the other to terminate it altogether. Although the Contracts Act 1950 does not define a condition, the Sale of Goods Act 1957 states that, a condition is a stipulation essential to the main purpose of the contract, the breach of which gives rise to the right to treat the contract as repudiated

A warranty, on the other hand, is referred to in the Sale of Goods Act 1957 as a stipulation collateral to the main purpose of the contract, the breach of which gives rise to a claim for damages but not a right to reject the goods and treat the contract as repudiated. Hence a warranty may be said to be a term of a contract which is not so important to the main purpose of the contract.
A breach of a warranty will entitle the innocent party to claim damages only. It must be noted that a party who is entitled to terminate the contract for breach of a condition, may choose to continue the contract and treat the breach as a breach of warranty only. In such cases he will only be entitled to damages. An illustration is seen in the case of Associated Metal Smelters Ltd v Tham Cheow Toh (1971) 1 MLJ 271 where the subject matter of the contract was the sale and purchase of a metal furnace. One of the conditions of the contract was that the furnace would have a temperature of not less than 2600 F. The furnace did not meet this requirement. However, the plaintiff had chosen to continue with the contract, and treat the breach of the condition only as a breach of a warranty. Thus he was only entitled to damages


In Ming Lian Corporation Sdn Bhd v Haji Noordin (1974) the court held that the enforceability of a hire-purchase agreement was not affected if the hirer signed an agreement with blank spaces which were later filled in by the owner provided the hirer was aware of the terms and knew what he was signing. However, section 4B(2) expressly prohibits an owner, or dealer requiring any intending hirer to sign a hire-purchase agreement unless such hire-purchase agreement has been duly completed. The words unless such hire-purchase agreement has been duly completed thus suggest that the hire purchase agreement cannot be a blank document. It is thus submitted that Ming Lians case is no longer good law in the light of section 4B(2).

Prior to the formation of a hire-purchase agreement, an intending hirer must be given a written statement in accordance with the form set out in Part 1 of the Second Schedule. This is expressly provided by section 4. This Second Schedule notice sets out the financial obligations of the intending hirer such as the number of instalments to be paid including the amount of each instalment. This is to ensure that the intending hirer is aware of his financial obligations before making a commitment to be bound by the hire-purchase agreement. The intending hirer is under no obligation to enter into any hire purchase agreement and is not required to provide any consideration for the preparation or service of this notice. If this notice is not given to the hirer, the subsequent hire-purchase agreement entered into by the hirer will be null and void.

Section 1(2) of the Hire-Purchase Act 1967(hereinafter referred to as the Act) states that the Act shall apply in respect only of hire-purchase agreements relating to the goods specified in the First Schedule. The goods in the First Schedule include: All consumer goods which are defined in section 2 to mean goods purchased for personal, family or household purposes; Motor vehicles namely invalid carriages; motor cycles; motor cars including taxi cabs, and hire cars; goods vehicles where the maximum permissible laden weight does not exceed 1540 kilogram; and buses

In Helby v Matthews (1895) the House of Lords ruled that a hire-purchase agreement was not an agreement to buy under the Sale of Goods Act 1893 (UK). Thus in a hire purchase agreement, the hirer does not have title to the goods. The owner lets goods out on hire (ie a contract of bailment) AND agrees that the hirer may either return the goods and terminate the contract or he may exercise his option to purchase the goods on the completion of payments. This fundamental principle is enacted under section 2(1) of the Hire-Purchase Act 1967 which states that a hire-purchase agreement includes a letting of goods with an option to purchase. It further goes on to exclude transactions where the property in the goods passes at the time the agreement or upon or before delivery of the goods, thereby indicating that a hire-purchase agreement is not an agreement for the sale of goods.

SOGA-Merchantable quality:Section 7(2) and (3) states that the implied terms of merchantable quality and fitness for purpose can be excluded in respect of second-hand goods provided the agreement contains a statement to the effect That the goods are second-hand; and That all conditions and warranties of quality and fitness are expressly negatived and the owner proves that the hirer has acknowledged in writing that the exclusion or exemption clause was brought to his notice. Section 34 further reiterates that the Act may itself permit the exclusion of certain provisions of the Act. Thus it is permissible to provide exemption clauses in respect of second-hand goods.

SOGA- TRANSFER OF THE GOODS Section 26 of the Sale of Goods Act 1957( referred to as the Act) states that:the goods remain at the sellers risk until the property is transferred to the buyer. It is thus important to determine whether property has passed to the buyer, for if it has, then buyer will have to bear the risk of the loss of the goods. Section 19(1) of the Act states that where there is a contract for the sale of specific or ascertained goods, property in the goods is transferred to the buyer at such time as the parties of the contract intend it to be transferred. If the agreement between two parties specifically states that the goods will not pas to the buyer until the last and final payment. As buyer has not made the last and final payment, property has not passed to him. Property remains with the seller, who thus will have to bear the risk of the loss of the goods.

If the parties did not indicate expressly when property is to pass. In such a situation, the rules for ascertaining the intention of the parties are found in sections 20 to 24 of the Act. Section 21 states that: where there is a contract for the sale of specific goods but the goods are not in a deliverable state (ie ready to be taken by the buyer) and the seller is bound to do something to put the goods into a deliverable state, the property does not pass to the buyer until the seller has taken the steps to put the goods in a deliverable state and the buyer has notice of it.

DELIVERING THE GOODS. Section 31 of the Act states that it is the duty of the seller to deliver the goods and the duty of the buyer to accept and pay for them in accordance with the terms of the contract of sale. It is thus essential that parties keep to what has been agreed upon. Thus section 37(3) states that where the seller delivers to the buyer the goods he contracted to sell mixed with goods of a different description not included in the contract, the buyer do any of the following:

accept the goods which are in accordance with the contract and reject the rest or reject the whole.
as an unpaid seller, has essentially two rights: rights in relation to the goods under section 46 which includes a lien on the goods, right of stopping the goods when the goods are on transit to the buyer or a right of resale; or to sue for the price of the goods under section 55.