Govt of Malaysia v Gurcharan

8/3/2019 Govt of Malaysia v Gurcharan

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Diploma in Corporate Administration Suggested Answer Page 1 of 9

SUGGESTED ANSWER

MALAYSIAN BUSINESS LAW

JUNE 2004

SECTION A

1. Necessaries is not defined in the Contracts Act 1950 and one has to refer to caselaw to determine what constitutes necessaries. In Government of Malaysia vGurcharan Singh & Ors the court came to the conclusion that the word necessariesmust be construed broadly and in so interpreting, a court would have regard to thefacts of the case, the conditions and the circumstances in which the goods weresupplied. The legal definition is thus wider that bare essentials of life and includesgoods and services reasonably necessary to the minors actual requirements such as

food, shelter, clothing, medical services. However, these must be tested against theminors station in life. Thus what may constitute necessaries may vary according tothe position of the minor. The test is to look at the nature of the goods or servicessupplied, the minors actual needs and his station in life.

2. A bill of exchange is defined in section 3(1) of the Bills of Exchange Act 1949 as anunconditional order in writing addressed by one person to another, signed by theperson giving it, requiring the person to whom it is addressed to pay on demand or ata fixed or determinable future time a certain sum in money, to the order of a specifiedperson, or to bearer. A bill of exchange thus has the following characteristics:

There are three parties involved the drawer, drawee and payee; The order to pay is unconditional; The bill is addressed to one person who can be identified with

reasonable certainty;

The bill must be in writing and signed by the drawer or his agent; The bill must order payment of a sum which is certain in money and

not in services

The bill is payable on demand on sight or presentation; The bill is payable to the order of a specified person or bearer.

3. The reasons why parties may still prefer to refer their disputes in a court of lawinclude the following:

Judgments by the court are enforceable through the resources of the State; Witness can be compelled to attend without special application to the court; The courts can order disclosure of documents; The courts can order the consolidation of actions, such as third party

proceedings or joinder of parties, other multi-party disputes or class actionsthus saving time and costs;

A defendant can be compelled to enter an appearance or defence under acourt order;


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When an authoritative decision is required on a matter of public interest, ajudgment, unlike an arbitrators award, may be preferred.

4. A cooling-off period is defined under section 2 of the Direct Sales Act 1993 as theperiod of ten working days commencing on the day after the date of the making of adirect sale contract. A purchaser is protected under section 26 of the Act which provides that he can rescind or withdraw from the contract at any time before theexpiry of the cooling-off period without being liable for breach of contract. The purchaser merely has to serve a notice of rescission (Form AJL-3) by eitherdelivering it in person to the vendor or by registered post addressed to the vendor.Where the notice is posted, it is deemed to have been served on the expiry of 3 daysfrom the date it is posted section 26(3).

5. The employees listed in the First Schedule of the Employment Act 1955 include: Any person, irrespective of his occupation, who has entered into a contract ofservice and his monthly wages do not exceed RM1,500.00; Any person who, irrespective of the amount of his monthly wages, who has

entered into a contract of service of whichi. He is engaged in manual labour including such labour as an artisan orapprentice;ii. He is engaged in the operation or maintenance of any mechanicallypropelled vehicle used for the transport of passengers or goods or forreward or for commercial purposes;iii. He supervises or overseas other employees engaged in manual labouremployed by the same employer;iv. He is engaged as a domestic servant.

6. In Helby v Matthews (1895) the House of Lords ruled that a hire-purchase agreementwas 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 goodsout on hire (ie a contract of bailment) AND agrees that the hirer may either return thegoods and terminate the contract or he may exercise his option to purchase the goodson the completion of payments. This fundamental principle is enacted under section2(1) of the Hire-Purchase Act 1967 which states that a hire-purchase agreementincludes a letting of goods with an option to purchase. It further goes on to excludetransactions 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 isnot an agreement for the sale of goods.

7. Illustration (f) of Section 26 of the Contracts Act 1950 illustrates the concept thatconsideration need not be adequate with the following example:

A agrees to sell a horse worth $1,000 for $10. As consent to the agreement wasfreely given. The agreement is a contract notwithstanding the inadequacy of theconsideration.


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Explanation 2 of Section 26 states that an agreement is valid even though theconsideration is inadequate provided the consent of the promissory is freely given.Thus in Phang Swee Kim v Beh I Hock (1964) the Federal Court applied Explanation2 and Illustration (f) of section 26 and held that the agreement to transfer the land wasvalid despite the fact that the consideration was inadequate. In addition there was noevidence of suppression of the value of the property, misrepesentation, or fraud.

8. Section 3 of the Copyright Act 1987 defines live performance to include performances of works eligible for copyright such as dramatic, musical or literaryworks, and others such as improvised dramatic, musical or literary works, dances,circus act, variety act, puppet shows or performance in relation to expressions offolklore given live by one or more persons in Malaysia. The performance must begiven live by one or more persons in Malaysia but whether it was given in the presence of an audience is not material. Certain activities are excluded from thedefinition of live performance such as any reading, recital or delivery of any item of

news or information, any performance of a sporting activity or a participation in alive performance by a member of an audience.

9. Riba is an Arabic word which literally means increase, growth or to rise. Fromthe Syariah or Islamic point of view, riba technically refers to the premium orinterest that must be paid by the borrowed to the lender along with the principalamount as a condition for the loan. However, Muslims are prohibited from dealingwith riba. This is particularly so in Islamic banking and such banks are not allowedto conduct any banking business with an element of riba orinterest.

10.It is important to determine when property, that is, title or ownership, passes in a saleof goods because section 26 of the Sale of Goods Act 1957 provides that risk primafacie passes with property. In other words, when property in the goods has passedfrom the seller to the buyer, the buyer will have to bear all losses, damages ordestruction to the goods, irrespective whether delivery has been made or not. Inaddition, when property has passed, title has passed as well. Thus by determiningwhether property has passed from the seller to the buyer, one is also determiningwhether the buyer has the right to pass title to another person. Finally, the passing ofproperty is important because the right to sue a third party for damages to, or loss ofthe goods, may depend on who has the property.


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SECTION B

1 (a) An offer once communicated, remains open unless it has been withdrawn orrevoked. Under normal circumstances, there is no obligation for the proposerto keep his proposal open indefinitely. He may revoke it at any time so longas it has not been accepted by the offeree. Under section 5(1) of the ContractsAct 1950, a proposal may be revoked at any time before the communicationof the acceptance is complete as against the proposer but not afterwards.Section 6 further provides that a proposal is revoked by the communication ofnotice of revocation by the proposer to the other party.

In this case, although Jimmy promised to keep the offer open until 29.1.2004,he is under no obligation to do so. When Chris purported to accept the offerby sending a telegram on 25.1.2004, he was aware of the fact that Stan hadalready purchased the computer, indicating that the offer has already beenaccepted. It is thus essential to determine whether Chris can still accept the

offer even though he is aware of the fact that offer has been revoked.

Section 6 states that a proposal is revoked by the communication of notice ofrevocation by the proposer. In this case, Jimmy did not communicate therevocation. It was his friend, Stan, who had communicated that he hadpurchased the computer to Chris. In the case of Dickinson v Dobbs (1876)the English court held that communication of revocation need not be made bythe proposer personally so long as the offeree becomes aware that the proposer has withdrawn the proposal or changed his mind. This casehowever, seems to be at variance with the specific wording of section 6 whichstates that the proposal may be revoked by the communication of notice ofrevocation by the proposer (which may include his agent acting on his

behalf).

It is thus submitted that based on section 6, revocation of the offer must bemade by Jimmy or his agent. Is Stan Jimmys agent? If he is, then therevocation of the offer has been communicated to Chris and there is nobinding contract between Jimmy and Chris. On the other hand, if Stan is notJimmys agent, Chris can argue that the offer has not been revoked and hisacceptance will be effective to constitute a binding contract between him andJimmy.

(b) Where there is a breach of contract, the party not in default may claim one ormore of the following remedies: Rescission of contract; Damages Specific performance; Injunction or Quantum meruit.


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Specific performance is a decree of the court directing that the contract shall be performed specifically, that is, according to its terms. This remedyhowever, is entirely given at the discretion of the court guided by theprovisions of the Specific Relief Act 1950. Under section 20 of the SpecificRelief Act 1950, specific performance is not given if damages are adequate orwhere the contract would require supervision of the court, such as buildingcontracts.

On the basis of section 20, Amy is advised that she will not be able to forceExcel Sdn Bhd to complete the building of her home as this would entail thecourts supervision. She is advised to claim for damages (which would beadequate to compensate her) on the basis of section 74 of the Contracts Act1950. Section 74(1) states that an injured party is entitled to damages arisingnaturally from the usual course of things resulting from the breach. As suchthe extra cost incurred by Amy to employ another contractor to complete thework, would be a natural consequence of Excel Sdn Bhds failure to completethe building.

2 (a) 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 agreementsrelating to the goods specified in the First Schedule. The goods in the FirstSchedule include:

All consumer goods which are defined in section 2 to mean goodspurchased for personal, family or household purposes;

Motor vehicles namely invalid carriages; motor cycles; motor carsincluding taxi cabs, and hire cars; goods vehicles where the maximumpermissible laden weight does not exceed 1540 kilogram; and busesincluding stage buses.

(b) Prior to the formation of a hire-purchase agreement, an intending hirer mustbe given a written statement in accordance with the form set out in Part 1 ofthe Second Schedule. This is expressly provided by section 4. This SecondSchedule notice sets out the financial obligations of the intending hirer suchas the number of instalments to be paid including the amount of eachinstalment. This is to ensure that the intending hirer is aware of his financial

obligations before making a commitment to be bound by the hire-purchaseagreement. The intending hirer is under no obligation to enter into any hire- purchase agreement and is not required to provide any consideration for thepreparation or service of this notice. If this notice is not given to the hirer, thesubsequent hire-purchase agreement entered into by the hirer will be null andvoid.


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(c) Section 7(2) and (3) states that the implied terms of merchantable quality andfitness for purpose can be excluded in respect of second-hand goods providedthe agreement contains a statement to the effect

That the goods are second-hand; and

That all conditions and warranties of quality and fitness are expresslynegatived and the owner proves that the hirer has acknowledged inwriting that the exclusion or exemption clause was brought to hisnotice.

Section 34 further reiterates that the Act may itself permit the exclusion ofcertain provisions of the Act. Thus it is permissible to provide exemptionclauses in respect of second-hand goods.

(d) In Ming Lian Corporation Sdn Bhd v Haji Noordin (1974) the court held thatthe enforceability of a hire-purchase agreement was not affected if the hirer

signed an agreement with blank spaces which were later filled in by theowner provided the hirer was aware of the terms and knew what he wassigning. However, section 4B(2) expressly prohibits an owner, or dealerrequiring any intending hirer to sign a hire-purchase agreement unless suchhire-purchase agreement has been duly completed. The words unless suchhire-purchase agreement has been duly completed thus suggest that the hire- purchase agreement cannot be a blank document. It is thus submitted thatMing Lians case is no longer good law in the light of section 4B(2).

3 (a) As the sale is conducted through home parties, and not through the usualretailers or a fixed place of business, it would be deemed to be a door-to-doorsale and thus be deemed to be a direct sale.The Direct Sales Act 1993 wouldbe the regulating legislation. Section 2 of the Direct Sales Act 1993 defines adirect sale to include a door-to-door sale. A door-to-door sale is furtherdefined as the sale of goods conducted by a person or any person authorized by him who goes from place to place not being a fixed place of businessseeking out for purchasers. Goods are further defined as every kind ofmovable property other than choses in action, negotiable instruments, shares,debentures and money.

(b) To ensure that the business can be carried out legitimately, Angeline isadvised that by virtue of section 4 of the Direct Sales Act 1993, the businessmust be carried out by a body incorporated under the Companies Act 1965. Inaddition, a licence must be obtained from the Ministry of Domestic Trade andConsumer Affairs under section 6. The licence will only be issued providedthat the business is a genuine direct sale and not an illegal pyramid scheme.Section 7 defines an illegal pyramid scheme as one where the commissiongiven to the vendors is not dependent on sales volume but merely by therecruitment of members.


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Angeline is thus advised that the first thing she has to do is to register acompany under the Companies Act 1965. An application for a licence shouldthen be made by filing the documents required under section 6 which includesnot only the companys memorandum and articles of association, but also themarketing and trading scheme. Upon the issuance of the licence, it has to berenewed yearly in order to ensure that the business remains legitimate. Thelicence may be revoked by the Controller of Direct Sales for various reasonssuch as in the event that the company deviates from its marketing scheme orthe company is wound up.

In addition, Angeline is advised that the manner of conducting door-to-doorsales must comply with the Direct Sales Regulations 1993.

(c) Any person who, in the course of a trade of business, applies a false tradedescription to any goods or who supplies or offers to supply any goods towhich a false trade description is applied shall be guilty of an offence underthe Trade Descriptions Act 1972. A false trade description as defined under

section 4 includes the place of manufacture. Thus in this case, when the goodsare described as being manaufactured in the United States whereas they aremanufactured in Taiwan, the offence of applying a false trade description hasbeen committed.

On conviction, the person shall be liable to a fine not exceedingRM100,000.00 or to imprisonment for a term not exceeding 3 years or both.For a second or subsequent offence, the fine imposed shall not exceedRM200,000.00 or imprisonment not exceeding 6 years or more.

(d) There is a presumption of liability on advertisers under section 7A of the Act.Thus Success Sdn Bhd would be guilty of the committing an offence.

However, the company can raise the defence under section 23 on the groundthat the commission of the offence was due to the fault of another person, inthis case, Angeline.

Similarly, Lim & Co will also be held to have committed the offence but theycan easily claim the defence under section 24 that the commission of theoffence was to the reliance of information supplied to them by Angeline.However, for this defence to apply, they must prove that they had taken allreasonable precautions and had exercised all due diligence to avoid thecommission of the offence.

4 (a) Section 20 of the Patents Act 1983 provides that in the absence of any provisions to the contrary in any contract of employment, the rights to a patent for an invention made in the performance of the contract ofemployment shall be deemed to accrue to the employer. Sub-section 2 furtherstates that if the employees contract of employment does not require him toengage in any inventive activity but nevertheless the employee makes aninvention using the data or means placed at his disposal by the employer, theright of the invention belongs to the employer unless otherwise provided inhis contract of employment. As the employee makes use of the employersdata and means, it is fair to say that the invention should belong to the


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employer. Where the employee is employed to make inventions, he is said to be paid by the employer to make inventions and since the employer hasexpended money for this purpose, it is just to say that the invention shouldbelong to the company. However, an employee can expressly provide in hiscontract that the invention belongs to him. It will be up to him to negotiatewith his employer and the Patent Act 1983 does recognize the right of theemployee to expressly provide that the invention belongs to him.

Where an invention acquires an economic value much greater than the partiescould reasonably have foreseen at the time of concluding the agreement or theexecution of the work, the Act further provides that the inventor (ie theemployee) may be entitled to equitable remuneration which may be fixed bythe court in the absence of agreement between the parties. What is equitableremuneration is for the court to decide and it is possible that a court of lawmay adequately compensate an employee.

Section 26 of the Copyright Act 1987 similarly recognizes that copyright

belongs to the employer so long as the work was made in the course of theemployees employment. However unlike the Patents Act 1983, there is noexpress provision for equitable remuneration in the event that the workbecomes highly successful and profitable. A court may perhaps be persuadedto follow the Patents Act 1983. This is yet to be seen.

(b) Unlike copyright protection which does not have a system of registration, theexclusive rights of the owner of a patent under section 36 will only beenjoyed by him when the patent has been registered. An application must befiled in the Patent Registration Office and when the Registrar is satisfied thatthe application complies with the Act, he shall grant the patent and issue acertificate of grant and record the patent in the Register. Thereupon, the

owner has the exclusive right to exploit his patent.

5 (a) Section 26 of the Sale of Goods Act 1957( referred to as the Act) states thatthe goods remain at the sellers risk until the property is transferred to thebuyer. It is thus important to determine whether property has passed to thebuyer, Ali, for if it has, then Ali will have to bear the risk of the loss of thepainting. Section 19(1) of the Act states that where there is a contract for thesale of specific or ascertained goods, property in the goods is transferred tothe buyer at such time as the parties of the contract intend it to be transferred.In this case, the agreement between Ali and John specifically states that the

painting will not pas to the buyer until the last and final payment. As Ali hasnot made the last and final payment, property has not passed to him. Propertyremains with the seller, John, who thus will have to bear the risk of the loss ofthe painting.

(b) In this case, the parties Tanya and Vanessa did not indicate expressly whenproperty is to pass. In such a situation, the rules for ascertaining the intentionof the parties are found in sections 20 to 24 of the Act. Section 21 states thatwhere there is a contract for the sale of specific goods but the goods are not in


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a deliverable state (ie ready to be taken by the buyer) and the seller is boundto do something to put the goods into a deliverable state, the property doesnot pass to the buyer until the seller has taken the steps to put the goods in adeliverable state and the buyer has notice of it. Here the wheel on themountain bicycle had to be repaired, thus indicating that the bicycle is not in adeliverable state. Since the bicycle was damaged while at the workshop,property and risk thus remains with the seller, Vanessa. She will have to bearthe risk.

(c) Section 31 of the Act states that it is the duty of the seller to deliver the goodsand the duty of the buyer to accept and pay for them in accordance with theterms of the contract of sale. It is thus essential that parties keep to what hasbeen agreed upon. Thus section 37(3) states that where the seller delivers tothe buyer the goods he contracted to sell mixed with goods of a differentdescription not included in the contract, the buyer do any of the following:

accept the goods which are in accordance with the contract and rejectthe rest or reject the whole.Peter is advised that he can, if he wishes, refuse to accept the goods.

(d) Salim, as an unpaid seller, has essentially two rights ie 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 ontransit to the buyer or a right of resale;

or to sue for the price of the goods under section 55.In this case, Salim is no longer in possession of the goods as the 10 cartonshave been delivered to Saads office. His only remedy is to sue for the priceof the goods.

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Govt of Malaysia v Gurcharan