MBA 1007

Business Law

Yap Ling

920330-14-6558

0163343338

200588

NOVEMBER 2015 SEMESTER

Contents

QUESTION 1....................................................................................................................2

QUESTION 2....................................................................................................................2
QUESTION 3....................................................................................................................3

QUESTION 4....................................................................................................................3

QUESTION 5....................................................................................................................4

QUESTION 6....................................................................................................................4

QUESTION 7....................................................................................................................5

QUESTION 8....................................................................................................................5

QUESTION 9....................................................................................................................6

QUESTION 10..................................................................................................................7

QUESTION 11..................................................................................................................8

QUESTION 12..................................................................................................................8

QUESTION 1

English common law and the rules of equity form part of the law of Malaysia.

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Discuss the extent of the application of the English law as applied in Malaysia today.

The law of Malaysia is mainly based on the common law legal system that means that

English law forms part of the laws of Malaysia. In Article 160 of the Federal

Constitution states the definition of law which includes the common law in so far as it

is in operation in the Federation or any part thereof that concerns the extent to which

the English law is applicable in Malaysia. In the Section 3 of the Civil Law Act 1956

(Act 67) (Revised 1972) gives the meaning of the English law which means the

common law of England and the rules of equity and, in prescribed circumstances,

English statutes.

The common law is the body of rule developed by the old common law courts - Court

of Exchequer, Court of Common Pleas and Court of Kings Bench that distinct from

the old Court of Chancery and were extinct todays world. Before Norman Conquest in

1066, the common law was applied in England and based essentially on customs

common throughout England in contrast to local customs. The common law is the

unwritten or unenacted law of England and it based solely on decisions of the courts.

Equity means fairness and is the body of rules developed first by the Lord Chancellor

and by the old Court of Chancery in the end of the fifteenth century. Equity, unlike the

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common law, is not a complete body of rules which can exist on its own and it merely

filled the gaps in the common law and softened the strict rules of common law.

Furthermore, equity is a discretionary system of justice. An equitable remedy is not

available as of right; it may not be granted if the plaintiff considered morally

undeserving. The equitable remedies offered were injunction, specific performance,

rescission and rectification that the major contributions of equity are the trust concept.

If there is a conflict between common laws and equity, the equity should always prevail

(the Earl of Oxfords case-1615)

Application Of English Law In The Federation Of Malaysia

In 1963, which when Malaysia was formed, there were three separate statutes

authorizing the application of English Law which are the Civil Law Ordinance 1956

(CLO 1956) in Peninsular Malaysia, the Application of Laws Ordinance 1951 in Sabah

as well as the Application of Laws Ordinance 1949 in Sarawak.

With effect from 1 April 1972, after the formation of Malaysia, the CLO 1956 was

extended to Sabah and Sarawak by the Civil Law ordinance (Extension) Order 1971.

The Civil Law Act 1956 (Act 67) (Revised 1972) (CLA 1965) being incorporate to all

the three earlier statutes that are the statutory authority for the application of English

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law in todays Malaysia. The extent of the application of English law is prescribed in the

following three sections which are Section 3, Section 5 and Section 6.

In Section 3 (1), it provides for the general application of English law. It states that:

Save so far as other provision has been made or may hereafter be made by any written

law in force in Malaysia, the Court shall:

In West Malaysia or any part thereof, apply the common law of England and the rules of

equity as administered in England on the 7th day of April, 1956;

In Sabah, apply the common law of England and the rules of equity, together with

statutes of general application, as administered or in force in England on the 1st day of

December, 1951;

In Sarawak, apply the common law of England and the rules of equity, together with

statutes of general application, as administered or in force in England on the 12th day of

December,1949 , subject however to sub-section 3(ii):

Provided always that the said common law, rules of equity and statutes of general

application shall be applied so far only as the circumstances of the States of Malaysia

and their respective inhabitants permit and subject to such qualifications as local

circumstances render necessary.

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In short, section 3(1) provides that the courts in Malaysia shall apply the common law

as well as rules of equity existing in England in the absence of written law on 7th April

1956 in West Malaysia, 1st December 1951 in Sabah and 12th December 1949 in

Sarawak.

In sub-sections (1)(b) and (1)(c) of section 3 states that English statutes of general

application Sabah and Sarawak shall be applied. The difference in wording between

these subsections on the one hand and subsection (1)(a) on the other hand perpetuated a

controversy which earlier arose from section 3(1) CLO 1956 which was word for word

the same as section 3(1)(a) CLA 1956. Are English statutes of general application

applicable in West Malaysia? Two views, each as cogent as the other, exist. Professor

Bartholomew, writing on section 3(1) CLO 1956, holds that such English statutes are

applicable.39 Joseph Chia, in discussing the corresponding provision in the CLA 1956,

expresses a contrary opinion.40 Judicial opinion supports the Joseph Chias view.

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QUESTION 2

(a) State the similarities and differences between legislation and subsidiary

legislation

Legislation refers to the laws which have been formally passed by the properly elected

bodies, i.e. the Parliament (at the Federal level) and the State Legislative Assemblies (at

the State level). Legislation passed by Parliament is generally called an Act

of Parliament, while those passed by the State Legislative Assemblies are called

Enactments (with the exception of Sabah and Sarawak, where they are called

Ordinances).

Delegated legislation (also known as subsidiary legislation) refers to the rules and

regulations, which are passed by some person or body under some enabling parent

legislation. The Interpretation Act 1967 defi nes it as any proclamation,

rule, regulation, order, bye-law or other instrument made under any Act, Enactment,

Ordinance, or other lawful authority and having legislative effect.

Subsidiary (delegated) legislation, though necessary, needs to be sufficiently

controlled. In relation to the Malaysian legal system:

a. explain and distinguish legislation from delegated legislation; and

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 b. the advantages/ importance of subsidiary (delegated) legislation,c.

its disadvantages and the ways in which it may be controlled.

Legislation Vs Delegated Legislation

Legislation refers to the laws which have been formally passed by the properly

elected bodies, i.e. the Parliament (at the Federal level) and the State Legislative

Assemblies (at the State level). Legislation passed by Parliament is generally called an

Act of Parliament, while those passed by the State Legislative Assemblies are called

Enactments (with the exception of Sabah and Sarawak, where they are called

Ordinances).

Delegated legislation (also known as subsidiary legislation) refers to the rules

and regulations, which are passed by some person or body under some enabling parent

legislation. The Interpretation Act 1967 defi nes it as any proclamation,

rule, regulation, order, bye-law or other instrument made under any Act, Enactment,

Ordinance, or other lawful authority and having legislative effect.

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(b) Does the common law of England apply in Malaysia? Give reasons for your

answer.

The law of Malaysia is mainly based on the common law legal system that means that

English law forms part of the laws of Malaysia. In Article 160 of the Federal

Constitution states the definition of law which includes the common law in so far as it

is in operation in the Federation or any part thereof that concerns the extent to which

the English law is applicable in Malaysia. In the Section 3 of the Civil Law Act 1956

(Act 67) (Revised 1972) gives the meaning of the English law which means the

common law of England and the rules of equity and, in prescribed circumstances,

English statutes.

The common law is the body of rule developed by the old common law courts - Court

of Exchequer, Court of Common Pleas and Court of Kings Bench that distinct from

the old Court of Chancery and were extinct todays world. Before Norman Conquest in

1066, the common law was applied in England and based essentially on customs

common throughout England in contrast to local customs. The common law is the

unwritten or unenacted law of England and it based solely on decisions of the courts.

Equity means fairness and is the body of rules developed first by the Lord Chancellor

and by the old Court of Chancery in the end of the fifteenth century. Equity, unlike the

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common law, is not a complete body of rules which can exist on its own and it merely

filled the gaps in the common law and softened the strict rules of common law.

Furthermore, equity is a discretionary system of justice. An equitable remedy is not

available as of right; it may not be granted if the plaintiff considered morally

undeserving. The equitable remedies offered were injunction, specific performance,

rescission and rectification that the major contributions of equity are the trust concept.

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QUESTION 3

Pak Mat wants to give his land to his daughter, Minah, for her 21st birthday. As Minah

will not be paying any money to her father, her father worried that since there is no

consideration for the transfer of his land to Minah, the transfer may be void by virtue of

section 26 of the Contracts Acts 1950. Advise Pak Mat.

An agreement without a valid consideration is void unless they belong to one of those

categories of agreement listed in the same section as being exempted from the rule.

Section 2(d) Contact Act 1950

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 so or to abstain

from doing something, such act or abstinence or promise is called consideration of the

promise

Consideration may be viewed as a sort of bargain, or price which one party pays to buy

the promise or act of the other. When the promisor promises to do or to abstain from

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doing something, the promisee must pay a price for it. This price to be paid may be an

act or abstinence or a price to perform a future act or abstinence.

Example

A lost his cat and offered a reward of RM 1000/- to anyone who finds it and returns it to

A. B finds the cat and returns it to A. Here B pays the price for A promise by performing

the act which by Sec 2(d) is the consideration of the promise.

TYPES OF CONSIDERATION

Consideration can be classified as:

1. Executory

2. Executed

3. Past

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QUESTION 4

Ms BC is an officer with Bank XYZ Bhd in Kuala Lumpur. Advice Ms BC on the

following issues:

(a) Would it be advisable for Ms BC to open a joint saving account for Mr and Mrs

N if Mr N was recently adjudged a bankrupt? State the reason(s) for your answer.

How a joint account holder will be affected depends on the type of account and the

bankruptcy laws in your state. If the account is a savings, checking, or other similar type

of account, a joint account holder could be affected. Any account with your name on it

can be considered an asset for your bankruptcy estate. Even though the joint account

holder will not incur liability for your debts simply because they share a savings

account with you, their interest in the account could be affected. A bankruptcy trustee

may want to use the funds in the account to satisfy your debts. Depending on your

states rules and the structure of the account, the bankruptcy trustee may have the ability

to use all or fifty percent of the funds in the account.

That doesn't mean that a Chapter 7 trustee will successfully grab all the funds in a joint

account, however. If you can offer proof that only a certain amount of the money

actually belongs to you, or that your name is on the account merely as a convenience to

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a friend or relative who really owns the account, you may be able to rebut the

presumption that the funds in the account belong to despite your name being on the

account.

Don't be tempted to use a joint account as a way of putting assets beyond the reach of

your creditors. Say you open a joint account with your neighbor Fred. You sell your

Porsche and deposit the check. Fred then withdraws the check and buries the money in a

tin can in his backyard, right next to the fence. This transaction is a fraudulent transfer,

and Fred can be required by a creditor or Chapter 7 trustee to return the payment.

If money is held in a bank account in joint names, the official receiver or trustee must

decide how much of the money legally belongs to the bankrupt. Only the bankrupts

share of the money will be treated as an asset in the bankruptcy; money belonging to the

other accountholder will be released to them (i.e. it will not form part of the bankrupt

estate). However, if the bank account is overdrawn, the bank can ask the joint account

holder to pay all the money owed.

For a couple (married or not) who have joint debts and wish to become bankrupt, it is

simpler to lodge separate debtors petitions and statements of affairs. Joint debts should

be shown in full in each statement, because each joint debtor is fully liable for payment

and the liability cannot be divided (for example, a joint debt of $6,000 should be shown

on each individual statement as $6,000). For joint secured debts, the total amount of the

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debt less the value of the security is used to calculate the amount owing. Each debtor is

responsible for the total debt, and should show it in full. Their equity in the asset, if any,

is shared, and the value of the equity should be halved to show each persons share.

(b) Would it be advisable for Ms BC to open a saving account for Mr T, a 17-year-

old person, who appears to be mentally unstable? State the reason(s) for your answer.

It would be advisable for Ms BC to open a saving account for Mr. T in conjunction with

a guardian.

Managing money well is a problem for many people. For people living with a mental

illness, however, financial situations can become even more complicated. Substantial

medical bills coupled with a limited income can make money management extremely

challenging. Although financial pressures can be stressful, there are ways to get a handle

on your finances and reclaim your financial independence.

Develop a Spending Plan

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If you find that you are frequently running out of money before you receive your next

check or that you are in debt from borrowing from friends and family, you may want to

review your finances and make a spending plan. Spending plans can help you prepare in

advance.

Step 1: Know Your Income

You should make sure you know exactly how much money you expect to get and when

you expect to get it. If you receive regular checks from the government or an employer,

you should know what to expect. If your hours and pay varies from week-to-week or

you are self-employed, you should project an average set of wages.

Step 2: Know Your Regular Expenses

Look at the previous month and think of all the expenses that you regularly have to pay.

Some expenses, such as rent, will have a fixed cost. Others will vary based on usage

(such as power) or what you've spent. These expenses might include:

Rent

Utilities (telephone, cable, Internet, power, water, trash)

Groceries

Insurance

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 Medications

Transportation costs

Medical costs not covered by insurance

Entertainment and leisure costs

Personal costs

Any debt repayments

Step 3: Use all of this information to create a spending plan.

A spending plan serves as a good guideline.

Step 4: Print out this Daily Spending Journal from the National Endowment for

Financial Education's (NEFE) guide "Your Personal Financial Growth."

No matter how well we plan, there is always a temptation to buy something extra-chips

or soda from a vending machine, a new pair of shoes, or a coffee from a store you walk

by. Impulse buying can be fun and rewarding, but impulse buying on a regular basis can

cause financial troubles.

If you write down everything you buy in a daily spending journal-even if you just buy a

newspaper for $0.50-you will get a chance to uncover some new information. You may

not think that three cans of soda a day is a lot, but each can costs a dollar. Three cans a

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day is $3.00. If you drink three cans of soda every day for a year, you spent $1095 on

soda. If you smoke a pack a day at $5/pack, you spend $1,825 a year on cigarettes

alone.

Getting Help

If you are having a difficult time managing your money despite efforts to track and

regulate your spending, you may want to consider asking a trusted family member or

friend to assist you with your finances. There are several ways you can do this.

Informal mentoring by others - Friends, family, and volunteers may help you manage

your finances. Schedule a regular meeting to have someone come over and help you

look at your finances and see whether you have been spending well.

Mentoring or Assisting Programs - One of the easiest ways to get help with your

finances is to join a mentoring or financial assistance program. If you are part of a

financial institution, there may be advisors on staff who can help you manage your

money. Local non-profits might also offer training.

Power of Attorney - If, because of your condition, you are unable to manage yours

affairs, you can give other people the ability to exercise some or all of your actions in

your name, including financial actions, through a power of attorney. A power of attorney

is a legal document and needs to be notarized. The more specific and limited a power of

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attorney is, the better. For example, a good power of attorney might authorize Jane Doe

to make withdrawals from your bank account to pay your utility and rent bills only. A

more broad power of attorney allowing Jane Doe to make withdrawals from your bank

account could cause more problems.

QUESTION 5

Dozier and his wife, daughter, and grandson lived in the house Dozier owned. At the

request of the daughter and grandson, Paschall made some improvements to the house.

Dozier did not authorize these, but he knew that the improvements were being made and

did not object to them. Paschall sued Dozier for the reasonable value of the

improvements, but Dozier argued that he had not made any contract for such

improvements. Was he obligated to pay for such improvements?

A contract is a legally binding or valid agreement between two parties.

The law will consider a contract to be valid if the agreement contains all of the

following elements:

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 1. offer and acceptance;

2. an intention between the parties to create binding relations;

3. legal capacity of the parties to act;

4. genuine consent of the parties;

5. consideration to be paid for the promise made;

An agreement that lacks one or more of the elements listed above is not a valid contract.

Each of these elements is dealt with in more detail in this section.

In Contract law there is what is referred to as part performance and unjust enrichment.

Although, there was no written contract and the courts will have to figure out what the

contractor is entitled to, he will be entitled to something because one, he performed, two

the home owner will be unjustly enriched if he is not compensated and more

importantly, three, the home owner was aware of the improvements and allowed the

contractor to perform.

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QUESTION 6

When Harriet went away for the summer, Landry, a house painter, painted her house. He

had a contract to paint a neighbours house but painted Harriets house by mistake.

When Harriet returned from vacation, Landry billed her for $3,100, which was a fair

price for the work. She refused to pay. Landry claimed that she had a quasi-contractual

liability for that amount. Was he correct?

A quasi-contract (or implied-in-law contract or constructive contract) is

a fictional contract created by courts for equitable, not contractual, purposes. A quasi-

contract is not an actual contract, but is a legal substitute formed to

impose equity between two parties. The concept of a quasi-contract is that of a contract

that should have been formed, even though in actuality it was not. It is used when a

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court finds it appropriate to create an obligation upon a non-contracting party to avoid

injustice and to ensure fairness. It is invoked in circumstances of and is connected with

the concept of restitution.

Generally the existence of an actual or implied-in-fact contract is required for the

defendant to be liable for services rendered, and a person who provides a service

uninvited is anofficious intermeddler who is not entitled to compensation. "Would-be

plaintiffs cannot deliver unordered goods or services and demand payment for the

benefit....A corollary is that one who does have an enforceable contract is bound by the

contract's terms: subject to a few controversial exceptions, she cannot sue for restitution

of the value of benefits conferred..." [1] However, in many jurisdictions under certain

circumstances plaintiffs may be entitled to restitution under quasi-contract (as in the

example of Oklahoma below). They are used as remedies for unjust enrichment,

management of another's affairs, or payment of a thing not due.

Quasi-contracts are defined to be "the lawful and purely voluntary acts of a man, from

which there results any obligation whatever to a third person, and sometime a reciprocal

obligation between the parties.

Hence, Landry was correct and Harriet had to pay for the work.

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QUESTION 7

Smith made a contract to sell automatic rifles to a foreign country. Because the sale of

such weapons to that country was illegal under an act of Congress, the U.S. government

prosecuted Smith for making the contract. He raised the defense that because the

contract was illegal, it was void and there is no binding obligation when a contract is

void; therefore, no contract for which he could be prosecuted existed. Was he correct?

The dealer's point seems good, but it's moot and is proof of his intentions and desires.

1. It is against American law to sell arms to anyone, unless

a. the American is a licensed arms dealer (licenses from the ATF)

b. the buyer has been cleared to buy; clearance issued by the ATF and the state

criminal files center (cost $9)

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2. Therefore, making a commitment to sell arms to anyone else is a violation of law. The

intention is proven by the contract.

3. Therefore, the contract is not enforceable in the US courts. That does not render the

contract null and void -- it may be recognized as a binding contract in the buyer's

country! --and it might be enforceable in the World Court. Of course, the payoff may

be a .44 magnum (or a 9-mm parabellum) in the back of the neck, too.

4. Moving forward, the ATF will prove several aspects of their case to get a guilty

verdict. Criminal intent is only one part. Access to weapons, perhaps owning them in

fact, establishes the sincerity of the seller. If the seller is unable to locate or purchase

arms, then it can be argued he did it not to sincerely sell arms, but to run a confidence

game and steal the buyer's money. Which once uttered, convicts the man of intended

theft.

5. If a second person is involved (and with an arms contract, there's at least one other

person) -- you have a separate violation of the RICO act. This is independent of the

ATF case for selling firearms to an unqualified buyer.

6. The counts against you at this point:

attempting to sell arms to a buyer not cleared to buy them

issuing an invalid commercial paper ("contract") to a second party

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 pursuing the violation of US law in issuing the commercial paper; and in

attempting to sell arms et al

violation of the RICO statutes.

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QUESTION 8

Ray, Linda, and Nancy form a partnership. Ray and Linda contribute property and cash.

Nancy contributes only services. Linda dies, and the partnership is liquidated. After all

debts are paid, the surplus is not sufficient to pay back Lindas estate and Ray for the

property and cash originally contributed by Linda and Ray. Nancy claims that the

balance should be divided equally among Ray, Lindas estate, and Nancy. Is she correct?

From the case above, if the distribution provisions provided that upon liquidation, the

assets are to be distributed based on positive capital accounts, then the cash would be

distributed to Linda's estate and Ray.

If the allocation provisions provided that all distributions, liquidation or not, are to be

distributed first to Linda and Ray until Linda and Ray have received cumulative

distributions equal to their contributions and then the balance to be split among all

partners, then the cash would be distributed to Linda's estate and Ray.

If the distribution provisions simply provided that all distributions, liquidation or not,

are to be distributed equally among the partners, then the cash would be distributed

equally to all 3 partners...this would then result in Linda's estate and Ray then having a

capital loss for their resulting positive capital account and Nancy would have phantom

income for her resulting negative capital account balance.

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QUESTION 9

Baxter, Bigelow, Owens, and Dailey were partners in a New York City advertising

agency. Owens, who was in poor health and wanted to retire, advised the partners that

she had assigned her full and complete interest in the partnership to her son,

Bartholomew, a highly qualified person with 10 years of experience in the advertising

business. Baxter, Bigelow, and Dailey refused to allow Bartholomew to attend

management meetings and refused his request to inspect the books. Bartholomew

pointed out that his mother had invested as much in the firm as any other partner. He

believed, as assignee of his mothers full and complete partnership interest, that he is

entitled to (a) inspect the books as he sees fit and (b) participate fully in the

management of the firm. Was Bartholomew correct?

This depends on what the Partnership Agreement provides. If it requires consent for an

assignment or that any assignment makes the recipient merely an "assignee" rather than

a substituted partner, then the recipient would either not be entitled to receive the

interest without consent, or would not be able to participate in management unless the

other partners agreed to admit the recipient as a substituted partner. If the Agreement

allows assignments and that the recipient would be admitted as "substituted partner"

automatically, then Bartholomew would be correct.

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QUESTION 10

Amy Gargulo and Paula Frisken operated as a partnership Kiddies Korner, an infants

and childrens clothing store. They operated the business very successfully for three

years, with both Paula and Amy doing the buying and Paula keeping the books and

paying the bills. Amy and Paula decided to expand the business when an adjoining store

became vacant. At the same time, they incorporated the business. Childrens Apparel,

Inc., was a major supplier to the business before the expansion. After the expansion,

business did not increase as anticipated, and when a nationally known manufacturer of

childrens apparel opened a factory outlet nearby, the business could no longer pay its

bills. Childrens Apparel, which had supplied most of the stores stock after expansion,

sued Amy and Paula as partners for bills due for expansion stock. Childrens Apparel

did not know that Amy and Paula had incorporated. Amy and Paula contended that the

business was incorporated and that they therefore were not liable for business debts

occurring after incorporation. Were Amy and Paula correct?

The incorporation of the business required them to file Articles of Incorporation with

the Secretary of State. The new business name would have been required to include

something such as Inc., Corp., Corporation, etc. to indicate the limited liability status of

the firm. As long as Amy and Paula either:

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i) changed all cards and stationary and invoices to show the new corporate name, or

ii) if they did not, filed assumed name certificate with the Secretary of State and local

county...then they would be protected. If they did neither, Childrens Apparel would

have a valid claim.

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QUESTION 11

Ross, Marcos, and Albert are partners. Ross and Marcos each contributed $60,000 to the

partnership; Albert contributed $30,000. At the end of the fiscal year, distributable

profits total $150,000. Ross claims $60,000 as his share of the profits. Is he entitled to

this sum?

A type of business organization in which two or more individuals pool money, skills,

and other resources, and share profit and loss in accordance with terms of

the partnership agreement. In absence of such agreement, a partnership is assumed

to exit where the participants in an enterprise agree to share

the associated risks and rewards proportionately .

A partnership, as distinguished from a corporation, is not a separate entity from the

individual owners. The partnership income tax is paid by the partnership, but the profits

and losses are divided among the partners, based on their agreement.

Partnerships are usually registered with the state in which they do business, but the

requirement to register varies from state to state.

A type of unincorporated business organization in which multiple individuals,

called general partners, manage the business and are equally liable for its debts; other

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individuals called limited partners may invest but not be directly involved

in management and are liable only to the extent of their investments. Unlike a Limited

Liability Company or a corporation, in a partnership each partner shares equal

responsibility for the company's profits and losses, and its debts and liabilities. The

partnership itself does not pay income taxes, but each partner has to report their share of

business profits or losses on their individual tax return.

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QUESTION 12

Compare and contrast consolidations, mergers, and conglomerates.

A Merger is when two or more corporations come together but only one of the

corporation stays exists afterwards. For example if company A and Company B merge

to and only company A or B exists afterwards. In consolidation, when two or more

corporations come together to form a completely new corproation. For example

company A and Company B consolidate to form company C.

Mergers and consolidations are both ways in which companies can combine to add

assets, increase market share and grow profits. A merger is different from a

consolidation, but both follow essentially the same process.

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 COURSEWORK
1. Please summarize the difference between a company, partnership and sole-
proprietorship.

A comparison highlighting the distinction between a company, partnership and sole-

proprietorship is summarized and simplified as follows:

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