BUSINESS LAW

BBUN2103

MAY 2020

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LIST OF CONTENTS

Page

ASSIGNMENT 1
1.0 Introduction 1

2.0 Valid Contract Elements 1

2.1 Offer 1

2.2 Acceptance 2

2.3 Consideration 3

2.4 Capacity 3

2.5 Certainty 4

3.0 Void Contracts 5

3.1 Agreement which contravene the Law (Illegal 5

Contract)
3.2 Agreement in Restraint of trade 6
3.3 Agreement in restraint of legal proceeding 7

4.0 Recommendation for Amendment 8

5.0 Summary 8

ASSIGNMENT 2

1.0 Introduction 9

2.0 Way of Appointment of an agent. 10

2.1 Agency by Express Appointment by the Principal. 10

2.2 Agency implied Appointment by the Principal 10

2.3 Agency by Estoppels 11

2.4 Agency by Necessity. 11

3.0 Summary 12
I. References 13

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Assignment 1

1.0 Introduction

In Malaysia, contract law is fully governed and enforced by the Contract Act 1950. According
to the Malaysia legislation, contract is defined as an agreement that is formed by two or
more parties and gives declaration to every party to provide service, a product or focus on
demonstration and is enforceable by Malaysia Law. Contract Act 1950 stating that a contract
is an ‘agreement enforceable by law’ or ‘agreement which is legally binding between the
parties an agreement which binds the parties concerned. In order to make a contract, it
must be an offer an acceptane to the matters concerned. Section 38(1) of the Contracts Act
1950 provides that the parties to a contract must either perform or offer to perform their
respective promises, unless such performance has been dispensed with by any law A valid,
legal binding contract consist of several essensial elements, which consist of offers,
acceptane, consideration, capacity, intention, free consent, certainty and valid objects.

2.0 Valid Contract Elements

2.1 Offer

By referring to Section 2a in the Contact Act 1950, offer can be defined as when one
individual showed to another his willingness to do so or to refrain from doing anything, with
a view to gaining the approval of that other person to the act or abstinence, he is said to
make a proposal. On the other hand, offer is also widely known as proposal. An offer can be
made in the writing form or orally for as long as it not required to be composed by law. it is
clear action which initiate the contract or agreement and cannot be be ambiguous or
indistinct, so it must be spelled out in wording that are specific and precise so both party are
aware of what they were offered to. According to Malaysian Contract Law in 2013, they
describe that the nature of the article which is being offered and under what terms it is
offered as a key point when making a clear offer to other party, this is also briefly explained
in the Contract Act 1950 under section 2(a). In general, offer can be made either to an
individual, a group of persons or public. One is need to aware that when making offers to
the public, the offer is accepted for as long they perform the conditions stated in the offer
and as soon as they fulfil the offer, the one who make the offer are prohibited to withdraw
from the contract.

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The case of Harvey V.Facey in 1893 clearly tells us that any statement that is made in
purpose to give information to other individuals are deemed to be listed as an offers. To
explain further, an individual called as A giving an information to individual B, by telling him
will you sells us a bumper hall pen? Individual A then replied that they will sell the bumper
hall pen for 900 euro as he claimed it is the lowest offer possible, both party agreed to the
price and transaction was made. a claimed is arose by saying that a contract is exist
between them because there is an offer and acceptance between both party. The result of
this case is that the court had decided that individual A is only supply information and do
not make any offer and therefore it is not being count as a legal contract.

2.2 Acceptance

The second element for the formation of valid contracts is acceptance. Acceptance is clearly
defined in the section 2b of the Contract ACT 1950 as when a person to whom the proposal
is made implied his agreement thereto, the proposal is said to be accepted and the proposal
is accepted, it became a promise. Despite of that, there are two condition that must be fulfil
as stated in section 7 of Contract Act 1950 in order to make a valid acceptance. The first
one is it must be absolute and unqualified, this means the promise must agree to every part
of term exist in the proposal.This binds both parties to the contract. Acceptance, when in
doubt, can't be pulled back, nor would it be able to change the terms of the offer, or adjust
it, or alter it. To do as such makes the acceptance a counter-offer (Malaysian Contract Law,
2013). Acceptance is defined in Section 2(b) under CA 1950. The second condition is be
expressed in some usual and reasonable manner. The time limit for an Acceptance is
grounded on the principle of reasonable time. Last but not least, it is also said that an
Acceptance as well could be revoked under specific conditions and it is discussed in Section
5(2) of CA 1950 (Mazita Mohamed, Nurretina Ahmad Sharif, Rohizan Halim & Haslinda Mohd
Anua, 2011).

If we learn through Ramsgate Victoria Hotel Co v. Montefiore in 1966 we can

understand more about the time limit of an acceptance, the defendant was applied for some
share in the plantiff’s company as no further news was send to the defendant, when he was
informed that the share was allotted to him, the defendant is refused to accept the share.
The court had decide that the plantiff had been given an amount period of time to lapse
before accepting defendant’s offer and thus the defendant is not liable to accept the share.

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2.3 Consideration

One of the vital element of when forming a contract is the consideration part. Section 2(d)
of the contract order 1950 making a clear definition that consideration is exist in each
contract and its value is ranging and determined by the offeror’s wishes. Consideration of an
agreement might consist of conduct, price to pay in return to something or more,
consideration not always is a positive nature, and it also can be in the term of abstinence
from doing something such as hindrance, misfortune and more. Consideration must be
clearly settled upon by both parties to the agreement or it must be explicitly inferred by
the terms of the agreement. According to the Contract Act 1950 and English Law, It is
indistinct that in Malaysia, consideration might and often come from another person
which is labelled as the third party and not necessarily the promisee.

As an example, individual giving his promise to gift a present to individual B, if he

manages to won the athletic event. Thus, the consideration here is individual B, conduct,
which is to win a race and those consideration is valuable with regard in law so individual A
must keep his promise if B won the race and it is considered as a valid contract.

2.4 Capacity

The other element that is as important when forming a valid contract is capacity.
According to section 10 of the Contract Law 1950, everyone is having a capacity to
contract if they are be of the age of majority, be of sound mind and not disqualified
from contracting by any low that he is subjected to (Mazita Mohamed, Nurretina Ahmad
Sharif, Rohizan Halim & Haslinda Mohd Anua, 2011). In Malaysia, Age of Majority Act
1971 determined that an individual is achieving the age of majority at the age of 18 and
thus, by the age of 18 years old, they are eligible to enter into a contract. Apart from
that, one also should be of sound mind to make a contract. Apart from that, a person is
said to be of sound of mind if he is capable to understand and forming a rational
judgement as to its effect upon his interests (Section 12 of contract Law 1950) and ay
violation to this term will resulting in voidable contract. Last but not least, one must not
lose its capacity to make a contract to whatever law that he is subjected to. This is
mean, if there is any law that make one person lost his capacity to make a contract due
to some circumstances, that person is thought to have lost his capacity to enter a
contract.

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 According to Alsagoff (2010), every person who is competent to contract is free to
contract upon such terms as he thinks fit. So long as the consideration and object of the
agreement is lawful and not expressly declared to be void and he enters into the contract
freely and voluntarily, his contract shall be enforced by the courts of justice. The law
however placed limitations upon the capacity of certain persons to bind themselves by a
promise or to enforce a promise made to them. These person include minors, insane
persons and bankrupts. Section 10 of the Contract Acts 1950 clearly states that all
agreements are contracts if they are made by free consent of the parties competent to
contract. Section 11 of the Contract Act provides a person is competent to contract when he
is of the age of majority according to the law to which he is subject, and who is of sound
mind, and is not disqualified from contracting by any law to which he is subject. A person
who is below 18 years old is a minor in Malaysia as stated under section 2 of the Age of
Majority Act 1971. In other words, one has attained the age of majority at the age of 18.
Thus only those of this age are legally competent to enter a valid contract.

2.5 Certainty

The last element that is required when forming a contract is the certainty. Every
part, term, condition in the contract must be clear. An understanding can once in a while be
faulty because of the powerlessness of the court to figure out what are the genuine terms
concurred by the gatherings. Each term or condition in the agreement should in this way be
clear and its importance ascertainable (Mazita Mohamed, Nurretina Ahmad Sharif, Rohizan
Halim & Haslinda Mohd Anua, 2011)

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3.0 Void Contract

3.1 Agreement which contravene the Law (Illegal Contract)

Section 2(g) of the Contracts Act 1950 is stating that “An agreement not enforceable
by law is said to be void". Thus, an agreement will not be enforceable by law if it is illegal or
unlawful. A contract will be considered as unlawful/illegal and void if it consists of any one of
the following criteria as stated by s 24 of the Contracts Act 1950. Thus, any person that is
yearn to enter into a contract must ensure that the contact that they going to make is one
or could be considered as void. There are several factors that lead the contract to be void
such as agreement which contravene the law, an agreement that in restraint of trade and
legal proceedings.

Agreement which contravene the law (Illegal Contracts) may comprises of crimes or
a violation that maybe of a legislative rules or of common law. It is not because, federal nor
may legislatures endorse law that prohibited certain type of contract and declare it as a
void. In this regard it is easier to refer to some case studies. This case study involves Asia
Television Ltd and Viwa Video sdn Bhd. The Appellant file a complaint that claimed certain
copyright in video cassette form, claiming breach by the respondents.

The appellants’ claim to copyright was based on publication within the provisions of
section 2(2)(c) of the Copyright Act 1969. However, the Films (Censorship) Act 1952
provides for censorship of films including video, and imposes a penalty for non-compliance
with prescribed procedures which, inter alia, includes the issue of a certificate of approval by
the authority. The issue was the effect of non-compliance with provisions of the latter Act on
the question of acquisition of copyright under the Copyright Act. The appellant had not been
issued with a certificate from the authority under the Films (Censorship) Act. Abdoolcader F.
J., delivering the judgment of the Federal Court,cited with approval the following statement
of Megarry J. in Curragh Investment Ltd v. Cook:

“… where a contract is made in contravention of some statutory provision then,

in addition to any criminal sanctions, the courts may in some cases find that the
contract itself is stricken with illegality. But for this to occur, there must be a
sufficient nexus between the statutory requirements and the contract … There are
today countless statutory requirements of one kind or another, yet I cannot
believe that an individual or a company who is in breach of any of these
requirements (for example, under the Factories Act) is thereby disabled from

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making a legal contract for the sale of land, or validly entering into a covenant
for title.”

After considering the relevant statutory provisions and the question of interplay between
them, their Lordships concluded that there was insufficient nexus such as would satisfy the
test laid down in the Curragh Investment case. In their views, there was no prohibition in
either of the Acts which would preclude the appellants from acquiring copyright if they were
otherwise qualified, although they might have been in breach of the Films (Censorship) Act
which was concerned with criminal liability and provided penalties for breach. Consequently,
non-compliance with provisions of that Act did not affect the acquisition of copyright under
the Copyright Act.

3.2 Contract in restraint of trade

Contracts in restraint of trade are prima facie illegal and void and yet it can be rebutted by
providing information that the restraint is reasonable between parties involved and to the
interest of the public (Barker.D,2003). The plan and value of the law is summarised by Lord
Mac Naghten in Nordenfelt v. Maxim Nordenfelt Guns and Ammunition Co. Ltd saying that

“The public have an interest in every person’s carrying on his trade freely: so
has the individual. All interference with individual liberty of action in trading,
and all restraints of trade of themselves, if there is nothing more, are contrary to
public policy, and therefore void. That is the general rule. But there are
exceptions: restraints of trade and interference with individual liberty of action
may be justified by the special circumstances of a particular case. It is sufficient
justification, and indeed it is the only justification, if the restriction is reasonable,
that is, in reference to the interest of the parties concerned and reasonable in
reference to the interests of the public, so framed and so guarded as to afford
adequate protection to the party in whose favour it is imposed, while at the same
time it is in no way injurious to the public.”

Section 28 of the Contract Act on the other hand is strict compare to the English law,
it state that every agreement by which anyone is restrained from exercising a lawful
profession, trade, or business of any kind, is to that extent void. This mean, such restriction
is still void even if it is reasonable.

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 A strict implementation to the execution of section 28 of the Contracts Act renders all
contracts in restraint of trade void even with rational and relevant information. This
approached was used by Hashim J. in Wrigglesworth v. Anthony Wilson that rose an alarm
where the accuser and the defendant was agreed to not practicing as an advocate and
solicitor within the next five miles of Kota Bharu town for a period of two years after the
termination of his contract. Since the defendant breach the promise, the plaintiff applied for
an injunction to confine the defendant from practising. The effect of this case is, the high
court of Malaysia decline the use of English Law and the exact interpretation of section 28
would in effect render void some forms of mercantile contracts unless courts are prepared
to get around the question by adopting a more liberal approach.

3.3 Contracts in Restraints of legal Proceeding

According to section 29 of the Contracts Act, an agreement whereby a person ‘ is restricted

from enforcing his rights under or in respect of any contract, by the usual legal proceedings
in the ordinary tribunal, or which limits the time within which he may thus enforce his
rights, is void to that extent .’ Next, by referring to the English law, this restraint is
categorized as a contract that is looking to reject the jurisdiction of the courts, and so they
are void to that extent as being opposing to public policy. However, section 29 goes further
by making void those agreements that limits the time within which a person may enforce his
rights subject, of course, to the qualification that anytime limit must be within the period for
bringing an action prescribed by the Limitation Ordinance 1953.

In Corporation Royal Exchange v. Teck Guan76, a clause in a fire insurance policy

stated that ‘If the claim be made and rejected, and an action or suit be not commenced
within three months after such rejection, all benefit under this policy shall be forfeited.’ The
court resolved that this article reduced the period within which an assured might bring a suit
for compensation to a period less than authorized by the limitation statute. Hence, the
clause infringed section 28 of the Contracts Enactment [now section 29 of the Contracts Act]
and was therefore, to that extent, void.

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4.0 Recommendations For Amendment
The first recommendation is to add a new provision that give the authority to control
the content and terms of a contract. a numerous issues and complaint were files regarding
its confusing and incomprehensive part as it is does not shows a clear contents of each part
inside the contract (Sinnadurai & Koh, 1987). The Contract Act 1950 did not comprise or
indicate any specific establishment regarding the content of a contract. There is no specific
term inside a contract that can be categorized into its sole meaning. If this recommendation
were to implemented, it will benefits others as everyone will have better understanding and
thus giving the same justice towards all parties involved in the contracts and indirectly will
prevent the elements of mistake and involuntary misrepresentation exist in a contract.

Secondly, I would like to recommend that the authority to review back the contract
law 1950 to act as a medium to create trust value. If the law is examined holistically, we can
clearly see that this Act in general comprise a limited cover to its consumes and thus, as
technologies is advancing, there are many type/format of written contract which resulting to
many practices by commercial parties to exploit consumer using the CA 1950. To overcome
this problem, the authority should review back the main function of the act and use that as
the new platform to increase the relation amongst society that values trust instead as a tool
for short term profit. it would bring a huge benefit if the Contract Act would lead to the
collective solution instead of the current individualistic manner. The effects of this
improvement will minimize the elements of fraud that exist in when forming a contract.

last but not least, to improve the efficiency in executing the Contract Act, it is
recommended that this Act or law to be taught in secondary school to increase community
awareness toward Malaysia’s law in general and Contract Law in specific.

5.0 Summary
Malaysia as wholly used Contract Act when practising contract law in business matter
or others. Moreover, a contract is only considered as valid if it contain all the elements as
mentioned before which comprises of offer, acceptance, consideration, capacity, intention
and certainty. If the contract to the one making the contract failed to obey and submit to
this entire element, it is said to be a void contract in the eyes of the Law. Last but not least,
Contact Act in 1950, still need some improvement in some aspect to improves its reliability
purposes. All party need to engage into the contract with the intention to commit to a
collective agreement in a peace cohesive way and not based on short term purposed.

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Assignment 2

1.0 Introduction.
Agency is a relationship created when one person cannot act by himself and has to appoint
someone else to act for him. Agency is also a relationship between a Principal and an agent
in which the Principal confers his or her rights on the agent to act on Principal’s behalf.1
Law of Agency is governed by Part X, Contract Acts 1950

The concept of agency can be explained using this example. sometimes it is not possible for
a person to perform all tasks entrusted to him or her. For example, when a housewife has to
look after a few kids and at the same time she has to purchase groceries and fetch her kids
from school. Unless she gets some assistance from another person, she will not be able to
perform all the duties smoothly. Assistance from another person in law will give rise to the
creation of an agency law

As agency is a relationship between a Principal and his Agent, section 135 of Contract Acts
1950 defines Agent as person employed to do any act for another or to represent another in
dealings with third persons. Whilst Principal is defined as a person to whom such act is
done, or who, so represented, is called the Principal.

The example is A appointed B to be his agent to buy goods from C. A will be known as the
Principal, B is the agent while C is the third party. Agency relationship creates two contracts
enforceable by law. Firstly, a contract of agency between Principal and Agent and secondly,
a contract of sale between Principal and Third party.

In a contract of agency, consideration is not important. Under Section 136 and 137 of
Contract Acts 1950, capacity to be a Principal and Agent are as the capacity to contract
which is of majority age and sound mind. If Principal appoints a minor to be his agent,
Principal cannot claim if any loss incurred under Agent’s action. The contract between them
is void contract.

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2.0 Way of Appointment of an agent.
2.1 Agency by Express Appointment by the Principal.

Section 139 of the Contract Act state that the authority of agents can be conveyed through
an expression both in oral or writing or implied from words of conducts of both parties.
According to Section 140 of Contract Act, it is evidently states that an authority is said to be
express and appointed when it is given by words spoken or written.

2.2 Agency implied Appointment by the Principal

2.2.1 When a person by his words or conduct hold out another person as having
authorities to act for them.

This method of appointments is happen when a person is allowing another person, on his
behalf customarily pays for them and thus an agency might be formed. This is mean, he will
bound with the contract as if he has authorized. Plus, this is happening due to that one
person willingly taking someone else’s behalf and thus having the authorities to act for
them.

2.2.2 Agency relationship between husband and wife

A wife can legally use and use her husband’s name and credit to buy goods on credit if the
goods is a requirement and fit for their standard of living. On the Other hand, husband are
able to rebutted the privilege if the husband can prove that his wife is adequately provided
with the goods, is given ample amount of allowance to buy good without pledging husband's
credit and expressly warned the tradesman no to supply his wife with goods on credit or if
the order was irrational with her husband's income even though it was a necessity.

By referring to cases of Miss Gray Ltd v Earl Cathcart, his husband filed a complaint
that says his wife made a debt of 215 pounds by using his husband name. Then, as the
shop owner demand his payment, her husband argue that he gave his wife sufficient
monthly allowances for her to spend. thus by obeying the Contract Law 1050, her husband
is not bound to pay his wife’s debt. The case is said to be rebuttable by the issue of an
express warning to the trader, by the fact that the wife is sufficiently supplied with
allowances. Furthermore, if the husband can prove any of his statement, he is not prompt to
pay any of the good that his wife purchased. Thus the wife is personally liable and deemed
to pay her own debt.

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2.3 Agency by Necessity.

Even without formal appointment, in emergency cases, a person can become an agent by
necessity and this is stated by Section 142 of Contract Acts 1950. However some kind of
contractual relationship must already exist between them. Agency by necessity may be
appointed if the following criteria are met. The criterion includes, there must be a real and
actual emergency, the Agent's action is crucial in preventing loss to the Principal. It is
difficult for the Agent to talk and get further instruction from the Principal. Last but not
least, the Agent of necessity must act in good faith and his action must be reasonable in the
circumstances. In the case of Prager v Blatspiel, Stamp and Heacock,during the First World
War the plaintiff who was from Romania contracted to buy a number of furs from defendant
who was from London. The plaintiff paid for the skins but owing to the war the agent
couldn’t dispatch the skins to him. The skins increased in value and the agent sold them
under agency of necessity. The court held that there was no agency of necessity. The skins
were not likely to drop in value and could be preserved by proper storage.

2.4 Agency by Estoppels

Referring to section 190 of contract Act 1950, this section is used when a person who is
without authority or when he is not formally appointed, act as an Agent. But, the Principal is
conscious of it but does not deny the, authority of the person. The Principal, by his word or
conduct consents the third party to believe that the person is his Agent. Therefore, he will
be estopped from denying the agents authority.

As an instance, As A tells individual C in the presence of B that A is in consent is B’s

agent and B does not denying that A is his agent if C sells goods to A and believing him to
B’s agent and later claims for the price. Taking freeman and lockyer v Buckhurst part
properties as our case study, in that organization, there were a total of 4 directors and one
of this director , A contracted on behalf of the company with T which is a third party
without any authorities. The other board of directors knew about this contract but refuse to
inform individual T that A actually does not have any authority to act behalf of the family.
Thus, T is forced to believe that A had authority to enter into a contract on behalf of the
company. I was held that the company is estopped from denying that A is the company’s
agent and had authority on behalf of the company

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3.0 Summary

In a conclusion, it is believe that the law of agency is a mutual connection that was created
when a person appointed someone else’s to act in their behalf. Apart from that Law of agency
is governed by Part X of contract Acts 1950. There are several parties that make the
creation of agency and they are known as Principal and agent, where the agent is the one
who will act for the Principal. Last but not least, agency can be formed by using several
ways namely as express, implies and necessity.

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Assoc Prof Dr Zuhairah Ariff Abd Ghadas, Mazita Mohamed, Nurretina Ahmad Shariff,
Rohizan Halim, Haslinda Mohd Anuar, (2011). Business Law, Open University
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Past, Executed and Executory Consideration . (2003, June 02). Retrieved from
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/LA201E_topic4_unit2.html (2006). CONTRACTS ACT 1950. Kuala Lumpur: THE
COMMISSIONER OF LAW REVISION, MALAYSIA.

Consideration Cases. (2013, November). Retrieved from LawTeacher, UK:

http://www.lawteacher.net/cases/contract-law/consideration-cases.php

Contracts Law In Malaysia. (2013, November). Retrieved from LawTeacher, UK:

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Malaysian Contract Law. (2013, November). Retrieved from LawTeacher, UK:

http://www.lawteacher.net/free-law-essays/contract-law/malaysian-contract-law-
essay.php

Voidable Contract. (2016). Retrieved from Investopedia:

http://www.investopedia.com/terms/v/voidable-contract.asp

Contract Law Terms: Definitions & Contract Types. (n.d.). Retrieved June 16, 2016, from
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Mazita Mohamed, Nurretina Ahmad Sharif, Rohizan Halim & Haslinda Mohd Anua. (2011).
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Creation of agency. Retrieved from http://agency.uslegal.com/creation-of-agency/.

Contracts Act 1950.

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Kamaruddin Mahmood. (2014, March 1) Creation of Agency (Implied Agreement).

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Pedina, Mohana Rao. (2013) Business Law. New Delhi: PHI Learning Limited

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