ASSIGNMENT – LEGAL FRAMEWORK FOR MANAGERS

TABLE OF CONTENTS

1. Question 1 and Answers Page 2

2. Question 2 and Answers Page 2

3. Question 3 and Answers Page 4

4. Question 4 and Answers Page 6

5. Question 5 and Answers Page 7

6. Question 6 and Answers Page 12

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1. QUESTION 1

State any rights in which the Employment Act 1955 gives exclusive protection to

female employees.

1.1. ANSWER 1

As stipulated in Employment Act 1955:

a) Under Section 34(1), employers are not permitted to employ women to carry

out industrial and agricultural work between 10.00pm to 5.00am without

exemption from the Director General of Labour Department; and

b) Under Section 35, no female employee shall be employed in any underground

working.

2. QUESTION 2

State whether the parties below are required by law of contract to fulfill their legal

obligations in the following situations and explain your answer:-

a) Ronaldo wants to accept the offer made by Tom. Since Tom does not stipulate

the mode of acceptance, Ronaldo decides not to take any action and

presumes that Tom shall understand and accept his silence as an acceptance.

b) Aiman placed the following advertisement in Motor Trader magazine: “For

sale- 1965 Mini Austin in good condition. A bargain at RM12,000”. Tom, who

was interested in vintage cars, wrote a letter to Aiman on Monday offering to

buy the car for RM10,000. Aiman wrote back saying, “ I’m afraid I cannot

accept anything less than RM12,000. Let me know by Friday evening if you still

wish to buy the car”. On receipt of the letter, Tom wrote back immediately

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saying :”RM12,000 seems a bit pricey, but I’ve always wanted to own a Mini

Austin, so consider it a deal. I am a bit short of money this month. Would you

be willing to accept RM6,000 immediately and the rest next month? If I hear no

more from you I shall take it that we’ve got a deal and I will collect the car on

Friday”. The letter was lost in the post and never arrived. Aiman having heard

nothing from Tom, assumed that Tom was not interested in the car and agreed

to sell it to Zul on Friday morning. Tom arrived at Aiman’s house to collect the

car on Friday afternoon and saw Zul drive off in the car. Advise Tom whether

there exist a contract for the sale of the car between him and Aiman.

2.1. ANSWERS 2

a) By law of contract (Proposal and Acceptance), neither Tom nor Ronaldo are

required to fulfill their legal obligations since silence does not necessarily

indicate there is acceptance and acceptance only becomes effective when it

has been communicated. According to Section 3 of the Contracts Act 1950,

acceptance must be made in the manner prescribed by the offer. In this case

even Tom did not stipulate the mode of acceptance. However, according to

section 4(1) of the Contracts Act 1950, the communication of the proposal

(offer) is complete as it has come to the knowledge of the person to whom it is

made which is Ronaldo.

b) In the case of Aiman (proposer) and Tom (acceptor) by law of contract

(Contracts Act 1950) this case is classified as counter offer. The acceptance

must be made in exactly the same terms as the proposal. There should not be

any modification of the proposal. If an offer is modified, the modification will

become a counter offer and not acceptance. It is concluded that there is no

contract exist between Aiman and Tom even though Tom had communicated

his acceptance to Aiman. By making a counter offer, Tom had rejected the

original offer. Reference case is Hyde v. Wrench (1940) 3 bench 334.

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3. QUESTION 3

Mr. Irfan, a sixteen year old boy, wants to know as to whether he can enter into

commercial contracts. Advise him as to what types of contracts he may enter into

legally.

3.1. ANSWER 3

In Irfan case, according to the law of contract, capacity to contract, in order to form a

valid and binding contract, the parties must have the capacity and are competent to

enter into contract. Section 10(1) of the Contracts Act 1950 states that "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". The following persons are considered not competent

to enter into a contract:

1. Minors

2. Insane person

3. Bankrupts

In term of effect of contracts made by minors, according to general rule in Malaysia:

contracts made by infants are void. This can be referred to case of Mohori Bibee v.

Dhurmodas Ghose (1903) 30 Cal 539, 30 1A 114.

However, there are exceptions to the general rule which are contracts of insurance,

contracts of necessaries and contracts of scholarship which Irfan may enter into

legally.

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1. Contracts of insurance:

According to the Insurance Act 1963 (revised 1972): an infant over the age of 10

years may enter into a contract of insurance. But if he or she is below the age of 16

years, he or she can only enter into a contract of insurance with the written consent of

his or her parents or guardian.

2. Contracts for necessaries:

Necessaries: things which are essential or necessary to the existence and reasonable

comfort of the infant, such as food, clothes. Luxurious articles do not fall within

category of necessaries.

Education was held to be included under necessaries in the case of Government of

Malaysia v Gurcharan Singh & Ors (1971) 1 MLJ 211.

Contracts of scholarship:

Contracts (amendment) Act 1976: A scholarship agreement entered into by an infant

is valid when the scholarship, award, bursary, loan or sponsorship is granted by

federal or state government, a statutory authority or an educational institution such as

university.

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4. QUESTION 4

Discuss the legal rights of unpaid seller against the buyer.

4.1. ANSWER 4

In remedies for breach of contract, the definition of unpaid seller according to the Sale

of Goods Act 1957 is: a seller to whom the whole of the price has not been paid or

tendered; or when a bill of exchange or other negotiable instrument has been

received as conditional payment, and the condition on which it was received has not

been fulfilled due to the fact that the instrument has been dishonoured etc.

1. Legal rights of unpaid seller against the goods are:

a) A lien on the goods for the price, where he is in possession of the goods

(section 46 (1) (b) of the Sale of Goods Act 1957)

b) A right of stopping the goods in transit in the case of the buyer's insolvency,

where he has parted with the possession of the goods (section 46(1)(b) of the

Sale of Goods Act 1957)

c) A right of resale, subject however to section 54 (section 46(1)(c) of the Sale of

Goods Act 1957.

d) A right of withholding delivery, where the property in goods has not passed to

the buyer (section 46 (2) of the Sale of Goods Act 1957)

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2. Rights of the seller to sue for breach of contract.

The seller can sue the buyer for breach of contract if:

a) It is contracted that the price be paid on a certain date regardless of delivery

and the buyer wrongfully neglects or refuses to pay such price even though the

property in the goods has not passed and the goods have not been

appropriated to the contract (section 55(2) of the Sale of Goods Act 1957)

b) The property in the goods has passed to the buyer and the buyer wrongfully

neglects or refuses to pay for the goods; (section 55(2) of the Sale of Goods

Act 1957)

c) Also referring to Section 31 of the Sale of Goods Act 1957: it is the duty of the

seller to deliver the goods whereas it is the duty of the buyer to accept and to

pay for them in accordance with the terms of the contract of sale.

5. QUESTION 5

In what ways may an agency be created? When the agent would lose his right of

remuneration?

5.1. ANSWERS 5

1. Creation of agency according to Contracts Act 1950

a) Definition of Agency: the relationship which subsists between a principal and

an agent, where the agent has been authorised to act for the principal or

represent him in dealing with others.

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b) Definition of a principal: a person who authorises the agent to act on behalf of

him.

c) Definition of an agent is a person who is employed by the principal to do

certain act for him or to represent him in dealings with third party (Section 135

of the Contracts Act 1950)

d) According to Contracts Act 1950, creation of an agency is created by the

agreement of both the principal and the agent. No specific formality in order to

form a contract of agency. Consideration is not necessary in order to form a

contract of agency (Section 138 of the Contracts Act 1950)

e) Creation of agency may be made by:

i. By express appointment

The agent is appointed either orally or in writing (Section 140 of the

Contracts Act 1950)

ii. By implied appointment

It may occur in three situations:

Implied by the Partnership Act 1961

Section 7 of the Partnership Act 1961 states that: "every partner is an

agent of the firm and his other partners for the purpose of business of

the partnership"

The firm or other partners are liable to whatever contracts which had

been entered into by any of the partners.

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Implied from the circumstances of the case

The creation of agency may be implied by referring to the words,

conduct or the regular conduct of the business between parties.

It appears to third parties that certain person is having authority to act

on behalf of another person (Section 140 of the Contracts Act 1950)

Implied from the relationship of husband and wife.

It is implied that the wife has authority to pledge the husband's credit in

a contract, on a condition that the contracts are for necessaries and

suited to their condition and style of living. In other words, the wife is an

agent of the husband.

But the husband can rebut this implied authority by proving that:

He expressly forbade his wife from pledging his credit;

He expressly warned the tradesman not to supply his wife with

goods or credit;

His wife was given enough allowance for buying goods without

having to pledge her husband's credit; or

The contract was unreasonable, taking into consideration her

husband's income at that time.

iii. By ratification

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Definition of ratification is certification or acceptance by the principal for an

act done without authority or exceeding the authority given.

Agency by ratification may arise in two situation:

When an agent who was appointed by the principal, has exceeded his

given authority; or

When a person, who has no authority to act for the principal, has acted

as if he has the authority to act on behalf of the principal.

The principal has a choice either to reject or to accept the contract

which has been made on behalf of him.

If he accepts and affirms the contract, this means that he ratifies the

contract and there exists an agency relationship between the principal

and the agent (Section 149 of Contracts Act 1950). The principal is

bound to the said contract.

But, if the principal does not accept such contract, then no agency

relationship exists and the principal would not be liable upon such

contracts.

iv. By necessities or emergency

It may occur in two situations:

When a wife is deserted and has no means of support

Wife can pledge her husband's credit for necessaries suited to the

income and life condition of her husband.

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But, she cannot become an agent by necessity if her husband has

provided her with sufficient allowance.

When a person is entrusted with another person's property and it becomes

necessary for him due to the emergency situation, to do something in order

to preserve and to protect that property although he has no authority to do

so. Reference case is Great Northern Railway v Swaffield.

v. By estoppel

When the principal himself induces a third party to believe that a person

has an authority to act for him, as if that person is his agent, he is estopped

by law from denying that agent's authority (Section 190 of the Contracts Act

1950) In other words, the principal cannot avoid the liability upon the

contract being made by that particular agent.

When the principal does not inform the third party that his agent has no

authority or the agent's authority has been terminated, but the agent

continues acting on behalf of the principal, then the principal is estopped by

law from again denying the agent's authority. In this case, the principal

would be liable for the contract made by such agent regardless as to

whether the agent had acted with or without the principal's knowledge.

Reference case is Freeman & Lockyear v Buckhurst Park Properties Ltd.

Agency by estoppels happens only if the principal himself, through his own

words or conduct, induced the third party to believe that a certain person is

having the authority to act on behalf of the principal. It does not happen if

the third party was induced by agent only. Reference case is Armagas v.

Mundogas, The Ocean Frost.

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2. When the agent would lose his right of remuneration?

The agent would lose his right of remuneration when the agent is guilty of

misconduct. This is provided under Section 173 of the Contracts Act 1950. The

reference case is Andrew v. Ramsay. In the case, it was held that the principal is not

bound to pay the agents commission due to the fact that the agent had received

secret profit or a bribe when performing his duties as an agent.

6. QUESTION 6

Ahmad, Abu and Ali have decided to form a partnership business for selling books

and stationeries. Among the agreed terms in their agreement was that Ali is excluded

from sharing any profit. Is Ali a partner? Justify your answer.

6.1. ANSWERS 6

In the case of Ahmad, Abu and Ali, Ali is not a partner. The justification is, according

to Section 3(1) of the Partnership Act 1961: "Partnership is the relation which subsists

between persons carrying on business in common with a view of profit".

Further justification is, the partnership must be form with a view of profit. Referring to

case: Gulazam v. Noorzaman and Sobath, the parties agreed among themselves to

form a partnership of buying and selling cattle and agreed to share the profits. It was

held that, all essential elements including 'with a view of profit' were present to

constitute a partnership.

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