Group AssignmentCSEA2121Commercial LawSem1 2013/2014

Dr RosmawaniCheHashim

Group membersMatric No.

Foo Jia YiCEA120019Hon JiaXuanCEA120027Kevin GanWai MingCEA120032Ong Hui YinCEA120086SohHui SzeCEA120098Jacqueline HiiRu WeiCEA120116Lim Zheng WeiCEA120117Gan Nan SieCEA120118Su Shi YiCEA120120

Table of Content

No.ContentPage(s)

1Discuss critically:a) Doctrine of separation of powers in Malaysiab) Federal Constitution as the highest law in Malaysiac) Custom as one of the sources of law in Malaysia2-5

6-9

9-11

2.Section 57 of Contract Act 1957 lays down the law relating to two categories of impossibility of performance. Discuss these categories and support your answer with relevant sections and case-law.12-17

3.The person getting insured must willingly disclose and surrender to the insurer his complete true information regarding the subject matter of insurance. Discuss the application of this principle in contract of insurance and legal issues thereof.18-22

4.a) Discuss the right (condition and warranty) conferred by Section 7(1)(b) of The Hire-Purchase Act 1967 (Act 212) to the hirer.b) Explain the meaning and procedure of re-possession under The Hire-Purchase Act 1967 (Act 212).23-24

25-28

5.References 29-30

Question 1(a) Discuss critically on the Doctrine of separation of powers in Malaysia.History of the Doctrine of separation of powersThe basic idea of the doctrine of separation of powers is that the entire power or ruling authority of the State shall not be given to only a person. Concentration of power in the hand of the same person or institution is often found to be an invitation to despotism[footnoteRef:2]. This doctrine is to avoid arbitrary power in order to avoid misuse of power by the ruling authority. It is to be divided into three(3) branches of government, namely the executive, judiciary and legislative. Legislative is commonly known for making the laws, executives is known as to enforce or implement laws, while judiciary is known as the peace-maker for settling disputes by interpreting the laws. [2: (Tocqueville, 1997)]

As of the 17th Century, a king has absolute power and this scenario has caused a lot of sufferings. Montesqueiu[footnoteRef:3] in The Spirit of Laws propounded a theory of strict separation of power of which there is no sharing of powers among the branches. Principles propounded by Montesqueiu are as follows: [3: (Montesquieu,1777)]

i. There are 3 main classes of governmental functions.ii. Each of them should be vested one function.iii. To concentrate more than one class of functions in any person or organ is a threat to individual liberty.iv. The same person should not form part of more than one of the 3 branches.v. One organ of government should not control or interfere with the exercise of functions by another organ.vi. One organ should not exercise the function of another.However, in Malaysia, our country could not execute the doctrine of separation of powers absolutely. TunSuffian in Parliamentary system vs Presidential system states that we are under the influence of British Westminster system and hence, there is a fusion between legislative and executive.[footnoteRef:4] Therefore, our country do not really enforce the separation of powers. [4: (Wan Arfah Hamzah, 2003)]

Overlapping of three branches of government in Malaysiai. Legislature and ExecutiveBased on the Westminster system, legislature and executive are connected. The Cabinet member must be a member of the parliament. Article 43(3)[footnoteRef:5] states that the cabinet is collectively responsible to the parliament. The law making power has been delegated to the executive department to through subsidiary legislation. There is no limit on the amount or nature of power that legislature body(parliament) can delegate to the executive body in Malaysia. Article 44[footnoteRef:6] hence states that the King[footnoteRef:7] [5: Article 43 of the Federal Constitution] [6: Article 44 of the Federal Constitution] [7: King. Referring to the Yang Di-PertuanAgong]

ii. Legislature and JudiciaryIn the United Kingdom, the 10 Law Lords in the House of Lords act both as judges and as legislators. However, in Malaysia, no judges are allowed to take part in politics and they are certainly not a member of the parliament. Though law making is the function of the parliament, there are still many important legal principles which are of product of common law fashioned by judges in the course of deciding cases, known as case law. The question of guilty or innocence is for the court to decide, but once the accused is found guilty, the penalty is dictated by the parliament.

iii. Judiciary and ExecutiveJudges of subordinate courts are part of the judicial and legal service. They may be transferred from the judiciary to the legal service. The Administrative Tribunals, which include members of executive officers, has the function of the same as the court which is dispute resolution. The King, who is the head of Executive Body, based on the advice of the Prime Minister, who is member from the Executive Body, appoint judges. Under a fair number of laws passed under Article 149 & 150 of the Federal Constitution, the executive authorized to resort to extra-judicial, preventive detentions. These executive detentions, without recourse to the court, are an undoubted exercise of the judicial power.The Independence of Judiciary (Articles and Cases)Prior to 1988, the power of judiciary shall be vested in 2 High Courts. After 1988, there shall be two high courts, thus, the power of judiciary shall be delegated in accordance to the Federal Constitution. However, the Federal Constitution was done by the Parliament, and therefore, the power of judiciary can be conferred by parliament, hence, there is interference of parliament to the function of judiciary. Parliament can make any law in order to control and limit the power of judiciary.Before the amendment, the courts can review every aspects of law including natural justice. DatukDr Shad SaleemFaruqi, in his column entitledReflecting on the LawinThe Staron 16 April 2008 summed up the situation as follows:[footnoteRef:8] [8: Retrieved fromhttp://mstar.com.my/berita/cerita.asp?file=/2008/4/16/TERKINI/Mutakhir/Restoring_judicial_power&sec=mstar_berita]

The amendment to Article 121(1) has created the wrong perception that the Malaysian Executive wishes to silence the Judiciary. All Judges feel humiliated. Some have accepted their truncated role as mere agents of Parliament and not as independent pillars of the Federal Constitution. Others insist that their review powers are intact.

The confusion generated by the 1988 amendment to Article 121(1) has created the belief and misconception that:a. the courts are powerless to address issues and do justice wherever there is a lacuna in the law;b. the courts are confined to merely interpreting and implementing acts of Parliament;c. the courts are no longer able to make and develop common law;d. the courts are deprived of their inherent jurisdiction, along with their inherent right to exercise judicial review over the decisions of public bodies and Executive functions.

The removal of TunSalleh Abbas case was another insight of where the tribunal of removal was misused. It was used to get rid of judges who decided not to carry out their job in governments favour. Hence, the appointment of members of tribunal can be seen as an interference of executive.[footnoteRef:9] Judiciary only have inherent jurisdiction which is the power to confer justice and to make the best solution to any disputes. [9: Retrieved fromhttp://www.freemalaysiatoday.com/category/opinion/2012/04/03/revisiting-the-1988-judicial-crisis/]

In the case of SugumarBalakrishnan v Director of immigration, State of Sabah and Anor[footnoteRef:10], J. Gopal Sri Ram, Court of Appeal, held that the amendment to A.121 does not change the situation as the power of judiciary still lies in the hand of judiciary. There is no provision conferring the judiciary the power to judge as the power is an inherent power hence, no one can take away. [10: [1998] 3 MLJ 289]

In the case of KokWahKuan v Public Prosecutor,[footnoteRef:11]The trial judge allow YDPA (executive) to decide on the sentence. However, the Court of Appeal overturned the judgment holding that it violates the doctrine of separation of powers. Lastly, the Federal Court upheld the trial decision, stating that there is no provision in the Federal Constitution, stating the statement of doctrine of separation of powers in Malaysia. The Federal Court Judge dissent the judgement by J. Malamjun, emphasizing that there is separation of powers and the power of judiciary shall be with the judiciary and the King should not be allowed to decide on the sentence. [11: [2007] 5 MLJ 174]

Even though the judiciary is inseparably an independent branchof the government, the judiciary was made subject to Parliament after the judicial crisis 1988. Instead of being directly held by the judiciary, judicial power is carry out by parliament and vested by it in courts nowadays. The Attorney General[footnoteRef:12] was also conferred the power to give instruction to the court on thetypes of cases that they should hear and whether to cease a particular case. The Judiciary is empowered to hear and determine civil andcriminal matters, and to pronounce onthe legality of any legislative or executive acts. In addition, the authority is given to the judiciary to interpret the Federaland State Constitutions. [12: Attorney General of Malaysia.Principal legal adviser to the Government of Malaysia.]

Separation of powers enforces the concept of rule oflaw where government by law not rulesby men.Fusion ofpowers (executive and legislature) in Parliamentary system can sometimes be positive and in the other time couldbring to dictatorial effect. Question 1(b) Discuss critically on the Federal Constitution as the highest law in Malaysia.A Constitution is a document that contains all of the order of rules and regulations. It constitutes to an important policy for removing a country's governance and administration. It determines the constitution of a Kingdom, a form of government and the rights of the people.The Constitution also contains principles that form the national institutions like the executive, legislative and judicial with the powers and role of each institution within the framework of governance and administration of the nation. Constitutions are designed to be guidelines on the pattern of political and administrative system of governance of a country, as well as provide protection to the people. The Constitution also states that the responsibility and duty of every citizen against the government and the nation.The Federal Constitution contains of 183 items, is the supreme law in Malaysia. It is a written legal document that has been developed based on the two previous documents, namely the Federation of Malaya Agreement 1948 and the 1957 Independence Constitution.Federal Constitution also consists of 15 sections and 13 tables. It touches on the jurisdiction of the executive, legislative, judiciary, the Islamic religion, nationality, national language, the special position of Malays and natives in Sabah and Sarawak and the like.Supremacy of Federal ConstitutionArticle 4(1) of the Federal Constitution states that the Constitution is the supreme law of the Federation and any law passed after Merdeka Day, which is inconsistent with this Constitution shall be void to the extent of the inconsistency. It is clearly stated that the Federal Constitution is the source of all governmental powers and it acts as the standard or yardstick for Malaysi Legal System. It also operates as a controlling mechanism.Sultan Azlan Shah once said that Constitution has not only bestowed power upon institutions and individuals charged with duties under our system of government, but in doing so explicitly laid down limits upon the exercise of any such power. In order to achieve the status of supremacy of Constitution, we must look into the separation of powers and the roles of legislature.According to the case of Marbury v Madison[footnoteRef:13], it was held that All countries which make a written constitution wish that the written constitution can be the fundamental law and supreme law of the land and by this, there must be a theory in each country that a legislative act contrary to the constitution is void. This theory is the theory of written constitution and it is a fundamental principle of society. The theory of the fundamental principle of the society can be found in the case of LohKooiChoon v Government of Malaysia,[footnoteRef:14]it was held that [13: 5 U.SS 137 (1803)] [14: [1977] 2 MLJ 187]

Constitution is the supreme law of the land embodying three basic concepts:i. individual has certain fundamental rights upon which not even the power of the state may encroach.ii. the distribution of sovereign power between the states and the federation.iii. no single man or body shall exercise complete sovereign power, but it shall be distributed among the executive, legislative, and judiciary branches of government.

However, in the case of Ah Thian v Government of Malaysia,[footnoteRef:15] it was held that the doctrine of supremacy of parliament is not applied in Msia, here, there is a written constitution. The power of parliament and states assembly in Malaysia is restricted by the constitution and they cannot make law according to their wish. [15: [1976] 2 MLJ 112]

A few conflicts arise due to the subject of Federal Constitution as the supreme law in Malaysia. One of it was the state of supremacy of Federal Constitution, in other words, whether our constitution is really supreme.

Whether our constitution is really supreme?Article 4(1) of the Federal Constitution provides that the Federal Constitution is supreme, but on the other hand, Article 159 and 161E of Federal Constitution provides the power to the Parliament to amend the Federal Constitution. The more important a particular law is to a society, the more difficult it is for that law to be changed. The philosophy behind the amendments procedure in Malaysia has been laid down by Reid Commission:the methods should not be too difficult as to produce frustration nor too easy to weaken seriously the safeguards of the constitution.Hence, Federal Constitution is a document with spirit thus amendment is necessary when the circumstances of society change.

Another issue is whether the laws to amend Federal Constitution are in face inconsistent with the Federal Constitution and thus void under Article 4(1) of Federal Constitution?According to the case of LohKooiChoon v Government of Malaysia,[footnoteRef:16] it was held that [16: [1977] 2 MLJ 187]

A constitutional amendment cannot be invalidated under Article 4(1) merely because it is inconsistent with the Federal Constitution. The Federal Constitution is the supreme law and cannot be inconsistent with itself. An amendment which complies with Article 159(3) becomes part of the constitution. It becomes part and parcel of the constitution.

In the case of Phang Chin Hock v Public Prosecutor,[footnoteRef:17] Article 4(1) is only enforced to nullify the ordinary laws which are inconsistent with the Constitution and is not applicable to the laws which are approved under Article 159. Suffian LP states that the parliament can only amend the constitution according to whatever the parliament thinks is necessarily provided that they have to obey all the conditions stated in the provisions. In interpreting Article 159 and Article 4, harmonious construction requires us to give effect to these two provisions and but this we have come to know that the Acts made by parliament following the procedures provided in Article 159 is valid even though it is inconsistent with the Constitution. [17: [1980] 1 MLJ 213]

It is clearly seen that the Federal Constitution is the supreme law in Malaysia, however, it can be amended accordingly, suitable to the needs of the society, and the amendments do not contradict with the articles stated in the Federal Constitution.

In a nutshell, the Federal Constitution is the supreme law of the land so that any general law that is inconsistent with the constitution is void. Unlike the British Parliment which is supreme and with full powers to make laws on any matter, the local parliament functions under a written constitution and is governed by it. Although the Malaysian Parliaments law-making power is limited by constitutional provisions but its actual powers should not be underestimated. It has the capacity to amend the constitution under which it functions albeit by a two-thirds majority vote of both chambers of parliament. The federal constitution also provides that Islam be the religion of the federation but guarantees the freedom of religion. Islamic law is enforced only among Muslims although principals of that religion do manifest themselves in the legal system.

Question 1(c) Discuss critically on Custom as one of the sources of law in Malaysia. (L01)Custom is a practice followed by people of a particular group or region. It is the usual and generally accepted behaviour among most people within a particular society. It derives its characteristics from the community, thus making it different from one race to another. The execution of custom is influenced by the environment, religion, inner morality and so on. This custom is common tradition or usage so long established that it has the force or validity of law. It prescribes rules for ceremonies, including marriage and religious rites, agricultural systems, and settlement of disputes. Custom concerns community interactions, family matters, distribution of inheritance but it rarely touches on politics.According to Article 160 of Federal Constitution, and any custom or usage having the force of law , not all customs have legal consequences. Unlike laws of Parliament, failure to comply with a custom will not lead to a person being imposed with sanctions, unless the custom has been adopted as a law. Breach of custom rules may give rise to the feelings of guilt or remorse on the part of the perpetrator and disapproval from other members in the society.The Malay Adat which includes AdatPerpatih and AdatTemenggong govern the Malays whereas the Chinese and Hindus are governed by the Chinese and Hindu Customary Law. There are also Orang Asli Customary Law as well as the Native Customary Law.AdatPerpatih can be found in Negeri Sembilan and Naning in Malacca. It is based on matrilineal, which is in favour of women in the distribution of inheritance. It contains traditions that are customary sayings which have been passed down from generation to generation. AdatPerpatih covers matters concerning matrimonial law and property and, to a limited extent, criminal law and restitution. More importantly, it covers matters concerning the state, which includes succession in title or lineage and the election of traditional chiefs. According to AdatPerpatih, ancestral property is passed on to the female descendants of the tribe who hold the property in trust for the tribe. These properties cannot be sold by any will and can only be inherited by female tribe members in equal share. A man is considered as the salaried worker in the tribal system. When a man marries into a female tribe, his wife already owns a piece of land as her share of the customary holding. The unmarried males have the right to life occupancy over the property of their mothers. Where a female is married, the property in the descendant line and lineage membership passes through the women. In Munahbinti Haji Badar v IsamBinti Mohamed Syed &Anor,[footnoteRef:18]held that land which hadbeen transferred outside the clan to a male belonging to another clan had to be returned, conditional upon payment of a sum of money. [18: [1936] 1 MLJ 34]

AdatTemenggung applies in other states. There are numerous digests of AdatTemenggung. These include a digest of law compiledby the Sultan of Pahang; a digests of Kedah laws; the ninety-nine laws of Perak; a digests ofSelangor laws; and the Melaka digests which contains maritime rules. The Malacca Laws, though entitled RisalatHukumKanun (A Tract on Customary Law), is a digest grafting the Islamic Law of the new Sultanate {of Malacca} on to the earlier law of a Hindu Court. It is normally based on the characteristic of patrilineal form of organization. Patrilineal is a system in which one belongs to father's lineage; it generally involves the inheritance of property, names or titles from father to sons. Generally, the customs of Chinese and Indians relating to marriage and divorce are no longer of much importance since the passing of the Law Reform (Marriage and Divorce) Act 1976, which the act was largely based on the English legislation, which abolished polygamous marriages among the non-Muslims. The act introduced a uniform law on marriage, divorce and its ancillary matters among non-Muslims and a common system of solemnization and imposed compulsory registration of marriage.In Sabah and Sarawak, the Malay custom is a mixture of Islamic law and the local customs. Islamic law was codified in 1936 and administered as part of the native customary laws in matters concerning marriage, inheritance, matrimonial property and bethoral, resulting in a situation where there was no uniform application of Malay custom. For instance, inMatusin bin Simbi v Kawangbinti Abdullah,[footnoteRef:19]Islamic law was applied as the Malay who originated from Brunei, buthad resided with the Bajau community in Sabah for 40 years. The judge held that the racial lawof the deceased remained unaltered by change of domicile. Clearly, there had been some conflicts between the local customary laws and the Malay custom. [19: [1953]SCR 106]

In a nutshell, custom, to a certain extent, is an important source of unwritten law. This is because Customs are inherited from one generation to another generation. Common law must be used first, by virtue of Section 3(1) Civil Law Act 1956 which states that in the absence of written law, the courts in Malaysia shall apply the common law and rules of equity existing in England , suit the local circumstances and local custom. Therefore, custom is very influential as all laws are made based on its suitability on local custom. Law is also the cultural expression. Decisions made must suit the local custom. It is only effective and useful for the specific group of people who are born to be bound by the custom.

Question 2: Section 57 of Contract Act 1957 lays down the law relating to two (2) categories of impossibility of performance. Discuss these categories and support your answer with relevant sections and case-law. (L02) Impossibility of performance.A contact can be discharged if there is impossibility of performance or also known as frustration. According to Section 57 of Contract Act 1967, a contract to do an act which after the contract is made becomes impossible or by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful. Hence, the two categories of impossibility of performance are:(1) When the contract become physically impossible of performance.(2) When the contact becomes unlawful to perform.If a frustrating event occurs the contract automatically ends and the parties are excused from their future obligations, although any accrued liabilities will remain.It is important that a party is sure that frustration has actually occurred if it is going to rely on frustration to justify ceasing to perform its obligations under the contract to avoid being in breach if the event is not in fact a frustrating one.Impossible of performance due to physical impossibility to perform.For the first category, the contract become physical impossible of performance when there is a destruction of subject matter. The recognition of this frustration is formulated in the case Taylor v Caldwell[footnoteRef:20]. In this case, Taylor (plaintiff) rented out a music hall in the Survey Gardens for the purpose of giving four grand concerts from Caldwell (defendant). Taylor agreed to pay Caldwell 100 for every single day. Taylor incurred big expense and lots of effort in organising the concerts. However, a week before the first concert to be given the music hall was destroyed by an accidental fire. The destruction was not fall on any fault on either party and in consequences there is no concert could be given due on this destruction. Taylor sought to bring an action for breach of contract against Caldwell (defendant) for failing to provide the hall and want to claim for the compensation for all expenses that already incurred. The court held that the plaintiff's action for breach of contract failed. The contract had been frustrated as the fire meant the contract was impossible to perform. Therefore the defendant not liable to pay because of the frustration of contract which is the agreement becomes impossible to perform. [20: (1863) 3 B & S 826 Is frustrated due to destruction of subject matter.]

Judgement delivering by Blackburn J:The principle seems to us to be that, the contract in which the performance depends on the continued existence of a given person or thing, a condition is implies that that the impossibility of performance arising from the perishing of the person or thing, shall excuse the performance. In none of these cases is the promise other than positive, nor is there any express stipulation that the destruction of the person or thing shall excuse the performance; but that excuse is by law implied, because from the nature of the contract it is apparent that the parties contracted on the basis of the continued existence of the particular person or chattel.Besides, death or incapacity of either party is also one of the factors result to physical impossibility of performance. For further understanding we can check on more cases such as Condor v Baron Knights,[footnoteRef:21] in this case, contract for personal performance frustrated because of the illness made it impossible to perform. A 16 year old agreed by contract to play the drums for the defendant band for 7 nights per week for 5 years. The plaintiff suffered a mental breakdown and was told by his doctor that he should not perform more than 4 nights per week. The band dismissed him. He brought a claim for wrongful dismissal. Condor (plaintiff) won the case because the court held that the plaintiff's action was unsuccessful as his medical condition made it impossible for him to perform his contractual obligations and the contract was thus frustrated. [21: [1966] 1 WLR 87 Is frustrated due to personal death or incapacity.]

However, it is excepted when the death or incapacity of one party does not come to the knowledge of another party when an offer is made. Acceptance without prior knowledge of the death or mental disorder of the offeror is a good acceptance and enforceable. This exception is explained in the case Bradbury v Morgan.[footnoteRef:22] In this case, JM Leigh requested Bradbury (plaintiff) & Co to give credit to HJ Leigh, his brother. JM Leigh guaranteed his brother's account to the extent of 100. Bradbury thereafter credited HJ Leigh in the usual way of their business. JM Leigh died but Bradbury, having no notice or knowledge of his death, continued to supply HJ Leigh with goods on credit. JM Leigh's executors (Morgan) refused to pay, arguing that they were not liable as the debts were contracted and incurred after the death of JM Leigh and not in his lifetime. Judgment was given for the plaintiffs, Bradbury. [22: Is not frustrated as the death or mental disorder of offeror is known by offeree before acceptance occurs.]

Moreover, non-occurrence of particular event will also lead to frustration. A contract may also be frustrated where it is deprived of its commercial purpose with the supportive case Krell v Henry.[footnoteRef:23] In the case, Henry (defendant) agreed to rent from Krell (plaintiff) a suite of rooms in Pall Mall, for the day on which coronation was to take place. Unfortunately, the coronation did not take place, Henry no longer wanted the room, Krell sued for the rent. The court held that although contract can still be performed, it was frustrated because the viewing of the procession was the foundation of the contract. [23: [1903] 2 KB 740 A contract may also be frustrated where it is deprived of its commercial purpose.]

However, the contract must be deprived of the whole commercial purpose to amount to frustration by referring to Herne Bay Steam Boat v Hutton[footnoteRef:24].In the case, the court held that the contract was not frustrated. The contract had not been deprived of its sole commercial purpose as it was still possible to perform the days cruise. The Naval Review was not the only commercial purpose of the contract. [24: [1903] 2 KB 683 Exception: the contract must be deprived of the whole commercial purpose to amount to frustration, if not, it is not a frustration.]

We need to know also where a contract will not be frustrated if , it is more difficult or expensive to perform; impossibility of performance is the fault of either of the parties; where there is aforce majeureclause; Where the frustrating event could be foreseen.

Impossibility of Performance as It Becomes Unlawful to PerformUnder Section 10(1) of Contract Act, all agreements are contract if it is for lawful consideration and lawful object. This means that only agreement that is enforceable by law and regulations is valid. A contract can be void if the content of the contract is unlawful even if it is valid previously. Normally, this happens as there is government influence or interference. Government interferes by changing of law and regulations applied in the respective country will result in it certain contract becomes unlawful to perform. Where a law subsequent to contracting is passed, which renders the fundamental principle of contracting illegal, the contract will be found to be frustrated. There are several situations in which this may occur. Events such aswarmay render certain trading or actions illegal, as was the case inDenny, Mott & Dickinson v James Fraser[footnoteRef:25].Changes in the law may render building work illegal, or the use of certain materials illegal. A contract for the construction of a reservoir was held to be frustrated following wartime building regulations. [25: [1944] AC 265 Frustration as war makes the contract becomes illegal.]

For instance, in the case of Avery V Bowden,[footnoteRef:26] the ship was supposed to pick up some cargo at Odessa. With the outbreak of the Crimean War, government made it illegal to load cargo at an enemy port, so the ship couldnt perform its contract without breaking the law. Hence, the court held that the contract is frustrated as it is unlawful to perform. [26: (1856) 5 E & B 714]

There are still a lot of examples on type of frustrated contract which are where the contract becomes illegal to perform it will frustrate the contract and we can refer to case FibrosaSpolka v Fairbairn.[footnoteRef:27] [27: [1943] AC 32 Frustration where the contract becomes illegal to perform it.]

We need to know also where a contract will not be frustrated if , It is more difficult or expensive to perform; Impossibility of performance is the fault of either of the parties; Where there is aforce majeureclause; Where the frustrating event could be foreseen.However there are examples of cases that the contract not frustrated such as Tsakiroglou& Co Ltd v NobleeThorlGmbH.[footnoteRef:28] The Nobleethorl (defendant) agreed to ship some Sudanese peanuts during November or December 1956 to Hamburg for a certain price. On 2nd of Nov the Suez Canal was closed to shipping. The defendant could still have transported the peanuts within the contractually agreed time but this would mean going via the Cape of Good Hope which would have taken four times as long and increased the cost of transport considerably. The defendant did not carry the goods and argued that the contract had been frustrated. The court held that the contract was not frustrated. It was still possible to perform the contract without any damage to the peanuts. The fact that it was more difficult or costly to perform is not sufficient to amount to frustration. In short, performance had only become onerous or more expensive; performance still possible; manner of performance not specified. Contract not frustrated. [28: [1962] AC 93 Exemption: A contract will not be frustrated merely because it becomes more difficult or expensive to perform.]

Here is another example which is Davis Contractors v Fareham UDC.[footnoteRef:29] Davis Contractors (plaintiff) agreed to build 78 houses for Fareham Council (defendant) within 8 months for an agreed price of 85,000. Due to a shortage in skilled labour and material the contract took 22 months to complete and was much more expensive than anticipated. Davis Contractors were paid the contractually agreed price but bought an action arguing for more money based on the fact that the contract had become frustrated and therefore they were entitled to further payment based on a quantum meruit,[footnoteRef:30]basis. [29: [1956] AC 696] [30: Quantummeruitis aLatinphrase meaning "what one has earned". In the context ofcontractlaw, it means something along the lines of "reasonable value of services".]

The court held that the contract was not frustrated. This is because the fact that a contract becomes difficult to perform not so profitable is not sufficient to amount to frustration. It was still possible to perform the contract and the risk can reasonably be expected of occurred.In addition, a contract will not be frustrated if the impossibility is the fault of either of the parties and we can refer to cases Maritime National Fish v Ocean Trawlers.[footnoteRef:31] A contract will not be frustrated also where there exists aforce majeure[footnoteRef:32]clause. The clause must actually cover the event which occurred Jackson v The Union Marine Insurance Co Ltd.[footnoteRef:33] Frustration will also not exist where the frustrating event should have been foreseen and there are some cases are related which are Walton Harvey Ltd v Walker &Homfrays Ltd[1931] 1 Ch 274 and Peter Cassidy Seed Co Ltd v Osuustukkuk-Auppa Ltd[1957] 1 WLR 273. [31: [1935] AC 524 Exemption: A contract will not be frustrated if the impossibility is the fault of either of the parties.] [32: Force Majeure.This clause is meant to benefit both parties in a contract.Force majeure would come into play, forexample, when you buy a house.If the house isdestroyed in a fire caused by a lightning strike, neither party remains obligated.] [33: (1874) LR 10 CP 125]

Moreover, frustration will also not exist where the frustrating event should have been foreseen. Example of the cases areWalton Harvey Ltd v Walker &Homfrays Ltd [1931] andPeter Cassidy Seed Co Ltd v Osuustukkuk-Auppa Ltd[1957].

Effect of Frustration of a ContractWhere a contract is found to be frustrated, both parties are released from their obligations under the contract and neither party may sue for breach.The allocation of loss is decided by the Law Reform (Frustrated Contracts) Act 1943. This provides:S. 1(2): All money payable under the contract ceases to be payable and any money already paid may be recovered. Where expenses have been incurred this may be deducted from the amounts payable or paid. This is at the discretion of the court and is subject to what is just and equitable in the circumstances of the case. There is no provision allowing expenses to be recovered which exceed the amounts paid or payable.S. 1(3) - Where a valuable benefit has been conferred this must be paid for.

Question 3: The person getting insured must willingly disclose and surrender to the insurer his complete true information regarding the subject matter of insurance. Discuss the application of this principle in contract of insurance and legal issues thereof.Definition of InsuranceInsurance is defined as a social device providing financial compensation for the effects of misfortune as stated in Insurance Act 1996[footnoteRef:34]. Insurance Act 1996 classifies insurance into two classes which are life business and general business. According to S4 (1)(a) Insurance Act 1996, life business is all insurance business that concern with life policies shall include any type of insurance business carried on as incidental only to the life insurers business. In general, Insurance Malaysia states that, life insurance is the premium that insured to pay monthly, quarterly or annually and upon the expiry. Insured beneficiary receives death or critical illness benefit either in the form of lump sum or periodic payout. [34: Act 553]

On the other hand, S4 (1)(b) defines general business as all insurance business which is not life business. General liability insurance and product liability insurance are examples of general business. In order to be insured, a contract of insurance is required. Contract of insurance is a contract whereby for specified consideration, one party undertakes to compensate the other for a loss relating to a particular subject as a result of the occurrence of designated hazards as stated by West's Encyclopedia of American Law. In short, it is a document which containing terms of contract or policy.Duty to DiscloseGenerally, contracting parties are not required by law to reveal voluntarily all that they know about the proposed agreement. However, insurance contracts are exceptional. According to section 21 of the Insurance Contract (IC) Act 1984[footnoteRef:35], the contracting parties who enter into the contract are required to disclose to each other all information which will influence either partys decision to enter into the contract, regardless of whether such information was requested or not. Insurance contracts are uberrimaefidei or of utmost good faith[footnoteRef:36] because these contracts emphasize on mutual trust and confidence between the insured and insurer. In other words, a duty to disclose forms the basis of an insurance contract. [35: Act No. 80 of Government of Australia] [36: S 13(1) of Insurance Contract Act]

Much emphasis have been placed on the duty to disclose as insurers may be able to refuse to pay a claim or part of a claim under an insurance policy if the policyholder has not complied with their duty of disclosure. Therefore, not only the insured has the responsibility but both insurers and policyholders have a duty to act towards each other with the utmost good faith. However, section 12 of theIC Actdoes not require a higher duty on a policyholder in respect todisclosuresmade to insurers. Insured has the heavy responsibility to disclose the subject matter of the insurance as he knows himself better than anyone else. The problems regarding the duty to disclose was illustrated in the case of Lambert v Co-operative Insurance Society Ltd[footnoteRef:37]. When Mrs Lambert insured her familys jewellery the insurer did not ask about her husbands previous convictions and she did not mention them. When Mrs Lambert claimed 311 for lost jewellery, the insurer avoided the policy. The Court of Appeal held that the insurer was entitled to do so under the rules of law set out in the 1906 Act[footnoteRef:38]. The conviction was a material circumstance, which would have influenced a prudent insurer. It did not matter that a person in Mrs Lamberts position would not have realized this. The law was clear, though not necessarily fair. [37: [1975] 2 Lloyds Rep 485] [38: Insurance Marine Act 1906]

Furthermore, the requirement to disclose information is also explained in the case of Carter v. Boehm[footnoteRef:39]by Lord Mansfield. The Lordship held that Mr. Carter as the proposer owed a duty ofutmost good faith(uberrimaefidei) to the insurer under which he was required to disclose all facts material to the risk. Quoting his words, [39: (1766) 3 Burr. 1905 at pp. 1909-1910]

Insurance is a contract based upon speculation. The special facts, upon which the contingent chance is to be computed, lie most commonly in the knowledge of the insured only; the underwriter trusts to his representation and proceeds upon the confidence that he does not keep back any circumstance in his knowledge, to mislead the underwriter into a belief that the circumstance does not exist, and to induce him to estimate the risque as if it did not exist. Good faith forbids either party by concealing what he privately knows, to draw the other into a bargain from his ignorance of that fact, and his believing the contrary.Meanwhile in the case of Goh Chooi Leong v. Public Life Co. Ltd[footnoteRef:40], the insured had suffered pulmonary tuberculosis but did not disclose this fact to the insurer when the insurer agreed to insure his life for $10,000. When the insured dies due to this disease, the insurer did not want to pay and claimed the insured failed to declare the truth of his health condition. The court held that it was a deliberate lie and the contract was voidable. Gill J held that it is a trite law that a contract of insurance is a contract of uberrimaefidei which can be avoided for non-disclosure of material facts. Thus, due to inadequate information by insured, insurer was able to avoid the contract in this case. [40: [1964] MLJ 5]

Material FactsFrom the cases mentioned above, it can be concluded that the information disclosed need only be of material facts. Failure to comply with the requirement will give the other party a right to avoid the contract.There are many decided cases on the definition of material information because there is no definitive legal definition. The discussion below provides examples as to what constitutes to a material fact. Material facts and material information will depend on the class of insurance, but will normally include the following[footnoteRef:41]: [41: Airmic Research]

Business sector and activities, including processes, products and geographical areas of business activities Changes to business activities, acquisitions or disposals in relation to products, markets, locations or supply chain Additional premises, risks, insurable items, especially in high risk geographical, geological or metrological areas Higher than ordinary degree of risk, especially in relation to high value or very fragile (for example) goods Greater liability than normal or expected, possibly because of specific (industry) contract terms of trade Restricted rights of subrogation associated with claims or losses because of the business sector or specific products Previous claims history / experience of the business, especially in relation to historical, emerging or other unexpected risks Previous policy cancellation / refusal of insurance / special restrictions or conditions applied to insurance contracts Details of the trading profitability and financial status of the business, including finance, insolvency or liquidation concerns Status, reputation, length of service, qualifications and experience of board members, as well as details of any criminal convictions Material facts are tested whether the facts would influence the mind of a prudent insurer in deciding whether to accept the risk, and if so, at what premium. It should be noted that non-disclosure of not material facts will not affect the validity of the contract. There is an alternative test has been suggested to determine whether the facts were material in the opinion of a reasonable insured. Nevertheless, the Court of Appeal in Lambert v. Co-operative Insurance Society Ltd[footnoteRef:42]have both adopted the test of prudent insurer. In the case, the defendant refused to indemnity the plaintiff for the loss of some jewellery insured with them on the grounds that she had failed to disclose that her husband had been previously convicted for an offence. This was upheld by the Court of Appeal. [42: [1976] 2 Lloyds Rep 631]

Moreover, the issue of materiality also been questioned in the case of New India Assurance Co. Ltd v. Pang Piang Chong &Anor[footnoteRef:43]. The defendant insured his station-wagon and himself against usual third party risks. The vehicle was involved in an accident in which one Abdon was killed. The insurers sought a declaration that they were entitled to avoid the insurance on the grounds that the policy was obtained by a non-disclosure of a material fact, and/or, representation of a fact which was false in some particular material. The insured had made a statement that he had not been convicted for an offence in connection with the driving of a motor vehicle. In fact, he had been convicted for driving in contravention of statutory offences not related to the actual driving of a motor vehicle licence and not displaying an L plate in a conspicuous position while driving. The application was dismissed by the court. Syed Othman J held that [43: [1971] 2 MLJ 34]

Materialmeans of such a nature as to influence the judgement of a prudent insurer in determining whether he will take the risk, and, if so, at what premium & on what conditions.In short, the duty to disclose only extends from the stage of negotiations right to the conclusion of the contract of insurance. In the absence of specific terms in the contract, there is no further duty to disclose material facts by the insured after the conclusion of the contract even though there is a subsequent increase in the risk. However, in respect of policies that require renewal, the duty to disclose arises afresh upon each renewal of the contract.

Question 4(a) Discuss the rights (condition and warranty) conferred by Section 7(1)(b) of The Hire-Purchase Act 1967 (Act 212) to the hirer.

Hire Purchase Agreement means the agreement entered into between the hirer and the owner in relation to the goods. In this agreement the title of the goods remains with the owner despite possession been given to the hirer. Owner is the person who sells his or her property to a hirer under a hire-purchase agreement Hirer is the person who buys property from an owner under a hire-purchase agreement.According to Section 7, there are certain conditions and warranties to be implied in every hire-purchase agreement. Section 7(1) states that in every hire-purchase agreement there shall be:(a) an implied warranty that the hirer shall have and enjoy quiet possession of the goods;(b) an implied condition on the part of the owner that he shall have a right to sell the goods at the time when the property is to pass;(c) an implied warranty that the goods shall be free from any charge or encumbrance in favour of any third party at the time when the property is to pass.Unless the agreement involve second hand goods, merchantable quality of the goods, and the condition of goods regarding fitness for purpose, otherwise these implied conditions and warranties cannot be excluded or modified.Section 7(1)(b) is about the condition as to title. In a hire-purchase agreement, a sale does not occur till the hirer has exercised his or her option to purchase. Under this section, during the time of the agreement, the title of the property does not have to be in the hand of the owner. The title of the property is required by the owner only when the property is to be passed to the hirer, which means when the hirer finished all the instalments. English authorities have expressed the view that the party letting out goods on hire-purchase should have title at the time of delivery to the hirer because the option to purchase can be exercised at any time after the delivery. In the case of Goddard J. inKarflex Ltd v. Poole [1993],[footnoteRef:44] the plaintiffs described themselves as the owners of a motor car and agreed to hire it to a hirer who is the defendant in this case on the terms that in consideration of an initial payment of 95, the hirer should have the option of purchasing it at any time during the currency of the agreement on making certain agreed payments. However, the hirer failed to pay his monthly payments and the plaintiffs re-took the possession of the motor car and commenced this action to recover agreed compensation. Before the action was tried the hirer argued that the plaintiffs were not in fact the owners of the motor car at the date of agreement as it have been sold to them by a person who had no title to it. Therefore he counter-claimed the 95 paid by him on entering the agreement. The court had held that the owner impliedly contracts not that he will at some time become possessed of that property during the currency of the agreement, but that he is the owner of the property at the time he lets it out. So the plaintiffs were not entitled to pay back the initial payment and the defendant was entitled to recover the amount already paid by him. [44: [1933] All ER Rep 46]

In Public Finance Bhd v Ehwan bin Saring,[footnoteRef:45]where by the respondent purchased a motorcar from T for RM 82000, and paid RM 40517.97 to T and RM 16482.03 to appellants. He entered a hire-purchase agreement with the appellants for the balancing amount and the appellants advance to the respondent a total amount of RM 25000 to pay T the balance of the purchase price. However, the Custom and Excise Department seized and forfeited the vehicle for an alleged offence. The respondent claimed for the RM 57000. MohdGhazali J. held that the appellants had held themselves out as owners of the vehicle at the time the agreement was entered into. Since the vehicle was seized by the Customs, it had become impossible for the appellants to pass a good title to the respondent. Therefore, the appellants must return the RM 57000 that they received from the respondent. [45: [1996] 1 MLJ. 331]

In conclusion, the main purpose for this section is to protect the right of the hirer to receive the title of the property he or she has bought under the hire-purchase agreement when he or she has paid the last instalment. If the owner doesnt have the title to the property at the time when the property is to pass, which is at the time when the hirer paid the last instalment, the hirer can claimed whatever the he or she had lost under this section.

Question 4(b) Explain the meaning and procedure of re-possession under The Hire-Purchase Act 1967 (Act 212). (LO3) In general, repossession is a process where a lender or seller can take the property from the borrower or buyer usually due to default of the latter.[footnoteRef:46] Lender or seller is referring to the owner of the property whereas borrower or buyer is referring to the hirer. So, repossession occurs where there is default by the hirer, for the non-payment of installments.[footnoteRef:47] Detailed provisions of setting out the rights and obligations of both hirer and owner in the event of repossession of the goods can be found in Sections 16 to 20 of the Hire-Purchase Act 1967. [46: Retrieved from http://www.investorwords.com/4188/repossession.html] [47: See cases relating to various aspects of repossession: KaYim Credit & Leasing SdnBhd v. Pang Kim Cha & Bros DevSdnBhd [1989] 2 MLJ 61; Pang Brothers Motors SdnBhd v. Lee Aik Seng [1987] 1 MLJ 179; United Manufactures SdnBhd v. Sulaiman bin Ahmad &Anor [1989] 1 MLJ 482.]

The process of the repossession is defined in the case of KohSiak Poo v Med-Bumikar Mara Sdn Bhd.[footnoteRef:48] In this case, the court held that when a hirer breaches a hire-purchase agreement relating to payment of installments of sums of money, the owner may take possession of the goods if he complies with Section 16(1) of Hire-Purchase Act 1967. This section clearly states that an owner shall not exercise any power of taking possession of goods unless: [48: [1994] 3 MLJ 610]

i. The hirer has defaulted in two successive payments or defaulted in respect of the last payment, and ii. The owner has served on the hirer a notice, in writing in the form set out in the Fourth Schedule of the Act, and iii. The period fixed by the notice has expired, which shall not be less than twenty-one days after the service of the notice. However, the owner cannot repossess the goods if he did not comply with the notice that set out in the Fourth Schedule of the Act. The following cases illustrate the effect of non-compliance with notice under Section 16(1) of the Hire-Purchase Act 1967, that is the notice set out in the Fourth Schedule of the Act. In the case of Pang Bros Motors SdnBhd v Lee Aik Seng,[footnoteRef:49] the date specified in the notice was short of two days for the statutory minimum number of days (21 days). The court held that the notice was bad in law even if served and its effect was therefore null and void. [49: [1978] 1 MLJ 179]

Besides that, the hirer can use the reasonable force to oust persons from his place or house and it is illustrated in the case of Public Prosecutor v Mohamed Nor.[footnoteRef:50]In this case, the hirer failed to pay monthly installment and the owner had sent their agents to repossess the car without giving prior notice that set out in the Fourth Schedule of the Act. However, the hirer used physical violence to oppose repossession. The court held that the owners action was invalid as he did not comply with the Section 16(1) of the Hire-Purchase Act 1967 and the hirer has a right to use reasonable force the goods. [50: [1988] 3 MLJ 119]

In the case where a hirer is a deceased, an owner shall not exercise any power of taking possession of goods unless there had been four successive defaults of payments by virtue of Section 16(1A) of the Act. The rational of this section is to give time for deceaseds relatives to settle deceased estates. However, if there are reasonable grounds for believing that the goods will be removed or concealed by the hirer, the owner need not comply with the subsection (1). The onus of providing the existence of those grounds lies upon the owner. According to Section 16(3) of the Hire-Purchase Act 1967, a notice in the writing in the form set out in the Fifth Schedule of the Act shall be served on the hirer or every guarantor by the owner within twenty-one days after he has taken possession of the goods. However, if the notice that required by subsection (3) is not served, the owners right under the hire-purchase agreement cease and determine unless the hirer exercises his right to recover the possessed goods in accordance with Section 16(6) of the Act. Moreover, the owner has the duty to provide a receipt which set out the short description of the goods and the date and the place where the owner taking possession of the goods. While, Section 16A states that a hirer who returns goods within twenty-one days after the service on him of the notice set out in the Fourth Schedule shall not be liable to pay the cost of possession, the cost incidental to taking possession and the cost of storage. Next, Section 17 of the Hire-Purchase Act 1967 clearly states that the owner shall not sell or dispose the goods without the written consent of the hirer until the expiry of the twenty-one days after the date of the service on the hirer of the required notice prescribed in Section 16(3). If the notice is under Section 18(1)(a), the owner must not sell or dispose the goods until the time for payment or tender pursuant to the notice has been expired. Any sale in contravention of this section constitutes an offence. The hirers rights and immunities when goods are repossessed will be discussed under Section 18 of the Hire-Purchase Act 1967. The hirer may give a notice to the owner within twenty-one days after received a notice under Section 16(3), to require the owner to:i. redeliver to or to his order the goods that have been repossessed (subject to compliance by the hirer with the provisions of section 19); orii. sell the goods to any person introduced by the hirer who is prepared to buy for cash at a price not less than the estimated value of the goods set out in the first mentioned notice. In general, the hirer may recover from the owner the difference in amount where the value of the goods exceeds the money owed or the total net amount paid exceeds the debt. Under the Section 18(4), where an owner intends to sell the goods either by auction or by private treaty, the owner is required to give the hirer an option to purchase at the price at which he intends to sell if the price less than the owners estimate of the value where it is otherwise than by auction. Failure of the owner to comply with this section is an offence.The hirer may regain the possession of the goods if the conditions outlined in the Section 19(1) of the Act are met. Within the twenty-one days after giving notice to the owner pursuant to Section 18(1), the hirer:i. pays or tenders to the owner any amount due in respect of the period of hiring up to the date of the payment or tender,ii. remedies any breach of the agreement or where he is unable to remedy the breach because the owner has taken possession of the goods,iii. pays or tenders to the owner the reasonable costs and expenses of the owner of and incidental to his taking possession of the goods and of his returning them to the hirer.Therefore, the owner shall forthwith return the goods to the hirer and the goods shall be received and held by the hirer pursuant to the terms of the hire-purchase agreement as if the breach had not occurred and the owner had not taken possession.

ReferencesStatutesHire-Purchase Act 1967 (Act 212).Insurance Act 1996Laws of Malaysia, Federal Constitution Law Reform (Frustrated Contracts) Act1943Marine Insurance Act 1906 (the 1906 Act)Specific Relief Act 1950The Contract Act 1950

BooksBuxbaum, D. C. (1968). Family Law And Customary Law in Asia: A Contemporary Legal Perspective. Martinus Nijhoff Publishers.Tocqueville, A. d. (1997). Democracy in America. Influence of Democratic Ideas and Feelings on Political Society.Wan Arfah Hamzah, R. B. (2003). An Introduction to the Malaysian Legal System. Fajar Bakti Sdn.Vohrah, B., & Wu, M. A. (2000). The Commercial Law of Malaysia. Longman.

JournalLIM. "Insurance Malaysia."Insurance Malaysia. Insurance Malaysia, 5 Aug. 2013. Web. 29 Nov. 2013.LM Friedman, (1990) Legal Culture and the Welfare State Social Change as an Engine of Legal Change p269-278Montesquieu,The Spirit of the Laws, vol. 1,trans. Thomas Nugent (London: J. Nourse, 1777), pp. 221-237, passim.West's Encyclopedia of American Law, edition 2. Copyright 2008 The Gale Group, Inc.Websites RetrievedLaw Commission. Retrieved from http://lawcommission.justice.gov.uk/areas/consumer-insurance.htmThe Law Handbook. Retrieved from http://www.lawhandbook.org.au/handbook/ch23s01s06.php#Ch136Se57234http://www.legalmax.info/members2/sog/karflex.htmhttp://www.ukessays.com/essays/law/instances-where-the-contract-is-void-law-essay.phphttp://arifomar.blogspot.com/2010/05/malayan-law-journal-kes-jual-beli.html

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