LAW 503

MOHD RAZMAN BIN MOHD ZAMRI2010585961

ABDUL HAKIM BIN NASHARUDIN2010356877

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April 2010-Question 1

• Desa Permai Bhd has distributed pamphlets of its latest development project in project in Port Dickson called Indah Villa. The pamphlet gave among others, the following details:

– The house will be three storey's

– It is freehold property

– The houses comes with swimming pool

– The houses will have clear view of the nearby sea

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• The pamphlet also mentioned that the government had approved the plans to build railways lines near the housing area, which will operates as daily commuter service. After reading the pamphlet, Melor became very interested and went to the sales office to confirm the detail stated in the pamphlet. Upon her enquiry, the officer in charge assured her that the property is freehold. Melor immediately paid a deposit of RM30,000 and managed to secure a housing loan from a bank.

• Two month later, the government announced that it had scrapped the idea of building commuter service near Indah Villa as it was too expensive. At the same time, the City Council approved an application to build a hotel near Indah Villa, which overlooked their sea view. Melor also found that the houses are actually leasehold property and had no swimming pool.

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Introduction

• Every contract made in Malaysia is govern mainly under Contract Act 1950.

• 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.

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1st Issue• Whether Melor can take legal action due to breach of

term made by Desa Permai Bhd.

Rule of Law

• The detail statement of freehold property is a term

A term in contract law refers to stipulation which give efficacy to the intention of the parties. It would determine the liabilities of the parties and in the event of a breach, the term of the contact would be the basis as to whether the party who is not fault may rescind the contract or obtain any relief as a result of the breach.

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• Case:

Schawel V Reade – The plaintif, while examining a horse with a view to buying it for stud purposes, was told by the defendant: “You need not look for anything; the horse is perfectly sound. If there was anything the matter with the horse, I should tell you.” In reliance upon this statement, the plaintif bought the horse without examining it. It was subsequently discovered that the horse was totally unfit for stud purposes and it was held that the defendant statement was a term of the contract.

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Application

• As according to the case of Schawel V Reade, Melor went to the sales office to confirm that the property is freehold. Upon her enquiry, the officer in charge assured her that the property is freehold. Thus, the statement is a term because the assurance is granted. However, Melor find out that the status of the property is leasehold and lead to the breach of contract.

Conclusion The Desa Permai Bhd is liable for breach of contract. Thus,

Melor may rescind the contract or obtain any relief as a result of the breach.

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2nd Issue• Whether Melor can take legal action against Desa Permai Bhd

for the breach of condition done by the developer.

Rule of Law• The houses comes with the swimming pool is consider as

promissory condition.

• A condition is an essential term of the contract which goes to the root of the contract. It means some event which the existence of the contract depends. A promissory condition is a term of contract under which one party promises to do particular thing and a failure on his part to perform the promised act constitute a breach of contract.

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• Case:

Behn V Burness – The court held that a ship which was stated in a contract and charter party to now in port of Amsterdam and the fact that the ship was not in port at the date of the contract, discharged the charterer from further performance of the contract. The statement was a condition because of the commercial importance which charterers attach to such descriptive statement.

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Application• As according to the case of Behn V Burness, Melor has been

promise by the Desa Permai Bhd in the pamphlet given that the house comes with swimming pool. However, later Melor find out that the house had no swimming pool. Thus, this is actually lead to the breach of contract because the developer failed to provide the swimming pool as in the pamphlet.

Conclusion Melor can take legal action towards the Desa Permai Bhd for

breach of contract. She may to terminate performance of the contract or to affirm the contract and recover damages for the breach.

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3rd Issue• Whether Melor can take legal action against Desa Permai Bhd

due to breach of representation.

Rule of Law• The detail statement of the house will have clear view of

the nearby sea is a representation.

It must distinguished a contractual term and mere representation. The basis of the distinction between a representation and a term is the intention of the parties and to determine this, it must be judged objectively by looking at various factors such as the language used, the expertise or knowledge of the parties and the precision of the statement.

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• Case:

Baker V Asia Motor Co Ltd – The court decided that a statement made by the defendants that a car was a 1958 model when in fact it was 1953 model and had become a term of the contract of sale. Therefore, the action against the defendant for damages for breach of contract was allowed.

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Application• By applying the case of Baker V Asia Motor Co Ltd, the

developer which is Desa Permai Bhd had distribute a pamphlet stating that the houses will have clear view of the nearby sea. Unfortunately, the City Council approved an application to build a hotel near Indah Villa. This had actually create distraction and prevent them from having a clear view of the nearby sea. Thus, this is consider as a representation because the developer did not take consider the project near the Indah Villa which could prevent the houses to have clear view of the nearby sea.

Conclusion

• Melor can take legal action towards the Desa Permai Bhd for breach of contract due to false representation.

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4th Issue• Whether Melor can take legal action on behalf of the

misrepresentation done by Desa Permai Bhd.

Rule of Law

• The statement in the pamphlet that mention that the government had approved plans to build railway lines near the housing area is a misrepresentation.

• Misrepresentation is a false statement made by a representor and which includes the other party to enter into a contract. The English law divides misrepresentation into fraudulent misrepresentation, innocent misrepresentation, and negligence misrepresentation. Misrepresentation is defined under S.18 of the Contract Act 1950.

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• Case:

Peek V Gurney – The promoter on a company were sued by the appellant who had purchased shares on the faith of false statement contained in the prospectus issued by them. The appellant was not a person to whom shares had been alloted – he purchased the shares from allottees. It was held that the prospectus was only addressed to the first applicant for shares and hence, there was no misrepresentation.

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Application• As according to the case of Peek V Gurney, the Desa Permai

Bhd is actually making a misrepresentation in the pamphlet which had attract the interest of Melor. The pamphlet mentioned about the government had approved plan to build railway lines near the housing area. However, two months later, the government announced that it had scrapped the idea of building commuter service. This clearly show that the idea of building the facility is still under evaluation and no approval granted during the moment the pamphlet distributed. So, the developer is actually simply state that the government had approved the plan in order to improve the sale of the house.

Conclusion In a conclusion, Melor can take legal action towards Desa

Permai Bhd.

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