Your money no good here!

In my younger days, i use to buy sweets from A'Beng shop.
Being the only chinese family in my kampung, the shop... is the whole kampung blood line.
As I remembered correctly, at one time during CNY, when A'Beng shop closed for 3 days, it become a total disaster to the whole kampung. We have to travel to the next 'pekan' or town 22 kilometers away for a supply.

To cut the story short, what i remembered most about A'Beng shop ...well .. we always get the free sweets. You know why? Well ... I dont really have the answer to that. But sure did, everytime we wanted to pay for the sweets, A'Beng would said "Your money no good here lo.." and not to mention his sweetest smile that I would never forget.

Nowadays, you won't get free things no more? You have to pay even to pee ? You want to give charity also you have to pay! I wonder, if I could or my chidren perhaps, having a chance to meet the A'Beng in our community, before I could close my eyes.

CONTRACT OF AGENCY

.The law of agency is based on a relationship between principle (P) and agent (A)
.Principle and agent there is an agreement, actual relationship
.There is a contract, when somebody employs an agent, there is a contract of agency

.Q: What is contract of agency?
.A: Contract of agency is a contract whereby a contract known as principle appoints another known as agent to react on behalf of principle in return for payment known as commission. The agreement between principle and agent is a contract of agency

.Reason for appoint agent
1) time
2) skills and expertise
3) own way to expand business
4) allow principle to extend his business beyond physical limit
5) remain secrecy, confidentiality of identity

.The role of agent to bring the third party and principle together.
.When agent is appointed, agent is appointed with:
1. General power – agent will do everything on behalf of principle
2. Specific power – sometime agent appoint with specific power, agent in real estate, agent appoint to sell a house, so, the agent power is selling a house (very limited, general and specific power)

.The power is given to agent known as scope of the power
.As long as agent acts between the scopes of his power, the principle is liable and bound by the option by the agent.
.If the agent act intra-vires (within his power), the principle will be bound
.If the agent act ultra-vires (outside his power), then principle will not be bound or liable
The agent will have to assume personal liability

.How do we create an agent?
The relationship of agency may arise in any of these four ways:
1) expresses appointment
2) implied appointment
3) necessity
4) ratification

Expressed Appointment
principle express to agent to appoint him as an agent


Implied Appointment
3 ways:
a. Common law
b. Doctrine of estoppel
c. Section 7 partnership act

a) Common law
- under common law, wife still stay with her husband is consider as an agent of the husband (implied agent)
- She can buy goods and necessity by using the husband credit or money
- The husband will bound by what his wife buy
- This rule will not apply if:
i) the wife is given sufficient allowance
ii) if the husband has instructed to retailer or shop not to give credit to his wife
iii) If the expenditure is far exceed what is reasonable and unparticular and if it not commensurate with the husband income

b) Doctrine of estoppel
- the oldest doctrine in English law
- most widely use doctrine
- When somebody create impression
i. that something is true and the other person belief
ii. that impression and act on it
iii. then that person creating that impression (who exerts) will stop by the law from deny that impression (exertion)


Agent by ways of necessity
- An agent must been given a task to do
- In process to perform a task, he come across problem, and the issue is so stressing that he need to take an agent step in order to protect his principle interest and the step he has taken is an unauthorized action (ultra-vires).
- The way for the agent to avoid the liability is by claiming necessity
- Example:
i. Abu appoint KTM to send vegetables from Penang to Singapore
ii. The journey delay about 3 to 4 days due to flood
iii. KTM took immediate steps to sell the vege in Ipoh for lower price
iv. Original role : transport agent
v. In Ipoh: sales agent
vi. The principal suffer lost because the vege were sold at lower price
vii. The principal sue agent for the losses
viii. The act of selling is cover by necessity, if successful in establishing necessity, the scope of KTM is enlarge from transport agent to sales agent
ix. If the person can prove that the commission of the act was done by way of necessity, he will escape of personal liability

Three conditions must comply in order for necessity to be successful?
1) The agent must have attended or try to communicate with the principle for further instruction but somehow was unable to get the principle
2) The agent must have taken in good faith to prevent further lose to the principle or to mitigate or to lesser the potential loss to the principle
3) There must a situation of commercial agency

Case:
Great Northern Railway v Swaffield
- GNR is an agent to transport horse by train from one place to another
- When arrived destination, no one came to claim the horse
- The company decided to keep the horse at a special place
- The next day, the owner come and collect the horse
- The Company gives 2 bills to him, bill on transportation and bill to keep the horse
- The owner refuse to pay the second bill
- Court: Principle has to pay the bill because 3 condition apply
i) the company had tried to communicate with principle for further instruction
ii) the action taken to prevent further losses to the principle
iii) situation of commercial agency

Springer v GW Railway
- Consignment of tomato from one place to another
- The journey postpone because of strike
- Due to his GWR reload the tomatoes and sell it at lower price
- Springer claims of lose of profits against GWR
- GWR could not claim necessity because GWR did not inform the principle of the situation
-

Agent by way of ratification
- ratify means an act of legalizing a previous action which was originally unlawful
- Conditions:
- Conditions:
i. Before ratification, the agent must act ultra-vires
ii. The principle must have full information about the act which need to clarify
iii. The agent must have acted on behalf and in the name of principle

Case:
Keighley Maxted v Durant
- did not brought the name of the principle
- the principle could not ratify the action

iv. There must be competence principle at the time the ultra-vires act was done and at the time it was to be ratify

Case:
Kelner v Baxter
- A company was about incorporated
- While waiting, the promoter bought the hotel on behalf of the company
- The agent act –ultra vires
- When the company finally incorporated, the company ratifies it
- Court: - This was impossible because the act was done
- there was no principle (the principle does not incorporated yet)


v. Ratification must not injure the interest of the 3rd party

SALES OF GOOD ACT (SOGA)

.The primary law covering the sales of goods is SOGA 1957 (Rev1989) – primary source of law
a) SOGA 1957
b) Common law

.Peninsular Malaysia uses Sales of Goods Ordinance 1957
.Penang & Malacca state apply Sales of Goods Act 1893 (an English Act)
.For Sabah and Sarawak is Sales of Goods Act 1893 (an English Act)
.In 1989 the ordinance upgraded to be an act and called SOGA 1987 which apply to Penang and Malacca, leaving Sabah & Sarawak.
.Purpose of SOGA to regulate the transaction between Buyer and Seller
.Condition: Breach of contract will entitle to terminate the contract, claim for damages. The act introduce of implied condition and warranty.
.There are 5 implied conditions imposed by the act (Section 14, 15, 16 & 17)
.Implied terms is an attempt to protect consumers
.The scheme of consumer protection: Look at implied condition in total is a scheme of protection.
.Whether or not agreed to include to the contract, the law will implied this condition in the contract.

Section 14
Implied condition is to title

Section 15
Implied condition dealing compliance description

Section 16
Two implied condition:
a) merchantable quality
b) fitness for purpose

Section 17
Implied condition compliance with sample

SECTION 14
The seller must have the goods title to the goods
If the contract of sales between buyer and seller review that the seller not has a title to a goods, then the seller has breach the contract
Case:
Rowland v Divall
- buyer bought car from seller
- after 3 months, discover that the car has no title
- Buyer terminates the contract because of implied condition to the title


SECTION 15
. Goods sold must conform to the description given
. Implied condition to description due to transaction based on description given by the seller, eg. Catalogs, tv, internet, brochure
. The good deliver do not correspond to the description, the buyer have power to terminate the contract

Case:
Beaie v Taylor
- Buyer advertise a car for sale
- Described the car as 1961 model
- Buyer belief heavily on the description
- Buyer bought the car and discovers that only half is 1961 model
- Seller breach the implied of description

SECTION 16
. Two implied condition – merchantable quality and fitness for purpose
a. Merchantable quality is very difficult to define. Quality is good enough to restrict
b. Fitness for purpose is implied condition. Actually sec 16 does not automatically impose and implied condition as the fitness for purpose under sec 16.
. There is NO implied condition as to fitness for purpose
. Unless the seller is in a business of selling goods of that nature and the buyer rely heavily on the skill and judgment of the seller.

Case:
Grant v Australian Knitting Mills
- Grant enter a department store looking for underwear
- The underwear choose by Grant is made by wooden
- He bought the action under section 15 and 16.
- Court decided under sec. 15, because did not answer the description, breach implied as to description
- Under sec. 16, the underwear is not fit for the purpose

Priest v Last (hot water bottle)
- A hot bottle sold to buyer
- Put in hot water, close it tightly, about to use it, the hot water bottle explode
- Buyer relied on the skill of the seller to choose the product
- This case implied condition of fitness of purpose

Frost v Alylesbury Dairy Company (fresh milk)
- Supplied fresh milk
- Frost family drink contaminated milk and died of typhoid
- The contaminated milk is not human for drink, fitness for purpose

Khong Seng v Ng Tiong Kiat Biscuit Factory
- Khong Seng supply shortenings (fatty acid) to biscuit company
- The shortenings was very low quality, infect that is not suitable for making biscuit
- Ng Tiong refuse to pay for the shortenings
- Fall under fitness for purpose

SECTION 17
. The goods sold must correspond to the sample

EXEMPTION CLAUSE

· Normally included in the contract to avoid one party escape his liability under the contract
· Prepared by stronger party (client) – contract of adhesion “just follow, take it or leave it”. You don’t have choice but to subscribe to the contract
· Example 1: buy a house, no freedom of choice, terms has been dictate by the seller
· Example 2: parking at your own risk – law allow it based on idea ‘freedom of contract’. You r free to park or not to park there, no one force you. At the parking ticket there is always statement stated ‘management will not responsible if car stolen or loss’. Management uses the exemption clause to escape from obligation or liability
· If the exemption clause in the agreement and u sign the documents, then you are bond by the exemption clause.
· But what if clause is not in the contract, are the party signed bond? Law has involve overrules principle to regulate and control and even determine the validity of the exemption clause.
· Exemption clause rules:
1. The Rule of Notice

Principles :
· An exemption clause can only valid if it is brought to the attention of the other party before or at the time the contract is made.
· If the rule is not complying, then the exemption clause will not be valid

Case:
Olley v. Marlborough Court Hotel
- Mr and Mrs Olley register as guest of the hotel, given key of the room
- Put their belonging and go for a walk
- When returned, they found some of belonging and expensive fur coat is missing/stolen
- They brought the issue to management of the hotel to claim for damages
- Hotel management denied paying because there is an exemption clause state that the hotel is not responsible for any losses and put in a notice in a room.

Court:
- The exemption clause is not valid because the contract was made at the counter and the exemption clause is not brought up to them when they made their registration, so, they can claim damages.
- Notice came after the contract, the agreement is not valid.
- Any agreement must be brought to the attention to the party before or at the time the contract is made (to let them to make a choice whether to stay or not).

2. The ticket rules

Principle:
· An exemption clause found in or on any part of a ticket, shall not treated as valid
· A ticket is not a contractual agreement
· A ticket is not a contract, but is evidence that the contract is exceeded
· Ticket is subsequent of the contract, ticket come after contract

Case:
Parker v South Eastern Railway
Chapelton v Barry Urban District Council
· Exception of this rule if the airplane tickets because the terms in the ticket is a part of the contract

Malani Nathan v Malaysia Airline
Thornton v Shoe Lane Parking
· Thornton drove in multilevel parking space, when he press a button, the bar rise up and he drove in and park his car at second floor.
· The exemption clause was put at 3rd floor.
· Something happen to the car
· He sue the parking management
· The exemption clause should put before the entrance corner to make sure that they have the choice to park
· Shoe lane parking said there is no contract between Shoe lane parking and Thornton

Court:
A contract can make through machine


3. Contra Proferentum Rule/Rule of Interpretation

Principle:
If the exemption clause contains any ambiguity in terms of scope, extent, impact, the words used, the law would interpreted the exemption clause in favor of the weaker party and against the stronger party

Case:
Curtin v Chemical Cleaning

4. The rule of inconsistency

Principle:
· If a subsequent oral statement is inconsistent with the written term of exemption clause, then the written exemption clause will be treated as it amended by the oral statement.
· Court would interpret that inconsistency in the way that would favor the weaker party

Example/Case:
· There is notice (exemption clause stating that management will not be responsible for any damages or lost of things) at a corner of the car park.
· X noticed the exemption clause and he park his car
· X remove his valuable thing from car and at the moment wanted to lock the car, X saw Z (worker) and approach Z. Z say don’t worry that it is safe to keep the stuff in the car and nothing will happen.
· X left is belonging and when came back his belonging is missing.
· X make complain but management said they not liable because of the exemption clause

Case:
Mandelsohn v Normand
Curtis v Chemical Cleaning & Dying Company

· A lady take her cloths for dry cleaning, when received receipt she saw exemption clause and ask the girl who is on duty.
· The salesgirl said, only if the beads spoilt
· When lady came back to pick up her cloths she found that the color had changed
· Court: The exemption clause had been amended by the oral statement by the salesgirl

Court:
There is inconsistent between the oral statement made by worker and the exemption clause.
Inconsistency in the agreement, so, oral statement will be taken. X can claim damages.


5. Rule of Negligence
Principle:
· Contract can be seen from the perspective of right and duty
· Contract between A and B, A paid RM100,000 to B to built a house
· In the perspective of right:
> A has the right to received the house
> B has the right to received RM100,000

· In the perspective of duty:
> A has to pay RM100,000
> B has to built the house

· When a party has an obligation on the contract, he must discharge his obligation.
· A breach of contract is when one party unwilling or unable to perform the obligation under a contract. The other party can claim for damages
· When somebody has perform his duty then he is said to be relief from the contract

Method discharge of contract
1. By way of performance
2. By way of novation
3. By way of waiver
4. By way of rectification
5. By way of frustration

CONTRACT

CONSIDERATION

· An agreement without consideration is not a contract
· Under common law, a contract is binding because there is consideration; view the contract as an exchange of promises
· Consideration is the price we pay for the promise, nobody made promise freely
· Example 1: A promise B, to give RM1000 for washing his car, A not bind to his promise unless B has given his consideration
· Example 2: A set an agreement with B agreed to sale a house for RM300,000. Both parties are bind i.e. contract by their promise
- A want to sell house to B
- B want to give RM300000 to A for a house

What make A bound?
· A promised is bound by B consideration.
· B has promise to give RM300000 to A because A promise to give away his house
· A & B are bound by their promises, therefore, a contract exists
· However, A promise is not binding if it is not supported by consideration
· A contract of both parties are bound by consideration
· Consideration is the center of a contract
· Only when there is consideration, the contract becomes binding

Bare promise
· Promise that is not binding because there is no consideration (nudum pactum)


Principle of consideration
1) Consideration may not be adequate but it must be sufficient

Q: How to distinguish between adequate and sufficient?
A: Adequate means it relative to quantitative aspect
Sufficient means it related to qualitative aspect

Example: Ali own a house value RM100,000. Ali willing to sell a house to Babu for RM1000. This is a valid contract because RM1000 is sufficient for the seller

· Even-though, there is no fraud, misinterpretation or duress we may view that the amount paid for the house is not adequate.
· However, under Malaysian law when the consideration is went far (not adequate) below the actual values of exchange, this would alert court to investigate whether the other party consent has been free
· If the court is satisfied the consent is voluntary or free then the contract would be ahead, despite the inadequacy of the consent

Case:
Ghappel Co. Ltd v Nestle Co. Ltd

2) Consideration must be real and off-value
3) Mere performance of assisting duty is no consideration unless what has been done was over and above that required by the duty (above the demand of the duty).

Case:
Hartley v Ponsonby
· Remaining crew member is seriously unhanded
· All the crew member share the workload
· There was consideration because very serious unhanded

Example:
One night while two policeman on patrol, there is a girl who come home late and was afraid. She asked one of the policeman to accompany her home. When arrived at the girl house the girl promise to give RM50 to the policeman the next day because of his kindness. The action of the policeman is considered as consideration because over and above the demand of his duty

Glasbrook Brothers v Glamorgan Country Council
- The fireman is called to put out a fire (performance of his duty)
- Because the house in havoc condition the owner of the house ask the fireman to guard his house and promise to pay them for their service (over and above duty demand)
- So, the fireman can ask for the money because the consideration occurs

Ward v Byham
- A man and a women live together and they have child out of a back lock
- Later both had quarrel and the man left the women
- The man promise to pay child support allowance every month to the women if the women promise to look after the child well and the child always happy
- After several months, the man stop pay the allowance
- The women bring the case to court and order the man kept the promise
- Under English law, if a man and a women have a child out of back lock, it is the duty of the mother to look after the child
- There is no consideration because there is the duty of the mother to look after the child
- However on the day of the trial, the child look very happy and thus the court rule that even it is the duty of the mother to look after the child, but it is not her duty to make the child happy (the consideration is to make the child happy), so the man has to pay for the child support allowance.


4) Past consideration is not consideration
· Situation where consideration may not present (exceptional situation) are mention in Sec 26 contain three (3) exceptional situation where consideration may not be present the agreement still a contract

· Section 26 (a)
- a promise in writing register under the relevant law if any make between two parties in near relation to one another and for reason of natural love and affection, then the promise is binding (confined to family arrangement)
i) a promise made in writing
ii) between 2 person standing in near relation
iii) make on an account of natural love and affection
iv) register under the relevant law
- Near relation is blood relation and according to the personal law
- Under the Chinese culture law, foster children will have blood relation with the foster father side and not the foster mother side
- Example:
Husband promise to his wife to give her a house. The promise made in writing.
3 years later the wife reminded her husband about it, but the husband ignores the statement.

- In this case, consideration does not exist, exception of consideration also not valid

· Section 26 (b)
- a promise to compensate someone who has voluntary done something for the benefit of the promisor or someone who has voluntary done something which was the duty of the promisor to do so (duty –impose by law as well as moral duty and contractual duty)
- Example 1:
- A park his car at one place and discover that his car is given a good wash and polish by B without A desire
- Therefore, past consideration exist and B cannot claim under section 26 (d) because A is not bound to it.
- However B can claim from A under the exemption principles, Section 26 (b) because a promise made by A to compensate B who has voluntary done something (wash A car) that benefit A
- Example 2:
- A goes outstation for 3 weeks and ask B to look after his house
- B promise to do so
- On 2nd week, he saw a letter from income tax department and the letter notify he has 7 days to pay the tax of RM50,000 of he will be arrested
B paid the amount on behalf of A and told A about it when A return for oversea
- A promise to pay the money back to B but later refuse to do so.
- B can claim under Sec 26 (b) because B had done something that benefited A, which was the duty of the promiser (A) to do, pay taxes.


· Section 26 (c)
- stated if a promise is made to pay statute bad debt, then this is valid contract
- Under the common law a debt under the “statute barred debt” mean that the statute or limitation a person may only recover its debt between 6 years.
- After 6 years cannot recover the debt anymore and the debt becomes statute barred debt
- For land is 12 years
- Example:
- A gives loan to B eight years ago amount RM300k
- After 7 years only, A found out that B owing him RM300k and sent notice for B to settle the debt
- B is not bound to this request but if B promises to pay back then B is bind by contract [bound under Section 26(c)].
- 6 years from the time it discover from the accident