MBA & DEC 2008

BUSINESS LAW AND ETHIC DLW 5013

DR POINTON

CASE REVIEW -INDIVIDU

ABD RAZAK BIN MISBAN 012009030146

DLW 5013- BUSINESS LAW AND ETHICS

INDIVIDUAL ASSIGNMENT 1 – CASE 1

On 13 March Julia, a newly qualified doctor, received the following letter from her uncle.
in Singapore:

Dear Julia

Congratulations on completing your degree. I was pleased to learn that you are making enquiries
about joining a local clinic. During the last vacation we discussed my forthcoming retirement. One of
my colleagues is keen to buy all my equipment for RM 30,000 but I told him I had promised to give
you first refusal. You can have the lot for RM 25,000. Please let me know by return if you are
interested.

Your affectionate uncle

Joseph

Julia has asked her medical friends whether her uncle’s offer is a good. They assure her it represents
excellent value. Unfortunately she will need to borrow most of the money if she has to pay by 30
March. She phoned her uncle to find out whether she can have till 31 December to pay however her
uncle is away at a conference so Julia leaves a message with his secretary. Two weeks pass by, and
as Julia has not heard from her uncle, she arranges a loan with her bank. On 30 March she writes to
her uncle, enclosing a cheque for RM 25,000. On 2 April her uncle phones to say he has already sold
the equipment to someone else in Singapore.
REQUIRED
Advise Julia.

Fact
Here Julia’s uncle offered to sell his clinic equipment to Julia for RM25,000. In Julia‘s uncle letter he
did mention that somebody else also was offering him for same item at RM30,000 but he promised to
give Julia first refusal. In addition her uncle requested that the response to be made by return. While
considering the offer made, Julia had asked her medical friend on the offer and her friend assure her
that it represent a good value. Julia decided to accept the offer but to request whether she can have till
31 December to pay. She tried to communicate his acceptance to his uncle but he was away for
conference so Julia just leaves a message with her uncle’s secretary. Dated 30 March despite of
hearing any respond from her uncles, Julia wrote to her uncles to accept the offer by enclosing a
cheque for RM 25,000. However on 2 April her uncles phones to say he has already sold to someone
else.

Decision
Until and unless the acceptance is communicated, no contract comes into existence. Therefore in this
case Julia’s uncle were not bound by his offer until the answer was received, then the Julia would not
be bound until she had received word that her uncles had received her acceptance, and this could go
on indefinitely. Supposedly Julia needs to communicate with his uncles on her acceptance before she
made any arrangement with the bank. Somehow she also must communicate with authorize person
where the contract is bind not to unauthorized person such her uncles secretary.

Reason
This case concerns the acceptance of an offer and the importance of how that acceptance is
communicated to the offeror. Even though Julia has wrote to his uncles with enclosing the RM25000
cheque on her acceptance but there is no acceptance been made to communicate the acceptance as
requested in her uncle’s earlier letter dated 13 March. Due to the acceptance was not communicated
to her uncle, it could prevent the contract being created. The general rule is that an acceptance must
be communicated to the offeror. Until and unless the acceptance is so communicated, no contract
comes into existence: “Lord Denning in Entores v Miles Far East Corp. [1955] 2 All ER 493.”
Besides that the acceptance must be communicated by the Julia or someone authorized by Julia. If
someone accepts on behalf of the Julia, without authorization, this will also not be a valid acceptance:
“Powell v Lee (1908) 99 LT 284”

Where acceptance by post has been requested or where it is an appropriate and reasonable means of
communication between the parties, then acceptance is complete as soon as the letter of acceptance is
posted, even if the letter is delayed, destroyed or lost in the post so that it never reaches the offeror.
See:Adams v Lindsell (1818) 1 B & Ald 681. However in Julia case there is a letter was posted to his
uncle for the acceptance but it was already two week pass by from the moment that she received the
offer from her uncles. Even her uncle did not mention on the exact time for Julia to return her
acceptance but he did mention there was an offer to him with higher price. So it means it is very
urgent, and therefore although Julia did replied his uncle letter but it consider late or defective
acceptance that does not create contract.
INDIVIDUAL ASSIGNMENT 1 – CASE 2
Ah Meng, aged 17, decides to leave home in Muar and look for a job in Kuala Lumpur. Over the next
three weeks he enters into the following agreements:

(a) He borrows RM 500 from his brother to tide him over until he can find a job.
(b) He takes a two-year lease on a room, paying three months’ rent in advance.
(c) By pretending to be 21, he orders a RM 1,000 suite of furniture from Fancy Furnishings Sdn
Bhd on 12 months’ interest-free credit.
(d) He sets up a catering business and immediately agrees to cater for 100 people attending a 21 st
birthday party for a price of RM 2,000. He insists on a RM 500 deposit. As the day for the
party approaches, he finds that he has taken on too much work for one person, so he rings his
customers on the afternoon of the party to say that he will not be able to do the catering after
all.

REQUIRED
Discuss the legal effects of these transactions.

Fact
Ah Meng an infant borrowed money RM500 from his brother to tide him over until he can find a job.
In addition He takes a two-year lease on a room, paying three months’ rent in advance. Then he is
also ordered a RM 1000 suite of furniture from Fancy Furnishing Sdn.Bhd on 12 months interest-free
credit by falsely representing himself as to be 21 years old. He also entered into an agreement to cater
for 100 people attending a 21st birthday party for a price of RM 2,000 and insist on RM500 deposit.
However on the afternoon of the party he rang his customer to say that he not be able to deliver the
job due to he finds that he has taken on too much work for one person.

Decision
1. The contract entered into by his brother was void as he was an infant at the relevance time.
2. As a second party also no contract is bind due to Ah Meng has paid the two year lease on a room
by paying three months’ rent in advance.
3. Meanwhile for the purchase of RM 1,000 suite of furniture from Fancy Furnishings Sdn Bhd on 12
months’ interest-free credit the contract entered is void even if it established that the Ah Meng
induced the other party to enter into the contract by falsely representing himself as to be 21 years old
as well as he is protected by the law of tort.
4. Ah Meng is not binding into any contract to cater for 100 people attending a 21st birthday party
due to he does not have capacity or have only limited capacity to the contract since he is a minor.

Reason
Under the Majority Act 1971, a minor (typically under 18) can disaffirm a contract made, no matter
the case. However, the entire contract must be disaffirmed. The minor cannot keep any of the goods
traded for. Also, barter transactions such as purchasing a retail item in exchange for a cash payment is
generally recognized through a legal fiction to not be a contract due to the absence of promises of
future action. A minor may not disavow such a trade.

In this case Ah Meng is only 17, the common law regarded minors as a class needing protection from
the penalty of their immaturity so a contract entered by the minor is not binding on him. Therefore in
Ah Meng case of falsely himself as a major and from the general principle is that a minor is liable for
torts committed by him. However where there is a contract and there is a possibility of an alternate
remedy in tort against the minor, the common law principle is that the plaintiff cannot proceed
against the minor in tort, if to do so would be indirectly enforcing a contract which is otherwise
unenforceable. Consequently a minor who dishonestly induce another to give him a loan by falsely
his age cannot be proceeded against in the tort of deceit such as case R leslie vs Sheill. In Contract
Act it appears even more liberal for minors.

Meanwhile for any restitution takes place where under the Contracts Act, a contract entered into by a
minor is void unless it is for the supply of necessaries, the fact remains that money and property
usually exchange hand in voids transaction but the minor could be ordered to make restitution or
return the goods obtain by his fraud in this case the deposit money of RM 500.