BUSINESS LAW

COURSE CODE: UL 2023

SYNOPSIS
This course will focus mainly on the business law as it is applied in Malaysian legal system. Business law is a combination of several laws relating to business and trade. The main emphasis of this course will be on the principles of contract law and agency law. We will also briefly focus on laws relating to sale of goods, law of hire purchase and negotiable instruments.

INTRODUCTION
What is law? -Law regulates the citizens and their relationship with the state and with each other. -A body of rules which we have to follow in our day to day lives. For example, traffic law, immigration law, business and trade law etc. -Law is different things to different people. Law in not necessarily justice. -Sometimes it is used as such.

Cont
-Justice refers to fairness and rightfulness; -Justice is a moral value and law is a mean to achieve this justice. -In Malaysia, the concept of justice is to attain equitable distribution of wealth among the various ethnic groups. The law also preserves the special status of the Malays without violating the legitimate interest of other ethnic groups.

LAW OF CONTRACT
The law of contract is found in case law and in the statutes; The principal statute that deals with contract is the Contracts Act of 1950 (revised in 1974); The Revised Act is now applied though out Malaysia; The origin of contract law is English;

CONTRACT- WHAT IS IT?

Under the law, the word contract refers to an agreement between two or more parties that is legally binding between them. Section 2(h) of the Contracts Act provides that a contract is an agreement enforceable by law.

Cont
The basis of all contracts lies in the agreement of all parties; Not all agreements are contracts; To be a contract, an agreement must meet all essential elements of a contract (outlined below). Section 10(1) states that an agreement must be made by the free consent of parties competent to contract for a lawful consideration and with a lawful object.

Essential elements
The essential elements of a contract are:
Proposal and acceptance; Consideration; Intention to create legal relations; Certainty; Legal Capacity; Free consent and agree; Legality of the objects; Required formalities.

Cont
Where one or more of the elements are missing, the agreement is not a contract and will not be enforceable under the law. If Ahmad agrees with Ali to have dinner at a restaurant, is this agreement a contract? It is a social agreement and lacks the essential elements of a contract outlined above.

OFFER OR PROPOSAL
An agreement between two or more person (s) is constituted by a proposal and an acceptance; Proposal is used in the Act but it is also known as an offer which is used in the English law; A proposal or an offer is made when one person indicates to another his willingness to do or abstain from doing anything, with a view to obtaining an assent of that other (the agreement or the consent of the other person) to such act or abstinence.

Cont
Example:
A, by offering to buy Bs car for $10,000 in the hope that B will accept, is making a proposal or offer. According to section 2(b), when the person to whom the proposal is made signifies (show) his assent (consent), the proposal or offer is said to be accepted.

-Thus an acceptance by B would create an agreement between A and B. -The proposal has now become a promise and the party making the proposal (offeror or proposer) is referred to as promisor and the party accepting the proposal is now called the promisee.

 Therefore, in that example, Bs acceptance of As proposal or offer to buy the car establishes an agreement or a promise. A is the promisor and B is the promisee.

INVITATION TO TREAT
A proposal and invitation to treat is not the same thing. The Contracts Act does not address this issue. The English law provides guidance on this. An invitation to treat is not a proposal or offer rather it is an initial communication between parties.

 Examples of an invitation to treat would be a price list, a display of goods with price tags in a self service super market, an advertisement or an auctioneer inviting bids for a particular article. In an auction the auctioneer is merely inviting the people to make an offer or proposal which the auctioneer may accept or reject.

 Based on section 10 of the Auction Sales Act, A sale by public auction shall be complete when the auctioneer announces its completion by the fall of the hammer . When a shopkeeper displays goods in a shop, it is an advertisement and not a proposal to sell. The proposal is made by the customer when he/she selects the goods for payment at the counter.

 Pharmaceutical Society of Great Britain v. Boots Cash Chemist Ltd. [1953] 1 QB 401.
The focus of the Case was whether a sale had occurred in the self-service shop when a customer chose an article which he wanted to purchase and put it in the basket. The payment was to be made at the counter at that point a pharmacist supervises the sale. The Court ruled that the display was only an invitation to treat.

 Coelho v. The Public Services Commission [1964] MLJ 12

The Case affirms that an advertisement is only an invitation to make an offer and not an offer itself. An applicant who responded to an advertisement for an employment; The applicant was hired and later terminated on the ground that he was on probation.

 The High Court ruled that the advertisement was an invitation to qualified people for application. If anyone is offered an employment, such offers could either be accepted simply or with the imposition of conditions as terms of the contract, additional to those set out in the advertisement. In the latter case the offers by the applicants would have been met by

counter-offers which the offerors could accept or refuse. -In this case the acceptance letter to the applicant was in fact an unqualified acceptance and that there was no question of his appointment being on probation. Therefore, the termination of these applicants on the ground that they were on probation was not valid.

 The challenge with the vending machines and automatic ticket machines for parking.
Does a contract come into being the moment a coin is inserted or the user is merely making an offer or proposal? What happens if the machine does not deliver because it is empty and the coin is not returned?

 These issues were addressed in Thornton v. Shoe Lane Parking Ltd. [1971] 2 QB 163.
A customer is committed at the moment he inserts the money into the machine. The contract was concluded at that time. The Court analyzed its decision as follows:
The offer is made when the owner of the machine holds it out to the public as it being ready to receive money. The acceptance takes place when the customer puts his money into the machine. The terms of the contract is placed on the notice board near the machine as to what is offered for the money. The customer is bound by those terms as long as they are sufficiently brought to the customers attention.

TO WHOM THE PROPOSAL CAN BE MADE

An offer can be made either to a person or to the general public. When an offer is made to a specific person, only that person can accept the offer. See section 2(b). When an offer is made to the general public anyone who meets all the terms of the proposal may accept. See Carlill v. Carbolic Smoke Ball Co. [1893] 1 QB 256, an English case.

COMMUNICATION OF PROPOSAL
A result of the rule is that only an addressee may accept the proposal is the core of communication of the proposal. The fact that someone has done something which coincides with the proposal without being aware of the proposal does not make an agreement. Someone accepting a proposal must be aware that it exists.

 Example:
Someone returning a lost property to its owner cannot legally claim a reward if he is not aware of the existence of an offer of reward at that time.

REVOCATION OF PROPOSAL
A proposal stays open until it lapses or is withdrawn (the proposal must be communicated); Normally, there is no obligation to keep the proposal open indefinitely; he may revoke it at any time; but must be revoked before someone accepts it. Section 5(1) states this principle.

 How does a proposal get revoked? Section 6 (a,b,c,d) provides:

By a notice to the other party by the proposer before acceptance; By the lapse of time specified in the proposal; if no time is specified, by the lapse of a reasonable time without acceptance; The fulfillment of all condition by the acceptor; By the death or mental disorder of the proposer and if this information is known by the acceptor before acceptance.

 A revocation or withdrawal by the proposer must be done prior to the acceptance by mail or telegragph. Example as outlined in the illustration to section 5:
A proposes, by a letter sent by mail or post, to sell his computer to B; B accepts the proposal by a letter sent by post or mail; A may revoke his proposal at any time before or at the moment when B posts his letter of acceptance, but not afterwards.

 If a company offers an applicant a job on condition that he passes a skill test. If the applicant fails the test, the proposal obviously revoked because the applicant has failed to fulfill a condition precedent (in the offer)

 If the proposer dies or become insane after the communication of the proposal, this fact must be known to the acceptor before acceptance in order for the proposal to be revoked. The law subsection 9(d) states that acceptance without prior knowledge of the death or insanity of the proposer is a good acceptance.