Business Law Business Contract: Issues and Case Study 1 QUESTION ONE A real estate sale is usually initiated by an offer from the buyer to the seller, written on a real estate contract form, and normally backed by a monetary deposit. In this case, whether the seller (Kajima) accepts the offer on advice of his lawyer, Taisei, both the buyer (Hattori) and the seller (Kajima) are bound by a legally binding contract. While the forms vary by locality, the essential terms include the offer amount, legal description, names of the parties, and date of closing. In addition to these terms, the contract interweaves numerous contingencies, disclosures of information, and procedures that dictate responsibilities of buyer and seller. The land contract is the road map that takes the buyer and the seller all the way through to closing. It is very important to understand its terms and follow them carefully. If it becomes necessary to terminate the contract, Kajima’s close adherence to contract terms and procedures is critical if he is unhappy with the outcome of it of the price of the land. Buyer and seller may have conflicting points of view of the issue. The non- settlement of termination issues can result in additional time and money, and cause unwanted stress. However, occasionally, even when it is clear that the Hattori has followed contract procedures, the Kajima may prolong the formal termination process. If Kajima and Hattori cannot agree that the contract is terminated, the matter could lead to prolonged negotiation and possibly, litigation. In most cases, it is in the Kajima's best interest to have formal termination of the contract, freeing him to put the property back on the market. Whatever Kajima reason for wanting to terminate a contract, he needs to execute and sign a written agreement called, The Early Termination of Contract with Hattori. Both Kajima and Hattori will need to mutually agree. This document names all parties and clearly identifies the contract to be ended. It releases both sides from any further obligation under the original contract. Thus Kajima are both free and enter into a new contract with a different party. 2 While this outlines use in a real estate related transaction, the Early Termination of Contract is a wise idea when ending any type of contract. Most sellers do not enter a real estate contract with the intention of terminating. However, Kajima must not take for granted that all will go as expected. If a contingency date lapses, he will lose the benefit and protection of the contingency. In other case he needs to take this case to court. My real advice to Kajima, he should not make the decision solely on what his lawyer Taisei advised him to do. He should done some research or get a third person opinion that is familiar with real estate market before making such decision. Reference M. P. Furmston, Geoffrey Chevalier Cheshire, William B. Simpson, Cecil Herbert Stuart Fifoot. (2007). Cheshire, Fifoot and Furmston's Law of Contract. Oxford: Oxford University Press Visu Sinnadurai (1987) Law of Contract in Malaysia & Singapore: Cases & Commentary. Vancouver: Lexis Law Publishing Wiss, J. (2003), Consideration. At www.papplewickcollege.com /Example5LawYR3.doc. Retrieved on 3 Oct 2008 3 QUESTION TWO The general rule of common law is that the innkeeper of hotel management will be liable for damage to, or loss of, a guest’s property, unless an act of God, civil unrest, or the guest’s own negligence caused the damage or loss. Because this is true, hospitality managers have an extraordinarily difficult task. When innkeepers face great liability exposure, they should also have a great deal of control over a guest’s possessions. My advice, both guest (Mr. Maori) and the hotel management or innkeepers (Mahkota Hotel) have a common responsibility to understand how liable innkeepers should be for the possessions of their guests. On the same time the guest has to realize the importance of protecting their valuables. But biggest responsibilities fall to the management of Mahkota Hotel. As innkeepers they have a huge task not only to inform but to protect the guest and their possession by taking several steps such as: 1. Posting notice This is a critical point and one that must be fully understood by the hospitality manager. Simply put, if a hotel wishes to take advantage of laws limiting its liability for a guest’s possessions, the guest must be made aware of the existence and content of that law. 2. A secure safe If a hotel is to limit its liability for a guest’s possessions, the hotel must provide a safe where guests can keep their valuables during their stay. Hotels are required to provide a safe for guest valuables and to operate the safe in a reasonable manner. That is, the safe should be in good working order, and access to the safe should be restricted and closely monitored. 3. Suitable locks on doors and windows Obviously, the hotel that wishes to limit its liability must provide a reasonably safe room for its guests. This would include providing functioning locks for doors and windows. 4. Limits on required possession An innkeeper is not required to accept for safe keeping an unlimited amount of personal property. A hotel is not a bank, and it is not reasonable to assume that it would be as secure as a bank. 4 5. Limits on replacement values of luggage Because it is impossible to know for certain exactly what may have been contained in a lost piece of luggage, most hotels place a money limit on the replacement value of such items. Thus, if a piece of luggage placed in the care of the innkeeper is lost, the hotel’s liability will be limited to the money/currency value specified in the statute. 6. Penalty for negligence If an innkeeper is negligent, the statute limiting liability becomes ineffective. As a warning illustration, “An innkeeper shall be liable for a loss of any of such property of a guest in his inn caused by the theft or negligence of the innkeeper or his servant.” With reference to Section 4 of the Innkeeper Act 1952 (revised 1981) that “No innkeeper shall be liable to make good to any guest any loss of or injury to goods brought to his inn, not being a horse or other live animal, or any gear appertaining thereto or any car or carriage, to a greater amount than the sum of five hundred Ringgit, except in the following cases:” a) Where such goods shall have been stolen, lost or injured through the willful act, default or neglect of such inn-keeper or any servant in his employ: where such goods shall have been deposited expressly for safe custody with such innkeeper or his manager b) Provided always that in the case of such deposit it shall be lawful for such innkeeper or his manager, if he thinks fit, to acquire, as a condition of his liability: i) ii) that the guest shall at the time of such deposit declare the value of such goods, that such goods shall be deposited in a box or other receptacles fastened and sealed by the person depositing the same: c) Provided always that the innkeeper or his manager may refuse to receive for safe custody under this section goods of any one guest the declared value of which exceeds five thousand Ringgit, and that he shall in no case be liable for loss of or injury to goods so deposited by a guest to an amount exceeding the declared value thereof.” (Ref: Law of Malaysia Act 24.8) 5 Therefore, the management of Hotel Mahkota must in any how be able to display the Innkeeper Act to inform guest of the Innkeeper's liability and the guest responsibility (as part of agreed contract). For example, a large sum of money and valuables will be kept in the hotel safe deposit box at the reception counter. In the room notice are placed at strategic locations to advise guest on the safety and security procedure and the usage of the safe box provided in the room. All these are measures taken by the hotel to ensure the guest comfort and safety and the security of their valuables while staying in the hotel. For Mr. Moari, he should not leave behind such an amount of money and boxes of digital camera even though in the safe deposit box if he fully understands the law written of guest responsibility. But if the management of the hotel is found of failing to inform or acting on Mr. Moari about the procedure of using the safe deposit box, it is clear that the hotel management has to be liable for the losses. Reference ER Hardy-Ivamy & Vincent Powell-Smith. (1995) Malaysian Law of Sale of Goods – Cases and Materials. Sydney: Butterworths Michael John Boella, Alan Pannett. (2000). Principles of Hospitality Law. Sydney: Cengage Learning EMEA Lee Mei Pheng. (2005). General Principles of Malaysian Law (5th edition) Petaling Jaya: Fajar Bakti The Commissioner Of Law Revision, Malaysia Under The Authority Of The Revision Of Laws Act 1968 (2006) Laws Of Malaysia (Reprint) Act 248 Innkeepers Act 1952 Incorporating All Amendments Up To 1 January 2006. Kuala Lumpur: Percetakan Nasional Malaysia Bhd 6 QUESTION THREE The case is the matter of performance of the contract. It is duty of the seller who is Tan Choong to deliver the goods of the buyer, Gary acting as an agent for Richard to accept and pay for them (RM7, 500 in deposit of a RM75, 500 car), in accordance with the terms of the contract of sale agreed upon. To Tan Choong, all payment and delivery are concurrent conditions. Unless otherwise agreed, delivery of the goods and payment of the price are concurrent conditions, that is to say, the Tan Choong must be ready and wiling to give possession of the goods to the buyer in exchange for the price, and the Richard shall be ready and willing to pay the price in exchange for possession of the goods. Tan Choong acting on expression that Gary acts on behalf of Richard permission to by goods (the car). The problem is, did Gary provide enough evidence that he was appointed by Richard to by the car for his behalf legally? Maybe Tan Choong knew about the limitation of Gary’s authority, but he doesn't know the actual price permitted by Richard for Gary to buy the car. Where an agent ‘named’ the principal in this case Gary, Tan Choong as the third party knows that the agent is acting for a known principle (Richard). Where an agent contracts as agent for a named principal, the relation of an agency lawfully exists. The agent incurs no right or liability under the contract of Section.183 Contracts Act 1950. It is the principle alone who can sue and be sued by the third party provided the agent has acted within his authority in making the contract. (Section.179 Contracts Act 1950) If a contract is held to be void, the contract has never come into existence. In Chapter V of Sale of Goods Act 1957, Tan Choong is considered as an unpaid seller. In this chapter of the Acts, the term “seller” includes any person who is in the position of a seller, as, for instance, an agent of the seller to whom the bill of lading has been indorsed, or a consignor or agent who has himself paid, or is directly responsible for, the price. 7 Therefore Tan Choong has a right as notwithstanding that the property in the goods may have passed to the buyer (Richard), the unpaid seller of goods, as such, has, by implication of law: a) a lien on the goods for the price while he is in possession of them; b) in case of the insolvency of the buyer a right of stopping the goods in transit after he has parted with the possession of them; c) a right of resale as limited by this Act. In this case Richard has no right to return or not accepting the goods (car). Unless otherwise agreed, where goods are delivered to the Richard and he refuses to accept them, having the right so to do, he is not bound to return them to the seller, but it is sufficient if he intimates to the seller that he refuses to accept them. When the Tan Choong is ready and willing to deliver the goods and requests the Richard to take delivery, and the Richard does not within a reasonable time after such request take delivery of the goods, he is liable to Tan Choong as the seller for any loss occasioned by his neglect or refusal to take delivery, and also for a reasonable charge for the care and custody of the goods: If it is so, Richard is entitled to not only receive the goods but also to pay the rest of payment even though the price s exceeded. It is because it is the instruction given to Gary but not to Tan Choong. If so it seems as if the contract is legitimate & Richard has to pay for the rest of payment 8 References Dennis Campbell (2006). Remedies for International Sellers of Goods - Volume II. NY: Lulu Publishing Commissioner of Law Revision. (2001) Malaysia Sale of Goods Act 1957 (Act 382). Kuala Lumpur: Percetakan Nasional Malaysia Berhad Commissioner of Law Revision. (2001) Malaysia Contracts Act 1950. Kuala Lumpur: Percetakan Nasional Malaysia Berhad Abdul Majid bin Nabi Baksh & Krishnan Arjunan. (2005). Business Law in Malaysia, Lexis. Nexis, Malayan Law Journal 9 QUESTION FOUR The case is the matter of breaching the trust of partnership. When Dewi violated partnership agreement between him and Chandra on the matter of taking advantage of company credit, matters regarding to RiverinOil Company, it is considered as a violation by a partner of a duty the partner owes to another partner (in this case is Chandra). Sections 12 and 14 of the Malaysia Partnership Act 1961 (the Act) provides that with regard to ordinary torts, the partners are jointly and severally liable for such torts committed by one of the partners in the ordinary course of business of the firm, or with the authority of his co-partners. Section 15 of the Act states that if a partner, acting in his individual capacity as a trustee, improperly makes use of trust property in the business of the firm, as a general rule, his other partners are not liable to the beneficiaries. However if any partner has notice of a breach of trust, he will be liable and if the trust money is still in the firm’s possession, the beneficiaries can trace and recover the trust money from the firm. This section also states that where partners are affected by notice of the improper use of trust property, their liability is joint and several. Section 11 of the Act provides that all partners are jointly liable for all contractual and other debts and liabilities which are incurred while each is a partner. For example, if a partner dies, he becomes severally liable for such debts and liabilities in so far as they remain unsatisfied but subject to the prior payment of his separate debts. Thus for contractual liability, the partners are only jointly liable, not jointly and severally liable. Every partner is liable jointly with his co-partners and also severally for everything for which the firm while he is a partner therein becomes liable under section 12 or 13. Section 14 of the Act also states when one partner pledges the credit of the firm for a purpose apparently not connected with the firm’s ordinary course of business, the firm is not bound, unless he is in fact specially authorized by the other partners. Therefore Chandra has to remember that all contracts made on behalf of a company are made by the both partners. In other word, Chandra is liable to the outcomes of decision that Dewi made. Each partner is personally liable, but most declarations of trust provide for full indemnity of the partners out of property of the trust. 10 Reference Richard A. Mann, Barry S. Roberts, Len Young Smith (2005) Business Law. NY: Thomson West Syed Ahmad Alsagoff. (2003). Principles of the Law of Contract in Malaysia. (2nd edition) Kuala Lumpur: Malayan Law Journal The Commissioner of Law Revision, Malaysia. (2006) Act 135 Partnership Acts 1961 Incorporating All Amendments Up to 1 January 2006. Percetakan Nasional Malaysia Bhd Visu Sinnadurai, (2004) Law of Contract (3rd edition) Kuala Lumpur: Malayan Law Journal 11 QUESTION FIVE The Sale of Goods Act 1957 gives the interpretation of a contract of sale of goods as a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. Goods means every kind of movable property other than actionable claims and money; and includes stocks and shares, growing crops, grass and things attached to or forming part of the land, which are agreed to be served from land before sale, or under for contract of sale. In this case, as a seller Cik Jah must guarantee the existing or future goods to Che Wan. Section 6 of the Sale of Goods Act 1957 (the Acts) states that the goods which form the subject of a contract of sale may be either existing or future goods, owned or possessed by the Cik Jah. There may be a contract for the sale of goods the acquisition of which by the seller depends upon a contingency which may or may not happen. But here, where by a contract of sale the Cik Jah purports to affect a present sale of future goods, the contract operates as an agreement to sell the goods. Section 7 of the Acts concerning goods perishing before making of contract states that Cik Jah must aware that where there is a contract for the sale of specific goods, the contract is void if the goods without the knowledge of the seller have, at the time when the contract was made, perished or become so damaged as no longer to answer to description in the contract with Che Wan. In other term she must composites for any damaged and lost to the goods. As for goods perishing before sale but after agreement to sell (Section 8 of the Acts) states that where is an agreement to sell specific goods, and subsequently the good, without any fault on the part of the seller or buyer, perish, or become so damaged as no longer to answer to their description in the agreement, before the risk passes to the buyer, the agreement is thereby avoided. As for rules of delivery, Cik Jah as a seller, she entitled to make sure that all goods sold are to be delivered at the place at which they are at the time of the sale, and goods agreed to be sold are to be delivered at the place at which they are at the time of the agreement to sell, or, if not then in existence, at the place at which they are manufactured or produced. 12 As under the contract of sale agreed upon, Cik Jah is bound to send the goods to the Che Wan and all the expenses of and incidental to putting the goods into a deliverable state shall be borne by the Cik Jah. Section 41 states that it is Che Wan ’s right on examining the goods where goods are delivered to the buyer which he has not previously examined, he is not deemed to have accepted them unless and until he has had a reasonable opportunity of examining them for the purpose of ascertaining whether they are in conformity with the contract. Unless otherwise agreed, when the seller tenders delivery of goods to the buyer, he is bound, on request, to afford the buyer a reasonable opportunity of examining the goods for the purpose of ascertaining whether they are in conformity with the contract. As for Che Wan, she is bound as the buyer who is deemed to have accepted the goods when he intimates to the seller (Che Jah) that she has accepted them, or when the goods have been delivered to her and she does any act in relation to them which is inconsistent with the ownership of the seller, or when, after the lapse of a reasonable time, she retains the goods without intimating to the seller that she has rejected them. My advice to Che Wan and Cik Jah on their legal rights under the contract of sale of goods is to negotiate for compensation. Both suffers loses. The best way is to minimize the losses. Try to resolve the dispute out-of-court. Out-of-court resolution methods are faster and cheaper than many other ways to resolve the disputes, and a good way to retain goodwill between two parties. Methods such as capitulation and negotiation were not meant to giving in to the other side’s demands blindly but with consideration and sincerity. These methods are bound to save time, trouble and costs for both Che Wan and Cik Jah If out-of-court methods fail, Che Wan can sues Cik Jah in the Small Claims Court, Magistrates or Sessions Court. But this can take a long time, be costly and a lot of trouble. 13 Reference Leow, Chye Sian. Damages for Breach of Contract for Sale of Goods [online]. Singapore Academy of Law Journal; Volume 13, Issue 1; Mar 2001; 135-149. Availability: http://search.informit.com.au/documentSummary;dn=898393802151751;res=IELHSS. Retreived on 27 Oct 2008 Wu Min Aun & Beatrit Vohrah. (2000). Commercial Law of Malaysia (2nd edition) Petaling Jaya: Longman Lee Mei Pheng. (2005). General Principles of Malaysian Law (5th edition) Petaling Jaya: Fajar Bakti ER Hardy-Ivamy & Vincent Powell-Smith. (1995) Malaysian Law of Sale of Goods – Cases and Materials. Sydney: Butterworths 14
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