University Technology Malaysia

International Business School (IBS)

The legal aspects of business (RMB1072)

Take home exam

Prepare for: Mr Zainal Abidin Pit

30/ 6/ 2010

Q 7:
a. How are damages assessed in the case of breach of
contract? State your answer with reference to contract Act
1950 and decided cases.

Introduction:

There are various remedies available to an innocent party

where there has been a breach of contract. The main remedy is
damages. Damages are granted as compensation for the
damage, loss or injury he has suffered through a breach of
contract. Section 74 of the Contract Act 1950 sets out the
provision for such compensation. The said section reads:
Section 74 (1) when a contract has been broken, the party who
suffers by breach is entitled to receive, from the party who has
broken the contract, compensation for any loss or damage
caused to him thereby, which naturally arose in the usual
course of things from the breach, or which the parties knew,
when they made the contract, to be likely to result from the
breach of it.
(2) Such compensation is not to be given for any remote and
indirect loss or damage sustained by reason of breach.
(3) When an obligation resembling those created by contract
has been incurred and has not been discharged, any person
injured by the failure to discharge it is entitled to receive the
same compensation from the party in default as if the person
had contracted to discharge it and had broken his contract.
Section 74 indicate that the party may recover damages for
other expenses incurred as a result of the breach; for loss of
profits arising as result of breach; and for the difference
2
between the price of goods as contracted for and the actual
price the goods were sold for as result of breach.
S 74 provide that when a contract has been broken, the party
who suffers by breach is entitled to receive, from the party who
has broken the contract, compensation for any loss or damages
caused to him, thereby, which naturally arise in the usual
course of things from the breach, or which the parties knew,
when they made the contract, to be likely to result from the
breach of contract.

Damages in breach of contract disputes are assessed with

reference to the minimum legal obligations under the contract.
Where loss cannot be proved, the claimant is only entitled to
nominal damages.

Types of damages:

1. Unliquidated Damages
Unliquidated damages are assessed by the court and are
designed to compensate the innocent party for any losses
incurred as a result of a breach of contract.
Loss includes any harm or damage to the claimant themselves
or any of their property, including any reduction of value of such
property caused by the breach of contract.

Section 74 CA;50 ‘’ when a contract has been broken, the party

who suffers by the breach in entitled, compensation for any loss
or damage caused of things from the breach, or which the

3
parties knew, when they made the contract, to be likely to result
from the breach of it’’

Cases: A contract to sell and deliver 50 ginsengs of saltpetre to

B, at a certain price to be paid on delivery. A breaks his
promise. B is entitled to receive from A, by way of
compensation, the sum, if any, by which the contract price falls
short of the price for which B might have, obtain 50 ginsengs of
saltpetre of like quality at the time when the saltpetre ought to
have been delivered.

2. Liquidate Damages

Liquidated damages refers to damages set by the parties

themselves where they decide upon a fixed sum being payable
in the event of a breach of contract. Where the sum is a
genuine pre-estimate it will be enforced by the court.

Section 75 CA 50 ‘’ when a contract has been broken, if a sum

is named in the contract as the amount to be paid in case of
such breach, or if the contract contains any other stipulation by
way of penalty, the party complaining of the breach is entitled
where or not actual damage or loss is proved to have been
caused thereby, to receive from the party who has broken the
contract reasonable compensation not exceeding the mount so
named or as the case may be the penalty stipulated.
Example, A contracts with B to pay RM1,000, if he fails to pay
B RM500 on a given day, A fails to pay B RM500 on that day, B

4
is entitled to recover from A such compensation, not exceeding
RM 1000, as the court considers reasonable.

3. Pecuniary:

Pecuniary loss is the usual ground upon which damages are

awarded for breach of contract.

Pecuniary damages are losses that can be qualified in

monetary terms.

They may consist of:

A) expectation losses eg. Loss of profits/earnings

B) reliance losses eg. wasted expenses

Effect of this section is that the plaintiff is only allowed to

recover a reasonable sum for breach of contract. If a sum is
stipulated in the contract, the amount of damages recoverable
by the plaintiff exceed the sum stipulated in the contract.

The plaintiff is required to prove the actual damage has

suffered- Weam Brothers (M) Ltd. V.

Facts: this was an appeal against the award of damages for

breach of contract in respect of a hire-purchase agreement
relating to a motorcar. The main ground of appeal was that the
learned president of Sessions Court failed to consider whether
the relevant clause in hire-purchase agreement was a penalty
clause or was a genuine per-estimate of the damage as on the
5
date of the agreement. The learned president merely applied
the common law principle for the assessment of damages for
breach of contract.

Held: 1. whether the clause in the agreement was a penalty

clause or not was irrelevant in view of Section 75 of the
contracts ordinance, 1950, which provides that in every case
the court must determine what is the reasonable compensation.
The effect of section is that the plaintiff is disentitled from
recovering simplicities the sum fixed in the contract whether a
penalty or liquidated damages and must prove the damages
suffered by him unless named is genuine per-estimate.

4. non-pecuniary
Damages for non-pecuniary loss are sometimes awarded in
certain circumstances, such as:

 Pain and suffering as a result of a physical injury;

 Physical inconvenience;
 Damage to a commercial reputation; and
 Any distress caused to the claimant.

Case: Langley J held that the correct measure of damages was

the market price of the shares at the time they should have
been delivered, less the contract price. This is the general rule
where there was an available market for goods that should
have been delivered, but were not.

Case: Oxus Gold and another v Templeton Insurance

Ltd provides an interesting contrast to the Golden Strait
6
decision. The case concerned the assessment of damages for
Oxus's failure, in breach of contract, to deliver shares to
Templeton. It therefore concerned, in effect, the breach of an
obligation to perform a single act on a certain date.

5. Nominal damage:
Situations where nominal damages are normally awarded:

A) where the Plaintiff has suffered no pecuniary loss;

B) where the damage is shown but its amount is not sufficiently

proved;

C) although the plaintiff has sustained damage, the damage

arises from the conduct of the Plaintiff himself;

D) Plaintiff simply brings his action with a view to establishing

his right.

 In Industrial & Agricultural Distribution Sdn Bhd v Golden

Sands Construction Sdn Bhd [1993] 3 MLJ 433, the Court
further illustrated the importance of proving damages and
stated that :

 “damages are not meant to be punitive in nature but rather

compensatory…It is therefore important for the plaintiff to
establish his loss and not, so much as what the defendant had
gained from the breach.”

b. With reference to decided cases, distinguish between an

offer and an invitation to treat.
7
Firstly, An offer is something which must be done or refrained
from being done which is accepted to become a contract.
An offer is the promise made by one party to another. In all
circumstances, however, an offer must be made in clear an
unambiguous terms. If more than one interpretation can be
given to an offer, neither interpretation will be followed by the
Courts. There are 'unilateral' and 'bilateral' offers. Offers to
purchase real property are bilateral, i.e. containing the
exchange of mutual promises.
An offer or proposal is necessary for the formation of an
agreement. Section 2(a) of the Contract Act 1950 states that
‘when one person signifies to another his willingness to do or to
abstain from doing anything, with a view to obtain the assent to
that other to the act or abstinence, he is said to make a
proposal’. The first limb of Section 2(c) of the Contract Act 1950
calls the person making the proposal the promisor. Under the
Contract Act 1950 and English law, a proposal or offer is
something which is capable of being converted into an
agreement by its acceptance. A proposal must be a definite
promise to be bound provided certain specified terms are
accepted. The promisor must have declared his readiness to
undertake an obligation upon certain terms, leaving the option
of acceptance or refusal to offer.
The communication of a proposal is complete when it comes to
the knowledge of person to whom it is made- Section 4(1),
Contracts Act 1950. This means that an offer or proposal is
effective once it is communicated to the offeree by the offer. An
offer should be contrasted with an option and advertisement.
8
An option is merely an undertaking to keep the offer open for a
certain period of time while an advertisement is an attempt to
induce offers.

Secondly, an invitation to treat is an action inviting other parties

to make an offer to form a contract. These actions may
sometimes appear to be offers them, and the difference can
sometimes be difficult to determine. The distinction is important
because accepting an offer creates a binding contract while
"accepting" an invitation to treat is actually making an offer.

Advertisements are usually invitations to treat, which allows

sellers to refuse to sell products at prices mistakenly marked.
Advertisements can also be considered offers in some specific
cases. Auctions are sometimes invitations to treat which allows
the seller to accept bids and choose which to accept.
Case: M.N. GUHA MAJUMDER v. R.E. DONOUGH.
Facts: property owned by the defendant was advertised for
sale, and written offers to purchase were invited. The plaintiff
viewed the property on two occasions. During the interval
between the two occasions the plaintiff was in communication
with the defendant’s agent, and it was alleged that the
defendant had accepted the plaintiff’s offer to purchase the
property for RM70, 000. There had been on the occasion of the
second visit to the property some discussion on the mode of
payment. There was also no clear agreement on the sale of
orchid plants which the defendant wished to sell separately,
although the matter was discussed between the parties. The
defendant denied that he had decided to go with the sale. The
9
defendant was anxious, however, to affect a quick sale as he
was desirous of leaving Kinching permanently for Johore
Bahru. The question for determination was whether there was a
contract in existence between the plaintiff and the defendant at
the material time.
Held: 1. the law does not impute an intention to enter into such
a legal relationship as that of vendor and purchaser where the
circumstances and the conduct of the parties negative any
intention of the kind.
2. the evidence indicated that the parties did not intend to be
immediately bound. They had not the necessary animus
contrahendi. What passed was only a negotiation from
beginning to end.

Q10:

10
A contract without consideration is void. In view of this
statement, discuss the concept of consideration with reference
to the Contracts Act 1950 and decided case.

The word ‘consideration is defined in Section 2 (d) of the said

Act as ‘when, at the desire of the promisor, the promise or any
other person has done or abstained from doing, or does or
abstain from doing, or promises to do or to abstain from doing,
something, such act or abstinence or promise is called a
consideration for the promise’.

Section 26 of the contract Act 1950 provides that, as a general

rule, an agreement without consideration is void.
Consideration need to move from the promisee. In Malaysia, a
party to an agreement can enforce the promise even if he had
given no consideration so long as somebody has done so.
Consideration may be executor, executed or past – Kepong
Prospecting Ltd. & Ors. V. A. E. Schmidt & Marjorie Schmidt.
Facts: in 1953 Tan applied to the Government of the State of
Johore for a prospecting permit for iron ore. He was assisted in
the negotiations by Schmidt, a consulting engineer. A
prospecting permit was granted to Tan in November 1953, and
in December 1953 Tan wrote to Schmidt stating that Schmidt
was to be paid 1 percent of the said land and this was in
payment for the work and for any work that Schmidt might to do
in assisting to have mining operations started up. Tan then
executed a power of attorney in favour of Schmidt which
conferred upon Schmidt widely expressed power to contract for
the disposal of any Tan’s mining properties on such

11
consideration and subject to such consideration as Schmidt
thought proper.
In September 1955, an agreement was made between the
company and Schmidt. Under Clause 1 of the agreement the
company inter alia agreed to pay Schmidt 1 per cent of all ore
that might be won from any land comprised in the 1954
agreement in ‘ consideration of service by the consulting
engineer for and on behalf of the company prior to its formation,
after incorporation and for future services’
dispute arose between those originally interested in the
company and persons who were subsequently interested.
Schmidt commenced the present proceedings in July 1959
claiming inter alia an account of all moneys payable to him
under the 1955 agreement.
Held: clause 1 of the 1955 agreement established a legally
sufficient consideration moving from Schmidt. Services prior to
the company’s formation could not amount to consideration as
they could not be rendered to non-existing company, nor could
the company bind itself to pay for services claimed to have
been rendered before its incorporation. But the inclusion of that
ineffective element did not prevent the other two elements.

Natural love and affections is valid consideration:

English law does not recognize natural love and affection as
valid consideration. On the other hand, the Contract Act 1950 in
Malaysia recognizes natural love and affection as valid
consideration if certain prerequisites are complied with. These
are contained in Section 26(a) which reads:

12
An agreement made without consideration is void unless it is
expressed in writing and registered under the law for the time
being in force for registration of such documents, and is made
on account of natural love and affection between parties
standing in a near relation to each other.

13
Q3:
Define a partnership and describe in details the duties and
oblations of a partner in a partnership.

Definition of partnership:
Partnership is defined in Section 3(1) of the partnership Acts
1961 at the relation which subsists between persons carrying
on business in common with a view of profit.

In Peninsular Malaysia, a partnership business must be

registered under the Registration on Businesses Act 1956; in
Sarawak, under the Sarawak Cap. 64 (Business Names) and
Cap, 33 (Business, Professions and Trade Licensing); and
Sabah, under the Trade Licensing Ordinance No 16 1948.
Howe ever, the mere failure to register the partnership under
these statutes would not mean that the partners connote
enforce their rights against each other of on the facts, a
partnership exists:
GULAZAM v. NOORZAMAN AND SOBATH[1957]
Facts: the plaintiff claimed that the defendants, who were cattle
dealers, had made arrangements to form a partnership with him
to purchase, keep, and sell cattle. The conditions were that the
plaintiff was to provide capital for the purchase of the cattle and
the defendants were to look after and sell them, with the profits
to be divided equally amongst them. After a while, the
defendants failed to render accounts to the plaintiff, neither did
they pay his share of the profits.
The plaintiff, therefore, claimed for an account to be taken and
payment of any sum of money found due to him. The
14
defendants’ claim was not maintainable as the partnership
business had not been registered under Section 8 of the
Registration and Licensing of Businesses Ordinance 1953.
Held: 1. on the facts, a partnership existed between the parties.
2. Section 8 of the Registration and Licensing of
Businesses Ordinance 1953 does not affect the right of one
partner in a firm which has failed to comply with the ordinance
to bring an action against his co-partners.

Duties of partners:
In a partnership, partners owe a duty of mutual faith and trust in
each other; principle of ‘’ utmost good faith’’. It is the duty of
every partner that he must use his knowledge and skill for the
benefit of the firm and not for his personal gain.
1. Partners owe fiduciary duties:
 Honesty and full disclosure: they must be truthful to each
other regarding anything relating to the partnership itself,
property owned by the partnership and the other partners’
.Every partner must show true and proper accounts to his co-
partners. He must explain the points raised by other partners
relating to the accounts. Every partner must do duty with his
authority. He must perform his work with the authority given.
Section 30 PA 1961:’’ Partners are bound to render true
accounts and full information of all things affecting the
partnership to any partner or his legal representatives’’
 No unauthorised personal profits as partners are trustee:
Every partner must give full and accurate information about the
firm to his co-partners. A partner must not conceal any
information concerning the firm from other partners. It's the duty
15
of every partner to use the property of the business, just for
business not for personal matters. It’s the duty of every partner
that he must attend and perform his duties carefully and
honestly.
 No conflict of duty & interest: Every partner is bound
to indemnify the firm for any loss caused to it by his fraud in the
conduct of business of the firm. It’s the duty of every partner
that he must be just and faithful to other partners. A partner
cannot assign his rights and interest in the firm to an outsider in
order to make him partner in the business without the consent
of other partners.

Section 26 PA 1961 dictates the interests and duties of

partners in absence of any agreement to the contrary between
the partners.

 No secret profits: S31 PA 1961: Partners are accountable to

firm for any benefits obtained, without consent of other
partners, from any transaction concerning the partnership.

2. Partners not to compete with the firm: a partner cannot do

business with another company which is at odds with the
partnership, nor can he or she conduct any side business which
places them in competition with the business of the partnership.
Section PA 1961: Partners not compete with the firm in
business of similar nature without consent of other partners.
Otherwise, he must account for and pay over all profits made
by him in that business

16
3. Duties of loyalty: the partners also have a duty of loyalty,
which means that they must remain loyal to the partnership.
Q8:
Since a company is created by the force of law, it can only be
dissolved through specific legal procedures.
Discuss the various ways where a company be dissolved.

There are various ways to dissolve a company. Such as:

1. By voluntary liquidation – the members of the company may
pass a resolution to wind up or through winding up by creditors;
2. By the Registrar of Companies striking off the register
summarily a company which appears to be defunct- section
308, company Act 1965.
3. The court, in approving a scheme of arrangement, may order
the immediate dissolution of a company- Section 178, company
Act 1965.
4. By compulsory liquidation – by court order.
For bankers, who are usually the creditor of companies, the
most common resources to take in recovery of unsecured debts
or the unsecured portion of debt concerned is to petition for the
winding up of debtor company. Section 217(1) of the
Companies Act 1965 provides that the flowing persons may
petition for the winding up of a company under an order of the
court:
(a) The company;
(b) Any creditor of the company;
(c) A contributory;
(d) The liquidator;

17
(e) The Minister pursuant to Section 205 or on the ground
of Section 218 (1)(d) of the Companies Act 1965; or
(f) In relation to banks, financial institutions, scheduled and non-
scheduled institutions under the banking and financial
institutions Act1989, Bank Negara Malaysia.
(g) In relation to insurance companies, Bank Negara
Malaysia; or
(h) The Registrar of companies on the ground specified in
Section 218(1)(m) or (n) of the companies Act 1965.
The grounds and circumstance in which a company may be
wound up by the court are laid down in Section 218 (1) of the
companies Act 1965:
(a) The company has by special resolution resolved that it
be wound up by the court;
(b) Default is made by the company in lodging the
statutory report or in holding the statutory meeting;
(c) The company does not commence business within a
year from its incorporation or suspends its business for whole a
year;
(d) The number of members is reduced to blow two;
(e) The company is not unable to pay its debts;
(f) The directors have acted in the affairs of the company in
their own interests rather than in the interests of the member as
whole, or in any other manner whatsoever which appears to be
unfair or unjust to other members;
(g) An inspector appointed under Part IX has reported that
the company should be wound up;
(h) The period fixed for the duration of the company by the
memorandum or articles, if any, has expired;
18
(i) The court is of the option that it is just and equitable that the
company be wound up;
(j) In relation to banks, financial institutions and other
institutions licensed under the Banking and Financial
Institutions Act 1989 or the Islamic banking Act 1983, if its
banking has been revoked or surrendered;
(k) The company has carried on Islamic Banking
business, licensed business or scheduled business, or it has
accepted, received or taken deposits in Malaysia in
contravention of Islamic Banking Act1989, as case may be;
(l) The insurance companies license has been revoked or
wound up or had an order made against it under Section 59(4)
(B) the Insurance Act 1996,
(m) The company is being used for unlawful purpose or
any purpose prejudicial to or incompatible with peace, welfare,
security, public order, good order or morality in Malaysia; or
(n) The company is being used for any person prejudicial
to national security or public interest.
The ground used by bankers when petitioning for the winding
up of company debtors is that the company is unable to pay its
debts; that is under section 218(1)(e) of the companies Act
1965.
Thus, the court may order the winding up of a company if the
company is unable to pay its debt. Under Section 218(2)(a) of
the companies Act 1965, the company shall be deemed to be
unable to pay its debt if a notice of demand of the debt is
served on the company and it neglected to pay the sum due for
three weeks thereafter or to secure or compound for it to
reasonable satisfaction of the creditor, execution or other
19
process issued on a judgement, decree or order of any court in
favour of a creditor of the company is returned unsatisfied; or it
is proved to the satisfaction of the court that the company is
unable to pay its debts.

20
Q5:

a. Define the terms ‘’ agent’’ and ‘’ principal’’. Explain the rights

and duties of agent under the law of agency.
b. State briefly the four (4) ways in which an agency may be
created.

1. Definition of agent:
Agent is defined as ‘a person employed to any act for another
or to represent another in dealings with third persons’. The
person for whom such act is done, or who is represented, is
called the ‘ principle’ for example if Karim appoints Haider to
buy some goods on his behalf, Karim is called the principle’
while Haider is his ‘agent’.
In other words, agency is the relationship which subsists
between the principle and agent, who has been authorized to
act for him or represent him in dealing with others. Thus, in
agency, there are in effect to contracts,
a. The first, made between the principal and agent from which
the agent derives his authority to act for and behalf of the
principal; and
b. The second, made between the principle and third party
through the work of the agent.
Any person who is eighteen years old or above and who is
sound mind may be principal. As between the principal and
third person, any person may become an agent; but persons of
unsound mind and who are below eighteen years of age are
not liable towards their principle for acts done by them as
agents. For example, if Elmahi employs Muhmmed who is
21
sixteen years old to buy some goods from Razifee on his behalf
and Razifee supplies the goods, Elmahi cannot allege that he is
not liable to pay for the goods just because Muhmmed is not
age of majority. Elmahi is still liable to pay for the goods.
However, if Muhammed had taken the goods and sold them for
his own benefit, Muhmmed is not liable to pay Elmahi for those
good.
2. The duties of an agent under the law of agency:
1. To obey the principle’s instructions- Section 164, Contract
Act 1950.
Failure to do will result in breach of contract and agent will be
liable for any loss suffered by the principal.
2. In the absence of instructions from the principal, to act
according to the customs which prevail, in doing business of
the same kind, at the place where he carries on his work.
Otherwise, he has to make good any loss sustained by the
principal.
3. To exercise care and diligence in carrying out his work and
to use such skill as he possess- Section 165, Contract Act
1950.
4. To render proper accounts when required.
An agent is under a duty to account for all monies and property
handle by him as agent for the principal- Section 166, Contracts
Act 1950.
5. To pay his principal all sums received on his behalf.
6. To communicate with the principal.
In case of difficulty, an agent must use all reasonable diligence
in communicating with and seeking to obtain instructions from
the principal.
22
7. Not to let his interest conflict with his duty.
The duty of an agent is to act solely for the benefit of the
principal and he cannot allow his own personal interest to
conflict with this duty- Section 169, Contract Act 1950.
8. Not to make any secret profit out of the performance of his
duty. Secret profit means a bribe or payment of a secret
commission or any financial advantage which an agent
receives over and above the commission or other remuneration
agreed by parties. If the principle knows about the secret profit
and consents to it, the agent is entitled to keep the profit he
makes since the profit is not longer secret- Section 168,
contract Act 1950. If, however, the profits are secret, then the
principle may do the following:
a. Repudiate the contract if it is disadvantageous to him,
b. Recover the amount of secret profit from the agent – Section
169, Contract Act1950;
c. Refuse to pay agent his commission or other remuneration;
d. Dismiss the agent for breach of duty
e. Sue the agent and third party giving the bribe for damages
for any loss he may have sustained through entering into the
contract.
9. Not to disclose confidential information or documents
entrusted to him by his principal.
10. Not to delegate his authority.
The maxim delegate’s non potest delegare applies the
relationship between principal and agent as there is a personal
one.
3. The right of agent:

23
1. Principal must pay to the agent the commission on other
remuneration agreed, unless the agency relationship is
gratuitous.
2. Not principal should not wilfully prevent or hinder the agent
from earning commission.
3. To indemnify the agent for acts done in exercise of his
authority. The right to be indemnified entitles the agent to
recover not only his commission or remuneration about also
money which he paid on the principal’s behalf and all losses
suffered by him in carrying out the directions of his principal.

(b) State briefly the four (4) ways in which an agency may be
created.

Agency may be created in the following ways:

1. By express appointment: Section 139, Contract Act 1950 an

agency may be created by express appointment by the
principal. The authorisation may be given by words spoken or
written: Section 140, Contracts Act 1950.
2. By implied appointment: Section 139, Contract Act 1950
An agency can be created by implied appointment when a
person, by his words or conduct, holds out another person as
having authority to act for him: it can be inferred from the
circumstance of the case: Section 140, Contracts Act 1950.
This is illustrated in the case of Chan Yin Tee v. William Jacks
& Co (Malay) Ltd
3. By ratification: Section 149, Contracts Act 1950 an agency
by ratification can be created by either an agent, who was duly
24
appointed and has exceeded his authority, or a person, who
has no authority to act for the principal and has acted as if he
had the authority. When either one of the above happens, the
principal can either reject or accept the contract so made.
When the principal accepts and confirms the contract, it is
ratification. Ratification may be expressed or implied.
The effect of ratification is to render the contract binding on the
principal as if the agent had been properly authorized
beforehand: Section 149, contract Act1950.
Retification is retrospective. It dates back to the time when the
original contract was made by the agent and not at the time of
ratification.
4. By necessity (in an emergency): Section 142, Contracts Act
1950
An agency of necessity may be created if the following
conditions are satisfied:
- It must be impossible for the agent to get the principle’s
instruction.
- The agent’s action is necessary in the circumstance in order
to prevent loss to the principal with respect to the principal with
respect to interest committed to his charge
- The agent has acted in good faith.
An agency of necessity is created when a person is entrusted
with another’s property and it becomes necessary to do
something to preserve that property although he has no
express authority to do so. There must be already some
existing contractual relationship between the principal and the
person who acts on his behalf, between the owner and master
of the ship, or an owner and carrier of goods. Thus, if goods are
25
sent by train to B at Kuala Lumpur with directions to send them
immediately to C at Butterworth, B may sell them at Kuala
Lumpur if they will perish and not be able to bear the journey to
Butterworth without being spoilt.
5. By estoppels
Ordinarily, a person cannot be bound by a contract made on his
behalf without his authority. However, if he, by his words and
conduct, allows a third party to believe that X is his agent, when
X is not, and the third party relies on it, he will be stopped or
precluded from denying the existence of X’s authority. For
example, if X tells B in the presence of C that he (X) is C’s
agent and C does not contradict this statement, C cannot later
deny that X is his agent if B sells goods to X believing him to be
C’s agent and later sues him (C) for the price.

26