Business Law

against, generally, can argue that, Arguably, implied authorization

Free Consent
Section 10 Contract Acts 1950, contracts must be entered into with the free consent of
parties.

Section 13: Two or more person are said to consent when they agree upon the same thing
in the same sense.

Section 14: Consent is free if it is not caused by coercion, undue influence, fraud,
misrepresentation and mistake.

Void & Voidable

Section 2(g), agreement not enforceable by law is said to be void.

Section 2(i), an agreement which is enforceable by law at the option of one or more of the
parties but not at the option of the other is a voidable contract.

Express, Implied Terms, Condition & Warranty

Express term covers all statements agreed by the parties as forming part of what they
have agreed to. It can be oral or in writing.

Implied term is not present in the contract. It is implied and inserted into contract by
various sources such as trade customs and business usage, by courts, previous conduct of
parties and statutes.

Condition is a fundamental and major term where innocent party can choose to rescind
contract and claim damages or continue with contract and claim damages.

Warranty is not a major term, only a subsidiary obligation where innocent party cannot
rescind contract but can only claim damages.

Innominate/Intermediate is a term that can be either a condition or a warranty, depending

on how serious the consequences of the breach.

Exclusion Clause

Introduction
This question requires a discussion of:
-Whether an exclusion clause included as a part of the contract
-Whether an exclusion clause covers the breach or not
Explanation of law
Explanation of exclusion clause
An exclusion or exemption clause is an onerous term of contract that modify the principal
obligations arising under the contract, or limit or exclude the liability of a party which
will arise if that party breaches his primary obligations.

For an exclusion clause to be valid

There are 2 rules for an exclusion clause to be valid which are rules of incorporation and
rules of construction or interpretation. Rules of incorporation determine whether an
exclusion clause included as a part of the contract while rules of construction or
interpretation determine whether an exclusion clause covers the breach or not.

Incorporation of an exclusion clause into a contract

For an exclusion clause to be incorporated, requirements to be satisfied are the exclusion
clause must not be inserted after a proposal is accepted or a contract is complete. Besides
that, the document containing the exclusion clause must be an integral part of the
contract. Furthermore, a notice of the exclusion clause must be reasonably sufficient.
Moreover, where an oral agreement is put into a written contract, the terms that are in
writing will be given priority compared to terms made orally.

There are 2 ways to incorporate terms into a contract which are by signature or by prior
and sufficient information. In this case, the incorporation of an exclusion clause into the
contract is by signature/ prior and sufficient information.

Incorporation of exclusion clause by signature

The exclusion clause is incorporated into the contract by signing a document. The general
rule of this incorporation way is that a party is bound by the document that he has signed
regardless of whether he has read or not according to the case of L’Estrange v Graucob
[1934].
Incorporation of exclusion clause by prior and sufficient information
Where no contract is signed, an exclusion clause can be incorporated by giving a notice
regarding existence of exclusion clause:
1. The document containing the clause must be an integral part of the. According to
Chapelton v Barry UDC [1940], receipts, tickets and vouchers are not
something that a reasonable person will consider to be a document that contains
an important term such as an exclusion clause.
2. Reasonable notice must be given to the party before or at the time the contract is
made applying Olley v Malborough Court Ltd [1949].
3. Alternatively, parties must have previous, consistent dealings with each other.

Construction of exclusion clause

According to Sze Hai Tong Bank v Rambler Cycle [1959], an exclusion clause cannot
be used to exclude liability for a fundamental breach of contract.

If an exclusion clause is ambiguous or has more than one meaning, the court will apply
the “contra proferentem” rule, and it will choose a meaning that works against the party
who had wanted to exclude liability.

Exclusion of liability for negligence

According to Premier Hotel Sdn Bhd v. Tang Ling Seng [1995], the words in the
exclusion clause must be sufficiently clear in order to exclude liability for negligence. For
example, use expressions such as “howsoever, whatsoever caused, or under any
circumstances”.

According to Chin Hooi Nan v. Comprehensive Auto Restoration Services Sdn Bhd,
although an exclusion clause may be wide and comprehensive, defendant must still prove
that the plaintiff’s loss or damage were not due to his negligence and misconduct. He
must show that he had exercised due diligence and care.

In Bourkes v CIMB [2017], bank excluded liabilities for any losses of borrower, arising
from the loan agreement. However, the court held that an exclusion clause has the effect
of negating the remedy available to a plaintiff and makes any cause of action futile.
Applying section 29 Contracts Act 1950, it is void for illegality.

Conclusion
When the exclusion clause is valid, defendant is not liable, and plaintiff cannot claim.
When the exclusion clause is not valid, defendant is liable and plaintiff can claim.
[must exercise due diligence and care to exclude liability]

Coercion
Section 15, coercion is where a person commits or threatens to commit any act forbidden
by the Penal Code on any person, or unlawfully detains or threatens to detain any
property of any person with intention to cause any person to enter into a contract.

Section 19(1), when consent to a contract is caused by coercion, the contract is voidable
at the option of the innocent party.

Section 65 and section 66, innocent party must return any benefit received under the
contract, or to pay compensation for the benefit. He can also get back any benefit given
or get payment for the benefit as compensation.

Undue influence
Section 16(1), undue influence occurs where the relations subsisting between parties are
such that one party is in a position to dominate the will of the other, and he uses that
position to obtain an unfair advantage over the other.

Section 16(3), once the above requirements are established, dominant party bears the
burden of proving that the contract was not cause by his undue influence.

Section 16(2), it provides that a person is deemed to be in a position to dominate the will
of another where he holds a real or apparent authority over the other, he stands in a
fiduciary relation to the other, or he makes a contract with a person whose mental
capacity is temporarily or permanently affected because of old age, illness, or mental or
physical weakness.

Section 20, when consent to an agreement is caused by undue influence, the contract may
be set aside absolutely, or the court would set terms and conditions as it may seem just.

Fraud
Section 17 Contract Acts 1950, fraud includes any of the following acts committed by a
party to a contract, with intent to deceive another party or to induce him to enter into the
contract.

Explanation to section 17, mere silence of one party is not fraud. Illustration (a), Illustration (d)
of section 17.

Section 19(1), when consent to a contract is caused by fraud, the contract is voidable at
the option of the innocent party. Illustration (a), Illustration (c), Illustration (d) of section
19.

Section 19(2), the innocent party may insist that the contract shall be performed and be
put in the position he would have been.

Misrepresentation
Under Section 18 Contracts Act 1950, misrepresentation includes:
(a) Making a positive assertion of a fact which is not true. The maker of the assertion
believes it is true. However, this assertion is not justified, based on the information that
he has.
(b) The person who commits a misrepresentation breaches his duty. He has no intention
to deceive. He obtains an advantage by misleading another person who suffers loss.
(c) The person who commits a misrepresentation has innocently caused another party to
make a mistake as to the substance of the subject matter of the agreement.

Explanation to section 17, mere silence of one party is not misrepresentation.

Section 19(1), when consent to a contract is caused by misrepresentation, the contract is

voidable at the option of the representee.

Section 19(2), the innocent party may insist that the contract shall be performed and be
put in the position he would have been.

Void Contracts
Section 21 Contract Acts 1950, where both parties to an agreement are under a mistake as
to a matter of facts essential to the agreement.

Section 22, where both parties to an agreement are under a mistake as to any law not in
force in Malaysia.

Section 26, where the agreement is without consideration.

Section 30, where the agreement which meaning is not certain.

Section 57(2), where the contract is frustrated.

Section 24(a), where the consideration or object of an agreement is forbidden by a law.

Section 24(c), where the consideration or object of an agreement is fraudulent.

Section 24(d), where the consideration or object of an agreement involves injury to

another person or property.

Section 24(e), where the consideration or object of an agreement is immoral or opposed

to public policy.

Section 25, where the consideration for one or more objects is in part unlawful.

Section 28, where the agreement is in restraint of a profession, trade or business.

Section 29, where agreement is in restraint of legal proceedings.

Under section 28, any agreement, that is made to prevent or restraint one party from
working in a profession, trade or business, is void.

Under section 29, any agreement that prevents a party absolutely from taking legal action
or that fixes a time-limit to enforce legal rights is void.

Discharge by Agreement
Section 63 Contract Acts 1950, parties may enter into a novation contract whereby the
original contract needs not be performed and a new contract takes over.

Section 64 Contract Acts 1950, there can be a waiver of a debt or obligation by a creditor.

Discharge by Impossibility of Performance

Section 57 provides for two categories of impossibility:
Section 57(1), impossibility at the time the contract is made.
Section 57(2), impossibility after the contract has been made.

Discharge by Frustration
Under the doctrine of frustration, as laid out in Davis Contractors Ltd v Fareham Urban
District Council [1956], a contract is frustrated when a supervening event occurs which
radically changes the whole purpose of the contract by no fault of either party. The event
must have not been provided for in the contract and must not have been foreseen by the
parties. Further, the promisor must not have been responsible for the event.

Section 66 Contract Acts 1950, any money or advantage received under the contract must
be restored/make compensation.

Under section 15 Civil Law Act 1956:

 All sums paid to a party shall be recoverable
 Sums payable shall cease to be payable.
 If the party who was paid or who is payable has incurred expenses, he may be
allowed to retain or recover any sum not in excess of expenses incurred.
 Where a party has obtained a valuable benefit, the value of such benefit shall be
recoverable from him
Damages
Section 76 Contract Acts 1950, damages are monetary compensation for losses.

Section 75 Contract Acts 1950, liquidated damages are where parties fix the amount of
damages to be paid when there is breach.

Topic 3: Agency

Ratification
Section 149 Contract Acts 1950, where acts are done by an agent on behalf of a principal
but without the principal’s knowledge or authority, the principal may elect either to ratify
such as accept and confirm the contract expressly or impliedly by conduct or disown the
agent’s acts.
Section 136, principal must have contractual capacity both at the time of the contract and
at the time of ratification.

Section 151, principal must have full knowledge of the material facts, unless he is
prepared to ratify regardless of whether he knows about these facts.

Section 152, principal must ratify the whole act or contract. He cannot ratify the parts
beneficial to him and reject those not beneficial to him.

Section 153, illustration (a) and (b), ratification must not cause a third party to suffer loss,
damages or terminate his rights.

Necessity
Section 142 Contract Acts 1950 provides that an agent has authority, in an emergency, to
do all such acts for the purpose of protecting his principal from loss as would be done by
a person of ordinary prudence, in his own case, under similar circumstances.

Section 167 provides that agent has a duty, in cases of difficulty, to use all reasonable
diligence to communicate with his Principal first to obtain his instructions.

Authority of an Agent
Section 179 Contract Acts 1950, an agent’s acts are binding on principal if the acts are
done within the agent’s authority.

Implied authority: Section 141, authority that is incidental or necessary to carry out the
authorized act.

Duties of an Agent to his Principal

Section 164 Contract Acts 1950, an agent needs to obey the Principal’s lawful
instructions.

Section 164, act according to the custom of doing such business at the place where
business is conducted.

Section 165, exercise reasonable care and diligence and use the skill he possesses in
conducting the agency business, he must compensate Principal for the direct
consequences that result from his own neglect, lack of skill or misconduct.

Section 166, when demanded by principal, he must produce proper accounts of all money
and property handled by him.

Section 171, pay to principal all sums received, can only deduct for: advances, expenses,
his commission and other remuneration due to him for his services.

Section 167, in cases of difficulty, use all reasonable diligence to communicate with
Principal in obtaining instructions.

Section 169, not to allow his personal or financial interest to conflict with his duty owed
to Principal.

Section 168, not to make any secret profit when performing his duty.

Section 168, if principal knows of the secret profit and consents to it, the profit is no
longer secret, so Agent is entitled to keep the profit.

Remedies for Principal when there is breach of duty

Section 168 Contract Acts 1950, principal can repudiate the contract with the third party
if the third party colludes with Agent and especially if the contract is not to the
Principal’s advantage.

Section 169, if cannot repudiate the contract with third party, if Principal has not suffered
any loss, he may recover the amount of secret profit, bribe or any benefit that Agent may
have made from the transaction.

Effects of contract by Agent

Section 179 Contract Acts 1950, contracts entered into by an agent may be enforced by
the Principal as if the contracts have been entered into by the Principal personally.

Section 183, in absence of any contrary provision, an agent cannot personally enforce
contracts that he signed on behalf of his principal. An agent is also not personally bound
by the contracts.

Topic 4: Partnership
Section 3(1) Partnership Act 1961, partnership is defined as the relation which subsists
between persons carrying on business in common with a view of profit.

Section 2 Partnership Act 1961, partnership includes trade, occupation or profession.

Section 7 Partnership Act 1961: every partner is an agent of the firm and other partners
when conducting the partnership business.

Section 7 Partnership Act 1961, apparent authority is any act which is usual and in the
kind of the business run by the firm.

Section 10, restriction placed on partner’s authority.

Section 11 Partnership Act 1961, every partner is jointly liable for all contractual debts
and obligations incurred while he is partner.

Section 12 Partnership Act 1961, if a partner causes injury or loss to a third party while
acting in the ordinary course of the firm’s business or while acting under the authority of
the other partners, the firm is liable as much as the partner.
Section 14 Partnership Act 1961, where the firm becomes liable under section 12, every
partner is jointly and severally liable with other co-partners.

Section 16 Partnership Act 1961, liability of non-partners for “holding out”.

Section 38(3), if a partner retires, dies or becomes a bankrupt, he will not be liable for the
firm’s debts incurred after he has retired, died or become bankrupt.

Liability of Incoming and Outgoing Partners

Section 19(1) Partnership Act 1961, incoming partner is not liable to creditors for
anything done before he became a partner unless he signs a special agreement with the
existing partners, that he will be liable.

Section 19(2) Partnership Act 1961, retiring partner remains liable for the firm’s debts
incurred before his retirement.

Section 19(3) Partnership Act 1961, retiring partner can be released from this old debt if a
novation contract is signed between himself, the partners of the new firm and the 3rd
party.

Section 38(1) Partnership Act 1961, retiring partner remains liable to 3rd parties who
continue to deal with the firm after his retirement, unless he has given express notice to
them that he has retired/resigned.

Section 38(2), for new customers or creditors who have no dealings with the firm before
the retirement, the firm only needs to give notice of the partner’s retirement by putting an
advertisement in the Federal Gazette, Sabah Gazette and Sarawak Gazette.

Partnership property
Section 22 Partnership Act 1961, partnership properties are properties that are originally
brought in, acquired on account of the firm and acquired for purpose of partnership or in
the course of business.

Partnership Agreement
Section 26 Partnership Act 1961 lists out partners’ rights and duties. The partnership
agreement can contain different provisions.
s.26(e), every partner is entitled to take part in the management of firm. A partnership
agreement may provide that only certain partners can take part in the management.

s.26(h), if partners have differences regarding partnership business, this is to be resolved

by a majority vote.

s.26(g), no person may be introduced as a new partner without the consent of all existing
partners. A partnership agreement may give only certain partners the authority to
introduce or bring in new partners.

Section 30 Partnership Act 1961, a partner has obligation to make a full and frank
disclosure to other partners of all information that relate to the partnership business.

Section 31 Partnership Act 1961, every partner must account to the partnership for any
benefit he obtains, without the consent of the other partners, from any transaction
concerning the partnership or from any use of the partnership property, name, or business
connection.

Section 32 Partnership Act 1961, if a partner, without the consent of the other partners,
carries on any business of the same nature as the partnership or competing with the
partnership, he must account for and pay over to the partnership all profits made by him
in that business.

Topic 5: Sale of Goods

Section 4(1) Sale of Goods Act 1957: Elements of a “contract of sale of goods”:
A contract whereby the seller sells or transfers the property in goods to the buyer
for a price.

Section 14(a), in a sale of goods contract, there is an implied condition that the seller
must be the owner or he has a right to sell the goods The seller has no right to sell if the
goods are stolen or the original owner has not given permission to sell.

Section 15, in a sale of goods contract, there is an implied condition that the seller must
sell goods according to the description of the goods.

Section 16(1) SOGA - In a sale of goods contract, generally, there is no implied condition
that the goods must be of merchantable quality and goods sold must be fit for buyer’s
purpose.

Section 16 - Implied condition as to quality or fitness for purpose. In 2 circumstances,

there will be an implied condition that the goods must be of quality or fit for the buyer’s
purposes:
s.16(1)(a): Goods must be fit for purpose
s.16(1)(b): Goods must be of merchantable quality
Section 26 of the Sale of Goods Act 1957 – Goods remain at the seller’s risk until the
property is transferred to the buyer.

Nemo Dat rule & exceptions

Section 27 of the Sale of Goods Act 1957 and the “Nemo Dat” rule provide that:
where goods are sold by a seller who is not the owner and not under the owner’s
authority or consent, the buyer does not get a good title from the seller.
Exceptions to Nemo dat rule:
Section 27 of the Sale of Goods Act 1957, transfer of title by estoppel
Proviso to Section 27 of the Sale of Goods Act 1957, sale by a mercantile agent
Section 28 of the Sale of Goods Act 1957, sale by one of joint-owners
Section 29 of the Sale of Goods Act 1957, sale under a voidable title
Section 30(1) of the Sale of Goods Act 1957, sale by a seller in possession
Section 30(2) of the Sale of Goods Act 1957, sale by a buyer in possession

Delivery of goods
Section 2: Delivery means “voluntary transfer of possession from one person to another”.

Section 31: it is the Seller’s duty is to deliver the goods in conformance to contract, and
the Buyer’s duty is to accept and pay for the goods.

Section 33: Delivery may be made by doing anything which the parties agree shall be
treated as delivery or which has the effect of putting the goods in the possession of the
buyer or any authorized person

Section 36: Goods sold are to be delivered at the place at which they were at the time of
sale, unless contract provides otherwise.

Section 37, delivery of wrong quantity:

if the quantity is less than what the buyer ordered:
reject the goods; or accept the goods and pay based on the contract price.

if the quantity is more than what the Buyer ordered:

accept the goods that he ordered and reject the rest; or reject the whole consignment; or
accept the whole consignment and pay for all.

Section 38, Installment delivery

If the seller delivers less quantity of goods, and promises to deliver on the next day, must
the buyer agree to this?
The Buyer is not bound to accept delivery by installments, unless he has otherwise
agreed.

Section 41, where goods are delivered to the buyer, and he has not previously examined
the goods, the buyer is not considered to have accepted goods until and unless he has a
reasonable opportunity of examining the goods to see whether goods conform with
contract.

Section 42, buyer is deemed to have accepted the goods when:

- He makes known to the seller that he has accepted or
- He does any act to the goods that is inconsistent with Seller’s ownership (e.g. Sell or
damage the goods); or
- Buyer retains goods without indicating to the seller that he has rejected the goods. After
a lapse of a reasonable time, the buyer must pay for the goods.

Topic 5: Consumer Protection

Consumer Protection Act 1999

Section 68(1) - Defective product

The persons who will be liable are:
- The producer of the product;
- The person who has put his name or use a trademark on the product.
- He is holding himself out as the producer of the product.
- The importer who has imported the product into Malaysia as his business, in order to
sell to another person.

Under section 52, the remedy that a consumer can obtain against a manufacturer:
- Require them to repair the defective product,
- Require them to replace the product with product of identical type,
- Where the defects is one that cannot be remedied, the consumer may reject the goods.
- The consumer may also obtain compensation for the reduction in value of the goods.

Section 24C - General procedural unfairness

Contracts or terms are considered unfair because these happen during the process or
procedure of entering into contract.

Section 24D - General substantive unfairness

Contracts or terms that are considered unfair based on their contents and interpretation of
their contents

Liabilities of a Service Provider

Section 9, misleading or deceptive conduct –It cannot engage in conduct which is
misleading or deceptive to the public. It cannot mislead consumers as to the nature,
characteristics, manufacturing process, suitability for a purpose, availability or quantity
of the goods or services.

Section 10, misleading misrepresentation: It cannot make a false or misleading

representation with regard to the goods or services provided.

Section 12, misleading price indication: It cannot give a misleading indication as to the
price at which the goods or services are available.
Section 13, bait advertising: It cannot advertise that it will supply any goods or services,
but which it does not intend to supply. Also, where it does not reasonably believe that the
goods can be supplied at the price or at the quantity required by the consumer.

Section 14, gifts, prizes, free offers: It cannot offer any gifts, prize or free items with the
intention of not providing them as offered. Where such offers are linked to a purchase of
other goods or services, the service provider cannot charge more than the usual price or
reduce the quantity or quality of such goods or services.
Section 15, claiming services or goods are limited: In offering any “limited” goods or
service, a service provider must ensure that the production has a pre- determined
maximum number or is limited to only an actual number. It must also state the maximum
quantity of the goods offered and the specific time- frame of the offer.

Section 16, accepting payment without intention to supply: It cannot demand or accept
payment without intending to supply the goods or services.

Section 20, non-compliance with standards: It cannot supply services or goods which do
not comply with the safety standards that are fixed under the Consumer Protection Act
1999.

Topic 6: Hire Purchase

Section 2(1) Hire-Purchase Act 1967, nature of a Hire-Purchase Agreement, a letting of
goods with an option to purchase or an agreement for the purchase of goods by
installments.

Section 4A, agreement must be in writing. It must be in writing, national language or

English. If not, Hire-Purchase agreement is void, owner commits an offence.

Section 45(1) Hire-Purchase Act 1967, a Hire-Purchase Agreement deemed not to be in

writing if handwriting is illegible and not clear. Also, print-size is smaller than ten-point
Times.

Section 4B, agreement must be signed and duly-completed. Hire-Purchase Agreement

must be signed and duly-completed before Hirer signs. Owner cannot deliver a HPA that
is not duly-completed. If these are not complied with, the HPA is void. The Owner,
dealer or agent are guilty of an offence.

Section 4E: Hirer may request in writing to keep registration certificate of motor vehicle.

Section 4F: Hire Purchase agreement is void if motor vehicle is altered or modified in its
construction and structure.

Section 4G: For second-hand motor vehicle, owner or dealer to declare in writing any
defects, in accordance with inspection report.
Under section 7(2) Hire-Purchase Act 1967, there is an implied condition that goods
under hire-purchase shall be of merchantable quality.

Under s.7(2)(a) or (b), the owner can exclude liability for any breach of the implied
condition of merchantable quality.

Section 7(2)(a) – where the Hirer has examined the goods or a sample, as regards defects
which the examination ought to have revealed, Hirer cannot subsequently rescind the
Hire Purchase Agreement even if there is breach of implied condition of Merchantable
Quality.

However, if on that particular examination, the defects cannot be revealed and if the
defects are subsequently discovered, then the Hirer can still rescind the HPA. This is even
though a thorough examination would have revealed the defect.

Section 7(2)(b) – For the owner can exclude liability for any breach of the implied
condition of merchantable quality if:
The Agreement has a statement to the effect that the goods are second-hand, all
conditions and warranties as to quality are expressly negative.
The Owner must prove the Hirer has acknowledged in writing that the statement was
brought to his notice.

Under section 7(3) HPA 1967, where Hirer expressly or impliedly makes known to the
Owner/dealer the particular purpose for him getting the goods, there is an implied
condition that the goods shall be reasonably fit for that purpose.

Section 9, Right to get a statement relating to his financial position

Section 10, Right to appropriation of payments
Section 11, Right to apply for an order for the goods to be removed
Section 12, Right to assign Hirer’s rights
Section 13, Right to have title and interest passed by operation of the law
Section 14, Right to early completion of agreement
Section 15, Right to terminate the Agreement

Conditions for repossession: section 16 to section 18 Hire-Purchase Act 1967

- The Hirer has defaulted in 2 successive installments.
- Where the Hirer is deceased, there must be a default of 4 successive installments before
the Owner can takes possession of the goods.
- Payment of installments by the Hirer must not have exceeded 75% of the total cash
price of the goods.

Section 16(1), the notice period must not be less than 21 days after the notice has been
served.
Section 16(3), within twenty-one (21) days after the Owner has taken possession of the
goods, it must serve on the Hirer and guarantors, another notice in writing, the Fifth
Schedule notice.
Bank Endgame would have right to repossess if Bank Endgame has served 4th Schedule
Notice to him, and the 21 days period has expired.

Topic 7: Business Torts

Winfield: Negligence is defined as “the breach of a legal duty to take care which results
in damage, undesired by the defendant, to the plaintiff”

Section 12 Civil Law Act 1956: where the plaintiff suffers damage partly because of his
own fault and partly because of another person’s fault, he can still sue.

According to the “Egg-shell skull” rule, if plaintiff suffers a greater or serious loss
because of his physical deficiencies, existing illnesses, characteristic or behavior,
defendant cannot argue that a normal person who does not have those deficiencies would
not have suffered such a serious loss. Thus, the defendant is still liable for the plaintiff’s
loss.

Impact of AI software on contracts

 Increases the volume of contracts

 Assess risk in contracts- identify terms and clauses (exclusion and confidentiality
clauses)
 Identify contract types, manage contract effectively
 Clarify the content of contracts
 Sort through large volume of contract, flag individual contracts
 Read contracts, extract contract data
 Consistency of terms, e.g.: private and confidential (definition of terms)
 Block-chain model and machine learning which enable contracts to evolve and re-
write. (only need to change one time, subsequent will change automatic)
 Develop contracting standards

How AI Is Changing Contracts

In this era of technology, artificial intelligence (AI) has provided efficiency to companies
in contracting. One of the main challenges that the firms face in contracting is managing
a large volume of contracts. As the contracts are bulky and complex, it takes a lot of time
for the firms to analyze, review, improve and execute the contracts. Besides that, the
firms also deal with inconsistent terms and clauses in the contracts. As the contracts lack
uniformity and consistency, it is difficult to organize, manage, update and keep track of
the contracts. Consequently, the manpower of drafting the contract is large and the
contracting process is long. However, with the help of AI, the companies can manage the
contracts more effectively and efficiently.

First and foremost, the AI improves the tools for managing contracts. The AI contracting
software helps the firms to identify contract types, offer simple predictions, and sort
through a large volume of contracts. It is more convenient and faster in analyzing and
extracting the data in any patterns of the contract. The AI contracting software has set its
algorithm on a set of contracts to recognize patterns as well as extract key variables such
as clauses, dates, parties and other related information from the contracts. For example,
AI helps to clarify the contents of a large volume of sale and purchase agreements with
many complex information of the buyer and seller. As a result, the volume of contracts
and the efficiency of managing the contracts can be increased which in turn allows the
lawyers to focus more on other works instead of reviewing the contract.

Furthermore, AI contracting software keeps the contents of the contracts consistent. The
AI contracting software helps the company to make sure some specific legal terms to be
consistent throughout the contracts. In this circumstance, the AI contracting software
helps the firms to standardize the terms by identifying noncompliance terms and
correcting the terms. For instance, AI standardize terms such as private and confidential
terms in a contract. Besides that, the risk of using the AI contracting software in drafting
a contract is much lower than a contract drafted by humans. It ensures that every detail in
the contracts is accurate and correct compared to humans where sometimes some typing
errors could happen. Consequently, the AI contracting software maintains the consistency
and uniformity of terms in the contracts while reducing the risk of human error.
Moreover, AI is affecting the processes of contracting as it has developed contracting
standards. The AI contracting software has reduced the burden of the lawyers which
allows them to put more focus on high-value work. For illustration, the routine work of
drafting or reviewing the contracts can be done with AI contracting software where it can
save time in managing the contracts and yet produce high-quality works. Therefore, the
role of contract management professionals will shift where the resources of document
review can be allocated to other areas. Hence, the companies can reduce the employee in
contracting while providing more resources for the lawyers. On the other hand, AI
contracting software has a block-chain model and machine learning which enable
contracts to evolve and re-write. Consequently, the AI software will automatically learn
from past mistakes and upkeep the latest format of contracting.

In a nutshell, the contracting technology benefits the tools, contents and processes of
contracting, allowing the contracting process to become easier, faster and better. Indeed,
the availability of AI is superb as it does not require frequent breaks as well as able to
perform the job continuously and work for long hours. Hence, AI definitely can help to
increase the productivity of a firm in contracting.

[Beverly Rich, J.D. (2018, February 12) How AI Is Changing Contracts. Retrieved from:
https://hbr.org/2018/02/how-ai-is-changing-contracts]

Merchantable quality & Purpose of SOGA 1957

Explanation of section 16 Sale of Goods Act 1957
Section 16 Sale of Goods Act 1957 provides that there is no implied condition as to
quality or fitness for purpose. In a sale of goods contract, generally, there is no implied
condition that goods must be of merchantable quality or goods sold must be fit for
buyer’s purpose.

Meaning of merchantable quality

 A basic level of quality expected in a product, considering its price and
description.
 Goods are not of merchantable quality if it is of no use for any purpose for which
it is normally used such as a blunt knife or a broken chair.
 If goods have several purposes, it is of merchantable quality if can fulfill any one
of those purposes following the case of Henry Kendall Ltd v William Lillico Ltd.

Exceptions as to quality or fitness for purpose

In 2 circumstances, there will be an implied condition that goods must be of quality or fit
for the buyer’s purposes:

Section 16(1)(a) Sale of Goods Act 1957 - Goods must be fit for purpose:
 Sale is in the course of business, not private sale.
 Buyer indicated to the seller the particular special purpose that he bought the
goods.
 Buyer relies on seller’s skill or judgment to select the goods for him.
 Seller specializes in selling the goods in his business.

Section 16(1)(b) Sale of Goods Act 1957 - Goods must be of merchantable quality:
 Goods are bought by description.
 The Seller normally sells the goods in his business.
 Buyer needs not have indicated to seller, the particular purpose that he bought the
goods.
 If buyer has checked goods & did not see an obvious defect, he cannot later
complain.
Transfer of Title by Estoppel – s. 27 Sale of Goods Act 1957

Explanation of the law

Section 27 Sale of Goods Act 1957and the “Nemo Dat” rule provides that where goods
are sold by a seller who is not the owner and not under owner’s authority or consent, the
buyer does not get a good title from the seller.

Under the exceptions to Nemo Dat rules, although the seller does not have a good title to
the goods, the seller can still sell to the buyer. The buyer can still acquire a good title
from that sale.

The exception which is applicable in this case is section 27 Sale of Goods Act 1957, sale
by estoppel.

The requirements are the true owner by his conduct makes it appear to buyer that the
seller has authority to do so and the buyer relies on this by buying in good faith and
paying good value for the goods. Hence, the true owner will be estopped or prevented
from denying the seller’s authority to sell.

The effect of section 27 Sale of Goods Act 1957 is that any sale made by a seller by
estoppel is valid as though he is expressly authorised by the owner.

Application to the facts

On the facts,

Conclusion
In conclusion, the sale by Thanos is valid as if expressly authorized by Tony. Bruce has
obtained a good title to the car.
Sale by One of Joint Owners – Section 28 Sale of Goods Act 1957
Explanation of the law
The exception which is applicable in this case is section 28 Sale of Goods Act 1957, sale
by one of joint owners.

The requirements are:

i. He goods are owned by several owners.
ii. The seller is a co-owner.
iii. The seller has sole possession of the goods with the consent of the other co-
owners.
iv. The buyer buys the goods in good faith and pays good value for it. He has no
notice that the seller has no authority to sell.

The effect of section 28 Sale of Goods Act 1957 is that any sale made by one of joint
owners is valid as though he is expressly authorised by the owner.

Sale under a voidable title – Section 29

The exception which is applicable in this case is section 29 Sale of Goods Act 1957, sale
under a voidable title.

The requirements are:

i. The seller obtains goods under a voidable contract.
ii. The true owner has not yet rescinded the original contract at the time of the
second sale.
iii. The buyer buys the goods in good faith, without notice of the seller’s defective
title.

The effect of section 29 Sale of Goods Act 1957 is that any sale made by a seller under
voidable title is valid as though he is expressly authorised by the owner.
Sale by a Buyer in possession after sale – s.30(2)
The exception which is applicable in this case is section 30(2) Sale of Goods Act 1957,
sale by a buyer in possession after sale.

The requirements are:

i. After buying or agreeing to buy the goods, the buyer obtains possession of the
goods or documents of title with the seller’s consent.
ii. Title to the goods remains with the seller
iii. The 1st buyer then sells to a 2nd buyer.
iv. The 2nd buyer buys the goods in good faith, without notice of the original seller’s
rights.

Section 30(2) Sale of Goods Act 1957 provides that any sale made by a buyer in
possession after sale is valid as though he is expressly authorised by the seller.