SUBJECT NO 07D

MALAYSIAN BUSINESS LAW

MAY 2002

FIVE questions ONLY are to be attempted. All questions carry equal marks.
THREE questions must be answered from Section A and TWO questions from
Section B.

Friday afternoon 31st May 2002 Time allowed: 3 hours

SECTION A
(Answer THREE questions only)

1. (a) Jack owns several pieces of land in Petaling Jaya. In 1998 Jack promised
to give one of the pieces of land to his son, Bob, if Bob passes his law examination
before 2001. This promise was made in the presence of several witnesses. Bob passed his
law examination in 2000 but to date Jack has not fulfilled his promise. Bob seeks your
advice on the legal position.
(6 marks)

(b) On 10 April 2002 Tan wrote to Lim offering to sell his (Tan's) Baruda motor car to Lim
for RM100,000. Lim received Tan's letter on 12 April 2002. Lim showed Tan's letter to his
nephew, Chee. On 14 April 2002 Chee wrote to Tan as follows:

"With Lim's approval, l, Chee, hereby agree to buy your Baruda car for
RM100,000. If I do not hear from you before 30 April 2002 I will consider
the Baruda to be my car."

Tan received Chee's letter on 16 April 2002. To date Tan has not replied to
Chee's letter. Chee seeks your advice on the legal position. (7 marks)

(c) Peter is a portrait painter. Peter entered into a contract with Alan to paint Alan's portrait
for a fee of RM5,000. It was a term of the contract that Alan would pay the fee to Peter's
sister, Jane. Jane was not a party to the agreement. Peter died soon after the portrait was
completed. Alan has now refused to pay Jane, saying that,

(i) No consideration moved from Jane;

(ii) Jane was not a party to the agreement.

Advise Jane (7 marks)

(Total: 20 marks)
2. (a) When may the silence of a contracting party amount to fraud?
(4 marks)

(b) State the circumstances when a contract may be deemed to be discharged

by frustration. (8 marks)

(c) Julie is a well-known actress. She is nineteen years old. Acme Films Bhd is
a film production company and is keen to engage Julie under a contract to
act in three of its forthcoming films. It seeks your advice on the following
matters:

(iii) whether the proposed contract may provide that Julie shall not
marry during the duration of the contract;

(iv) whether it may obtain a decree of specific performance against Julie

if she breaches her obligations under the proposed contract.

Advise Acme Films Bhd. (8 marks)

(Total: 20 marks)

3. (a) Two important rights of an unpaid seller are (i) stoppage in transit and (ii)
right of resale. State the main rules that govern the exercise of the two
rights. (10 marks)

(b) LMN Bhd sells cars. It does not sell vans. In 1997 it bought a Loton van to
provide transport for its employees. Recently LMN Bhd sold and delivered
the van to Bill for RM20,000 for his business. Before the sale was
concluded LMN Bhd told Bill that the van had not been examined for
defects. Before taking delivery Bill had the van examined by Don, an
experienced mechanic. Yesterday, Bill discovered that the van had a
defective gearbox.

Advise Bill as to his rights, if any, against LMN Bhd. (10 marks)
(Total: 20 marks)

4. (a) Where the buyer wrongfully refuses to accept the goods delivered by the
seller, the seller may claim damages.

Explain how the seller's damages may be assessed. Refer to decided cases
in your answer. (8 marks)

(b) examined three identical Motex watches displayed for sale at Boh's premises. On 21 April
2002 Wang telephoned Boh and told Boh that he would like to buy two of the Motex
watches. Wang asked for the two watches to be sent to his house on 24 April 2002. On 22
April 2002 Boh packed two Motex watches for Wang in a box and placed the box in a
cupboard. On 23 April 2002, Pok, a thief, broke into Boh's premises and stole the box
containing the two watches. On 24 April 2002 Pok sold the two watches to Tam. Tam
bought the watches in good faith.

Answer the following questions:

(i) May Boh claim the purchase price of the two watches from Wang?
 (ii) May Wang claim the two watches from Tam?
(12 marks)
(Total: 20 marks)

5. (a) "An agent cannot employ another person to perform acts which he had
undertaken to perform personally."

State the exceptions to this rule. (5 marks)

(b) Recently Kee appointed seven persons as his agents for two years to sell his
goods. Yesterday Kee discovered that one of the persons, Qua, will not
attain the age of majority until April 2003. Kee seeks your advice on this
matter.
(5 marks)

(c) Beng recently appointed Tong as his agent to sell his (Beng's) goods.
Yesterday Tong entered into a contract with Cheow on Beng's behalf
without informing Cheow that he was acting as agent for Beng. Answer the
following questions:

(i) May Beng enforce the contract against Cheow?

(ii) Under what circumstances may Cheow refuse to fulfil his

obligations under the contract?

(iii) Does Cheow have any rights against Tong?

(10 marks)
(Total: 20 marks)

6. (a) In June 2000 Doe and Woo entered into a contract which contains an
arbitration clause. The clause provides for the appointment of a single
arbitrator. In March 2002 a major dispute arose between Doe and Woo over
certain terms of the contract. On April 1 2002 Doe wrote to Woo stating
that he wished to appoint Bagong as the arbitrator. To date Woo has not
responded to Doe's letter.

Advise Doe on the legal position. (6 marks)

(b) Superman Records Bhd is a recording company which has produced a

number of highly popular pop songs. Superman Records Bhd has strong
grounds to believe that Tipu is producing pirated copies of its records and
cassette discs. Superman Records Bhd has reliable information that Tipu's
pirating activities are carried out from a bungalow in Klang. Tipu has made
huge profits from pirating Superman Records Bhd's records and cassette
discs. He has deposited the profits in three Malaysian banks.

Superman Records Bhd intends to sue Tipu and claim damages. However it
feels that it does not have enough evidence to prove its case in court. It is of
the view that Tipu will destroy all incriminating evidence once its writ is
 served on him. It also feels that Tipu will withdraw and conceal the money
deposited in Malaysian banks once the action is commenced.

Superman Records Bhd seek your advice on the steps it should take in respect of this
matter. Advise Superman Records Bhd on the steps it should take and the legal
requirements that must be satisfied. (14 marks)

SECTION B
(Answer TWO questions only)

7. (a) The High Court has powers under the Patents Act 1983 to invalidate a
patent under certain circumstances. State the circumstances. (7 marks)

(b) In 1988 Tok wrote and published a popular play called "Pendekar Batok". Tok died in
1989. Rizal is Tok's executor. Last week Rizal discovered that Suka Films Bhd had made a
film based on Tok's play. The film was released in April 2002. Suka Films Bhd did not
obtain the consent of Tok's estate before making the film. Rizal seeks your advice on the
legal position and the remedies, if any, available to Tok's estate.
(13 marks)
(Total: 20 marks)

8. Affectionate Finance Bhd is a newly incorporated finance company. It intends to

provide credit facilities for the hire-purchase of new consumer goods. It seeks your
advice as to the validity of the following clauses which it intends to insert into its
hire-purchase agreement:

(a) "The implied terms as to title, fitness and merchantable quality are hereby
excluded".

(b) "The owner may sell the goods repossessed after the expiry of 14 days
from the date of repossession".

(c) "The owner is entitled to claim RM200 as a service fee if the hirer wishes
to assign his rights under this agreement."

(d) "The owner may enter the hirer's premises to repossess the goods let."

(e) "The owner may serve all notices required by the Hire-Purchase Act 1967
by ordinary post."

Advise Affectionate Finance Bhd.

(Total: 20 marks)

9. (a) What are the liabilities of an acceptor of a bill of exchange? (6 marks)

(b) What is the legal effect if a cheque is crossed.

(i) "&Co"
(ii) "Account Payee"? (7 marks)

(c) Sally has a current account with Bank Anda. Sally drew a cheque for
RH6000 in favour of Danny. Sally wrote the words "six thousand" in such
 a way that Danny was able to alter the words to "sixty thousand". Sally left
a small space after writing the figure "6000" and Danny was able to insert
an additional "O" to alter the figure to 60000. The alterations were not
apparent on the cheque. Bank Anda paid out Riv160,000 to Danny from
Sally's account. Danny has disappeared without a trace. Sally intends to sue
Bank Anda.

Advise Sally. (7 marks)

(Total: 20 marks)

10. (a) Ling runs a small business as a distributor of cigarettes and soft drinks. He
has nine employees. Ling seeks your advice whether the contracts of service of the
employees listed below would be regulated by the Employment Act 1955.

(i) Alice, an accounts clerk, who is paid RM1600 a month.

(iii) Masnah, a general clerk, who is paid RM1475 a month.

·
(iv) Samy, a van driver, who is paid RM1550 a month.

(v) Mong, a supervisor, who is paid RM1800 a month. Mong

supervises five manual labourers employed by Ling.

Advise Ling. (10 marks)

(b) DEF Bhd intends to employ fifty new employees for its factory in Klang.
contracts of employment of the new employees will be regulated by
Employment Act 1955. DEF Bhd seeks your advice as to whether it

(i) may limit the paid annual leave of the employees to ten days for the
first two years of employment;

(ii) may require the employees to work on gazetted public holidays;

(iii) may prevent the employees from forming or joining a trade union.
(10 marks)
Advise DEF Bhd. (Total: 20 marks)

11. (a) How may a purchaser rescind a direct sale contract? What is the effect of
such a rescission? (8 marks)

(b) Consider the facts below and state whether Charlie and Tony have
committed offences under the Trade Descriptions Act 1972.

Charlie
 Charlie sells pianos and organs. In March 2002 a piano displayed at
Charlie's showroom was damaged in a flash flood. Charlie repaired the
piano and sold it to Ramli, describing the piano as "new". Ramli was not
told that the piano had previously suffered damage in a flood.

Tony

Tony is a doctor and has a clinic in Shah Alam. Recently Tony sold a
computer used in the clinic to Azmi. Tony told Azmi that the computer was
imported from Germany. In fact the computer was imported from a South
American country.
(12 marks)
(Total: 20 marks)

12. (a) "Contractual capacity or ahliyya is a prime requirement of Islamic Law.

There is a natural presumption of capacity subject to specified exceptions."

State when a person may not have contractual capacity under islamic law.
(10 marks)

(b) In January 2002 Benny obtained an unsecured loan of RM20,000 from

Fargo, a licenced moneylender. The loan agreement signed by the parties
provides that

(i) Benny will repay the loan by thirty monthly instalments;

(ii) The interest charged is 18.5% per annum;
(iii) The interest will be raised to 19% per annum if Benny defaults over
the payment of any instalment.

Benny did not pay the insraiment due in April 2002 and Fargo has made several
visits to Benny's house to harass Benny and his family.

Benny seeks your advice on his rights, if any, in respect of this matter.
(10 marks)
(Total: 20 marks)