Sub-- Legal And Business Environment

Assignment No. 1

Q1 Explain In Detail:
a.)Explain Essential Elements / Fundamentals of Valid Contact
Contract is an official agreement. It could be written or even be in oral. Contracts can be
written by using formal or informal terms, or entirely verbal or spoken. It is a promise made
between two or more parties that which allow the courts to make judgement. A contract has
six important elements so that it will be valid which is offer, acceptance, consideration,
intention to create legal relation, certainty and capacity. If the main elements are not in
contract, it would be an invalid contract.
1. Offer
The first element in a valid contract would be offer. An offer or a promise or an agreement
needs to be in contract because if there is no offer than there will be no contract. In the
Contracts Act, 1950, the first elements in a contract would be offer. It is one of the elements
to make sure that the contract is legally valid or acceptable. In a contract, it is very important
that a party would make an offer. There is a difference of offer between an advertisement and
an option. To make an offer, there should be at least two parties or even more so that it would
be legally capable of entering into a contract. If the offer is accepted than it would constitutes
to a legally valid contract. When an offer is being made, the other party or person would
know what is being offer and what the person or party who made the offer expect to have in
return. It is the same when anybody goes on a holiday, stays at a hotel and so on. For
example, a family has made an arrangement with a tour agency to have a holiday at Hong
Kong for a few days. The tour agency would make a contract by making forms to the family
which would have to be filling up. The family member who fills up the form would have to
be clear with the rules and regulations given by the tour agency company. Once it is fills up,
the contract has been made between the family and the tour agency.
2. Acceptance
After having an offer in the contract, there should be acceptance. For a contract to be made
there should be acceptance from the other party or person. When the other party is clear with
the offer, there would make an acceptance once they are clear with the rules and regulations
being offer in the contract. There will be no contract if the parties are still negotiating or
discussing and have not made accept the offer. The person or party can accept the offer being
made in writing or orally which is made verbally or being spoken out. For example, a tourist
writes to hotel K requesting information about the cost and availability of accommodation for
the week commencing on the 15th April 2011. The staff at hotel K answers the inquiry states
that the accommodation available for that week would cost RM 600 and if the tourist
responds with the deposit of RM 100 within a week, then the room will be allocated to him. If
the tourist accepts the offer, then the contract has been made for the tourist and hotel K.
3. Consideration
Consideration is also a very important element in the contract. Consideration in a contract
would mean the other person would be giving back something in return. It would be consider
as an exchange which would be made between the promisee and promissor. There should be
consideration in a contract so that it would be legally valid. For example, a customer in a fast
food restaurant like McDonalds orders a set lunch which costs RM7.95. By ordering the set
lunch, the customer is agreeing to pay RM7.95 as consideration. However, consideration does
not give any threats to on ‘ line holiday contracts. Holiday services which are being provided
by the on ‘ line holiday providers and also the consideration by giving something back in
return which would be the payment money or even the payment made by the holiday makers
would eventually follow the requirements for consideration of a contract.
4. Intention to Create Legal Relations
It is essential to have this element in a contract. It is a necessity of the intention to create legal
relations although the Contracts Act 1950 is silent on the intention to create legal relations as
one of the requirements of a valid contract. This element would have an agreement which is
not a contract in the strict sense unless it is the common intention of the parties that it should
be legally enforceable. If there is no intention to create legal relations in a contract, the
contract could be subject to a lawsuit. For example, when there is a contract or an agreement
made between the parent and the children. If the parent passes away, the children would have
whatever property or possession which is left by the parent.
5. Certainty
Another main element in a contract would be certainty. The terms and regulations being
made in a contract should be stated clearly and understood by the parties of the contract. If
the agreement is not certain, it would be no longer valid. For example, if the guest wants to
stay in a hotel, , the guest needs to inform how many days he or she is staying at the hotel, the
type of room, and also the date when he or she are going stay and the number of days he or
she is staying.
6. Capacity
Capacity in a contract is the parties to the contract must have the legal capacity to do so. 18
years old is stated as the age of a major. Minors who are people below the age of eighteen
have no capacity to enter into contracts. Therefore, insane people or people with unsound
minds also cannot enter into any valid contracts. For example, a person who is at the age of
sixteen years old could not stay at a hotel. The hotel staff would not allow having the person
who is sixteen years old to stay at the hotel since that person is not eighteen years old or
above. For the person to stay at the hotel, he or she must have a guardian who is above
eighteen years old or a parent to accompany him or her to stay in the hotel.
Conclusion of the elements in a valid contract
Therefore it is important to have the main elements in a contract. Only if there are all the
main elements in a contract then it would be legally valid to make a contract. People should
take precaution in making a contract to make sure that the parties would be in agreement with
the terms made in a contract.

b) Defined Unpaid Seller And His Various Rights.

Bill of exchange/ promissory note/ cheque has been received by seller but it dishonours. Till
the time bill of exchange/ promissory note/ cheque is with the seller so, till that time he is
only called as seller but when any of the mentioned instruments dishonours then after this
seller is called unpaid seller.

Rights of Unpaid Seller

Rights of unpaid seller against goods
1.Right of possession/ lien
2.Right of stoppage of goods in transit
3.Right of resale

Rights of unpaid seller against buyer

1.Suit for price
2.Suit for interest and special damages
3.Suit for damages for nonacceptance
4.Suit for breach of contract

A. Rights of unpaid seller against goods

1.Right of possession/ lien
If the buyer fails to pay the price within the decided time, then unpaid seller has the right to
keep the goods in his possession and he can refuse to deliver the goods until the due
payment is paid.
When right of possession can be exercised:-
à When goods are sold on cash basis, but payment is unpaid
à When goods have been sold on credit basis and the term of credit has expired
à When the buyer becomes insolvent even within the decided period for payment
à So, far as the goods are in the possession of unpaid seller, he can exercise this right. If
goods are lost/ given up then right of possession/ lien is also lost/ given up
Termination of Right of Possession
à By delivery of goods to the buyer/ his agent
à By delivery of goods to the carrier/ courier company
à By waiver
This means that it’s specifically mentioned in the contract that seller can’t retain the
possession of the goods even if the price has not been paid
à When buyer has obtained the possession of goods lawfully
2.Right of stoppage of goods in transit
If a buyer fails to pay the price within the decided time, then unpaid seller has the right to
stop the goods in transit.
Conditions for stoppage of goods:-
à When seller is unpaid either wholly or partially
à When the buyer becomes insolvent
à Goods must be in the course of transit- This means that goods must not be in the
possession of the seller and have not reached the buyer’s possession as well
Termination of Transit
à By delivery to the buyer/ his agent
à Interception by the buyer (Interception means the act of catching/ receiving)
When buyer or his agent obtains the delivery of the goods before their arrival at the
appointed destination hence, the transit comes to an end
à Acknowledgement to the buyer by the carrier/ courier company that they are holding the
goods on buyer’s behalf, then also transit comes to an end
à Part delivery of goods
If part of the goods are delivered to the buyer then the transit comes to an end for the
remainder of the goods as well
3.Right of resale
The unpaid seller has the right to resell the goods.
Conditions for resale:
à When goods are of perishable nature- Then unpaid seller can resell them immediately
without the notice to the buyer. But in case of non-perishable items unpaid seller needs to
send notice to the buyer for reselling them
à Where unpaid seller gives the notice to buyer and buyer still don’t pay for it
à Where the right of resale is reserved/ mentioned in the contract
If contract clearly specifies that reselling can’t be done or vice versa
à Buyer becomes insolvent
à Buyer fails to pay the price of the goods
B. Rights of unpaid seller against buyer
1.Suit for price
2.Suit for interest and special damages
Here, suit can be filed for interest and special damages.
Where, interest will be paid on the amount of the deal between seller and buyer on the
choice/ discretion of the court.
3.Suit for damages for non-acceptance
Suit can be filed against the buyer if the buyer wrongfully refuses to accept the goods.
4.Suit for breach of contract

Q2 Write Short Notes:

1) Rights of Bailor

Bailment .

             A ‘bailment’ is the delivery of goods by one person to another for some purpose,
upon a contract that they shall, when the purpose is accomplished, be returned or otherwise
disposed of according to the directions of the person delivering them. (Section 148 of the
Indian Contract Act, 1872)

Who is Bailor? 

     In Bailment the person delivering the goods is called the ‘bailor’. and the person to whom
they are delivered is called the ‘bailee’.

     If a person is already in possession of the goods of other contracts to hold them as a bailee,
he thereby becomes the bailee, and the owner becomes the bailor of such goods, although
they may not have been delivered by way of bailment.

Rights of Bailor : 

      The rights of Bailor are as follows :

1) Right to claim damages if bailee makes wrongful use

2) Right to claim proportionate share in mixed goods

3) Right to claim return of goods or their loss 

4) Right to claim damages due to mixing up of goods 

1) Right to claim damages if bailee makes wrongful use (Section 154 of I.C.A)

          If the bailee makes any use of the goods bailed which is not according to the conditions
of the bailment, he is liable to make compensation to the bailor for any damage arising to the
goods from or during such use of them.

2) Right to claim proportionate share in mixed goods (Section 155 I.C.A): .

          If the bailee, with the consent of the bailor, mixes the goods of the bailor with his own
goods, the bailor and the bailee shall have an interest, in proportion to their respective shares,
in the mixture thus produced.
    
3) Right to claim return of goods  : (Section 160, 161 of I.C.A)

        In bailment, the goods are delivered for a specific purpose. after the purpose is served,
the goods may be returned to the bailor. Bailor has a right to claim return of goods.

          
4) Right to claim damages due to mixing up of goods 

            According to Section 156 and Section 157 of the Indian Contract Act, 1872 bailor has
a right to claim damages due to mixing up goods. Section 156 & Section 157 runs as follows

2) Creation of Agency.
Agency is a relationship between a principal and an agent in which the principal confers his
or her rights on the agent to act on principal’s behalf.  Such a relationship is based on an
agency contract.  The rights and duties of the agent and principal are in accordance with the
express or implied terms of the contract.
To create an agency, the consent of the agent and the principal is necessary.  The principal
must intend that the agent act for him or her, the agent must intend to accept the authority and
act on it.  The intention of the agent and the principal must be either in express terms of the
contract or can be inferred from the conduct of the parties.  In the absence of any claim or
exercise of control by one party over the activities of another, there can be no agency
relationship
A contract of agency may be express or implied. Consideration is not an essential element in
the agency contract. Agency contract may also arise by estoppel, necessity or ratification.
Types of an Agency Contract

1-Express Agency
An agency is defined as a contract, either express or implied, by which one of the parties
confides to the other the management of some business, to be transacted in his name, or on
his account, by which that other assumes to do the business, and to render an account of it[i]. 
Express agency is an actual agency created by the written or spoken words of the principal
authorizing the agent to act on behalf of the principal.  In express agency, authority is directly
granted to or conferred upon the agent or employee in express terms, and it extends only to
such powers as the principal gives the agent in direct terms, with the express provisions
controlling.

2-Implied Agency
An agency relationship can be either express or implied.  Agency is created by implication
when, from the nature of the principal’s business and the position of the agent within that
business, the agent is deemed to have permission from the principal to undertake certain acts. 
In other words, implied agency involves permission to act, even though permission is not
explicitly established orally or in writing.  An implied agency is frequently established by the
conduct and communication of the parties and the circumstances of the particular case[i]. 
Generally, one should look from the viewpoint of the principal and the agent to determine
whether the agent has implied authority[ii].
It is elemental agency law that an agency relationship may be implied, inferred, or based on
apparent authority. Implied or inferred agency is actual authority given implicitly by the
principal to his agent circumstantially proved, or evidenced by conduct, or inferred from a
course of dealing between the alleged principal and the agent. Authority can be implied only
from facts.  Implied powers must be based on some act or acquiescence of the principal,
express or implied