Nov 26, 2007

Business Law Tutorial 7

[ Question 789 are not tested in the exam...so no worries!! ]



7. When Tua signed a contract to sell her house to Dr. Senyum which is worth RM500000 for RM250000, can she do so?



Under Explanation 2 to Section 26 of COntracts Act, 1950, consideration need not be adequate but must be of some value. Here, even though the consideration is inadequate but the contract is valid.



Section 10 of COntracts Act, 1950 states that all agreements are contracts if the consent is freely given. According to Section 14 of Contracts Act, 1950, the consent is said to be freely given if none of the vitiating factor presents.



Section 16 of Contracts Act, 1950 defines undue influence as an act of dominating one's mind until one cannot think for oneself. Here, there is presumed undue influence because the relationship between Tua and Dr. Senyum is Doctor and patient. It gives rise to voidable contract.



Voidable contract is defined in Section 2(i) of Contracts Act, 1950 as an agreement which is enforceable by law at the option of one or more parties but not at the option of other or others.



If Dr. Senyum can prove that there is no presence of undue influence, the contract remains valid because consideration need not be adequate. Therefore, Dr. Senyum can sue Tua for breach of contract.

If Dr. Senyum cannot prove there is no presence of undue influence, the contract is voidable. It depends on Tua whether to carry on the contract or not. Here, when Tua had changed her mind about selling her house to Dr. Senyum, she decided not to carry on with the contract, thus the contract is void. Dr. Senyum cannot sue Tua for breach of contract.





8. Section 10 of COntracts Act, 1950 states that all agreements are contracts if the consent is freely given. According to Section 14 of Contracts Act, 1950, the consent is said to be freely given if none of the vitiating factor presents.



Section 18 of Contracts Act, 1950 defines misrepresentation as an act of making false statements which influence one to make decisions. The false statement made by Foo, of which the restaurant will earn a monthly profit of at least Rm 10000 for the next eighteen months, has influenced Goh to buy the restaurant. In the end, Goh suffers damages. It gives rise to voidable contract.



Voidable contract is defined in Section 2(i) of Contracts Act, 1950 as an agreement which is enforceable by law at the option of one or more parties but not at the option of other or others.



It is up to Goh whether to carry on with the contract or not. If Goh decided not to carry on with the contract, he can sue for breach of contract under Section 18 of Contracts Act, 1950 and claim for damages.





9. Section 16 of Contracts Act, 1950 defines undue influence as an act of dominating one's mind until one cannot think for oneself. There are two types of undue influence, namely the presumed undue influence and normal undue influence.



Presumed undue influence is assumption of presence of undue influence. Relationships that give rise to presumed undue influence are doctor and patient, parent and child, lawyer and client, religious advisor and desciple, etc. The party being sued have to prove that he has not influenced another party.



Normal undue influence requires the party who sue to prove the presence of undue influence. Once the period of undue influence elapses, the contract can be repudiated within reasonable time.





10. When Jack lent RM50000 to Peter on 1.6.98 to assist Peter in his business, did he know his cousin business is illegal? If he did not know, he can still sue Peter for breach of contract, provided that Jack has the proof or contract to prove his transaction with Peter. If Jack knew, then it is an illegal contract.

Illegal contract is defined in Section 24 of Contracts Act, 1950 as an agreement which is said to be unlawful, if it is forbidden by law, or it is of such a nature that if permitted it would defect the law, or it is fraudulent, or it involves or implies injury to the person or property of another, or the court regards it as immoral or opposed to public policy. It gives rise to void contract.

Void Contract is defined in Section 2(g) of Contracts Act, 1950 as an agreement which is not enforceable by law. It gives rise to no rights or obligations. In this case, Jack cannot sue Peter for RM 50000 because the contract is void.


11. A contract is said to be discharge by frustration if there is a change in circumstances which renders a contract legally or physically impossible of performance.

Under Section 57(2) of COntracts Act, 1950, there are two instances of frustration. The frustration should be supervening and subsequent to the formation of the contract. Self induces frustration does not discharge a party of his contractual obigations - Maritime National Fish Ltd. v. Ocean Trawlers Ltd. Mere increase in price does not amount to frustration.

The contract does not merely voidable but is brought to an end forthwith and automatically - Hirji Mulji v. Cheong Yue Steamship Co. Ltd- Such contract becomes void.

Section 2(g) of Contracts Act, 1950 defines void contract as an agreement which is not enforceable by law. It gives rise to no rights or obligations.



12. Condition is a major breach of which it goes to the root of the contract, and the contract can be repudiated.

Warranty is a minor breach of which the party only can claim for damages but the contract still have to be carried on.

Innominate term is a breach of which its severity will be assessed, whether it is a condition or warranty - Hong KOng Fir Shipping v. Kawasaki Kisen Kaisha, as the term is not clearly stated in the contract. The judge will try to save the contract as much as he can.

If either one of the conditions below is satisfied, it is a condtion:
  • the other party has renounced his obligations under the contract; or
  • the other part has rendered his obligations impossible of performance; or
  • the party not in default has been deprived of substantially the whole benefit which it was intended he should obtain from the contract.

1 comment:

  1. Anonymous11:42 PM

    Erm..i would like to ask u a question about business law..:
    James placed an advertisement in the Star newspaper, for the sale of his BMW motorbike, made of aluminium, a lightweight metal, for RM150,000.00 or nearest offer. A new motorbike of the same type would cost 250,000.00. Dahari knew that the motorbike is worth more than RM150,000.00. He responded quickly to say he accepted the offer. However James informed him that he has sold the aluminium BMW lightweight motorbike and now he has only a racing motorbike available for sale for RM220,000.00.

    Advise Dahari.

    ReplyDelete

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