MGM 3351COMMERCIAL LAW DR SUHAIMI AB RAHMAN DEPT. OF MANAGEMENT & MARKETING FACULTY OF ECONOMICS & MANAGEMENT UNIVERSITI PUTRA MALAYSIA Room A110 03-89467656 03-89437951 firstname.lastname@example.org
What is Commercial Law? (Commerce + Law) • Commerce = Businesses; Buying and Selling; Dealings; Financial Transactions; Marketing; Merchandising; Trade; Trading; Trafficking; etc. • Law = rule or set of rules established in a community, demanding or prohibiting certain actions; enforceable rules
Definition on Commercial Law “The object of commerce is to deal in merchandise and, if we adopt this criterion, commercial law can be defined as the special rule which apply to contracts for the sale of goods and to such contracts as are ancillary thereto, namely contracts for carriage and insurance of goods and contracts the main purpose of which is to finance the carrying out of contracts of sale” H C Gutteridge, ‘Contract and Commercial Law’ (1935) 51 LQR
Definition - Continued “Commercial is that branch of law which is concerned with rights and duties arising from the supply of goods and services in the way of trade” R M Goode, Commercial Law,(1982), p. 35
Definition - Continued “ ‘Commercial Law’ can be defined as the law relating to commercial activities and transactions” R Bradgate and N Savage, Commercial Law, (1991), p. 4
The Basis of Commercial Law • It is based on transactions • It is concerned primarily with dealings between merchants, in the broad sense of professionals as opposed to consumers • It is centered on contract and on the usages of market • It is concerned with a large mass of transactions in which participant is a regular player – so that the transactions are typical and in large measure repetitive and lend themselves to a substantial measure of transactions
The Attribute of the Law • Should not be static • Must be pragmatic and responsive • Must correspond to current needs of commercial transactions
Our Subject Commercial Law is a combination of different subjects; Law of Contract; Agency; Sales of Goods; Partnership; Hire Purchase; Insurance and Negotiable Instruments
Objective of the Course The main objective of the course is to expose the students with laws that relate to businesses
Learning Outcomes • Students will be able to determine and apply the law in their daily businesses • Students will be able to solve problems critically according to the laws provided • Students will know what are their rights and liabilities in their daily businesses transactions • Students will be able to interact confidently with others in business community
Books and References • Shaik Mohd Noor Alam S.M. Hussain (2002) Undang-undang Komersil Malaysia • Wu Min Aun & Beatrix Vohrah (2002) Commercial Law of Malaysia • Syed Ahmad Alsagoff (2003) Principles of Law of Contract in Malaysia • Laurence Kofmann & Elizabeth MacDonald (1995) The Law of Contract
Laws • Statutes • Case Law Statutes • Contract Act 1950 • Sale of Goods Act 1957 • Hire Purchase Act 1967 • Partnership Act 1961 • Bill of Exchange Act 1949 • Insurance Act 1963
Evaluations • Ujian 1 15% • Ujian 2 15% • Kerja Kursus 30% • Peperiksaan Akhir 40% 100% First test will be held on the 5th week (4 August 2009) Second test will be held on the 11th week (15 September 2009) Assignments shall be submitted within two weeks before the date of final exam The date for final exam will be announced by the Academic Office
Common Terms • Plaintiff v Defendant • Appellant v Respondent • Valid (sah); Not Valid (tidak sah); Void ab initio (batal dari awal); Void (batal); Voidable (boleh batal); Enforceable (boleh dikuatkuasa); Unenforceable (tidak boleh dikuatkuasa) • Undang-undang Lazim (common law)
Agreements and Contracts It is important to have first determined whether there is an agreement or not in a particular transaction. Then we could only decide whether there is a contract or not.
What is Agreement? Agreement under section 13 of the MCA 1950 “Two or more persons are said to consent when they agree upon same thing in the same sense”
Mistake Mistake occurs when parties to contract oversight important facts that relate to an agreement. Mistake is not an opposition to an agreement (or disagreement) but would give a legal effect to that agreement. The legal effect (s. 21 of the MCA) “The agreement could not be enforced - void”
Effect of a Mistake in an Agreement Mistake denies the existence of an agreement. In Tham Kong v Oh Hiam & Ors.  1 MLJ 44 the Malaysian High Court held that a piece of land in Setapak could be excluded from the agreement to sell.
Agreement Not All Agreements Are Contracts !! Section 10(1) of the MCA 1950 “All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void”
What Agreements Are Contracts? • Consent • Competent • Consideration • Not Declared to be Void Exemption • Written Agreements • Registered Agreements
Intention: The Basis of Contract Consensus Ad Idem (Proposal + Acceptance) To determine the enforceability of an agreement. Therefore, if there is a mistake in an agreement, such agreement could not be enforced in law. Mistake denies the ‘intentions’ of the parties to make a binding contract.
How the Courts Construe Agreements As Contracts The courts will normally look at the extrinsic conducts of the parties involved. For examples; • Words used • Documents/Letters • Discussions/Correspondences/Communications All these will help the courts to understand the intentions of the parties
“Subject to Contract” The phrase doesn’t by itself mean that such and such agreement is not enforceable at law. The court will normally construe the agreement according to the intention of the parties. See the judgment of L. Parker in Von Hatzfeldt-Wildenburg v Alexander  1 Ch. 288; see also the judgment of Raja Azlan Shah in Esso Standard Malaya Bhd. V Southern Cross Airways (M) Bhd.  1 MLJ 168
“Subject to Contract” - Continued The use of the phrase could mean that the parties involved; • Want that the initial agreement shall not be enforceable unless a future contract be made • All the items be put in formal contracts/future contracts
Law of Contract Law of contract determines which agreements are enforceable and which are not. The law of contract regulates enforceable agreements and provides remedies if the agreements are broken.
What is Contract? A contract is a legally enforceable agreement giving rise to obligations for the parties involved. In Malaysia, s. 2(h) of the MCA defines “contract as an agreement enforceable by law”.
Formation of Contract All Contracts Are Agreements BUT Not All Agreements Are Contracts • Proposal • Acceptance • Consideration • Intention to Create A Legal Relationship • Free Consent • Legal Capacity • Not to be Declared Void and for a Lawful Object
Formation of Contract Contract can be made through one of these methods: • Conduct • Writing • Oral
Proposal and Acceptance To determine the meeting of the minds ‘consensus ad idem’ (Proposal + Acceptance = Agreement)
Proposal/Offer A proposal is a conduct or an expression of a person that shows his willingness to do or not to do something if another person accepts that proposal. “A proposal is made when one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence”. (s. 2(a) MCA)
Proposal Proposal can be; • Implied from the Conducts of the Parties • Made in Writing • Made Orally
Proposal: Legal Principles A proposal could be made either to a specific party or to a general public. A proposal to a specific party; only that party can accept the proposal A proposal to a general public; anybody can accept that proposal
Carlill v Carbolic Smoke Ball Co.  1 QB 256 The defendant made an advertisement in the newspaper that they would offer a sum of money to anyone who would still suffer from influenza (flu) after using their product, according to the instructions. The plaintiff used the product according to the instructions, but still became ill.
Carlill - continued The plaintiff asked for the sum of money that the defendant has promised but the defendant refused to pay. Defendant argued that there was no valid contract because the offer has been made to the general public and the plaintiff did not communicate his acceptance to them. Held: The plaintiff had accepted the offer the company has made to the world at large and therefore is entitled to the money.
What Amounts to a Proposal There is no a straightforward answer. The possible test; • Whether a further bargaining is still expected • Whether the statement shows a clear willingness to be bound
Proposal: Legal Principles The proposal must be clear and definite. The proposal should clearly show the willingness of the proposer to be bound by his terms. (No bargaining is expected)
‘Invitation to Treat’ ‘Invitation to treat’ is not a proposal. Any act that follows invitation to treat cannot be considered as ‘acceptance’, THUS cannot convert the promise into a binding contract.
What is Invitation to Treat? ‘Invitation to Treat’ is a statement that does not show a clear willingness of a person to be bound by his promise. Examples • Advertisements (further bargaining between the parties is still possible) Coelho v The Public Services Commission • Public Auctions Payne v Cave
Examples of Invitation to Treat • Items Displayed in Shops Pharmaceutical Society of Great Britain v Boots Cash Chemists • Automatic Machines Thornton v Shoe Lane Parking
Communication of Proposal A proposal must be communicated to the acceptor. R v Clarke “There cannot be assent without knowledge of the offer”, Higgins J.
Communication of Proposal; When Complete? “The communication of a proposal is complete when it comes to the knowledge of the person to whom it is made”, (s.4(1) of the MCA)
Acceptance and Consensus Ad Idem (Proposal + Acceptance = Consensus Ad Idem) • There should be a proposal • There should be an acceptance Both elements should be communicated to the parties concerned.
Acceptance: Legal Principles • Acceptance Must Be Absolute and Unqualified (s.7 (a) of MCA) • Qualified Acceptance Amounts to Counter Offer • Hyde v Wrench (1840) 3 Beav 334– A counter offer will destroy the original offer
Battle of the Forms Butler Machine Tool v Ex-Cell-O-Corporation  1 All ER 965 – An arrangement to sell a machine. Both parties have their own standard terms. A makes an offer with ‘price variation clause’. B accepts but with its own terms i.e. without ‘price variation clause’ The court give the judgment to the person who last make an offer.
Acceptance: Legal Principles • A Request for Further Information Stevenson v McLean (1880) 5 QB 346
Communication of Acceptance An acceptance must be communicated to the proposer (the acceptance should come to the knowledge of the proposer)
Communication of Acceptance • A Mere Silence is not Sufficient to Constitute Acceptance of a Proposal Felthouse v Bindley (1862) 11 CB (NS) 869
General Rule Acceptance should be brought to the proposer’s notice (Instant Communication) • Face-to-face negotiations • Telephone conversations • Telex messages
What about if the Proposer Fails to Receive the Message? • Fault on the proposer “During the communication, the acceptor believes that the proposer has received his message” • There is no fault on the proposer
Postal Rule Adams v Lindsell (1818) 1 B & Ald 681 Communication of acceptance is complete and a contract is concluded when the acceptor has posted the letter of acceptance