-Def!n3-

Caveat Emptor



In Latin, it means Buyer Beware ! Asking the buyers to pay attention to the goods they are going to purchase. Sellers do not carry full responsibilities for any faulty transactions. As the consumers, we also holds the responsibility to make sure the to-be-purchased goods are in good conditions. The doctrine of Caveat Emptor implies that buyers could not later hold the seller responsible for the defected goods they bought. According to Answers.com, Caveat Emptor was first laid down by Chief Justice- John Marshall in 1817 as a principle in United States law. Laidlaw versus Organ was the first case that adopted Caveat Emptor, it regards to the purchase of tobacco.



Caveat Venditor



Contrary to Caveat Emptor, it means Seller Beware ! Sellers must be aware of buyers as they might also be tricked by buyers to enter into transactions. Under the doctrine of Caveat Venditor, seller holds the responsibility for defected goods thus it prevents seller from selling poor quality goods. MacPherson versus Buick Motor Co., a case regarding the purchase of automobile in 1916 held Buick Motor liable for MacPherson's injury due to the collapse of a defective wheel.

-C@se -

Lee versus Lee's Air Farming Ltd


It is one of the cases where the veil of incorporation principle applied. Other cases include Salomon versus Salomon & Co. Ltd and Macaura versus Northern Insurance Co.


Some FACTS about the case
Mr Lee formed and owned his company -Lee's Air Farming Ltd. Besides being the sole director for the company, he also worked as chief pilot. Unfortunately, he was killed in plane crash. His wife wanted a compensation from Workers' Compensation Act 1922, however under this Act, Mr Lee has to be an employee in order to get the claim. The legal issue here is whether the company Mr Lee owned is a separate legal entity which will decide whether Mrs Lee can claim for the compensation.

It was held that the company is a separate legal entity and Mr Lee can be an employee for the company he owned thus Lee's Air Farming Ltd. was liable to pay Mrs Lee the compensation.

-Ex@mpL3-

Holding and Subsidiary Company


Holding company and subsidiary company are two separate legal entities. Section 5 of Companies Act 1965 stated that "The first mentioned corporation is a subsidiary of any corporation which is that other corporation's subsidiary."

A company is a subsidiary of that parent company if the parent company:
a) controls the compositions of the borad of directors of the first mentioned company.
b) controls more than half of the voting power of the first mentioned corporation.
c) holds more then half of the issued share capital of the first mentioned corporation.

Example 1:

Maxis Communications Sdn Bhd (Parent) and its subsidiaries including UMTS, Maxis Mobile Sdn Bhd, Maxis Multimedia Sdn Bhd and Maxis Broadband Sdn Bhd. Based on Maxis's 2003 annual report, UMTS (Malaysia) Sdn. Bhd, a wholly owned subsidiary of Maxis , is awarded the 3G Spectrum Assignment by Malaysian Communications and Multimedia Commission for the provision of 3G services. In May 2003, Maxis completes its acquisition against Malaysian Mobile Services Sdn. Bhd which formerly known as TIMECel Sdn. Bhd.

Example 2:

Berkshire Hathaway Inc. (Parent) is a diversified company that involved in the business of financial services, insurance, jewelry, air services, furniture and many more. It has more than 50 subsidiaries. One example is NetJets. Inc, evidence shown in its official website: http://www.netjets.com/default.asp



Click this link to view the list of its subsidiaries : http://www.berkshirehathaway.com/subs/sublinks.html

-Revi$i0n-

EXAM ALERT


This coming Thursday will be the business law exam !! Now , let's start revising...

What is LAW ?
Basically, it is sets of uniform rules or principles. When it links to our community, it will be defined as a set of principles which govern and regulate human behaviour.

Why LAW ?
Law is essential to preserve order in the society, to solve disputes among individuals and most importantly, it serves as a guideline which must be widely acceptable so that people will obey.

Law & Government
In Malaysia, law can be divided into public law and civil (private) law. Our government consists of Judiciary, Legislature and Executive.

Malaysian Legal System
Structure of this sytem is formed by unwritten sources and written sources.
Under unwritten sources, there are:

* Customary law
* Islamic law - is only applicable to Muslims and Shariah Court is in charge of any issues related to Islam.
* English common law - with the rules of equity are applicable to Malaysia based on Section 3(1) of Civil Law Act 1956
* Case law - judicial decision

Under written sources, there are:

* Constitution - the supreme source of Malaysian law. It grants powers to the Federal and State Government as well as fundamental rights to citizens.
* Legislation - enacted by Federal Parliament or the State Legislative Assemblies. and must pass through proper legislative processes.
* Subsidiary Legislation - enacted by Executives under a mandate of the parent act.

-Eli9!bLe-

Generally, everyone of us is eligible for entering into a contract. “Every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is of sound mind and is not disqualified from contracting by any law to which he is subject.” However, three categories of people do not have the legal capacity to contracts based on Section 11 of Contracts Act. They are :


1) Minor
According to the Age of Majority Act, 18 years old is the age of majority in Malaysia. Thus anyone who is aged below 18 do not have the legal capacity to enter into a contract.

2) Of unsound mind
Examples are insanity, madness, mental problems, schizophrenia, epilepsy, intoxication, drunken, unconscious either permanently or intermittently. These person cannot act rationally and think logically therefore they are ineligible to be involved in a contract.

3) Specifically barred by law
Persons who are being limited under bankruptcy law, political law and law of war against enemy citizens. For instance, Company A is suffering financial distress. Few days later, Company A declares to be barred under the bankruptcy law and in consequence its business operations got disrupted. In the end, they had to withdraw its engagement in the business contract with company K.

-Br@!nSt0rM-

Today while I was reading the newspaper, I saw one brochure inserted inside. It is Domino's pizza brochure attached with coupons. Buy 1 free 1 written on the coupon with terms and conditons. Hmm, I started to wonder is coupon an invitation to treat or an offer and acceptance? The example below demonstrated my opinion:

Scenario
After I read through the brochure, I tear out the coupon and keep it. I plan to present it and claim for free pizza during my next visit to Domino's pizza. Just two weeks before the coupon expires, I went to Domino's and used it to get a free pizza for purchasing one pizza.

This coupon is actually an unilateral offer by Domino's. Unilateral offer defines as offer made to anyone, like in the Carlil and Carbolic Smoke Ball Company case. Accordint to Section 2(a) of the Contracts Act, Domino's was making an offer to whoever that has the willingness to visit their store to purchase pizza, can use this coupon to redeem for a free pizza. Based on the scenario described above, I have the intention to buy a pizza and claim for my free pizza using the coupon as I tear it out and kept it. From Section 2(b) of the Contracts Act, I can be said that I had accepted the offer as I presented the coupon while buying to get my free pizza. I also fulfilled the terms and conditions, one example is I used the coupon before it expires. Here, transaction is made thus also implies that Offer and Acceptance had take place.

What if after i read through the brochure, I just left the coupon as it is which means that i do not have the intention to use the coupon for any discounts on pizzas. Can I say that the coupon is an invitation to treat as I do not keep it or use it to buy pizza.

The answer is no. By definition, invitation to treat is not an offer but an invitation to make an offer. This case is similar to Carlil versus Carbolic case whereby Domino's promised a free pizza for anyone who presented the coupon when purchasing a pizza, with terms and conditions fulfilled. Since the well known case had distinguished offer from invitation to treat, I would like to conclude that coupon is not an invitation to treat. Consideration is involved in this case too. Maybe I will buy a pizza without using the coupon or perhaps I am not interested in Domino's but favor Pizza Hut.

-D!sTinguiSh-

DIFFRENCES BETWEEN FRAUD AND MISREPRESENTATION


Based on Section 17 of Contract Act, Fraud refers to certain acts which is intended to deceive another party or to induce him/her to enter into contract.

Fraud
- With an intention to deceive other party thus is a willful wrong.
- The person making the false statement but ownselves does not believe in it.
- The aggrieved party can sue the accused to claim damages.
- The aggrieved party can file a lawsuit to set aside the contract anytime. Hence,
fraudulent contract will never be a valid contract.
- A high standard of proof is required to set aside the contract.

Section 18 defines Misrepresentation as false statement made by one party which induces the other to enter into a contract, but the person who made such presentation thought it was true.

Misrepresentation
- Without any intention to deceive others thus is an innocent wrong.
- The person believes that the false statement is true. A result of being ignorant or
getting wrong information.
- The aggrieved party does not has the right to claim damages.
- The aggrieved party has to file a lawsuit within the specified time to set aside the
contract. If not, the contract is then a valid contract.
- Lower standard of proof is required to set aside the contract.