Selected Topics on Business Law

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Business Law Table of Contents Case 1 – Invitation to Treat Case 2 – Postal Rule Case 3 – Undue Influence Case 4 - Frustration Reference

Case 1 – Invitation to Treat

On the 7th of June 2013, Paul went to Midvalley Megamall to buy some gifts for the upcoming birthday’s party of his friend Wayne. Paul saw an expensive Sony smart watch on display took it and while walking to the cashier counter, saw another watch, Samsung and was taken by it. He immediately returned the Sony smart watch in favor the new one. The manager of the shop, who was watching Paul, was not satisfied with Paul’s action and told Paul he has to pay for the Sony watch as he had picked up the Sony watch. The manager argued, by picking up the Sony watch Paul has accepted the offer by the shop. Paul got into a heated argument with the manager and stormed out of the Midvalley Mall. On the 20th of June, Paul received a letter of demand from Midvalley Megamall for the payment of the Sony smart watch. Is Paul liable to pay for the Sony smart watch? Discuss. Answer: According to the ‘Offer’ element in the essential elements of the Contract law, it is the customer who makes the offer by taking the goods and placing it on the shopkeeper or cashier’s counter, and the shopkeeper or cashier accepts the offer by accepting the customer’s money. The price displayed on the goods is not an offer where it is only an invitation for the customer to make an offer, thus it is an invitation to treat. Besides, the law gives the shopkeeper or cashier the right whether to accept or reject the customer’s offer. Thus, referring to the law above, the contract in Paul’s case is not liable. While Paul was walking to the cashier counter with the Sony smart watch, he saw another watch, Samsung and he immediately returned the Sony smart watch. The manager must have mistaken about the law and thought that Paul had accepted the ‘offer’ made by the shop by picking up the Sony watch on display and thus, charged Paul guilty. Here, we clearly get to know that Paul has not make the offer to buy the Sony smart watch yet, where he has not place it on the cashier’s counter. Paul shall not be liable for any product yet as long as he has not place the product on the counter and has not made any offer. Paul’s case is also supported firmly by a previous case with a very similar situation. Based on the case of Pharmaceutical Society of Great Britain v Boots Cash Chemist Ltd. in the year of 1953, Pharmaceutical Society claims that Boots, which displays drugs on self-service basis, is against the law because pharmaceutical products must be carried out by a qualify pharmacist. The court held that the display of goods in the store was not an offer but only an invitation to treat. It was the customer who made the offer by placing the goods in cashier’s counter and the shop/cashier could either accept or reject the offer. Acceptance was made at the ringing up of the price by the cashier. Thus, this case further strengthens Paul’s standing to prove that he is not liable to pay for the Sony smart watch as there is not a single offer or acceptance taken place yet.

Case 2 – Postal Rule

The next day, on the 8th June 2013, Paul received a flyer from Zalatan advertising a Mini Ipad tablet for sale. Paul wrote a letter to show his interest on the tablet and Zalatan replied on the 9th of June offering the tablet for RM 999. Paul received the letter on 10th of June and posted the letter of acceptance on 11th of June. On the 12th of June tablet was sold to Christina when she visited the shop. Paul’s letter was only received by Zalatan on the 17th of June. Paul got to know that the Mini Ipad tablet has been sold to Christina. Discuss as to who shall have the right to buy the tablet. Answer: According to Postal rule, acceptance takes effect when the letter is posted. Acceptance that is sent by post or any other appropriate and reasonable means of communication between the parties is completed on the date that the letter was posted. Even if the letter is destroyed, delayed, or lost during the posting process, the acceptance is still effective. In this situation, Paul shall have the right to buy the tablet because contract is formed when the letter of acceptance is posted which is on 11th of June. In Paul’s case, he received a flyer from the seller, Zalatan on 8th June 2013 which showed that a Mini Ipad tablet is for sale, where he then wrote a letter to show interest on the tablet and Zalatan replied on 9th June 2013 showing that he will offer the tablet for RM999. Although an advertising flyer is considered to be an invitation to treat, Paul has made his offer to Zalatan to show his interest and Zalatan replied him with the condition to sell the tablet at RM999 which is a counter offer. The counter offer from Zalatan was accepted by Paul on 11th June 2013 which is the next day after he received the counter offer. Zalatan will be able to revoke his offer before Paul sends his acceptance. In other words, Zalatan’s revocation letter should be received by Paul before the 11th of June which was before the letter of acceptance was posted. Since Zalatan did not send any revocation of his offer, thus Paul remains his right to purchase the tablet. This case is similar to Adam V Lindsell’s case where Paul is facing the same situation as Adam the buyer. In Adam V Lindsell’s case, Lindsell who is the seller, make an offer to sell wool to Adam on 2nd Sept 1871. Adam received the offer on 5th Sept 1871 and replied his acceptance to Lindsell on the same day. Before Lindsell received the letter of acceptance on 9th Sept 1871, he had already sold the wool to another buyer on 8th Sept 1871. It is similar to Paul that before his letter of acceptance was received by Zalantan on 17th June 2013, Zalatan had already sold the tablet to Christina which is another buyer on 12th June 2013. In both cases, acceptance was already sent by the buyer but before it had been received, the seller had already sold the products to another customer. Referring to the Postal rule, the court held that in Adam V Lindsell’s case, acceptance is effective when it is posted which is on 5th Sept 1871. Therefore by referring to Adam v Lindsell’s case, Paul shall have the right to buy the tablet. Since both cases are similar on what was happening at the moment, Paul should able to refer to Adam V Lindsell’s case and remain his right to buy the tablet.

Case 3 – Undue Influence

Paul, who was working for Mr.Fergusson was called to Mr.Fergusson’s office. Mr.Fergusson asked Paul to sign a contract, which declares that Paul has to transfer 20% of his properties to Mr.Fergusson. Paul being afraid that Mr.Fergusson would fire him from his job, agreed to sign the contract. Paul realized that he had more to lose when he agreed to sign the contract with Mr.Fergusson. He comes to you looking for advice as to whether he can escape the obligations of the contract between himself and Mr. Fergusson. What would be your advice in this case? Answer: A contract has to be made by the mutual agreement between the parties out of their own free will. Section 19 and 20 provides that when consent to an agreement is caused by coercion, fraud or misrepresentation, or undue influence, the agreement is considered a voidable contract at the option of the party whose consent was so caused. Thus, Paul can escape from the obligations of the contract between himself and Mr. Fergusson by proving that there was undue influence. Undue influence occurs between two parties who have special “fiduciary” relationship. It arises when one of the party to a contract use his/her special relationship with the other party to influence that other party into making a contract. Such relationship includes parent-child relationship, doctor-patient relationship and solicitor-client relationship. Referring to the contract law mentioned above, undue influence can be proved in this case as there is a special relationship between Paul and Mr. Fergusson as employer-employee. This special relationship influenced Paul to sign the contract which declares that he has to transfer 20% of his properties to Mr. Fergusson. Paul’s consent was not freely given as he was asked by his employer, Mr. Fergusson to sign the contract and he was afraid that if he refuses to sign the contract, Mr. Fergusson would fire him. Thus, he agreed to sign the contract resulted from the influence of Mr. Fergusson’s special relationship with him. Comparing both Paul’s situation to Inche Noriah v Shaik Allie Bin Omar (1929)’s case, both involved transfer of property and specific relationship between parties. In Inche Noriah v Shaik Allie Bin Omar (1929) case, an old and illiterate woman gave her property to her nephew who had been managing her affairs without knowing that the gift comprised practically the whole of her property. Therefore in Inche Noriah v Shaik Allie Bin Omar (1929) case, the court held that there was an undue influence that cause by the relationship between parties and it was not rebutted. In Paul’s situation, he may refer to Inche Noriah v Shaik Allie Bin Omar (1929) case because both cases are similar. Since Paul’s consent to the agreement was caused by undue influence, thus according to Section 19 and 20, the contact is voidable at Paul’s option. It means that Mr. Fergusson cannot force Paul to perform the contract. Whereas, Paul can repudiate the contract and escape from the obligations of the contract between himself and Mr. Fergusson but Paul must return any advantage that he has received from the contract to Mr. Fergusson.

Case 4 - Frustration

The following week, Paul who was famous singer invited & subsequently signed a contract to perform in a concert in KL between 5 to 7th of July 2013 with Giggs Company. When he was preparing to travel to KL in 3rd of July, Hayan Storm cancelled all flight in Manila Airport. Giggs Company threatens to sue Paul base on breach of contract. Advise him. Answer: According to Section 57(2), it states that after the contract is made, the promisor is able to void the contract when the act becomes impossible and unlawful. A contract that is discharged means that parties are released from their obligations. Discharge can happen when the event is frustrated. Frustration occurs when the law recognizes that when either party without intention or default is unable to perform or incapable to perform, then the contract is said to be void or discharged. In this case, Paul who was a popular singer had signed a contract with Giggs Company to perform in a concert in Kuala Lumpur (KL). The concert happen at 5th to 7th of July 2013 and at 3rd of July 2013 when Paul wanted to travel to KL, the flight was cancelled due to Hayan Storm which is unexpected and unpreventable by Paul. Paul does not need to pay for the losses to Giggs Company. The fact is that the Hayan Storm was the reason of non-performance of contract by Paul and Hayan Storm is natural disaster which caused the flight to be impossible to take off. In this case, it is impossible for Paul and Giggs Company to have known about it earlier and prevent it from happening therefore, either party are not at fault of the event. It can be concluded that even if Giggs Company bring any legal action against Paul, it will end up that Paul need not have to pay any damages to Giggs Company. In the case ‘Robinson v Davison (1871)’, the principle has laid down where the frustration of contract takes place when the performer fell ill and could not play on the appointed date. The court held that as it was not her fault that she was unable to perform, thus the contract was frustrated. Due to the condition in both case are similar, therefore it was able to further prove and explain that Paul is not liable for the damages that is caused by Hayan Storm and Giggs Company will not able to claim its damages from Paul because unable to perform is not the intention of Paul and instead it was impossible for him to perform. In a nutshell, Paul is not liable for the allegation claimed by Giggs Company because the non-performance by Paul can be discharged by the way of frustration as there was a supervening event, the Hayan Strom, which prevented Paul from being performed the contract.

Reference

Jacob, C. J. (2011). Principles of Malaysian Business Law . Malaysia: Pearson. 1
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