TUTORIAL QUESTION 1

Datin Nadia has been carrying on business on her own selling trendy shawls since she was an
undergraduate student at IIUM. The business was known as Hijabster Enterprise. Her business
was doing very well where she made a lot of profits. DatinShima and DatinZet interested to join
her business, together they incorpo rated a company namely, HijabsterSdn. Bhd. in September
2016. All of them were the shareholders as well as the directors of HijabsterSdn.Bhd.

Prior to the incorporation, DatinNadia entered into a contract with JakelSutera House to purchase
2000 rolls of various types of fabrics which to be used as raw materials in making the shawls and
female clothes.Datin Nadia mentioned to JakelSutera House that the contract was entered on
behalf of and the payment will be made by HijabsterSdn. Bhd. After its incorporation, the board
has not ratified the contract but both DatinShima and DatinZet agreed to settle the invoice for the
1000 rolls of fabrics to JakelSutera House Sdn Bhd.

During the board meeting, the board passed a resolution to enable a purchasing of sewing
machines as a step to reduce manufacturing cost. On that point, DatinZet signed the contract on
behalf of the company to purchase 30 sewing machines with Singer SdnBhd and it was
witnessed by her husband. The payment should be paid monthly. However, Singer SdnBhd has
not received the monthlyinstalments for five months.

In order to expand its business, HijabsterSdn. Bhd. incorporated a wholly owned subsidiary,
namely, MuslimsterSdnBhdwhich was mainly to cater male customers by selling them male’s
clothes. In fact, MuslimsterSdnBhd shares the same premises of business, the same employees
and the profits of MuslimsterSdnBhd are treated as the profits of its parent company,
HijabsterSdn Bhd.

After a while, not long after the incorporation of MuslimsterSdnBhd, due to economic downturn,
MuslimsterSdnBhd has to reduce its operational cost by terminating some contracts with the
suppliers and the manufacturers. The suppliers and the manufacturers then sought for
compensation resulting from the breach of contracts.Nonetheless, due to insufficient fund to pay
the compensation, the board of directors of MuslimsterSdnBhd has come into an agreement that
the parent company should assist the subsidiary to pay the same.

On the other hand, JakelSutera House claimed payment from HijabsterSdnBhd for the balance of
1000 rolls of fabrics which has been supplied previously. However, HijabsterSdnBhd refused to
make the payment and insisted that the payment should be made by Datin Nadia.

Advise the following parties:

1) JakelSutera House would like to sue Datin Nadia for the outstanding balance.
2) MuslimsterSdnBhdwould like to seek assistance from its parent company,
HijabsterSdnBhd for the compensation resulting from the breach of contracts with the
manufacturers and suppliers.
3) Singer SdnBhd would like to bring action against MuslimsterSdnBhd for the due monthly
in arrears.

(15 Marks)