CHAPTER 2: LAW OF CONTRACT Legal Capacity A person must competent to contract.

. Legal capacity refers to the ability to make a contract. A person is considered competent when: 1. Reach the age of majority In Malaysia, age of majority is 18 years. >18 is called a minor. Whatever benefits passed to the minor cannot be recovered. Void ad initio (void from beginning) Exceptions [contract is still valid] Contract of marriage Contract of necessaries Contract of scholarship Contract of insurance 2. Sound mind 3. Not disqualified by any law which he is subject Free Consent Parties enter into a contract with their own willingness No element of: Coercion (S15) Threatening intention of causing any person to enter into an agreement Voidable Undue Influence (S16) Pressure of influence by another person Voidable Fraud (S17) Various act - Intent to deceive a. Fact which is not true b. Concealment of fact (did not reveal) c. Promise made without an intention to perform

d. Any act fitted to deceive e. Act or omission which law specifically declares to be fraudulent Voidable Except of not caused the other party to enter the contract or not use his diligence to discover the truth Misrepresentation (S18) False facts do not have the intention to deceive 1. positive false statement 2. One of fact, mere expression of opinion or not a representation of fact 3. addressed to the misled party 4. induced the misled party to enter into a contract

Mistake (S21,22,23)

By FHK

 Void & Illegal Contracts S2(g) CA - A void contract is an agreement not enforceable by law Cannot bring the case to court in order to enforce their rights in that agreement 1. S24 CA Consideration or object of an agreement is lawful unless: a) forbidden by law b) nature that if permitted would defeat any law c) fraudulent d) involves or implies injury to the person or property e) immoral or opposed to public policy 2. S26 An agreement without consideration is void except S26(a), (b),(c) 3. S27 An agreement in restraint of marriage of any person other than a minor during his or her minority is void 4. S30 - Agreement which is uncertain is void Consequences of void or illegal agreement S66, a person who received any advantage under the agreement are bound to restore it to the other party or pay adequate compensation for the same. LAW OF CONTRACT IN SHARIAH Al-Aqd Contract between two parties Ijab One party makes an offer Qabul Other party accepts Valid contract: 1. legal capacity 2. Ijab & Qabul 3. Valuable consideration

4. Sincere intention to create legal relation 5. Subject matter which is recognized by Shariah Ijab (Offer) word first spoken Modes of Ijab Words, written, gesture, conduct, post Termination of Ijab Revocation Rejection by the oferee Counter offer Absence of acceptance Deah Lapse of time Qabul (Acceptance) Spoken words by the second party Majlis al-Aqd - concluded in a contracting session (majlis) If the parties are separate, the offer fails to exist. Offer must be renewed and new majlis must be created. Acceptance of the offer only has legal effect BEFORE the separation of the parties. The majlis created the essential unity of time and place necessary for the declaration of intention and consent.

Termination of Aqd 1. Performance (al-ada) 2. Express agreement (iqalah) 3. Impossibility of performance (istihalah at-tanfidh) natural disaster, policy, revoke in writing/verbal 4. Breach (naqd al-Aqd)

By FHK

CHAPTER 3: SALES OF GOODS S4(1) a contract whereby a seller transfer the property in the goods to a buyer for a price Contract of sale the ownership; at the time of the sale Agreement to sell the ownership; in the future Goods (S2) Moveable property

goods shall correspond with description most be the same as described. Applies particularly if the buyer has not seen the goods but relies on the description of the seller. Goods may be unascertained or future goods.

Implied condition as to fitness or quality S16 (1) buyer must exercise care in making purchases. S16(1)(a) implied condition that the goods should be reasonably fit for a particular purpose. 1. Make known to the seller either expressly or implication before or at the time of the contract. the particular purpose 2. buyer relies on the skill and sellers judgement to choose the goods 3. goods are of description 4. goods must not be bought under patent or trade name S16(1)(b) - Implied condition as to merchantable quality goods are fit for the purpose to which they are bought. If has several purposes considered as merchantable for any of the purposes. 1. bought by description 2. seller who deals in goods of that description is the manufacturer of producer or not Implied condition as to sale by sample 1. bulk shall correspond with the sample in quality S17(2)(a) 2. reasonable opportunity to compare S17(2)(b) 3. goods are free from any defect S17(2)(c) By FHK

Formation of a contract of sale 1. Proposal - Acceptance 2. Formalities Words/writing Terms of contract Implied terms: Condition Important term, essential part of the contract. If seller breach; buyer may repudiate or terminate the contract S12(2) Warranty Only a stipulation collateral to the main purposes of the contract. If breach; may only claim damages. IMPLIED CONDITION Term as to title S14(a) - Seller has the right to sell Term as to time S11 Time for payment is not important [warranty] seller cannot repudiate Time for delivery is important [condition] buyer may refuse to accept and recover the purc. price Implied condition as to sale by description S15

Transfer of property/risk in the goods Essential to know the time when the property is transferred to determine who should bear the risk if the goods are stolen, lost, or damaged S19: Sale of specific goods or ascertained goods property passes at the time when the parties INTEND it to pass S20: Sale of specific goods in a deliverable state when the contract is made S21: Sale of specific goods, still to be put in a deliverable state property does not pass until the action has been done and the buyer has notice thereof S22: sale of specific goods in a deliverable state, where the seller needs to ascertain the price of the goods, weight or measure it property does not pass until this is done and the buyer has notice thereof S23: in a contract of sale of ascertained or future goods sold by description property passes when the goods is unconditionally appropriated to the contract with the consent of another and put in a deliverable state S24: for goods delivered on approval or on sale or return property passes when the buyer - signifies his acceptance to the seller - does any act adopting the transaction - retains the goods without giving any notice of rejection within a fixed or reasonable time

Goods sent on trial where the buyer is given the options to purchase or to return the goods within a specific time. Risk lies with the seller until the property passed to the buyer unless there is a damage or loss caused by the buyers fault Transfer of risk S26 generally risk passes with the property in the goods irrespective of whether delivery has been made - goods remain at the sellers risk until the property pass to the buyer - when the property pass to the buyer, is at the buyers risk whether delivery has been made or not - however, if there is a delay in delivery, the person at fault must bear the risk whether the property is passed or belonged to the other person Nemo dat quod non habet (nemo dat rule) S27 No one can transfer a better title than what he has. only the owner or his authorized agent can transfer the title to another person There are exceptions somebody without title may transfer the ownership to a third party (bona fide purchaser) Bona fide purchaser who bought the goods in good faith for value, paid and does not know about the sellers lack of authority to sell

By FHK

May get the title in six circumstances: 1- Sale under estoppel S27 - someone without the authority sells the owners goods in his knowledge without his objection. i. seller must be in possession of the goods or document of title ii. possession must be with the consent of the owner iii. bona fide purchaser 2- Sale by mercantile agent S27 - acts as an agent in the course of business i. at the time of disposition, the aent must be in possession of the goods or document of title ii. possession must be with the consent of the owner iii. disposition made when ordinary course of business iv. bona fide purchaser 3- Sale by one joint-owners S28 i. one of the owner has sole possession of the goods ii. permission of the other co-owners 4- Sale under a voidable contract S29 i. true owner must have intended to transfer the title under the voidable contract ii. seller in possession of the goods

iii.

iv.

voidable contract ha snot been rescinded by true owner at the time of sale bona fide purchaser

5- Sale by seller in possession after sale S30(1) - Original buyer has to pursue his remedy against the seller. Cannot claim the goods from the bona fide purchaser 6- sale by buyer in possession S30(2) - buyer bought the goods or agreed to buy the goods obtain possession of the goods with the consent of the owner can pass a good title to a bona fide purchaser under a sale even though he has NOT OBTAINED THE TITLE YET Owner could only claim the price from the first buyer. H cannot claim the goods from bona fide purchaser Law will always protect bona fide purchaser Remedies to the seller when the buyer breaches the contract of sale Against the buyer - sue for the price S55 - claim damages S56

By FHK

Against the goods S46(1) - Lien Keep the goods until payment is made i. the property in the goods has been passed to the buyer but the seller is still in possession of the goods - Stoppage in transit Stop the goods in transit and retake delivery if i. buyer becomes insolvent ii. goods are still in transit - Resale After seller has exercise his right of lien or stoppage in transit he may resell i. goods are of a perishable nature (veg, fruit) ii. if imperishable nature, seller gives notice of his intention to resell and the buyer does not tender the price within a reasonable time iii. right to resell is expressly reserved in th contract in case the buyer should make any default Remedies to the buyer 1. damages for non-delivery of goods S57 - seller neglects or refuses to deliver the goods buyer entitled to his loss of profit on the resale as a result of sellers non delivery 2. specific performance S58 - will grant this remedy if the conract is for a sale of specific goods or ascertained goods. Consider this is appropriate remedy

3. action in tort - the title to the goods has passed to the buyer but the delivery is withheld. wrongful interference with the goods 4. action for conversion, seller has dealt with the goods in a manner inconsistent with the ownership of the buyer. better for a buyer to sue under contract

By FHK