MBAOUM 0312. BMLW5103 BUSINESS LAW.

ASSIGNMENT

Lecturer: Ha Thi Thanh Binh PhD. Student : Trinh Manh Tin MBAOUM 0312_Class 2B

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OCTOBER SEMESTER 2012 BMLW5103 BUSINESS LAW ASSIGNMENT

QUESTION 1: Analyze the differences between a proposal and an invitation to treat and discuss the rules to determine the point of time on which an agreement is reached. Using the latest Malaysian decided cases to support your analysis.

I.

DEFINITIONS

A business proposal is a written offer from a seller to a prospective buyer. Business proposals are often a key step in the complex sales processi.e., whenever a buyer considers more than price in a purchase. A proposal puts the buyer's requirements in a context that favors the sellers products and services, and educates the buyer about the capabilities of the seller in satisfying their needs. A successful proposal results in a sale, where both parties get what they want, a win-win situation. Business proposal has a practical orientation and is designed to find the best solution to a problem in order to generate either financial savings or greater revenue (Bazerman, M. H., & Moore, 2009). According to Section 2(a) of the Contracts Act 1950, as explained in Table 1.1, a proposal is said to exist when one person signifies to another, his willingness to do or to abstain from doing anything, with a view to obtain the assent of that other person to the act or the abstinence. In other words, a proposal is the readiness of the person who makes the offer to create a legal relation and to be bound by the law, whenever the terms of the proposal are agreed upon by the acceptor. There is a difference in the use of word under the Malaysian law and the English law though the meaning is similar. Under the English law, the term offer is used while under the Malaysian Contracts Act, the word proposal is used.

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Invitation to treat (or invitation to bargain in the United States) is a contract law term. It comes from the Latin phrase invitatio ad offerendum and means "inviting an offer". Or as Andrew Burrows writes, an invitation to treat is "an expression of willingness to negotiate. A person making an invitation to treat does not intend to be bound as soon as it is accepted by the person to whom the statement is addressed." Contract lawyers distinguish this from a binding offer, which can be accepted to form a contract (subject to other conditions being met). The distinction between an offer and invitation to treat is best understood through the categories that the courts create. Invitations to treat include the display of goods; the advertisement of a price or an auction; and an invitation for tenders (or competitive bids). There may however be statutory or complementary obligations, so consumer protection laws prohibit misleading advertising and at auctions without reserve there is always a duty to sell to the highest bona fide bidder. II. DIFFERENCES

In simple words, contract is a bargain, in which both parties are expect to get benefits with consensus ad idem in a legal relation. An proposal is a necessary element that must present for a legally binding contract to be in place. An proposal and an invitation to treat are two different aspects. An invitation to treat is defined as an action inviting other parties to make an offer to form a contract, whereas an offer is an expression made by offeror to offeree communicating the offerors willingness to perform a promise. The distinction is important because accepting an proposal creates a binding contract while accepting an invitation to treat is actually making an proposal. Advertisements, brochures and auctions are usually an invitation to treat. For ex: the superstore that displayed the goods is making an invitation to treat, while an

consumer is making an proposal to buy the goods when she puts them into the basket. Advertisement, usually is an invitation to treat, is defined as a communication media use to persuade the audience to take some action for the particular products. Most commonly,
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the desired result is to attract the audience attention with respect to a commercial offering. Advertisements have no sufficient offer to contract. An advertisement is usually silent on matters which are valid to contract such as the availability of the product or service advertised. Thus, advertisement is an expression of willingness to negotiate, inviting the reader to request the service or goods prescribed. An auction is a process of buying and
selling goods or services by offering them up for bid, taking bids, and then selling the item to the highest bidder. The original advertising of the auction is just an invitation to treat. When a bid is made by a person, an proposal is made.

INVITATION TO TREAT

PROPOSAL

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QUESTION 02: Discuss the rule Nemo dat quod non habet and its exceptions. Providing examples to support your discussion.

I.

DEFINITIONS

Nemo dat quod non habet, literally meaning "no one gives what he doesn't have" is a legal rule, sometimes called the nemo dat rule, that states that the purchase of a possession from someone who has no ownership right to it also denies the purchaser any ownership title. This rule usually stays valid even if the purchaser does not know that the seller has no right to claim ownership of the object of the transaction (a bona fide purchaser); however it is often difficult for courts to make judgments as in many cases there is more than one innocent party. As a result of this there are numerous exceptions to the general rule which aim to give a degree of protection to bona fide purchasers as well as original owners. The principle states that a seller cannot pass on a better right to the property than they actually have. So, if goods are stolen, the buyer does not get ownership even if there was no indication that they were stolen. For example: the situation where a thief steals the true owners car and then resells it to a bona fide buyer who pays the market price for the car. The buyer will not obtain any title from the thief in that the thief has no legal title to the car.

II.

EXCEPTIONS

- Estoppel: An estoppel arises when the true owner leads the innocent purchaser to believe that the unauthorised seller has the right to sell the goods. In order to be an successful estoppel, the following points must be established: (i) The true owner intentionally or negligently represents that the seller is entitled to sell the goods; (ii) The innocent buyer acts in reliance on the representation; and (iii) The innocent buyer buys the goods.
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- Sale by a mercantile agent: An agent having in the customary course of his business as such agent authority either to sell goods, or to consign goods for the purpose of sale, or to buy goods, or to raise money on the security of goods.(sec2(9))sale of goods act 1930. It is clear that the definition excludes servants, shopmen, clerks, warehousemen and carriers. In order to qualify as a mercantile agent, the agent must also be independent from the principal and acting as an agent in a way of business and authorised to deal with goods in his own name. Mercantile Agent In possession as Mercantile Agent With owners consent. Must sell while acting as Mercantile Agent. Buyer should act in good faith and without notice. Ex: Motor Guarantee Ltd. v. British Wagon Co. Ltd A dealer in second- hand cars sold his lorry to a company and then immediately took back from the company under a hire purchase agreement. He then resold the lorry to another company, which claimed that it had good title to the lorry having bought from a mercantile agent in good faith. The Court refused to sustain this claim. The lorry had been handed back to the dealer not as an agent but as a hire and, therefore as its bailee. J. Mackinnon said: Because one happens to trust his goods to a man acting not as a mercantile agent but in a different capacity, I do not think that it is open to a third party who buys the goods from that man to say that they were in his possession as a mercantile agent. - Sale by joint owner: If one of the several joint owners of goods has the sole possession of them by permission of the co-owners,the property in the goods is transferred to any person who buys them of such joint owner in good faith and has not at the time of the contract of sale notice that the seller has no authority to sell. The sale must be by one of the joint owners. The joint owner must be having sole possetion of goods. This must be with the permission of the co-owners. The buyer must have bought the goods in good faith and without notice at the time of the contract that the seller has no authority to sell. This exception is to protect the right of the bonafide purchaser who sees his seller in possession and has no reason to suppose that that he is not entitled to sell. In this exception as in the first, it
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is to be observed that , if there was possession alone unaccompanied by consent of the other owners, the purchasers title would not be any better than that of the person from who he purchased. - Sale by person in possession under a voidable contract: when the seller of goods has obtained possetion thereof under a contract voidable but the contract has not been rescinded at the time of the sale, the buyer acquires a good title to the goods, provided he buys them in good faith and without notice of the sellers defect of title. Ex: A man entered the plaintiffs shop and asked to see some pearls and some rings. He selected pearls at the price of 2550 and a ring at the price of 450 He produced a cheque book and wrote out a cheque for 3000 In signing it, he said: You see who I am, I am Sir George Bullough, and he gave an address in St. Jamess Square. The plaintiff knew that there was such a person as Sir George Bullough, and finding on reference to a directory that Sir George lived at the address mentioned, he said, Would you like to take the articles with you? to which the man replied: You had better have the cheque cleared first, but I should like to take the ring as it is my wifes birthday tomorrow, whereupon the plaintiff let him have the ring. The cheque was dishonored, the person who gave it being in fact a fraudulent person named North who was subsequently convicted of obtaining the ring by false pretences. In the meantime, North, in the name of Firth, had pledged the ring with the defendants who, bona fide and without notice, advanced 350 upon it. In this case, I think, there was a passing of the property and the purchaser had a good title, and there must be judgment for the defendants. - Seller in possession after sale: Where a person, having sold goods, continues or is in possession of the goods or of the documents of title to the goods, the delivery or transfer by that person or by a mercantile agent acting for him of the gods or documents of title under any sale, pledge o other disposition thereof to any person receiving the same in good faith and without notice of the previous sale shall have the same effect as if the person making the delivery to
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transfer were expressly authorized by the owner of the gods to make the same. The goods must be in possetion of the seller after he has sold the goods. It need not be a personal possetion. There must be some sort of delivery to the subsequent purchaser of goods or documents of title. The subsequent purchaser must be in good faith and without notice of the previous sale If all the above requirements are fulfilled the purchaser will acquire a good title. Ex: (A) purchases a second hand motor car from (B), the owner, who was well known to the plaintiff. Immediately thereafter a hiring agreement was generated whereby (B) would be entitled to use the car as a hirer. No registration of the transfer was affected as required by the motor vehicles act, nor was intimation given to the motor vehicles department of the agreement of hire as required by the motor vehicles acts and rules. There was no transfer of insurance and the existing insurance was allowed to follow on the part of (B) registration book and insurance certificates were made over to (B) by (A). (B), thereafter representing that he was the true owner sold the car to the defendant. Judgment The court held that (A) had committed a breach of duty under the motor vehicles act and rules to get himself registered as the owner, as also of duty to give notice of hiring agreement to the department. These defaults were serious and by her conduct (A) definitely hold out (B) to be the owner of the car and therefore (A) suit for declaration that she was the owner of the car must fail. - Buyer in possession before sale: Where a person, having bought or agreed to buy goods, obtains with the consent of the seller, possession of the goods or the documents of title to the goods, the delivery or transfer by that person or by a mercantile agent acting for him, of the goods or documents of tile under any sale, pledge or other disposition thereof to any person receiving the same in good faith and without notice of any lien or other right of the original seller in respect of the gods shall have effect as if such lien or right did not exist. The person selling or pledging must be someone who has bought or agreed to buy. The person selling the goods must be in possetion of the goods with the consent of the seller. There must be a
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delivery or transfer of the goods or documents of title to the innocent subsequent purchaser. It is not necessary that the buyer in possetion must transfer the same document of title which he received from the original seller. The buyer in possetion must have acted n the usual course of business of a merchantile agent even though he may not be a merchantile agent. The subsequent innocent purchaser must be bona fide and must not have known that the original seller has any right in respect of the goods. Ex: The contract was for the sale of copper to be sent on the ships of the defendant. The seller sent to the buyer a bill of landing endorsed in blank along with a draft for acceptance on account of the price of the copper. Since the buyer had become insolvent in the mean time, he did not accept the draft but retained the bill of landing and delivered the same to the plaintiffs with whom he had entered into a contract before obtaining the possetion of the bill of landing. The plaintiffs took the bill of landing in good faith and paid the price to the said buyer. The plaintiffs had no knowledge of the original sale and the rights of the seller. The original seller after coming to know of the said transaction stopped the copper in transit. The plaintiff sued the defendant of non-delivery of copper. Judgment It was held that the buyer having obtained possetion of the bill of landing with the consent of the seller, its transfer by him to the plaintiffs passed a good title to them in copper lying on the ship. The seller was thus not entitled to stop the goods in transit. III. CONCLUSION

It is elementary learning to identify nemo dat quod non habet as the most important conveyancing principle business law, however, that the innocent purchaser who buys in good faith needs some protection, and so there are various exceptions to the nemo dat rule. The main difficulty with the legislative response is that on the one hand it is too extensive in terms of legal consequence whilst on the other it is too restrictive in its scope because the protection to the innocent buyer is somewhat piecemeal.

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