2.

Partnership Law
Examine the liability of a partner who commits wrong or tortuous act and criminal
offences.
Section 12 of the Partnership Act 1961 provides liability of firm for wrongs or
tortuous liability of partners. The partners are jointly and severally liable for such
wrongs committed by one the partners in the ordinary cause of business of the firm
with the authority of his co-partners. Tort is a civil wrong. The examples of tortuous
act are nuisance, defamation, trespass and negligence. In partnership, tort may occur
in the following situation. For example, Abu, Bakar and Cheng are partners carrying
out business of repairing electrical equipment. Cheng repaired a microwave oven for a
customer but due to his negligent the customer was electrocuted when using the
microwave oven. In this case, Cheng was negligent in performing his work and
therefore the firm and the other partner were liable to the customer. Example is further
explained by the case of Hamlyn v Houston & Co (1903), H and S were partners in a
firm. H bribed a clerk of another firm to get secret information on contracts and
tenders of the said firm. The court held that H as the partner had done illegitimately
that which was part of his business to do legitimately. Hence, the firm was liable for
his act. Although partners are jointly liable in civil cases, they are not jointly liable in
criminal cases. Any partners who commit criminal offences shall be personally liable.
Other partners shall not be liable unless there is evidence their participation in the
commission of crime. In the case of Chung Shin Kian & Anor v Pendakwaraya
(1980), two partners in a firm had used a tradename (Texwood) belonged to another
company on their products. There was no evidence to prove that the second appellant
was involved in the crime except as to become a partner in the business. Thus, the
appeal of the second appellant was allowed.

3. LLP
Benefit of the Limited Liability Partnership (LLP) in Malaysia?
Limited Liability Partnership, 2012 has the following benefits. It is a body having
continuing legal existence independent of its members compared to traditional
partnership, the legal existence of which dependent upon membership. So, it can hold
and own assets, enter into contract, sue and be sued. It also enjoys perpetual
succession where changes in members will not affect legal entity of Limited Liability
Partnership. It enjoys protection of limited liability for its members against unlimited
liability without strict management procedures of an incorporated body and it also
offers a degree of flexibility of partnership agreement for internal management of
business compared to companies which are required to adhere to statutory
management control imposed by the Companies Act 1965 and other legislations.

4. AGENCY LAW
(a)

Explain the actual authority and apparent authority in respect to the law of
agency.

Actual authority is that which is expressly given by the principal to the agent orally or
in writing, or implied from the express authority given from the circumstances of the
case, the custom or usage of trade or the situation and conduct of the parties. It is
divided to two categories, express actual authority and implied authority. Express
authority is expressly given by the principal (orally or written) to the agent, Section
140 Contract Act 1950. For example, Tan appoints Sam as his agent to purchase
goods not exceeding RM 10,000. In such case, Sams actual authority is to purchase
goods on behalf of Tan, not exceeding RM 10,000. Meanwhile, implied authority is
the proper or necessary authority given to the agent to execute the express authority.
For example, Tan appoints Sam as his agent to sell Tans proton wira. Sam has the
implied authority to allow the purchaser to test drive the car. This is further explained
in Panorama Development (Guilford) Ltd v Fidelis Furnishing Fabrics Ltd (1971), the
court held that the company was liable for the contract hiring of motor vehicles made
by the company secretary. Although the company secretary exceeded his actual
authority in hiring the motor vehicles from the plaintiffs, the act was within the usual
authority of a company secretary and it was considered as part of the company
administration. Apparent authority is that which is not expressly given by the
principal but which the law regards the agent as possessing although the principal has
not consented to the exercise of such authority, Section 190 Contract Act 1950. The
principal is therefore precluded from denying the authority of the agent because the
element of estoppel applies. It is due to the representation made by the principal to the
third party that leads the third party to believe that the agent has such authority.
In the case of Graphic Lines Pte Ltd v Chai Chee Mein & Ors (1987), the court held
that the assistant manager had an apparent authority because the general manager had
represented to the plaintiff that advertisements should be done through the assistant
manager.

(b)

What are the remedies available to a principal where the agent has breached
his duty and make a secret profit.

One of the duties of an agent is not to make any secret profit out of the performance
of his duty. Secret profit means a bribe or payment of a secret commission or any
financial advantage which an agent receives over and above the commission or
remuneration agreed by both parties. If the principal knows about the secret profit and
consents to it, the agent is entitled to keep the profit he makes since the profit is no
longer secret.

When the profit is kept secret without the knowledge of the principal, then the
principal may repudiate the contract if it is disadvantageous to him, Section 168
Contract Act 1950. Illustration to Section 168 CA 1950, Abu directs Bakar to sell his
estate. Bakar buys the estate for himself in the name of a nonexistent person, Chong.
Ali, on discovering that Bakar had bought the estate for himself, may repudiate the
sale, if he can show that Bakar has dishonestly concealed any material fact, or that
sale has been disadvantageous to him. The principal can recover the amount of secret
profit from the agent, Section 169 Contract Act 1950. Example to Section 169 CA
1950, Abu directs his agent, Bakar to buy a certain house for him. Bakar told A that
the house that he found cannot be purchased and Bakar bought it for himself. Abu
may, on discovering that Bakar has bought the house, compel him to sell it to him at
the price he gave earlier. The principal has the rights to refuse to pay the agent his
commission or other remuneration. Dismissal the agent for breach of duty and sue the
agent and the third party giving the bribe, for damages for any loss the principal may
have sustained through entering the contract, further explained in the case of Mahesan
v Malaysian Government Officers Co-Operative Housing Society Ltd (1978)

5. SOGA 1957
Discuss the relevant issues from the situations provided below, and limit your answer
to the law of Sale of Goods only.

(A) T Sdn Bhd, a detergent manufacturer bought two consignments of chemical detergents
from P Enterprise, however, it was discovered that the quality of the chemical was not
equal to the sample provided prior to the contract.
As provided under Section 17 (2) (a) Sales of Goods Act 1957 Sale by Sample, in a
contract for the sale of goods by sample, there is an implied condition that the bulk
shall correspond with the sample in quality. In other words, the bulk of goods must
correspond with the sample. If the bulk is totally inferior to the sample, the buyer may
elect to reject all the goods. Further explained by an English case, Godley v Perry
(1960).

(B) Mr A, an antique dealer, left his Pang Dynasty Sword with Mr. B, a mercantile agent,
who sold the sword to Miss C consideration of which was far below the market price.
Mr. A wants his sword back.
3

Transfer of title. The English rule of Nemo dat quod non habet is set out in Section 27
Sale of Goods Act 1957. There are exceptions to Nemo dat quod non habet. Under the
proviso to Section 27 Sale of Goods Act 1957 provides that a mercantile agent is
with the consent of the owner in possession of the goods or document of title to the
goods, any sale made by him when acting in the ordinary course of business of a
mercantile agent shall be as valid as if he were expressly authorized by the owner of
the goods. Mercantile agent is further defined by Section 2 of Sale of goods Act
1957. Since Mr B approved mercantile agent of Mr. A, thus the sale is valid and Miss
C will retain the good title of the antique sword.
(C) B bought 10 boxes of training books from P Training Sdn Bhd , however, the books
were destroyed by flood that hit P warehouse in Serdang. B has already paid 10% of
the total purchase price to P.
In accordance to Section 20 Sale of Goods Act 1957, the sale of a specific good must
be in a deliverable state, thus the property in good is passed to the buyer. It is
immaterial whether the time of the payment of the price or the time of delivery of the
goods is postponed. Even though B has bought 10 boxes and paid 10% of the total
purchase to P Training Sdn Bhd, P training still holds the risk of the goods, as it is not
in a deliverable state.
(D) M, a pen collector, purchased a classical pen with a brand of T from a Japanese
vendor, Mr. Tak. However, the pen cant be used for writing whatsoever. She was
really upset and wants to rescind the contract.
In accordance to Section 16(1) (b) Sale of Goods Act 1957, goods must be of a
merchantable quality. Merchantable quality means goods are fit for the particular use
to which they were sold. Therefore, if they are defective for their use, they are
considered unmerchantable. But In the proviso to Section 16 (1) (b), the implied
condition does not apply if the buyer has conducted some examination before or at the
time of the contract, the buyer cannot complain about the defects which revealed by a
proper examination.

(E) P entered into a transaction with Y for the purchased of Iranian carpets belonging to Y
and K. P knew that Y and K are now not in good terms, however proceeded to pay and
take delivery of the items. K now intends to take possession of the carpets.

In accordance to Section 28 of the sale of goods act 1957 provides that if one of
several joint owners of goods has the sole possession of them by permission of the coowners, the property in the goods is transferred to any person who buys them from
such joint owner in good faith and has not at the time of contact of sale notice that the
seller has no authority to sell. Even though, there was no agreement from K, P will
retain the good title of the carpets s he does not know that Ys lack of authority over
the carpets.

6. COMPANY LAW
(a)

Explain the effect of Incorporation as stipulated under S 16(5) Companies

Act 1965

In accordance to Section 16 (5) Companies Act 1965 , after fulfilling all the
requirement of the Act incorporate the company, and the Companies Commission of
Malaysia (CCM) issues a certificate of incorporation, a new legal entity comes into
existence. The company, an artificial person, is born out of the process of law. This
new entity is separate from its members. Like a natural person it has its own name and
can own property. This means that the company can use own name to enter into
transactions and need not go through its members, and that the companys assets do
not belong to the members. The reason for creating the legal fiction of the separate
legal personality has been said to be a matter of convenience. The separate legal
personality concept is useful in large companies where there are many shareholders,
and these shareholders are frequently changing. If the company does not have a
separate legal personality, it would mean that a change among the shareholders would
require a transfer of the companys assets. Liabilities and contract from the former
group of shareholders to the present group. It would entail a lot of difficulties to deal
with multiple transfers. On top of that it would be difficult to keep up with the
frequent transaction of shares on the market.

(b)

At circumstances, the law may look at what lies behind the corporate veil
and the position is known as piercing the corporate veil .
Explain such circumstances.

Five exceptions to the general legal principle that a company is a person separate from
its members and also from its directors arise in the following instances. Where the
number of members of a company falls below two other than the case of a company
whose issued shares are wholly held by a holding company, if the number of

shareholders is reduced to below two and it carries on business for more than 6
months while the number is so reduced, the shareholder concerned would be
personally liable for the debts of the company contracted after those six months.
Section 36, Company Act 1965. Where in the course of winding up of a company or
in any proceedings against a company, it appears to the court when hearing the
application of the liquidator or any creditor or contributory that any business of the
company has been carried on with intent to defraud creditors or any other person for
fraudulent purpose, the persons, either acting or knowing the fraud will be held
personally liable Section 304 Company Act 1965. Nationality rules. The court may
look at the nationality of a companys members whilst determining the national status
of a company. For instance, in time of war, the foreign nationality of members may
affect the national status of a company, further explained by Daimler Co Ltd v
Continental Tyre @ Rubber Co (Great Britain) Ltd. Next is holding and subsidiary
companies. Although according to the separate legal entities principle, a holding
company and its subsidiary company are two separate legal entities, there are
instances where they are not treated as separate. For example, a holding company
must produce group or consolidated accounts, Section 169 and the ninth schedule of
Companies Act 1965. Further explained by cases in Firestone Tyre & Rubber Co.Ltd
v Llewellin (1957). Finally, evasion of legal obligations or abuse of legal rights. An
individual cannot evade his obligations by using a company which he controls to do
what he himself is prevented from doing, Section 121 (2) Companies Act, 1965 and
taxation rules. Further explained by Jones v Lipman (1962).