1.

0 CONTENT

NO DETAILS PAGES

1.0 CONTENT 1

2.0 DEFINITION OF GOODS 2-4

3.0 CLASSIFICATION OF GOODS 5-6

4.0 IMPLIED TERMS 6-14

5.0 TRANSFER OF PROPERTY IN THE GOODS 15-20

6.0 SUMMARY 21-22

7.0 REFERENCES 23

8.0 COURSEWORK 24-36

Page 1 of 36
2.0 DEFINITION OF GOODS

In economics, goods are materials that satisfy human wants and provide utility,

for example, to a consumer making a purchase of a satisfying product. A common

distinction is made between goods that are tangible property, and services, which are

non-physical. A good is a consumable item that is useful to people but scarce in relation

to its demand, so that human effort is required to obtain it. In contrast, free goods, such

as air, are naturally in abundant supply and need no conscious effort to obtain them.

Commodities may be used as a synonym for economic goods but often refer to

marketable raw materials and primary products.

Although in economic theory all goods are considered tangible, in reality certain

classes of goods, such as information, only take intangible forms. For example, among

other goods an apple is a tangible object, while news belongs to an intangible class of

goods and can be perceived only by means of an instrument such as print or television.

Goods may increase or decrease their utility directly or indirectly and may be

described as having marginal utility. Some things are useful, but not scarce enough to

have monetary value, such as the Earth's atmosphere, these are referred to as 'free

goods'.

Page 2 of 36
In economics, a bad is the opposite of a good. Ultimately, whether an object is a good or

a bad depends on each individual consumer and therefore, it is important to realize that

not all goods are good all the time and not all goods are goods to all people.

Goods may be classified into Existing goods, future goods; and contingent

goods.

Existing goods: At the time of sales if the goods are physically in existence and

are in possession of the seller the goods are called Existing Goods. Existing goods can

be classified into specific or unascertained.

Specific goods. Goods identified and agreed upon at the time of the making of

the contract of sale are called specific goods [Sec. 2(14)]. It may be noted that in

actual practice the term ascertained goods is used in the same sense as specific

goods, For example, where A agrees to sell to B a particular radio bearing a distinctive

number, there is a contract of sale of specific or ascertained goods.

Unascertained goods. The goods, which are not separately identified or

ascertained at the time of the making of the contract, are known as unascertained

goods. They are indicated or defined only by description. For example, if A agrees to

sell to B one bag of sugar out of the lot of one hundred bags lying in his godown; it is a

sale of unascertained goods because it is not known which bag is to be delivered. As

Page 3 of 36
soon as a particular bag is separated from the lot for delivery, it becomes ascertained or

specific goods.

The distinction between specific or ascertained and unascer-tained goods is

important in connection with the rules regarding transfer of property from the seller to

the buyer.

Future goods: Future goods are goods to be manufactured or produced or yet to

be acquired by seller. There cannot be present sale in respect future goods because the

property cannot pass.

Page 4 of 36
3.0 CLASSIFICATION OF GOODS

If a product cannot be classified with the aid of the List of Classes, the

Explanatory Notes and the Alphabetical List, the following remarks set forth the criteria

to be applied:

A finished product is in principle classified according to its function or purpose.

If the function or purpose of a finished product is not mentioned in any class heading,

the finished product is classified by analogy with other comparable finished products,

indicated in the Alphabetical List. If none is found, other subsidiary criteria, such as that

of the material of which the product is made or its mode of operation, are applied.

A finished product which is a multipurpose composite object (e.g., clocks

incorporating radios) may be classified in all classes that correspond to any of its

functions or intended purposes. If those functions or purposes are not mentioned in any

class heading, other criteria, indicated under (a), above, are to be applied.

Raw materials, unworked or semi-worked, are in principle classified according

to the material of which they consist.

Goods intended to form part of another product are in principle classified in the

same class as that product only in cases where the same type of goods cannot normally

be used for another purpose. In all other cases, the criterion indicated under (a), above,

applies.

Page 5 of 36
 When a product, whether finished or not, is classified according to the material

of which it is made, and it is made of different materials, the product is in principle

classified according to the material which predominates.

Cases adapted to the product they are intended to contain are in principle

classified in the same class as the product.

Page 6 of 36
4.0 IMPLIED TERMS

Sometimes a contract dispute will end up in court. A court must examine and

interpret the contract. Often, a court will imply certain terms in order to clarify the

contract. This lesson explores the use of implied terms.

Implied Terms

Business contracts are often very lengthy. A contract drafter normally attempts to

cover all of the terms and provisions of the agreement. Implied terms are words or

provisions that a court assumes were intended to be included in a contract. This means

that the terms aren't expressly stated in the contract.

Generally, the drafter of the contract wants to avoid the use of implied terms.

Most parties don't want to rely on a court's interpretation of the contract terms.

However, it's usually not possible to cover every detail of an agreement. In these cases,

the court will assume that some terms are implied. This allows the court to enforce the

contract and follow through with the parties' intent. It also protects parties from fraud by

omission and misrepresentation.

Use of Implied Terms

Page 7 of 36
 The use of implied terms is fairly common, because there are several different

ways that courts use implied terms. Each of the uses is based on public policy. For

instance, sometimes a court will imply a term if the court decides that it's necessary in

order to enable the intentions of the contracting parties. Also, terms can be implied by

law when there is a statute that directly addresses the issue. This is true in several areas

of the law, including state laws that cover commercial transactions.

For example, it's common for courts to imply terms in a sales contract. These are

contracts that involve the purchase of goods or services. Sales contracts include an

implied warranty of merchantability. This means that a court will imply usability. In

other words, there is an implied guarantee that the goods or services will serve the

reasonable and expected purpose.

An implied warranty of merchantability is used even when there isn't a written

or oral sales contract. Let's say that you come into my garden store and purchase a new

lawnmower. We don't have a written contract. You simply pick out the one you want,

pay me, and wheel it out the door. Once you get home, the lawnmower won't start. You

can't mow your lawn. You return to the store for a refund or replacement.

I refuse to refund your money or replace the lawnmower. I say that I never

guaranteed that the mower would work. We end up in court and the court orders me to

refund your money, or replace your mower with one that works. This is because of the

Page 8 of 36
implied warranty of merchantability. I never guaranteed the mower, but the guarantee is

implied.

Defining Implied Terms

Guarantees are not the only type of term to be commonly implied. Many

contract terms can be implied, but the practice of using implied terms is dependent on

the court's ability to give the proper and intended meaning to those terms. The court

often assumes that certain terms are common knowledge, and that both parties

understood the definition of those terms without defining the terms in detail.

For example, if I said the mower was four-wheeled, then the court will imply

that the mower has four wheels on which to travel. I won't be successful in arguing that

it's a two-wheeled mower, but it comes with two extra, or replacement, wheels.

Sometimes a court will have to interpret contract terms that have more than one

meaning. In these cases, courts will imply the term as it is most reasonably used,

considering the context. For example, if I say the mower is suitable for mowing a yard,

then the court will imply that I mean a residential lawn area. My argument that I meant

the English measurement of only one yard, as in three feet, will fail.

Page 9 of 36
 Implied terms are terms that are not expressly stated but nevertheless form a part

of the contract.

Good faith

In many jurisdictions, a duty of good faith and fair dealing* is implied in all

contracts, ie neither party can do anything that would have the effect of destroying or

injuring the right of the other party to receive the fruits (=benefits or results) of the

contract. Although many jurisdictions (including the US) recognise good faith, English

law generally refuses to recognise it as an implied contractual term.

Terms implied by custom or trade

One is generally bound by the customs of a particular industry. The terms of a

contract may have been negotiated against the background of the customs of a particular

locality or trade. The parties often assume that their contract will be subject to such

customs and thus do not deal specifically with the matter in their contract.

Course of dealing

If two parties have regularly conducted business on certain terms, the terms may be

assumed to be same for each contract made. The parties must have dealt with each other

Page 10 of 36
on numerous occasions and been aware of the term meant to be implied. Terms (or entire

contracts) may be implied based on the previous course of dealing between the parties.

Implied warranties

In common law jurisdictions, there are certain implied warranties or assurances

presumed to be made in the sale of products or real property.

The warranty of merchantability is implied, unless expressly disclaimed or a sale

is made using the phrase as is or with all faults. In order to be merchantable, the goods

must reasonably conform to an ordinary buyers expectations, ie it functions like other

goods of the same type.

The warranty of fitness for a particular purpose is implied by law where a seller

knows or has reason to know of a particular purpose or use for which an item is being

purchased by the buyer (and the buyer relies on the sellers expertise in selecting the

product).

Other implied warranties include warranty of title, implying that the seller has the

right to sell items and is the proper owner and, in conjunction with real estate transactions,

the warranty of habitability, often defined as the minimum standard for housing suitable

for human habitation.

It should be noted that there are two meanings of the phrase fair dealing. As used

above, fair dealing refers to the transacting of business in an honest manner. However,

Page 11 of 36
the phrase also refers to the doctrine of limitations and exceptions to copyright which is

found in many of the common law jurisdictions (known as fair use in the United States).

Implied Terms In Malaysia

Implied Terms Of The Sale Of Goods Act, 1957

The statutory of implied terms main function is to protect the rights to every buyer

or consumer. These statutory implied terms are in Section 14- 17 of the Sales of Goods

Act, 1957 and are the implied terms in every contract of sale of goods.

Section 14 of the SOGA is divided into three parts. The first part states that an

implied condition on the part of the seller, that, in the case of a sale, he has a right to sell

the goods, and that in the case of an agreement to sell, he will have a right to sell the

goods at the time when the property is to pass. This in short means that it is an implied

condition to the seller to ensure that the buyer will enjoy the ownership as well as

possession and use of the goods, failure to do so gives the buyer the right to reject the

contract as the issue constitutes an implied condition (Razman and Shukor, 2001). The

next part states that there is an implied warranty that the buyer shall enjoy quit possession

of the goods, and if the seller fails to comply, the buyer is entitled to claim for damages

since the matter is being constituted as an implied warranty. Paragraph c, the last part of

Section 14 of SOGA, states that there is an implied warranty that the goods shall be free

Page 12 of 36
from any charge or encumbrance in favor of any third party not declared or known to the

buyer before or at the time when the contract is made. If the seller fails to comply, the

buyer is entitled to claim for damages since the matter is being constituted as an implied

warranty.

Section 15 of the SOGA is on the sale of goods by description. It states that where

there is a contract for the sale of goods by description there is an implied condition that

the goods shall correspond with the description; and, if the sale is by sample as well as

by description, it is not sufficient that the bulk of the goods corresponds with the sample

if the goods do not also correspond with the description. The case in point is the case of:

Purshotumdas and Co. v Mitsui Bussan Kaisha Ltd. (1911) 12 SSLR 67

In this case, the partys previous contracts entailed the sale goods being flour,

which was sold in bags bearing a recognized trademark. Later the previous contract

description of flour was used to order and flour of identical quality was delivered but,

short of the same well-known trade mark. The court held that the goods did not comply

with the description (Beatrix and Wu, 1991).

Section 16 of SOGA, in a nutshell says that there is no implied condition or

warranty as to the quality or fitness for any particular purpose of goods, unless the buyer

requests the goods be reasonable for a purpose and the goods be of merchantable quality.

The last section of implied terms is Section 17 of SOGA, and in summary points out that,

Page 13 of 36
when dealing with goods by sample, it is required by the seller to ensure that the bulk of

the goods must correspond with the sample. If the seller fails to comply, the buyer is

entitled to reject the contract since the matter is being constituted as an implied condition.

Page 14 of 36
5.0 TRANSFER OF PROPERTY IN THE GOODS

Transfer of Property in Goods

The property in the goods is said, to be transferred from the seller to the buyer

when the latter acquires the proprietary rights over the goods and the obligations linked

thereto. 'Property in Goods' which means the ownership of goods, is different from '

possession of goods' which means the physical custody or control of the goods.

The transfer of property in the goods from the seller to the buyer is the essence

of a contract of sale. Therefore the moment when the property in goods passes from the

seller to the buyer is significant for following reasons:

Ownership -- The moment the property in goods passes, the seller ceases to be

their owner and the buyer acquires the ownership. The buyer can exercise the

proprietary rights over the goods. For example, the buyer may sue the seller for non-

delivery of the goods or when the seller has resold the goods, etc.

Risk follows ownership -- The general rule is that the risk follows the

ownership, irrespective of whether the delivery has been made or not. If the goods are

damaged or destroyed, the loss shall be borne by the person who was the owner of the

Page 15 of 36
goods at the time of damage or destruction. Thus the risk of loss prima facie is in the

person in whom the property is.

Action Against Third parties -When the goods are in any way damaged or

destroyed by the action of third parties, it is only the owner of the goods who can take

action against them.

Suit for Price - The seller can sue the buyer for the price, unless otherwise

agreed, only after the gods have become the property of the buyer.

Insolvency - In the event of insolvency of either the seller or the buyer, the

question whether the goods can be taken over by the Official Receiver or Assignee, will

depend on whether the property in goods is with the party who has become insolvent.

Essentials for Transfer of Property -- The two essentials requirements for

transfer of property in the goods are:

Goods must be ascertained: Unless the goods are ascertained, they (or the

property therein) cannot pass from the seller to the buyer. Thus, where there is a

contract for the sale of unascertained goods, no property in the goods is transferred to

the buyer unless and until the goods are ascertained

Intention to PASS Property in Goods must be there: In a sale of specific or

ascertained goods the property in them is transferred to the buyer at such time as the

Page 16 of 36
parties to the contract intend it to be regard shall be had to the terms of the contract, the

conduct of the parties and the circumstances of the case.

Transfer of Property in Unascertained and future goods

In section 18 and 23 the rules relating to transfer of property in unascertained

and future goods are laid down. These sections provide that where goods contracted to

be sold are not ascertained or where they are future goods, the property in goods does

not pass to the buyer unless and until the goods are ascertained or unconditionally

appropriated to the contract so as to bring them in a deliverable state, either by the seller

with the assent of the buyer or by the buyer with the assent of the seller. Such assent

may be expressed or implied, and may be given either before or after the appropriation

is made.

The above rule is fundamental rule and it applies irrespective of what the parties

intended until goods are ascertained or appropriated there is merely as certained

agreement to sell. example: Sale of ten tons of wheat from a granary, has not the

Page 17 of 36
effect of transferring property to buyer (It is an agreement to sell only) until ten tons are

appropriated to the contract by the seller and the buyer knows it.

The process of ascertainment or appropriation consists in earmarking or setting

apart goods as subject-matter of the contract. It involves separating, weighing,

measuring, counting or similar acts done in relation to goods with an intention to

identify and determine the specific goods to be delivered under the contract. The

distinction between ascertainment and appropriation is that whereas ascertainment

can be a unilateral act of the seller, that is, he alone may set apart the goods,

appropriation involves the element of mutual consent of the seller and the buyer.

Essentials of valid appropriation: As regard a valid or proper appropriation of

goods, the following point should be noted:

(i) The appropriation must be of goods answering the contract description,

both as to quality and quantity.

(ii) The appropriation must be intentional, i.e., it must be made with intention

to appropriate goods to specific contract, and it must not be due to mere accident or

mistake.

Page 18 of 36
 (iii) The appropriation must be made either by the seller with the assent of the

buyer or by the buyer with the assent of the seller. Assent of the other future party is

thus necessary; whether before of after the appropriation is made for a valid

appropriation.

(iv) The appropriation must be unconditional, i.e. the seller should not reserve to

himself the right of disposal of the goods until and unless certain conditions are

fulfilled.

Delivery to Carrier: When a seller delivers the goods to a carrier or other bailee

for the purpose of transmission to the buyer and does not reserve the right of disposal,

the property passes on to the buyer at once. As soon as goods are loaded and railway

receipt obtained and the same is sent to buyer direct the ownership is passed on delivery

of goods to railway company. If the railway receipt is sent to banker with instructions to

deliver the same on payment, the right of disposal is said to be reserved and the property

will not pass to buyer at the time of delivery of goods to railway co.

The delivery to the carrier may be:

Page 19 of 36
 (i) Absolutely for the buyer. Where the bill of lading or railway receipt is made

out in the name of the buyer and is sent to him, the presumption is that no right of

disposal has been reserved by the seller in respect of those goods. The ownership in

such a case passes from the seller to the buyer.

(ii) Absolutely for the seller. Where the bill of lading or railway receipt is taken

in the sellers or his agents name and is sent to the agent of the seller to be delivered to

the buyer on the fulfillment of certain conditions, the seller is deemed to have reserved

the right of disposal of the goods. In such a case the ownership does not pass to the

buyer until the necessary conditions are fulfilled and the documents of title are delivered

to the buyer.

Page 20 of 36
6.0 SUMMARY

Business law is a broad area of law. It covers many different types of laws and

many different topics. This lesson explains generally what business law is and how it's

used.

Business law encompasses all of the laws that dictate how to form and run a

business. This includes all of the laws that govern how to start, buy, manage and close

or sell any type of business. Business laws establish the rules that all businesses should

follow. A savvy businessperson will be generally familiar with business laws and know

when to seek the advice of a licensed attorney. Business law includes state and federal

laws, as well as administrative regulations.

Besides, business law is an important topic to understand due to how intertwined

business transactions are with society. Any regulation or legal rights that affect

employers, employees, and consumers, as well as how businesses interact

internationally, are considered topics of business law.

Business law includes a complex web of state, federal and municipal statutes.

These laws work together to ensure predictability and fairness.

Page 21 of 36
 The Business Law major focuses on the fundamental relationship between law

and business and is ideal for those planning careers in a wide range of business areas

including professional accounting, business management, international trade and

industrial relations.

Page 22 of 36
7.0 REFERENCES

1. https://worksmart.org.uk/work-rights/pay-and-contracts/contract-

terminology/what-difference-between-implied-and-express-terms

2. https://sol.du.ac.in/mod/book/view.php?id=645&chapterid=391

3. http://studypoints.blogspot.my/2011/08/discuss-various-rules-

regarding_3667.html

4. http://www.ekconsultinggroup.com/assets/resources/Law_Sale_Goods.pdf

5. https://www.lawteacher.net/free-law-essays/commercial-law/sale-of-goods-law-

in-malaysia-commercial-law-essay.php

6. http://www.streetdirectory.com/travel_guide/154234/exercising_and_running/im

portance_of_business_law_knowledge.html

Page 23 of 36
8.0 COURSEWORK

1. Please summarize the difference between a company, partnership and sole-

proprietorship.

A comparison highlighting the distinction between a company, partnership and sole-

proprietorship is summarized and simplified as follows:

Company Partnership Sole-proprietorship

1. Structure

A company is a person Two or more persons Individual in business on

separate from its members. carrying on business with a his own.

view of profit.

2. Registration

Need to be registered with Need to register their Needs to register his

the Companies business with the business with Companies

Commissions of Malaysia Companies Commission of Commission of Malaysia

as a company under the Malaysia under the under the Registration of

Companies Act 1965. Registration of Businesses Businesses Act 1956.

Act 1956.

3. Transferability

Shares in a company are Generally, a partner cannot A sole-proprietor may

Page 24 of 36
generally transferable transfer his status as transfer his business to

although the right of partner to someone else someone else.

transfer may be restricted. without the consent of all

the other partners.

4. Management

Members of a company as Partners are agents of the The sole-proprietor owns

such are neither its firm for carrying on its and manages the firm

managers (directors) nor its business in the ordinary himself.

agents. course of business and are

generally entitled to

manage the firm.

5. Number of

members The maximum is twenty. There is only one person in

There is no maximum (There is no ceiling on the a sole-proprietorship.

number of members number of members for

(except where it is a private professional firms).

company, in which case the

maximum is fifty.)

6. Constitution

A company must be A partnership may be No agreement is necessary

Page 25 of 36
constituted in writing, i.e. formed orally or in writing. since the sole-proprietor is

by a Memorandum and only one person by himself

Articles of Association.

7. Capital and liability

Capital subscribed by Partners may withdraw A sole-proprietor may also

members for their shares capital but their liability withdraw capital. His

cannot ordinarily be for the firms debts to its liability for the firms debts

returned to them, but (in a creditors is unlimited. to its creditors is unlimited.

limited company) they are

not liable for its debts once

they hold fully paid shares.

8. Borrowing powers

Companies can borrow for Partners have unrestricted A sole-proprietor has

purposes covered by their powers of borrowing in unrestricted powers of

objects as contained in their terms of amount and borrowing.

Memorandum of purpose.

Association.

9. Security over assets

Companies can use current Partners cannot create A sole-proprietor cannot

assets as security by floating charges but they create floating charges but

Page 26 of 36
creating floating charges. can mortgage the firms can mortgage the firms

assets. assets.

10. Rules, procedure

and information to

public

Companies are subject to Partnerships may be Sole-proprietorships are

various statutory rules of formed informally and formed informally and

procedure and are required they need not supply information about the firm

to supply certain information to the public. need not to be published.

information to the public.

11. Dissolution

A company is dissolved by Partnerships may be Sole-proprietorships may

winding-up and liquidation dissolved informally, e.g. be dissolved informally by

which is a formal. by agreement of the the sole-proprietor himself.

partners.

Page 27 of 36
 2. Please define liability of partners.

Ordinary Torts

By virtue of section 12, Partnership Act 1961 in order to make a firm liable, the tortuous

act must be committed by a partner either in the ordinary course of the business of the

firm or with the authority of his co-partners: Blyth v Fladyate [1891] 1 Ch. 337.

Misapplication Section 13 of the Partnership Act 1961. Every partner is liable jointly

and severally for everything for which the firm, while he is a partner therein, becomes

liable under sections 12 or 13 abovementioned: section 14, Partnership Act 1961. This

means that if the partnership firm is liable for wrongs under section 12 of the Partnership

Act 1961 or liable to make good the loss due to misapplication of money or property, the

plaintiff can sue all the partners jointly or may even sue one or more of the partners

concerned.

Misappropriation

Section 15 of the Partnership Act 1961 provides to the effect that if a partner, acting in

his individual capacity, improperly makes use of trust property in the business of the firm,

as a general rule, his other partners are not liable to the beneficiaries. However, if the trust

money is still in the firm's possession or under its control, the beneficiaries can recover

the same from the firm.

Page 28 of 36
Contractual Liability

Section 11 of the Partnership Act 1961 states to the effect of this section is that all partners

in a firm are jointly liable for all contractual and other debts and liabilities including tax

and judgment debts which are incurred while each is a partner. A joint liability basically

means that where there is only one cause of action for the recovery of debt, and that cause

of action having been exhausted, a second cause of action or a new proceeding is no

longer available against any partner or partners whom the creditor failed to sue at the first

instanceGuinness Anchor Marketing Sdn Bhd v Chellam Joe Vetha Thya Singh [1999]

7 CLJ 392.

Third parties may sue all the partners individually or the firm - Krishnan v Abdul Razak

& Anor [1967] 1 MLJ 43 where an action was brought against the partners individually

and not in the name of the firm, the failure of any partner to file a defence entitled the

plaintiff to sign final judgment against him. Similarly, when a firm sues third parties, it

can do so in its own name or all the partners can be joined as plaintiffs in the actionM.

K. Varma & Anor v K. M. Oli Mohamed.

M. K. VARMA & ANOR v K. M. OLI MOHAMED [1950] MLJ 80

Facts:

Page 29 of 36
The plaintiffs brought an action in their personal capacities for alleged breach of an

agreement to manage and run a cinema as partners on behalf of a partnership. The

defendant contended that the plaintiffs were riot entitled to maintain the suit in their

personal capacities.

Held:

The plaintiffs had the alternatives of joining all the partners as plaintiffs or of suing in the

name of the firm, and as they had failed to take either alternative, the claim had to be

dismissed.

Criminal Liability

Although partners are jointly liable in civil cases, they are not jointly liable in criminal

cases--Chung Shin Kian & Anor v Public Prosecutor.

Chung Shin Klan & Anory Public Prosecutor [1980] 2 MLJ 246

Facts: Officers from the Trade Description Department raided the accused's tailor shop.

At that time, there were ten workers engaged in stitching materials into jeans and jackets.

The premises were searched and officers discovered various types of `Texwood' labels

and tags, and `Texwood' jeans and jackets both finished and unfinished. During the raid,

Page 30 of 36
only the first accused was present in the shop. The second accused, a partner, was not

present. The charge made against both the accused was that in the courseof their business,

they applied a false trade description name `Texwood' to ten pieces of jackets and fifty-

seven pairs of jeans. Both accused were convicted and sentenced for an offence under

Section 5(1)(a) of the Trade Description Act 1972. They appealed.

Held:

1. The first accused's appeal was dismissed.

2. The second accused's appeal was allowed. There was no evidence

showing that the second accused was implicated in the offence except

that he was a partner of the shop. The word `person' in Section 3 of

the Trade.

Description Act 1972 includes anybody of persons corporate or unincorporated:

Interpretation Act 1967. It does not include every partner in a partnership. Section 14 of

the Partnership Act 1961 provides for joint liability for contracts and recovery of damages

and fines, not criminal liability. It would be otherwise if the firm was the subject of the

charge.

Therefore, the second accused's appeal was allowed and his conviction was quashed.

Page 31 of 36
Order accordingly.

Duration of Liability

A new partner who has just been admitted into a firm is not liable for the debts incurred

prior to his admissionsection 19(1), Partnership Act. However, if the new partner agrees

to be liable for the existing debts of the partnership at the time of his admission, he would

be liable.

Section 19(2) and (3) states:

(2) A partner who retires from a firm does not thereby cease to be liable for partnership

debts or obligations incurred before his retirement.

(3) A retiring partner may be discharged from any existing liabilities by an agreement to

that effect between himself and the members of the firm as newly constituted and the

creditors, and this agreement may be either express or inferred as a fact from the course

of dealing between the creditors and the firm as newly constituted.

Case:

Subramaniam Chettiar v Kader Mastan & Co[1934] MLJ 74

Liability of Persons for Holding Out Section 16, Partnership Act 1961 provides that

persons may be liable by `holding out'.

Page 32 of 36
Case:

William jacks & Co (Malaya) Ltd v Chan & Yong Trading Co

Liability of Retired Partners

After retirement, a partner is still liable to persons who deal with the firm after a change

in its constitution unless he has given notice to such persons that he is no longer a partner:

section 38(1), Partnership Act 1961

Cases:

-Re Siew Inn Steamship Co [1934] MLJ 180

-Tan Sin Moh v Lebel Ltd [1988] 2 MLJ 51

-Philips Singapore Pte. Ltd v Han Jong Kwang & Anor [1989] 2 MLJ 323

-Mayban Finance (Singapore) Ltd v Yap Thiam Sen & Anor. [1991] 1 MLJ 204

-Malayan Banking Berhad v Lim Chee Leng & Anor [1985] 1 MLJ 214

RE STEW INN STEAMSHIP CO [1934] MLJ 180

Facts:

A retired partner had inserted a notice of his retirement in several issues of a newspaper

to which certain old customers were proved to be regular subscribers. After his retirement,

these same old customers lent money to the firm on the security of promissory notes

Page 33 of 36
executed by the remaining partners. One of the lenders later sued the retired partner on

these notes, denying having actually seen notice of his retirement in the papers.

Held:

The retired partner was liable on the notes. Actual notice was necessary as far as old

customers were concerned.

TAN SIN MOH v LEBEL LTD [1988]2 MLJ 51

Facts:

This was an appeal against a receiving and adjudicating order made following a failure to

satisfy the judgment debt. The appellant alleged that the judgment entered against him

was wrong in law because the claim against him contained a material error in respect of

the registered particulars in the Registry of Businesses.

It was alleged that he had withdrawn from the partnership on 1 February 1976 but the

withdrawal was wrongly registered as 23 August 1978. The respondent relied on section

38(1) of the Partnership Act 1961 to treat apparent members of the partnership firm as

still being members until they had notice of the change. The High Court held that a person

who had habitual dealings with a partnership is entitled to be specifically notified of the

withdrawal of the partners, a mere notice to the Registrar of Businesses is insufficient.

Page 34 of 36
On appeal. the Supreme Court held as follows:

Held:

Dismissing the appeal:

1. The respondent was, on the evidence available, a person who had habitual dealings

with the partnership and was therefore to be specifically notified of the withdrawal of the

appellant from the partnership, something which the latter had omitted to do (the case of

Hop Aik Tin Mining Company v Kam Hoy Trading was followed here).

2. The respondent creditor was therefore entitled under section 6 of the Registration of

Businesses Act 1956 to rely on the particulars kept in the Business Registry to ascertain

whether the appellant remained a partner of the firm at the commencement of the suit.

The Singapore case of Philips Singapore Pte Ltd v Han Jong Kwang & Anor also decided

on the issue whether the registration of the retirement of a partner with the Registrar of

Businesses constituted constructive notice to third parties who dealt with the partnership.

It was held that the mere fact of registration of retirement did not give notice of that fact

to third parties who dealt with the partnership.

In Mayban Finance (Singapore) Ltd v Yap Thiam Sen & Anor [1991] 1 MLJ 204, the

High Court of Singapore held that a third party was entitled to treat a withdrawing partner

as still being a member of the firm until the third party received notice of the change in

Page 35 of 36
constitution of the firm. In other words, the withdrawing partner would still be liable to

the third party for all debts incurred by the firm between his withdrawal and the service

of notice to the third party. In Jemco Sdn Bhd v Andrew Liau Ka Lieng & Ors [1985] 2

MLJ 119 oral notice of the retirement of three defendants was held to be effective notice.

MALAYAN BANKING BERHAD v LIM CHEF LENG & ANOR [1985] 1 MLJ 214

Facts:

The respondents were partners of a firm called Berjasa Corporation. The appellants sued

the respondents under a trust receipt which matured and became payable on 14 June 1975.

Two of the respondents resigned from the firm on 16 August 1976.

Held:

The respondents incurred the debt on the trust receipt before their resignations or

retirement and they could not escape liability by merely pleading resignation or retirement.

Page 36 of 36