Question 1:

Issues

The issues in this case are whether Sabrina can sue Ali, whether they need to
pay rental to En. Burhanuddin, whether they need to pay the installments for electrical
items to Bunny Electrical Sdn.Bhd, and whether Ali and Stephanie have to pay back
the friendly loan to Mr. Heryanto.

Explanation of Law

A proposal is defined in S.2 (a) Contacts Act 1950, when one person signifies to
another his willingness to do or to abstain from doing anything, with a view to
obtaining the assent of that other to the act or abstinence. According to S.2(b)
Contacts Act 1950 provides that the proposal is accepted when the person to whom
the proposal is made signifies his assent thereto while the communication of a
proposal is completed when it comes to the knowledge of the person to whom it is
made– S.4(1) Contacts Act 1950. And S.2(c) Contract Art 1950 provides that the
person making the proposal is called the “promisor” and the person accepting the
proposal is called the “promise”. Besides that, according to the S. 4(2)(b) Contract
Art 1950 provides that the communication of an acceptance is complete as against
the acceptor, when it comes to the knowledge of the proposer while the
communication of a revocation is complete as against the person to whom it is made,
when it comes to his knowledge from S.4(3)(b) Contract Art 1950. Furthermore,
according to the S. 5(1) Contract Art 1950, a proposal may be revoked at any time
before the communication of its acceptance is complete as against the proposer, but
not afterwards. A proposal is revoked by the communication of notice of revocation
by the proposer to the other party which is provided from S. 6 (a) Contract Art 1950
in case of Byrne v. Van Tienhoven. Van Tienhoven & Co posted a letter from their
office in Cardiff to Byrne & Co in New York, offering 1000 boxes of tinplates for
sale on 1 October. Byrne and Co got the letter on 11 October.
They telegraphed acceptance on the same day. But on 8 October Van Tienhoven had
sent another letter withdrawing their offer, because tinplate prices had just risen 25%.
They refused to go through with the sale. Finally, Lindley J held that the withdrawal
of the offer was not effective until it was communicated.
 S. 30 of the Contracts Act provides that agreements, the meaning of which is not
certain, or capable of being made certain, are void. The language used must not be too
vague or be so obscure as to be incapable of any precise or definite meaning. For
example, in Karuppan Chetty v. Suah Thian (1916) 1 FMSLR 300, the agreement
granting a lease at $35 a month ‘for as long as he likes’ was declared void for
uncertainty. The age of majority for contracts is 18 years according to s. 2 of the Age
of Majority Act 1971. A minor (below 18 years of age) is therefore incompetent to
contract. All parties to a contract must be legally competent to enter into a contract i.e.
they must have the legal capacity to contract. S. 10(1) of the Contracts Act provide
that all agreements are contracts if they are made by the free consent of parties
competent to contract, for a lawful consideration and with a lawful object, and are
not hereby expressly declared to be void. S. 11 of Contract Act provides that the
person is of the Age of Majority according to the law to which he is subject, the
person is of sound mind, and he/she is not disqualified from contracting by any law to
which he is subject are competent to contract. What is the effect of a contract entered
into by a minor? Such contract will become void. For example, in Tan Hee Juan v.
Teh Boon Keat & Lai Soon [1934], the court held that the transfer of the lands
executed by the infant plaintiff in favour of the defendants were void and ordered the
defendants to restore the property to the plaintiff. The court did not order the minor to
refund the purchase money he received i.e. RM 17,000. There are also several
exceptions to general rule. The first exception is contract to marry. The second
exception is contract for “necessaries”. A minor’s liability for necessaries supplied
to him arises under s. 69 of the Contract Act. This is a statutory liability and not a
contractual liability. S. 69 of Contract Act provides that if a person, incapable of
entering into a contract, or anyone whom he is legally bound to support, is supplied
by another person with necessaries suited to his condition in life, the person who has
furnished such supplies is entitled to be reimbursed from the property of such
incapable person. Necessaries are things which are essential to the existence and
reasonable comfort of a minor and would include items such as food, lodging,
clothing, medicine and medical care, and basic education and vocational training.
They must be ‘suited to his condition in life’ – would depend on the minor’s station in
life, his actual needs, the circumstances in which it was supplied and the purpose
which was served. Necessaries may vary considerably with each individual depending
on the above. The supplier is entitled to be reimbursed from the property of such
incapable person. The supplier is only entitled to a reasonable price for the necessaries
supplied. For example, in Nash v. Inman [1908] 2 KB 1, P was a Saville Row tailor
and D was an infant undergraduate at Cambridge. P supplied D very expensive
clothing to the value of about £ 145. The clothes included 11 fancy waistcoats. P then
sued D for the price of the clothes. Evidence showed that D’s father was in a good
position and it could be said that the clothes supplied were suitable to D’s position in
life. However, his father proved that D was amply supplied with such clothes when P
delivered the clothing now in question. Finally, the court held that P’s claim failed
because he had not established that the goods supplied were necessaries. There will be
some effects of a contract by a minor. In Mohori Bibee v. Dhurmodas Ghose , the
Privy Council has held that a contract entered into by a minor is void. S.2 (g) of
Contract Act provides that an agreement not enforceable by law is void. Generally,
where one party has performed his part of the bargain under a void contract, s. 66
would require the party who has benefitted from the contract to restore the advantage
or compensate the other for the value of the benefit received. The Privy Council held
that s. 66 only applies to a contract which becomes void. It does not apply to an
agreement entered into by a minor who could never have made contract. S. 66 of
Contract Act provides where an agreement is discovered to be void, or when a
contract becomes void, any person who has received any advantage under the
agreement or contract is bound to restore, or to make compensation for it, to the
person from whom he received it. A minor is incompetent to contract. His contract is
void ab initio i.e. void right from the very beginning. It follows therefore that a minor
cannot be compelled to repay any moneys received in respect of such a contract.

For the formation of a hire purchase agreement, s. 4(1) of the Hire Purchase Act
provides that before a hire purchase agreement is entered into, the owner is required
to give the prospective hirer a written statement duly completed and signed in
accordance with the form set out in Part 1 of the Second Schedule. The document
contains a short description of the goods comprised in the hire purchase agreement
and a summary of the hirer’s financial obligations under the proposed hire purchase
agreement. Particulars include cash price of the good, deposit, insurance, term charges,
duration of payment of instalments, number of instalments, amount of each instalment,
etc. S. 4(4) of Hire Purchase Act provides that pre-contractual duty of disclosure is a
mandatory obligation on the part of the owner – the non-compliance of which would
render a hire-purchase agreement void. A hire purchase agreement shall be in writing
and it shall be either in the national language or the English Language - s. 4A(1) of
Hire Purchase Act-A hire-purchase agreement in respect of any goods specified in
the First Schedule shall be in writing & (1A)-A hire-purchase agreement shall be in
the national language or English language. Otherwise it shall be void – s. 4A (2) of
Hire Purchase Act-A hire purchase agreement that does not comply with subsections
(1)and (1A) shall be void. The agreement is deemed not to be in writing, such as, if
the handwriting is not clear and legible; or where it is printed and the print is of a size
smaller than the type known as ten-point Times; or that is not printed in black - s.
45(1) of Hire Purchase Act. s. 4B (1) of Hire Purchase Act provides that it must be
signed by or on behalf of all parties to the agreement. S. 4B (2) of Hire Purchase
Act provides that the hire purchase agreement must be duly completed before it is
signed by the hirer. It shall be void if it contravenes s. 4B(1) & (2) of the Hire
Purchase Act. S. 4C (1) of the Hire Purchase lists the information that must be
contained in every hire purchase agreement – the contents include the date of
commencement of the hiring, the number of instalments, the amount of instalments,
time of payment, to whom and where they are payable, the description of the goods
sufficient to identify them, the address where goods are situated, consideration –
where consideration is not cash such as an old car used for trade-in, then there has to
be a description of the trade in, particulars on the cash, deposit, freight, vehicle
registration fees, insurance, charges and the amount payable (all this has to be
contained in a table)

Application of Law

Ali, 17 years old promised to marry Sabrina somewhere in June 2010, that was
agreed and accepted by Sabrina. So the proposal is formed between Ali and Sabrina.
The communication of proposal and acceptance are both completed when Sabrina
accept the offer from Ali which is agree to marry to him. In the meantime, Ali
proposed another girl, Stephanie who is 16 years old to be his wife and the proposal
was accepted. They get married in May 2010. According to the S.2 Age of Majority
Act 1971, the age of majority for contract is 18 years old, but both of them are still
minor, therefore it is incompetent to contract, so the marriage of them supposed to be
not valid. Besides that, Ali and Stephanie rented a double storey semi detached house
at Wangsa Junstion located at approximately 4km from the university at a monthly
rental of RM1500 from En.Burhanuddin. In this case, accommodation considered as a
necessary, so the contract is valid because of the exception of the general rules. After
that, Ali and Stephanie went to Bunny Electrical Sdn.Bhd and bought a rice cooker,
refrigerator, washing machine, television, electric kettle and microwave oven on hire
purchase totalling Rm 4000.00. They requested for the transaction to be conducted in
accordance with Hire Purchase Act 1976 which was agreed by Bunny Electrical
Sdn.Bhd. They paid a down payment of RM300 and the balance to be paid by
instalment at RM150 per month for 36 months. However the parties do not enter into
any written agreement for this transaction. Sabrina confronted Ali and insist him to
marry her as promised before. However, Ali refused and said that their relationship
was over. The termination of proposal is not valid because the termination of proposal
must done before Sabrina accept the offer. In the other hand, Stephanie borrowed
RM3000 from Mr. Heryanto and signed a promissory note agreeing to repay the said
sum, so the debt is valid and enforceable by law.

Conclusion

In conclusion, Sabrina can sue Ali because the proposal between them is valid
and the revocation of the offer is not valid due to the notice of revocation was done
after acceptance. Besides that, Ali and Stephanie need to pay the unpaid rental with a
reasonable price, RM3000 which is 2 months of rental because of they are still minor
so they do not have to compensate En. Burhanuddin more than the unpaid rental. Ali
and Stephanie no need to pay back the installment for the electrical items because the
parties did not enter into any written agreement for the transaction, so the hire
purchase agreement is void. Lastly, Ali and Stephanie have to pay back friendly loan
to Mr.heryanto because they had signed a promissory note agree to repay the said
sum . So, the agreement is enforceable by law and Mr . Heryanto has the right to take
legal action to them if he want.
Question 2:

There are several classification of companies which is provided in S. 14(2) of

Company Act. A company may be limited by shares; limited by guarantee; limited
by both shares and guarantee (no longer possible - S. 14A of Company Act) and an
unlimited company.

The company limited by shares is where a company is limited by shares, a

member cannot be asked to pay more than the amount (if any) unpaid on his shares
when the co. is wound up. His liability is limited to the unpaid amount on the shares
held by him. If he has paid in full for his shares, he cannot be asked for any further
contribution – s. 4(1) of Company Act and s. 214(1)(d) of Company Act provides
company formed with share capital, company cannot return capital to shareholder,
shareholder may pay in full or in part for the shares, shareholders need not pay more
than the amount unpaid on the shares – partly paid shares, shareholders have to pay
when the company makes a ‘call’ and cannot ask for further contribution from fully
paid Shareholders.
The Company Limited by Guarantee. Where a company is limited by
guarantee, the liability of its members is limited by the MA to such amount that the
members guarantee or undertake to contribute to the assets of the company in the
event the company is being wound-up – s. 4(1) of Company Act; S. 214(1)(e) of
Company Act provides that members must pay the amount as stipulated in the MA,
but only when the company is being wound up, it has no share capital, it cannot
request for any contributions or donations or make any collection of money from the
public without the prior approval of the Minister, only a public company can be a
company limited by guarantee. S. 24(1) & (2) of Company Act provides that the
company must use its profits and other income for its purposes. It is prohibited from
paying dividends to its members. It is a company which is incorporated usually for the
purposes of providing activities of recreation or amusement; or which encourages
trade/commerce, research, art, science, religion, education or other purposes
beneficial to society. s. 24 of Company Act provides that company apply to CCM to
omit the word “Berhad” from its name. S.19 (2) of Company Law provides company
must get prior approval from the Minister to acquire and hold lands.
 Unlimited Company is defined in S. 4(1) of Company Act. Liability of
members to contribute to the company’s assets is not limited. Company’s name must
end with the words ‘…..Sdn’. Cannot use the word ‘…Bhd’. It must be a private
company and not a public company. Company can return capital to members.

But, while lifting of the corporate veil, the principle of separate corporate
personality as confirmed in Saloman v. A Saloman & Co. Ltd. [1897] forms the
corner-stone of company law. Incorporation of a company casts a veil over the true
controllers of the company, a veil through which the law will not usually penetrate.
There are however instances when the law will disregard or look behind they
corporate personality and have regard to the reality of the situation. Lifting or piercing
the corporate veil mean in effect ignoring the fact that the business is carried on by a
company and looking behind the company to see who is actually operating it. This
would involve treating the rights or liabilities or activities of the company as the rights
or liabilities or activities of its shareholders, for example treating the business of a co.
as that of its principal shareholder. Lifting the corporate veil is sometimes expressly
authorised by statute (statutory exceptions).

There are exceptions to the Separate Entity Doctrine i.e. when will the corporate veil
be lifted?

A. Statutory Exceptions

1. When the membership of a company falls below two –

If at any time only one member of a company remains, that member has six
months in which to find another member. If after the six-month grace period the
company is still carrying on business with only one member, that member is
personally liable for all of the debts of the company contracted after the grace period.
The company and the member shall be guilty of an offence - s. 36 CA 1965. Except in
the case of a wholly owned company – where all the shares in a wholly owned
subsidiary company is owned by the holding company.

2. Where a person signs, issues or authorizes the signing or issue of certain

instruments on which the company's name does not appear properly - s. 121(2)(c) of
Company.
 The name of the company must appear in letters on all bills of exchange,
promissory notes, cheques, negotiable instruments, indorsements and orders.
Otherwise, the person who signed or issued the document (or who authorized the
signing or issue) is liable to the holder of the document for the amount due, unless the
company pays upon the instrument. He shall also be guilty of an offence under the
Act. For example in Hendon v. Adelman (1973, – the directors of L & R Agencies Ltd
were personally liable under the equivalent of s.121(2) of Company Act because they
purported to sign a cheque on behalf of the company by writing ‘LR Agencies Ltd’.
This was not the correct name of the company.

3. Where debts are contracted on behalf of a company and at the time that the
debts were contracted the officer responsible had no reasonable or probable
expectation that the company would be able to pay the debts, that officer may
be guilty of an offence and on conviction, he may be liable to pay of the whole
or any part of the debt so contracted – S. 303(3) of Company Act – the
application to the court may be made by the liquidator, creditor or
contributory.

4. Fraudulent trading -Where any business of the company has been carried out
with intent to defraud creditors of the company, the court may make the
person who was knowingly a party to the transaction personally responsible
for the debts or other liabilities of the company- S. 304(1) of Company Act .
He shall also be guilty of an offence under S. 304(5) of the Company Act.
For example, in Siow Yoon Keong v. H. Rosen Engineering [2003] 4 MLJ 569;
[2003] 5 AMR 735.

 Siow Yoon Keong v. H Rosen Engineering BV

Rosen had completed works under a contract between Rosen and Petronas Gas
Sdn Bhd dated 24/3/1990. Petronas made payments to Ventura Industries Sdn Bhd
totalling RM 1,067,100. Under an agreement between Ventura and Rosen, Ventura
would retain 20% thereof and remit the balance of 80% to Rosen. Ventura paid a sum
of RM 423,000 to Rosen but failed to pay the balance of RM 423,000. The appellant,
Siow, as managing director and alter ego of Ventura, had used Ventura’s funds to
invest in shares on the stock exchange under his own name, instead of discharging the
debt to Rosen.

Having acquired the shares, partly using Ventura’s funds and partly his own funds,
Siow realising that he was about to incur losses on his investments, arranged for a co.
resolution to be passed by the board of directors to ratify the investment and the use of
the company’s funds, including that which was due to Rosen. This had the effect of
transferring the losses on his investments to the company. The company’s funds were
used to pay Siow’s losses and the company was left with no funds to pay Rosen, to
whom RM 423,000 was due.

The court applying s. 304(1) held that it was very clear that the intention of Siow
was to defraud Rosen, the creditor and it was also equally clear that it was done for a
fraudulent purpose.

Siow was held to be personally liable for the debt and the court ordered Siow to
pay to Rosen the balance sum of RM 423,000 together with interest for which
judgement had been obtained by Rosen against Ventura.

5. Where dividends are paid when there are no available profits out of which to
pay them .

No dividends may be paid to the shareholders of a company unless there are

profits available. If a director or manager of a company willfully pays or permits the
payment of a dividend when there are no available profits, he is liable to the creditors
of the company for the amount of the debts due to them to the extent by which the
dividends exceeded the available profits and shall be guilty of an offence.- s. 365(1)
& (2b); Art: 100, Table A of Fourth Schedule

6. If a company breaches the prohibition against providing any financial

assistance for the of its own shares, s. 67(3) of Company Act makes its
officers guilty of an offence.

7. The directors of a holding company are required to prepare consolidated

accounts incorporating the financial position of the holding company and its
subsidiaries. In this respect, the Act does not regard each company in the
group as a separate legal entity but recognizes the group of company as a
single economic entity or unit - s. 169 of Company Law