Assignment 4

1 (a) Three ways of creating agency: I. Express appointment Express appointment can be in a written or an oral form. Example, a letter of power attorney or words spoken. II. Implied appointment An agent occurs when a person by his words or conduct holds out another person as having authority to act for him. Example, Ali allows Ismail to book a room on his behalf and habitually pays for the room, Ismail is therefore Alis agent by implied appointment. Ratification An agent who was duly appointed has exceeded his authority or a person who has no authority to act for the principal has acted as if he has the authority. They can reject the contract and the acceptance called as ratification.

III.

(b) Duties of agent: I. To obey the principals instruction. II. To exercise skill and diligence when carrying our duties. III. To render proper accounts to his principal IV. To communicate with the principal. V. To pay sums received for principal. VI. Not to let his personal interest conflict with his duty. Duties of principal: I. To pay the agent commission or other remuneration agreed unless the agency relationship is gratuitous. II. Not to wilfully prevent or hinder the agent from earning his commission. III. To indemnify the agent for acts done in the exercise of his authority.

(c) An agency agreement can be terminated by the act of parties or by operation of law . Examples, death of either party; bankruptcy. (d) Principal A principal is the person for whom such act is done, or who is so represented, by the Agent. A Principal must be at least eighteen years old or above and of sound mind. Agent An agent is defined as 'a person employed to do any act for another or to represent another in dealings with third persons. Any person may become an agent; but persons of unsound mind and who are below eighteen years of age are not liable towards their principals for acts done by them as agents. (e) Actual authority Actual authority can be express authority and implied authority. Express authority is authority expressly given by the principal (orally or in writing). Implied authority from the actual authority given, from the circumstances of the case, custom or usage of trade, and the conduct of parties. Ostensible authority An agent is treated by the law as having apparent or ostensible authority to bind his principal if he enters into an unauthorised transaction which is related to the principals business. It is irrelevant that the Principal did not know about the transaction nor did he give any consent to the agent. An innocent third party who did not know of the agents lack of authority at the time of the contract has the right to assume the agent has authority to enter into the transaction to bind his principal. 2 (a) Sole proprietorship is also called individual proprietorship, or one man business. Sole proprietorship is a form of business organization in which an individual introduces his own capita), uses his own skill and intelligence in the management of its affairs, assumes all the risks of business and is solely responsible for the results of its operations. The main of characteristics of sole proprietorship are : (1) Ownership The business is owned by a single individual.

(2) Management and control Being small in size, it is managed by the owner himself. However, he may have some paid workers to assist him. In any Case, the ultimate control rests in his hands. (3) Finance The necessary capital to run the business is provided by the sole owner. However, he may borrow from other sources such as friends or bank as need arises. (4) Risk The proprietor himself bears all the risks. No body else has any stake in the business. (5) Unlimited liability The sole trader is personally liable for debts of the business. The creditor can lay claim not only on his business assets but also his persona! Property such as car, houses, furniture etc to recover the loan. (6) Legal status In law, the sole trader and his business are considered as one, In other words, all the assets and liabilities of the business are the personal assets and liabilities of the proprietor. We can say that the owner and the business exist together. In other words, the two are considered as one in the eyes of Paw. (7) Relationship with customers The sole trader tries to keep good relationship with his customers. The customers are generally personally known to the proprietor and their orders are higher valued. (8) No legal formalities The sole trader can set up or close the lawful business as and when he likes the operation of his business is not governed by any special act or ordinance. (9) Ease of dissolution The sole trading business is as easy to end or dissolve as is its formation. The decision of the proprietor alone ends the business.

(b)

Nature of partnership: It is formed to make profits. Minimum 2 up to a maximum 20 persons to form a partnership. There must be a carrying on of business in common. A business under s.2 this includes every trade, occupation or profession.

(c) Advantages of partnership: Business risks are spread among more than one person. Individual partners can develop special skills upon which the other partners can rely on. Certain partners may be able to draw upon larger capital resources to set up the partnership or expand the partnership. Very often the partners will be members of the same family. (d) Formation of a partnership : A partnership may be created orally or in writing. A partnership is not a legal person by itself Madan Lal & Anor v Ho Siew Bee The partnership must be for a lawful business purpose. A partnership must be registered under the Registration of Businesses Act 1956 (now centrally administered by the Companies Commission of Malaysia). But failure to register does not prevent a partnership from coming into existence. (e) The rights of partners in the partnership : To share equally in the capital and profits of the business; To be indemnified by the firm for any payments incurred in the course of the firms business; To be indemnified by the firm for anything done necessary to preserve the firms business or property. To take part in the management of the business; All partnership books are to be kept at the place of business of the firm. To earn interest at the rate of 8% per annum on payment or advance made beyond the amount of capital which he has agreed to subscribe. To prevent the admission of a new partner; To prevent any change in the nature of the partnership business. No partner is entitled to interest on capital before ascertainment of profits.

(f) The liabilities of partners: Ordinary torts o Joint and several Liabilities in tort for a tort committed by any partnership in the ordinary course of the firms business or with the authority of his co-partners. o If a tort is committed outside this scope, then the partner responsible is personally liable. o Torts are civil offences such as defamation, negligence, negligent misstatement, trespass Misapplication o Every partner is liable jointly and severally for losses caused by the firms misapplication of money or property. o All the partners can be sued jointly or individually. o The partnership is liable to make good the loss suffered by a 3rd party caused by the partners misapplication of money or property while acting within the scope of his apparent authority. Misappropriation o General rule: if a partner acting in his individual capacity improperly makes use of clients money or property in the firms business, the partnership is not liable. o However if the clients money or property is still in the firms possession or under its control, the client can recover the same from the partnership. Contractual liability o All partners are jointly liable for debts and contracts incurred by the partnership. o If the firms assets are not sufficient to discharge the debt, the partners will be required to pay for any outstanding debt from their private assets. o A new partner who has just been admitted to the firm is not liable for debts incurred prior to his admission unless he agrees to be liable Criminal liability o All partners ARE NOT jointly liable in criminal cases. Duration o When a person is admitted as a partner into an existing firm he immediately assumes the liability of a partner. o A new partner is not liable for anything done before he became a partner s.19 (1) PA UNLESS he agrees with the creditors to be liable.

Liability of persons for holding out o S. 16 of the Partnership Act 1961:o A person, who by words spoken or written or by conduct presents himself; or who knowingly allows himself to be represented as a partner; he is liable as a partner to anyone who has on the faith of such representation given credit to the firm. o Where after a partners death, the partnership business continues in the old firm name and the deceased partners name continued to be used, the executor or administrator of the estate is not liable for any partnership debts contracted after his death. Retired partners o When a partner retires from the firm, he remains liable for the partnership debts incurred before his retirement - 19(2). o When a partner retires from the firm, he remains liable for the partnership debts incurred after his retirement unless he has given notice to such persons that he is no longer a partner under S. 38 (1) Partnership Act 1961. e.g. Actual notice to old customers. Re Slew Inn Steamship Co.

(g) Ways to end the partnership: partnership agreement has expired; By mutual agreement; Upon the death or bankruptcy of a partner; if the purpose of the partnership becomes illegal. If the partnership business is at a loss. by a court order

Case study (a) Conditions are important contract terms, if breached gives the injured party the rights to rescind the contract and sues for damages. Warranties are minor contract terms, if breached gives the injured party only the right to damages and not a right to rescind the contract. (b) In this case, Laily should know that she have right as a buyer as we know under the section 15 of the Sale of Goods Act 1957, which seller is in breach of condition that goods sold to fit description. Laily could not reject since she had kept the goods. This is known as implied condition of description. (c) Under section 14(a) of the Sale of Goods Act 1957, buyers have right to reject the goods and gets a full refund of the price. Such as in the implied warranty as to quiet possession, seller was display the policy that Goods Sold Are Not Refundable . (d) An exclusion clause is a term of a contract which is included in the contract by one party of the contract to exclude or modify his liability in the event of a breach of a term of contract on his part. General rule of the an exclusion clause in these unsigned documents only binds the customer provided: The seller has given reasonable notice of the term to the customer before the contract is made. The term must be in clear, precise and legible writings (e) No, it is should not be different answer. Under section 15 of the Sale of Goods Act 1957.