BTW 1042 Malaysian Business Law Tutorial Booklet
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Welcome Welcome to a very important and interesting area of law. You‘ll find many of the topics in the course to be highly relevant not just to business and commerce but as a consumer, and thus important to your daily life.
The purpose behind studying any unit is to gain knowledge and this is the same for Law units obviously. Certainly, just learning the law is useful, but it is far better if you can BOTH learn the law AND learn how to use that knowledge in new or unexpected situations. In other words develop skills as well as knowledge that will continue to serve you well, long after you finish your studies. So, the unit has been designed to teach both – and to assess both in the assignment and in the final exam. Over the years we have seen a lot of students struggle with law units because they did not understand that they were required to master two skills – knowledge of the law and the ability to use that knowledge. Some students even try to memorise large slabs of the text and then write out what they have memorised in the exam. Those students almost always fail. Showing the examiner that you know the law AND can apply it requires that you explain and discuss the legal issues involved in the question - just copying out the text book will never do that effectively. Finally, we view study as very much a personal voyage/experience and not just a simple exercise to obtain a ―piece of paper‖. So we encourage students to become more involved in their studies than the bare minimum needed to pass. Whilst this may appear to be a rather antiquated and idealistic approach it is also a very successful way of obtaining the most out of your potential. Once again welcome, enjoy and good luck.
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Responsibilities of Students As a Monash University student you have the following responsibilities:
to apply yourself to your studies to the best of your abilities to become familiar with the rules and regulations governing the degree in which you are enrolled, and to ensure that the units selected meet the degree requirements to be aware of the policies and practices of the university and of any faculty and department in which you are enrolled, which are contained in the materials and information made available to you to be aware of the rules and regulations concerning the use of university computing, library and other facilities, as set out in published material to meet deadlines for work to be submitted to take the initiative and consult appropriately when problems arise to submit original work for assessment without plagiarising or cheating for on-campus students, to attend lectures, tutorials and seminars for each unit in which you are enrolled to accept joint responsibility for your own learning to contribute to the development of university programs and policies by participating in consultative and deliberative processes in a responsible and ethical manner to be aware of the university's commitment to equal opportunity and to demonstrate tolerance and respect for all members of the university community to respect the right of staff members to express views and opinions to respect the working environment of others in all areas of the university to retain a copy of all assignment work submitted for assessment, and hold it until a grade for the unit has been published to regularly scan personal computers for viruses and other destructive software and to ensure that ‗infections‘ are not transmitted to computers owned by the university, or to computers owned by other students, or by other individuals or organisations to regularly back-up documents, databases, presentations, spreadsheets and other files held on a personal computer which relate to your study at university and to arrange secure storage for these ‗back-up‘ copies to regularly check both the unit Blackboard site and your official university email account.
Plagiarism, Cheating and Collusion You are reminded that university rules (Statute 4.1) prohibit plagiarism, cheating and collusion and that severe penalties may be imposed on students who engage in, or who support other students engaged in, activities which seek to undermine the integrity of the unit assessment process. In simple terms: Plagiarism – means to take and use another person‘s ideas and/or manner of expressing them and to pass them off as your own by failing to give appropriate acknowledgement. Cheating – means seeking to obtain an unfair advantage in an examination or in other written or practical work required to be submitted or completed by a student for assessment.
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Collusion – is the presentation of work which is the result in whole or in part of unauthorised collaboration with another person or persons. Within the university, plagiarism is regarded as a form of theft and is therefore a serious offence. The Faculty will consider that plagiarism has occurred in any of the following circumstances: when phrases and passages are used verbatim without ‗quotation marks‘ and without a reference to the author when an author's work is paraphrased and presented without a reference when other students' work is copied or partly copied when items for assessment are written in conjunction with other students (without explicit direction by the relevant staff member) when a piece of work has already been submitted or assessed.
Ethical Behaviour In the course of your studies you may undertake research projects or case studies, and otherwise discuss business issues with managers, employees or customers of companies or other organisations. Prior to contacting any individual or organisation, you must acquaint yourself with the university‘s Ethics Policy which is available at: http://www.monash.edu.au/resgrant/human-ethics/index.html You must appreciate the goodwill of the individuals and organisations that agree to assist you and must behave in a professional and ethical manner at all times. You must never use or divulge the confidential information of any organisation, including your employer, in any assignment or report without the written permission of this organisation. Students collecting material for assignments etc. must properly represent themselves at all times. You must disclose:
the fact that you are a student of a Monash program the details of the project you are working on whether or not you are employed and if you are employed, who your employer is whether there is the potential for a conflict of interest such as would occur if your employer was an actual or potential competitor of the respondent‘s business.
You must never practise any form of misrepresentation nor use unethical practices to collect information. If you have any doubt about whether or not the data collection you wish to undertake falls within the university‘s Ethics guidelines you must consult your Unit Coordinator.
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Teaching Staff Semester 2, 2016 Chief Examiner: Dr. Adnan Trakic Teaching Staff: Lecturer: Dr. Adnan Trakic Telephone: (+603) 5514 6000 Extn. 6383 Email:
[email protected] Location: Room 6-5-20
Tutors:
Dr. Abdul Majid (Contact details to be announced in tutorials) Ms. Usha Rajan (Contact details to be announced in tutorials) Mr. Athirathan (Contact details to be announced in tutorials) Dr. Adnan Trakic (Contact details to be announced in tutorials)
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Unit Schedule
Where do our laws come from? Week
Activities
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Topic 1: Introduction to the Malaysian Legal System
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Topic 2: Law of Torts, Negligent Misstatement Topic 3a (i): Law of Contract, Formation Topic 3a (ii): Law of Contract, Consideration, Promissory Estoppel, Intention Topic 3b (i): Law of Contract, Content- Express Terms Topic 3c:Law of ContractExemption Clauses Topic 3d: Law of Contract, Vitiating Factors Topic 3e: Law of Contract, Discharge, Breach & Remedies Topic 4: Agency
3 4
5
6 7 8
9 10
11
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Topic 5a: Business Organisations: Law of Partnership Topic 5b: Business Organisations: Company Law Topic 6: Revision
Tutorial Important Dates Questions Assignment Choose Assignment Instructions Partner and Expectations Module 1 Module 2 Module 3a(i)
Module 3a (ii) Module 3b (i) Module 3c Module 3d
Module 3e Module 4
Module 5a
Module 5b
SWOT VAC
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Where do laws come from?
Module 1: Introduction to the malaysian Legal System Topic Outline
This is a preliminary topic which examines what law is and from where it originates. Secondly, it examines the nature and characteristics of the Malaysian Legal system, and how commerce is regulated. Accordingly it is a very important topic because it provides the foundation for understanding all other topics studied this semester. This topic focuses on:
the nature of the Malaysian Legal system and the various sources of laws
the role of parliament as a source of law, statutes and the primary rules of statutory interpretation
the role of courts as a source of law, and the doctrine of precedent
the Malaysian court system - the appellate structure of courts will be used to illustrate the rules of precedent
the origins of terms such as common law and equity and the meanings and remedies that are given by each
alternative dispute resolution systems operating in Malaysia
Learning Objectives On completing this topic, you should be able to:
identify the sources of law in Malaysia
describe the role of parliament as a source of law
describe the role of the judiciary as a source of law
recognise the fundamental rules of statutory interpretation
identify, and describe the hierarchy of courts and the appeal system and recognise the role of alternative dispute resolution mechanisms
understand relevant variations in the Australian legal system
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Readings Trakic et al., 2014, Law for Business
Ch 1 & 2
Wan Arfah Hamzah, Malaysian Legal System Abdul Majid bin Nabi Baksh & Krishnan Arjunan, Business Law in Malaysia Sweeney and O‘Reilly, Law in Commerce
Ch 1-8 Ch 1-4 Ch 1
Tutorial Questions 1. Does the common law of England apply in Malaysia? Give reasons for your answer. 2. When do judges get the opportunity to make new laws? 3.
Define the following terms: obiter dicta ratio decidendi appellant respondent plaintiff defendant
You may also find a legal dictionary useful to clarify the meaning of other words and phrases you cover in this unit.
4.
5.
Explain the doctrine of precedent. How does it work?
Read the case … and answer the following:
(a)
What were the facts of the case?
(b)
What did the court decide?
(c)
What reasons did the court give for deciding the way it did?
(d)
Would the decision bind: i. The Magistrates Court; ii. The Court of Appeal; iii. The High Court of Malaya; iv. The Sessions Court;
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ABC PTY LTD Appellant v. AHMAD BAKHIL Respondent COURT OF APPEAL No. 4755 of 1997 JUDGES: WINNEKE, P., TADGELL and BATT, JJ.A. WHERE HELD: KUALA LUMPUR DATE OF HEARING: 6 April 1988 DATE OF JUDGMENT: 28 May 1988 CATCHWORDS: Contract - Document signed by one party - Whether contractual Whether exemption of liability. TADGELL, J.A.: The appellant complains of a judgment for pecuniary damages for personal injuries, interest and costs given against it in favour of the respondent in the High Court on 3 March 1997 after a trial before a judge alone. The appellant carried on the business of providing for hire to the public "go-karts and a go-kart racing track" at West Keysborough. The evidence indicates that a go-kart is a low-slung, open, four-wheeled, rubber-tyred vehicle powered by a rear-end petrol engine and designed for recreational racing on a dedicated track. The respondent, Ahmad Bakhil, attended with his friend, Kamini Surendran, at the appellant's racing track at about 7 p.m. on Monday, 26 April 1993. He had turned 25 years of age a couple of days before. Miss Surendran was an employee of a local radio station, 3MP, which had booked the appellant's racing track for a corporate promotion night for staff members, their families and friends. She and the respondent were members of the group attending the promotion night to which, according to his evidence, she had invited him only that evening. He deposed that "I went there as part of that group to compete and have fun with these particular people on the super-kart go-kart track". The respondent swore in chief that when he and Miss Surendran arrived at the track they called at what he described as "like a canteen-type of set-up" which, one might gather, was some kind of booth or office. There was no other evidence describing it. He swore in chief that he was told (but it does not appear by whom) "... to sign a particular form so you can register your name to be able to do a lap of the go-kart race and once I did that I was qualified to drive the faster vehicle". He signed the form. In cross-examination the respondent swore that he did not read the form. He swore that he was not given enough time to read the form or an opportunity to do so, and that "I was being rushed by the group of people and by operators and people to get these forms signed, give it across to the right people there so we can get out on the track and start proceedings because there was a large group of people there ... They were saying that I had to hurry up and sign the document to get out there ...".
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He said also in effect that he treated the form as "a marketing, probably, or registration type of form". In re-examination, being asked to expand on that, he said "... it's usually I feel for a marketing registration purpose (1) to get my details for obviously issuing me with a licence as a registration form and (2) as a marketing purpose for sending out pamphlets, things to keep to go back with other people, other groups and things like that". In that connexion it may be mentioned that the four opening lines at the top of the form, in prominent, bold capitals, beginning "TO HELP WITH OUR ADVERTISING ..." were printed in red, the rest being in black. Miss Surendran swore that when she arrived at the premises she was asked to sign a form "where I put my name and address". It was the same kind of form as that signed by the respondent. When asked in chief what the form was for, she said "I guess - we were there as a group, and it was organised by 3MP who I work for. Everyone in the group signed a form to get our licences. You have to get a licence before you can drive." She swore in cross-examination that "... it was very rushed. I didn't read my form"; and that "There was a group of us together and it was very rushed to fill the forms out ...". Both the respondent and Miss Surendran drove go-karts at the track on the night in question. He swore that he qualified to race for a trophy and that in the course of a race his vehicle overturned, when he suffered a fracture of his arm. His story was that the overturning was attributable to a defect in the track whereas the appellant contended that the respondent's vehicle had collided with another while he was driving recklessly, causing it to overturn. In his statement of claim the respondent relied on three causes of action: breach of a contract for the hire of a go-kart; breach of s.52 of the Trade Practices Act 1974 and of s.11 of the Fair Trading Act 1985; and negligence. The extent to which the respondent relied at the trial on the causes of action other than negligence was a matter of some debate before us. Senior counsel for the respondent (who had not, but whose junior had, appeared at the trial) told us that the case had been conducted purely as a negligence claim, the contract claim and the statutory claims having been abandoned. Be that as it may, it is clear enough that the appellant relied on the document that had been signed by the respondent as constituting an agreement, whether the respondent relied on any agreement or not. The respondent certainly did not rely on the document. The learned judge accepted the respondent's evidence that he had not been in a collision with another vehicle but did not find that a defect in the track caused or contributed to the collision. Instead, his Honour found that the most likely explanation for the accident was that the respondent attempted to round a corner at a speed that, because of his want of instruction and experience, led him to take inappropriate action which resulted in the overturning. His Honour found in effect that the appellant had allowed the respondent to engage in go-kart racing, an inherently dangerous pastime, when he had not had "sufficient education, instruction, experience and testing" to do so without risk to himself and others. The judge found the appellant to have been liable to the respondent on that footing but did not specifically note in his reasons for judgment the cause of action upon which
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liability was found to have been incurred. Inferentially or presumably, however, the cause of action on which the respondent was found to have succeeded was negligence, for the judge found the respondent to have been guilty of contributory negligence, and he apportioned liability 75% to the respondent and 25% to the appellant. His Honour assessed damages at $35,000 and awarded 25% of that sum - $8,750 - to the respondent, together with damages in the nature of interest of $2,012, and costs. …. [T]the appellant contends . . . that, because the document which was signed by the respondent was of a kind that every driver was required to sign before driving, and was clearly contractual on its face, we should conclude that the respondent bound himself by it. Counsel for the appellant was disposed to concede in his reply that contractual documents containing an onerous exemptive provision must be brought to the notice of the party against whom they are to be enforced, and contended that in this case the provision in question was so brought. Assuming, without deciding, that the term on which the appellant seeks to rely is onerous in the relevant sense, and that the concession was well made (as to which see, for example, the judgment of Bramwell, L.J. in Parker v. South Eastern Railway Co., supra, at 428, the judgment of Jacobs, J. referred to above and Interfoto Library Ltd. v. Stiletto Visual Programs Ltd. [1989] Q.B. 433) I see no reason why the proved facts of the case require a conclusion that there was a contract of hire between the appellant and the respondent constituted by the document that the respondent signed, or indeed any contract at all. The following considerations tend, in my opinion, to render any such conclusion at best speculative. There was no evidence that anyone, whether on behalf of the appellant or 3MP, had told or suggested to the respondent, or any other participant in the promotion night, that participation required or concerned on the part of a participant any kind of agreement with the appellant save for a licence to drive. Nor is there evidence that, before participants were asked to sign the form, they were given any notice or other indication that any contractual or other arrangement was to exist between them and the appellant, save for a licence to drive. In the circumstances it is unnecessary to attempt to construe the term of the form on which the appellant seeks to rely. I would dismiss the appeal. __________________ WINNEKE, P.: In my opinion this appeal should be dismissed. __________________ BATT, J.A.: The facts of this case are set out in the reasons for judgment of Tadgell, J.A., which I have had the benefit of reading. I regret that I cannot share his Honour's conclusion. . . .The circumstances referred to earlier show, in my judgment, that the respondent's completion and signature of Ex.1 was the price or quid pro quo for the appellant's consent, licence and permission abovementioned which he needed. The known circumstances attending the signing of Ex.1, then, are eloquent of contract. The final question is whether, on its true interpretation, Ex.1, and specifically clause 2, exempted or relieved the appellant, or rendered it immune, from liability to the respondent in damages for the negligence on its
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part which the trial judge found, namely, allowing the respondent to engage in the inherently dangerous pastime when he had not had sufficient instruction from the appellant. In my view, it is clear that on its true interpretation clause 2 did have that effect. For the foregoing reasons, I am of opinion that the appeal should be allowed, the judgment below should be set aside and in lieu thereof it should be ordered that there be judgment for the defendant (the appellant).
7. Imagine a hypothetical statute called the Road Traffic Act 1985. Section 18 reads: (1) It is an offence for any person to drive any vehicle on any footpath. (2) The penalty for breach of subsection (1) is 2 Penalty Units. (3)This section will not apply if the relevant Roads Authority or municipal council have specifically authorised the conduct in quest ion either in writing or by way of posted signs. Would the Road Traffic Act 1985 s 18 apply to each of the following scenario s? Give reasons for your answers: a) b) c) d)
Venus was caught galloping a horse along a footpath. Michael was caught riding a motorbike on a footpath. Cassy was caught riding her tricycle on a footpath. Sekar‘s grandmother was stopped driving her motorised wheelchair footpath.
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Module 2A: The Law of Take care or Torts, “else”!? Negligence and negligent Misstatement (Advice) Topic Outline This topic examines careless advice that results in a victim suffering a purely financial loss: NOT a physical injury: eg poor advice regarding investments from a financial planner.
Learning Objectives On completing this topic, you should be able to:
state the common law rules developed for negligent misstatement and apply these rules to a practical situation;
state and apply the rules relevant for auditors and the giving of advice to a third party.
draw comparisons between Malaysian and Australian case-law.
Readings Trakic et al., 2014, Law for Business
Ch 14
Abdul Majid bin Nabi Baksh & Krishnan Arjunan, Business Law in Malaysia Sweeney and O‘Reilly, Law in Commerce
Ch 21 Ch 3
Tutorial Questions 1. What must be shown before a person can have an action against another for negligent misstatement? 2. Mrs. Nguyen asked her accountant Mr. Wu for investment advice. On behalf of his client Mr Wu telephoned the City of Dandenong, and asked them about their plans to redevelop the suburb of Doveton. In particular
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he asked them about any road widening or other construction proposals that may affect the value of real property in the area being redeveloped. He was told by a clerk that ―To the best of my knowledge there are no specific road widening proposals that may affect any part of the area, but I cannot be 100% sure as at this stage the redevelopment is in the early planning stages, and the situation may change.‖ Mr. Wu then advised Mrs. Nguyen in a letter dated 1 April 2005 to purchase land in the suburb of Doveton because the area was about to be redeveloped, and land values would triple because of the redevelopment. He did not mention anything about the current position of the redevelopment plans. On the basis of this advice, Mrs. Nguyen then purchased land for $500,000, and a few months later was horrified to discover that due to an access road to the Monash freeway being built, the land purchased by her had decreased in value to $150,000. Advise Mrs. Nguyen of her non-contractual rights, if any, against Mr Wu and the City of Dandenong
3. Video case study/problem 1 Watch the video problem titled ‗Video 1: Defective Advice‘ and also view the Defective Advice Brochure. The script of the video scenario and the brochure are reprinted at the end of these Study Materials.(a) Having viewed the video, advise Wayne (the client) whether he is likely to succeed in suing Steve (the accountant) in negligence to recover the tax penalties he has suffered.(b) Advise Primrose (the florist) whether she is likely to succeed in suing Steve (the accountant) for negligent misstatement.
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Enforcin g a contract is simple: a BIG, BIG Stick!!
Module 3: The Law of Contract Introduction
This topic covers the legal aspects that relate to making contracts. A contract is essentially an agreement between two or more persons that will be enforced by a court of law. A contract may be entirely in writing or entirely oral or partly written and partly oral. A large part of contract law revolves around ascertaining the intention of the parties. To do this the courts will apply an objective test. What would a reasonable person, observing the behaviour of the parties, conclude? Most of the rules governing contracts are derived from the common law, however the Contracts Act 1950, the Sale of Goods Act, the Consumer Protection Act and the Specific Relief Act introduce some legislative variations and these will be studied. Another area important to business is the use of exemption clauses, where one party will seek protection from legal action by including a term into the agreement that seeks to deny their liability or exempt them from liability. Such clauses have an important impact upon the remedies available other ―injured party‖. In order to make it easier for you this topic has been divided into 4 subtopics as follows.
Sub-topics Topic 3a: Formation This will deal with forming valid contracts. Topic 3b: Contents Terms, both express and implied within the contract will be examined in this topic . Topic 3c: Exemption Clauses This will examine exclusion clauses and limitation clauses Topic 3d: Vitiating factors How an agreement can be legally terminated due to factors that ―vitiate‖ or affect a party‘s consent to the contract. Topic 3e: Breach of contract & Remedies This sub-topic will cover the different forms of breach and remedies available. 15
3a: Formation Topic Outline This will deal with forming valid contracts. It will be divided into two parts: (1) offer and acceptance; (2) intention to be bound and consideration. (There are other aspects to formation such as legality of the agreement and capacity of the parties but we will only focus on the 4 listed here.) When analysing whether a contract is formed it is useful to bear in mind the concept of consensus ad idem. In order to determine whether an agreement is reached (offer and acceptance), and secondly, whether such an agreement is intended to be legally binding (intention to be bound) and is legally binding (consideration).
Part 1: Offer and Acceptance Learning Objectives On completing this sub-topic, you should be able to:
define the elements of a simple contract
define the terms ‗offeror‘ and ‗offeree‘
identify and distinguish between an ‗offer‘ and an ‗invitation to treat‘, or a request for information
recognise and apply the rules of offer and acceptance to a practical problem, including revocation of an offer, termination of an offer, lapse of an offer, and communication of acceptance
make comparisons between Malaysian and Australian case-law Also you will consider: • What is an invitation to treat? • How does it differ from an ―offer‖? • What is the purpose of retaining the concept of an invitation to treat? • A business may enter into many different commercial contracts.
Readings Trakic et al., 2014, Law for Business Syed Ahmad Alsagoff, Principles of the Law of Contract in Malaysia Adnan Trakic, An Offer Vis-a-Vis An Invitation to Treat: A Comparative Analysis with Reference to Malaysia‖, [2012] 5 MLJ i Adnan Trakic, ‘Offer‘ and Its Significance for Formation of Contracts: The Malaysian Perspective, [2012] 5 MLJ cxlvii Abdul Majid bin Nabi Baksh & Krishnan Arjunan, Business Law in
Ch 3 & 4 Ch 1-4
Ch 8&9
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Malaysia Sweeney and O‘Reilly, Law in Commerce
Ch 4
Tutorial Questions 1. What are the elements that make up a legally enforceable agreement? 2. Alan needed money quickly. He owned an original 1886 edition of Kidnapped by Robert Louis Stevenson, a book which he advertised in the newspaper for sale for $1000. Cate saw the advertisement. She telephoned Alan, saying that she would buy the book for $1000. Alan, however, replied that he had reconsidered the matter and that he could not sell the book for less than $2000. Cate replied that she would give him $1500. Alan replied that he would only sell the book for $2000 but that he would keep his offer open for seven days. He also said that Cate could fax her acceptance to him if she wanted. The next day Alan sold the book to his friend David because David loved the book so much and because he paid $7000 for it. Two days later Cate decided to purchase the book for Alan‘s price of $2000. She posted her acceptance to Alan. The next day David told Cate that he had bought a copy of Kidnapped from Alan for $7,000. Cate rang Alan to confirm that she had accepted his offer. Later that day Alan received Cate‘s acceptance. Is there a contract between ay of the parties? Explain why using ―IRAC‖. 3. Video case study/problem Watch the video problem titled ‗Video 2: Forming a contract?‘ The script of the video scenario is available at the end of this Unit Guide. Advise Gerrie whether there is a binding contract to buy/sell the car. Give full reasons for your answer.
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Part 2: Intention/Consideration
Topic Outline This topic examines the second series of rules for formation of contract and the elements for making a valid contract. It examines:
the intention to be bound to a contract
the rules relating to consideration and,
the doctrine of promissory estoppel.
Learning Objectives On completing this sub-topic, you should be able to:
recognise and apply the presumptions regarding the intention to create legal relations to a factual problem
define consideration, including what constitutes valid consideration
apply the rules on consideration to a practical problem,
describe and apply the elements of promissory estoppel
identify how consideration
make comparisons between Malaysian and Australian case-law
a
deed
overcomes
potential
problems
regarding
Readings Trakic et al., 2014, Law for Business
Ch 5-7
Syed Ahmad Alsagoff, Principles of the Law of Contract in Malaysia Abdul Majid bin Nabi Baksh & Krishnan Arjunan, Business Law in Malaysia Sweeney and O‘Reilly, Law in Commerce
Ch 5 & 6 Ch 10 & 11 Ch 5
Tutorial Questions 1.
(a) You and your friends form the Sunway Photographic Society in order to pursue your hobby of photography. You need to find a place where you can hold meetings. Luckily one of the group‘s fathers lets you use his garage (on his residential property) for 6 months provided
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you pay him the sum of RM10 per month, and promise not to wreck the property. Is this a legally binding agreement? (b) You decide to organise a raffle to raise money. Is it possible to take steps to ensure that there is no legally binding agreement between the Sunway Photographic Society and the contestants? Provide an example of what you would do.
2.
X has several outstanding debts, including:
RM10,000 owing to B
RM 5,000 owing to C
Y, X‘s father, offers to pay B the sum of RM2,500 on the understanding that B will not make any claims against X for the balance of the RM10,000 debt. B agrees, but later changes his mind and claims the balance of the debt owed by X. C agrees to accept a sweepstake ticket in the Melbourne Cup in settlement of the debt. Later C thinks that the ticket was not sufficient and wants repayment of half the RM5,000 debt in addition to the ticket. Would B and/or C be successful?
3.
Answer the following question using IRAC:
Albert is a builder. Bea is the owner of a block of land upon which she intends to build a house. Albert and Bea enter into a contract for Albert to build a house for RM75,000. The contract contains no provision for the price to increase in line with price rises in materials. The price of materials rises significantly. Albert wants an extra RM10,000 to continue. Bea agrees and Albert builds the house. Does Bea have to pay the extra RM10,000?
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3b: Contents Topic outline This topic examines the content of the contract, in other words the terms of the contract. Terms are divided into two general categories: (1) express terms; and (2) implied terms. We will also examine exemption clauses, which are a very important type of term, and, thus they deserve separate attention. Thus this topic will be divided into three parts: (1) express terms; (2) implied terms; and (3) exemption clauses.
Part 1: Express Terms In Part 1 we will examine:
the concept and nature of terms in a contract
how a court may characterise statements as terms, representations or mere puffery
problems involved in including oral statements as express terms where a written contract exists
Learning Objectives On completing this sub-topic, you should be able to:
distinguish between a ‗term‘ and a ‗representation‘ and list the consequences that flow from the distinction
define and apply the parol evidence rule and the exceptions to this rule
explain and apply the criteria of a collateral contract
apply the tests for determining whether a term is a condition, warranty or intermediate term
distinguish between an express and implied term
make comparisons between Malaysian and Australian case-law.
Readings Trakic et al., 2014, Law for Business Syed Ahmad Alsagoff, Principles of the Law of Contract in Malaysia Abdul Majid bin Nabi Baksh & Krishnan Arjunan, Business Law in Malaysia Sweeney and O‘Reilly, Law in Commerce
Ch 8 Ch 9 Ch 13 Ch 6
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Tutorial Questions 1. In Oscar Chess Ltd v Williams [1957] 1 WLR 370 the statement about the age of the car was held to be a ‗mere representation‘, whereas in Esso Petroleum Co Ltd v Mardon [1976] 2 WLR 583 the statement about the turnover of the petrol station was held to be a ‗term‘. What is the difference between a ‗term‘ and a ‗mere representation‘? Why is the difference crucial? What factors do the courts take into account when differentiating between terms and mere representations? 2. What is the parol evidence rule? What effect does it have on determining the contents of a contract? What are the major exceptions to the parol evidence rule? 3. You are the legal compliance team who work for The Southern Cross Hospital which is in conflict with Zapit Ltd and wants your help resolving the following problem. The hospital hired an X-ray machine from Zapit Ltd. At the time of hiring, the hospital manager enquired about maintenance of the Xray and was told that all maintenance was the responsibility of the hospital during the period of hire. At the same time the hospital manager was presented with a three page pre-typed document for signature. The manager only read parts of the document. One clause that the manager did not read said: ―Any maintenance must be carried out by Zapit Ltd. Strict compliance with this condition is of the essence of the contract.‖ The hospital repaired the X-ray using its own hospital maintenance staff. The staff are highly skilled and able to carry out such repairs. When Zapit heard of the hospital‘s actions it notified the hospital that the contract was terminated and the machine had to be returned immediately. The hospital is unable to replace the machine at short notice and wants to know if it has to return the X-ray. (a) Advise the hospital regarding its rights and obligations, and make suggestions as to how it might avoid this problem in the future. (b) Would your answer be different if the manager had read the document in full? (c) Would your answer be different if the manager queried whether the hospital could perform the maintenance and was told by a secretary at Zapit: 'I‘m not totally sure but I think it should be ok.'
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Part 2: Implied Terms In Part 2 we will examine situations where the law allows terms to be implied. Implied terms are divided into two sub-categories: terms implied by the courts, eg for business efficacy, past dealings and trade custom; and: terms implied by statute, such as terms relating to the merchantable quality or fitness of the purpose of goods and consumer protection laws
Learning Objectives On completing this sub-topic, you should be able to: • describe when the courts are prepared to ―fill in the gaps‖ in the express contract; • identify those contracts where the courts commonly imply terms; • explain what happens with terms implied by statutes • apply the concepts and rules examined in this topic to practical situations
make comparisons between Malaysian and Australian law
Readings Trakic et al., 2014, Law for Business Syed Ahmad Alsagoff, Principles of the Law of Contract in Malaysia Abdul Majid bin Nabi Baksh & Krishnan Arjunan, Business Law in Malaysia Sweeney and O‘Reilly, Law in Commerce
Ch 8 Ch 9 Ch 13 Ch 6
Tutorial Questions 1. How are terms ―implied‖ into contracts? 2. Charlie enters R Pty Ltd’s shop. He speaks to a salesperson, ―Look, I‘m going climbing in the Himalayas and I need a warm sleeping bag. What have you got?‖ The salesperson shows Charlie three sleeping bags, one of which is the tent manufactured by X. The salesperson is called away. Charlie selects X‘s tent and pays the cashier $750.
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Charlie goes to the Himalayas and suffers frost-bite because the tent is totally inadequate. In fact the tent is designed for use in mild climates. Charlie hobbles into R‘s store and demands an explanation and compensation. The manager says, ―Well you selected the tent and what‘s more the sign at the cashier‘s desk clearly states that R Pty Ltd makes no promises, warranties or conditions in relation to the goods sold and shall not be liable for any damages save and except replacement of goods proved to be faulty at the time of sale.‖ C remembers reading the sign at the time he bought the goods. Does C have a good cause of action against R Pty Ltd.?
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3c: Exemption Clauses In Part 3 we will examine exemption clauses which are divided into: (1) exclusion clauses; and (2) limiting clauses.
Learning Objectives On completing this sub-topic, you should be able to:
tests and limitations applied to the inclusion and interpretation of exemption clauses; and
the effect of an exemption clause.
Readings Trakic et al., 2014, Law for Business Syed Ahmad Alsagoff, Principles of the Law of Contract in Malaysia Abdul Majid bin Nabi Baksh & Krishnan Arjunan, Business Law in Malaysia Sweeney and O‘Reilly, Law in Commerce
Ch 9 & 10 Ch 9 Ch 14 Ch 6
Tutorial Questions 1. Where a person signs a document that contains an exemption clause, is that party bound by the exemption clause? Where the document containing an exemption clause is unsigned, what must the party seeking to rely on the clause show before they can rely on the clause? 2. Annie takes her expensive coat to Simon‘s Dry Cleaning. She is handed a ticket, the face of which contains a number, her name, a description of the coat and an annotation to the effect that the coat will be available for collection the following Friday. On the reverse side in small print are the words: ‗Conditions apply‘. On the rear wall facing the counter is a sign written in even smaller print which reads: ‗Simon‘s Dry Cleaning will not be liable for any stains or other damage to any clothing whatsoever‘. On Annie‘s return she discovers the coat has bad stain marks on it. Advise her. 3. Jim runs a small cartage operation in Kuala Lumpur. One of his best customers is ABC Ltd, which operates a chain of retail stores throughout the metropolitan area. ABC uses Jim to transfer goods from one store to another as the situation requires. The agreed procedure is always the same. ABC telephones Jim and gives him the collection point and the destination. Jim picks up the goods. An employee of ABC and Jim fill in and sign a collection docket. ABC keeps the duplicate. Jim takes
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the goods directly to the drop off point and has the docket countersigned by another employee of ABC. Jim’s Cartage Company Sir John Monash Drive, Caulfield Collection Docket Date:
This receipt is an acknowledgment that the goods were delivered to Jim in reasonable condition. Consignor must arrange own insurance. Under no circumstances is Jim to be regarded as a common carrier.
Pick-up address: Destination: Goods: Consignor‘s signature: Jim‘s signature: See Over – Terms
Jim will use best endeavours to ensure goods delivered safely. Jim does not accept any responsibility for any loss or damage to any goods carried pursuant to this contract however such loss or damage may arise or be caused whether by negligence or otherwise.
At 12.30 pm on June 5th Jim collects a quantity of expensive goods from one of ABC‘s shops. The usual procedure on collection is followed. The docket is filled in, signed and a duplicate kept by ABC. As it is nearly lunch time Jim decides to have lunch before delivering the goods. He travels a number of kilometres off the direct route to another suburb to collect a friend. Together they then go to a hotel which has a great counter lunch. Jim parks on a steep hill. Unfortunately Jim hasn‘t checked his brakes lately. They slip and the vehicle races down the hill smashing into a number of obstacles on the way. The goods belonging to ABC are totally destroyed. ABC maintains that Jim must pay for the goods. Jim denies liability on the basis of the exclusion clause. Advise the parties. Do you need extra information? If so what would it be?
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3d: Vitiating factors Topic outline
This topic examines: how an agreement between parties may be unenforceable because there was no genuine agreement dues to the existence of vitiating factor(s)
actionable duress, unconscionable conduct and/or undue influence
misrepresentation that may be actionable under common law (fraudulent, negligent and purely innocent misrepresentation) and the remedies available
regulation of misleading or deceptive conduct under legislation
the instances in which contracts created by a minor will and will not be enforceable against the minor due to the minor‘s limited contractual capacity.
Learning Objectives On completing this sub-topic, you should be able to:
define the term ‗vitiating factors‘
list the elements of a misrepresentation
apply the different types of misrepresentation, both common law and statutory, to a practical situation
list the remedies available for each type of misrepresentation
define and recognise conduct that is unconscionable and describe its effect
define duress and its effect on a contract
define incapacity of a minor and describe the rules regarding the liability of minors for contracts involving necessaries and beneficial contracts of service
apply the rules applicable to minors to a practical problem
make comparisons between Malaysian and Australian law
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Readings Trakic et al., 2014, Law for Business Syed Ahmad Alsagoff, Principles of the Law of Contract in Malaysia Abdul Majid bin Nabi Baksh & Krishnan Arjunan, Business Law in Malaysia Sweeney and O‘Reilly, Law in Commerce
Ch 11 Ch 11, 12, 13, & 14. Ch 15 Ch 8
Tutorial Questions 1. Answer the following questions, using cases to support your answer: a. What are the elements of misrepresentation? b. When is a misrepresentation fraudulent? What are the remedies for a victim of such a fraudulent misrepresentation? What are the remedies for a victim of such an innocent misrepresentation? What is negligent misrepresentation? c. Explain the legal concept of ‗duress, coercion, undue influence and mistake‘. d. Explain the remedy of rescission. In what circumstances is the right to rescind lost? 2.
In 2001 Bill Baxter decided he wanted to move out of Kuala Lumpur and live on a small farm. He inspected several properties before he found one that truly suited his purposes — a 50-hectare property situated about 100 kilometres from Kuala Lumpur. As Bill was inspecting the property he noticed that a creek ran through the bottom paddock. When he asked the owner whether the creek was permanent, the owner told him that ‗it had never run dry‘. This pleased Bill because he knew how important it was to have a permanent source of water. He signed a contract of sale the following day. Bill moved into the property in November but to his great annoyance the creek ran dry only one month later. Furthermore, neighbours have advised him that the creek always dries up in July. Bill comes to you for advice. You discover that the signed contract does not refer to the owner‘s comments about the creek Advise Bill of all the legal grounds upon which he can sue the vendor and discuss any remedies that may arise from each of these grounds. Please refer to relevant legislation and cases.
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3e: Discharge, Breach of contract and remedies Topic outline This topic examines how a contract is discharged, in particular what happens when a party breaches a term of the contract: the different types of discharge
the different forms of breach that can occur in a contract
the relevant remedies available to the party to seek relief for that form of breach.
Learning Objectives On completing this sub-topic, you should be able to:
list the ways that a contract may be discharged
define and recognise when a contract has been breached
list the types of breach and the consequences that flow from each type
list the rules relating to the award of damages with particular emphasis on the two ‗limbs‘ of Hadley v Baxendale
make comparisons between Malaysian and Australian law
Readings Trakic et al., 2014, Law for Business Syed Ahmad Alsagoff, Principles of the Law of Contract in Malaysia Abdul Majid bin Nabi Baksh & Krishnan Arjunan, Business Law in Malaysia Sweeney and O‘Reilly, Law in Commerce
Ch 12 & 24 Ch 17, 18 & 19 Ch 18 & 19 Ch 8
Tutorial Questions 1. On 1 March 2015, the Monash Soccer Team booked a flight to London to participate in the World Universities Football Cup from 21 to 26 March 2015. Their travel agents, Freedom Flight Sdn Bhd, gave a discount fare of RM2000 per person, 50% of the price was
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paid upon booking and the balance of the price was to be paid on 19 March 2015 upon collecting the tickets. On 18 March 2015, the air traffic controllers of KLIA declared a strike when the airport management refused to reduce their retirement age to 45 years old. When the Monash Soccer Team went to Freedom Flight Sdn Bhd on 19 March 2015, he refused to pay the balance unless it is confirmed that the team can fly out of Kuala Lumpur on 19 March 2015. The strike lasted for three days. By that time it was too late for the team to compete in the competition. The Monash Soccer Team claims for the return of the sum paid to Freedom Flight Sdn Bhd. Freedom Flight Sdn Bhd refused to return it and instead sued for the balance 50% to be paid by the Monash Soccer Team. Decide.
2. Alpha Pty Ltd hires a machine from Beta Machines Ltd. The machine has been negligently maintained by Beta. It breaks down, and it will take Beta three weeks to repair the machine. A replacement can be hired, but none is available for a week. Normal losses amount to RM1,000 a day. [Alpha‘s factory operates 7 days a week.] Alpha Pty Ltd has also lost a lucrative government contract worth a further RM50,000. The hire of the replacement machine is RM5,000 in total. What damages can Alpha Pty Ltd claim?
3. On 1 July, Mary, a builder, ordered building materials from Sancho, a building materials supplier. The materials were to be delivered on 1 October. However, on 1 September Sancho advised Mary that he would be unable to supply the materials on the due date. (a) What options are available to Mary in these circumstances? (b) What would your answer be if Sancho had advised Mary that he may be unable to supply the materials. (c) Consider the following. What if when Sancho advised Mary that he is unable to supply the materials, Mary replied: ―That‘s ok, have another 3 days.‖ Could Mary change her mind the next day and demand that the deadline be met?
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4. Sara engages Bob to dress up as a clown and roam the streets of Melbourne advertising her novelty shop. The contract, which is to last for one year, states that Bob must advise Sara at the start of each day the route he plans to take. On the tenth day Bob did not advise Sara of the route he was taking. Unfortunately Bob took a route past a cemetery where mourners at a funeral took offence to his antics. Sara has subsequently received many complaints and many people have chosen to boycott her store. This has happened during the Christmas buying season and she has suffered many thousands of dollars of lost profits. Sara wishes to repudiate the contract. Can she do this?
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Module 4: AGENCY, Agency!
Introduction
So far we have been looking at situations where the parties to the contract were the ones that were involved in making the contract. This topic looks at agency. Agency is a term widely used in commercial circles. We are all familiar with terms such as real estate agent, authorised agent, licensed agent, and many others. Agency is also a legal term. It describes a particular relationship between two persons – the principal (Pr) and the agent (A) and the third person (TP). Important point: Not all relationships which wider commercial usage calls agencies are in fact agencies within the meaning of the law. We are concerned only with what makes up an agency relationship in law. Agency law is very important. In this complex, commercial environment many transactions are not conducted between principal and principal. Intermediaries are widely used to act on behalf of the principals. In fact some business entities would find it impossible to operate without using an agent. The most common way that an agent acts on behalf of the principal is by making a contract on the principal‘s behalf. In this respect the agency situation is an exception to the doctrine of privity of contract. A principal may also become liable for an agent‘s misrepresentations.
Topic outline This topic will examine:
the definition of an agent and how an agency relationship is established
how the agent‘s actions may affect the principal‘s rights and obligations in relation to a third party
the agent‘s authority, how the law determines the scope of that authority
the rights and duties owed by the agent to the principal, the concept of fiduciary duties
situations in which an agent may become liable to the principal and/or to the third party
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termination of agency.
Learning Objectives At the end of this topic you should be able to:
list the ways that an agency may be created
define and recognise an agency situation
define and apply the rules of an agent‘s authority to a practical problem and derive a conclusion
list and apply the rules regarding an agent‘s duties to the principal to determine if the agent breached these duties
understand the rights and duties of an agent.
make comparisons between Malaysian and Australian law
Readings Trakic et al., 2014, Law for Business Abdul Majid bin Nabi Baksh & Krishnan Arjunan, Business Law in Malaysia Sweeney and O‘Reilly, Law in Commerce
Ch 13 Ch 20 Ch 10
Tutorial Questions 1.
Andrew used to work for Peter. His job primarily consisted of collecting debts from Peter‘s clients. One of Peter‘s clients, Trevor, who did not know that Andrew had been dismissed, paid Andrew $200 which he owed Peter. Andrew disappeared with the money. Peter wants to know whether he can compel Trevor to pay him again, or must he seek the money from Andrew?
2.
Sam, the Accountant of XYZ Ltd, often acted as the Acting Manager of the company while the Managing Director and other senior staff were absent. His normal duties when in such a position involved overseeing internal company matters and ensuring that his own Accounting Department operated well. While acting as Acting Manager, Sam purchased land at auction from TP on behalf of the company for $1 million. Advise the company whether it may withdraw from the contract on the ground that he acted outside his authority.
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3.
Video case study/problem Watch the video problem titled ‗Video 3: Agency‘. The video is included on the CD-ROM that accompanies your unit materials (or for on-campus students, these may have been viewed in class and/or available for loan on CD from your campus library reserve desk). The script of the video scenario is available at the end of this Unit Guide. Advise Steve whether he is liable to pay for the painting purchased by Primrose. Give full reasons for your answer.
4.
Patrick appoints Adolf as his agent to sell his original art work by Tom Wesselmann entitled ‗Bathtub Collage‘. Patrick and Adolf enter a written contract which states Adolf is entitled to a commission of 10% of the sale price. Adolf is approached by the Galerie Sonnabend (GS) in Paris. GS agreed to purchase the work for $950,000. In addition, they paid Adolf an additional commission of 15% of the purchase price to ensure that their offer was accepted by Patrick. The Tate Gallery in London offered $1,000,000 to Adolf to purchase the painting but did not agree to give him an additional personal commission, saying his commission was to be paid by Patrick. Patrick sold the work to GS unaware that the Tate Gallery had offered a higher price. After the sale Patrick becomes aware that Adolf obtained a secret commission of 15% of the sale price from the GS. (a) (b)
Advise Patrick if he is bound to sell the art work to GS. Does Patrick have any cause of action against Adolf?
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Not all BUSINESS STRUCTURES are ideal….some provide little legal protection…
Module 5: business Structures: Partnership and Corporations Introduction
This topic examines the advantages and disadvantages of each of the different forms of business structures, in particular partnerships and corporations and the liability associated with that business structure. In order to make it easier for you to work through this topic, it has been divided into three sub-topics that discuss the common types of business structures you will encounter. o o
Topic 5a: Partnerships Topic 5b: Companies
Part 5a: Partnerships Topic outline This topic examines the creation, structure, operation and dissolution of partnerships, as well as the interaction between partnerships and ―outsiders‖. Furthermore, the rights and duties of partners under the Partnership Act will be examined.
Learning Objectives At the end of this topic you should be able to:
define the requirements for establishing a partnership under common law and by statute (formal and informal)
list the factors courts have considered in the interpretation of the definition of partnership
define the concept of fiduciary relationship and its application to a partnership
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define the principles of ‗actual‘ and ‗apparent‘ authority of a partner
list the acts of a partner that bind the other partners
determine whether and to what extent partners are liable for their copartners contractual and/or tortious acts
determine when a partnership can be dissolved and the consequences of dissolution
list the advantages and disadvantages of a partnership structure
make comparisons between Malaysian and Australian law
Readings Trakic et al., 2014, Law for Business Abdul Majid bin Nabi Baksh & Krishnan Arjunan, Business Law in Malaysia Sweeney and O‘Reilly, Law in Commerce
Ch 20 Ch 26 Ch 11
Tutorial Questions 1.
Answer the following questions using cases as well as the relevant sections of the Partnership Act 1961 a. A is owed RM5,000 by the business. The amount is to be repaid by instalments out of the accruing profits of the business. b. B is an employee of the business. As part of her remuneration package she receives a share of the profits. c. What is the interest rate payable for any advance made by a partner beyond the amount of capital that partner has agreed to subscribe? d. What notice should a retiring party give in order to avoid being liable for partnership debts incurred after their retirement? e. Describe the nature of a partnership‘s contractual and noncontractual liability to outsiders.
2.
During a particularly hot summer, Fred, Cedric and Desmond commence a business together making sandwiches using the name ‗Soggy Sangers‘ as their trading name. They also sell coffee and cakes.
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Only Desmond has put capital into the business, and no formal agreement exists between them. However, on many occasions Fred has purchased stock, such as bread, and fresh vegetables, for the business from their various suppliers by using his own money, and he has also set up an account with the suppliers in the name of ‗Soggy Sangers‘. Cedric also has often placed orders on behalf of the business with their various suppliers for stock. At their next meeting Fred, suggests selling alcoholic ice cream. Desmond likes the idea but Cedric, being a teetotaller, does not. Such a change would require extensive renovation of the shop, and also obtaining a licence to sell alcohol. This requires an application to the relevant government authority, which may reject the application. Finally Desmond wishes to leave in two months but wants to make sure that he has no further obligations and commitments once he leaves the business. Answer the following questions: (a) Is the business a partnership? Yes/No (explain). (b) Can Fred and Desmond validly make a decision to embark on the ice cream making venture without Cedric‘s consent? (d) What should Desmond do before he leaves the business? 3.
Albert and Beatrice carry on a business in partnership as hairdressers. (a)
Albert buys a hair dryer, RM100 for the business from X on credit.
(b)
Albert borrows from Y RM3,000 which he claims will be used for partnership purposes.
(c)
Albert buys from Z on behalf of the partnership two dogs, an Alsatian and a poodle.
The partnership agreement between Albert and Beatrice expressly forbids Albert from entering into any of these transactions. X, Y and Z were ignorant of these restrictions. Advise X, Y and Z as to their rights against Beatrice and/or Albert. What would the result be if X, Y, Z had notice of the restrictions? 4.
Video case study/problem Watch the video problem titled ‗Video 4: Partnership‘. The script of the video scenario is available at the end of this Unit Guide. Advise Steve‘s partner, Gerrie, to what extent (if any) she will be liable for the losses by the firm‘s clients due to Steve‘s negligence and breach of contract involved in Steve‘s defective tax advice.
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Part 5b: Companies Topic outline This topic examines corporations, their nature and functions. It also examines the roles played by participants in the operation of a company, and the directors‘ duties under common law and under the Companies Act.
Learning Objectives At the end of this topic you should be able to explain:
how a company comes into existence, the various types of company – how they differ; why chose one and not another the nature of a company list the consequences of a company having a separate legal identity to the participants in the company and the mysterious rite called ‗lifting the corporate veil‘ how a company operates how a company will be bound by the actions of its directors, employees and agents duties of directors and other officers of the company recognise and apply the remedies for the breach of these directors‘ duties to a practical problem
Readings Trakic et al., 2014, Law for Business Abdul Majid bin Nabi Baksh & Krishnan Arjunan, Business Law in Malaysia Sweeney and O‘Reilly, Law in Commerce
Ch 20 Ch 25 Ch 12
Tutorial Questions 1. A company is a person separate from its members and its directors. Explain what this means. 2. Sam, Brian and Ah Kau intend to set up a company known as Setia Sdn Bhd. They seek your advise on the following: a) How is a company incorporated? b) What is the effect of incorporation?
3. Jack and Jill are 2 directors and shareholders of Jakun Sdn. Bhd. Jakun Sdn Bhd would like to borrow RM100,000 from Asia Bank Berhad. Asia Bank Berhad asked for the Memorandum of Association and Articles of Association of Jakun Sdn Bhd.
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a) Explain what is a Memorandum of Association and Articles of Association b) Why is it important for Asia Bank Berhad to obtain a copy of these documents?
4. Sally and Jacob are undecided whether to set up a company or a partnership. Explain to Sally and Jacob 5 legal differences between a company and a partnership 5. What are a director‘s statutory duties? What are a director‘s common law duties?
6. Corina Parsons was the company secretary of Grand Pty Ltd. The terms of her authority were set out in her employment contract — these were rather restrictive since the managing director was her uncle who did not have a great deal of confidence in his young eighteen-year-old niece (who in fact looked a lot older than her age). Without the permission of the company Corina hires a car in the company‘s name from Exec Hire Car Company. In fact she uses the car for her own personal use — neither Grand Pty Ltd nor Exec Hire Car Company was aware of this until later on. Advise Grand Pty Ltd whether it is responsible for the debt to Exec Hire Car Company.
7. Video case study/problem Watch the video problem titled ‗Video 5: Companies‘. The script of the video scenario is available in the e-Unit Guide. Advise the manufacturer whether Wayne is personally liable for the outstanding invoice.
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Additional Materials The following section contains additional materials to assist your study in this unit. Following, you will find the scripts and associated material for video scenarios 1–5. The statutory materials are reprinted in your unit Reader.
Video 1: Defective advice [SETTING: The scene takes place in the office of a tax accountant.] Characters:
Steve (the professional-looking accountant)
The ‘client’, Wayne, average-looking person (the proprietor of a small café business, Wayne’s World)
Primrose another small-business owner (florist)
[The scene opens with Steve (accountant) and Wayne (client) sitting in Steve’s office.] Steve: I understand that you want to reduce your tax bill this year? Wayne: You bet I do. Steve: Well, there is a way, and it‘s perfectly legal. As a small business run by a sole proprietor, the tax man doesn‘t distinguish between your business expenses and your personal expenses, right? It‘s not like a company. So what you should do is have all your business bills put into your name, and then you can claim things like your home phone bills, gas, electricity and the like against the business income. The tax man can‘t tell the difference between home ones and work ones, see? Wayne: But how can that be legal? Steve: Look, it‘s a bit technical, got to do with the concept of legal personality. Ever heard of it? Wayne: No Steve: Well, don‘t you worry about it. Leave the worrying to me! That‘s what you pay me for! Here is a brochure* setting out all the details of what you have to do. [Wayne reads the brochure* briefly. The camera films the brochure briefly. The brochure begins ‗Want to pay less tax?‘] Wayne: Okay, where do I sign? (Chuckles) Steve: No, there‘s nowhere to sign, just do like I‘ve just told you and you‘ll be fine. [The two men shake hands and Wayne leaves Steve’s office.] [New scene] [After leaving Steve’s office, Wayne immediately sees his friend, Primrose – the florist – who seems to be delivering flowers.] Primrose: What are you up to, Wayne? Wayne: Just been to the accountant to save myself a whole lot of tax. Primrose: Not possible, Wayne. You can‘t beat those guys. 39
Wayne:
Oh yes you can. Have a look at this brochure*. You could use the same method for your florist business. [Primrose examines it and looks impressed.] Primrose: Can I keep this for a few days? Wayne: Sure. Just let me have it back when you‘ve finished, because I might show some of my friends at the pub.† Primrose: Thanks. Bye. [Scene closes.] [New scene.] [Scene opens with Wayne and Primrose together, looking different (six months have passed).] Primrose: (Turns to Wayne, clearly upset/angry): Thanks for nothing, Wayne. I followed your accountant‘s advice six months ago and now the tax department is claiming I owe them heaps of money in unpaid tax and penalties. Wayne: Yeah, I got a huge tax bill too. The same thing happened to my friends at the pub† who followed the advice in that brochure too. It seems that accountant‘s advice was totally wrong, maybe even negligent. But I don‘t think it‘s fair that I have to pay tax penalties when it was my accountant‘s fault. We‘re going to see if we‘ve got rights to make him pay for this problem. Primrose: That sounds fairer. Let me know what happens. [Scene closes,] End of scenario. †‘friends at the pub‘: a colloquial expression meaning friends with whom he socialises frequently. *Brochure: the brochure referred to in this scenario is shown below.
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Video 2: Forming a contract? [SETTING: The scene takes place in the street.] Characters:
‘Gerrie’, trying to sell a car
Wayne, potential car buyer
Primrose, potential car buyer
[The scene opens with Gerrie and Wayne standing beside Gerrie’s car with a ‘For Sale $15,000’ sign on it. Bonnet of car is up. Wayne has just finished inspecting the car.] Gerrie:
So now that you‘ve seen the car, are you interested?
Wayne:
Well, I like the car, but I can‘t afford 15,000 dollars right now.
Gerrie:
Well, I could give it to you for 14,000, but that‘s as low as I can go.
Wayne:
I could give you 10,000 dollars now, and the other 4,000 when I get paid next month.
[Primrose approaches.] Primrose:
Hi Gerrie. I heard you were selling your car and I‘m looking for a car like this. How much would you take for it?
Gerrie:
Well, Primrose, I‘ll take 14,000 — no less than that.
Wayne:
Just a minute — I‘m buying the car. We just agreed.
Gerrie:
No we didn‘t, Wayne. I wanted 14,000 now, but you said you‘d pay on 10,000 now and the other 4,000 next month.
Primrose interrupts:
I‘ll give you $14,000 today, but the car‘s got to pass my mechanic‘s tests — I‘m no mechanical expert, so I‘d have to get my mechanic to check out the engine.
Gerrie:
[talking now to Primrose] That‘s OK. You can take it to your mechanic for a check and if he says it‘s in good condition, you take the car.
Wayne:
No, it‘s not OK, I am buying the car. We agreed.
Gerrie:
[talking to Wayne] No we didn‘t — I wanted all the money now, and you wanted to pay in a month.
Wayne:
Oh, OK, I‘ll pay you all $14,000 this afternoon.
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Gerrie:
14,000 it is then — and no mechanic‘s check: a definite sale. Yes, OK you have a deal.
Primrose interrupts again: (urgently) I‘ll give you the full 15,000, but the car‘s still got to pass my mechanic‘s tests. Gerrie:
(Excited) You have a deal — $15,000 it is. Here are the keys, you go and get your mechanic to look at it.
[Gerrie hands the car keys to Primrose, who drives away. Gerrie and Wayne remain standing at the kerbside. Wayne is NOT happy.] Wayne:
That‘s not right. [pause] That‘s just not right — we had a deal: 14,000 for me to buy the car. You agreed to sell me the car. We had a contract and you broke it!
Gerrie:
I‘m sorry, but that‘s rubbish. I hadn‘t actually given you the keys to the car yet…and you hadn‘t paid me the money yet. We didn‘t have a contract. Sorry, but I did nothing wrong here.
[At that instant, the car returns with Primrose driving. We see Primrose get out of the car and hand the car keys back to Gerrie.] Gerrie:
That was quick.
Primrose:
Well, my mechanic is just around the corner and she took one look at the radiator and said the car has blown a head gasket. Fixing a head gasket is not a cheap job. Sorry, but I‘m not taking the car.
[Primrose immediately walks away.] Gerrie:
(calling after Primrose) But we had a deal, Primrose!
[Gerrie turns back to Wayne.] Gerrie
OK Wayne, so the car is yours after all for 14,000 like you wanted.
Wayne:
I don‘t think so, Gerrie.
[Scene closes.] End of scenario.
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Video 3: Agency [SETTING: The scene takes place in the office of a tax accountant.] Characters:
The accountant, Steve
Primrose
[The scene opens with Primrose entering the accountant’s office. Steve looks up and smiles.] Steve: Ah, Primrose… Primrose: Hello Mr Cooper. I was just dropping off this week‘s flowers for your reception area, when your secretary said you wanted to see me. Steve: Yes, Primrose. Clients often comment on your floral arrangements and I thought you might be able to help me out. I‘ve decided that the board room here needs some new artwork and I‘m afraid I don‘t have the time or the skill to pick something appropriate. I hear you have a background in interior decorating and I was wondering whether you might be interested in helping me out. Primrose: Well… Steve: I‘d pay you for your time of course — does $100 sound fair? Primrose: Yes it sounds fine, but how would this work? Steve: Well, I have the name and address of a small exclusive gallery here. I was thinking that I could give the gallery a call and tell them to expect you. I‘ve bought work from there before so they will be happy to let me pay after delivery. You could call in to the gallery at a time that suited you, and choose something appropriate for the boardroom. Would that be OK? Primrose: That sounds fine — I could go there early next week and bring the painting with me when I come here again next Thursday. Steve: Excellent. Now I‘ll call that gallery while you‘re here. [Steve picks up phone and dials number on business card. After short pause for ringing, Steve speaks into phone.]
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Hello Chris. How are you?…That‘s great…Yes, I‘m fine too. I‘m ringing because I need another painting for the office. Something substantial. I‘ll be sending someone down to your gallery — her name is Primrose. I‘ve asked Primrose to select a painting for me and pick it up. I‘m hoping that you can just send the invoice to me at my office like you did last month. Is that possible?…It is? — oh that‘s excellent…Thanks for your help. Primrose thinks that she‘ll be in to select the painting early next week…[Steve looks at Primrose to confirm and Primrose nods affirmatively]…yes, early next week. OK, thanks Chris. It‘s a pleasure doing business with you…goodbye. [Hangs up phone.] Primrose: So do you have a price range in mind for this painting? Steve: Well, it‘s not going to be cheap. I‘d prefer something original, and it will need to be large. Let‘s say, a maximum amount of $10,000? Here‘s the gallery‘s card. [Steve hands the business card to Primrose.] Primrose: OK. Thanks. I‘ll see you next week then, with the painting. [Steve shakes hands with Primrose.] Steve: Thanks for helping me. Goodbye. [Scene closes.] [New scene.] Steve:
[Primrose has a painting with her, currently painting is turned away from the camera.] Primrose:
Mr Cooper, here‘s the painting you asked me to buy. I‘m very excited about it. It really was an excellent buy — the artist is becoming popular and I‘m sure it will increase in value quickly.
Steve:
Is that right? Great. [Looks in direction of painting] Hmmm, it‘s not quite as large as I was expecting. Can I have a look?
Primrose:
Of course you can — it‘s your painting. [Primrose turns the painting around to face Steve. The painting is unusual/horrible and Steve‘s face registers startled surprise and shock.]
Steve:
…[ stunned silence]…I‘m almost speechless. It is not very appropriate for the boardroom! And how much did it cost by the way?
Primrose:
Like I was saying, it‘s a bargain. Just $12,000. I saw a smaller one by this artist on sale last month for over 20,000. It‘s a really good buy…and I think you‘ll grow to like it.
Steve:
I don‘t think I‘ll ever like it and at 12,000 that‘s more than the limit I set.
Primrose:
[shrugging shoulders] Well, Chris at the gallery wouldn‘t let me bargain the price down any lower. 12,000 is a really good price for this. Oh, and by the way he said the invoice should reach you in today‘s mail.
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Steve:
I‘m not paying for this piece of junk, you can be sure of that…And I won‘t be paying you that $100 I promised either — you‘ve totally made a mess of this, that‘s for sure!
[Scene closes.] End of scenario.
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Video 4: Partnership [SETTING: The scene takes place in an accountant’s office — same office as Video 1: Defective Advice.] Characters:
Steve, accountant and senior partner in Steve’s Professional Accounting firm
Gerrie, financial adviser and junior partner in Steve’s Professional Accounting firm
[The scene opens with Steve alone in office. There is a pile of papers/letter on his desk or in nearby background.] [Steve hears a knock and Gerrie appears. Gerrie seems angry or upset. She has opened mail in her hand.] Steve: Come in Gerrie. Sit down. Gerrie: I don‘t understand. This was delivered to me here today. [She slaps the document on Steve‘s desk and points to it – ] – it says I‘m being sued. Steve: Sued? What for? Gerrie: It says…yeah, it says here [seems to read from the document]…that you gave some person incorrect tax advice that caused him to lose $20,000 in tax penalties…Is this true? Steve: [coughs embarrassedly]…Well it could be – who was the client ? Gerrie: It says something about Wayne of Wayne‘s World Cafés. Steve: Wayne?…Yes I remember advising Wayne. I‘ve got a letter from his lawyer somewhere here. [He leafs half-heartedly through the stack of papers on his desk] Gerrie: Well, is it true – did you give bad advice? Steve: Ummm, it seems I did get the advice wrong. I got some legal advice and it seems I might have been negligent and maybe also in breach of my contract to clients like Steve. Gerrie: Oh. [shocked/deflated] Ouch!…But I don‘t understand. If you‘re responsible, then why haven‘t you paid that client Wayne?…and why am I being sued?…I‘d only just joined this firm at the time this event happened.
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Well, there‘s a lot of people I gave similar advice to – some just relied on a brochure I sent out – and they‘re all wanting me to pay for their losses. I can‘t afford it all. Even if I sold my home, it still wouldn‘t be enough. I guess that client, Wayne‘s lawyer, is probably suing both me and you to make sure Wayne gets his money. Gerrie: But I wasn‘t the one who gave the wrong advice – it was you! In fact I thought we‘d agreed that you‘d give financial planning advice to clients and leave me to give the tax advice. Anyway, I‘m only a junior partner compared to you – our partnership agreement says we share profits and losses 60-40: I only get 40% of the profits and so I‘m only responsible for 40% of any losses. I still don‘t understand why I should have to pay for any of your mistakes, but if I do, then surely I‘m not responsible for the whole lot? Steve: I don‘t know. Maybe you should get some advice about where you stand. [Scene closes.] End of scenario. Steve:
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Video 5: Companies [SETTING: The scene takes place at a café table.] Characters:
Wayne, owner and director of a company operating Wayne’s World Cafés in Melbourne, Australia
Primrose, florist
[The scene opens with Wayne and Primrose sitting opposite each other across the café table.] Wayne: Hi Primrose [Wayne and Primrose shake hands] Primrose: Hello Wayne, sorry to disturb you here at the café, but I really need to discuss this matter with you. Wayne: Well, I have a little time before the lunchtime customers arrive. What can I help you with? Primrose: It‘s about the flowers for your cafés for the last four months. I run my florist business on a tight budget and I simply can‘t afford to let accounts go unpaid for long. Wayne: I understand that, but… Primrose: [Holds out a stack of papers (invoices)] These invoices alone total over $5,000, and that doesn‘t include the current month‘s orders. With your 10 cafés around the city your orders for flowers have grown enormously… Wayne: Yeah, I know. First I just had one and then 2, and then 5, and almost before I knew it there were 10. That‘s part of the reason why I formed the company six months ago, rather than running all the cafés as a sole trader. Primrose: …and that‘s great for you, but my business needs to survive, and for that I need you to pay these invoices. \Wayne: Well, that‘s just it, you see. The cafés aren‘t doing so well. A few months ago, business started dropping off and in the last two months, things just seem to be getting worse. I‘m sure that in summer business will pick up and the cafés will start to turn a profit again, but at the moment my business is ‗in the red‘. [Wayne takes the invoices from Primrose and glances through them.] Wayne: All these orders were made after I formed the company — they are all in my company‘s name — [POINTING DOWN TO INVOICE READS ALOUD]: ‗Wayne‘s World Pty Ltd.‘ Primrose: Yeah,…so?… Wayne: Like I said…the company is ‗in the red‘ — it‘s not making enough money to cover the expenses at the moment. Primrose: I‘m really sorry to hear that Wayne, but I‘m trying to run a business too. I need these accounts to be paid. The way I see it, you ordered the flowers for your company, and in any case you run the company so you are personally responsible to pay its bills, like you did when you were a sole trader.
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Yes I do run the business — in fact I‘m the only director and the sole shareholder, but that doesn‘t mean I have to pay its expenses. Primrose: I don‘t think that‘s right — or fair!…If I don‘t get the money by the end of the week, your company and you will be hearing from my lawyer…I want the money you owe me. [Scene closes.] Wayne:
End of scenario.
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