Law Revision Questions

Section A- Short Answer Essays

1. Distinguish between the Sessions Court and the High Court within the court structure
in Malaysia.
Ans:
Malaysia's court system is composed of two types of courts, subordinate courts
and superior courts. Sessions Courts is one of the subordinate courts whereas the
High Courts is also one of the Superior Courts within the Malaysian court
system.

Sessions Courts are headed by Sessions Court Judges, with unlimited civil
jurisdiction, where they hear all actions and suits of a civil nature in respect of
motor vehicle accidents, landlords and tenants and distress. However, in civil
cases, the value of the subject matter heard by the Sessions Court must be more
than RM 100,00 but not more than RM 1,000,000. On the other hand, the
criminal jurisdiction covers all offenses over 10 years old, but not murder,
firearm possession, kidnapping, and drug trafficking which is punishable by
death.

While the High Court is headed by the Chief Judge. The civil jurisdiction
generally hears any matter of a civil nature in respect of the dissolution of
marriage (divorce), matters relating to the winding -up of companies
(bankruptcy), guardianship or custody of children, and so on. It hears - civil
cases which cannot be determined in the subordinate courts and are heard
before the High Court i.e above RM 1,000,000. Whereas criminal jurisdiction
includes criminal cases punishable by death. The High Courts has a Appellate
Jurisdiction that hears civil and criminal appeals from the Subordinate Courts.
2. Discuss whether the following ventures are partnerships:
(a) Tracy started a business selling flowers with Annie but Annie is excluded
from sharing any profits:
(b)John, James and Jonathan formed a scuba diving association as they enjoy
the sport very much.
Ans (a):
By virtue of Section 3(1), a partnership is defined as “The relation which subsists
between persons carrying on business in common with a view of profit.” In other words,
this means that each partner receives some of the profits. On these grounds, since Annie
is excluded from sharing any profits with Tracy, it is obvious that the following venture
is not a partnership. As such, this venture may be a ‘Sole Trader’ as it seems that Tracy
owns the business and has multiple responsibilities.
Moreover, it is also not just to clarify Annie as a sleeping partner either because it has
not been disclosed whether she actively takes part in the management of the business or
not. It is an important factor in the partnership agreement for the partner to state that
each person contributes money, property, labour or skill, and expects to share in the
profits and losses of the business. In a business partnership, they can split the profits
any way, under one condition—all business partners must be in agreement about profit-
sharing. Partners may choose to split the profits equally, or can also receive a different
base salary and then split any remaining profits. How they choose to structure the
profit-sharing agreement will be up to the business partners to decide.

Ans (b):
As stated by Gerald Hill and Kathleen Hill (2005), the definition of association is “any
group of people who have joined together for a particular purpose, ranging from social
to business, and usually meant to be a continuing organization. It can be formal, with
rules and/or by-laws, membership requirements and other trappings of an organization,
or it can be a collection of people without structure. An association is not a legally-
established corporation or a partnership.”
Under Section 3(1), a partnership is defined as, “the relation which subsists between
persons carrying on business in common with a view of profit.” However, as it is not
clarified in the statement, the reasoning behind establishing the association on whether
or not it is for making profits or purely for entertainment value is unclear. This means
that it may not be classified as a partnership according to the aforementioned statute.
In Smith v Anderson [1880] 15 Ch D 247, the court held that a business is carried on if
an activity is being repeated. As such, a partnership implies a repetition of acts. This
excludes the case of an association formed for doing one specific act which is never to be
repeated. On these grounds, it is clear that John, James and Jonathan’s venture is not a
partnership as it is an association which was formed for doing one particular act (never
to be repeated).
3. Describe five (5) differences between a partnership and a private limited company.
Ans:
Firstly, a partnership is an accounting and economic entity but no separate legal entity
as opposed to a private limited company where the company itself is a separate legal
entity which means that the law sees it as an artificial or legal person. This principle is
first established in the case of Salomon v Salomon & Co Ltd. It has also been
incorporated in S20 Companies Act 2016 states that the effect of incorporation of a
company is that the company is vested with a corporate personality and is treated as a
legal person. The law of partnership is governed by the Partnership Act 1961 and
section 3 (1) defines partnership as the relation which subsists between persons carrying
on business in common with a view of profit.
Secondly, partners in a partnership have unlimited liabilities whereas members in a
private limited company have limited liability. This means that owners of the
partnership are responsible for any debt of the partnership whereas shareholders in a
private limited company are not responsible for the debts of the company. The company
being a legal person is responsible for its own debts.

Thirdly, in a partnership, assets are owned by the partners unlike a private limited
company where the assets are owned by the company not members, this is due to the
fact that a company is a separate legal entity. This is further explained in the case of
Macaura v Northern Assurance Co, where Macaura owned a plantation insured in his
own name and later sold the plantation to Co, but continued to insure the plantation in
own name. Later, a fire broke out and Macaura attempted to claim. The court held Co
had a separate legal entity from Macaura, who had no insurable interest therefore, Co
did not have to pay.

Next, a partnership has minimal running and start-up cost in contrast with a company,
which has higher running costs and cost of administration.

Finally, a partnership has an element of the lack of permanence as changes to

membership may lead to dissolution whereas a company has perpetual succession
meaning it will last forever despite changes in membership, unless it is wound up.

Section B – Problem based question.

Question 1
Peggy, 15 years old, needed a pair of shoes to attend her friend’s birthday party.
She went to Susetan Departmental Store and saw a pair of Jimmy Choo’s
displayed on the shelf and marked at RM149. Peggy felt that it was exactly what
she needed and was elated that she could get a pair of Jimmy Choo’s for that
price. She immediately tried them on and they fitted her so well. She took the
pair of shoes and went to the counter to pay for it. The electronic scan however
showed the price RM1490. Peggy refused to pay RM1490. She argued that since
the pair of shoes was displayed and offered at RM149 and she had accepted
such an ‘offer’, the cashier could not insist that she paid RM1490. Advise Peggy.
The cashier further replied that she cannot sell the pair of shoes to Peggy
because she is only 15 years old and therefore a minor. Is the cashier correct?
Issue: Is the shoes that displayed on the shelf an offer or ITT ?

Law:
According to Section 2 (a) of the Contracts Act 1950, offer is defined as “ 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.”

Invitation to treat refers to “ an attempt to induce a proposal or offer. It is a

preliminary communication between the parties at the stage of negotiation ”. Besides,
there are few types of invitation to treat, i.e. display of goods at the store,
advertisements for sale of goods, advertisement for job, tenders and auctions as well.

Referring to Section 2 (b) of the Contracts Act 1950, acceptance is defined as “ when the
person to whom the proposal is made signifies his assent thereto, the proposal is said to
have been accepted.”

In the case of Pharmaceutical Society of Great Britain v Boots Cash Chemist Ltd [1953]
1 QB 401, the defs were charged under Pharmacy and Poisons Act which prohibits the
sale of certain drugs without supervision of pharmacists. Drugs on display shelves with
prices marked Pharmacist only at the counter.

Display of goods at the store is referring to an invitation to treat, not offer, the owner
holding himself out as being prepared to consider a proposal made to him at the
suggested price. And yet, Offer to buy refers to when a customer is intending to buy and
puts articles in the basket off the shelf.

As per Section 7 (a) of the Contracts Act 1950, It stated that “a proposal to be converted
into a promise, the acceptance of that proposal must be absolute and unqualified”.

The case of Hyde v Wrench [1840] 49 ER 132 , the defs offered to sell the land for the
plaintiff at £1,000, but the offer was rejected. P responded by offering to buy the land
for £950. D refused to sell at that price whereupon P said he would pay £1,000 for the
land. D refused to sell. The court held that it is a rejection of the original proposal and
no longer for P to buy it with the original price.

Application:
In the case of Peggy, a pair of Jimmy Choo’s displayed on the shelf is considered as an
invitation to treat. As stated above, display of goods in the shops is a type of invitation to
treat, but not an offer. When Peggy intended to buy the shoes and put them on the
counter, it was an act of making an offer. However, Peggy refused to pay because she
thought it was just RM149 instead of RM1490. At this moment, the cashier has the right
to decline the offer that was made by Peggy as the price is wrong. This action is a
counter offer, and RM149 is no longer for Peggy and she can't buy it with the price of
RM149 unless she accepts the new price which is RM1490.

Conclusion:
The acceptance is not applied. It is an invitation to treat with no intention to be bound,
and the original offer is no longer for Peggy. She could only accept the new price which
is RM1490. Peggy's action will fail, she has no right to force the cashier to accept her
offer.