Case study: LIM CHUI LAI v. ZENO LTD.[1964] 30M.L.J 314

     Nemo dat quod non habet, literally meaning that "no one can give what he/she doesn't have". In an easier way to explain it, any sale of possession from someone who doesn't have the ownership, unless there is a permission of the right owner to sale. "Sale by person not the owner"

    

     Let's look at the case study, LIM CHUI LAI v. ZENO LTD to see what was happened previously in "Sale by person not the owner" situation and what was the judgement based on the issue.

     Facts: 

      The chairman of the respondent company's board of directors entered into an agreement  with a contractor, named Ahmad.  Ahmad also declared to the Authority of Petaling Jaya that the respondent company were the company to supply the construction material, thereby he also entered in a secured contract with the authority that to carrying out financing of his company's project. Thereafter, the respondent company bought the material and sent it to the construction site.

   

     Not so far from the time after contract, the respondent company realised that the Ahmad had some troubles with the authority of Petaling Jaya, and it caused to stop the contract. The respondent company told the authority that the material on the construction site was belonging to them and they also would sell them. 

   

     Somehow, the respondent company found out that the material delivered to Ahmad was no longer in the construction site, and Ahmad was the person who sold the material to the appelant for RM14,000 of which Ahmad get half of it as the payment.

    The respondent company then require the costs of material from the appellant.

Appellant argued that:

1. the respondent had delivered the material to Ahmad. So, Ahmad had to be deserved the name for  the owner of the material. 

2. the material were the property of the partnership of the respondent and Ahmad. Therefore, Ahmad has the right to sell them.

    Held: 

      Ahmad was not the owner of the property, because the respondent was merely placing the material for the purpose of proceeding construction. Therefore, Ahmad was merely a bailee, but not the owner when the time he sold to the appellant.  Since, Ahmad was not the owner, he had neither the title nor the authority to sell the property. 

      unless According to Sale of Good Acts 1957, section 27, where goods are sold by a person who is not the owner thereof or who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by his conduct precluded from denying the authority to sell.

Review to the historical case, Farquharson Brother & Co. v. C.King [1920] A.C.325

     Although, Ahmad insured the good, but it doesn't mean that he was the owner. So, There was nothing  a bailee could to do with the material. Therefore, appeal dismissed. 

Sale of Goods Acts Reviews

  

Formalities and elements of Contract:

   
   There is no formal requirement for the creation of contract. It can be made by oral, writing, or maybe implied by conduct, behaviour and customs. 


    Parties involved:seller and buyer. Their capacity is governed by contract Act 1950.


     Price:The Price of goods can be set by the contact, determined according to a course dealing with the parties (buyer and seller). When The price cannot be determined by either of these method, the buyer must pay a reasonable price. There must be Offer and Acceptance indeed before proceed to transaction.


   These Three Element is vital for a formation of contract.


Term of Contract:
      Two types of terms of contract are specified in SOGA which are Condition and Warranty. 


Condition: A stipulation Which is Essential to the main contract. Whatever rules written in the contract are the most important and close to to the purpose of the contract. It defines "What make the contract happened in between both parties". For example: The term of contract states that a computer in good condition is sold. In this case, we may want to know the most on how "good" is good of the condition.


Warranty: A stipulation which is collateral to the main contract. Rule written in the contract which is not as important as to be the main purpose of the contract in which the statement is supplementary. For example: posters on the road states that " to buy a computer will from us, you will get $100 voucher, and a little statement at the bottom of the poster states that LIMITED 100 vouchers". In this situation, the main purpose of both parties is to sell and buy the computer, but not because of the purpose of the $100 voucher.


      Mostly, what I mentioned above is just a expressed contract which is stated under the knowledge of both parties. Yet, there are some implied terms which can protect consumers.


Implied Terms:


       Title:Title of ownership of the good and the owner has right to sell goods.
       Quiet Possession of Good: buyer shall have ownership and enjoy quiet possession.
       Encumbrance or Charge: Goods shall be free from charge or encumbrance in favour of any third party not declared or known to the buyer before or at the time when the contract is made. 
       Sale by description & sale by sample: It is not sufficient that the bulk of the goods do not correspond with the sample or description.
        Fitness for Purpose: buyer make known of the seller for the purpose which goods are required. So, seller is assumed to show their skill or judgement and the good are of description which is the business supplies.
        Merchantable Quality: The good shall be in merchantable quality.

Definition of GODDS

How do we classify goods?

Goods is any kind of movable property in which  it is agreed or agree to transfer from seller to buyer.















Good can be included, if:

1. Growing crops or grass - for instances, plants, vegetable, fruits of the land which is grown for selling purpose.

2. Stock & Shares - It is invisible, but it is exclusively counted as a good. It can be transferred

3. Items attached to land,yet severable to land - doors, plants, vegetables & etc.




Good can excluded, if:
1. Actionable claims-a claim to any debt or to any beneficial in movable property not in possession of a claimant.


2.Money - items which is used as generally accepted payment of goods and services and repayment of liabilities.


3. Land -  the part of earth which is not covered by water.

Caveat Emptor- Endless housing loan

Caveat Emptor, this is the word derived from Latin's word which has the meaning of "Let the Buyer Beware" . It defines all buyer must be very careful in consuming, because not all of the seller is going to  Let us look at the case which is happened in 2 years before in Malaysia. This news is extracted from a popular business newspaper, Utusan Konsumer, Jan-Feb, 2009.

Case :        
           This person, called Shanti (Not her real name), was borrowing a housing loan from a bank (no specified). The amount she borrowed from bank was RM40,500 and her maturity of repayment is 20 years., monthly instalment is not specified, maybe RM300++.
         
  After 16 years later from her first repayment, she found out that she still owes the an outstanding balance RM36,576 when the bank sent her a housing loan statement in December 2007. The Bank Revised her monthly instalment to RM456 which is higher than her past repayment, besides extend her maturity to become 26 years. 
           16 years to pay most of the interest rather than the principal RM3924. What about the rest? Can she finish repay the outstanding balance RM36,576 to the within 4 years? Undeniable, the answer is NO.


                  How can she do? Can she sue the Bank  for a fraudulent In this way? 
  
My Opinion:

In Fact, BNM (Central Bank Malaysia) notified that "in case of a floating rate loan, you should also note that your monthly increase substantially when interest rates("BLR, Base Lending Rate, announced by government, latest rate is 5.80%" quote from Banking info) go up."
      
            BLR  is a fixed rate set by government and all financial institution should follow the rate and offer a new interest rate to customer.Mostly, it is written in the housing loan contract, unless bank offer a fixed rate which is not following the central bank. Mostly, housing loan will be written in term of the interest rate offered.For example: BLR-2%,  the interest rate. When BLR increase therefore interest rate increase. BLR is independent.

            You should notice that when BLR  increases, Interest portion served in your repayment become more, therefore you should have to adjust your a higher monthly instalment. In a sense that, BLR will fluctuate and affect the interest and our tenure. Yet, why do we still pay the fixed monthly amount set by financial institution? whenever you do not settle the housing loan, the bank still has a right to confiscate for auction.

          By right, you have the right to ask the solicitor in charge of housing loan to explain the terms of contract one by one, if consumers do not understand the terms.
            
            You can refer to the web-site, URL as below: http://www.bankinginfo.com.my/02_know_your_products/0202_applying_for_loan/housing_loans.php?intPrefLangID=1&

Fact:
         She must read the contact of housing loan before the contract is  signed, approved and legally binding. 
Usually, BLR is listed in the contract, but most of the borrowers In fact, she should know the how is the calculation of interest going during their repayment period. By right, she should be carefully to select different housing loan products and go through details of the terms in order to protect themselves from overcharging of any bank. Bankers are always not responsible to tell every term to their customer. 

Sales of Goods Act

What is the definition of " Sales of Goods "?

The seller transfer or agree to transfer the property in good to the buyer for a price.

The Seller- It refers to the person who want to give up some items or something belongs to him/her to someone in the interest of getting some items or money in return.

transfer or agree to transfer - Give some items to someone with some money return within the agreement between seller and buyer. Usually , these group of buyers will get the items immediately or the other day in future which is agreed by seller.

the property in good - the seller is not only transfer their item physically to the buyer, but also the ownership of the items should be transfer to the other parties. It may be sell or rent.

the buyer- It refers to the person who want to give up money or ownership in items for exchanging the ownerships in items of the seller.

We can refer the Law to the Sale of goods contract 1957 Malaysia and merchantile law proposed in West Malaysia, Penang and Malacca.

Holding and Subsidiary company

Holding Company: A company acts like a parent company of the other company.

Subsidiary Company: A company which is registered under the holding company name.

For Example:

-MASB (Known as MAS Airline, Malaysia Airline System Berhad), the Holding Company.

-FlyFirefly Sdn Berhad( Known as Firefly Airline) the subsidiary company of MASB.

URL: http://www.fireflyz.com.my/about/company-profile

Same goes here, Firefly Sdn Bhd is counted to be a legal person separately from MASB. Yet, MASB has the power to control over Firefly Sdn Bhd. They just act like a totally different entity, but they have relationship to each other.

Therefore:

-the company's liability is limited.

-they can sue or maybe sued by others.

-they must be incorporated by two or more person.

-they may own land.

-Their members may come and go without changing the company's personality.

-they are separately different legal entities.

-A company will not end when its members leave and continue to exist until it is dissolved through certain legal processes.

Salomon case- Company is a separately legal person.

Fact:

Salomon was a shoemaker and he was running his business in a limited company form, A. Salomon & Co. It was a limited company in which it was not necessary for the company members to pay the debt if the company had no sufficient asset to liquidate into cash to pay creditors.

His wife and his 5 children had 6 shares for each of them, Salomon was holding another 20001 shares out of 20007 if the company. the company was under control by Salomon as he had most of the shares of the company. Some Parts of his shares are paid by using Debenture (A Secured loan Certificate, which has a seniority to get debt back from the company.)

The company went into bankruptcy where there is an incapability to pay off its debt to unsecured creditors by liquidating its assets. Besides, The Secured creditors had the priority to get the receivable payment. Salomon was also a Secured Creditor of A. Salomon & Co. Ltd, because he also held the debenture of the company which he was secured to get seniority of repayment of debt.

Since unsecured creditor could not get back their claims, Salomon was sued. He was sued because he was not deserved to get any money unless he paid off all the debt of the company before. He was the one who own the company, therefore the responsibility of paying debt should go to Salomon.

On the other side, Salomon was arguing that he was the one who only operating the company, and not necessary the company debt was his obligation to pay off. Therefore, he refused to pay all the debt to creditors who was getting back their claims.

Held:

The judgement held that even though Salomon's Co Ltd was owned by Salomon himself and he had almost the power to control the company to behave like what he did, but the company and Salomon were separately different entity in law.

This company could be counted as a legal entity which incorporated by 2 or more persons, yet It did not mean the company could be controlled by only a single person. Since, it was separated to be a legal person in law, it just acted like a normal person, therefore it has the right to sue and maybe sued by others.

Therefore, the decision was the company was legal separated person with Salomon. So, he could refuse to pay off the debt of the company.