Sale Of Goods In Malaysia

The Sale of Good Act 1957 (SOGA herein forth) was enacted in 1957 and the statue was applicable to sale of goods in peninsular Malaysia (East Malaysia), excluding the states of Penang and Malacca. The Act was later revised in 1990 and it includes both states1. The states of Sabah and Sarawak (West Malaysia) are not governed by this act instead they are governed by section 5(2) of the Civil Law Act of 1956, which provides, among others, that the law to be administered in England in the like case at the correspondent period. The English statue applied is the Sale of Goods Act 1979, which is a revision of the Sales of Goods Act 1893.As a result Sabah and Sarawak are bound by statute to continue to apply principles of English law relating to the sale of goods. The contrast between the laws West and East Malaysia has the potential to raise unwarranted legal problems, even though English statue is the principle source of law for both parts of Malaysia.

The Act contains definitions or interpretations which clarify what the wording used in it refers to and the context. Below are some of the definitions of key terms in the SOGA.

Buyer 

a person who buys or agrees to buy goods.

Seller 

a person who sells or agrees to sell goods.

Goods 

means every kind of movable property other than actionable claims and money; and includes stock and shares, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale.

specific goods 

means goods identified and agreed upon at the time a contract of sale is made; and any expression used but not defined in this Act which is defined in the Contracts Act 1950 [Act 136], shall have the meaning assigned to it in that Act.

Future goods 

means goods to be manufacture or produced or acquired by the seller after the making of the contract of sale.

Implied Terms Of The Sale Of Goods Act, 1957

The statutory of implied terms main function is to protect the rights to every buyer or consumer. These statutory implied terms are in Section 14- 17 of the Sales of Goods Act, 1957 and are the implied terms in every contract of sale of goods.

Section 14 of the SOGA is divided into three parts. The first part states that an implied condition on the part of the seller, that, in the case of a sale, he has a right to sell the goods, and that in the case of an agreement to sell, he will have a right to sell the goods at the time when the property is to pass. This in short means that it is an implied condition to the seller to ensure that the buyer will enjoy the ownership as well as possession and use of the goods, failure to do so gives the buyer the right to reject the contract as the issue constitutes an implied condition (Razman and Shukor, 2001). The next part states that there is an implied warranty that the buyer shall enjoy quit possession of the goods, and if the seller fails to comply, the buyer is entitled to claim for damages since the matter is being constituted as an implied warranty. Paragraph c, the last part of Section 14 of SOGA, states that there is an implied warranty that the goods shall be free from any charge or encumbrance in favor of any third party not declared or known to the buyer before or at the time when the contract is made. If the seller fails to comply, the buyer is entitled to claim for damages since the matter is being constituted as an implied warranty.

Section 15 of the SOGA is on the sale of goods by description. It states that where there is a contract for the sale of goods by description there is an implied condition that the goods shall correspond with the description; and, if the sale is by sample as well as by description, it is not sufficient that the bulk of the goods corresponds with the sample if the goods do not also correspond with the description. 

In this case, the party’s previous contracts entailed the sale goods being flour, which was sold in bags bearing a recognized trademark. Later the previous contract description of flour was used to order and flour of identical quality was delivered but, short of the same well-known trade mark. The court held that the goods did not comply with the description.

Section 16 of SOGA, in a nutshell says that there is no implied condition or warranty as to the quality or fitness for any particular purpose of goods, unless the buyer requests the goods be reasonable for a purpose and the goods be of merchantable quality. The last section of implied terms is Section 17 of SOGA, and in summary points out that, when dealing with goods by sample, it is required by the seller to ensure that the bulk of the goods must correspond with the sample. If the seller fails to comply, the buyer is entitled to reject the contract since the matter is being constituted as an implied condition.

Transfer of Property and Risks

The property in the goods is said, to be transferred from the seller to the buyer when the latter acquires the proprietary rights over the goods and the obligations linked thereto. 'Property in Goods' which means the ownership of goods, is different from ' possession of goods' which means the physical custody or control of the goods.

The transfer of property in the goods from the seller to the buyer is the essence of a contract of sale. Therefore, the moment when the property in goods passes from the seller to the buyer is significant for following reasons:

a.  Ownership 

b.  Risk follows ownership -The general rule is that the risk follows the ownership, irrespective of whether the delivery has been made or not. If the goods are damaged or destroyed, the loss shall be borne by the person who was the owner of the goods at the time of damage or destruction. Thus the risk of loss prima facie is in the person in whom the property is.

c.  Action Against Third parties 

d.  Suit for Price - The seller can sue the buyer for the price, unless otherwise agreed, only after the gods have become the property of the buyer.

e.  Insolvency - insolvency of either the seller or the buyer, the question whether the goods can be taken over by the Official Receiver or Assignee, will depend on whether the property in goods is with the party who has become insolvent.

Essentials for Transfer of Property 

The two essentials requirements for transfer of property in the goods are:

     Goods must be ascertained

Unless the goods are ascertained, they (or the property therein) cannot pass from the seller to the buyer. Thus, where there is a contract for the sale of ascertained goods, no property in the goods is transferred to the buyer unless and until the goods are ascertained.

     Intention to PASS Property in Goods must be there

In a sale of specific or ascertained goods the property in them is transferred to the buyer at such time as the parties to the contract intend it to be regard shall be had to the terms of the contract, the conduct of the parties and the circumstances of the case.

Company Law

Formation Of a Company

  

BASIC INFORMATION ABOUT COMPANY LAW IN MALAYSIA

A company must have a minimum of two directors, being natural persons of full age and having their principal or only place of residence in Malaysia and not under bankruptcy .Directors need not be shareholders of the company. A director has onerous duties under the Companies Act as in common law. The duties of directors stipulated in the Companies Act are not exhaustive and generally directors are imposed with statutory duties, duty of care and fiduciary duties. In addition, directors are also governed by a Code of Ethics.

(1) Every company shall have at least two directors, who each has his principal or only place of residence within Malaysia.

(2) No person other than a natural person of full age shall be a director of a company.

(3) The first directors of a company shall be named in the memorandum or articles of the company.

(4) Any provision in the memorandum or articles of a company which was in force immediately before the commencement of this Act and which operated to constitute a corporation as a director of the company shall be read and construed as if it authorized that corporation to appoint a natural person to be a director of that company.

(5) On the commencement of this Act any corporation which holds office as a director of a company shall cease to hold office and the vacancy may be filled as a casual vacancy in accordance with the articles of the company.

(6) Notwithstanding anything contained in this Act or in the memorandum or articles of a company or in any agreement with a company, a director of a company shall not resign or vacate his office if, by his resignation or vacation from office, the number of directors of the company is reduced below the minimum number required by subsection (1) and any purported resignation or vacation of office in contravention of this section shall be deemed to be invalid.

COMPANY FORMATION

1. Who can become a director of a Private Limited Company/ Sdn Bhd?

• A person must be of age 18 years and above.

• A person must not be an Undischarged Bankrupt.

2.Who can become a company secretary of a Private Limited Company/

   Sdn Bhd?

• A member of MIA (Malaysia Institute of Accountants)

• License Secretary of SSM (Suruhanjaya Syarikat Malaysia)

• Member of MAICSA (Malaysian Institute of Chartered Secretaries and Administrators)

• Lawyer in Malaysia 

3. Information required for incorporation are as follows:

• I/C or Passport Number

• Full name as per I/C or passport

• Residential address in Malaysia

• Propose 'COMPANY NAME'

• Nature of the business of the company 

4. What is the Charges for Formation of a company

• RM 1,688 Net 

Types of Business Entities

1. Sole Proprietorship 
2. Partnership business entity
3. Limited Company (SDN. BHD. or Sendirian Berhad or BHD or Berhad)

Sole Proprietor (or Sole Trader)

Like many other countries out there, the Sole Proprietorship business entity in Malaysia is owned solely by one individual, as his/her liability is unlimited.

Partnerships

The “Partnership” business entity is a joint-entity holder with two or more persons to carry out a legal business in Malaysia. The Companies Commission of Malaysia requires that partnership entities MUST comprise of at least two (2) members and a maximum twenty (20) members.

Limited Company (SDN BHD or BHD)

Sendirian Berhad (SDN BHD) is a private limited company, where it prohibits any invitation to the public to subscribe to any of its shares, deposit money with the company for investment or subscription. Minimum members in a private limited company is TWO (2) and maximum is FIFTY (50).

Berhad (BHD) is a public limited company where its shares can be offered to the public for fixed periods and any other forms of subscription. The minimum amount of members’ (shareholders) are TWO (2) and maximum of unlimited amount of members.

There are three (3) types of limited companies in Malaysia:

1. Limited by Shares
2. Limited by Guarantee
3. Unlimited company with/without share capital

Companies Limited by Shares

Liability of members’ contribution to this company is limited to the amount specified on their unpaid shares. Should the company becomes insolvent or goes into liquidation, members are not obligated to pay off the company’s debts if and unless any one of the members gives a personal guarantee.

Companies Limited by Guarantee

In a limited company’s Memorandum and Articles of Association, members’ liability is limited to the amount they ‘guarantee’ or undertake during winding up – In which the amount is specified in the Memorandum, agreed and signed by all members.

Unlimited Companies

Unlimited companies are no different from sole proprietorship and partnership business entities. One of the only difference is that they have a special articles of association and are free to return capital to its members’.

Law Of Contract

Formation Of a Contract

 

A contract is an agreement reached between two or more parties which is legally enforceable when executed in accordance with specific requirements. Contracts should be project specific and reflect the agreement between the parties. Contracts are obviously a key part of every business and it is therefore fundamental that all parties to a contract understand the terms included in a contract and the rights and responsibilities of the parties under that contract.

Every contract should have:

• -Offer
• -Acceptance
• -Consideration
• -Intention to create legal relations
• 
  

'Acceptance

As a general proposition of law, the acceptance of the offer made by one party by the other party is what creates the contract. This acceptance, as a general rule, cannot be withdrawn, nor can it vary the terms of the offer, or alter it, or modify it. To do so makes the acceptance a counter-offer. Though this proposition may vary from state to state, the general rule is that there are no conditional acceptances by law. In fact, by making a conditional acceptance, the offeree is rejecting the offer. However the offerer, at his choosing, by act or word which shows acceptance of the counter-offer, can be bound by the conditions tendered by the offeree.

Consideration

Consideration for a contract may be money or may be another right, interest, or benefit, or it may be a detriment, loss or responsibility given up to someone else. Consideration is an absolutely necessary element of a contract. As a word of caution, it should be noted that consideration has to be expressly agreed upon by both parties to the contract or it must be expressly implied by the terms of the contract. A potential or accidental benefit or detriment alone would not be construed as valid consideration. The consideration must be explicit and sufficient to support the promise to do or not to do, whatever is applicable. However, it need not be of any particular monetary value. Mutual promises are adequate and valid consideration as to each party as long as they are binding.

Intention to create legal relations

It is a basic requirement to the formation of any contract, be it oral or written, that there has to be a mutual assent or a "meeting of the minds" of the parties on all proposed terms and essential elements of the contract. It has been held by the courts that there can be no contract unless all the parties involved intended to enter into one. This intent is determined by the outward actions or actual words of the parties and not just their secret intentions or desires. Therefore, mere negotiations to arrive at a mutual agreement or assent to a contract would not be considered an offer and acceptance even thought the parties agree on some of the terms which are being negotiated. Both parties must have intended to enter into the contract and one can not have been misled by the other.

offer

An offer can be oral or written as long as it is not required to be written by law. It is the definite expression or an overt action which begins the contract. It is simply what is offered to another for the return of that person's promise to act. It cannot be ambiguous or unclear. It must be spelled out in terms that are specific and certain, such as the identity and nature of the object which is being offered and under what conditions and/ or terms it is offered.

Terms of Contract

Parties to a contract are bound only by its terms, not by other statements made in pre-contract talk. If inducements were promised, they can sit alongside the main contract as a “collateral contract”. Contracts will always contain different types of terms, with “conditions” being more important than “warranties”. It’s possible to have a term that excludes one party from responsibility, but the courts generally view exclusion clauses as unfair.

Breach Of Contract

Breach of contract is a legal cause of action in which a binding agreement or bargained-for exchange is not honored by one or more of the parties to the contract by non-performance or interference with the other party's performance.

Void/illegal contracts/agreements

What Are the Differences Between a Void Contract and a Voidable Contract?

When dealing with contracts, the terms "void" and "voidable" are often confused. Even though these two contract types seem similar, they are actually completely different.

A contract that is "void" cannot be enforced by either party., The law treats a void contract as if it had never been formed. A contract will be considered void, for example, when it requires one party to perform an act that is impossible or illegal.

A "voidable" contract, on the other hand, is a valid contract and can be enforced. Usually only one party is bound to the contract terms in a voidable contract. The unbound party is allowed to cancel the contract, which makes the contract void.  

The main difference between the two is that a void contract cannot be performed under the law, while a voidable contract can still be performed, although the unbound party to the contract can choose to void it before the other party performs.

What Are Some Examples of Void and Voidable Contracts?

Void contracts are unenforceable by law. Even if one party breaches the agreement, you cannot recover anything because essentially there was no valid contract. Some examples of void contracts include:

• Contracts involving an illegal subject matter such as gambling, prostitution, or committing a crime.
• Contracts entered into by someone not mentally competent.
• Contracts that require performing something impossible or depends on an impossible event happening.
• Contracts that are against public policy because they are too unfair.
• Contracts that restrain certain activities.

Voidable contracts are valid agreements, but one or both of the parties to the contract can void the contract at any time. As a result, you may not be able to enforce a voidable contract:

• Contracts entered into when one party was a minor. 
• Contracts where one party was forced or tricked into entering it.
• Contracts entered when one party was incapacitated.

Malaysian Legal System

Malaysian Legal System

The Malaysian Legal System is largely based on the British Common Law system as a result of the colonization of the country by the British in the 19th century to the 1960 s. The law system is known as The Constitution of Malaysia which lays down the legal framework to protect the citizens of the country. There are also individual state laws.

There is a dual-law in Malaysia :

a) Criminal and Civil Laws

b) Sharia Laws

The dual law system brings its own problems and those who oppose the laws claim the system goes against the Freedom of Religion. The dual system has caused difficulty for those who convert from the Muslim religion to another religion of which is illegal in sharia laws. 

Federal and state laws are described as Acts of Parliament. State laws are set within the state and are passed in Parliament. In the case of state law, federal laws can override any law including sharia law.

Capital Punishment

In comparison to English sentencing guidelines, capital punishment applies in Malaysia. The main offences where the death penalty may apply are described below:

- Offences against the King such as war

- Murder

- Treason

- Drug Trafficking 

- Terrorism

- Possession of firearms

There is no exemption for foreigners on capital punishment. Capital punishment can only be passed by the High Court of Malaysia. Death sentences are carried out by hanging. There are automatic appeals when a death sentence is passed and the last course of action on appeal is that of a pardon or clemency by the King or Governor of the State. Children and pregnant woman are exempt from the death sentence. There are to date approximately 150 people on death row.

MALAYSIAN LEGAL SYSTEM HIERARCHY

The Malaysian legal system hierarchy is mainly centered despite federal constitution of Malaysia. The British Common Law has a great influence over this system and also the Islamic law but to a lesser extent and no political interference is there in this system. In Malaysian legal system hierarchy there are usually two kinds of trials, namely civil and criminal. The jurisdictions of courts in the matters of civil or criminal cases are there in the Subordinate Courts Act 1948 and Courts of Judicature Act 1964.

The Superior Courts 

Malaysian legal system hierarchy comprises the Malaysian High Court, the Court of Appeal, the Federal Court and the Court of Sarawak and Sabah.

    High Court 

The High Court has general re-visionary and supervisory jurisdiction over all Subordinate Courts and hears appeals related to criminal and civil cases from Subordinate Courts. The High Courts have rights to hear cases concerning all the criminal matters.

        Court of Appeal

   The Court of Appeal hears all the civil and criminal cases against the judgments of High Court.

       Federal Court 

All civil cases from Court of Appeal comes to the Federal Court only after the Federal Court grants leave. The criminal cases are also heard by the Federal Court from Court of Appeal only the issues which are heard by High Court in its jurisdiction.

         Court of Sabah and Sarawak

The Sabah and Sarawak Court only hears appeals on matters of their native customs and laws.

The Subordinate Courts 

In Malaysian legal system hierarchy, the Subordinate Courts comprises the Sessions Courts, the Penghulu’s Courts in western part of Malaysia and the Magistrates’ Court.

        Penghulu’s Court 

The Penghulu’s Courts hear civil issues in which the claim is below RM 50-00 and where the offenders are of Asian race and speaks and understands the Malay language. In Penghulu’s Court’s criminal cases are heard in which the fine is not more than RM 25-00.

        Magistrates’ Court 

  The Magistrates’ Courts hear all the civil issues in which the claim is not more than RM25, 000-00. In criminal issues, the Courts have the power to try all the offences in which the imprisonment term is not more than 10 years

.

       Session’s Court

  The Sessions Courts hear all the issues in which the claim crosses RM 25, 000-00 but not more than RM 250, 000-00. It also hears criminal cases except matters of death penalty.

        Juvenile Court

This court is for the issues related to the minors who are below the age of 18 years.

Syariah Courts

 The Syariah Courts have jurisdiction over the issues of Muslims and has an imprisonment term of not exceeding three years.

Classification of Law

1.Public Law

Public law regulates the relationship between the citizen and the State.

Constitutional Law – defines the structure of government and the right of individual under that government.

Administrative law – regulates the duties and exercise of powers by administrative authorities.

Criminal Law – deals with acts or omissions which are offences against the State and for which the offender is liable to be tried and if found guilty, will be punished according to the law.

2. Private Law

Private law deals with the relation between a citizen and another. It is also known as Civil Law. It includes contract, Family Law, Tort, Land Law and commercial law in general. Legal action may be commenced or initiated by individuals seeking for damage or compensation.

3.International Law

Includes Private and Public International Law.Public international law deals with relationship between states. Eg. Border, territorial waters etc.Private International law is concerned with the application of various national laws of the facts of a particular case involving two or more countries eg. System of law applicable to a marriage between 2 different nationals in a third country.

Sources of Law

The main sources of law are:-

a. the Federal Constitution
b. the 13 Constitution of the States comprising the Federation
c. Federal law made by Parliament
d. State laws made by State Assemblies
e. Federal and State Subsidiary Legislation
f. Judicial Decision
g. Principles of English Law
h. Islamic Law

FEDERAL CONSTITUTION

Malaysia has a written constitution unlike the United Kingdom. The Federal Constitution is the supreme law of the land. Generally, any law which is inconsistent with the Federal Constitution is invalid. The Malaysian Parliament functions under a written constitution and is governed by it. Its law making power is limited by the provisions in the constitution. However our Parliament as a legislative body has the capacity to amend , repeal and make new constitution by way of two third majority vote of the both houses of Parliament. ( Dewan Negara & Dewan Rakyat). The Federal Constitution also establishes a constitutional Monarchy and a Federal System of Government.

THE STATE CONSTITUTION

The 13 States of Malaysia have individual constitutions which provide for a single chamber Legislative Assembly in each state. The government is headed by a Menteri Besar or a Chief Minister. (In the Malay States the MB is assisted by a cabinet known as the Executive Council) In Sabah & Sarawak, members of the Executive Council are known as State Ministers.

LEGISLATION

It refers to laws made by a person or body which has power to make law. In Malaysia, Parliament and Legislative Assemblies have powers to enact laws in their respective areas. Laws made by Parliament may extend to the whole country. However, laws enacted by a State Assembly only apply to that particular state only.

ENGLISH LAW

The legacy of English Law remains in Malaysia even after independence. The English Law is adopted so far as they were suitable to local conditions. Many of the local laws especially those affecting trade, commerce and banking were patterned on English Models (or in some instance other colonial laws).

SUBSIDIARY LEGISLATION/ DELEGATED LEGISLATION

Also known as delegated legislation. A statute will confer power on an authority for it to enact rules and regulation. An example of delegated legislation is the parking by laws enacted by various councils under powers conferred on them by the State Local Government Enactments.

THE COMMON LAW

Refers to law laid down by judges sitting in the Superior Courts as distinct from statute law enacted by the legislative.- Judge made law. This system was inherited from England

ISLAMIC LAW

Applicable to Muslims only and administered in the Syariah Courts. The courts possess civil jurisdiction over offences by Muslim against the religion.

System of Courts and Administration of Justice

The judiciary in Malaysia is mostly centralized and is influenced heavily by the English Common law.  Basically there are two major types of trials which are criminal trials and civil trials.  Starting from the Federal Court, there exists a hierarchy court structure in the country which means that the power and responsibilities keep decreasing as we move down the hierarchy pyramid.

The superior courts in the country are the federal court, court of appeal and high courts whereas the subordinate courts are made up of the sessions court the magistrate court and other courts. To understand this hierarchy better, you can go through the following information.

COURTS

Federal Court

This is the highest court in Malaysia and hears appeals of civil decisions of the court of appeal where the federal court gives the permission. This court also hears criminal appeals but only on those cases when first the High court has exercised its original jurisdiction in the matter.

Court of Appeal

This is that court which hears all civil appeals against the verdict of the high court. It also hears appeals of criminal decisions of the High court.

High Courts

There are 2 high courts in Malaysia which have revisionary and general supervisory jurisdiction over the subordinate courts. These courts have unlimited civil jurisdiction and also in criminal matters besides matters related to the Islamic law.  Some matters which a High court may hear are custody of children, legitimacy of persons, matrimonial clauses, bankruptcy and matters related to winding up of businesses or companies, grants of probate and injunction.

Subordinate Courts

The magistrates’ courts as well as the Sessions courts in Malaysia have jurisdiction in both civil and criminal matters. 

Sessions Courts

These are those courts in Malaysia which are somewhat similar to the former Quarter Sessions in England. However, there is and exception in matters which are related to landlord and tenant distress, vehicle accidents.

Magistrates Courts

Magistrates in Malaysia are divided into First Class and Second Class Magistrates. In the case of criminal matters, the first class magistrates courts have power to try all offences where the maximum imprisonment term does not exceed 10 years.

Other Courts

The Court of a Penghulu or Malay Village Head hears all the cases related to civil matters. The criminal jurisdiction of such a court in Malaysia is limited to the offences of a minor nature.