Sunday, 24 April 2016
Agency Law
Agency Law
What is AGENCY ?
A relation, created either by express or implied contract or by law, whereby one party (called the principal) delegates the transaction of some lawful business or the authority to do certain acts for him or in relation to his rights or property, with more or less discretionary power, to another person (called the agent) who undertakes to manage the affair and render him an account there of.
Who is an AGENT ?
An individual or firm authorized to act on behalf of another (called the principal), such as by executing a transaction or selling and servicing an insurance policy. The agent does not assume any financial risk in the transaction, as a dealer would.
Parties to Agency
The creation of agency involves 3 parties :
- The principal who passes the authority to act to the agent.
- The agent who in turn with this authority affects the legal relations of the principal with a third party.
- Third party is someone who may be indirectly involved but is not a principal in a deal.
Who can become an AGENT ?
Any person can become agent :
- Including minors and unsound mind persons.
- However, they are not responsible for their act.
- The principal must be responsible and take the risks of their acts.
Creation of AGENCY
- Agency is created or formed by agreement and consent of both parties.
- No specific formality in order to form the contract of agency.
- Consideration is not necessary in order to form a contract of agency.
- S 138 OF CA : “ No consideration is necessary to create an agency”.
Effect of Agency By Necessity
1. The agent will be protected from any claims by the Principal .
2. The agent will be entitled to the additional payment for his effort to protect & to preserve the safety and interest of the Principal.
3. A contract exists between the Principal and & 3rd party.
Termination of Agency
Section 154 – 163 of Contract Act 1950 deal with the manner which an agent may be terminated.
i. By the act of the parties
- Mutual consent
- Unilateral revocation by the principal
- Unilateral renunciation by the agent
ii. By operation of law
- Completion of the task undertaken to be performed by the agent-section 154.
- Expiration of the period fixed.
- by the death of either the principal or agent- section 154.
- by the subsequent insanity of either the principal or agent- section 154
Company Law
Company Law
WHAT IS COMPANY ?
Company is a legal entity, allowed by legislation, which permits a group of people, as shareholders, to apply to the government for an independent organization to be created, which can then focus on pursuing set objectives, and empowered with legal rights to own property, hire employees or loan and borrow money. Companies in Malaysia are governed by the Companies Act, 1965. The Act is based on the Australian Uniform Companies Legislation of 1961 & the United Kingdom’s Companies Act 1948.
Types of companies
What is a Corporation ?
Firm that meets certain legal requirements to be recognized as having a legal existence, as an entity separate and distinct from its owners. Corporations are owned by their stockholders who share in profits and losses generated through the firm's operations, and have three distinct characteristics. A firm can buy, sell, own, enter into a contract, and sue other persons and firms, and be sued by them. It can do good and be rewarded, and can commit offence and be punished.
Types of business entity :
- Sole proprietorship
- Partnership
- Limited liability company
- Corporation
- Foreign company
- Foreign company local agent
Who can be appointed as a director?
An individual can be a director as long as he is :
- 18 years old
- Must not be an undercharged bankrupt.
- Must not have been convicted of criminal offence involving fraud or dishonesty.
- Must not have been imprisoned for an offence under S132, S132A or under S303 of Companies Act.
What are the classifications of Private and Public company ?
Private Company :
According to S.15(1) of the CA 1965, a company having a share capital may be incorporated as a private company if its Memorandum or Articles:
- Restricts the right to transfer its shares.
- Limits the number of members to not more than fifty.
- Prohibits any invitation or offer of shares or debentures to public.
- Prohibit invitation or offer public to deposit money with company.
Public Company :
- Section 4(1) of the CA 1965 defines a public company as a company other than a private company.
- In Malaysia, a public limited company has "Berhad‟ or (Bhd.) as part or at the end of its name.
Directors
What does it mean by directors?
- A company must have at least 2 directors, both of them must be residence of Malaysia.
- No comprehensive definition of director but the term director include any person occupying the position of director by whatever name called.
- A director is an officer of a company but he is not an employee unless he has separate contract of employment as a salaried executive.
What are the types of directors?
Non-executive director
- He has no other function except by express delegation
- Take part in the collective decision of the " BOD "
Managing or Executive Director
- Who is in addition to their function of attending board meeting as but also work, usually full-time, in the management of the company as employee.
- Fiduciary Duties
- Duties of skill, care and diligence
- Statutory duties
Incorporation can be defined as the process of legally declaring a corporate entity as separate from its owners. Incorporation has many advantages for a business and its owners, including:
- Protects the owner's assets against the company's liabilities.
- Allows for easy transfer of ownership to another party.
- Achieves a lower tax rate than on personal income.
- Receives more lenient tax restrictions on loss carry forwards.
- Can raise capital through the sale of stock.
Advantages of Incorporation
1. Limited Liability
Limited personal liability is one of the most common reasons businesses become corporations. A corporation is a distinct legal entity, so incorporating protects the business owner’s personal assets, even if the corporation is in debt or facing other liabilities.
2. Tax Benefits
Owners of corporations are only taxed on their own salary, bonuses and dividend payments. There are also other tax benefits that are available to some corporations.
3. Business Credibility
When a business has completed the process of becoming incorporated, it can have a favorable impact with investors, making it easier to raise capital. Plus, in some cases, there is a perceived permanency and reputability on the part of clients or customers when a business is a corporation.
4. Shares Incentives
One of the defining elements of a shares corporation is the shares structure, which gives board members and employees a share in the ownership of the company. This can be an attractive benefit for employees and can lead to higher employee retention rates.
5. Perpetual Existence
Unlike a sole proprietorship or partnerships, a corporation continues to exist even if the owner passes away or leaves the business. A corporation will remain in existence until the shareholders take measures to dissolve it, or until the corporation is merged with another business.
Disadvantages of Incorporation
1. Cost
The initial cost of incorporation includes the fee required to file your articles of incorporation, potential attorney or accountant fees, or the cost of using an incorporation service to assist you with completion and filing of the paperwork. There are also ongoing fees for maintaining a corporation.
2. Loss of Personal “Ownership”
If a corporation is a shares corporation, one person doesn’t retain complete control of the entity. The corporation is governed by a board of directors who are elected by shareholders.
3. Required Structure
When you form a corporation, you are required to follow all of the rules outlined by the state in which you filed. This includes the management of the corporation, operational requirements and the corporation’s accounting practices.
4. Ongoing Paperwork
Most corporations are required to file annual reports on the financial status of the company. Ongoing paperwork also includes tax returns, accounting records, meeting minutes and any required licenses and permits for conducting business.
Contract Law
CONTRACT LAW
Contract law
In a brief explanation,
contract law can be defined as a binding agreement with specific terms between
two or more persons or parties to do something in return for a valuable benefit
known as consideration. In addition, contract law explains the business
arrangement for the supply of goods and services at a fixed price. A contract
also means that being willing to be legally bound to your side of that
agreement, as long as the other party is bound to theirs.
Examples of contract
- Employment agreement
- Credit card agreement
- Agreement when you sign up an e-mail account or a
Facebook account
- An agreement upon purchasing goods from someone
- Tenant agreement
Requirements for a contract
- Offer + Acceptance = Agreement
- Consideration
- Intention to create legal relations
Offer
An offer refers to an
invitation to make a contract. In example putting a price tag on an item in a
store. Moreover, offers can go back and forth.
Bilateral and Unilateral Contract
A bilateral contract
requires two promises and two performances. Whereas, a unilateral contract a
contains a promise by only one person to do promise by only one person to do
something, if and when the other something, if and when the other party
performs some act.party performs some act.
How Parties Reach Agreement
Acceptance
An express act or
implication by conduct that manifests assent to the terms of an offer in a
manner invited or required by the offer so that a binding contract is
formed.The point at which one party agrees to the other parties offer. For
example, when you are signing a tenancy agreement.
Consideration
In contract law
consideration is concerned with the bargain of the contract. A contract is
based on an exchange of promises. Each party to a contract must be both a
promisor and a promisee. They must each receive a benefit and each suffer a
detriment. This benefit or detriment is referred to as consideration.
Express terms
Express terms can be defined as the provision in a contract that is clearly, directly and conspicuously communicated in written spoken words. Express terms are terms that have been precisely mentioned and agreed by both parties at the time the contract is made. They can either be oral or in writing.
Implied terms
In a brief explanation, implied terms can be contemplated as provision in a contract that is not directly stated in written or spoken words but is introduced into the contract by the courts as necessary to give effect to the obvious intentions of the contracting parties, or by a statute.
Exemption clause
An exemption clause is an agreement in a contract that imposes that a party is limited or excluded from liability. Exemption clauses can be used unfairly which may bring disadvantages to a party. Therefore, there have been changes to the law to create more fairness and to limit the use of clauses. In a simple definition, exemption clause is a provision in a contract under which one party (usually the one which drafted the agreement) is protected from being sued by the other party for damages, loss and negligence or its liabilities are severely restricted. For example, in banks they use exemption clauses in documents of foreign trade where they accept no liability for any injury to the customer unless it can be proven to have been the direct result of their negligence or mistake. The courts, however, look at this clause with disfavor and often interpret it narrowly to see if it is reasonable in the circumstances.
Discharge of Contract
What is Discharge of Contract ?
Discharge of contract means the termination of a contractual relationship between parties. A contract is said to be discharged when it ceases to operate and when the rights & obligation created by it come to an end. In example, Two parties A and B make a contract to build a hospital. A is the municipal authority of the city and B is a construction company. Due to some reasons the contract get discharged. Then the both parties are free from the obligations of contract and the rights & obligations of the parties come to an end.
How a contract gets discharged?
- Performance
- Frustration
- Breach
- Agreement.
Performance
A person who performs a contract in accordance with its terms is discharged from any further obligations. Performance of a contract must be exact and precise and should be in accordance with what the parties had promise. Section 38(1).
Frustration
A contract is frustrated when there is a change in the circumstances, which renders a contract legally or physically impossible of performance, section 57(2). Moreover, Frustration of a contract excuses non-performance and automatically discharges the contract except where the terms of contract override this implied legal provision. However, frustration is not acceptable as an excuse where the circumstance was foreseeable, and is not applicable to certain types of contracts such as insurance policies.
Breach
Breach of contract can be described as an unjustifiable failure to perform all or some part of a contractual duty constitutes a breach of contract. It eventuates when a party who has a duty of immediate performance fails to perform, or when one party hinders or prevents the performance of the other party. A total, major, material, or substantial breach of contract constitutes a failure to perform properly a material part of the contract. A partial or minor breach of contract is merely a slight deviation from the bargained-for performance. A breach may occur by Anticipatory Repudiation, whereby the promisor, without justification and before committing a breach, makes an affirmative statement to the promisee, indicating that he or she will not or cannot perform the contractual duties.The differences in the types of breach are significant in ascertaining the kinds of remedies and damages available to the aggrieved party.
Agreement
The general rule is that what has been created by agreement may be extinguished by agreement. An agreement by the parties to an existing contract to extinguish the rights and obligations that have been created is itself a binding contract, provided that it is made under seal or supported by consideration. Where the agreement for discharge is not under seal, the legal position varies according to whether the discharge is bilateral or unilateral.
- Bilateral discharge
- Unilateral discharge
Unilateral discharge takes place where only one party has rights to surrender. Where one party has entirely performed his part of the agreement, he is no longer under obligations but has rights to compel the performance of the agreement by the other party. For unilateral discharge, unless the agreement is under seal, consideration must be furnished in order to make the agreement enforceable.
Remedies
There are several remedies for breach of contract, such as award of damages, specific performance, rescission, and restitution. In courts of limited jurisdiction, the main remedy is an award of damages. Because specific performance and rescission are equitable remedies that do not fall within the jurisdiction of the magistrate courts. In brief, a legal remedy is a court order that seeks to uphold a person's rights or to redress a breach of the law. When one party breaches a contract, the other party may ask a court to provide a remedy for the breach. The court may order the breaching party to pay money to the non-breaching party.
Introduction of Business Law
The Fundamentals of Business Law in Malaysia
Definition of business
A business is an organization or enterprising entity enlisted in commercial, industrial or professional activities. A business can be a for-profit entity, such as a publicly-traded corporation, or a non-profit organization engaged in business activities, such as an agricultural cooperation. Moreover, business can also be defined in a simple meaning as a person's practice of living by engaging in the commerce.
Explanation of Business Law in Malaysia
Broadly speaking, business law refers to the laws that apply to business entities, such as partnerships and corporations. It can also be considered as the laws relating to setting up and operating such businesses. Business law also states the rules and legislation that all businesses should follow specifically in Malaysia.
In a simplified meaning, Business Law in Malaysia explains the procedures and regulations which all businesses in Malaysia are obliged to. This is implemented to ensure all businesses to run and go on well based on the procedures to avoid trouble upon the ongoing process of the businesses. There are many different types of businesses affecting the law in Malaysia. Below are few examples.
- Contract law ( Contract Act 1950 )
- Company law ( Companies Act 1965 )
- Agency law ( Agencies Act 1971 )
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