CASE:
HARRISONS & CROSSFIELD ( NZ ) LTD V LIAN AIK HANG ( SUED AS A FIRM )
[ 1987 ] 2 MLJ 286, HC (SINGAPORE )
FACTS:
The defendants agreed to sell to the plaintiffs a maximum of 314 metric tons of peanut kernel of 60/70 pieces per ounce TBS ( ie Thai Brown Skin ) to be packed in new jute bags to be delivered to Auckland, New Zealand. The peanut kernels were to be form the ‘1980 Thailand Crop’ and payment was to be against the draft and bill of lading accompanied by ( a ) an Aflatoxin-free Certificate issued by the Singapore government; ( b ) a Certificate of Crop 1980; and ( c ) a Certificate that the goods were packed in sound clean bags not previously used for any purpose ( aflatoxins are carcinogenic toxins produced mainly by the mould known as aspergillus flavus )
After shipment of the goods, the defendants presented by the requisite documents (including an Aflatoxin-free Certificate issued by the Department of Scientific Service, Singapore) and were paid for the consignments.
When the goods arrived in Auckland, the plaintiffs rejected the goods on the grounds that the goods did not correspond with the samples and were of seriously inferior quality. They also alleged that the goods were not from the 1980 Thailand Crop and that some 20% of the peanut kernels were form an older crop. They further alleged that the goods were ‘unfit for human consumption and were by reason of the mould aflatoxin, age and degree of infestation by insects, of unmerchantable quality’. The defendants disputed this allegation and refused to reimburse the plaintiffs.
The evidence showed that all the shipments of peanut kernels contained a high level of aflatoxin, far in excess of the permissible limit of 15 parts per billion. The cause of problem was the condition of the peanut kernels and the presence of insects before shipment. The plaintiffs claimed the sum of US$535,244.08, or, alternatively, damages, interest and costs.
HELD:
The court was not satisfied that the samples delivered to the Departments of Scientific Service were representative of the peanut kernels shipped to the plaintiffs. The sale was a sale by sample, a fact not in dispute, and some 20% of what was tendered to the plaintiffs consisted of shriveled peanut kernels that were not aflatoxin-free. All three shipments contained aflatoxin far in excess of the permissible limit of 15 parts per billion. The goods supplied did not correspond to the description or sample. Judgment was entered for the plaintiffs.
Monday, April 26, 2010
CASE:
WEE LIAN CONSTRUCTION SDN BHD V INGERSOLL - JATI MALAYSIA SDN BHD [2005] 1 MLJ 162
FACTS:
The plaintiff and the defendant had entered into an agreement (‘the agreement’) for the sale of a used machine, an Ingersoll-Rand CM 351 Crawlair Drill fitted with a VL140 Drifter (‘the machine’) at a price of RM130,000 subject to the terms and conditions contained in the purchase order. The machine was inspected and accepted by the plaintiff without objection. The plaintiff did not elect to engage their own independent technical advisers for a second opinion on the machine despite being accorded the opportunity to do so by the defendants. It was stated that the machine was fitted with a VL140 drifter prior to delivery to the plaintiff. The agreed warranty period was for six months and no complaint was raised during that time. After the expiry of the six months’ warranty period, the defendant continued to provide goods, after-sales service and repairs on the used machine, as and when requested by the plaintiff. 22 months later, the plaintiff complained that the machine was fitted with a VL120 drifter and not VL140, and refused to settle there pair costs.
HELD:
In determining the difference between a VL120 Drifter and a VL140 Drifter an application of the‘finger test’ or ‘visual test’ would have easily revealed the differences. The difference between both types of drifters also could have been easily verifiable upon the plaintiff obtaining a second opinion. The plaintiff elected not to do despite the defendant’s advice. Further, the plaintiff had sufficient time to see if the Drifter was VL120 or a VL140 but had chosen to complain after using the said machine for 22 months. Accordingly, there was no breach of s 15 of the SOGA as claimed by the plaintiff. The time and place of delivery is prima facie an important factor and, dependent upon the circumstances of each case. The plaintiff had been given the opportunity to inspect the machine even after delivery. The plaintiff’s conduct of purchasing another new drifter which had been modified to suit the machine and then sought to claim damages for non-conformity with description and alleged under-production loss, long after the expiry of the six-month warranty period was unwarranted. Therefore, once a buyer is deemed to have accepted the goods, he loses his right to reject the same for breach of conditions.
WEE LIAN CONSTRUCTION SDN BHD V INGERSOLL - JATI MALAYSIA SDN BHD [2005] 1 MLJ 162
FACTS:
The plaintiff and the defendant had entered into an agreement (‘the agreement’) for the sale of a used machine, an Ingersoll-Rand CM 351 Crawlair Drill fitted with a VL140 Drifter (‘the machine’) at a price of RM130,000 subject to the terms and conditions contained in the purchase order. The machine was inspected and accepted by the plaintiff without objection. The plaintiff did not elect to engage their own independent technical advisers for a second opinion on the machine despite being accorded the opportunity to do so by the defendants. It was stated that the machine was fitted with a VL140 drifter prior to delivery to the plaintiff. The agreed warranty period was for six months and no complaint was raised during that time. After the expiry of the six months’ warranty period, the defendant continued to provide goods, after-sales service and repairs on the used machine, as and when requested by the plaintiff. 22 months later, the plaintiff complained that the machine was fitted with a VL120 drifter and not VL140, and refused to settle there pair costs.
HELD:
In determining the difference between a VL120 Drifter and a VL140 Drifter an application of the‘finger test’ or ‘visual test’ would have easily revealed the differences. The difference between both types of drifters also could have been easily verifiable upon the plaintiff obtaining a second opinion. The plaintiff elected not to do despite the defendant’s advice. Further, the plaintiff had sufficient time to see if the Drifter was VL120 or a VL140 but had chosen to complain after using the said machine for 22 months. Accordingly, there was no breach of s 15 of the SOGA as claimed by the plaintiff. The time and place of delivery is prima facie an important factor and, dependent upon the circumstances of each case. The plaintiff had been given the opportunity to inspect the machine even after delivery. The plaintiff’s conduct of purchasing another new drifter which had been modified to suit the machine and then sought to claim damages for non-conformity with description and alleged under-production loss, long after the expiry of the six-month warranty period was unwarranted. Therefore, once a buyer is deemed to have accepted the goods, he loses his right to reject the same for breach of conditions.
CASE:
AILSA CRAIG FISHING CO LTD VS MALVERN FISHING CO & ANOR [1983] WLR 964
FACTS:
The appellant boat owners were members of an association which had contracted with one of the respondents, a security company, for the provision of security services for boats berthed in a particular place. The contract provided that even if there was a total failure to provide the services that had been contracted for, the respondent’s liability was limited to the sum of ₤1,000. The respondents were found to be at fault for an event that resulted in the sinking of the appellant’s boat. The appellants claimed, inter alia, that there had been a total failure to provide security and thus the respondents could not assent the limitation of liability contained in the contract.
HELD:
The strict principles that apply when constructing an exemption clause, particularly where there has been a total breach of contract, do not apply in their full rigour when the clause merely limits liability.
[Clauses limiting liability] will of course be read contra proferentem and must be clearly expressed, but there is no reason why they should be judged by the specially exacting standards which are applied to exclusion and indemnity clauses. The reason for imposing such standards on these clauses is the inherent improbability that the other party to a contract including such a clause intended to release the proferens from a liability that would otherwise fall upon him. But there is no such high degree of improbability that he would agree to a limitation of the liability of the proferens, especially when the potential losses that might be caused by the negligence of the proferens or its servants are so great in proportion to the sums that can reasonably be charged for the services contracted for.
AILSA CRAIG FISHING CO LTD VS MALVERN FISHING CO & ANOR [1983] WLR 964
FACTS:
The appellant boat owners were members of an association which had contracted with one of the respondents, a security company, for the provision of security services for boats berthed in a particular place. The contract provided that even if there was a total failure to provide the services that had been contracted for, the respondent’s liability was limited to the sum of ₤1,000. The respondents were found to be at fault for an event that resulted in the sinking of the appellant’s boat. The appellants claimed, inter alia, that there had been a total failure to provide security and thus the respondents could not assent the limitation of liability contained in the contract.
HELD:
The strict principles that apply when constructing an exemption clause, particularly where there has been a total breach of contract, do not apply in their full rigour when the clause merely limits liability.
[Clauses limiting liability] will of course be read contra proferentem and must be clearly expressed, but there is no reason why they should be judged by the specially exacting standards which are applied to exclusion and indemnity clauses. The reason for imposing such standards on these clauses is the inherent improbability that the other party to a contract including such a clause intended to release the proferens from a liability that would otherwise fall upon him. But there is no such high degree of improbability that he would agree to a limitation of the liability of the proferens, especially when the potential losses that might be caused by the negligence of the proferens or its servants are so great in proportion to the sums that can reasonably be charged for the services contracted for.
Partnership
It is important to differential the actual authority and apparent authority. Actual authority arises where the principal's words or conduct reasonably cause the agent to believe that he or she has been authorized to act. Apparent or ostensible authority exists where the principal's words or conduct would lead a reasonable person in the third party's position to believe that the agent was authorized to act, even if the principal and the purported agent had never discussed such a relationship.
Apparent authority of partner in a firm has mention in Section 7 Partnership Act 1961. It provides that Every partner is an agent of the firm and his other partners for the purpose of the business of the partnership; and the acts of every partner who does any act for carrying on in the usual way business of the kind carried on by the firm of which he is a member bind the firm and his partners, unless the partner so acting has in fact no authority to act for the firm in the particular matter, and the person with whom he is dealing either knows that he has no authority or does not know or believe him to be a partner.
That has four conditions to determine whether a partner has the apparent authority. The first condition is where the act done must be of the type of business that is carried out by the firm. Second condition is the act will bind the firm if it is done in usual and ordinary manner. If not, the act would not bind the firm or other partners. Third condition is the third party know or believe that the partner has authority or power to act and fourth condition is third parties enter into a transaction and he now that the person does not have authority to act, the firm will not be liable.
As a whole, there are four conditions to determine the apparent authority of partners. The four conditions will be binding on the firm. However, the apparent authority is used to determine the position of the partner as an agent of the company.
Apparent authority of partner in a firm has mention in Section 7 Partnership Act 1961. It provides that Every partner is an agent of the firm and his other partners for the purpose of the business of the partnership; and the acts of every partner who does any act for carrying on in the usual way business of the kind carried on by the firm of which he is a member bind the firm and his partners, unless the partner so acting has in fact no authority to act for the firm in the particular matter, and the person with whom he is dealing either knows that he has no authority or does not know or believe him to be a partner.
That has four conditions to determine whether a partner has the apparent authority. The first condition is where the act done must be of the type of business that is carried out by the firm. Second condition is the act will bind the firm if it is done in usual and ordinary manner. If not, the act would not bind the firm or other partners. Third condition is the third party know or believe that the partner has authority or power to act and fourth condition is third parties enter into a transaction and he now that the person does not have authority to act, the firm will not be liable.
As a whole, there are four conditions to determine the apparent authority of partners. The four conditions will be binding on the firm. However, the apparent authority is used to determine the position of the partner as an agent of the company.
Contract of sale of goods
Contract of sale of goods is defined in section 4 of the Sales of Goods Act 1957 as a contract in which sellers transfer ownership of, or agree to transfer ownership rights of such goods to the buyer with the replies mentioned the price. A contract of sale may be in the form of absolute or conditional.
Sales contract also includes an agreement to sell and sales. Sales occur when under the contract of sale the property to the goods transferred from the seller to the buyer but an agreement to sell the property to occur when the goods will only be moved at a time before or after the conditions are complied with. Differences both sales agreement is the transfer of ownership occurs while the agreement to sell the property transfer occurred at a time before. This difference is particularly important in terms of transfer of risk of these and from the corner of the remedies can be claimed.
When sales occur in the contract description, then there is a known condition that goods sold shall meet the given subject. The extent that goods sold must meet the description must be viewed from the angle of the principle that says de minis non curat lex, that "law is not a trivial matter concerned".
Sales usually happen when the buyer through the description agreed to buy goods based on the description given by the seller. Sometimes buyer see the goods to be purchased, but is sometimes considered as sales through description. Example in the case of Taylor vs. Beale. In case a buyer was interested in an ad selling a car that describe the car as a 1961 model. Buyers inspect the car before purchase. After buying the car he found semi-car model 1961 car models and half earlier.
Court decided the seller had violated the conditions known about the subject because even though the buyer has seen the car, buyers are still dependent on the subject given by the seller in making the decision to buy. Determining the facts in section 15 Sale of Goods Act where goods are coincide exactly with the subject. The quality and quality does not arise. According to section 12 (2) Sale of Goods Act failure to provide goods seller described the actual contract allows the buyer rejects.
Sales contract also includes an agreement to sell and sales. Sales occur when under the contract of sale the property to the goods transferred from the seller to the buyer but an agreement to sell the property to occur when the goods will only be moved at a time before or after the conditions are complied with. Differences both sales agreement is the transfer of ownership occurs while the agreement to sell the property transfer occurred at a time before. This difference is particularly important in terms of transfer of risk of these and from the corner of the remedies can be claimed.
When sales occur in the contract description, then there is a known condition that goods sold shall meet the given subject. The extent that goods sold must meet the description must be viewed from the angle of the principle that says de minis non curat lex, that "law is not a trivial matter concerned".
Sales usually happen when the buyer through the description agreed to buy goods based on the description given by the seller. Sometimes buyer see the goods to be purchased, but is sometimes considered as sales through description. Example in the case of Taylor vs. Beale. In case a buyer was interested in an ad selling a car that describe the car as a 1961 model. Buyers inspect the car before purchase. After buying the car he found semi-car model 1961 car models and half earlier.
Court decided the seller had violated the conditions known about the subject because even though the buyer has seen the car, buyers are still dependent on the subject given by the seller in making the decision to buy. Determining the facts in section 15 Sale of Goods Act where goods are coincide exactly with the subject. The quality and quality does not arise. According to section 12 (2) Sale of Goods Act failure to provide goods seller described the actual contract allows the buyer rejects.
Sale of Goods
SALE OF GOODS
INTRODUCTION
The sale of goods by description is provided for by section 15 of the SOGA which reads:
The Sales of Goods Act 1957 governs the law with respect to the sale of goods. It deals with such matters as contracts for the sale of goods, the passing of ownership and the risk of goods sold, and the remedies of the buyers and sellers for breaches by the other party.
The Sales of Goods Act does not extend to the states of East Malaysia, ie to Sabah and Sarawak. The two states would seem to continue to be subject, as far as the law on the sale of goods is concerned, to the UK Sale of Goods Act 1979. Meanwhile, Sabah and Sarawak are excluded from the ambit of the Sales of Goods Act by Section 5 (2) of the Civil Law Act, 1956 and still adopt the principle of English law relating to sales of goods.
INTRODUCTION
The sale of goods by description is provided for by section 15 of the SOGA which reads:
The Sales of Goods Act 1957 governs the law with respect to the sale of goods. It deals with such matters as contracts for the sale of goods, the passing of ownership and the risk of goods sold, and the remedies of the buyers and sellers for breaches by the other party.
The Sales of Goods Act does not extend to the states of East Malaysia, ie to Sabah and Sarawak. The two states would seem to continue to be subject, as far as the law on the sale of goods is concerned, to the UK Sale of Goods Act 1979. Meanwhile, Sabah and Sarawak are excluded from the ambit of the Sales of Goods Act by Section 5 (2) of the Civil Law Act, 1956 and still adopt the principle of English law relating to sales of goods.
Wednesday, April 21, 2010
Income Tax Law
BASIS OF TAXATION
Income tax is generally imposed on a territorial basis in that only income accruing in or derived from Malaysia is liable to tax. However, resident individuals and other non-corporate entities are also taxed on foreign-sourced income remitted into Malaysia. Foreign-sourced income received by resident companies are not subject to tax even if such income is remitted to Malaysia.
Income derived by tax residents from businesses of banking, insurance and air/sea transport operations are assessable on a world income scope.
Relief from double taxation of foreign-sourced income is available by means of bilateral credit if there is a tax treaty or unilateral relief if there is no tax treaty. The relief is restricted to the lower of Malaysian tax payable on the foreign-sourced income or foreign tax paid if there is a treaty or one-half of the foreign tax paid there is no treaty.
Sources of Income Liable to Tax
Sources of income which are liable to income tax are as follows:
Gains and profits from trade, profession and business
Salaries, remunerations, gains and profits from an employment
Dividends, interests or discounts
Rents, royalties or premiums
Pensions, annuities or other periodic payments/li>
Other gains or profits of an income nature not mentioned above.
Chargeable income is arrived at after adjusting for expenses incurred wholly and exclusively in the production of the income. Specific provisions or reserves for anticipated losses or contingent liabilities are not tax deductible. No deduction for book depreciation is allowed although capital allowances are granted. Unabsorbed losses may be carried forward indefinitely to offset against future income.
Personal Income Tax
All individuals are liable to tax on income accrued in, derived from or remitted to Malaysia. The rate of tax depends on the resident status of the individual which is determined by the duration of his stay in the country (as stipulated under Section 7 in the Income Tax Act 1967).
Income tax is generally imposed on a territorial basis in that only income accruing in or derived from Malaysia is liable to tax. However, resident individuals and other non-corporate entities are also taxed on foreign-sourced income remitted into Malaysia. Foreign-sourced income received by resident companies are not subject to tax even if such income is remitted to Malaysia.
Income derived by tax residents from businesses of banking, insurance and air/sea transport operations are assessable on a world income scope.
Relief from double taxation of foreign-sourced income is available by means of bilateral credit if there is a tax treaty or unilateral relief if there is no tax treaty. The relief is restricted to the lower of Malaysian tax payable on the foreign-sourced income or foreign tax paid if there is a treaty or one-half of the foreign tax paid there is no treaty.
Sources of Income Liable to Tax
Sources of income which are liable to income tax are as follows:
Gains and profits from trade, profession and business
Salaries, remunerations, gains and profits from an employment
Dividends, interests or discounts
Rents, royalties or premiums
Pensions, annuities or other periodic payments/li>
Other gains or profits of an income nature not mentioned above.
Chargeable income is arrived at after adjusting for expenses incurred wholly and exclusively in the production of the income. Specific provisions or reserves for anticipated losses or contingent liabilities are not tax deductible. No deduction for book depreciation is allowed although capital allowances are granted. Unabsorbed losses may be carried forward indefinitely to offset against future income.
Personal Income Tax
All individuals are liable to tax on income accrued in, derived from or remitted to Malaysia. The rate of tax depends on the resident status of the individual which is determined by the duration of his stay in the country (as stipulated under Section 7 in the Income Tax Act 1967).
Insurance Law
Insurance law is the name given to practices of law surrounding insurance, including insurance policies and claims. It can be broadly broken into two categories - regulation of the business of insurance and regulation of claim handling.
Objective is to provide knowledge and understanding of the laws which form the background to the operation of insurance, the system within which these laws operate and the ability to apply knowledge and skills to simple situations.
As a preliminary matter, insurance companies are generally required to follow all of the same laws and regulations as any other type of business. This would include zoning and land use, wage and hour laws, tax laws, and securities regulations. There are also other regulations that insurers must also follow.
Types of Insurances include Life Insurance, Marine Insurance, Fire Insurance, Accident Insurance, Motor Insurance, and Aviation Insurance
A contract of insurance is a contract whereby one person, called the insurer, agrees to indemnify another person, called the insured, against a loss which may arise upon the occurrence of the particular event.
The consideration paid by the insured either in the form of a lump sum or a periodical amount is called the “premium”. The loss which is insured is known as the “risk”.
Objective is to provide knowledge and understanding of the laws which form the background to the operation of insurance, the system within which these laws operate and the ability to apply knowledge and skills to simple situations.
As a preliminary matter, insurance companies are generally required to follow all of the same laws and regulations as any other type of business. This would include zoning and land use, wage and hour laws, tax laws, and securities regulations. There are also other regulations that insurers must also follow.
Types of Insurances include Life Insurance, Marine Insurance, Fire Insurance, Accident Insurance, Motor Insurance, and Aviation Insurance
A contract of insurance is a contract whereby one person, called the insurer, agrees to indemnify another person, called the insured, against a loss which may arise upon the occurrence of the particular event.
The consideration paid by the insured either in the form of a lump sum or a periodical amount is called the “premium”. The loss which is insured is known as the “risk”.
Sale of Goods Act
Sale of Goods Act (with its variations) is a stock short title used for legislation in the United Kingdom relating to the sale of goods.
An Act with this short title will have been known as a Sale of Goods Bill during its passage through Parliament.
Sale of Goods Acts may be a generic name either for legislation bearing that short title or for all legislation which relates to the sale of goods.
Sales of Goods Act 1957
(1) A contract of sale of goods is a contract whereby the seller
transfers or agrees to transfer the property in goods to the buyer
for a price. There may be a contract of sale between one partowner
and another.
(2) A contract of sale may be absolute or conditional.
(3) Where under a contract of sale the property in the goods
is transferred from the seller to the buyer, the contract is called
a sale, but where the transfer of the property in the goods is to
take place at a future time or subject to some condition thereafter
to be fulfilled, the contract is called an agreement to sell.
(4) An agreement to sell becomes a sale when the time elapses
or the conditions are fulfilled subject to which the property in the
goods is to be transferred.
An Act with this short title will have been known as a Sale of Goods Bill during its passage through Parliament.
Sale of Goods Acts may be a generic name either for legislation bearing that short title or for all legislation which relates to the sale of goods.
Sales of Goods Act 1957
(1) A contract of sale of goods is a contract whereby the seller
transfers or agrees to transfer the property in goods to the buyer
for a price. There may be a contract of sale between one partowner
and another.
(2) A contract of sale may be absolute or conditional.
(3) Where under a contract of sale the property in the goods
is transferred from the seller to the buyer, the contract is called
a sale, but where the transfer of the property in the goods is to
take place at a future time or subject to some condition thereafter
to be fulfilled, the contract is called an agreement to sell.
(4) An agreement to sell becomes a sale when the time elapses
or the conditions are fulfilled subject to which the property in the
goods is to be transferred.
Lifting the Veil of Incorporation
Lifting the Veil of Incorporation
The concept of a company being a legal entity can sometimes give undesirable results. In particular, shareholders could use a company to obtain funds dishonestly, and then not be liable for repayment.
There are therefore numerous exceptions to the rules defined by Salomon v Salomon & Co Ltd. These can be implemented by the courts on a case-by-case basis, or by statute.
A company once incorporated becomes a legal personality, a juristic entity, separate and distinct from its members and shareholders and capable of having its own rights, duties and obligation and can sue or be sued in its own name.
It is also proving that a corporation exists merely as a completely controlled front (alter ego) for an individual or management group, so that in a lawsuit the individual defendants can be held responsible (liable) for damages for actions of the corporation. If a corporation has issued stock and held regular meetings of shareholders and directors, it is unlikely a judge will "pierce" the veil and limit the liability to the corporation, unless there is proof that the corporation was created to accomplish a fraud on those dealing with it.
Exceptions implemented by statute
The Companies Act 1985 includes a number of exceptions to the general rule
imposed by Salomon v Salomon & Co Ltd.
1) A public company must have at least two members. If there is a single
member (who is aware he is the only member) for more that six months,
he is personally liable for any debts incurred during that period.
2) Groups of companies must produce accounts acknowledging their
internal relationship, and profits and losses of different subsidiaries can
be offset for taxation purposes.
3) Under the Transfer of Earnings and Protection of Employment
Regulations (XXX), if an employee transfers from one company to a
sister company, their period o employment is held to be continuous.
4) Employees of a company can be liable for the company’s actions in
some circumstances:
- A public company must have an s117 certificate. If it operates
without one, a director may be personally liable for any debts
incurred.
- A company cheque must bear the name of a company exactly,
otherwise the director who signs is liable if the cheque is not cleared.
This applies even if the omission is due to a printing error. A
director of Michael Jackson Ltd was personally liable for a cheque
he signed bearing the company name M Jackson Ltd.
- If a company is wound up, its director may not carry out similar
business with a similar name for five years. Double glazing
companies are a good example of this; before his legislation,
directors would pay themselves high bonuses and run a company
into the ground, then would buy the assets of the insolvent company
cheaply and set up a virtually identical company with a similar name
to transfer any goodwill.
- Under the Company Directors Disqualification Act 1986, a person
who is disqualified from being a director can be personally liable if
they act as a director during their disqualification period.
- If directors know a company is close to insolvency but continue
trading, they may be personally liable. For example, Courts
Furniture Ltd recently continued taking orders and deposits despite
the directors knowing the business was close to closing.
The concept of a company being a legal entity can sometimes give undesirable results. In particular, shareholders could use a company to obtain funds dishonestly, and then not be liable for repayment.
There are therefore numerous exceptions to the rules defined by Salomon v Salomon & Co Ltd. These can be implemented by the courts on a case-by-case basis, or by statute.
A company once incorporated becomes a legal personality, a juristic entity, separate and distinct from its members and shareholders and capable of having its own rights, duties and obligation and can sue or be sued in its own name.
It is also proving that a corporation exists merely as a completely controlled front (alter ego) for an individual or management group, so that in a lawsuit the individual defendants can be held responsible (liable) for damages for actions of the corporation. If a corporation has issued stock and held regular meetings of shareholders and directors, it is unlikely a judge will "pierce" the veil and limit the liability to the corporation, unless there is proof that the corporation was created to accomplish a fraud on those dealing with it.
Exceptions implemented by statute
The Companies Act 1985 includes a number of exceptions to the general rule
imposed by Salomon v Salomon & Co Ltd.
1) A public company must have at least two members. If there is a single
member (who is aware he is the only member) for more that six months,
he is personally liable for any debts incurred during that period.
2) Groups of companies must produce accounts acknowledging their
internal relationship, and profits and losses of different subsidiaries can
be offset for taxation purposes.
3) Under the Transfer of Earnings and Protection of Employment
Regulations (XXX), if an employee transfers from one company to a
sister company, their period o employment is held to be continuous.
4) Employees of a company can be liable for the company’s actions in
some circumstances:
- A public company must have an s117 certificate. If it operates
without one, a director may be personally liable for any debts
incurred.
- A company cheque must bear the name of a company exactly,
otherwise the director who signs is liable if the cheque is not cleared.
This applies even if the omission is due to a printing error. A
director of Michael Jackson Ltd was personally liable for a cheque
he signed bearing the company name M Jackson Ltd.
- If a company is wound up, its director may not carry out similar
business with a similar name for five years. Double glazing
companies are a good example of this; before his legislation,
directors would pay themselves high bonuses and run a company
into the ground, then would buy the assets of the insolvent company
cheaply and set up a virtually identical company with a similar name
to transfer any goodwill.
- Under the Company Directors Disqualification Act 1986, a person
who is disqualified from being a director can be personally liable if
they act as a director during their disqualification period.
- If directors know a company is close to insolvency but continue
trading, they may be personally liable. For example, Courts
Furniture Ltd recently continued taking orders and deposits despite
the directors knowing the business was close to closing.
Corporation / Company
A corporation is defined as a legal entity or structure created under the authority of the laws of a state, consisting of a person or group of persons who become shareholders. The entity's existence is considered separate and distinct from that of its members.
Like a real person, a corporation can enter into contracts, sue and be sued, pay taxes separately from its owners, and do the other things necessary to conduct business. Since a corporation is an entity in its own right, it is liable for its own debts and obligations. As a result, providing that corporate formalities are followed, the corporation's owners (the shareholders) enjoy limited liability, and are legally shielded from the corporation's liabilities and debts.
The existence of a corporation is not dependent upon who the owners or investors are at any one time. Once formed, a corporation continues to exist as a separate entity, even when shareholders die or sell their shares. A corporation continues to exist until the shareholders decide to dissolve it or merge it with another business.
Corporations are subject to the laws of the state of incorporation, and to the laws of any other state in which the corporation conducts business. Corporations may thus be subject to the laws of more than one state. All states have corporation statutes that set forth the ground rules as to how corporations are formed and maintained.
In the eyes of the law, a corporation has many of the same rights and responsibilities as a person. It may buy, sell, and own property; enter into leases and contracts; and bring lawsuits. It pays taxes. It can be prosecuted and punished (often with fines) if it violates the law. The chief advantages are that it can exist indefinitely, beyond the lifetime of any one member or founder, and that it offers its owners the protection of limited personal liability.
Limited Liability
If you own shares in a corporation that cannot pay its debts and is sued by its creditors, the assets of the company may be seized and sold. But although you can lose your investment, the creditors cannot attach your personal assets (such as cars, houses, or bank accounts) to satisfy their claims.
There are some important exceptions to this rule, however. If the business affairs of a corporation and its shareholders are so entangled that they are, in effect, one and the same, an opponent in a lawsuit may be able to convince a court to "pierce the corporate veil" and impose personal liability, or responsibility, on the active shareholders. Personal liability may also be imposed if the corporation does not comply with required legal formalities or fails to keep proper records.
Like a real person, a corporation can enter into contracts, sue and be sued, pay taxes separately from its owners, and do the other things necessary to conduct business. Since a corporation is an entity in its own right, it is liable for its own debts and obligations. As a result, providing that corporate formalities are followed, the corporation's owners (the shareholders) enjoy limited liability, and are legally shielded from the corporation's liabilities and debts.
The existence of a corporation is not dependent upon who the owners or investors are at any one time. Once formed, a corporation continues to exist as a separate entity, even when shareholders die or sell their shares. A corporation continues to exist until the shareholders decide to dissolve it or merge it with another business.
Corporations are subject to the laws of the state of incorporation, and to the laws of any other state in which the corporation conducts business. Corporations may thus be subject to the laws of more than one state. All states have corporation statutes that set forth the ground rules as to how corporations are formed and maintained.
In the eyes of the law, a corporation has many of the same rights and responsibilities as a person. It may buy, sell, and own property; enter into leases and contracts; and bring lawsuits. It pays taxes. It can be prosecuted and punished (often with fines) if it violates the law. The chief advantages are that it can exist indefinitely, beyond the lifetime of any one member or founder, and that it offers its owners the protection of limited personal liability.
Limited Liability
If you own shares in a corporation that cannot pay its debts and is sued by its creditors, the assets of the company may be seized and sold. But although you can lose your investment, the creditors cannot attach your personal assets (such as cars, houses, or bank accounts) to satisfy their claims.
There are some important exceptions to this rule, however. If the business affairs of a corporation and its shareholders are so entangled that they are, in effect, one and the same, an opponent in a lawsuit may be able to convince a court to "pierce the corporate veil" and impose personal liability, or responsibility, on the active shareholders. Personal liability may also be imposed if the corporation does not comply with required legal formalities or fails to keep proper records.
Types of Business Organizations
Sole proprietorship is the simplest form of business organisation. It is owned by one person, but it need not be operated by that person alone. A sole proprietorship can even have large numbers of employees.
There are advantages and limitations of running a Sole Proprietorship type of business. Do carefully study the legal implications of the pros and cons before deciding the best option.
Advantages of Sole Proprietorship
- As a sole proprietor, you have absolute freedom in decision making.
- All profits will be your personal property.
- No reports of accounts are required.
- You only need to pay personal income tax and not business tax.
Limitations of sole proprietorship
- You are responsible for the debts and risks of the business.
- Legally, there is no difference between your personal and your business property. - Your liabilities are unlimited, whicn means risks and failures in the business will involve your personal property.
A partnership is the relationship existing between two or more persons who join to carry on a trade or business. Each person contributes money, property, labor or skill, and expects to share in the profits and losses of the business.
A partnership must file an annual information return to report the income, deductions, gains, losses, etc., from its operations, but it does not pay income tax. Instead, it "passes through" any profits or losses to its partners. Each partner includes his or her share of the partnership's income or loss on his or her tax return.
A partnership is also a type of business entity in which partners (owners) share with each other the profits or losses of the business. Partnerships are often favored over corporations for taxation purposes, as the partnership structure does not generally incur a tax on profits before it is is distributed to the partners (i.e. there is no dividend tax levied). However, depending on the partnership structure and the jurisdiction in which it operates, owners of a partnership may be exposed to greater personal liability than they would as shareholders of a corporation.
Corporation is the most common form of business organization, and one which is chartered by a state and given many legal rights as an entity separate from its owners. This form of business is characterized by the limited liability of its owners, the issuance of shares of easily transferable stock, and existence as a going concern. The process of becoming a corporation, call incorporation, gives the company separate legal standing from its owners and protects those owners from being personally liable in the event that the company is sued (a condition known as limited liability). Incorporation also provides companies with a more flexible way to manage their ownership structure. In addition, there are different tax implications for corporations, although these can be both advantageous and disadvantageous. In these respects, corporations differ from sole proprietorships and limited partnerships.
There are advantages and limitations of running a Sole Proprietorship type of business. Do carefully study the legal implications of the pros and cons before deciding the best option.
Advantages of Sole Proprietorship
- As a sole proprietor, you have absolute freedom in decision making.
- All profits will be your personal property.
- No reports of accounts are required.
- You only need to pay personal income tax and not business tax.
Limitations of sole proprietorship
- You are responsible for the debts and risks of the business.
- Legally, there is no difference between your personal and your business property. - Your liabilities are unlimited, whicn means risks and failures in the business will involve your personal property.
A partnership is the relationship existing between two or more persons who join to carry on a trade or business. Each person contributes money, property, labor or skill, and expects to share in the profits and losses of the business.
A partnership must file an annual information return to report the income, deductions, gains, losses, etc., from its operations, but it does not pay income tax. Instead, it "passes through" any profits or losses to its partners. Each partner includes his or her share of the partnership's income or loss on his or her tax return.
A partnership is also a type of business entity in which partners (owners) share with each other the profits or losses of the business. Partnerships are often favored over corporations for taxation purposes, as the partnership structure does not generally incur a tax on profits before it is is distributed to the partners (i.e. there is no dividend tax levied). However, depending on the partnership structure and the jurisdiction in which it operates, owners of a partnership may be exposed to greater personal liability than they would as shareholders of a corporation.
Corporation is the most common form of business organization, and one which is chartered by a state and given many legal rights as an entity separate from its owners. This form of business is characterized by the limited liability of its owners, the issuance of shares of easily transferable stock, and existence as a going concern. The process of becoming a corporation, call incorporation, gives the company separate legal standing from its owners and protects those owners from being personally liable in the event that the company is sued (a condition known as limited liability). Incorporation also provides companies with a more flexible way to manage their ownership structure. In addition, there are different tax implications for corporations, although these can be both advantageous and disadvantageous. In these respects, corporations differ from sole proprietorships and limited partnerships.
Offer
Offer and acceptance analysis is a traditional approach in contract law used to determine whether an agreement exists between two parties. As a contract is an agreement, an offer is an indication by one person (the "offeror") to another (the "offeree") of the offeror's willingness to enter into a contract on certain terms without further negotiations. A contract is said to come into existence when acceptance of an offer (agreement to the terms in it) has been communicated to the offeror by the offeree.
From Wikipedia, the offer and acceptance formula, developed in the 19th century, identifies a moment of formation when the parties are of one mind. This classical approach to contract formation has been weakened by developments in the law of estoppel, misleading conduct, misrepresentation and unjust enrichment.
Offer as "an expression of willingness to contract on certain terms, made with the intention that it shall become binding as soon as it is accepted by the person to whom it is addressed", the "offeree". An offer is a statement of the terms on which the offeror is willing to be bound.
Whether two parties have an agreement or a valid offer is an issue which is determined by the court using the Objective test (Smith v. Hughes). Therefore the "intention" referred to in the definition is objectively judged by the courts. In the English case of Smith v. Hughes the court emphasised that the important thing is not a party's real intentions but how a reasonable person would view the situation. This is due mainly to common sense as each party would not wish to breach his side of the contract if it would make him or her culpable to damages, it would especially be contrary to the principle of certainty and clarity in commercial contract and the topic of mistake and how it affects the contract. As a minimum requirement the conditions for an offer should include at least the following 4 conditions: Delivery date, price, terms of payment that includes the date of payment and detail description of the item on offer including a fair description of the condition or type of service. Without one of the minimum requirements of condition an offer of sale is not seen as a legal offer but rather seen as an advertisement.
From Wikipedia, the offer and acceptance formula, developed in the 19th century, identifies a moment of formation when the parties are of one mind. This classical approach to contract formation has been weakened by developments in the law of estoppel, misleading conduct, misrepresentation and unjust enrichment.
Offer as "an expression of willingness to contract on certain terms, made with the intention that it shall become binding as soon as it is accepted by the person to whom it is addressed", the "offeree". An offer is a statement of the terms on which the offeror is willing to be bound.
Whether two parties have an agreement or a valid offer is an issue which is determined by the court using the Objective test (Smith v. Hughes). Therefore the "intention" referred to in the definition is objectively judged by the courts. In the English case of Smith v. Hughes the court emphasised that the important thing is not a party's real intentions but how a reasonable person would view the situation. This is due mainly to common sense as each party would not wish to breach his side of the contract if it would make him or her culpable to damages, it would especially be contrary to the principle of certainty and clarity in commercial contract and the topic of mistake and how it affects the contract. As a minimum requirement the conditions for an offer should include at least the following 4 conditions: Delivery date, price, terms of payment that includes the date of payment and detail description of the item on offer including a fair description of the condition or type of service. Without one of the minimum requirements of condition an offer of sale is not seen as a legal offer but rather seen as an advertisement.
Contract
In law, a contract is a binding legal agreement that is enforceable in a court of law or by binding arbitration. That is to say, a contract is an exchange of promises with a specific remedy for breach.
Agreement is said to be reached when an offer capable of immediate acceptance is met with a "mirror image" acceptance (i.e., an unqualified acceptance). The parties must have the necessary capacity to contract and the contract must not be either trifling, indeterminate, impossible, or illegal. Contract law is based on the principle expressed in the Latin phrase pacta sunt servanda (usually literally "agreements are to be kept"). Breach of contract is recognized by the law and remedies can be provided.
As long as the good or service provided is legal, any oral agreement between two parties can constitute a binding legal contract. The practical limitation to this, however, is that only parties to a written agreement have material evidence (the written contract itself) to prove the actual terms uttered at the time the agreement was struck. In daily life, most contracts can be and are made orally, such as purchasing a book or a sandwich. Sometimes written contracts are required by either the parties, or by statutory law within various jurisdiction for certain types of agreement, for example when buying a house or land.
Contract law can be classified, as is habitual in civil law systems, as part of a general law of obligations (along with tort, unjust enrichment or restitution).
According to legal scholar Sir John William Salmond, a contract is "an agreement creating and defining the obligations between two or more parties".
As a means of economic ordering, contract relies on the notion of consensual exchange and has been extensively discussed in broader economic, sociological and anthropological terms (see "Contractual theory", below). In American English, the term extends beyond the legal meaning to encompass a broader category of agreements. (Wikipedia)
Agreement is said to be reached when an offer capable of immediate acceptance is met with a "mirror image" acceptance (i.e., an unqualified acceptance). The parties must have the necessary capacity to contract and the contract must not be either trifling, indeterminate, impossible, or illegal. Contract law is based on the principle expressed in the Latin phrase pacta sunt servanda (usually literally "agreements are to be kept"). Breach of contract is recognized by the law and remedies can be provided.
As long as the good or service provided is legal, any oral agreement between two parties can constitute a binding legal contract. The practical limitation to this, however, is that only parties to a written agreement have material evidence (the written contract itself) to prove the actual terms uttered at the time the agreement was struck. In daily life, most contracts can be and are made orally, such as purchasing a book or a sandwich. Sometimes written contracts are required by either the parties, or by statutory law within various jurisdiction for certain types of agreement, for example when buying a house or land.
Contract law can be classified, as is habitual in civil law systems, as part of a general law of obligations (along with tort, unjust enrichment or restitution).
According to legal scholar Sir John William Salmond, a contract is "an agreement creating and defining the obligations between two or more parties".
As a means of economic ordering, contract relies on the notion of consensual exchange and has been extensively discussed in broader economic, sociological and anthropological terms (see "Contractual theory", below). In American English, the term extends beyond the legal meaning to encompass a broader category of agreements. (Wikipedia)
Validity of a Contract
When you start a business, you can expect to be signing contracts with different parties for the duration of your operation. This is a very risky part of business, but is also a very normal part of it.
The only way to protect yourself is to determine the validity of a preferred contract before you sign and make a commitment.
As a business owner, one thing that you will constantly deal with is a contract. Whenever you do business, you and your partners will always enter into contracts. In fact, the mere action of incorporating a corporation or partnership requires people to sign and notarize a contract as a sign of good faith and to show that the venture is legal.
Because of its importance, businessmen go to great lengths and take some time to determine the validity of a contract. In business, just because you are extended a contract it doesn’t mean that you should sign it already. You should look into its terms and provisions first to see if you will not run into problems later on after signing that piece of paper and finalizing the deal.
The requirements for the contract to be valid are actually very simple. Here are the points that you should look for when a contract is offered to you in relation to your business:
The parties to the contract should be clearly defined
This part is important since it shows who are bound by the terms and provisions of the offered contract. The parties listed in a contract are the ones that reserve the right to do something under the contract.
The most common example is the Terms and Agreements statement that most users are required to read when joining a website. In this case, the parties here are the users and the owners of the website. If you do take the time to read it, you’ll find that there is a provision in every TOS stating that the website reserves the right to terminate the membership given certain circumstances.
There is a clear object of the contract
The object is the item for which the contract has been formulated. It doesn’t even have to be a tangible commodity; as long as there is something defined in exchange for your part of the contract, then that qualifies as the object of the agreement. The object of the agreement should also be legal, otherwise you will have trouble suing the other party later on if a breach is committed.
For example, you are running an advertising firm and someone approaches you with an offer of a marketing partnership. The contract offers you a fixed fee in exchange for your company undertaking the marketing campaign for their product. In this sample scenario, which is the object of the contract? No, it is not the product but rather the advertising services that you are to extend on their behalf.
The only way to protect yourself is to determine the validity of a preferred contract before you sign and make a commitment.
As a business owner, one thing that you will constantly deal with is a contract. Whenever you do business, you and your partners will always enter into contracts. In fact, the mere action of incorporating a corporation or partnership requires people to sign and notarize a contract as a sign of good faith and to show that the venture is legal.
Because of its importance, businessmen go to great lengths and take some time to determine the validity of a contract. In business, just because you are extended a contract it doesn’t mean that you should sign it already. You should look into its terms and provisions first to see if you will not run into problems later on after signing that piece of paper and finalizing the deal.
The requirements for the contract to be valid are actually very simple. Here are the points that you should look for when a contract is offered to you in relation to your business:
The parties to the contract should be clearly defined
This part is important since it shows who are bound by the terms and provisions of the offered contract. The parties listed in a contract are the ones that reserve the right to do something under the contract.
The most common example is the Terms and Agreements statement that most users are required to read when joining a website. In this case, the parties here are the users and the owners of the website. If you do take the time to read it, you’ll find that there is a provision in every TOS stating that the website reserves the right to terminate the membership given certain circumstances.
There is a clear object of the contract
The object is the item for which the contract has been formulated. It doesn’t even have to be a tangible commodity; as long as there is something defined in exchange for your part of the contract, then that qualifies as the object of the agreement. The object of the agreement should also be legal, otherwise you will have trouble suing the other party later on if a breach is committed.
For example, you are running an advertising firm and someone approaches you with an offer of a marketing partnership. The contract offers you a fixed fee in exchange for your company undertaking the marketing campaign for their product. In this sample scenario, which is the object of the contract? No, it is not the product but rather the advertising services that you are to extend on their behalf.
Tuesday, April 13, 2010
One day, Jay saw a banner hanging in front of her favorite cassette outlet in Alamanda which reads: "BIG SALE! LATEST TOO PHAT'S ALBUM IS UP FOR GRAB WITH 50% DISCOUNT! LIMITED STOCK! HURRY, HURRY, HURRY!" After reading it, Jay immediately jumped in the outlet and said she wanted that album at the said discounted price. But to her disappointment, the shop owner said that the cassette is now sold at normal price. Can Jay sue the shop owner for breach of contract? Discuss according to Contracts Act 1950 and relevant decided case(s).
Jay cannot sue the shop owner for the breach of contract as there is an invitation to offer. It is just an invitation to make an offer on the sale of the products. It is a sort of preliminary negotiation to buy something. Examples include the goods displayed in the shop with price tag, advertisement in the newspaper, and Auction sale and Tender.
Similar case is "Pharmaceutical Society of Great Britain v. Boots Cash Chemist"
Fact: The defendant was prosecuted for selling drugs (poison) without the presence of a qualified pharmacist. The customer selected the drug and put in the basket and has not paid yet to the cashier.
Held: Displaying of medicine in the pharmacy is merely an invitation to treat and not offer. When the customers put the goods in the basket, they offer to buy them and the sale will take place at the cashier’s desk if the cashier accepts the price.
Jay cannot sue the shop owner for the breach of contract as there is an invitation to offer. It is just an invitation to make an offer on the sale of the products. It is a sort of preliminary negotiation to buy something. Examples include the goods displayed in the shop with price tag, advertisement in the newspaper, and Auction sale and Tender.
Similar case is "Pharmaceutical Society of Great Britain v. Boots Cash Chemist"
Fact: The defendant was prosecuted for selling drugs (poison) without the presence of a qualified pharmacist. The customer selected the drug and put in the basket and has not paid yet to the cashier.
Held: Displaying of medicine in the pharmacy is merely an invitation to treat and not offer. When the customers put the goods in the basket, they offer to buy them and the sale will take place at the cashier’s desk if the cashier accepts the price.
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