QUESTION MARKS

BUSINESS LAW (LAW 416)

LECTURER DR. NASREEN MIZA HILMY BT NASRIJAL

CLASS BA243 1A
STUDENT
2018298634
NUMBER

NAME NUR FATEHA BINTI HARIS

The issue in this question is whether the owner has complied with the requirements of the formation
of Hire-Purchase (HP) agreement?
Based on Section 2(1), there is two definition of HP which is HP agreement is a letting of
goods with an option to purchase. This is similar to that in common law. The second definition is an
agreement for the purchase of goods by installments. However, it does not include agreements where
the ownership passes at the time of the agreement or upon delivery of goods. In such an agreement, if
the ownership passes at the time of the contract, it is not called HP agreement but a credit sale. The
definition also does not include agreement where the hirer is the dealer in the same goods. The HP Act
1967 provides the procedure that must be complied with for a valid formation of a hire-purchase
agreement. Failure to comply with the requirements of the Act would render the agreement void or in
some circumstances, the commission of an offence.
The first procedure of the formation of hire-purchase agreement is duty to give notice of the
2nd schedule before entering the HP agreement. Section 4(1) provides that before any HP agreement is
entered into in respect of any goods, in a case that where negotiations leading to the making of a hire-
purchase agreement is carried out by a person who would be the owner under the hire-purchase
agreement, or by his agent, other than the dealer, acting on his behalf, the owner or the agent must
serve on the intending hirer a written statement duly completed and signed by him in accordance with
the form set out in Part I of the 2 nd Schedule Notice. In other case where negotiations leading to the
making of hire-purchase agreement is carried out by the dealer, the dealer shall serve on the intending
hirer a written statement duly completed and signed by him in accordance with the form set out in the
Part I of the 2nd schedule notice and at any time after the service of the 2 nd Schedule notice but before
the HP agreement is entered into, serve on the intending hirer a written statement duly completed and
signed by him and the prospective owner in accordance with the form set out in Part II of the 2 nd
schedule. The purpose of giving this notice is to inform the intending hirer concerning the financial
obligations which may be incurred by the intending hirer under the hire-purchase agreement. Section
4(2) states that the notice must be served by delivering it in person to the intending hirer or his agent.
The intending hirer must acknowledge receipt of the notice by signing the appropriate column in the
notice. Based on Section 4(3), any person who has been served with the notice shall not be under any
obligation to enter into any HP agreement. Neither he is under duty to pay any payment in respect of
the preparation or service of such notice. Section 4(4) provides that if a HP contract is made without
serving the notice as required by Section 4(1), the agreement shall be void. In Affin Credit (M) Sdn.
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Bhd. v Yap Yuen Fui case, hirer offer to enter a hire purchase agreement need pre-contractual
disclosure. Section 4(5) states that the owner or dealer who fail to serve a 2nd schedule notice before an
agreement is signed shall also be guilty of an offence under the Act. The penalty for the said offence is
if that entity is a corporate entity, he or she is liable to a fine not exceeding RM100 000 and to a fine
not exceeding RM250 000 for a second or subsequent violation. However if a person is not a
corporate body, he shall be liable to a fine not exceeding RM25 000 or to imprisonment for a period
not exceeding 3 years or both, and for a second or subsequent offence, to a fine not exceeding RM50
000 or to imprisonment for a term not exceeding 5 years, or both, as provided for in Section 46.
The second procedure of the formation of hire-purchase agreement is it must be in writing.
Under Section 4A (1), a hire-purchase agreement shall be in writing. The new Section 4A (1A)
requires a HP agreement to be in National Language or English Language. Section 4A (2) stated if an
agreement is not made in writing or not in the prescribed language, the consequence is that the
agreement is void. Section 4A (3) then said that a failure to comply with the above requirement, the
owner would be guilty of an offence under the Act. According to Section 45, an agreement is
considered not to be in writing if the handwriting is not clear and legible or if the print size of the font
is smaller then ten-point Times. The penalty imposed on the owner for the offence is as prescribed
under the new amended Section 46 as mentioned before.
Next, the HP agreement must be signed. Section 4B (1) provides that every hire-purchase
agreement shall be signed by or on behalf of all parties to the agreement. However, under Section 4B
(2), the hirer cannot be insisted or caused to sign an incomplete or a blank HP agreement. Under a
new Section 4B (2) (2A), the owner also cannot deliver or caused to be delivered a HP agreement or
any other form or document relating to HP agreement which has not been duly completed. If the
agreement is not signed or is signed or delivered without having being complete, the agreement shall
be void as prescribed by Section 4B (3). Then, Section 4B (4)(a) and (b) provides that the owner, the
dealer, the agent or person acting behalf of the owner who fails to sign the agreement or who requires
the hirer to sign or who delivers an incomplete agreement shall be guilty of an offence. The penalty of
the above offence is as provided under Section 46.
Other than that, the HP agreement must contain certain the details. Section 4C (1)(a) requires
the hire-purchase agreement to state the following contents which is the date on which the hiring
starts, the number of installments to be paid under the agreement by the hirer, the amounts of each
installments and the person to whom and the place at which the payments are to be made, the time for
the payment of each of those installments, a description of the goods sufficient to identify them and
the address where the goods are to be kept. Section 4C (1)(b) provides that where any part of the
consideration is or is to be provided not in cash, the HP must contain a description of that part of the
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consideration. According to Section 4C (1)(c), the hire-purchase agreement must also provide the
table containing the following information:
a) cash price of goods
b) the deposit showing separately the amount paid in cash and the amount provided by
consideration other than cash
c) delivery of freight charges if any
d) vehicle registration fees if applicable
e) insurance
f) the total amount referred to above less deposit
g) term charges
h) the annual percentage rate for term charges which shall be calculated in accordance with the
formula set out in the seventh schedule
i) the total amount in items (f) and (g) above which is referred to as the balance originally
payable under the agreement
j) the total amount payable
Under Section 4C (1)(d), the HP agreement shall not contain any particulars which differ in any
material way from the particulars contained in the 2nd Schedule notice served on the hirer before the
HP agreement is entered. Hence, the hirers are advised to ensure that the particulars in the agreement
are similar to the 2nd Schedule notice received earlier. Section 4C (2) provides that any agreement
which does not comply with this requirement would render the HP agreement void. In addition, if the
owner enters an agreement without stating the above contents, the owner shall be guilty of an offence
as prescribed by Section 4C (3). The penalty of the above offence is as provided under Section 46.
The next procedure of formation is separate agreement for every item of goods. Section 4D (1)
provides that if there are more than one goods being hired at one time from the same owner by the
same hirer, there must be separate agreement for each goods. Hire-purchase agreement which contains
more than one goods shall be void as it does not comply with the above requirement stated in Section
4D (2). Under Section 4D (3), the owner would be liable for an offence under the Act and the penalty
is under Section 46. According to Section 4D (4), any goods which are essentially similar or
complimentary to each other and sold as a set shall be regarded as an item.
Furthermore, no alterations and additions can be made to the agreement. Any alteration,
additions or amendments will have no effect unless the hirer or his or her agent has consented by
signing or initialing the agreement in the margin opposite the change or, in an agreement supplemental
to the HP agreement provided under Section 39.
Next, the copies of the agreement must be served on the hirer and guarantor. As provided
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under Section 5(1), within 21 days after making of the HP agreement, the owner must serve or cause
to be served on the hirer and the guarantors each with a copy of the agreement. Section 5(3) states that
if the whole payment of the HP agreement includes payment for insurance, a copy of the insurance
policy should also be served. The new Section 5(4) provides that any person who contravenes this
section shall be guilty of an offence under this Act. The penalty is as provided under Section 46.
Booking fee is also one of the formation of HP agreement. Under the new law of Section 30A,
the owner cannot collect or accept a booking fee from an intending hirer before the receipt of the
completed form set out the 2nd Schedule by the hirer. This means booking fee can only be paid once
the 2nd Schedule (Part I and II) is served. Section 30A (2) states the maximum amount of booking fees
is 1% of the cash price of the goods comprised in a HP agreement. The booking fee shall form part of
the deposit under Section 31 (Section 30A(3)). Any person who contravenes the above rules shall be
guilty of an offence under this Act and penalty provided under Section 46.
The last procedure of the formation of hire-purchase agreement is deposit to be paid by the
hirer. Section 31 (1) provides that if there is no prescribed minimum deposit required on a hirer, an
owner entering into a hire-purchase agreement must first obtain from the hirer a deposit in cash or in
goods, or partly cash and partly goods, to a value of not less than one-tenth (1/10) of the cash price of
the goods. However, the banking institution or financier may ask for a higher deposit at it discretion.
The owner is guilty of an offence if he entered into a HP agreement without having first obtained the
deposit. Section 31 (1A) provides that the owner must collect the deposit upon the signing of the HP
agreement. Then, Section 31 (1B) states that if any owner, dealer or his agent fails to deliver the goods
to the intending hirer, he shall refund the full amount of the deposit to the intending hirer. According
to Section 31 (3), any person who contravenes subsection (1A) and (1B) shall be guilty of an offence
under this Act. The penalty is provided under Section 46.

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 In this question, MHE did not state the exact details of the agreement when Ella signed the
hire-purchase agreement and instead told Ella that the details will be filled later. For the HP agreement
to be formed, it must contains certain the details requires the hire-purchase agreement to state the
following contents which is the date on which the hiring starts, the number of installments to be paid
under the agreement by the hirer, the amounts of each installments and the person to whom and the
place at which the payments are to be made, the time for the payment of each of those installments, a
description of the goods sufficient to identify them and the address where the goods are to be kept. In
this situation, MHE did not comply with the details of agreement. HP agreement also must be in
writing and it is not complied in this case because the amount that Ella has to pay for the monthly
installments are different with what she had been explained before.
In conclusion, the hire-purchase agreement is void because it did not comply with the
formation of hire-purchase agreement.

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ANSWER Q2:

The issue in this question is whether the company has become a body corporate?
Section 2 of the Companies Act 2016 (CA 2016) defines a company as a company
incorporated under this Act or under any corresponding previous written law. Under Section 3 CA
2016, a corporation is described as any body corporate formed or incorporated or existing in Malaysia
or outside Malaysia and includes any foreign company, limited liability partnership and foreign
limited liability partnership. When the Registrar is satisfied with the details and documents submitted,
the company is registered or incorporated under Section 15 CA 2016. Further, under Section 17 Ca
2016, the Registrar may issue a certificate of incorporation. Hence, the company starts from the date
of incorporation. Upon this incorporation, the company attains a separate legal entity from its
members. It is as if the company is an artificial legal person, created by the process of incorporation.
From the date of incorporation, the first effect that turned a company becomes a body
corporate is separate legal entity. As laid down in the case Salomon v Salomon @ Co. Ltd, a
company and its members are two separate bodies. It is as if there is a veil that separates the company
from its members. The company becomes an “individual person”, having its own rights and powers
with a distinct personality from its members. Thus, members of the company or shareholders cannot
be made liable for the debts and liabilities of the company. Only the company is liable for its debts. In
addition, as seen in Lee v Lee’s Air Farming Ltd, a company can make contract with its own
members. Thus, the law recognizes the company as a “legal person” and enforces its rights and
liabilities.
Second effect is ability to sue and be sued in its own name. As a result of being a separate
legal entity, a company has ability to sue and be sued in its own name. this is evidently stated in
Section 21 (1)(a) CA 2016. If any wrong is done to a company, it is for the company to sue in its own
name. Likewise, if a company commits any wrongdoing, the company and not its members should be
sued. Members may not bring an action on behalf of the company as the action should be brought in
the company’s name. The relevant case is Foss v Harbottle. In this case, the shareholders sued the
directors for misappropriation of the company’s property. The court held that the action cannot be
maintained. It is for the company to sue and not the members.
Next is perpetual succession. A company’s existence will not be affected by the death of its
shareholders / members / controllers. A company does not die and it continues to exist until it is
properly wound up or struck off the register which is a process to end the life of a company.
Therefore, even though the shareholders / members / controllers die, the company remains in
existence and can survive the death of its members. This is illustrated in the case of Re Noel Tedman
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Holding Ptd Ltd. In this case, the husband and wife were the only shareholders and directors of the
company. Both of them died in an accident and were survived by their infant child. In spite of their
death, the company was still in existence. According to the company’s Articles of Association, the
directors had to approve the transfer of their shares. Since there were no directors, the court decided to
appoint new directors. However, members were required to vote for their appointment and the
company had no members. The court then decided to allow the personal representatives of the
deceased to appoint the new directors that could assent on the transfer of the shares. Section 20 CA
2016 clearly provides that a company shall continue in existence until it is removed from the register.
Other than that, the effect is the ability to own properties. Section 21 (1)(b) CA 2016 distinctly
provides that a company shall have the full capacity to acquire, own, hold, develop or dispose of any
property. A company has ability to own property in its own name. Shareholders have no proprietary
interest in those assets. Even if a person owns all shares in the company, he does not own the
company’s property. A member or shareholder does not have any interest (legally or equitably) in the
co.’s property. Therefore, a member or shareholder cannot claim a right over the property. The
relevant case is Macaura v Northern Assurance Co. Ltd. In this case, the owner of a timber estate
sold all the timber to a company which was owned almost solely by him. He was the company’s
largest creditor. He insured the timber against fire, but in his own name. after the timber was
destroyed by the fire, he claimed from the insurance company, but the insurance company refused to
pay. The court held that in order to have an insurable interest in a property, a person must have a legal
or equitable interest in that property. The claim failed as the claimant does not have legal or equitable
rights in the assets of the company.
Lastly, limited liability of shareholders. Company is liable for its own debts. A holder of fully
paid shares cannot be made to contribute more to the company as members are to contribute capital
only once. Furthermore, Section 192(1) states that a member shall not be liable for an obligation of a
company by reason only of being a member of the company. Other than that, the liability of a member
of a company is limited in the case of a company limited by shares, any amount unpaid on a share
held by the member, in the case of a company limited by guarantee, any amount which the member
has undertaken to contribute to the company in the event of it being wound up, any liability expressly
provided for in the constitution of the company and any liability as provided under this Act. If a
company is wound up, the most of shareholder can lose is the amount that he has paid for his shares.
Directors and officers of a company are not responsible for the company’s debts. Creditors of the
company cannot take any action against the members, because the member are separate from the
company. In the case of Re Application by Yee Yut Ee,Yee was the secretary of a company that was
wholly-owned subsidiary of the American corporation. The company had retrenched their staff and
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dispute arose as to the retrenchment benefits. The matter was brought to the Industrial Arbitration
Court where an award was made in the company’s absence. As the company did not comply with the
award, the Arbitration Court ordered that Yee be personally liable as he had been appointed director
by then. The High Court held that a director is not liable for the company’s debts.
In this question, SSB demanding payment of the goods of the company to Lim and told that he
will be sued if not settled the payment. Lim can’t be sued due to the failing in settling the payment
because the company is separate legal entity with Lim which prevent Lim to be sued. Other than that,
the company is liable for its own debts because of the limited liability of shareholders. In regards with
case of Re Application by Yee Yut Ee and the case of Salomon v Salomon @ Co. Ltd, members of
the company or shareholders cannot be made liable for the debts and liabilities of the company. Only
the company is liable for its debts. In the other hand, Loh can be sued by Bank Pertama because he
make a personal loan for himself and not the company. Lim also can sue Loh because Loh wants to
sell off a land belongs to ABC to repay his personal loan to the bank. It is under the ability to sue and
be sued in its own name. It is same as the case of Foss v Harbottle which the shareholders sued the
directors for misappropriation of the company’s property.
In conclusion, Lim can’t be sued and can sue Loh for his actions which he make a personal
loan for himself and not the company. Lim also can sue Loh because Loh wants to sell off a land
belongs to ABC to repay his personal loan to the bank. Therefore, ABC has become a body corporate.