Tutorial Notes
Business Law
TUTORIAL NOTES
Business Law
CHAPTER 1 – AN INTRODUCTION TO
THE CONCEPT OF LAW IN MALAYSIA
WHAT IS 'LAW'?
L
aw can generally be described as a set
of rules, developed over a long period
of time that regulates interactions that
people have with each other, and which sets
standards of conduct between individuals
and
between
individuals
and
the
government and which are enforceable
through sanction.
The term 'law' is defined both by Article
160(2) of the Federal Constitution 1957 and
Item (43C) of section 2(1) of the Interpretation
and General Clauses Ordinance 1948 to
include:



The written law; Common law in so far as it is in
operation in the Federation or any
part thereof; and
Any custom or usage having the force
of law in the Federation or in any part
thereof.
business law. Although businesses often use
legal standards in carrying out their activities
and in decision-making, businesses also
adopt codes of ethics or conduct to guide
employers and employees when considering
ethical issues during the decision-making
process. For example, bankers are guided by
the BNM/GP 7, the Code of Ethics issued by
Bank Negara Malaysia, which sets the
minimum standards required in the
respective bank's Code of Conduct.
RULE OF LAW
The rule of law was formulated in its modern
form in the late nineteenth century by an
eminent Oxford academic lawyer, Professor
Dicey. It is at the heart of our present legal
system and is based on the idea that laws
should conform to a minimum standard of
fairness in both content and procedure. Dicey
suggested that the rule of law involves the
following three propositions:

LAW IN RELATION TO JUSTICE
Law aims to maintain justice in society.
Justice is an abstract idea of right and wrong,
fairness and equality. Therefore, the aim of a
given law is to encourage the doing of what
is right or just in a particular set of
circumstances.
LAW AND ETHICS
Ethics is about what is right and what ought
to be, not simply accepting what is. The
purpose of law is to govern the conduct of all
members of society, both natural and
artificial (such as businesses and companies)
whilst ethics guides individuals in
ascertaining the soundness of rules, and their
impact upon relationships.
Law and ethics, though of different concepts,
are often related; particularly in the area of


No person must be punished except
for a breach of the law. This means
that a person should be able to know
whether what they may want to do is
lawful or unlawful. It also recognizes
the law as the highest authority in
society;
All persons are equal before the law
irrespective of status or position; and
The rights or freedoms of citizens are
enforceable in the courts.
LAW, THE STATE AND THE
CONSTITUTION
Law in Malaysia
Malaysia, which consists of Peninsular
Malaysia, Sabah and Sarawak, is one political
unit but it is not governed by the same set of
laws. There are, however, two important
links which unite the two parts of Malaysiathe Parliament and the Federal Court. The
Malaysian Parliament can and does legislate
for the whole country while the Federal
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TUTORIAL NOTES
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Court acts as a final court of appeal for the
whole country.
What is a 'State'?
For international purposes, Malaysia is one
state. Within Malaysia, however there are
thirteen states altogether.
Each state has a government and has rules
which lay down who shall govern and how.
Unlike the United Kingdom where there is an
unwritten constitution derived generally
from the common law, statutes, and
conventions, Malaysia has a written
constitution. The written constitution is
called the Federal Constitution. The Federal
Constitution declares itself to be the supreme
law of the Federation. Article 4(1) of the
Federal constitution states:
4.Supreme Law of Federation.
(1) This Constitution is the supreme
law of the Federation and any law
passed after Merdeka Day which is
inconsistent with this Constitution
shall, to the extent of the inconsistency
be void.
CLASSIFICATION OF LAW
The major legal systems existing in the world
today include:



Civil law
Civil law is derived from Roman law.
It is a complete code of written laws
whose primary source of law is
legislation. Common law
Common law is derived from case law
(or precedent) and statute.
Sino-Soviet
This system is based on the
philosophy of Karl Marx (that is, the
eradication of capitalism and the
elimination of private ownership). Its
emphasis on codes makes it more like



a mere variant of civil law albeit with
an emphasis on public law.
Islamic
The Islamic legal system is derived
from the Koran. It co-exists with other
laws.
Hindu
The Hindu legal system is based on
the doctrine of proper behaviour.
Hindu law is followed by Hindus.
Talmudic
The Talmudic legal system is derived
from the Old Testament of the Holy
Bible. It is the law of the Jews. states
altogether.
Public Law
Public law is basically the law which governs
the relationship between individuals and the
state. Public law may be further subdivided
into two categories- constitutional law and
criminal law.
Constitutional law lays down the rights of
individuals in the state. It deals with
questions such as supremacy of Parliament
and rights of citizens. It also covers areas
dealing with state and federal powers.
Criminal law codifies the various offences
committed by individuals against the state,
such as murder, cheating, criminal breach of
trust, forgery, causing grievous hurt, theft,
robbery and counterfeiting.
International Law
International law may be defined as that
body of law which is composed for its greater
part of the principles and rules of conduct
which states feel themselves bound to
observe, and consequently commonly do
observe, in their relations with each other.
Private Law
The third broad division of law is private
law. Private law is concerned with matters
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that affect the rights and duties of individuals
amongst themselves. Basically, private or
civil law is intended to give compensation to
persons injured, to enable property to be
recovered from wrongdoers, and to enforce
obligations (contracts and trusts).
Contracts are based on agreement. The law of
contract is the branch of private law which
determines when a promise or a set of
promises is legally enforceable. The promises
which are to be enforced form the contract.
The essential elements in a contract are as
follows:







there must be an offer
acceptance of that offer
both parties making the contract must
have the capacity to contract
there
must
be
no
mistake,
misrepresentation or undue influence
the object must be lawful
both parties must intend to enter into
legal relations
there must also be consideration
Tort is based on an obligation imposed by
law. A tort is a civil wrong. It is the breach of
a general duty which is imposed by the law
(and not agreed between the parties). It is
remediable by a civil action for unliquidated
damages.
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CHAPTER 2 – SOURCES OF
MALAYSIAN LAW
MEANING OF 'SOURCES'
T
he word 'sources' has several
meanings which may include the
following:
1) Historical sources
These are factors that have influenced
the development of the law although
they are not recognized as law. These factors may include religious beliefs,
local customs and opinion of jurists.
2) Legal sources
These are the legal rules that make up
the law.
3) Places where the law can be found
For example, statutes, law reports and
text books.
MAIN SOURCES OF MALAYSIAN LAW
Written Law
Written law is also referred to as statute law.
As seen earlier, this is law made by
Parliament and any subordinate bodies to
whom Parliament has delegated power to
legislate.
Statutes assume the existence of common
law, and in many cases they reaffirm
common law principles; for example, the Sale
of Goods Act 1957 and the Bills of Exchange
Act 1949. Where statute law and common
law conflict, statute law will prevail to the
extent of the conflict.
Once an Act of Parliament comes into
existence, it remains law until it is repealed
by a later Act of Parliament. Most Acts of
Parliament set out the law on a particular
matter in broad terms. They also contain a
provision stating that detailed rules
necessary to give effect to the legislation can
be found in the relevant regulations or
guidelines.
The Federal Constitution
Malaysia is a Federation of thirteen states
with a written constitution, the Federal
Constitution, which is the supreme law of the
country. Besides laying down the powers of
the Federal and State Governments, the
Federal Constitution enshrines the basic or
fundamental rights of the individual. These
rights written into the Constitution can only
be changed by a two-thirds majority of the
total number of members of the legislature.
This is in contrast to normal laws which can
be amended by a simple majority.
State Constitutions
Besides the Federal Constitution, which
applies to all States in the Federation, each
State also possesses its own constitution
regulating the government of that State. The
State Constitution contains provisions which
are enumerated in the Eighth Schedule to the
Federal Constitution. Some of these
provisions include matters concerning the
Ruler, the Executive Council, the Legislature,
the
Legislative
Assembly,
financial
provisions,
State
employees,
and
amendment to the Constitution.
Legislation
Legislation refers to law enacted by a body
constituted for this purpose. In Malaysia,
laws are legislated by Parliament at federal
level and by the various State Legislative
Assemblies at state level. Laws that are
enacted by Parliament after 1946 but before
Malaysia's Independence in 1957 are called
Ordinances, but those made after 1957 are
called Acts. On the other hand, laws made by
the State Legislative Assemblies (except in
Sarawak) are called Enactments. The laws in
Sarawak are called Ordinances.
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TUTORIAL NOTES
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Subsidiary Legislation
The Interpretation Act 1967 defines
subsidiary legislation as 'any proclamation,
rule, regulation, order, notification, by-law or
other instrument made under any
Ordinance, Enactment or other lawful
authority and having legislative effect'.
Subsidiary legislation is very important as
legislation by Parliament and the State
legislatures is insufficient to provide the laws
required to govern everyday matters.
Subsidiary legislation deals with the details
about which the legislature has neither the
time nor the technical knowledge to enact.
Legislature merely lays down the basic and
main laws, leaving the details to persons or
bodies to whom they delegate their
legislative powers. Such persons or bodies
include the Yang di-Pertuan Agong,
Ministers and local authorities, among
others.
Unwritten Law
Unwritten law is mainly comprised of:

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
English law
Judicial decisions
Customs
English Law
English law forms part of the laws of
Malaysia. English law can be found inter alia
in the English common law and rules of
equity. However, not all of England's
common law and rules of equity form part of
Malaysian law. Section 3(1) of the Civil Law
Act 1956 (Revised 1972) provides that, in
Peninsular Malaysia, the courts shall apply
the common law of England and the rules of
equity as administered in England on 7 April
1956. In Sabah and Sarawak, the courts shall
apply the common law of England and the
rules of equity, together with statutes of
general application, as administered or in
force in England on 1 December 1951 and 12
December 1949 respectively.
Judicial Decisions
Malaysian law can also be found in the
judicial decisions of the High Court, Court of
Appeal and the Federal Court, the then
Supreme Court and the Judicial Committee
of the Privy Council. Decisions of these
courts were made and still are being made by
what is called the 'doctrine of binding
precedent'.
Customs
Customs of the local inhabitants in Malaysia
are also a source of law. Generally, customs
relating to family law, i.e. marriage, divorce
and inheritance, are given legal force by the
courts in Malaysia. 'Adat' applies to Malays;
prior to the enforcement of the Law Reform
(Marriage and Divorce) Act 1976, Hindu and
Chinese customary law applied to the
Hindus and Chinese respectively. In Sabah
and Sarawak, native customary laws apply in
land dealings over native customary lands
and family matters where natives subject
themselves to native customary laws.
Islamic Law
As seen earlier, the Federal Constitution
provides that States have the power to
administer Islamic Law. The head of the
Muslim religion in a state (except for Penang,
Malacca, Sabah, Sarawak and the Federal
Territories) is the Sultan. In Penang, Malacca,
Sabah, Sarawak and the Federal Territories,
the Yang di-Pertua Negeri is the head.
The courts which enforce Islamic law in the
country are the Syariah Courts. Islamic law
applies to Muslims only and does not apply
to non-Muslims. In business, in particularly
the areas of banking and finance, Islamic
principles are increasingly relevant in
lending and investments.
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