Analysis of laws governing sales of goods in Malaysia

Author: Iloka Benneth Chiemelie

Published: 31th of March 2014

1.0 Introduction

Sale is an important aspect in the business process as it is the stage at which the finished goods are made available to the consumers. In the economic setting, production as a process in the business is not complete except the finished goods is consumed by the final consumers, and this is because it is at this stage that the money invested in the business is recovered following the consumers purchases that generates money for the company. 

For businesses, the purpose of any business process if to yield subsequent profitable returns in order to ensure that the business process is sustainable. Besides establishing sustainability in the business process, business owners also wish to increase their profitability in order to view the business process as rewarding.

However, the current business setting is becoming very competitive as a result of increase in globalization and internationalization of firm, which now gives customers numerous choices for satisfying their wants an increase the business cycle relatively, then reducing the potential for numerous companies to be successful at the same time. The increase in competition now means that companies adopt a form of price competition which involves reducing the price of their commodities lower than that of their competitors in order to attract new customers and retain the existing customers. This paper is designed to understand how sales of goods is done between customers and sellers as supported by the Malaysian law.

2.0 Principles governing sales of goods in Malaysia

JETRO (2001) presented an analysis of the business setting in Malaysia as it related to establishing an understanding between the customers and businesses based on the research conducted by Deloitte Touche Tohmatsu (Deloitte KassimChan Management Consultants Sdn Bhd).

The research presented the right framework for understanding the legal setting of business transaction in the country as it related to B2C based transactions. From the analysis, it was noted that Malaysia adopted a classical “Caveat Emptor” principles in its business setting, which is in line with the British concept and this can easily be linked to the colonization effects of the British on the county (JETRO, 2001). The principle is a “let the buyer be aware” principle. This implies that the parties involves are to conduct the business transaction in such a way that both of term define an agreeable term between each other on how the business process will be undertaken. The principles is based on the understanding that the parties are deemed to be knowledgeable enough to care about their own interest in the business process (JETRO, 2001). On a general ground, the parties that are involved in the transaction don’t owe any obligation to take care of the interest of the other part in the transaction, which means that the buyer need to take care of their own interest.

Basically, the notion presented here is that the seller can sale his or her products under any setting and the buyer also has the right to make purchases based on his or her own grounds. As such, for business to be conducted there must be a mutual understanding between the seller and the buyer as only such will provide the needed enigma for contract to be made and the business process sealed. This is more towards an open system of freedom in the business setting where the government or any other third party doesn’t influence the business transaction in any way. Once the seller and the buyer agree, the transaction can be made on any ground as related to the terms they agreed between themselves. The relevance of this principle is centric to the freedom of choice in which the seller can decide on whom to make his or her finished products available for, while the buyer can also made the free choice of which seller to purchase goods and/or services from.

3.0 Relevant laws surrounding the principles

Based on the general principle of sales of good in Malaysia described above, (JETRO, 2001) noted that the government of Malaysia has enacted a number of laws in the form of numerous legislations that have been set up to protect the specific interest of consumers. The need to protect the interest of consumers is central to the understanding that while the producers know all the facets of the business in relation to how the business process is being undertaken, what is expected from the business process and the real value of products and/or services made available to the consumers, the consumers doesn’t know these factors but are only instead mired by the share farces of perception and recommendation for such products and/or services.

The following are the statues and the guidelines that govern the protection of consumers in Malaysia.

3.1 Statues

1.      Consumer Protection Act 1999

2.      Sale of Goods Act 1957

3.      Contracts Act 1950

4.      Trade Descriptions Act 1972

5.      Food Act 1993

6.      Direct Sales Act 1993

7.      Penal Code

8.      Hire Purchase Act 1967

9.      Communication and Multimedia Act 1998 (JETRO, 2001)

3.2 Guidelines

1.      Malaysian Code of Advertising Practice 1990 (JETRO, 2001)

These laws and guidelines are basically designed to protect the consumers in the following areas:

3.3 Right to basic needs – this implies that the consumers are entitled to basic needs for goods and services, and such can be used to enhance their livelihood on earth by providing them with the necessary spectrum form which their standards of living can be increased through the value provided by these goods and services (JETRO, 2001).

3.4 Right to safety – while the consumers need the goods and services to meet their own personal needs, they also deserve to be protected against goods and services that are hazardous to health and as such the producers agree not to make available to the consumer any good or services that will yield hazardous effects on their lives (JETRO, 2001).

3.5 Right to choose – the consumer will not be forced under any circumstances to adopt any given product or services for meeting personal needs, but instead they must be entitled to access varieties of products and services at a competitive prices and make necessary choice as to which of these goods and/or services to adopt for their personal use (JETRO, 2001).

3.6 Right to be informed – basically, this is the notion presented in the principle for sales of goods and services discussed above, and it is based on the understanding that consumers are entitled to access adequate information that will enable them to make informed decision or choice on goods and services (JETRO, 2001).

3.7 Right to be heard – this is the ground from which the advocating of consumers interests that also include the right to be represented in the governmental and policy making systems is exercised to ensure that the market is better designed to serve the consumers (JETRO, 2001).

3.8 Right to redress – even with all the protective rights discussed above that have been designed to better serve the interest of the consumers, it should be noted that issues can still arise that might contradict with the interest of the consumers and this issues will mean that these rights might not be self-sufficient. On that account, (JETRO, 2001) noted that the right to redress is design to cater for cases where consumers feel that they have been cheated on by the producers and this right gives them the power to seek redress for claims that involves unfilled promises in the transaction process.

While the principle of sales of goods and services as discussed above is based on the understanding that both the consumer and sale should seek to meet their own interest without any of the party having the obligation to seek for the interest of the other, it was easily deduced that such a setting will create an unfavourable condition for consumers who might not know the actual value of goods and services made available to them. As such, the above laws and statues have helped set the framework for protecting consumers.

4.0 Sale of Goods Act 1957

The main focus of this paper is based on understanding the sales of goods act, as it is the genera law that governs how products and services are transacted in the Malaysian setting. Based on earlier identification, it was made known that the Malaysian system is fashioned around the British system, which is a clear sign of the colonization and this is what is obtainable from the Malaysian sales of goods act (JETRO, 2001). The Act is applicable to states in West Malaysia and the states in east Malaysia by the virtue of Section 5 of the Civil Law Act 1956.

The enactment of the sales of goods act was made earlier in 1957 but the revised in 1990 in order to include the state of Malacca and Penang. The earlier laws where every much a model of the UK Sales of Goods Act 1893 (JETRO, 2001).

Following the absence of express conditions and warranties, the Malaysian Sales of Goods Act prescribed in its implied terms and condition towards the quality and fitness for purpose of goods supplied under a contract of sales to safeguard the interest of consumers. From the section 16, the following conditions can be made (JETRO, 2001):

a)      When a buyer openly expresses or by a mare implication shows to the seller the main purpose for which the goods are required, with high reliance on the seller that the goods are of description which it is as of the time of the supply to business, there is an implied conditions that the goods will be considered reasonably fit for such purpose.

b)      In cases where the goods are bought by description from a seller who deals with goods as contained in such description, there is an implied condition that the goods shall be presented in a quality that is merchantable.

From the subsection (a) and (b) as presented above, it can be seen that the Malaysian Sales of Goods Act is designed towards protecting the rights of the consumers by enacting an act that looks to ensure that business transactions are always done in an equitable way in which the consumer is not left at the mercy of the seller, and agreed goods must be of the quality it was when such agreement where made. 

5.0 How law deals with sale of goods through online

The sale of goods is a very important aspect of the business process, and this is based on the understanding that it is key to ensuring a successful business process. Production as discussed earlier is not complete else the final goods has reached the respective customers as it is the only way companies can recover the investment made in the production process. However, the increase in competition now means that companies are forced to adopt a cost cutting strategy as a competitive tool as well as infuse numerous unethical transaction based process into the stream of business undertaken that leave the customers at the mercy of the company. Earlier discussion have highlighted how this issue can be solve in the physical setting, but it becomes a different story in cases where the company cannot be identified as a result of the fact that it undertakes it business process in the online setting. As such, this section seeks to understand how the Malaysian law has been designed to help protect customers in the risky computer based business transaction.

Still on the points presented by (JETRO, 2001), a framework for which businesses are conducted online in Malaysia has been created by the government. The Malaysian Digital Signature Act 1997 is the legal framework upon which the Malaysian system of electronic authentication, electronic signature and electronic certification authorities are based on.

From the act, it is stated that online business will be conducted in the same manner as that of offline, and the principle is still based as to the discussions above that none of the parties is under any obligation to seek for the personal interest of the other and transaction should be done on agreed terms, which will also be used to measure the violation of contract in the legal settings.

The definitions as presented in the act are that:

5.1 Authentication – this is used to differentiate between one business and the other and it is still the same in the case of offline transaction and authentication is based on domain names registered by the respective business. The domain name represent the online shop / location or agent of the business and it is deemed to be the base from which trust is created between business and consumers, and a place where the business can be traced as is in line with the offline setting (JETRO, 2001). All businesses that wish to conduct online transaction are mandated by the Malaysian law to authenticate their identity by adopting a domain name that is used to represent the company and the transaction it undertakes.

5.2 Electronic signature – just like the offline signature, this is the force that puts every business transaction to become a binding legal contract (JETRO, 2001). The signature is in the form of a written confirmation message that the company uses to declare their intention to go into a contract with the consumers.

5.3 Certification – in order for the company to go into contract with the consumer, the consumer need to certify their interest and this normally comes in the form of “agreeing” to written terms and condition. The company presents their terms and conditions for the consumers to go through and decided either to “accept” or “decline”. In cases where the consumers chooses to decline, there is no contract (JETRO, 2001), but if the consumer accepts the terms and conditions presented by the company, there a contract that is legally binding is established and both parties are expected to meet the terms and conditions contained in the contract or the purpose for which the contract was created.

As noted by (JETRO, 2001), for an online transaction to take place, the three factors discussed above must be integrated together. That is to say, the company must present goods and services through an authenticated website, which the consumers certifies to buy through the set terms and conditions created by the company, and the company on the other hand makes the goods and services available based on the descriptions agreed between the company and the consumer.

In cases where contracts of sales are breached in the online setting, the customer can make claims for redress or damages through the respective bodies enacted to handle such by proving such claims with the company’s online signature and authenticated website (JETRO, 2001), as such creating the right platform for the protection of customers in online based form of transaction.

6.0 Recommendation

From the above discussion, a number of issues have been pointed out, and it is based on the understanding that increase in competition is subsequently increase the level of unethical practices in the Malaysian market. The sale of goods principles adopted in the Malaysian setting is a clear illustration of the need to protect customers’ value and it can be seen from the numerous acts and laws enacted by the Malaysian government to ensure that the desires of customers to satisfy their personal needs doesn’t put them in the danger of being at the mercy of the seller, but instead creates the right business environment where transaction is based on mutual understanding.

However, a number of factors can be identified in the settings of the principles because it is based on the ground that the parties are not under any obligation to seek for the interest of the other party, and this creates an open wave of business transaction in which the companies can adopt unethical practices that might misrepresent or miscommunicate the real value of their goods and services to the customers. The fact that these sellers cannot be held responsible for customers’ decision creates an open disclosure that the seller can base their unethical practices on and as such limits the protection given to the customers by the laws enacted by the government.

On that ground, it is recommended that the law should be amended to cover to increase consumer protection by increasing the level of transparency between business transaction in the sense that the sellers should be forced to communicate the actual value of their goods and services to the customers and the contract is not deemed to be binding in cases where the sellers fail to do so. This will significantly reduce the intentions of the sellers to adopt any unethical practices in the process of the business transaction and as such it would offer the consumers increased power and increase their overall value obtainable from the business transaction.

7.0 Conclusion

The sale of goods in Malaysia is not something that is country specific as goods and services are sold across the world, but the level and process of legal application in this setting can vary between countries and as such what is obtainable in Malaysia might not be what is obtainable in other countries. However, credo will be given to the British colonization as it means that the sales of goods and services in Malaysia is a direct model of the principle acceptable in the British setting in which transaction is done on equal grounds where both party seek to meet their own interest, without being under any obligation to care for the interest of each other.

However, the paper has been able to identify the limitations of such approaches and it comes in the form that sellers might take advantage of such disclosure to adopt unethical practices that will leave the consumers at their own mercy as they seek to meet the set objective of increased profitability in the company.

 8.0 References

JETRO (2001), “Consumer Protection Law regarding B2C: Malaysia”; based on the research conducted by Deloitte Touche Tohmatsu (Deloitte KassimChan Management Consultants Sdn Bhd) in November 2001. Available at: http://www.jetro.go.jp/en/reports/survey/other/surveys_b2c/malaysia.pdf [Accessed on: 26/06/2013].