Contracts Act

This Act may be cited as the Contracts Act.

Nothing herein contained shall affect the provisions of any Act or any usage or custom of trade, or any incident of any contract, not inconsistent with the provisions of this Act.

when one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal;

when the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted; a proposal, when accepted, becomes a promise;

the person making the proposal is called the “promisor”

and the person accepting the proposal is called the “promisee”;

when, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise;

every promise and every set of promises, forming the consideration for each other, is an agreement;

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promises which form the consideration or part of the consideration for each other are called reciprocal promises;

an agreement not enforceable by law is said to be void;

an agreement enforceable by law is a contract;

an agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of the other or others, is a voidable contract;

a contract which ceases to be enforceable by law becomes void when it ceases to be enforceable.

The communication of a proposal is complete when it comes to the knowledge of the person to whom it is made.

The commission of an acceptance is complete —

The communication of a revocation is complete —

A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards.

An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards.

Illustrations

A proposes, by a letter sent by post, to sell his house to B.

B accepts the proposal by a letter sent by post.

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A may revoke his proposal at any time before or at the moment when B posts his letter of acceptance, but not afterwards.

B may revoke his acceptance at any time before or at the moment when the letter communicating it reaches A but not afterwards.

the communication of notice of revocation by the proposer to the other party;

the lapse of the time prescribed in such proposal for its acceptance, or, if no time is so prescribed, by the lapse of a reasonable time, without communication of the acceptance;

the failure of the acceptor to fulfil a condition precedent to acceptance;

the death or mental disorder of the proposer, if the fact of his death or mental disorder comes to the knowledge of the acceptor before acceptance.

absolute and unqualified;

expressed in some usual and reasonable manner, unless the proposal prescribes the manner in which it is to be accepted. If the proposal prescribes a manner in which it is to be accepted, and the acceptance is not made in such manner, the proposer may, within a reasonable time after the acceptance is communicated to him, insist that this proposal shall be accepted in the prescribed manner, and not otherwise; but, if he fails to do so, he accepts the acceptance.

All agreements are contracts if they are —

Nothing herein contained shall affect any law in force in

Brunei Darussalam by which any contract is required to be made in writing or in the presence of witnesses, or any law relating to the registration of documents.

of the age of majority according to the law to which he is subject;

of sound mind; and

not disqualified from contracting by any law to which he is subject.

A person is said to be of sound mind for the purpose of making a contract if, at the time when he makes it, he is capable of understanding it and of forming a rational judgement as to its effect upon his interests.

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A person who is usually of unsound mind, but occasionally of sound mind, may make a contract when he is of sound mind.

A person who is usually of sound mind, but occasionally of unsound mind, may not make a contract when he is of unsound mind.

Illustrations

coercion, as defined in section 15;

undue influence, as defined in section 16;

fraud, as defined in section 17;

misrepresentation, as defined in section 18; or

mistake, subject to the provisions of sections 21, 22

and 23.

Consent is said to be so caused when it would not have been given but for the existence of such coercion, undue influence, fraud, misrepresentation or mistake.

A contract is said to be induced by “undue influence” where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other.

In particular and without prejudice to the generality of the foregoing principle, a person is deemed to be in a position to dominate the will of another where —

Where a person who is in a position to dominate the will of another, enters into a contract with him, and the transaction appears, on the face of it or on the evidence adduced, to be unconscionable, the burden of proving that such contract was not induced by undue influence shall lie upon the person in a position to dominate the will of the other.

Illustrations

the suggestion, as to a fact, of that which is not true by one who does not believe it to be true;

the active concealment of a fact by one having knowledge or belief of the fact;

a promise made without any intention of performing it;

any other act fitted to deceive;

any such act or omission as the law specially declares to be fraudulent.

Explanation — Mere silence as to facts likely to affect the willingness of a person to enter into a contract is not fraud, unless the circumstances of the case are such that, regard being had to them, it is the duty of the person keeping silence to speak, or unless his silence is, in itself, equivalent to speech.

Illustrations

A sells, by auction, to B, a horse which A knows to be unsound. A says nothing to B about the horse’s unsoundness. This is not fraud in A.

B is A’s daughter and has just come of age. Here, the relation between the parties would make it A’s duty to tell B if the horse is unsound.

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B says to A, “If you do not deny it, I shall assume that the horse is sound.” A says nothing. Here, A’s silence is equivalent to speech.

A and B, being traders, enter upon a contract. A has private information of a change in prices which would affect B’s willingness to proceed with the contract. A is not bound to inform B.

“Misrepresentation”

the positive assertion, in a manner not warranted by the information of the person making it, of that which is not true, though he believes it to be true;

any breach of duty which, without an intent to deceive, gives an advantage to the person committing it, or anyone claiming under him, by misleading another to his prejudice, or to the prejudice of anyone claiming under him;

causing, however innocently, a party to an agreement to make a mistake as to the substance of the thing which is the subject of the agreement.

Voidability of agreements without free consent 19.

When consent to an agreement is caused by coercion, fraud or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused.

A party to a contract, whose consent was caused by fraud or misrepresentation, may, if he thinks fit, insist that the contract shall be performed, and that he shall be put in the position in which he would have been if the representations made had been true.

Exception — If such consent was caused by misrepresentation or by silence, fraudulent within the meaning of section 17, the contract, nevertheless, is not voidable, if the party whose consent was so caused had the means of discovering the truth with ordinary diligence.

Explanation — A fraud or misrepresentation which did not cause the consent to a contract of the party on whom such fraud was practised, or to whom such misrepresentation was made, does not render a contract voidable.

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Illustrations

A, intending to deceive B, falsely represents that 500 gantangs of indigo are made annually at A’s factory and thereby induces B to buy the factory. The contract is voidable at the option of B.

A, by a misrepresentation, leads B erroneously to believe that 500 gantangs of indigo are made annually at A’s factory. B examines the account of the factory, which show that only 400 gantangs of indigo have been made. After this B buys the factory. The contract is not voidable on account of A’s misrepresentation.

B, having discovered a vein of ore on the estate of A, adopts means to conceal, and does conceal, the existence of the ore from A. Through A’s ignorance B is enabled to buy the estate at an undervalue. The contract is voidable at the option of A.

A is entitled to succeed to an estate at the death of B; B dies; C, having received intelligence of B’s death, prevents the intelligence reaching A, thus induces A to sell him his interest in the estate. The sale is voidable at the opinion of A.

Power to set aside contract induced by undue influence 20.

When consent to an agreement is caused by undue influence, the agreement is a contract voidable at the option of the party whose consent was so caused.

Any such contract may be set aside either absolutely or, if the party who was entitled to avoid it has received any benefit thereunder, upon such terms and conditions as to the court may seem just.

Illustrations

A’s son has forged B’s name to a promissory note. B, under threat of prosecuting A’s son, obtains a bond from A for the amount of the forged note. If B sues on this bond, the court may set the bond aside.

A, a moneylender, advances $100 to B, an agriculturist and, by undue influence, induces B to execute a bond for $200 with interest at 6 per cent per month. The court may set the bond aside, ordering B to repay the $100 with such interest as may seem just.

Agreement void where both parties are under mistake as to matter of fact 21.

Where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void.

Explanation — An erroneous opinion as to the value of the thing which forms the subject matter of the agreement is not to be deemed a mistake as to a matter of fact.

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Illustrations

A agrees to sell B a specific cargo of goods supposed to be on its way from England to Brunei Darussalam. It turns out that, before the day of the bargain, the ship conveying the cargo had been cast away and the goods lost. Neither party was aware of the facts. The agreement is void.

A agrees to buy from B a certain horse. It turns out that the horse was dead at the time of the bargain, though neither party was aware of the fact. The agreement is void.

A, being entitled to an estate for the life of B, agrees to sell it to C. B was dead at the time of the agreement, but both parties were ignorant of the fact. The agreement is void.

Effect of mistake as to law 22.

A contract is not voidable because it was caused by a mistake as to any law in force in Brunei Darussalam; but a mistake as to a law not in force in Brunei Darussalam has the same effect as a mistake of fact.

Illustration

A and B make a contract grounded on the erroneous belief that a particular debt is barred by limitation: the contract is not voidable.

Contract caused by mistake of one party as to matter of fact 23.

A contract is not voidable merely because is was caused by one of the parties to it being under a mistake as to a matter of fact.

What considerations and objects are lawful, and what not 24.

The consideration or object of an agreement is lawful unless —

it is forbidden by law;

it is of such a nature that, if permitted, it would defeat the provisions of any law;

it is fraudulent;

it involves or implies injury to the person or property of another; or

the court regards it as immoral or opposed to public policy.

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In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void.

Illustrations

A agrees to sell his house to B for $10,000. Here, B’s promise to pay the sum of $10,000 is the consideration for A’s promise to sell the house, and A’s promise to sell the house is the consideration for B’s promise to pay the $10,000. These are lawful considerations.

A promises to pay B $1,000 at the end of 6 months if C who owes that sum to B, fails to pay it. B promises to grant time to C accordingly. Here the promise of each party is the consideration for the promise of the other party and they are lawful considerations.

A promises, for a certain sum paid to him by B to make good to B the value of his ship if it is wrecked on a certain voyage. Here A’s promise is the consideration for B’s payment, and B’s payment is the consideration for A’s promise and these are lawful considerations.

A promises to maintain B’s child and B promises to pay A $1,000 yearly for the purpose. Here the promise of each party is the consideration for the promise of the other party. They are lawful considerations.

A, B and C enter into an agreement for the division among them of gains acquired, or to be acquired, by them by fraud. The agreement is void as its object is unlawful.

A promises to obtain for B an employment in the public service and B promises to pay $1,000 to A. The agreements is void as the consideration for it is unlawful.

A, being agent for a landed proprietor, agrees for money, without the knowledge of his principal, to obtain for B a lease of land belonging to his principal. The agreement between A and B is void, as it implies a fraud by concealment, by A, on his principal.

A promises B to drop a prosecution which he has instituted against B for robbery, and B promises to restore the value of the things taken. The agreement is void as its object is unlawful.

A’s estate is sold for arrears of revenue under the provisions of an Act by which the defaulter is prohibited from purchasing the estate. B, upon an understanding with A, becomes the purchaser and agrees to convey the estate to A upon receiving from him the price which B has paid. The agreement is void as it renders the transaction, in effect, a purchase by the defaulter and would so defeat the object of the law.

A, who is B’s solicitor, promises to exercise his influence as such with B in favour of C and C promises to pay $1,000 to A. The agreement is void because it is immoral.

A agrees to let her daughter to hire to B for concubinage. The agreement is void because it is immoral, though the letting may not be punishable under the Penal Code

(Chapter 22).

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Void agreements

Agreements void if considerations and objects unlawful in part 25.

If any part of a single consideration for one or more objects, or any one or any part of any one of several considerations for a single object, is unlawful, the agreement is void.

Illustration

A promises to superintend, on behalf of B, a legal manufacture of indigo and an illegal traffic in other articles. B promises to pay to A a salary of $10,000 a year. The agreement is void, the object of A’s promise and the consideration for B’s promise, being in part unlawful.

Agreements without consideration void 26.

An agreement made without consideration is void unless —

it is expressed in writing and registered under the law

(if any) for the time being in force for the registration of such documents, and is made on account of natural love and affection between parties standing in a near relation to each other;

it is a promise to compensate, wholly or in part, a person who has already voluntarily done something for the promisor or something which the promisor was legally compellable to do;

it is a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorised in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits.

In any of these cases, such an agreement is a contract.

Explanation 1 — Nothing in this section shall affect the validity, as between the donor and donee, of any gift actually made.

Explanation 2 — An agreement to which the consent of the promisor is freely given is not void merely because the consideration is inadequate; but the inadequacy of the consideration may be taken into account by the court in determining the question whether the consent of the promisor was freely given.

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Illustrations

A promises, for no consideration, to give to B $1,000. This is a void agreement.

A, for natural love and affection, promises to give his son, B, $1,000. A puts his promise to B into writing and registers it under a law for the time being in force for the registration of such documents. This is a contract.

A finds B’s purse and gives it to him. B promises to give A $50. This is a contract.

A supports B’s infant son. B promises to pay A’s expenses in so doing. This is a contract.

A owes B $1,000 but the debt is barred by limitation. A signs a written promise to pay B $500 on account of the debt. This is a contract.

A agrees to sell a horse worth $1,000 for $10. A’s consent to the agreement was freely given. The agreement is a contract notwithstanding the inadequacy of the consideration.

A agrees to sell a horse worth $1,000 for $10. A denies that his consent to the agreement was freely given.

The inadequacy of the consideration is a fact which the court should take into account in considering whether or not A’s consent was freely given.

Agreement in restraint of marriage void 27.

Every agreement in restraint of the marriage of any person, other than a minor during his or her minority, is void.

Agreement in restraint of trade void 28.

Every agreement by which anyone is restrained from exercising a lawful profession, trade, or business of any kind, is to that extend void.

Saving of agreement not to carry on business of which goodwill is sold

Exception 1 — One who sells the goodwill of a business may agree with the buyer to refrain from carrying on a similar business, within specified local limits, so long as the buyer, or any person deriving title to the goodwill from him, carries on a like business therein:

Provided that such limits appear to the court reasonable, regard being had to the nature of the business.

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Of agreement between partners prior to dissolution

Exception 2 — Partners may, upon or in anticipation of a dissolution of the partnership, agree that some or all of them will not carry on a business similar to that of the partnership within such local limits as are referred to in the last preceding exception.

Or during continuance of partnership

Exception 3 — Partners may agree that someone or all of them will not carry on any business, other than that of the partnership, during the continuance of the partnership.

Agreements in restraint of legal proceedings void 29.

Every agreement, by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights, is void to that extent.

Saving of contract to refer to arbitration dispute that may arise

Exception 1 — This section shall not render illegal a contract by which two or more persons agree that any dispute which may arise between them in respect of any subject or class of subjects shall be referred to arbitration, and that only the amount awarded in such arbitration shall be recoverable in respect of the dispute so referred.

Saving of contract to refer questions that have already arisen

Exception 2 — Nor shall this section render illegal any contract in writing, by which two or more persons agree to refer to arbitration any question between them which has already arisen, or affect any provision of any law in force for the time being as to references to arbitration.

Agreements void for uncertainty 30.

Agreements, the meaning of which is not certain, or capable of being made certain, are void.

Illustrations

A agrees to sell to B “100 tons of oil”. There is nothing whatever to show what kind of oil was intended. The agreement is void for uncertainty.

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A agrees to sell to B 100 tons of oil of a specified description, known as an article of commerce. There is no uncertainty here to make the agreement void.

A, who is a dealer in coconut oil only agrees to sell to B “100 tons of oil”. The nature of A’s trade affords an indication of the meaning of the words and A has entered into a contract for the sale of 100 tons of coconut oil.

A agrees to sell to B “all the grain in my granary at Tutong”. There is no uncertainty here to make the agreement void.

A agrees to sell to B “1,000 gantangs of rice at a price to be fixed by C”. As the price is capable of being made certain, there is no uncertainty here to make the agreement void.

A agrees to sell to B “my white horse for $500 or $1,000”. There is nothing to show which of the two prices was to be given. The agreement is void.

Agreements by way of wager void; exception in favour of certain prizes for horse racing 31.

Agreements by way of wager are void; and no suit shall be brought for recovering anything alleged to be won on any wager or entrusted to any person to abide the result of any game or other uncertain event on which any wager is made.

This section is not deemed to render unlawful a subscription or contribution, or agreement to subscribe or contribute, made or entered into for or toward any plate, prize or sum of money, of the value or amount of $500 or upwards, to be awarded to the winner or winners of any horse race.

Nothing in this section is deemed to legalise any transaction connected with horse racing forbidden by any written law in force for the time being.

A makes a contract with B to buy B’s horse if A survives C. This contract cannot be enforced by law unless and until C dies in A’s lifetime.

A makes a contract with B to sell a horse to B at a specified price if C, to whom the horse has been offered, refuses to buy him. The contract cannot be enforced by law unless C refuses to buy the horse.

A contracts to pay B a sum of money when B marries C. C dies without being married to B. The contract becomes void.

Enforcement of contracts contingent on event not happening 34.

Contingent contracts to do or not to do anything if an uncertain future event does not happen can be enforced when the happening of that becomes impossible, and not before.

Illustration

A agrees to pay B a sum of money if a certain ship does not return. The ship is sunk. The contract can be enforced when the ship sinks.

When event on which contract is contingent to be deemed impossible if it is future conduct of living person 35.

If the future event on which a contract is contingent is the way in which a person will act at an unspecified time, the event shall be considered to become impossible when such person does anything which renders it impossible that he should so act within any definite time, or otherwise than under further contingencies.

Illustration

A agrees to pay B a sum of money if B marries C.

C marries D. The marriage of B to C must now be considered impossible, although it is possible that D may die and that C may afterwards marry B.

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Contracts become void if contingent on happening of specified event within fixed time; contracts may be enforced which are contingent on specified event not happening within fixed time 36.

Contingent contracts to do or not to do anything if a specified uncertain event happens within a fixed time become void if, at the expiration of the time fixed, such event has not happened, or if, before the time fixed, such event becomes impossible.

Contingent contracts to do or not to do anything if a specified uncertain event does not happen within a fixed time may be enforced by law when the time fixed has expired and such event has not happened, or, before the time fixed has expired, if it becomes certain that such event will not happen.

Illustration

all damages which he may be compelled to pay in any suit in respect of any matter to which the promise to indemnify applies;

all costs which he may be compelled to pay in any such suit if, in bringing or defending it, he did not contravene the orders of the promisor and acted as it would have been prudent for him to act in the absence of any contract of indemnity, or if the promisor authorised him to bring or defend the suit;

all sums which he may have been paid under the terms of any compromise of any such suit, if the compromise was not contrary to the orders of the promisor and was one which it would have been prudent for the promisee to make in the absence of any contract of indemnity, or if the promisor authorised him to compromise the suit.

“Contract of guarantee”, “surety”, “principal debtor” and “creditor”

B requests A to sell and deliver to him goods on credit. A agrees to do so, provided C will guarantee the payment of the price of the goods. C promises to guarantee the payment in consideration of A’s promise to deliver the goods. This is a sufficient consideration for C’s promise.

A sells and delivers goods to B. C afterwards requests A to forbear to sue B for the debt for a year, and promises that, if he does so, C will pay for them in default of payment by B. A agrees to forbear as requested. This is a sufficient consideration for C’s promise.

A sells and delivers goods to B. C afterwards, without consideration, agrees to pay for them in default of B. The agreement is void.

Surety’s liability 81.

The liability of the surety is co-extensive with that of the principal debtor, unless it is otherwise provided by the contract.

Illustration

A guarantees to B the payment of a bill of exchange by C, the acceptor. The bill is dishonoured by C. A is liable not only for the amount of the bill but also for any interest and charges which may have become due on it.

“Continuing guarantee”

A, in consideration that B will employ C in collecting the rents of B’s estate, promises B to be responsible to the amount of $5,000 for the due collection and payment by

C of those rents. This is a continuing guarantee.

A guarantees payment to B, a tea dealer, to the amount of $1,000 for any tea he may from time to time supply to C. B supplies C with tea to above the value of $1,000 and C pays B for it. Afterwards, B supplies with tea to the value of $2,000. C fails to pay. The guarantee given by A was a continuing guarantee and he is accordingly liable to B to the extent of $1,000.

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A guarantees payment to B of the price of five sacks of flour to be delivered by B to

C and to be paid for in a month. B delivers five sacks to C. C pays for them. Afterwards B delivers four sacks to C, which C does not pay for. The guarantee given by A was not a continuing guarantee, and accordingly he is not liable for the price of the four sacks.

Revocation of continuing guarantee 83.

A continuing guarantee may at any time be revoked by the surety, as to future transactions, by notice to the creditor.

Illustrations

A, in consideration of B’s discounting, at A’s request, bills of exchange for C, guarantees to B, for 12 months, the due payment of all such bills to the extent of $5,000.

B discounts bills for C to the extent of $2,000. Afterwards, at the end of 3 months, A revokes the guarantee. This revocation discharges A from all liability to B for any subsequent discount. But A is liable to B for the $2,000 on default of C.

A guarantees to B, to the extent of $10,000, that C shall pay all the bills that B shall draw upon him. B draws upon C. C accepts the bill. A gives notice of revocation.

C dishonours the bill at maturity. A is liable upon his guarantee.

Revocation of continuing guarantee by surety’s death 84.

The death of the surety operates, in the absence of any contract to the contrary, as a revocation of a continuing guarantee, so far as regards future transactions.

Liability of two persons, primarily liable, not affected by arrangement between them that one shall be surety on other’s default 85.

Where two persons contract with a third person to undertake a certain liability and also contract with each other that one of them shall be liable only on the default of the other, the third person not being a party to such contract, the liability of each of such two persons to the third person under the first contract is not affected by the existence of the second contract, although such third person may have been aware of its existence.

Illustration

A and B make a joint and several promissory note to C. A makes it, in fact, as surety for B and C knows this at the time when the note is made. The fact that A, to the knowledge of C, made the note as surety for B, is no answer to a suit by C against A upon the note.

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Discharge of surety by variance in terms of contract 86.

Any variance, made without the surety’s consent, in the terms of the contract between the principal debtor and the creditor, discharges the surety as to transactions subsequent to the variance.

Illustrations

A becomes surety to C for B’s conduct as a manager in C’s bank. Afterwards, B and C contract, without A’s consent, that B’s salary shall be raised and that he shall become liable for one-fourth of the losses on overdrafts. B allows a customer to overdraw, and the bank loses a sum of money. A is discharged from his suretyship by the variance made without his consent and is not liable to make good this loss.

A guarantees C against the misconduct of B in an office to which B is appointed by C and of which the duties are defined by an Act. By a subsequent Act, the nature of the office is materially altered. Afterwards, B misconducts himself. A is discharged by the change from future liability under his guarantee, though the misconduct of B is in respect of a duty not affected by the later Act.

C agrees to appoint B as his clerk to sell goods at a yearly salary, upon A’s becoming surety to C for B’s duly accounting for moneys received by him as such clerk. Afterwards, without A’s knowledge or consent, C and B agree that B should be paid by a commission on the goods sold by him and not by a fixed salary. A is not liable for subsequent misconduct of B.

A gives to C a continuing guarantee to the extent of $3,000 for any oil supplied by C to B on credit. Afterwards, B becomes embarrassed and, without the knowledge of A, B and C contract that C shall continue to supply B with oil for ready money and that the payments shall be applied to the then existing debts between B and C. A is not liable on his guarantee for any goods supplied after this new arrangement.

C contracts to lend B $5,000 on 1st March. A guarantees repayment. C pays the $5,000 to B on 1st January. A is discharged from his liability, as the contract has been varied, in as much as C might sue B for the money before 1st March.

Discharge of surety by release or discharge of principal debtor 87.

The surety is discharged by any contract between the creditor and the principal debtor by which the principal debtor is released or by any act or omission of the creditor, the legal consequence of which is the discharge of the principal debtor.

Illustrations

A gives a guarantee to C for goods to be supplied by C to B. C supplies goods to B and afterwards B becomes embarrassed and contracts with his creditors (including C) to

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assign to them his property in consideration of their releasing him from their demands. Here,

B is released from his debt by the contract with C and A is discharged from his suretyship.

A contracts with B to grow a crop of indigo on A’s land and to deliver it to B at a fixed rate and C guarantees A’s performance for this contract. B diverts a stream of water which is necessary for irrigation of A’s land and thereby prevents him from raising the indigo. C is no longer liable on his guarantee.

A contracts with B for a fixed price to build a house for B within a stipulated time, B supplying the necessary timber. C guarantees A’s performance of the contract. B omits to supply the timber. C is discharged from his suretyship.

Discharge of surety when creditor compounds with, gives time to, or agrees not to sue principal debtor 88.

A contract between the creditor and the principal debtor by which the creditor makes a composition with, or promises to give time to or not to sue, the principal debtor, discharges the surety, unless the surety assents to such contract.

Surety not discharged when agreement made with third person to give time to principal debtor 89.

Where a contract to give time to the principal debtor is made by the creditor with a third person, and not with the principal debtor, the surety is not discharged.

Illustration

C, the holder of an overdue bill of exchange drawn by A, as surety for B, and accepted by

B, contracts with M to give time to B. A is not discharged.

Creditor’s forbearance to sue does not discharge surety 90.

Mere forbearance on the part of the creditor to sue the principal debtor or to enforce any other remedy against him does not, in the absence of any provision in the guarantee to the contrary, discharge the surety.

Illustration

B owes to C a debt guaranteed by A. The debt becomes payable. C does not sue B for a year after the debt has become payable. A is not discharged from his suretyship.

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Release of one co-surety does not discharge others 91.

Where there are co-sureties, a release by the creditor of one of them does not discharge the others; neither does it free the surety so released from his responsibility to the other sureties.

Discharge of surety by creditor’s act or omission impairing surety’s eventual remedy 92.

If the creditor does any act which is inconsistent with the rights of the surety, or omits to do any act which his duty to the surety requires him to do, and the eventual remedy of the surety or omission himself against the principal debtor is thereby impaired, the surety is discharged.

Illustrations

B contracts to build a ship for C for a given sum, to be paid by instalments as the work reaches certain stages. A becomes surety to C for B’s due performance of the contract.

C, without the knowledge of A, prepays to B the last two instalments. A is discharged by this payment.

C lends money to B on the security of a joint and several promissory note made in

C’s favour by B, and by A as surety for B, together with a bill of sale of B’s furniture, which gives power to C to sell the furniture and apply the proceeds in discharge of the note.

Subsequently, C sells the furniture but, owing to his misconduct and wilful negligence, only a small price is realised. A is discharged from liability on the note.

A puts M as apprentice to B, and gives a guarantee to B for M’s fidelity. B promises on his part that he will, at least once a month, see M make up the cash. B omits to see this done as promised, and M embezzles. A is not liable to B on his guarantee.

Rights of surety on payment or performance 93.

Where a guaranteed debt has become due, or default of the principal debtor to perform a guaranteed duty has taken place, the surety, upon payment or performance of all that he is liable for, is invested with all the rights which the creditor has against the principal debtor.

Surety’s right to benefit of creditor’s securities 94.

A surety is entitled to the benefit of every security which the creditor has against the principal debtor at the time when the contract of suretyship is entered into, whether the surety knows of the existence of such security or not; and, if the creditor loses or, without the consent of the surety, parts with such security, the surety is discharged to the extent of the value of the security.

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Illustrations

C advances to B, his tenant, $2,000 on the guarantee of A. C has also a further security for the $2,000 by a mortgage of B’s furniture. C cancels the mortgage. B becomes insolvent and C sues A on his guarantee. A is discharged from liability to the amount of the value of the furniture.

C, a creditor, whose advance to B is secured by a decree, receives also a guarantee for that advance from A. C afterwards takes B’s goods in execution under the decree and then, without the knowledge of A, withdraws the execution. A is discharged.

A, as surety for B, makes a bond jointly with B to C, to secure a loan from C to B.

Afterwards, C obtains from B a further security for the same debt. Subsequently, C gives up the further security. A is not discharged.

Guarantee obtained by misrepresentation invalid 95.

Any guarantee which has been obtained by means of misrepresentation made by the creditor, or with his knowledge and assent, concerning a material part of the transaction, is invalid.

Guarantee obtained by concealment invalid 96.

Any guarantee which the creditor has obtained by means of keeping silence as to material circumstances is invalid.

Illustrations

A engages B as clerk to collect money for him. B fails to account for some of his receipts and A in consequence calls upon him to furnish security for his duly accounting.

C gives his guarantee for B’s duly accounting. A does not acquaint C with B’s previous conduct. B afterwards makes default. The guarantee is invalid.

A guarantees to C payment for iron to be supplied by him to B to the amount of 2,000 tons. B and C have privately agreed that B should pay $5 per ton beyond the market price, such excess to be applied in liquidation of an old debt. The agreement is concealed from A. A is not liable as a surety.

Guarantee on contract that creditor shall not act on it until co-surety joins 97.

Where a person gives a guarantee upon a contract that the creditor shall not act upon it until another person has joined in it as co-surety, the guarantee is not valid if that other person does not join.

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Implied promise to indemnify surety 98.

In every contract of guarantee there is an implied promise by the principal debtor to indemnify the surety, and the surety is entitled to recover from the principal debtor whatever sum he has rightfully paid under the guarantee, but no sums which he has paid wrongfully.

Illustrations

B is indebted to C and A is surety for the debt. C demands payment from A and on his refusal, sues him for the amount. A defends the suit, having reasonable grounds for doing so, but is compelled to pay the amount of the debt with costs. He can recover from B, the amount paid by him for costs as well as the principal debt.

C lends B a sum of money and A, at the request of B, accepts a bill of exchange drawn by B upon A to secure the amount. C, the holder of the bill, demands payment of it from A and, on A’s refusal to pay, sues him upon the bill. A, not having reasonable grounds for so doing, defends the suit, and has to pay the amount of the bill and costs. He can recover from B, the amount of the bill, but not the sum paid for costs as there was no real ground for defending the action.

A guarantees to C, to the extent of $2,000, payment for rice to be supplied by C to B.

C supplies to B rice to a less amount than $2,000, but obtains from A payment of the sum of $2,000 in respect of the rice supplied. A cannot recover from B more than the price of the rice actually supplied.

Co-sureties liable to contribute equally 99.

Where two or more persons are co-sureties for the same debt or duty, either jointly or severally, and whether under the same or different contracts, and whether with or without the knowledge of each other, the co-sureties, in the absence of any contract to the contrary, are liable, as between themselves, to pay each an equal share of the whole debt, or of that part of it which remains unpaid by the principal debtor.

Illustrations

A, B and C are sureties to D for the sum of $3,000 lent to E. E makes default in payment. A, B and C are liable, as between themselves, to pay $1,000 each.

A, B and C are sureties to D for the sum of $1,000 lent to E and there is a contract between A, B and C that A is to be responsible to the extent of one-quarter, B to the extent of one-quarter and C to the extent of one-half. E makes default in payment. As between the sureties, A is liable to pay $250, B $250, and C $500.

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Liability of co-sureties bound in different sums 100.

Co-sureties who are bound in different sums are liable to pay equally as far as the limits of their respective obligations permit.

Illustrations

A, B and C, as sureties for D, enter into three several bonds, each in a different penalty namely, A in the penalty of $10,000, B in that of $20,000, C in that of $40,000, conditioned for D’s duly accounting to E. D makes default to the extent of $30,000. A, B and

C are each liable to pay $10,000.

A, B and C, as sureties for D, enter into three several bonds, each in a different penalty namely, A in the penalty of $10,000, B in that of $20,000, C in that of $40,000, conditioned for D’s duly accounting to E. D makes default to the extent of $40,000. A is liable to pay $10,000, and B and C $15,000.

A, B and C, as sureties for D, enter into three several bonds, each in a different penalty namely, A in the penalty of $10,000, B in that of $20,000, C in that of $40,000, conditioned for D’s duly accounting to E. D makes default to the extent of $70,000. A, B and

C have to pay each the full penalty of his bond.

PART 8A [S 3/2016]

Scholarship Agreements

Application to all scholarship agreements 100A.

This Part applies to all scholarship agreements entered into before or after 28th January 2016.

Interpretation 100B.

In this Part, unless the context otherwise requires —

“appropriate authority” means the Government, a statutory authority or an approved educational institution;

“approved educational institution” means any institution or body declared as such by the Minister under section 100C;

“scholarship agreement” means any contract or agreement between an appropriate authority and any person (in this Act referred to as a scholar) with respect to, any scholarship, award, bursary, loan, sponsorship or appointment to a course of study, the provision of leave with or without pay, or any other facility, whether granted

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directly by the appropriate authority, or by any other person or body, or by any government outside Brunei Darussalam, for the purpose of education or learning of any description;

“statutory authority” means a body corporate established by or under any written law to perform or discharge any public function;

“surety” means a person referred to as a surety, or as a guarantor, or by any other corresponding term, in a scholarship agreement.

Approved educational institution 100C.

The Minister of Finance and Economy may, by notification published in the Gazette, declare any institution or body, whether corporate or unincoporate, to be an approved educational institution for the purposes of this Act.

Validity of scholarship agreement 100D.

Notwithstanding anything to the contrary contained in the Act, no scholarship agreement shall be invalidated on the ground that —

the scholar entering into the agreement is not of the age of majority;

the agreement is contrary to any provision of any written law in force relating to moneylenders; or

the agreement lacks consideration.

Remedy in event of breach 100E.

Where a scholarship agreement has been breached by a scholar —

if a sum is named in the agreement as the amount to be paid in case of such breach, notwithstanding anything to the contrary contained in this Act, the scholar and the surety shall be liable jointly and severally to pay and the appropriate authority shall be entitled to be paid the whole of the sum whether or not actual damage or loss has been caused by the breach, and no deduction shall be made from the sum on account of any partial period or service performed by the scholar on completion of his course of study; or

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if no such sum is mentioned in the scholarship agreement, the scholar and the surety shall be jointly and severally liable to pay and the appropriate authority shall be entitled to be paid —

the whole amount expended by the appropriate authority under the agreement; and

A lends a horse, which he knows to be vicious, to B. He does not disclose the fact that the horse is vicious. The horse runs away. B is thrown and injured. A is responsible to B for damage sustained.

A hires a carriage of B. The carriage is unsafe, though B is not aware of it, and A is injured. B is responsible to A for the injury.

Care to be taken by bailee 104.

In all cases of bailment, the bailee is bound to take as much care of the goods bailed to him as a man of ordinary prudence would under similar circumstances, take of his own goods of the same bulk, quality and value as the goods bailed.

Bailee when not liable for loss etc. of thing bailed 105.

The bailee, in the absence of any special contract, is not responsible for the loss, destruction or deterioration of the thing bailed if he has taken the amount of care of it described in section 104.

Termination of bailment by bailee’s act inconsistent with conditions 106.

A contract of bailment is voidable at the option of the bailor, if the bailee does any act with regard to the goods bailed, inconsistent with the conditions of the bailment.

Illustration

A lets to B, for hire, a horse for his own riding. B drives the horse in his carriage. This is, at the option of A, a termination of the bailment.

Liability of bailee making unauthorised use of goods bailed 107.

If the bailee makes any use of the goods bailed which is not according to the conditions of the bailment, he is liable to make

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compensation to the bailor for any damage arising to the goods from or during such use of them.

Illustrations

A lends a horse to B for his own riding only. B allows C, a member of his family, to ride the horse. C rides with care, but the horse accidentally falls and is injured. B is liable to make compensation to A for the injury done to the horse.

A hires a horse in Brunei Darussalam from B expressly to go to Kuala Belait.

A rides with due care, but goes to Muara instead. The horse accidentally falls and is injured.

A is liable to make compensation to B for the injury to the horse.

Effect of mixture, with bailor’s consent, of his goods with bailee’s 108.

If the bailee, with the consent of the bailor, mixes the goods of the bailor with his own goods, the bailor and the bailee shall have an interest, in proportion to their respective shares, in the mixture thus produced.

Effect of mixture, without bailor’s consent, when goods can be separated 109.

If the bailee, without the consent of the bailor, mixes the goods of the bailor with his own goods, and the goods can be separated or divided, the property in the goods remains in the parties respectively; but the bailee is bound to bear the expense of separation or division and any damage arising from the mixture.

Illustration

A bails 100 bales of cotton marked with a particular mark to B. B, without A’s consent, mixes the 100 bales with other bales of his own, bearing a different mark: A is entitled to have his 100 bales returned and B is bound to bear all the expenses incurred in the separation of the bales and any other incidental damage.

Effect of mixture, without bailor’s consent, when goods cannot be separated 110.

If the bailee, without the consent of the bailor, mixes the goods of the bailor with his own goods in such a manner that it is impossible to separate the goods bailed from the other goods and deliver them back, the bailor is entitled to be compensated by the bailee for the loss of the goods.

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Illustration

A bails a barrel of high grade flour, worth $45, to B. B without A’s consent, mixes the flour with inferior flour of his own, worth only $25 a barrel. B must compensate A for the loss of his flour.

Repayment by bailor of necessary expenses 111.

Where, by the conditions of the bailment, the goods are to be kept or to be carried, or to have work done upon them by the bailee for the bailor, and the bailee is to receive no remuneration, the bailor shall repay to the bailee the necessary expenses incurred by him for the purpose of the bailment.

Restoration of goods lent gratuitously 112.

The lender of a thing for use may at any time require its return, if the loan was gratuitous, even though he lent it for a specified time or purpose.

But if, on the faith of such loan, made for a specified time or purpose, the borrower has acted in such a manner that the return of the thing lent before the time agreed upon would cause him loss exceeding the benefit actually derived by him from the loan, the lender must, if he compels the return, indemnify the borrower for the amount in which the loss so occasioned exceeds the benefit so derived.

Return of goods bailed, on expiration of time or accomplishment of purpose 113.

It is the duty of the bailee to return or deliver according to the bailor’s directions, the goods bailed, without demand, as soon as the time for which they were bailed has expired or the purpose for which they were bailed has been accomplished.

Bailee’s responsibility when goods are not duly returned 114.

If, by the fault of the bailee, the goods are not returned, delivered or tendered at the proper time, he is responsible to the bailor for any loss, destruction or deterioration of the goods from that time.

Termination of gratuitous bailment by death 115.

A gratuitous bailment is terminated by the death either of the bailor or of the bailee.

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Bailor entitled to increase or profit from goods bailed 116.

In the absence of any contract to the contrary, the bailee is bound to deliver to the bailor, or according to his directions, any increase or profit which may have accrued from the goods bailed.

Illustration

A leaves a cow in the custody of B to be taken care of. The cow has a calf. B is bound to deliver the calf as well as the cow to A.

Bailor’s responsibility to bailee 117.

The bailor is responsible to the bailee for any loss which the bailee may sustain by reason that the bailor was not entitled to make the bailment, or to receive back the goods, or to give directions respecting them.

Bailment by several joint owners 118.

If several joint owners of goods bail them, the bailee may deliver them back to, or according to the directions of, one joint owner without the consent of all, in the absence of any agreement to the contrary.

Bailee not responsible on re-delivery to bailor without title 119.

If the bailor has no title to the goods and the bailee, in good faith, delivers them back to, or according to the directions of, the bailor, the bailee is not responsible to the owner in respect of such delivery.

Right of third person claiming goods bailed 120.

If a person, other than the bailor, claims goods bailed, he may apply to the court to stop the delivery of the goods to the bailor and to decide the title to the goods.

Right of finder of goods; may sue for specific reward offered 121.

The finder of goods has no right to sue the owner for compensation for trouble and expense voluntarily incurred by him to preserve the goods and to find out the owner; but he may retain the goods against the owner until he receives such compensation; and where the owner has offered a specific reward for the return of goods lost, the finder may sue for such reward and may retain the goods until he receives it.

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When finder of thing commonly on sale may sell it 122.

When a thing which is commonly the subject of sale is lost, if the owner cannot with reasonable diligence be found, or if he refuses, upon demand, to pay the lawful charges of the finder, the finder may sell it —

when the thing is in danger of perishing or of losing the greater part of its value;

when the lawful charges of the finder, in respect of the thing found, amount to two-thirds of its value.

Bailee’s particular lien 123.

Where the bailee has, in accordance with the purpose of the bailment, rendered any service involving the exercise of labour or skill in respect of the goods bailed, he has, in the absence of a contract to the contrary, a right to retain such goods until he receives due remuneration for the services he has rendered in respect of them.

Illustrations

A delivers a rough diamond to B, a jeweller, to be cut and polished, which is accordingly done. B is entitled to retain the stone till he is paid for the services he has rendered.

A gives cloth to B, a tailor, to make into a coat. B promises A to deliver the coat as soon as it is finished, and to give a 3 months credit for the price. B is not entitled to retain the coat until he is paid.

General lien of bankers, factors, wharfingers, solicitors and policy-brokers 124.

Bankers, factors, wharfingers, advocates and solicitors, and policy-brokers may, in the absence of a contract to the contrary, retain, as a security for a general balance of account, any goods bailed to them; but no other persons have a right to retain, as a security for such balance, goods bailed to them, unless there is an express contract to that effect.

(Repealed)

A is employed by B, residing in London, to recover at Brunei Darussalam a debt due to B. A may adopt any legal process necessary for the purpose of recovering the debt and may give a valid discharge for the same.

A constitutes B his agent to carry on his business of a shipbuilder. B may purchase timber and other materials, and hire workmen, for the purpose of carrying on the business.

Agent’s authority in emergency 142.

An agent has authority, in an emergency, to do all such acts for the purpose of protecting his principal from loss as would be done by a person of ordinary prudence, in his own case, under similar circumstances.

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Illustrations

An agent for sale may have goods repaired if it be necessary.

A consigns provisions to B at Kuala Belait, with directions to send them immediately to C at Kuching. B may sell the provisions at Kuala Belait if they will not bear the journey to Kuching without spoiling.

Sub-agents

When agent cannot delegate 143.

An agent cannot lawfully employ another to perform acts which he has expressly or impliedly undertaken to perform personally, unless by the ordinary custom of trade a sub-agent may, or, from the nature of the agency, a sub-agent must, be employed.

“Sub-agent”

Where a sub-agent is properly appointed, the principal is, so far as regards third persons, represented by the sub-agent, and is bound by and responsible for his acts as if he were an agent originally appointed by the principal.

The agent is responsible to the principal for the acts of the sub-agent.

The sub-agent is responsible for his acts to the agent, but not to the principal, except in case of fraud or wilful wrong.

Agent’s responsibility for sub-agent appointed without authority 146.

Where an agent, without having authority to do so, has appointed a person to act as a sub-agent, the agent stands towards such person in the relation of a principal to an agent, and is responsible for his acts both to the principal and to third persons; the principal is not represented by or responsible for the acts of the person so employed, nor is that person responsible to the principal.

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Relation between principal and person duly appointed by agent to act in business of agency 147.

Where an agent, holding an express or implied authority to name another person to act for the principal in the business of the agency, has named another person accordingly, such person is not a sub-agent, but an agent of the principal for such part of the business of the agency as is entrusted to him.

Illustrations

A and B buy 100 bales of cotton, which they agree to sell for their joint account;

A and B are partners in respect of such cotton.

A and B buy 100 bales of cotton, agreeing to share it between them. A and B are not partners.

A agrees with B, a goldsmith, to buy and furnish gold to B to be worked up by him and sold and that they shall share in the resulting profit or loss. A and B are partners.

A and B agree to work together as carpenters but that A shall receive all profits and shall pay wages to B. A and B are not partners.

A and B are joint owners of a ship. This circumstance does not make them partners.

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Lender not partner by advancing money for share of profits 193.

A loan to a person engaged, or about to engage, in any trade or undertaking, upon a contract with such person that the lender shall receive interest at a rate varying with the profits, or that he shall receive a share of the profits, does not, of itself, constitute the lender a partner, or render him responsible as such.

Property left in business by retiring partner or deceased partner’s representative 194.

In the absence of any contract to the contrary, property left by a retiring partner, or the representative of a deceased partner, to be used in the business is to be considered a loan within the meaning of section 193.

Servant or agent remunerated by share of profits not partner 195.

No contract for the remuneration of a servant or agent of any person, engaged in any trade or undertaking, by a share of the profits of such trade or undertaking shall, of itself, render such servant or agent responsible as a partner therein nor give him the rights of a partner.

Widow or child of deceased partner receiving annuity out of profits not partner 196.

No person, being a widow or child of a deceased partner of a trader, and receiving, by way of annuity, a proportion of the profits made by such trader in his business shall, by reason only of such receipt, be deemed to be a partner of such trader or be subject to any liabilities incurred by him.

Person receiving portion of profits for sale of goodwill not partner 197.

No person receiving, by way of annuity or otherwise, a portion of the profits of any business, in consideration of the sale by him of the goodwill of such business shall, by reason only of such receipt, be deemed to be a partner of the person carrying on such business or be subject to his liabilities.

Responsibility of person leading another to believe him partner 198.

A person who has, by words spoken or written, or by his conduct, led another to believe that he is a partner in a particular firm, is responsible to him as a partner in such firm.

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Liability of person permitting himself to be represented as partner 199.

Anyone consenting to allow himself to be represented as a partner is liable, as such, to third persons who, on the faith thereof, give credit to the partnership.

Minor partner not personally liable, but his share is 200.

A person who is under the age of majority according to the law to which he is subject may be admitted to the benefits of partnership, but cannot be made personally liable for any obligation of the firm; but the share of such minor in the property of the firm is liable for the obligations of the firm.

Liability of minor partner on attaining majority 201.

A person who has been admitted to the benefits of partnership under the age of majority becomes, on attaining that age, liable for all obligations incurred by the partnership since he was so admitted, unless he gives public notice, within a reasonable time, of his repudiation of the partnership.

Partner’s liability for debts of partnership 202.

Every partner is liable for all debts and obligations incurred while he is a partner in the usual course of business by or on behalf of the partnership; but a person who is admitted as a partner into an existing firm does not thereby become liable to the creditors of such firm for anything done before he became a partner.

Partner’s liability to third person for neglect or fraud of co-partner 203.

Every partner is liable to make compensation to third persons in respect of loss or damage arising from the neglect or fraud of any partner in the management of the business of the firm.

Partner’s power to bind co-partners 204.

Each partner who does any act necessary for, or usually done in, carrying on the business of such partnership as that of which he is a member binds his co-partners to the same extent as if he were their agent duly appointed for that purpose.

Exception — If it has been agreed between the partners that any restriction shall be placed upon the power of any one of them, no act done in contravention of such agreement shall bind the firm with respect to persons having notice of such agreement.

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Illustrations

A and B trade in partnership, A residing in England and B, in Brunei Darussalam.

A draws a bill of exchange in the name of the firm. B has no notice of the bill nor is he at all interested in the transaction. The firm is liable on the bill, provided the holder did not know of the circumstances under which the bill was drawn.

A, being one of a firm of solicitors, draws a bill of exchange in the name of the firm without authority. The other partners are not liable on the bill.

A and B carry on business in partnership as bankers. A sum of money is received by

A on behalf of the firm. A does not inform B of such receipt and afterwards A appropriates the money to his own use. The partnership is liable to make good the money.

A and B are partners. A, with the intention of cheating B, goes to a shop and purchases articles on behalf of the firm, such as might be used in the ordinary course of the partnership business and converts them to his own separate use, there being no collusion between him and the seller. The firm is liable for the price of the goods.

Annulment of contract defining partners’ rights and obligations 205.

Where partners have by contract regulated and defined, as between themselves, their rights and obligations, such contract can be annulled or altered only by consent of all of them, which consent must either be expressed, or be implied from a uniform course of dealing.

Illustration

A, B and C intending to enter into partnership, execute written articles of agreement, by which it is stipulated that the net profits arising from the partnership business shall be equally divided between them. Afterwards they carry on the partnership business for many years, A receiving one-half of the net profits and the other half being divided equally between B and C. All parties know of and acquiesce in this arrangement. This course of dealing supersedes the provision in the articles as to the division of profits.

Rules determining partner’s mutual relations, where no contract to contrary 206.

In the absence of any contract to the contrary, the relations of partners to each other are determined by the following rules —

all partners are joint owners of all property originally brought into the partnership stock, or bought with money belonging to the partnership, or acquired for purposes of the partnership business. All such property is called partnership property. The share of each partner in the partnership property is the value of his

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original contribution, increased or diminished by his share of profit or loss;

all partners are entitled to share equally the profits of the partnership business and must contribute equally towards the losses sustained by the partnership;

each partner has a right to take part in the management of the partnership business;

each partner is bound to attend diligently to the business of the partnership and is not entitled to any remuneration for acting in such business;

when differences arise as to ordinary matters connected with the partnership business, the decision shall be according to the opinion of the majority of the partners; but no change in the nature of the business of the partnership can be made, except with the consent of all the partners;

no person can introduce a new partner into a firm without the consent of all the partners;

if, from any cause whatsoever, any member of a partnership ceases to be so, the partnership is dissolved as between all the other members;

unless the partnership has been entered into for a fixed term, any partner may retire from it at any time;

where a partnership has been entered into for a fixed term, no partner can, during such term, retire, except with the consent of all the partners, nor can he be expelled by his partners for any cause whatever, except by order of court;

partnerships, whether entered into for a fixed term or not, are dissolved by the death of any partner.

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When court may dissolve partnership 207.

At the suit of a partner, the court may dissolve the partnership in the following cases —

when a partner becomes of unsound mind;

when a partner, other than the partner suing, has been adjudicated bankrupt under any law relating to bankruptcy;

when a partner, other than the partner suing, has done any act by which the whole interest of such partner is legally transferred to a third person;

when any partner becomes incapable of performing his part of the partnership contract;

when a partner, other than the partner suing, is guilty of gross misconduct in the affairs of the partnership or towards his partners;

when the business of the partnership can only be carried on at a loss.

Dissolution of partnership by prohibition of business 208.

A partnership is in all cases dissolved by its business being prohibited by law.

Rights and obligations of partners in partnership continued after expiry of term for which it was entered into 209.

If a partnership entered into for a fixed term be continued after such term has expired, the rights and obligations of the partners will, in the absence of any agreement to the contrary, remain the same as they were at the expiration of the term, so far as such rights and obligations can be applied to a partnership dissolvable at the will of any partner.

General duties of partners 210.

Partners are bound to carry on the business of the partnership for the greatest common advantage, to be just and faithful to each other, and to render true accounts and full information of all things affecting the partnership to any partner or his legal representatives.

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Account to firm of benefit derived from transaction affecting partnership 211.

A partner must account to the firm for any benefit derived from a transaction affecting the partnership.

Illustrations

A, B and C are partners in trade. C, without the knowledge of A and B, obtains for his own sole benefit a lease of the house in which the partnership business is carried on. A and B are entitled to participate if they please, in the benefit of the lease.

A, B and C carry on business together in partnership as merchants trading between

Brunei Darussalam and London. D, a merchant in London, to whom they make their consignments, secretly allows C a share of the commission which he receives upon such consignments, in consideration of C’s using his influence to obtain the consignments for him. C is liable to account to the firm for the money so received by him.

Obligations, to firm, of partner carrying on competing business 212.

If a partner, without the knowledge and consent of the other partners, carries on any business competing or interfering with that of the firm, he must account to the firm for all profits made in such business and must make compensation to the firm for any loss occasioned thereby.

Revocation of continuing guarantee by change in firm 213.

A continuing guarantee, given either to a firm or to a third person, in respect of the transaction of a firm is, in the absence of agreement to the contrary, revoked as to future transactions by any change in the constitution of the firm to which, or in respect of the transactions of which, such guarantee was given.

Non-liability of deceased partner’s estate for subsequent obligations 214.

The estate of a partner who has died is not, in the absence of an express agreement, liable in respect of any obligation incurred by the firm after his death.

Payment of partnership debts and of separate debts 215.

Where there are joint debts due from the partnership and also separate debts due from any partner, the partnership property must be applied in the first instance in payment of the debts of the firm, and, if there is any surplus, then the share of each partner must be applied in payment of his

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separate debts or paid to him. The separate property of any partner must be applied first in the payment of his separate debts, and the surplus (if any) in the payment of the debts of the firms.

Continuance of partners’ rights and obligations after dissolution 216.

After a dissolution of partnership, the rights and obligations of the partners continue in all things necessary for winding up the business of the partnership.

Notice of dissolution 217.

Persons dealing with a firm will not be affected by a dissolution of which no public notice has been given, unless they themselves had notice of such dissolution.

Winding up by court on dissolution on or after termination 218.

Where a partner is entitled to claim a dissolution of partnership or where a partnership has terminated, the court may, in the absence of any contract to the contrary, wind up the business of the partnership, provide for the payment of its debts and distribute the surplus according to the shares of the partners, respectively.

Limited liability partnerships, incorporated partnerships and joint-stock companies 219.

Extraordinary partnerships such as partnerships with limited liability, incorporated partnerships and joint-stock companies, shall be regulated by the law for the time being in force relating thereto.