bizlaw bible (best version i think)

8/20/2019 BizLaw Bible (Best Version i Think)

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AB107 – Business Law Bible


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Ratio decidendi (rational for the decision): Binding authority

Obiter dictum (a saying by the way): only has persuasive authority


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Chapter 3: Contract: Offer and Acceptance (pg 57 – 83)

Principles of Contract Law

Nature of Contracts

Elements of Contract

• The concept of necessary meeting of minds is ascertain in 4 key elements

o Offero Acceptanceo Considerationo

Intention to create legal relations

Types of Contract (pg 60)

• Simple Contactso Writteno Oral

• Special Contractso Contracts by deed or contracts under sealo Always in writingo The written document is called a deedo Contracts under seal do not require consideration to be enforceable

Written and Oral Contracts (pg 60)

• Oral Contracts (Parol Contracts)

o

Difficult to ascertain the precise terms of the contact in event of dispute• Written Contact

o Useful as it provides evidence of the parties’ contractual obligations – Forefront Medical

Technology (Pte) Ltd v Modern Pak Pte Ld (2006)

o Contracts for certain transactions must be evidenced by a written note of memorandumotherwise they are unenforceable

! Eg. Assignment of copyright and transfer of real property

• Parol Evidence Ruleo Oral (Parol) evidence will not be admitted in a court action to add to , vary, amend or

contradict a written contract – Evidence Act s 94 – Engelin Teh Practice LLC v Wee Soon

Kim Anthony (2004)

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Offer (pg 63)

• An offer is an expression made by one party (offeror) to another party (offeree) communicating thatofferor’s willingness to perform a promise

• For an offer to be effective, it must be communicated to the offeree o

E.g. If offer is sent on Monday and it reaches offeree on Wednesday, the offer is deemed to be

made on Wednesday.

Unilateral Contract (pg 63)

• Offer can be addressed to one particular person, a group of people or to everyone

• Unilateral contact is one that is brought into existence by the act of one party in response to a

conditional promise by another

• Carlill v Carbolic Smoke Ball Co (1892)

o Although offer is made to the world, the contract is made with that limited portion of the public who came forward and perform the condition on the faith of the advertisement

• Offeree makes no promise in this case but simply performs the condition attached to the offeror’s promise

• In a bilateral contract, parties would know the identities of each other and there is an exchange of

promise

Invitation to Treat (pg 64)

• An invitation to treat is an invitation to commence negotiations, it is an invitation to make an offero Advertisements is not considered an offer but ITT

• Acceptance of ITT does not lead to a contract – Partridge v Crittenden (1968)

• Display of goods and prices are considered ITT and not an offer

• Offer is only made when customer selects the item and pays for it at the cashier – Chwee Kin Keong &Others v Digilandmall.com Pte Ltd (2004) and Pharmaceutical Society of Great Britain v Boots Cash

Chemists (Southern) Ltd (1952) – pg 65

Auctions and Tenders (pg 66)

• Auctionso Auctioneer invite bids which are considered ITT

o Bids by audience are offerso Sale completed when auctioneer indicates his acceptance by fall of hammer

• Tendero Tender submitted is considered as an offero Advertisement which invites tenders are considered ITTo

Once tender is accepted, a contract is formed

Provision of information (pg 67)

• Communication may not be an offer but a mere response to a request for information

•

Harvey v Facey (1893)o Provision of information was not an offer

! Lowest price for Bumper Hall Pen, $900 in response to a request for information

Acceptance(pg 67)

• Acceptance may be made in writing, orally or by conduct

• Communication constitutes an acceptance only if it is an unconditional expression of agreement to the

terms of the offer – Compaq Computer Asia Pte Ltd v Computer Interface (S) Pte Ltd (2004)

• Conditional Acceptance is no acceptance – Stuttgart Auto Pte Ltd v Ng Shwu Yong (2005)

• A counter offer – where offeree seeks to accept the offer but on slightly different terms does not

amount to an acceptance

• Prospective purchaser may accept offer subject to contract or subject to a written contract to be drafted

by solicitors


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o Contract will only come into existence when condition is fulfilled – Thomson Plaza (Pte) Ltdv Liquidators of Yaohan Department Store Singapore Pte Ltd (in liquidation) (2001)

• Agreement contains words to the effect that it shall not be a final and binding agreement, there is nocontract – Cendekia Candranegara Tjiang v Yin Kum Choy & Others (2002)

Knowledge of Offer (pg 68)

• Contract could be formed even if offeree is ignorant of the offer and offeree performs obligationswhich amounts to acceptance of contract – Gibbons v Proctor (1891)

• Opposite view was taken in US case – Fitch v Snedaker (1868) and Australian Case – R v Clarke

(1927)

• Once offeree is aware of the offer, it does not matter that he was prompted to act for reasons other thanthe desire to accept the offer – Williams v Carwardine (1833)

o Therefore still entitled to the reward

• Two identical cross offers do not ordinarily make a contract – Tinn v Hoffman & Co (1873)

o Cross offer implies a lack of consensus or meeting of minds between the parties at the time ofmaking the offers

Communication of Acceptance (pg 69)

• For an acceptance to be effective, it must be communicated to the offeroro Offeror must physically receive the written acceptance or heard the oral acceptance – CS

Bored Pile System Pte Ltd v Evan Lim & Co Pte Ltd (2006)

o

Waiver of Communication (pg 69)

• Facts show that the offeror has waived the need for communication of acceptance

• In case where offer is made to the whole world

• In unilateral contact, the act by the offeree may itself be constructed as acceptance, without requiringformal communication to the offeror

Silence (pg 70)

• Silence is normally not constructed as acceptance unless

• Both parties have agreed that the offeree’s silence is to be constructed as his acceptance

•

Both parties have to agree to it for it to be effective – Felthouse v Bindley (1862) o

Felthouse had no right to impose a condition that a sale contact would come into existence ifBindley remained silent

• Both offeror and the offeree may agree that the offeree would have a position obligation tocommunicate only if he wishes to reject the offer – Southern Ocean Shipbuilding Co Pte Ltd v

Deutche Bank AG (1993)

o Silence in this case can be construed as Acceptanceo Midlink Development Pte Ltd v The Stansfield Group Pte Ltd (2004)

! It is always a question of fact whether silent inactivity after an offer is made istantamount to acceptance

The Postal Acceptance Rule (pg 71)

•

Acceptance is deemed to have been effective as soon as the letter is posted, regardless as to when itreaches the offeror or whether it reaches him at all – Adams v Lindsell (1818)

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• It should only be applied in cases where both parties agree that acceptance should be sent by post

• Offer made by telegram gives rise to a presumption that the offeror wishes a speedy reply such that anacceptance sent by post would not attract the postal rule – Quenerduaine v Cole (1883)

o General rules applies in this case and acceptance occurs only when the posted letter is actuallyreceived

• Offeror often stipulate that acceptance is not valid until physically received by the offeror, offeror

overrides the postal rule and general rule applies

Instantaneous Communications (pg 72)

• Instantaneous Communication proper where offeror and offeree talks on the phoneo Communication is instant in its fullest senseo Similar to situation of oral communicationo Acceptance must be actually be received by the offeror

• Near Instantaneous Communications where two person communicate by typing on keyboard andresponding real time

o Communication is instantaneous or virtually soo Entores Ltd v Miles Far East Corporation (1955)

! Acceptance is complete when it is received and not when it is sent

•

Asynchronous (not communicating in real time) where there is instantaneous or virtually instantaneoustransmission but not instantaneous communication

o Eg, acceptance is by facsimile, email or voice mail but no one is manning the receivingequipment

o Case law – Chwee Kin Keong v Digilandmall.com Pte Ltd suggests that General Rule applieswhere acceptance is valid upon receipt (Physically receive)

• Electronic Transactions Act (ETA) (pg 73-74) o Part IV deals with electronic contracts o Section 11 ETA states that an offer or acceptance can be sent electronically in the form of an

“electronic record”

o Electronic record is deemed sent by the originator if it is sent by the originator himself,someone authorized by him or by an information system programmed by or on behalf of the

originator to operate automatically – s 13 (1) & (2) ETA

o

For additional certainty, there are provisions for a party to require an acknowledgement ofreceipt to ensure messages have been received properly, s 14 ETA

o General rule is that despatch of an electronic record occurs when the message enters aninformation system outside the control of the originator, s 15(1) ETA

o Moment of receipt depends on whether the addressee has designated a specific informationsystem for receiving messages

! If addressee has done so, generally receipt occurs when the electronic record enters

the designated information system of the addressee ! If message is sent elsewhere, then receipt occurs when the message is retrieved by

the addressee, s 15(2)(a) ETA

! If addressee has not designated an information system, receipt occurs when themessage enters any information system of addressee s 15(2)(b) ETA

o Advisable for addressee to designate an information system o

Provisions of ETA deal with the time transmission is received but do not resolve the issue ofwhen acceptance is communicated

o ETA does not definitively endorse the postal rule or the general (receipt) rule

o As Singapore High Court noted in Chwee Kin Keong v Digilandmall.com Pte Ltd

! S 15 ETA does not purport to change or even clarify the legal principles governingcontract formation


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Termination of Offer and Acceptance (pg 75)

• Withdrawal

• Rejection (Counter Offer)

• Lapse of Time

• Failure of Condition

•

Death

Withdrawal (pg 75)

• General rule is that an offer can be withdrawn at any time prior to acceptance

• Revocation of offer must be communicated to the offeree

• Only effective when offeree receives notice of revocation – Byrne v Van Tienhoven (1880)

• Reliable third party could communicate a valid revocation – Dickinson v Dodds (1876) o

Important point is that offeree obtains knowledge of revocationo Overseas Union Insurance Ltd v Turegum Insurance Co (

o

o

o

o

)• Revocation of an offer can also occur if the offer is replaced or substituted by a fresh offer, fresh offer

must state that it supersedes the earlier offer – Banque Paribas v Citibank NA (1989)

• No legal obligation by the offeror to keep promise of opening for certain period of time. Can withdraw before stipulated time.

o Unless there is a separate contract called options which is essentially a promise, supported by

consideration to keep an offer open for a specific period

• For unilateral contacts, general rule states that offer can be revoked at any time prior to acceptance

which in this case occurs when the offeree’s obligations have been fully performed

• Alternative view is that if an offeree within a reasonable time from the making of the offer begins to perform his obligations, the offeror cannot revoke the offer – Abbott v Lance (1860)

• In support of alternative view, in Dickson Trading (S) Pte Ltd v Transmarco Ltd (1989), Chan KekKeong JC said (obiter dictum) “the offeror in a unilateral contract has an obligation not to revoke theoffer after the offeree has embarked on the performance of the conditions."

Rejection and Counter-offer (pg 78)

• Offer can be terminated when an offeree rejects the offer in writing, orally of conduct.

• Rejection must be communicated to offeror to be effective and offer is extinguished and cannot berevived

• Counter offer is construed as rejecting the initial offer – Hyde v Wrench (1840)

• Need to be careful when deciding if a counter-offer, inquiry or request was made.

Lapse of Time (pg 79)

• Offeror states that his offer is open for a specified period

•

Purported acceptance after that period would not be effective since offer had lapsed

• Court may imply that offeror has specified the period of offer even if he has not done so expressly –Wee Ah Lian v Teo Siak Weng (1992)

• Offer is still valid and capable of acceptance after deadline if it is clear from the offeror’s conduct andother evidence that the terms of the supposedly lapsed offer continue to govern their relationship after

the specified period – Panwell Pte Ltd & Anor v Indian Bank (No 2) (2002)

• In case where there is no express or implied period when offer is open, law usually presumes that an

offer will lapse after a reasonable time has passed – Ramsgate Victoria Hotel Co v Montefiore (1866)

Failure of Condition (pg 80)

• An offer may be made subject to a condition such that if the condition is not met, the offer isautomatically terminated

• Such condition may be expressly stated in the offer or it may be implied – Financings Ltd v Stimson(1962)


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Death (pg 80)

•

An offer is terminated by death of either the offeror or the offeree• If a man who makes an offer dies, the offer cannot be accepted after he is dead – Dickinson v Dodds

• Bradbury v Morgan (1862) – The court held that the death of an offeror did not terminate the offerunless the offeree had notice of the offeror’s death.

• Reynolds v Atherton (1921) – Offeree dies before acceptance, this offer cease to be capable ofacceptance.

Termination of Acceptance (pg 81)

• Once an acceptance has been communicated to an offeror, it cannot be withdrawn since, upon

communiation, there is a contract.

• Once posted, acceptance cannot be revoked (postal rule) – Wenkheim v Arndt (1873)


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Chapter 4: Consideration and Intention to Create Legal Relations (pg 85 – 112)

Consideration (pg 85)

• Consideration can be viewed as the price or compensation for the promise given by one party to theother.

•

As defined by Sir Frederick Pollock and later adopted by the House of Lords in Dunlop v Selfridge(1915)

o An act or forbearance of one party or the promise thereof, is the price for which the promise of

the other is bought and the promise thus given for value is enforceable

• In respect of each act, forbearance or promise, person who makes or performs it is the promisor and the

person to whom it is made or performed is the promisee

• In order for a promise to be enforceable, consideration must first be given.

Types of Consideration (pg 86)

• Executory Consideration

• Executed Consideration

• Past Consideration

Executory

• Executory consideration refers to consideration which have not been performed

Executed Consideration

• Executed consideration refers to consideration which has been performed

• In other words, executed consideration involves an act or forbearance, which has been fulfilled

Past Consideration

• Past consideration refers to an act performed prior to and to that extent independent of the promises

being exchanged

•

Action which was performed was not done in contemplation of or in response to a promise given

• Past consideration is no consideration

• Roscorla v Thomas (1842)

o The court held that the promise was made after the transaction had already been concluded

and therefore past consideration.

• The key with executed consideration is that the act was performed in exchange for another promise

given whereas with past consideration the act was performed without the reciprocal promise in mind

• For past consideration to become executed consideration (Pao On’s 3 requirements) – Pao On v Lau

Yiu Long (1980)

o Act done at promisor’s requesto Parties understood act is to be remuneratedo Contract must otherwise be enforceable

•

Courts have held that past consideration is no considerationo Teo Song Kwang (alias Richard) v Gnau Lye Chan and Another (2006)

o Sim Tony v Lim Ah Ghee (1995)

Consideration Must Move from Promisee, but need not move to promisor (pg 88)

• General rule is that for a promisee to enforce the promise, he must show that consideration has movedfrom him

• Tweddle v Atkinson (1861)

o Court held that Tweddle could not enforce the contract between the two fathers o First he was not a party to the contract o

No consideration flow from him • The consideration however, need not move to the promisor (need not benefit the promisor)- Malayan

Banking Berhad v Lauw Wisanggeni


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• Basically, the rule states that although the promisee must provide consideration, the consideration need

not benefit the promisor.

• A third party who is a stranger to the contract may benefit from the contact although he may not

enforce it.

Consideration must be Sufficient but Need Not be Adequate (pg 90)

• Adequacy of Consideration (pg 90)o Law will not interfere with the parties bargaino Common law will not inquire the fairness to the consideration as long as the parties agree to it

willingly – Lam Hong Leong Aluminium Pte Ltd v Lian Tech Huat Construction Pte Ltdand Another (2003

o Swiss Singapore Overseas Enterprise Pte Ltd Navalmar UK Ltd (No 2)(2003)

! Once subject of exchange is recognized in law as suitable consideration, quantity isirrelevant

o Chappell & Co Ltd v Nestle Co Ltd (1960)

! Chocolate wrappers were deemed as sufficient consideration

• Sufficiency of Consideration (pg 91) o All consideration must be of some value in the eyes of the law

o

Sufficient consideration is also described as good consideration or valuable consideration. o Sufficient Consideration

! Goods, services, money, property ! Forbearance to sue – Alliance Bank Ltd v Broom (1864); Lam Hong Leong

Alumnium Pte Ltd v Lian teck Huat Construction Pte Ltd and Another (2003)

! Performance of existing contractual duty to a third party – The Eurymedon; Pao Onv Lau Yiu Long (1980); SSAB Oxelosund AB v Xendral Trading Pte Ltd (1992)

o The same applies to a compromise of a legal action such as a out of court settlement –Callisher v Bischoffsheim (1870); K-Rex Finance Ltd v Cheng Chih Cheng (1993)

o Requirement: ! The legal action must be reasonable and not frivolous

! Claimant has an honest belief in the chance of success of the claim ! Claimant has not concealed from the other party any facts, which to the claimant’s

knowledge, might affect its validity. o In situations where the promise to perform, or the performance of, a pre-existing contractual

obligation to a third party can be a valid consideration.! The Eurymedon, even though the defendant was already contractually bound to a

third party to carry out a duty, the Privy Council still affirmed that goodconsideration is present when the plaintiff shipping company made a separate offer to

pay the defendant if they unload the goods from the Eurymedon.

Situations where case law held that the consideration provided was insufficient

• Moral Obligations & Obligations

• Vague or insubstantial consideration

• Performance of existing public duty

•

Performance of existing contractual duty

• Moral Obligation (pg 93)

o Consideration amounts to nothing more than moral obligationo Eastwood v Kenyon (1840) – The court rejected the plaintiff’s view and held that moral

obligation is insufficient consideration for a fresh promise.o A promise which is supported merely by the wishes or motives of the promise – no matter

how exemplary cannot be enforced because it lacks good considerationo Thomas v Thomas (1842) – The court held that the nominal rent was sufficient consideration

but the husband’s wishes were irrelevant; motives are not the same things as considerations

• Vague or Insubstantial Promise (pg 94)o

Consideration is too vague or insubstantial in nature to be enforceableo White v Bluett (1853) – The court held that Bluett’s promise was nothing more than a promise

“not to bore his father”. As such it was too vague and was insufficient consideration for thealleged discharge by his father.


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• Existing Public Duty (pg 94)

o Promisee is already under a public duty to perform an act and the same act is the purporteddecision

o Collins v Godefroy (1831) – The words of Lord Tenterden, “If it be a duty imposed by law

upon a party regularly subpoenaed to attend from time to time to give his evidence, then a promise to give him remuneration for loss of time incurred in such attendance is a promise

without consideration.o

If the court finds the promisee did something more that required by an existing public duty,then it may be sufficient.

o Eg. Glassbrook Bros Ltd v Glamorgan City Council (1925) – The Court held that the policewent beyond their public duty by providing a stationary force which was in excess of what

they thought was adequate in the circumstances.

• Existing Duty to Promisor (pg 95)

o Promisee is under an existing duty to the promisor to perform the act which is to be the purported consideration

o Stilk v Myrick (1809) – It was held that there was no consideration for the captain’s promise

because the remaining crew did what they were contractually required. Two sailors desertingwere within the usual emergencies found in such a voyage.

o However, if it is more than what is contractually required, that may constitute good

considerationo Williams v Roffey Bros and Nicholls (Contractors) Ltd (1991) – The English Court of

Appeal held that as long as the extra payment was not given under duress or fraud, the oral promise was enforceable because the defendant obtained “practical benefits” from the

plaintiff’s work. The benefit was that they would not be liable under the main contract for latecompletion.

• Rule in Pinnel’s Case (pg 97)o General rule is that partial fulfillment of a contractual obligation does not discharge the

promisee’s obligations also applies to a debto Pinnel’s Case (1602) – Payment of a lesser sum on that day in satisfaction of a greater sum

cannot be any satisfaction for the wholeo If payment and acceptance of [a part] before the day in satisfaction of the whole would be a

good satisfaction… [because the part] before the day would be more beneficial to him than the

whole at the day and the value of satisfaction is immaterialo Part payment of a debt does not discharge the entire debt unless the part payment was made at

the request of the creditor and the payment was made earlier, at a different place, or in

conjunction with some other valuable consideration – Foakes v Beer (1884)

Consideration and Promissory Estoppel (pg 98)

• Where Promissory estoppels is established, a promisee may have a valid defense against a promisor’sclaim even though no consideration has been given by promisee

• Doctrine was explained in orbiter dictum by Denning J in the case of Central London Property Trust v High Trees House Ltd (1947)

• Elements required to establish Promissory Estoppelo Parties must have an existing legal relationshipo

Promise must be clear and unequivocal and intended to affect the legal relationshipo

Promisee relied upon the promise and altered his positiono Overall it must be inequitable(unfair) for the promisor to be allowed to go back on his promise

Suspensive or Extinctive (pg 99)

• Once elements of Promissory Estoppel is established, it is tantamount to upholding a promise eventhough no consideration flowed from the promisee

• Original legal relationship is suspended for the duration of the promise

• The effect of promissory estoppels is to suspend the promisor’s rights temporarily

• When the promisor gives reasonable notice of his intention to revert to the original legal relationship,

the original relationship is restored.

• Tool Metal Manufacturing Co Ltd v Tungsten Electric Co Ltd (1995) – The House of Lords affirmed

the principle of PE. Tool Metal was entitled to revoke their voluntary suspension by giving adequatenotice to Tungsten Electric. The parties were deemed to have returned to their original agreement


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• However, the promise could become “final and irrevocable if the promisee cannot resume his position.”

– Ajayi v R T Briscoe (Nigeria) Ltd (1964)

Shield not Sword (pg 100)

• Promissory estoppel can only be used as a shield and not as a sword, only as a defence against a claim

made by a plaintiff.• Combe v Combe (1951) – English Court of Appeal held that PE can only be “used as a shield and not

as a sword.” – Assoland Construction Pte Ltd v Malayan Credit Properties Pte Ltd (1993)

Intention to Create Legal Relations (pg 101)

• The test is whether a reasonable person viewing all the circumstances of the case would consider thatthe promisor intended his promise to have legal consequences.

Social and Domestic Agreement (pg 101)

• Cover situations where the agreement is made between friends or between family members

• General presumption that such agreements lack the necessary intention to form a contract

•

Balfour v Balfour (1919) - The English Court of Appeal held that the claim failed because the partiesdid not intend the promise to be legally binding.

• De Cruz Andrea Heidi v Guangzhou Yuzhitang Health Products Co Ltd and Others (2003) – Courtheld that there was no contract between the parties, Andrea and Rayson as there was an absence of anintention to create legal relations; even if Rayson made profits, it would not elevate it to a commercial

transaction but merely means that the friend doing the favour has decided to keep some part of thediscount for himself, perhaps to compensate for his time and expense, without informing the recipient.

• Some social or domestic agreements may possess the necessary intention – Tan Hin Leong V LeeTeck Im (2001)

• Merritt v Merritt (1970) – The English Court of Appeal found the necessary intention and held that thewife succeeded in her claim for breach of contract.

Commercial Agreements (pg 103)

• General presumption that there is the necessary intention to create legal relations

• Edwards v Skyways Ltd (1964) – General presumption of intention in commercial agreement is notrebutted by the use of the phrase ex gratia to describe the payment. Skyways was legally bound tomake the payment

• Honour Clauses (pg 103)o Binding commercial agreement may be found to be unenforceable because of the absence of

the necessary intentiono Parties in an honour clause have expressly stated their agreement is not to be legally binding –

Rose & Frank Co v J R Crompton & Bros Ltd (1925)

• Letters of Comforto Letters of comfort are letters written by one party usually intended to vouch for the financial

soundness or probity of another related party who wishes to enter into a contract with a third

party! If third party is uneasy about entering into contract, the letter of comfort would act as

an additional assurance from the letter’s issuero Memorandum of understanding is usually a document which records the understanding of the

parties on a proposed commercial projecto Letter of intent is simply that it records the intention of parties, usually in connection with a

proposed commercial projecto Compaq Computer Asia Pte Ltd v Computer Interface (S) Pte Ltd (2004)

! Letter of award issued by Compaq was incapable of creating a binding contract as itwas subject to final terms and conditions being agreed by parties

o Mohamed Bassatne v Rifaat El Gohary (2004) and Khng Thian Huat v Riduan Bin Yusof

(2005) involving a MOA and LOI respectively ! Parties’s conduct had determined that the respective agreements were indeed binding

o

Kleinwort Benson Ltd v Malaysian Mining Corporation Berhad (1989) – On appeal, Courtonly found a moral not legal obligation. The wording of the letter of comfort did not amount


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to a warranty of MMC’s future conduct. On this basis, the court saw no need to apply theusual presumption of intention to create legal relations.

• Administrative Relationships (pg 105) o Management Corporation Strata Title No 473 v De Beers Jewellery Pte Ltd (2001) – No

intention to create legal relations could exist on either side since De Beers was in the positionof an applicant for a license and the MC was in the position of the issuing authority.

o

The situation as analogous to that which exists when someone applies to a governmental orstatutory body for an approval, for example, a licence to operate a restaurant or a radio or evena permit to construct a building.

Privity of Contract (pg 105)

• General rule of privity is that no one other than a person who is a party to the contract may be entitledto enforce or be bound by the terms of the contract. Similar to the rule that consideration must movefrom the promisee.

• Price v Easton (1833) – Court held that Price could not succeed because he was not a party to thecontract between the debtor and Easton

• Management Corporation Strate Title Pan No 2297 v Seasons Park Ltd (2005)

• Exceptions through which third party may acquire contractual rights of liabilities

o

Thai Kenaf Co Ltd v Keck Seng (S) Pte Ltd (1993)o Agency (Chapter 16)

! General rule of Agency: Principal, although not a party to the contract, has a direct

contractual relationship with the third party. Conversely, the agent who is a party tothe contract, is not liable for and not entitled to enforce the contract.

o Assignment of Choses in action ! Rights or liabilities relating to a chose in action under a contract between parties may

be transferred to a third party under a assignment ! Typically, assignment is made with the full consent of three parties

o Letter of Credits

• Contracts (Rights of Third Parties) Act (CRTA) (pg 107) o Third Party is able to enforce any term of a contract to which he is not a party where

! Contract states expressly that he may do so, s 2(1)(a) CRTA !

Contract purports to confer a benefit on him, unless on a true construction of thecontract, the contracting parties did not intend the third party to be able to sue, s2(1)(b) and 2(2) CRTA

! Third party is expressly identified in the contract by name as a member of a class, or

as answering a particular description, although he need not have existed at the date ofthe contracts, 2(3) CRTA

o Third party who sues under CRTA will have a right to all remedies for breach of contracto This is so even though the third party gave no consideration, s 2(5) CRTA

o Subject to the qualification that the third party must been able to rely on such an exemptionclause if he had been a party to the contract s 4(6) CRTA

o Once rights of third party are risen under CRTA, the contracting parties cannot rescind or vary

those rights without consent s 3 CRTA o CRTA DOES NOT apply to

!

Contracts on bills of exchange, promissory notes and other negotiable instruments ! Memoranda and articles of association that bind a company and its members ! Contracts of employment where a third party wishes to enforce a term against an

employee ! Contracts for carriage of goods by sea or for all international carriage of goods by rail,

road or air o CRTA enables contracting parties to choose whether or not to confer enforcement rights in a

known third party where this is not already provided by another statue o

Contracting parties may be sued by a total stranger who is not a party to the contract since theCRTA does not require the third party to be individually names or even inexistence

o A clause can be used to prevent that that says “A person who is not a party to this agreementshall have no right under the Contracts (Rights of Third Parties) Act to enforce any of itsterms.”


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Chapter 5: Contract Terms (pg 113 – 140)

• Terms are promises and undertakings given by each party to the other.

• Form the substance of a contract

• Specify the way in which contractual obligations are to be performed

Terms and Representations (pg 113)

• 3 types of pre-contractual statements: puffs, representations and terms

• 1) Puffs are statements which have no legal effect whatsoever

o Tend to be statements which are vague because of imprecision or exaggerationo Dimmock v Hallet (1866) – Court held that the description of the land “fertile and improvable”

was a mere puff.2) Representation is a statement made before or at the time a contract is formed concerning somematter relating to the contract and is not an integral part of the contract

o Contract is not breached if the representation is untrueo Behn v Burness (1863) - In this situation, the party may have a remedy under the law of

misrepresentation but cannot initiate an action for breach of contract3) Terms are statements which form part of a contract

o

The only similarity between terms and representations is that they originate as oral and writtenstatements before a contract is formed.

o Terms are part of the contract while representations are not.

• Terms and representations create different rights and obligations for the contracting party.o Jet Holding Ltd and Others V Cooper Cameron (Singapore) Pte Ltd and Another –

Representations cannot in law be elevated to terms of contract whether express or implied o Main criterion for distinguishing terms and representations is the intention of the parties – Tan

Chin Seng & Others v Raffles Town Club Pte Ltd

o Basic test is whether there is evidence that one or both contracting parties intended that there be contractual liability in respect of the statement

Guidelines to Distinguish Terms from Representations (not to be applied rigidly)

•

When Statement is made (pg 115)• Maker’s Emphasis (pg 115)

• Maker’s Special Knowledge (pg 116)

• Invitation to verify statement (pg 116)

• Written Statement (pg 117)

1) When Statement Is Made

• If statement is made closer to time the contract was finally concluded, then it is more likely to be a termrather than representation

• Rationale is that a long interval between the time the statement is made and the point the contract is

formed suggests that statement is relatively unimportant

• Routledge v McKay (1954) – The English court of appeal held that there was clear and significant

interval of one week between the making of the statement and the making of the contract. Thisindicates that the statement was not a term of the contract.

2) Maker’s Emphasis

• Greater the emphasis, the more likely the statement is a term

• Suggests that statement is important to one or both parties

• Bannerman v White (1861) – White told Bannerman that he would not even bother to ask the price if

sulphur had been used. The court held that Bannerman was found to have breached the contract, thusentitling White to repudiate the contract.

3) Maker’s Special Knowledge

•

Where maker of statement has greater knowledge concerning the statement as compared to the other party, it is more likely that the statement is a term


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• Oscar Chess Ltd v Williams (1957) – The court of Appeal held that William’s statement was not a

term of the contract because as a private individual, Williams was not in a position to guarantee theaccuracy of the year of registration given.

• Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd (1965) – The English Court of Appealheld that there was a breach of contract because the defendant’s statement was a term of the contract.The seller, a motorcar dealer, was in a better position to know the true facts regarding the Bentley (as

opposed to Oscar Chess v Williams where the seller was an individual who had no way of knowingotherwise).

4) Invitation to Verify Statement

• If the maker of the statement invited the other party to verify the truth of the statement made, then thestatement is more likely to be a representation .

• Maker of statement shows that he does not intend contractual liability to result from his statement

• If maker dissuades the other party from verifying the truth of the statement, then statement is morelikely to be a term

• Ecay v Godfrey (1947) – The statement was held to be a representation.

5) Written Statement

• If a statement was originally made orally and later reduced into writing, then if is more likely to have become a term of the contract.

• Where there is a written contract, all the terms of the contract are presumed to be contained within thewritten document

Express and Implied Term (pg 117)

• An express term is a term which has been expressly agreed between the parties

• Can be made orally or in writing

• An implied term is a term which has not been expressly agreed by the parties but is nevertheless

implied into the contract

• Can be implied into a contract by a court to give efficacy to the contract or it may be implied by a

statute • Term cannot be implied if the implication of such a term would be plainly against the express terms of

the contact – Tan Hin Leong v Lee Teck Im (2001); Telestop Pte Ltd v Telecom Equipment Pte Ltd(2004)

• Where terms are clear and unambiguous, they must be given their natural meaning as there is no roomfor rewriting or implying terms into contract in those circumstances – Bayerische Hypo- undVereinsbank AG v C K Tang Ltd (2004)

Terms Implied by the Court - Custom and Usage (pg 118)

• Terms can be implied into a contract because such contracts are subject to unwritten terms hallowed by

long usage or custom• Hutton v Warren (1836) – Hutton was entitled to such allowance because it was an accepted custom

that a tenant was bound to a farm for the entire tenancy but upon quitting, may claim an allowance forseeds and labor

• Bernard Desker Gary & Others v Thwaites Racing Pte Ltd & Another (2003) – Practise from which

terms of contact were drawn was not accepted by all trainers and owners, thus they could not beimplied into the contract by custom and practice

Terms Implied by the Court - Business Efficacy and Officious Bystander Tests (pg 118)

• Court will supply a term which it considers as having been intended by the parties so as to ensure thattheir contract will proceed on normal business lines

• Requires the court to determine the presumed intention of the parties which may be gathered from the

express words of the contract and the facts and circumstances surrounding it – Romar Positioning Equipment Pte Ltd v Merriwa Nominees Pty Ltd (2004)


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• The Moorcock (1889) – The English Court of Appeal held that even though the defendant did not give

any warranty that the ground below the jetty was safe, it was an implied undertaking to this effect.Hence the plaintiff succeeded.

• Officious bystander test – So obvious it goes without saying that it is an implied term in the contract – Shirlaw v Southern Foundries (1926) Ltd v Anor (1939)

• Energy Shipping Co Ltd v UDL Shipping (Singapore) Pte Ltd (1995) – The above tests were used in

the case. However, whichever test is adopted, the important point to be implied must be necessary toensure business efficacy does not mean that a court will exercise its discretion.

• Singapore Court of Appeal in the Hiap Hong & Co Pte Ltd v Hong Huat Development Co (Pte) Ltd(2001) case has confirmed the position that in considering implied terms, it must be borne in mind that

the touchstone is necessity and not merely reasonableness

Terms Implied by Statute (pg 120)

• Statutory provisions such as the Sale of Goods Act (SGA)

• Terms implied by statute operate by force of law

• Irrelevant that the parties are unaware of the statute

Classification of Terms (pg 120)

• More important terms tend to generate more serious consequences when breached

Condition and Warranty (pg 121)

• Conditions are those terms which are important, essentially or fundamentally to the contract. They arestatements of fact or promise which go to the root of the contract – Behn v Burness (1863) + The

Mihalis Angelo (1917 )

• Warranties are less important terms and constitute secondary obligations

• Bettimi v Gye (1876) – The court held that the rehearsal clause was not vital to the contract. Bettini’s breach of the warranty did not entitle Gye to repudiate the contract. The contract remains on foot and

Gye could claim for damages.

• A breach of condition gives the injured party the option to affirm the contract, keeping it on foot or

alternatively discharging the contract.• He may also claim damages

• Breach of warranty does not give the injured party the right to discharge the contract

• Contract remains on foot and the injured party only has a claim in damages

• Categorization is a task for the court and court must consider all the relevant aspects of the caseincluding the intention of the parties and the purpose of the contract

Innominate Term (pg 122)

• Innominate terms cover terms which can be breached resulting in trivial consequences, as well as thoseresulting in serious consequences. (not condition or warranty)

• Hong Kong Fir Shipping Co Ltd v Kawasaki Kaisen Kaisha Ltd (1962) – The court held that the plaintiff breached an innominate term, but the breach was not sufficiently serious to entitle Kawasaki to

repudiate the contract. Kawasaki could only claim damages.• Breaching innominate term

o If a breach results in trivial consequences, a remedy in damages should suffice (treated like awarranty).

o If a breach results in serious consequences, the injured party should be entitled to treat thecontract as discharged (treated like a condition).

• The testo

Diplock LJ – “does the occurrence of the event deprive the party who has further undertakingsto perform, of substantially the whole benefit which it was the intention of the parties asexpressed in the contract that he should obtain as the consideration for performing thoseundertakings?”

• Condition – warranty approach must take precedence over the Hong Kong Fir approach because it is premised on the intentions of the contracting parties themselves.

•

Approach has been approved in Singapore in caseso Chua Chay Lee & Others v Premier Properties Pte Ltd (2000)


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o Mizuho Corporate Bank Limited v Woori Bank (2004)

Exemption Clauses (pg 124)

• An exemption clause is a term in the contract, which seeks to exclude the liability of the party relyingon the clause. An exemption clause seeks to exclude liability totally while the limitation of liability

seeks to limit the liability.• The party who wishes to rely on an exemption clause must establish the 4 points below

o Incorporation – The clause must be incorporated into the contract

o Construction – The clause, properly construed, must cover the loss of injury which occurred.o Unusual factors – There must not be any extraordinary facts in the case which prevents the

operation of the clauseo UCTA – The clause must not contravene the UCTA.

• Limitation of liability clause seeks to limit the liability of a party relying on it to a sum specified in thecontract

• Warren Khoo J in Singapore High Court made a distinction between EC and LLC and approved thefollowing comments of Lord Wilberforce in Ailsa Craig Fishing Co Ltd v Malvern Fishing Co Ltd &

Securicor (Scotland) (1983)

o Clauses of limitation are not regarded by the courts with the same hostility as clauses of

exclusion: this is because they must be related to other contractual terms in particular to therisks to which the defending party may be exposed, the remuneration which he received and

possibly also the opportunity of the other party to insure

Reliance on Exemption Clause – Incorporation (pg 125)

• An exemption clause becomes incorporated into a contact in two ways, by signature or notice

• L’Estrange v Graucob (1934) – The court held that the document containing contractual terms issigned, then in the absence of fraud or misrepresentation. The party signing it is bound, and it is whollyimmaterial whether he has read the documents or not.

• Subject only to factors such as fraud or misrepresentation, the exemption clause is incorporated by the

signature of the parties

• When there is no written contract or the contract is not signed, the exemption clause may still be

incorporated into the contract if the person relying on the exemption clause can show that he gavereasonably sufficient notice of the exemption clause to the injured partyo Where Notice Affixed (pg 126)

! Notice should be printed on somewhere a reasonable person would have expected to find

contractual terms for EC to be incorporated.! Chapelton v Barry Urban District Council (1940) – The English Court of Appeal held that no

reasonable person would expect to find contractual terms on the ticket since it would be

regarded simply as a receipt for money paid.o When notice is given (pg 126)

! Notice must be given before or at the time contract was made for EC to be incorporated.! Olley v Marlborough Court Ltd (1949) – The English Court of Appeal held that the contract

was already formed before the couple entered their room and that therefore the notice given onthe bedroom wall was too late.

o

Adequacy of Notice (pg 127)! Reasonable steps must have been taken to bring notice to the attention of the injured party for

EC to be incorporated.! The notice must be sufficiently conspicuous and legible.! Thornton v Shoe Lane Parking Ltd (1971) – The English Court of Appeal held that the

contract was formed when Thornton paid his money into the machine, which later issued theticket. For the exemption clause to be incorporated there must have been reasonable

sufficiency of notice prior to or at this time. A notice on the ticket is too late. The defendantfailed to prove reasonable sufficiency of notice.

! Thomson v London Midland Scottish Railway Co (1930) – The English Court of Appeal heldthat reasonably sufficient notice was given since the ticket made reference, albeit rather

circuitously, to the exemption clause.! The above case suggest that as long as the party relying on the exemption clause has done

what is reasonable to bring the notice to the attention of the injured party, he will be entitled to


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rely on the clause despite the fact that the injured party may be under some disability preventing him from understanding the notice

! A different outcome may emerge if the party relying on the clause knows from the very beginning that the injured part is under some disability.

! Geier v Kujawa, Weston & Warne Bros (Transport) Ltd (1970) – The court held that therewas no sufficiency of notice because Geier did not take the reasonable step of translating the

notice.! Jet Holding Ltd & Others v Cooper Cameron (Singapore) Pte Ltd & Another (2005) – Court

held that no adequate notice was given as the standard form clauses involved should have

been brought fairly and reasonably to the plaintiff’s attention by “pointing them out, more sowhen the terms and conditions were not printed on the reverse of the quotation”

o Previous Course of Dealings (pg 128)

! If there has been previous course of dealings between the parties which included an exemptionclause, and then the exemption clause may be incorporated through the previous course ofdealings.

! Henry Kendall & Sons v William Lillico & Sons & Ors (1969) - The EC formed part of the

contracts (But in this instance, the EC was held to be ineffective from shielding from liability).

Reliance on Exemption Clause – Construction (pg 129)

• The wider the clause the more protection it will provide to the party relying on it.

• Two rules of construction must be borne in mind when constructiono Contra Proferentum Ruleo Main Purpose Rule

• Contra Proferentum Rule (pg 129)o Contra Proferentum Rule –The rule states that where there is any ambiguity in interpreting a

clause, the construction to be adopted is the one which is least favourable to the person who put forward the clause – Hollier v Rambler Motors (AMC) Ltd (1972) + Hong Realty Pte Ltdv Chuan Keng Mong (1994) + Singapore Telecommunications Ltd v Starhub Cable Vision

Ltd

• Main Purpose Rule (pg 129)

o

The rule states that there is a general assumption that the parties do not intend an EC to defeator be repugnance to the main purpose of a contract.

o EC will generally be ineffective if there is a fundamental breach.o B-Gold Interior Design & Construction Pte Ltd v Zurich Insurance (Singapore) Pte Ltd

(2007) – It would be “contrary to all sense of justice and fair play” if the exemption clausewere allowed to deny the appellant the “very essence of the cover” which it had sought underthe policy. This would lead to an absurdity and the courts must intervene to hold such a clause

ineffective.o Photo Production Ltd v Securicor Transport Ltd (1980) – The Court of Appeal held that the

exemption clause was invalid because the breach was fundamental. The House of Lords laterruled that the clause did include the breach. Thus Securicor was not liable.

o House of Lords decision has been approved in Singapore in Parker Distributions (Singapore)Pte Ltd v A/S D/S Svenborg & D/S as 1912 A/S (1983) & Sun Technosystems Pte Ltd v

Federal Express Services (M) Sdn Bhd (2007)o Rule is a rule of interpretation and thus if EC uses clear and unambiguous words, it can be

effective even in the case of fundamental breach

• Exemption Clause and Third Parties (pg 130)o A TP may take advantage of an EC in a contract to which he is not a party, subject to

requirements contained in the Contracts (Rights of Third Parties) Act (CRTA).o

New Zealand Shipping Co Ltd v AM Satterrthwaite & Co Ltd (1975) – The court allowedEC to extend to the third party. Privity of contract involved but there is a loosening of thegeneral rule.

Reliance on Exemption Clause – Unusual Factors (pg 131)

• Third consideration to be taken into account is whether there are any unusual factors which may limit

the effectiveness of the clause


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• Curtis v Chemical Cleaning & Dyeing Co (1951) – A misrepresentation to the true scope of the EC

could render the entire clause invalid.

• Evans (J) & Sons (Portsmouth) Ltf v Andrea Merzario Ltd (1976) – The court held that the oral

assurance which created a collateral contract neutralized the written contract’s EC.

• Oral undertaking creates a second subsidiary contract known as a collateral contract

• Collateral contact is implied by court and run parallel with the main contract

•

Can be used to add or vary the terms of the main contract as an exception to the parol evidence rule

Reliance on Exemption Clause – Unfair Contact Terms Act (pg 132)

• Final and often determining factor is whether it complies with UCTA

• UCTA requires exemption clauses to be reasonable if they are to be valid

• EC which are unreasonable will be invalid despite the fact that they may be incorporated and well

constructed

Preliminary Comments

• UCTA applies not only to EC in contract cases but also to EC in tort cases – s 1(3) UCTA

• Definition of negligence in s 1(1) UCTA includes negligence to both contact and tort

•

All cases involving EC, burden of proving reasonableness falls upon the party seeking to rely on EC -s 11(5) UCTA

• Majority of UCTA provisions which deal with EC apply only in cases of business liability – s 1(3)UCTA

• Or in consumer transactions – s 12 UCTA

• Limited application outside business transactions

• In cases of Misrepresentation, UCTA will apply even in non consumer and non business liabilitysituations – s 3 Misrepresentation Act

Personal Injuries and Other Losses (pg 133)

• A person cannot exclude his liability for negligence in relation to personal injury or death – s 2(1)UCTA

•

Xu Jin Long v Nian Chuan Construction Pte Ltd (2001)o any contractual term that prevents a party from being sued in negligence for death or personal

injury is a restriction of liability under s 2 of the Act and such term is not enforceable

• Liability for other loss or damage such as financial loss or property damage can be excluded if the

clause is reasonable – s 2(2) UCTA

Consumer Transactions (pg 133)

• Where transaction is a consumer transaction, EC must be reasonable for it to be valid – s 3 UCTA

• Consumers protected by s 6 UCTA in relation to sale of goods contacts

• Consumer rights enshrined in s 12 -15 Sale of Goods Act (SGA) are entrenched by s 6 UCTA such thata seller cannot exclude his liability under the SGA by using an exemption clause. This is an absolute

prohibition.

Non Consumer Transactions (pg 133)

• If a non consumer transaction uses a standard written contact and it contains an exemption clause, theexemption clause must be reasonable if it is to be valid – s 3 UCTA

• Prohibition in s 6 UCTA which seeks to entrench the buyers’ rights specified in the sale of goodlegislation is relaxed when transaction is non consumer

Misrepresentation (pg 133)

• If liability arises from a misrepresentation, the misrepresentor can only seek protection behind anexemption clause if the clause is reasonable – s 3 Misrepresentation Act

Meaning of Reasonableness (pg 134)


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• In evaluating of whether an exemption is reasonable, the court must consider all the circumstances

whicho Were known too Ought reasonably to have been known too Were in the contemplation of the parties when the contract was made: S 11 (1) UCTA

• According to the Second Schedule of the UCTA, the factors which are to be considered are:

o

The bargaining strength of the parties – If the bargaining strengths of the parties are equal, theEC is considered to be reasonable.

o Whether the customer received an inducement to agree to the term (did the business offer to

provide additional benefits if the customer were to pay a higher amount?)! All things equal clause is likely to be reasonable

o Whether the customer knows or ought to know about the exemption clause – All factors in theincorporation of EC. Knows=Reasonable

o Whether Compliance with some condition is practicable – Does the EC states that the businesswill only be liable if certain condition is adhered? i.e. return within 3 days?

! George Mitchell (Cherterhall) Ltd v Finney Lock Seeds Ltd (1983)

! EC was unreasonable because among other things the buyer could not discover the breach until the plants grew whereas the seller was at all times aware

o Whether the goods were ordered specially: it is unclear whether the fact that the goods were

specially ordered makes the EC more or less likely to be reasonable! One possible argument is that if goods are manufactured to customer’s specifications

but causes damage to customer, then the clause should be considered reasonable asany defect is due to customer’s own specification

• Consmat Singapore (Pte) Ltd v Bank of America National Trust & Savings Association (1992)

o Bank relied on an exemption clause in its standard contract

o UCTA not applicable on the facts but state that the clause would be enforceable if the UCTAis assumed

o Both parties had equal bargaining power

• Elis Tjoa v United Overseas Bank (2003)o Not unreasonable for a bank’s EC to require its customers to check their statement regularly

and to notify the bank promptly of any unauthorised transactions

o However if the bank had inadvertently and unilaterally made a wrong debit without any

instruction whatsoever it may then be unreasonable and against public policy to allow it torely on the clause

• Kenwell & Co Pte Ltd v Southern Ocean Shipbuilding Co Pte Ltd (1999)

o Defendant fail to adduce evidence of reasonableness and hence clause could not be rely upon

o EC used commonly in the industry may still be unreasonable under UCTA o The more unreasonable an EC, the greater the burden upon the party relying on it to establish

its reasonableness

o Fact that parties entered into contract willingly does not prevent one party from laterquestioning the reasonableness of an EC


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Chapter 6: Vitiating Factors (pg 141 – pg 178)

• Factor which may prevent a contract from being enforceable and deprive the contract from its efficacy

• Four Vitiating Factorso Incapacityo

Illegality

o

Misrepresentationo Mistake

Incapacity (pg 142)

• Lack of capacity which may characterize a contracting party

• Rationale is rooted in public policy

• Children do not have sufficient understanding or experience to make binding agreements

• People with unsound mind or people who are intoxicated are considered to lack capacity – Re Yeh Ee

Swan (2003)

Minors (pg 142)

•

Minors are persons who have not reached the age of majority• At law, age of majority defines the stage at which a person reaches adulthood and is considered legally

responsible for his actions – Singapore 21 years old, UK 18 years old.

• Rai Bahadur Singh & Anor v Bank of India (1993) – Court found that English Infants Relief Fact1874 applied and rendered the letter of set-off void as plaintiffs were minors.

• Law is concerned to protect minors from entering contracts which they may not fully appreciate theconsequences of their actions

• Law must also ensure that the other party does not suffer unnecessary hardship if he has contracted

fairly with the minor

• Proposal was made to reduce majority age to 21 to remove legal barriers preventing young people from

starting and conducting business and hence hinder entrepreneurship – Civil Law (Amendment) Act fors 35 and s 36 were inserted on 1 Mar 09 to give minors contractual capacity in ‘certain commercialactivities”

1.

s 35 – to give contracts entered into by minors who have attained the age of 18 years the sameeffect as if they were contracts entered into by persons of full age; except in cases where:

2. s 35(4)a. any contract for the sale, purchase, mortgage, assignment or settlement of any land,

other than a contract for a lease of land not exceeding 3 years; b. any contract for a lease of land for more than 3 years;c. any contract whereby the minor’s beneficial interest under a trust is sold or otherwise

transferred to another person, or pledged as a collateral for any purpose; andd. any contract for the settlement of —

i. any legal proceedings or action in respect of which the minor is, pursuant toany written law, considered to be a person under disability on account of his

age; orii. any claim from which any such legal proceedings or action may arise.

3.

s 36 – to allow such minors to bring certain legal proceedings and actions in their names as ifthey were of full age

• Three classes of Minors’ Contacts1. Valid Contacts – Binds both Minor and other party2. Voidable Contacts – Binds other party & binds minor unless minor repudiates3. Ratifiable Contracts – Binds other party and binds minor only if minor ratifies

• In cases stated, it must be noted that they deal with a minor’s contract which is still executory by minor.If minor has already performed obligation, then the minor is generally unable to recover any money

paid or goods delivered, unless there has been total failure of consideration by the other party.

Classes of Minors’ Contracts - Valid Contracts (pg 144)

• Binds both minor and other party


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• Fully enforceable

• Two groups of contracts make up the category of valid contractso Beneficial contracts for necessaries

o Beneficial contracts of employment

• Contract on whole must benefit the minor - if it contains onerous terms prejudicial to minor, contract

may not be binding

•

In cases sated• Valentini v Canali (1889) – Court held that Valentini could not recover the money because he had

already had the benefit of the house

o Lord Coleridge CG stated: “ When an infant has paid for something and has consumed or usedit, it is contrary to natural justice that he should recover back the money which he has paid

• Beneficial Contracts for Necessaries (pg 145) o Refers to goods and services which the law deems reasonably required by a minor in his

particular station in life

o Section 3 SGA – necessaries means goods suitable to the condition in life of the minor orother person concerned and to his actual requirements at the time of sale and delivery

o Nash v Inman (1908) - Contract was unenforceable because Nash failed to prove that theclothes were necessaries to defendant.

! Having shown that the goods were suitable to the condition in life of the infant, [the plaintiff] must then go on to show that they were suitable to his actual requirements

at the time of sale and delivery

o Necessaries may include luxurious items of utility if they are considered appropriate for theminor in his position – Peters v Fleming (1840)

• Executory Contracts for Necessaries (pg 146) o Complication arises if the contract for necessaries is still executory on the part of the other

party

o Nash v Inman (Goods) – The other party must have performed his obligations before thecontract is binding upon the minor.

o Roberts v Gray (Services) – Binding upon the minor regardless whether the other party has performed his obligations or not.

• Loans for Necessaries (pg 146)o

Person who lends money to a minor is generally unable to enforce the contract and recover themoney from the minoro Exception arises if money was used to purchase necessaries – Marlow v Pitfeild (1719)

o Financial Institutions in Singapore typically lend money to minors only if minor can supply aguarantor who will guarantee the loan.

• Beneficial Contracts for Employment (pg 147)o The important point is that the contract must benefit the minoro De Francesco v Barnum (1890) – De Francesco was under no obligation to provide her with

engagements and her pay was totally unsatisfactory. Fry LJ held that the terms of the deedwere unreasonable and not beneficial to the girl and, therefore, unenforceable.

o Chaplin v Leslie Frewin (Publishers) Ltd (1966) – Winn LJJ took the view that the contractwas beneficial to Chaplin, stating that “the mud may cling but the profits will be secured.”

! Such contracts will be binding even if there are certain aspects which are not

advantageous! Overall, the contact must benefit the minor

Classes of Minors’ Contracts – Voidable Contracts (pg 148)

• Binds other party and binds minor unless minor repudiate (refuse to accept) .

• Minor is entitled to repudiate the contract without any liability on his part any time during his infancyor within a reasonable period of time after he attains majority.

• Until he repudiates, the contract remains enforceable.

• Davies v Benyon-Harris (1931) – Minor entered into a lease for flat. Lease was not void but voidable.Enforceable if repudiated within a reasonable time after attaining majority.

• Once repudiated, the minor is no longer bound to perform any future obligations. He would not beentitled to recover any money paid or property transferred by him to the other party unless there is a

total failure of consideration – Steinberg v Scala (Leeds) Ltd (1923)


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• Others penalize illegal performance without affecting the parties’ contractual rights at all

• Where legislature’s intention to prohibit a type of contact is clear from the statute, then the contact may be void and unenforceable by all the parties, whether or not they are aware of the statutory illegality

• Re Mahmoud and Ispahani (1921) – Wartime regulations prohibited the buying or selling of linseedoil. Court held that the legislature has made a “clear and unequivocal declaration… that this particular

kind of contract shall not be entered into” and that, consequently, the contract was void.

•

Other provisions however only penalise certain conduct without rendering the entire contract voido Overloading a ship which was illegal in itself might not cause a contract for transporting

goods on that ship to be void because the act which contravenes the statute was considered to be at the periphery of the contact – St John Shipping Corporation v Joseph Rank Ltd (1957)

o Unlawful performance on an otherwise lawful contact does not necessarily render the entirecontract void

• If the statutory provision simply imposes a fine for non compliance, the likelihood is that noncompliance would not cause the entire contract to fail – Shaw v Groom (1970)

• Issue is whether the relevant statue intended to prohibit the contract as well, resulting in additional civilconsequences.

Contracts in Restraint of Trade (pg 153)

•

Restraint of trade contracts are agreements under which a business or person agrees to refrain fromundertaking certain types of trade or employment

• Used to prevent a business or person from entering into a field in which the other party operates – Barang Barang Pte Ltd v Boey Ng San & Others (2002)

• General rule is that clauses and hence contracts in restraint of trade are void – Asiawerks Global Investment Group Pte Ltd v Ismail bin Syed Ahmad

• Can be enforceable if it can be shown that the restraint of trade is reasonable given the interests of the parties and the public generally

• Three Elements which make it valid o Protect proprietary or legitimate interest of covenantee

o Reasonable in duration, scope and subject matter o Must not be contrary to public interest

Elements which make Restraint of Trade Valid – Legitimate Interest (pg 154)

• The restraint must protect some proprietary or legitimate interest of the covenantee

• Asia Business Forum Pte Ltd v Long Ai Sin & Another (2003) – restrain a former employee fromexploiting trade secrets or trade contracts obtained from his employment

• Restraint is intended merely to minimize competition or to prevent an employee from using the personal skills or knowledge acquired during his previous employment, then it is likely to be void – Herbert Morris Ltd v Saxelby (1916) and Buckman Laboratories (Asia) Pte Ltd v Lee Wei Hoong

(1999)

• Stratech Systems Ltd v Nyam Chiu Shin & Others (2005)

o Although restriction period of nine months was not unreasonably long, the duration of the prohibition was only one factor to be considered – not most important

o Court will not uphold a covenant benefitting an employer merely to protect itself from

competition by a former employee

o Stratech was unable to demonstrate any legitimate interest that required protection by arestraint of trade clause, the court ruled that the main function of the clause was to indeedinhibit competition in business and clause was therefore invalid

Elements which make Restraint of Trade Valid – Reasonable Scope (pg 155)

• Restraint must be reasonable in terms of its period, geographical scope and subject matter

• Mason v Provident Clothing & Supply Co Ltd (1913) – Restraint void as area is too large.

• British Reinforce Concrete Engineering Co. Ltd v Schelff (1921) – Restraint void because scope too broad.

• Asiawerks Global Investment Group Pte Ltd v Ismail bin Syed Ahmad & Another (2004)

o

Court held that clause was prima facie void as the business carried on by the company in theclause must be read narrowly to mean only the actual business already undertaken by the plaintiff


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Elements which make Restraint of Trade Valid – Public Interest (pg 156)

• Restraint must not be contrary to public interest – Asia Polyurethane Mfg Pte Ltd v Woon Sow Liong(1990)

• Esso Petroleum Co Ltd v Harper’s Garage (Stourtport) Ltd (1968) – Restraint too long. Test of

reasonableness requires a consideration of the public interest which must be protected in such exclusive

dealing agreements.

Effects of Illegality (pg 156)

• At common law, the general effect of illegality is that the contract is void.

• The law treats the contract as if it had not existed in the first place and no party can sue on the contract.

• Effect of illegality summarized in judgment of Devlin LJ in Archbold’s (Freightage) Ltd v Spanglett

Ltd

o If at time of making contract, there is an intent to perform it in an unlawful manner, thecontact although it remains alive is unenforceable at the suit of the party having the intent; ifintent is held in common, it is not enforceable at all

o Prevent a plaintiff from recovering under a contract if in order to prove his rights under it hehas to rely on his illegal act; may not do even if he can show that at time of making contract,

he had no intent to break the law and at time of performance he was not aware that it wasillegal

o Avoid the contract ad initio and that arises if the making of the contract is expressly orimpliedly prohibited by statute or is otherwise contrary to public policy

Recovering Property (pg 157)

• In some cases the court may allow an innocent party to recover property which would otherwise pass tothe defaulting party under the illegal contract.

• Tokyo Investment Pte Ltd v Tan Chor Thing (1993)

o Court held that TCT could recover his shares from appellant! TCT was not relying on the illegal contract to claim his shares! FTA was intended to protect the class of investing public!

TCT was not equally at fault with the appellant since burden to obtain license was onappellant

! Not to allow TCT to recover would be encouraging illegality! TCT did not know he was dealing with an unlicensed futures broker

• Siow Soon Kim & Others v Lim Eng Beng alias Lim Jia Le (2004)

o Court held that test to apply to determine if court should assist a plaintiff to enforce an

agreement was whether the plaintiff was able to establish his cause of action independently ofthe illegality. In the case, respondent was not asking the court to enforce an illegalarrangement but a wholly legitimate partnership agreement. Therefore respondent was ruled infavor.

Recovering Damages (pg 158)

•

If statute merely proscribes certain types of conduct, the rights of the defaulting party and the innocent party may be different

• The defaulting party may be prevented from enforcing the contract by the maxim ex turpi causa nonoritur action (an action does not arise from a base cause).

• However the innocent party may be able to recover damages from the defaulting party.

• Archbold’s (Freightage) Ltd v Spanglett (1961) – Court of appeal held that the contract was illegal inits performance but since Archbold’s was not aware of the illegality, it was entitled to claim damages

• Ignorance of law would not allow recovery of any kind and it is important to note that the case above isan ignorance of fact (that Spanglett’s vehicle did not have necessary license)

Severance (pg 159)

• In certain cases, the illegality may be confined to a part of the contract

•

Sometimes within the clause itself particular words can be severed so as to save the rest of the clause – National Aerated Water Co Pte Ltd v Monarch Co , Inc (2000)


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• Severance is possible if

o Promises are severable in natureo It is possible to sever the void part by deleting the offending words or clause without adding,

substitution, rearranging or re-drafting the contract (blue pencil test) o Severance must not change the basic nature of the contract.

• Goldsoll v Goldman (1915) – Using the blue pencil test, the court severed the other locations and the

reference to real jewellery and allowed the remaining clause to stand.

Misrepresentation (pg 159)

• Misrepresentation is generally a tort and fraudulent misrepresentation is historically rooted in the tort

of deceit

Elements of Misrepresentation (pg 160)

• A misrepresentation is a false statement of fact made by one party (representor) to another (representee)which induces and is relied upon by the representee to alter his position.

• Not all false statement representations amount to misrepresentation, it must be o a false statement

o

which is relied upon by the representee and induced into contract – Koh Keow Neo & Othersv Chee Johnny & Others (2004)

False Misrepresentation – False Statement of Fact (pg 162)

• Operative statement must be one of past or existing fact

• It cannot be a mere statement of opinion or a statement of some likely future event

• However, a statement of intention as to future action could be a false statement of fact if at the time ofmaking the statement of intention, the representor did not in fact hold that intention – Tan Chin Seng

& Others v Raffles Town Club Pte Ltd (No 2) (2003)

• Edgington v Fitzmaurice (1885) – Information in the prospectus is different from the real intention.

Stated intention was not actually held because company raised money for liabilities instead ofimprovements.

•

Tipper Corp Pte Ltd v JTC Corporation (2007) – Plaintiff had not asserted that the defendant had nointention of keeping its word when the alleged representation was made.

• Statement of opinion usually cannot form the basis of a misrepresentation unless the representor hadaccess to the relevant facts and had no reasonable ground for holding such an opinion.

• Bisset v Wilkinson (1927) – The property could not hold that many sheep but that claim was astatement of opinion and did not amount to misrepresentation.

• Singapore, Amarjeet Singh KC in the High Court case Tai Kim San v Lim Cher Kia made a carefuldistinction between a misrepresentation of fact and an expression of opinion

o Where an opinion is expressed, it must be expressed upon reasonable grounds and made

honestlyo Where opinion is stated as if it is a positive fact, it can constitute a misrepresentationo Where facts are not equally known to both sides, then a statement of opinion by the one who

knows the facts best involves very often a statement of a material fact for he impliedly states

that he knows facts which justify his opinion

• General rule is that silence in itself does not amount to misrepresentationo In Keates v Lord Cadogan (1851), the court held that Lord Cadogan had no duty to disclose

the state of his house, therefore, no misrepresentation.

• Silence may amount to misrepresentation is three situationso Dimmock v Hallett (1866)

What is stated becomes a half-truth by what is left unsaid. i.e. Saying the place is fully let butdid not say the tenants had given notice to quit. This constitutes misrepresentation. Trans-World (Aluminium) Ltd v Cornelder China (Singapore) (2003) – Misrepresentation ofstatements comes from a willful suppression of material and important facts thereby rendering

the statement untrue

o A change of circumstance arose which rendered a previously truthful statement misleading –With v O’Flanagan (1936)

o

The law imposes a duty is upon one party to disclose facts to the other party. i.e. Insurancecontracts.


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False Misrepresentation – Inducement (pg 164)

• For a false statement to be a misrepresentation, the statement must induce the representee to enter intothe contract

• As long as it is one of the inducing causes; it is immaterial that it is not the sole inducing cause –

Edgington v Fitzmaurice (1885)

•

Panatron Pte Ltd v Lee Cheow Lee & Anothero

Court held that misrepresentation need not be the sole inducement…so long as they had played a real and substantial part and operated in the representees’ minds, no matter howstrong or how many were the other matters which played their part in inducing them to act

• Overseas Chinese Banking Corp Ltd v Infocommcentre Pte Ltd (2005)

o False statement was made to representee but he was not induced by the statement to enter intocontract and therefore there is no misrepresentation

• Tai Kim San v Lim Cher Kia (1884) – The Singapore High Court held that plaintiffs had not beeninduced by any representations to sell their shares to the defendant. Hence false statement is not amisrepresentation.

• A mere opportunity of a chance to investigate the truth of the statement made by the representor doesnot deprive the other party to rely on the misrepresentation.

• Jurong Town Corp v Wishing Star Ltd (No 2) (2005)

o

A person who has made a false representation cannot escape its consequences just because theinnocent party has made his own inquiry or due diligence, unless the innocent party has cometo learn of the misrepresentation before entering into the contract or does not rely on the

misrepresentation when entering into the contract

• Redgrace v Hurd (1881)

o Mere fact that the representee had an opportunity to investigate and ascertain whether arepresentation is true or false was not sufficient to deprive him of his right to rely onmisrepresentation

o No fraud or negligence on the part of Redgrave, the misrepresentation was thus an innocentone and contract was rescinded

Categories of Misrepresentation – Fraudulent Misrepresentation (pg 165)

•

The representor knowing that is false makes the false statement. It is also known as the tort of deceit. – Lim Geok Hian v Lim Guan Chin (1994)

• Representee must prove that there is dishonesty on the part of the representor, there is no fraud even ifthe statement is farfetched, negligent, or ill-conceived.

• Singapore High Court held that whenever fraud or deceit is alleged, a high degree of proof is requiredon he who asserts – Vellasamy Lakshimi v Muthusamy Sippiah David (2003)

• Court requires a degree of probability which is commensurate with the gravity of the imputation –Tans- World (Aluminum) Ltd v Cornelder China (Singapore) Pte Ltd (2003) and Samwoh Resources

Pte Ltd v Lee Ah Poh (2003)

• Derry v Peek (1889)o House of Lords held that for fraudulent misrepresentation to arise, the false representation

must be made knowingly or without belief in its truth or recklessly, careless whether it be trueor false. Since none was present, no fraudulent misrep.

• Panatron Pte Ltd v Lee Cheow Lee & Another (2001)

o Trial judge came to the conclusion that Phua did make the alleged misrepresentations to the

respondents and that Phua knew that these representations were false

o False statements in turn induced the respondents to subscribe for the shares in Panatron

Categories of Misrepresentation – Negligent Misrepresentation (pg 166)

• Arises when the false statement is made by the representor without due care – s2 (1) Misrepresentation Act

• This makes the representor liable even without fraudulent intent unless he can prove he has reasonablegrounds to believe the statement to be true.

• Howard Marine & Dredging Co Ltd v A Ogden & Sons (Excavations) Ltd (1978)

o

The manager was still liable as a reasonable manager would have checked the shippingdocuments and not relied on the Loyds Register.


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o Negligent misrepresentation pursuant to s 2 MA is statute based and arises in the context of acontract

• Hedley Byrne & Co Ltd v Heller & Partners Ltd (1964)

o Common law tort and does require the existence of a contracto Discussed also in Trans-World (Aluminium) Ltd v Cornelder China (Singapore) Pte Ltd

(2003)

Categories of Misrepresentation – Innocent

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