AB107 Business Law Bible

AB107 Business Law Bible

Ratio decidendi (rational for the decision): Binding authorityObiter dictum (a saying by the way): only has persuasive authority

Chapter 3: Contract: Offer and Acceptance (pg 57 83)Principles of Contract LawNature of ContractsElements of Contract The concept of necessary meeting of minds is ascertain in 4 key elements Offer Acceptance Consideration Intention to create legal relationsTypes of Contract (pg 60) Simple Contacts Written Oral Special Contracts Contracts by deed or contracts under seal Always in writing The written document is called a deed Contracts under seal do not require consideration to be enforceableWritten and Oral Contracts (pg 60) Oral Contracts (Parol Contracts) Difficult to ascertain the precise terms of the contact in event of dispute Written Contact Useful as it provides evidence of the parties contractual obligations Forefront Medical Technology (Pte) Ltd v Modern Pak Pte Ld (2006) Contracts for certain transactions must be evidenced by a written note of memorandum otherwise they are unenforceable Eg. Assignment of copyright and transfer of real property

Parol Evidence Rule 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)

Offer (pg 63) An offer is an expression made by one party (offeror) to another party (offeree) communicating that offerors willingness to perform a promise For an offer to be effective, it must be communicated to the offeree 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) 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 offerors promise In a bilateral contract, parties would know the identities of each other and there is an exchange of promiseInvitation to Treat (pg 64) An invitation to treat is an invitation to commence negotiations, it is an invitation to make an offer 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 65Auctions and Tenders (pg 66) Auctions Auctioneer invite bids which are considered ITT Bids by audience are offers Sale completed when auctioneer indicates his acceptance by fall of hammer Tender Tender submitted is considered as an offer Advertisement which invites tenders are considered ITT Once tender is accepted, a contract is formedProvision of information (pg 67) Communication may not be an offer but a mere response to a request for information Harvey v Facey (1893) 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 Contract will only come into existence when condition is fulfilled Thomson Plaza (Pte) Ltd v 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 no contract 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 obligations which 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 than the desire to accept the offer Williams v Carwardine (1833) Therefore still entitled to the reward Two identical cross offers do not ordinarily make a contract Tinn v Hoffman & Co (1873) Cross offer implies a lack of consensus or meeting of minds between the parties at the time of making the offersCommunication of Acceptance (pg 69) For an acceptance to be effective, it must be communicated to the offeror ExceptionOfferor must physically receive the written acceptance or heard the oral acceptance CS Bored Pile System Pte Ltd v Evan Lim & Co Pte Ltd (2006)

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 requiring formal communication to the offerorSilence (pg 70) Silence is normally not constructed as acceptance unless Both parties have agreed that the offerees silence is to be constructed as his acceptance Both parties have to agree to it for it to be effective Felthouse v Bindley (1862) Felthouse had no right to impose a condition that a sale contact would come into existence if Bindley remained silent Both offeror and the offeree may agree that the offeree would have a position obligation to communicate only if he wishes to reject the offer Southern Ocean Shipbuilding Co Pte Ltd v Deutche Bank AG (1993) Silence in this case can be construed as Acceptance 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 is tantamount to acceptanceThe Postal Acceptance Rule (pg 71) Acceptance is deemed to have been effective as soon as the letter is posted, regardless as to when it reaches the offeror or whether it reaches him at all Adams v Lindsell (1818) 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 an acceptance sent by post would not attract the postal rule Quenerduaine v Cole (1883) General rules applies in this case and acceptance occurs only when the posted letter is actually received Offeror often stipulate that acceptance is not valid until physically received by the offeror, offeror overrides the postal rule and general rule appliesInstantaneous Communications (pg 72) Instantaneous Communication proper where offeror and offeree talks on the phone Communication is instant in its fullest sense Similar to situation of oral communication Acceptance must be actually be received by the offeror Near Instantaneous Communications where two person communicate by typing on keyboard and responding real time Communication is instantaneous or virtually so 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 instantaneous transmission but not instantaneous communication Eg, acceptance is by facsimile, email or voice mail but no one is manning the receiving equipment Case law Chwee Kin Keong v Digilandmall.com Pte Ltd suggests that General Rule applies where acceptance is valid upon receipt (Physically receive) Electronic Transactions Act (ETA) (pg 73-74) Part IV deals with electronic contracts Section 11 ETA states that an offer or acceptance can be sent electronically in the form of an electronic record 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 For additional certainty, there are provisions for a party to require an acknowledgement of receipt to ensure messages have been received properly, s 14 ETA General rule is that despatch of an electronic record occurs when the message enters an information system outside the control of the originator, s 15(1) ETA Moment of receipt depends on whether the addressee has designated a specific information system 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 the message enters any information system of addressee s 15(2)(b) ETA Advisable for addressee to designate an information system Provisions of ETA deal with the time transmission is received but do not resolve the issue of when acceptance is communicated ETA does not definitively endorse the postal rule or the general (receipt) rule 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 governing contract formation

Termination of Offer and Acceptance (pg 75) Withdrawal Rejection (Counter Offer) Lapse of Time Failure of Condition DeathWithdrawal (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) Important point is that offeree obtains knowledge of revocation Overseas Union Insurance Ltd v Turegum Insurance Co (2001) 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. 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 offerees 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 Kek Keong JC said (obiter dictum) the offeror in a unilateral contract has an obligation not to revoke the offer 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 be revived 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 offerors conduct and other 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 is automatically terminated Such condition may be expressly stated in the offer or it may be implied Financings Ltd v Stimson (1962)

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 offer unless the offeree had notice of the offerors death. Reynolds v Atherton (1921) Offeree dies before acceptance, this offer cease to be capable of acceptance.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)

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 the other. As defined by Sir Frederick Pollock and later adopted by the House of Lords in Dunlop v Selfridge (1915) 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 ConsiderationExecutory Executory consideration refers to consideration which have not been performedExecuted Consideration Executed consideration refers to consideration which has been performed In other words, executed consideration involves an act or forbearance, which has been fulfilledPast 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) 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 Ons 3 requirements) Pao On v Lau Yiu Long (1980) Act done at promisors request Parties understood act is to be remunerated Contract must otherwise be enforceable Courts have held that past consideration is no consideration Teo Song Kwang (alias Richard) v Gnau Lye Chan and Another (2006) 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 moved from him Tweddle v Atkinson (1861) Court held that Tweddle could not enforce the contract between the two fathers First he was not a party to the contract 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 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) Law will not interfere with the parties bargain 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 Ltd and Another (2003 Swiss Singapore Overseas Enterprise Pte Ltd Navalmar UK Ltd (No 2)(2003) Once subject of exchange is recognized in law as suitable consideration, quantity is irrelevant Chappell & Co Ltd v Nestle Co Ltd (1960) Chocolate wrappers were deemed as sufficient consideration Sufficiency of Consideration (pg 91) All consideration must be of some value in the eyes of the law Sufficient consideration is also described as good consideration or valuable consideration. 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 On v Lau Yiu Long (1980); SSAB Oxelosund AB v Xendral Trading Pte Ltd (1992) 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) 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 claimants knowledge, might affect its validity. 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 good consideration 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) Consideration amounts to nothing more than moral obligation Eastwood v Kenyon (1840) The court rejected the plaintiffs view and held that moral obligation is insufficient consideration for a fresh promise. 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 consideration Thomas v Thomas (1842) The court held that the nominal rent was sufficient consideration but the husbands wishes were irrelevant; motives are not the same things as considerations Vague or Insubstantial Promise (pg 94) Consideration is too vague or insubstantial in nature to be enforceable White v Bluett (1853) The court held that Bluetts promise was nothing more than a promise not to bore his father. As such it was too vague and was insufficient consideration for the alleged discharge by his father. Existing Public Duty (pg 94) Promisee is already under a public duty to perform an act and the same act is the purported decision 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. If the court finds the promisee did something more that required by an existing public duty, then it may be sufficient. Eg. Glassbrook Bros Ltd v Glamorgan City Council (1925) The Court held that the police went 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) Promisee is under an existing duty to the promisor to perform the act which is to be the purported consideration Stilk v Myrick (1809) It was held that there was no consideration for the captains promise because the remaining crew did what they were contractually required. Two sailors deserting were within the usual emergencies found in such a voyage. However, if it is more than what is contractually required, that may constitute good consideration 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 plaintiffs work. The benefit was that they would not be liable under the main contract for late completion. Rule in Pinnels Case (pg 97) General rule is that partial fulfillment of a contractual obligation does not discharge the promisees obligations also applies to a debt Pinnels Case (1602) Payment of a lesser sum on that day in satisfaction of a greater sum cannot be any satisfaction for the whole 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 immaterial 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 promisors claim 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 Estoppel Parties must have an existing legal relationship Promise must be clear and unequivocal and intended to affect the legal relationship Promisee relied upon the promise and altered his position Overall it must be inequitable(unfair) for the promisor to be allowed to go back on his promiseSuspensive or Extinctive (pg 99) Once elements of Promissory Estoppel is established, it is tantamount to upholding a promise even though 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 promisors 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 adequate notice to Tungsten Electric. The parties were deemed to have returned to their original agreement 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 that the 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 parties did not intend the promise to be legally binding. De Cruz Andrea Heidi v Guangzhou Yuzhitang Health Products Co Ltd and Others (2003) Court held that there was no contract between the parties, Andrea and Rayson as there was an absence of an intention 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 the discount 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 Lee Teck Im (2001) Merritt v Merritt (1970) The English Court of Appeal found the necessary intention and held that the wife 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 not rebutted by the use of the phrase ex gratia to describe the payment. Skyways was legally bound to make the payment Honour Clauses (pg 103) Binding commercial agreement may be found to be unenforceable because of the absence of the necessary intention 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 Comfort 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 letters issuer Memorandum of understanding is usually a document which records the understanding of the parties on a proposed commercial project Letter of intent is simply that it records the intention of parties, usually in connection with a proposed commercial project 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 it was subject to final terms and conditions being agreed by parties Mohamed Bassatne v Rifaat El Gohary (2004) and Khng Thian Huat v Riduan Bin Yusof (2005) involving a MOA and LOI respectively Partiess conduct had determined that the respective agreements were indeed binding Kleinwort Benson Ltd v Malaysian Mining Corporation Berhad (1989) On appeal, Court only found a moral not legal obligation. The wording of the letter of comfort did not amount to a warranty of MMCs future conduct. On this basis, the court saw no need to apply the usual presumption of intention to create legal relations. Administrative Relationships (pg 105) 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 position of an applicant for a license and the MC was in the position of the issuing authority. The situation as analogous to that which exists when someone applies to a governmental or statutory body for an approval, for example, a licence to operate a restaurant or a radio or even a 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 entitled to enforce or be bound by the terms of the contract. Similar to the rule that consideration must move from the promisee. Price v Easton (1833) Court held that Price could not succeed because he was not a party to the contract 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 Thai Kenaf Co Ltd v Keck Seng (S) Pte Ltd (1993) 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 to the contract, is not liable for and not entitled to enforce the contract. 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 Letter of Credits Contracts (Rights of Third Parties) Act (CRTA) (pg 107) 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 the contract, the contracting parties did not intend the third party to be able to sue, s 2(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 of the contracts, 2(3) CRTA Third party who sues under CRTA will have a right to all remedies for breach of contract This is so even though the third party gave no consideration, s 2(5) CRTA Subject to the qualification that the third party must been able to rely on such an exemption clause if he had been a party to the contract s 4(6) CRTA Once rights of third party are risen under CRTA, the contracting parties cannot rescind or vary those rights without consent s 3 CRTA 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 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 Contracting parties may be sued by a total stranger who is not a party to the contract since the CRTA does not require the third party to be individually names or even inexistence A clause can be used to prevent that that says A person who is not a party to this agreement shall have no right under the Contracts (Rights of Third Parties) Act to enforce any of its terms.

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 performedTerms and Representations (pg 113) 3 types of pre-contractual statements: puffs, representations and terms 1) Puffs are statements which have no legal effect whatsoever Tend to be statements which are vague because of imprecision or exaggeration 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 some matter relating to the contract and is not an integral part of the contract Contract is not breached if the representation is untrue 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 The only similarity between terms and representations is that they originate as oral and written statements before a contract is formed. Terms are part of the contract while representations are not. Terms and representations create different rights and obligations for the contracting party. 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 Main criterion for distinguishing terms and representations is the intention of the parties Tan Chin Seng & Others v Raffles Town Club Pte Ltd Basic test is whether there is evidence that one or both contracting parties intended that there be contractual liability in respect of the statementGuidelines to Distinguish Terms from Representations (not to be applied rigidly) When Statement is made (pg 115) Makers Emphasis (pg 115) Makers 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 term rather 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. This indicates that the statement was not a term of the contract.2) Makers 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, thus entitling White to repudiate the contract.3) Makers 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 Oscar Chess Ltd v Williams (1957) The court of Appeal held that Williams statement was not a term of the contract because as a private individual, Williams was not in a position to guarantee the accuracy of the year of registration given. Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd (1965) The English Court of Appeal held that there was a breach of contract because the defendants 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 knowing otherwise).4) Invitation to Verify Statement If the maker of the statement invited the other party to verify the truth of the statement made, then the statement 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 more likely 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 the written documentExpress 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 room for rewriting or implying terms into contract in those circumstances Bayerische Hypo- und Vereinsbank 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 for seeds 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 be implied into the contract by custom and practiceTerms 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 that their 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) 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 to ensure 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 reasonablenessTerms 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 statuteClassification of Terms (pg 120) More important terms tend to generate more serious consequences when breachedCondition and Warranty (pg 121) Conditions are those terms which are important, essentially or fundamentally to the contract. They are statements 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. Bettinis 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 case including the intention of the parties and the purpose of the contractInnominate Term (pg 122) Innominate terms cover terms which can be breached resulting in trivial consequences, as well as those resulting 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 If a breach results in trivial consequences, a remedy in damages should suffice (treated like a warranty). If a breach results in serious consequences, the injured party should be entitled to treat the contract as discharged (treated like a condition). The test Diplock LJ does the occurrence of the event deprive the party who has further undertakings to perform, of substantially the whole benefit which it was the intention of the parties as expressed in the contract that he should obtain as the consideration for performing those undertakings? 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 cases Chua Chay Lee & Others v Premier Properties Pte Ltd (2000) 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 relying on 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 Incorporation The clause must be incorporated into the contract Construction The clause, properly construed, must cover the loss of injury which occurred. Unusual factors There must not be any extraordinary facts in the case which prevents the operation of the clause 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 the contract Warren Khoo J in Singapore High Court made a distinction between EC and LLC and approved the following comments of Lord Wilberforce in Ailsa Craig Fishing Co Ltd v Malvern Fishing Co Ltd & Securicor (Scotland) (1983) 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 the risks to which the defending party may be exposed, the remuneration which he received and possibly also the opportunity of the other party to insureReliance on Exemption Clause Incorporation (pg 125) An exemption clause becomes incorporated into a contact in two ways, by signature or notice LEstrange v Graucob (1934) The court held that the document containing contractual terms is signed, then in the absence of fraud or misrepresentation. The party signing it is bound, and it is wholly immaterial 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 gave reasonably sufficient notice of the exemption clause to the injured party 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. 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 on the bedroom wall was too late. 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 the ticket. 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 defendant failed to prove reasonable sufficiency of notice. Thomson v London Midland Scottish Railway Co (1930) The English Court of Appeal held that 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 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 there was 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 plaintiffs attention by pointing them out, more so when the terms and conditions were not printed on the reverse of the quotation

Previous Course of Dealings (pg 128) If there has been previous course of dealings between the parties which included an exemption clause, and then the exemption clause may be incorporated through the previous course of dealings. 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 construction Contra Proferentum Rule Main Purpose Rule Contra Proferentum Rule (pg 129) 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 Ltd v Chuan Keng Mong (1994) + Singapore Telecommunications Ltd v Starhub Cable Vision Ltd Main Purpose Rule (pg 129) The rule states that there is a general assumption that the parties do not intend an EC to defeat or be repugnance to the main purpose of a contract. EC will generally be ineffective if there is a fundamental breach. 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 clause were allowed to deny the appellant the very essence of the cover which it had sought under the policy. This would lead to an absurdity and the courts must intervene to hold such a clause ineffective. 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 later ruled that the clause did include the breach. Thus Securicor was not liable. 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) 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) 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). New Zealand Shipping Co Ltd v AM Satterrthwaite & Co Ltd (1975) The court allowed EC to extend to the third party. Privity of contract involved but there is a loosening of the general 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 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 contracts 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 ruleReliance 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 constructedPreliminary 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 liability situations s 3 Misrepresentation ActPersonal 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) 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) UCTAConsumer 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 that a 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, the exemption 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 good legislation is relaxed when transaction is non consumerMisrepresentation (pg 133) If liability arises from a misrepresentation, the misrepresentor can only seek protection behind an exemption clause if the clause is reasonable s 3 Misrepresentation ActMeaning of Reasonableness (pg 134) In evaluating of whether an exemption is reasonable, the court must consider all the circumstances which Were known to Ought reasonably to have been known to 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: The bargaining strength of the parties If the bargaining strengths of the parties are equal, the EC is considered to be reasonable. 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 Whether the customer knows or ought to know about the exemption clause All factors in the incorporation of EC. Knows=Reasonable Whether Compliance with some condition is practicable Does the EC states that the business will 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 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 customers specifications but causes damage to customer, then the clause should be considered reasonable as any defect is due to customers own specification Consmat Singapore (Pte) Ltd v Bank of America National Trust & Savings Association (1992) Bank relied on an exemption clause in its standard contract UCTA not applicable on the facts but state that the clause would be enforceable if the UCTA is assumed Both parties had equal bargaining power Elis Tjoa v United Overseas Bank (2003) Not unreasonable for a banks EC to require its customers to check their statement regularly and to notify the bank promptly of any unauthorised transactions 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 to rely on the clause Kenwell & Co Pte Ltd v Southern Ocean Shipbuilding Co Pte Ltd (1999) Defendant fail to adduce evidence of reasonableness and hence clause could not be rely upon EC used commonly in the industry may still be unreasonable under UCTA The more unreasonable an EC, the greater the burden upon the party relying on it to establish its reasonableness Fact that parties entered into contract willingly does not prevent one party from later questioning the reasonableness of an EC

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 Factors Incapacity Illegality Misrepresentation MistakeIncapacity (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 Fact 1874 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 the consequences 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 for s 35 and s 36 were inserted on 1 Mar 09 to give minors contractual capacity in certain commercial activities1. s 35 to give contracts entered into by minors who have attained the age of 18 years the same effect 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 minors 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 to any 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 if they 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 minors 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 Fully enforceable Two groups of contracts make up the category of valid contracts Beneficial contracts for necessaries 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 Lord Coleridge CG stated: When an infant has paid for something and has consumed or used it, it is contrary to natural justice that he should recover back the money which he has paid Beneficial Contracts for Necessaries (pg 145) Refers to goods and services which the law deems reasonably required by a minor in his particular station in life Section 3 SGA necessaries means goods suitable to the condition in life of the minor or other person concerned and to his actual requirements at the time of sale and delivery Nash v Inman (1908) - Contract was unenforceable because Nash failed to prove that the clothes 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 Necessaries may include luxurious items of utility if they are considered appropriate for the minor in his position Peters v Fleming (1840) Executory Contracts for Necessaries (pg 146) Complication arises if the contract for necessaries is still executory on the part of the other party Nash v Inman (Goods) The other party must have performed his obligations before the contract is binding upon the minor. Roberts v Gray (Services) Binding upon the minor regardless whether the other party has performed his obligations or not. Loans for Necessaries (pg 146) Person who lends money to a minor is generally unable to enforce the contract and recover the money from the minor Exception arises if money was used to purchase necessaries Marlow v Pitfeild (1719) Financial Institutions in Singapore typically lend money to minors only if minor can supply a guarantor who will guarantee the loan. Beneficial Contracts for Employment (pg 147) The important point is that the contract must benefit the minor 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 deed were unreasonable and not beneficial to the girl and, therefore, unenforceable. Chaplin v Leslie Frewin (Publishers) Ltd (1966) Winn LJJ took the view that the contract was 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 minorClasses 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 infancy or 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 be entitled 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)

Classes of Minors Contracts Ratifiable Contracts (pg 148) If a minors contract does not fall within the class of valid or voidable, it would be ratifiable. Such contracts would not be valid or enforceable against the minor unless he ratifies it after he attains majority. The contract nevertheless binds the other party. Legislature has enacted a catch all provision to compel a minor to return property improperly obtained by him by virtue of an unenforceable contract either by payment or the return of property s 3 MCAMentally Unsound and Intoxicated Persons (pg 149) Contract with persons stated is valid but may not be enforceable against him if it can be shown that at the time the contract was made: He was incapable of understanding the nature of the contract; The other party knew or ought to have known of his incapacity. s 3(2) SGA also applies to mentally unsound and intoxicated persons, where they have obtained goods which are necessaries, they may be required to pay a reasonable price for the goods Che Som bte Yip & Ors Maha Pte Ltd & Ors (1989) Court held that brothers knowledge of the third plaintiffs condition was imputed to the bank. Hence the mortgage was voidable.Illegality (pg 150) Classified depending on the source of law infringed statute or common law Four Illegal Contracts Gaming and Wagering Contracts Contracts contrary to public policy Contracts illegal in performance Contracts in restraint of tradeGaming and Wagering Contract (pg 151) S5 Civil Law Act, contracts of gaming and wagering are generally void by statute. Thus, no legal effect and unenforceable. May involve Betting Act. Money paid or won under a wagering or gaming contract cannot be recoveredContracts Contrary to Public Policy (pg 152) When the contract contravene some aspect of public policy. Contract to commit a crime, a tort or a fraud on a third party Apthorp v Neville & Co (1907) and in Kong Seng Construction Pte Ltd v Chenab Contractor Pte Ltd and Another (2008), an agreement was made with the object of deceiving a third party. Promote sexual immorality such as contracts to lend money to finance a brothel Ahvena Ravena Mana Aroogmoogum Chitty v Lim Ah Han, Ah Gee and Chop Lee Watt (1894) To benefit a foreign enemy or undermines the relationship with a friendly country Regazzoni v KC Sethia (1944) Ltd (1958), which was cited in Everbright Commercial Pte Ltd & Another v AXA Insurance Singapore Pte Ltd (2000) and Wu Shun Foods Co Ltd v Ken Ken Food Manufacturing Pte Ltd (2002) Contract inimical to administration of justice such as contract to give false evidence at a trial R v Andrews (1973) Contract to oust the jurisdiction of the courts, such as a provision specifying that the right to interpret the rules of an association vests only in its council Baker v Jones (1954)Contracts Contrary to Statute (pg 152) Illegal due to statutory provisions which prohibit them Legislature wishes to proscribe the performance of certain activities which would be entailed in such contacts Some statutes expressly or impliedly prohibit certain types of contract and prevent their inception altogether while others seek only to penalize certain types of unlawful conduct without prohibiting the underlying lawful contract Others penalize illegal performance without affecting the parties contractual rights at all Where legislatures 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) War time regulations prohibited the buying or selling of linseed oil. 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 void 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) Unlawful performance on an otherwise lawful contact does not necessarily render the entire contract void If the statutory provision simply imposes a fine for non compliance, the likelihood is that non compliance 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 civil consequences.Contracts in Restraint of Trade (pg 153) Restraint of trade contracts are agreements under which a business or person agrees to refrain from undertaking 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 Protect proprietary or legitimate interest of covenantee Reasonable in duration, scope and subject matter Must not be contrary to public interestElements 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 from exploiting 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) 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 Court will not uphold a covenant benefitting an employer merely to protect itself from competition by a former employee Stratech was unable to demonstrate any legitimate interest that required protection by a restraint of trade clause, the court ruled that the main function of the clause was to indeed inhibit competition in business and clause was therefore invalidElements 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) Court held that clause was prima facie void as the business carried on by the company in the clause must be read narrowly to mean only the actual business already undertaken by the plaintiffElements 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 Harpers 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 Archbolds (Freightage) Ltd v Spanglett Ltd If at time of making contract, there is an intent to perform it in an unlawful manner, the contact although it remains alive is unenforceable at the suit of the party having the intent; if intent is held in common, it is not enforceable at all Prevent a plaintiff from recovering under a contract if in order to prove his rights under it he has 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 was illegal Avoid the contract ad initio and that arises if the making of the contract is expressly or impliedly prohibited by statute or is otherwise contrary to public policyRecovering Property (pg 157) In some cases the court may allow an innocent party to recover property which would otherwise pass to the defaulting party under the illegal contract. Tokyo Investment Pte Ltd v Tan Chor Thing (1993) 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 on appellant 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) 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 of the illegality. In the case, respondent was not asking the court to enforce an illegal arrangement but a wholly legitimate partnership agreement. Therefore respondent was ruled in favor.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 non oritur action (an action does not arise from a base cause). However the innocent party may be able to recover damages from the defaulting party. Archbolds (Freightage) Ltd v Spanglett (1961) Court of appeal held that the contract was illegal in its performance but since Archbolds 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 is an ignorance of fact (that Spangletts 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) Severance is possible if Promises are severable in nature 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) 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 deceitElements 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 a false statement which is relied upon by the representee and induced into contract Koh Keow Neo & Others v 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 of making 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 of improvements. Tipper Corp Pte Ltd v JTC Corporation (2007) Plaintiff had not asserted that the defendant had no intention of keeping its word when the alleged representation was made. Statement of opinion usually cannot form the basis of a misrepresentation unless the representor had access 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 a statement 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 careful distinction between a misrepresentation of fact and an expression of opinion Where an opinion is expressed, it must be expressed upon reasonable grounds and made honestly Where opinion is stated as if it is a positive fact, it can constitute a misrepresentation 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 misrepresentation 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 situations Dimmock v Hallett (1866)What is stated becomes a half-truth by what is left unsaid. i.e. Saying the place is fully let but did not say the tenants had given notice to quit. This constitutes misrepresentation.Trans-World (Aluminium) Ltd v Cornelder China (Singapore) (2003) Misrepresentation of statements comes from a willful suppression of material and important facts thereby rendering the statement untrue A change of circumstance arose which rendered a previously truthful statement misleading With v OFlanagan (1936) The law imposes a duty is upon one party to disclose facts to the other party. i.e. Insurance contracts.False Misrepresentation Inducement (pg 164) For a false statement to be a misrepresentation, the statement must induce the representee to enter into the 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 & Another Court held that misrepresentation need not be the sole inducementso long as they had played a real and substantial part and operated in the representees minds, no matter how strong 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) False statement was made to representee but he was not induced by the statement to enter into contract and therefore there is no misrepresentation Tai Kim San v Lim Cher Kia (1884) The Singapore High Court held that plaintiffs had not been induced by any representations to sell their shares to the defendant. Hence false statement is not a misrepresentation. A mere opportunity of a chance to investigate the truth of the statement made by the representor does not deprive the other party to rely on the misrepresentation. Jurong Town Corp v Wishing Star Ltd (No 2) (2005) A person who has made a false representation cannot escape its consequences just because the innocent party has made his own inquiry or due diligence, unless the innocent party has come to 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) Mere fact that the representee had an opportunity to investigate and ascertain whether a representation is true or false was not sufficient to deprive him of his right to rely on misrepresentation No fraud or negligence on the part of Redgrave, the misrepresentation was thus an innocent one and contract was rescindedCategories 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 if the statement is farfetched, negligent, or ill-conceived. Singapore High Court held that whenever fraud or deceit is alleged, a high degree of proof is required on 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) 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 true or false. Since none was present, no fraudulent misrep. Panatron Pte Ltd v Lee Cheow Lee & Another (2001) 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 False statements in turn induced the respondents to subscribe for the shares in PanatronCategories 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 reasonable grounds to believe the statement to be true. Howard Marine & Dredging Co Ltd v A Ogden & Sons (Excavations) Ltd (1978) The manager was still liable as a reasonable manager would have checked the shipping documents and not relied on the Loyds Register. Negligent misrepresentation pursuant to s 2 MA is statute based and arises in the context of a contract Hedley Byrne & Co Ltd v Heller & Partners Ltd (1964) Common law tort and does require the existence of a contract Discussed also in Trans-World (Aluminium) Ltd v Cornelder China (Singapore) Pte Ltd (2003)Categories of Misrepresentation Innocent Misrepresentation (pg 167) A false statement made in the absence of fraud and fault Representor made the false statement believing and having reasonable grounds to believe in its truth Redgrave v Hurd Remedies for Misrepresentation (pg 168) Rescission is when a contract is terminated by the representee because of misrepresentation Rescission is available in all three types of misrepresentation Available even if false statement has become a term of the contract s 1 Misrepresentation Act Once a representee chooses to rescind the contract, it becomes void ab initio meaning that the contract is treated as if it never existed Representee must give notice of rescission to the other party Once rescinded, rescission is final and contract cannot be revived Rescission is not available when Contract is affirmed expressly or impliedly by the representee after he discovered the misrepresentation Singapore of Appeal in Jurong Town Corp v Wishing Star Ltd (No 2) (2005) clarified that the right of rescission is not lost easily Representee must have communicated his choice to the other party in clear and unequivocal terms and he would not be bound by a qualified or conditional decision Representee would not lose his right automatically to rescind merely by calling on the representor to reconsider his position and recognize his obligations Reasonable amount of time had lapsed since the discovery of the misrepresentation Parties cannot be restored to their original position before the contract (restitutio in integrum impossible) Court exercises its discretion pursuant to s 2(2) Misrepresentation Act to award damages in lieu of rescission Damages is the monetary compensation ordered by the court requiring the defaulting party to pay money to the injured party Common law allows damages for fraudulent misrepresentation S 2(1) Misrepresentation Act allows the court to award damages for negligent misrepresentation S 2(2) Misrepresentation Act grants to the court a discretion to order damages in lieu of rescission for both negligent and innocent misrepresentation Vita Health Laboratories Pte Ltd and Others v Pang Seng Meng (2004) Rajah JC declined to award damages in lieu of rescission under this provision as the plaintiffs had not shown how this head of damages ought to be assessed Complexities arise in the calculation of the quantum because of the interplay of contractual and tortuous principles as well as the unusual wording of the statutory provision Indemnity is an obligation whereby one person (the indemnifier) is held responsible for the liability or loss of another person (the indemnifiee) An indemnity is used to help restore the injured party to his status quo ante (the position he was in beforehand) S 3 Misrepresentation Act stipulates that an exemption clause which attempts to exclude or restrict liability arising from a misrepresentation will not be enforceable unless it meets the reasonableness test expressed in s 11(1) UCTA

Remedies for different categories of Misrepresentation (pg 169)FraudulentRecission + Damages

NegligentRecission (or damages in lieu) + Damages

InnocentRecission (or damages in lieu) + Indemnity

Mistake (pg 170) Contracts are robust creatures and they do not fall to just any mistake Only mistakes which lie at the root of the contract would have that effect At common law, mistake vitiates a contract such that it becomes void ab initio. However in equity, mistake does not necessarily lead to void ab initio. 4 types of mistakes Common mistake Mutual mistake Unilateral mistake Non est factum Common Mistakes occur when both parties to the contract make the same fundamental mistake of fact Each knows the intention of the other and accepts it but is mistaken about some underlying fact Couturier v Hastie (1852) Mutual Mistakes occurs when the parties misunderstand each other and are at cross purposes Wellmix Organics (International) Pte Ltd v Lau Yu Man (2006) Both parties are not aware of each others mistake Mutual mistakes overlaps with law of contract as there is a lack of coincidence between offer and acceptance Unilateral Mistake occurs when only one party is mistaken, the other party knows or ought to have known the first partys mistake Test is an objective one based on what a reasonable person would have known in similar circumstances Ho Seng Lee Construction Pte Ltd v Nian Chuan Construction Pte Ltd (2001) Chwee Kin Keong & Others v Digilandmall.com Pte Ltd (2005) Non Est Factum (it is not my deed) Arises when a person signs a document that is fundamentally different in character from that which he contemplated Lee Siew Chun v Sourgrapes Packaging Products Pte Ltd (1993) To avoid contact on basis of non est factum, plaintiff must show The document signed is radically different or totally different in character or substance from that which he intended to sign Had not been careless in signing the document He took such care as a person in his position ought to have taken

Other Vitiating Factors (pg 172)

Duress (pg 172) An agreement entered into under the constraint of threat or actual injury may be held to be void or voidable Lloyds Bank Ltd v Bundy (1974) Economic Duress notion of inequality of bargaining power Atlas Express v Kafco (1989) Plaintiffs claim for a minimum fee for transportation was not enforceable as term was obtained only because the defendant was by that stage in the difficult position of not being able to find an alternative carries Citibank NA v Lim Soo Peng & Another (2004) Use of commercial pressure did not constitute economic duress unless it amounted to a coercion of the complainants will, thereby vitiating consent Criteria for determining economic duress Whether defendant did or did not protest At time of coercion, did defendant had an alternative course open to him such as an adequate legal remedy Whether defendant was independently advised and Whether after entering into contract, the defendant took steps to avoid it Sharon Global Solutions Pte Ltd v LG International (Singapore) Pte Ltd (2001) Plaintiff had not exploited the situation to improve its financial position, defendant was not put into a position where it had no alternatives Agreement reached was not a result of economic duress but as a result of commercial negotiation between the partiesUndue Influence (pg 174) Equitable doctrine The unconscientious use of ones power or authority over another to obtain a benefit or achieve a purpose by exerting improper pressure 2 types of cases of undue influence Undue influence must be actually proven Mookka Pillai Rajagopal v Kushvinder Singh Chopra (1996) By virtue of the relationship between the parties, law presumes that undue influence is present and the burden of proof is then on the party complained of having exercised undue influence To establish undue influence in the first type, person who raise complain must establish the following That the other person had the capacity to influence the complainant Influence was exercised Exercise was undue Its exercise brought about the transaction Lim Geok Hian v Lim Guan Chin (1994) Context of a brother-sister relationship does not auto fall within the second case Based on first case, complainant failed to establish all four elements and therefore no undue influence on part of brother. Affirmed by Pelican Engineering Pte Ltd v Lim Wee Chuan (2001)(Husband-wife), Tan Teck Khong & Another v Tan Pian Meng (2002) (Mother-son) To establish second type, complainant needs to show both There was a relationship of trust and confidence between him and the wrongdoer, The relationship was such that it could fairly be presumed that the wrongdoer abused the trust and confidence in procuring the complainant to enter into the impugned transaction. Susilawati v American Express Bank Ltd (2008)Unconscionable Bargain (pg 174) Suggests that any agreement which is manifestly inequitable and constitutes an unconscionable bargain should be set aside Lim Geok Hian v Lim Guan Chin (1994) Thean JA held that the concept of inequality of bargaining power is insufficient in itself and in the absence of unconscionable conduct, to justify the setting aside of a contract Unconscionability can be an exception under Singapore Law and does in fact constitute a vitiating factor for contracts involving performance of bonds Fong Whye Koon v Chan Ah Thong (1996) GHL Pte Ltd v Unitrack Building Constrcution Pte Ltd (1999) Eltraco International Pte Ltd v CGH Development Pte Ltd (2000) Anwar Siraj v Teo Hee Lai Building Construction Pte Ltd

Chapter 7: Contract Discharge (pg 179 204) Discharges refers to the termination of a contact Parties are relieved of their obligations under contract Four main ways: Performance, breach, agreement and frustrationPerformance (pg 179) Parties perform their obligations as stipulated in the contact and once and for all the obligations are performed, the contract comes to an endPrecise Performance (pg 180) General rule is that if a contract is to be discharge by performance, the parties must perform their obligations fully and precisely Cutter v Powell (1795) The court held that payment was conditional upon the completion of the voyage; payment even part payment may not be made. In Re Moore & Co and Landauer & Co (1921) The court held that the buyer was lawfully entitled to reject the shipment on the basis of less than full and precise performance.Exceptions to Precise Performance (pg 180) to soften the rule and prevent unfairness De Minimis Rule (pg 181) Divisible Contacts (pg 181) Substantial Performance (pg 181) Prevented Performance (pg 183) Acceptance of Partial Performance (pg 183)De Minimis Rule If the deviation in performance is microscopic, then the contract is deemed to have been performed fully and