Download - Contract Law

CAP 5 Bizlaw Templates

Essentials of

Contract

This question deals with essentials of a contract. In order for a contract to be

enforceable in law, there must be four elements present. They are: (1) Offer;

(2) Acceptance; (3) Consideration; and (4) Intention to create legal relations.

If any of those four elements are missing, there will not be a valid contract.

Offer In Preston Corpn Sdn Bhd v Edward Leong (1982), an offer was defined as an

intimation of willingness by an offeror to enter into a legally binding contract

and is expressly or impliedly indicated that it is to be binding on the offeror

as soon as it has been accepted by the offeree.

This is opposed to an Invitation To Treat (ITT). ITT is an offer to negotiate or

an offer to receive offers, and is not an indication by the offeror that he is

willing to be bound should the other party be interested in proceeding

further. Page 24

For example, the case of Pharmaceutical Society of Great Britain v Boots Cash

Chemicals (1952) provides that the display of goods is merely an ITT, and not

an offer. Thus if there is a mistake in the displayed price, the cashier can

refuse the offer at that price and instead make a new quote. Also, if display

of goods is considered an offer, seller might not be able to state that the

goods have been reserved.

Also, in Patridge v Crittenden (1968), it was held that an advertisement is an

ITT. Following this it can be generally stated that advertisements, catalogues

and menus would generally only amount to ITTs as it would be unreasonable

to expect the advertiser to always have sufficient stocks of the items

advertised. See Carlill v Carbolic Smoke Ball Co (1892) for an exception in the

case of unilateral contracts. Page 26

An offer may be terminated by revocation, lapse of time, when the offer is

subject to an unsatisfied condition, death of the offeror, and rejection.

For a revocation to be valid, it must be made before acceptance by the

offeree, as provided by Byrne v Van Tienhoven (1880). If revocation is made

by post, it is only valid upon receipt.

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An offer is also terminated upon rejection by the offeree. It must be noted

that if the offeree makes a counter-offer, that is an offer which is inconsistent

with the original offer as new terms are introduced, the counter-offer has the

effect of rejecting the original offer, as provided by Hyde v Wrench (1840).

However, if the offeree is not making a counter-offer but just asking for more

information, he is not rejecting the original offer and hence the original offer

is still valid. Hence, whether or not there is a counter-offer is a question of

fact for the court to decide.

Apply the law...any offer? Any counter-offer?

Acceptance The next requirement would be an acceptance of the offer. Valid acceptance

must be communicated properly. For communication of acceptance via post,

the Postal Acceptance Rule, as provided by Adams v Lindsall (1818), applies

in Singapore. It states that acceptance is effective when the letter is posted,

unless the contract provides for otherwise. Page 33

It must also be noted that in order for both offer and acceptance to be valid,

all essential terms must be agreed upon, as mentioned in Scammell v Ouston

1941). Page 36

Apply the law...was there a valid acceptance? For there to be an offer and

acceptance, there must be a “meeting of the minds” and a reasonable person

would have/would not have construed XXX to be an acceptance of the offer.

Consideration The next essential of a valid contract would be consideration, unless the

contract is by seal or deed. Consideration must move from the promisee, but

need not move to the promisor. Consideration must be sufficient, but need

not be adequate. The court will not help one out of a bad bargain. Whether

or not consideration is sufficient depends on several points. Page 37

For example, if one party is already under public duty to perform what he

subsequently agrees to do by contract, consideration will be insufficient, as

stated in Collins v Godfroy (1831). Or, where one party is under existing

contractual obligation to another to perform something, but thereafter that

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party demands more to perform the very same obligation, there will be no

fresh or further consideration, and hence is insufficient, as stated in Stilk v

Myrick (1809) (see variations to contract).

Apply the law...was there valid consideration?

Intention to Create

Legal Relations

Finally, there must be intention to create legal relations. In domestic

situations, it is presumed that there are no intentions to create legal

relations, as in Balfour v Balfour (1919).

However, Merritt v Merritt (1970) rebuts this and provides that if it was

envisaged from the beginning that should something go wrong, parties to the

agreement would seek legal redress, and then there would be an intention to

create legal relations. In this case, the parties were not on good terms and

hence had intent to create legal relations.

Variation of

Contract

There are four ways for any variations of a contract to be valid. They are:

1. Fresh consideration

2. Variation made by way of seal or deed,

3. Williams v Roffey exception,

4. Promissory estoppel.

If there is fresh consideration for the variation, the variation will be valid, as

both parties get something in return for agreeing to the change.

The Williams v Roffey exception provides that when party A promises to pay

more to party B in return for the proper completion of the contract, and in

doing so, receives a benefit or obviates a disbenefit, and this promise is not

given as a result of economic duress or fraud by party B, then the benefit or

avoidance of disbenefit is capable of consideration, and the promise is legally

binding. Page 45

Apply the law...

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Promissory estoppel is generally used as a defence to a variation of a

contract. Elements of Promissory Estoppel:

1. Clear representation

2. Representee suffered a detriment

3. Detriment must be suffered in reliance of the representation

4. It must be inequitable for the representor to insist on his legal rights

Party X had relied on the promise of party Y and it would be unfair for Y to

renege on the terms…

Termination of

Contract

This question deals with contract law. There are four ways a contract can be

terminated. They are: performance; agreement; repudiatory or fundamental

breach; and frustration.

Performance Generally, payment is conditional upon complete performance as in Cutter v

Powell (1795), unless the following exceptions are applicable:

(1) There is substantial performance, as provided in Hoenig v Isaacs (1952)

Whether or not there is substantial performance is a question of fact for the

court to decide. Page 104

(2) The contract is divisible such that payment is made after completion of

each stage.

(3) If one party has begun performing his obligations, but has been prevented

by the other party from completing the contract, he may be entitled to

payment on a quantum meruit basis, as provided in Planche v Colburn

(1831).

(4) If one party has not completed his obligations, but the other party accepts

the incomplete performance, then payment may be entitled on a quantum

meruit basis. However, if the party has no choice but to accept the

incomplete performance, then there is no acceptance, as provided by

Sumpter v Hedges (1831).

Agreement A contract can also be terminated if both parties agree to its termination,

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subject to conditions provided by the contract.

Repudiatory or

Fundamental

Breach

The next way in which a contract may be terminated is by repudiatory or

fundamental breach. Repudiation occurs when one party intimates to

another that he no longer intends to be bound by the contract, and can be

anticipatory or actual. A fundamental breach occurs when one party without

repudiating the contract, commits a fundamental breach of the contact.

However, the innocent party has the option to keep the contract alive and

not terminate it, but he will be subject to all ensuing consequences Page 108

Frustration Finally, a contract can be terminated by frustration. Frustration is the

occurrence of an unexpected event beyond the control of the parties which

makes further performance of the contract illegal, impossible, or radically

different from what was originally envisaged by the parties. When frustrated,

both parties are relieved from their contractual obligations. Page 111

For example, impossibility may arise if the contract states that it must be

fulfilled in a particular manner and that becomes impossible, as provided by

Nicholl & Knight v Ashton Edridge & Co (1901).

If the contract can now only be performed in a way that is radically different

from what was originally envisaged by the parties that may result in

frustration. Whether or not there is frustration if a particular purpose of the

contract is no longer attainable depends on whether that purpose was

understood by both parties to be the very basis of the contract, as in Krell v

Henry (1903).

It is important to note that labour shortages or price increases do not

amount to frustration, as stated in Davis Contractors Ltd v Fareham UDC

(1956). Page 113

Also, if the parties foresaw a particular event or could have reasonably

foreseen that a particular event would occur and nonetheless decided to go

ahead with the contract, and that event occurs, making performance

impossible, the doctrine of frustration would not apply. Page 114

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In addition, frustration cannot be successfully raised if it is self-induced, as

provided in Maritime National Fish Ltd v Ocean Trawlers (1935).

A force majeure clause can widen or narrow down what amounts to

frustration in law, and what happens to a contract during a frustrating event,

such that liability to either party is reduced – either by discharging the

contract or provide for a temporary suspension of the contract. Page 115

In frustration, generally, losses lie where they fall. If the contract is applicable

under the Frustrated Contracts Act, then Section 2(2) provides that any sum

paid before the frustrating event can be recovered and any sum payable

after the frustrating event need not be paid. However, if one party incurred

an expense for the purpose of performing the contract before the discharge,

or the other party obtained a benefit from the performance of the contract

before the discharge, the court has the discretion to make an adjustment

(pay for whatever has been performed). Page 116

Apply the law...impossible performance? Force majeure clause would solve

most issues of increase in prices or labour shortages. However, a force

majeure clause is to be restricted to supervening events without the fault of

either party.

Restraint of Trade This question deals with the laws governing restraint of trade. Restraint of

trade clause seeks to restrict the other party to the contract in terms of what

the other party can do later on with his business or profession.

Restraint of trade clauses are prima facie void. To be upheld, the clause must

be reasonable as between the parties themselves and with regard to public

interest. To determine reasonableness, the court will first establish if there is

a legitimate interest to be protected, as in Lansing Linde Ltd v Kerr. In sales of

businesses, goodwill would have been paid, and it would be legitimate to

expect that the seller would not set up a business in competition to the one

he had sold. Secondly, the court will establish if the clause is reasonable in

terms of time, area and scope of restraint Page 83

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If the restraint is unusually wide, the court may run a blue pencil through it

such that the clause becomes reasonable. However, the court will only do

this if it is possible to do so without adding or altering words. In addition, if

the clause is found to be invalid, such clauses would usually be severable

from the rest of the contract. Blue pencil is also not commonly invoked in

Singapore. Page 86-87

Apply the law...legitimate interest? Reasonableness in terms of time, area

and scope of restraint.

If the restraint of trade clause is valid, the party enforcing the clause can seek

an injunction to force the offender to observe the clause. He can also seek an

account of profits made, and sue for incidental losses due to the unfair

competition.

Remedies The more common remedies for breach of contract are: Damages; Specific

performance; and Injunctions.

Unliquidated

Damages

Unliquidated damages refer to damages that have not been pre-agreed to by

the parties to the contract and are hence determined by the court. The aim

of unliquidated damages is to put the plaintiff in the position he would be in

if the contract had been properly performed. Page 119

To claim unliquidated damages, it must be proved that some loss has been

suffered. Generally, only losses suffered by the plaintiff as a result of the

contract not being properly performed can be claimed, and not the profits

made by the defendant, as given by Teacher v Calder.

Expectation and

Reliance Loss

A claim may also be based on expectation or reliance loss. This refers to what

the plaintiff would have expected to get if the contract had been properly

performed, as in Chaplin v Hicks. Reliance loss refers to wasted expenditure

incurred by the plaintiff prior to the breach, as in Anglia Television Ltd v

Reed. Page 121

It is possible to claim both expectation and reliance loss if it does not result in

double compensation, that is, the expectation loss is calculated on a net

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basis.

Incidental Loss Incidental losses can be claimed as well. For example, the expenses incurred

in sourcing for another supplier when the original supplier is unable to

perform his obligations, can be claimed. Page 122

Damaged Feelings Generally, damages for injured feelings such as disappointment cannot be

claimed. However, if the very purpose of the contract were to provide

pleasure, relaxation or peace of mind, it may be possible to claim for such

losses, as in Jarvis v Swan Tours Ltd. Page 123

Limitations In claiming any unliquidated damages, there are 3 conditions that must be

satisfied. They are: Remoteness; Mitigation; and Causation. Page 124

If the damages are considered too remote, then they cannot be claimed. The

test for remoteness was laid down in Hadley v Baxendale. Damages would

not be too remote if they arose naturally. If the loss was exceptional, then it

can be claimed only if it was within the contemplation of the parties at the

time of the contract.

Also, the plaintiff must have taken reasonable steps in mitigating his loss, as

in Brace v Calder. Whether or not reasonable steps were taken is a question

of fact for the court to decide.

Finally, it must be proved that the plaintiff’s loss has been caused by the

defendant’s breach.

Liquidated Damages Liquidated damages refer to those pre-agreed to by the parties to the

contract. The basic rule is that if the sum stated in the contract can be

considered to be a pre-genuine estimate of the loss, it will be binding on the

parties. If not, it will be deemed as a penalty clause.

Whether or not the court will find it to be a pre-genuine estimate depends

on whether the sum stated is extravagant compared to the greatest loss that

can possibly follow from the breach, and whether a single sum is payable

regardless of the extent of the breach.

Once the court finds the damages specified as a pre-genuine estimate, then

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the plaintiff is only entitled to the damages specified, and not actual losses.

Apply the law… In this case, since the sum stated by the clause is not

extravagant compared to the greatest loss since XXX, and the sum is variable

depending on the extent of the breach, the clause is likely a genuine pre-

estimate of the loss and not a penalty. Therefore, the courts would likely

hold it enforceable and Party Y would be liable for liquidated damages. Only

what is stated in the clause can be recovered, not the actual loss.

Penalty Clause On the other hand, if the clause is a penalty, and it is greater than the actual

loss, then only the actual loss can be claimed. However, in the less likely

event that it is a penalty and yet is less than the actual loss, then plaintiff has

a choice of claiming either the sum stated in the contract or the actual loss.

Specific

Performance

In addition to damages, the court may grant specific performance, which is a

discretionary remedy. For example, the court may order the party in breach

to perform its contractual obligations. Where damages are adequate, specific

performance is usually not granted. Also, an order of specific performance

generally would not be granted in contracts of personal service (employment

contracts). Page 131

Injunction Another common discretionary remedy if an injunction, which is a court

order forcing a party to observe a negative covenant.

Restitution Aside from contractual remedies, the innocent party may have remedies

under the law of restitution. If A is enriched at the expense of B in

circumstances such that enrichment is unjust, B may be able to sue A and

seek restitution. This is particularly useful when contract laws do not apply

(no contract). Page 132

Alternative Dispute

Resolution

Other than litigation, there are other ways of resolving civil disputes, such as

mediation and arbitration.

Mediation Mediation can be conducted through the Singapore Mediation Centre. Both

parties must agree to submit their dispute to mediation. Mediation is

relatively cheap and disputes can be mediated in a relatively short time. Also,

there is privacy, unlike litigation. In addition, mediation is amicable and

works towards creating a win-win situation. In mediation at the SMC, the

mediator is a professional who could have technical expertise in the matter

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being disputed. However, the main disadvantage is that it may not be final if

an agreement cannot be reached.

Another type of mediation can be conducted at the Primary Dispute

Resolution Centre, which is free. The difference from SMC is that the

mediator is a judge of the Subordinate Courts.

Arbitration Arbitration is conducted at the Singapore International Arbitration Centre.

Arbitration is relatively faster and cheaper than litigation. Like mediation,

there is privacy. Also, the parties may be able to choose an arbitrator that

has relevant technical expertise. In addition, an arbitration award may be

enforced domestically and internationally in over 140 countries, unlike

litigation. The main difference from mediation is that judgement passed is

final. However, there may be very limited grounds on which an appeal can be

made to courts against an arbitral award.

Tort of Negligence This case deals with the tort of negligence. Negligence refers to carelessness.

However, mere carelessness does not give rise to liability. In order to be

liable under the tort of negligence, four elements must be proved: (1) The

defendant owed the plaintiff a duty of care; (2) The defendant breached that

duty of care; (3) The defendant’s breach caused the plaintiff’s loss; and (4)

That loss is not too remote. Page 300

If any one element is missing, then liability under the tort of negligence

cannot be established. The burden of establishing duty of care falls on the

plaintiff, which may be lightened by raising res ipsa loquitur where if plaintiff

does not know the cause of the accident, but the thing causing the accident

is under the defendant and the accident does not normally occur unless

there has been negligence on the part of the defendant, court will infer

negligence. Page 311

Duty of care The establishing of duty of care is based upon Lord Atkin’s “neighbour

principle”, arising from the case of Donoghue vs Stevenson. In doing so, the

court must first satisfy itself whether factually speaking, it was foreseeable

that the defendant’s actions or omissions could cause damage to the

plaintiff. Then, the court will determine whether legally speaking, there is a

close and proximate relationship between the parties and if so, whether

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there are any policy considerations which negate the finding of a duty of

care. Page 301

In this case... apply the law to the case here... given that there was a close

and proximate relationship between the parties such that X ought to have

held Y in contemplation when carrying out his act as well as XXX being in the

interest of the public, X owes Y a duty of care, on the facts of the case.

Breach of duty of

care

The plaintiff then has to establish that there was a breach of that duty of

care. This means the omission to do something which a reasonable man

would do, or doing something which a prudent and reasonable man would

not do, as elaborated in Blyth v Birmingham. If the defendant professes to

have a particular skill or knowledge, then the question becomes what

another person of similar skill and knowledge would have done. In addition,

the court will weigh and balance many factors such as the likelihood of

danger and the severity of the danger if it results, as well as the cost of

averting the danger. Page 309

In this case... apply the law to the case here... a reasonable person with the

same training and skills would not have done XXX. Furthermore, the benefit

is much higher than taking any possible protective measures and the

defendant ought to have taken the following measures, and since they did

not, they are likely to have breached their duty of care.

However, whether or not there was indeed a breach of duty of care is a

matter of fact for the court to decide.

Causation of loss Next, causation of loss must be established through the application of the

“but for” test. That is, whether the plaintiff’s loss could have been avoidable,

but for the defendant’s negligence. However, the chain of causation may be

broken in the presence of a novus actus interveniens and the damages

caused by the defendant is exarcebated by some unreasonable act on the

part of the plaintiff, as in Mckew v Holland and Hannens and Cubitts. Page

312

In this case... apply the law to the case here...however, whether or not there

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was indeed causation is a matter of fact for the court to decide.

Loss not remote Lastly, it must be established that the damages claimed by the plaintiff are

not too remote, that is, whether they are reasonably foreseeable. The test

for remoteness was laid down in Hadley v Baxendale. Damages would not be

too remote if they arose naturally, or in the usual course of things, such

damages would not be incurred. Exceptional loss can only be claimed

provided it was within the contemplation of both parties at the time of the

contract. Also, usually, what has to be foreseen is the type of harm, not the

extent of harm. Thus, the “thin skull” rule states that the defendant has to

take the plaintiff as he finds him. Page 313

In this case... apply the law to the case here...

Given that XXX was damage that was foreseeable by a reasonable person

under the circumstances, the loss is not too remote and therefore, this

element of the tort of negligence is fulfilled.

However, whether or not there the damages are remote or not is a matter of

fact for the court to decide.

Defences Even if all four elements have been established, the defendant may have

several defences, such as raising contributory negligence, voluntary

assumption of risk, and excluding liability.

Contributory

Negligence

In raising contributory negligence, if the defendant can establish that the

plaintiff contributed to the loss as a result of fault on his part, the damages

claimable may be reduced, as in Sayers v Harlow. It does not have to be

established that the plaintiff owes the defendant a duty of care and that it

has been breached.

For example, apply case... on the facts of the case, the plaintiff contributed

to the loss through XXX as a direct result of fault on his part. The defendant

may use this as a defence to mitigate loss.

Voluntary

assumption of risk

or Volunti Non Fit

In addition, if the plaintiff voluntarily assumes the risk that a tort may be

committed against him, the defendant may use this as a defence, as in Morris

v Murray.

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Injuria For example, apply case... on the facts of the case, the plaintiff voluntarily

assumed risk when XXX…

However, in this case, there was no true voluntary assumption of risk as the

plaintiff did not agree orally, in writing or by any action implying they agreed

to take on risk. Hence, this defence would likely be overruled by the courts.

Exclusion Clause 1) Is the clause part of the contract Page 65

Apply the law… on the facts of the case, the exclusion clause was

introduced after acceptance and thus was not part of the contract,

and therefore is not binding.

2) Is there reasonable notice of the clause? Page 66

Apply the law… on the facts of the case, there was no reasonable

notice of the clause given, as it was not noticeable / no reasonable

person in the circumstances would have expected to find contractual

terms on XXX item.

Furthermore, as the clause was unusual, Party Y should have taken

more steps to bring it to the attention of the other party, for

example, having it in bold print.

Therefore, the courts would likely rule that this clause is invalid.

3) Does the clause cover the breach Page 68

Apply the law… on the facts of the case, the exclusion clause is

ambiguous and does not clearly cover what has happened. Under the

doctrine of contra proferentem, it will be strictly construed against

the party trying to rely on it.

4) Is the clause valid under the UCTA?

Under section 2(1) of the UCTA, any clause attempting to exclude

liability from negligence resulting in personal injury, death would be

invalid. Section 2(2) provides any clause attempting to exclude

liability from negligence resulting in property damages would be

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invalid unless the clause is reasonable.

Whether or not the clause is reasonable depends on the bargaining

strength of the parties as in Consmat Singapore Pte Ltd v America

National Trust, whether the customer was induced to agree with the

term, whether the customer knows about the clause, and whether

any conditions within the clause are reasonable. Reasonableness is a

question of fact for the court to decide. Page 70

In this case, apply law...

In conclusion...liable/not liable under tort of negligence, damages/remedies,

defences.

Tort of Vicarious

Liability

The employer of the person in fault may also be liable under the tort of

vicarious liability. In order to establish such a liability, two conditions must be

satisfied.

Firstly, the employee must be legally at fault.

Secondly, the actions that put him legally at fault must have taken place in

the course of employment, as established in Lister v Hesley Hall Ltd. The test

for this is to see if there is a close connection between the nature of the

employment and the employee’s wrongdoing. If there is a close connection,

then the employer can be made vicariously liable. If an employer is held

vicariously liable, he has a right to institute an action against the employee to

get an indemnity, and even terminate the employment contract, depending

on circumstances.

Contractors are not employees and hence someone who engages a

contractor cannot be made vicariously liable.

In this case, apply law... although X company was not primarily liable as it

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had provided sufficient training to its employee, it may still be made

vicariously liable for the actions of its employee Y because its employee was

negligent in the course of business.

Product liability

(SGA)

This question deals with product liability under the Sale of Goods Act. For

transactions not including “goods”, such as property and services, they are

not governed by the SGA, and the general rule would be caveat emptor or

buyer beware. However, since the transactions in this case involve goods, the

SGA applies.

Section 12 Section 12(1) provides that it is an implied condition that the seller has the

right to sell the goods when property or ownership is to pass to the buyer.

Since this term is a condition, Party X can repudiate the contract, reject the

goods and sue for damages if the courts rule that there has been a breach.

Section 13 Implied terms that the goods will correspond with the description. Not

necessarily in the course of business.

1) Do the goods correspond with the description provided?

2) Did the buyer rely on the description of the seller?

Goods do not cease to be a sale by description just because the goods are

exposed for sale and selected by the buyer. This means that even if the

buyer’s inspection should have revealed unsatisfactory differences but the

buyer did not notice, defendant could still be held liable. (Overlap with 14).

Section 14(2) Section 14(2) provides for that when the seller is selling in the course of

business, it is an implied term that goods supplied under the contract will be

of satisfactory quality. Section 14(2A) states that goods would be deemed

satisfactory if a reasonable person would regard the goods as satisfactory

considering the description, price and all other relevant circumstances.

Section 14(2B) provides for certain factors that may deem a good

unsatisfactory, such as: Fitness for purpose for which the goods are

commonly supplied, appearance and finish, freedom from minor defects,

safety, and durability.

Section 14(3) Section 14(3) provides for the impied term that when the seller is selling in

the course of business and the buyer makes known to the seller any

particular purpose for which the goods are being bought, the goods must be

reasonable fit for that purpose, unless the buyer does not rely or if it is

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unreasonable for the buyer to rely on the seller’s skill and judgement.

Remedies Remedies for breach of section 14(2) or section 14(3) would be to repudiate

the contract, reject the goods and sue for damages if any. However, the

buyer can lose this right. Section 35 provides that the buyer would be

deemed to have accepted the goods if he does any act in relation to the

goods which is inconsistent with the ownership of the seller, or if he

intimated to the seller that he has so accepted the goods, or if he keeps the

goods for more than a reasonable period of time without informing the seller

that he has rejected them.

Furthermore, under Section 15A in non-consumer sales, if the goods are

bought for resale and the breach in 13, 14 or 15 is so slight as to be

unreasonable for the buyer to reject the goods, he cannot do so and can only

sue for damages if any.

Liability of

manufacturers and

distributors

Retailer can in turn sue the manufacturer, by virtue of Britestone Pte Ltd v

Smith & Associates Far East, Ltd (2007).

Consumer can also directly sue the manufacturer, when there is a guarantee,

or if the customer suffers physical injury as a result of negligence on the part

of the manufacturers.

The case of TV Media Pte Ltd v De Cruz Andrea Heidi (2004), the well known

Slim 10 case, provides that manufacturers and distributors can also be

directly liable for the breach of the SGA and other areas of law such as the

tort of negligence.

Exclusion Clause Whether or not any exclusion clause is valid or not depends on whether it

was properly incorporated into the contract (Chapelton v Barry UDC),

whether there was reasonable notice of the exclusion clause, and whether

the exclusion clause covers that breach. The exclusion clause must not be

ambiguous, or it will be construed against the party relying on the clause,

based on the Contra Proferentum Rule.

Even if the court finds the exclusion clause to be of proper incorporation, it

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may be statutorily invalid. Under section 6(2) of the UCTA, it is provided that

in consumer sales, any attempt to exclude liability for breach of section 13,

14, 15 would be invalid. In contrast, section 6(3) of the UCTA provides that in

non-consumer sales, liability for the breach of section 13, 14, 15 may be

excluded if it is reasonable, based on certain factors such as the ones

mentioned at the beginning of this paragraph.

In this case.....apply the law....however, whether or not this is a

consumer/non-consumer sale .....whether or not the exclusion clause is

reasonable...whether the buyer has lost his right to reject...is a matter of fact

for the court to decide.

In conclusion, liable under SGA...remedies.

Factors vitiating a

contract

This question deals with factors vitiating a contract. A contract may be

declared unenforceable if some vitiating factors are present, such as

incapacity, illegality, against public policy, misrepresentation, duress, undue

inluence, mistake and unconscionability.

Misrepresentation In this case, the laws on misrepresentation are relevant. Misrepresentation is

a false statement of material fact that induces the formation of the contract.

This is true even if the misrepresentation is not the sole inducing factor for

the formation of the contract, as provided for in Edginton v Fitzmaurice. An

opinion does not amount to a representation, unless the maker of the

opinion could not have reasonably believed in the truth of the statement, or

the opinion was backed by evidence. Sales talk also does not amount to a

representation, as a reasonable person would not take such statements

seriously.

If the person relying on the representation is given an opportunity to verify

the truth of the statement, but he does not make use of that opportunity, it

would appear that does not deprive him of his right to sue for

misrepresentaion, as provided by Redgrave v Hurd.

Types There are three types of mispresentation, namely fraudulent, negligent and

innocent.

Fraudulent Misrepresentation is fraudulent if the maker knew it was false or did not

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believe in the truth of the statement or was recklessly careless whether the

statement was true or false, as provided by Panatron v Lee Cheow Lee.

Negligent Mispresentation is negligent if it was made without having reasonable

grounds for its belief, as provided by Howard Marine & Dredging Co v A

Ogden & Sons (Excavations) Ltd.

Innocent The misrepresentation is innocent is there are reasonable grounds for its

belief.

Remedies Remedies for mispresentation include recission of contract, which means

terminating the contract and returning the parties to the position they were

before the contract. Misrepresentation makes a contract voidable, that is,

the contract is still valid until set aside. However, there are certain bars to

recission such as affirmation of the contract, lapse of reasonable time,

resititutio in integrum is impossible or if there are third party rights involved.

In addition, damages may be claimed for fraudulent and negligent

misrepresentations if losses have been suffered. However, for negligent

misrepresentation, by virtue of section 2(2) of the Misrepresentation Act, the

court has the power to disallow recission and grant damages instead. For

innocent misrepresentation, the court may grant indemnity instead.

In excluding liability for misrepresentation, it may be valid under section 3 of

the Misrepresentation Act, provided it is reasonable, such as whether it was

properly incorporated into the contract, whether there was reasonable

notice of it, and whether the clause covers the breach.

There may also be an “entire agreement” clause in the contract that may

exclude liability indirectly.

In this case, identify areas of misrepresentation.

In my opinion, this misrepresentation is fraudulent/ negligent/ innocent.

However, the type of misrepresentation is a matter of fact for the court to

decide.

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The remedies available to XXX are to rescind the contract and claim damages,

or to claim damages only if the court disallows recission, or to be indemnified

if the court determines the misrepresentation to be innocent.

Tort of Passing Off This question deals with the tort of passing off. To establish a tort of passing

off, 3 conditions must be satisfied, as laid down in Reckitt & Coleman

Products v Borden Inc. It must be proved that there is goodwill attached to

the the plaintiff’s business, there is misrepresentation by the defendants that

the goods or services offered are the same as those offered by the plaintiff,

and that the plaintiff has suffered or is likely to suffer losses.

Goodwill Goodwill refers to the benefit attached to the reputation of the business.

Apply the law...is the plaintiff a well-known organisation?

Misrepresentation Next, the defendant must have misrepresented his goods or services. This

could include the name of the business, its logo, and its colour scheme,

among others.

Apply the law...similar name? logo? Question of fact for the court to decide.

Losses Thirdly, the plaintiff must prove that losses were suffered or that he is likely

to suffer losses. If the prior two elements have been satisfied, then it is highly

likely that the offending company could create confusion in the company and

possibily damage the goodwill of the plaintiff’s business.

Apply the law....

Remedies The remedies available to the plaintiff would be to seek an injunction from

the court, and sue for damages or for an account of profits.

Partnerships There are 5 main types of business organisations, namely sole

proprietorships, partnerships, limited partnerships, limited liability

partnerships, and companies. The type of business organisation in this

question refers to partnerships.

Partnerships are governed by the Partnership Act. Section (1) of the

Partnership Act defines a partership as a relation that subsists between

persons carrying on business in common with a view of profit.

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A partnership is an unincorporated business organisation. That means that

the business is not a separate legal entity from its partners and the partners

may be personally liable for the obligations of the partnership.

Partners are agents of the firm, as well as agents of each other. This means

that they owe fiduciary duties of good faith to the firm and to each other. As

a result, there are certain laws governing relationships between partners and

third parties, as well as relationships between partners.

Partnership and 3rd

Parties

A partner of a firm may have actual, implied or apparent authority to enter

into contracts on behalf of the partnership. Actual authority refers to

authority that the parner has been expressly conferred with by the other

partners.

Implied authority refers to authority that a partner would usually have.

Section 5 provides that every partner is an agent of the firm and the other

partners, and any act done by him in the usual way of business will bind the

partnership and the other partners, unless he had no authority to do the act

in question and the person with whom he was dealing knows of that, or does

not believe him to be a partner. Thus, all partners can be made accountable

for debt incurred by a partner acting in the usual way of business. Case law

provides for some guidelines as to what is in the usual way of business. For

example, partners have the usual authority to employ employees and receive

money in respect of debts due to the firm. Ultimately, this is still a question

of fact for the court to decide.

Apparent authority arises if the firm represents to another person that the

partner in question has the authority to do certain acts and that other person

relies on that representation, as provided by section 36(1).

In addition to contractual liability with third parties, there could be tortious

liability. Under section 10, any wrongful act or omission done by the partner

in the ordinary course of business of the firm binds the firm. What is

determined as the ordinary course of business of the firm is a question of

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fact for the court to decide. Section 12 provides that the liability of partners

in relation to torts is “joint and several”. If the claimant has sued a partner

and has not been paid or fully paid, he may bring a subsequent action against

other parners who were not initially sued. Hence, a partnership has unlimited

liability.

Defence

Authority must be in the course of business – by virtue of Lim Kok Koon v Tan

Cheng Yew (2004) the firm was not liable for the actions of a partner as it

was not within the ordinary scope of business for a lawyer to act as a

personal trustee.

Between partners Section 20(1) provides that all property originally brought into the

partnership and all property acquired on account of the firm or for the

purposes of the partnership shall be deemed partnership property and be

applied by the partners exclusively for the purposes of the partnership. If one

partner misappropriates partnership property, he may be liable under the

tort of conversion, or may have to account for any profits as a result of using

partnership property.

Also, section 24(1) states that, unless there is agreement to the contrary,

profits and losses are to be shared equally. In additon, section 24(2) provides

that the firl must indemnify every partner in respect of payments made or

liabilities incurred by him in the ordinary and proper course of the business

of the firm.

With regards to management of the partnership, section 24(5) provides that

every partner has the right to take part in the management of the firm.

Section 24(8) provides that ordinary matters may be decided by the majority

of partners, but that in order to change the nature of the partnership

business, the consent of all the partners must be obtained.

With regards to remuneration, section 24(6) provides that every partner is

not entitled to any remuneration for his services, as there will be a

distribution of profits and there is no presumption of any regular salary.

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In terms of expulsion of partners, section 25 provides that no majority of

members can expel a partner, unless the contract provides otherwise.

Finally, partners owe each other fiduciary duties of good faith. Section 29 of

provides that a partner has to account for any benefit derived by him without

the consent of the other parners from any transaction concerning the

partnership. Section 30 provides that a partner who competes with the

partnership without the approval of the other partners is accountable for the

profits made. Any breach of these sections would result in the partner

returning any profits made or benefits derived, as provided by Bentley v

Craven.

There are several ways of dissolving partnerships, such as by agreement,

non-judicial dissolution, and judicial dissolution.

In judicial dissolution, the partnership may be dissolved by the court as set

out in section 35. For example, section 35(b) provides that where one

partner is guilty of conduct which is prejudicial to the carrying on the

partnership business, the partnership may be dissolved. Section 35(c)

provides that where one partner willfully or persistently commits a breach of

the partnership agreement, the partnership may be dissolved.

Directors’ Duties –

Conflict of Interests

This question deals with the duties of directors, which are bound by both

case law and statutory law. Directors owe fiduciary duties of good faith to

the duty, have duties to act with due care and skill, and have statutory duties

to adhere to.

The case of Furs Ltd v Tomkies (1955) provides that directors have the duty

to avoid conflict of interests. Section 156(1) of the Companies Act provides

that when a company enters into a transaction or is proposing to enter into a

transaction and a director has directly or indirectly an interest in that

transaction, he must declare the nature of his interest at the meeting of

directors as soon as the releavant facts have come to his knowledge. Section

156(2) states that interest shall be taken to mean material interest. Also,

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Section 157(1) states that a director must act honestly and use reasonable

diligence in the discharge of his duties, including avoidance of conflict of

interests.

Section 156(10) and Section 157(3) states that a breach of section 156 and

157 respectively amounts to an offence. In addition, Section 154(2) provides

that if a person has committed any offence under section 157, he may be

disqualified for up to 5 years, unless granted the leave of court.

In this case....apply the law....X has material interest in the

transaction...potential conflict of interest...Whether or not X has breached

his fiduciary duties depends on the following facts: (1) Whether he has

declared his material interest to his fellow directors as soon as he had

knowledge of the transaction; (2) Whether approval of the members of the

company has been obtained. Should they both be satisfied, which is a matter

of fact for the court to decide, then no liability would arise.

If X has breached his fiduciary duties of good faith to the company under

conflict interest heading.....breach of section 156,157, civil and criminal

liability.

Limit potential liabilities by informing directors and obtaining members’

approval before transaction.


Loans and

Guarantees

This question deals with directors’ duties. Directors owe fiduciary duties of

good faith to the company, and have a duty to act in the best interests of the

company, under the bona fide heading. Section 157(1) also provides tha a

director must act in the best interests of the company. Section 162(1) of the

Companies Act provides that a company shall not make a loan or provide a

guarantee or any security in respect of a loan to a director unless:

(1) The act is to provide such a director with funds to meet expensditure

incurred or to be incurred by him for the purposes of the company or

for the purpose of enabling him properly to perform his duties as an

officer of the company.

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(2) The prior approval of the company has been given at a general

meeting at which the purposes of the loan or guarantee have been

disclosed.

(3) The loan is made to such a director who is engaged in the full-time

employment of the company where the company has at a general

meeting approved of a loan scheme to employees, and the loan is in

accordance with that scheme.

Under Section 157(3), a breach of section 157 amounts to an offence. Also,

under Section 162(4), a breach of section 162 amounts to an offence.

By providing a guarantee/loan to X.....apply the law...breached section 162,

criminal and civil liability.

Also, the court may find that while the loan may be in the best interest of the

director, it may not be in the best interest of the company, and the company

may not have to honour the loan as it would amount to a breach of fiduciary

duties under the bona fide heading. The director(s) who approved the

loan/guarantee may also be found to have breached section 157, and be

criminally and civily liable. However, this is a question of fact for the court to

decide.

In my opinion, the company should have disclosed the purpose of the

guarantee/loan during its AGM and seeked approval from its members.

However, if facts of the case reveal that X is also a full-time employee, and

the guarantee/loan is part of an approved loan scheme, then there is no

need to seek further approval as no liabilities would arise from this.


Insider Trading

This question relates to the breach of duties imposed by the Securities and

Futures Act as a result of insider trading. Section 218(1) prohibits insider

trading, and provides that if a person connected to a corporation possesses

information concerning that corporation that is not generally available to the

public, and is such that a reasonable person would expect it to have a

material effect on the price of securities of that corporation, then he is

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prohibited from buying or selling any such securities. Section 219 provides

that persons not connected to the corporation but in possession of price-

sensitive information can come under similar prohibitions.

Section 221 provides that a person who contravenes section 218 and 219

shall be guilty of an offence and shall be liable on conviction to a fine not

exceeding $250,000 or to imprisonment for a term not exceeding 7 years, or

both.

Section 234 provides that the person who contravened section 218 could

face civil liability to a person who has contemporaneously with the

contravention, subscribed for, purchased, or sold securities and who has

suffered a loss.

In thise case...apply the law...show how information is confidential and has

material effect on price.

Thus he is is guilty......

Alternatively, X is liabile under section 232, in which the MAS may bring a

civil claim against him instead.

In addition, X may be found liable under section 234...person who bought

from or sold shares to X can bring a civil action against X to claim the

difference between the price he paid/received and the price at which the

shares would have been transacted at after the information had been made

public.

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