CONTRACT – ELEMENTS WHICH FORM A CONTRACT

Contracts (Pg 58)

Nature of Agreement giving rise to obligations which are enforceable by law
contract - all contracts are agreements but not all agreements are contracts
- 4 elements = offer, acceptance, consideration & intention to create legal relations
Types of Simple contracts
Contracts - oral contracts (parol contracts)
- written contracts (supremacy of written agreement over oral statements)
 Parol evidence rule = oral evidence not admissible to add to, vary, amend or contradict
written contract

Special contracts
- contracts under seal, deed or indenture
 do not need consideration

Offer (Pg 62)

Specific An offer is an expression made by one party (offeror) to another party (offeree). It can be made
Offeree by written, orally or by conduct. For an offer to be effective, the offer must be communicated to the
offeree.
Unilateral A contract brought into existence by the act of one party in response to the conditional promise
Contracts by another.
Offeror may not know the offeree’s identity immediately.
No exchange of promise.
Only 1 promise (made by offeror).
Offeree makes no promise, only performs conditions attached to offeror’s promise.
Carlill v Carbolic Smoke Ball Co. (1892) – Although the offer is made to the world, the contract is
made is that limited portion of the public who came forward to perform the condition on the faith of
the advertisement.
Bi-lateral Both parties would know the identities of each other.
Contracts There is exchange of promise.
Invitation to Advertisement, catalogues, price lists do not constitute an offer.
Treat (pg64) At law an invitation to treat = invitation to commence negotiations. It is an offer to make an
offer. Accordingly, acceptance of an invitation to treat does not constitute an offer.
Patridge v Crittenden (1968).

Display of goods and prices in a shop considered to be an invitation to treat. Pharmaceutical

Society of Great Britain v Boots Cash Chemists (Southern) Ltd (1952) the court held that the
display of goods with prices constituted an invitation to treat, the buyer selecting the goods as his
offer to buy it and the sale took place at the counter when the buyer’s offer to buy it is accepted by
the acceptance of the price.

Internet sales?- Web advertisement which use “loose language” may create an unilateral contract
that can bind the advertiser. Chwee Kin Keong & others V Digilandmall.com Pte Ltd (2004)
(pg65)
Auctions & Invitation to treat = display of goods & services and auctioneer invite bids
Tenders Offer = Bids made by audience
Acceptance = Auctioneer indicates bids accepted
Provision of Mere response to a request for information does not constitute an offer Harvey v Facey
Information (1893) – The court held that there was no contract because provision of information was not an
offer.
Termination of Offer (Pg 74)
General rule = offer can be withdrawn at any time prior to acceptance. When an offer is
withdrawn, the offer is said to be revoked.
- A revocation of an offer must be communicated to the offeree.
- Revocation is only effective when the offeree receives notice of the revocation
Byrne v Van Tienhoven (1880) – It was held that the revocation was not effective until it was
received by the plaintiff. Since the offer was accepted prior to the revocation, there was a
valid contract.

A reliable third party can also communicate a valid revocation. Dickinson v Dodds (1876) The
English Court of Appeal held that Dodds had validly withdrawn his offer to Dickinson even though this
was done through a third party.

Notice of withdrawal need not be explicit

Enough if offeree knows offeror changed his mind. Enough if offeree given information which showed
offeror has changed his mind and no longer wants to proceed with the offer OUI v Turegum
Withdrawal Insurance (2001)

Revocation can be during fixed period of offer

Routledge v Grant (1828) It was held that it was permissible for Grant to withdraw his offer during
the six weeks period despite the implied assurance that the offer would remain open during this
period. The rationale is that an offeree cannot enforce an offeror’s promise to keep his offer open
unless there is separate contract supported by consideration to do so, such contracts are called
options. – Tay Joo Sing v Ku Yu Sang

Unilateral Contracts
General rule = Offer can be revoked before acceptance (full performance) Unfair!
Constructive revocation- Advertise withdrawal on the same medium provided offeree had not done
the obligation
Alter view = Offer cannot be revoked once offeree begins to perform
Abbot v Lance (1860), it was held that the offeror cannot withdraw his offer once the offeree has
started to act. Dickinson Trading (S) Pte Ltd v Transmarco Ltd, 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.
An offer can also be terminated when an offeree rejects offer. Rejection may be made in writing,
orally or by conduct, and must be communicated to the offeror. Once communicated, a rejection
extinguishes the offer and the offer cannot be revived.
Rejection Counter offer construed as rejecting the initial offer. (Offeree accepts offer but on condition of
and new term)
counter - Anything less than an unconditional acceptance may be viewed as a counter offer which
offer (Pg rejects the original offer. Hyde v Wrench (1840) – The court held that there was no contract
78) because Hyde’s reply was a counter offer, which extinguished the earlier offer.
- When the response is an inquiry or a request of information, it should not be construed as an
offer. ‘The Masters Stelios’; Monvia Motorship Corporation v Keppel Shipyard (Pte) Ltd
(1983)
Acceptance after specific period which offeror states that his offer is open = Ineffective
- If the offer is opened for a specified period, a purported acceptance after that period would be
ineffective since the offer had lapsed.
Lapse of
- In certain circumstance, the court may imply that the offeror has specified the period of offer
even if he has not done so expressly. Wee Ah Lian v Teo Siak Weng (1992)
time (Pg
79)  When no specified period of time is expressed, an offer would lapse after a reasonable
amount of time, (depending on the facts of the case). Ramsgate Victoria Hotel Co v
Montefiore (1866) – the court held that Montefiore could refuse to take up the shares
because his offer had lapsed after a reasonable time. For commercial transcations, the
period tends to be shorter since prices continually fluctuate in the business world.
Offer automatically terminated if condition not met
Offer made subject to condition either expressly stated in offer or implied.
For purchase of goods, goods must remain in the same state as when the offer is first made for offer
Failure of to be valid. If goods are severely damaged, offer may be deemed lapsed as the conditions are no
Condition longer met.
(Pg 80) Financings Ltd v Stimson (1962) – The English Court of Appeal held that Stimson was not bound to
the contract because there was an implied condition that at the time of acceptance by the
plaintiff(Financings), the car would be in substantially the same state as when the offer was made by
Stimson. The condition was broken and therefore the offer was no longer available for acceptance.
 - When the offeror/offeree dies, there is no more offer
Dickinson v Dodds  if a man makes an offer dies; the offer cannot be accepted after he is dead.
Death (Pg Reynolds v Atherton (1921)  Offeree dies before acceptance, this offer cease to be capable of
80) acceptance.
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 offeror’s death.

Acceptance (Pg 67) & Termination of Acceptance (Pg 80)

Unconditional expression of assent to the terms of the offer = Acceptance
Cannot change even 1 of terms proposed.
-Conditional Acceptance (counter-offer) not treated as acceptance
-“Subject to contract” not treated as acceptance
An acceptance must be made in writing, orally or by conduct.
AcceptanceCommunication of67)Knowledge of Offer (Pg

As long as offeree has knowledge of offer, motive is irrelevant. Once the 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.
William v Carwardine (1833) – the court held that the plaintiff was entitled to a reward because when giving
the information sought by the police, she had done so with knowledge of the reward even though her motive
for giving the information was her own remorse.

Cross Offers do not make a contract – Tinn v Hoffman & Co (1873) The reasoning appears to imply that
the lack of consensus or meeting of minds between the parties at the time of making the offers.

General Rule: Acceptance effective when communicated to/received by offeror.

If in writing, it must be physically received by the offeror, and if orally, heard by the offeror. obiter dictum in
Entores Ltd v Miles Far East Corporation (1955)
Usually offerors specify mode of communication of acceptance required.

Unilateral contract- Acceptance when offeree had done the conditional promise stated by the offeror. In the
first place, Offeree must know of the contract for the contract to be effective- offer must be communicated to
the offeree.

However, there are 3 situations where acceptance need not be communicated to/received by the
offeror, they are discussed below:
 Waiver of communication
Offeror waives need for communication of acceptance, eg unilateral contract where the offer is made to the
whole world. In such a situation, acceptance = act of one person in response to the conditional promise
made. Carlill v Carbolic Smoke Ball Co. (1892)

Silence constitutes to acceptance

- For this to be effective, both parties must agree to it.
 If offeror imposes on offeree without offeree’s consent  considered not enforceable.
Felthouse v Bindley (1862) – held that there was no contract between the two parties. The
plaintiff had no right to impose a condition that a sale contract would come into existence if the
defendant remained silent.
- In a case where both the offeror and the offeree agree that the offeree would have a positive
Exceptions (Pg 69)

obligation to communicate only if he wishes to reject the offer, is rare. Southern Ocean
Shipbuilding Co Ltd v Deutsche Bank AG (1993)
 “If you wish to reject the offer, you must communicate to me or else silence is acceptance.”
- When there is implicit acceptance. Midlink Development pte ltd V The stansfield Group pte
ltd(2004)- The conduct of paying the rent showed that he had accepted and therefore the contract
exist.

The Postal Rule

- Acceptance deemed 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) – the court held that the
acceptance was communicated and the contract was formed as soon as the plaintiff posted the
acceptance letter. Lee Seng Heng v Guardian Assurance Co Ltd (1932)
 Apply only to acceptance and not revocation/withdrawal of offer
 Applied only when parties have agreed that acceptance should be sent by post. An offer
sent by telegram should not presumptuously assumed that an acceptance by post is acceptable
as it gives rise to presumption that the offeror wishes a speedy reply. (Quenerduaine v Cole
(1883))
 The postal rule can be avoided offerors stipulate that acceptance is not valid until physically
received by the offeror.
 Instantaneous Communications (Pg 72)
Electronic Transactions Act (Pg 73)
1. Instantaneous communications eg phone
- identical to situation where contract made orally.
- general rule apply  acceptance effective when heard by offeror
2. Near instantaneous communications eg ICQ MSN
- very similar to situation where contract made orally (difference = written medium)
- general rule( receipt rule) apply  acceptance effective when heard/read by offeror
- Entores Ltd v Miles Far East Corporation(1955 pg 72)
3. Asynchronous communications or instantaneous transmission eg email, fax
- s11 ETA states that an offer or acceptance can be sent electronically in the form of an electronic
record.
- s13(1), s13(2) ETA states that generally an electronic record is deemed sent by originator himself,
someone authorized by him or by an information system programmed by or on behalf of the
originator to operate automatically.
Exceptions

- s14 ETA states that there are provisions for a party to require an acknowledgement of receipt to
ensure messages have been received properly.
Specific Information System [e.g: e-mail, FAX, voice-mail] designated by addressee for receiving
messages
 No s15(2b)  receipt occurs at the time electronic record enters ANY information system of the
addressee.
 Yes s15(2a)
Is it sent to the designated Information System?
Yes  receipt occurs and acceptance communicated when electronic record enters the
designated information system
No receipt occurs when electronic record is retrieved by addressee.
1) If acceptance is received within normal business hours, communication occurs upon receipt.
2) If acceptance is received outside normal business hours, communication occurs at the start of the next
business day.
Chwee Kin Keong & others V Digilandmall.com Pte Ltd (2004)- Found in favour of the receipt rule.
Automated email response could constitute unequivocal acceptance. The intention to accept an offer is not
undermined merely because it is communicated via automated response. However, defendant won the case
on the basis of unilateral mistake. (pg65)
AcceptanceTermination of

Acceptance cannot be revoked.

“Postal rule” applies: once acceptance posted, acceptance cannot be revoked even if it is by faster means of
communication - Wenkhiem v Arndt (1873)
 Anything given or promised by one party in exchange for a promise or undertaking of another
Consideration (Pg 85)
At law, consideration is essential for all contracts, except those which are under seal. Consideration is the
something which is given in exchange for another thing.
The state of mind of the parties, especially the one performing the act is critical.
Executory Refers to consideration, which is yet to be performed.
Consideration - Involves promise to perform an act in future
Refers to consideration, which has been performed.
Executed
Involves an act or forbearance, which has been fulfilled.
Consideration
Act was performed in exchange for another promise given.
Refers to an act performed prior to and to that extent independent of, the promises being
exchanged. The act was performed without the reciprocal promise in mind as compared to
executed consideration. 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.

Exceptions (Past consideration becomes executed & thus good consideration): State of mind,
Past especially the on performing the act, is critical.
Consideration - Act done at promisor’s request
pg87 - Parties understood act is to be remunerated Have to satisfy ALL 3 rules
- Contract must otherwise be enforceable
Pao On v Lau Yiu Long (1980) – “an act before the giving of a promise to make a payment or to
confer some other benefit can sometimes be consideration for the promise. The act must have
been done at the promisor’s request, the parties must have understood that the act was to be
remunerated further by a payment or the conferment of some other benefit, and payment, or the
conferment of a benefit, must have been legally enforceable had it been promised in advance.”
Followed in Sim Tony v Lim Ah Ghee (1995).
Two Main Rules on Consideration (Pg 88)
1. Must move from promisee but need not move to promisor Promisee must have promised to give up
something in exchange for the promise of another. Tweedle v Atkinson (1861) – the court held that
Tweedle could not enforce the contract between the two fathers (privity of contract) because he is not a
party, and secondly, no consideration flowed from him.
2. Need not be adequate but must be sufficient – Law will not interfere with parties contract so long as
consideration is of “some value” in the eyes of the law.
 Law does not measure value Chappell & Co Ltd v Nestle Co Ltd (1960) – The HOL
held that the consideration included the wrappers even though they were of no value to
Nestle.
Need not be
 Once the subject of exchange is recognized in law as suitable consideration, quantity is
Adequate
irrelevant.
(Pg 90)
 Law will not inquire as to the fairness of the consideration as long as the parties agreed
to it willingly.

Sufficient Goods, Any gds, svcs or property with some value in the eyes of the law is clearly
(Pg 91) Services, sufficient/valuable consideration, thus good consideration.
Money and
Property
Forbearance Promise not to sue or enforce a valid claim or settlement of legal action =
to sue sufficient consideration Alliance Bank Ltd v Broom (1864). K-Rex Finance
Ltd v Cheng Chih Cheng (1993)

The same applies to a compromise of a legal action, e.g.: through an out of

court settlement.
 The requirement is that the legal action is that it must be reasonable
and not frivolous [silly or unimportant], that the claimant has an honest
belief in the chance of success of the claim and that the claimant has
not concealed from the other party any fact which, to the claimant’s
knowledge, might affect its validity. Miles v New Zealand Alford Estate
Co (1886)
 Malayan Banking Bhd v Lauw Wisanggeni(2003): Held that the bank
had furnished their consideration by giving more time to repay his
outstanding debts. Although this consideration does not benefit the
defendant, it is held that consideration moved from the plaintiff need not
benefit the defendant.
 Performance of existing contractual duty to 3rd party = sufficient
consideration Eurymedon (1975) – The Privy Council held that even though
Performance
the defendant was already contractually bound to a third party to do so, the
of existing
defendant’s act of unloading the ship formed good consideration for the contract
contractual
with the plaintiff. (double jeopardy to labourers as they can be sued twice if they
duty to third
didn’t unload in time) Also clarified in Pao On v Lau Yiu Long (1980) by the
party
HOL. Also accepted in the Singapore High Court in SSAB Oxelosund AB v
Xendral Trading Pte Ltd (1992).
Perform more Promisee did something more than required by an existing contract/public
than required duty = sufficient consideration Glassbrook v Glamorgan (1925) – sufficient
by existing consideration as police went beyond public duty by providing more men than
contract or they deemed adequate Hartley v Ponsonby (1857) – sailor required to do
public duty much more than expected from him originally
Performance Williams v Roffey (1991) (Pg 95) promise of extra $ by defendants (main
of existing contractor) to plaintiffs (sub-contractors) enforceable. Performance of existing
contract if contract = sufficient consideration as long as
promisor - promise not made under fraud
obtained - defendant obtained “practical benefit” (In Williams v Roffey, the
“practical practical benefit was that the defendants would not be liable under the
benefit” main contract for late completion)
Eastwood v Kenyon (1840) – Court rejected the plaintiff’s view and held that
Moral moral obligation is insufficient consideration for a fresh promise. Thomas v
obligation & Thomas (1842) –The nominal rent was sufficient consideration but the
motives husband’s wishes were irrelevant; motives (the husband’s wishes) is not
legally enforceable as it lacks good consideration.
Vague or White v Bluett (1853) – Bluett’s promise was nothing more than a promise “not
insubstantial to bore his father”. As such it was too vague & was insufficient consideration
consideration for the alleged discharge by his father.
Performance When the purported consideration is the performance of an existing public
of existing duty = insufficient consideration Collins v Godefroy (1831)
public duty
Insufficient
Performance When the purported consideration is the performance of an existing
(Pg 93)
of existing contractual = insufficient consideration Stilk v Myrick (1809) – It was held
contractual that there was no consideration for the captain’s promise because the remaining
duty crew did what they were contractually required
Pinnel’s Case (1602)(Pg 97) – Part payment of a debt does not discharge the entire debt
and so it is insufficient consideration, unless:
- part payment was requested and accepted by creditor
- payment was made earlier, at a different place, or in conjunction with some other
valuable consideration (example, money available earlier is more beneficial)
Foakes v Beer (1884) affirmed Pinnel’s Case – the HOL held that Beer’s promise not to take
further action was not supported by consideration & payment not made in advance but stretched
over 10 weeks. Mrs Beers could claim the money.
When Promissory Estoppel is established, the promisee may have a valid defence against
a promisor’s claim even if no consideration flow from the promisee.
Hughes v Metropolitan Railway Co (1877)
– 4 Requirements for Promissory Estoppel
- Parties must have existing legal relationship
- Clear and unequivocal promise which affects the legal relationship
- Promisee relied upon promise and altered his position
- Inequitable (unfair) for the promisor to go back on his promise.
Central London Property Trust v High Trees House Ltd (1947) D&C Builders v Rees (1966)
Promissory
Effect of promissory estoppel = suspensive or extinctive
Estoppel
Suspensive: Original legal relationship suspended for duration of promise (the edited promise?)
(For no
- Effect of Promissory Estoppel is to suspend promisor’s rights temporarily
consideration)
- When promisor gives reasonable notice of his intention to revert to the original legal
(Pg 98)
relationship, the original relationship is restored
Tool Metal Manufacturing Co Ltd v Tungsten Electric Co Ltd (1995)

However, the promise (the edited promise?) could become ‘final and irrevocable if the promisee
cannot resume his position.” Ajayi v R T Briscoe (Nigeria) Ltd (1964)pg100
Shield not sword
- Can only be used as a defense against a claim by a plaintiff
- Cannot be used to commence a suit. Combe v Combe (1951); Lai Yew Send v
Pilecon Engineering (2002)
Intention to Create Legal Relations (Pg 101)
- To determine if the promisor has an intention to create legal relations, Objective Test is used.
- 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.
General presumption = no legal intention
- 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. Choo Tiong Hin v Choo Hock Swee (1959) – the plaintiff’s promises were not
Social and
enforceable because the lack of intention to create legal relations.
Domestic
Agreements
However, in 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. For example, if the couple are
not on good terms, it can be argued that there is an intention to create legal relations and thus
promise is enforceable.
General presumption = Legal intention
- Edwards v Skyway Ltd (1964) - There is necessary intention to create legal relations. The court
held that Skyways was legally bound.

Exceptions (not legally binding):

1. Honour Clauses
- when parties have expressly stated that their agreement is not to be legally binding (Rose &
Commercial Frank Co v J R Cromption & Bros Ltd (1925))
Agreements
2. Letter of comfort, intent, awareness and Memoranda of Understanding
- HSBC v Jurong Engineering (2000) – Letter of awareness held not binding.
- Kleinwort Benson Ltd v Malaysian Mining Corporation Berhad (1989) – Court only found a
moral not legal obligation.

3. Administrative relationships
MCST 473 v de Beers (2001) – Application for license does not give rise to legal relationship

Privity of Contract (Pg 102)

General rule = only those who are party to contract entitled to enforce or be bound by terms of contract
Price v Easton (1833) – court held that Price could not succeed, as he was not a party to the contract between the
debtor and the Easton.

Exceptions (3rd party who’s not a party of the contract, entitled to enforce or be bound by terms of contract)
Thai Kenaf Co Ltd v Keck Seng (S) Pte Ltd (1993)
- Agency relationship [pg. 107]
A person (principal) authorizes another person (agent) to act on his behalf
According to general rules of agency, the principal, although not a party to the contract, has a direct
contractual relationship with the Third party.

- Assignment of choses in action [pg. 107]

Rights and liabilities is transferred to a third party. Made in consent of all three parties.

- Letter of Credit [pg. 107]

Seller can sue the bank for non-payment even though the underlying sale contract is between the buyer and
seller and the underlying contract of the letter of credit is between the buyer and the bank.

Contracts (Rights of 3rd Parties) Act (Pg 107)

Does not abolish privity rule but adds additional exceptions
1. Contract states expressly that he may do so S 2(1a) CRTA
2. Contract purports to confer benefit on 3rd party S 2(1b) & S 2(2)CRTA
3. Contract expressly identifies 3rd party by name/member of class/particular description S 2(3) CRTA
Contract (Rights of 3rd Parties) Act can be excluded if clause is included to prevent 3rd parties from executing his
rights
CONTRACT - TERMS (Pg 113)

Puffs, Representation, and Terms (Pg 114)

Statements with no legal effect whatsoever. They tend to be statements which are vague
Puffs (No legal
because they are imprecise or exaggerating. – Dimmock v Hallet (1866) – Court held that the
effect)
description of the land “fertile and improvable” was a mere puff.
Statement made before or at the time a contract is formed concerning some matter relating to
Representation
the contract. Although it may be in writing, it is not an integral part of the contract. Contract is
(Not part of the
not breached when representation held to be untrue. Behn v Burness (1863) Party can only
contract)
take action under law of misrepresentation but cannot initiate action for breach of contract.
Terms are statement, which form part of the contract. Only similarity between terms &
Terms (Part of the
representations is that they originate as oral & written statements before contract formed.
Contract)
Terms are part of contract while representations are not. Terms & representations create
different rights & obligations for the contracting party.

Guidelines to distinguish terms from representations (Pg 115)

- Main criterion is to look at the intention of both parties. The basic test is whether there is evidence that one
or both contracting parties intended that there be contractual liability in respect of that statement.
- Not necessary to use or apply all the guidelines.
Statement made closer to the time the contract concluded, more likely to be a term
When Statement Routledge v McKay (1954) – There was clear & significant interval of 1 week between the
was Made making of the statement & the making of the contract. So the statement was not a term of the
contract.
The greater the emphasis, the more likely the statement is a term. Bannerman v
Maker’s Emphasis White (1861) – Bannerman was found to have breached contract, thus entitling White to
repudiate contract.
Maker of the statement has greater knowledge concerning the statement ( more likely
to be a term Oscar Chess Ltd v Williams (1957) – William’s statement was not a
term of the contract because as a private individual, Williams was not in a position to
Maker’s Special
guarantee the accuracy of the year of registration given.
Knowledge
Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd (1965) – There
was a breach of contract because the defendant’s statement was a term of the contract. The
seller, a motorcar dealer, was in a better position to know the true facts regarding the Bentley.
Invitation to Verify Maker of the statement didn’t invite other party to verify truth of statement made, more
Statement likely to be a term. Ecay v Godfrey (1947) – statement held to be a representation.
Statement written, more likely to be a term (Parol Evidence Rule) written contract is
Written Statement
exhaustive [complete], anything not written, not part of contract

Express and Implied Terms (Pg 117)

Express term = Term which has been expressly agreed between the parties. Can be made orally or in writing.
Parol Evidence Rule
If the terms are reduced to writing, what is orally agreed generally cannot be used as evidence. Once an agreement
is reduced to writing, evidence cannot be raised to contradict, vary, add or subtract from the agreement. Hawkrish v
Bank of Montreal (1969). Exceptions to the case was evident in Exklusiv Auto Services Pte Ltd v Chan Yong
Chua Eris (1996).

Implied term = Term which has not been expressly agreed by the parties but is nevertheless implied into the contract.
Implied terms can be implied into the contract by a court to give efficacy to the contract or it may be implied by a
statute.
Implied Terms

UsageCustom &

Terms can be implied into the contract because such contracts are subjected to unwritten terms
hallowed by long usage or custom. Hutton v Warren (1836) – Hutton was entitled to such the
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 seed and labor.
 The court will supply a term which it considers must have been intended by the parties, so as to
ensure that their contract will proceed on normal business lines. The Moorcock (1889) – Even though

Business Efficacy
the defendant did not give any warranty that the ground below the jetty was safe, there was an implied
undertaking to this effect. Hence the plaintiff succeeded.
Officious bystander test – So obvious it goes without saying 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 is that the term to be implied must
be necessary for the contract. Having power to imply terms to ensure business efficacy does not mean
that a court will exercise its discretion whenever reasonable to do so. [Must be necessary not merely
reasonable]
Statute

Terms can also be implied by statue. E.g. Sales if Goods Act

It is irrelevant that the parties are unaware of the statute

Classification of Terms (Pg 121)

Terms which are important, essential or fundamental to the contract. They are statements of fact or
Condition

promise which go to the root of the contract.

Breach
A breach of condition entitles injured party option to affirm or discharge contract. In either case,
he may also claim damages.
Warranties are less important terms and constitute secondary obligations. If a warranty was breached,
the breach would not go to the root of the contract.
Warranty

Breach
A breach of warranty entitles injured party to claim damages only & the contract remains on foot.
Bettimi v Gye (1876) – the court held that the rehearsal clause was not vital to the contract. Bettini’s
breach of the warranty did not entitle Gye to repudiate the contract. The contract remains on foot and
Gye could claim for damages.

Innominate terms cover terms which can be breached resulting in trivial consequences, or in
serious consequences. 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.
Innominate Term

Trivial consequences  like breach of warranty - entitles injured party to claim damages only &
the contract remains on foot.

Serious consequences  like breach of condition - entitles injured party option to affirm or
discharge contract & either case can claim damages.
- What are serious consequences? It depends on whether the breach deprives the injured party
of substantially the whole benefit which he was intended to obtain as the consideration for his
undertakings.

Exemption Clause (Pg 123)

An exemption clause is a term in the contract which seeks to exclude total liability of the party relying on the clause.

There is another type of clause called the limitation of liability clause which seeks to limit the liability of the party
relying on the clause
.
The party who wishes to rely on an exemption clause must establish the four points below:
1. Incorporation – the clause must be incorporated into the contract
2. Construction – the clause, properly construed, must cover the loss or injury which occurred.
3. Unusual factors – There must not be any extraordinary facts in the case which prevents the operation of
the clause
4. UCTA – the clause must not contravene the UCTA.
 Signed
L’Estrange v Graucob (1934) – The document containing contractual terms is signed, then in the absence
of fraud or misrepresentation, the party signing it is bound, and it doesn’t matter if he has read the
documents or not.

If not signed, EC can still be incorporated if sufficient notice given:

1. Where Notice is placed

Should be located at a place which a reasonable person would expect to find to be effective. Chapelton v
Barry Urban District Council (1940) :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.

2. When Notice is Given

Incorporation (Pg 125)

To be effective the notice must be given before or at time the contract was made. Olley v Marlborough
Court Ltd (1949) – Contract was already formed before couple entered room & therefore notice given on
the bedroom wall was too late.

3. Adequacy of Notice [Reasonable sufficient notice]

Reasonable steps taken to bring notice to attention of injured party to be effective. Thornton v Shoe Lane
Parking Ltd (1971) – 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. Also, a notice at a different section of the
car park is not acceptable.
Thomson [illiterate] v London Midland Scottish Railway Co (1930) – Reasonably sufficient notice was
given since the ticket made reference to exemption clause. Plaintiff’s illiteracy did not help her.
Geier v Kujawa, Weston & Warne Bros (Transport) Ltd (1970) A different outcome may emerge if the
party relying on the clause knows from the very beginning that the injured party is under some disability.
Driver knew her disability and did not take the reasonable step of translating the notice.

4.Previous Course of Dealings

If there has been previous course of dealings between the parties which included an exemption clause, and
the parties indicated that the present contract would be bound by the terms of the earlier contract, then the
exemption clause may be incorporated through the previous course of dealings. Henry Kendall & Sons v
Williams Lillico & Sons & Ors (1969) - The exemption clause formed part of the contracts (But in this
instance, the e.c. was held to be ineffective from shielding from liability) + Spurling v Bradshaw (1956)

The wider the clause the more protection it will provide to the party relying on it.
2 rules of construction
Contra Proferentum Rule
Where there is any ambiguity in interpreting a clause, the construction to be adopted is the one which is
least favorable to the person who put forward the clause Hollier v Rambler Motors (AMC) Ltd (1972
Main Purpose Rule
It states that there is a general presumption that the parties do not intend an exemption clause to defeat or
Constructon (Pg 129)

to be repugnant to the main purpose of the contract.

Exemption clause is ineffective when there is a fundamental breach of contract. 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 HOL later ruled that the clause did include the breach. This is
because the court viewed the rule simply as a rule of interpretation or construction. Thus Securicor was not
liable.
Exemption Clause and Third parties
EC effective to protect 3rd parties? The privity of contract rule allows only contractual parties the
rights under the contract  3rd parties cannot shelter behind EC, unless the EC extends to the 3 rd
parties, such as the CRTA[Chapter 4].
New Zealand Shipping Co Ltd v AM Satterrthwaite & Co Ltd (1975) – the court allowed it. Privity of
contract[Chapter 4] involved but there is a loosening of the general rule. Pg131
Unusual Factors

Curtis v Chemical Cleaning & Dyeing Co (1951) – a misrepresentation to the true scope of the EC could
render the entire clause invalid.

Evans (J) & Sons (Portsmouth) Ltf v Andrea Merzario Ltd (1976) – The court held that the oral assurance
which created a collateral contract neutralized the written contract’s EC.
Collateral contract that runs parallel to the main contract as an exception to the parol evidence rule.
(Pg 131)

S3 Misrepresentation act- If liability arises from misrepresentation, the misrepresentator can only
(Pg

seek protection behind an exemption clause if the clause is reasonable and applies even in non-business
liability transaction unlike UCTA
133)Misrepresentation

The UCTA requires EC to be “reasonable” to be valid.

- UCTA not only applies to contract cases but also to EC in tort cases
- Burden of proving reasonableness falls upon the party seeking to rely on the EC
- Apply only in cases of ‘business liability’. Subject to exceptions.UCTAs1(3)
- Looks at the bargaining power of the party

Two key sections 2 & 3

S2(1) – Liability for death & personal injuries arising from negligence cannot be excluded. Xu Jin
Long v Nian Chuan Construction Pte ltd(2001)-negligence liability
S2(2) – Liability for other types of damages arising from negligence can be excluded if EC satisfies
reasonableness. (financial loss or property damages) negligence liability
S3 – For consumer & non-consumer transactions, EC must satisfy “reasonableness” to be valid.
Contracutal liability
S6- For consumer transaction, then the exemption clause must be reasonable to be valid. It also
protects them under s 12-15 sales of goods act such that the seller cannot exclude liability under
SGA by using exemption clause. This is absolute prohibition. Refer to lect notes for SGA
S3 Misrep. Act – if liability arises from a misrep., the misrepresentor can only seek protection
behind EC if it is reasonable.
WHAT CONSTITUTES TO REASONABLENESS THEN?
S11 – reasonableness must be judged at the time the contract was made and not at the time the breach
UCTA (Pg 132)

occurred and the person who is alleging that the clause is reasonable has the burden of proving it to be
such.
2nd Schedule Guidelines:
1. Bargaining strength of parties – if bargaining strengths of parties are equal, EC considered to be
reasonable. Cosmat Singapore (Pte) Ltd v American National Trust and Savings Association
(1992) – the EC was held to be valid. Both parties considered to have equal bargaining strength.
2. Whether customer received an inducement to accept EC – if received an inducement to
accept EC, more likely to be reasonable.
3. Whether customer knows about exemption clause – All factors in the incorporation of EC. If he
knows then reasonable.
4. Compliance with some condition – If compliance with certain condition practical, more likely to
be reasonable.
Geoge Mitchell Ltd v Finney Lock Seeds ltd (1983)- Exemption clause was unreasonable
pursuant the equivalent s6(3) UCTA because the buyer could not discover the breach until the
plants grew whereas the seller was at all times in postion to know if the wrong seed was supplied
5. Whether goods specifically ordered – Special order probably makes EC more reasonable. E.g.:
A good is manufactured according to specifications by the customer and it causes damage to him,
the EC is reasonable, such that any defect in the good is due to customer’s specifications.

Even if a party knowingly enters a contract with a restrictive condition, he will still be able to seek protection
of UTCA (refer to bk for more reference)
CONTRACT - VITIATING FACTORS
There are 4 main factors, which can affect the enforceability of a contract.

INCAPACITY (Pg 142) – Lack of capacity which may characterize a contracting party.

Minors The category of persons who lack capacity are called minors.
Relevant Acts / Cases
Valid Contracts – Binds If minor has performed his obligations by payment of money or
both minor and other party, delivery of goods and services, he is unable to recover any monsy
but on the whole must paid or goods delivered by him unless there is a total failure of
benefit the minor consideration by the other party. Valenti v Canali (1889)
Nash v Inman (1908), Pg145
Beneficial Contracts (Ctt. Unenforceable because Nash fail to prove that the clothes were
for necessaries – necessaries)
Necessaries refer to
those goods and Peters v Flemings (1840) Pg145
services which the law (Flemmings bought gold watch and chains which could be
deems reasonably necessaries for his position)
required by a minor in
his particular station in S3 SGA defines necessaries
life. S3 (2) SGA deals only with executed contracts in that the goods must
have been ‘sold and delivered’ to the minor.
Goods: (Nash v Inman)  the other party must have performed his
obligations before the contract is binding upon the minor ( provided
Executory Contracts that it is a valid contract)
for Necessaries
Services: (Roberts v Gray)  binding upon the minor regardless
whether the other party has performed his obligations or not.
De Francesco v Barnum (1890) Pg147
Beneficial Contracts
(Contract is totally not beneficial to the minor)
for Employment – The
important point is that,
Chaplin v Leslie Frewin (Publishers) Ltd (1966) Pg 147
overall the contract
(Contract on the whole is beneficial to the minor even though there
must benefit the minor
are certain aspects that are not advantages to the minor)
Loans for Exception exists if money is used by minor to purchase necessities.
Necessaries – A
person who lends Financial Institutions in Singapore typically lend money to minors only
money to a minor if minor can supply a guarantor who will guarantee the loan. Can
is generally unable enforce the contract against the guarantor
to enforce the
contract and
recover the
money.
 Voidable Contracts – Binds
other party and binds minor
unless minor repudiate. Minor is entitled to repudiate the contract without any liability on his
Arises when a minor part any time during his infancy or within a reasonable period of time
acquires an interest in a after he attains majority. Until he repudiates, the contract remains
subject matter where the enforceable. Davies v Benyon-Harris (1931) Pg148
minor faces recurring future (Minor entered into a lease for flat. Held that contract is not void but
obligations. Eg, lease, voidable and thus enforceable against him
partnership and purchase of
shares in a company.
What amounts to reasonable time within to repudiate a voidable contract is a question of fact which
depends on the circumstance of the case. 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).
Ratifiable Contracts – If a minor’s contract does not within the class of valid or voidable, it
binds minor only if minor would be ratifiable. Such contracts would not be valid or enforceable
ratifies after he attains against the minor unless he ratifies it after he attains majority. The
majority. Nevertheless, contract nevertheless binds the other party.
contract binds the other
party. If ratified, defendant to transfer to the plaintiff(minor) any property
acquired by the defendant under the contract, or any property
representing it
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:
Mentally
- he was incapable of understanding the nature of the contract;
Unsound
- the other party knew or ought to have known of his incapacity.
and
Che Som bte Yip & Ors Maha Pte Ltd & Ors (1989)
Intoxicated
Persons
S 3(2) SGA also applies to mentally unsound and intoxicated persons. When they have obtained
goods which are necessaries, they may be required to pay a reasonable price for the goods.

ILLEGALITY (Pg 150) – When the source of law is infringed – whether statue or common law.

Illegal Gaming and
Contracts
Wagering (Pg
151)
Contracts Contrary to
Public Policy (Pg 152)
Contracts Contrary to
statute(Pg 152) Refer to
lecture notes. The issue is
whether the relevant
statute intended only to
prohibit the offending
conduct, resulting in
criminal sanctions, or
whether it intended to
prohibit the contract as
well, resulting additional
civil consequences.
S6 Civil Law Act, contracts of gaming and wagering are generally
void by statute. Thus, no legal effect and unenforceable. May involve
Betting Act. Exception will be legalize gaming and wagering
contracts authorized by Singapore totalisator board act.
When the ctt contravenes some aspect of public policy.
1)To commit a crime,tort or a fraud on a third party Apthorp v
Neville & co(1907)
2) promote sexual immorality
3) benefit a foreign enemy or undermines the relationship with a
friendly country
4) Inimical to administration of justice(give false evidence in trial, 5)
oust the jurisdiction of the courts.
Illegal because statutory provisions prohibit them.
1) Contract expressly prohibited. Re Mahmoud and
ispahani(1921)- Held that contract was unenforceable as it is clear
that this particular kind of contract shall not be entered into and thus
contract is void. Property not recoverable.
2) Only penalize certain conduct without rendering the entire contract
void.St John Shipping Corporation v Joseph Rank ltd (1957)-
Held that overloading of ship is illegal but might not cause a contract
of transporting goods to be void. an unlawful performance on an
otherwise lawful contract does not necessarily renfer the entire
contract void.

3) Statutory provision imposes a fine for non-compliance- would not

cause the entire contract to fail:shaw v groom(1970). Parties
contractual rights and obligations remain unaffected by the illegality.
 Contracts in Restraint of A restraint of trade, in essence, a contract which seeks to prevent or
Trade (2 classes of minimize competition.
contract, employment The general rule is that such clauses or contracts in restraint of trade
and sale of business are void Asiawerks Global Group Pte Ltd v Ismail bin Syed
contract) Ahmad
Critials for vaildity of restraint of trade

- Legitimate interest
The restraint must protect some proprietary or legitimate interest of the employer ( the
person benefitting from the restraint). Trade Secrets and trade contracts may constitute
legitimate interests. A restraint intended merely to minimize competition or to prevent an
employee from using personal skills or knowledge acquired during his previous employment
is then likely to be void. Sratech Systems Ltd v Nyam Chiu Shin & Others (2005)
(restraint invalid)

- Reasonable Scope
Reasonable in terms of its period, geographical scope and subject matter.
Mason v Provident Clothing & Supply Co Ltd (1913) –Held that the area of restraint was
1000 times larger than the area in which he was employed)
Asiawerks Global investment Group Pte Ltd v Ismail bin Syed Ahmad & Another
(2004)
(Restraint void because scope too broad)
Court will ensure that the restraint of trade goes no further than what is necessary to protect
the interest concerned.

- Public Interest
Contrary to public interest.
Esso Petroleum Co Ltd v Harper’s Garage (Stourtport) Ltd (1968)
(Restraint too long and the test of reasonableness requires a consideration of the public
interest which must be protected in such exclusive dealing agreements.
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.
In some cases the court may allow an innocent party to recover property which
Recovering
would otherwise pass to the defaulting party under the illegal contract.
Property
However,claim cannot rely on an illegal contract. Tokyo Investment v Tan Chor
(Pg 157)
Thing (1993) (TCT allowed to recover the shares)(refer to pag157)
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).
Recovering However the innocent party may be able to recover damages from the defaulting
Damages party. Archbold’s (Freightage) Ltd v Spanglett Ltd (1961)-Contract was illegal in
Effects of performance and plaintiff was not aware of the illegality. The lack of awareness of
Illegality the illegality(a fact) is different from the lack of awareness of law.
Sometimes within the clause itself particular words cab be severed so as to save
the rest of the clause. Generally, severance is possible in cases of illegality if:
a) the promises are severable in nature
b) it is possible to sever the void part by deleting the offending words or
clause without adding, substitutin, rearranging or re-drafting the contract
Severance
(blue pencil test)
c) 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) – When the source of law is infringed – whether statue or common law. 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.

Criteria for misrepresentation:

In a claim for misrep., the operative statement must be one of past or existing fact. It cannot be a
mere statement of opinion or statement of some likely future event. A statement of intention as to
future action could be a false statement of fact if at the point of making the statement, the
representor did not in fact hold that intention. Edgington v Fitzmaurice (1885) (Information in the
prospectus is different from the real intention.)

A statement of opinion usually cannot form the basis of a misrepresentation. Unless respresentor
had access to relevant facts and had no reasonable ground for holding such and opinion. Bisset v
Wilkinson (1927) (The property cannot hold that much sheep but that claim was a statement of
False opinion and did not amount to misrep.)
Statement of
Fact Silence does not amount to misrepresentation. Keates v Lord Cadogan (1851) (Court held that
Pg 162 Lord Cadogan had no duty to disclose the state of his house, therefore, no misrep.) However, if
silence:
a. is a partial non-disclosure if what is stated becomes a half-truth by what is left unsaid. E.g.
Saying the place is fully let but did not say the tenants had given notice to quit. This
constitute misrepresentation. Dimmock v Hallett (1866)
b. a change of circumstance arose which rendered a previously truthful statement misleading.
With v O’Flanagan (1936)
c. in fiduciary contracts, a duty is imposed upon one party to disclose facts to the other party.
e.g. insurance contracts.

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) In the case of Tai Kim San v Lim Cher Kia
(2001), the false statement did not induce the plaintiff, thus there was no misrepresentation.
Inducement
Pg 164
A mere opportunity to investigate the truth of the statement but did not does not deprive the other
party to rely on the misrepresentation unless the innocent party knew about the misrepresentation
before entering the contract or did not rely on the misrep when entering the contract. In Redgrave
v Hurd (1881), the misrepresentation was an innocent one and the contract was rescinded.

Categories for Misrepresentation

Derry v Peek (1889) – For fraudulent Remedies Pg 168

The representor knowing misrep. to arise, the false representation Rescission + Damages
that is false makes the must be made knowingly, or without belief in
false statement. It is also its truth, or recklessly, careless whether it be Res. is possible even if
known as the tort of true or false. None of these elements were the false statement has
deceit. (Representee present in this case, thus no fraudulent become a term of the
Fraudulent must prove that there is misrep. contract. S1 Misrep.
Misrep. dishonesty on the part of Act.
Pg 165 the representor, there is In Panatron Pte Ltd v Lee Cheow Lee
no fraud even if the &Another (2001), the respondents was Once representee
statement is farfetched, induced by the misrepresentation to invest chooses to rescind the
negligent, or ill- and the representor had knowledge of the contract. It becomes
conceived. A high degree company’s status, it was held that it is of void ab initio, treated
of proof is needed) fraudulent misrepresentatin. as if is has never
existed.
Negligent misrepresentation arises when
Howard Marine & Dredging
the false statement is m,ade by the
Co Ltd v A Ogden & Sons
representor without due care. This is in
(Excavations) Ltd (1978)
Negligent S2(1) Misrep. Act. This makes the Rescission (or
The manager was still liable
Misrep. representor who makes a false damages in lieu) +
as a reasonable manager
Pg 166 statement liable even without fraudulent Damages
would have checked the
intent unless he can prove he has
shipping documents and not
reasonable grounds to believe the
relied on the Lloyds Register.
statement to be true.
 Innocent
misrepresentation is a
false statement made in
Rescission (or damages in lieu) + Indemnity.
the absence of fraud and
Innocent
fault. The representor had
Misrep. An Indemnity is an obligation whereby one person is held responsible
made the statement
Pg 167 for the liability of another person. An indemnity is used to help restore
believing and having
the injured party to his status quo ante (the position before hand)
reasonable grounds to
believe in its truth.
Redgrave v Hurd (1881)
Rescission is not possible when:
a. the contract is affirmed expressly or impliedly by the representee after he discovered the
misrep.
b. a reasonable amount of time has lapsed after the discovery.
c. Impossible to restore to their original position.
d. Court exercises discretion (S 2(2) Misrep. Act) to award damages in lieu of rescission.

MISTAKE (Pg 153)

Common mistake occurs when both parties to the contract make the same fundamental
Common
mistake. Couturier v Hastie (1852)
Mutual Mutual mistake occurs when the parties misunderstand each other and are at cross purposes.
Only when one party is mistaken. Chwee Kin Keong & Others v Digilandmall.com Pte Ltd
Unilateral
(2005) – The appellants have constructive knowledge of the mistake in pricing of the printers
Non est factum means “it is not my deed”. Arises when a person signs a document that is
fundamentally different in character from that which he contemplated. Lee Sire Chun v
Sourgrapes Packaging Products Pte Ltd (1993) To avoid a contract on the this basis, the
plaintiff must show
Non est factum
a. the document signed is radically different or totally different in character or substance
from that which he intended to sign
b. he had not been careless in signing the document
c. he took such care as a person in his position ought to have taken.

OTHER VITIATING FACTORS (Pg 172)

If a person is forced to enter into a contract as a result of actual violence or threats of actual
violence, the contract would be unenforceable.

Economic Duress refers to unlawful or illegitimate commercial pressure. If a party to a

commercial transaction is left with no choice but to agree to certain terms and agrees to those
terms under protest, economic duress may be made out. Atlas Express Ltd v Kafco Ltd
(1989)

Criteria for economic duress:

Duress
1) Whether the defendant did or did not protest
2) Whether, at the time of coercion, the defendant had an alternative course open to him such
as an adequate legal remedy
3) Whether the defendant was independently advised
4) Whether after entering the contract, the defendant took steps to avoid it

The party must have objected in the first place (protest) and take steps asap to avoid changes
to the contract. If not they would lose their right as in North Ocean Shipping Co Ltd v Hyundai
Construction Co Ltd (1979)
Undue Undue influence is the unconscientious use of one’s power or authority over another to obtain a
Influence benefit or achieve a purpose by exerting improper pressure.A situation when the contract may
(Pg 174) not be entered into by one’s own free will. Undue influence seeks to prevent victimization.

2 types of undue influence

1) Undue influence must be actually proven
2) By virtue of the relationship between the parties, the law automatically presumes that undue
influence is present and the burden of proof is then on the party complained of having exercised
undue influence to show that no undue influence in fact has been exercised.

Undue influence is also presumed in some relationships like solicitors and clients, doctors and
 patient
Lim Geok Hian v Lim Guan Chin (1994).. Brother and sister is not presumed and must be
proved.

1) To establish undue influence, the person who raises the complaint must establish the
following:
a. that the other party had the capacity to influence the complainant
b. the influence was exercised
c. its exercise was undue
d. its exercise brought about the transaction

2) When it is presumed, the presumed party has the burden of proving that

there is no undue influence.

Vague concept suggests that any agreement which is manifestly inequitable and constitutes an
Unconscionable unconscionable bargain should be set aside.
Bargain
(Pg 174) This can be an exception under Singapore law and does in fact constitute a vitiating factor for
contracts involving performance bonds.

CONTRACT – DISCHARGE (Pg 179)

Discharge = termination of a contract. After a contract is discharged, the parties are relieved of
their obligations under the contract. There are four ways  Performance, Breach, Agreement and
Frustration.

Performance (Pg 180)

Performance – discharging a contract by performing all obligations as stipulated in the contract.
If the contract is an entire one, there must be precise performance to discharge the contract.
Precise Performance = perform all their obligations fully & precisely
Cutter v Powell (1795) - payment conditional upon completion of voyage, and since Cutter did not complete the
voyage; even part payment need not be made – very harsh.
Re Moore & Co and Landauer & Co (1921) - buyer lawfully entitled to reject shipment on the basis of less than full
& precise performance.
Over the years, the courts have acknowledged that this rule of full & precise performance, if applied strictly,
may cause unfairness. Here are the exceptions to this rule:
If deviation in performance microscopic = contract deemed to have been
De minimis performed fully & precisely. What is microscopic depends on the facts of the case.
Acros Ltd v E A Ronaasen & Sons (1933) - Although staves were of merchantable
rule quality & could be used to manufacture cement barrels, contract was breached because
staves did not correspond to description of the goods.
Divisible Contract may be viewed as several independent/divisible obligations
- Viewed as several sub-contracts that can be discharged separately eg Employment
contra Contracts.
cts - Cutter v Powell (1795) – this unfair outcome can be avoided.
Exceptions to the Precise Performance Rule (Pg 180)
The promissor has substantially performed obligations under contract, able to
claim full payment less any amount necessary to make good the defect.
Boone v Eyre (1779) - According to the principle in the case, where a promisor has
substantially performed his obligations under a contract, he can claim the agreed
payment, less the amount necessary to make good the defect.
Two cautionary remarks –

1. IF contract is an entire obligation & payment is made conditional upon

performance of entire contact, then the promisor may not be able to invoke
substantial performance to claim payment. (as opposed to a divisible one)
Substantial Bolton v Mahadeva (1972) - The court of appeal refused to grant Bolton
compensation on a quantum meruit basis because it held that the use of the word
perfor lump sum ,suggested that the contract was an entire one, and the nature and
mance amount of defects were such that it could not be said that the contract was
substantially performed. An entire contract requires precise performance to
discharge, so Bolton received nothing.

Hoenig v Isaacs (1952) - The Official Referee held that this was not an entire
contact. Further there was substantial performance although there were some
defects. Hoenig was entitled to receive the amount less the cost of rectifying the
defects.

2. Practical problem of determining what exacts to ‘substantial performance’.

The degree of completion required would again depend on the facts of the case.
- Promisor performed part of his obligations but prevented by other party from
performing remaining obligations  the contract treated as discharged on basis
of prevented performance.
- PROMISOR may sue for breach of contract
Prevented - Promisor may claim payment that is commensurate with the obligations performed
perfor on the basis of quantum meruit. (as much as he has earned)
mance Planche v Colburn (1831) It was held that Planche was entitled to reasonable
remuneration based on quantum meruit because the contract was discharged by
Colburn’s action in abandoning the project.

Acceptance - Voluntary acceptance of promisor’s partial performance by promise can

discharge the contract.
of - Promisor can claim for reasonable remuneration on quantum meruit basis under
Partial the law of restitution.
- HOWEVER, the promisor may still be liable to the promisee in a claim for damages
Perfor for his partial performance of the contract.
mance - Sumpter v Hedges (1898) - Court did not allow Sumpter’s claim because
by Hedges did not have a clear choice of accepting it. It was on his land, so he
had no choice but to accept it.
promis
ee
Breach (Pg 183) – 2 types of Breach (Actual & Anticipatory)
Actual Breach When the time for performance of the obligation has arrived, the Promisor fails to perform it.

Anticipatory When the time for performance of obligation has not yet arrived, the Promisor, by words or conduct,
Breach clearly expressed his intention not to perform the obligation.

- Not every breach of contract results in the contract from being discharged.

- For the breach to result in a discharge of the contract, the breach has to be repudiatory breach.- Fundamental
breach or breach of condition.

- If it is non-repudiatory breach, the innocent party can only sue for damages, and the contract remains on foot.
- In all cases of breach, actual or anticipatory, repudiation must be unequivocal (clear).

- An honest misapprehension as to one’s obligations under a contact which leads to non-performance would not
amount to repudiation if there is underlying willingness to correct one’s understanding and fulfill those obligations.
- Mersey Steel and Iron Co v Naylor Benson & Co (1884) – No repudiation because Mersey Steel was
under a genuine misapprehension that they should not pay for the shipments.
- Wong Poh Oi v Gertrude Guok and Another (1966) – Mere non payment of an installment or breach of one
term does not necessarily put an end to a contract. The defendant’s purported repudiation was wrongful.
For an Actual Breach to be a Repudiatory Breach, it For a Anticipatory Breach to be a Repudiatory
must either: Breach:
1. Breach of condition - Behn v Burness - the threatened non-performance must have the effect
(1863) of depriving the other party of substantially the whole
2. Fundamental Breach [breach goes to the benefit which the contract was intended to bestow on
root of the contract] - arises where the him. The party must indicate an inability to perform its
breach of an innominate term brings about obligations or it is indicative that he refuse to perform
serious consequences, such that it deprives his obligation.
the innocent party of substantially the whole - Hochster v De La Tour (1853) – De La Tour’s letter
benefit which it was intended to confer. constituted a repudiatory breach entitling Hochster to
- Hong Kong Fir Shipping Co Ltd v sue prior to contracted date & claim damages.
Kawasaki Kaisen Kaisha Ltd.
Performance of obligations outside the
time limits specified in the contract can
amount to a fundamental breach.
- Tate & Another v Sihan Sadikan
(1992) – failure to produce & pass title
on time was fundamental thus plaintiffs
entitled to recover their payment.
Effects of Repudiatory Breach:
- Breach of condition or fundamental breach  Entitles
innocent party to sue for damages &
discharge/terminate the contract
- OR he may choose to affirm the contract so that it
remains on foot. He can also claim for damages.
[See Election below].
Effects of Non-repudiatory Breach:
- Breach of a warranty or non-serious breach of an
innominate term  Only entitles innocent party to sue for
damages & contract NOT considered as discharged.
 Election (Pg 188)
When a repudiatory breach is present, contract not automatically discharged. Innocent party can choose to
either:
- accept the repudiation
 acceptance of repudiatory breach & treat contract as discharged
 claim damages to put him into the position as if the contract has been performed properly
Hong Fok Realty Pte Ltd v Bima Investment Pte Ltd (1993)
- affirm the contract
 contract remains on foot
 innocent party still retains the right to claim damages for the breach.
In both cases, innocent party must communicate choice to other party.

In affirming under anticipatory breach, two points should be noted:

1. Innocent party risks contract being frustrated in future if a supervening event occur. Avery v
Bowen (1855) – Bowden’s liability for anticipatory repudiation relieved by war which frustrated the
contract.
2. Right to affirm contract requires innocent party to have legitimate interest. It should not be
punitive and can carry on without the cooperation of the guilty party.In absence of legitimate
reasons, innocent party must accept the anticipatory breach, treat the contract as discharged &
claim damages. Clea Shipping Corporation v Bulk Oil International, “The Alaskan Trader”
(1984). - Rationale is if damages would be a sufficient compensation, he should not be
permitted to perpetuate the contract which may result in greater detriment to the defaulting
party.
3. When damages are difficult to prove

Agreement (Pg 190)

Existing A contract may include a term that it would be discharged upon occurrence of a stipulated event
Agreement or at expiration of a certain period.
- E.g.: - IPO that may include a term that the contract is deemed discharged if STI falls below 1.500.
- A tenancy agreement will have a specified date on which it will end.
A contract may be discharged by parties:
- entering into a fresh agreement to extinguish earlier contract, or
- contract terminated as a result of common intention of parties that it should no longer bind them
Mutual When the contract is partially or entirely executory, the parties may execute a mutual
Release release which discharges each party from all their obligations under that contract.
Unilateral 1 party who performed all his obligations discharges the other party who has not
Release performed all his obligations by executing a release in the form of a deed, so that no
consideration is required [Chapter 3-206].
Accord and When one party purchases his release with fresh valuable consideration provided to
Satisfaction the other party, the understanding to do so is the accord and the consideration
Subsequent
provided is the satisfaction. This discharges the earlier contract.
Agreement
Variation Contract altered by a subsequent agreement, supported by fresh consideration.
Depending on the case, the contract may be discharged entirely or amended by the
subsequent agreement.
Waiver of Where one party, at or without the request of the other party, voluntarily grant the other
Rights party an indulgence not to perform an obligation under a contract without consideration
passing, the first party has been given a waiver. Usually given in respect of specific
modes of performance but not usually in respect of the whole contract.
Leivest International Pte Ltd v Top Ten Entertainment Pte Ltd (2006) – By its
demand and acceptance of the costs and rent, Leivest had “waived the breaches and it
cannot resurrect them.”
Frustration (Pg 192)
Discharge of a contract by occurrence of a supervening event, for which neither party is responsible
- The very basis of contract is destroyed
- Contract radically different from originally contemplated (does not mean impossible, rather impractical due to
extreme/unreasonable difficulty)
Davis Contractors Ltd v Fareham Urban District Council (1956) - HOL rejected appellant’s claim as cost increase
did not alter situation so much that task undertaken was radically different from what was originally contemplated.
Lee Chee Wei v Tan Hor Peow Victor (2007)- held that “imprudent commercial bargains cannot be aborted or
modified merely because of an adverse change of circumstances.”

Note: Supervening event + Not parties fault + Radical change in circumstances = Frustration

When Frustration operates:

- Frustration does not require impossibility of performance, although impossibility of performance may give rise to
frustration.
- Impracticability caused by extreme or reasonable difficulty, expense or injury may be sufficient to trigger
frustration.

The types of Frustrated Contracts are:

Destruction Subject matter of contract destroyed due to no fault of parties. Taylor v Caldwell (1863) The
of subject hall [subject matter] was destroyed and the court held that the contract was discharged by frustration.
matter
Event which is subject matter of contract cancelled/postponed due to no fault

of parties.

Real issue is whether the event which failed to occur, could reasonably be

considered to be one which both parties hold to be the very basis of the contract
Non-
occurrence
of event
such that if the event did not take place, the parties would not have contemplated

entering into the contract in the first place.

Krell v Henry (1903) – Once the coronation was postpones, the purpose for which the flat was
rented was vanished.
Herne Bay Steamboat v Hutton (1903) Pg 194 – The Court of Appeal held that the contract was not
frustrated. One reason was that a tour of the fleet was still possible although the naval review was
cancelled.
Unexpected government action or ruling preventing performance of contract. Metropolitan
Water Board v Dick, Kerr & Co. (1918) – The contract was frustrated. Lim Kim Som v Sheriffa
Government
Taibah bte Abdul Rahman (1994) – Court of Appeal agreed & held that the contract was frustrated.
Interference
Oakwell Engineering ltd v Energy power systems ltd (2003)- held that insufficient to frustrate the
contract because the defendants had already assumed the risk under the agreement.
Contract for personal service frustrated when personal incapacity affects performance of
contract in a fundamental way. Possard v Spiers v Pond (1876) - Contract was frustrated
because she had fallen ill. Personal incapacity which affects the performance of such a contract in a
Personal
fundamental way will frustrate the contract  Lau Lay Hong v Hexapillar Pte Ltd (1993).
Incapacity
Contract for personal services = contract for services of a particular person.
Contract for services will not be treated in a similar way. Service can be provided by another
person and need not be a particular individual.
More foreseeable event, less likely event will be held to frustrate a contract –
rationale is that the more foreseeable the event is, the parties can be expected to have
provided for it in their contract.
Fordeseeabilit However, mere foreseeability of the event is no bar to frustration.
y Housing & Development Board v Microform Precision Industries Pte Ltd (2003) –
The defendant had been aware that Plot 2 had been land locked for a long time and
thus it is cannot be regarded as an unforeseen contingency, hence frustration cannot be
established.
 Clauses that expressly provide for occurrence of events which will normally fall
within class of events leading to frustration eg. war, natural disaster. Effect of such a
clause depends greatly on its construction. China Resources (S) Pte Ltd v Magenta
Resources (s) Pte Ltd (1997) – Force majeure clause applied & the USSR embassy
(Pg 197)Factors Limiting Frustration

letter was ‘next best thing’ & therefore adequate evidence of the force majeure. If a FMC
turns out to be an exemption clause, it would be subjected under UCTA.
Examples of FMC:
a) include events leading to frustration & events not leading to frustration
Force Majeure
b) progress payment
Clauses
c) exclusion of liability
d) optimal solution = both parties discharged, further payment not payable & work
done before frustration must be compensated
Principles of a FMC:
Allocate risk of specified future events between the parties
Precise construction is crucial in order to determine the scope
A party who relies on FMC must not only bring himself within the clause but also
take all reasonable steps to avoid its operation or mitigate its results
No frustration if it is self-induced, i.e.: No Frustration if it is the result of voluntary
Self induced action of one of the parties. Maritime National Fish v Ocean Trawlers (1935) – The
frustration privy council held that the unavailability of a license was due to the allocative decision of
Maritime National.
- Frustration automatically discharges a contract (Unlike repudiation which must be accepted before
it can discharge the contract)
- Frustration effective immediately & requires no communication or advice from one party to the
other party
of Frustration

- Contract is terminated NOT ab initio but only as for the future

Under the Frustrated Contracts Act, FCA (Pg 200),
a) All future obligations cease S2(1) FCA
b) $ payable ceases to be payable S2(2) FCA
see BK

c) $/expenses incurred prior to time of discharge recoverable S2(2) FCA

Effects

d) Benefits other than $ conferred prior to time of discharge can be compensated with an
amount the court considers just S2(3) FCA
(Pg 201)

- to prevent unjust enrichment

- 1 party has performed obligations but other party yet to received any benefits = benefits not
considered conferred, thus not liable for compensation

CONTRACT – REMEDIES (Pg 205)

Common Law remedy – Damages (Pg 206)
In the case of discharge of contract by breach, we come to the concept of remedies.
Principal common law remedy for a breach of contract.
- Refers to monetary compensation payable by the defaulting party
- General intention is compensatory, to put injured party in same position as if contract had been performed
properly- Johnson v Agnew(1979)
- Cf. Tort where damages is to bring circumstances to as if negligence did not occur
Singapore telecommunications Ltd v Starhub Cable Vision Ltd (2006)- Breach of contract is distinct from its
right to damages for such breach. Held there is a breach of contract, but for damages, singtel have to prove loss.

(Pg 208)Causation
Remoteness (Pg 209)
Defendant’s breach of contract caused plaintiff’s loss = plaintiff entitled to recover damages
For damages to flow, the loss must have been caused by the breach. ‘But for’ test.- Irawan Darsono &
Another v Ong Soon Kiat(2002)
Monarch SS Co v Karlshamns Oljefabriker (A/B) (1949) – Effective cause of delay was vessel’s
unseaworthiness, hence it was the appellant’s fault. The prohibition by the British authorities was not the
cause of the delay.
Once causation is established, extent of loss can be quite extensive. The concept of remoteness prevents
a limitless scenario. The law considers a remote loss to be beyond the scope of compensation by the
defendant, even though caused by or a consequence of the breach.
Damage must be proximate & not remote = damages recoverable
Hadley v Baxendale (1854)
1. First Limb:
- normal loss/damage arising from usual circumstances
- such damage may be fairly or reasonably considered as arising naturally, ie according to the
usual course of things from the breach itself.
- defendant has imputed knowledge of what happens in usual circumstances
2. Second Limb:
- abnormal loss/damages arising from special circumstances
- such damages may reasonably be supposed to have been in contemplation of both parties at
time contract made.
- defendant has actual knowledge of special circumstances
Usual course of things
Knowledge of ordinary practices and demand of plaintiff’s trade or business is considered to be part of
‘usual course of things’. Loss arising from normal business activity falls within 1st limb. Koufos v C
Czarnikow Ltd (‘The Heron II) (1969) - Koufos has imputed knowledge of ordinary practices &
exigencies of Czarnikow’s business. Koufos was liable under 1st limb of Hadley v Baxendale.
Imputed and Actual Knowledge
Imputed knowledge = knowledge presumed to be known by parties; subject of 1 st limb.
If you have imputed knowledge, and you still cause loss to be suffered by the other party then you are
liable because a reasonable person is deemed to know what is the “usual course of things”.
Actual knowledge = knowledge actually possessed by the parties; subject of 2 nd limb.
If you have actual knowledge, and you still cause loss to be suffered by the other party then you are
liable.
In Hadley v Baxendale, Bax. was not liable for the lost profit because he had NO actual knowledge that
late delivery would cause the mill to stop work.
A person with actual knowledge of special circumstances will be liable for the higher loss which may arise
if the breach occurred in those circumstances. Victoria Laundry (Windsor) Ltd v Newman Industries
Ltd (1949) – In absence of actual knowledge concerning Ministry of Supply contract, Newman Industries
not liable for substantial profits foregone due to failure to obtain that contract.
Probability of Occurrence
Defendant must know the likely loss/damage is a serious possibility or a real danger. Defendant’s
awareness of the probability of such loss occurring – if Defendant is fully aware that it is probable that a
loss will occur as a result of his act then he is liable. “reasonable contemplation”
Type of Damage
Defendant only needs to know type/kind of damage, need not know exact damage
suffered. Parsons (livestock) Ltd v Uttley Ingham & Co Ltd (1978) – It was
within the reasonable contemplation of the parties that there was a serious
possibility that the pigs might suffer as a result of the defendant’s breach; it was
not necessary that the exact nature or amount of damage be contemplated.
 Plaintiff cannot recover loss which he could have avoided.
Plaintiff must minimize loss after defendant’s breach:
- Cannot recover loss, which could have been avoided
- Plaintiff should take all reasonable steps to mitigate his loss British Westinghouse Electric
& Manufactory Co v Underground Electric Railway Co of London (1912)
- If plaintiff fails to mitigate, damages amount awarded would be reduced by amount he would have
Mitigation (Pg 213)

saved. Brace v Calder (1895)

- Burden of proof is upon defendant to show that plaintiff has failed to take reasonable steps to
minimize loss – Ei-Nets Ltd & another v Yeo Nai Meng(2004)
- When plaintiff who attempts to take reasonable steps to mitigate his loss which increase his
loss, he can still recover the additional loss - Melachrino v Nicholl & Knight (1920)
Anticipatory breach
1. innocent party accepts breach/discharges contract/claims damages – mitigation rule applies
2. innocent party affirms contract – “legitimate interest” rule applies & mitigation rule doesn’t apply
(innocent party may affirm contract & incur expenses not wanted by defaulting party)
- Affirmation is only available in cases where the plaintiff has some legitimate interest to protect
which cannot be compensated merely through the payment of damages. White & Carter
(Councils) Ltd v McGregor (1962)
 General principle = place injured party in the same financial position as if contract properly
performed. –Wee Poh Hueh Florence v Performance Motors Ltd (2004). The award of damages is
calculated on the benefit which would accrue to the injured party and not on the cost of performing the
obligation by the defaulting party.

Expectation Loss & Reliance Loss

- Expectation loss (loss of profit/bargain): amount which injured party would have expected to gain.
- Reliance loss (wasted expenditure): expenses incurred by injured party in reliance on contract, thus
incurring expenses that are rendered wasted because of the breach.
Anglia Television Ltd v Reed (1970) – Anglia Television entitled to recover damages regardless
of whether expenditure (reliance loss) was incurred before or after contract was entered into with
Reed.
- If injured party can calculate both EL & RL, he may claim for both losses BUT the EL must be
calculated as a net figure exclusive of expenses.
- If EL is calculated on a gross basis inclusive of expenses, he cannot claim for RL as it will be double-
recovery. He then has to choose between EL or RL.
Cullinane v British “Rema” Manufacturing Co Ltd (1954) – case of double recovery rejected. Court
held that Cullinane could only claim one of them. Hong Fok Realty Pte Ltd v Bima Investment Pte Ltd
(1993) – can either sue for the bargain, (price between the market value and the property at the date of
breach) or the wasted expenditure provided they are within the contemplation of the parties.

Difficulty in Assessment
Difficulties in assessing damages often arise in cases where the loss is to some degree speculative in
nature.
In such a situation, the court may take into account the probabilities involved and award damages
accordingly.
Chaplin v Hicks (1911) – Although there was no certainty that Chaplin would be among the 12 chosen
for employment, she should still be allowed the 100 pounds damages awarded by the jury.
Raffles Town Club Pte Ltd v Tan Chin Seng & others (2005)- Held there the is pecuniary losses and
the damages loss is the difference represented the decline due to the breach.

Non-pecuniary Losses
Assessment (Pg 215)

Courts are generally reluctant to award damages for non-pecuniary losses eg hurt feelings, anxiety, loss
of reputation. Exceptions:
- when important object of contract is to provide enjoyment, security, pleasure, relaxation Jarvis v
Swan Tours Ltd (1973) – Jarvis was entitled to damages comprising cost & disappointment he suffered.
Haron bin Mundir v Singapore Amateur Athletic Association (1992) – Plaintiff awarded damages,
being the amount he would have received from the defendant if he had won medals at the SEA Games.
Claim for non-pecuniary losses was rejected.
Farley v Skinner (2001) – The House of Lords held that damages for mental distress resulting from
breach of contract could be awarded in exceptional cases where a major or important object of the
contract had been to give pleasure, relaxation and peace of mind, and where physical inconveniences
and discomfort had been caused by the breach.

Liquidated Damages and Penalties

Clause in contract specifying amount of damages to be paid by defaulting to injured party due to breach. -
Generally, enforceable if a liquidated damage clause is a genuine pre-estimate of loss. If such a clause
amount to penalty, imposed to cause fear to the other party, it may not be enforceable. Dunlop
Pneumatic Tyres Co Ltd v New Garage & Motor Co Ltd (1915) established the guidelines(anyone can
determine, need not apply all the guidelines):
- liquidated damages are extravagant and unconscionable in comparison with the greatest conceivable
loss = penalty
- single lump sum payable on occurrence of one or more breaches(serious/trivial) = penalty
- description of clause as a ‘penalty’ or ‘LDC’ relevant but not conclusive

Penalty (Generally not enforceable)

- higher than actual loss: LDC unenforceable, can only claim actual loss Ford Motor Co v Armstrong
(1915)
- lower than actual loss: can claim either actual loss or as per LDC Bulsing v Joo Seng (1972)

Genuine Pre-estimate of loss (Generally enforceable)

- higher than actual loss: LDC enforceable. Dunlop Pneumatic Tyres v New Garage & Motor (1915)
- lower than actual loss: LDC enforceable. Cellulose Acetate Silk v Widnes Foundry (1925)
 Interest
Interest may be included in an award for damages in the following situations:
a) if the contract provided for the payment of interest. This is the norm for all contracts involving
loans and often appears in other commercial contracts\
b) if the court finds that the parties have impliedly agreed to pay interest under the contract
c) if the court exercises its discretion under paragraph 6 of the First Schedule, Supreme Court of
Judicature Act

Equitable remedies (Pg 224)

Monetary compensation not adequate.
Court order requiring defaulting party to perform obligations as specified in the contract. The rationale is that, in
certain cases, damages are not adequate remedy.
(Pg 224)Specific performance (SP)

The following should be considered before specific performance is awarded:

Damages adequate = specific performance not available
Beswick v Beswick (1967). Usually, land or houses are generally considered unique;
possible to get specific performance. If damages are inadequate, specific performance.
Damages are would usually be granted.
adequate Coastland Properties Pte Ltd v Lin Geok Choo (2001)- Specific performance would
not be granted unless the subject matter of the contract is a thing of intrinsic value by
reason of which damages may not be a sufficient. In this case, the exquisite fine art is
and thus SP is granted.
1 party is minor, lack of mutuality = specific performance not available
Mutuality
Contract must be specifically enforceable by both parties. Thus if adult cannot get a SP
against an infant, correspondingly an infant cannot get an order of SP against an adult.
Supervision required = specific performance not available
Supervision If court required to supervise performance of contract on a ongoing basis, specific
performance is not available.
Contracts to lend $ Specific performance not enforceable

Court order requiring a party to abide by a negative covenant in a contract If the distributor breaches this
covenant, his supplier may seek an injunction to restrain him from doing so.

Note: If damages is adequate, an injunction will not be granted.

Interlocutory Obtained by a party facing a breach of covenant by the other party. Temporary injunction
[temporary] is granted to maintain status quo while main legal proceedings are pursued.
Permanent injunction, granted after main legal proceedings have shown that the plaintiff
Perpetual
has rights to injunctive remedy.
Preventive injunction, seeks to restrain a person from conduct which he agreed not to
Prohibitory
do.
(Pg 226)Injunction

Mandatory Restorative injunction compels action to restore negative covenant already breached.
Mandatory injunction = enforce –ve agreement which has been breached
Specific performance = enforce +ve obligation which has not yet been performed
Not enforceable by specific performance. Remedy for breaches of such contracts is
usually damages.
Case law shoes that the court will enforce negative covenants in contracts for personal
service, as long as it would not amount to an indirect way of compelling specific
Contracts for performance
personal Service Warner Brothers Pictures Inc v Nelson (1937) – Court refused to grant an injucnction to
enforce her negative covenant “not to engage in any other occupation” as this would be
tantamount to an order of specific performance for her to work with them. However, court
ordered Injunction to stop her working as an actress for any other party during the
contract period
Prevent defendant from removing assets from jurisdiction until main legal proceedings
Mareva Injunction
over
Anton Piller Order & Quantum Meruit (Pg 228)
Anton Piller Order allows plaintiff to seize defendant’s documents/property.
- Plaintiff has extremely strong prima facie case
- Very serious damage (actual/potential) to plaintiff
- Defendants have incriminating evidence & will destroy the evidence
Quantum Meruit is an alternative remedy to damages based on “as much as he has earned”.
- Contract: implied promise to pay for obligations performed Gold Coin Ltd v Tay Kim Wee (1987)
- quasi-contract: unjust situation Craven-Ellis v Canons Ltd (1936)
Refund of Money Paid
In order to succeed in a claim for refund, there must be a total failure of consideration. This occurs when the
plaintiff has not enjoyed the benefit of any part of what he bargained for. Rover International Ltd v Cannon Film
Sales Ltd(1943)
If plaintiff received any benefits from the contract, this remedy would not be available but he can still claim
damages.
Misrepresentation: recission if there is misrep which means that there is total failure of consideration since
consideration would be regarded as non-existent.

Limitations of Actions (Pg 231)

Time period for parties to seek legal remedies. The purposes to have a limitation period are:
- Evidence necessary to determine the issues may have deteriorated
- Documents may have been destroyed
- Witnesses’ recollection of events may become inaccurate
- So that Defendant does not have threat of litigation hanging over him indefinitely
Limitation Act
General rule = Claim has to be made within six years from date of breach S(6)
- contract under seal or deed, the action is barred after 12 years from the date of the course of action
accrued.
- fraud or mistake, six years begin to run from the date the plaintiff discovers the fraud or mistake or could
have discovered the fraud or mistake with reasonable diligence
- for actions in respect of latent injury or damage, three years begin to run after plaintiff first have knowledge
of his rights to bring such a claim
- In seeking SP and injunctions, if there is an unreasonable delay, then these remedies may not be granted

Laches
Extinction of a plaintiff’s right to remedies through the passing of time.

LAW OF TORT (pg 495)

Negligence refers to carelessness. Mere carelessness does not give rise to liability. In order to prove under the
tort of negligence, three elements must be proven:
Tort of Negligence (Pg 497)

- the defendant owed the plaintiff a duty of care

- the defendant’s breach that duty of care
- the defendant’s breach caused the plaintiff’s loss
- that loss is not too remote
Spandeck Engineering (S) Pte Ltd v Defence Science & Technology Agency (2007) Although
factual foreseeablility was established, there was insufficient proximity. Since Spandeck could have
brought its claim through arbitration proceedings against the Government of Singapore, DSTA was not
engaged as a supervising officer to exercise a duty of care. Furthermore, the contract had provided
arbitration as a means to deal with claims for under-certification, hence there were cogent policy
reasons why DSTA should not be viewed as having a duty of care in tort.

This test is for all negligence cases regardless of the kind of loss and includes negligent misstatement.
 Two Prong
Factual Foreseeability
Test - – Preliminary requirement of reasonable foreseeability from a factual
perspective
Spandeck – Is established if it can be shown that “the defendant ought to have known
that the claimant would suffer damage from his (the defendant’s)
carelessness”
1. There
must be Proximity
Duty of care (Pg 498)

factual - Proximity described as encompassing physical proximity( in the sense

foreseeability of space and time), circumstantial proximity (in terms of the r/s btw
established them. Eg employer and employee) and causal proximity( the closeness
2. There is or directness of the causal connection or r/s btw the particular act or
either course of conduct and the loss or injury sustained. Eg TP) –Sutherland
physical, Shire Council v heyman(1985)
circumstantial - Once proximity is established, a prima facie duty of care exists
or causal
proximity Policy
established – Are there relevant policy considerations which would negate the prima
3. There facie duty of care?
must be no – Examples: contractual relationship which regulate rights and obligations?
policy issues Relative bargaining power of the parties? Public policy issues?
that negate
the prima
facie duty of
care.
Breach of Duty of Care (Pg 505)

The test for this 4 factors in determining standard of care:

would be as
stated in Blyth v Level of Skill - The skill required is that of the reasonable man in the shoes of the
Birmingham defendant. Wells v Cooper (1958) No breach of duty of care as the defendant has
Waterworks met the standard of care of a reasonably competent amateur carpenter.
(1856) as “the Professional expertise was not required of him.
omission to do
something which Likelihood of Injury- If the likelihood of injury to the plaintiff is high, then the court
a reasonable will require a higher standard of care upon the defendant. If the likelihood is
man… would do low, the standard of care is lower. Bolton v Stone (1951) The House Of
or doing Lords held that the chances of such accidents are too small for the cricket
something which club to take steps to prevent them.
a prudent and
reasonable man Seriousness of Injury – The more serious the likely injury, the higher the
would not do” standard of care is required of the defendant. Paris v Stepney Borough Council
(1951) The failure to provide goggles for the plaintiff was a breach of duty of care
The standard of because the plaintiff had only one good eye.
care is the level of
care, which is Cost of Avoiding Risk – If the risk of harm is high, the defendant will be expected
expected to be to take steps to minimize the risk even if such steps involve substantial cost. If the
exhibited in the cost of avoiding the risk is low, then there is a greater expectation that steps will
defendant’s be taken to avoid the risk in concern.
conduct. It follows Latimer v AEC Ltd (1953) The House of Lords held that the plaintiff failed to
that if his conduct prove breach of duty on the part of the defendant. The management did everything
does not meet the possible to remove the effects of the flood.
standard of care,
then he is said to An alternative way in which a defendant can be shown to have breached his
have breached duty of care:
his duty of care. Res Ipsa Loquitur – The event speaks for itself. This principle states that the
breach is so self-evident that the fact the event occurred in itself proves the
breach. E.g.: Things were under control of the defendant and the accident could
not, in the ordinary course of things, have occurred without the negligence of the
defendant.

Scott v London & St. Katherine Docks (1865) The court held that things would
not have occurred if not for the negligence of the defendant. There was no need to
establish the fact that the defendant breached the duty of care.
 (Pg 508)Resulting Damage
Causation – The damage suffered by a plaintiff who is making his claim in
negligence must have resulted from the breach of duty by the defendant. BUT-
The plaintiff must
FOR test is used to determine causation. Barnett v Chelsea & Kensington
show that he
Hospital (1969) The court held that there was a duty of care owed by the hospital
suffered damage
and this duty was breached. However, the doctor’s negligence did not cause the
as a result of the
husband’s death because death would have taken place anyway.
defendant’s
Tan Hun Toe v Harte Benis Mathew (2001)- Held that although he was not
breach.
negligent during the operations, there was negligence in the post- operative care
given to Harte. His injury was attributed to this post-operative negligence.

Direct Consequence Test – whether the damage is a direct result of the

defendant’s breach of duty.
Re Polemis & Furness, Withy & Co (1921) The court held that the presence of
petrol vapor in the hold was not foreseeable. However, the defendant was held
liable for the total loss of the ship because the defendant’s breach of duty in
allowing the plank to fall into the hold.

Reasonably Forseeability Test( use this) – whether the damage or loss Is

reasonably foreseeable.
Remoteness (Pg 510)

The concept is The Wagon Mound (No 1) (1961) It was held that the fire was a direct
used to limit the consequence of the defendant’s breach of duty. However, it was unforeseeable
scope of the that the fuel oil would burn in water. Damage was not reasonably foreseeable,
damage, which thus, the plaintiff’s claim failed.
may be claimed
against a It is not necessary to foresee the exact damage. It is sufficient if the type or kind of
defendant. damage is reasonably foreseeable. Bradford v Robinson Rentals Ltd (1967)
The plaintiff suffered frostbite from a long drive during very cold weather. The court
held that injury from cold weather was foreseeable although frostbite was not.
Damages were awarded as that kind of injury is reasonably foreseeable.

Egg-Shell Skull Rule – damage is not too remote even if damage suffered by
plaintiff maybe more severe than could be reasonably foreseen by defendant.
Smith v Leech Brain & Co (1962) Although it was generally not foreseeable that
a burn could cause cancer and death, the plaintiff’s existing pre-disposition meant
that the damage was not too remote. The plaintiff’s physical weakness
exacerbated his injury and the defendant had to accept that.
Defenses (Pg 512)

Volenti Non Fit Injuria, (meaning that a man consents cannot be considered an injury.)
enables a defendant to avoid liability by arguing that the plaintiff has consented to the
risks involved in the relevant circumstance which led to the tort. E.g.: A player in a rugby
match impliedly assumes risk associated with the sport, so no liability to him if a tort is
Volenti Non committed.  Complete Defence.
Fit
Injuria Morris v Murray (1991) – The plaintiff agreed to the defendant’s proposal to take him on a
plane even though the defendant was very drunk. It was held that the plaintiff had voluntarily
assumed the risk so defendant was not liable. Smith v Baker & Sons (1891) Court held
that there was no voluntary assumption of risk in the true sense of the phrase. Damages
awarded because there is no true voluntary assumption of risk.
S3(1) Contributory Negligence and Personal Injuries Act describes the situation where a
Contributory defendant can raise the defense of contributory negligence.(Partial Defense) In the
Neglige situation where the plaintiff injury was partly contributed by his own fault, the court will
nce apportion the liability.Sayers v Harlow UDC (1958) Plaintiff contributed to her own injury.
Damages were reduced by 25%.
Exclusion of S2(1) UCTA, a clause to exclude liability for death and personal injury arising out of
Liability negligence is totally invalid. In relation to liability for other losses such as property damage
(Disclai or economic loss, S2(2) UCTA says that such a clause would be upheld if it is reasonable.
mer)
Psychiatric Harm
Psychiatric Harm (Pg 513)

Cases when a plaintiff suffers anxiety, distress or psychiatric harm after seeing a scenario or witnessing or
hearing an incident which was negligently caused by a defendant.

– Depends on whether the court is willing to find that a defendant owes a duty of care to the plaintiff
– The courts are generally reluctant to allow compensation in such cases, partly because of difficulties in
determining objectively that the plaintiff suffers from psychiatric harm and assessing the claim
generally.
– Must pass the spandeck test

The parties affected by such incidents can be separated into two categories:
a) Primary victims
– where a defendant’s negligent act or omission caused an immediate fear of physical injury to
himself.
b) Secondary victims
– Where a person suffers psychiatric harm as a result of witnessing injury to others.
– Pang Koi Fa v Lim Djoe Phing (1993)- Plaintiff suffers from psychiatric illness she now
suffers as result of the trauma and shock she underwent with her daughter.( closeness of time
and space, visual and aural perception)
– Three elements to be taken into consideration- McLoughlin v O’Brian (1983)
 The class( must be love & affection) of the persons whose claims should be
recognized
 The proximity of the claimants (both time and space) to the accident
 The means by which the shock was caused ( the shock must come through sight or
hearing of the event or of its immediate aftermath.

Refers to financial loss which is not associated with any damage to plaintiff’s body or property.
Spartan Steel & Alloys Ltd v Martin & Co (Contractors) Ltd (1973). Court held that the plaintiff could
sue for the loss of those materials [physical loss] and for the loss of profits for those materials that were
damaged [consequential economic loss]. However, they could not sue for the loss of profits due to the lack
of power [pure economic loss].

Loss flowing from physical damage  recoverable.

Pure Economic Loss (Pg 510)

Pure economic loss  generally not recoverable. Exception: RSP Architects Planners & Engineers
(Raglan Squire & Partners) v MCST Plan No 1075 (1999) [Holistic Approach]

If pure economic loss NOT accompanied by physical injury or property damage was allowed, it could lead
to unlimited liability.
Thus restrictive approach adopted, but 2 qualifications:
 p.e.l. recoverable for negligent misstatement
 p.e.l. recoverable in some countries (S’pore)

RSP Architects Planners & Engineers v Ocean Front Pte Ltd (1996) The court held that
– developers owed a duty of care
– very close proximity between them
– not a case of unlimited liability

RSP Architects Planners & Engineers (Raglan Squire & Partners) v MCST Plan No 1075 (1999) –
Close proximity. Management relied on skill and judgment, defective buildings different from consumer
goods.
 Statement published which tends to lower a person’s reputation in the estimation of right thinking members
(Pg 527)Tort of Defamation of society.
- Oral defamatory statements = slander
- Written defamatory statements = libel [piece of writing that contains bad/false things about a
person]

Elements of tort of Defamation:

1. It must be Published: statement made or sent to any person other than the subject of statement
2. It must be Untrue
3. It must have the Effect of lowering the person’s reputation generally

Remedies
Damages and injunction
Tortfeasor passes off gds/svcs as those of another - falsely promotes his own gds/svcs as having same
origin/quality as the other or somehow being associated with the other.

According to the case law in Reckitt & Coleman Products v Borden Inc (1990). To establish passing off,
plaintiff has to prove 3 elements:
 he must establish there is goodwill or reputation attached to his business
Tort of Passing Off (Pg 526)

- attachment between trader & customer which brings in business

- can be associated in the minds of customers in the brand name, logo, trademark or
appearance of a product
 there must have been a misrepresentation by the tortfeasor
- leads public to believe that the goods or services offered by him are the same as those
offered by the plaintiff
 plaintiff must suffer or is likely to suffer loss of goodwill. (reputation)

CDL Hotels International Ltd v Pontiac Marina Pte Ltd (1998) - goodwill established and damages
awarded. Held that there was goodwill generated by the advertisement, there is real risk of misrep because
of their visual and phonetic similarities, and strong likelihood of their goodwill since theirs was a five star
and CDL was only 4 star.
Lifestyle 199 Pte Ltd v $1.99 Ltd (2000)  Claim failed because title was descriptive of products.

If Tort of Passing off is established, Injunction, Damages or Account for profits may be obtained.
Vicarious Liability 528)Tort of Inducing Breach of Contract (Pg

- Tortfeasor induces person (employee) to breach a contract with 3 rd party (employer)

Example:
- Manufacturer A  contracted with  Agent.
- Manufacturer B induces Agent to breach contract with Manufacturer A.
- Agent eventually did.
- Manufacturer A can sue Manufacturer B in Tort.
- Manufacturer A can also sue Agent for breach of contract under law of contract.

Not common as contracts have termination clauses that enables either party to end contract upon meeting
certain conditions. So, there will be a breach only when contract termination is not in accordance with the
clause.

1) Employer is variously liable for torts committed by employee if acting within scope of authority or
conditions of employment.
2)Employer is vicariously liable only if has strict control of employee’s conduct in performance of work.
- Eg, employer not liable for torts of independent contractor
- Plaintiff prefer to sue employer cause they got $ but employee do not have.
 Duty of Care: “Special Relationship” – Plaintiff could “reasonably rely on defendant’s judgement” (similar to
Spandeck)

Factors determining the existence of a special relationship & duty of care:

1. Advice paid for

 Payment good evidence that advice being relied on and advisor knows it  Duty of care exists.
Hedley Byrne & Co Ltd v Heller & Partners Ltd (1964) Plaintiffs relied on the references and incurred
huge losses. Held that if not for the disclaimer, defendant will be liable since there was a duty of care owed
due to special r/s.

2. Advisor in business of giving advice (given by a professional or by a person who held himself as
having knowledge or skill in that particular matter)
 If not in line of business, can still be liable if reasonable for advisee to rely on adviser’s skill &
judgment & the advice given.( Proximity)
Esso v Mardon (1976) pg517 Esso liable even though not in biz of giving advice

3. Advisee’s reliance on advice reasonable?

 The adviser knows/ought to know the advisee is likely to rely upon his advice and it is reasonable
for advisee to do so  Duty of care exists. (reasonable foreseeability)
 However, even if the adviser knows that the advisee will rely upon his advice but if it is reasonable
for the adviser to believe that the advisee will not solely rely upon his advice then the adviser will
not be liable. James McHaughton v Hicks Anderson (1991) pg518
Caparo Industries plc v Dickman (1990) pg518 The accounts the defendants prepared were for the
shareholders collectively and not for investors or individual shareholders. No proximity. The policy
consideration behind the decision was of course that if the accountants were held to have owed a duty of
care to all investors and shareholders, that would expose them to unlimited liability.

If advice is given with the purpose or knowledge that it may be relied upon by a third party, then the adviser
may owe a duty of care to the third party. Morgan Crucible Co plc V Hill Samuel & Co ltd & Ors(1991)
United Project Consultants Pte ltd v Leong Kwok Onn (2005)- Held that there was a duty of care as he
Negligence Misstatements (Pg 516)

should have foreseen such damages will result from this and since he was hired as a tax agent, he had
assumed some responsibility.
4. Disclaimer? (exclusion clause)
 To limit or exclude liability
 Must satisfy the UCTA, if not then not effective  Duty of care exists.
Smith v Eric S Bush (1990) defendants held liable for their negligent misstatements. Furthermore the
disclaimer they had was subjected to the UCTA, and thus invalid. They owed a duty of care.

Breach of Duty of Care:

1. To prevent Breach of Duty of Care, there must be a Standard of reasonably competent fellow
professional in same field:
 “fair, reasonable and competent degree of skill” Lanphier v Phipos (1838)
 “an act of gross negligence such as could not have been committed by any other ordinarily
informed member of the profession” Cook v Falconer’s Representative (1850)
JSI Shipping (s) Pte Ltd v Teofoongwonglcloong (2007)- Held that auditor’s duty

include the obligation to verify and to be sensitive to the possibility of fraud.

2. To minimise claims for breach of duty of care.:

 Ensure highest order of standard of professional practice is adopted
- follow standards set by professional bodies or leading practitioners in
that field
- if not followed, clear breach of d.o.c
- if followed, can still be breach of d.o.c. if individual cases require
higher std
 use disclaimers subject to UTCA. Smith v Eric S Bush(1989)- Held that the
disclaimer was not reasonable and thus liable for damages
 purchase professional indemnity insurance
Resulting damage: same as to establish resulting damages for tort of negligence.
1. easy to show causation: reliance
 AGENCY (Pg 435)

Nature of Agency (Pg 435)

Agent = person who through authority conferred to him by principal is empowered to establish legal relations with a
3rd party on his principal’s behalf
Liability of General rule: not liable if agent acts within scope of authority given to him by principal
agent - if agent acts outside scope of authority given to him by principal, liability falls upon agent
Employees(servant): person employed by & under control of employer
- engaged under contract of service
- authorized to enter into legal relationships with 3rd parties
- high degree of supervision & control
Employees &
Independent contractor: person employed to provide certain services
Contractors
- engaged under contract for service
- authorized to enter into legal relationships with 3rd parties and the contractor himself is the
principal
- free to choose how to perform work
1. power of attorney: deed (document) where donor authorize donee to act on his behalf
Types of 2. general agent: authorized by principal in all matters
agency 3. special agent: authorized by principal to perform task outside scope of general agency
4. commission agent: agents working for a commission

Creation of Agency (Pg 439)

4 ways agency can be created: agency contract (actual authority), apparent authority, ratification, operation
of law
(Pg 440)Apparent/ostensible authority (Pg 439)Actual Authority

Rights/obligations (actual authority) of agent/principal specified in contract

Expressed actual authority
- expressly specified, orally or written, in contract

Implied actual authority

- authority to do all acts reasonably incidental to acts which have been expressly authorized
- authority to do all acts which are within reasonable customs & usages of that trade

Agent appears to have authority

- arises when principal held out to 3rd party that agent had authority when he did not
- agency by estoppel: principal estopped from denying existence of agency
- any act done by agent with apparent authority will be binding on principal Freeman & Lockyer v
Buckhurst Park (1964) – director did not have actual authority but had apparent authority, thus
BP bound
- 3rd party must not know that the agent has a lack of authority

Hely-Hutchinson v Brayhead Ltd (1968)-Held that had apparent authority due to his position and also
had implied actual authority being implied from the conduct of his board over many months. (Pg 442)

4 requirements for apparent authority:

- representation that agent had authority made to 3 rd party when in fact he does not have authority
- representation must be made by principal
- 3rd party must relied on the representation and was induced into entering into contract with the
principal
- 3rd party must not know that the agent has a lack of authority
- Principal had capacity to enter into contract
Through past conduct/ actions with the agent and tp, may lead to apparent authority.
Through their positions, may have apparent authority if within the usual job scope for their position
To prevent apparent authority:
- Company disclose to 3rd parties the limits of the agent’s authority
- Advertise when agents cease employment
- Notify customers individually – cause ostensible authority can only be argued if 3 rd party had no
knowledge of the agent’s lack of authority
 Process by which principal retrospectively gives authority to agent
(Pg 443)Ratification
- Agent exceeded his authority but principal wants to benefit from contract
- Effects of ratification: agent deemed to have actual authority thus contract deemed to haven been
concluded between principal & 3rd party on date agent entered into contract (relating back) Bolton
v Lambert (1889) – company ratified director’s action thus 3rd party bound by his acceptance
Exception:
Ratification will NOT have retrospective effect where:
- Agent accepts the offer “subject to ratification” by principal. These, therefore, constitutes to
conditional acceptance and remember that conditional acceptance is no acceptance! Hence, 3 rd
party can withdraw his offer at any time before ratification.
- 3rd party knows that agent has no authority.

Conditions for ratifications:

- Principal must be identified, need not be named but agent must at least disclose that he is acting
on behalf of the principal: Keighley Maxstead v Durant (1901) – contract not binding as principal
is undisclosed
- Principal must exists at time contract made Kelner v Baxter – non-existent company cannot ratify
- Principal must have capacity to enter into & perform the contract at the time the contract was
made, and at the time of ratification.
 Minor is OUT!
- Principal must ratify within reasonable time (ratification before time of performance)
Operation of Law (Pg 446)

Law deem agency to exist even if no agreement between principal & agent
Agency of necessity
- In emergencies, some people conferred with authority to act for others
- Require immediate action when communication with principal impossible

Co-habitation
- Woman co-habits with husband presumed to have husband authority to pledge his credit for
necessaries
- Implied authority

Principal – Agent Relationship (Pg 447)

1. Duty to follow instructions
- act in accordance with principal’s instructions
- if not, breach of agency contract with principal
- Bertram, Armstrong & Co v Godfray (1830)
2. Duty to use care & skills
- standard a reasonable person would expect from a agent in that field Keppel v Wheeler
(1927) – principal able to sue agent for difference in profit.
 E.g.: A property agent should fulfill his role up to the standard expected of property
agents generally.
3. Duty to avoid conflicts of interest
Duties of - cannot accept bribes/secret commissions
agent - cannot make secret profits Hippisley v Knee Brothers (1905)
- cannot become counterparty in transaction with principal De Bussche v Alt (1878)
4. Duty not to delegate
- performs personally
- principal selected agent because of personal character & abilities John McCann v Pow
(1975) – agent not entitled to commission when flat sold by sub-agent.
5. Duty to keep separate accounts
- Agent has duty to keep proper separate accounts for principal showing all principal’s
property & all transactions undertaken on behalf of his principal.
- On demand by principal, agent must show these accounts.
If one fails, principal can sue agent for breach of agency contract.
 1. Right to remuneration
- agent can claim fees only when his duties under his agency contract are fulfilled Luxir
(Eastbourne)Ltd v Cooper (1941)
Rights of 2. Right to indemnity (protection against possible damage/loss)
agent - right to be indemnified by principal for liability/expenses incurred legally in performing
(owed by duties
principal) - However this right is lost if the liability is caused by agent’s negligence, breach of duty or if
he has acted beyond the scope of his authority
3. Right of lien (right to take and hold or sell the property of a debtor)
- right to hold onto principal’s property so long as principal is indebted

Principal - 3rd Party Relationship (Pg 451)

Principal bound to 3rd party as long as:
- agent does not exceed actual (express/implied) authority
- agent has ostensible/apparent authority
- principal ratified agent’s act
General
Applicable even when agent acted fraudulently as long as he acted within authority Leefengsteel v
Rule
1stcommercialbank (1997) – LFS liable for action of agent even though he acted fraudulently but
still within authority
Principal may also be liable for agent’s misrepresentation if he knows about it and acquiesced in it or
ratified it.
Agent acting within actual authority but without disclosing he is acting for a principal, can
bind principal
- undisclosed principal may be bound even if at time of contract, 3 rd party had no idea agent
was agent
- allow a person not a party to contract (undisclosed principal) to be bound by contract

4 qualifications (undisclosed principal may not be bound by contract):

- agent’s authority from ostensible/apparent authority or ratification (both cases, principal is
disclosed) (principal not bound)
- If contract implies that agent is the principal, the undisclosed principal may lose the right under
the contract. Trigen Industries Ltd v sinko technologies pte ltd & another (2003)- held that
Undisclosed agent is liable since contract is under their name even though they are acting on principal behalf.
Principal - contract revolves around identity of agent, so agent’s identity is important (principal not bound)
- undisclosed principal revealed, 3rd party must elect to sue either agent or principal-
 If 3rd party chooses to sue the Agent, then principal is not bound because 3 rd party cannot
change his mind.
Siu Yin Kwan & another v Eastern Insurance co ltd(1994)
- Undisclosed principal may sue and be sued on a contract made by agent if acting within
scope of actual authority
- In entering the contract, the agent must intend to act on the principal behalf
- The agent may also sue and be sured on the contract
- Any defence which tp may have against the agent is available to principal.
- Terms of the contract may exclude the principal’s right to sue and his liability to be sued.
Agent is the only principal.

Agent - 3rd Party (Pg 456)

rd
Agent not bound to 3 party as long as:
- agent has actual or ostensible/apparent authority
- principal ratified agent’s act (ratification)

Circumstances where agent personally liable:

1. undisclosed principal
2. agent agrees to be liable – if the agent signs the contract in his own name without any
reference to his principal, the presumption is that he is the principal and the agent is
General Rule
liable to the 3rd party.
3. non-existent principal
4. breach of warranty of authority – agent maybe sued for breach of warranty of authority
by 3rd party, where the agent acts without authority but professes to 3 rd party that he has
the necessary authority
5. custom & trade usage in some business sectors – establishes that an agent’s contract
entails personal liability on the part of the agent
6. negotiable instrument
 When agent represents to 3rd party that he has authority when he does not:
- 3rd party can sue for breach of warranty of condition
- Agent’s representation = promise & 3rd party’s attempt to enter contract =
consideration
Breach of
- If the act was done intentionally, the TP can bring about an action in tort of deceit, if
warranty of
representation is careless, tort of negligent misstatement.
authority
Ku Yu Sang v Tay Joo Sing (1993) – agent personally liable when:
- Fraudulently represented he had authority when he had not: liable in tort of deceit
- Innocently represented he had authority when he never had authority or his authority had
ceased (whether he knew or not): liable in tort of negligent misstatement

Termination of Agency (Pg 459)

- express termination/revocation clause in contract
Acts of - full performance of agency contract
parties - repudiatory breach of agency contract, e.g.: agent discovered to have accepted a bribe
- principal revoking agent’s authority
- principal/agent = bankrupt/dissolved/dies/mentally incompetent
Operation of
- destruction of subject matter (frustration of agency contract)
Law
- the agent or principal becomes mentally incompetent

BUSINESS ORGANISATION (Pg 237)

Unincorporated vs Corporated entities

Unincorporated entities (firms)

- sole proprietorships, partnerships, joint ventures
- unincorporated business entity does not have separate legal entity
- Unlimited personal liabilities: rights/liabilities of unincorporated business entity = rights/liabilities of
people
Incorporated entities (company/corporation)
- Separate legal entity with its own rights and liabilities
- Existence separate & independent of people who establish it
- Corporation can continue to function even when original founders die

Sole Proprietorship (Pg 239)

Business owned by single person
Not a Unlimited personal liability: Rights/liabilities of business = sole proprietor
separate The sole proprietorship is not separate from its creator. Personal assets may be seized to satisfy
entity business debts.
Business Registration Act BRA (S5) - the business must be registered under the Business
Registration
Registration Act. People exempted from act are taxi drivers and licensed hawkers.
Effect of - amount to an offence & liable to a fine S12(2) BRA
non- - cannot enforce contracts against 3rd party S21(1) BRA
registration - 3rd party can enforce contract against him S21(5) BRA
Registration Registrar can refuse to register name identical/resembles already registered name or company
process name S13(1)(b) BRA
- Dissolved voluntarily: give notice to Registry of Business within 14 days S15(1) BRA
Dissolution
- Dissolved involuntarily: when sole proprietor dies or is made a bankrupt.
- Sole proprietor not protected or shielded from business debts, thus some risk involved
Evaluation (unlimited liability)
- Ease & low costs in setting up & closing down formalities
Partnership (Pg 242)
Relationship that subsists between persons carrying on business in common with a view for profit S1(1)
Partnership Act – 2 or more persons carrying on business with common objective of generating profits
- persons can include companies & other corporate bodies
- business = include every trade, occupation and profession S45 PA
- Partnership implies a continuing r/s. Rabiah Bee Bte Mohamed Ibrahim v Salem Ibrahim (2007)
- Not separate legal entity
- Unlimited personal liability: Rights/liabilities of partnership = partners
- Partners personally liable for debt of firm
245)Formation (Pg

- partnership is formed by contract [oral or written]: stipulates rights/obligations of partners

- min number = 2 & max = 20 S17(3) CA unless professional partnership S17(4) CA
- automatically dissolves if partnership business is illegal S34 PA
- partnership’s business name = firm’s name S4 PA
- firm name must be registered S5 BRA

Governed by PA provision and case law

- PA can be varied by consent of all parties S19 PA

Property
- partnership property = all property originally brought into partnership by partners S20(1) PA
- partnership property = all property bought with partnership fund S21 PA
- must be used for partnership purpose S20(1) PA
- creditor cannot execute against partnership property if judgment against individual partner, unless the
(Pg 246)Relationship among partners

creditor has a judgment against the firm S23(1) PA

- E.g.: If a partner in a firm has personal outstanding debt, the creditor cannot execute against the
property of the firm
Ng Chu Chong v Ng Swee Choon(2002)- held that defendant had infringed the plaintiff
trademark as defendant did not have individual rights to the trademark, but it
belongs to the firm instead.
Management
- every partner has right to take part in management of the firm S24(5) PA
- partners only entitled to share of profits & not payment for work S24(6) PA

Liability & Indemnity

- partners share equally in profits/losses S24(1) PA
- in practice, depends on contribution

Fiduciary duty
- duty of ‘utmost good faith’
- cannot engage in biz competing with firm S30 PA – hence, a person cannot be a partner in 2 retailing
firms, unless all the partners in BOTH firms consent
- cannot make secret profits S29 PA
- must make full disclosure of info on all things affecting the firm S28 PA
 Partner’s actions binding firm
- Every partner is an Agent of the firm
- any partner can bind firm to 3rd party as long as act done in usual course of business S5 PA unless:
- 3rd party knows partner is not authorized S8 PA  not binding
- 3rd party does not believe him to be partner S5 PA  not binding
- The firm & every partner are bound by the act/agreement with 3rd party entered into under the firm’s
name by a person authorized to do so [regardless whether that person is a partner or not] S6 PA

Nature of liability
- Partners liable jointly in contract/debt. This means that 3 rd party can only bring 1 legal action against
partners and cannot seek to sue other partners if he fails S9 PA. tp will normally sue the firm under the
firm’s name to avoid omitting any of the partner’s names.
Relationship between partners & 3rd parties (Pg 249)

- Once partner held liable, the judgment can be enforced against the firm. If firm’s assets are
insufficient, personal property of the individual partners may also be seized to satisfy the partnership
debts.
- Partners liable jointly & severally in wrongful acts & omissions. – 3 rd party can bring more than 1 legal
action against the partners (breach of fiduciary duties, breach of tort) Once partner is sued, unpaid
claimant may still seek to sue other partners. S10, 12 PA
- For partnership/other partners to be liable, wrongful acts must be so closely linked/connected to
jobscope of partner OR usual course of biz.
- The liability of the firm for the misapplication of funds by a partner while the funds are in the firm’s
custody. If the funds are received by the firm in the course of business, then even if one of the partners
acts entires and take the money, other partners will be liable. 11 PA
Lim kok Koon v Tan Cheng Yew & another (2004) pg 250

Sleeping & Salaried Partners

- Sleeping partner = passive investors, but treated like any other partners
- Salaried partners = Given the title of partner and he hold himself to 3rd party as partner but still
employee, thus liable as partner S14 PA
- Partner by holding out = 3rd party hold person as partner ie. Assume/appear to be partner

Incoming & outgoing partners

- Retiring partner remains liable for partnership debt incurred before retirement S17(2), (3) PA
- Retiring partner remains liable for partnership debts incurred after retirement S36 PA unless:
- Retiring partner ensure 3rd parties know he is no longer a partner:
1. for biz with no previous dealings, advert in Gazette sufficient
2. for biz with previous dealings, personal notice must be given eg. letters, official email, etc
- However, a retired partner is not liable for debt incurred after his retirement if 3 rd party are unaware that
the retired partner was a partner in the firm before his retirement
Colin Ng v Engelin (1995) – Name change allowed as retiring partners would not be exposed to
liability.
- all existing partners must consent before new partner can be added S24(7) PA
- new partners not liable for partnership debt incurred before becoming partner S17(1) PA
Situations for Voluntary dissolution (partners want to dissolve)
- expiry of fixed term or specific project S32(1)(a), (b) PA
- any partner gives notice to others S32(1)(c) PA
- any other reason for dissolution provided in partnership agreement
Dissolution (Pg 252)

Situations for Involuntary dissolution (process by law)

- 1 of partners become bankrupt or dies S33(1), (2) PA
- Partnership business becomes unlawful S34 PA
- 1 partner petitions court to dissolve partnership as another partner unable to perform or the court
thinks the situation is just & equitable that the partnership be dissolved S35 PA

Consequences of dissolution
- Partnership property applied to payment of debts & remaining balance is distributed among partners
S39 PA
- If partnership property insufficient to pay debts, partnership debts becomes partners’ personal debts:
unlimited personal liability
 Joint Ventures (Pg 255)
Association of persons, natural/corporate, who agree by contract to engage in common undertaking for joint profit
by combining respective resources, without forming a partnership
Differences - no joint or several liability – each venturer bears his own liability
with - no authority to bind joint-venturer
partnership - a joint-venturer can transfer interest to 3 rd party without approval of other joint-venturer

Limited Liability Partnership (Pg 253)

Incorporated partnership: partnership incorporated with limited liability (separate legal entity)
- Separate legal entity with its own rights and liabilities S8 LLPA
- Partners have limited liability: LLP assets/liabilities are not partners’ assets/liabilities
- privacy: accounts not required to be filed
- tax transparency
- Existence separate & independent of people who establish it
Benefits
- perpetual succession: changes in partners of LLP will not affect existence, rights or liabilities
- Must submit annual declaration of solvency or insolvency. S24 LLPA
- Although a partner may be held personally liable for claims from losses resulting from his own
wrongful act or omission, he shall not be personally liable for the wrongful acts or omissions of
any other partner of the llp. S 8(3) LLPA
Powers - can sue & be sued in its name
S5 LLPA - acquire & hold property in its name
- common seal in its name
- do such acts in its name such as corporation can legally do
Liability - No personal liability for business debts
S5 LLPA - Partners not personally liable for wrongful acts & omissions of any other partners
- Only partner who committed wrongful act personally liable

Limited Companies
Incorporation creates an artificial entity capable of possessing rights/liabilities & owing duties independent of its
members S19(5) Companies Act CA
- Separate legal entity with its own rights and liabilities
- Shareholders have limited liability: Company assets/liabilities are not shareholders
assets/liabilities
Consequences
- If company fails to pay debt, company sued & not shareholders
- Company can hold property in its own name
- Perpetual succession: changes in shareholders will not affect existence, rights or liabilities
- Higher tax rate
- Higher admin cost
Disadv. - Company secretary required
- Compulsory audit if turnover more than $5million
- More formalities
- More costly to close down