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Biz Law Holy Bible - Summary Business Law

Business Law (Singapore Management University)

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BIZ LAW BIBLE

CHAPTER 1
Court Structure
Supreme Court
 Court of appeal
- Appeal cases
 High court
- Appeal cases & First instance (murder cases)
Subordinate Courts
 District court, Magistrate’s court, Juvenile Court, Coroner’s Court, Small Claims Tribunal
- Up to $250,000
Singapore  COMMON LAW LEGAL SYSTEM
Legislature Judiciary
makes law  Statutes = Act of Parliament makes law  Case law
apply law  when deciding cases using laws

Using law from cases

Stare decisis (theory of binding precedence): present case has to follow decisions of previous case where the
relevant facts are the same
Vertical Stare decisis: lower courts follow decision of higher courts
- Purpose: for consistency and predictability but times and values may change over time – by court of appeal
Ratio decidendi (reason for deciding): Binding authority
Obiter dictum (mere saying based on hypothetical facts): only has persuasive authority

Using law from statutes

1. Interpret meaning of Statute
 Interpretation Act (definition of words used in statutes)
- s9A: can use “extrinsic material” if statute is ambiguous OR if giving the words their ordinary
meaning would lead to an absurd or unreasonable result, taking into account the context and
purpose of statute
 Rules to guide statutory interpretation:
- Literal rule: If statute is clear, words given ordinary grammatical meaning
- Golden rule: If statute can be interpreted > 1 way, choose interpretation that avoids absurd result
- Mischief rule: If ambiguous statute, consider mischief that statute is trying to cure
- Words should be interpreted in the context of the section and the statute as a whole
- Ejusdem generis: If a list is followed by general words, then the general words should be
interpreted in the context of the list

2. Determine intention of Parliament

Statutory law > Case law!

Customary law: Trade customs

International law: Law made through international treaties
English law Act listed in 1st Schedule or any other written law applicable in SG
Criminal law: Law governing actions which are crimes
- Punish person committing crime
- Warn potential offenders not to commit crimes
Civil law: Law governing actions which are civil wrongs
- Compensate person who has been wronged

Equitable Principles > Common law Principles

CHAPTER 2
Contract: A legally enforceable agreement entered into by 2 or more parties, containing the rights and
obligations of each party

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

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Principles of Contract Law

Contract

Vitiating Factors Remedies - The

Formation - How Terms - The Discharge - How
- Factors which Cures for a
a Contract is Substance of a contract is
Undermine a Breach of
Made Contract fulfilled or ended
Contract Contract
Nature of Contracts
Elements of Contract
 The concept of necessary meeting of minds is ascertain in 4 key elements
o Offer
o Acceptance
o Consideration
o Intention to create legal relations
Types of Contract (pg 60)
 Simple Contacts
o Written
o Oral
o Deed (written contract under seal)
 Special Contracts
o Contracts by deed or contracts under seal
o Always in writing
o The written document is called a deed
o Contracts under seal do not require consideration to be enforceable
Written and Oral Contracts (pg 60)
 Oral Contracts (Parol Contracts)
o Difficult to ascertain the precise terms of the contact in event of dispute
 Written Contact
o Useful as it provides evidence of the parties’ contractual obligations – Forefront Medical
Technology (Pte) Ltd v Modern Pak Pte Ld (2006)
o Contracts for certain transactions must be evidenced by a written note of memorandum
otherwise they are unenforceable
 Eg. Assignment of copyright and transfer of real property

 Parol Evidence Rule

o Oral (Parol) evidence will not be admitted in a court action to add to , vary, amend or
contradict a written contract – Evidence Act s 94 – Engelin Teh Practice LLC v Wee Soon
Kim Anthony (2004)

Offer (pg 63)

 An offer is an expression made by one party (offeror) to another party (offeree) communicating that
offeror’s willingness to perform a promise, made with intention that upon acceptance by the offeree, a
binding agreement is formed. (intention to be legally bound)
 For an offer to be effective, it must be communicated to the offeree
o E.g. If offer is sent on Monday and it reaches offeree on Wednesday, the offer is deemed to be
made on Wednesday.
Unilateral Contract (pg 63)

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

 Unilateral contact is one that is brought into existence by the act of one party in response to a
conditional promise by another -> “an act for a promise”
 Carlill v Carbolic Smoke Ball Co (1892)
o Although offer is made to the world, the contract is made with that limited portion of the
public who came forward and perform the condition on the faith of the advertisement
 Offeree makes no promise in this case but simply performs the condition attached to the offeror’s
promise
 In a bilateral contract, parties would know the identities of each other and there is an exchange of
promise
Invitation to Treat (pg 64)
 An invitation to treat is an invitation to commence negotiations, it is an invitation to make an offer
o Advertisements is not considered an offer but ITT
 Acceptance of ITT does not lead to a contract – Partridge v Crittenden (1968)
 Display of goods and prices are considered ITT and not an offer
 Offer is only made when customer selects the item and pays for it at the cashier – Chwee Kin Keong &
Others v Digilandmall.com Pte Ltd (2004) and Pharmaceutical Society of Great Britain v Boots
Cash Chemists (Southern) Ltd (1952) – pg 65
 S13 of ETA -> intention/circumstances and language; objectively ascertained (impt!)
Auctions and Tenders (pg 66)
 Auctions
o Auctioneer invite bids which are considered ITT
o Bids by audience are offers
o Sale completed when auctioneer indicates his acceptance by fall of hammer
 Tender
o Tender submitted is considered as an offer
o Advertisement which invites tenders are considered ITT
o Once tender is accepted, a contract is formed
Provision of information (pg 67)
 Communication may not be an offer but a mere response to a request for information
 Harvey v Facey (1893)
o Provision of information was not an offer
 Lowest price for Bumper Hall Pen, $900 in response to a request for information
Acceptance(pg 67)
 Acceptance may be made in writing, orally or by conduct
 Communication constitutes an acceptance only if it is an unconditional expression of agreement to the
terms of the offer – Compaq Computer Asia Pte Ltd v Computer Interface (S) Pte Ltd (2004)
 Conditional Acceptance is no acceptance – Stuttgart Auto Pte Ltd v Ng Shwu Yong (2005)
 A counter offer – where offeree seeks to accept the offer but on slightly different terms does not amount
to an acceptance
 Prospective purchaser may accept offer subject to contract or subject to a written contract to be drafted
by solicitors
o Contract will only come into existence when condition is fulfilled – Thomson Plaza (Pte) Ltd
v Liquidators of Yaohan Department Store Singapore Pte Ltd (in liquidation) (2001)
 Agreement contains words to the effect that it shall not be a final and binding agreement, there is no
contract – Cendekia Candranegara Tjiang v Yin Kum Choy & Others (2002)
Knowledge of Offer (pg 68)
 Contract could be formed even if offeree is ignorant of the offer and offeree performs obligations
which amounts to acceptance of contract – Gibbons v Proctor (1891)
 Opposite view was taken in US case – Fitch v Snedaker (1868) and Australian Case – R v Clarke
(1927)
 Once offeree is aware of the offer, it does not matter that he was prompted to act for reasons other than
the desire to accept the offer – Williams v Carwardine (1833)
o Therefore still entitled to the reward
 Two identical cross offers do not ordinarily make a contract – Tinn v Hoffman & Co (1873)
o Cross offer implies a lack of consensus or meeting of minds between the parties at the time of
making the offers
Communication of Acceptance (pg 69)
 For an acceptance to be effective, it must be communicated to the offeror

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o Offeror must physically receive the written acceptance or heard the oral acceptance – CS
Bored Pile System Pte Ltd v Evan Lim & Co Pte Ltd (2006)
General Rule:
Acceptance must
be communicated

Exception

Offeror waives Parties agree that Acceptance

communication of offeree's silence is properlu made
acceptance acceptance under postal rule

Waiver of Communication (pg 69)

 Facts show that the offeror has waived the need for communication of acceptance
 In case where offer is made to the whole world
 In unilateral contact, the act by the offeree may itself be constructed as acceptance, without requiring
formal communication to the offeror
Silence (pg 70)
 Silence is normally not constructed as acceptance unless
 Both parties have agreed that the offeree’s silence is to be constructed as his acceptance
 Both parties have to agree to it for it to be effective – Felthouse v Bindley (1862)
o Felthouse had no right to impose a condition that a sale contact would come into existence if
Bindley remained silent
 Both offeror and the offeree may agree that the offeree would have a position obligation to
communicate only if he wishes to reject the offer – Southern Ocean Shipbuilding Co Pte Ltd v
Deutche Bank AG (1993)
o Silence in this case can be construed as Acceptance
o Midlink Development Pte Ltd v The Stansfield Group Pte Ltd (2004)
 It is always a question of fact whether silent inactivity after an offer is made is
tantamount to acceptance
The Postal Acceptance Rule (pg 71)
 Acceptance is deemed to have been effective as soon as the letter is posted, regardless as to when it
reaches the offeror or whether it reaches him at all – Adams v Lindsell (1818)
 It should only be applied in cases where both parties agree that acceptance should be sent by post
 Offer made by telegram gives rise to a presumption that the offeror wishes a speedy reply such that an
acceptance sent by post would not attract the postal rule – Quenerduaine v Cole (1883)
o General rules applies in this case and acceptance occurs only when the posted letter is actually
received
 Offeror often stipulate that acceptance is not valid until physically received by the offeror, offeror
overrides the postal rule and general rule applies
Instantaneous Communications (pg 72)
 Instantaneous Communication proper where offeror and offeree talks on the phone
o Communication is instant in its fullest sense
o Similar to situation of oral communication
o Acceptance must be actually be received by the offeror
 Near Instantaneous Communications where two person communicate by typing on keyboard and
responding real time
o Communication is instantaneous or virtually so
o Entores Ltd v Miles Far East Corporation (1955)
 Acceptance is complete when it is received and not when it is sent
 Asynchronous (not communicating in real time) where there is instantaneous or virtually instantaneous
transmission but not instantaneous communication
o Eg, acceptance is by facsimile, email or voice mail but no one is manning the receiving
equipment
o Case law – Chwee Kin Keong v Digilandmall.com Pte Ltd suggests that General Rule applies
where acceptance is valid upon receipt (Physically receive)
 Electronic Transactions Act (ETA) (pg 73-74)
o Part IV deals with electronic contracts

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o Section 11 ETA states that an offer or acceptance can be sent electronically in the form of an
“electronic record”
o Electronic record is deemed sent by the originator if it is sent by the originator himself,
someone authorized by him or by an information system programmed by or on behalf of the
originator to operate automatically – s 13 (1) & (2) ETA
o For additional certainty, there are provisions for a party to require an acknowledgement of
receipt to ensure messages have been received properly, s 14 ETA
o General rule is that despatch of an electronic record occurs when the message enters an
information system outside the control of the originator, s 15(1) ETA
o Moment of receipt depends on whether the addressee has designated a specific information
system for receiving messages
 If addressee has done so, generally receipt occurs when the electronic record enters
the designated information system of the addressee
 If message is sent elsewhere, then receipt occurs when the message is retrieved by
the addressee, s 15(2)(a) ETA
 If addressee has not designated an information system, receipt occurs when the
message enters any information system of addressee s 15(2)(b) ETA
o Advisable for addressee to designate an information system
o Provisions of ETA deal with the time transmission is received but do not resolve the issue of
when acceptance is communicated
o ETA does not definitively endorse the postal rule or the general (receipt) rule
o As Singapore High Court noted in Chwee Kin Keong v Digilandmall.com Pte Ltd
 S 15 ETA does not purport to change or even clarify the legal principles governing
contract formation

Termination of Offer and Acceptance (pg 75)

 Withdrawal
 Rejection (Counter Offer)
 Lapse of Time
 Failure of Condition
 Death
Withdrawal (pg 75)
 General rule is that an offer can be withdrawn at any time prior to acceptance
 Revocation of offer must be communicated to the offeree
 Only effective when offeree receives notice of revocation – Byrne v Van Tienhoven (1880)
 Reliable third party could communicate a valid revocation – Dickinson v Dodds (1876)
o Important point is that offeree obtains knowledge of revocation
o Overseas Union Insurance Ltd v Turegum Insurance Co (2001)
 Revocation of an offer can also occur if the offer is replaced or substituted by a fresh offer, fresh offer
must state that it supersedes the earlier offer – Banque Paribas v Citibank NA (1989)
 No legal obligation by the offeror to keep promise of opening for certain period of time. Can withdraw
before stipulated time.
o Unless there is a separate contract called options which is essentially a promise, supported by
consideration to keep an offer open for a specific period
 For unilateral contacts, general rule states that offer can be revoked at any time prior to acceptance
which in this case occurs when the offeree’s obligations have been fully performed
 Alternative view is that if an offeree within a reasonable time from the making of the offer begins to
perform his obligations, the offeror cannot revoke the offer – Abbott v Lance (1860)
 In support of alternative view, in Dickson Trading (S) Pte Ltd v Transmarco Ltd (1989), Chan Kek
Keong JC said (obiter dictum) “the offeror in a unilateral contract has an obligation not to revoke the
offer after the offeree has embarked on the performance of the conditions."
Rejection and Counter-offer (pg 78)
 Offer can be terminated when an offeree rejects the offer in writing, orally of conduct.
 Rejection must be communicated to offeror to be effective and offer is extinguished and cannot be
revived
 Counter offer is construed as rejecting the initial offer – Hyde v Wrench (1840)

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

Lapse of Time (pg 79)
 Offeror states that his offer is open for a specified period
 Purported acceptance after that period would not be effective since offer had lapsed
 Court may imply that offeror has specified the period of offer even if he has not done so expressly –
Wee Ah Lian v Teo Siak Weng (1992)
 Offer is still valid and capable of acceptance after deadline if it is clear from the offeror’s conduct and
other evidence that the terms of the supposedly lapsed offer continue to govern their relationship after
the specified period – Panwell Pte Ltd & Anor v Indian Bank (No 2) (2002)
 In case where there is no express or implied period when offer is open, law usually presumes that an
offer will lapse after a reasonable time has passed – Ramsgate Victoria Hotel Co v Montefiore (1866)
Failure of Condition (pg 80)
 An offer may be made subject to a condition such that if the condition is not met, the offer is
automatically terminated
 Such condition may be expressly stated in the offer or it may be implied – Financings Ltd v Stimson
(1962)

Death (pg 80)

 An offer is terminated by death of either the offeror or the offeree
 If a man who makes an offer dies, the offer cannot be accepted after he is dead – Dickinson v Dodds
 Bradbury v Morgan (1862) – The court held that the death of an offeror did not terminate the offer
unless the offeree had notice of the offeror’s death.
 Reynolds v Atherton (1921) – Offeree dies before acceptance, this offer cease to be capable of
acceptance.
Termination of Acceptance (pg 81)
 Once an acceptance has been communicated to an offeror, it cannot be withdrawn since, upon
communiation, there is a contract.
 Once posted, acceptance cannot be revoked (postal rule) – Wenkheim v Arndt (1873)

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

Consideration (pg 85)
 Consideration can be viewed as the price or compensation for the promise given by one party to the
other. (Price for a Promise)
 Or Benefit-Detriment Analysis – Promisor obtains benefit, promisee suffers detriment
 As defined by Sir Frederick Pollock and later adopted by the House of Lords in Dunlop v Selfridge
(1915)
o An act or forbearance of one party or the promise thereof, is the price for which the promise of
the other is bought and the promise thus given for value is enforceable
 In respect of each act, forbearance or promise, person who makes or performs it is the promisor and the
person to whom it is made or performed is the promisee
 In order for a promise to be enforceable, consideration must first be given.
Types of Consideration (pg 86)
 Executory Consideration
 Executed Consideration
 Past Consideration
Executory
 Executory consideration refers to consideration which have not been performed
Executed Consideration
 Executed consideration refers to consideration which has been performed
 In other words, executed consideration involves an act or forbearance, which has been fulfilled
Past Consideration
 Past consideration refers to an act performed prior to and to that extent independent of the promises
being exchanged
 Action which was performed was not done in contemplation of or in response to a promise given
 Past consideration is no consideration
 Roscorla v Thomas (1842)
o The court held that the promise was made after the transaction had already been concluded
and therefore past consideration.
 The key with executed consideration is that the act was performed in exchange for another promise
given whereas with past consideration the act was performed without the reciprocal promise in mind
 For past consideration to become executed consideration (Pao On’s 3 requirements) – Pao On v Lau
Yiu Long (1980)
o Act done at promisor’s request
o Parties understood act is to be remunerated
o Contract must otherwise be enforceable
 Courts have held that past consideration is no consideration
o Teo Song Kwang (alias Richard) v Gnau Lye Chan and Another (2006)
o Sim Tony v Lim Ah Ghee (1995)

Consideration Must Move from Promisee, but need not move to promisor (pg 88)
 General rule is that for a promisee to enforce the promise, he must show that consideration has moved
from him
 Tweddle v Atkinson (1861)
o Court held that Tweddle could not enforce the contract between the two fathers
o First he was not a party to the contract
o No consideration flow from him
 The consideration however, need not move to the promisor (need not benefit the promisor)-Malayan
Banking Berhad v Lauw Wisanggeni
 Basically, the rule states that although the promisee must provide consideration, the consideration need
not benefit the promisor.
 A third party who is a stranger to the contract may benefit from the contact although he may not
enforce it.
Consideration must be Sufficient but Need Not be Adequate (pg 90)
 Adequacy of Consideration (pg 90)
o Law will not interfere with the parties bargain
o Common law will not inquire the fairness to the consideration as long as the parties agree to it
willingly – Lam Hong Leong Aluminium Pte Ltd v Lian Tech Huat Construction Pte Ltd
and Another (2003

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o Swiss Singapore Overseas Enterprise Pte Ltd Navalmar UK Ltd (No 2)(2003)
 Once subject of exchange is recognized in law as suitable consideration, quantity is
irrelevant
o Chappell & Co Ltd v Nestle Co Ltd (1960)
 Chocolate wrappers were deemed as sufficient consideration
 Sufficiency of Consideration (pg 91)
o All consideration must be of some value in the eyes of the law
o Sufficient consideration is also described as good consideration or valuable consideration.
o Sufficient Consideration
 Goods, services, money, property
 Forbearance to sue – Alliance Bank Ltd v Broom (1864); Lam Hong Leong
Alumnium Pte Ltd v Lian teck Huat Construction Pte Ltd and Another (2003)
 Performance of existing contractual duty to a third party – The Eurymedon; Pao On
v Lau Yiu Long (1980); SSAB Oxelosund AB v Xendral Trading Pte Ltd (1992)
o The same applies to a compromise of a legal action such as a out of court settlement –
Callisher v Bischoffsheim (1870); K-Rex Finance Ltd v Cheng Chih Cheng (1993)
o Requirement:
 The legal action must be reasonable and not frivolous
 Claimant has an honest belief in the chance of success of the claim
 Claimant has not concealed from the other party any facts, which to the claimant’s
knowledge, might affect its validity.
o In situations where the promise to perform, or the performance of, a pre-existing contractual
obligation to a third party can be a valid consideration.
 The Eurymedon, even though the defendant was already contractually bound to a
third party to carry out a duty, the Privy Council still affirmed that good consideration
is present when the plaintiff shipping company made a separate offer to pay the
defendant if they unload the goods from the Eurymedon.
Situations where case law held that the consideration provided was insufficient
 Moral Obligations & Obligations
 Vague or insubstantial consideration
 Performance of existing public duty
 Performance of existing contractual duty

 Moral Obligation (pg 93)

o Consideration amounts to nothing more than moral obligation
o Eastwood v Kenyon (1840) – The court rejected the plaintiff’s view and held that moral
obligation is insufficient consideration for a fresh promise.
o A promise which is supported merely by the wishes or motives of the promise – no matter
how exemplary cannot be enforced because it lacks good consideration
o Thomas v Thomas (1842) – The court held that the nominal rent was sufficient consideration
but the husband’s wishes were irrelevant; motives are not the same things as considerations
 Vague or Insubstantial Promise (pg 94)
o Consideration is too vague or insubstantial in nature to be enforceable
o White v Bluett (1853) – The court held that Bluett’s promise was nothing more than a promise
“not to bore his father”. As such it was too vague and was insufficient consideration for the
alleged discharge by his father.
 Existing Public Duty (pg 94)
o Promisee is already under a public duty to perform an act and the same act is the purported
decision
o Collins v Godefroy (1831) – The words of Lord Tenterden, “If it be a duty imposed by law
upon a party regularly subpoenaed to attend from time to time to give his evidence, then a
promise to give him remuneration for loss of time incurred in such attendance is a promise
without consideration.
o If the court finds the promisee did something more that required by an existing public duty,
then it may be sufficient.
o Eg. Glassbrook Bros Ltd v Glamorgan City Council (1925) – The Court held that the police
went beyond their public duty by providing a stationary force which was in excess of what
they thought was adequate in the circumstances.
 Existing Duty to Promisor (pg 95)

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o Promisee is under an existing duty to the promisor to perform the act which is to be the
purported consideration
o Stilk v Myrick (1809) – It was held that there was no consideration for the captain’s promise
because the remaining crew did what they were contractually required. Two sailors deserting
were within the usual emergencies found in such a voyage.
o However, if it is more than what is contractually required, that may constitute good
consideration
o Williams v Roffey Bros and Nicholls (Contractors) Ltd (1991) – The English Court of Appeal
held that as long as the extra payment was not given under duress or fraud, the oral promise
was enforceable because the defendant obtained “practical benefits” from the plaintiff’s work.
The benefit was that they would not be liable under the main contract for late completion.
 Rule in Pinnel’s Case (pg 97)
o General rule is that partial fulfillment of a contractual obligation does not discharge the
promisee’s obligations also applies to a debt
o Pinnel’s Case (1602)– Payment of a lesser sum on that day in satisfaction of a greater sum
cannot be any satisfaction for the whole
o If payment and acceptance of [a part] before the day in satisfaction of the whole would be a
good satisfaction… [because the part] before the day would be more beneficial to him than the
whole at the day and the value of satisfaction is immaterial
o Part payment of a debt does not discharge the entire debt unless the part payment was made at
the request of the creditor and the payment was made earlier, at a different place, or in
conjunction with some other valuable consideration – Foakes v Beer (1884)
Consideration and Promissory Estoppel (pg 98)
 Where Promissory estoppels is established, a promisee may have a valid defense against a promisor’s
claim even though no consideration has been given by promisee
 Doctrine was explained in orbiter dictum by Denning J in the case of Central London Property Trust v
High Trees House Ltd (1947)
 Elements required to establish Promissory Estoppel
o Parties must have an existing legal relationship
o Promise must be clear and unequivocal and intended to affect the legal relationship
o Promisee relied upon the promise and altered his position
o Overall it must be inequitable(unfair) for the promisor to be allowed to go back on his promise
Suspensive or Extinctive (pg 99)
 Once elements of Promissory Estoppel is established, it is tantamount to upholding a promise even
though no consideration flowed from the promisee
 Original legal relationship is suspended for the duration of the promise
 The effect of promissory estoppels is to suspend the promisor’s rights temporarily
 When the promisor gives reasonable notice of his intention to revert to the original legal relationship,
the original relationship is restored.
 Tool Metal Manufacturing Co Ltd v Tungsten Electric Co Ltd (1995) – The House of Lords affirmed
the principle of PE. Tool Metal was entitled to revoke their voluntary suspension by giving adequate
notice to Tungsten Electric. The parties were deemed to have returned to their original agreement
 However, the promise could become “final and irrevocable if the promisee cannot resume his position.”
– Ajayi v R T Briscoe (Nigeria) Ltd (1964)
Shield not Sword (pg 100)
 Promissory estoppel can only be used as a shield and not as a sword, only as a defence against a claim
made by a plaintiff.
 Combe v Combe (1951) – English Court of Appeal held that PE can only be “used as a shield and not
as a sword.” – Assoland Construction Pte Ltd v Malayan Credit Properties Pte Ltd (1993)
Intention to Create Legal Relations (pg 101)
 The test is whether a reasonable person viewing all the circumstances of the case would consider that
the promisor intended his promise to have legal consequences.
Social and Domestic Agreement (pg 101)
 Cover situations where the agreement is made between friends or between family members
 General presumption that such agreements lack the necessary intention to form a contract
 Balfour v Balfour (1919) - The English Court of Appeal held that the claim failed because the parties
did not intend the promise to be legally binding.
 De Cruz Andrea Heidi v Guangzhou Yuzhitang Health Products Co Ltd and Others (2003) – Court
held that there was no contract between the parties, Andrea and Rayson as there was an absence of an
intention to create legal relations; even if Rayson made profits, it would not elevate it to a commercial

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transaction but merely means that the friend doing the favour has decided to keep some part of the
discount for himself, perhaps to compensate for his time and expense, without informing the recipient.
 Some social or domestic agreements may possess the necessary intention – Tan Hin Leong V Lee Teck
Im (2001)
 Merritt v Merritt (1970) – The English Court of Appeal found the necessary intention and held that the
wife succeeded in her claim for breach of contract.
Commercial Agreements (pg 103)
 General presumption that there is the necessary intention to create legal relations
 Edwards v Skyways Ltd (1964) – General presumption of intention in commercial agreement is not
rebutted by the use of the phrase ex gratia to describe the payment. Skyways was legally bound to
make the payment
 Honour Clauses (pg 103)
o Binding commercial agreement may be found to be unenforceable because of the absence of
the necessary intention
o Parties in an honour clause have expressly stated their agreement is not to be legally binding –
Rose & Frank Co v J R Crompton & Bros Ltd (1925)
 Letters of Comfort
o Letters of comfort are letters written by one party usually intended to vouch for the financial
soundness or probity of another related party who wishes to enter into a contract with a third
party
 If third party is uneasy about entering into contract, the letter of comfort would act as
an additional assurance from the letter’s issuer
o Memorandum of understanding is usually a document which records the understanding of the
parties on a proposed commercial project
o Letter of intent is simply that it records the intention of parties, usually in connection with a
proposed commercial project
o Compaq Computer Asia Pte Ltd v Computer Interface (S) Pte Ltd (2004)
 Letter of award issued by Compaq was incapable of creating a binding contract as it
was subject to final terms and conditions being agreed by parties
o Mohamed Bassatne v Rifaat El Gohary (2004) and Khng Thian Huat v Riduan Bin Yusof
(2005) involving a MOA and LOI respectively
 Parties’s conduct had determined that the respective agreements were indeed binding
o Kleinwort Benson Ltd v Malaysian Mining Corporation Berhad (1989) – On appeal, Court
only found a moral not legal obligation. The wording of the letter of comfort did not amount
to a warranty of MMC’s future conduct. On this basis, the court saw no need to apply the
usual presumption of intention to create legal relations.
 Administrative Relationships (pg 105)
o Management Corporation Strata Title No 473 v De Beers Jewellery Pte Ltd (2001) – No
intention to create legal relations could exist on either side since De Beers was in the position
of an applicant for a license and the MC was in the position of the issuing authority.
o The situation as analogous to that which exists when someone applies to a governmental or
statutory body for an approval, for example, a licence to operate a restaurant or a radio or even
a permit to construct a building.
Privity of Contract (pg 105)
 General rule of privity is that no one other than a person who is a party to the contract may be entitled
to enforce or be bound by the terms of the contract. Similar to the rule that consideration must move
from the promisee.
 Price v Easton (1833) – Court held that Price could not succeed because he was not a party to the
contract between the debtor and Easton
 Management Corporation Strate Title Pan No 2297 v Seasons Park Ltd (2005)
 Exceptions through which third party may acquire contractual rights of liabilities
o Thai Kenaf Co Ltd v Keck Seng (S) Pte Ltd (1993)
o Agency (Chapter 16)
 General rule of Agency: Principal, although not a party to the contract, has a direct
contractual relationship with the third party. Conversely, the agent who is a party to
the contract, is not liable for and not entitled to enforce the contract.
o Assignment of Choses in action
 Rights or liabilities relating to a chose in action under a contract between parties may
be transferred to a third party under a assignment

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 Typically, assignment is made with the full consent of three parties

o Letter of Credits
 Contracts (Rights of Third Parties) Act (CRTA) (pg 107)
o Third Party is able to enforce any term of a contract to which he is not a party where
 Contract states expressly that he may do so, s 2(1)(a) CRTA
 Contract purports to confer a benefit on him, unless on a true construction of the
contract, the contracting parties did not intend the third party to be able to sue, s 2(1)
(b) and 2(2) CRTA
 Third party is expressly identified in the contract by name as a member of a class, or
as answering a particular description, although he need not have existed at the date of
the contracts, 2(3) CRTA
o Third party who sues under CRTA will have a right to all remedies for breach of contract
o This is so even though the third party gave no consideration, s 2(5) CRTA
o Subject to the qualification that the third party must been able to rely on such an exemption
clause if he had been a party to the contract s 4(6) CRTA
o Once rights of third party are risen under CRTA, the contracting parties cannot rescind or vary
those rights without consent s 3 CRTA
o CRTA DOES NOT apply to
 Contracts on bills of exchange, promissory notes and other negotiable instruments
 Memoranda and articles of association that bind a company and its members
 Contracts of employment where a third party wishes to enforce a term against an
employee
 Contracts for carriage of goods by sea or for all international carriage of goods by
rail, road or air
o CRTA enables contracting parties to choose whether or not to confer enforcement rights in a
known third party where this is not already provided by another statue
o Contracting parties may be sued by a total stranger who is not a party to the contract since the
CRTA does not require the third party to be individually names or even inexistence
o A clause can be used to prevent that that says “A person who is not a party to this agreement
shall have no right under the Contracts (Rights of Third Parties) Act to enforce any of its
terms.”

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Chapter 5: Contract Terms (pg 113 – 140)

 Terms are promises and undertakings given by each party to the other.
 Form the substance of a contract
 Specify the way in which contractual obligations are to be performed
Terms and Representations (pg 113)
 3 types of pre-contractual statements: puffs, representations and terms
 1) Puffs are statements which have no legal effect whatsoever
o Tend to be statements which are vague because of imprecision or exaggeration
o Dimmock v Hallet (1866) – Court held that the description of the land “fertile and
improvable” was a mere puff.
2) Representation is a statement made before or at the time a contract is formed concerning some
matter relating to the contract and is not an integral part of the contract
o Contract is not breached if the representation is untrue
o Behn v Burness (1863) - In this situation, the party may have a remedy under the law of
misrepresentation but cannot initiate an action for breach of contract
3) Terms are statements which form part of a contract
o The only similarity between terms and representations is that they originate as oral and written
statements before a contract is formed.
o Terms are part of the contract while representations are not.
 Terms and representations create different rights and obligations for the contracting party.
o Jet Holding Ltd and Others V Cooper Cameron (Singapore) Pte Ltd and Another –
Representations cannot in law be elevated to terms of contract whether express or implied
o Main criterion for distinguishing terms and representations is the intention of the parties – Tan
Chin Seng & Others v Raffles Town Club Pte Ltd
o Basic test is whether there is evidence that one or both contracting parties intended that there
be contractual liability in respect of the statement
Guidelines to Distinguish Terms from Representations (not to be applied rigidly)
 When Statement is made (pg 115)
 Maker’s Emphasis (pg 115)
 Maker’s Special Knowledge (pg 116)
 Invitation to verify statement (pg 116)
 Written Statement (pg 117)
1) When Statement Is Made
 If statement is made closer to time the contract was finally concluded, then it is more likely to be a term
rather than representation
 Rationale is that a long interval between the time the statement is made and the point the contract is
formed suggests that statement is relatively unimportant
 Routledge v McKay (1954) – The English court of appeal held that there was clear and significant
interval of one week between the making of the statement and the making of the contract. This
indicates that the statement was not a term of the contract.
2) Maker’s Emphasis
 Greater the emphasis, the more likely the statement is a term
 Suggests that statement is important to one or both parties
 Bannerman v White (1861) – White told Bannerman that he would not even bother to ask the price if
sulphur had been used. The court held that Bannerman was found to have breached the contract, thus
entitling White to repudiate the contract.
3) Maker’s Special Knowledge
 Where maker of statement has greater knowledge concerning the statement as compared to the other
party, it is more likely that the statement is a term
 Oscar Chess Ltd v Williams (1957) – The court of Appeal held that William’s statement was not a term
of the contract because as a private individual, Williams was not in a position to guarantee the accuracy
of the year of registration given.
 Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd (1965) – The English Court of Appeal
held that there was a breach of contract because the defendant’s statement was a term of the contract.
The seller, a motorcar dealer, was in a better position to know the true facts regarding the Bentley (as
opposed to Oscar Chess v Williams where the seller was an individual who had no way of knowing
otherwise).

4) Invitation to Verify Statement

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 If the maker of the statement invited the other party to verify the truth of the statement made, then the
statement is more likely to be a representation.
 Maker of statement shows that he does not intend contractual liability to result from his statement
 If maker dissuades the other party from verifying the truth of the statement, then statement is more
likely to be a term
 Ecay v Godfrey (1947) – The statement was held to be a representation.
5) Written Statement
 If a statement was originally made orally and later reduced into writing, then if is more likely to have
become a term of the contract.
 Where there is a written contract, all the terms of the contract are presumed to be contained within the
written document
Express and Implied Term (pg 117)
 An express term is a term which has been expressly agreed between the parties
 Can be made orally or in writing
 An implied term is a term which has not been expressly agreed by the parties but is nevertheless
implied into the contract
 Can be implied into a contract by a court to give efficacy to the contract or it may be implied by a
statute
 Term cannot be implied if the implication of such a term would be plainly against the express terms of
the contact – Tan Hin Leong v Lee Teck Im (2001); Telestop Pte Ltd v Telecom Equipment Pte Ltd
(2004)
 Where terms are clear and unambiguous, they must be given their natural meaning as there is no room
for rewriting or implying terms into contract in those circumstances – Bayerische Hypo- und
Vereinsbank AG v C K Tang Ltd (2004)

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

 Terms can be implied into a contract because such contracts are subject to unwritten terms hallowed by
long usage or custom
 Hutton v Warren (1836) – Hutton was entitled to such allowance because it was an accepted custom
that a tenant was bound to a farm for the entire tenancy but upon quitting, may claim an allowance for
seeds and labor
 Bernard Desker Gary & Others v Thwaites Racing Pte Ltd & Another (2003) – Practise from which
terms of contact were drawn was not accepted by all trainers and owners, thus they could not be
implied into the contract by custom and practice

Terms Implied by the Court - Business Efficacy and Officious Bystander Tests (pg 118)
 Court will supply a term which it considers as having been intended by the parties so as to ensure that
their contract will proceed on normal business lines
 Requires the court to determine the presumed intention of the parties which may be gathered from the
express words of the contract and the facts and circumstances surrounding it – Romar Positioning
Equipment Pte Ltd v Merriwa Nominees Pty Ltd (2004)
 The Moorcock (1889) – The English Court of Appeal held that even though the defendant did not give
any warranty that the ground below the jetty was safe, it was an implied undertaking to this effect.
Hence the plaintiff succeeded.
 Officious bystander test – So obvious it goes without saying that it is an implied term in the contract –
Shirlaw v Southern Foundries (1926) Ltd v Anor (1939)
 Energy Shipping Co Ltd v UDL Shipping (Singapore) Pte Ltd (1995) – The above tests were used in
the case. However, whichever test is adopted, the important point to be implied must be necessary to
ensure business efficacy does not mean that a court will exercise its discretion.
 Singapore Court of Appeal in the Hiap Hong & Co Pte Ltd v Hong Huat Development Co (Pte) Ltd
(2001) case has confirmed the position that in considering implied terms, it must be borne in mind that
the touchstone is necessity and not merely reasonableness

Terms Implied by Statute (pg 120)

 Statutory provisions such as the Sale of Goods Act (SGA)
 Terms implied by statute operate by force of law
 Irrelevant that the parties are unaware of the statute

Classification of Terms (pg 120)

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

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Condition and Warranty (pg 121)

 Conditions are those terms which are important, essentially or fundamentally to the contract. They are
statements of fact or promise which go to the root of the contract – Behn v Burness (1863) + The
Mihalis Angelo (1917)
 Warranties are less important terms and constitute secondary obligations
 Bettimi v Gye (1876) – The court held that the rehearsal clause was not vital to the contract. Bettini’s
breach of the warranty did not entitle Gye to repudiate the contract. The contract remains on foot and
Gye could claim for damages.
 A breach of condition gives the injured party the option to affirm the contract, keeping it on foot or
alternatively discharging the contract.
 He may also claim damages
 Breach of warranty does not give the injured party the right to discharge the contract
 Contract remains on foot and the injured party only has a claim in damages
 Categorization is a task for the court and court must consider all the relevant aspects of the case
including the intention of the parties and the purpose of the contract
Innominate Term (pg 122)
 Innominate terms cover terms which can be breached resulting in trivial consequences, as well as those
resulting in serious consequences. (not condition or warranty)
 Hong Kong Fir Shipping Co Ltd v Kawasaki Kaisen Kaisha Ltd (1962) – The court held that the
plaintiff breached an innominate term, but the breach was not sufficiently serious to entitle Kawasaki to
repudiate the contract. Kawasaki could only claim damages.
 Breaching innominate term
o If a breach results in trivial consequences, a remedy in damages should suffice (treated like a
warranty).
o If a breach results in serious consequences, the injured party should be entitled to treat the
contract as discharged (treated like a condition).
 The test
o Diplock LJ – “does the occurrence of the event deprive the party who has further undertakings
to perform, of substantially the whole benefit which it was the intention of the parties as
expressed in the contract that he should obtain as the consideration for performing those
undertakings?”
 Condition – warranty approach must take precedence over the Hong Kong Fir approach because it is
premised on the intentions of the contracting parties themselves.
 Approach has been approved in Singapore in cases
o Chua Chay Lee & Others v Premier Properties Pte Ltd (2000)
o Mizuho Corporate Bank Limited v Woori Bank (2004)
Exemption Clauses (pg 124)
 An exemption clause is a term in the contract, which seeks to exclude the liability of the party relying
on the clause. An exemption clause seeks to exclude liability totally while the limitation of liability
seeks to limit the liability.
 The party who wishes to rely on an exemption clause must establish the 4 points below
o Incorporation – The clause must be incorporated into the contract
o Construction – The clause, properly construed, must cover the loss of injury which occurred.
o Unusual factors – There must not be any extraordinary facts in the case which prevents the
operation of the clause
o UCTA – The clause must not contravene the UCTA.
 Limitation of liability clause seeks to limit the liability of a party relying on it to a sum specified in the
contract
 Warren Khoo J in Singapore High Court made a distinction between EC and LLC and approved the
following comments of Lord Wilberforce in Ailsa Craig Fishing Co Ltd v Malvern Fishing Co Ltd &
Securicor (Scotland) (1983)
o Clauses of limitation are not regarded by the courts with the same hostility as clauses of
exclusion: this is because they must be related to other contractual terms in particular to the
risks to which the defending party may be exposed, the remuneration which he received and
possibly also the opportunity of the other party to insure
Reliance on Exemption Clause – Incorporation (pg 125)
 An exemption clause becomes incorporated into a contact in two ways, by signature or notice
 L’Estrange v Graucob (1934) – The court held that the document containing contractual terms is
signed, then in the absence of fraud or misrepresentation. The party signing it is bound, and it is wholly
immaterial whether he has read the documents or not.

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 Subject only to factors such as fraud or misrepresentation, the exemption clause is incorporated by the
signature of the parties
 When there is no written contract or the contract is not signed, the exemption clause may still be
incorporated into the contract if the person relying on the exemption clause can show that he gave
reasonably sufficient notice of the exemption clause to the injured party
o Where Notice Affixed (pg 126)
 Notice should be printed on somewhere a reasonable person would have expected to find
contractual terms for EC to be incorporated.
 Chapelton v Barry Urban District Council (1940) – The English Court of Appeal held that no
reasonable person would expect to find contractual terms on the ticket since it would be
regarded simply as a receipt for money paid.
o When notice is given (pg 126)
 Notice must be given before or at the time contract was made for EC to be incorporated.
 Olley v Marlborough Court Ltd (1949) – The English Court of Appeal held that the contract
was already formed before the couple entered their room and that therefore the notice given on
the bedroom wall was too late.
o Adequacy of Notice (pg 127)
 Reasonable steps must have been taken to bring notice to the attention of the injured party for
EC to be incorporated.
 The notice must be sufficiently conspicuous and legible.
 Thornton v Shoe Lane Parking Ltd (1971) – The English Court of Appeal held that the
contract was formed when Thornton paid his money into the machine, which later issued the
ticket. For the exemption clause to be incorporated there must have been reasonable
sufficiency of notice prior to or at this time. A notice on the ticket is too late. The defendant
failed to prove reasonable sufficiency of notice.
 Thomson v London Midland Scottish Railway Co (1930) – The English Court of Appeal held
that reasonably sufficient notice was given since the ticket made reference, albeit rather
circuitously, to the exemption clause.
 The above case suggest that as long as the party relying on the exemption clause has done
what is reasonable to bring the notice to the attention of the injured party, he will be entitled to
rely on the clause despite the fact that the injured party may be under some disability
preventing him from understanding the notice
 A different outcome may emerge if the party relying on the clause knows from the very
beginning that the injured part is under some disability.
 Geier v Kujawa, Weston & Warne Bros (Transport) Ltd (1970) – The court held that there
was no sufficiency of notice because Geier did not take the reasonable step of translating the
notice.
 Jet Holding Ltd & Others v Cooper Cameron (Singapore) Pte Ltd & Another (2005) – Court
held that no adequate notice was given as the standard form clauses involved should have
been brought fairly and reasonably to the plaintiff’s attention by “pointing them out, more so
when the terms and conditions were not printed on the reverse of the quotation”

o Previous Course of Dealings (pg 128)

 If there has been previous course of dealings between the parties which included an exemption
clause, and then the exemption clause may be incorporated through the previous course of
dealings.
 Henry Kendall & Sons v William Lillico & Sons & Ors (1969) - The EC formed part of the
contracts (But in this instance, the EC was held to be ineffective from shielding from liability).
Reliance on Exemption Clause – Construction (pg 129)
 The wider the clause the more protection it will provide to the party relying on it.
 Two rules of construction must be borne in mind when construction
o Contra Proferentum Rule
o Main Purpose Rule
 Contra Proferentum Rule (pg 129)
o Contra Proferentum Rule –The rule states that where there is any ambiguity in interpreting a
clause, the construction to be adopted is the one which is least favourable to the person who
put forward the clause – Hollier v Rambler Motors (AMC) Ltd (1972) + Hong Realty Pte Ltd
v Chuan Keng Mong (1994) + Singapore Telecommunications Ltd v Starhub Cable Vision
Ltd
 Main Purpose Rule (pg 129)

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o The rule states that there is a general assumption that the parties do not intend an EC to defeat
or be repugnance to the main purpose of a contract.
o EC will generally be ineffective if there is a fundamental breach.
o B-Gold Interior Design & Construction Pte Ltd v Zurich Insurance (Singapore) Pte Ltd
(2007) – It would be “contrary to all sense of justice and fair play” if the exemption clause
were allowed to deny the appellant the “very essence of the cover” which it had sought under
the policy. This would lead to an absurdity and the courts must intervene to hold such a clause
ineffective.
o Photo Production Ltd v Securicor Transport Ltd (1980) – The Court of Appeal held that the
exemption clause was invalid because the breach was fundamental. The House of Lords later
ruled that the clause did include the breach. Thus Securicor was not liable.
o House of Lords decision has been approved in Singapore in Parker Distributions (Singapore)
Pte Ltd v A/S D/S Svenborg & D/S as 1912 A/S (1983) & Sun Technosystems Pte Ltd v
Federal Express Services (M) Sdn Bhd (2007)
o Rule is a rule of interpretation and thus if EC uses clear and unambiguous words, it can be
effective even in the case of fundamental breach
 Exemption Clause and Third Parties (pg 130)
o A TP may take advantage of an EC in a contract to which he is not a party, subject to
requirements contained in the Contracts (Rights of Third Parties) Act (CRTA).
o New Zealand Shipping Co Ltd v AM Satterrthwaite & Co Ltd (1975) – The court allowed
EC to extend to the third party. Privity of contract involved but there is a loosening of the
general rule.
Reliance on Exemption Clause – Unusual Factors (pg 131)
 Third consideration to be taken into account is whether there are any unusual factors which may limit
the effectiveness of the clause
 Curtis v Chemical Cleaning & Dyeing Co (1951) – A misrepresentation to the true scope of the EC
could render the entire clause invalid.
 Evans (J) & Sons (Portsmouth) Ltf v Andrea Merzario Ltd (1976) – The court held that the oral
assurance which created a collateral contract neutralized the written contract’s EC.
 Oral undertaking creates a second subsidiary contract known as a collateral contract
 Collateral contact is implied by court and run parallel with the main contract
 Can be used to add or vary the terms of the main contract as an exception to the parol evidence rule
Reliance on Exemption Clause – Unfair Contact Terms Act (pg 132)
 Final and often determining factor is whether it complies with UCTA
 UCTA requires exemption clauses to be reasonable if they are to be valid
 EC which are unreasonable will be invalid despite the fact that they may be incorporated and well
constructed
Preliminary Comments
 UCTA applies not only to EC in contract cases but also to EC in tort cases – s 1(3) UCTA
 Definition of negligence in s 1(1) UCTA includes negligence to both contact and tort
 All cases involving EC, burden of proving reasonableness falls upon the party seeking to rely on EC -
s 11(5) UCTA
 Majority of UCTA provisions which deal with EC apply only in cases of business liability – s 1(3)
UCTA
 Or in consumer transactions – s 12 UCTA
 Limited application outside business transactions
 In cases of Misrepresentation, UCTA will apply even in non consumer and non business liability
situations – s 3 Misrepresentation Act
Personal Injuries and Other Losses (pg 133)
 A person cannot exclude his liability for negligence in relation to personal injury or death – s 2(1)
UCTA
 Xu Jin Long v Nian Chuan Construction Pte Ltd (2001)
o any contractual term that prevents a party from being sued in negligence for death or personal
injury is a restriction of liability under s 2 of the Act and such term is not enforceable
 Liability for other loss or damage such as financial loss or property damage can be excluded if the
clause is reasonable – s 2(2) UCTA
Consumer Transactions (pg 133)
 Where transaction is a consumer transaction, EC must be reasonable for it to be valid – s 3 UCTA
 Consumers protected by s 6 UCTA in relation to sale of goods contacts

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 Consumer rights enshrined in s 12 -15 Sale of Goods Act (SGA) are entrenched by s 6 UCTA such that
a seller cannot exclude his liability under the SGA by using an exemption clause. This is an absolute
prohibition.
Non Consumer Transactions (pg 133)
 If a non consumer transaction uses a standard written contact and it contains an exemption clause, the
exemption clause must be reasonable if it is to be valid – s 3 UCTA
 Prohibition in s 6 UCTA which seeks to entrench the buyers’ rights specified in the sale of good
legislation is relaxed when transaction is non consumer
Misrepresentation (pg 133)
 If liability arises from a misrepresentation, the misrepresentor can only seek protection behind an
exemption clause if the clause is reasonable – s 3 Misrepresentation Act
Meaning of Reasonableness (pg 134)
 In evaluating of whether an exemption is reasonable, the court must consider all the circumstances
which
o Were known to
o Ought reasonably to have been known to
o Were in the contemplation of the parties when the contract was made: S 11 (1) UCTA
 According to the Second Schedule of the UCTA, the factors which are to be considered are:
o The bargaining strength of the parties – If the bargaining strengths of the parties are equal, the
EC is considered to be reasonable.
o Whether the customer received an inducement to agree to the term (did the business offer to
provide additional benefits if the customer were to pay a higher amount?)
 All things equal clause is likely to be reasonable
o Whether the customer knows or ought to know about the exemption clause – All factors in the
incorporation of EC. Knows=Reasonable
o Whether Compliance with some condition is practicable – Does the EC states that the business
will only be liable if certain condition is adhered? i.e. return within 3 days?
 George Mitchell (Cherterhall) Ltd v Finney Lock Seeds Ltd (1983)
 EC was unreasonable because among other things the buyer could not discover the
breach until the plants grew whereas the seller was at all times aware
o Whether the goods were ordered specially: it is unclear whether the fact that the goods were
specially ordered makes the EC more or less likely to be reasonable
 One possible argument is that if goods are manufactured to customer’s specifications
but causes damage to customer, then the clause should be considered reasonable as
any defect is due to customer’s own specification
 Consmat Singapore (Pte) Ltd v Bank of America National Trust & Savings Association (1992)
o Bank relied on an exemption clause in its standard contract
o UCTA not applicable on the facts but state that the clause would be enforceable if the UCTA is
assumed
o Both parties had equal bargaining power
 Elis Tjoa v United Overseas Bank (2003)
o Not unreasonable for a bank’s EC to require its customers to check their statement regularly
and to notify the bank promptly of any unauthorised transactions
o However if the bank had inadvertently and unilaterally made a wrong debit without any
instruction whatsoever it may then be unreasonable and against public policy to allow it to
rely on the clause
 Kenwell & Co Pte Ltd v Southern Ocean Shipbuilding Co Pte Ltd (1999)
o Defendant fail to adduce evidence of reasonableness and hence clause could not be rely upon
o EC used commonly in the industry may still be unreasonable under UCTA
o The more unreasonable an EC, the greater the burden upon the party relying on it to establish
its reasonableness
o Fact that parties entered into contract willingly does not prevent one party from later
questioning the reasonableness of an EC

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

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

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 Five Vitiating Factors

o Incapacity
o Illegality
o Misrepresentation
o Mistake
o Economic Duress

Incapacity (pg 142)

 Lack of capacity which may characterize a contracting party
 Rationale is rooted in public policy
 Children do not have sufficient understanding or experience to make binding agreements
 People with unsound mind or people who are intoxicated are considered to lack capacity – Re Yeh Ee
Swan (2003)
Minors (pg 142)
 Minors are persons who have not reached the age of majority
 At law, age of majority defines the stage at which a person reaches adulthood and is considered legally
responsible for his actions – Singapore 21 years old, UK 18 years old.
 Rai Bahadur Singh & Anor v Bank of India (1993) – Court found that English Infants Relief Fact
1874 applied and rendered the letter of set-off void as plaintiffs were minors.
 Law is concerned to protect minors from entering contracts which they may not fully appreciate the
consequences of their actions
 Law must also ensure that the other party does not suffer unnecessary hardship if he has contracted
fairly with the minor
 Proposal was made to reduce majority age to 21 to remove legal barriers preventing young people from
starting and conducting business and hence hinder entrepreneurship – Civil Law (Amendment) Act for
s 35 and s 36 were inserted on 1 Mar 09 to give minors contractual capacity in ‘certain commercial
activities”
1. s 35 – to give contracts entered into by minors who have attained the age of 18 years the same
effect as if they were contracts entered into by persons of full age; except in cases where:
2. s 35(4)
a. any contract for the sale, purchase, mortgage, assignment or settlement of any land,
other than a contract for a lease of land not exceeding 3 years;
b. any contract for a lease of land for more than 3 years;
c. any contract whereby the minor’s beneficial interest under a trust is sold or otherwise
transferred to another person, or pledged as a collateral for any purpose; and
d. any contract for the settlement of —
i. any legal proceedings or action in respect of which the minor is, pursuant to
any written law, considered to be a person under disability on account of his
age; or
ii. any claim from which any such legal proceedings or action may arise.
3. s 36 – to allow such minors to bring certain legal proceedings and actions in their names as if
they were of full age
 Three classes of Minors’ Contacts
1. Valid Contacts – Binds both Minor and other party
2. Voidable Contacts – Binds other party & binds minor unless minor repudiates
3. Ratifiable Contracts – Binds other party and binds minor only if minor ratifies
 In cases stated, it must be noted that they deal with a minor’s contract which is still executory by
minor. If minor has already performed obligation, then the minor is generally unable to recover any
money paid or goods delivered, unless there has been total failure of consideration by the other party.

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

 Binds both minor and other party
 Fully enforceable
 Two groups of contracts make up the category of valid contracts
o Beneficial contracts for necessaries
o Beneficial contracts of employment
 Contract on whole must benefit the minor - if it contains onerous terms prejudicial to minor, contract
may not be binding
 In cases sated

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 Valentini v Canali (1889) – Court held that Valentini could not recover the money because he had
already had the benefit of the house
o Lord Coleridge CG stated: “ When an infant has paid for something and has consumed or used
it, it is contrary to natural justice that he should recover back the money which he has paid
 Beneficial Contracts for Necessaries (pg 145)
o Refers to goods and services which the law deems reasonably required by a minor in his
particular station in life
o Section 3 SGA – necessaries means goods suitable to the condition in life of the minor or
other person concerned and to his actual requirements at the time of sale and delivery
o Nash v Inman (1908) - Contract was unenforceable because Nash failed to prove that the
clothes were necessaries to defendant.
 Having shown that the goods were suitable to the condition in life of the infant, [the
plaintiff] must then go on to show that they were suitable to his actual requirements
at the time of sale and delivery
o Necessaries may include luxurious items of utility if they are considered appropriate for the
minor in his position – Peters v Fleming (1840)
 Executory Contracts for Necessaries (pg 146)
o Complication arises if the contract for necessaries is still executory on the part of the other
party
o Nash v Inman (Goods) – The other party must have performed his obligations before the
contract is binding upon the minor.
o Roberts v Gray (Services) – Binding upon the minor regardless whether the other party has
performed his obligations or not.
 Loans for Necessaries (pg 146)
o Person who lends money to a minor is generally unable to enforce the contract and recover the
money from the minor
o Exception arises if money was used to purchase necessaries – Marlow v Pitfeild (1719)
o Financial Institutions in Singapore typically lend money to minors only if minor can supply a
guarantor who will guarantee the loan.
 Beneficial Contracts for Employment (pg 147)
o The important point is that the contract must benefit the minor
o De Francesco v Barnum (1890) – De Francesco was under no obligation to provide her with
engagements and her pay was totally unsatisfactory. Fry LJ held that the terms of the deed
were unreasonable and not beneficial to the girl and, therefore, unenforceable.
o Chaplin v Leslie Frewin (Publishers) Ltd (1966) – Winn LJJ took the view that the contract
was beneficial to Chaplin, stating that “the mud may cling but the profits will be secured.”
 Such contracts will be binding even if there are certain aspects which are not
advantageous
 Overall, the contact must benefit the minor
Classes of Minors’ Contracts – Voidable Contracts (pg 148)
 Binds other party and binds minor unless minor repudiate (refuse to accept) .
 Minor is entitled to repudiate the contract without any liability on his part any time during his infancy
or within a reasonable period of time after he attains majority.
 Until he repudiates, the contract remains enforceable.
 Davies v Benyon-Harris (1931) – Minor entered into a lease for flat. Lease was not void but voidable.
Enforceable if repudiated within a reasonable time after attaining majority.
 Once repudiated, the minor is no longer bound to perform any future obligations. He would not be
entitled to recover any money paid or property transferred by him to the other party unless there is a
total failure of consideration – Steinberg v Scala (Leeds) Ltd (1923)

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

 If a minor’s contract does not fall within the class of valid or voidable, it would be ratifiable.
 Such contracts would not be valid or enforceable against the minor unless he ratifies it after he attains
majority.
 The contract nevertheless binds the other party.
 Legislature has enacted a catch all provision to compel a minor to return property improperly obtained
by him by virtue of an unenforceable contract either by payment or the return of property – s 3 MCA
Mentally Unsound and Intoxicated Persons (pg 149)

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 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:
o He was incapable of understanding the nature of the contract;
o The other party knew or ought to have known of his incapacity.
 s 3(2) SGA also applies to mentally unsound and intoxicated persons, where they have obtained goods
which are necessaries, they may be required to pay a reasonable price for the goods
 Che Som bte Yip & Ors Maha Pte Ltd & Ors (1989) – Court held that brother’s knowledge of the third
plaintiff’s condition was imputed to the bank. Hence the mortgage was voidable.
Illegality (pg 150)
 Classified depending on the source of law infringed – statute or common law
 Four Illegal Contracts
o Gaming and Wagering Contracts
o Contracts contrary to public policy
o Contracts illegal in performance
o Contracts in restraint of trade
Gaming and Wagering Contract (pg 151)
 S5 Civil Law Act, contracts of gaming and wagering are generally void by statute.
 Thus, no legal effect and unenforceable. May involve Betting Act.
 Money paid or won under a wagering or gaming contract cannot be recovered
Contracts Contrary to Public Policy (pg 152)
 When the contract contravene some aspect of public policy.
o Contract to commit a crime, a tort or a fraud on a third party – Apthorp v Neville & Co (1907)
and in Kong Seng Construction Pte Ltd v Chenab Contractor Pte Ltd and Another (2008),
an agreement was made with the object of deceiving a third party.
o Promote sexual immorality such as contracts to lend money to finance a brothel – Ahvena
Ravena Mana Aroogmoogum Chitty v Lim Ah Han, Ah Gee and Chop Lee Watt (1894)
o To benefit a foreign enemy or undermines the relationship with a friendly country –
Regazzoni v KC Sethia (1944) Ltd (1958), which was cited in Everbright Commercial Pte
Ltd & Another v AXA Insurance Singapore Pte Ltd (2000) and Wu Shun Foods Co Ltd v
Ken Ken Food Manufacturing Pte Ltd (2002)
o Contract inimical to administration of justice such as contract to give false evidence at a trial
– R v Andrews (1973)
o Contract to oust the jurisdiction of the courts, such as a provision specifying that the right to
interpret the rules of an association vests only in its council – Baker v Jones (1954)
Contracts Contrary to Statute (pg 152)
 Illegal due to statutory provisions which prohibit them
 Legislature wishes to proscribe the performance of certain activities which would be entailed in such
contacts
 Some statutes expressly or impliedly prohibit certain types of contract and prevent their inception
altogether
 while others seek only to penalize certain types of unlawful conduct without prohibiting the underlying
lawful contract
 Others penalize illegal performance without affecting the parties’ contractual rights at all
 Where legislature’s intention to prohibit a type of contact is clear from the statute, then the contact may
be void and unenforceable by all the parties, whether or not they are aware of the statutory illegality
 Re Mahmoud and Ispahani (1921) – War time regulations prohibited the buying or selling of linseed
oil. Court held that the legislature has made a “clear and unequivocal declaration… that this particular
kind of contract shall not be entered into” and that, consequently, the contract was void.
 Other provisions however only penalise certain conduct without rendering the entire contract void
o Overloading a ship which was illegal in itself might not cause a contract for transporting
goods on that ship to be void because the act which contravenes the statute was considered to
be at the periphery of the contact – St John Shipping Corporation v Joseph Rank Ltd (1957)
o Unlawful performance on an otherwise lawful contact does not necessarily render the entire
contract void
 If the statutory provision simply imposes a fine for non compliance, the likelihood is that non
compliance would not cause the entire contract to fail – Shaw v Groom (1970)
 Issue is whether the relevant statue intended to prohibit the contract as well, resulting in additional civil
consequences.
Contracts in Restraint of Trade (pg 153)

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 Restraint of trade contracts are agreements under which a business or person agrees to refrain from
undertaking certain types of trade or employment
 Used to prevent a business or person from entering into a field in which the other party operates –
Barang Barang Pte Ltd v Boey Ng San & Others (2002)
 General rule is that clauses and hence contracts in restraint of trade are void – Asiawerks Global
Investment Group Pte Ltd v Ismail bin Syed Ahmad
 Can be enforceable if it can be shown that the restraint of trade is reasonable given the interests of the
parties and the public generally
 Three Elements which make it valid
o Protect proprietary or legitimate interest of covenantee
o Reasonable in duration, scope and subject matter
o Must not be contrary to public interest
Elements which make Restraint of Trade Valid – Legitimate Interest (pg 154)
 The restraint must protect some proprietary or legitimate interest of the covenantee
 Asia Business Forum Pte Ltd v Long Ai Sin & Another (2003) – restrain a former employee from
exploiting trade secrets or trade contracts obtained from his employment
 Restraint is intended merely to minimize competition or to prevent an employee from using the
personal skills or knowledge acquired during his previous employment, then it is likely to be void –
(1916) and Buckman Laboratories (Asia) Pte Ltd v Lee Wei Hoong (1999)
 Stratech Systems Ltd v Nyam Chiu Shin & Others (2005)
o Although restriction period of nine months was not unreasonably long, the duration of the
prohibition was only one factor to be considered – not most important
o Court will not uphold a covenant benefitting an employer merely to protect itself from
competition by a former employee
o Stratech was unable to demonstrate any legitimate interest that required protection by a
restraint of trade clause, the court ruled that the main function of the clause was to indeed
inhibit competition in business and clause was therefore invalid
Elements which make Restraint of Trade Valid – Reasonable Scope (pg 155)
 Restraint must be reasonable in terms of its period, geographical scope and subject matter
 Mason v Provident Clothing & Supply Co Ltd (1913) – Restraint void as area is too large.
 Heller Factoring (Singapore) Ltd v Ng Tong Yang (1998) – in the case for Singapore, a small country,
a whole prohibition for the whole country would be necessary in the context of the factoring industry
 British Reinforce Concrete Engineering Co. Ltd v Schelff (1921) – Restraint void because scope too
broad.
 Backman Labatories (Asia) Pte Ltd v Lee Wei Hong (1999) – clause was geographically too wide as it
sought to protect not only Buckman’s atual but potential business regions where they were merely
trying to establish a permenant prescence
 Asiawerks Global Investment Group Pte Ltd v Ismail bin Syed Ahmad & Another (2004)
o Court held that clause was prima facie void as the business carried on by the company in the
clause must be read narrowly to mean only the actual business already undertaken by the
plaintiff
Elements which make Restraint of Trade Valid – Public Interest (pg 156)
 Restraint must not be contrary to public interest – Asia Polyurethane Mfg Pte Ltd v Woon Sow Liong
(1990), ie it must not have significant impact on ttading agreements such that it reduces competition
 ROT clause likely to be void if so.
 Esso Petroleum Co Ltd v Harper’s Garage (Stourtport) Ltd (1968) – Restraint too long. Test of
reasonableness requires a consideration of the public interest which must be protected in such exclusive
dealing agreements.
Effects of Illegality (pg 156)
 At common law, the general effect of illegality is that the contract is void.
 The law treats the contract as if it had not existed in the first place and no party can sue on the contract.
 Effect of illegality summarized in judgment of Devlin LJ in Archbold’s (Freightage) Ltd v Spanglett
Ltd
o If at time of making contract, there is an intent to perform it in an unlawful manner, the
contact although it remains alive is unenforceable at the suit of the party having the intent; if
intent is held in common, it is not enforceable at all
o Prevent a plaintiff from recovering under a contract if in order to prove his rights under it he
has to rely on his illegal act; may not do even if he can show that at time of making contract,
he had no intent to break the law and at time of performance he was not aware that it was
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o Avoid the contract ad initio and that arises if the making of the contract is expressly or
impliedly prohibited by statute or is otherwise contrary to public policy
Recovering Property (pg 157)
 In some cases the court may allow an innocent party to recover property which would otherwise pass to
the defaulting party under the illegal contract.
 Tokyo Investment Pte Ltd v Tan Chor Thing (1993)
o Court held that TCT could recover his shares from appellant
 TCT was not relying on the illegal contract to claim his shares
 FTA was intended to protect the class of investing public
 TCT was not equally at fault with the appellant since burden to obtain license was on
appellant
 Not to allow TCT to recover would be encouraging illegality
 TCT did not know he was dealing with an unlicensed futures broker
 Siow Soon Kim & Others v Lim Eng Beng alias Lim Jia Le (2004)
o Court held that test to apply to determine if court should assist a plaintiff to enforce an
agreement was whether the plaintiff was able to establish his cause of action independently of
the illegality. In the case, respondent was not asking the court to enforce an illegal
arrangement but a wholly legitimate partnership agreement. Therefore respondent was ruled in
favor.
Recovering Damages (pg 158)
 If statute merely proscribes certain types of conduct, the rights of the defaulting party and the innocent
party may be different
 The defaulting party may be prevented from enforcing the contract by the maxim ex turpi causa non
oritur action (an action does not arise from a base cause).
 However the innocent party may be able to recover damages from the defaulting party.
 Archbold’s (Freightage) Ltd v Spanglett (1961) – Court of appeal held that the contract was illegal in
its performance but since Archbold’s was not aware of the illegality, it was entitled to claim damages
 Ignorance of law would not allow recovery of any kind and it is important to note that the case above is
an ignorance of fact (that Spanglett’s vehicle did not have necessary license)
Severance (pg 159)
 In certain cases, the illegality may be confined to a part of the contract
 Sometimes within the clause itself particular words can be severed so as to save the rest of the clause –
National Aerated Water Co Pte Ltd v Monarch Co , Inc (2000)
 Severance is possible if
o Promises are severable in nature
o It is possible to sever the void part by deleting the offending words or clause without adding,
substitution, rearranging or re-drafting the contract (blue pencil test)
o Severance must not change the basic nature of the contract.
 Goldsoll v Goldman (1915) – Using the blue pencil test, the court severed the other locations and the
reference to real jewellery and allowed the remaining clause to stand.

Misrepresentation (pg 159)

 Misrepresentation is generally a tort and fraudulent misrepresentation is historically rooted in the tort
of deceit
Elements of Misrepresentation (pg 160)
 A misrepresentation is a false statement of fact made by one party (representor) to another (representee)
which induces and is relied upon by the representee to alter his position.
 Not all false statement representations amount to misrepresentation, it must be
o a false statement
o which is relied upon by the representee and induced into contract – Koh Keow Neo & Others
v Chee Johnny & Others (2004)
False Misrepresentation – False Statement of Fact (pg 162)
 Operative statement must be one of past or existing fact
 It cannot be a mere statement of opinion or a statement of some likely future event
 However , a statement of intention as to future action could be a false statement of fact if at the time of
making the statement of intention, the representor did not in fact hold that intention – Tan Chin Seng
& Others v Raffles Town Club Pte Ltd (No 2) (2003)
 Edgington v Fitzmaurice (1885) – Information in the prospectus is different from the real intention.
Stated intention was not actually held because company raised money for liabilities instead of
improvements.

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 Tipper Corp Pte Ltd v JTC Corporation (2007) – Plaintiff had not asserted that the defendant had no
intention of keeping its word when the alleged representation was made.
 Statement of opinion usually cannot form the basis of a misrepresentation unless the representor had
access to the relevant facts and had no reasonable ground for holding such an opinion.
 Bisset v Wilkinson (1927) – The property could not hold that many sheep but that claim was a
statement of opinion and did not amount to misrepresentation.
 Singapore, Amarjeet Singh KC in the High Court case Tai Kim San v Lim Cher Kia made a careful
distinction between a misrepresentation of fact and an expression of opinion
o Where an opinion is expressed, it must be expressed upon reasonable grounds and made
honestly
o Where opinion is stated as if it is a positive fact, it can constitute a misrepresentation
o Where facts are not equally known to both sides, then a statement of opinion by the one who
knows the facts best involves very often a statement of a material fact for he impliedly states
that he knows facts which justify his opinion
 General rule is that silence in itself does not amount to misrepresentation
o In Keates v Lord Cadogan (1851), the court held that Lord Cadogan had no duty to disclose
the state of his house, therefore, no misrepresentation.
 Silence may amount to misrepresentation is three situations
o Dimmock v Hallett (1866)
What is stated becomes a half-truth by what is left unsaid. i.e. Saying the place is fully let but
did not say the tenants had given notice to quit. This constitutes misrepresentation.
Trans-World (Aluminium) Ltd v Cornelder China (Singapore) (2003) – Misrepresentation of
statements comes from a willful suppression of material and important facts thereby rendering
the statement untrue
o A change of circumstance arose which rendered a previously truthful statement misleading –
With v O’Flanagan (1936)
o The law imposes a duty is upon one party to disclose facts to the other party. i.e. Insurance
contracts.
False Misrepresentation – Inducement (pg 164)
 For a false statement to be a misrepresentation, the statement must induce the representee to enter into
the contract
 As long as it is one of the inducing causes; it is immaterial that it is not the sole inducing cause –
Edgington v Fitzmaurice (1885)
 2 tests to show inducment
o Materality Test (Objective Test)
o Actual inducement test (Subjective Test)
 Materality Test
o Would a reasonable man would have been influence by it to enter into the contract.

 Actual Inducement Test – Representee must have relied on the representation

Scenarios where there is no inducement
o Not aware of the representation
o Aware of representation but knew it was unture or did not believe it to be true
o Not influenced by it, as where he would have enterted into the contract even if he had known
the true facts.
 Panatron Pte Ltd v Lee Cheow Lee & Another
o Court held that misrepresentation need not be the sole inducement…so long as they had
played a real and substantial part and operated in the representees’ minds, no matter how
strong or how many were the other matters which played their part in inducing them to act
 Overseas Chinese Banking Corp Ltd v Infocommcentre Pte Ltd (2005)
o False statement was made to representee but he was not induced by the statement to enter into
contract and therefore there is no misrepresentation
 Tai Kim San v Lim Cher Kia (1884) – The Singapore High Court held that plaintiffs had not been
induced by any representations to sell their shares to the defendant. Hence false statement is not a
misrepresentation.
 A mere opportunity of a chance to investigate the truth of the statement made by the representor does
not deprive the other party to rely on the misrepresentation.
 Jurong Town Corp v Wishing Star Ltd (No 2) (2005)

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o A person who has made a false representation cannot escape its consequences just because the
innocent party has made his own inquiry or due diligence, unless the innocent party has come
to learn of the misrepresentation before entering into the contract or does not rely on the
misrepresentation when entering into the contract
 Redgrace v Hurd (1881)
o Mere fact that the representee had an opportunity to investigate and ascertain whether a
representation is true or false was not sufficient to deprive him of his right to rely on
misrepresentation
o No fraud or negligence on the part of Redgrave, the misrepresentation was thus an innocent
one and contract was rescinded
Categories of Misrepresentation – Fraudulent Misrepresentation (pg 165)
 The representor knowing that is false makes the false statement. It is also known as the tort of deceit. –
Lim Geok Hian v Lim Guan Chin (1994)
 Representee must prove that there is dishonesty on the part of the representor , there is no fraud even if
the statement is farfetched, negligent, or ill-conceived.
 Singapore High Court held that whenever fraud or deceit is alleged, a high degree of proof is required
on he who asserts – Vellasamy Lakshimi v Muthusamy Sippiah David (2003)
 Court requires a degree of probability which is commensurate with the gravity of the imputation –
Tans- World (Aluminum) Ltd v Cornelder China (Singapore) Pte Ltd (2003) and Samwoh Resources
Pte Ltd v Lee Ah Poh (2003)
 Derry v Peek (1889)
o House of Lords held that for fraudulent misrepresentation to arise, the false representation
must be made knowingly or without belief in its truth or recklessly, careless whether it be true
or false. Since none was present, no fraudulent misrep.
 Panatron Pte Ltd v Lee Cheow Lee & Another (2001)
o Trial judge came to the conclusion that Phua did make the alleged misrepresentations to the
respondents and that Phua knew that these representations were false
o False statements in turn induced the respondents to subscribe for the shares in Panatron
Categories of Misrepresentation – Negligent Misrepresentation (pg 166)
 Arises when the false statement is made by the representor without due care – s2 (1) Misrepresentation
Act
 This makes the representor liable even without fraudulent intent unless he can prove he has reasonable
grounds to believe the statement to be true.
 Howard Marine & Dredging Co Ltd v A Ogden & Sons (Excavations) Ltd (1978)
o The manager was still liable as a reasonable manager would have checked the shipping
documents and not relied on the Loyds Register.
o Negligent misrepresentation pursuant to s 2 MA is statute based and arises in the context of a
contract
 Hedley Byrne & Co Ltd v Heller & Partners Ltd (1964)
o Common law tort and does require the existence of a contract
o Discussed also in Trans-World (Aluminium) Ltd v Cornelder China (Singapore) Pte Ltd
(2003)
Categories of Misrepresentation – Innocent Misrepresentation (pg 167)
 A false statement made in the absence of fraud and fault
 Representor made the false statement believing and having reasonable grounds to believe in its truth –
Redgrave v Hurd
Remedies for Misrepresentation (pg 168)
 Rescission is when a contract is terminated by the representee because of misrepresentation
o Rescission is available in all three types of misrepresentation
o Available even if false statement has become a term of the contract – s 1 Misrepresentation
Act
o Representee expresses his intention not to be bound by the contract
 Once a representee chooses to rescind the contract, it becomes void ab initio – meaning that the
contract is treated as if it never existed
 Representee must give notice of rescission to the other party
 Once rescinded, rescission is final and contract cannot be revived
 Rescission is not available when
o Contract is affirmed expressly or impliedly by the representee after he discovered the
misrepresentation

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 Singapore of Appeal in Jurong Town Corp v Wishing Star Ltd (No 2) (2005)
clarified that the right of rescission is not lost easily
 Representee must have communicated his choice to the other party in clear and
unequivocal terms and he would not be bound by a qualified or conditional decision
 Representee would not lose his right automatically to rescind merely by calling on
the representor to reconsider his position and recognize his obligations
o Reasonable amount of time had lapsed since the discovery of the misrepresentation
o Parties cannot be restored to their original position before the contract (restitutio in integrum
impossible)
o Court exercises its discretion pursuant to s 2(2) Misrepresentation Act to award damages in
lieu of rescission
 Damages is the monetary compensation ordered by the court requiring the defaulting party to pay
money to the injured party
o Common law allows damages for fraudulent misrepresentation
o S 2(1) Misrepresentation Act allows the court to award damages for negligent
misrepresentation
o S 2(2) Misrepresentation Act grants to the court a discretion to order damages in lieu of
rescission for both negligent and innocent misrepresentation
 Vita Health Laboratories Pte Ltd and Others v Pang Seng Meng (2004) – Rajah JC declined to award
damages in lieu of rescission under this provision as the plaintiffs had not shown how this head of
damages ought to be assessed
 Complexities arise in the calculation of the quantum because of the interplay of contractual and
tortuous principles as well as the unusual wording of the statutory provision
 Indemnity is an obligation whereby one person (the indemnifier) is held responsible for the liability or
loss of another person (the indemnifiee)
 An indemnity is used to help restore the injured party to his status quo ante (the position he was in
beforehand)
 S 3 Misrepresentation Act stipulates that an exemption clause which attempts to exclude or restrict
liability arising from a misrepresentation will not be enforceable unless it meets the reasonableness test
expressed in s 11(1) UCTA

Remedies for different categories of Misrepresentation (pg 169)

Fraudulent Recission + Damages
Negligent Recission (or damages in lieu) + Damages
Innocent Recission (or damages in lieu) + Indemnity

Mistake (pg 170)

 Contracts are robust creatures and they do not fall to just any mistake
 Only mistakes which lie at the root of the contract would have that effect
 At common law, mistake vitiates a contract such that it becomes void ab initio.
 However in equity, mistake does not necessarily lead to void ab initio.
 4 types of mistakes
o Common mistake
o Mutual mistake
o Unilateral mistake
o Non est factum
 Common Mistakes occur when both parties to the contract make the same fundamental mistake of fact
o Each knows the intention of the other and accepts it but is mistaken about some underlying
fact – Couturier v Hastie (1852)
 Mutual Mistakes occurs when the parties misunderstand each other and are at cross purposes –
Wellmix Organics (International) Pte Ltd v Lau Yu Man (2006)
o Both parties are not aware of each other’s mistake
o Mutual mistakes overlaps with law of contract as there is a lack of coincidence between offer
and acceptance
 Unilateral Mistake occurs when only one party is mistaken, the other party knows or ought to have
known the first party’s mistake

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o Test is an objective one based on what a reasonable person would have known in similar
circumstances – Ho Seng Lee Construction Pte Ltd v Nian Chuan Construction Pte Ltd
(2001)
o Chwee Kin Keong & Others v Digilandmall.com Pte Ltd (2005)
 Non Est Factum (it is not my deed)
o Arises when a person signs a document that is fundamentally different in character from that
which he contemplated
o Lee Siew Chun v Sourgrapes Packaging Products Pte Ltd (1993)
 To avoid contact on basis of non est factum, plaintiff must show
o The document signed is radically different or totally different in character or substance from
that which he intended to sign
o Had not been careless in signing the document
o He took such care as a person in his position ought to have taken

Other Vitiating Factors (pg 172)

Economic Duress
 Exerting some amount of pressure to persuade or induce a party to enter into a contract is sometimes
necessary and probably acceptable.
 For there to be economic duress there has to be three elements present:
o The illegitimate pressure was applied to him/her;
o That the illegimate pressure coerced his/her will so as to vitiate her consent AND
o There is a casual link between the pressure applied and the victim’s agreement to the variation
of the contract.

Economic Duress

Pressure
Sufficient of Coerce Illegitimate Caused the impuged act

Factors Nature of threat

 Protest
 Alternative Nature of demand
independent advice
 Prompt action to
avoid modification
 Response of victim

Sufficient to Coerce (pg 428)

Pao on v Lau Yiu Long (1980) guidelines

 Whether the person alleged to have been coerced did or did not protest;
 Whether, at the time he was allegedly coerced into making the contract, he did or did not have an alternative
course open to him such as an adequate legal remedy
 Whether he was independently advised; and
 Whether after entering the contract, he took steps to avoid it.

The Alev (1989)- victim must prove that he or she had acted reasonably in taking the other party’s threat
seriously.

Illegitimacy

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Was a threat made to breach the contract? (Nature of Pressure)

 Generally, when the threat is of any form of unlawful action, ie crimes, tort, breach of contract it usually
amounts to illegitimate pressure
 Lee Kuan Yew v Chee Soon Juan (2003)- Threat to enforace one’s legal rights do not amount to
illegitimacy.
 Mention of inability to fufil original contract if variation was not made usually do not to illegitimate
pressure.

If threat was made was it to support an unreasonable demand? (Nature of demand)

 Was demand made in good or bad faith?

 CTN Cash Carry Ltd v Gallaher Ltd (1994) – a threat to breach a contract, made with an absence of bad
faith, should not amount to an illegitimate threat.
 Sharon Global Solutions Pte Ltd v LG International (Singapore) Pte Ltd – the plaintiff decleration that it
would not perform unless the defendant shared the additional freight should be regarded as a legtimate
notice of its inability of perform rather than an illegitimate threat

Caused the impulged act (pg 432)

For Physical Duress
 As long as pressure was a reason – need not be predominant or clinchin reason
 Burden of proof is on the party making threat to show that there is no casual link

For Duress to property and economic duress

Huyton SA v Peter Cremer GmbH & Co (1999) – The minimum test of subjective causation in economic duress
is the “but for” test.
 Pressure must be decisive or clinching for the victim agreeing to variation at all or on the terms in which the
variation was made.
 Burden of proof is on the victim

Effect of economic duress

 Agreement for variation is rendered voidable NOT void
 Variation agreement is considered valid until the victim take steps to avoid it
 If the victim words or conduct shows that the victim has affirmed the variation agreement, he/she losses the
right to avoid the agreement
North ocean shipping co. ltd. v. Hyundaiconstruction co. ltd and another (1979) – owners of the Atlantic
Baron, free from duress took no action to void the contract after the important telex , which is a sign of
affrimation.

Undue Influence (pg 174)

 Equitable doctrine
 The unconscientious use of one’s power or authority over another to obtain a benefit or achieve a
purpose by exerting improper pressure
 2 types of cases of undue influence
o Undue influence must be actually proven – Mookka Pillai Rajagopal v Kushvinder Singh
Chopra (1996)
o By virtue of the relationship between the parties, law presumes that undue influence is present
and the burden of proof is then on the party complained of having exercised undue influence
 To establish undue influence in the first type, person who raise complain must establish the following
o That the other person had the capacity to influence the complainant
o Influence was exercised
o Exercise was undue
o Its exercise brought about the transaction
 Lim Geok Hian v Lim Guan Chin (1994)
o Context of a brother-sister relationship does not auto fall within the second case
o Based on first case, complainant failed to establish all four elements and therefore no undue
influence on part of brother.

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o Affirmed by Pelican Engineering Pte Ltd v Lim Wee Chuan (2001)(Husband-wife), Tan
Teck Khong & Another v Tan Pian Meng (2002) (Mother-son)
 To establish second type, complainant needs to show both
o There was a relationship of trust and confidence between him and the wrongdoer,
o The relationship was such that it could fairly be presumed that the wrongdoer abused the trust
and confidence in procuring the complainant to enter into the impugned transaction.
o Susilawati v American Express Bank Ltd (2008)
Unconscionable Bargain (pg 174)
 Suggests that any agreement which is manifestly inequitable and constitutes an unconscionable bargain
should be set aside
 Lim Geok Hian v Lim Guan Chin (1994)
o Thean JA held that the concept of inequality of bargaining power is insufficient in itself and in
the absence of unconscionable conduct, to justify the setting aside of a contract
 Unconscionability can be an exception under Singapore Law and does in fact constitute a vitiating
factor for contracts involving performance of bonds
o Fong Whye Koon v Chan Ah Thong (1996)
o GHL Pte Ltd v Unitrack Building Constrcution Pte Ltd (1999)
o Eltraco International Pte Ltd v CGH Development Pte Ltd (2000)
o Anwar Siraj v Teo Hee Lai Building Construction Pte Ltd

Chapter 7: Contract Discharge (pg 479 – 509)

 Discharges refers to the termination of a contact
 Parties are relieved of their obligations under contract
 Four main ways: Performance, breach, agreement and frustration
Performance (pg 479)
 Parties perform their obligations as stipulated in the contact and once and for all the obligations are
performed, the contract comes to an end
Precise Performance (pg 480)
 General rule is that if a contract is to be discharge by performance, the parties must perform their
obligations fully and precisely
 Cutter v Powell (1795) – The court held that payment was conditional upon the completion of the
voyage; payment even part payment may not be made.
 In Re Moore & Co and Landauer & Co (1921) – The court held that the buyer was lawfully entitled to
reject the shipment on the basis of less than full and precise performance.
Exceptions to Precise Performance (pg 180) – to soften the rule and prevent unfairness
 De Minimis Rule (pg 480)
 Divisible Contacts (pg 181)
 Substantial Performance (pg 504)
 Prevented Performance (pg 183)
 Acceptance of Partial Performance (pg 183)
De Minimis Rule
 If the deviation in performance is microscopic, then the contract is deemed to have been performed
fully and precisely. What is microscopic is depended on the facts of the case.
 Arcos Ltd v E A Ronaasen & Son (1933)- If written contract specifies conditions of wieght,
measurement and the like, those conditions must be complied with. A ton does not mean about a ton, or
a yard about a yard  contract that specifies measurements must be complied with.
 Arcos Ltd v E A Ronaasen & Son (1933) – The House of Lords held that although the staves were of
merchantable quality and could be used to manufacture cement barrels, the contract was breached
because the staves did not correspond to the description of the goods.

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Divisible Contracts
 A contract may in certain circumstance be viewed as several independent obligations. These may be
deemed as severable sub-contracts. e.g. Employment Contracts
 Cutter v Powell (1795) – The employment contract was needed to be completed in full before payment.
(Unfair outcome can be avoided)
Substantial Performance - doctrine of substantial performance
 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
– Boone v Eyre (1779).
 2 cautionary remarks:
o If the contact is an entire contract (as opposed to a divisible one) and payment is made
conditional upon the performance of the entire contact, then the promisor may not be able to
invoke substantial performance to claim payment.
o Bolton v Mahadeva (1972) – Whether a contract is an entire or divisible one is a question of
construction. The court of appeal refused to grant Bolton compensation on a quantum meruit
basis because it held that the use of the word lump sum suggested that the contract was an
entire one. Bolton received nothing.
o 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.
o Secondly, there is always a practical problem of determining what exacts to ‘substantial
performance’. The degree of completion required would again depend on the facts of the case
Prevented Performance
 When a promisor has performed part of his obligations but is prevented by the other party from
performing the rest of his obligations, the contract may be treated as discharged on the basis of
prevented performance.
 Promisor may claim payment to commensurate with the obligations performed on the basis of quantum
meruit.
 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 of Partial Performance

 When promisee voluntarily accepts the partial performance of the promisor – when this happens, the
promisor is entitled to pay the promisee the reasonable remuneration under the law of restitution. –
Empresswood Enterprise Pte Ltd v Kao Shin Ping (2005)
 Note however that the promisor may still be liable to the promise in a claim for damages for having
only performed part of the contact
 Sumpter v Hedges (1898) – The court did not allow Sumpter’s claim. This is because Hedges did not
have a clear choice of accepting it. It was on his land, so he had to accept it. If the facts of the case
were different, then Sumpter may have succeeded.

Time of performance
 Time is not the essenc unless it has been either expressively or impliedly made to do so.
 Faliure to comply with time stipulations will entitle the other party to discharge the contract for breach.
 time may be made an essence if following undue delay by one party, the other party gives notice that
the contract will be treated as at an end unless performance is completed within a reasonable space of
time.
 Contigent Condition – eg Car insurance payout only allowed if accident occurs, ie car accident =
contingent condition
 Interdependent and concurrent obligations- vendor obligation to deliever television arises if other
party pays the price.

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Breach (pg 183)

 A breach occurs when a party fails to perform all his obligations under the contract
 An actual breach arises when the time of performance for the obligation has arrived and the promisor
fails to perform it
 An anticipatory breach occurs when the time for performance has not arrived but the promisor by
words or conduct has clearly expressed his intention not to perform the obligation
Repudiation (pg 489)
 For the breach to result in the contract being discharged, the breach must amount to a repudiaton of the
contract
 Otherwise a breach which does not amount to a repudiation simply entitles the innocent party to sue for
damages
 San International Pte Ltd v Keppel Engineering Pte Ltd (1998)- renounciation of the contract WILL
NOT ENTITLE the innocnet parrty to discharge unless renounciation amounts to:
o A fundamental breach meaning that the breach goes to the root of the contract; or
o A breach of condition
 Test of repeudiation is to ascertain whether the actions or actions of the party in default are such as to
lead a reasonable person to believe that the party no longer intends to be bound by its provision.
 Mizuho Corporate Bank Limited v Woori Bank (2004)
o No evidence to show either form of breach
o Parties have not expressly agreed that the clause was a condition, neither can it be said that it
must be so by necessary implication
o Court also fail to see how the breach of the …clause goes to root of contract or deprived the
defendants of substantially the whole benefit which it was the intention of the parties as
expressed in the contract that he should obtain as the consideration for reimbursing the
plaintiffs
 Breach of condition is self explanatory where a condition of the contract is breached
 Fundamental breach arises where the breach of an innominate term brings about serious consequences
such that it deprives a party of substantially the whole benefit which it was intended the contract should
confer – Hong First Shipping Co Ltd v Kawasake Kaisen Kaisha Ltd
 The innocent party can then terminate the contract
 Shia Kian Eng v Nakano Singapore (Pte) Ltd (2001)
o Even if the defaulting party’s conduct does amount to a refusal to perform, it does not follow
that the innocent party would be entitled to terminate the contract
o UNLESS the repudiation deprives the innocent party of substantially the whole benefit of the
subcontract then remaining unperformed
 Performance of obligations outside the time limits specified in the contract can amount to a
fundamental breach. (Time is of the essence) – Teo Teo Lee v Ong Swee Lan & Others (2002)
o Tate & Another v Sihan Sadikan (1992) – The failure to produce and pass title on time was
fundamental and went to the root of the contract. Plaintiffs entitled to recover their payment.
 For an anticipatory breach to be considered repudiatory, the threatened non performance must have the
effect of depriving the other party of substantially the whole benefit which the contract was intended to
bestow on him – Afovos Shipping Co SA v Pagnan (1983)
 Hochster v De La Tour (1853) – The court held that De La Tour’s letter constituted a repudiatory
breach entitling Hochster to sue prior to the contracted date and claim damages.
 By Products Traders Pte Ltd & Another v JAK Alhadad & Co Pte Ltd (2004)
o Court held that anticipatory breach could not be successfully shown
 In all cases of breach, whether actual or anticipatory, the 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
fulfil those obligations.
 Mersey Steel and Iron Co v Naylor Benson & Co (1884) – The House of Lords held that there was 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) – The court held that mere non payment of an
instalment or breach of one term does not necessarily put an end to a contract. The defendant’s
purported repudiation was wrongful.

Election (pg 496)

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 When a repudiatory breach is present, the contract is not automatically discharged, the innocent party is
granted with a right of election as to whether to terminate the contract
 In both cases, the innocent party should communicate unequivocally to the other party his decision
 Innocent party can:
o Accept the repudiation (Discharge Contract)
 Acceptance of repudiatory breach
 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)
o Affirm the contract
 Contract remains on foot and both parties must continue to fulfil their obligations and
complete the contract
 Innocent party still retains the right to claim damages for the breach.
 Aggrived party loses the right to discharge the contract.
 Howard v Pickford Tool Co (1951)
o An unaccepted repudiation is a thing writ in water and of no value to anybody; it affords no
legal rights of any sort or kind
 Arokiasamy Joseph Clement Louis v Singapore Airlines Ltd (2004)
o Although plaintiff was deemed to have repudiated the employment contract, the contract was
not discharged automatically
o SIA had elect to accept his repudiation and had thereafter effectively communicated their
acceptance to him by sending a termination letter to his last known postal address

Affirming After Anticipatory Breach (pg 498)

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

o Innocent party places himself at risk that a supervening event may occur, discharging the
contract by frustration.
o Defaulting party may be relieved of his liability because the frustrating event discharges the
contract, wiping the slate clean

 Can freely affrim contract if: White and Carter Councils Ltd v McGregor (1962)
o Does not require the co-operation of the party in breach
o If claiming a fixed as opposed to unliquidated damages, because there is no need to mitigate
losses.
o Innocent party has a legitimate interest in affriming contract.

 MP- Bilt Pte Ltd v Oey Widarto (1999) – Doctorine of Legitimate interest
o Cannot apply retrospectively to accrued debts (accumlated debts) – can be sued for even after
acceptance of repiduation
o Does not apply if the innocent party can perform his obligation without the co-operation of the
contract breaker.

 Avery v Bowen (1855) – It was held that Bowden’s liability for the anticipatory repudiation was
relieved by war which frustrated the contract.
 The right to affirm is not unfettered (unrestrained).
 In the absence of legitimate reasons, the innocent party must accept the anticipatory breach, treat the
contract as discharged and claim damages.
 Clea Shipping Corporation v Bulk Oil International, “The Alaskan Trader” (1984) – The 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.

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Agreement (pg 190)

 The discharge may be effected by a term within the existing agreement or by a subsequent agreement
Existing Agreement
 A contract may include a term that it would be discharged upon the occurrence of a stipulated event or
at the expiration of a certain period
 Certain statutory provisions might modify the right of parties to discharge a contract by agreement
o The Employment Act, for example specifies the minimum periods of notice required to be
given by employers to certain classes of employees in cases of termination of employment
Subsequent Agreement
 Contract may be discharged by the parties entering into a fresh agreement seeking to extinguish the
earlier contract
 Mutual Release - When the contract is partially or entire executory, the parties may execute a mutual
release which discharges each party from all their obligations under that contract.
o Li Hwee Building Construction Pte Ltd v Advanced Construction & Engineering Pte Ltd
(2002)
 Unilateral Release - When one party who had performed all his obligations seeks to discharge the
other party who has not performed all his obligations, then the first party may execute a release in the
form of a deed, so that no consideration is required.
 Accord and Satisfaction - When one party purchases his release with fresh valuable consideration
provided to the other party, the understanding to do so is the accord and the consideration provided is
the satisfaction. This discharges the earlier contract.
 Variation - Where the contract is 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 - Where one party, at or without the request of the other party voluntarily grant the other party
an indulgence not to perform an obligation under a contract without consideration passing, the first
party has been given a waiver.
o Usually given in respect of specific modes of performance but not usually in respect of the
whole contract. i.e. an employee consistently late. Employer can prevent by including the
clause “no waiver unless in writing” in the employment contract.
o Leivest International Pte Ltd v Top Ten Entertainment Pte Ltd (2006) - Court held that when
Top Ten failed to pay the costs and interest on time, Leivest could have terminated the lease
Frustration(pg 192)
 Frustration refers to the situation where a supervening event occurs, for neither party is responsible,
with the result that the very basis of the contract is destroyed so that the venture to whch the parties
now find themselves committed is radically different from that originally contemplated.
 Davis Contractors Ltd v Fareham Urban District Council (1956) – The House of Lords rejected the
appellant’s claim as the cost increase did not alter the situation so much that the task undertaken was
radically different from what was originally contemplated by the parties.
 Supervening event + Not parties fault + Radical change in circumstances = Frustration
When Frustration Operates (pg 193)
 Frustration does not require strict impossibility of performance although impossibility of performance
may give rise to frustration
 Impracticability caused by extreme or unreasonable difficulty, expense or injury may be sufficient to
trigger frustration
 Lee Chee Wei v Tan Hor Peow Victor (2007) – emphasized that a frustrating event should not be
lightly established and held that “imprudent commercial bargains cannot be aborted or modified merely
because of an adverse change of circumstances.”
 Glahe International Expo AG v ACS Computer Pte Ltd (1999)
o Threshold for frustration is not easily reached
o New import duties and an unfavourable exchange rate made a computer sales contract
unprofitable, but did not frustrate it
Types of Fustration Contracts (pg 193)
 Destruction of subject-matter
 Government interference
 Non-occurrence of event
 Personal Incapacity

Types of Frustration Contracts – Destruction of Subject Matter (pg 194)

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 Subject matter of the contract was destroyed due to no fault of the parties
 Taylor v Caldwell (1863) – The hall was destroyed and the court held that the contract was discharged
by frustration.
Types of Frustration Contracts – Non-Occurrence of Event (pg 194)
 An event whose occurrence forms the underlying basis of the contract is cancelled or postponed due to
no fault of the parties.
 The 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 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) – The Court of Appeal held that the purpose for which the flat was rented was
vanished and contract was thus frustrated
 Herne Bay Steamboat v Hutton (1903) – 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.
Types of Frustration Contracts – Government Interference (pg 194)
 This is usually in the form of an unexpected government action or ruling which prevents the
performance of a contract.
 Metropolitan Water Board v Dick, Kerr & Co. (1918) – The House of Lords held that the contract was
frustrated as the works was halted by the Minister of Munitions, acting under statutory powers
 Oakwell Engineering Ltd v Energy Power Systems Ltd (2003) – Contract was not frustrated as the
defendants had already assumed a risk under the agreement
 Lim Kim Som v Sheriffa Taibah bte Abdul Rahman (1994) - The Singapore Court of Appeal agreed
and held that the contract was frustrated as Government issued an order for the compulsory acquisition
of the property under the Land Acquisition Act, this enables the government to acquire the property for
public purposes
 Shenyin Wangou-APS Management Pte Ltd & Another v Commerzbank (South East Asia) Ltd
(2001) – Contract had been frustrated by the act of the Malaysian Government
Types of Frustration Contracts – Personal Incapacity (pg 196)
 A contract for personal services may be frustrated by personal incapacity if the incapacity affects the
performance of the contract in a fundamental way.
 Possard v Spiers v Pond (1876) – Court held that the contract was frustrated because she had fallen ill.
 Personal incapacity which affects the performance of such a contract in a fundamental way will
frustrate the contract – Lau Lay Hong v Hexapillar Pte Ltd (1993).
 Frustration can also discharge a contract for personal service if the service provider dies
 Contract for services, (not personal ones) will not be treated in a similar way. (University – Student
example)
Factors Limiting Frustration (pg 197)
 Forseeability of frustrating event
 Force majeure clauses
 Self-induced frustration
Factors Limiting Frustration – Foreseeability (pg 197)
 The more foreseeable the event the more unlikely the event will be held to frustrate a contract.
However, mere foreseeability of the event is no bar to frustration.
 Mere foreseeability of the event is no bar to frustration
o Tatem Ltd v Gamboa (1939)
o Ocean Tramp Tankers Corporation v V/O Sovfracht, “The Eugenia” (1964)
o Lim Kim Som v Sheriffa Taibah bte Abdul Rahman (1994)
Factors Limiting Frustration – Force Majeure Clause (pg 199)
 These clauses which expressly provide for the occurrence of events such as war or natural disasters
which will normally fall within the class of events which lead to frustration.
 The effect of such a clause depends greatly on its construction.
 If clause is constructed as a complete provision fully governing the situation which has arisen, then it
will be effective to prevent frustration from arising
 There will be no breach of contract despite its non performance
 General principals relating to FMC based on RDC Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd &
Another Appeal (pg 199)
 China Resources (S) Pte Ltd v Magenta Resources (s) Pte Ltd (1997) – The Singapore Court of
Appeal held that the force majeure clause applied and that the USSR embassy letter was the ‘next best
thing’ and therefore adequate evidence of the force majeure.
 If an FMC turns out to be an exemption clause, then it would be subjected under the UCTA.
Factors Limiting Frustration – Self Induced Frustration (pg 200)

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 If frustrating event is the result of voluntary action of one of the parties, then there is no frustration.
 Maritime National Fish v Ocean Trawlers (1935) – The privy council held that the unavailability of a
license was due to the allocative decision of Maritime National.
 Similarly in J Lauritzen AS v Wijsmuller BV, The Super Servant Two (1990)

Impracticabality, increased costs (pg 518)

 Generally, impracticality or increased costs in itself is insufficient to frustrate a contract.
 Tsakiroglou co Ltd v Noblee Throl GmbH (1960)- shipment via the cape instead of the suez cannel
does not amount to radically different performance.
 However, when the superevening event is so abnormal as to outside the the ordinary range of
commerical risk (astronomical rise in price), it might be considered radically different.

Effects of Frustration (pg 201)

 Frustration automatically discharges a contract.
 Unlike repudiation which must be accepted before it can discharge the contract, frustration is effective
immediately and requires no communication or advice from one party to the other.
 Contract is terminated not ab initio but only as for the future
 All outstanding obligations are no longer required to be performed – Fibrosa Spolka Akcyjna v
Fairbairn Lawson Combe Barbour Ltd (1943)
 Common law ruled that any costs, expenses or losses incurred prior to the frustrating event must be
borne by the party which suffers them
 Overall effect of the common law and the statutory provisions can be summarised as follows
a) all future obligations of the parties cease
b) money paid prior to time of discharge is recoverable – s 2(2) FCA
c) money payable ceases to be payable s 2(2) FCA
d) expenses incurred prior to time of discharge can be recovered s 2(2) FCA
e) benefits conferred (other than money) prior to time of discharge can be compensated with an
amount the court considers just – s 2(3) FCA

 Pursuant to s3(5) FCA, the provisions of the legislation apply to all contracts other than:
a) a contract for the carriage of goods by sea
b) certain types of charter-parties
c) a contract of insurance
d) a contract to which s 7 of the SGA applies and
e) a contract for the sale of specific goods where the contract is frustrated because the goods
have perished

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Chapter 8: Contract Remedies (pg 205 – 235)

 Remedies are the cures available to the injured party to rectify or compensate for the breach
 Types of remedies
o Common Law Remedies
 Damages
o Equitable Remedies
 Specific Performance
 Injunction
o Quantum Meruit (Contract & Quasi-contract)
Common Law Remedies – Damages (pg 206)
 Damages are the principal common law remedy for a breach of contract. It refers to the monetary
compensation payable by the defaulting party.
 Injured party always have right to claim damages for loss resulting from breach of contract even if he is
not entitled to terminate the contract
 The monetary sum ordered by a court to compensate such damage
 Damages is intended to place the plaintiff as far as money can do it, in the same position he would be in
if the contract had been performed properly
o Robinson v Harman (1848)
o Harvester Baptist Church Ltd v Chua Moh Huat Dennis (1992)
 Statement approved in Jognson v Agnew (1979) – general principal for the
assessment of damages in contract law is compensatory
o Singapore Telecommunications Ltd v Starhub Cable Vision Ltd (2006) – It is trite law that a
right to damages arises on proof of the breach of the contract itself because a legal right has
been violated
 Types of damages:
o Unliquidated damages: unascertained damages
o Liquidated damages: pre-estimated damages
o Nominal damages – nominal sum (usually $2)
o General & special damages: general damages can be recovered for pain while loss of earnings
or actual medical cost are under special damages
 Four aspects of damages: Causation, remoteness, mitigation and assessment
Aspects of Damage - Causation (pg 550)
 It is logical that a plaintiff should not be entitled to recover damages for breach of contract if the breach
did not cause the loss suffered by the plaintiff.
 For damages to flow, the loss must have been caused by the breach. – Irawan Darsono & Another v
Ong Soon Kiat (2002)
 Monarch SS Co v Karlshamns Oljefabriker (A/B) (1949) – The House of Lords held that the effective
cause of the delay was the vessel’s unseaworthiness and hence it was the appellant’s fault. The
prohibition by the British authorities was not the cause of the delay.
 The ‘But for’ Test (Use “dominant and effective cause” for contractual cases)
o The plaintiff would not have suffered loss but for the breach
 Asia Hotel Investments Ltd v Starwood Asia Pacific Management Pte Ltd & Another (2005) – AHI
did not prove causation based on the available evidence
Aspects of Damage – Causation in law: Remoteness (pg 552)
 Once causation is established, the extent of loss can be quite extensive.
 The concept of remoteness prevents a limitless scenario. The law considers the loss, although caused
by or a consequence of the breach, to be beyond the scope of compensation.
 For damages to be recoverable, the damage must be proximate and not remote – Korea Jonmyong
Trading Co v Sea-Shore Transportation Ptd Ltd & Another (2003)
 Hadley v Baxendale (1854)
o A case of unusual loss as it was unusual for mill not to have spare crank shaft
o Baxendale didn’t know that Hadley had no spare crank shaft resulting in loss of profit
o Court held that Baxendale was not liable for the loss of profit
 First Limb, normal loss – Such damage as may fairly or reasonably be considered arising naturally, i.e.
According to the usual course of things from the breach itself.
 Second Limb, abnormal loss – Such damages as may reasonably be supposed to have been in
contemplation of both parties at the time they made the contract.

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Applying Hadley v Baxendale (pg 210)

 Usual Course of Things
 Imputed and actual knowledge
 Probability of occurrence
 Knowledge of nature of damage

Applying Hadley v Baxendale – Usual Course of Things (pg 211)

 Knowledge of the ordinary practices and exigencies of the plaintiff’s trade or business is considered to
be part of the ‘usual course of things’.
 Accordingly, the loss arising from normal business activity will usually fall within in the first limb.
 Koufos v C Czarnikow Ltd (‘The Heron II) (1969) - The House of Lords held that Koufos must be
imputed to know the ordinary practices and exigencies of Czarnikow’s business. Koufos was liable
under the first limb of Hadley v Baxendale.
Applying Hadley v Baxendale – Imputed and Actual Knowledge (pg 211)
 Both the first limb and the second limb imply that the defaulting party has some knowledge of the
likely loss suffered by the plaintiff. This knowledge includes imputed knowledge and actual
knowledge.
 Imputed knowledge is knowledge presumed to be known by the parties and is the subject of the first
limb.
 Actual knowledge is knowledge actually possessed by the parties and is the subject of the second limb.
 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 the absence of actual
knowledge concerning the Ministry of Supply, Newman Industries would not be liable for the
substantial profits foregone because of the failure to obtain that contract.
Applying Hadley v Baxendale – Probability of Occurrence (pg 212)
 Knowledge of the plaintiff’s likely knowledge raises the question as to the defendant’s awareness of the
probability of such loss occurring.
 The defendant must know that the likely loss is a serious possibility or a real danger
 Correct terminology for rule on remoteness is “reasonable contemplation”
Applying Hadley v Baxendale – Type of Damage (pg 212)
 The defendant need not have in mind the exact damage actually suffered as long as he is aware of the
type or kind of damage in question – Chuan Hup Marine Ltd v Sembawang Engineering Pte Ltd
(1995)
 Parsons (Livestock) Ltd v Uttley Ingham & Co Ltd (1978) – The English Court of Appeal held that the
loss fell within the second limb because it was within reasonable contemplation of the parties that the
pigs might suffer as a result of the breach.
 Jackson & Another v Royal Bank of Scotland (2005)
o English court of appeal held that the bank by inadvertently sending the sensitive information
to EB was in breach of an obligation of confidence under its contract with plaintiffs
o Plaintiffs were entitled to damages for subsequent loss of profits
o Amount of damages be limited to a period of one year from the date of breach, all other loss
being too remote under the test in Hadley v Baxendale
o House of lords overruled the decision to limit the bank’s liability as LC did not limit the
bank’s liability
Aspects of Damage – Mitigation (pg 213)
 Mitigation means that a plaintiff cannot recover loss, which he could have avoided.
 The plaintiff ought to minimize the loss. If he fails to do so, the amount he would be awarded would be
reduced by the amount he would have saved. – British Westinghouse Electric & Manufactory Co v
Underground Electric Railway Co of London (1912)
 Mitigation principle reaffirmed in Singapore – Chua Keng Mong v Hong Realty Pte Ltd (1994)
 Ei-Nets Ltd & Another v Yeo Nai Meng (2004) – The burden of proof is upon the defendant to show
that the plaintiff has failed to take reasonable steps to minimize the loss.
 Brace v Calder (1895) – What amounts to reasonable steps depends on the circumstances of each case
 When a plaintiff who attempts to take reasonable steps to mitigate his loss suffers even more, he can
still recover the additional loss – Melachrino v Nicholl & Knight (1920).
 PT Master Mandiri v Yamazaki Construction (S) Pte Ltd(2001) – As long as a plaintiff acted
reasonably, he would not be barred from recovering his losses simply on the ground that with the
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 Anticipatory Breach - If plaintiff chooses to discharge and claim damages, mitigation rule will apply
and he will be required to mitigate his loss. Problem is when he affirms the contract.
 In Singapore, there is no obligation on the plaintiff part to mitigate his loss before there has been any
breach which he has accepted as a breach – MP-Bilt Pte Ltd v Oey Widarto (1999)
 In the face of an anticipatory breach, a plaintiff may be entitled to affirm the contract and incur (and
perhaps inflate) expenses, performing obligations which are not warranted by defaulting parties
 White & Carter (Councils) Ltd v McGregor (1962) – No attempt was made by White to mitigate its
loss after affirming the contract with McGregor. White & Carter than sued McGregor for the full
contract price. House of Lords held that it was entitled to succeed.
 Although against principle of mitigating losses, in this case, White & Carter affirmed because they had
legitimate interest. 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. i.e.
Reputation.
Aspects of Damage – Assessment (pg 215)
 Roberinson v Harman (1948)- The general principle of assessment is that the injured party is to be
placed in the same financial position he would be in if the contract had been properly performed.
 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.
 Trigen Industries Ltd v Sinko Technologies Pte Ltd & Another; Wee Poh Hueh Florence v
Performance Motors Ltd (2004)
 AS Nordlandsbanken v Nederkoorn (2001) – Seeks to compensate the wrong on a just and fair basis
Issues in Assessing Damages (pg 216):
 Expectation loss & reliance loss (pg 216)
 Problematic Cases
o Speculative losses (Difficulty in assessment) (pg 218)
o Non-pecuniary Losses (pg 220)
 Liquidated Damages Clause (pg 222)
 Taxation (pg 223)
 Interest (pg 224)
Expectation Loss and Reliance Loss
 Loss of profits is often called expectation loss because this loss is the amount which the injured party
would have expected to gain had the contract been performed properly
 Wasted expenditure is often called reliance loss and it represents the expenses incurred by the injured
party who relying upon the contract, prepares to perform his obligations, incurring expenses which are
rendered wasted because of breach
 Anglia Television Ltd v Reed (1970) – The court held that Anglia Television was entitled to recover
damages regardless of whether the expenditure (reliance loss) was incurred before or after the contract
was entered into with Reed.
 Where injured party is not able to calculate his expectation loss, he may claim solely as reliance loss, if
he can calculate both, he may claim both expectation and reliance loss as long as the expectation loss is
calculated as a net figure exclusive of expenses
 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.

Diminunition of value or Cost of cure (pg 543)

Diminiuation of value – give the plaintiff the financial benefit that he would have otherwise obtained if the
contract had been performed.
 The difference between the market or resale value of the contractual performance and the
value stated in the contract.
 Where the contractual performance entails the production of something which the plaintiff
intends to use in order to generate a profit.

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Cost of cure- Sum of money to repair any defects due to the defendant’s breach of contract
 Can be awarded if even though there is no diminution in value Redford v De Frobervile (1977)
 Cost of Cure only awarded if:
o The plaintiff sought to mitigate his losses, he will recover the cost of cure where he has, or
ought to have, incurred that cost in reasonably seeking to minimise his losses
o The plaintiff has or intends to cure the defective performance by the defendant
o Plaintiff’s intentions or aims in entering into the contract and desiring the defendant’s
performance may be important. Eg, plaintiff wanted performance in order to profit from it in
the sense of economic gain, difference in value inadequate.
Tito v Waddel (No2)(1977), Ruxeley Electronics and Construction Ltd v Forsyth (1996)- courts were
not satisfied wth rewarding “cost of cure” damages as it was not clear that the plaintiff intended to use
such damages to make good the defective performance of the defendant.

Ruxeley Electronics and Construction Ltd v Forsyth (1996)- Cost of cure was not awarded as the
construction of the swimming pool has been achieved to a substantial extent and such

Difficulty in Assessment
 The fact that damages are difficult to assess should not prevent the injured party from obtaining them
 Court may take into account probabilities involved and award damages accordingly
 Chaplin v Hicks (1911) – The English Court of Appeal held that although there was no certainty that
Chaplin would be among the 12 chosen for employment, she would still be allowed the damages
awarded by the jury.
 Raffles Town Club Pte Ltd v Tan Chin Seng & Others (2005)
o Trial judge awarded $1000 in damages to the plaintiff members for loss of amenity,
accessibility and enjoyment but decline to award damages for their pecuniary loss
o Court held that despite the difficulties it must still do its best to assess the loss as RTC had
clearly breached its contractual obligation of providing a premier club to the plaintiffs and to
maintain it as such
o Court eventually awarded each plaintiff $3000 for the dimunition in value of membership
Non Pecuniary Losses
 Loss covers things such as hurt feelings, anxiety, or loss of reputation arising from breach of contract.
 Courts are generally reluctant to award damages for non-pecuniary losses.
 Haron bin Mundir v Singapore Amateur Athletic Association (1992) – The plaintiff was 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.
 Following cases are where non-pecuniary loss was compensated
 Plaintiff suffers substantial physical inconvenience – Bailey v Bullock (1950)
 A contract whose aim is to provide enjoyment or security is breached giving rise to disappointment or
distress – Jarvis Swan Tours Ltd (1973)
 Damages for loss of amenities (pleaseure) – Ruxley Electronics and Construction Ltd v Forsyth
(1996)
 Where an important (not necessarily the sole) object of the contract is to give pleasure, relaxation or
peace of mind, damages are recoverable if the contract is breached and mental distress results – Farley
v Skinner (2001)
 Trial judge awarded $1000 in damages to the plaintiff members for loss of amenity, accessibility and
enjoyment but decline to award damages for their pecuniary loss - Raffles Town Club Pte Ltd v Tan
Chin Seng & Others (2005)
 Plaintiff awarded damages for loss of amenity due to loss of prestige in driving an inferior car – Wee
Poh Hueh Florence v Performance Motors Ltd (2004)

Time of Quantification (pg 547)

 Liquidated damnges will be assessed at the time of the breach
 If it is not possible for plaintiff to know about breach  court assess damages at the time when plaintiff
would have discovered the breach with reasonable diligence
 If at time of discovery, not possible to act on that knowledge to cut losses, court may delay assessment until
at the point at which it is possible for the plaintiff to do so
 Given reasonable discovery and possibility of mitigation, if plaintiff demostrate he failed to mitigate court
may defer the time of assessment until the time when it is no longer proable that this is the case.

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 For anticipatory breach, court will assess damages at the tiem when the defendant ought to have performed
his part of the bargain and not at the point when the anticipatory breach was accepted.

Liquidated Damages and Penalties

 Pre-estimated damages which have been agreed upon by the parties.
 Generally, the courts will enforce a liquidated damage clause as long as it is a genuine pre-estimate of
loss.
 However, if such a clause was 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 for
construction of the clause:
o If the liquidated damages are extravagant and unconscionable in comparison with the greatest
conceivable loss, then it is likely to be a penalty
o If a single lump sum is payable on the occurrence of one or more breaches, some of which are
serious and others trifling, then it is likely to be a penalty
o The description of the clause as a ‘penalty’ or ‘liquidated damages clause’ is relevant but not
conclusive
 Where LDC is found in standard form contract prescribed by statute, there is an inference that such a
clause will be valid
 Golden Bay Realty Pte Ltd v Orchard Twelve Investments Pte Ltd (1991) – Inconceivable that in these
circumstances, the legislature will include in the prescribed contract a liquidated damages clause which
could be struck down as a penalty
 Harris Hakim v Allgreen Properties Ltd (2001) – Court of Appeal held that where the LDC is
prescribed by stature, the injured party can only claim the amount stipulated on the clause; he is not
allowed to elect to claim damages at common law nor to recover more than what he is entitled to under
the clause

Penalty (generally not enforceable)

 Higher than actual loss – LDC not enforceable. Can claim only actual loss – Ford Motor Co v
Armstrong (1915)
 Lower than actual loss – Can claim either actual loss or as per LDC – Bulsing Ltd v Joo Seng & Co
(1972) (May opt to sue for breach of contract, avoiding the LDC, and seek to recover damages in full)

Taxation
 The court will deduct an amount representing the plaintiff’s tax liability – Teo Sing Keng v Sim Ban
Kiat (1994).
Interest
 Interest will only be awarded if it is a contract provided for payment of interest, (but not a debt) or
parties have impliedly agreed to pay interest under the contract, or if the court exercises its discretion
under paragraph 6 of the First Schedule, Supreme Court of Judicature Act.

Equitable Remedies (pg 224)

 Equity developed the general rule that the party seeking equitable remedies must come with ‘clean
hands’, his conduct in relation to the contract must be irreproachable – Ken Glass Design Associate
Pte Ltd v Wind Power Construction Pte Ltd (2003)
 In certain cases, monetary compensation in the form of damages is not an adequate remedy
 Specific Performance and Injunction

Specific Performance (pg 224)

 Specific performance is an order of the court requiring the party in breach to perform the contractual
obligations.
 If the order is disregarded, the defendant could face possibilities for contempt of a court order.
 Subject matter is unique and buyer will probably not be satisfied with monetary compensation –
Falcke v Gray (1859)
 Contract to buy company shares or debentures and contracts for sale of land – Coastland Properties
Pte Ltd v Lin Geok Choo (2001)
 Guiding Principles on the exercise of Specific Performance

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o Where damages would be an adequate remedy, specific performance may not be available:
Beswick v Beswick (1967)
o Where an order for specific performance would require the court to supervise the performance
of obligations on an ongoing basis – specific performance not available
o One of the parties is a minor, specific performance is not available as the contract lacks
mutuality (Mutuality means that the contract must be specifically enforceable by both parties)
o Contracts to lend money cannot be enforced by specific performance
Injunction (pg 226)
 Injunction is a court order forcing the other party to the contract to observe a negative covenant.
 Negative convenant – “promise not to do something”
 For instance, a valid restraint of trade in the contract is breached; the other party may seek an
injunction to enforce it – Warner Brothers Pictures Inc v Nelson (1936)
 An injunction will not be granted where damages would be an adequate remedy – Re Fineplas
Holdings Pte Ltd; Sitra Wood Products Pte Ltd v Fineplas Holdings Pte Ltd (2001)
Types of Injunction (pg 226)
 An injunction can be interlocutory or interim (temporary) in nature or perpetual (permanent) in nature
 Interlocutory injunction is usually obtained by a party facing a threat of breach of covenant by the other
party
 Seeks to maintain status quo while main legal proceedings are pursued
 Perpetual injunction is granted when the main legal proceedings have shown that the plaintiff has a
right to injunctive remedy
 Prohibitory injunction is preventive in that it seeks to restrain a person from conduct which he has
agreed not to do
 A mandatory injunction is restorative in that it compels action to restore a breach of covenant which
has already occurred
 Mandatory injunction is ordered to enforce a negative covenant which has been breached; specific
performance is ordered to enforce a positive obligation which has not yet been performed
Contracts for Personal Service (pg 227)
 General principle is that contracts for personal service such as employment are not enforceable by
specific performance
 It is not feasible nor desirable for a person to be forced to enter into personal relations with others
against his will
 Court will enforce negative covenants in contracts for personal service as long as in doing so, it would
not amount to an indirect way of compelling specific performance
 Warner Brothers Pictures Inc v Nelson (1937)
o Court refused to grant injunction to enforce Nelson’s negative covenant not to engage in any
other occupation as this would tantamount to an order specific performance for her to work
with Warner Bros
o However court ordered an injunction to stop her from working as an actress for any other
party during contract period
Mareva Injunction (pg 227)
 Where plaintiff suspects that defendant intends to dispose of or remove assets from the jurisdiction.
 Mareva injunction freezes defendant’s assets until main legal proceedings are completed.
Anton Piller Order (pg 228)
 Order authorises plaintiff to inspect, photograph and take into custody documents or property of
another person.
 Usually granted by court ex parte (without the defendant being heard before the issuing court)
 Once issued, Anton Piller Order is executed with the defendant’s consent, usually in his presence
 Granted only on exceptional cases – National Scientific (S) Pte Ltd v Ho Wai Ming & Others (2002)
 Computerland Corp v Yew Seng Computers Pte Ltd (1991)
o Must be a prima facie case (On first examination, matter appears to be self-evident)
o Damage, potential or actual, must be very serious for the applicant.
o Clear evidence that defendant have in their possession incriminating documents or things that
defendant may destroy before any application can be made.
Quantum Meruit (pg 228)
 Claiming damages on the basis of quantum meruit (as much as he has earned).
 May be claimed in cases of contract or cases of quasi contract (cases which do not possess all the
necessary elements of a contract yet the law enforces obligations as if they are contractual obligations)
 Available if court finds that there is an implied promise to pay for the performance of the contract

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 where contract expressly provides for the agent to be paid only upon happening of a specific event,
payment to him on a quantum merit basis would not normally arise as an implied promise to pay would
then be inconsistent with the express terms of the contract – Grossner Jens v Raffles Holdings Ltd
(2004)
 Gold Coin Ltd v Tay Kim Wee (1987) – Singapore Court of Appeal held that the respondent could
succeed in claiming quantum meruit based in contract as there included an implied promise to pay
commission
 Craven-Ellis v Canons Ltd (1936) – Court ordered compensation on a quantum meruit basis despite
the fact that there was no valid contract.

Refund of Money Paid (pg 230) (not in notes)

 Where money is paid by a plaintiff to a defendant under a contract and the defendant fails completely
to discharge his obligations, the plaintiff has the option of either claiming in contract for damages for
breach or he may elect to terminate the contract on the ground that the defendant has repudiated it and
sue for the refund of the money in quasi contract – Ooi Ching Ching Shirley v Just Gems Ltd (2003)
 There must be total failure of consideration
 Test has been stated “whether or not the party claiming total failure of consideration has, in fact
received any part of the benefit bargained for under the contract” – Rover International Ltd v Canon
Film Sales Ltd (No 3) (1989)
 Perspective to take is that of the payor-plaintiff – Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe
Barbour Limited (1943)
 If plaintiff obtains something from the contractual agreement, this remedy would not be available to
him although he can still claim for damages from the defendant
Limitations of Action (pg 230)
 Law provides time limits for parties to seek legal remedies in court
 After limitation period, no person can initiate legal proceedings seeking remedies
 This is so as legal claim becomes stale after some time
o Deterioration or destruction of evidence
o Personal recollections become fuzzy
o Unfair for potential defendant to have a perpetual threat of proceedings
Limited Legislation (pg 231)
 Accordance to Limitation Act
 Section 6 states a limitation for a period of 6 years
 Time runs from the date of the contractual breach
 For fraud cases, contract runs when the plaintiff discovers the breach or could with reasonable
diligence discovers it – s29 Limitation Act
o Ching Mun Fong v Liu Cho Chit (2001)
o It’s the plaintiff means of ascertaining the mistake and not what the court eventually decides
that is relevant
 For actions in respect of latent injury or damage, the section postpones the commencement of the
limitation period to the date on which the plaintiff first had knowledge of his rights to bring such a
claim – Chia Kok Leong & Another v Prosperland Pte Ltd
 The plaintiff is required to institute the action within three years of such commencement date

Laches (pg 231)

 Equity also provides for the extinction of a plaintiff’s right to remedies through the effluxion (passing)
of time
 Achieved through the doctrine of laches – s32 Limitation Act
 There are two ingredients to be considered with respect to the doctrine of laches
o Length of the delay
o Whether such delay caused prejudice or injustice
o Management Corporation Strata Title No 473 v De Beers Jewellery Pte Ltd (2001)
 Tay Joo Sing v Ku Yu Sang (1994)
o High Court ruled in favour of KYS ordering TJS to specifically performing his obligations
o On appeal, Court of Appeal held that order for specific performance should not be made as the
legal action was initiated after 25 months
o Court also took judicial notice of the fact that in 1987, Singapore was getting out of a
recession and by 1989, the price of property had increased substantially

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Chapter 16 – Agency
Definition
 The principal is the person whom the agent represents
 The third party is the person whom the agent deals with on behalf of the principal
 An Agent is a person, who through the authority conferred upon him by his principal, is empowered to
establish legal relations on his principal’s behalf with a third party.
 Resulting contract binds the principal and the third party but does not bind the agent
Liability of Agent
 The general rule is that an agent is not liable to his principal or the third party as long as he acts within
the scope of authority given to him by the principal
 Any liability flowing from his act flows to the principal who authorized the act
 Liability falls upon the agent personally only if he acts outside the scope of authority given to him
Agency and Distributorship
 Agency has only one contract of sale, between principal and customer
 In distributorship, there are 2 contracts of sale, Distributorship Contract between distributor and
manufacturer and another retail contract between distributor and customer
Agents, Employees and Contractors
 An employee is a person who is employed by and under the control of his employer or master
 Employee is acting as an agent if the employer has instructions for the employee to create legal
relationships on his behalf with third parties
 An independent contractor is a person who is engaged by another person to provide certain services
 When agent or employee deals with a third party, he does so on behalf of the principal
 When a contractor deals with a third party, he does so as a principal
Types of Agency
Power of Attorney
 A document in the form of a deed by which a person (donor) appoints and authorizes another (donee)
as agent to act on his behalf in respect of certain matters
o Typically use if donor plans to travel overseas for an extended period and he needs someone to
maintain his financial and legal affairs
 Power of Attorney can be revoked by the donor at any time unless it is an irrevocable Power of
Attorney
General Agent
 A person authorize by his principal to act on behalf of the principal in all matters relating to a specific
trade or business
o Appointment of general manager
Special Agent
 Usually appointed to perform a specific function outside the scope of his general agency.
Commission Agent and Del Credere Agents
 Commission agents are those that are paid by the principal for every completed sale
 A del credere agent further guarantees his principal that the third party with whom he contracts will pay
for the goods sold under the contract
 Liability shifts to the Del Credere Agent if third party fails to pay

Creation of Agency
Actual Authority
 Agency relationships created through actual authority being granted in the form of an agency contract
 Rights and obligations of P and A are usually specified in the contract
 Scope of authority is the most important aspect of contract as it refers to the agent’s actual authority
 Express Authority is that which has been specifically expressed, either in oral or writing
 Implied actual authority refers to the agent’s power to do all acts which are within reasonable customs
and usages of the particular trade he is engaged in or which are reasonably incidental to the discharge
of his duties as agent
Ostensible Authority
 Ostensible Authority is called “apparent authority” because the agent appears to have authority when in
fact he does not.
o Agent has no actual authority
o Principal has in some way held out to the third party that the agent has the principal’s
authority to act – Lim Kok Koon v Tan Cheng Yew & Another

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 Agency by Estoppel in that principal is stopped from denying the agency because of his representation
that the agent has his authority
 If agent acts within his ostensible authority, his action will bind the principal to the third party –
Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd (1964)
 Five Factors for Ostensible Authority
o Representation as to agent’s ostensible authority made to third party
o Representation was made by a principal or person who had actual authority of principal
o Third party was induced by such representation to enter in to the contract
o Principal has capacity to enter into the contract
o Third party does not know agent lacks authority
 To prevent third parties from raising the argument of ostensible authority, some principals choose to
disclose to third parties the limits of authority granted to their agents
o Ostensible Authority can only be successfully argued where the third party had no knowledge
of the agent’s lack of authority
 if the company has expressively authorized the agent to make representations on its behalf, then any
representation made by that agent that he himself has authority to do an act is good representation for
the purposes of conferring apparent authority on the agent to do that act even if he has been expressly
prohibited to do it, and even if it is not something that agents in his position usually have power to do –
The Raffaella; Soplex Wholesale Supplies Ltd and PS Refson & Co Ltd v Egyptian International
Foreign Trading Co (1985) and First Energy (UK) Ltd v Hungarian International Bank Ltd (1993)
 A person may also have both ostensible authority as well as implied authority – Hely-Hutchinson v
Brayhead Ltd (1968)
Ratification
 Ratification is the process through which a principal retrospectively confirms or ratifies an agent’s act,
binding the principal to the third party as if the agent had actual authority to do so in the first place
 Occurs when agent has exceeded his authority when contracting with third party but the principal with
hindsight wishes to benefit from the contract.
 Effect of ratification
o Grant retrospectively to the agent authority to act on behalf of the principal
o Agent will be deemed to have had actual authority for his act
 Ratification is deemed to have taken effect from the date of the agent’s act
o Contract is deemed to have been concluded as between the principal and the third party on the
date when the agent entered into the contract and not on the date of ratification
 Bolton Partners v Lambert (1989)
o Purported Withdrawal of offer is ineffective as the ratification related back to the date of
acceptance by the Managing Director, contract was concluded on that date and accordingly,
the offer cannot thereafter be withdrawn
 Principal of relating back will not apply if
o Agent accepts offer with a qualification that the acceptance is ‘subject to ratification’
o Third party knows that the agent has no authority from his principal
 Unconditional Acceptance will take place at the point of ratification, and in this situation, offeror can
withdraw his offer at any time before the ratification takes place – Warehousing & Forwarding Co of
East Africa Ltd v Jafferali & Sons Ltd (1964)
Conditions for Ratification
1. Principal must be Identified
o Agent must expressively state that he is acting on behalf of his principal
o Principal is usually named or must at least be ascertainable
o Keighley, Maxsted & Co v Durant (1901)
 There was no contract as agent had contracted in his own name and had not
disclosed he was acting for a principal
2. Principal must Exist
o At the time the agent made the contact, the principal must exist - Kelner v Baxter (1866)
o For companies, under s 41 CA, it allows a company to ratify contracts made on its behalf prior
to its incorporation
3. Principal must have Capacity
o Principal must have capacity to enter into and perform the contract at the time the contract
was made and at time of ratification
o Common law may not enforce a contract entered into by an agent on behalf of a minor

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o Contract is also not enforceable if it amounts to an act which is ultra vires on the part of the
company – Ashbury Railway Carriage and Iron Co v Richie (1875)
4. Principal must Ratify within Reasonable Time
o Principal must ratify within a reasonable period after the contract was made by the agent
o At very least prior to the date when the contract is to be performed
Operations of Law
 The law deems an agency to exist even if there is no agreement to that effect by the principal or agent
 Agency of Necessity
o Law recognizes that a person, in an emergency situation should be conferred with authority to
act on behalf of another
o Couturier v Hastie (1852)
 Shipmaster who finds his cargo is unexpectedly perishing is empowered to dispose of
his cargo at the nearest port at the best available price without the authority of the
owner
o Rationale is that such circumstances require immediate action and communication with the
principal is impossible
 Cohabitation
o Based on the premise that a wife has the implied authority from her husband to manage their
home
Relationships Created by Agency
 Specific rights and obligations between a P and his A will normally be stipulated in the agency contract
 Rights and obligations as between a principal and the third party may be affected by the contract which
binds them
 Business professionals who in course of work from time to time act as agents for their clients, may be
regulated by statute
 Case law has built up a substantial body of rules governing these relationships
Principal-Agent Relationship
Duties of Agent
 Relationship between an agent and his principal is a fiduciary one
 Duties of the agent are generally characterized by good faith
 Duty to Follow Instructions
o General duty to follow the instructions of the principal
o Agent should clarify the intention of the principal if instructions are unclear
o There will be a breach of agency contract if agent fails to follow his principal’s instructions
and agent is liable for damage to his principal – Bertram, Armstrong & Co v Godfray (1830)
 Duty to Use Care and Skill
o Agent must discharge his duties with reasonable care and skill
o Standard required is that which a reasonable person would expect from an agent in that field
of activity
o Agent is expected to use the skill in discharging his duty if he is engaged due to that particular
skill – Keppel v Wheeler (1927)
 Duty of Avoid Conflicts of Interests
o Agent must not place himself in a position where his interest conflict with his principal’s
interest
o He is entitled to do so if A has disclosed to P and obtained consent to continue to act as an
agent
o Agent must not accept a bribe or secret commission
 Remedy by Principal, “account of profits” to claim the bribe or secret commission
from the agent
 Secret profit is not allowed even if agent acted in good faith and principal suffered no
damage – Hippisley v Knee Brothers (1905)
o Agent should not without the knowledge and consent of his principal become in his own right
the counterparty in a transaction with his principal
 This would place the agent’s interest as a counterparty in direct conflict with his duty
to protect his principal’s interest – De Bussche v Alt (1878)
 Duty not to Delegate
o Agent has a general duty to perform his obligations and not delegate his responsibility to
others – John McCann & Co v Pow (1975)
o P assumed to have selected the Agent based on the agent’s personal character and abilities

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 Duty to Keep Separate Accounts

o General duty to keep proper separate accounts for the principal showing all property
belonging to and all transactions undertaken on behalf of his principal
Rights of Agent
 Right to Remuneration
o Principal undertakes to pay the agent a fee for acting on the principal’s behalf when
employing the agent
o Agent can claim the fee only when he has fulfilled his duties – Cain Sales & Consultancy Pte
Ltd v Beyonics Technology Limited(2003)
o Important to ensure that the agency contract states the specific events which trigger the agent’s
right to claim his fee
 Right to Indemnity
o Case law generally provides that an agent is entitled to be indemnified by his principal for all
liabilities and disbursements lawfully incurred by him in performing his duty
o Agent loses this right if the liability is caused by his negligence, breach of duty or if it arises
because he has acted beyond the scope of his authority
 Right of Lien
o Agent can lawfully retain custody of the principal’s property until such time as the amount
owing to him has been fully paid
Principal – Third Party Relationship
A Principal is bounded generally to a third party for all acts performed by the Principal’s Agent as long as
1. The agent does not exceed his authority
2. Agent has ostensible authority
3. Principal has lawfully ratified the contract with the third party
General Rule
 The general rule is that as long as agent acts within his
o Actual authority
o Ostensible Authority
o Or Principal Ratifies the agent’s act
 Principal is bound to the third party for the agent’s act
 General rule applies even if the agent acts fraudulently to the detriment or benefit of the principal –
Lloyd v Grace, Smith & Co (1912) and The Cherry (2003)
 Fraudulent Agent can create substantial liability for a principal – Lee Feng Steel Pte Ltd v First
Commercial Bank
o Lee Feng Steel was liable for the fraud of its agent (DO) committed against it
 Principal may also be liable for his agent’s misrepresentation made to a third party (issue of name cards
by agent)
o Occurs when Principal knew about misrepresentation and acquiesced in it or ratified it – Ng
Buay Hock & Another v Tan Keng Huat & Another (1997)
 If however agent had no actual authority or ostensible authority to make the representation (being
inconsistent with an express term of the contract), his principal is not bound by it – Ng Kong Teck v
Sia Kiok Kok & Another (1997)
Undisclosed Principal
 Principal whose agent acted within the agent’s actual authority but did not disclose to the third party
that he was acting for a principal may sue and be sued under the contract
 Four main qualifications which limit the application of this rule and if any apply, the undisclosed
principal will not be bound to the third party
o Agent’s authority must not be ostensible authority or one which arose by virtue of a
ratification
 Ostensible authority will not suffice because by definition, ostensible authority
requires a principal to have made some representation by words or conduct,
concerning his agent to the third party
 Ratification also not possible because to ratify, a principal must have been named or
identifiable
o If the agent entered into the contract in circumstances which implies that he is, in fact the
principal, the undisclosed principal may lose his rights under the contract
 Humble v Hunter (1848)

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 Where an agent executes the contact as “owner” of a ship, the undisclosed

principal which in this case is the ship’s true owner might not be able to
assume his rights under the contract
 If agent had signed the contact in his own name – without excluding the possibility of
subsequently disclosing the true principal, result might have been different
o Contract revolves around matters which are unique to the agent or the agent’s identity is
critical to the contract
 Undisclosed Principal may not intervene in the contact subsequently – Collins v
Associated Greyhound Racecourses Ltd (1930)
o When an undisclosed principal is revealed to the third party, third party can elect either to sue
the agent of principal
 Third party cannot change his mind once election is made – only one legal action is
allowed – Trigen Industries Ltd v Sinko Technologies Pte Ltd & Another (2003)
 In Singapore, doctrine has been confirmed in Hong Kong & Shanghai Banking Corp v San’s Rent a
Car Pte Ltd t/a San’s Tours & Car Rentals (1994) and the Rainbow Spring (2003)
 Both cases are cited with approval by Court of Appeal in Privy Council Case, Siu Yin Kwan &
Another v Eastern Insurance Co Ltd (1994)
o Undisclosed Principal may sue and be sued on a contract made by an agent on his behalf
acting within the scope of his actual authority
o In entering contract, agent must intend to act on the principal’s behalf
o Agent of an undisclosed principal may also sue and be sued on the contract
o Any defense which third party may have against the agent is available against his principal
o Terms of contract may, expressly or by implication exclude
 the principal’s right to sue
 His liability to be sued
o Contract itself or circumstance surrounding the contract may show that the agent is the true
and only principal
 In practice, an agent will usually seek to avoid personal liability by at least disclosing if not naming his
principal whenever he contracts with a third party
Agent-Third Party Relationship
 General rule is that as long as agent had [1] actual authority or [2] ostensible authority or [3] principal
ratified the agent’s act
o Agent owes no liability to third party
Agent Agrees to be Liable
 Agent will be held liable if the contract with the third party on its proper construction shows that the
agent agrees to be liable to the third party
 Intended for both principal and agent to be liable – The Swan (1968)
 Agent signs contract in own name without any reference to his principal, the general presumption is
that he is the principal
Trade Usage
 Custom and trade usage have established that an agent’s contract entails personal liability on the part of
the agent
 Stockbroker who acts as agent on behalf of client will be held liable for transactions entered into with
other brokers on behalf of client
 Air Forwarding Agents are liable for the freight payable to airlines when they arrange for transportation
of their client’s goods – Perishables Transport Co Ltd v N Spyropoulos (London) Ltd (1964)
Negotiable Instruments
 Agent who signs a negotiable instrument such as a bill of exchange may be liable even if he describes
himself as an Agent.
 Bills of Exchange Act provides for this. To avoid liability, he should sign with
o “For and on behalf of P”, [Agent] as agent
o “per pro or pp [Principal], [Agent]
Non Existent Principal
 Agent may be liable if he contracts on behalf of a non-existent P.
 Much depends upon the construction of contract. If contract shows that intention was for TP to contract
only with P, TP actually contracted to no one. No one is liable to TP – Black v Smallwood (1966)

Breach of Warranty of Authority

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 Agent represents himself to have authority when he does not, Third Party may sue the Agent for breach
of warranty of authority.
 Agent’s representation is taken as warranty that he has his principal’s authority, if warranty is broken,
there is a breach of warranty of authority within an implied contract
 Tends to be initiated only if principal is not bound to the third party through ostensible authority
 In case of Ku Yu Sang v Tay Joo Sing (1993), quoted with approval the summary of law on breach of
warranty of authority in Yonge v Toynbee (1910)
o Liability of the person who professes to act as Agent arises if:
 He is fraudulent
 He has without fraud untruly represented that he had authority when he had not
 He innocently misrepresented that he has authority where the fact is either
 That he never had authority
 His original authority has ceased by reason of facts of which he has no
knowledge or means of knowledge
 Agent knows he does not have his principal’s authority and intentionally represents otherwise, the third
party may also bring an action in the tort of deceit
 If representation was made carelessly, the third party may also be in a position to bring an action in the
tort of negligent misstatement
 Agent may face concurrent liability in both tort (negligent misstatement) as well as contract (implied
contract) – Fong Maun Yee & Another v Yoong Weng Ho Robert (1997)
Undisclosed Principal
 Agent may attract personal liability if he contracts with a third party without disclosing his principal
 Agent who contracts with a third party on behalf of a disclosed but unnamed principal can
subsequently reveal himself to be the principal and acquire the rights and obligations under contract –
Harper & Co v Vigers (1909)
o If third party is willing to take the liability of an unknown person, it is hard to suppose that the
agent was the one person in the world with whom he was unwilling to contract.

Termination of Agency
Act of Parties
 Provisions in the agency contract stipulating when the agency terminates
 May also be terminated by
o Full performance of the agency contract
o Breach of contract which amounts to a repudiation
o The principal revoking the agent’s authority as long as there is no undertaking by the principal
to the contrary
Operation of Law
 Principal or agent becomes bankrupt, dissolved or dies
 Agency is created with a particular subject matter in mind and the destruction of that subject matter
will terminate the agency through principal of frustration
 Agent or Principal becomes mentally incompetent – Ch’ng Choon Eng v Phaik Keow Lucien Gladys
(2000).

Chapter 9: Unincorporated Business Entities

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Incorporated Entities
 Through Incorporation, an entity is made to become a separate legal body which has its own legal
rights and obligations
 The entity will have an existence separate and independent of the people who established
o Corporation can continue even if founders retire or leave
Unincorporated Entities
 Unincorporated entity does not have a separate legal personality
 Law does the distinguish the founders and the entity itself
SOLE PROPRIETORSHIP
 Essentially a business owned by a single person
 Rights and obligations of the business become the rights and obligations of the sole proprietor
Unlimited Liability
 Sole proprietor has unlimited liability as far as his business is concerned
 Personal assets of the sole proprietor can be sought by the unsatisfied creditors
 Benefits
o Ease of set up
o Low cost
o Relatively simple requirements for maintenance
Business Registration
 Only Formality is that every sole proprietor who carries on business must comply with s 5(1) Business
Registration Act (BRA)
 Certain exceptions are listed in the First Schedule – Licensed Hawkers, Taxi Drivers and Trishaw
Riders
 Professionals such as accountants, doctors, lawyers and architects who are governed by other statutes
are exempted from the provisions of the Business Registration Act s (4)1(g)
 Process
o Application must be first made to the Registrar of Business before commencement of
Business
o Certificate of Registration issued upon registration by Registrar
o Liable to a fine if a sole proprietor uses an unregistered business name, s12(2) BRA
o Sole Proprietor is unable to enforce any contract entered into with another third party while
using the unregistered business name, s21(1) BRA
o Third party can however enforce contract against the sole proprietor, s 21(5) BRA

 Selection of Business Name

o Has wide discretion in selection
o Must be specified in the application in the Registrar of Business
o Prohibited from carrying out business using an unregistered business name s12 (1) BRA
o Registration can be refused in the event that the business name to be registered is identical or
resembles an already registered business name or company name.
o Registration of a business name does not grant any proprietary rights to the name
o Proprietary rights are ownership rights
o Thus a sole proprietor who uses a business name which infringes upon another person’s
proprietary right in that name will not enjoy protection simply because he has registered the
business name, s 12(3) BRA
Dissolution
 Sole Proprietorship can be dissolved with minimum fuss
 Formality required is for sole proprietor to send a notice of cessation of business to the registrar of
Businesses within 14 days of ending the business, s 15(1) BRA
 Certificate of registration will then be cancelled
 Bankruptcy or death of a sole proprietor also results in the dissolution of the sole proprietorship
Partnership
 Main principles of partnership law are found in the Partnership Act (PA) which is essentially identical
to the English Partnership Act of 1890
 In addition, other principles of partnership law which are found within rules of common law and equity
continue to apply in Singapore s46 PA

Definition

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 A partnership is the relationship which subsists between persons carrying on a business in common
with a view of profit, s 1(1) PA
o Participation of two or more persons
o Carrying on a business
 There must be a commercial element in every partnership
o A common objective of generating profit: Lek Bong Hua v Lek Boon Chye (1999)
 Sharing of profits is the hallmark of a partnership: Excel Golf Pte Ltd v Allied Domecq Spirits and
Wine (Singapore) Ltd (N0 2) (2004)
 Partners in a partnership have greater rights and obligations vis-à-vis each other
 Pursuant to s 2(1) Interpretation Act, persons is generally defined to include companies and other
corporate bodies
o Partnership as in unincorporated entity would not have limited liability but a company as a
partner would have limited liability
o Person who has not reached the age of maturity (below 21) may also be a partner
 Carrying on a business is generally any undertaking involving the sale or supply of goods or services
 Includes every trade, occupation or profession, s 45 PA
 One off business may also fall under in certain circumstances
 Chinese loan association which provided loans to its members has been held as not carrying on a
business: Soh Hood Beng v Khoo Chye Neo (1987)
Formation
 A partnership is formed by contract
 Contract may be oral or in writing
 Agreement should stipulate the respective rights and obligations of the partners and any qualifications
they wish to effect upon the general provisions of PA
 Partnership may be illegal if it is formed for an illegal purpose
o Partnership automatically dissolved if an event occurs which make the partnership business
unlawful
 Partnerships cannot have more than 20 members
 Professional partnerships which are governed by specific legislation such as accountancy and law may
exceed 20: s 17(4) CA
 Partnership formed is called a firm
 The business name is the firm-name s 4 PA
 Firm name must be registered s 5 BRA
 Certain professional partnerships will be registered pursuant to their relevant legislation since BRA
does not generally apply to them
 Ng Teck Sim Colin v The Guek Engelin & Anor (1995)
o Goodwill of a business carried out by a partnership forms part of the partnership’s assets
o If goodwill is not sole, each partner is entitled to use the name of the firm provided that by so,
he does not hold out the other partners as still being partners
Relationship among Partners
 Governed by PA as well as Case Law
 Statutory provisions may be varied by the consent of all partners , s 19 PA
 Partners have a wide discretion in determining the nature and scope of their rights and obligations to
each other
 Property
o All property bought into the partnership by the partners, or acquired or created in the course of
the partnership business for the firm is considered partnership property
o A corollary principle is that all property bought with partnership funds is deemed to be
partnership property s 21 PA
o Ng Chu Chong v Ng Swee Choon – A partnership is not a separate entity but an aggregate
 Creditor cannot execute against partnership property unless the creditor has a judgement against the
firm
 If a partner has outstanding personal debts, his creditor cannot execute against the property of the firm,
Wee Soon Kim Anthony v Lim Chor
 Management
o General rule is that all partner is entitled to participate, s 24(5) PA
o Partners are generally not entitled to remuneration
o Entitled to a share of the profits generation
 Liability and Indemnity

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o General rule is that every partner is entitled to share equally in the firm’s profits and is liable
equally for the firm’s losses, s24 (1) PA
o In practice, partners can agree to bear differing proportions of liability to reflect the amount of
capital each initially contributed or the amount of work each undertook.
 This is however a internal arrangement: Koh Ewe Chee v Koh Hua Leong &
Another (2003)
o S 24 PA contains the qualification that the rules therein are subject to any agreement express
or implied between the partners
o As far as third parties are concerned, each partner is jointly and severally liable for partnership
debts
o Firm is required to indemnify each partners for expenses and liabilities necessarily incurred by
him on the ordinary and proper conduct of the firm’s business
 Fiduciary Duty
o Fiduciary nature of the relationship is not expressly stipulated in the statute
o Fiduciary duty owed means that a partner cannot without the consent of his partners engage in
other business which compete against the firm s 30 PA
o General duty upon each partner
Relationship with Third Parties
 Most significant provision which determines the relationship between partners and third parties, s 5 PA
 Binding the Firm
o Effect of s 5 PA is to enable any partner to bind the firm to a third party as long as the act is in
the usual course of business of the firm
o In event that 3rd party knows that he is not authorized to bind the firm or does not believe him
to be partner then the 3rd party losses the benefit of this provision: s 8 and s 5 PA
o Significance is that Rouge partner can accumulate substantial liabilities upon his firm, use the
firm name and enter into unfavorable contracts.
o Every partner is bound by any act or agreement with a third party which is executed in the
firm name by a person authorized
 Joint and Several Liability
o In contract and debt, the partners are liable jointly: s 9 PA
o Third party can only bring one legal action against the partners
 Sleeping Partners and Salaried Partners
o Liability of sleeping partners and salaried partners towards third parties bear some mention
o Partners who are not engaged in day to day activities of the firm
o They are passive investors in which they usually only contribute capital to the firm and simply
await their share of profits
o Liabilities imposed upon partners generally are also imposed upon sleeping partners
o Salaried partners are persons who are given the title of partner for the purposed of dealings
with third parties but who are still employees as far as the partnership is concerned
o Position of salaried partner is also used sometimes as in intermediate stage prior to being
accepted as a equity partner
o Since a salaried partner is held out as a partner to third parties, he is liable to third parties as a
partner despite the fact that he remains an employee of the firm: s 14 PA
 Retiring Partners and New Partners
o A partner who retires remains liable for the partnership debts incurred before his retirement,
unless he
 Enters into an agreement with the creditors and remaining partners to be discharged
from his liability, s 17(2) and (3) PA
o Should also ensure that after retirement, all firm’s clients and the public generally are notified
that he is no longer a partner
o If no such notice is given, a third party may be entitled to claim that the retired partner appears
to have remained a partner and is therefore liable as a partner, s 36 (1) and (2) PA
o Partners are not liable for the firm’s debt after retirement with respect to third parties who are
unware of their status as partners, s36 (3) PA
o When a partner retires, the remaining partners continue to carry on the business as a going
concern, there is technically a dissolution of the old partnership and a new partnership is
created which takes on the assets and liabilities of the old partnership without any break in the
continuity of the business, Chiam Heng Chow v Mitre Hotel (1993) and Sim Yak Song v Lim
Chang & Another (2003)

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o Existing partners must give their consent before a person can be added into the partnership as
a new partner: s 24(7) PA
o New Partners are generally not liable for partnership debts incurred prior to them becoming
partners: s 17(1) PA
Dissolution
 Partnership ceases to carry on business upon dissolution
 Voluntary Dissolution
o Partners may wish to dissolve voluntarily due to:
 Partnership was for a fixed term or specific project, at the expiry of that term or
termination of the project: s 32 (1)(a) and (b) PA
 Partnership was for an indefinite period by any partner giving notice to the others: s
32 (1) PA
 Partnership agreement provides for any other reason for dissolution
 Involuntarily Dissolution
o Dissolution could be unintended by the partners but by the process of law
 One of the partners become bankrupt, dies or his share in the partnership property is
charged for his personal debts: s 33 (1) and (2) PA
 An event renders the business of the partnership unlawful s 34 PA
 At the application of a partner, court decrees the partnership to be dissolved because
another partner is unable to perform his part of the partnership contract or is guilty of
conduct prejudicial to the partnership business; business can only be carried on at a
loss; or if the court thinks it is just and equitable that the partnership be dissolved: s
35 PA
 Consequences of Dissolution
o Partnership property is to be applied in payment of partnership debts and liabilities with
balance to be distributed among partners according to their entitlements: s 39 PA
o Statutory provisions apply for the settlement of partnership accounts unless otherwise
specified by the agreement: s 44 PA
o In addition, the court may on the application of a partner, make an order for an account of all
profits made by the partnership upon dissolution, Ong Key Eng v Ng Chiow Tong (2001)
New Partnership Forms
 The Limited Liability Partnerships Act 2005 (LLPA) came into force in 2005
 Formation of LLP
o Registration under the Limited Liability Partnership Act
o Registration by 2 or more persons associated for carrying on lawful business with view to
profit
o At least 1 manager ordinarily resident in Singapore
 Limited Liability Partnership
o The LLP allows partners to incorporate with limited liability while still carrying on business
as a partnership
o Combines the benefits of a partnership with those of private limited companies
o Comes with safeguards to minimize abuse and provide protection to parties who deal with
LLP
o LLP is a separate legal entity from its partners: s 4(1) LLPA
o Like a company, it has perpetual succession and any change in partners will not affect its
existence, rights or liabilities: s 4(2) and (3) LLPA
o A firm of a private company may convert to LLP by fulfilling the prescribed requirements: s
20 and s 21 LLPA
o LLP is being capable of:
 Suing and being sued in its name
 Acquiring and holding property in its name
 Having a common seal in its name
 Doing such other acts and things in its name, as bodies corporate may lawfully do
and suffer: s 5(1) LLPA
o Partners will by agreement decide on the terms upon which they will own and manage the
LLP
o Partners will not be held personally liable for any business debts incurred by the LLP: s 8(1)
and (2) LLPA

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o A partner may be held personally liable for claims from losses resulting from his own
wrongful act or omission but he shall not be liable personally for the wrongful acts or
omission of any other partners of the LLP: s 8(3) LLPA
o Partner is agent of LLP and authorized act binds the LLP
o Unauthorized act binds LLP if third party misled by LLP to think that partner had authority
 Unless third party knew partner had no authority
 Third party was unaware that agent is a partner
o LLP is liable for tort if partner commits tort while acting in course of LLP’s business or while
acting with LLP’s authority
o LLP is required to keep accounting records and others that will sufficiently explain the
transactions and financial position of the LLP
o LLP is not required to submit annual returns to ACRA, instead LLP must submit to the
registrar of Limited Liability Partnership an annual return declaration of solvency or
insolvency, again with criminal sanctions for non compliance: s 24 LLPA
o LLP will be taxed as a partnership,
o Similar to company, dissolution of a LLP is through winding up: s30 LLPA
JOINT VENTURES
 A business venture undertaken jointly by two or more parties who agree by contract to engage in some
common undertaking for joint profit by combination of their resources without, however forming a
partnership or corporation in the legal sense
 May be natural persons or corporations
 Main Differences between Partnerships and Joint Ventures
o Partnership has joint and several liability, a Joint Venture usually does not have joint liability
o Each venturer bears his own liability
o Each partner in a partnership is an agent of the other partners and can bind the partnership in
contacts with third parties
o A joint venturer is usually not an agent of the other venturers
o Each venturer has limited authority to act on behalf of the venture contract
o A joint venture contract may allow a joint venture to transfer his interest in the venture to a
third party without the approval of the other venturers
COMPANIES
Definition
 An incorporated business organization registered under the Companies Act (CA)
 Regulated by Accounting and Corporate Regulatory Authority (ACRA)
Corporate Status
 Incorporation creates ‘personhood’
 Company becomes an artificial person capable of possessing rights and owing duties independent of its
members as expressed by s 19(5) CA
Consequences of Corporate Status
 Company can own property in its own name
 Company can enter into contracts and generally exercise rights and owe obligations in its own name
 Assets owned by company are assets of the company and not its members
 Liabilities of the company are liabilities of the company and not its members – Saloman v A Salomon
& Co Ltd (1987)
o Court held that shareholders are not liable for the liabilities of the company
 Company has perpetual succession and continues to exist until it is wound up even if its members
change over time
Lifting the Corporate Veil
 There are exceptions to the general rule that liabilities of company are not treated as liabilities of its
members
 Veil of incorporation which separates the members from their company is removed or penetrated so
that the acts of the company are deemed to be acts of its members
 One situation is when there is substantial wrongdoing by the company and the wrongdoing can be
attributed to one or more of its members
 Secondly is when the company is wound up or sued and it has a debt which was knowingly created by
a company officer who at that time had no reasonable or probable expectation that the company could
pay the debt
o Officer has committed an offence and can be fined, jailed and may be declared personally
liable for the debt: s 399 (3) and s 340 (2) CA

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 Thirdly if the business of a company has been carried on with the intention of defrauding creditors of
the company, creditors of other persons or for any fraudulent purpose, the court upon the winding up of
the company may declare any person who was knowingly a party to the carrying on of business in that
manner to be personally liable for any or all debts or liabilities of the company: s 340(1) CA
Incorporation Process
 For incorporation, there must be at least at least one member: s 20A CA
o Member may be natural or artificial such as another company
 Memorandum and Articles of Association (MA & A)
o Memorandum of association of the proposed company must be prepared and executed
o It becomes the constitutional document of the company, s22(1) CA
 State name of company
 Initial capital structure
 Limited or not
 Details of initial members (called subscribers)
 There must be at least one director who is ordinarily resident in Singapore, s 145 (1)
CA
 Only natural person can be director, s 145 (2) CA
 A natural person can be a member and director of the same company
o Articles of Association is a sister document to the memorandum of association
 Contains rules governing the operation of a company, s 35(1) CA
 Govern the appointment of directors, holding of members and directors’ meeting and
method of issuing shares
o Section 35 (1) CA read together with s 36 (2) CA effectively renders the articles of association
compulsory for all companies
o For companies limited by shares, there is a standard set of articles of association in Table A of
Fourth Schedule of the Statute
o Table A applies to all companies limited by shares unless specifically excluded: s 36 (2) CA
o Table A is often excluded as subscribers wish to tailor the articles of association of their
company to suit their purposes
 Registrar of Companies
o Once MA &A have been executed, these documents together with ancillary papers must be
lodged with the Registrar of Companies: s 19(1) CA
o A person who undertakes the task of incorporating the company is called a promoter
o Company obtains legal personality on the date the notice of incorporation is issued: s 19(5)
CA
Types of Companies
 When a company has limited liability, it means that if the company is dissolved, the members of the
company are liable only up to the amount unpaid on the shares held respectively by them: s 22(3) CA
 An unlimited company on the other hand is one whose members upon the company being wound up
are liable without limitation
Unlimited Company
 The rarest a they negative one of the main reasons why companies are used in business
 Used in situations where the benefits of incorporation are desired, but the limitation of liability is
prohibited
Company Limited by Guarantee
 Members must stipulate a fixed amount in the company’s memorandum which they undertake to
contribute to the company if it is wound up: s 22(1)(e) CA
 Constitutes a guarantee by the members to the company and money is not paid up immediately
 Used chiefly in situations where the benefits of incorporation are desired but no business activities are
anticipated

Companies Limited by Shares

 A share represents the interest of a member (shareholder) in the company which issued the share
 Right of participation in the company on the terms of the articles of association – Prudential
Assurance Co Ltd v Newman Industries (No 2) (1982)
 Upon winding up, members are liable only up to the amount they have paid (plus any amount due but
unpaid) on the shares they own
Private and Public Companies

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 Pursuant to s 18(1) CA, a private company is defined as a company with share capital whose
memorandum or articles of association restricts the right to transfer its shares and also limits the
number of its members to 50
 Companies limit by guarantee do not have share capital and are by definition public companies
 Public companies upon fulfilling various conditions is permitted to raise funds from the public through
issuing shares and debentures and can be publicly listed on stock exchanges
Structure of Company
 Owners of company referred to as ‘members’ and invest in Company’s business
 Most companies are divided into shares and members are shareholders holding shares
 Creditors are not shareholders/members, they are lenders or supplier on credit
 Section 4(1) defines officer to include the directors of the company, the company secretary and other
person employed in an executive capacity
 Directors run and manage the company and are employed by shareholders
 Directors may or may not be shareholders
 Company secretary acts as a main administrative officer of the company responsible for statutory
matters
 Company must maintain at its registrar office a register containing details of all its directors, managers,
secretaries and auditors: s 173(1) CA
Officers as Agents
 Company officers function as agents of the company
 Fact that a person is a company officer does not automatically make him an agent of the company –
Dart Sum Timber (Pte) Ltd v Bank of Canton Ltd (1982)
Company Secretary
 Company secretaryship is a statutory office
 Every company must have one or more company secretaries, all of whom must be natural persons who
reside in Singapore s 171(1) CA
 He or his agent or clerk must be present at the registered office of the company during business hours: s
171(30 CA
Directors
 Directors have overall management responsibility over their company
 Directors may exercise all the powers of a company except any power which pursuant to the CA or
memorandum and articles of association, is required to be exercised by the company in general
meeting: s 157A CA
 Directors have duties to fulfill
o Duty to act bona fide in the interests of the company
o Duty to act with due care and skill
o Duty to avoid conflicts of interests
o Duty to use powers for proper purposes
Dissolution of Companies
 The process which the company is dissolved is known as liquidation or winding up. Liquidation may
be voluntary or may be ordered by the court.
Voluntary Winding Up
 When members of the company voluntarily decides to liquidate the company
 Reasons
o Purpose for which company is incorporated is achieved
o Company is to be reconstructed and its business merged with another company
 Begins when members of a company pass a resolution at a general meeting: s 290 CA
 If directors make a declaration of solvency together with a statement of affair, then the winding up
proceeds as a members’ voluntarily winding up: s293 CA
o Company is solvent and able to pay its creditors within a period not exceeding 12 months
from date of resolution
 If for any reason the liquidator believes that the company’s assets would not be sufficient to pay off the
creditors within the period specified in the declaration of solvency, then he is to call a meeting of
creditors: s 295(1)CA
o Situation is known as creditors’ voluntary winding up: s 296 CA
 Appointment of liquidator: s 294(1) CA
 Task of liquidator is to liquidate the assets of the company and pay off the creditors
 Powers of directors cease once liquidators are appointed
 Order of repayment of liabilities set out in CA
 Surplus is distributed to members

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 Upon dissolution, company ceases to exist

Winding Up by the Court
 Application is made in form of petition
 Can be presented by certain persons including the company itself, or more often a creditor: s 253(1)
CA
 Person petitioning the winding up must establish one of the statutory grounds for winding up
o Company by special resolution has resolved that it be wound up by the court
o Company has no members
o Company is unable to pay its debt which exceed $10,000
o Directors have acted in their own interest rather than in the interest of the members as a whole
o Period for the company’s existence as stated in its articles or memorandum of association has
expired
o Court is in opinion that it is just and equitable that the company be wound up and the
company is being used for unlawful purpose

Ending
 In case of voluntary winding up, process ends when liquidator calls a final meeting of the members of
the company (together with company’s creditors in the case of a creditors’ voluntary winding up): s 308
CA
 Liquidator presents a final account showing how winding up has been conducted and how company’s
assets have been disposed
 Liquidator file a return with the Registrar of Companies and the Official Receiver
 Company is deemed to be dissolved three months after the filling of the return
 In case of winding up by court, upon completion, the liquidator must apply to the court for an order of
dissolution: s 275 CA
 Company is dissolved upon grant of the order: s 276 CA

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Chapter 18 – Torts in Business

 The law of tort is the set of rules specifying certain actions and omissions as wrongs which give rise to
civil liability
TORT
 Based almost entirely on case law
 Overlaps with some other areas of law
 Person’s act may be a tort, breach of contract and a criminal offence simultaneously
 Person who commits a tort is a tortfeasor
Classification of Tort
 Tort of Intentional Conduct
o Person intentionally causes harm to another
 Tort of Negligent Conduct
o Person unintentionally causes harm to another
 Tort of Strict Liability
o Torts which are neither intentional or intentional
NEGLIGENCE
 Covers both act and omissions
 Person can be negligent at law for doing something he should not have done as well as for not doing
something when he should have
 Can be found to be negligent to total strangers, in contrast to the law of contract where the privity of
contract principle generally prevents third party from enforcing a contract.
Elements of Negligence
 Duty of Care
 Breach of that Duty
 Damage resulting from that breach
Duty of Care
 A Duty of care is imposed upon a person to take reasonable care for his acts and omissions.
 3 categories of cases:
o 1) Physical damage to a plaintiff’s person or property
o 2) Pure economic loss
o 3) Claims based on negligent statement (or negligent misstatement)
 Boundaries which circumscribe the situations where a duty of care exists are not static and it constantly
develops as technology and the scope of human activities develop
 Donoghue v Stevenson (1932) - Although the plaintiff could not sue the retailer as she had no contract
with him, she sued the manufacturer for breach of the duty of care. Lord Atkin’s neighbour principle –
“Who then, in law, is my neighbour? The answer seems to be – persons who are so closely and directly
affected by my act that I ought to reasonably to have them in contemplation as being as affected when I
am directing my mind to the acts or omissions which are called in question.”
o The Neighbor Principle
o House of Lords held that the manufacturer of the ginger beer was liable in negligence
 Anns & Others v London Borough of Merton (1978) – 2 Stage Test to determine if Duty of Care
exists
o First one has to ask whether as between the alleged wrongdoer and the person who has
suffered damage, there is a sufficient relationship of proximity or neighborhood such that in
the reasonable contemplation of the former carelessness on his part may be likely to cause
damage to the latter in which case a prima facie duty of care exists
o Secondly if first is affirmative, it is necessary to consider whether there are any considerations
which ought to negative or reduce or limit the scope of duty or the class of person to whom it
owed or the damages to which a breach of it may give rise.
 Three Stage Test – Caparo Industries plc v Dickman (1990)
o Proximity – Are the parties proximate to one another?
o Foreseeability – Is it foreseeable that the plaintiff would suffer harm?
o Policy – After evaluating all the circumstances of the case, is it just and reasonable overall to
find a duty of care?
 Application of three stage test in Singapore – RSP Architects Planners & Engineers v Ocean Front
Pte Ltd (1996)

 Spandeck—A single test to determine the imposition of a duty of care in all claims arising out of
negligence irrespective of the type of damages claimed, including claims for pure economic loss.

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o Preliminary requirement of factual foreseeability

 Established when it can be shown that “the defendant ought to have known that the
claimant would suffer damage from his carelessness”
 Easily established thus not necessary to go into much detail
o First prong of two-stage Spandeck test: Legal Proximity
 Meaning: A sense of closeness between the person who owes and the person who is
owed a duty of care
 Physical proximity (in the sense of space and time)
 Circumstantial proximity (in terms of the relationship b/w them)
 Causal proximity (the closeness or directness of the causal connection or relationship
b/w the particular act or course of conduct and the loss or injury sustained)
 If either one of the above is established, a prima facie duty of care exists
o Second prong of two-stage Spandeck test: Policy
 Are there any relevant policy considerations which would negate the prima facie duty
of care?
 Is there a contractual relationship which regulates the rights and obligations of the
parties?
 What are the relative bargaining positions of the parties?
 Are there any broader public policy issues relevant to the case?
 A “catch-all” factor that allow courts to view the facts of the case in its entirety
before deciding whether a duty of care exists.
 If proximity and foreseeability are established, but for some reasons of justice of
public policy, the court may deem it unreasonable to find a duty of care.
Cases for Illustrating Duty of Care
 Marc Rich & Co. v Bishop Rock Marine Co Ltd (1996) – The court held that even assuming there was
foreseeability and proximity, it would still not be just and reasonable to impose a duty of care.
 Hill v Chief Constable of West Yorkshire (1989) – The court held that there was no duty of care
because if such an action would to succeed, the police would embark on defensive policing which is
not in the interest of the public.
 Home Office v Dorset Yacht Co Ltd (1970) – Detainees escaped from one of the plaintiff’s property
and damaged defendant’s property. The House of Lords held that the Home Office owed a duty of care
to the respondent.
 Smith v Littlewoods Organization (1987) – The House of Lords held that defendant did not owe a duty
of care to the plaintiff for the acts of third parties. Defendant was not aware of any previous acts of
vandalism and had no reason to suspect that a fire would be started in the cinema by vandals.
 Spring v Guardian Assurance plc & Others (1994) – Guardian owed Spring a duty of care in
preparing the referral properly. If Guardian had performed its duty properly, it would have discovered
that Spring was not dishonest. Guardian breached this duty and Spring consequently lost job
opportunities.
 Rescue Situations – There is no duty upon a bystander to act by protecting another person or his
property when he sees the person or his property in danger.
Breach of Duty
 The test for this would be as stated in Blyth v Birmingham Waterworks (1856) as “the omission to do
something which a reasonable man… would do; or doing something which a prudent and reasonable
man would not do.”
 The standard of care is the level of care, which is expected to be exhibited in the defendant’s conduct.
 It follows that if his conduct does not meet the standard of care, then he is said to have breached his
duty of care.
Factors in Determining Standard of Care
 Level of Skill
 Likelihood of Injury
 Seriousness of Injury
 Cost of Avoiding Risk

1) Level of Skill
 The skill required is that of the reasonable man in the shoes of the defendant.
 If a defendant follows the accepted practice in his profession, there is a strong likelihood that he has
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 Wells v Cooper (1958) – No breach of duty of care as the defendant has met the standard of care of a
reasonably competent amateur carpenter. Professional expertise was not required of him.

2) Likelihood of Injury
 If the likelihood of injury to the plaintiff is high, then the court will require a higher standard of care
upon the defendant. If the likelihood is low, the standard of care is lower.
 Bolton v Stone (1951) – The House of Lords held that the chances of such accidents are too small for
the cricket club to take steps to prevent them

3) Seriousness of Injury
 The more serious the likely injury, the higher the 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 because the plaintiff had only one good eye.

4) Cost of Avoiding Risk

 If the risk of harm is high, the defendant will be expected to take steps to minimize the risk even if such
steps involve substantial cost.
 Latimer v AEC Ltd (1953) – The House of Lords held that the plaintiff failed to prove breach of duty
on the part of the defendant. The management had done everything possible to remove the effects of
the flood.
Res Ipsa Loquitur: Alternative way to show defendant has breached his duty of care
 The event speaks for itself.
 This principle states that the breach is so self-evident the fact the event occurred in it proves the breach.
 It should be noted that res ipsa loquitur is usually successful only in exceptional cases where it is
obvious that he accident could not 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.
 Teng Ah Kow & Another v Ho Sek Chiu & Others (1993) – Court held that they were liable. The
evidence also showed that the third respondent did not take reasonable care in checking the gas
cylinder; hence they were also liable.
o Res ipsa loquitur is a rule of evidence
o Essence is that an event in which in the ordinary course of things was more likely than not to
have been caused by negligence by itself is evidence of negligence
Resulting Damage
 Plaintiff must show that he suffered damage as a result of the defendant’s breach
 2 Aspects to consider
o Causation
o Remoteness

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.
 Two aspects to satisfy: Causation in fact & Causation in law
 Causation in fact: Looks at the defendant’s breach of duty and the claimant’s damage from the
perspective of physical connection
o BUT-FOR test: If plaintiff would not have suffered damage but for a certain event, then that
event is a cause of the damage.
 Causation in law: Is there a new intervening act which limits legal responsibility?
o Whether a floodgate will open that exposes the defendant to unlimited liabilities?
 Barnett v Chelsea & Kensington Hospital (1969) – The court held that there was a duty of care owed
by the hospital and this duty was breached. However, the doctor’s negligence did not cause the
husband’s death because death would have taken place anyway.
 Tan Hun Toe v Harte Denis Mathew (2001) – The court found that Tan was not negligent during the
operation. However, there was negligence in the post-operative care given to Harte and 60% of Harte’s
injury was attributable to this negligence. Accordingly, Tan was liable for 60% of the assessed
damages. On appeal, Court of Appeal affirmed the findings of causation and 60% apportionment but
raised the overall amount of damages awarded to Harte.
 Heidi De Cruz Andrea v Guangzhou Yuzhitang (2003) – Court was convinced that Slim 10 cause the
liver failure given the circumstantial evidence. Loss was not too remote as it was reasonably

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foreseeable that failure to keep proper records and do batch tests would result in damage, although
exact extent of loss was not foreseeable (egg –shell skull rule)
Remoteness
 The concept is used to limit the scope of the damage, which may be claimed against a defendant.
 Two test of remoteness
o Reasonable foreseeability
o Direct consequences test
 Direct Consequence Test - Re Polemis (1921) – The court held that the presence of petrol vapour 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 - The Wagon Mound (No 1) (1961) – It was held that the fire was a
direct consequence of the defendant’s breach of duty. However, it was unforeseeable that the fuel oil
would burn in water. Damage was not reasonably foreseeable, thus, the plaintiff’s claim failed.

 The Wagon Mound (No 2) (1967)- a reasonable person in the position of the ship's engineer would
have been aware of the risk of fire. Since the gravity of the potential damage from fire was so great
there was no excuse for allowing the oil to be discharged even if the probability or risk of fire was low

 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.
o It is not necessary to foresee the exact damage actually suffered by the plaintiff as a result of
the defendant’s breach of duty
 Egg-Shell Skull Rule - 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 plaintiff had to
accept that.
o Damage suffered by the plaintiff may be more severe than that which could reasonably be
foreseen by the defendant
o Nevertheless defendant could still be liable as damage is not too remote under the Egg- Shell
Skull Rule
Defenses
 Defendant who is alleged to be liable for a tort can raise several defenses to avoid liability

Ex Turpi Causa
 The plaintiff’s wrongdoing must be sufficiently connected with the damage he suffered, and the
damage caused by the defendant should be proportionate to the plaintiff’s wrongdoing

Volenti Non Fit Injuria

 Enables a defendant to avoid liability completely by arguing that the plaintiff has consented to the risks
involved in the relevant circumstance which led to the tort.
 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.
Contributory Negligence
 S3(1) Contributory Negligence and Personal Injuries Act describes the situation where a defendant can
raise the defence of contributory negligence
 This defence can only be raised in situations where the plaintiff’s injury was partly contributed to by
his own fault
 Unlike volenti, contributory negligence is a partial defence
 Sayers v Harlow UDC (1958) – Plaintiff contributed to her own injury. Damages were reduced by
25%.
Pure Economic Loss
 Economic loss that flowed from a negligent act is not accompanied by physical injury or property
damage.
 Generally, pure economic loss is not recoverable from a negligent act. Only from a negligent statement.
 Spartan Steel & Alloys Ltd v Martin & Co (Contractors) Ltd (1973) – Court held that the plaintiff
could sue for the loss of those materials (direct physical loss) and for the loss of profits for those

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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).
Different Approaches
 Dutton v Bognor Regis Urban District Council (1972) – The damage done here was not solely
economic loss. It was physical damage to the house. Lord Denning MR held that whether the inspector
negligently passes the house as properly built and it collapses and injures a person or if the owner
discovers the defects in time to repair it, the council is liable in either case. Claim for pure economic
loss is possible
 Murphy v Brentwood District Council (1990) – The loss sustained by the owner is purely economic.
Such losses are recoverable if they flow from breach of a relevant contractual duty, but, here again, in
the absence of a special relationship of proximity they are not recoverable in tort.
Recent Trends
 Hedley Byrne v Heller & Partners – The House of Lords held that pure economic loss is recoverable
against a defendant who makes a negligent statement (as opposed to a negligent act). The rationale is
that, by its nature, negligent advice may not result in physical damage to a person or property
 Several common law jurisdictions such as Canada, Australia and New Zealand have chosen to depart
from English approach in distinguishing. If proximity is established, plaintiff may be able to claim
damages either for loss flowing from physical damage or pure economic loss.
 In Singapore - Generally not recoverable. Exception
o RSP Architects Planners & Engineers v Ocean Front Pte Ltd (1996) – Singapore Court of
Appeal held that pure economic loss was recoverable. The court undertook 2-stage process of
determining proximity in order to establish a duty of care. After reviewing cases, court held
that duty of care was established and no policy reason which would negative that duty.
Accordingly, architects were liable for pure economic loss.
o RSP Architects Planners & Engineers (Raglan Squire & Partners FE) v MCST Plan No
1075 (1999) – RSP was known to owe a duty of care to the MCST although at that time RSP
provided its services, the MCST had not yet been formed. On the facts, the court also found
that the RSP’s breach of duty was justified
Psychiatric Harm
 Claiming damages for suffering from anxiety, distress or psychiatric illness after seeing a scenario or
witnessing or hearing an incident which was negligently caused by a defendant.
 Claims for grief or sorrow are generally not recoverable.

 McLoughlin v O’Brian (1983) – The House of Lords held that plaintiff could recover damages for her
trauma from the defendant. Lord Wilberforce stated necessity to consider 3 elements:
o Class of persons whose claims should be recognized (proximity to injured party) – Close and
loving relationship
o Proximity of such persons to the accident (time and space) to the accident immediate
aftermath
o Means by which the shock is caused (sight or hearing of the event or its immediate aftermath)
 Pang Koi Fa v Lim Djoe Phing (1993) – Amarjeet JC held that the plaintiff succeeded in her claim and
awarded damages against the defendant. He stated:
o Claim for nervous shock may be confused with a claim for grief, sorrow, deprivation and
suffering which arises out of necessity for caring for those who may be near and dear who
have suffered injury from a distressing event
o In distinguishing the present case from the ones relating to just grief and suffering, I must say
that here the claim is not exclusively for the loss the plaintiff has suffered nor the sense of loss
she feels.
o Rather, I view it as a claim for the psychiatric illness she now suffers as a result of the trauma
and shock she underwent when her daughter suffered and died from an operation negligently
performed by the defendant and the defendant’s other acts
 Primary victims – Persons who suffers from psychiatric illness as a result of defendant’s act or
omission that caused an immediate fear of physical injury to himself.
o May be able to recover damages in the tort of negligence if they can show that the physical
injury which they feared was reasonable foreseeable,
o Even though the psychiatric illness itself may not be reasonable foreseeable – Page v Smith
(1995)
 Secondary victims – Persons who suffers psychiatric illness as a result of witnessing injury to others.

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NEGLIGENT MISSTATEMENT
 Negligent misstatement is confined to negligent statements
 Professional advisers may owe contractual duties to their clients under their contracts and also tortuous
duties imposed by the law of tort.
 When a plaintiff can claim in negligence under both contract and tort, he normally will do so.
 If both succeed, the court will grant him damages under one claim only so that double compensation is
not enjoyed
 If he can only claim under tort, the plaintiff is known as a “third party” and he has no contractual
relationship with the adviser.
Negligent Misstatement – Duty of Care
 Hedley Byrne & Co Ltd v Heller & Partners Ltd (1964) – Plaintiffs relied on the references and
incurred huge losses. The court held that there was a “special relationship” between the defendant and
the plaintiff which gave rise to a duty of care owed by defendant. If it were not for the disclaimer, the
defendant might be liable for the advice given to the plaintiff.
Factors Determining the Existence of a Special Relationship & Duty of Care [Hedley Byrne & Co Ltd v Heller
& Partners Ltd (1964)]
 Paid or Gratuitous Advice
 Is advisor carrying on Business of providing advice
 Does adviser know that advisee will rely on advice – was advice given for this purpose
 Any Disclaimer

1) Paid or Gratuitous Advice

 Lord Devlin in Hedley Byrne
o Payment for information or advice is very good evidence that it is being relied on and the
adviser knows what it is.
o Where there is no consideration, it will be necessary to exercise greater care in distinguishing
between social and professional relationships and between those which are of a contractual
character and those which are not.
o It may often be material to consider whether the advisor is getting his reward in some indirect
form

2) Adviser’s Business
 Duty of care can be established even where adviser is not engaged in the business or providing expert
advice.
 The only requirement is that the circumstances show that it was reasonable for the advisee to rely on
the adviser’s skill and judgment and the advice given.
 Esso Petroleum & Co. Ltd v Mardon (1976) – It was held that Esso was liable to the respondent, even
though Esso was not in the business of providing the advice given.

3) Purpose of and Advisee’s Reliance upon the Advice

 The court requires that the adviser knows or ought to know that the advisee is likely to rely upon the
advice and that it is generally reasonable for the advisee to do so. If so, there may be a duty of care
 Caparo Industries plc v Dickman & Others (1990) – The House of Lords held that defendant did not
owe a duty of care to Caparo as an individual shareholder. The accounts the defendants prepared were
for the shareholders collectively and not for investors or individual shareholders.
 The policy considerations behind the decision were that if the accountants were held to have owed a
duty of care to all investors and shareholders, which would expose them to unlimited liability.
 Ikumene Pte Ltd & Fairlamb v Leong Chee Leng (1993) – The Singapore Court of Appeal held that
auditor did not owe a duty of care to Fairlamb as a shareholder or guarantor. There was lack of
proximity between them because the purpose of the audited accounted was for presentation to the
shareholders in general meeting.
 Standard Chartered Bank & Anor v Coopers & Lybrand (1993) – Singapore High Court ruled that
foreseeability for Stanchart relying on the audit report was not enough to establish a duty of care. Also,
following Caparo, the court held that audit report was prepared for shareholders of Pan-El, not for
individual shareholders or creditors.
 Morgan Crucible Co plc v Hill Samuel & Co Ltd and Ots (1991) – If statements can reasonable be
inferred to have been given with the purpose or knowledge that they may be relied upon by buyer in
hostile takeover, then advisors may owe a duty of care to buyer
 James McNaughton Paper Group Ltd v Hicks Anderson Co (1991) – Even if adviser knew that his
advice would be relied upon by advisee, the adviser will not be liable if it can be shown that it was

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reasonable for him to believe that the advisee will not rely solely upon his advice when making his
decision
 United Project Consultants Pte Ltd v Leong Kwok Onn (2005) – Court held that because he had
access to and filed income tax returns for KT, he had acquired the actual knowledge that some if not all
of the appellant’s directors were underreporting their director’s fees to IRAS, so he should have
foreseen the penalty or loss that the appellant would eventually suffer

4) Disclaimer
 Like exemption clauses in a contract, disclaimer must be reasonable under UCTA
 Allows advisers to limit or exclude liability for the advice they give
 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.
Negligent Misstatement – Breach of Duty
 In respect of professional advisers, the standard of care used in determining whether a breach of duty
has occurred is that of a reasonably competent fellow professional in the same field
 Lanphier v Phipos (1838)
o Every person who enters into a learned profession undertakes to bring to the exercise of it a
reasonable degree of care and skill
 For a professional adviser to breach his duty, he “must show an act of gross ignorance, such as could
not have been committed by any other ordinarily informed member of the profession.” – Cooke v
Falconer’s Representatives (1850)
 One professional’s opinion or usual practice may not be sufficient evidence in this matter
 Fong Maun Yee & Another v Yoon Weng Ho Robert (1997) – the fact that a particular lawyer would or
would not verify the purported client instructions is irrelevant; what matters is the extent of the legal
duty in question

Minimizing Personal Liability for Professional Negligence

 Adopt high standards of professional practice.
o Performing their responsibilities at the standard set by professional bodies
o Even if professional practice standards are met, this does not guarantee that there will be no
negligence
o Yeo Yoke Mui v Ng Liang Poh (1999) – Yeo had followed Singapore conveyancing practice
by sending to Yeo a copy of the road interpretation plan and explanatory notes. However, a
duty of care could still not be discharged, Yeo should have gone further to explain the meaning
of Category 4 and 5 roads and how this would affect the property.
 Appropriately worded disclaimers have been held to be effective as a mean to avoid liability.
 Purchase professional indemnity insurance.
o Cover against various claims, primarily for professional negligence
Negligent Misstatement and Negligent Misrepresentation
 Negligent Misstatement (Hedley Byrne):
o Requires special relationship (proximity)
o Contract not required
o Remedy: Damages
 Negligent Misrepresentation (S2 Misrepresentation Act):
o No special relationship required
o Must induce a contract
o Remedy: Rescission & damages

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OTHER TORTS IN BUSINESS

Passing Off
 Arises when a person seeks to pass off his goods or services as those of another
 Involves a person who falsely promotes his products as having the same origin or quality as the product
of another, usually a more well known person or manufacturer or as being somehow associated with
that other product or manufacturer
 Reckitt & Coleman Products v Borden Inc (1990) – 3 conditions to establish passing off:
o Plaintiff must establish there is goodwill or reputation attached to his business and that it is
recognised to be distinctive of the goods or services
o There must have been a misrepresentation by the defendant that the goods or services offered
by him are the same as those offered by the plaintiff
o Plaintiff must suffer or must be likely to suffer loss.
 CDL Hotels International Ltd v Pontiac Marina Pte Ltd (1998) – Goodwill established and damages
awarded.
 Goodwill of a trader is that attachment existing between the trader’s customers and his business and
that which brings patronage, custom and business
 Goodwill is intangible but can be associated in the minds of customers with the brand, logo, trade
mark, or the get up (appearance) of a product
 Edmund Irvine & Tidswell Ltd v Talksport Ltd (2002) – Passing off used successfully to protect
personality rights in a case of radio endorsement falsely attributed to a famous Formula One racing
driver, Eddie Irvine
 Lifestyle 199 Pte Ltd v $1.99 Ltd (2000) – Claim failed because title was descriptive of products. If
claim held, injunction would be unfair as it implied ONE.99 could claim a monopoly on the concept of
selling items at $1.99.
Defamation
 Defamation occurs when a statement is published which tends to lower a person’s reputation in the
estimation of right thinking members of society generally
 Defamatory statements made orally are usually called “slander” whereas written defamatory statements
are called “libel”
 For statement to be defamatory, it must fulfil 3 elements:
o It must have been published – i.e. statement made or sent to any person other than the person
who is the subject of the statement, the statement is considered published.
o It must be untrue
o It must have the effect of lowering a person’s reputation generally
 Certain types of communication, however attract legal privileges such that defamatory statements made
as part of communication are not actionable
o Parliamentary proceedings and judicial proceedings
Inducing Breach of Conduct
 Arises when a person seeks to induce another person to breach his contract with a third party.
 Scenario – New manufacturer approaches existing agent of a competing manufacturer to persuade the
agent to terminate its agency contract and become the new manufacturer’s agent.
 Consequences – Termination of agency contract is a breach of contract, competing manufacture can
take legal action against new manufacturer (tort). Competing manufacturer can take legal action against
his agent for breach of contract (contract).
 As long as termination does not amount to breach, there can be no action for inducing breach of
contract

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