Business Law Notes

Table of Contents
Law Overview 7
Definition and Function of Law 7
Common Law v Civil Law 7
Criminal Law v Civil Law 7
Sources of Law 8
Meanings of Common Law 8
Checks and Balances (Singapore Legal System) 8
Terminology 9
Statutory Interpretation 9
Offer and Acceptance (Chapter 7) (p. 181) 10
What is a contract (p. 181) 10
Types of contracts (p. 181) 10
Offer (p. 183) 10
Situations of invitations to treat vs. offers (p. 185) 11
Advertisements (p. 186) 11
Displays of goods for sale (p. 188) 11
Auction sales (p. 190) 11
Tenders (p. 190) 12
Termination of Offer (p. 191) 12
Revocation (p. 191) 12
Rejection and Counter-Offer (p. 194) 13
Lapse of Time (p. 195) 13
Failure to fulfill a condition (p. 196) 13
Death (p. 197) 14
Acceptance (p. 197) 14
Acceptance must be communicated to offeror (p. 198) 14
General Receipt Rule (p. 198) 14
Acceptance by conduct (p. 199) 14
Acceptance by instantaneous communication (p. 199) 14
Exception: The postal acceptance rule (p. 201) 15
Acceptance by silence? (p. 203) 15
Ignorance of offer (p. 204) 15
Issues with Offer and Acceptance (p. 208) 15
Certainty and Completeness (p. 208) 15
Subject to contract (p. 208) 16
Oral Agreements (p. 209) 16
Completeness (p. 210) 16
Vagueness (p. 211) 16
Fairness (p. 211) 16
Agreement to negotiate (p. 212) 16
Electronic contracts (Chapter 24) (p. 796) 17
ETA Section 13 (despatch and receipt) 17
ETA Section 5, 11, 14, 15, 16 (invitation to treat v offer, validity of contracts, input
errors) 17
Consideration and Intention to Create Legal Relations (Chapter 8) (p. 217) 19
Consideration (p. 217) 19
1. Must be requested by the promisor (p. 220) 19
2. Must not be past consideration (p. 221) 19

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 3. Must move from the promisee (p. 223) 20
4. Must be sufficient (p. 223) 20
(NO) Intangibles and Moral Obligations (p. 224) 20
(YES) Forbearance and Compromise (p. 225) 21
(NO) Existing Public or Legal Duty (p. 226) 21
Existing Contractual Duty (p. 226) 21
(YES) Owed to a third party (p. 226) 21
Owed to the promisor (p. 227) 21
(NO) In return for a promise for more (p. 227) 21
(NO) In return for a promise for less (p. 233) 22
Exceptions: Where Consideration is Not Required (p. 234) 22
Contract by deed (p. 234) 22
Promissory Estoppel (p. 234) 22
Elements of a Promissory Estoppel (p. 235) 23
Clear and unequivocal promise (p. 235) 23
Reliance (p. 236) 23
Inequitable to go back on promise (p. 241) 23
Shield, not sword (p. 242) 24
Effect of promissory estoppel: Suspensive or extinctive? (p. 243) 24
Intention to Create Legal Relations (p. 244) 24
Social and Domestic Agreements (p. 245) 24
Business and Commercial Agreements (p. 246) 25
Terms of Contract (Chapter 10) (p. 292) 26
Law on contractual terms (p. 292) 26
What does the law do? (p. 293) 26
Parol Evidence Rule and the Interpretation of Contracts (p. 295) 26
Exceptions (p. 296) 26
Section 93 of Evidence Act (p. 297) 27
Section 94 of Evidence Act (p. 298) 27
Pre-Contractual Statements (p. 305) 27
1. Puffs (p. 305) 27
2. Representations (p. 306) 27
3. Terms (p. 306) 27
Representation or Terms (p. 306) 27
Request to Verify (p. 307) 27
Importance of statement (p. 307) 27
Timing of Statement (p. 308) 28
Oral statements and written contracts (p. 309) 28
Special skill and knowledge (p. 309) 28
Types of Terms (p. 312) 28
1. Conditions (p. 312) 28
2. Warranties (p. 312) 29
3. Innominate Terms (p. 312) 29
Secondary meanings of “Condition” and “Warranty” (p. 314) 29
Differentiating between Conditions and Warranties (p. 314) 29
“Hong Kong Fir Approach” (p. 316) 29
Two Step Process/Test (p. 318) 30
RDC Concrete Approach used in Common Law before the qualification in Sports
Connection Case (p. 321) 30
Four situations (p. 322) 30
Sports Connection Case (p. 324) 31
Implied Terms (p. 326) 31
Terms implied in fact (p. 327) 31
Officious Bystander Test (p. 328) 31
Business Efficacy Test (p. 328) 31
Officious bystander test v Business efficacy test (p. 328) 32
Other conditions for terms implied in fact (p. 329) 32

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 Terms implied by law (p. 330) 32
Implied Obligations (p. 330) 32
Other goals of the courts (p. 331) Error! Bookmark not defined.
Terms implied by statute (p. 331) 32
E.g. Sale of Goods Act (SGA) (p. 331) 33
Terms implied by customs (p. 332) 33
Exemption Clauses (Chapter 11) (p. 336) 34
Incorporation (p. 337) 34
Incorporation by Signature (p. 338) 34
Exceptions (p. 338) 34
Non est factum (p. 339) 34
Misrepresentation (p. 339) 34
Express warranty (p. 339) 35
Collateral contract (p. 340) 35
Incorporation by Notice (p. 341) 35
4 Factors that make a notice reasonably sufficient (p. 341) 35
Type of document (p. 341) 35
Time of notice (p. 342) 35
Adequacy of notice (p. 343) 35
Effect of the Clauses (p. 344) 36
Incorporation by Previous Course of Dealing (p. 346) 36
Construction (p. 347) 36
Three approaches (p. 347) 36
Contra Proferentem Rule (p. 347) 36
Rules in Cases of Negligence (p. 349) 37
Doctrine of Fundamental Breach (not used anymore) (p. 351) Error! Bookmark not
defined.
Statutory Limitations on the use of Exemption Clauses: Unfair Contract Terms Act
(UCTA) (p. 353) 37
Primary Focus (p. 354) 37
Contracts to Which UCTA Does not Apply (p. 354) 37
First Schedule (to the UCTA) (p. 354) 37
Applicability of UCTA to “Business Liability” (p. 355) 38
Applicability of UCTA to Negligence Liability (p. 355) 38
Applicability of UCTA to Breach of Contract (p. 356) 38
UCTA and Sale or Supply of Goods (p. 358) 39
UCTA and Consumer Contracts (p. 358) 39
Test of Reasonableness (p. 359) 39
Second Schedule (to the UCTA) (p. 360) 39
Exception Clauses and Consumer Protection Legislation in Singapore 40
Consumer Protection (Fair Trading) Act (p. 364) 40
Amended by the Consumer (Fair Trading) Amendment Bill (Lemon Law) (p. 365)
40
Misrepresentation (Chapter 13) (p. 401) 41
Operative Misrepresentation (p. 402) 41
Elements of Misrepresentation (p. 402) 41
Statement of fact? (p. 403) 41
Puff (p. 403) 41
Opinion (p. 403) 41
Intention (p. 403) 41
Law (p. 403) 41
Representation by Conduct (p. 404) 42
Express representations (p. 404) 42
Implied representations (p. 404) 42
Silence (p. 405) 42

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 Exceptions (p. 405) 42
Ambiguity and Falsity (p. 406) 42
Materiality (objective) (p. 406) 43
Actual Inducement (subjective test) (p. 406) 43
Addressed to the Other Party (p. 408) 43
Types of Misrepresentation (p. 409) 44
Fraudulent Misrepresentation (p. 410) 44
Shared Responsibility Between Principal and Agent (or two agents) (p. 411) 44
Negligent Misrepresentation (p. 411) 44
Negligence at common law (p. 411) 44
Section 2(1) of Misrepresentation Act (p. 412) 44
Measure of damages (p. 412) 45
Burden of proof (p. 413) 45
Innocent Misrepresentation (p. 413) 45
Rescission (p. 414) 45
Restitution impossible (p. 415) 45
Affirmation (p. 415) 46
Lapse of time (p. 416) 46
Third party rights (p. 416) 46
Section 2(2) of Misrepresentation Act (p. 416) 46
Types of misrepresentation (p. 417) 46
Where right to rescind is lost (p. 417) 46
Exclusion of liability (p. 417) 47
Expressly excluding liability (p. 418) 47
Preventing liability from arising (p. 418) 47
Relative knowledge of parties (p. 419) 47
Capacity and Privity of Contract (Chapter 9) (p. 253) 48
Incapacity (p. 254) 48
Minors (p. 254) 48
General Rule (p. 255) 48
Exceptions (p. 256) 48
Binding Contracts for Minors (p. 257) 48
Beneficial contracts for necessaries (p. 257) 48
Beneficial contract of employment, apprenticeship or education and analgous
contracts (p. 260) 49
Voidable Contracts (p. 262) 50
Ratified Contracts (p. 263) 51
Remedies Against a (Protected) Minor (p. 263) 51
MCA Section 3(1) (p. 264) 51
MCA Section 2 (p. 266) 52
Economic Duress, Undue Influence and Unconscionability (Chapter 14) (p. 422) 53
Economic Duress (p. 423) 53
Basis for Intervention (p. 425) 53
Was there coercion of the will? (p. 428) 53
Was the pressure illegitimate? (p. 429) 54
Effect (p. 432) 55
Undue Influence (p. 432) 55
Categories of Undue Influence (p. 434) 55
Class 1: Actual undue influence (p. 434) 55
Class 2: Presumed undue influence (p. 435) 55
Nature of the Parties’ Relationship (p. 436) 56
Class 2(A): Presumed trust and confidence (p. 436) 56
Class 2(B): Trust and confidence must be proven (p. 436) 56
Requirement of “manifest disadvantage” (p. 436) 56
Rebutting the presumption (p. 438) 56

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 Effect of Undue Influence (p. 441) 57
Creditors and Doctrine of “Infection” (p. 441) 57
Two conditions for the doctrine to apply (p. 442) 57
Creditor is put on inquiry (p. 442) 57
Reasonable steps taken to minimize risk (p. 443) 57
Illegality and Public Policy (Chapter 15) (p. 452) 58
Statutory Illegality (p. 453) 58
Contracts Illegal per se v contracts illegal in performance (p. 455) 58
Situations where there is no statutory prohibition (performance is illegal) (p. 455)
59
Illegality at Common Law (p. 457) 59
Types of Common Law Illegality (p. 457) 59
Consequences or Effects of Illegality (p. 458) 60
Recovery of Benefits Conferred Under Illegal Contract (Restitution) (p. 459) 60
Exception 1: Recovery where parties are not in pari delicto (p. 459) 60
Exception 2: Timely repudiation or repentance (p. 460) 60
Exception 3: Recovery when plaintiff does not rely on the illegal contract (p. 461) 60
Contracts in Restraint of Trade (p. 462) 61
Validity of “Restraint of Trade” Clause (p. 464) 61
Employment Contracts (p. 466) 61
Sale of Business (p. 472) 62
Other Categories (p. 472) 62
Severance (p. 474) 63
Severance of Entire Clauses (p. 474) 63
Severance within Covenants: “Blue Pencil Test” (p. 474) 63
Performance, Breach and Agreement (Chapter 16) (p. 479) 64
Discharge by Agreement (p. 479 and p. 484-485) 64
Discharge by Performance (p. 479) 64
De Minimis Defects (p. 480) 64
Vicarious Performance (p. 480) 64
Personal Obligations (p. 481) 64
Time of Performance (p. 482) 65
Entire Obligations and Substantial Performance (p. 504) 65
Apportionment Act (p. 506) 66
Quantum Meruit (p. 506) 66
Quantum Meruit on a contractual basis (p. 507) 66
Quantum Meruit on a restitutionary basis (p. 508) 67
Several or Divisable Obligations and Substantial Performance (p. 508) 67
Discharge by Breach of a Promissory Obligation (p. 484) 67
Manner and Timing of Breach of Contract (p. 488) 67
Repudiatory breaches (“I won’t do it”) (p. 489) 68
Making performance impossible (“I won’t let you do it”) (p. 490) 68
Effects of a Breach of Contract (p. 491) 68
Actual breach giving rise to right of discharge (p. 492) 69
Effect of election to discharge contract for actual breach (p. 496) 69
Effect of election to affirm contract despite an actual breach (p. 496) 69
Anticipatory repudiatory breach (ARB) (p. 496) 69
Effect of election to discharge contract for ARB (p. 496) 69
Effect of election to affirm contract despite an ARB (p. 497) 69
Limits on right of election to affirm contract (p. 497) 69
Frustration (Chapter 17) (p. 513) 71
Elements of Frustration (p. 514) 71
Radically different performance (p. 514) 71
Neither party at fault (p. 515) 71

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 Time of frustration (p. 515) 71
Foresight and foreseeability (p. 516) 71
Classifications of Frustration (p. 516) 71
General Impossibility (p. 5.16) 71
(1) Destruction of subject matter of contract (p. 516) 71
(2) Death or incapacity (p. 517) 72
(3) Unavailability (p. 517) 72
(4) Failure of source of supply (p. 517) 72
(5) Method of performance impossible (p. 518) 72
Illegality (p. 519) 72
Radical Change (p. 519) 73
(1) Frustration of purpose (p. 519) 73
(2) Delay, unavailability (p. 520) 73
(3) Impracticability, increased costs (p. 520) 73
Frustration of a lease/sale of land (p. 521) 73
Self-Induced Frustration (p. 521) 73
Negligence (p. 521) 73
Choosing between several contracts (p. 522) 74
Partial Frustration (p. 523) 74
Express Provision (p. 524) 74
Construction (p. 524) 74
Foresight and Foreseeability (p. 525) 74
Foreseen events (p. 525) 74
Foreseeable events (p. 525) 74
Effects of Frustration (p. 526) 75
Frustrated Contracts Act (FCA) (p. 527) 75
Payments, expenses, benefits (p. 527) 75
Severability (p. 528) 75
Ambit of act (p. 528) 75

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Law Overview
 How does law affect business?
o Guidelines = what to do and what not to do
o When things go wrong (go to court) = get reprimanded or get justice

Definition and Function of Law

 Definition: the set of rights and obligations/duties, laid down by the State, by which a
community regulates its affairs (behavior of members)
o A set of rules prescribing and governing relations between persons, persons and
the state, and between states
 Role/Function
o Secure justice and fairness
o Prevents the strong taking advantage of the weak i.e. without law the strong will
always overpower the weak
o Protects different people i.e. the government (who made the law), the rich (can
hire people that know the law), the clever (people that study law and know the
law)
 How does law achieve these ends
o Facilitate transactions and regulate conduct (make sure that people do certain
things)
o Law is territorial in nature (different places will have different laws)

Common Law v Civil Law

 Common law tradition (Commonwealth colonies)
o Look at old cases to determine the law
o Some of the law is in the code, some of it is made by the judges in old cases
(precedence)
o Common law judges are more powerful
 Civil law tradition (everywhere in Europe but England)
o No past cases
o Everything comes from a code/statute (written law) – made by the government
o Judges just interpret the law

Criminal Law v Civil Law

 Criminal Law
o Prosecuted by the state – between the prosecutor (police) and defendant
(criminal)
o Seeks to punish and deter
o For the community
 Civil Law
o Between 2 parties (no involvement of the police) – between the plaintiff (injured
party) and defendant (perpetrator)
o Seeks to compensate – it is not to deter people from things
o For individuals
 You can have a crime that is also a civil wrong
o i.e. if you drive and hit another person (your fine is given to the government and
then the person has to sue on their own)

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 o You can be punished on several accounts for the same offense

Sources of Law
 Constitution: basic/Supreme law of the land that overrides other laws
 Written Law: Acts of Parliament/Legislation Statute
o Includes Subsidiary Legislation (made by the minister)
 Case Law: Judge-made laws (precedence)
 English law:
o England common/case law
o Statutes (clearly stated to be Singapore law)
o Application of English Law Act – we can import law from England
 Customary Law: Religious law i.e. if you are of Muslim background in times of inheritance
and divorce situations they will use Sharia Law
 International Law: if Singapore is part of treaties or conventions

Meanings of Common Law

 Common Law (English) vs. Civil Law (roman)
 Common Law (Case law) vs. Written Law (Statutes)
 Common Law (King’s Court) vs. Equity (Chancellor’s Court)
o These 2 laws used to fight
o King’s Court – administer Common Law (very strict – must follow what is said)
o Chancellor (finance minister) – administer Equity Law (will look at the fairness of
the situation)
o Singapore administers both of these

Checks and Balances (Singapore Legal System)

 3 Arms of Government
o Executive: President and Cabinet (Prime Minister is in the Cabinet) – implements
and enforces the laws (the civil servants will do this
o Legislature: President and Parliament – law-making body. Makes the written law
(Statute/Legislation/Act of Parliament)
o Judiciary: Supreme Court and state courts – interpret and administer the law.
Judges also make case law.
 The Judiciary (in order of importance)
o Privy Council (used to be around but not anymore)
o Supreme Courts
 Court of Appeal – no original jurisdiction, only appellate jurisdiction (if a
decision is made in the high court and you don’t agree then you can appeal
here)
 High Court (anything above the below) – has original jurisdiction and
appellate jurisdiction (if a decision is made in the lower courts and you
don’t agree then you appeal here)
 Can only appeal once to the High Court. After that you can only
appeal to the Court of Appeal
o State Courts
 District Court (up to $250 000, if your crime is punishable up to 10 yrs)
 Magistrates’ Court (up to $60 000, unless is first appeal, if your crime is
punishable up to 5 yrs but can only sentence you up to 3 yrs, if the judge

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 wants to sentence you to more than 3 yrs then you go up to the District
Court)
 Small Claims Tribunal ($10 – $20k)
o Some specialized State Courts
 Family Court (divorces)
 Juvenile Court (underged)
 Coroner’s Court (is it murder?)
 Taxation Tribunal
 Small Claims Tribunal

Terminology
 Stare Decisis: prior decisions are binding if certain conditions are met
o Vertical Stare Decisis: Legal principles that form the basis of decisions of judges in
higher courts must be followed by judges in lower courts when faced with the
same factual situation or highly similar factual situations i.e. Court of Appeal
decisions bind the High Court
o Horizontal Stare Decisis: previous decisions of courts on the same level are
binding on judges in such courts when facing the same factual situation in future
 It is not a must for high court judges to follow previous decisions made by
other high court judges
 They will usually agree for efficiency purposes
 Court of Appeal has no horizontal stare decisis
o For fairness and constancy – no need to appeal over and over again
o When circumstances are really different then you can’t use the stare decisis
o If the stare decisis made by the Court of Appeal then it will take a very long time to
change – it is expensive to appeal to the Court of Appeal and there is no guarantee
that the person will win
 Then you must wait until someone is willing to appeal to the Court of
Appeal
 Ratio Decidendi: The legal principle which forms the basis of the judgment
o The reason why he decision was made
 Obiter dicta: Statement of observation made in passing by the judge which does not form
the basis of the judgment
o It is not binding
o Can be persuasive but has no legal effect

Statutory Interpretation
 Literal Rule: the linguistic approach – what is the ordinary meaning of the word/s?
o If there is only one meaning of the word the judge must apply it
 Golden Rule: literal rule is followed unless it leads to an absurd result; the apply the
meaning that does not do so
o If there is 2 meanings and one is absurd then you choose the not the absurd one
 Purposive Rule: where words are ambiguous (not clear) find out the purpose behind the
statute i.e. what mischief is it trying to cure/prevent/address?
 Section 9A Interpretation Act – is an extension of the golden rule. You can look at
parliament speeches, obscure or unreasonable meanings of words etc.
o Can use extrinsic aids to find out purpose of statute i.e. if you can argue that the
statute is unreasonable then you can win the case

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Offer and Acceptance (Chapter 7) (p. 181)
What is a contract (p. 181)
 Contract: a legally binding agreement
o An agreement which gives rise to legal remedies if the promise is broken
o Role: to provide for confident planning of exchanges
 Contracts can be
o Orally only
o In writing only (no signature)
o In writing and signed – have proof (cannot lie/forget)
o By conduct only
o A combination of all of the above
 Requirements of a valid contract
o Meeting of the minds (consensus ad idem) – seen through offer and acceptance
o Consideration and intention to create legal relations
o Parties must have the capacity to contract
o Parties must freely consent to the agreement
 Mistake, misrepresentation, illegality, duress and undue influence may
vitiate free consent

Types of contracts (p. 181)

 Void: law treats contract as if it never existed on account of a serious flaw (nullity)
 Voidable: law treats contract as valid when made but one of the parties to the contract
has the right to avoid it i.e. due to misrepresentation
o Only the party that was made to enter via misrepresentation can avoid it, the other
party cannot
 Unenforceable: contract is valid and legally binding but cannot be enforced i.e.
agreements between drug smugglers
 Bilateral: a promise in return for a promise
o Two or more parties must come to a mutual promise
o One party cannot impose their proposal on another
 Unilateral: a promise in return for an act to be performed by the offeree
o Offeror makes a conditional offer and offeree accepts by performing the act
o i.e. when a public announcement is made about a lost purse. The offeree just
needs to find the purse and collect the reward

Offer (p. 183)

 Consensus ad idem: established when and both parties accept the offer and the contract
comes into existence. Both parties are bound by their mutual promise
 Offer: a proposal by one party indicating his willingness to be bound by certain terms
provided they are unconditionally accepted by the other
 Offeror: the party making the offer
 Offeree: the party to whom the offer is made
 An offer contains
1. A proposal of terms of the exchange

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 2. An expression of willingness to be bound as soon as the offeree manifests
acceptance (power is with the offeree to bind the offeror at the moment they
accept)
3. Power to bind the offeror upon acceptance
 Other Elements of an offer
o Can be made orally, in writing or by conduct
o Must be communicated to offeree to be effective – the offeror induces the offeree
to believe that they intend to be bound
 Offers to public at large (p. 184) (Unilateral offer)
o An offer to a group or to the whole world
o Any member of the group or member of the public may accept the offer i.e. a lost
purse where anyone who finds it and returns it gets the reward
o Carlil v Carbolic Smoke Ball Company (1893)
 Offer distinguished from invitation to treat
o Invitation to treat: when one party invites others to make an offer
 An expression to go into negotiation with the other party
o A statement may be an invitation to treat, although it contains the world “offer”
(Spencer v Harding (1870))

Situations of invitations to treat vs. offers (p. 185)

Advertisements (p. 186)

 Usually are invitations to treat
 Lack of specifics/details – which show intention to be bound when read by normal person
 People who read the advertisements may want to negotiate further
 Intending seller may have limited number of items to sell, with the results that he may not
be in a position to sell to all who might respond to the advertisement
 Advertisements online are also usually invitations to treat since the seller may accept or
reject
 Determined by offeror’s intention to be bound i.e. unlimited stock or limited to the first 5
people (offer is to the to 5 people)
 Patridge v Crittenden (1968): court ruled that the advertisement for sale of birds was an
invitation to treat and not an offer for sale

Displays of goods for sale (p. 188)

 Usually invitations to treat
 The buyer makes an offer when they go to the cashier to pay and the sale is completed
when the cashier accepts the offer
 The shop does not have to sell the goods at the marked price, i.e. if there is a misquoted
price
 Buyer cannot insist upon buying a particular item
 Pharmaceutical Society of Great Britain v Boots Cash Chemists (1953): when a customer
picks up a good from the shelf they are making an offer. There is no contract until the
buyer’s offer is accepted
 Fisher v Bell (1960): Price tag is an invitation to treat and not an offer to sell

Auction sales (p. 190)

 The call for bids by the auctioneer is an invitation to treat
 Bids made by those present at the auction are offers

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  When the hammer falls then the contract is complete – before the hammer falls the bidder
is free to withdraw (confirmed by Sales of Goods Act)
 “without reserve” – auction will be sold to the highest bidder, no matter how low the bid
(Warlow v Harrison (1859))

Tenders (p. 190)

 Tender is an offer
 An invitation to tender is an invitation to treat
 The offer is made by the person who submits the tender. The acceptance takes place
when the person inviting the tender accepts one of them. (Spencer v Harding (1870))
 Exception: (Harvela Investments Ltd v Royal Trust Co of Canada (1986)) When the
invitation to treat indicated it had the intention to accept the highest offer, the court ruled
that this meant there was a contractual offer rather than an invitation to treat

Termination of Offer (p. 191)

 If an offer is terminated prior to its acceptance, no contract can come into existence
 Any attempt to disclaim the obligations after the acceptance will be a breach of contract

Revocation (p. 191)

 Offeror can revoke his offer any time before full acceptance
o (Bryne v Van Tienhoven (1880)) revocation not effective because contract came
into existence before letter of revocation reached offeree
 Once revoked the offer ceases to exist
 No longer possible for the offeree to accept it
 Must be communicated to the offeree
o Once communicated to offeree the revocation is in effect
 Can be communicated by a reliable third party
 Implied revocation is possible
o If offeree comes to know of the revocation of the offer by the offeror through a
third party or is given information which shows the offeror’s change of mind, that
would be sufficient to terminate the offer (Dickinson and Dodds (1876))
o Notice of withdrawal need not be explicit
 Overseas Union Insurance Ltd v Turegum Insurance Co (2001)
 Revocation by post: is the revocation effective from when it arrives or when it is read? (p.
192)
o Withdrawal is effective as soon as it reaches the offeree. There is no requirement
for it be read (The Brimnes (1975))
 No legal obligation of the offeror to keep the offer open for a specific period even if they
had promised to do so (p. 193)
o Offeror can withdraw their offer any time before the deadline (Routeledge v Grant
(1828))
o Claimant cannot enforce an offeror’s promise to keep the offer open unless the
offeree provides consideration in return for offeror’s promise to keep offer open
(Mountford v Scott (1975))
 Replacement by subsequent offer (p. 193)
o The second offer must stipulate that it supersedes the earlier offer, so that it can
no longer be accepted (Pickfords Ltd v Celestica Ltd (2003))
 Revoking a unilateral offer (p. 193)

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 o The offeror does not know if someone has accepted the offer or has begun to
accept the offer
o Sufficient revocation if offeror takes reasonable steps to bring the withdrawal to
the attention of others i.e. if the offer was made by a newspaper advertisement,
then another similar advertisement withdrawing it
o Two-offer approach: a main offer and an implied offer not to revoke the main
offer
 If an offeree begins his obligations within a reasonable time from the
making of the offer, the offeror cannot revoke his offer
o Quantum Meruit Approach: offeror allowed to withdraw offer at any time before
full performance subject to compensation being paid to the offeree a suitable sum
for his time and effort
o Daulia Ltd v Four Millbank Nominees Ltd (1978) – qualification that the offeror
cannot prevent the condition from being satisfied, as soon as the offeree starts to
perform the act. Offeror is entitled to require full performance of the condition he
has imposed and short of that they are not bound
o Singapore: (DicksonTrading (s) Pte Ltd v Transmarco Ltd (1989)) once the offeree
has embarked on the performance, it is too late for the offeror to revoke his offer

Rejection and Counter-Offer (p. 194)

 Offer terminated when rejected
o Expressly: Offeree states they have no interest in the offer
o Impliedly: they purport to accept the offer with conditions attached or counter-
offers or silence
 Counter-offer
o Acts as a rejection of the original offer and stands as a new offer capable of being
accepted by the offeror (Hyde v Wrench (1840))
 A counter offer is not an inquiry of information (Stevenson v Mclean (1880))
o There is no rejection of the offer in the inquiry
o A counter offer seeks to introduce new terms, inquiry seeks to clarify what the
offer is
Lapse of Time (p. 195)
 When the offer has a specified time limit it will lapse if not accepted within that time
 If it is clear from the offeror’s conduct and other evidence that the terms of the
supposedly lapsed offer continue to govern the relationship after the specified period,
then the offer is still valid and capable of acceptance after the deadline (Panwell Pte Ltd &
Anor v Indian Bank (No. 2) (2002))
 If there is no specific time limit then the offer will lapse after a reasonable period of time
o Depends on the circumstances of each case i.e. when dealing with commodities
whose prices fluctuate daily, the period will be shorter (shares) (Ramsgate Victoria
Hotel v Montefiore (1866))

Failure to fulfill a condition (p. 196)

 If conditions, that have been expressly stated or implied by courts from the circumstances
of the case, have not been satisfied then the offer is not capable of being accepted
(Financings Ltd Stimson (1962))
 An offer can lapse if there has been a fundamental change in the basis of the offer (Dysart
Timbers Ltd v Roderick William Nielsen (2009) – New Zealand)

13
Death (p. 197)
 Death of offeree or offeror
 Only if the offeree knows that the offeror has died, it will not terminate if the offeree has
no notice of it (Bradbury v Morgan (1862))
 Offeree’s acceptance may be valid if made in ignorance of the death of the offeror
o Not accepted if it involves personal services of the offeror
 Some offers may survive and be accepted and binding on the personal representatives of
the deceased
 If offeree dies before accepting the offer, the offer made to them is no longer capable of
acceptance

Acceptance (p. 197)

 Acceptance: a final and unqualified expression of assent to the terms of an offer
o An unconditional agreement to all the terms of the offer which bring a contract
into existence
o Makes both parties legally bound
o Can only be signified orally, in writing or by conduct
o Must be made when the offer is still open and must be absolute and unqualified
 General Principles
o Offeree must agree to all the terms contained in the offer. Any attempts to
introduce new terms would result in a counter-offer

Acceptance must be communicated to offeror (p. 198)

General Receipt Rule (p. 198)

 Acceptance must be validly communicated when it is brought to the notice of the offeror
 If the offeror has prescribed a specific way for the offer to be accepted then they would
not be bound unless the acceptance is made that way
 If stipulation is solely for the offeror’s benefit, they can waive any requirement
 If stipulation is for the benefit of both parties it must be clear that both parties have
waived the stipulation (MSM Consulting Ltd v Tanzania (2009))

Acceptance by conduct (p. 199)

 Parties indicate approval by their conduct (Brodgen v Metropolitan Railway (1877))
 Implied or explicit waiver of requirement of communication
o i.e. unilateral offers (Carlil v Carbolic Smoke Ball Co (1893))

Acceptance by instantaneous communication (p. 199)

 Includes face-to-face negotiations, communication by telephone, telex and fax
 Email and text messaging are likely to also count
 Communication must be received by the offeror, not just sent (Entores Lts v Miles Far East
Corporation (1955))
o This is to prevent people from being bound by contract without knowing
o Brinkibon v Stahag (1983) messages were received during normal working hours.
If sent outside working hours then it won’t be instantaneous communication
 This general rule does not apply when the offeror is at fault i.e. faulty/not maintained
equipment

14
  Cases must be resolved by reference to the intentions of the parties, by sound business
practice and in some cases by a judgment where the risks should lie (Transniko Pte Ltd v
Communication Technology Sdn Bhd (1996))

Exception: The postal acceptance rule (p. 201)

 Non-instantaneous
 Acceptance takes place at the time when the letter of acceptance is posted
o It is complete regardless of when it reaches the offeror or reaches the offeror at all
(Adams v Lindsell (1818))
 No difference if the letter of acceptance is lost in the post
o However, if it is lost or delayed because of carelessness of the offeree the postal
rules do not apply (LJ Korbetis v Transgrain Shipping BV (2005))
 Two conditions
o Will apply only where it is reasonable to do so – an offer made by post can
generally be accepted by post. However, the offeror is at liberty to prescribe the
mode of acceptance and expressly exclude the application of the postal rule
o Letter of acceptance must be properly stamped and addressed
 Can a postal acceptance be recalled before it reaches the offeror?
o Argument 1: a contract comes into existence immediately upon the posting of the
letter of acceptance. Thus the offeree has no acceptance to revoke
o Argument 2: there is no prejudice to the offeror if they are unaware of the
acceptance and the letter of acceptance can be intercepted by faster means

Acceptance by silence? (p. 203)

 General rule: silence is not a mode of acceptance (Felthouse v Bindley (1862))
o Acceptance is some form of objective manifestation of the offeree’s intention
through positive action
o Mental assent is insufficient
 Rationale: no one should be able to force a contract upon an unwilling party
 Exception: silence to be made acceptance if offeree says so (offeror cannot impose)
o If the offeror suggests and offeree agrees or offeree prescribes silence as a mode of
acceptance (Midlink Development Pte Ltd v The Stansfield Group Pte Ltd (2004))

Ignorance of offer (p. 204)22

 General rule: a person cannot accept an offer of which they have no knowledge
o It is impossible to reach an agreement resulting in a binding contract
o i.e. (R v Clarke (1927)) Clarke provided information to the police without knowing
there was a reward. Tried to claim it afterwards when he knew about it but court
held that he could not claim it since he was ignorant of it at that time
o Exception: (Gibbons v Proctor (1891)) a person gave information to the police
without knowing there was a reward then was allowed to receive the money even
though he had no prior knowledge of the offer of reward
 Motive of the person claiming the reward is irrelevant. Only if they had knowledge of it
o i.e. (Williams v Cawardine (1833)) plaintiff was entitled to the reward since she
knew about it even though her motive was to ease her own conscience

Issues with Offer and Acceptance (p. 208)

Certainty and Completeness (p. 208)
 Terms of a contract must be certain and complete

15
  There may be no enforceable contract if terms are conditional, incomplete or vague

Subject to contract (p. 208)

 If an agreement has statements like “subject to contract” or “subject to a formal contract
being drawn up by our solicitors”
 Postpone liability until the document has been drafted and signed
 General view: no binding contract has been concluded

Oral Agreements (p. 209)

 Ultimately the issue must be determined by reference to the objective evidence
 (OCBC Capital Investment Asia v Wong Hua Choon (2012)) parties agreed to have a
“supplemental agreement to be executed to effect necessary changes”, but the bank did
not do so within the expiry of the time limit. Thus there was no contract. Showed that the
intention of the parties was not to be bound prior to the formal execution of the written
agreement

Completeness (p. 210)

 Courts will avoid making contracts for the parties but are willing uphold contracts where
possible by filling the gaps
o Court may avail of a definite formula if there is one (Brown v Gould (1972))
 May also take into account previous course of dealing between the parties or a trade
practice
o (Sudbrook Trading Estate v Eggleton (1983)) the court provided objective
standards to determine the valuation of the land due to ambiguity in the contract
 Contracts might in certain cases be implied from a course of conduct or dealings between
parties (Cooperative Centrale, Singapore Branch v Motorola Eletcronics Pte Ltd (2011))

Vagueness (p. 211)

 Sometimes the agreement may be so vague that it is incomplete
 Scammel and Nephew Ltd v Ouston (1941) agreement on hire-purchase terms were so
vague they left open questions like whether payments would be made on a weekly,
monthly or yearly basis etc. Thus there was no contract
 Courts have tended to uphold a contract by filling in the gaps through taking a practical
approach such as considering the previous course of dealings and custom of the trade
(Hillas v Arcos (1932))
 Last resort: declaring a contract void for being too vague (Shaw v Lighthouseexpress Ltd
(2010)) (p. 212)
Fairness (p. 211)
 Courts uphold contract on the basis of fairness and reasonableness between parties
 Foley v Classique Coaches (1934) refusal to enforce the contract would be substantially
unfair to the landowner (Foley)

Agreement to negotiate (p. 212)

 Lock-in agreement: agreement to negotiate between the parties on a particular matter
with a view to reaching agreement
 Lock-out agreement: an agreement not to negotiate with third parties with regard to it
 (Walford v Miles (1992)) a lock-in agreement is unenforceable for uncertainty. There was
no duty to negotiate in good faith. A lock-out agreement may be enforceable if there had
been a time limit for its duration

16
Electronic contracts (Chapter 24) (p. 796)
 Electronic contracts have the same legal effect as paper contracts

ETA Section 13 (despatch and receipt)

 Rationale: determine the time and place an electronic communication is deemed to be
dispatched and received
 Section 13 (1) Despatched
o (a) Time when it leaves an information system under the control of the originator
or of the party who sent it on behalf of the originator
 If you believe emails are non instantaneous, this is the time of acceptance
o (b) If the electronic communication has not left an information under the control
of the originator or of the party who sent it on behalf of the originator, the time of
dispatch when the electronic communication is received
 Section 13 (2) Receipt
o Time when the electronic communication is capable of being retrieved (where
there is a designated electronic address)
o If you believe emails are instantaneous, this is the time of acceptance
 Section 13 (3) Receipt
o The time when the electronic communication is capable of being retrieved and the
addressee is aware that such electronic communication has been sent (where
there is no designated electronic address)
 Section 13 (4)
o Electronic communication presumed to be capable of being retrieved when it
reaches the address
 Section 13 (5)
o An electronic communication is deemed to be despatched at the place where the
originator has its place of business and is deemed to be received at the place
where the addressee has its place of business

ETA Section 5, 11, 14, 15, 16 (invitation to treat v offer, validity of contracts, input errors)
 Section 5: parties retain the autonomy to decide whether to exclude or agree to the use of
electronic transactions or to agree to additional requirement as to the form or
authentication of a contract or transaction
o Agreement/consent to use of electronic transactions are clarified to be inferred
from the conduct of the parties
 Section 11:
o An offer may be expressed by means of electronic communications
o The contract cannot be denied validity or enforceability on the sole ground that
electronic communication was used for the formation of a contract
 Section 14: a proposal to contract that is not directed at a particular party, but is
generally accessible, is only an invitation to make an offer
o Exception: when the offeror specifically and clearly enunciates the stages of the
transaction and when there is a clear offer made
 Section 15: a contract can be formed when no natural person reviewed or intervened in
the actions carried out by automated message systems
 Section 16: if there is an input error by a natural person in the electronic communication
and the automated message system does not allow the natural person to correct the
error, the person has the right to withdraw the portion of the electronic communication
in which the input error was made. Only applicable if

17
o The person notifies the other party of the error as soon as possible after having
learned of it
o The person has not used or received any material benefit or value from the goods
or services received from the other party

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Consideration and Intention to Create Legal Relations (Chapter 8) (p. 217)
Consideration (p. 217)
 Definition: something that has value in the eyes of the law and given in exchange for a
promise (the price of the promise)
o Value: previous cases have said such an exchange is of value
 A promise is only enforceable if it is supported by consideration
o Purpose: to make sure there are some promises that are not enforceable
 In benefit-detriment analysis, valuable consideration in the eyes of the law consists of
o Some right, interest, profit or benefit received by one party (promisor) OR
o Some forbearance, detriment, loss or responsibility given, suffered or undertaken
by the other (promisee – who has to show the consideration)
o The law only requires a benefit OR a detriment, not both
o Curie v Misa (1875)
 Promisor: maker of the promise, promisee: recipient of the promise
o A party can be both a promisor and a promisee
o Important to specify the promise that is being enforced to see if there is
consideration
 Can be in the form of a promise (yet to be performed) or an act (an act already
performed)
 Must distinguish between conditions and considerations
o When the fulfillment of the condition is not within the control of the promisee
(i.e. age), the promise is merely a conditional gift
o (Chapell & Co Ltd v Nestle Co Ltd (1960)) – when the fulfillment of the condition
involves a performance by the promisee it is not as clear
 Is the condition a detriment to the promisee or simply a condition?
 Consideration is an exchange not a gift
o Gratuitous promises, promises that ask for nothing in return, are not enforceable

1. Must be requested by the promisor (p. 220)

 Combe v Combe (1951) the plaintiff refrained from applying for the maintenance of £100
per year promised to her after their divorce (thus conferring a benefit). However, the
court ruled in favour of her ex-husband because the promise was not supported by any
consideration as he (the promisor) had not requested for her to refrain from applying
(the consideration)

2. Must not be past consideration (p. 221)

 An act done prior to and independently of a promise cannot count as valid consideration
o It was not done in exchange for the promise
 Past consideration must be distinguished from executed consideration
o Executory consideration: yet to be performed at the time the contract is formed
o Executed consideration: performed at the time the contract is formed,
undertaken in return for the promisor’s offer
 The acceptance of an offer in an unilateral contract
 Cairhill v Carbolic Smoke Ball Co (1893) consideration provided by the
plaintiff was executed at the time the contract was formed

19
  Exception: (Pao On v Lau Yiu Long (1980)) plaintiffs had agreed, at the defendants’
request, not to sell their shares for a year. Defendants agreed to indemnify plaintiffs if
they suffered losses. Plaintiffs suffered and sued defendants on indemnity
o Defendant’s argument: defendant’s promise to indemnify was after the plaintiff’s
promise not to sell therefore past consideration
o Consideration was ruled as valid and enforceable:
 Act was done at the promisor’s request (the promisee can initiate but it
can still be at the promisor’s request i.e. do you want me to xx? Yes)
 Parties both understood that the act would be compensated
 Compensation would be enforceable if it had been promised in advance of
act
o Other exceptions: Sim Tony v Lim Ah Ghee (1995); Rainforest Training Lt and
another v State Bank of India Singapore (2012)

3. Must move from the promisee (p. 223)

 Can only enforce a promise if the consideration of the promise is furnished by them
o Twedle v Atkinson (1861) the fathers of a newly wed couple promised to pay a
sum to Twedle (the husband). When one of the fathers died later on, Twedle
could not enforce the promise because he was not a party or privy to the contract
 Does not have to move to the promisor

4. Must be sufficient (p. 223)

 Consideration must be sufficient but need not be adequate
o Sufficient = legal validity = has value in the eyes of the law
o Adequate = comparative value (fairness)
o Court’s role is to ascertain whether an exchange has taken place, not whether it is
a fair exchange
 Nominal consideration: consideration both parties have consented to (still counts as
sufficient)
o Chappel & Co Ltd v Nestle Co Ltd (1960) the chocolate wrappers may not be of use
to Nestle but it still counted as consideration
 Grossly inadequate consideration may indicate the promisor did not freely/willingly
consent to the exchange. May have been coerced or improperly influenced
o May be set aside under the grounds of duress or undue influence
 Easy to identify when in monetary terms (cash or goods/services that have
ascertainable market prices)

(NO) Intangibles and Moral Obligations (p. 224)

 Moral obligations are generally not considered valid consideration for a promise
o Lack certainty
 Love and affection should not be held at ransom for a promise
o In marriages there should not be a commercial agreement
 The law would not allow moral obligations or good behavior be used to extort favorable
promise from the other party
o White v Bluett (1853) the son’s good behavior was his moral obligation and is not
consideration for his father’s promise – also too vague. What counts as
complaining?

20
(YES) Forbearance and Compromise (p. 225)
 Forbearance: an agreement where one party agrees to refrain from enforcing a claim
against another party in return for a promise from the latter
 Compromise: when in dispute, one party agrees to surrender their claim in
consideration of the other’s payment or other promises
 Generally yes because time and money can be saved by not enforcing the claim
 Exception: no consideration when a person promises not to enforce an invalid claim that
they knew was invalid at the time of the promise
o (Wade v Simeon (1846))
o Surrendering a groundless claim is neither a benefit to the other party or a
detriment to themselves
o No need to prove you are giving up a valid claim but rather the right to claim
 Often you cannot prove the validity of the claim without a full trial
o Need to prove they had reasonable grounds for the claim, that they honestly
believe they have a fair chance of success and they haven’t concealed anything
that could affect the validity of the claim (Callisher Bischoffsheim (1870))

(NO) Existing Public or Legal Duty (p. 226)

 Consideration that is something that someone is already legally obliged to do is not valid
o An act obliged by the law is not a benefit or detriment
 Exception: when the act exceeds the requirements of the legal duty, may constitute good
consideration
o Glasbrook Bros v Glamorgan County Council (1925) policemen only legally obliged
to provide a mobile force and thus by providing a stationary force was going
beyond legal obligation

Existing Contractual Duty (p. 226)

(YES) Owed to a third party (p. 226)

 Performance of, or promise to perform, an existing contractual duty owed to a third
party is sufficient consideration
 Scotson v Pegg (1861) When A promised B to perform an existing contractual duty which
A owed to X, such a promise benefits B by giving B the personal right to enforce that
promise

Owed to the promisor (p. 227)

(NO) In return for a promise for more (p. 227)

 When alleged consideration lies in a performance an existing contractual duty owed to
the promisor then it is generally not sufficient consideration
 The promisor derives no benefit from a performance they are already entitled to and the
promisee suffers no detriment for doing what they are already bound to do
 Stilk v Myrick (1809) captain promised to divide the wages of two deserters among the
remaining seamen if they could bring the ship home. However, court held that it was
not enforceable because the seamen were already bound under the existing terms of the
previous contract that they were to complete the voyage
o Rationale: didn’t want to encourage promisees from extorting more benefits from
the promisor after having already concluded a contract
 Exception: any performance over and above the promisee’s existing contract is sufficient
consideration

21
 o Hartley v Ponsonby (1857) voyage had become too hazardous so completing the
voyage was more than what was required in their original contractual
undertakings
 Paying more for the performance of an existing duty is good consideration if the
promisor stands to gain factual/practical benefits or obtain detriment
o Williams v Roffey (1991) defendants obtained benefits from the plaintiff
completing his existing duty because the defendants avoided being liable for late
completion from another contract and avoided the need to engage another
subcontractor – this case is somewhat inconsistent with Stilk v Myrick
 Plaintiff had no money – even if defendant sued the plaintiff for the
damages they owe the third party they would not be able to pay
 Does not overrule Stilk v Myrick. If there is no practical benefit then use
Stilk v Myrick, if there is then use Williams v Roffey
o 5 elements to determine if promises to pay more can be legally binding?
 A to be in a valid contract with B
 At some stage before A has completed the obligations, B has doubts that
A’s ability to complete the obligations
 B promises A additional payment for A to complete his remaining
obligations on time
 B obtains a practical benefit or obviated a disbenefit
 B’s promise was not given as a result of economic duress or fraud
o Exception: Sea-land Service Inc v Cheong Fook Chee Vincent (1994) “practical
benefits” should be understood ‘narrowly’ as real and significant benefits (not
under duress) – this is also inconsistent with the Sharon Global Solutions Pte Ltd v
LG International (Singapore) Pte Ltd (2001) case

(NO) In return for a promise for less (p. 233)

 General rule: promisor is not bound by their promise to forgo a debt in light of a partial
payment
o Pinnel’s case (1602) and Foakes v Beer (1884)
o Exception: additional consideration or fresh consideration for the
reduction/extinguishment of the debt at the request of the promisor i.e. an
earlier payment, payment at a different place, an additional performance
 Can argue Williams v Roffey because the debtor can gain practical benefits for getting the
money now

Exceptions: Where Consideration is Not Required (p. 234)

Contract by deed (p. 234)

 Deed: formal documents in writing that have been signed by the parties before a
witness or witnesses, sealed and delivered
 Gratuitous promises made by deeds can be enforced (Development Bank of Singapore
Ltd v Yeap Teik Leong (1988), Hong Leong Finance Ltd v Tay Keow Neo (1991))

Promissory Estoppel (p. 234)

 Prevents a person from going back on a promise even though promise is not supported
by consideration
 (Central London Property Trust Td v High Trees House Ltd (1947)) plaintiffs leased a
block of flats to defendants for a certain rental fee and defendants leased it to sub-
tenants. During the war, defendants couldn’t find sub tenants and the plaintiffs reduced

22
 rent by half. After the war, the landlord sought to restore the rent back to its original
price. Lord Denning, in his obiter, said that if they had tried to claim back the rent before
the war ended they would have been estopped because their previous promise would
have legally prevented them from doing so
 Traditionally is used to protect promisee from disadvantage in relying on the promisor’s
promise

Elements of a Promissory Estoppel (p. 235)

 Existing legal relationship
 Clear and unequivocal promise of the promisor not to go back to original contract
 Reliance by the promisee
 Conditions such that it is inequitable to go back on the promise
 Doctrine is a shield, not a sword

Clear and unequivocal promise (p. 235)

 Clearer the promise = promisee is more likely to be reliant on it = more inequitable for
the promisor to retract it
 Silence/mere inaction does not generally constitute a clear promise – it lacks certainty
 Can be implied by words or conduct
o (Hughes v Metropolitan Railway Company (1877)) landlord gave tenant 6 months
to repair premises but tenant indicated that he would not begin repairs while
negotiating. After negotiations broke down and landlord wanted to forfeit the
lease because the tenant did not carry out the repairs within the 6 months, the
court held that he could not since it could be reasonably inferred that the notice
period would not run while negotiations were ongoing

Reliance (p. 236)

 Promisee’s reliance is evidenced by their change in position
o Doing or omitting to do something that they would have otherwise not have done
or omitted to do
 In some cases, detrimental reliance is necessary
o Thus is inequitable for promisor to go back on his promise
 English position does not require detrimental reliance
o W J Alan & Co Ltd v El Nasr Export and Import Co (1972) Lord Denning said that
he just needed to demonstrate that he had acted differently than he otherwise
would’ve in reliance on the promise
 English position endorsed by Singapore High Court in Abdul Jalil bin Ahmad bin Talib v A
Formation Construction Pte Ltd (2006)
 Lam Chi Kin David v Deutsche Bank (2010)
o Narrow: Promisee already suffered detriment before promisor goes back on
promise
o Broad: Promisee only suffers detriment if promisor permitted to go back on
promise (seen in Hughes v Metropolitan Railway Company)

Inequitable to go back on promise (p. 241)

 When promisee relies and sometimes suffers detriment because of a promise, it is
inequitable to allow the promisor to retract their words

23
  The Post Chaser (1982) court held it was not inequitable for promisor to recede his
promise because the lapse of two days between reliance (of promisee) and retraction (of
the promise) was too short to have any prejudice to the promisee
o Is it just and equitable? – usually need to look at all the relevant circumstances
(D&C Builders v Rees (1966))

Shield, not sword (p. 242)

 Only be invoked to defend or resist a claim, cannot be used to create a new cause of
action where none existed before
 Combe v Combe (1951) court rejected her argument that defendant was estopped since
to do otherwise would amount to creating a contractual relation that did not exist before

Effect of promissory estoppel: Suspensive or extinctive? (p. 243)

 Some cases suggest promissory estoppel is suspensive – original contract may be
revived by promisor upon giving due notice to promisee
o High Trees case – possible to restore back to full rent in the future
o Hughes case – tenant’s obligation to repair would have been resurrected upon
being given notice and more time
o Sufficient for promisor to make his intention to withdraw the promise clear and
give the promisee reasonable time to make the necessary adjustments thereafter
 Some exceptional cases may extinguish obligations if the reliance on the promise makes
it impossible for the promisee to perform their original obligation or highly inequitable
for them to do so
 High Trees Case – promisors would not be allowed to claim back rent for the war years,
only after. This would mean that the payment obligations during the war were
extinguished
o In such cases of periodic payment, where it is not possible to recover the former
payments, the right to these payments are extinguished
o However, general right to future payments is merely suspended and may be
revived at reasonable notice
 Suspensory effect is justifiable because often these promises are made in response to
certain, temporary circumstances. Thus the promise should only be binding while the
extenuating circumstances last
 For one off payments, it is dependent on whether the creditor’s intention is to forgive
the entire debt or allow the debtor more time to pay

Intention to Create Legal Relations (p. 244)

 An agreement is not enforceable, even when supported by consideration, if both parties
did not intend for it to be legally binding
 Intention exists if an objective view of the facts suggests so – even if one of the parties
insists on the contrary
 Norwest Holdings Pte Ltd (in liquidation) v Newport Mining Ltd (2010) Singapore High
Court reiterates the principle of objectivity because it enables parties to deal in reliance
with each other’s manifest intentions
o Exception: when a party’s actual intention different from their apparent intention
and this is known by the other party

Social and Domestic Agreements (p. 245)

 Presumption that parties do not intend for the agreement to be legally binding

24
  Balfour v Balfour (1919) love and affection is not an intention to create legal relations
 Jones v Padavattan (1969) informal family arrangements dependent on good faith are
also not intention to create legal relations
 Rebutted: Merritt v Merritt (1970) couple was clearly making a serious bargain as the
wife insisted on a written agreement
 All surrounding facts of a case are relevant. Two main factors:
o Certainty: the more certain, the more likely the parties have carefully considered
the content and effects of the agreement
o Actual reliance: evidence of such reliance will usually suggest the parties had an
intention to be bound

Business and Commercial Agreements (p. 246)

 Presumption that the parties intend for the agreement to be legally binding
o Burden of rebutting the presumptions lies on the party who asserts the absence
of contractual intent
 Rebutted: when parties expressly state in the agreements that they have no intention to
create legal relations
o Rose & Frank Co v J R Crompton & Bros Ltd (1923) “honour clause” stated that the
agreement will not be subject to legal jurisdiction
 Rebutted: letter of comfort (dependent on surrounding circumstances and the text of the
letter)
o Usually a letter issued by a parent company or substantial shareholder to
encourage a financial institution to extend a loan facility to its subsidiary or
investee company
o Kleinwort Benson Ltd v Malaysia Mining Corp Bhd (1989) court held that the
wording of the letter held no intention to create legal relations
 “it is our policy to ensure that the business of our subsidiary is at all time
in a position to meet its liabilities to you” – moral not legal obligations
o Similar in (Hongkong and Shanghai Bank Corporation Ltd v Jurong Engineering
Ltd (2000))

25
Terms of Contract (Chapter 10) (p. 292)
Law on contractual terms (p. 292)
 Rules on how the precise obligations of the parties to a contract are to be determined
and how such obligations should be categorized to determine the remedies upon breach
of such obligations
 Purpose: promote contractual efficacy without violating these rules
o Courts do not make contracts for the parties
o Rules are designed to find out and give effect to the intentions of the parties on
an objective basis

What does the law do? (p. 293)

 Allows people to contract freely and explicitly agree on “express terms”. If a dispute
arises, the law will fill in the blanks with “implied terms” (implied in fact or in law)
 Law does not treat all the terms of being of equal weight – often parties do not make
distinctions between importance of terms so court must categorise the breach of certain
obligations to give rise to different rights

Parol Evidence Rule and the Interpretation of Contracts (p. 295)

 Singapore Evidence Act (Cap 97, 1997 Rev Ed)
 States that when parties have reduced their agreement to writing they cannot attempt to
change, add to or contradict the written contract by way of extrinsic evidence
 “Parol” means “oral” but the parol evidence rule can also exclude evidence not orally
made
o i.e. terms recorded in another document not referred to in written contract
 Entire agreement clause – parties express indication that the written contract embodies
their complete contract
o This does not stop a court from applying a contextual approach
 Purpose: reduce uncertainty
 “written document contains the entirety of the contract” – this is the ONLY contract

Exceptions (p. 296)

 To prove that the contract was the result of mistake (non est factum), lack of
consideration or of misrepresentation (s 94a)
 To prove there was a mistake in the written contract and identify what the contract
should be (Joscelyne v Nissen (1970))
 To prove contract has not come into existence or is no longer in operation (Pym v
Campbell (1856))
 To prove a custom of the trade (Smith v Wilson (1832)) (s 94e)
 To aid interpretation of the contract (Zurich Ins v B-Gold (2008)) (s 94f)
 To prove existence of collateral contracts (a subsidiary contract that induces a person to
enter a main contract) (p. 298)
o City and Westminster Properties (1934) Ltd v Mudd (1959) written lease was
overridden by landlord’s oral assurance because without it the tenant would not
have signed the lease
o May be implied by court and run parallel to main contract

26
  To prove existence of any oral agreements that the written contract is silent about as
long as it is not inconsistent (s 94b)
 To prove subsequent oral agreements to rescind/modify contract (s 94d)

Section 93 of Evidence Act (p. 297)

 If parties have drawn up a written contract then parties may only prove the terms of
their agreement with the written document alone
 Secondary evidence, inter alia, refers to certified, electronic or other types of copies of
the original document

Section 94 of Evidence Act (p. 298)

 When a written contract is shown to exist, oral evidence shall not be admitted “for the
purpose of contradicting, varying, adding to, or subtracting from its terms” subject to
certain exceptions (listed above)

Pre-Contractual Statements (p. 305)

1. Puffs (p. 305)
 Vague or exaggerated statements that are part of contract negotiations
 Legally insignificant – not meant to be taken seriously

2. Representations (p. 306)

 A statement of fact that was intended to induce a party into a contract
 No intention to be part of the contract
 If false, the party cannot sue for breach of contract

3. Terms (p. 306)

 Forms part of the contract
 If a written document is signed, everything a term
 If breached, can sue for breach of contract

Representation or Terms (p. 306)

 Depends on the intention of the parties
 If parties disagree then judges will determine the status on an objective basis

Request to Verify (p. 307)

 Invitation to verify: representation
o Shows the maker of the statement does not intend for contractual liability to
result from their statement
o (Ecay v Godfrey (1947)) seller told the buyer to check the boat for any flaws
 Dissuasion to verify: term
o (Schawel v Reade (1913)) seller told the buyer that he need not check the stud
horse
 Whether the other party actually verifies is not important

Importance of statement (p. 307)

 If the statement is so important that one party would not have entered the contract
without it, it is likely to be a term
o Bannerman v White (1861) buyer told the seller he would not even ask for the
price if the hops had been treated with sulphur

27
  Statement asserting a feature of intrinsic significance in relation to the subject matter of
the contract is likely to be a term
o Darwish M K F Al Gobaishi v House of Hung Pte Ltd (1995) seller asserted that all
the gemstones were genuine, natural and not treated
 Importance must be accepted by BOTH parties

Timing of Statement (p. 308)

 Closer to the time the contract was concluded = more likely to be a term
 Further from the time the contact was concluded = more likely to be a representation
 Must question the intention of the statement

Oral statements and written contracts (p. 309)

 If there is a written contract, pre-contractual oral negotiations not put in writing are
representations (Helibut Symons v Buckleton (1913))
 Normally, parol evidence rule would shut out such negotiations but there are special
cases where contracts are partly oral and partly written
o (J Evans v Andrea Merzario (1976))

Special skill and knowledge (p. 309)

 If the statement is made by a party with special skill or knowledge relevant to the
statement, it is likely to be a term because the other party would be reliant on the
accuracy of the statement
o (Dick Bentley Productions Ltd v Harold Smith (1965)) defendant dealt with cars
and thus was in a position to give the true facts regarding the Bentley
 If the statement is made to a party with special skill or knowledge relevant to the
statement, it is likely to be a representation because the party would probably not
intend to expose themselves to a breach of contract if the statement proves false
o (Oscar Chess Ltd v William (1957)) plaintiffs had more technical knowledge to
protect themselves while the defendant had little expertise in the car business
and was not in a position to give a warranty on the year or model
 However, all relevant facts must be considered
o (Eian Tauber Pritchard v Peter Cook (1998)) seller had less expertise than the
buyer but the statements made by the seller pertaining the specifications of the
car were considered terms. Buyer and seller had placed such importance on the
specifications that they were terms of the contract.

Types of Terms (p. 312)

 Courts are to assess the objective language to determine whether the parties intended
the term to be a condition, warranty or innominate term
 Parties can agree expressly how to characterize a term – no matter how minor or
substantial the consequences may be

1. Conditions (p. 312)

 Important – essentially or fundamentally to the contract
 Statements of fact which go to root of contract (main purpose, party would not have
gone into contract without it)
 May claim damages in compensation for losses suffered
 Innocent party is given the choice to terminate the contract

28
2. Warranties (p. 312)
 Less important, secondary obligations
 Will not go to root of contract
 May seek damages but not termination
 If innocent party mistakes a warranty as a condition, terminates the contract and then
enters into another contract for the same performance with a third party, they are liable
in damages as a result of the wrong assessment

3. Innominate Terms (p. 312)

 Difficult to classify as a warranty or condition
 A term that can be breached in multiple ways
 Remedy for the breach of this term would depend on the consequences of the breach
o If breach deprives innocent party of substantially the whole benefit then the
same remedy as for a breach of condition
o If breach results in trivial consequences then same remedy as for a breach of
warranty

Secondary meanings of “Condition” and “Warranty” (p. 314)

 Promissory condition: condition (as defined above)
 Contingent condition: a term that specifies an event or events that must occur if the
contract is to come into force or remain in force (a condition in a laypersons sense)
o Conditions precedent (to come into force) and conditions subsequent (to remain
in force)
o (L Schuler AG v Wickman Machine Tool Sales Ltd (1974))
 Warranty (in the consumer sense): where the seller will replace any faulty
components/repair free of charge during the warranty period

Differentiating between Conditions and Warranties (p. 314)

 Poussard v Spiers (1876): Poussard was contracted to sing but fell ill and was unable to
sing until a few days after opening night. Defendant approached another singer to
replace her. Poussard showed up a few days later but defendant refused to engage her.
Poussard sued for breach of contract but court rules that her failure to appear on
opening was a breach of condition entitling defendant to treat the contract as
terminated
 Bettini v Gye (1876): plaintiff was contracted to sing and be in London six days prior to
the performance for rehearsals. Plaintiff fell sick, came late for rehearsals but made it in
time for opening night. Defendants refused her services and treated contract as
terminated. Court ruled that obligation to attend rehearsals were not a condition as the
principal purpose of the contract was the actual performance (which she was able to
perform)

“Hong Kong Fir Approach” (p. 316)

 Innominate term came into existence in the Hong Kong Fir Shipping Co Ltd v Kawasaki
Kisen Kaisha Ltd (1962) case
o Term was classified as an innominate term and that the breach was not serious
enough so innocent party only received damages
o Condition-warranty approach was too simplistic – a condition, no matter how
minor, would terminate the contract and warranty, no matter how serious, would
only result in monetary compensation

29
  Focus on the consequences of the breach rather than the intention of the party
 Innominate terms cannot be characterized simply by looking at their content
o Possible to imagine both serious and extremely trivial breaches of the term
o Could be a condition or warranty, depending on the nature and consequences of
the breach
o Serious breach = treat it as a breach of condition
 i.e. “it goes without saying that, if that happens, the contract is at an end”
(Bunge Corporation New York v Tradax Export SA Panama (1981))
o Not serious = treat it as a breach of warranty
o i.e. a term where a ship must be seaworthy. A missing nail (warranty) v defective
engines (condition)
 Critics argue that this approach may mistakenly terminate contracts
 Helps promote justice (The Hansa Nord (1964))

Two Step Process/Test (p. 318)

 Identified in the Bunge Corporation, New York v Tradax Export SA Panama (1981)
1. Use condition-warranty approach (use the language to classify the term, Man Financial)
a. If parties can agree a term should be regarded as a condition, even if the
consequences are minor, then it is usually treated as a condition
b. If a statute classifies a term i.e. Sales of Goods Act states which of its implied
terms are conditions and which are warranties
c. If there is precedent governing particular terms
d. Consider the nature and context of the transaction: in mercantile transactions
case law suggests courts are more likely to classify contractual terms as
conditions in this particular context, especially in relation to timing
2. Use Hong Kong Fir approach
a. After determining it is an innominate term, court must determine if the breach
has deprived the innocent party of substantially the entirety of the benefit of the
contract – thus the term is treated as a condition

RDC Concrete Approach used in Common Law before the qualification in Sports Connection Case
(p. 321)
 Came into existence from the RDC Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd (2007) case
 Purpose is to synthesise condition-warranty approach and Hong Kong Fir approach
 Warranties are like innominate terms

Four situations (p. 322)

 (1) Express reference: contract contains a term that clearly states that in the event of
certain events occurring, the innocent party has the right to terminate contract
o Court does not have to classify the type of term breached
 (2) Renunciation of contract: defaulting party renounces contract and clearly informs
the innocent party they will not perform any of their contractual obligations
o Right to termination arises without court having to classify type of term breached
 (3) Condition-warranty approach: court ascertains the term breached was a condition.
Used if situations 1 & 2 do not apply
o Discern intention of the parties – if contracting parties regard it as important
then the court will classify it as a condition

30
  (4) Hong Kong Fir approach: court determines the term breached was not a condition
but the breach results in a deprivation of substantially the whole benefit that the
innocent party was to obtain from the contract
o Ascertain the severity of the consequences of the breach – right to terminate if
consequences are serious

Sports Connection Case (p. 324)

 Deuter and Sports entered an agreement with a “Non-Competition Clause” where Sports
would not sell competing products without Deuter’s consent. Clause would not be in
effect as long as Sports purchased $1 million worth of Deuter products. One year Sports
failed to do so, Deuter activated the clause and terminated for breach of condition.
Sports sued for wrongful termination
 High Court ruled that breaching of the clause deprived Deuter of substantially the whole
benefit. Court implicitly decided the term was not a condition
 Upon appeal, Court of Appeal applied RDC Concrete approach and found that the term
was not a condition as Deuter had no intention to treat the clause as a strict prohibition.
Then court had to determine the consequence of the breach and the severity. Court
acknowledged consequences but didn’t substantially deprive Deuter of benefits due to a
number of reasons. Therefore, Deuter was not entitled to terminate and had breached
the agreement. Sports was entitled to claim damages
 Express warranty: the term expressly states that breach of it would never entitle the
innocent party to terminate
 Implied warranty: discharge may still be possible if sufficiently severe

Implied Terms (p. 326)

 Express terms in a contract cannot provide for all eventualities
o Express terms: terms parties stated in their contracts; in writing or orally (does
not need to be clearly stated)
 Law supplements the express terms of a contract with “implied terms”

Terms implied in fact (p. 327)

 Give effect to unexpressed intentions of parties
 Court fills in gaps by thinking what the parties would have unequivocally agreed upon if
they had addressed their minds to the problem
 Court tries to supply a term that would give business efficacy

Officious Bystander Test (p. 328)

 As per Mackinnon LJ in Shirlaw v Southern Foundries (1926): if asked by an
intrusive/interfering bystander if the implied term would be included as an express
term, both parties would reply “Oh, of course!” – the term is so obvious that they would
not admit possible disagreement

Business Efficacy Test (p. 328)

 Implied terms that are necessary for contract to proceed on normal business (can the
business function?)
 The Moorcock (1889): during low tide, boat rested on hard ground and was damaged.
Court ruled there was an implied warranty that the ground was safe when the plaintiff
paid to park there (even though there was no warranty provided by the defendant).
Defendants liable to damages

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Officious bystander test v Business efficacy test (p. 328)
 Andrew Phang J: “Business efficacy” test and “officious bystander” test are complements
to each other. “officious bystander” test is a practical method by which the “business
efficacy” test is implemented
 Any term implied for a particular contract does not set a precedent for future contracts
of the same type
 Sembcorp Marine Ltd v PPL Holdings Pte Ltd (2013): 3 step test
1) No contemplation at the time of contract, a gap, not discussed
2) Business efficacy test – imply a term not the term
3) Officious bystander test – imply that particular term

Other conditions for terms implied in fact (p. 329)

 Stated in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977)
 Must be reasonable and equitable
 Gives business efficacy
 “goes without saying”; obvious
 Capable of clear expression
 Must not contradict any express terms

Terms implied by law (p. 330)

 Concerns specific types of contracts, usually defining relationships between parties i.e.
landlord and tenant, employer and employee
 Implied term gives effect to policies intended to make relationships work that particular
type of contract
 “Default terms” – apply unless overridden (Malik v Bank of Credit and Commerce
International SA (1998))
 Advantages:
o Certainty is promoted; risk can be properly estimated; important social policies
can be given effect
 Andrew Phang J: Any term implied by law will result in the same term implied in all
future contracts of that particular type
Implied Obligations (p. 330)
 Liverpool City Council v Irwin (1977): landlord of a block of apartments has an implied
obligation to take reasonable care of common areas
 Scally v Southern Heath and Social Services Board (1992): employer has an implied
obligation to inform employees of pension rights
 Lister v Romford Ice & Cold Storage (1957): employee has an implied obligation of
faithful service. Implied term also requires employee to indemnify employer should the
employee cause losses to the employer in the course of employment
 Malik v Bank of Credit and Commerce International SA (1998): implied obligation
between employee-employer for relationship of trust and confidence

Terms implied by statute (p. 331)

 Implied in types of contract in accordance to a law passed by Parliament (unless
explicitly dislodged by parties)
 Provide coherence and framework to a type of contract

32
E.g. Sale of Goods Act (SGA) (p. 331)
 For the smooth functioning of a sale of goods system in a country – allows buyers and
sellers to routinely engage in sales without wasting time focusing on all the minute
details
 Allows focus on the main elements of the transactions
 Reduces transaction costs and frees up time
 Sections:
o s12 (1): seller has a right to sell the goods
o s12 (2): implies a warranty that the goods are free from charges in favour of third
parties
o s13 (1): implies a condition that goods sold by description will correspond with
their description
o s14 (2): when a seller sells goods in the course of his business there is an implied
condition that the goods supplied under the contract are of satisfactory quality
o s15 (2): goods sold by sample will correspond with their sample

Terms implied by customs (p. 332)

 Implied in contracts relating to specific subjects that take place in the context of trade
associations and practices that have developed rules and customs i.e. sale of
commodities
 Party will be bound by the usage in that trade if the usage is well-known, certain,
reasonable and legal (Nelson v Dahl (1879))
 If it is a generally accepted custom in the community and that anyone inquring would
have been told about that custom then this custom would bind the parties even if both
are ignorant of its existence (Chan Cheng Kum v Wah Tat Bank Ltd (1971))
 Must be sufficiently uniform and accepted by the relevant community as controlling in
the absence of express agreements

33
Exemption Clauses (Chapter 11) (p. 336)
 a.k.a. exclusion clauses/exception clauses
 Terms that seek to exclude or limit liability of one of the parties in the event of a
breach of contract
 Three types
o Exemption (exclusion) clauses: seek to exclude the liability completely
o Limitation of liability clauses: seek to limit liability (i.e. to a certain monetary
amount)
o Indemnity clauses: seek to pass liability (or risk thereof) to a third party
 Requirements for an exemption clause to be valid:
o Must be properly incorporated into the contract
o Must be properly construed
o Operation must not be excluded or restricted by statute, namely UCTA (Unfair
Contract Terms Act)

Incorporation (p. 337)

 Courts require the party relying on the exemption clause to show that the other party
agreed to its incorporation into the contract at the time of or prior to the contract
o Otherwise it will not be part of the contract
 Three ways to incorporate an exemption clause
o By signature
o By notice
o By a previous course of dealing

Incorporation by Signature (p. 338)

 General rule: a person signing a contract made in writing is bound by everything
contained in the document, whether they have read it or not
 L’Estrange v F Graucob Ltd (1934): if the contract has been signed then it does not
matter if it has been read
 Press automation technology Pte Ltd v Trans-Link Exhibition Forwarding Pte Ltd
(2003), Tjoa Elis v United Overseas Bank (2003)

Exceptions (p. 338)

Non est factum (p. 339)

 “it was not my deed”
 Available to vulnerable people (i.e. blind or illiterate) who sign under a mistaken
belief (Saudners v Anglia Building Society (1971))

Misrepresentation (p. 339)

 When the effect of the exemption clause is misrepresented
 Curtis v Chemical Cleaning and Dyeing Co (1951) when plaintiff inquired about the
exemption clause an employee told her it only applied to sequins and beads but when
her dress came back with a stain, the cleaners relied on the exemption clause to deny
liability

34
Express warranty (p. 339)
 Exemption clauses in a written contract can be overridden by express warranty given
at or before the time the contract was concluded
 Anti-Corrosion Pte Ltd v Berger Paints Singapore Pte Ltd and another appeal (2012) A
had been verbally assured by B that a sealer coat was not necessary and that
warranty would be provided. Parol evidence rule did not apply in this case

Collateral contract (p. 340)

 May override the written contract
 A second or subsidiary contract created when an oral undertaking overshadows the
written contract and neutralizes the exemption clause
 Evans (J) & Son (Portsmouth) Ltd v Andrea Merzario Ltd (1976) defendant assured
plaintiff that containers would be stored below deck but written contract stated they
may be carried on deck. English Court of Appeal held the collateral contract
neutralized the exemption clause
o This exception would not apply in Singapore because of EA s 94b

Incorporation by Notice (p. 341)

 When terms are in an unsigned document, the party seeking to rely on it must prove
that the other party knew that the document would be expected to have such terms
 Must also show they did everything reasonable to bring notice of such clauses to the
other party
 Parker v South Eastern Railway (1877) ticket printed “See Back” where there was an
exemption clause limiting the liability to £10 even though the plaintiff’s bag was
worth £24. Court deemed it could be reasonable notice if the party took reasonable
steps to bring the clause to the plaintiff’s notice

4 Factors that make a notice reasonably sufficient (p. 341)

Type of document (p. 341)

 Cannot be in an unsigned document where a reasonable person would not expect to
find contractual terms i.e. receipts, tickets, vouchers
 Chapleton v Barry Urban District Council (1940) exemption clause was not
incorporated as it was on a ticket that would normally be regarded as a receipt for
money paid

Time of notice (p. 342)

 Notice must be made before or at the time of contract – ineffective if after
 Olley Marlborough Court Ltd (1949) Court held that contract had been concluded at
the reception desk and notice of the exemption clause after they had entered the
hotel room was too late
 Thorton v Shoe Lane Parking Ltd (1971) Court held that the contract had formed when
plaintiff paid. The ticket issued by the machine after he paid was too late. Insufficient
notice prior to or at the time of contract

Adequacy of notice (p. 343)

 Notice must be sufficiently conspicuous and legible
o No need to show if the other party actually took notice of it
 Thompson v London, Midland and Scottish Railway Co (1930) notice deemed adequate
since the railway ticket was a common form of contractual document

35
  Different outcome if the party relying on the exemption clause knows from the
beginning that the other party is disabled
o Geier v Kujawa, Weston & Warne Bros (Transport) Ltd (1970) not adequate as
defendant knew the plaintiff could not speak English but did not take steps to
try and translate the exemption clause
 Jet Holding Ltd and others v Cooper Cameron (Singapore) Pte Ltd and another (2005)
not adequate as Court held that exemption clauses should have been brought to the
plaintiff’s attention fairly and reasonably by “pointing them out, more so when the
terms and conditions were not printed on the reverse of the quotation”

Effect of the Clauses (p. 344)

 The more onerous or unusual the clause, the greater degree of notice required to
incorporate it
o Cannot simply hand over or display a document – must take special steps to
draw attention to it
 Thorton v Shoe Lane Parking Ltd (1971) it is not common to expect an exclusion of
liability for personal injury in a car park. Therefore additional steps needed to be
taken to bring notice to it
 Interfoto Picture Library v Stiletto Visual Programmes Ltd (1989) late fee was deemed
much higher than usual and should’ve called for a greater degree of notice (rather
than simply being printed on the standard terms)
o Plaintiffs were allowed a reasonable sum due to Quantum Meruit
 O’Brien v MGN Ltd (2001) the court was satisfied that the newspaper had done just
enough to bring the rules to the claimant’s

Incorporation by Previous Course of Dealing (p. 346)

 If the parties have previously made a series of contracts, and those contracts
contained an exemption clause, then it may be incorporated in a subsequent contract
without having to make a reference to it at the time
 Course of dealing must be well established
 Spurling v Bradshaw (1956) defendant had previously received similar documents
and parties had been in business together for many years. Clause was incorporated
(even though the clause in question was only sent after the conclusion of the
contract)
 Holier v Rambler Motors (AMC) Ltd (1972) plaintiff had only been dealing with the
defendant three or four times in five years. Contract was made orally and frequency
was not sufficient enough

Construction (p. 347)

 Determines whether it actually covers the breach
 Determines the effectiveness

Three approaches (p. 347)

Contra Proferentem Rule (p. 347)

 “contra proferens” = “against the maker”
 If there is doubt as to the meaning and scope of the exemption clause, the ambiguity
will be resolved against the party that made the clause
 Houghton v Trafalgar Insurance Co (1954) clause excluded when the car was carrying
“any load in excess of that which the car was constructed. However, meaning of

36
 “load” was ambiguous (weight, goods, people?). Clause could not exclude the
insurer’s liability
 Courts tend to apply it more to cases of complete exclusion rather than simply
limiting liability
o Ailsa Craig Fishing Co Ltd v Malvern Fishing Co Ltd and Securicor (Scotland) Ltd
(1983) clause was upheld even though it was ambiguous because limitation
clauses need not be construed as strictly as exclusion clauses
o Limitation clauses tend to be considered part of the bargain (more so than
exclusion clauses)

Rules in Cases of Negligence (p. 349)

 In this, parties must show that clear words in the clause fully cover the facts that have
occurred. If not, its inapplicable (White v John Warrick (1953))
 Guidelines (from Canada Steamship lines Ltd v The King (1952))
o Clause’s language expressly exempts the party from their negligence
o If first rule not satisfied, consider if words used are wide enough to cover
negligence. If there is doubt, doubt must be resolved against party relying on
the clause
o If second rule is satisfied, court must then consider if the exemption clause
covers a liability that is not negligence

Statutory Limitations on the use of Exemption Clauses: Unfair Contract Terms Act
(UCTA) (p. 353)
 UK Act applicable in Singapore by virtue of Application of English Law Act
 Applies to exemption clauses in contractual and non-contractual situations (like tort,
s 2)
 Only deals with unfair exemption clauses
 Most provisions of UCTA only apply to business liability (s 1(3))

Primary Focus (p. 354)

 Protect the parties, especially the consumers
 Can apply even in non-consumer/non-business cases – where exemption clauses are
invoked in cases of misrepresentation
 When an exemption clause falls under the UCTA there are 2 outcomes:
o Clause is rendered inoperative OR
o Subject to test of reasonableness – rendered inoperative if it fails

Contracts to Which UCTA Does not Apply (p. 354)

First Schedule (to the UCTA) (p. 354)

 Lists contracts to which ss 2-4 do not apply
 Para 1: (ss 2-4 not applicable)
o Contracts of insurance
o Contracts relating to creation, transfer or termination of rights or interests in
land or intellectual property
o Contracts relating to the formation or dissolution of a company, or its
constitution or the rights and obligations of the corporation or its members

37
  Para 2: (ss 2(2)-4 and 7 not applicable except in favour of the “person dealing as a
consumer”)
o Marine salvage or towage contracts
o Ship or hovercraft charterparties
o Contracts for the carriage of goods by ship or hovercraft
 Para 3: (ss 2(2)-4 not applicable except in favour of the “person dealing as a
consumer”)
o Contracts involving the carriage of goods by ship or hovercraft where means
of carriage are concerned
 Para 4: (s 2 not applicable except in favour of the employee)
o Clauses excluding or restricting negligence liability in contracts of
employment
 s 26 (of UCTA): excludes certain international supply contracts (Trident Turboprop
(Dublin) Ltd v First Flight Couriers Ltd (2009))

Applicability of UCTA to “Business Liability” (p. 355)

 Business liability: liability for a breach in obligations or duties arising from things
done or to be done by a person in the course of business
 Business: a profession and the activities of any Government department or local or
public authority (s 14)
 ss 2-7 cannot be relied upon by a party to exclude or limit liability under an
exemption clause other than in the course of business

Applicability of UCTA to Negligence Liability (p. 355)

 Negligence: breach of any obligation to take reasonable care or exercise reasonable
skill in the performance of that contract (s 1(1))
 Applies in cases of negligence other than in the context of contract (s 2)
 s 2(1): a person cannot exclude/restrict their liability for death or personal injury
resulting from negligence “by reference to a contract term or to a notice given to
persons generally or to particular persons”
o “notice” = also non-contractual cases of negligence. Includes announcements
and any other communication or pretended communication (s 14)
 s 2(2): a person cannot exclude or restrict their liability for damage other than death
or personal injury (i.e. property damage) for negligence unless “the term or notice
satisfies the requirement of reasonableness”

Applicability of UCTA to Breach of Contract (p. 356)

 s 3(1): applies when party not relying on the exemption clause either “deals as
consumer or on the other’s written standard terms of business”
 s 3(2a): party relying on the exemption clause “cannot exclude or restrict any liability
of his in respect of the breach”
 s 3(2b): party relying on the exemption clause cannot claim to be entitled to “render a
contractual performance substantially different from that which was expected of
him” or non-performance “in respect of the whole or any part of his contractual
obligation”
 Exemption clause only allowed to restrict/exclude liability “in so far as…the contract
term satisfies the requirement of reasonableness”

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UCTA and Sale or Supply of Goods (p. 358)
 s 6 deals with contracts of sale and hire-purchase when party not relying on
exemption clause (buyer) is dealing as a consumer
 s 6(1): a seller’s implied undertakings as to title (under SGA s 12 and Hire-Purchase
Act s 6(1)) cannot be excluded or restricted by an EC
 s 6(2): a seller’s implied undertakings as to the conformity of goods to their
description or sample or their quality or fitness for a particular purpose (under SGA
ss 13-15 and HPA s 6(2-3)) cannot be excluded or restricted by an exemption clause
 s 6(3): in non-consumer contracts, exclusion/restriction of liability is subject to the
test of reasonableness
 ss 7(2-3): same principles as s 6 apply in contracts not governed by SGA and HPA in
regard to passing ownership or possession of goods
o Liability for breach of s 2 Supply of Goods Act cannot be excluded/restricted
 s 7(4): right to transfer liability in respect of ownership of goods or give possession
or assurance of quiet possession can be excluded/restricted is subject to the test of
reasonableness

UCTA and Consumer Contracts (p. 358)

 s 12(1): a party deals as a consumer when
o Does not make the contract
o The other party makes the contract in the course of business
o In the case of sale of goods or hire-purchase, goods are “of a type ordinarily
supplied for private use or consumption”
 s 12(2): a buyer in a sale by auction or competitive tender not regarded as a
consumer
o s 12(3): burden of proof that the buyer is not dealing as a customer is on the
party that claims the other is not a customer
 Businesses can be considered as “dealing as a consumer” (R & B Customs Brokers Co
Ltd v United Dominions Trust Ltd (1988))

Test of Reasonableness (p. 359)

 s 11(1): the term shall have been a fair and reasonable one to be included having
regard to the circumstances which were, or ought reasonably to have been, known to
or in the contemplation of the parties when the contract was made
 Whether an exemption clause is reasonable depends on the facts of the case. A clause
in one context may not be in another
 The more unreasonable a clause, the greater the burden on the party relying on it to
establish reasonableness

Second Schedule (to the UCTA) (p. 360)

 Lists matters that may be relevant in determining if a clause is reasonable
 Strength of the bargaining positions and if there were alternative means
 If the customer was induced to agree to the exemption clause or if they could’ve
entered a similar contract without it
 If the customer knew or ought to have known the term, regard to any custom of the
trade or previous course of dealing
 If it was reasonable at the time of contract to expect that compliance with the
condition would be practicable
 If goods were manufactured, processed or adapted to customer’s special order

39
  Examples of the use of Second Schedule p. 360-364

Exception Clauses and Consumer Protection Legislation in Singapore

Consumer Protection (Fair Trading) Act (p. 364)
 Consumer: an individual who receives or has a right to receive goods or services
from a supplier
 Consumer transaction: supply of goods or services by a supplier to a consumer as a
result of a purchase, lease, gift, contest or other arrangement (excluding those
specified in the First Schedule)
 s 6(1): customer is entitled to go to court against the supplier if customer entered a
consumer transaction involving unfair practice
o s 4: list of unfair practices on p. 364
 s 11(1): customer has a right to cancel certain contracts within a cancellation period
 s 16: a person who “prints, publishes, distributes, broadcasts or telecasts an
advertisement in good faith” on behalf of a supplier is exempt from liability
 s 15(1): consumer protection given by this Act is in addition to any other
right/remedy the consumer may have apart from this Act
 s 13: not possible to contract out of the provisions of this Act
o An exemption clause would be invalid if it is inconsistent with the provisions
of this Act

Amended by the Consumer (Fair Trading) Amendment Bill (Lemon Law) (p. 365)
 Seeks to protect consumers against defective goods that do not conform to the
contract of sale of goods at the time of delivery
 3 criteria
o Transferee (to whom the goods are being transferred to) deals as a consumer
o Goods do not conform to the applicable contract
o Contract was made after 1 Sept 2012
 When eligible to rely on the law, consumer has a right to require the seller to
repair/replace the good at the seller’s discretion
 If not feasible to do so, the consumer has the right to require the seller to reduce the
amount to be paid accordingly or rescind the contract

40
Misrepresentation (Chapter 13) (p. 401)
 Definition: false statement of fact made by one party to another party, which induced
the other party to enter into the contract
 Originally, there was only liability of misrepresentation when the misrepresentation
was fraudulent or formed part of the contract
o After Hedley Bryne & Co Ltd v Heller & Partners Ltd (1964) there was also
possibility for negligent misrepresentation
o When not fraudulent or negligent, the innocent can seek for an indemnity
 UK Misrepresentation Act 1967: a representee can claim damages for negligent
misrepresentation the same way they could for fraudulent misrepresentation
 Hendersen v Merrett Syndicates Ltd (1995) confirmed that the innocent party may
have rights under both contract and tort
 Sometimes overlaps with breach of contract
o s 1: the innocent party will not be deprived of the right to rescind for
misrepresentation even if the representation has become part of the contract

Operative Misrepresentation (p. 402)

Elements of Misrepresentation (p. 402)
 The statement must be of a past or existing fact
o Statement will be treated as true if it is substantially true and the difference
would not have induced a reasonable person into the contract (Avon Insurance
v Swire Fraser (2000))
 Statement made by one contracting party (representor) to the other (representee)
and induced them to enter the contract

Statement of fact? (p. 403)

Puff (p. 403)

 The more detailed or precise, the more likely to be a representation

Opinion (p. 403)

 If found to be untrue, will not give rise to liability
 Exception: if representor did not hold that opinion, then it is a false statement of fact
 Implication that a statement of opinion has a reasonable basis i.e. a handbook which
contained information
o There are underlying facts that you can sue for misrepresentation for

Intention (p. 403)

 Expression as to the future, no past or existing fact
 Exception: if the intention was not held by the representor, it is a false statement of
fact
 Implication that the party has reasonable grounds for thinking they have the capacity
to do it

Law (p. 403)

 Unless representor does not hold that opinion/belief of the law or carries an
implication of fact that is untrue, it cannot be misrepresentation

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  If statement involves both fact and law, courts tend to regard it as statement of fact

Representation by Conduct (p. 404)

Express representations (p. 404)

 Spoken, written or visual media

Implied representations (p. 404)

 Express statements can also have implied representation
o Cassa di Risparmio della Repubblica di San Marino SpA v Barclays Bank Ltd
(2011) implied representation that the product was of low risk
o Test is whether a reasonable person would have understood the implied
representation being made
 By conduct i.e. a nod is agreement and a shake of the head is disagreement
o Walters v Morgan (1861) if the conduct is intended to induce the other party
into believing a certain state of facts
o Sometimes can be intended to conceal certain facts i.e. using a sticker to cover
the damaged part of a fruit to seem undamaged

Silence (p. 405)

 General rule: does not amount to a representation, active conduct is required
o One party does not have to disclose facts that they think will influence the
other party’s decision to enter the contract

Exceptions (p. 405)

 When it is half-truth or an untruth
o Spice Girls v Aprilia World Service (2002) pop group comprises of five
individuals without saying one of them is leaving is a misrepresentation
o No obligation to make statements but once the contract begins, they are meant
to have full and frank disclosure
 Impliedly representing a false statement is true
o Pilmore v Hood (1838) when a statement (which the representor knows is
false) made by the other party/third party is affirmed by the silence of the
representor’s silence
 Law regards a representation as having a continuing effect until contract is concluded
o Representor has a duty to ensure the representation continues to be true up
until the conclusion of contract
o If statement ceases to be true before conclusion, to the representor’s
knowledge, the representor must inform representee
o With v O’Flanagan (1936)
 Law imposes duty of utmost good faith in some contracts i.e. insurance
o i.e. proposed insurer has a duty to disclose all material facts that may influence
the insurer’s decision whether to insure or not

Ambiguity and Falsity (p. 406)

 When a statement bears two (or more) meanings – where one is true and the other(s)
is false
 Two steps to determine if misrepresentation
o Representee must prove they understood the statement in the sense which is
false

42
 o Representor must prove they intended for the statement to be understood as
false – not liable if they honestly intended it in the sense that is true
o Ackerhielm v De Mare (1959)
 Ambiguous statement can be fraudulent but not negligent or innocent
misrepresentation – type of misrepresentation is determined by representor’s
intention

Materiality (objective) (p. 406)

 When a reasonable man would have been influenced by the statement to enter into
the contract
 Uncertain if this is a must – is there misrepresentation if the represented was induced
by a misstatement which a reasonable man would have ignored?

Actual Inducement (subjective test) (p. 406)

 Misrepresentation must induce representee to enter the contract – the representee
must have relied on the representation
 Cannot be when
o Not aware of the representation
o Knew it was untrue or did not believe it to be true
o Was not influenced – would have entered the contract regardless
 Sufficient when representee, in deciding to enter the contract, was materially
influenced by the misrepresentation (Panatron v Lee Cheow Lee (2001))
 Misrepresentation need not be the only inducing cause (Edgington v Fitzmaurice
(1885))
 If representee had the opportunity to discover the truth but did not it does not
disentitle them from relief (Redgrave v Hurd (1881))
o Panatron v Lee Cheow Lee (2001) once inducement is proven, it does not mater
if the representee did not take steps to verify the truth
o JTC v Wishing Star (No 2) (2005) a representee who chooses to “act carefully
but fails, through negligence or otherwise” to discover the fraud is regarded as
having been induced
o Peekay Intermark Ltd v ANZ Banking Group Ltd (2006) misrepresentation,
other than fraud, may be defeated where it is reasonable to expect the
representee to make use of the opportunity to discover the truth

Addressed to the Other Party (p. 408)

 When the statement is not directly addressed to the recipient
o Direct recipient can also include a member of a class of persons that the
representation is directed to
 Representee’s authorized agent (2 situations)
o Agent is only passing on the representation to the principal. In this case, the
principal is the representee
o Representation is intended for both the agent and principal to be influenced
by the representation (i.e. partners in a firm). In this case, the principal and
agent are representees
 Representor intended, or reasonably expected, direct recipient to pass the
representation to the indirect recipient (even if there is no agency between the direct
and indirect recipients)

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 o i.e. A by misrepresentation induces B to buy an item and B later induces C to
buy the item with a similar misrepresentation. C can rely on the
misrepresentation against A if A knew that B intended to resell and likely
repeat the misrepresentation (Gross v Lewis Hillman (1970))

Types of Misrepresentation (p. 409)

 On a scale of diminishing culpability
o Fraudulent misrepresentation
o Negligent misrepresentation
o Innocent misrepresentation
 Remedies for recission and damages (indemnity in the case of innocent) for all three

Fraudulent Misrepresentation (p. 410)

 Fraudulent statement: made knowingly, without belief of its truth, or recklessly –
not caring whether it is true or false (Derry v Peek (1889))
 Represented may recover damages in an action under the tort of deceit
o Awarded to compensate for losses caused by reliance on the fraudulent
mispresentation (Smith New Court Securities v Scrimgeor Vickers (Asset
Management) (1997))
 Motive is irrelevant – sufficient that the representor made the false statement
knowingly with the intention that the representee would act on it (Standard
Chartered Bank v Pakistan National Shipping (No 2) (2002))
o Irrelevant if representor thought the statement was unimportant or irrelevant

Shared Responsibility Between Principal and Agent (or two agents) (p. 411)
 If agent knowingly makes a false statement within the scope of his authority, the
principal is liable for fraudulent misrepresentation
 If first agent knowingly makes a false statement to a second agent intending that
agent to pass the statement onto a third agent, the first agent is liable to the third
party
 If agent makes a statement they honestly believe is true but the principal knows is
false there are 2 situations
o If principal was aware and did not intervene they are liable
o If principal was not aware, not liable
o Armstrong v Strain (1952)

Negligent Misrepresentation (p. 411)

Negligence at common law (p. 411)

 Made carelessly or without reasonable grounds for believing it to be true
 Before Misrepresentation Act, unless duty of care was owed to representee,
misrepresentation could not be considered negligent – there must be a special
relationship between the parties (Hedley Bryne & Co Ltd v Heller & Partners Ltd
(1964))

Section 2(1) of Misrepresentation Act (p. 412)

 If a misrepresentation is neither fraudulent (prove fraud) nor innocent (prove there
was reasonable grounds for the representor to believe in it) then it is negligent by
default

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  A non-fraudulent misrepresentation carries the same liability as a fraudulent
misrepresentation
 The representor is not liable if they prove they had reasonable grounds to believe
that the statement was true up until the time the contract was made

Measure of damages (p. 412)

 Uncertain as to the correct basis for measuring damages
 View 1: contract measure
o Put the representee in the position they would have been had the
representation been true
 View 2: tort measure
o Put the claimant in the position they would have been if the tort
(misrepresentation) had not been committed
o Should the deceit (fraud) measure or negligence measure be applied?
 s 2(1) doesn’t necessarily conclude that the damages for negligent and fraudulent
misrepresentation should be the same

Burden of proof (p. 413)

 Fraudulent misrepresentation: representee bears burden of proving fraud
 Negligent misrepresentation: representee only has to prove the statement was false,
inducement and suffered loss. Representor has the burden to prove that they had
reasonable grounds to believe the statement was true
o More favourable to representee than fraudulent misrepresentation
o Representee does not need to establish a duty of care and special relationship
(Howard Marine & Dredging v Ogden & Sons (Excavations) (1978) and Ng Buay
Hock v Tan Keng Huat (1997))

Innocent Misrepresentation (p. 413)

 False statement is made honestly and with care
 Least culpable type
 No remedies but representee is entitled to rescission and, possibly, an indemnity
(allows the representee to be indemnified against all obligations necessarily created
by the contract (Whittington v Seal-Hayne (1900)))

Rescission (p. 414)

 Operative misrepresentation makes contract voidable at the option of the
representee
o Entitled to rescind the contract (terminate it as if it never existed)
o As opposed to breach of contract where contract is terminated in regards to
the future (still liable for obligations accrued before repudiation)
 Court puts restrictions on rescission’s availability where: restitution is impossible;
there has been affirmation or lapse of time; third party rights are affected; the court
exercises its statutory discretion under 2(2) of MA and gives damages in lieu of
rescission

Restitution impossible (p. 415)

 Under rescission, the representee returns what they received under the contract
o i.e. a buyer who wishes to rescind for misrepresentation and recover their
purchase money should return the goods to the seller
 If restoration or restitution is impossible, rescission should not be permitted

45
  Not precise restitution but substantial restitution
o Returns the subject matter in its altered state and makes allowance for any
diminution in its value or accounts for any benefit the representee derived
from using it
 If substantial restitution not possible, representee not barred from rescission should
the diminution be due to defect in the subject matter or external causes (i.e. third
party)

Affirmation (p. 415)

 Once misrepresentation is discovered, representee can affirm or rescind
 Upon affirmation, right to rescission is lost
 Affirmation can be express or implied by conduct (i.e. representee uses the goods
after knowing of the misrepresentation)
 Before election representee must know
o Of the untruth
o The law gives them the right to rescind
 Where election is conditional, upon the failure of the condition, right to rescind
emerges again (JTC v Wishing Star (No 2) (2005))

Lapse of time (p. 416)

 If, after discovering the truth, a reasonable period of time passes the inaction may be
evidence of affirmation
 For innocent and negligent misrepresentation, lapse of reasonable time can be a bar
for rescission even if the representee has not discovered the truth (starts from time of
contract) (Leaf v International Galleries (1950))

Third party rights (p. 416)

 If before representee rescinds a contract an innocent third party (acts in good faith
and gave consideration) has acquired interest in the subject matter, right to
rescission is lost

Section 2(2) of Misrepresentation Act (p. 416)

 Court may award damages instead of rescission – taking into account nature of
misrepresentation, loss caused by upholding the contract and loss rescission would
cause the other party

Types of misrepresentation (p. 417)

 Fraudulent misrepresentation: right to rescission and damages unaffected
 Negligent representation: right to rescission is subject to court’s power to give
damages instead
o May get two sets of damages: under s 2(1) and in lieu of rescission
 Innocent representation: right to rescission and indemnity are now restricted by
court’s power to award damages in lieu of rescission

Where right to rescind is lost (p. 417)

 Uncertain as to whether court is allowed to award damages in lieu when right to
rescind is lost (i.e. affirmation or third party rights)
 One interpretation says that for damages to be given in lieu right to rescind must still
be available (Government of Zanzibar v British Aerospace (Landcaster House) (2000))

46
Exclusion of liability (p. 417)
 Clauses excluding the consequences of misrepresentation, except when representor
is fraudulent, are valid and subject to rules applying to exemption clauses
o s 3: an exclusion clause has no effect unless it satisfies the requirement of
reasonableness of s 11(1) of UCTA
o Burden of proving the clause is reasonable lies with the party seeking to rely
on it
 Two types: those that exclude liability and those that seek to prevent liability from
arising

Expressly excluding liability (p. 418)

 “All liabilities for and all remedies in respect of any misrepresentations made are
excluded”
 “Contract is not cancellable or voidable by either party”

Preventing liability from arising (p. 418)

 Overbrooke Estate v Glencombe Properties (1974) “neither the auctioneers not any
person in the employment of the auctioneers has any authority to make or give any
representation or warranty” – limits the authority of the autctioneers
 “No representation has been made” or “neither party has relied on any
representation”
 Effective for preventing liability if clause is genuine that there is no representation, or
no reliance or authority
 To no avail if the party relying on the clause knows that representations have been
made (Cremdean Properties Ltd v Nash (1977))
 If both parties are commercial entities of similar bargaining power, courts are willing
to find clauses reasonable (Raiffeisen Zentralbank Osterreich AG v Royal Bank of
Scotland plc (2010))

Relative knowledge of parties (p. 419)

 South Western General Property v Marton (1982)
 If facts on the representation are only within the knowledge of the representor,
clause is likely to be unreasonable
 Guidelines in Second Schedule of UCTA are generally applicable

47
Capacity and Privity of Contract (Chapter 9) (p. 253)
Incapacity (p. 254)
 Need to protect inexperienced and/or vulnerable individuals
 Investors in a corporation deserve protection against their investment being applied
towards unintended purposes
 Need to balance this out with the party who dealt fairly with the individual or
corporation

Minors (p. 254)

 Considered vulnerable and requiring legal protection
 They lack experience and maturity of judgment
 General rule: minors lack the legal capacity to enter into a contract so people below
age of contractual capacity are protected
o In Singapore, s 35(1) Civil Law Act provides that the age of contractual
capacity for most contracts is 18
 All minors, age 21 and below, lack the capacity to enter into contracts dealing with
interest in land (unless for contracts for leases for 3 yrs or less) and of the sale or use
as collateral of a minor’s beneficial interest under a trust
o CLA 35(4a-d)

General Rule (p. 255)

 Contracts entered by someone who lacks capacity are not enforceable against them
o Other party will not be able to sue for breach and obtain remedies
o Minors under the age of 18 are not liable under a contract entered into while
they under 18 years of age
 Minority can only be used as a “defence” against a claim by the counterparty when
the minor’s obligations have yet to be executed
o A minor cannot use their minority to recover money paid or goods delivered
when they have already executed their obligations – unless there was no
consideration
o Steinberg v Scala (Leads) Ltd (1923) the girl could terminate the contract and
free herself from liability but could not recover the amount paid for the shares
because she had already received them
 Minor is allowed to enforce the contract against the counterparty – the counterparty
is always bound under the contract

Exceptions (p. 256)

 Binding contracts
 Voidable contracts
 Ratified contracts

Binding Contracts for Minors (p. 257)

 Beneficial contracts for necessaries
 Beneficial contracts of employment, apprenticeship and education
 Contracts analogous with the last categories

Beneficial contracts for necessaries (p. 257)

 Unless minor is bound, traders will not give a minor credit for necessaries

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 o Necessaries can be either goods supplied or services provided
 Two considerations if the goods and services are necessaries:
o Are they capable of being “necessaries” at law?
o Does the minor have actual need for the goods or services in fact?
 Supplier bears the burden of proving both
 For the contract to be binding, the good or service must benefit the minor
 Common law defines necessaries as: such articles as are fit to maintain the particular
person in the state, station and degree… in which he is (Peters v Fleming (1840))
 s 3(3) of SGA defines necessaries as: goods suitable to the condition in life of the
minor…concerned and to his actual requirements at the time of the sale and delivery
o “suitable to the condition in life” – takes into account social status
 Rings, pins and watch-chain (Peters v Fleming), servant’s uniform
(Hands v Slaney (1800))
 Articles of mere luxury cannot be necessaries but luxurious articles of
utility can be (Chapple v Cooper (1844))
 Real question: “whether it was reasonable for the minor, however rich, to be supplied
with articles of the kind in question”
 If minor is adequately supplied, they are not liable for the price even if the supplier
did not know this (Barnes & Co v Toye (1884))
o Nash v Inman (1908) minor was already adequately supplied at the time of sale
and delivery so tailor failed in his claim against him
 Fawcett v Smethurst (1914) contract contained a harsh term that the minor was liable
for damage to the car “in any event”, even if the minor was not at fault. Although the
hire was deemed necessary, the court held that it was not to the minor’s benefit
 SGA s 3(2) says the minor is only liable if the contract of the necessaries is executed
o “sold and delivered”
 For necessary services, executory contracts for services bind the minor where
contracts for education are concerned
o Roberts v Gray (1913) minor’s repudiation was wrongful because the minor
was still partly bound in the contract for teaching and instruction
o Contracts for education that equip a minor with necessary skills to earn a
livelihood are considered contracts for necessaries
 SGA s 3(2) only requires the minor to pay a reasonable price
o Minor does not necessarily have to pay the price agreed to the in the contract

Loans for necessaries (p. 260)

 General rule: a contract to lend money to a minor to purchase necessaries are
unenforceable (Darby v Boucher (1694))
 Loan can easily be misapplied to other purposes (unlike actual supply of necessaries)
o Lender can recover part of the loan that is actually used for the purchase of
necessaries (Marlow v Pitfield (1719))

Beneficial contract of employment, apprenticeship or education and analgous contracts (p. 260)
 Binding if they provide the minor with a means of earning their livelihood
 Only binding if the contract is beneficial to the minor
o Clements v L & NW Ry (1849) minor was held bound by contract of
employment because he gave up his statutory right to personal injury benefits
to join employer’s own insurance scheme. Insurance scheme was found to be
to the minor’s benefit

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  Not every contract that is beneficial will be binding (i.e. a minor’s trading contracts do
not bind them no matter how beneficial)
o Cowern v Nield (1912) when a minor trading in hay and straw failed to deliver
the order that had already been paid for, the buyer’s claim to recover price
paid failed

Analogous Contracts (p. 261)

 Same principle as beneficial contracts of education, apprenticeship or education
 Examples:
o Chaplin v Leslie Frewin (Publishers) Ltd (1966) contract to grant a publisher
exclusive rights to publish a minor’s memoirs
o Doyle v White City Stadium Ltd (1935) contract between a professional minor
boxer and British Boxing Board to follow the Board’s rules as he could not
earn his living as a boxer otherwise
o Denmark Productions Ltd v Boscobel Productions Ltd (1967) contract where a
group of minor musicians appointed a company to be their manager and agent
 Contrast:
o Proform Sports Management Ltd v Proactive Sports Management Ltd (2007)
representation contract was not analogous to a contract of employment – the
company did not provide Rooney with training to hone his football skills or
enable him to earn a living as a professional footballer

Voidable Contracts (p. 262)

 Contract is binding unless the minor avoids or repudiates the contract during their
minority or within a reasonable time after they attain the age of contractual capacity
(18 and under)
 Types of voidable contracts for minors:
o Contacts to lease or purchase land
o Contracts to subscribe to or purchase shares in a company
o Partnership agreements
o Marriage settlements
 These contracts concern interest in property of permanent nature and involve
recurring obligations
o A minor that retains the interest should be liable for obligations
o Rationale is vague and does not explain why certain contracts are included
and others excluded
 Mercantile Union Guarantee Corp Ltd v Ball (1937) unclear what
“permanent” means. Hire-purchase for a car did not fall in these
contracts even though they were recurrent obligations (installment
payment)
 “reasonable time” – depends on the facts of the particular case
o Edward v Carter (1893) five years after attaining age of majority to repudiate a
marriage settlement is too long even though the minor did not know of his
right to repudiate
 Upon repudiation, minor ceases to be bound by future obligations
o However, unclear if they are still bound by outstanding obligations that have
accrued

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 o i.e. upon repudiating the lease for a flat, minor is free from future payments
but cannot recover the past months paid unless there is a total failure of
consideration

Ratified Contracts (p. 263)

 Contract can still be binding and enforceable if minor ratifies the contract upon
attaining the age of contractual capacity

Remedies Against a (Protected) Minor (p. 263)

 Minors’ Contracts Act: provides remedies to protect a supplier who has dealt fairly
with a minor

MCA Section 3(1) (p. 264)

 If it is just and equitable, the court can require the defendant (the minor) to transfer
to the plaintiff (counterparty) any property acquired by the defendant under the
contract
 Includes all situations where the contracts are not exceptions (contracts that are
binding/enforceable for minors)
 Under this act, Nash v Inman and Steinberg v Scala could have claimed back remedies
 MCA provides restitutionary remedies i.e. order the minor to restore property
acquired under the contract (this contrasts to the position at common law and
equity)
o Common law: claim for damages can be made in tort but court will withhold
tortious remedy because it would be equivalent to enforcing the contract
against the minor
 Leslie Ltd v Sheill (1914) minor who lied about his age to get a loan
could not be sued in tort of deceit because it would be an indirect
enforcement of the loan
o Equity: restricted restitutionary remedy available. Minor only has to restore
property if it is obtained fraudulently i.e. misrepresenting their age
o Under MCA 3(1), restitutionary remedy is available in the absence of fraud
 If original goods are still in minor’s possession, then they may be ordered to return
them
o If the goods have been exchanged in a barter trade, minor can be ordered to
transfer the substitute goods
o If goods have been consumed, no order is possible
o If goods have been sold for cash, unclear
 MCA does not define “property” and if “property” includes monetary
cash
 If it does count, minor can be ordered to transfer the cash representing
the original goods
 Remedy under MCA 3(1) is under the discretion of the court
o Will only use it if it is “just and equitable to do so”
o MCA does not define what factors should be considered
o Should consider if the minor has possession of the property; fairness of
contract; if the supplier tried to take advantage of minor’s vulnerability;
minor’s appearance (mature or not) if age not explicitly revealed; the need to
avoid an indirect enforcement

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MCA Section 2 (p. 266)
 Financial institutions will only grant loans when repayment of loan and interest is
guaranteed by a party with contractual capacity
o Guarantee is thus enforceable against guarantor

52
Economic Duress, Undue Influence and Unconscionability (Chapter 14)
(p. 422)
 General rule: very little room for considerations of unreasonableness or lack of
fairness, especially in commercial transactions
o Except for special cases, court must not rewrite the contract on the basis of
unreasonableness or unconscionable conduct
 Courts attempt to address unfairness in transactions between parties of unequal
bargaining positions, which involve some element of duress (pressure) or undue
influence (exploitation)
o There are situations where the law deems such pressure or exploitation no
longer legitimate

Economic Duress (p. 423)

 If pressure exerted to induce or persuade a party to enter into a contract goes beyond
what the law deems acceptable or legitimate, the contract would be voidable at the
option of the pressured party
 Pressure through the threat of physical harm to the other party or their property is
illegitimate (Barton v Armstrong (1976) and Occidental Worldwide Investment Corp v
Skibs A/S Avainti, Skibs A/S Glarona, SKibs A/S Navalis (The Siboen and the Sibotre)
(1976))
 Commercial or economic pressure from a party of stronger bargaining position/less
to lose commercially is generally acceptable
o However, threat to breach an existing contract may be worthy of relief.
Usually done to induce a modification of an existing contract (North Ocean
Shipping Co Ltd v Hyundai Construction Co Ltd (The Atlantic Baron) (1979))

Basis for Intervention (p. 425)

 Duress is not lack of consent – there is pressurized consent
 Two elements in the wrong of duress
o Pressure amounting to coercion of the will of the victim
o Illegitimacy of the pressure exerted

Was there coercion of the will? (p. 428)

 Guidelines (Pao On v Lau Yiu Long (1980))
o Whether the victim protested
 If no, then it does not mean there is no economic duress. It might have
been futile to protest
o Whether, at the time of being coerced into the contract, they had an alternative
course open to them (i.e. adequate legal remedy)
 Did the victim in a situation have no practical choice?
 If yes, then it does not mean there is no economic duress. They might
not have pursued them because they did not consider them practical or
viable
o Whether they were independently advised
 If yes, likely NOT economic duress
o Whether, after entering the contract, they took steps to avoid it
 If no, likely NOT economic duress
o Whether they acted reasonably in taking the threats seriously (The Alev
(1989))

53
  If no, likely NOT economic duress

Was the pressure illegitimate? (p. 429)

 Two aspects to consider
o Nature of the pressure
o Nature of the demand which the pressure supported
 Threat of unlawful action generally amounts to illegitimate pressure
 Lawful Threat (p. 429)
o Threat to enforce one’s legal rights does not amount to economic duress (Lee
Kuan Yew v Chee Soon Juan (2003))
o If nature of threat is unreasonable, even if it is lawful, may be considered
illegitimate i.e. blackmail (Thorne v Motor Trade Association (1937))
o Lawful threat in commercial context is difficult to establish duress (CTN Cash
and Carry Ltd v Gallaher Ltd (1994))
 All threats to break contract (economic duress) are illegitimate (p. 430)
o Issue of causation: was it the threat that pushed the claimant to enter into the
transaction?
o Pao On (1980) threat to breach contract was treated as mere commercial
pressure because the threat did not cause the pressured party to enter the
transaction (did not coerce)
 Result did not find that the threat was illegitimate
 Shift to focus on illegitimacy of threat (p. 430)
o Threats to breach in contract should not be automatically treated as
illegitimate
o Requirement of good faith (CTN Cash and Carry Ltd v Gallaher Ltd (1994))
o Threat to breach contract made in the absence of good faith should not be
illegitimate
 Sharon Global Solutions Pte Ltd v LG International (Singapore) Pte Ltd (2001) Plaintifff
was not seeking to exploit the situation
o Threat to breach of contract was a legitimate notice of its inability to perform
rather than an illegitimate threat
o Take into account two factors
 Spirit and cooperative nature of the venture
 Plaintiff’s inexperience that resulted in the underestimation of costs
 Huyton SA v Peter Cremer GmbH & Co (1999) presence of bad faith can make a lawful
threat illegitimate
 Causal link between the pressure applied and the pressured party’s entry into the
transaction (p. 432)
o Degree of causation depends on the nature of the threat
o Barton v Armstrong (1976) as long as threat of injury to the victim is a reason
(not necessarily the overwhelming reason) for the victim entering the contract
it is a sufficient plea of duress
o Stronger causation requirement for economic duress because it is less serious
in nature
 “but for” test: the contract would not have been made, or been made
with those terms, without the pressure. Must be ‘the’ cause, not ‘a’
cause. Pressure must be decisive or clinching (Huyton SA v Peter
Cremer GmbH & Co (1999))

54
Effect (p. 432)
o Finding of economic duress renders contract voidable (Pao On v Lau Yiu Long (1980))
o Even if contract is held voidable, victim may not be able to rescind it if they have
affirmed it
o North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd (The Atlantic
Baron) (1979): held that they affirmed because it

Undue Influence (p. 432)

 A party must be relieved from a transaction if that transaction was entered into upon
the undue influence of the other party
 R v Attorney General for England and Wales (2003) when consent is obtained by
unacceptable means
o Unfair exploitation by one party in the relationship which gives them influence
over the other
 Alternative view: claimant’s inability to give real or meaningful consent because of
excessive dependence on the defendant
o Daniel v Drew (2005) “This is not my wish but I must do it”
o This view does not require wrongdoing or unconscionable conduct on the part
of the defendant
 Singapore View: basis on the defendant’s unconscionable behavior or the
unacceptable means by which a party’s assent to the transaction is acquired
o Lim Geok Hian v Lim Guan Chin (1994) unethical use of one’s power/authority
over another to get a benefit or achieve a purpose
o Rajabali Jumabhoy v Ameerali R Jumabhoy (1997) must have something wrong
with the way the influence was exercised (i.e. unfair or improper conduct,
coercion or misleading)

Categories of Undue Influence (p. 434)

Class 1: Actual undue influence (p. 434)

 Does not depend upon the existence of a special relationship between the parties
 Claimant has the burden of proving that the defendant exercised undue influence
o Done by showing that the independence of the claimant’s decision was
substantially undermined
 A special relationship may exist
o Allcard v Skinner (1887) undue influence generally comes from a personal
advantage obtained by the defendant through some close/confidential relation
to the claimant
 Once actual undue influence is established, claimant is entitled to relief. Relief does
not rely on proving that the transaction was disadvantageous
o CIBC Mortgages Ltd v Pitt (1994) actual undue influence is a type of fraud.
Victim entitled to have the transaction set aside as a right

Class 2: Presumed undue influence (p. 435)

 2 Factors to be proven
o Relationship of trust and confidence existed
o Resulting transaction was manifestly disadvantageous to the claimant
 Royal Bank Scotland plc v Etridge (No 2) (2002) proof of these two facts is prima facie
evidence that the defendant abused the influence they acquired in the relationship

55
  Defendant bears burden of rebutting or countering the inference by proving the
claimant had exercised a truly independent will

Nature of the Parties’ Relationship (p. 436)

Class 2(A): Presumed trust and confidence (p. 436)

 Claimant only needs to prove the existence of the relationship
 There is a presumption of influence for certain types of relationships (Royal Bank of
Scotland plc v Etridge (No 2) (2002))
o i.e. parent and child, guardian and ward, doctor and patient, lawyer and client,
trustee and beneficiary, religious adviser and disciple

Class 2(B): Trust and confidence must be proven (p. 436)

 Relationships do not fall into 2(A) and there is no presumption of influence
o i.e. employer-employee, husband-wife, agent-principal, siblings
 Must prove there is a relationship with influence
o Trust and confidence

Requirement of “manifest disadvantage” (p. 436)

 Claimant must show the transaction was to their manifest disadvantage
 Ask if the transaction is one that calls for explanation being “not reasonably
accounted for on the ground of friendship, relationship, charity or ordinary motives”
(Allcard v Skinner (1887) and Royal Bank of Scotland plc v Etridge (No 2) (2002))
 Singapore inconsistent
o Oversea-Chinese Banking Corp Ltd v Tan Tech Khong (2005) favoured the
Etridge test
o Gan Cheng Chan v Gan Meng Hui (2005) favoured manifest disadvantage test
 Need to balance the weight of the risk of the claimant enforcing the transaction and
the benefits gained by the claimant in accepting the risk considering the
relationship’s context (Bank of Credit and Commerce International SA v Aboody
(1989))

Rebutting the presumption (p. 438)

 By showing the claimant acted freely and independently in entering the transaction
o Can do this by showing the claimant received independent (in particular legal)
advice
o Inche Noriah v Shaik Allie bin Omar (1929) independent legal advice is not the
only way to rebut but if it is present, it does not matter if the advice was taken.
Only depends if the advisor gave the advice “with a knowledge of all relevant
circumstances and must be such as a competent and honest adviser would
give if acting solely in the interests of the donor”
 Whether the legal advice itself can emancipate the claimant from the
influence is not resolved
o Common practice for solicitors to act for both husband and wife
 The solicitor need not act for wife alone as long as the advice is in the
best interests of the wife. If there is a risk that other interests or duties
may inhibit his advice to his wife he must cease to act for her
 Royal Bank of Scotland plc v Etridge (No 2) (2002)
 Undue influence must be ‘the’ cause, not ‘a’ cause – may not be the only cause but
needs to be the main one

56
Effect of Undue Influence (p. 441)
 Render the contract concerned voidable
 Courts will attempt to restore parties as close to as their original positions as
possible, achieving practical justice (Cheese v Thomas (1994))

Creditors and Doctrine of “Infection” (p. 441)

 Surety arrangements: tripartite transactions, involving the principal debtor, the
guarantor and the creditor
o Guarantor enters the arrangement at the request of the debtor, assuming
obligations for no apparent benefit (except in commercial relationships)
 Not uncommon for a person to stand as a surety for their spouse
 If undue influence is exerted, creditor is not guilty of undue influence

Two conditions for the doctrine to apply (p. 442)

Creditor is put on inquiry (p. 442)

 In husband-wife cases, creditor is put on inquiry by the combination of two factors:
o Transaction is on its face not a financial advantage to the wife
o Substantial risk that in procuring the wife to act as surety, the husband has
committed a legal or equitable wrong
 Sufficient that the creditor knows of the husband-wife relationship
o Creditor is not put on inquiry if loan is advanced for joint purposes
 Creditors put on inquiry when relationship between surety and debtor is non-
commercial (Royal Bank of Scotland plc v Etridge (No 2) (2002))
o Includes parent and child; relatives; in-laws; employee and employer;
unmarried couples
o Mere knowledge of the non-commercial nature of the relationship is sufficient

Reasonable steps taken to minimize risk (p. 443)

 When creditor is put on inquiry, they must “take reasonable steps to satisfy itself that
the wife has had brought home to her, in a meaningful way, the practical implications
of the proposed transaction” (Royal Bank of Scotland plc v Etridge (No 2) (2002))
 Steps involve:
o Requiring the guarantor to get her own legal advice
 Informing her the purpose of the solicitor is for the creditor’s
protection and to allow them to rely on the written confirmation by
legal advisors that the guarantor has been properly advised
 For her benefit, not for the creditor’s benefit
o Some exceptional situations require more of the creditor
 If the creditor knows of facts that might indicate the guarantor being
inappropriately advised
 If the creditor has reason to suspect risk of undue influence being
exercised

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Illegality and Public Policy (Chapter 15) (p. 452)
 General Rule: Court will not assist a person who’s action is based on a contract that
is tainted by illegality or contrary to public policy
o Such contracts are totally or partially unenforceable
 In the interest of the greater public good, courts will override contractual rights
 Two broad categories:
o Statutory illegality
o Illegality at common law

Statutory Illegality (p. 453)

 Can only arise when there has been a breach in the statute in question
 Does the statute prohibit the conduct or does it also prohibit the making of such
contracts?
o Says contract is void
o Expressly prohibits the contract
o Impliedly prohibits the contract
o Does not impliedly prohibit the contract (prohibits the performance)
 If a statute expressly prohibits certain contracts and entering into them, the contract
is illegal and unenforceable. Innocence of either or both parties is irrelevant
o Phoenix General Insurance Co of Greece SA v Administratia Asiguralor de Stat
(1988) both contract and the performance were prohibited by the statute
o Re Mahomoud and Ispahani (1921) both the buyer and seller had to have
licenses. The buyer refused to accept the delivery and pleaded illegality so
that the contract was unenforceable (Defence of the Realm Act – to protect the
realm, Singapore)
 Courts decision is irrespective of guilt or innocence, knowledge or
otherwise
 When legislative intention is not clear, need to use statutory interpretation to discern
if it impliedly prohibits the contract
o Need to take into account the objective of the statute – what mischief is it
trying to prevent
o Cope v Rowlands (1836) statute implied to prohibit all persons from acting as
brokers without a license and thus prohibiting all contracts with such persons
 General rule: the contract is VOID

Contracts Illegal per se v contracts illegal in performance (p. 455)

 Illegal per se = both parties are involved in the wrongdoing
o i.e. s 3 Residential Property Act – expressly forbids foreigners from purchasing
residential property without necessary approval (contracts against this mean
the contract is VOID)
o Cheng Mun Siah v Tan Nam Sui (1980-1981) and Lim Xue Shan and another v
Ong Kim Cheong (1990)
 Illegal performance = not always both parties involved
o License or permit required before certain contracts can be performed, silent
on the effect of non compliance on the contractual rights
o i.e. s 5 Building Control Act – commencement of building without a permit
may not necessarily render the contract illegal. Only performing the contract
without the permit can contravene the statute

58
Situations where there is no statutory prohibition (performance is illegal) (p. 455)
 General rule: no prohibitions = contract enforceable
o i.e. when a statute only imposes penalties and does not deprive parties of
contractual rights
o In these cases both parties are entitled to sue
o St John Shipping Corporation v Joseph Rank Ltd (1957) contract was
enforceable because statute only imposed a criminal penalty for overloading
 Exception: both parties enter the contract with a “guilty intention” to breach a statute
o Neither of them can enforce the contract
o Don’t need to know of the statute but need to know of committing the act
o Ashmore, Benson, Pease & Co Ltd v AV Dawson Ltd (1973) plaintiff’s transport
knew of and participated in the illegality
 Rebuttal to exception: if there is only one “guilty party”
o “Guilty party” must have some degree of participation
o Guilty party cannot enforce, innocent party can
o Archbolds (Freightage) Ltd v S Spanglett Ltd (1961) contract was legal when
formed, innocent party was unaware of and did not participate in the illegality

Illegality at Common Law (p. 457)

 Case law is the source of illegality

Types of Common Law Illegality (p. 457)

 Contracts to prejudicial to administration of justice
o Stifle prosecution or to give false evidence in a court of law
 Contracts to deceive public authorities
o Alexander v Rayson (1936) object of the agreements was to deceive the local
authority. Agreements were for an illegal purpose and the plaintiff could not
enforce either of them
 Contracts to oust jurisdiction of the courts
o Deprive a party of the right to seek the compensation of the courts
o Hyman v Hyman (1929) courts’ power to award maintenance could not be
ousted by the agreement for the wife not to apply for maintenance
 Contracts to commit (or involving) a crime, tort or fraud
o Commit a crime (crime is committed at the time the contract formed, criminal
conspiracy)
o Commit a civil wrong or tort
o Fraud has both criminal and civil consequences
 Taylor v Bhail (1996) contract was tainted by fraud so builder could not
recover further payment and headmaster could not recover what he
paid out
 Contracts prejudicial to public safety
o Trading with the enemy
 Contracts promoting sexual immorality
o Pearce v Brooks (1866) plaintiffs were fully aware that the carriage was for an
illegal purpose (prostitution)
 Contracts which are liable to corrupt public life
o Agreement to buy public office or get a person of influence in civil service to
use their position to obtain benefits

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Consequences or Effects of Illegality (p. 458)

Recovery of Benefits Conferred Under Illegal Contract (Restitution) (p. 459)

 General Rule: money paid or property transferred under a legal contract are not
recoverable
 When both parties are at fault, the losses and gains remain where they have fallen

Exception 1: Recovery where parties are not in pari delicto (p. 459)
 pari delicto: not to be equally at fault
 Situation 1: one party is guilty of fraud
o Hughes v Liverpool Victoria Legal Friendly Society (1916) plaintiff could recover
the money paid because he entered into the contract through fraudulent
misrepresentation
 Situation 2: oppression by one party on the other
o Kiriri Cotton Co Ltd v Ranchhoddas Keshavji Dewani (1960) landlord abused his
property rights to exploit those in need for housing (Rent Restriction
Ordinance – to protect a tenant)
 Situation 3: class protecting statute
o A state that protects one group of people against another
o Kiriri: protects tenants from landlords who want inflated rental

Exception 2: Timely repudiation or repentance (p. 460)

 Before a contract is performed, it is open to either party to repent while contract is
still executory
 “opportunity of repentance” to encourage parties to pull out of the illegal contract
 Taylor v Bowers (1876) plaintiff could recover the machinery because the illegal
purpose had not been carried out
 Kearley v Thomson (1890) plaintiff could not recover the money because the contract
was partly performed
 Must have genuine repentance for the exception to apply
o Bigos v Boustead (1951) plaintiff’s repentance was not genuine, change of
heart was a result of the scheme failing

Exception 3: Recovery when plaintiff does not rely on the illegal contract (p. 461)
 Plaintiff relies on a basis that is separate and independent from the illegality
 Main categories to recover:
o Tort of Conversion: when a person wants to assert their rights to goods,
especially rights of ownership, against a person who has the goods (do not
claim back the good on the contract)
 Wrongfully taking possession of goods
 Wrongfully disposing of them
 Wrongfully refusing to give them up when demanded
o Contract of Bailment: delivery of goods by A to B but the goods still belong to A
 Bowmakers Ltd v Barnet Instruments Ltd (1945) in an illegal contract of
bailment, the bailor/owner could recover his goods because he was
relying on his proprietary rights and not on the contract of bailment
o Collateral Contracts: entitled to damages for breach of the collateral contract
(that is not tainted by illegality)

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  Strongman (1945) Ltd v Sincock (1955) even though main contract was
illegal, the collateral contract was breached and the builder was
entitled to damages for breach of the collateral contract
 Contradiction: if recovery is allowed by way of collateral contract,
plaintiff would be allowed to recover what cannot be recovered under
the illegal contract
 Only allowed in exceptional circumstances

Contracts in Restraint of Trade (p. 462)

 Restraint of trade covenants restrict freedom of trade (against public policy)
 In employment contracts, covenants in ROT prevents employees from leaving
employment and working for the employer’s competitor
o Employers use this to protect the training they have invested in the employee
and protect other interests i.e. trade secrets and clientele
 Two competing public policy considerations:
o General rule: It is in the interest of society to encourage competition and such
clauses prevent competition
o Rebuttal: It is in the interest of society that such covenants voluntarily entered
should be upheld

Validity of “Restraint of Trade” Clause (p. 464)

 Two Requirements:
o Legitimate interest that the party relying on the clause is seeking to protect.
o Reasonable in regard to the interest of the parties and the public in general
 General rule: all ROT covenants are contrary to public policy and therefore void and
unenforceable (Nordenfelt v Maxim Mordenfelt Funs and Ammunition Co (1894)
o ROT is only valid if it is reasonable both in the interests of the parties and in
the interests of the public
 Legal test of whether ROT is reasonable (Man Financial)
o Courts inquires if there was a legitimate interest to be protected by the ROT,
over and above the mere protection of the employer from competition
o Reasonable in duration, area and scope
o If answer to inquiry is affirmative, court applies twin tests of reasonableness
(Nordenfelt)
 Is ROT reasonable in reference to the interests of the parties
 Is ROT reasonable in reference to the interests of the public (need to
look at the number of entities in the industry/number of people that
will be affected)
o Smile Inc Dental Surgeons Pte Ltd v Lui Andrew Stewart (2012) court will
enforce ROT covenant only if it goes no further than necessary to protect
legitimate proprietary rights
 Burden of proof is on the party relying on the covenant to show that covenant was
reasonable at the time the contract was made
 Heller Factoring (Singapore) Ltd v Ng Tong Yang (1998) geographical limit for ROT in
Singapore is the whole country
 Party imposing the ROT needs to give consideration for imposing the clause

Employment Contracts (p. 466)

 Stricter approach to ROT in employment contracts due to

61
 o Differing nature of the legitimate proprietary interests to be protected (Man
Financial and SMILE)
o Difference in bargaining power (Man Financial and SMILE)
o Public policy: “Every man shall be at liberty to work for himself, and shall not
be at liberty to deprive himself or the state of his labour, skill, or talent, by and
contract that he enters into” (Herbert Morris Ltd v Saxelby (1916))
 When employee leaves employer, employer would have already obtained whatever it
has paid in terms of the employee’s services
o To have a covenant in ROT the employer needs proprietary interests to be
protected
 Trade secrets
 Business connections or clientele – employee must have personal
knowledge of and influence over the customers (Faccenda Chicken Ltd v
Fowler (1987))
 Maintenance of a stable workforce (Man Financial)
 Employee’s additional skill or knowledge of trade of profession during the course of
employment belongs to the employee and is very hard for the employer to inhibit the
use of
o Mason v Provident Clothing and Supply Co Ltd (1913) ROT provided that the
employee was not allowed to work in any similar business for three years
within 25 miles of London. Court ruled clause was wider than reasonably
necessary and the success of the employee was due to the employee’s natural
gift, less so with the training by the employer
o Fitch v Dewes (1921) unlimited time limit but there was a severely restricted
scope of the clause in terms of locality
o Buckman Laboratories (Asia) Pte ltd v Lee Wei Hoong (1999) legitimate interest
was not specific, geographical scope too wide
 Employer cannot use a ROT to protect itself from competition from a former
employee (Stratech Systems Ltd v Nyam Chiu Shin (alias Yan Qiuxin) and others
(2005))
 For medical practitioners, solicitors and accountants there is “special and intimate
knowledge of the patients of the business” (Routh v Jons (1947))
o SMILE unreasonable ROT because it was unlimited in duration
 Mano Vikrant Singh v Cargill TSF Asia Pte Ltd (2012) unreasonable ROT because it
took away a right/entitlement that already belonged to Mr. Singh
 Very difficult to enforce ROTs that forfeit benefits or rights accrued in return for the
employee undertaking the ROT covenant
o Can introduce a new element of benefit (i.e. monetary, new position, additional
paid leave, better terms of employment)

Sale of Business (p. 472)

 More readily upheld than employment contracts
 Protecting goodwill of the business
 Vancouver Malt and Sake Brewing Co Ltd v Vancouver Brewieries Ltd (1934) ROT not
upheld because sellers were not brewers of beers and had no proprietary interests to
transfer
Other Categories (p. 472)
 Extreme inequality between parties

62
 o Schroeder Music Publishing Co Ltd v Macaulay (1974) agreement extremely
unfair and totally unfair to the plaintiff court held the agreement was contrary
to public policy
 Solus agreement or exclusive purchasing agreement
o Esso Petroleum Co Ltd v Harper’s Garage (Stourport) Ltd (1968) tie of 21 years
was unreasonable and unenforceable. Plaintiff failed to establish an advantage
that a shorter time period wouldn’t have been adequate for
o Alec Lobb (Garages) Ltd v Total Oil (Great Britain) Ltd (1985) tie for 21 years
was reasonable because there was a £35 000 benefit for the tie and plaintiff
was allowed to terminate after 7 years

Severance (p. 474)

 Doctrine used to save a contract by cutting away the illegal portion
o Can delete whole terms/clauses or portions within clauses
 Two types of severance (Man Financial)
o Severance of entire/whole clauses
o “Blue pencil test”

Severance of Entire Clauses (p. 474)

 Test: does the ROT covenant constitute the whole or main consideration for the
promise sought to be enforced?
o If not then can use doctrine of severance
o Wyatt v Kreglinger & Fernau (1933) former employee provided no
consideration for the promise so was not entitled to the pension

Severance within Covenants: “Blue Pencil Test” (p. 474)

 Can delete certain portions as long as it does not alter the meaning of covenant/does
not mutilate it to the point of being incomprehensible
o CLAAS Medical Centre Pte Ltd v Ng Boon Ching (2010) “not altering the
meaning of the covenant” = not altering the sense of what remains of the
clause
o Goldsoll v Goldman (1915) struck out “real or” and the countries outside the UK
 Courts can strike out provisions i.e. unreasonably long durations of restraint
 Usually the clause least favourable to the employer will apply

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Performance, Breach and Agreement (Chapter 16) (p. 479)
 Discharge: contract comes to an end
o Termination: specifically for contracts
o Rescission: for misrepresentation

Discharge by Agreement (p. 479 and p. 484-485)

 Contract is discharged by a term within the existing agreement (“contractual
termination”) or by subsequent agreement (“subsequent contract of release”)
 In subsequent agreement
o When both parties are still subject to obligations (bilateral):
 Mutual release of outstanding obligations is generally effective without
need for further formalities or consideration
 Consideration in this new contract = do not have to do what they are
contractually bound
o When only one party is subject to obligations (unilateral):
 The other party seeking release from the outstanding obligation should
provide some form of valuable consideration for the release
 Release must be executed under seal to be effective
 In existing agreement:
o Term to bring the contract to an end, without breach of contract
o Employment contracts: employee and employer may bring employment
contract to an end by giving each other a reasonable notice of time
o Time-limited: a contract will end after a fixed term
o Express excuse for non-performance: up to the contracting parties of what
qualifies as an excuse for non-performance
 i.e. force majeure clause: excuse non-performance due to acts of God
(such as catastrophic or unusual weather conditions)

Discharge by Performance (p. 479)

 All contractual obligations are completely and fully performed
 Performance must be precise and “strict”
o Only discharged when all duties are performed
o Some contracts, such obligations are unrealistic i.e. provide professional
advice. Then it is only required that it is provided with “reasonable care”

De Minimis Defects (p. 480)

 Depending on the context, some degree of “microscopic” or “de minimis” deviations
in performance can be ignored (Acros, Ltd v E A Ronaasen & Son (1933))
 Get 100% of the consideration for the contract

Vicarious Performance (p. 480)

 Contract only needs to be performed by someone not necessarily the promisor
 Promisor can engage subcontractors to outsource the work but promisor is still liable
for any defects in the performance of the subcontractors
 Still amounts to full performance if the end result is the same contracted-for standard

Personal Obligations (p. 481)

 Contract must be fulfilled by the particular person

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  i.e. employment contracts – employees have been undertaken due to their unique
capabilities and attributes so their obligations cannot be fulfilled by someone else and
doing as such would amount to a breach of contract

Time of Performance (p. 482)

 Most contracts will expressly state when the contractual obligations should be
performed
 Where no date or time is specified, it is implied to be required to be performed within
a reasonable time from the formation of the contract
 General rule: time is not of the essence unless expressly or impliedly made to be so
(a condition)
o If time is a condition, failure to meet the deadline will allow the other party to
discharge the contract for breach
o If no express or implied provision at time of contract, time may be made of the
essence, following undue delay, if the party gives notice that the contract will
be treated as at an end unless performance is completed within a reasonable
space of time (Charles v Rickards Ltd v Oppenheim (1950))
 Can be set by reference to contingent events
o i.e. an insurer is obligated to pay the insured sum in the case of the house
being destroyed by fire. Until property is destroyed by fire, insurer has no
obligation to pay
 Some obligations can be interdependent and concurrent or interdependent and
consecutive
o Payment on delivery: according to SGA s28, purchaser is only obligated to pay
when the product is delivered and vendor’s obligation to pay and give
ownership of the product only arises when purchaser pays (interdependent
and concurrent)
o Open to negotiation: if the purchaser pays 40 per cent when ordering then 60
per cent on delivery then the vendor’s obligations to deliver is subsequent to
the purchaser’s payment of 40 per cent (interdependent and consecutive)
 Interdependent obligations require cooperation from the other party for the full
performance to occur
o Tender of performance: promisor must show that they were always willing
to perform their side of the contract and has done so far as is possible given
the non-cooperation of the other party
o Can use tender to prevent one party from being in breach due to the other
party refusing to cooperate

Partial Performance (p. 501)

 Hoenig v Isaacs (1952) and H Dakin v Lee (1916)
o Aggrieved party should be entitled to discharge since it is not full and precise
performance
o However, the party in breach has afforded the aggrieved party substantially
what was sought in the first place
o Hoenig v Isaacs (1952): defendants completed the performance but the
plaintiff was not satisfied with some of the furnishings. Defects = £56. Court
held defendant was entitled to contractually agreed price - £56
o H Dakin v Lee (1916): defendants failed to carry out exactly all the
specifications in building the house i.e. concrete not four feet deep as specified,

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 wrong joining of certain rolled steel joists and concrete not properly mixed.
Builders were entitled to recover the contract price, less the amount found to
be defective
 Cutter v Powell (1795)
o Cutter was to be paid 30 guineas upon completing the voyage. He passed
away 19 days before the end. The widow could not claim the 30 guineas
because the completion of the journey was a condition precedent to
completing the voyage

Entire Obligations and Substantial Performance (p. 504)

 If contract is really exact and precise, you cannot have substantial performance
 Is the partially performed contractual obligation by the party in breach an entire one?
Is the complete and entire performance of the obligation a condition precedent to the
aggrieved party’s counter performance?
o i.e. a partially painted portrait, even if nearly completed, is not the same as a
fully painted portrait
 If partial performance amounts to substantial performance, party in breach can be
entitled to claim the full price for that substantial performance
o However, party is still in breach and is still liable to compensate aggrieved
party for any losses that may have been incurred by the breach
o Remedy = full performance – cost to remedy the breach
o Usually the cut off point for substantial performance should be about 10%
 Other than substantial performance, if partially performed obligation is not an entire
obligation, there are other legal arguments for the party in breach to recover some of
the contractual price

Apportionment Act (p. 506)

 Apportionment of the sum payable by reference to how much has been completed
 s 3: rents, annuities, dividends and other periodical payments in the nature of income
shall be considered as accruing from day to day, and shall be apportionable in respect
of time accordingly”
o If obligation is periodic in nature and by way of income, partial completion of
work is payable in accordance to the number of days which have been
performed

Quantum Meruit (p. 506)

 When performance falls so short of substantial performance and apportionment act is
disallowed, party in breach may still recover a portion of contract price by way of
quantum meruit
 Two varieties (Lee Siong Kee v Beng Tiong Trading, Import and Export (1988) Pte Ltd
(2000))
o Quantum meruit on a contractual basis
o Quantum meruit on a restitutionary basis

Quantum Meruit on a contractual basis (p. 507)

 Some contracts may expressly provide that payment in return for performance will
be made in proportion to the amount done
o Term may be implied
o Manner of apportionment will be as described in the term

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  SGA s 30(1): Where the seller delivers the buyer a quantity of goods less than he
contracted to sell, the buyer may reject them, but if the buyer accepts the goods so
delivered the must pay for them at the contract rate
o Implied in fact at common law
o Where statute applies, partial deliveries must be met with proportional
payment at the contract rate (price per unit measure of the goods)
 Can imply an entirely new contract – where innocent party accepts the partial
performance
o Agree to payment for work already done or goods already delivered
o Defendant must have had the option to take or refuse the benefit of the work
done (Sumpter v Hedges (1898)) – this falls more under restitutionary basis

Quantum Meruit on a restitutionary basis (p. 508)

 Outside law of contract, lies in the law of restitution
 Even in complete absence of contractual provision, if partial performance has
conferred a benefit upon another then it is unjust to not provide a corresponding
payment to reflect the value of the benefit
o Claim for a reasonable sum in relation to the partial performance can be made
if party receiving the payment has the option of accepting or declining it

Severable or Divisable Obligations and Substantial Performance (p. 508)

 If contract is really exact and precise, you cannot have severable obligations
 Lengthy/complex agreement can consist of a number of divisable/severable parts
o i.e. construction contracts where the main contractor agrees to staggered
payments to its subcontractors depending on the stage of completion
o i.e. employment contracts where employee is payable on a periodic basis
 Complete performance of each divisable part of the contract will be payable part of
the contract price apportioned to that completed part
o Each part can technically be substantially performed/partially performed

Prevented Performance
 One party prevents the other from fully performing
 Possible for innocent party to claim some reasonable payment on a Quantum Meruit
basis
 Planche v Colburn

Discharge by Breach of a Promissory Obligation (p. 484)

 Breach: where a party fails to perform their part of the obligations according to the
terms of the contract agreed upon by the parties
 See p. 486-488 for breaches in interdependent/independent obligations;
promissory/contingent obligations
 See p. 502 for a diagram of legal consequences of breach
 To determine a breach
o Is there a term?
o What is the scope of the obligation?
o Was there a failure to perform or a defective performance?

Manner and Timing of Breach of Contract (p. 488)

 Contract may be breached if a party:

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 1) Fails to perform or defectively performs obligations by breaching a condition
or innominate term which goes to the root of the contract (“I couldn’t do it”)
2) “Repudiates” their obligations under the contract (“I won’t do it”) OR
3) Makes further performance of obligations impossible (“I won’t let you do it”)
 Actual breach: when one party has failed to perform at the time of performance
 Anticipatory breach: when contract is breached in executory stage (before the
obligation is supposed to be performed)
o 2 & 3 can fall under this category
 Repudiatory breach: breach allows a termination/renunciation of contract
o Breach of condition or innominate term that deprives substantially the whole
benefit
 Non repudiatory breach: breach doesn’t allow for termination/renunciation of
contract
o Breach of warranty or innominate term that does not deprive substantially the
whole benefit

Repudiatory breaches (“I won’t do it”) (p. 489)

 When one party informs the other party they cannot or will not perform their
obligations
o Can be done orally, in writing or inferred from conduct (i.e. inactivity)
o Whether actions of the party in default would lead a reasonable man to believe
the party in default has no intentions to be bound by the contract’s terms
 Can be actual or anticipatory breach, depending on the timing of repudiation
 San International Pte Ltd v Keppel Engineering Pte Ltd (1998) renunciation of some
but not all obligations will not entitle the innocent party to rescind unless a condition
or innominate term (depriving them of substantially the whole benefit) is breached

Making performance impossible (“I won’t let you do it”) (p. 490)
 Actions of one party make it impossible for the other party to perform obligations
 Aggrieved party who wants to discharge contract must prove that further
performance is impossible
o Not enough to prove that a reasonable person would conclude further
performance is impossible
 Universal Cargo Carriers Corporation v Ciati (1957) Ciati had not performed its
obligations 3 days before the deadline but indicated he would be willing to perform if
he could – thus had not repudiated the contract. However, it was impossible for him
to perform the obligations without causing delay that would negate the commercial
purpose of the hire contract
 Making further performance impossible can be an implied statement of repudiation

Effects of a Breach of Contract (p. 491)

 Two effects
o Aggrieved party is given the right to discharge the contract for breach
 Does not need prior sanction or approval of courts
o Party in breach may be ordered by courts to compensate the aggrieved party
with damages or other types of remedies

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Actual breach giving rise to right of discharge (p. 492)
 When a condition or innominate term depriving a part of substantially the whole
benefit is breached, aggrieved party may
o Elect to discharge
o Elect to affirm
 Availability of monetary compensation is not determined by whether the contract has
been discharged or affirmed

Effect of election to discharge contract for actual breach (p. 496)

 Contract is brought to an end prospectively
o Both parties are released from future obligations but are still bound by
obligations prior to the time of discharge
 Decision to discharge must be communicated (either by words, acts or silence)
o Until communicated, election may be withdrawn
 Can also sue for damages

Effect of election to affirm contract despite an actual breach (p. 496)

 Contract is kept alive and aggrieved party loses the right to discharge
 Aggrieved party still has the right to sue for damages
o Unless aggrieved party elects to waive their right to damages
 Party in breach is given a second chance to rectify the non-performance/defective
performance

Anticipatory repudiatory breach (ARB) (p. 496)

 Anticipatory: in advance of the time of actual performance
 Repudiatory: evidence that one party has no intentions to be bound by the terms of
contract or honour their contractual obligations when they are due
 Aggrieved party has the right to
o Elect to discharge
o Elect to affirm
Effect of election to discharge contract for ARB (p. 496)
 Aggrieved party can exercise their right to discharge immediately – does not have to
wait for the time of actual performance
 Also entitled to immediately sue for compensation for any loss suffered as a result of
nonperformance
 Moschi v Lep Air Service Ltd (1973)

Effect of election to affirm contract despite an ARB (p. 497)

 Breach treated as if it never occurred
o Continues to bind all parties to obligations
o No liability for monetary damages
 Anticipatory breach must be accepted by aggrieved party or it will be ignored
(Howard v Pickford Tool Co Ltd (1951))

Limits on right of election to affirm contract (p. 497)

 Innocent party cannot insist on affirming the contract where the 
cooperation of the
party in breach is required in order for the innocent party to fully perform his part of
the contract 


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 White and Carter (Councils) Ltd v McGregor (1962) White and Carter supplies
advertising bins. Mcgregor previously placed advertisements with White and Carter’s
bins. White and Carter continued to advertise even when told not to. Contract was
such that full payment would be required if annual payment not made
o It was held that there is no duty to mitigate or act reasonably insofar as the
innocent party has a free choice whether to affirm or discharge the contract.
o However, it goes on to talk about legitimate interest:
 Legitimate interest: a reason to carry on (not something you can sue
in damages)
 If it can be shown that a person has no legitimate interest, financial or
otherwise, in performing the contract rather than claiming damages, he
ought not to be allowed to saddle the other party with an additional
burden with no benefit to himself
o Therefore, the party seeking to prevent the other party from affirming the
contract must establish that the other party had no legitimate interest
o Can claim full payment if the innocent party
 Is claiming a fixed sum as opposed to unliquidated damages
 Does not require the cooperation of the party in breach
 Has a legitimate interest in continuing the contract
 Doctrine of “legitimate interest” (MP-Bilt Pte Ltd v Oey Widarto (1999))
o Does not apply to previously accrued debts
o Does not apply when the innocent party can perform their obligation without
cooperation of the party in breach
o Does not apply when innocent party is under legal obligation or practical
compulsion to complete the performance

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Frustration (Chapter 17) (p. 513)
 Definition: without default of either party, a contractual obligation has become
incapable of being performed because the circumstances in which the performance is
called for would render it a thing radically different that which was undertaken by
the contract (Davis Contractors v Farehamd UDC (1956))
 Should not be used to escape what has turned out to be a bad bargain
 Parties are free to make contractual provisions in the case of eventualities

Elements of Frustration (p. 514)

Radically different performance (p. 514)
 Look at the contractual promise and the circumstances that existed at the time of
contract
 Look at the supervening event and what performance would be like if contract were
to be enforced in the new circumstances
 Compare the two scenarios and decide if the performance is radically different
 Davis Contractors v Fareham UDC (1956) increased labour costs did not make the
contractual performance radically different from the performance contemplated at
the time of contract

Neither party at fault (p. 515)

 If one party is at fault, it is likely a breach of an express or implied term
 Contracting party cannot rely on “self-induced” frustration

Time of frustration (p. 515)

 Contract discharged automatically when the frustrating event occurs
 Can discharge prospectively – the time of performance has yet to arrive
 Effect of supervening event is determined at the time, or a reasonable time after –
should not wait until the time of performance to see how the event affects the
performance
o Rationale: parties’ rights should not be left indefinitely in suspense
 Contract frustrated as soon as “a sensible prognosis of the commercial probabilities
can be made” (The Evia (No 2) (1983))

Foresight and foreseeability (p. 516)

 Frustrating event is not expected, foreseen or even foreseeable

Classifications of Frustration (p. 516)

1. Impossibility – destruction of subject matter, cancellation of an event, death/illness of
a performer etc.
2. Illegality
3. Radical Change - commercial objective/purpose is defeated/disappeared

General Impossibility (p. 5.16)

(1) Destruction of subject matter of contract (p. 516)

 i.e. destruction of premises, failure of a crop, sinking of cargo
 Total destruction may not be necessary – sufficient if it is seriously damaged, has
become something else, or the destruction defeats the main purpose of the contract

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  Even if not the subject matter, if what is destroyed is necessary for performance it
frustrates the contract
 Exceptions
o Sale of goods: risk passes from seller to buyer, and once it has, if the buyer
destroys the goods, buyer is not discharged from his duty to pay the seller
o Building contracts: risk of damage or destruction lies with the builder until the
work is completed

(2) Death or incapacity (p. 517)

 Contracts of personal nature are frustrated by the promisor’s death/incapacity
 i.e. contracts of apprenticeship, employment, agency
 If personal element is absent, contract may still be performed by someone else on the
behalf of the promisor
 For incapacity (illness, imprisonment, conscription), depends on the likely duration
of the incapacity/unavailability
o Will the disruption make a radical change to the performance?
o Sudden illness of a performer for a one-night-only performance v illness of an
employee for a term of years
o Depends on nature and duration of performance, and prospects of recovery
o Poussard v Spiers (1876)

(3) Unavailability (p. 517)

 Subject matter, person or thing essential to performance is no longer available
 Whether it amounts to frustration depends on the length of anticipated unavailability,
period of contract and commercial purpose of contract

(4) Failure of source of supply (p. 517)

 Where expressly provided that goods are to be supplied by a particular source, failure
by that source may frustrate the contract
 Even if no express provision, can still frustrate if both parties contemplated supply by
that particular source
 If only one party intended to use that source, it does not frustrate the contract

(5) Method of performance impossible (p. 518)

 If contract provides, or both parties contemplated, a particular method of
performance and the method becomes impossible, the contract is frustrated
o Method must have been exclusive – otherwise, alternative methods may be
resorted to as long as they are not fundamentally different
 Tsakiroglou & Co Ltd v Noblee Throl GmbH (1960) both parties intended for shipment
to be via Suez Canal. When Suez Canal was closed and the alternative route was twice
as long, House of Lords ruled it was not a substantially different performance and
contract was not frustrated
o The goods were not perishables and there was no date fixed for delivery

Illegality (p. 519)

 Void ab initio to protect public policy
 Can be brought about by subsequent changes in the law i.e. wartime prohibitions
against trading with the enemy, prohibition against exporting a particular product,
restriction on movement of capital

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  Doctrine of frustration can be excluded by express agreement, but this does not apply
to illegality
 Contract can be frustrated by foreseeable or even foreseen (with no express
provision) illegality

Radical Change (p. 519)

(1) Frustration of purpose (p. 519)

 Performance under the changed circumstances would not fulfill the original
commercial purpose of the parties
 Krell v Henry (1903) coronation procession was cancelled, which was the main
purpose for both parties. Frustrates the contract (hire of premises) even though
continuation is physically possible
 Failure of the purpose of one party does not bring about frustration

(2) Delay, unavailability (p. 520)

 i.e. stranding of a ship, wartime requisition, bad weather, labour shortages
 Delay must be so abnormal in its effect or expected duration as to fall outside what
was the reasonable contemplation of the parties at the time of contract

(3) Impracticability, increased costs (p. 520)

 Insufficient by itself to frustrate a contract
 Unless, impracticability and increased costs are so abnormal that they are outside the
ordinary range of commercial risk (i.e. astronomical rise in price)
o Tsakiroglou & Co Ltd v Noblee Thorl GmbH (1960)
o Holcim (Singapore) Pte Ltd v Precise Development Pte Ltd (2011)

Frustration of a lease/sale of land (p. 521)

 Doctrine applies to lease (Singapore Woodcraft Manufacturing v Mok Ah Sai (1979))
and sale of land (Lim Kim Som v Sheriffa Taibah btw Abdul Rahman (1994))

Self-Induced Frustration (p. 521)

 Party in contract cannot rely on frustration due to their own conduct or conduct of
those for whom they are responsible
 Burden of proof that frustration is self-induced is on the party that asserts it is so
 Contracting party can rely on frustration caused by other party (Harrington v Kent
(1980))

Negligence (p. 521)

 Joseph Costantine v Imperial Smelting (1942) singer who had carelessly caught a cold
could plead frustration as long as it “was not deliberately induced in order to get out
of her engagement”
o Relationship between negligence and deliberateness
o Frustration: careless but does not want to catch a cold (careless but not
deliberate)
o Not frustration: hopes to catch a cold because she does not want to perform
the next day (deliberately careless)

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Choosing between several contracts (p. 522)
 Due to a supervening event, a person is not able to perform all contracts but can still
perform some of them
 If the contracting party chooses to perform some of the contracts, they cannot rely on
frustration to discharge them from the other contracts (Maritime National Fish v
Ocean Trawlers (1935))

Partial Frustration (p. 523)

 Contract can only be partially performed
 Sainsbury v Street (1972) due to crop failure, seller had to remain bound to deliver
140 tons but excused of the remaining 135 tons

Express Provision (p. 524)

 General rule: if parties have allocated risks in regard to possible eventualities, the
courts will uphold the contractual allocations
o Exception: supervening illegality
 Provision excluding frustration: contract makes it clear that it was intended that
one party assumes the risk of the supervening event
o Often called force majeure clauses
o Courts may imply them
o Can put the risks of supervening events on one party – contractual obligation
is absolute
o Can provide that in the event of a supervening event, contract comes to an end
 Then further elaborate on details of the legal consequences
o Can provide that in the event of a supervening event, there will be negotiation
about the continuation of the contract (China Resources v Magenta Resources
(1997))

Construction (p. 524)

 Clause must be full and complete (Bank Line v Arthur Capel (1919)) and be intended
to cover the supervening event in question
 The more devastating/catastrophic the event, the more particularly clear the words
must be

Foresight and Foreseeability (p. 525)

Foreseen events (p. 525)
 General rule: does not frustrate contract
 Rationale: if contracting parties envisaged such an occurrence and did not make
express provisions for it, they must have contracted with reference to the risk of such
occurrence

Foreseeable events (p. 525)

 Frustrating event: very remote possibility
 Foreseen event: highly likely of occurring and therefore should not be frustrating
 Foreseeable event: covers a wide spectrum of likelihood
o Highly foreseeable event cannot frustrate (Win Supreme Investment v Joharah
bte Abdul Wahab (1997))
o Reasonably foreseeable events also cannot frustrate (Glahe International Expo
v ACS Computer (1999))

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 o Low levels of foreseeability may suffice but the application of the doctrine will
be narrow

Effects of Frustration (p. 526)

 Brings the contract to an end from the time of the frustrating event
 Operates automatically, without election from either party

Frustrated Contracts Act (FCA) (p. 527)

Changes made to the effects of frustration at common law by the Frustration Contracts Act
Aspects Common Law Frustrated Contracts Act
Future obligations Released Released
Accrued Remain Released
Sums paid Not recoverable Recoverable
Sums payable Remain payable No longer payable
Expenses Not applicable Recoverable
Benefit Not applicable Recoverable

Payments, expenses, benefits (p. 527)

 s 2(2)
o All sums paid before time of discharge are recoverable
o All sums payable are not longer payable
o Incurred expenses prior to time of discharge can be partially retained or
recovered
 Cannot be more than the actual expenses
 s 2(3)
o If a contracting party has obtained a valuable benefit before time of discharge,
the other party can recover a sum (not exceeding the value of the benefit)
which is appropriate
 Courts also consider the effect the frustrating event had on the benefit
o Event can reduce the benefit through partial performance
o Event can eliminate benefit through complete destruction of the subject
Severability (p. 528)
 s 3(4): some parts of the contract can be frustrated while others remain unaffected

Ambit of act (p. 528)

 Does not apply to contracts of carriage of goods by sea, insurance contracts and
contracts for the sale of specific goods where the cause of frustration is the perishing
of the goods (s 3(5))

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Remedies for Breach of Contract (Chapter 18) (p. 533)
Self Help Remedies (p. 533)
 Repudiatory breach = aggrieved party can elect to end the contract
o Both parties will be released from any outstanding obligations
o Discharge of contract is a “self help” remedy – the remedy is in effect without
any intervention of the court

Types of Judicial Remedies (p. 533)

 When aggrieved party has suffered financial losses, sometimes discharge is not an
adequate remedy – other judicial remedies may be needed
o The common law remedy of damages
o The common law remedy of an action for a fixed sum
o The equitable remedy of specific performance
o The equitable remedy of injunction
 Common law remedies = available as of right
 Equitable remedies = discretionary (fairness)

Availability of Judicial Remedies: Limitation Periods and Laches (p. 534)

 Urgency – some judicial remedies can be barred by lapse of time

Common Law Remedies (p. 534)

 Limitations Act s 6: no action may be brought for a breach of contract after six years
have lapsed from the time when the contract was breached
o Starting time of limitation period may be postponed if innocent party was
ignorant of the breach
o Access to judicial remedies past the limitation period will be barred
 Exception: does not apply to any legal action rooted purely in unjust enrichment
(Management Corporation Strata Title No 473 v De Beers Jewellery Pte Ltd (2002))
o LA s 32: nothing in this Act shall affect any equitable jurisdiction to refuse
relief on the ground of acquiescence, laches or otherwise.

Equitable Remedies (p. 534)

 Apply equitable doctrine of laches in relation to equitable remedies
o Delay in applying for equitable relief from the courts may be turned away
where the delay is inordinate or inexcusable may make it inequitable to
provide the relief
o Equitable remedy may be denied if application for it is not made as soon as the
nature of the case might permit
 Two important factors
o Length of delay
o Whether the defendant acquiesced in the delay

Common Law Remedies: Damages (p. 534)

 Contractual damages are awarded to aggrieved party as a sum of money in
compensation when the breach has incurred financial loss
 If no financial loss is suffered, can claim nominal sum of money

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  Difficulty in assessment is not bar to recovery i.e. speculative sum of money (assess
profits)

Compensation Only (p. 535)

 Damages are compensatory in nature
o Addis v Gromphone Company, Ltd (1909): common law does not traditionally
award punitive damages in case of breach of contract
o Compensate for a loss
 Exception: punitive damages can be awarded for breach of contract on other bases
o Whiten v Pilot Insurance CO (2002): Pilot (insurance company) contested
against Mrs Whiten (who was accused of arson) in bad faith. Mrs Whiten was
awarded $300,000 based on the insurance policy and another 1M as punitive
damages for their behaviour
 Will only get damages if you go to court – but most people will not go to court
because it is expensive and risky to do so

Recovery of Unliquidated Damages (p. 548)

1. Causation in fact: was the breach an effective cause of the loss? (apply “but-for” test)
a. NO = Damages not claimable
b. YES = step 2
2. Remoteness (or causation at law): are the losses too remote? (consider tests in
Hadley v Baxendale)
a. YES = Damages not claimable
b. NO = step 3
3. Quantification (or Assessment) of damages: What is the sum required to put the
innocent party in a position as though the contract has been properly performed?
4. Mitigation: Have reasonable steps been taken to minimize the loss?
a. NO = quantum of damages awarded will be reduced by amount that could have
been saved through mitigation

(1) Non-pecuniary loss (p. 549)

 i.e. hurt feelings, disappointment, mental distress
 General rule: not compensable on policy grounds (Watts v Morrow (1991))
 Loss of reputation/embarrassment suffered is not recoverable (Addis v Gramophone
Company, Ltd (1909))
 Exceptions:
o Against a banker for refusing to pay a customer’s cheque when he has in his
hands funds of the customer’s to meet it
o For breach of promise of marriage
o Where the vendor of real estate fails to make title (Addis v Gramophone
Company, Ltd (1909))
o Where there is substantial physical inconvenience or discomfort (Hobbs v The
London and South Western Railway Company (1875))
o Distress is directly caused by physical loss
 Anxiety and distress of living in a house in poor condition due to
reliance on negligence in breach of contract in a surveyor’s report
(Perry v Sidney Phillips & Son (1982))

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  Unpleasantness of living in deteriorating premises until they became
uninhabitable due to landlord’s delay in repairs (Calabar Properties Ltd
v Stitcher (1984))
o Loss of reputation caused by grossly defective performance of an employer’s
obligations that results in financial loss to the employee
 Malik v Bank of Credit and Commerce International SA (1998): implied
term of trust and confidence where employer was obliged to not use
corrupt and dishonest conduct that would tarnish the reputation of the
employees
o Where very purpose of contract was to provide enjoyment or prevent distress
(Jarvis v Swans Tours Ltd (1973))
o Farley v Skinner (2002)
 Consider the cause of the inconvenience/discomfort
 If cause is simply disappointment that the contract has been breached,
not recoverable
 If cause is a sensory (sight, touch, hearing smell etc) experience,
damages can be recovered (subject to remoteness)

(2) Causation of Loss (p. 550)

 General rule: damages only due when breach caused plaintiff’s loss
 Apply “but-for” test: if not for
o Without the cause, the loss would not have happened
o Used to discriminate between cases where causation is satisfied and those
where it is not
 Sometimes there is more than one sufficient cause leading to the loss
o South Australia Asset Management Corporation v York Montague Ltd (1997))
valuers breached obligation to carry out valuation with reasonable care and
over-valued the security (for loans made by the lenders). Lenders then made
loans they would never have made otherwise. When market fell, lenders
claimed the entire loss suffered from the defaults in the loans should be
recovered from the valuers
 Valuer’s carelessness did not cause all the loss claimed by the plaintiffs
 Fall in market value would have occurred nonetheless
 Only damage valuers caused was the over-valuation in the assets
 Any further losses were due to the fall in the market
 Valuers were only obliged to provide a piece of information for the
lenders to take into consideration – not correct to make valuers
responsible for the market fluctuations

(3) Remoteness of Loss (p. 552)

 General rule: too remote = not compensable
o Losses which are out of the ordinary and would not normally be in the
contemplation of either party
o Exception: party in breach knew/ought to have known about the possibility of
unusual losses at the time of entering the contract

(a) “Naturally arising damages” and “damages arising from special circumstances”
 Hadley v Baxendale (1854)
o Plaintiff’s mill’s crankshaft broke. Plaintiff needed to send crankshaft to
makers to make a new one. Defendant agreed to deliver shaft to makers.

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 Defendant only knew that the article to be carried was the broken shaft and
that the plaintiff was a miller. Defendant did not deliver shaft on time.
Plaintiff sued defendant for loss of profits owed to delay
 Held: circumstances communicated to defendant did not show that a
delay in delivery would result in loss of profits of the mill therefore loss
of profits were too remote (irrecoverable)
 Transporter, in this case, would assume the mill would have a
replacement shaft already – no urgency for the transport
o First limb: arising naturally
 According to the usual course of things/in contemplation of both
parties at the time of contract
o Second limb: special circumstances
 If special circumstances were known to both parties, losses may be
claimed
 If special circumstances were wholly unknown to the party in breach,
aggrieved party can only claim losses that would have arisen naturally
 If special circumstances were known, usually they would have been
provided for in the contract in special terms
 In both cases, the knowledge of the defendant to the probability and nature of losses
of the plaintiff are critical

(b) Imputed and actual knowledge (p. 554)

 Victoria Laundry (Windsor) Ltd v Newman Industries Ltd (1949):
o Plaintiff wanted to expand laundry business. Plaintiff entered into the
contract with defendant for a new boiler. Agreed the new boiler would be
delivered on 5 June but was only delivered in Nov. Delay caused (1) loss of
profits for the period and (2) loss of highly lucrative profits which could have
been obtained with the Ministry of Supply
 Held: defendant knew plaintiffs were launderers and dyers that needed
the boiler for immediate use. Defendant should have known the
plaintiff would suffer their usual loss in their business (1). (2) is not
recoverable as it was not reasonably foreseeable as there was no actual
knowledge
o Imputed knowledge: knowledge which everyone must be taken to know
o Actual knowledge: knowledge one actually has
o When applying first limb of Hadley v Baxendale, only need to prove imputed
knowledge (defendant taken to know that such damage would arise from the
breach)
o When applying second limb, need to prove the defendant’s actual knowledge
of the special circumstances that gave rise to special losses
 Satef-Huttenes Albertus SpA v Paloma tercera Shipping Co SA (The Pegase) (1981)
o To prove actual knowledge (objectively), put a reasonable person in the
defendant’s shoes and see if the facts in question would come to the
defendant’s knowledge in such circumstances (at the time of making the
contract)

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(c) Probability of type of loss (p. 555)
 Given the knowledge (either imputed or actually) the defendant has, as reasonable
man must be able to foresee that there was a reasonable likelihood that damage
would result from the breach
 Koufos v C Czarnikov Ltd (The Heron II) (1969) degree of probability is not too remote
if it is higher than that in tort
 H Parsons (Livestock) Ltd v Uttley Ingham & Co Ltd (1978)
o Defendant provided plaintiff with faulty containers which led to the pig feed
getting mouldly. Pigs died of a rare intestinal disease as a result
o Ruled as being not too remote – reasonable foreseeable that the defective
container would lead to mouldy feed thus resulting in pigs getting ill
o Two tests of remoteness
 Where loss is physical, a more relaxed test of “reasonable
foreseeability” of the type of damage as a bare possibility – don’t need
to contemplate extent of loss, only type
 Where loss is economic, a stricter approach of “reasonable
contemplation” – should contemplate the extent of loss
(d) Types and extent of loss (p. 556)
 H Parsons (Livestock) Ltd v Uttley Ingham & Co Ltd (1978)
o Should focus on whether the type of damage (physical injury/loss of
profit/loss of market) could be reasonably contemplated as liable to occur not
the extent of damage (the pigs dying)
 Damages not too remote when
o Defendant ought to have known/actually knew the circumstances surrounding
the plaintiff that resulted in the loss
o Would have been obvious to a reasonable man that breach in contract would
have a significant likelihood of resulting in the type of loss that plaintiff
suffered

(e) The rationale for the rule in Hadley v Baxendale and the role of assumption of responsibility
(p. 559)
 Robertson Quay Investment Pte Ltd v Steen Consultants Pte Ltd (2008)
o First limb of Hadley v Baxendale: damage is in reasonable contemplation of the
parties. Even if damage is not expressly provided for, if both contracting
parties thought about it, they would have agreed the contract-breaker should
be liable in damages for the “ordinary” damage
o Second limb: damage is not within reasonable contemplation. Inappropriate
to impute knowledge that such damage would arise from the breach.
However, if there is actual knowledge communicated to the defendant in
advance, they have agreed that should such damage occur, the defendant
would be liable

(4) Mitigation of Loss (p. 561)

 General rule: losses which the aggrieved party could have taken reasonable steps to
avoid are not compensable
o Doesn’t have to be the cheapest option but what is reasonable
 British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric
Railways Company of London Ltd (1912)

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 o First principle: aggrieved party to be placed in as good a situation as if the
contract had been performed
o Second principle: aggrieved party has a duty of taking all reasonable steps to
mitigate loss
 If defendant took reasonable to steps to mitigate loss and incurred greater loss, those
increased losses are still recoverable (Banco de Portugal v Waterlow & Sons Ltd
(1932))
 What is reasonable is dependant on the circumstances of each case (Payzu, Limited v
Saunders (1919))
o Cases of personable service, it is unreasonable to expect the plaintiff to
consider an offer by a party who has grossly injured them
o Cases of commercial contracts, generally reasonable to accept an offer (of
alternative performance) from the party in default
o Plaintiff usually not required to take steps they cannot afford
o Plaintiff not required to take steps that would place its commercial reputation
or good public relations at risk
o Plaintiff not required to take steps that involve complex litigation
 Defendant has the burden of proof to show the plaintiff has not taken steps to
mitigate losses
o Courts usually favour the plaintiff even in doubtful cases (Strutt v Whitnell
(1975))
 Need to mitigate only arises after contract is discharged
 Mitigation has no relevance to the way the aggrieved party wants to have their
damages quantified
o Radford v De Froberville (1977) plaintiff can be awarded damages to provide
what the defendant failed to perform, even if there are more cost effective
ways to achieve the performance

Quantification and Measurement of Unliquidated Damages (p. 537)

 Put injured party in position as if the contract was performed properly

(1) Quantification by reference to “expectation”, “reliance” or other losses (p. 537)

(a) Expectation loss (p. 539)

 The aggrieved party can try to recover their nett expectation loss
o This is the nett profit they were supposed make on the basis that the contract
was performed
o The breach prevented the aggrieved party from making this profit
 Nett profit = total revenue – expenditures
 Gross profit = total revenue
Example:
Expected revenue – 50,000
Less costs
Cost of wine – (32,000)
Cost of renovations to warehouse – (7,500)
Net profit had contract not been breached – $10,500.
 Expectation loss does not always have to be profit – it can just be the value of what
was paid for

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(b) Reliance loss (p. 539)
 Losses made in reliance on the contract being fulfilled
o i.e. paying for renovations that would have otherwise not been needed if the
contract hadn’t been formed
 You make either reliance OR expectation loss. Do not double count (usually reliance
loss is counted in net profit)

(c) Other losses (p. 539)

 Other losses may be inflicted on the victim of the breach
o “consequential loss”: losses/damages/costs owed/paid to another party for
separate contract that had to be breached due to the breach in question
 Also known as “indemnity loss”
 i.e. liquidated damages of 10,000 for this other contract
o “incidental loss”: costs incurred after the breach had come to the innocent
party’s attention
 i.e. transport costs to return defective products

(2) Placing the innocent party in the position as if contract was fully performed (p. 540)
 General principle: court will quantify damages as to place the aggrieved party in the
monetary position they would have been had the contract been performed (Robinson
v Harman (1848))
o Total losses = Nett expectation loss + reliance loss + incidental loss +
indemnity loss

(3) Electing between different methods of quantifying loss (p. 541)

(a) Expectation or reliance basis: bad bargains, overly speculative expectation loss and pre-
contract reliance expenditure (p. 541)
 General rule: aggrieved party is free to choose how best to quantify his or her losses
 Bad bargains: reliance expenditure exceeds any expected gains
o CCC Films (London) Ltd v Impact Quadrant Films Ltd (1985): plaintiff has the
choice to claim over wasted expenditure or loss of profit unless the defendant
can prove that the plaintiff wouldn’t have recovered the expenditure if the
contract had been fulfilled
o Usually you will only claim expected loss in bad bargains (put back into
position as if the contract had been properly performed)
 Speculative losses: aggrieved party should avoid quantifying damages on an
expectation basis
o Anglia Television Ltd v Reed (1972): profitability of the film was speculative in
nature (impossible to establish what profits would have been made) so Anglia
Television claimed its reliance losses. Anglia could recover both
 Expenses incurred following the time of contract forming
 Expenses incurred prior to its formation (subject to satisfying the test
of remoteness)

(b) Different bases for quantifying expectation loss: “Diminution in value” or “cost of cure” (p.
543)
 Diminution in value: give the plaintiff the financial benefit they would have obtained
if the contract had been performed. Takes 2 forms

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 o Difference between market or resale value of the contractual performance and
the value as stated in the contract
o Where contractual performance entails the production of something that the
plaintiff intends to use in order to generate profit, the loss of user profit which
ought to have been earned had the defendant performed his obligations
o Usual in sale of goods cases
 Cost of cure: give the plaintiff a sum of money to repair any defects due to the
defendant’s breach of contract
o Plaintiff is in a position as if the defendant performed their part of the contract
and aims to award the plaintiff the sum which they have paid or would have to
pay for an equivalent substitute performance
 Can only claim ONE
o Radford v De Froberville (1977): cost of cure can be recovered even if there is
no diminution in value. Plaintiff hired defendant to erect a wall screening off
their property from another property. Lack of erecting this wall did not
change the market value (diminution in value) but the plaintiff had not been
supplied what was contracted for (cost of cure). Damages were the full cost of
erecting the wall in accordance to the very detailed specification in the
agreement
 Cost of cure is reasonable if
o Cure is necessary to mitigate losses
o If P effected the cure or intends to do so?
o P’s intention: sell for profit or personal use?
 Usually more reasonable for personal use
o Is the cost of cure proportionate to the loss?
 Tito v Waddell (No 2) (1977): courts refused to award cost of cure because it was
unclear whether the plaintiff would use the damages to rectify the defective
performance
 Radford v De Froberville (1977) and Dean v Ainley (1987): cost of cure awarded
because plaintiffs satisfied the court that they intended to use the damages to rectify
defective performance
 Ruxley Electronics and Construction Ltd v Forsyth (1996)
o Intention for damages is only relevant for reasonableness, not whether it
should be awarded. When an item is irreparably damaged then the owner is
entitled to the value of the article, irrespective of whether they intend to
replace it or spend the money on something else
o Cost of cure not awarded because the construction of the pool was achieved to
a substantial extent. Damages would be disproportionate to the non-monetary
losses. Forsyth could not be allowed “to create a loss, which does not exist”
o Digging up the imperfectly built pool and reconstructing it were deemed
unreasonable

Time of Quantification (p. 547)

 General rule: unliquidated damages will be assessed as at the time of the breach
o Can assess damages at a point in time other than the date in breach taking into
account particular facts and the need for the plaintiff to mitigate losses
o Tay Joo Sing v Ku Yu Sang (1994) and Johnson v Agney (1980)
 Guidelines (Treitel on the Law of Contract (2011))

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 o Ascertain damage suffered at the time of breach – this is when the plaintiff
knows of the breach and is able to take steps to mitigating the loss
o If plaintiff did not know of the breach then court will assess damages at the
time of discovery with reasonable diligence
o If impossible to mitigate losses, court may delay assessment until it is possible
to
o If there was a reasonable probability the defendant would make good their
default then time of assessment is when this is no longer probable
o In cases of late performance, time of assessment will be the time of the late
performance (not when it ought to be performed)
o In cases of anticipatory breach, time of assessment is when the defendant
ought to have performed (not at the point of anticipatory breach)

Liquidated v Penalties (p. 535)

 If pre-agreed by contracting parties as a term, and agreed sum is a genuine pre-
estimate of the loss, the court will order that sum to be paid as liquidated damages
 If the sum is intended to be a punishment, court will strike down the “penalty clause”
and award unliquidated damages
o Sometimes unliquidated damages can be greater than penalty clause sets
(Public Works Commissioner v Hills (1906))
 Distinction between liquidated damages clause and penalty clause (Dunlop Pneumatic
Tyre Company, Limited v New Garage and Motor Company, Limited (1915)):
o Words “liquidated damages” and “penalty” are not conclusive – court must see
if the payment is truly a penalty or liquidated damages
o Penalty = payment of money to be used as a legal threat to the offending party
o Liquidated damages = genuine agreed to pre-estimate of damage
o Question of construction – decided by the terms and inherent circumstances
 Judged at the time of the making of the contract and not the time of
breach
o Tests
 Penalty: sum is extravagant/unconscionable in amount in comparison
to the greatest loss that could conceivable be proved
 Penalty: if obligation is a fixed sum but clause provides for payment of
larger sum
 (Presumption of) penalty: a single lump sum is payable on occurrence
of serious or trifling breach
 Can be a genuine pre-estimate of damage even when it is near
impossible to make a precise pre-estimation
 Philips HK v AG of HK: court is slow to find a clause penal if agreed to by 2 commercial
parties acting at arm’s length

Common Law Remedies: Action for a Fixed Sum (p. 564)

 General rule: when contractual breach relates solely to an obligation to pay a fixed
some, court will order the fixed sum to be paid

Equitable Remedies: Specific Performance (p. 570)

 If damages are not adequate remedy, court can order an equitable remedy of specific
performance
o i.e. sale of rare antiques/land

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 o Failure to obey the order by the court can lead to penal sanctions
(fine/imprisonment)
 “The court gives specific performance instead of damages, only when it can by that
means do more perfect and complete justice” (Wilson v Northampton and Banbury
Junction Railway Company (1874))
 Government Proceedings Act s 27(1)(a): specific performance is not available
against the Singapore Government to which the state is a party

Limitations on Availability of Specific Performance (p. 570)

 Discretionary – if inequitable, can be withheld
 Substantial delay in applying for the relief can cause the court to withhold it (doctrine
of laches)
 Specific performance can be refused when:
o Needs constant supervision by the court
o Court is unable to specify the terms of the order which is to be complied with
o Needs an impossible performance (or excessively burdensome/futile actions)
o Relates to a contract of personal service – court will not force an unwilling
defendant i.e. contracts of employment
o Adversely affects the rights of third parties to the contract

Equitable Remedies: Injunction (p. 571)

 Negative contractual obligation – party in breach fails to honour a promise not to do
something
 Warner Bros v Nelson (1937): film actress agreed to act only for plaintiff for a certain
period and also agreed not to engage in any similar services with any other person or
“engage in any other occupation. She contracted with another film company so
plaintiff claimed an injunction to restrain her
o Held: injunction granted only not to work for anyone else during the period
but not to restrain her from any other occupation

Prohibitory Injunction (p. 571)

 Court orders defendant to refrain and/or cease doing an act in breach of the contract
o i.e. not to be employed by a competing business in breach of a valid ROT
 Prohibitory injunction likely to be granted unless
o Inequitable or oppressive
o Balance of convenience does not favour making such an order
 Lumley v Wagner (1852): defendant agreed to sing at plaintiff’s theatre and during
that certain period not sing anywhere else. She made a contract with another theatre
and refused to perform her contract. Plaintiff applied to court for SP and/or
injunction
o Held: application for SP failed (personal services) but injunction granted to
restrain the breach of her promise not to sing elsewhere

Mandatory Injunction (p. 571)

 Court orders defendant to correct an act that should not have been done
o i.e. demolish a wall built in breach of contract
 To restore the aggrieved party to the position they would have been if the negative
obligation had not been breached

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Statutory Damages in Lieu of or in Addition to Specific Performance or Injunction (p.
572)
 Supreme Court of Judicature Act First Schedule:
o High court has power to grant all reliefs and remedies at law and in equity,
including damages in addition to, or in substitution for, an injunction or
specific performance
o Powers also extended to District and Magistrate’s courts in Subordinate Courts
Act s 31(1) 52
 Ho Kian Siang v Ong Cheng Hoo (2000): damages in lieu/in addition to SP and
injunction are discretionary (as opposed to damages for breach of contract which are
available as of right)

Restitutionary Awards (p. 573)

 Purpose: seeks to reverse any “unjust enrichment” gained by the defendant at the
expense of the plaintiff
 Plaintiff needs to prove:
o The defendant was enriched
o At the expense of plaintiff
o Circumstances that make the enrichment “unjust” – some reason in the law
that would make it unfair for the defendant to keep that enrichment
o No defence available to the defendant to resist the justice of the plaintiff
 Law of unjust enrichment can only be applied when there is no contract or after a
contract has been terminated/vitiated
 Two areas of restitutionary remedies:
o Total failure of consideration
o Quantum meruit and quantum valebant

Benefits in money: total failure of consideration (p. 574)

 Doctrine of total failure of consideration: when the basis of the money has failed
 Consideration: refers to the actual performance and completion of the contractual
promises
 Success of claim depends on the claimant establishing that they have received no
party of the promised benefit
o Rowland v Divall (1923): plaintiff did not have good title to the car and there
was total failure of consideration and ordered the defendant to refund the
purchase price
o Fibrosa (1943): machinery couldn’t be delivered because the contract was
frustrated by WW2 (before FCA) and court ruled total failure of consideration
o Rover International Ltd v Cannon Film Sales Ltd (1989): contract expressed
time of payment of installments was of the essence. Therefore failure to pay
the third installment allowed Cannon Film to discharge and sue Proper Film
for damages

Benefits in kind: Quantum Meruit and Quantum Valebunt (p. 577)

 Restitution of non-monetary benefits (i.e. goods and services)
 Quantum meruit: money’s worth of a service
 Quantum valebunt: money’s worth of a good
 What if quantum meruit/quantum valebunt exceed contractually agreed price?

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 o Lodder v Slowley (1901): court allowed Slowley to recober on the basis of
quantum meruit for the value of the work he had completed up to the point of
the breach of contract
o Partial performance does not necessarily always mean conferring a benefit –
defendant can “subjectively devalue” the partial performance and argue that
the partial performance had no benefit
o Undeniable benefits:
 Receipt of a sum of money (even partially paid)
 Partial provision of goods or services that relieved defendant from
inevitable and necessary expenses
o In cases of incontrovertible benefits contract price should be ignored
o “requested for” benefit: sufficient indicator that the person desires and
values the benefit
 Can also impliedly request (i.e. encourage)
 Usually people regard having been benefitted by receiving part of what
they requested for
o Recovery of advance payments depends on the non-blameworthiness of
plaintiff
 Siong Kee v Beng Tiong Trading, Import and Export (1988) Pte Ltd
(2000) when plaintiff himself is at fault, court will not award quantum
meruit

Contractual Basis
 Contractual parties forgot to agree on remuneration so court will infer a promise to
pay a reasonable amount

Restitutionary Basis
 Obligation is imposed on the parties by the law without reference to any promsi or
agreement

Restrictions on Recovery for Unjust Enrichment (p. 580)

 Plaintiff can resist or minimize restitution if: (identified in Info-communications
Development Authority of Singapore v Singapore Telecommunications Ltd (No 2)
(2002))
o The payee has changed his position
o Change is bona fide
o Inequitable for them to make restitution or restitution in full
o Causal link between receipt of the benefit and the recipient’s change in
position

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Tort of Negligence (Chapter 6) (p. 133)
 Tort: a wrong
o Does not have to have a contract
o If there is a contract, then can sue in both tort and contract
o Civil (not criminal) liability enforceable by the individual (not state)
o Usually imposes duty not to act in certain ways
 My right = your obligation
 Negligent conduct: acts performed carelessly or without proper care
 A person must act with reasonable care – if not they MAY be liable to compensate
those to whom they owe a duty
 There are legal rules that serve as control mechanisms or devices to define the
circumstances in which a careless act or omission causes harm
o Not all forms of negligent conduct will result in legal liability

The Legal Requirements (p. 133)

 Legal requirements necessary for the plaintiff to establish an action in the tort of
negligence:
o Existence of duty of care (defendant owes to the plaintiff)
o Defendant breached this duty of care
o Defendant’s breach caused damage suffered by plaintiff (damage not too
remote)
 If legal requirements are met, plaintiff will succeed in their action in negligence
against the defendant
 Exception: Defendant can make use of valid defences
o Illegality (ex turpi causa)
 If proven, defendant not liable at all
o Voluntary assumption of risk (Colenti Non Fit Injuria)
 If proven, defendant not liable at all
o Exemption of liability
 Depends whether exemption entirely excludes or only limits the extent
of liability
o Contributory negligence
 If proven, defendant partially liable

Duty of Care (p. 134)

Main Judicial Formulations for Duty of Care (p. 134)

 Donoghue v Stevenson (1932): friend of a purchaser of the bottle of ginger beer
suffered gasto-enteritis upon consumption
o No contractual relationship between consumer and manufacturer
o Claim for personal injury under tort of negligence – consumer against
manufacturer
o “Duty of care” owed to your neighbor
 Will what you do or don’t be likely to cause damage to your neighbor?
o “Neighbor” = persons who are closely and directly affected by the act
 Ought to be in your contemplation
o Is not a pure foreseeability test

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  Test can be used for when careless act or omission caused physical
damage/injury/nervous shock to primary victim and consequential
economic loss
 Cannot be used for PURE economic loss or secondary victims of
nervous shock
 Anns v Merton London Borough Council (1978): council’s negligent failure to carry out
inspections resulted in inadequate foundations of the structure. Was a duty of care
owed to the lessee (plaintiff)?
o Two stage test:
 Is there a sufficient relationship of proximity or neighbourhood such
that, in the reasonable contemplation of the defendant, the carelessness
of the defendant would be likely to cause damage to the plaintiff?
 If yes, are there any considerations that ought to negate, reduce or limit
the scope of the duty or the class of persons to whom it is owed or the
damages to which a breach would give rise?
o Criticised for being too broad to state the scope of duty of care
 Caparo Industries plc v Dickman (1990): existing shareholder bought additional
shares from the company in reliance on the defendants’ audit report. Accounts of the
company were negligently audited. Plaintiff lost monies as a result. Is there duty of
care owed to the plaintiff to take reasonable care in auditing the accounts?
o Three elements for establishing duty of care
 Foreseeability of damage
 Relationship of proximity
 Whether it is fair, just and reasonable to impose a duty
o Do not use in Singapore

Meaning of “Foreseeability”, “Proximity” and “Fair, Just and Reasonable” or Public Policy (p.
138)
 Foreseeability: negligent act is likely to result in the damage suffered by the plaintiff
o Focus on the foreseeable harm and class of persons who may be affected
 Proximity: precise relationship between plaintiff and defendant
 Fair, just and reasonable or public policy: generally used interchangeably
o Public considerations employed by judges
 Need to preempt potentially defensive behavior of defendants
 Public benefit
 Ensuring consistency between common law and statutory purposes

Singapore Position (p. 139)

 Spandeck Engineering (S) Pte Ltd v Defence Science & Technology Agency (2007)
(“Spandeck”): superintending officer negligently undervalued and undercertified
works carried out by the contractor. Building contract between contractor and
employer, superintending officer was engaged by employer to administer and
supervise the project
o No contract between superintending officer and contractor
o Does the superintending officer owe a duty of care to the contractor?
 NO – event was foreseeable but proximity was not satisfied (arbitration
clause)
 Spandeck Test (single test for cases of negligence)
o Applies to all types of damage

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 o Preliminary requirement: factual foreseeability
 There is factual foreseeability if the defendant ought to have known
that the claimant would suffer damage from his (the defendant's)
carelessness
o First stage: proximity
 Focus on relationship between plaintiff and defendant (physical,
circumstantial and casual proximity)
 Includes voluntary assumption of responsibility and reliance
 If satisfied, prima facie duty of care established. Move onto second
stage
o Second stage: any consideration that ought to negate or limit the duty that
has arisen under the first stage
 Floodgates: Open defendant to liability in an indeterminate amount for
an indeterminate time to an indeterminate class. Will negate/limit the
duty
 Contractual matrix: according to the contract
 Relative bargaining position of parties: might be unfair to make
someone who is in a lower bargaining position liable
 Man B&W Diesel SE Asia Pte Ltd and another v PT Bumi International Tankers and
another appeal (2004): contract said MSE would be fully responsible for work
performed by its subcontractors and nothing shall create a contractual relationship
between sub-contractor and Bumi
o Contracting with MSE meant that Bumi should seek redress with MSE for the
faulty engines, not MBS
 TV Media Pte Ltd v De Cruz Andrea Heidi and another appeal (2004): negligence
liability for physical damage due to the manufacturer’s defective products is extended
to distributors and wholesalers

Various Scenarios of Duty of Care (p. 143)

 Different types of damage arising from negligent conduct are not equally recoverable
 General principle: more restrictive for claims of pure economic loss and psychiatric
harm than physical damage
 Differentiating between physical damage, economic damage consequent upon
physical damage and pure economic loss (Spartan Steel & Alloys Ltd v Martin & Co
(Contractors) Ltd (1973))
o Physical damage = damages for the materials used in processing the particular
batch of steel when the accident occurred (recoverable)
o Consequential economic loss = the loss of profit on that batch of steel
(recoverable)
o Pure economic loss = loss of profit for subsequent batches of steel which might
have been produced if electricity had not been halted (unrecoverable)

Statement vs. Act

 An act can also be an omission (did not do something they were supposed to do)
 Statement is saying something or writing something (not the act of stating the
statement but what is said in the statement)

Negligent Acts Causing Physical Damage (p. 143)

 Actual physical damage – does not include future or potential damage

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  Defects in construction or functionality are treated as economic loss, not physical
damage
o Defects may or may not lead to actual damage
 Generally unproblematic and uncontroversial – physical damage caused by
defendant’s act is direct and obvious
o i.e. car accident where the plaintiff suffers personal or property damage
 The Sunrise Crane (2004): Sunrise Crane owed a duty of care to inform the Pristine of
the nature of the cargo immediately prior to the transfer of the contaminate acid as it
was foreseeable that failure to inform the plaintiffs would result in the damage of the
plaintiff’s vessel
 General rule: no duty of care arises from mere omissions
o No duty of care for a person to save another person with whom there is no
prior relationship
o Exception: special relationship between plaintiff and defendant with a
voluntary assumption of responsibility
o Exception: defendant knew or ought to know that the third party has created a
source of danger on the defendant’s premises and failed to take reasonable
steps to prevent danger from damaging the plaintiff’s property
 Can also get consequential economic loss
o Monetary loss resulting from physical damage/injury i.e. medical fees, repair
cost, loss of income
 Use Donoghue v Stevenson under Spandeck

Negligent Misstatements Causing Economic Loss (p. 146)

 Factors determining if duty of care has arisen (Hedley Byrne & Co Lts v Heller &
Partners Ltd (1964)):
o Skill and expertise of the maker of the statement
o Whether the maker of the statement ought to know that the other person will
rely on the statement
 Payment for the advice is good evidence for reliance
 Is the adviser acting purely out of good nature or are they getting
reward in some form?
o Whether the maker of the statement voluntarily undertakes or assumes
responsibility for making the statement
o If relationship between maker of statement and recipient is akin to contract, a
duty of care is likely to arise
 Hedley Byrne & Co Ltd v Heller & Partners Ltd (1964): valid disclaimer clause since the
statement was made “without responsibility on the part of the bank or its officials”.
Defendant not liable for negligent misstatement
 Caparo Industries plc v Dickman (1990): no duty of care is owed by the auditors of a
company to individual members of the public at large who rely on the information to
buy shares
o Requirements for establishing duty of care:
 Purpose made known to the adviser at the time of the advice
 Adviser knows or ought to know that their advice will be
communicated to the plaintiff (specifically or as a member of an
ascertainable class) for the above purpose
 Adviser knows or ought to know that their advice will be acted on
without independent inquiry

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  Advice was acted upon by the plaintiff to their detriment

Negligent Misstatements Causing Physical Damage (p. 149)

 Marc Rich & Co AG v Bishop Rock Marine Co Ltd (1996): classification society (a non-
profit ogrnaisation) gave a negligent certification of a vessel’s seaworthiness. Ship
sank and cargo was damaged. Was there a duty of care owed to the owner of the
cargo?
o No duty of care – cargo owners already have contractual claims against the
ship owners
o Classification society had no protection at all via limitation provisions, unlike
the ship owners
 Perrett v Collins (1998): association approved by civil aviation authority to issue
certification owed duty of care to passenger on an aircraft that suffered personal
injury
o Defendant had voluntarily assumed responsibility for issuing the certification
(which is for the protection of the public)

Negligent Acts or Omissions Causing Economic Loss (p. 150)

 Generally not recoverable
 EXCEPTIONS
o RSP Architects Planners & Engineers v Ocean Front Pte Ltd (“Ocean Front”)
(1996): duty of care existed between management corporation (plaintiffs) and
the developers (defendants). Public policy reason against the existence of
duty of care
 Determinate amount of recover, determinate class of persons and no
transmissible warranty
o RSP Architects Planners & Engineers v Management Corporation Strata Title
Plan No 1075 (1999) (“Eastern Lagoon”): sufficient reliance and assumption of
responsibility to establish duty of care. Public policy supported the duty
o Both cases concerned real property – greater financial investment and possess
permanence of structure (especially in context of land scarce Singapore)
 Animal Concerns Research & Education Society v Tan Book Kwee (2011): non-profit
society engaged contractor to construct shelter for animals. Contractor used wrong
materials for backfilling which resulted in pollution of environment and the society
had to excavate and incurred economic losses
o Court held that the clerk of works owed a legal duty to the society to supervise
the backfilling
o Applying Spandeck test:
 Reasonably foreseeable that if Tan did not take care in supervising,
society would suffer loss
 Clear physical proximity as the society was the lessee of the site and the
clerk was physically present at the site
 Tan voluntarily assumed responsibility by appointing himself as clerk
(thus having all the skills and qualifications necessary to fulfill the role)
 By submitting a form saying he was not linked to the contractor, he
should have known the society would rely on him

Negligent Acts or Omissions Causing Nervous Shock of Psychiatric Harm (p. 152)
 Only applies to recognized psychiatric illnesses (not mere mental distress, anxiety or
disappointment) not associated with any physical injury

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  Page v Smith (1996): plaintiff (who is a primary victim) can recover for psychiatric
injury as long as some form of injury was foreseeable flowing from the negligent act
o Due to car crash caused by defendant’s negligence, plaintiff (primary victim)
suffered from chronic fatigue syndrome. Since physical injury was
foreseeable, not necessary for plaintiff to show psychiatric injury was
foreseeable
 Ngiam Kong Seng v Lim Chiew Hock (2008): argues there should not be a distinction
between primary and secondary victims. Should have a single test that applies to
both primary and secondary victims
o Duty of care exists if three proximity requirements are satisfied:
 Closeness of relationship between plaintiff and primary victim (i.e.
parent-child, husband-wife) (circumstantial proximity)
 Proximity of plaintiff to the accident in time and space (physical
proximity
 Means by which shock is caused (causal proximity)
 Mcloughlin v O’Brian (1983): “the closer the tie (not merely in any relationship, but in
care) the greater the claim for consideration” (in reference to circumstantial
proximity)
o Plaintiff did not see the accident but saw her injured family members in the
hospital. Court allowed recovery
o Use for cases of secondary victims
 Show close and loving relationship between plaintiff and sufferer
 Proximity in time and space to the accident
 The means by which the shock is caused either through actual sight or
hearing of the event or its immediate aftermath
 Pang Koi Fa v Lim Djoe Phing (1993): involved medical negligence that eventually
culminated in the death of the plaintiff’s daughter
o First proximity: satisfied, mother-daughter relationship
o Second proximity: plaintiff was proximate in time and space to the tortious
event (death of her daughter) as plaintiff witnessed the negligent diagnosis,
negligent operation and negligent post-operative treatment

Breach of Duty of Care (p. 154)

 Concerned with the “standard of care” expected of the defendant
o If defendant’s conduct falls beneath this standard, they have breached the duty
of care
o Standard = objective standard of a reasonable person using ordinary care and
skill
o Will normally be the case even if the defendant is inexperienced in the activity
or task (i.e. driving) (Nettleship v Weston (1971))
 Burden of proof on the plaintiff to prove that the defendant has been negligent i.e.
breached the duty of care expected of him

Factors to determine the standard of care (p. 155)

 Dependent on what is reasonably foreseeable as measured by the prevailing
knowledge at the time of the event (not after) (Roe v Minister of Health (1954))
 Likelihood of injury
o If likelihood is extremely low or remote, high standard of care is not required
to prevent the injury

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  Bolton v Stone (1951): plaintiff was injured by a cricket ball. Probability
of a person outside the cricketing grounds being hit was very low.
Held: defendant did not breach their duty of care to the plaintiff to
prevent the accident
o If likelihood is serious, higher standard of care required
 Paris v Stepney Borough Council (1951): plaintiff was already injured in
one eye, therefore had a higher chance of blindness compared to a
normal person. Held: employer breached duty of care by not providing
goggles plaintiff goggles for his work as a garage hand
 Cost of avoiding injury
o Needs to be balanced with risk of harm
o Latimer v AEC Ltd (1953): plaintiff tripped and fell on the floor of a factory
owned by defendant and sued for negligence
 Held: defendant did not breach its duty of care
 Defendant already took reasonable steps to remove the effects of the
flood and was unreasonable to expect them t close the factory
o Wagon Mound (No 2) (1967): a reasonable man would only neglect a small risk
provided they had a valid reason for doing so (i.e. considerable expense to
eliminate the risk). He would weight it against the difficult of eliminating it
 Presence of potential hazards/dangers posed to the plaintiff (i.e. contaminated nitric
acid in The Sunrise Crane)
 Presence of industrial standards and regulations (i.e. employer’s duties to employees
(Chandran a/l Subbiah v Dockers Marine Pte Ltd (2010))
 Level of plaintiff employee’s experience, training and skills (i.e. Zheng Yu Shan v Lian
Beng Construction (1988) Pte Ltd (2009))
 Level of knowledge and commercial sophistication of the plaintiff clients (Go Dante
Yap v Bank Austria Creditanstalt AG (2011))

Standard of Care Relating to Professionals and Professional Standards and Practice (p. 156)
 In regard to professionals, standard of care is what is reasonably expected of a
reasonably competent professional with respect to that particular field
 Specialist must exercise the ordinary skills of their specialty (Maynard v West
Midlands Regional Health Authority (1984))
 Bolam v Friern Hospital Management Committee (1957): Test is based on the standard
of the ordinary skilled man exercising and professing to have that special skill. A
professional need not possess the highest expert skill at the risk of being found
negligent. Sufficient if they exercise the ordinary skill of an ordinary competent
person exercising that particular art
 Level of experience is not relevant in determining the standard of care (Wilsher v
Essex Area Health Authority (1988))
 Professional can still be liable under tort of negligence even if they met professional
standards
o Professional standards are only a guideline
o Fong Muan Yee v Yoon Weng Ho Robert (1997): not common practice for
lawyers to verify their instructions
 Held: breached duty of care
 Failing to verify instructions had a foreseeable risk that the defendant
would be acting without authority

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  Defendant lawyer could have avoided risks by taking steps to confirm
his authority to act or warn the plaintiff he was acting without
authority

Use of Expert Evidence in Determining the Standard of Care (p. 157)

 Standard of care expected of professionals based on evidence of experts within the
same or similar professions
o Bolam v Friern Hospital Management Committee (1957): a doctor is not guilty
on negligence if he has “acted in accordance with a practice accepted as proper
by a responsible body of medical men in that particular art”
o Medical opinion must not ignore or controvert known medical facts or
advances in medical knowledge
o Bolam test has also been applied to assess the standard of care of auditors
o However, if professional opinion is not capable of withstanding logical
analysis, the judge is entitled to hold that the body of opinion is not reasonable
or responsible

Res Ipsa Loquitor (p. 159)

 Burden of proof on plaintiff to show the defendant breached duty of care
 Res Ipsa Loquitor: “the thing speaks for itself”
 Three criteria must be satisfied to use doctrine:
o Defendant must have been in control of the situation or thing which resulted
in the accident
o Accident would not have happened, in the ordinary course of things, if proper
care had been taken
o Cause of accident must be unknown to the plaintiff
 Defendant can displace effect of doctrine by giving evidence that they were not
negligent
 Scott v London & St Katherine Docks Co (1865): sacks of sugar under the control of the
defendant fell from a crane t the defendant’s warehouse
o Held: doctrine applied because accident, in the ordinary course of things, could
not have occurred withoutthe defendant’s negligence
 Teng Ah Kow and another v Ho Sek Chiu and others (1993): doctrine is a rule of
evidence. Once three criteria have been satisfied, burden of proof shifts to defendant
to prove they are not negligent
 Doctrine cannot apply when the accident could have happened via a number of
permutations

Causation of Damage (p. 159)

 Damage must have been caused by the defendant’s breach
 Causation is analysted by considering
o Factual causation – causal link between defendant’s negligent conduct and
damage (according to the laws of physics and natural science)
o Legal causation

Factual Causation (p. 160)

(1) “But for” test (p. 160)

 Fails “but for” test if plaintiff would have suffered damage even if the defendant was
not negligent (negligence does not cause the damage)

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 o Barnett v Chelsea & Kensington Hospital (1969): patient would have died even
with correct medical treatment. Held: doctor negligently refusing to examine
patient did not cause the death of the patient
 “but for” can be failed due to the presence of variables that cannot be established by
the plaintiff on a balance of probabilities
o Yeo Peng Hock Henry v Pai Lily (2001): GP did not advice plaintiff to see a
specialist or go to the hospital immediately. Plaintiff didn’t get an earlier
diagnosis and lost her sight.
 Held: defendant fell short of the standard of care required by a GP
 However, GP wouldn’t be expected to detect the actual rare disease that
she had
 Whether the plaintiff’s eye could be saved would be subject to variables
 Held: plaintiff had not proven, on a balance of probabilities, that if the
defendant had advised her to go to a hospital immediately that her eye
would have been saved
 “but for” is not applicable in the context of medical practitioner’s failing to warn
patients about risk of surgery
o Chester v Afshar (2005): insufficient evidence to show that if duly warned if the
patient would not have undergone surgery
 “but for” test can lead to absurd results in multiple causation cases (i.e. both causes
do not cause the damage). Therefore use the next section below

Material contribution to damage (p. 162)

 Did the breach materially contribute to the damage?
 Necessary for breach to be the sole or dominant cause
o Bonnington Castings Ltd v Wardlaw (1956): plaintiff suffered pneumoconiosis,
claiming it was due to the employer’s failure to install a safety equipment to
prevent exposure to silicon dust
 Cannot demonstrate precise proportions of the source of the dust
(either from employer’s negligence or other non-tortious sources)
 Severity of illness was proportionate to level of exposure to dust
 Held: defendant’s negligence materially contributed to the plaintiff’s
pneumoconiosis
o Holtby v Brigham & Cowan (Hull) Ltd (2000): where there were two or more
employers, each employer was liable to the plaintiff employee for a portion of
damage proportionate to the relative time of exposure to the agent of harm (in
this case, asbestos)

(3) Material contribution to risks of damage (p. 162)

 General rule: when there are several potential causes of harm, some tortious and
some natural, plaintiff can only succeed if they prove on a balance of probabilities
that the damage is attributed to the tort (Wilsher v Essex Area Health Authority
(1988))
 Exception: (Fairchild v Glenhaven Funeral Servcies Ltd (2003)) impossible for plaintiff
to prove on a balance of probabilities that the damage suffered was caused by the
employer/occupier’s conduct but each had materially increased the risk that plaintiff
would contract mesothelioma.
o Defendants jointly and severally liable (defendants consecutively exposed the
plaintiff to the same risk)

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 o Held: defendant’s conduct caused the damage. Remedy was awarded on the
grounds of fairness
o McGhee v National Coal Board (1973): if defendant has sole control over the
agent of harm he may be liable even if plaintiff can only establish that the
defendant negligently increased the risk of harm
 Employer failed to provide showers to wash off brick dust employee
was exposed to and materially increased the risk of employee
contracting dermatitis
 Held: defendant caused the damage even though it could not be
established that the dermatitis was caused by the brick dust during the
period the defendant failed to provide showers
o Marker v Corus (UK) plc (2006): one of the exposures to asbestos was partly
due to a failure of the plaintiff to take reasonable care of himself
 Fairchild exception still applicable
 Difference – defendants not jointly and severally liable, liable only
according to their respective contributions to the risks

(4) Loss of chance (p. 164)

 Hotson v East Berkshire Health Authority (1987): doctor was negligent of his diagnosis
but there was only a 25% chance of healing and that the complication wouldn’t have
developed if doctor diagnosed the injury properly
o Held: causation was not proved on a balance of probabilities. Defendants were
not liable
 Gregg v Scott (2005): negligent delay of diagnosis and treatment of plaintiff suffering
from cancer increased latter’s chances of premature death from 25-42%
o No evidence that the delay would, on the balance of probabilities, have caused
premature death
o Held: plaintiff could not claim damages in respect to alleged additional chance
he would have a premature death

Legal Causation (p. 164)

 Novus actus interveniens: new intervening act
o The act of the plaintiff or third party or even a natural event that takes place
between the defendant’s alleged negligence and the damage that ensued
o If novus actus interveniens is sufficient to break the chain of causation, the
defendant’s breach will not be regarded as the cause of the plaintiff’s damage
(Mckew v Holland & Hannen Cubitts (Scotland) Ltd (1959))
 When one tort is follower by another tort or a natural event
o Baker v Willoughby (1970): plaintiff injured his left leg by a road accident then
shot in the left leg by an armed robber
 Held: even though second tort wiped out the physical effect of the
defendant’s negligence (first tort), defendant remains liable
o If second event is a natural event, defendant ceases to be liable at the time of
the natural supervening event (Jobling v Associated Dairies (1982))

Remoteness of Damage (p. 165)

 Test of reasonable foreseeability (from Overseas Tankship (UK) Ltd v Morts Dock &
Engineering Co Ltd (or Wagon Mound (No 1) (1961)): loss is not too remote where the
type of loss was reasonably foreseeable, despite the precise extent not being
foreseeable

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 o Facts of case: charterers of the ship breached their duty in spilling fuel oil
which spread to the plaintiff’s wharf, damaging the wharf. Plaintiff’s molten
metal from the wharf caught fire to the cotton waste in the oil
o Held: although fire was directly caused by defendant’s breach, it was not
foreseeable that the oil would catch fire in water. Plaintiff’s claim for
negligence failed
 Wagon Mound (No 2) (1967): defendants (shipowners) found liable because fire was
foreseeable and risk could have been eliminated in the circumstances (thus could not
be neglected)
 Jolley v Sutton London Borough Council (2000): plaintiff, school boy, suffered spinal
injuries from trying to repair an abandoned boat
o Held: defendants (council that did not remove the boat from the grassed
playground area) were liable
o Hughes v Lord Advocate (1963): as long as the cause of the accident was a
“known source of danger”, the defendant would be liable even if the accident
was caused in a way which could not have been foreseen

Special Circumstances of the Plaintiff (p. 167)

 “eggshell skull” rule: the defendant has to take the plaintiff as he or she is, with
existing predispositions
o Smith v Leech Brain & Co Ltd (1962): plaintiff burnt his lip due to the
defendant’s negligence. Since plaintiff had a pre-cancerous condition, his lip
became cancerous. Held: defendant liable to entire damage

Mitigation of Damage (p. 167)

 Defendant has to prove that the plaintiff ought to have taken reasonable steps to
prevent or reduce the plaintiff’s loss
 If defendant can discharge its burden, plaintiff’s losses claimable would be reduced
accordingly

Assessment of Damage (p. 168)

 Main purpose of damages in tort is to compensate losses suffered i.e. restore plaintiff
to the position they would have been in if not for the defendant’s negligence
 Personal injury cases: awarded general damages and special damages
o General damages
 Pain and suffering
 Loss of amenities (i.e. loss of capacity due to the loss of a limb)
 Future loss of earnings
o Special damages
 Loss of earnings (pre-trial)
 Medical expenses
 Death cases: bereavement expenses for the benefit of certain specified dependents (s
21 CLA)
 Property damage: costs of repair or diminution in value of property
 Economic loss cases: quantification depends on precise scope of duty of care

Defences (p. 168)

Ex Turpi Causa (p. 168)
 Ex turpi causa non oritur actio: no action ought to be founded on a wicked act

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  The plaintiff being involved in a wrongdoing does not provide a good defense
o Ooi Han Sun v Bee Hua Meng (1991): a plaintiff who does not have a permit to
be in the country does not prevent him from claiming damages against the
negligent defendant that caused his injuries. However, plaintiff did not get
compensated on the basis of what he would have earned working illegally
 For defence to be valid, plaintiff’s wrongdoing must be sufficiently connected to the
damage and defendant’s damage must be proportionate to plaintiff’s wrongdoing
o Ashton v Turner (1981): plaintiff suffered the injury in the course of
committing a crime together with the defendant
o Clunis v Camden and Islington Health Authority (1998): plaintiff claimed against
the health care authority for their negligent omissions to provide psychiatric
care which allegedly resulted in the plaintiff killing someone
o Stone & Rolls Ltd Moore Stephens (2009): plaintiff company claimed auditors
were negligent in failing to detect fraud by S. S was the sole directing mind
and will of the company, fraud was imputed into the company so auditors not
liable
 United Project Consultants Pte Ltd v Leong Kwok Onn (trading as Leong Kwok Onn &
Co) (2005): defence of ex turpi causa can apply to reprehensible or grossly immoral
conduct (along with criminal offenses)

Volenti Non Fit Injuria (p. 169)

 Has the plaintiff acted freely and voluntarily with full knowledge of the nature and
extent of the risks of the defendant’s negligence and consented to those risks that
resulted in the tort?
o If so, defendant has a complete defense
 Applicable when plaintiff is aware of the nature and extent of risks and consented to
those in the participation of an inherently dangerous activity in deliberate breach of
employer’s orders and statutory regulations (ICI v Shatwell (1965)
 Does not apply when plaintiff took conscious risks to effect rescue in emergency
circumstances from defendant’s negligence (Haynes v Harwood (1935))
 S 2 UCTA: person’s agreement to or awareness of a term or notice purporting to
exclude/restrict liability does not necessarily mean voluntary acceptance of risk
o Full knowledge and consent must be shown by defendant

Exemption of Liability (p. 170)

 Must show exemption clauses incorporated, language covers the situation in
question, must be rendered enforceable by UCTA
o Cannot restrict death or personal injury according to s 2(1)
o Other than death or personal injury, subject to requirements of
reasonableness s 2(2)

Contributory Negligence (p. 171)

 Only a partial defence
 s 3 Contributory Negligence and Personal Injuries Act:
o (1) when person suffers damage that is, party their own fault and partly
another’s, they are not barred from recovery of damage. Damages recoverable
shall be reduced to such an extent that the court thinks is just and equitable in
regard to the claimant’s share in the responsibility for the damage

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  (a) shall not defeat any defence arising under a contract
 (b) where there is a limitation of liability clause, amount recoverable
shall not exceed the maximum limit
 To reduce damages based on contributory negligence, no need for defendant to show
that the plaintiff had been in breach of duty of care (Khoo Bee Keong v Ang Chun Hong
and another (2005))

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Agency (Chapter 20) (p. 618)
 Agent: one who acts on someone else’s behalf
 What is agency?
o KS Rajah JC (in Thai Kenaf Co Ltd v Keck Seng (S) Pte Ltd (1992): “the
relationship that exists between two persons when one, called the agent, is
considered in law to represent the other, called the principal, in such a way as
to be able to affect the principal’s legal position in respect of strangers to the
relationship by the making of contracts or the disposition of property”
 Agent is in charge of negotiating, concluding and even executing the contract on the
principal’s behalf but is not personally bound between the principal and the third
party
o “Drops out” of picture as soon as the contract is concluded (as long as agent
acts within their authority)
o Recourse is against the principal, not the agent

How Agency Arises (p. 620)

 Can arise from
o Agreement between the principal and agent
o Law imposes an agency of necessity
 Need to establish agency relationship because it confers power on the agent to bind
the principal to the resulting contract

By Agreement (p. 621)

 An agreement between the principal and agent that the latter should act for the
former
 Colman J (in Yasuda Fire and marine Insurance Co of Europe Ltd v Orion marine
Insurance Underwriting Agency Ltd (1995)): “there is no necessity for such a contract
to exist. It is sufficient if there is consent by the principal to the exercise by the agent
of authority and consent by the agent to his exercising such authority on behalf of the
principal”
 Consent is objectively ascertained
o Lord Pearson (in Garnac Grain Co Inc v HMF Faure & Fairclough Ltd (1968)):
“consent if they have agreed to what amounts in law to such a relationship,
even if they do not recognize it themselves and even if they have professed to
disclaim it… but the consent must have been given by each of them, either
expressly or by implication from their words and conduct”
 Need to determine the agent’s scope of authority
o Principal is only bound by agent’s acts when agent acted within their authority
o Agent is then said to be conferred real/actual authority

(1) Express Authority (p. 621)

 Express appointment where agent is specifically told what they are authorized to do
 No need formality, oral appointment can also confer express authority
o Scope of authority determined by true construction of the words of
appointment
 In a written agreement, scope of authority depends on examination of agreement

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 o Need to apply principles for construction of contracts
o Lord Reid (in Ashford Shire Council v Dependable Motors Pty Ltd (1961)):
“extent of agent’s authority, if in doubt, must be determined by inference from
the whole circumstances”

(2) Implied Authority (p. 622)

 By implication or inference from the conduct or relationship of parties
o Person can be a made an agent by appointment to a particular post or
designation. Then would have implied authority to do all the things that
would normally be necessary for the proper execution of their duties
o Lord Denning MR (in Hely-Hutchinson v Brayhead Ltd (1968)): “actual
authority is implied when it is inferred from the conduct of the parties and
circumstances of the case”
 Agent with express authority has implied authority to do all things that are incidental
to and necessary for the execution of that express authority

Without Agreement: Agency of Necessity (p. 622)

 Law confers authority on a person to act for another because they are required to act
expeditiously in order to protect the property or interests of that other person
o Originates from mercantile law where the shipmaster has authority to act as
ship owner’s agent to preserve the ship and its cargo
 When there is pre-existing agency, doctrine confers further or more authority to
authorized agent
o Concerned with over-condoning all that an agent does such that the agent
becomes in effect the principal
 When person is not hitherto to agency relationship, doctrine confers authority by
necessity
o Concerned with subjecting the principal to obligations without their consent
 Requirements for the doctrine to apply
o Agent unable to obtain timely instructions from the principal
o Agent must have acted reasonably, in good faith and in the interests of the
principal
o Necessity or emergency that compelled the agent to act

Ratification (p. 623)

 General rule: if the agent has neither actual nor ostensible authority, principal is not
bound by the agent’s acts
 Principal can ratify the agent’s acts subsequently
o Agent is conferred authority retrospectively and principal assumes full
contractual obligations and rights with respect to agent’s earlier acts
o Lord Sterndale MR (in Koenigsblatt v Sweet (1923)): “Ratification is equivalent
to an antecedent authority… and when there has been ratification the act that
is done is out in the same position as if it had been antecedently authorized”
 Ratification can be express or implied from principal’s conduct
o For implied, principal’s conduct must unequivocally indicate affirmation for he
agent’s acts

(1) Requirements (p. 624)

1. Ratification can only be done by the person whose name or whose behalf the act was
done

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  If agent professed to be acting on their own or failed to tell the third party they
were acting on the behalf of the principal, principal cannot ratify
 Keighley, Maxsted & Co v Durant (1901): agent was authorized to buy wheat at a
certain price for the defendants. Agent acted in excess and bought it at a higher
price from the plaintiffs but in his own name. Defendant ratified the purchase the
next day but failed to take the delivery of wheat. HOL held ratification was
ineffective as agent acted in his own name. Defendant had no contractual
obligations to plaintiff
2. Principal must be in existence at the time the transaction was completed and must be
legally competent then and at time of ratification
 Not applicable to companies in accordance to s 41 Companies Act (CA): a
company can ratify a contract, entered into by agent prior to formation, after its
formation. Company will then be bound by and entitled to benefits of the contract
3. General rule: all acts done by the agent, even unlawful ones, can be ratified by the
principal
 Contracts void at inception and acts prohibited by statute cannot be ratified
4. Ratification must be in time
 If there is a time fixed for the performance of the contract, ratification must be
within that period of time
 If there is no fixed time, ratification should occur within a reasonable time of the
principal acquiring knowledge of the unauthorized transaction
5. Principal should be named and identifiable by the agent to the third party

(2) Effects (p. 625)

 Retrospective effect – principal, third party and agent will be put in the position they
would have been in if the agent had had authority the entire time
o Cotton LJ (in Bolton Partners v Lambert (1889)): “ratification is thrown back to
the date of the act done, and that the agent is put in the same position as if he
had the authority to do the act at the time the act was done by him”
o Principal acquires rights and obligations under the contract with the third
party, agent drops out of the picture
o Also known as the doctrine of relation-back
 Principal is not bound by contract until they ratify but third party is bound from the
date of contract
o Bolton Partners v Lambert: director of plaintiff company was unauthorized to
bind the plaintiff but accepted an offer by the defendant. Prior to plaintiff’s
ratification, defendant purported to withdraw offer. Plaintiff subsequently
ratified. Held: defendant was bound by the contract. Defendant could not
withdraw because it was a contract not an offer
 Main inconvenience is the third party does not know if principal will ratify
o That is why ratification must be done in a reasonable time
o Reasonable time is determined according to the circumstances (Bowen LJ in
Re Portugese Consolidated Copper Mines Limited (1890))
 Doctrine of relation-back does not apply when the contract is subject to the
principal’s approval or ratification
o Third party may withdraw at any time before ratification
o There is no contract until approval has been obtained. An acceptance
dependent on the principal’s ratification is no more binding than an accepted

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 offer which can be withdrawn until acceptance (Maugham J in Watson v Davies
(1931))

Effects of Agency (p. 627)

Principal-Third Party Relationship (p. 627)
 Disclosed principal: third party knows the agent is an agent
o An unnamed principal is still a disclosed principal
o Third party aware of the principal’s existence
 Undisclosed principal: third party deals with the agent as if the agent is the
principal
o Unaware of the principal’s existence
o Undisclosed principal can still enforce the contract as long as the agent acted
within their authority

(1) Disclosed Principal (p. 628)

 When agent acts within their authority, principal is contractually bound to third party
 When agent acts outside their authority, principal may ratify
 After this, principal may sue and be sued on the contract
o Only if agent has actual authority, apparently authority or the unauthorized
acts have been ratified
 Neither third party nor principal may discharge respective liability to each other by
settling with agent
o Butwick v Grant (1924): third party paid agent for goods sold by principal.
Third party still liable to principal because authority to sell goods does not
necessarily imply authority to receive payment
o Irvine & Co v Watson & Sons (1880): principal’s payment to the agent for the
purchase price of oil contracted on the principal’s behalf did not discharge
liability to third party

(2) Undisclosed Principal (p. 629)

 Lord Lindley in Keighley, Maxsted & Co v Durant (1901): “middlemen, through whom
contracts are made, are common and useful in business transactions and in the great
mass of contracts it is a matter of indifference to either party whether there is an
undisclosed principal or not.”
 Rules that apply to undisclosed agency (Siu Yin Kwan v Eastern Insurance Co ltd
(1994)):
o Undisclosed principal may sue and be sued on a contract made by an agent on
his behalf (as long as the agent was acting within their authority)
o When entering the contract, agent intended to act on the principal’s behalf
o Agent of undisclosed principal may also be able to sue and be sued on the
contract
 If Agents acts as the principal
 Agent’s identity as contracting party is important to the third party
 Upon disclosing existence of principal, third party can choose to bind
agent
o Any defence the third party has against the agent is available against the
principal
o Contract terms may exclude principal’s right to sue and liability to be sued.
Contract may show that the agent is the true and only principal

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  Undisclosed principal’s right to intervene is dependent on agent acting within their
authority and intention to act on the principal’s behalf
 Once principal intervenes, agent loses their right to sue and liability to be sued
 Once the third party becomes aware of principal’s existence, they can choose whether
to sue the principal or agent
o Earl Carins LC in Kendall v Hamilton (1879): third party “may sue the agent, or
he may sue the principal, but if he sues the agent and recovers judgment, he
cannot afterwards sue the principal, even although the judgment does not
result in satisfaction of debt”
 Cannot ratify and there is no apparent/implied authority

(3) Apparent Authority (p. 631)

 A person, by his conduct or representation, creates an impression that another, the
“agent”, has the requisite authority to act on his behalf. If third party has relied on this
impression and alters their legal position, then the person creating that impression is
not allowed to deny the agent’s authority, and would be bound by that agent’s acts
 Apparent authority: authority which an agent appears to have but in fact does not
 Is a form of estoppel by preventing the principal from asserting theya re not bound by
the contract

Elements of Apparent Authority (p. 631)

 Slade J in Rama Corporation v Proved Tin and General Investments Ltd (1952):
o A representation
o A reliance on the representation
o Alteration of third party’s position resulting from such reliance

Representation (p. 632)

 The principal representing to the third party that the “agent” is authorized to act on
their behalf
 Usually implied by principal’s conduct
o Principal appointing “agent” to a position that would usually have the
authority to conclude contracts of the type in question
o Previous course of dealings between principal and third party
 When principal allows supposed agent to appear as if they are the principal’s agent
o Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd (1964): board
allowed a director to act as a managing director. Director contracted with
third party and company claimed they were not bound by the contract because
director had no authority. Held: board of directors gave the impression of
authority by acquiescing in the director’s conduct. Company bound by act
 When the principal revokes or limits the agent’s actual authority but fails to inform
the third party
o Agent appears to continue to possess authority even though their actual
authority is revoked or curtailed
o Example given by Lord Denning in Hely-Hutchinson v Brayhead ltd (1968): if a
person is a managing director, they can be assumed to have all the authority of
a managing director. However, if the board sanctions the managing director’s
authority to order of less than £500 then their ostensible authority is greater
than their actual authority. Company is bound by his ostensible authority in
his dealings with those who do not know of the limitation”

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  Representation must come principal or someone who was actually authorized by
principal
o Generally insufficient if representation comes from agent
o Lord Donaldson MR in United Bank of Kuwait v Hammond (1988): “an agent
cannot ordinarily confer ostensible authority on himself”
 Interested in two areas
o Authority to enter contract and loss of profits
o Authority to receive the goods

Reliance (p. 633)

 No reliance if the party did not deal with the “agent” as an agent
 If third party suspects the agent is actually without authority then cannot rely on
doctrine of apparent authority

Alteration of third party’s position (p. 634)

 Third party entering the contract is usually sufficient alteration (Arctic Shipping Co
Ltd v Moiblia AB, The Tatra (1990))
 Some cases require the third party to suffer detriment (Norfolk Country Council v
Secretary of State for the Environment (1973))

Principal-Agent Relationship (p. 634)

 Rights and duties of principal and agent derive from the terms of the contract, if any,
between parties
 Certain duties arise from agency relationship itself

(1) Duties of an agent (p. 634)

 When agent is appointed under contract, they are clearly bound to perform in
accordance to the terms
o Implied term of obligation to perform with reasonable care and diligence
o By acting outside their authority, agent is in breach of contract
 Even without a contract, agent is suppose to act with due care and skill
o Higher standard applied to paid agents rather than a gratuitous one
 Agents are fiduciaries
o Fiduciary: a person who stands in a position of trust and confidence of
another and is conferred discretion to act for the benefit of that other
o Fiduciaries can exercise individual discretion and are able to affect the legal
position of the beneficiary
o Fiduciary power allows agent to benefit the other as well as “indulge himself
and injure” that other
o Act entirely in the interest of the other party

(a) Duty to avoid a conflict of interests (p. 635)

 Agent is under obligation not to put themselves in a position whether their duties as
an agent and personal interests conflict
o Unless conflict has been fully disclosed to principal and principal gives consent
 If agent obtains a benefit in breaching this duty, they have to surrender the benefit to
the principal
 “human infirmity”: difficult to resist the temptation to favour oneself over one’s
principal
o No-conflict rule to remove this temptation

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(b) Duty not to make a secret profit (p. 636)
 Agent not allowed to use their position, without knowledge or assent by principal, to
make a personal profit or for a personal advantage
o Includes property or confidential information
 Not allowed to accept bribes or secret commissions from third parties the agent is
dealing with on behalf of the principal
o By accepting the bribe, both agent and third party are criminally liable under
Prevention of Corruption Act (PCA)
o Bribe can also be forfeited or confiscated under Corruption, Drug Trafficking
and Other Serious Crimes (Confiscation of Benefits) Act

(c) Duty not to delegate (p. 636)

 General rule: agent cannot appoint and delegate their authority to a sub-agent
o Exception: with express or implied authority of the principal
 Confidence is the basis of agency therefore authority to delegate cannot be implied as
an ordinary incident in the contract (Thesiger LJ in De Bussche v Alt (1878))
 Situations where authority to delegate may be implied (Thesiger LJ):
o Where it can be reasonably presumed that the parties of the contract of agency
originally intended for the agent to have the authority to delegate
 Implied through the conduct of the parties, usage of trade or nature of
particular business
o An unforeseen emergency arises in the course of employment which requires
a substitute
 Even when agent has the authority to delegate, no law where the sub-agent is directly
responsible to the principal
o Wright J in Calico Printers’ Association Ltd v Barclays Bank (1930): “even where
the sub-agent is properly employed there is still no privity between him and
the principal. The latter is entitled to hold the agent liable for breach of the
mandate which he has accepted, and cannot in general claim against the sub-
agent for negligence or breach of duty”
(2) Rights of an agent (p. 637)
 Be remunerated for carrying out their mandate
o Depends on the agreement between the parties
o If there is a contract, terms of contract dictate agent’s right to remuneration
 Entitled to being reimbursed for expenses incurred and to be indemnified by the
principal against all liabilities which they have been reasonably incurred in the
execution of the mandate
 Agent not entitled to reimbursement or indemnity for acts outside their authority
unless principal ratifies
o Also applies to expenses from illegal acts and agent’s own breach of duty
 Lien over principal’s property in respect of claims against principal
o Lien: security that allows the agent to retain possession of his principal’s
property until the principal satisfies all of the agent’s claims

Agent-Third Party Relationship (p. 638)

 General rule: agent owes no liability to the third party as long as they acted within
their authority
 Exceptions:

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 o Agent agreed to be personally liable
 Subject to proper construction of the contract with the third party
 Common practice in that particular trade or business
 Usual course of business between the specific parties
 When principal is undisclosed
o By statute
 s 26 of Bills of Exchange Act (BEA): “where a person signs a bill as
drawer, indorser, or acceptor, and adds words to his signature,
indicating that he signs for or on behalf of a principal, or in a
representative character, he is not personally liable thereon; but the
mere addition to his signature of words describing him as an agent, or
as filling a representative character, does not exempt him from
personal liability”
 s 41 of CA: renders agent personally liable on pre-incorporation
contracts if they are not subsequently ratified by the company after its
incorporation
o Agent who contracted outside their authority and whose principal does not
ratify, may be liable to the third party for breach of the agent’s implied
warranty of authority
 Willes J in Collen v Wright (1857): “a person who induces another to
contract with him as the agent of a third party by an unqualified
assertion to his being authorized to act as such agent, is answerable to
the person who so contracts for any damages which he may sustain by
reason of the assertion of authority being untrue”
 If the third party knows or must be taken to know of the agent’s lack of
authority, the agent is not made liable
 If principal ratifies, agent is not liable anymore

Termination of Agency (p. 639)

 May be terminated by the acts of the parties or by operation of law
 Certain classes of agency are irrevocable
 Consent: can be discharged by performance and breach or frustration. Can also
terminate by expiry of period of appointment
 Can also be terminated by agreement
o Either party can simply give notice of intention to withdraw from the agency,
subject to liability to damages if the agency is derived from contract
 Termination of agency does not necessarily mean termination of ostensible authority
unless the third party is informed
o Principal can still be liable for the acts of the former agent
 By operation of law
o Death of either party
 Agent may be liable to third party if principal dies
o Supervening insanity of either the principal or the agent
o Bankruptcy of the principal (immediately terminates agency)
o Bankruptcy of agent (only if agent if unfit to perform their duties)
 Irrevocable
o Authority given to an agent by contract or deed for the purpose of protecting a
pre-existing interest of the agent cannot be revoked without agent’s consent

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Privity of Contract and Third Parties (Chapter 9) (p. 269)
 Doctrine of privity of contract: only parties to a contract can sue and be liable to be
sued in respect of rights and obligations under that contract
o First rule: Third party cannot enforce a benefit promised under a contract
 Does not allow third parties to interfere
o Second rule: Contracting parties cannot impose a burden on the third party
 Protects third parties from being involuntarily burdened by obligations
under a contract they are not privy to
 Nature of obligations is that they should voluntary
 Rationale: contracting parties need to know their risk of legal liabilities. i.e.: Am I only
liable to the person that I have entered into a contract with?
 Beswick v Beswick (1968): nephew to pay uncle £6 10s per week for the rest of his life.
If uncle died, to pay the aunt £5 a week for the rest of her life. When uncle died,
nephew only paid one payment of £5 to the aunt.
o Held: aunt could not personally claim against the nephew since she was not
privy to the contract
o She could claim as administratrix for the uncle’s estate as she was claiming on
behalf of the uncle and he was privy to the contract
 As if the HUSBAND is suing
 Estate pays for the suit
o She did get the money in the end
 Twedle v Atkinson (1861): contract was between the fathers to pay the groom
o One of the father’s died and the groom tried to enforce the contract by suing
the estate
o Held: that the husband did not provide consideration and was not privy to the
contract
 Dunlop v Selfridge (1915): Dunlop (manufacturer) sold tires to Dew (wholesaler).
Contract had a term that said cannot sell below a certain price. Wholesaler sold to
Selfridge (retailer). Also had a term that cannot sell below a certain price. Selfridge
sold below the certain price. TWO CONTRACTS
o Contract between Dew and Selfridge was breached
o Dew did not sue because if Selfridge sells cheaper then Dew will get more
business from Selfridge
 Suing the retailer might mean no more business between retailer and
wholesaler
o The more expensive the product, the more the manufacturer benefits
o Held: Dunlop was not privy to the contract and therefore cannot enforce
 Contracts (Rights of Third Parties) Act (CRTPA)
o s 2(5): “and such remedy shall not be refused on the ground that, as against
the promisor, the third party is a volunteer”
 Arguments based on the doctrine of consideration cannot defeat a third
party’s claim
o s 8(1): does not override common law, ad hoc statutory techniques for
avoiding the privity rule nor prevent the creation of new techniques

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Third Party Enforcement of Benefits under Contract: Techniques to Get Around the
Privity Rule (p. 272)
 Common law exceptions. The rule can produce injustice
 Commercially inconvenient – i.e. agency
 Many exceptions created
o Statutory exceptions i.e. car insurance (cars are driven by different people not
just the person that buys it)

Common Law Techniques (p. 278)

(a) Agency (p. 287)

 Agent acts on behalf of the principal to negotiate and conclude a contract
 When it is a disclosed principal, there is no problem of privity with the apparent third
party principal
 Even with an undisclosed principal, principal can still assert their rights under the
contract
 More of a law of agency than a technique to get around the privity rule

(b) Assignment (p. 286)

 If A transfers or assigns their rights under a contract with B to a third party, the third
party can enforce those rights in their own name
 CLA s 4(8): absolute assignment
o A only need to give a written notice signed by A (the assignor) of the
assignment to the third party. Consent of B not needed
 Even if all requirements of s 4(8) are not met, equitable assignment can be effective if
there is clear evidence that the assignor intended for the third party to have the
benefit of their rights under the contract

(c) Law of Trusts (p. 288)

 Where a trust makes up part of a third party’s benefit, the law of trust enables the
third party to enforce the benefit against a contracting party
o Not based on contract law, based on law of trusts

(d) Tort of Negligence (p. 287)

 Claim in tort of negligence (no need to be privy to a contract for claims in tort)

(e) Collateral Contracts (p. 284)

 Shanklin Pier LD v Detel Products LD (1951): Detel assured Shanklin that the paint
would last 7-10 years. Shanklin told contractors to buy paint from defendants. Paint
only lasted 3 months. Shanklin sued defendants even though there was no express
contract between them
o Two real contracts – between Shanklin and contractors, contractors and Detel
o Held: implied a collateral contract where defendants promised that their paint
would last for 7-10 years. Consideration was Shanklin entering into an
agreement with contractors which included the purchase and use of Detel’s
paint

(f) Himalaya Clause (p. 284)

 Technique that enables a third party to rely on an exemption clause in a contract to
which they are not privy

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 o Emerged from the context of the shipping industry where the benefit of an
exemption clause ought to be shared to third parties (stevedores employed by
the carrier to unload the cargo owner’s goods from the carrier’s vessel)
o Sometimes stevedores negligently damaged the goods in the course of
unloading and the cargo owner sued in tort of negligence. The stevedores
sought to rely on the exemption clause in the contract of carriage they were
not privy to
 Scruttons Ltd v Midland Silicones Ltd (1962): held that the stevedores could rely on
the clause if four conditions were met
o Bill of lading (contract of carriage of goods by sea) makes it clear the third
party stevedore is to be protected by the exemption clause
o Bill of lading makes it clear that the carrier is acting as an agent for the
stevedore
o Carrier has authority from the stevedore to do so
o There are no difficulties about consideration moving from the stevedore
o The clause in Scruttons did not meet these conditions as it made no reference
to the stevedores at all
 New Zealand Shipping Co Ltd v AM Sattherwaite & Co Ltd (The Eurymedon) (1975):
clause satisfied the four conditions and became known as the “Himalaya Clause”
o 1st condition: exemption clause was to “protect any servant or agent of the
carrier including any independent contractor from time to time employed by
the carrier”
o 2nd condition: “the carrier is or shall be deemed to be acting as agent or trustee
on behalf of and for the benefit of all persons who are or might be his servants
or agents from time to time”
o 3rd condition: carrier is a wholly owned subsidiary of the stevedores, so there
was authority
o 4th condition: there was a unilateral collateral contract. Cargo owners made a
unilateral offer to extend the benefit of the exemption clause to anyone who
unloaded their goods at the port of destination. Stevedores unloading =
acceptance and consideration
 s 2(6) and s(7)(a) of CRTPA has a more direct method of enforcing an exemption
clause in a contract to which a stevedore is not privy to

(g) The ‘Black Hole’ Problem (p. 278)

 Can the promisee sue on behalf of the third party?
o Depends on the willingness of the promisee
o Technically, the promisee is allowed to sue the promisor for breach of any
term of the contract
 Issue is the types of remedies available to the third party
o Remedy of specific performance would make the promisor do what they
promised to do in the contract and hence enforce the third party’s benefit
 Discretionary according to the court
 If damages are sufficient, court will not award specific performance
o If specific performance is unavailable, can promisee claim substantial damages
for the third party?
 General rule: promisee is entitled to sue for breach of contract to recover substantial
damages in respect of the promisee’s own losses

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 o If promisee suffered no damages and is suing for the sole benefit of the third
party they can only be entitled to nominal damages
 Jackson v Horizon Holidays (1975): Mr. Jackson (the promisee) went on holiday with
his family (third party) but holiday was below the standard promised by Horizon
Holidays (promisor)
o Promisee sued and was awarded £1,100 of which £500 was for mental
distress
o Most of the judges felt that the award was solely for the promisee’s loss (might
have increased due to seeing his family in distress)
o Lord Denning said that in certain contracts promisee should be allowed to
claim for the loss of third parties
 Woodar Investment Development Ltd v Wimpey Construction UK Ltd (1980): promisee
cannot be allowed to recover damages on behalf of the third party
o Court suggested that certain types of contracts might warrant special
treatment (however this has yet to be applied to law):
 Contracts for family holidays
 Meals in a restaurant for a party
 Hiring a taxi for a group
 Linden Gardens Trust v Lenesta Sludge Disposals (1994): building contractor
(promisor) breached its contract with the owner of the site (promisee). Defects only
showed up after the development was sold to the third party
o Original owner tried to sue on behalf of the third party but promisor argued
that the promisee was only entitled to nominal damages as promisee didn’t
suffer any loss themselves
o House of Lords ruled promisee was allowed to claim in respect to the third
party’s loss by applying a principle in The Albazero (1977)
 “where it is in the contemplation of the parties that the proprietary
interests in goods may be transferred from one owner to another after
the contract has been entered into and before the breach which causes
damage to the goods, an original party to the contract, if such be the
intention of them both, is to be treated in law as having entered into the
contract for the benefit of all persons who may acquire an interest in the
goods before they are damaged, and is entitled to recover, by way of
damages for breach of contract, the actual loss sustained by these
persons.”
 The 4 criteria to prove is:
 Commercial contract for goods

 Contemplation of the parties that the proprietary interests in the
goods will be transferred to 3rd parties

 After original contract but before the breach

 INTENTION of both original parties for 3rd party to benefit in
law
 Promisor and promisee contracted with the knowledge that the
development would be occupied and possibly sold to third parties
 Prevented the third party from suing on contract
 Must have been the intention of the parties that the promisee is entitled
to claim for the third party’s loss due to promisor’s defective
performance

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 o Narrow ground: Albazero exception. Only applicable if there is a legal “black
hole”
 Legal “black hole”: party with the right to sue has not suffered
substantial loss of the one who did has no such right due to lack of
privity
 Defaulting party escapes liability
 Promisee only claims nominal damages
 Third party cannot enforce contract
 No legal black hole if the party suffering substantial loss has the right to
sue
 Alters the position of PRIVITY
o Broad ground: third party’s loss is the promisee’s own loss
 It is the loss of their performance interest in the contract because they
did not receive what they bargained for
 Alter the position of DAMAGES
 Alfred McAlpine Construction Ltd v Panatown Ltd (2000): could not use the narrow
ground because the third party was conferred a “duty of care deed” that allowed the
third party a direct right of action against the promisor
o Majority of the judges ruled in favour of the broad ground
 Chia Kok Leong and another v Prosperland Pte Ltd (2005): promisee (Prosperland)
was the developer of a condominium. Promisors were the main contractor and
architects
o Contractor and architects defectively performed but this only showed after the
promisee had sold ownership to the third party (MCST)
o Court applied “narrow ground” even though MCST had direct action against
the promisor under tort of negligence
 Only express contractual “provision of a direct entitlement” prevents
the application of the narrow ground
 Limited right of tort did not remove the black hole
 Narrow ground is ratio decidendi in this case
o The broad ground was probably more consistent with principle
 The only problem that could arise was that the builder could be
exposed to double liability
 Had nothing to do with the “filling up” of a legal black hole
 Should not be a prerequisite for the application of the exception under
the broad ground that the building employer had to show that he had
already carried out the repairs or intended to do so
 Can only be used in a limited area
 Family Food Court v Seah Boon Lock and another (2008): court restates its views on
the general scope and application of the “broad” or “narrow” grounds and consider
whether they could apply to an agent acting on behalf of an undisclosed principal
o Loss recoverable under broad ground must be genuine and subject to an
objective test of reasonableness
 To prevent unexpected profits (windfall)
 Remedies should be awarded to third party
o Losses recoverable under breach are subject to satisfy the requirements under
remedies (causation, remoteness, mitigation and assessment)
o Broad and narrow grounds cannot be applied simultaneously

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 o When an agent is seeking to claim on behalf of an undisclosed principal,
cannot use narrow ground
 Albazero exception only applies when, at the time of contract, it was
contemplated that the proprietary interest in the subject matter would
be transferred by the promisee to the third party
 Undisclosed principal = no contemplation
o Law unsettled whether agent for an undisclosed principal can use broad
ground

(h) Other Common Law techniques (p. 288)

 London Drugs Ltd v Kuehne & Nagel Internatuonal Ltd (1993): third party employees
are able to avail themselves to exemption clauses contained in a contract between
their employer and claimant if
o The benefit of the exemption clause is expressly or impliedly extended to the
employees
o Employees, at the time of loss and damage, were acting in the course of their
employment and performing the services undertaken in the said contract

Contracts (Rights of Third Parties) Act (CRTPA) (p. 272)

 Provides a “general and wide-ranging exception to the privity rule”

(a) Scope of application (p. 272)

 s 1(2): automatically applies to contracts entered into from 1 July 2002
 s 1(3): for contracts between 1 Jan and 30 June 2002, must expressly provide for
CTRPA application
 Certain contracts specifically excluded from CRTPA
o s 7(1), s 7(2A) and s 7(2)
 For certain contracts, CRTPA only confers limited rights to third parties
o s 7(3): third party will not acquire a right under the CRTPA to enforce a term
in a contract of employment against an employee
o s 7(4): third party may only acquire the right to enforce an exemption clause
in contracts of carriage of goods by sea, rail, road or air subject to their
respective rules of international transport conventions
 s 2(4): contracting parties at liberty to exclude or impose conditions precedent upon
application of the CRTPA by an express term

(b) Rights of third party to enforce contractual term (p. 273)

 Two requirements for a third party to acquire the right to sue
o s 2(3): Third party must be expressly identified in the contract by name, as a
member of a class or answering a particular description but need not be in
existence when the contract is entered into
 In Twedle v Atkinson and Beswick v Beswick the groom and widow were
expressly identified
 A subsequent purchaser of property would satisfy the requirement
although not identified by name
o Third party must fall within either one of the following situations
 s 2(1)(a): Contract expressly states that the third party may enforce the
term
 s 2(1)(b): a term in the contract purports to confer a benefit on the
third party

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  s 2(2): subject to proper construction
 Can be express or implied
 Can prevent implication by expressly stating that there is no
intention to benefit third parties
 See CLAAS Medical Centre Pte Ltd v Ng Boon Ching (2010) for scope and application of
ss 2(1)(b)and 2(2) (p. 273)

(c) Remedies available to a third party (p. 276)

 s 2(5): third party who is entitled to enforce a term in the contract has the same
remedies available to them as a contracting party (Carriernet Global Ltd v Abkey Pte
Led (2010))
o Remedies include damages, specific performance and injunction
o Usual rules for governing remedies apply

(d) Variation and rescission of contract (p. 276)

 s 3(1): where a third party has the rights to enforce a term under s 2 contract cannot
be varied or rescinded to alter or remove third party’s right without consent
o Third party must communicate their assent to the promisor or the promisor
should know the third party relied on the term
 Promisor – contracting party whom the third party would enforce the
term against
o s 3(3)(a): there can be an express term reserving the contracting parties’ right
to vary or rescind the contract without the third party’s consent
o s 3(3)(b): may also use an express term stating that the third party’s consent is
required for other circumstances

(e) Other provisions (p. 277)

 s 4: third party’s right of enforcement is subject to defences or set-offs available to
promisor
 s 6: promisor is protected against double liability if both the third party and promisee
sue them
o s 5: the promisee’s rights to enforce any term, including the term that confers
a benefit to the third party, is preserved
 s 8(2): third party is prevented from challenging an EC relied on by the promisor on
the basis of s 2(2) of UCTA
o If promisor negligently fails to honour a term to confer a benefit to third party,
third party cannot argue for reasonableness under UCTA

Other statutes (p. 278)

 See p. 278 for other legislation before CRTPA

Imposing Burdens on Third Parties: Techniques to Get Around the Privity Rule (p. 288)
Sub-bailment Contracts (p. 288)
 Bailment: arises when an owner of goods (bailor) parts with the possession of their
goods by delivering them to another person (bailee) to hold for a time or to have
something done to them before returning possession of the goods to the bailor
o i.e. jewellery taken to jewelers for repair
 Sub-bailment: the bailee bails the same goods to a sub-bailee

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  Is the third party (original bailor) burdened by the exemption clause contained in the
sub-bailment contract between bailee and sub-bailee?
o If bailor impliedly or expressly consented to the terms of sub-bailment, they
are bound (Morris v CW Martin & Sons Ltd (1966))

Land Law (p. 289)

 Third party may be bound by a restrictive covenant in a contract for the sale of land
between the contracting parties (Tulk v Moxhay (1848))

Unlawful Interference with Contractual Rights (p. 289)

 If third party knows A and B have contracted with each other, they are under
obligation to not induce either party to breach the contract

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