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Business Law Notes
Business Law Notes
The terms of a contract are statements which set out the duties and rights of each party. They are
either expressed or implied terms. Expressed terms are communicated (orally, through writing or
both) to parties. Implied terms are not communicated to parties and are either implied by the court
(case law. So obvious that they have to be implemented in order for the contract to be workable),
statute (may not be expressly indicated in the contract but involved anyway; unfair contract terms
act, sale of goods act) or by custom or trade usage.
When a term of a contract is breached, the innocent party may claim damages, with the amount
dependent on the evidence. However, the innocent party may not always be entitled to terminate
the contract as if he is not entitled to terminate the contract, the innocent party himself breaches
the contract and may be liable to pay damages.
A contract can only be terminated if there is a term in the contract which states that a breach in the
contract would allow the innocent party to terminate the contract, the term in breach was a
condition and not a warranty of the contract, the term in breach deprived the innocent party of the
benefit of the contract or if the party which breached the term renounces the contract, stating that
it will not carry out contractual obligations anymore.
An exemption clause is a term in a contract which limits or excludes liability for the party in breach.
(Exclusion of liability clause, limitation of liability clause) An exemption clause MUST be incorporated
into the contract by signature (even if it is not read or understood), notice (before or at the time of
the contract and where a reasonable person would expect to find it) or previous course of dealing.
The exemption clause must also be clear and unambiguous. It must not have been made ineffective
by statute or common law. A statute which makes an exemption clause ineffective is the Unfair
Contract Terms Act (UCTA). Under the UCTA, if an exemption clause seeks to exclude or limit liability
for negligence which leads to personal injury or death, it is ineffective. In the cases of consumer
contracts and standard form contracts (which are not negotiable such as insurance policies), the
exemption clauses are only effective if they are reasonable.
For consumer sales, the UCTA states that the seller is not allowed to exclude liability for providing
goods which do not correspond with their description, are not of satisfactory quality and are not fit
for the purpose made known to the seller. (Implied conditions)
Exemption clauses are deemed to be reasonable depending on the bargaining power of the parties,
whether the customer had an alternative means of meeting his/her requirements, whether the
customer could have entered a similar contract with another party without having to agree to a
similar exemption clause and whether the customer knew about the existence of the exemption
clause.
An exemption clause is also made ineffective when it is against common law. This is the case when a
contract breaker misrepresents the extent of the exemption clause to the other party.
** A contract for the sales of goods is made when the seller agrees to transfer ownership of a good
to a buyer for a money consideration called price. The Sales of Goods Act comes into effect for
contracts of sales of goods and no other forms of contracts such as standard form contracts, for
example. When barter trade is involved, it is not a contract of sales of goods as no money
consideration is involved. The transfer of ownership of land or property is NOT a contract of sales of
goods.
employee and scope of the restraint also affects whether the restraint of trade is valid as if a clerk
were to be under a restraint of trade where he/she cannot work for another competitor in the
industry, it has no effect on the trade secrets, highly confidential information and customer
connections as he/she has not worked in top management or contributed to the product and
therefore is not aware of all of this. The scope of the restraint should only cover the activities which
pose a threat to the company.
For the restraints of trade in contracts for the sales of businesses, they usually are for the seller of
the business to not set up a similar and competing business for a period of time in the same area as
the buyer. The courts normally allow the restraints of trade for contracts for the sales of businesses
as the purchase price also includes a sum of goodwill. This goodwill is the reputation of the business
and its old customers. As the buyer has paid money for this goodwill, it is reasonable to expect the
seller to not compete with the buyer in a similar and competing business for a period of time in the
same area. The restraint of trade is only upheld if the buyer is able to show that the area and period
of the restraint of trade is reasonable.
A solus trading agreement is when a person agrees to exclusively sell a product of a particular
manufacturer in return for benefits from the manufacturer such as discounted rates in order to earn
a higher profit when the goods are sold. The area and period of restraint of trade must be reasonable
in order to the restraint of trade to be valid.
**Discharge by Frustration
Frustration occurs when an unforeseeable event occurs that is beyond the parties control and
causes the contract to become impossible or illegal to perform or causes the performance of the
contract to be drastically changed from how it was originally envisioned. When frustration occurs,
the contract is discharged.
The contract becomes impossible to perform when the subject matter of the contract is destroyed,
the government acquires the subject matter of the contract or if there is a change in the law, causing
the previously legal contract to become illegal (if the contract was illegal in the first place, it is void,
however if it becomes illegal after a change in the law, it has been discharged by frustration). The
contracts performance becomes drastically changed if there is a serious illness or incapacity of a
party to a contract for the provision of personal services.
Frustration does not occur if the contract becomes more difficult or expensive to perform or if the
frustration is self-induced. Frustration is self-induced if the frustrating event occurs due to the
conduct of one of the parties. Therefore, when the contract is more difficult or expensive to perform
or if the frustration is self-induced, there will be no discharge of the contract due to frustration at
common law.
When a contract is frustrated, the contract is discharged due to frustration at common law. All
parties under the contract are released from future obligations. However, any obligations due before
the frustrating event need to be performed or else there will be a breach of contract.
The Frustrated Contracts Act says that when a contract is frustrated and the money is paid before the
frustrating event, the party is generally allowed to recover the money he/she has paid. Any money
payable under the contract at the time of the frustration does not need to be paid. Any expenses
incurred in performing the contract before the event of frustration can be recovered or retained.
Lastly, if a party has received a benefit from the contract before frustration, the court will order
him/her to pay a reasonable sum for the benefit obtained.
**Force majeure clauses are terms in a contract which state what happens if a certain event occurs
after the contract is made. It is important to have in contracts as it allows contracts to be discharged
in situations where it would not be considered frustration at common law. Contracts can be
suspended for a period of time when certain events occur due to force majeure clauses as well.
**REMEDIES
Remedies are either equitable remedies or common law remedies. Equitable remedies are
discretionary while common law remedies are by right. Equitable remedies are specific performance,
injunctions (both prohibitory and mandatory) and recission. Common law remedies are damages
(pecuniary, non-pecuniary losses and liquidated damages) and quantum merit, which is when the
party is paid according to the amount of work done.
Damages are monetary compensation. If an innocent party has suffered no losses, the damages
awarded will be nominal. Damages are for pecuniary losses (monetary losses such as loss of profit),
non-pecuniary losses (for not a direct monetary loss. However, the court will only award damages for
non-pecuniary losses if the benefit of the contract was to provide enjoyment or pleasure such as
holiday tours) and liquidated damages.
**The amount of damages payable is assessed according to mitigation and remoteness of damage. If
the loss is too remote and not closely related enough to the breach, the damages would not be
awarded. Natural and ordinary losses are awarded, however, unusual or special losses (such as the
loss of an important client due to undelivered merchandise) is not awarded unless the special
circumstance was made known to the seller and the seller had agreed to supply the goods or service
for that purpose. Mitigation is when there is a breach of contract, the buyer must take reasonable
steps to minimise his/her loss. If no reasonable steps are taken to minimise the loss, the damages will
not be awarded.
**Liquidated damages clause is a term in the contract which fixes the amount payable in the event of
a breach. It is a genuine pre-estimate of loss. When there is a breach, the innocent party can claim
damages as according to the liquidated damages clause and there is no need to provide evidence as
it is stated in the contract.
**However, if this liquidated damage clause is actually a penalty clause, the court will not award the
penalty to be recovered. A penalty clause is one which requires payment of a sum of money greater
than a genuine pre-estimate of loss and its purpose is to punish the party in breach. If a single lump
sum is required to be paid no matter how serious the breach is, it is likely to be a penalty clause.
Equitable remedies are recession, specific performance and injunction. Specific performance requires
the party to deliver the goods or services as agreed in the contract and is granted when payment of
damages will not suffice and the plaintiff would prefer to have the contract carried out. It is usually
granted for the sale of rare goods such as art pieces and for the sale of land or houses. Specific
performance is not granted in cases of employment and for cases which will require the constant
supervision of the court. Employment cases are not granted specific performance as it is against
public policy to force someone to work. If a specific performance is granted, the party must obey it or
else face a contempt of court charge.
Injunctions are either mandatory or prohibitory. Injunctions are court orders that are granted when a
party has agreed to not carry out a specific action in the contract but does it anyway. A prohibitory
injunction stops the contract breaker before he/she performs the act while a mandatory injunction
prevents the contract breaker from continuing with the act after he/she has started doing it.
**An agent is a person who acts on behalf of a principal. He/she is empowered to make legally
binding contracts between his/her principal and third parties. The authority given to the agent varies.
The agent can be given actual authority (which is either implied or express), apparent authority or
agency created by ratification.
Expressed actual authority is when the principal has given authority to the agent in writing or orally
to carry out the act.
Implied actual authority is when the authority comes along with the position of job given to the
agent and his/her duties that come along with the position. However, if there is no written or oral
communication of the principal of the agents authority. Agency by estoppel occurs when the agent
acts as if he/she has authority and the principal does nothing to stop it even when they are aware.
This gives third parties the impression that the agent has authority and so, deals with him/her. If
anything happens, the principal is liable as it had given third parties the impression that the agent
was authorized to carry out his/her actions due to having never been stopped when doing them
though the principal was aware. Agency created by estoppel also occurs when there is a
representation by the principal that the agent has actual authority as even when the agent leaves the
company, and the principal fails to inform any third parties concerned, the third party is still under
the impression that the agent has actual authority as they are not informed about the termination or
that the agent has left the company and thus continues to deal with him/her.
Agency by ratification occurs when the agent does an act that is not authorized. However, if the
principal ratifies the unauthorized act either expressed (writing or orally agreeing) or implied (using
the goods), the principal is bound with the contract between the third party and itself. The principal
is also free to reject the unauthorized act and thus is not liable when doing so. Effective ratification is
when the agent discloses the fact to the third party that he/she is acting on behalf of the principal as
if the third party is unaware of the existence of the principal, the contract cannot be ratified. The
third party is not liable to the principal.
The principal must also be in existence during the period that the agent made the unauthorized
contract and ratification must be done within a reasonable period of time or within the time fixed for
performance or else the contract cannot be ratified. The unauthorized act is authorized when it is
ratified by the principal.
An agent is required to follow the principals instructions, act with skill and care, not accept bribes (if
bribes are accepted, the principal can sue the agent for the bribe or the loss that results from the
transaction but not both), avoid a conflict of interest and is required to account for the goods or
money received on the principals behalf.
The law of intellectual property protects the creations of the human mind in the forms of
trademarks, patents and copyrights.
A trademark is a sign used by a person in the course of trade to distinguish its goods and services
from its competitors. It is under the Trade Marks Act. Trademarks have to be registered with the
Intellectual Property Office of Singapore (IPOS) in order to get protection. These trademarks are
protected for 10 years, after which they can be renewed for another 10 years. The protection is
territorial in nature and thus, to get the trademark protected outside of Singapore, the applicant
needs to go to the countries concerned directly or through the World Intellectual Property Office.
**To qualify for registering a trademark, the applicant must use or have a genuine intention of using
the trademark in the course of trade relating to the category of goods or services he/she is applying
the trademark for. Trademarks that cannot be registered are marks which do not have a distinctive
character, descriptive marks, if there are marks exactly the same, if the marks to be registered could
cause confusion, if the marks are deceptive and if they are against public policy or morality.
When trademarks are infringed, the remedies are AID. They are account of profits, injunction and
damages.
Some businesses do not register their trademark, and so cannot sue for trademark infringement.
However, they can sue for passing off. The tort of passing off comes into effect as it prevents a trader
from misrepresenting its goods as someone elses. However, it is more difficult to succeed in a claim
of passing off compared to trademark infringement as there is a need to prove that there is goodwill
or reputation attached to the business that was passed off, there was a misrepresentation by the
party which passed off the goods that the goods are similar to the plaintiffs through the usage of the
logo, trademarks or get ups which are similar AND if the plaintiff is likely to suffer loss or damage
through this passing off.
The remedies for passing off are AID.
Patents protect inventions and protection has to be applied for at IPOS. The patent rights are
territorial and so the applicant must file for patent protection in the countries concerned or with
WIPO. The protection of patents is 20 years and is not renewable. It comes under the Patents Act.
**To register a patent, it must be new and not known to the public in the world. The invention must
involve an inventive step so any improvements over an existing product must not be obvious to a
person skilled in that field. The invention must also be capable of industrial use.
The patent belongs to the inventor unless he/she invented the patent in the course of employment,
in which case the patent would be under the employer. When a patent is infringed, which is when
the invention is used, sold or manufactured without the consent of the patent owner, the remedies
are AID.
A copyright is an exclusive right to reproduce, publish, perform and communicate various types of
work such as novels and music. The law of copyright protects the expression of ideas and it has to be
in a tangible form. There is no need to register for protection as it is automatic when the idea is in
tangible form. Examples of works which are protected by copyright are literary works, music and
films. The period of protection for literary works is 70 years additional to the life of the author. The
period of protection for music is 70 years additional to the life of the author. The period of protection
for films, however, is 70 years after release.
Copyright is infringed when a party does something which only the copyright owner has the right to
do without the copyright owners permission such as reproducing the work or performing it.
Copyright infringement also occurs when a substantial amount of the work is copied. The remedies
for copyright infringement are AID.
The owner of an intellectual property has the rights to charge license fees if there are other parties
who wish to use it.