INTRODUCTION

3 Functions of Business Law

• facilitate business activities (contract law, company law etc.)

• adjudicate business activities (disputes, arbitration etc.)

• regulate business activities (competition law, food safety etc.)

Branches of Government

• legislature (making legislations/statutes)

• executive (implementing laws)

• judiciary (adjudicate disputes, interpret laws etc.)

Legal Systems

• common law legal system

-constitutional separation and independence between the legislative and judicial branches

-application of case-law precedent (bound by decisions of courts higher in its hierarchy)

• civil law legal system

-law found in statute books

-no precedent needed

Doctrine of Stare Decisis (Precedent)

• only the ratio decidendi of a past case is binding

• obiter dicta are not binding but may be persuasive

• where material facts differ, the previous decision can be distinguished and not followed

Wilkinson v Downton

• 4+1 elements required

-wilfully committed an act

-calculated to cause physical harm

-has caused physical harm

-no justification for alleged act

-although no malicious purpose, is imputed to the defendant (intended to cause severe distress)

-recklessness in causing distress will not be sufficient

Statutory Interpretation

• section 9A of the Interpretation Act

-permissible to use “extrinsic material” to either confirm the ordinary meaning of the words OR to
discover the meaning if the statute is ambiguous/giving the words their ordinary meaning would lead to
an absurd or unreasonable result

-can be explanatory statements to the Act, debates/speeches, international agreements

• intrinsic aids

-literal rule: ordinary meaning of the words

-golden rule: if literal meaning gives rise to absurdity or inconsistency, adopt the best interpretation of
the words in the statue that avoids an absurd result

-mischief rule (purposive approach): interpret the legislation by looking at the intention of the legislation
(what mischief and defect was it trying to remedy?)

OFFER AND ACCEPTANCE

Law of Contracts

• an agreement between two or more parties which is enforceable at law

• can be oral, writing or by conduct

Elements for a Contract

• offer

• acceptance

• consideration

• intention to create legal relations

What Can Happen to an Offer?

• accept

• revoke

-must occur before offeree accepts

-must be communicated to offeree

-unilateral offers: don’t act on the offer

• counter-offer

• rejection

-must be communicated to offeror

-rejection can sometimes be a counter-offer

• lapse of time

• failure of condition

• death

Valid Acceptance

• unconditional assent of offer

• offeree must be aware of offer

• acceptance must be communicated (expressly/impliedly through conduct) unless:

-postal acceptance rule applies or

-it is waived (unilateral contracts)

-can accept through silence (must be agreed upon that silence is construed as acceptance)

Electronic Transactions Act

•time and place of dispatch and receipt

-13 (2): when the electronic communication becomes capable of being retrieved by the addressee at an
electronic address designated by the addressee

-13 (3): at an electronic address that has not been designated by the addressee is the time when the
electronic communication becomes capable of being retrieved by the addressee at that address and
the addressee becomes aware that the electronic communication has been sent to that address

CONSIDERATION

• something that moves from the promisor to the promisee (or someone else as directed by the
promisor)

• need not be adequate but must be sufficient

-money, goods, services

-forbearance from suing and compromises but

• claim made must be reasonable and not vexatious or frivolous

• must have honest belief that claim had a chance of success
• no concealment of facts which may have affected claim

-performance of existing contractual duty owed to third party

• even though promisee is already contractually bound to promisor to perform the act, it is good
consideration for a separate promise from a third party

• law does not query the fairness or adequacy of the consideration

• only the parties to the contract can sue and be sued on the contract (privity of contract)

Insufficient Consideration

• vague promises

-promises to love someone

-to stop complaining about unfair treatment

• performance of existing contractual duty owed to the promisor

-BUT sufficient if performed over and above contractual duty

-see Williams v Roffey Brothers

Case: Roffey Bros was going to be liable under a penalty clause for late completion, so they had a
meeting on 9 April 1986 and promised an extra £575 per flat for on time completion.

- held Williams had provided good consideration even though he was merely performing a pre-existing
duty

- the practical benefit of timely completion, even though a pre-existing duty is performed, constitutes
good consideration

- held that other practical benefits than those envisaged as the original consideration may per se
constitute the requisite good consideration to fulfil the contract

-no duress, no fraud

•part payment of existing debt

-does not discharge the entire debt unless it was made at the request of the creditor and the payment
was made earlier, at a different place or in conjunction with some other valuable consideration

-see Pinnel’s Case: Foakes v Beer

Case: Beer agreed that she would not take any action against Foakes for the amount owed if he would
sign an agreement promising to pay an initial sum and pay an amount twice yearly until the whole
amount was paid back. Foakes was in financial difficulty and, with the help of his solicitor, drew up an
agreement for Beer to waive any interest on the amount owed. She signed. Foakes paid back the
principal but not the interest. Then Beer sued Foakes for the interest.

- the promise to pay a debt was deemed not to be sufficient consideration as there was no additional
benefit moving from Foakes to Beer that was not already owed to her

- payment of a lesser sum on the day in satisfaction of a greater, cannot be any satisfaction for the
whole

- exceptions to the rule in Pinnel’s case include:

• payment accompanied by fresh consideration

• prepayment of debt at the creditor’s request
• payment of a lesser sum at another place at the creditors request
• promissory estoppel

•performance of existing public duty

-see Collins v Godefroy

Case: Godefroy, the defendant, brought an action against an attorney for negligence and caused Collins,
the plaintiff, to be subpoenaed to attend and give evidence. Godefroy was keen to ensure that Collins
attended as this would help his case, so he promised to pay him one guinea per day he was at court as
compensation for the loss of his time. Collins attended court for six days but was not called to give
evidence.

- plaintiff was under a public duty to attend court having been subpoenaed, not supported by
consideration

- law would not allow someone to recover expenses incurred in the performance of a duty that they were
merely obliged to do by law

-BUT if promisee did something more than that required by existing public duty, it will be good
consideration

-see Glasbrook Brothers v Glamorgan

Case: During a strike, Glasbrook Brothers (the owners of a colliery) requested police protection in the
form of a body of officers quartered on the premises; though the police only had the resources to make
visiting patrols, they offered to place constables in exchange for a financial contribution. After the strike,
the police presented the colliery with a bill for the provided services; the colliery refused to pay and so
the police sued.

- obligation on the police to afford efficient protection, but if an individual asks for special protection in a
particular form, for the special protection so asked for in that particular form, the individual must pay

- will be adequate consideration where what is given is more than could have been expected from
performance of the existing duty, where in fact something extra is added to what the claimant is already
bound to do

•past consideration

-not sufficient unless the 3 conditions are satisfied (Pao On case)

• act done at promisor’s request

• parties understood that the act would be remunerated, or some other benefit conferred
• remuneration or some other benefit conferred would have been legally enforceable had it been
promised in advance

Case: Pao On agreed to sell their shares in the private company to Lau Yin Long so that LYL could acquire
the building. In return Pao On would get shares in the public company. Fearing a drop in share value of
the public company would result, Pao On and LYL made another agreement that Pao On would not sell
their shares for a while. However, Pao On realized that LYL might profit from this agreement and
demanded that this second agreement be replaced with one in which Pao On was indemnified for any fall
in share value but might also benefit from any rise in share value. Fearing that not agreeing to this would
delay the main contract, LYL agreed. The share value did drop, and Pao On sought to rely on the
indemnity contract.

- an act done before a promise was made was good consideration for that promise if it was done at the
promisor’s request and the parties understood the act was to be paid for at a later date, and the
payment or benefit would have been enforceable had it been promised in advance
Promissory Estoppel (see Central London Property v High Trees)

• existing legal relationship

• clear and unequivocal promise

• reliance on promise leading to altered position

• inequitable to go back on promise

Case: The defendants, High Trees, leased a block of flat from the plaintiffs, Central London Property
Trust. The property suffered from falling occupancy rates due to the outbreak of World War II in 1940, so
the parties agreed to reduce the rent by half. However, it was not expressly agreed how long this would
last for. The defendants continued to pay the rent at this new rate. By 1945 the war had ended and the
flats were at full occupancy. The plaintiffs sued High Trees for the full rent from 1945 onwards.

- parties should be prevented from going back on a promise to waive certain rights

TERMS OF A CONTRACT

Terms

• statements, undertakings and promises forming part of the contract

• if a term is breached, there is a breach of contract, can sue for remedies

Terms vs Representations

• depends on intention of the parties

-see Tan Chin Seng & others v Raffles Town Club

Case: In November 1996, while the Club premises were still at the drawing board stage, RTC Ltd initiated
an introductory launch to invite selected members of the public to join the Club as founder members at
the discounted price of $28,000. A number of financial institutions and other bodies were enlisted as
agents to carry out the launch. Each of these agents wrote to its own customers stating, in each instance,
that the addressee was specially selected and invited to apply for the founder membership. The invitees
were told that after this launch, people would have to pay $40,000 to become members.

- the prospectus promised "lavish reception and facilities" and that the Club would be "without peer in
terms of size, facilities and sheer opulence"

- held that in the light of the representations made in the promotional material which the defendant
dispatched to the plaintiffs, it was an implied term of the contract that the defendant would deliver to
the plaintiffs a premier club and it had failed to do so

• can be oral or written

• express or implied

-implied by court: business efficacy test that is necessary to give business efficacy to the contract

-implied by court: officious bystander test

-implied by statute

-implied by custom

Warranty vs Condition

• warranty is a less important term

• condition is a very important or essential term

• look at intentions of both parties and purpose of the contract

• breach of condition: innocent party can terminate the contract

• breach of warranty: innocent party cannot terminate the contract

Innominate Terms (OLD Law)

• see Hong Kong Fir case

• term may be too hard to classify as a warranty or condition

• breach of innominate terms can result in either serious/trivial consequences

Case: Ship owners let the vessel, Hongkong fir, to charterers for a period of 24 months. Clause 1 of the
contract obliged the owners to deliver a “seaworthy” vessel and Clause 3 further obliged them to
maintain the vessel’s seaworthiness and good condition. Upon initial delivery, the vessel’s machinery was
described to be in ‘reasonably good condition,’ yet required constant maintenance due to its age. The
vessel owner’s chief engineer was inefficient and incompetent, and the vessel suffered numerous
breakdowns and delays. The charterer’s repudiated the contract, alleging a breach of the obligations to
deliver and maintain a seaworthy vessel.

- to construe whether a contractual clause constitutes a condition precedent, the breach of which
permits repudiation, or an innominate term, the breach of which permits damages, depends on a
holistic assessment of the contract’s surrounding circumstances in determining the intention of the
parties in their treatment of the clause

- seaworthiness and maintenance clause was not viewed as so fundamental so as to amount to a

condition of the contract, but rather constitutes a term allowing damages

RDC Concrete

• 4 situations to entitle the party to terminate the contract

-situation 1: contract states clearly that in the event of a certain breach, the innocent party may
terminate the contract (express right to terminate)

-situation 2: party in breach renounces the contract by clearly conveying to the innocent party that he
will not perform his contractual obligations at all (anticipatory breach)

-situation 3a: party in breach has breached a “condition” of the contract, the innocent party can
terminate the contract regardless of the consequences of the breach

-situation 3b: regardless of the type of term breached, if the consequences of the breach deprive the
innocent party of substantially the whole benefit which it was intended that the innocent party
should obtain from the contract, the innocent party can terminate the contract

Implying Terms into the Contract

• see Sembcorp Marine Ltd v PPL Holdings Pte Ltd & Anor and another appeal

Case: At some point, the management teams of Sembcorp and PPL Shipyard came to learn about their
mutual interest in the same Santa Fe Projects. The idea of an alliance was mooted, and a joint venture
quickly materialised with the signing of a Sale and Purchase Agreement. Under the SPA, Sembcorp
purchased 50% of the issued share capital in PPL Shipyard from PPL Holdings. As a result, Sembcorp and
PPL Holdings (together with E-Interface) each had an equal interest in PPL Shipyard. The terms on which
the joint venture between Sembcorp and PPL Holdings was to be carried out were set out in the JVA.

- what is sought to be implied is based on an intention imputed to the parties from their actual
circumstances

• step 1: is there a gap? how did it arise?

-can only imply a term if the gap arose because the parties did not contemplate the gap/issue at all

• step 2: business efficacy test

-is it necessary in the business/commercial sense to imply a term in order to give the contract efficacy?

• step 3: officious bystander test

-the court considers the specific term to be implied

-the term must be one which the parties, having regard to the need for business efficacy, would have
responded “Oh, of course!” had the proposed term been put to them at the time of the contract

-if it is not possible to find such a clear response, then the gap persists and the consequences of the gap
ensues

Parol Evidence Rule

• cannot introduce extrinsic evidence to add to or vary or contradict terms of a written contract
-if parties enter into a written contract, they normally intend for written document to be entire contract

• rebuttable presumption

• codified in S93, S94 Evidence Act

Exemption Clauses

• excludes altogether or limits liability for breach of contract

• special contractual term

• 4 conditions for exemption clause to be effective:

-incorporation: very fact specific

-construction: how to interpret/construe it

-overriding factors

-unfair contract terms act

Incorporation

• where exemption clause is found in the signed document

-deemed incorporated even if the person signed without reading the document (see L’Estrange case)

Case: The claimant, L’Estrange, contracted to purchase a slot machine for cigarettes from the defendant,
Graucob, and the agreement included an express clause stating ‘This agreement contains all the terms
and conditions under which I agree to purchase the machine specified above and any express or implied
condition, statement, or warranty, statutory or otherwise not stated herein is hereby excluded’. The
machine proved to be faulty and the claimant thus brought an action against the defendant, alleging
that the machine breached the Sale of Goods Act by not being of merchantable quality. The defendant
asserted that the statute was made irrelevant by the express clause, and that he was not in breach of the
agreement they had made.

- express provisions of the contract were binding and effectively excluded the relevance of statutory sales
provisions

- the fact that the claimant had not properly read the contract did not impact its validity, as in signing
the contract she consented to be bound by its contents

• where the exemption clause is not found in the signed document (oral/written notice)

-1: party relying on the clause must give reasonable notice to the other party (see Thompson v LMSR)

Case: Thompson was unable to read and she travelled on a train with her daughter and niece. On the
back of her ticket it was printed that the tickets were issued subject to the terms outlined in the
company’s time tables. The time tables contained a clause purporting to exclude liability for any injuries
to passengers, howsoever caused. Thompson slipped and sustained injuries as a result of the company’s
negligence, and claimed damages.

- irrelevant that she was unable to read

- company had taken sufficient steps to bring the terms to customers’ attention in clear and legible print

- accepting the ticket for travel constituted acceptance of the terms of travel, and the reference to the
time tables amounted to adequate notice of the existence of the terms and of their contents

• notice must be reasonably legible and conspicuous

• can be taken to be a contractual document (see Chapelton case: would a reasonable person
have expected a receipt/ticket to contain a contractual term?)

Case: Chapelton wished to hire a deck chair and approached a pile of chairs owned by Barry Urban
District Council (BUDC). A notice adjacent to the chairs detailed the cost of hire and advised customers to
obtain tickets and retain them for inspection. Chapelton purchased tickets and placed them in his pocket.
On one side of the tickets, the council purported to exclude liability for any accidents caused by hiring the
chairs. Chapelton sat down and the canvas gave way. He sought damages from BUDC and it was held
they had effectively excluded liability.

- ticket was held to be a receipt and the conditions by which BUDC were held to have offered the chairs
for hire were those contained in the notice, and the notice did not contain any exclusion clause

-2: the more unusual/onerous the exemption clause, the more must be done to give notice of the clause
(see Thornton v Shoe Lane Parking)

Case: Thornton drove his car to a car park. Outside the car park, the prices were displayed and a notice
stated cars were parked at their owner’s risk. An automatic ticket machine provided a ticket, a barrier
was raised and Thornton parked his car. In small print on the ticket it was stated to be issued subject to
conditions displayed on the premises. On a pillar opposite the machine was a notice stating the owners
would not be liable for any injuries occurring on their premises. Thornton had an accident and sought
damages from Shoe Lane Parking (SLP).

- exclusion clause had not been successfully incorporated into the contract

- had not done enough to bring the existence of the terms to Thornton’s attention prior to the contract
formation

- offer was contained within the notice at the entrance, and Thornton accepted the offer on those terms
when he drove in

- too late to seek to incorporate further terms after he had driven in to the car park

-3: notice of exemption clause must be given before or at the time of the contract (see Olley)

Case: Olley was a guest in the defendant hotel. On arrival, Olley paid for a week’s board in advance and
then went to the room. In the room, a notice was displayed stating the proprietors would not be
responsible for any items lost or stolen, unless handed to them for safe keeping. Olley left the room and
deposited her key on the board in reception before leaving the hotel. The key was taken and several
items were stolen from her room. Olley sought damages in negligence.

- exclusion clause had not been successfully incorporated into the contract because the contract was
concluded at reception

- the notice purporting to exclude liability was not visible until after the contract was formed, when the
guest entered the bedroom

-4: a previous course of dealing can constitute reasonable notice if

• sufficient number of transactions

• consistent transactions
• current transaction is same as previous ones

Construction

• exemption clause must cover liability in question

• contra proferentem rule: where there is ambiguity in the exemption clause, use the interpretation
that is the least favorable to the party relying on the clause

-see Hollier v Rambler, Singapore Telecommunications v Starhub

Case: Hollier had his car repaired by the defendant garage three or four times over a period of five years.
On at least two of these occasions he had signed a form which stated the garage were exempted from
liability for damage caused by fire on their premises. Hollier had not read the form. On this occasion
there was an oral agreement for the repairs to be conducted, and Hollier had not signed a form. His car
was damaged by fire and Hollier claimed in negligence.

- three or four occasions in five years was insufficient to amount to a course of dealing and the exclusion
clause had not, therefore, been imported into the oral contract

• to exclude liability arising out of a fundamental breach (Hong Kong Fir type), clear words are needed

-see Photo Production; Sun Technosystems v Federal Express

• clear words are needed to exclude liability arising out of negligence

-use of “howsoever”, “whatsoever”, “in any circumstances” etc.

Overriding Factors

• misrepresentation about scope or effect of exemption clause

-written exemption clause

-told orally

• oral undertaking (see Evans v Andrea Merzario)

Case: The plaintiffs imported machines from Italy to England. The defendants were their forwarding
agents. In terms of the contractual arrangements between the parties, the defendants had complete
freedom regarding the transport of the goods to England. The defendants proposed a change in the
method of transportation and gave the plaintiff an oral assurance that the machines would be shipped in
containers carried under deck. No written provision was made for this change. One of the machines was
packed on deck (rather than under deck) and was lost at sea.

- held that the oral assurance to ship future goods under deck constituted an enforceable contractual
promise

- oral promise overrode the standard contract conditions because the promise was made in order to
induce the plaintiffs to agree to the goods being carried in containers

Unfair Contract Terms Act

• regulates effectiveness of exemption clauses

• does NOT apply to all exemption clauses, only to “business liability”

-liability for breach of obligations or duties that arose out of things that a person did (or to be done) in
the course of his business

• 3 main scenarios

-1: where there is a breach of duty to take reasonable care or exercise reasonable skill (under the
contract or under common law)

• cannot exclude liability for personal injury or death S2(1)

• for other types of damage, can exclude liability if exemption clause is reasonable S2(2)

-2: where the innocent party is a consumer but the party in breach is not a consumer

• can exclude liability if exemption clause is reasonable S3

-3: where there is a written standard term of business (standard form contracts)

• can exclude liability if exemption clause is reasonable S3

• reasonableness test S11(1): very broad test, term must be fair and reasonable in view of the
circumstances which (i) were known to or (ii) ought reasonably to have been known to or (iii)
contemplated by the parties at the time of making the contract
• burden of proof lies with the party seeking to rely on the exemption clause S11(5)

VITIATING FACTORS
4 Main Vitiating Factors

• incapacity

-minors

-drunken/insane persons

• illegality

-statutory illegality

-contracts contrary to public policy

• misrepresentation

-3 types of misrepresentation and their remedies

• mistake (not in syllabus)

Types of Minors’ Contracts

• valid

-binds both minor and other party

-necessaries/beneficial contracts for employment

• voidable

-binds other party and minor unless minor repudiates

-“opt out”

-recurring obligations like lease

• ratifiable

-binds other party and binds minor only if minor ratifies after attaining majority

-“opt in”

Incapacity: Minors

• no contractual capacity below 18 years old

• valid contracts

-(a): contracts for necessaries

• valid (binding on both parties)

• covers “necessaries” (all things reasonably required by the minor in his particular station in life)
• includes basic necessities and even luxurious items of utility suitable for the minor’s station in
life
• must have required goods/services at that time of contracting
• subjective definition (see Nash v Inman)
• minor has to pay for goods BUT only at a reasonable price

-(b): beneficial contracts of employment

• contract must, on the whole, be beneficial to the minor

• the terms of the contract cannot be unreasonable to the minor

Incapacity: Insane or Drunken Persons

• must be so mentally unsound or drunk that he could not understand the nature of the contract AND

• other contracting party knew of the incapacity

• if necessaries were supplied, then the mentally unsound/drunk person must pay a reasonable price for
the goods

Illegality

• contracts that contravene Statutes

• prohibits the formation of contract

-contract illegal as formed

-void from inception

-no party has contractual rights

• performance contravenes statute

-where statute is penal (criminal), guilty party pays penalty, both parties have contractual rights

• contracts contrary to public policy

-category 1: contracts to commit a crime

-category 2: contracts which promote sexual immorality

-both are void an unenforceable

• contracts in restraint of trade

-contracts that restrict liberty of person to carry on trade, business or profession

• contracts restricting activities of employees

• contracts restricting activities or seller/business

-are void and unenforceable unless 3 conditions are satisfied:

• restraint is necessary to protect a legitimate interest

• restraint must be reasonable in scope (in terms of time, period of restraint, geographical area
and activities restrained)
• restraint must not be contrary to public interest (must not reduce competition generally)

-if these conditions are not met, carry out “blue pencil test” (severance of clause with offending words
are deleted without any other edits of contract)

Misrepresentation

• false statement of fact made by 1 party to another (see Tan Chin Seng v Faffles TC, Tai Kim Seng v Cher
Kia)

-clear and unambiguous statement

-unkept promise or statement of intention is NOT false statement of fact

-statement of opinion is NOT false statement of fact

-general rule: representation must take active form hence, silence is NOT normally a representation

• exception 1: half-truths, where silent portions can be a false statement of fact (see Dimmock v
Hallet)
• exception 2: change in circumstance
• exception 3: where there is a duty to disclose (e.g insurance contracts)

• and which induces and is relied upon by representee to alter his position to enter into the contract
(see Edgington v Fitzmaurice, Panatron v Lee)
Case: The directors of a business provided a prospectus which contained a range of debentures, in order
to invite subscriptions. The directors stated that the debentures were in order to enable the business to
complete alterations to the buildings of the company, to develop trade and to purchase vans and horses.
However, it was later discovered that the real reason for issuing the debentures was for the directors to
pay off other liabilities. The plaintiff forwarded money for the debentures that had been offered having
relied upon the statements contained in the prospectus. However, he also was mistaken as he thought
the debenture was to provide him a charge on the company’s property. The company later became
insolvent and the plaintiff claimed for the money he believed he was owed.

- held that the misstatement of the reasoning behind issuing the debentures was a material
misstatement of fact and that the plaintiff had been influenced by this statement

- found liable for an action of deceit, despite the fact that the plaintiff had also been influenced by his
own mistake regarding the debentures

• 3 types of misrepresentation

-fraudulent

• made knowingly false OR made without belief in its truth OR made recklessly (dishonesty)
• remedies: rescission + damages

-negligent

• where representor had no reasonable grounds to believe in the truth of the statement (careless)
• rescission (or damages in lieu) + damages

-innocent

• not fraudulent AND not negligent (honest mistake)

• rescission (or damages in lieu) + indemnity

*damages = monetary compensation to compensate representee for loss suffered

Rescission

• contract set aside ab initio (as if contract never existed), parties put back into position they were in
before contract was made

• choice to rescind lies with representee, but choice is final

• reasonable notice of rescission must be given

• loss of right to rescind

-affirmation: representee has already chosen to affirm and continue with contract

-lapse of time: long period of time elapsed after misrepresentation

-restitutio in integrum impossible: impossible to restore parties back to their original position before the
contract (e.g third party rights have intervened such as where goods have passed to third party who
bought in good faith and for value, seller cannot rescind)

Indemnity

• representor is held responsible for the loss or liability of representee arising out of contract induced by
misrepresentation

• generally, not as much money as damages

-damages: representee is compensated for all losses caused by the misrepresentation, which are not
too remote

-indemnity: representee is compensated only for losses arising out of obligations necessarily created by
the contract that was induced by the misrepresentation

DISCHARGE OF CONTRACT

• involves the process under which the primary obligations (performance) come to an end

Discharge by Performance

• general rule: precise and exact performance by the parties of all the contractual obligations (see Cutter
v Powell)

Case: Mr. Cutter, a sailor, was hired for a voyage and given a promissory note from his employment that
ten days after the ship arrives at Liverpool, he will pay Mr. Cutter a certain sum, “provided he proceeds,
continues and does his duty as second mate in said ship from hence to the port of Liverpool.” Mr. Cutter
began sailing the ship as second mate for about six weeks, yet died before its arrival in Liverpool. Mr.
Cutter’s wife brought an action for a proportionate part of his due wages for the substantial amount of
the voyage on which he acted as second mate.

- where parties conclude an express contract, no terms can be implied into the contract

- contract between the parties expressly provided that the payment was conditional upon the completion
of the voyage and only payable after the ship’s arrival

- even though the sailor was not to blame for failure to perform the contract, the express terms of the
contract renders payment conditional on the full performance of the contract

• exceptions

-microscopic deviations – de minimis rule

• if the deviation in performance was microscopic, the contract will be deemed to have been
performed fully and precisely
-severable obligations

• contracts carrying severable obligations that are separate and independent (divisible) and can
be discharged separately (e.g progress payment in building contracts)
• depends on the intentions of the parties whether the contract is entire or divisible

-substantial performance

• usually where a party has performed obligations defectively

• if a party has substantially performed his obligations, he is entitled to the agreed sum, subject to
a deduction for the omission or defect in performance
• BUT doctrine does not apply if complete and precise performance is a pre-condition to payment

-voluntary acceptance of partial performance

• where one party partially performs and the other party accepts, there is an inference of a new
agreement for reasonable remuneration for partial performance on a quantum meruit basis (so
much as he deserves)
• genuine option to accept or reject the partial work done must exist (see Sumpter v Hedges)

Case: A builder contracted to build two houses and stables for the lump sum of £565. The builder only
completed part of the work, after which he abandoned the contract. The completed works amounted to
a value of £333. A summary judgement found that the builder abandoned the contract. The builder
brought an action against the land owner for the full payment of the £333 for his partial performance of
the contract.

- the contractual price cannot be recovered, neither in whole nor in part, until the contractual work is
complete

- there is no inference of a new contract for partial works

-prevented performance

• if a party has partially performed contractual obligations but is prevented by the other party
from continuing, he can either sue for damages for breach of contract OR seek a reasonable
remuneration for the work already done on a quantum meruit basis

Discharge by Repudiatory Breach

• not all breaches are repudiatory in nature

• minor breaches only entitle innocent party to claim for damages

• effect of a repudiatory breach

-can elect to affirm contract: contract continues, entitled to damages

-OR terminate contract: contract ends, entitled to damages

• effect of an anticipatory breach

-can either wait and insist on performance

-OR treat contract as discharged and sue for breach

• RDC concrete

-situation 1: contract states clearly that in the event of a certain breach, the innocent party may
terminate the contract (express right to terminate)

-situation 2: party in breach renounces the contract by clearly conveying to the innocent party that he
will not perform his contractual obligations at all (anticipatory breach)

-situation 3a: party in breach has breached a “condition” of the contract, the innocent party can
terminate the contract regardless of the consequences of the breach

-situation 3b: regardless of the type of term breached, if the consequences of the breach deprive the
innocent party of substantially the whole benefit which it was intended that the innocent party should
obtain from the contract, the innocent party can terminate the contract

• Sports Connection v Deuter Sports (2009)

-rare and narrow exception to the rules spelt out in RDC concrete

-if the contract expressedly states that a clause is a warranty AND

-clearly and unambiguously states that a breach of it would never entitle the innocent party to
terminate the contract THEN

-the court will give effect to such a clause and the contract cannot be terminated when the warranty is
breached

Discharge by Agreement

• termination clause in existing agreement (e.g employment contracts, terminate with 3 months’ notice)

• OR discharge by subsequent agreement

-must be supported by consideration unless under (i) unilateral release under seal or deed or (ii)
doctrine of promissory estoppel applies or (iii) principles set out in Williams v Roffey applies

Discharge by Frustration

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

• after making the contract but before the performance of the contract is completed

• which makes the circumstances radically different, making the contract

-illegal, or

• e.g change in laws

-impossible to perform, or

• e.g destruction of subject matter of contract (see Taylor v Caldwell 1863)

Case: The case centred on a musical hall which the claimant agreed to hire from the defendant. The hall
was to be used for ‘grand concerts’ and fetes. However, before the performance that the music hall was
to be used for; there was a fire and the hall was destroyed. Neither party was at fault for this
destruction. The claimant sued for breach of contract.

- held that the defendant was released from their obligations under the doctrine of frustration

- the burnt down musical hall renders the contract undoable under the current terms

• e.g death or incapacity (see Poussard v Spiers & Pond)

Case: The Claimant (Poussard) was an opera singer. She was contracted by the defendant to perform in
that capacity for a duration of three months. However, she fell ill just before the start of the opera and
could not sing for the first three days. The defendant hired another singer as potential cover and then
actual cover when the claimant could not sing for the first three days of performances. Once the
Claimant was well again, she wanted to take up her position in the performance but this was refused by
the Defendant.

- held that failure to turn up did amount to a breach of a condition of the contract as this went to its very
root and that Spiers were therefore free to rescind the contract

• see Shenyin Wanguo-APS Management Pte Ltd and Another v Commerzbank (South-East Asia)
Ltd

Case: In Shenyin Wangou v Commerzbank(2001), the plaintiffs deposited Malaysian ringgit in off-shore
accounts with the defendant bank in Singapore. 2 days before the maturity date, the Malaysian
government implemented capital control measures in response to the prevailing Asian financial crisis.
This resulted in the entire ringgit’s off-shore market to be wiped out. When the plaintiff’s deposits
matured, the defendant had to pay them in US dollars as ringgit was unavailable. As the plaintiffs has
previously entered into contracts with a third party to sell the ringgit, they were obliged to purchase the
ringgit at a higher exchange rate to fulfil these contracts.

-held that the contract had indeed been frustrated by the Malaysian government’s actions

- the situation cannot be regarded as a fault attributable to either party in the contract, and hence the
contract was frustrated

-radically different from what was originally envisaged

• e.g non-occurrence of event that was the underlying basis of the contract (e.g coronation) (see
Krell v Henry 1992)

Case: By contract in writing, the defendant agreed to hire from the plaintiff a flat in Pall Mall, on which
days it had been announced that the coronation processions would take place and pass along Pall Mall.
The contract did not contain any express terms on the coronation processions or any other purposes for
which the flat was to be hired. The defendant paid the deposit upon signing the contract. The
processions, however, did not take place on the announced dates. As a result, the defendant declined to
pay the balance of the agreed rent.

- both parties recognised that they regarded the taking place of the coronation processions on the days
originally fixed as the foundation of the contract, the words of the obligation on the defendant to pay
for the use of the flat for the days named were not used with reference to the possibility that the
processions might not take place

-these are not mutually exclusive

• if frustration is established, both parties are excused from performing their obligations

Scenarios where Frustration is Unlikely to Apply

• foreseeable events

-high likelihood that a particular event would occur and both parties decide to go ahead with the
contract, they cannot rely on frustration (see HDB v Microform Precision Ind Pte Ltd)

• self-induced frustration

-brought about by conduct of one of the parties (see Maritime National Fish Ltd v Ocean Trawlers Ltd)

Case: In March 1933, the appellants applied to the Minister to grant them licenses for five trawlers that
they were operating. The Minister informed that appellants that only three licenses would be granted
and asked them to name in respect of which three vessels they should be granted. The appellants named
the three trawlers and the vessel in question was not among them. Subsequently, they claimed that they
were no longer bound by the charterparty as it was frustrated by the refusal of the Minister to grant a
license in respect of the steam trawler in question.

- no frustration of the charterparty as the absence of a license was due to the fact that the appellants’
choice of vessels, which were to be granted licenses

• force majeure clauses

-a clause that relieves parties from obligations should some unexpected event occur

-may enable parties to suspend the contract for some time instead of being discharged by frustration

-if parties intended that such clause would be exhaustive of the parties’ rights, then frustration may not
apply

• effect of frustration

-“let expenses lie where they fall”

-future obligations end (see Fibrosa Case)

Case: The Polish company paid only £1,000 from the required £1,600 deposit to be paid upon placing the
order. On 1 September 1939, a war broke between Germany and Poland and on 3 September, Great
Britain declared war on Germany. As a result, Gdynia was occupied by the Germans and the English
company decided not to dispatch the goods. The Polish company wanted to recover the £1,000 paid as a
deposit.

- total failure of consideration and under the contract the payment of the £1,000 deposit was not an
absolute, final and “out and out” payment, but a conditional payment on account of the purchase price,
the appellants are entitled to recover that sum from the respondents

-money payable ceases to be payable S2(2) FCA

-money paid before discharge may be recoverable if it is just to do so S2(3) FCA

-benefits (other than money) that was conferred before discharge will be compensated with just
monetary amount S2(4) FCA

REMEDIES

Damages

• liquidated

-refers to damages that have been pre-agreed to by the parties to the contract

• unliquidated

-damages that have not been pre-agreed to by the parties to contract

-quantum determined by courts

-compensatory in nature (to place innocent party in same position he would be in if the contract had
been performed properly

-punitive damages generally not generally

Unliquidated Damages
• causation

-is there causal connection between the breach and the loss suffered?

• plaintiff must show that the breach of contract by the defendant was the cause of the loss

-the general test used by the courts is the same as that used assessing damages in general – the ‘but for’
test

• not an exclusive test

• remoteness

-the loss or injury must not be too remote (must be reasonably related to the contract)

-need only foresee kind of loss, not extent of loss

-see Hadley v Baxendale (1854)

• loss arising naturally (in the course of things in such a breach Limb 1)
• loss arising from special or exceptional circumstances where it can be shown that the loss was
within the contemplation of the parties at the time of the contract (Limb 2)

Case: The defendant then made an error causing the crankshaft to be returned to the claimant a week
later than agreed, during which time the claimant’s mill was out of operation. The claimant contended
that the defendant had displayed professional negligence and attempted to claim for the loss of profit
resultant from the unexpected week-long closure. The defendant retorted that such an action was
unreasonable as he had not known that the delayed return of the crankshaft would necessitate the mill’s
closure and thus that the loss of profit failed to satisfy the test of remoteness.

- a party could only successfully claim for losses stemming from breach of contract where the loss is
reasonably viewed to have resulted naturally from the breach, or where the fact such losses would
result from breach ought reasonably have been contemplated of by the parties when the contract was
formed

- Baxendale had not reasonably foreseen the consequences of delay and Hadley had not informed him
of them, he was not liable for the mill’s lost profits

• assessment

-to put the innocent party in the position he would be in if the contract had been performed properly
-principle of proportionality

-aim to compensate not to punish

-expectation loss: what the plaintiff would have expected to get if the contract had been properly
perfomed (e.g loss of profits)

-reliance loss: wasted expenditure incurred by the plaintiff prior to the breach

-can claim for both provided no over-compensation or double compensation

-cost of cure: damages measured according to cost of rectifying defect

-diminution in value: damages measured according to difference in value between what was promised
in contract and what was actually done

*where cost of cure is out of proportion to the advantage to be gained by the injured party, the court
may award the difference in value plus modest damages for the loss of amenity (see Ruxley Electronics
and Construction Ltd v Forsyth 1995)

Case: Ruxley agreed to build a swimming pool at Forsyth’s home. The contract specified the depth of the
pool was to be seven feet and six inches. Ruxley completed the pool to a depth of six feet and nine inches.
Forsyth brought an action for breach of contract, claiming the cost of rebuilding the pool to the specified
depth.

- could not recover the cost of re-building because this would be totally out of proportion to the loss he
had suffered

- worth no less because of the breach but to award nothing would render the contractual promise
illusory, and so a nominal award was appropriate

-non-pecuniary loss

• non-monetary losses (e.g distress, disappointment, hurt feelings)

• generally, not recoverable
• exception: if contract or important contractual term breached is to provide pleasure, relaxation
or freedom from distress
• see Jarvis v Swan Tours (1973) and Farley v Skinnier (2002)

Case: Farley instructed Skinner to prepare a survey on a property he was considering purchasing. The
property was 15 miles from an airport, and Farley specifically requested Skinner to ascertain whether it
would be affected by aircraft noise because he did not wish to live on a flight path. Skinner reported the
property was unlikely to be affected by aircraft noise. Farley purchased it and it was substantially
affected by aircraft noise. He sought damages for breach of contract.

- damages could be recoverable for the loss of a pleasurable amenity which may be of no economic
value, if they are of importance to the claimant

- sufficient to show that the question of the amenity formed an important part of the contract

• followed in Singapore in Yap Boon Keng Sonny v Pacific Prince International Pte Ltd (2009)
• mitigation

-innocent party has duty to take reasonable steps to reduce loss and not aggravate loss (depends on
facts of each case)

-consequences of failure to mitigate means that innocent party cannot recover compensation for loss
that he could have avoided by taking reasonable steps

-innocent party only required to take reasonable steps

-expenses incurred in mitigating losses are recoverable

-if reasonable steps to reduce loss results in an increased loss, innocent party can claim for increased
loss too

Liquidated Damages Clause

• specifies and quantifies damages in advance

• must represent a genuine pre-estimate of loss and is not a penalty

• see Dunlop Pneumatic Tyres Co Ltd v New Garage & Motor Co Ltd (1915)

-likely a penalty and unenforceable if stipulated sum is

• greater than the sum payable under the contract

• extravagant and unconscionable in amount in comparison with the greatest loss that could
conceivably be proved to have followed from the breach
• payable on the occurrence of one or more or all of several events

Specific Performance

• court orders the defendant to perform his obligations under the contract

• specific performance can be but will generally not be granted

• where damages are an adequate remedy

• where the court cannot supervise its enforcement
• contracts involving provision of personal services

• damages would not be adequate in contracts

• for the sale of land or real property

• for unique goods e.g antiques

• specific performance is an equitable remedy and granted at the discretion of the court where it is just
and equitable to do so
Injunction

• court order forcing a party to the contract to observe a negative covenant (e.g an agreement not to do
something)

• prohibitory injunction: prevent guilty party form doing an act in breach of contract

• mandatory injunction: require guilty party to do an act to undo the breach

• normally cannot be used where it would achieve the same result as specific performance (see Warner
Brothers Pictures Inc v Nelson 1937)

Case: The defendant was a film artist, otherwise known as Bette Davis, who had entered into a contract
with the plaintiffs, Warner Bros. Pictures, in the United States to provide her services exclusively to the
company for the period of twelve months with a further twelve-month option. Under the contract, she
could not, therefore, provide her services to another company, without the plaintiff’s express written
consent. By her own admission, the defendant came to the United Kingdom to agree with a business to
work to produce films for a third party and claimed that she was no longer bound by the original
agreement with the defendants.

- contract was not meant to force the defendant to specific performance but that an injunction would
enforce the contract to perform and therefore specific performance was not an appropriate remedy.

- on this basis, an injunction, with a time limit was applied to prevent Nelson from carrying out the other
contract

• injunction is discretionary: generally, not awarded unless damages are an inadequate remedy

AGENCY

• contract is made between principal and agent

Actual Authority

• whatever is in the contract (expressed)

• implied authority

-acts within the reasonable customs and usages of the particular trade

-acts which are reasonably incidental to the discharge of duties as an agent

Apparent Authority

• based on what the third party sees

-representation of authority
-representation made by principal or someone with authority

-third party induced into contract by representation

-principal has capacity

-third party does not know agent lacks authority

• contract between third party and principal through the agent

Agency by Ratification (sign/give formal consent to)

• used to retroactively bring a contract into existence where there is no actual authority nor implied
authority for the very act in question

-e.g when actual authority has been exceeded or there is no authority at all

• 4 requirements:

• principal must be identified

• principal must exist
• principal must have capacity
• principal must ratify within a reasonable amount of time

Authority by Operation of Law

• by statute

-e.g Partnership Act S5: every partner is an agent of the firm and other partners, act done by him in the
usual course of business will bind the firm and the other partners

• agency of necessity

-one party can make essential decisions for another party

-during emergency or an urgent situation where the beneficiary is unable to provide explicit
authorisation

-enables agents to act in the best interests of the principal, especially when time constraints or pressing
demands necessitate an immediate response

• cohabitation

-cohabitation agreement

Duties of the Agent

• to follow instructions
• to account for any profit made (see Hippisley v Knee Brothers)

• to use care and skill (see Keppel v Wheeler)

• not to delegate

• fiduciary duties

-to act in good faith

-no bribes/secret profits

-no conflict of interests (see De Bussche v Alt)

Rights of an Agent

• remuneration depending on agreement

• indemnity for expenses incurred in carrying out the agent’s authority

• lien on principal’s authority

-serves to guarantee an underlying obligation

Remedies for Breach

• damages

• discharge

-termination of agency agreement

Termination of Agency

• the decision of principal and agent

-agreement/giving notice

-discharge by performance

-revocation of authority

• automatic: by operation of law

-bankruptcy, frustration, death or insanity

Doctrine of Undisclosed Principal

• when the agent does not mention that he is an agent

-should principal be bound when the third party was not even aware that agent was acting as an agent?

• undisclosed principal can sue and be sued as long as agent was acting within the scope of authority
and agent intended to act on the principal’s behalf

• agent can also sue and be sued on the contract

• see Siu Yin Kwan v Eastern Insurance

- insurers are liable to undisclosed principals on an indemnity policy, provided it was made with the range
of their authority

Breach of Warranty of Authority

• agent represents to the third party that he has principal’s authority when in fact he does not

-fraud, misrepresentation

• by professing to act agent, agent impliedly contracts that he has authority

-see Yonge v Toynbee

Case: The claimant solicitors commenced a defamation action against the defendant, the solicitors’ client
became insane during the proceedings.

- the solicitors were strictly liable for the breach of their warranty as to their client’s capacity

- it was irrelevant that the insanity of the claimant solicitors’ client was not known to the solicitors

• restrictions on agent’s liability

-agent’s lack of authority is known to third party

-principal liable on main contract

TORTS

Tort of Negligence

1. Duty of care
2. Breach of duty
3. Causation of the damage
4. Actual damage caused
5. Was damage too remote?
6. Defences

Duty of Care
• established categories

-e.g food vendor/supplier to consumer (see Donoghue v S)

Case: Mrs Donoghue’s friend bought her a ginger-beer from Wellmeadow Café1 in Paisley. She consumed
about half of the bottle, which was made of dark opaque glass, when the remainder of the contents was
poured into a tumbler. At this point, the decomposed remains of a snail floated out causing her alleged
shock and severe gastro-enteritis.

- negligence is distinct and separate in tort

- there does not need to be a contractual relationship for a duty to be established

- manufacturers owe a duty to the consumers who they intend to use their product

-e.g doctor to patient if the relationship is already in place

• Spandeck Test (THE test in Singapore)

-factual foreseeability

-proximity: necessary closeness between principal and dependent (depends on the facts of the case)

• for nervous shock/psychiatric cases: (a) close ties of love and affection (e.g parent child,
spouses) (b) circumstancial proximity (time and space, see McLoughlin, Alcock) (c) own sensory
perception of even or immediate aftermath

-public policy considerations e.g floodgate

Breach of Duty

• standard of care required from a reasonable person in that position e.g professional/amateur

• relevant factors

-seriousness of the injury

-cost of avoiding the risk

-likelihood of harm

• does res ipsa apply? (does the action speak for itself/is breach self-evident?)

-under their control

-would not have happened but for

Causation of the Damage

• causation in fact
-“but for”

-see Barnett v Chelsea

Case: After their night shift as night-watchmen, at about 8 am on 1 January 1966, three people went to
the emergency department of the hospital run by the Chelsea & Kensington Hospital Management
Committee. They spoke to a nurse and told her that they had been vomiting since drinking tea at about 5
am. He advised the nurse, over the phone, that they should go home and call their own doctors. One of
them, Mr. Barnett, died about five hours later from arsenic poisoning. Mrs. Barnett sued the hospital for
negligence.

- even if they were to have admitted Mr. Barnett, there would have been little or no chance that the
antidote would have been administered to him in time to prevent his death

• causation in law

-was the chain of causation broken?

-was there a new intervening act, extraneous

-see Stapley, Sunny Metal

Actual Damage Caused

• must have actual damage to be able to claim

Was Damage too Remote?

• what extent of damage was reasonably foreseeable?

-see Wagon Mound

Case: The crew members of the Overseas Tankship (UK) Ltd were working on a ship, when they failed to
turn off one of the furnace taps. This caused oil to leak from the ship into the Sydney Harbour. Morts
Dock & Engineering Co (The Wagon Mound) owned the wharf, which they used to perform repairs on
other ships. The leaking oil on the water surface drifted to the site where Morts were welding metal. A
supervisor enquired to find out whether the oil was flammable, which he was assured that it was not.
However, a spark from welding and mixed with debris, caught fire from the spilt oil and this caused a fire
to spread rapidly. This caused significant damage to Mort’s wharf.

- could not be held liable to pay compensation for the damage to the wharf

- the damage caused to the wharf by the fire and the furnace oil being set alight could not be foreseen by
a reasonable person

• does exception of egg-shell skull rule apply?

-defendant must take victim as he finds him

Defences

• contributory negligence

• volenti non fit injuria – voluntary assumption of risk

Tort of Defamation

• protects a person’s right to uninjured reputation and good name

• publication of statement by a person which tends to lower reputation of another in the right thinking
members of society

Tort of Passing Off

• where a person conducts business so as to lead others to believe that his goods/services are those of
another’s

• wrongful to benefit from another trader’s goodwill by passing off own goods or services as his

Tort of Inducing Breach of Contract

• defendant knowingly and intentionally induces a third party to breach his contract with the principal

Vicarious Liability

• employer is vicariously liable for torts committed by employee acting within scope of authority or
conditions of employment

• employer is vicariously liable only if it has strict control of employee’s conduct in performance of work

• employer not liable for torts of independent contractor