Chapter 1 – Introduction to Law

1. Legal Institutions – Law Courts etc.

Elements of a 2. Substantive Law – rules
legal System 3. Legal culture – Attitudes and values held by the community

Def: Basic unit within which a legal system operates – e.g. Singapore, is one legal
jurisdiction, Johor is outside Singapore’s jurisdiction
Jurisdiction
*Note: Jurisdiction may extend beyond physical borders à cross border business
transactions
Civil Law v Common Law:
1. Civil Law: Based on codified law – South America, Indonesia, Sri Lanka, Japan
Legal Traditions
2. Common Law: Based on case laws (also includes written law) – Singapore, Hong
Kong, Malaysia, US, UK, Australia
Equity – Seen to complement, soften and can override hard application of legal rules.
Element included to make law just and fair

Law Reports – Important documents publicizing the judgements of courts

§ Plaintiff – Person who initiates legal proceedings
§ Defendant – Opposing party
§ Public Prosecutor – In criminal cases, acting for the state
Common Law
§ Appeals – Appellant is the one who appeals, respondent is the contrary party

Precedent - Principle whereby past cases decided by superior courts are binding and
authoritative for future cases decided by lower courts in the same hierarchy

Common Law employs inductive reasoning

Civil Law employs deductive reasoning
1. Civil and Criminal Law – Criminal covers laws prohibiting acts because they are
harmful to the community. Criminal punishes whereas civil compensates
2. Case law and statutes – Laws which are judge-made come under case law. Laws
Classification of
that are enacted by the legislature come under statutes.
Laws
3. Public law and Private Law – Public involves government whereas Private deals with
private persons
4. Substantive law and procedural Law
To distinguish Common Law:
1. Development of English Law: Common Law v Equity
Terminology of
2. Type of English Law: Common Law v Statue
Common Law
3. Type of Legal System: Common Law v Civil Law (& others)

Uncertainty:
1. Arise from imperfections in the legal process – law omitted, inconsistent
interpretations, lack of information etc.
2. Arise from change
Functions of
Business Law Functions:
1. Facilitator – Business law exists to facilitate businesses
2. Regulator – Used by governments to encourage certain activities while prohibiting
others
3. Adjudicator – Used to provide resolution between disputes
Ratio Decidendi – Rationale for decision (Binding Authority on all lower courts in same
hierarchy)
Obiter Dictum – A saying by the way (Persuasive Authority)
Terms Stare Decisis – Principle of binding precedence, LEGALLY MATERIAL FACTS must be
SIMILAR for stare decisis to apply
§ Vertical àLower courts have are bound by higher court decisions (spore)
§ Horizontal à Decided based on the case itself.

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Chapter 2 – Singapore Legal System
3 Governing Arms:
1. Executive – President, Prime Minister & Cabinet of Ministers)
2. Legislature – Parliament & President
3. Judiciary – Supreme Court and Subordinate Courts

Constitutional Bodies:
Singapore 1. Council of Presidential Advisers – Advise President on matters involving exercise of
Constitutional presidential discretion
Construction 2. Presidential Council for Minority Rights – Advise on legislation referred to it by
Parliament or the government which involves racial/religious issues

Head of State à President

Head of Government à Prime Minister (more executive power)
ParliamentàBody of elected & non-elected representatives of the people to enact legislation
and discuss policies
Type of Bills:
1. Introduced by the government
2. Introduced by an individual Member of Parliament (pg 28)

Process:
1. First Reading – Introduction but not read out in full (no discussion)
Law-Making by 2. Second Reading – Principles debated. Bill amended. Receive feedback and
Legislature comments from Public by Select Committee
3. Third Reading – Requires little/no amendments. Parliament votes (2/3)
4. Presented to President for his assent. Checked by Presidential Council for Minority
Rights for racial and religious matters
5. Assented by President à Bill becomes an Act of Parliament
6. Act published in Government Gazette

S9A Interpretation Act à Permissible for extrinsic materials when seeking to discover
Parliament’s intention in enacting a provisions

Approaches:
1. Literal Rule Approach – Take literal meaning of provision in the statue if no ambiguity
2. Golden Rule Approach – Seeks to qualify literal rule when applying it strictly leads to
absurdity and injustice (must have ambiguity, choose the sensible meaning)
3. Mischief Rule Approach – Consideration given to purpose of Parliament in enacting
the provision when it is ambiguous (use extrinsic evidence - parliamentary debates)

WHEN TO BRING IN S9A:

S9A bii) Ordinary meaning conveyed by text of provision, taking into account its context in the
Interpreting
written law, leads to result that is manifestly unreasonable. (When statute is not ambiguous
Legislation
but unreasonable in context)
S9A a) To confirm that meaning of provision is/is not the ordinary meaning conveyed by text
of provision (confirm using extrinsic evidence)

Guidelines (Maxim or Canons):

1. Ejusdem Generis – Broad words should be read narrowly to apply matter of the same
group
2. Noscitur a Sociis – Narrows broad word view
3. Expressio unius est exclusion alterius – mention of one thing is the exclusion of
another
4. Unity of an Act – Read as a whole, unless expressed
Judge hierarchy:
Chief Justice à Judge of Appeal à Judge of High CourtàJudicial Commissioners
The Judiciary
Hierarchy of Courts:
Supreme Court = Court of Appeal (Highest) + High Court
§ High Court claims for > $250,000
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 Subordinate Courts – District, magistrate, juvenile, family, coroner, small claims
§ District court claims up to $250,000
§ Magistrate Court claims up to $60,000
§ Small Claims Tribunals for claims up to $10,000
Reception of English Law:
§ English law introduced into Singapore
Sources of nd
§ General Reception of 2 Charter of Justice 1826, Specific Reception
Singapore Laws
§ Under specific reception, cut-off reception and continuing reception
§ Section 5 Civil Law Act (Repealed), Application of English Law Act
1. Issue legal proceedings – Writ of summons, originating motion, origination summons,
petition
2. Pleadings – Documents submitted by plaintiff & Defendant. Plaintiff to claim,
Litigation
Defendant to counterclaim
Process
3. Discovery and Interrogatories
4. Trial
5. Judgement and Enforcement
Range of dispute resolutions:
§ Disputants only à Concede or negotiate
§ Third Party Involvement
Dispute a. Mediate à Singapore Mediation Centre (Faster, Cheaper) domestic
Resolution arrangements. Mediator does not pass judgement, get parties to compromise
Methods b. Conciliate
c. Arbitrate – Private Process (Faster, Cheaper and can choose Arbitrator)
International agreement thus more enforceable
d. Litigate

Chapter 3 – Offer & Acceptance

Definition:
Legally binding Agreement giving rise to obligations which are enforced or recognised at
law

4 Key elements to a contract:

• Offer à Acceptance à Consideration à Intention to create legal relations

To be legally binding:
1. meeting of minds (consensus ad idem), manisfested through (1) offer & (2)
acceptance
a) whereby, parties in a contract have thought about the same thing
in the same manner before reaching an agreement.

b) Test of agreement is determined objectively, through their actions

2. consideration and intention to create legal relations
3. parties must have capacity to contract {exp]
Contracts 4. parties must freely consent to agreement

Factors that impairs free consent:

• Mistake
• Misrepresentation
• Duress and undue influence
(contract cannot suffer from illegality)

*note: All contracts are agreements but not all agreements are contracts as there has to
be “meeting of minds” - Wellmix Organics Pte Ltd v Lau Yu Man

Types:
1. Simple Contracts – Written/Oral
• Written Contracts provide evidence of parties contractual obligations -
Forefront Medical Technology (Pte) Ltd v Modern Pak Pte Ltd (2006)
• Parol Evidence Rule – oral evidence will not be admitted in a court action
to add to, vary, amend or contradict a written contract – Evidence Act S94

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 - Engelin Teh Practice LLC v Wee Soon Kim Anthony (2004)
-exception:
2. Special Contracts – Deeds or Contracts under seal
• Always in writing
• Do not require consideration to be enforceable
OFFER
Def: an expression of willingness to contract on specified terms , made with the intention
that it is to become legally binding as soon as it is accepted by the person to whom it is
address.
Effective Offer
Effective offer à it must be communicated to the offeree

Def: Contract brought into existence by the act of one party in response to a conditional
promise by another. Identity of the offeree may not be known immediately

Unilateral Carlill v Carbolic Smoke Ball Co (1892) - Although offer is made to the world, the
Contracts contract is made with that limited portion of the public who came forward and perform the
condition on the faith of the advertisement

*Note: bilateral contracts, parties would know the identities of each other
Def: An invitation to treat is an invitation to commence negotiations.
Advertisement does not constitute as an offer.

Acceptance of an invitation to treat does not lead to a contract - Partridge v Crittenden

(1968)
• Reasonable that normal seller would want to reserve the right to sell to whoever
he wants (unless there is “welcome all”)
• No normal advertisers would want to open himself to risk of not being able to
deliver enough goods (if Qty available not stated in advertisement, or limited qty)
Invitation to Treat
For online invitations to treat, use S14 of ETA: for electronic communications proposing to
conclude contracts, and not addressed to one or more specific parties, are to be treated
as invitations to treat unless there is clear indication of intention of the proposing party to
be bound by terms of proposal upon acceptance. (e.g. capable of immediate payment)
Chwee Kin Keong v Digilandmall.com Pte Ltd (2004)

Display of good & prices (ITT) Offer is only made when the customer selects the item and
pays for it at the cashier - Pharmaceutical Society of Great Britain v Boots Cash
Chemists (Southern) Ltd (1952)
Auctions – Auctioneer invites bids (ITT), bids by audience are offers. Sale completed
when auctioneer indicates his acceptance by fall of his hammer
Auction & Tenders
Tenders – Advertisement invite tenders (ITT). Person submits tender (offer)
Provision of Mere response to request for information does not constitute as an offer - Harvey v Facey
Information (1893)
ACCEPTANCE
Def: Final and unqualified expression of assent to the terms of an offer. An unconditional
agreement to all the terms of the offer which bring a contract into existence, making both
parties legally bound.

Acceptance may be made in writing, orally or by conduct

(for unilateral contracts, acceptance is by offeree’s performance of an ACT in return for a
promise, while in bilateral, it’s through offeree’s PROMISE in return for a promise.
Effective
Acceptance Communication constitutes an acceptance only if it is an unconditional expression of
agreement to the terms of the offer – Compaq Computer Asia Pte Ltd v Computer
Interface (S) Pte Ltd (2004)

Subject to contract/Subject to written contract to be draft by solicitors does not constitute

as acceptance. The contract will come to existence only when condition is fulfilled -
Thomson Plaza (Pte) Ltd v Liquidators of Yaohan Department Store Singapore Pte
Ltd (in liquidation) (2001)

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 Person cannot accept an offer that he does not know about – R v Clarke (1927)

Once the offeree is aware of the offer, it does not matter that he was prompted to act for
reasons other than the desire to accept the offer - Williams v Carwardine (1833)
Knowledge of Offer
Cross offers
2 Identical cross offers do not ordinarily make a contract – Tinn v Hoffman & co (1873) –
Cross offer implies a lack of consensus or meeting of minds between the parties at the
time of making the offers
General Rule: For an acceptance to be effective, it must be communicated to the offeror.
Offeror must physically receive written acceptance or hear the oral acceptance Entores
Ltd v Miles Far East Coporation (1955)

Exceptions:
1. Waiver of Communication - Facts show that the offeror has waived the need for
communication of acceptance E.g. unilateral contracts

2. Silence – For this to be effective, both parties must agree to it

Felthouse v Bindley (1862) - Felthouse had no right to impose a condition that a

sale contact would come into existence if Bindley remained silent

Both offeror and the offeree may agree that the offeree would have a position
obligation to communicate only if he wishes to reject the offer – Southern Ocean
Shipbuilding Co Pte Ltd v Deutche Bank AG (1993)
Communication of
Acceptance
3. Postal Rule - Acceptance is deemed to have been effective as soon as the letter is
posted, regardless as to when it reaches the offeror or whether it reaches him at all
– Adams v Lindsell (1818)
Requirement for rule to apply:
-only when it is reasonable to do so
-letter of acceptance must be properly stamped

It should only be applied in cases where both parties agree that acceptance should
be sent by post

Offer made by telegram gives rise to a presumption that the offeror wishes a speedy
reply such that an acceptance sent by post would not attract the postal rule –
Quenerduaine v Cole (1883)

*Note: Postal rule can be avoided when parties expressly provide for it à acceptance
should be physically received
Instantaneous Communication through phone:
• Communication is instant in its fullest sense
• Acceptance must be actually be received by the offeror

Asynchronous (not communicating in real time) where there is instantaneous or virtually

instantaneous transmission:
• Email, Voicemail etc.
• Chwee Kin Keong v Digilandmall.com Pte Ltd suggests that General Rule
applies where acceptance is valid upon receipt (capable of being retrieved)

Instantaneous
Communications
Electronic Transactions Act:
S11 ETA: An offer or acceptance can be sent electronically in the form of an “electronic
record”
S13(1) (a) ETA: Electronic record is deemed sent by the originator if it is sent by the
originator himself, someone authorized by him or by an information system programmed
by or on behalf of the originator to operate automatically

S13(1) (b) ETA: If the electronic communication has not left an information system under
the control of originator or of the party who sent it on behalf of the originator, time of
dispatch is the time when the electronic communication is received.
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 S13 (2) ETA: Time of receipt of acceptance is the time when it is capable of being
retrieved by the addressee at an electronic address designated by addressee. And by
receipt rule, acceptance is only communicated upon receipt

S13 (3) ETA: If electronic address not designated by addressee, then time of receipt is
when addressee becomes aware communication has been sent to that address and that
the communication is capable of being retrieved by addressee

S14 ETA: Used when discussing online invitation to treat

S15 ETA: Use of automated message system for contract formation shall not be denied
validity or enforceability - Chwee Kin Keong v Digilandmall.com Pte Ltd (2004)

Moment of receipt depends on whether the addressee has designated a specific

information system for receiving messages
• If addressee has done so, receipt occurs when the electronic record enters the
designated information system of the addressee
• If message is sent elsewhere, then receipt occurs when the message is retrieved
by the addressee, S15(2)(a) ETA
• If addressee has not designated an information system, receipt occurs when the
message enters any information system of addressee S15(2)(b) ETA
*Note: Provisions of ETA deal with the time transmission is received but do not resolve the
issue of when acceptance is communicated. ETA does not definitively endorse the postal
rule or the general (receipt) rule
TERMINATION TO OFFER & ACCEPTANCE
General Rule: offer can be withdrawn at any time prior to acceptance

Effective only: Revocation of offer must be communicated to the offeree & when offeree
receives notice of revocation – Byrne v Van Tienhoven (1880)
rd
Reliable 3 Party revocation: Can be valid as long as offeree obtains knowledge of
revocation -Dickinson v Dodds (1876)

Replacement/Substitution by fresh offer: fresh offer must state that it supersedes the
earlier offer – Banque Paribas v Citibank NA (1989)
Withdrawal
Withdrawal for stipulated fixed period offers: Even when offer is expressly stated to open
for a specific period of time, there is no legal obligation to do so. Apply General Rule
– Routledge v Grant (1828)

Unless there is a separate contract supported by consideration (“options”, typically used in

transactions involving real property) to do so, an offeree cannot enforce an offeror’s
promise to keep his offer open – Tay Joo Sing v Ku Yu Sang (1994)

Unilateral contract withdrawal: Offer cannot be revoked when offeree begins to perform
his obligations within reasonable time offer is made - Abbott v Lance (1860) / Dickson
Trading Pte Ltd v Transmarco Ltd (1989)
Rejection:
• Offer can be terminated when an offeree rejects the offer in writing, orally of
conduct.
Rejection & • Rejection must be communicated to offeror to be effective and offer is
Counter-Offer extinguished and cannot be revived
Counter-Offer:
• construed as rejecting the initial offer – Hyde v Wrench (1840)
• Accepts an offer but on the condition of a new term
Offeror states that his offer is open for a specified period. Purported acceptance after that
period would not be effective since offer had lapsed

Court may imply that offeror has specified the period of offer even if he has not done so
Lapse of Time
expressly - Wee Ah Lian v Teo Siak Weng (1992)

Exception: if it is clear from the offeror’s conduct and other evidence that the terms of the
supposedly lapsed offer continue to govern their relationship after the specified period –
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 Panwell Pte Ltd & Anor v Indian Bank (No 2) (2002)

No express/implied period:
Presumes that an offer will lapse after a reasonable time has passed – Ramsgate
Victoria Hotel Co v Montefiore (1866)
An offer may be made subject to a condition such that if the condition is not met, the offer
is automatically terminated
Failure of Condition
Such condition may be expressly stated in the offer or it may be implied – Financings Ltd
v Stimson (1962)
An offer is terminated by death of either the offeror or the offeree

If a man who makes an offer dies, the offer cannot be accepted after he is dead –
Dickinson v Dodds

Death Reynolds v Atherton (1921) – Offeree dies before acceptance, this offer cease to be
capable of acceptance.

Exception:
Bradbury v Morgan (1862) – The court held that the death of an offeror did not terminate
the offer unless the offeree had notice of the offeror’s death.
Once an acceptance has been communicated to an offeror, it cannot be withdrawn since,
Termination of upon communication, there is a contract
Acceptance
Once posted, acceptance cannot be revoked (postal rule) – Wenkheim v Arndt (1873)

Chapter 4 – Consideration & Intention to create Legal Relations

CONSIDERATION
Def: something that has value in the eyes of the law and given in exchange for a promise.
Defined by Dunlop v Selfridge (1915) -
An act or forbearance of one party or the promise thereof, is the price for which the
promise of the other is bought and the promise thus given for value is enforceable

Requirement to be a consideration: a benefit to the promisor or detriment to the promisee

**Note: In order for a promise to be enforceable, consideration must first be given

Executory: consideration refers to consideration which have not been performed

Executed: Executed consideration refers to consideration which has been performed. In

other words, executed consideration involves an act or forbearance, which has been
Types
fulfilled

Past: Act performed prior to and to that extent independent of the promises being
exchanged. Past Consideration is no consideration - Roscorla v Thomas (1842) – Court
held promise was made after transaction had already been concluded and therefore past
consideration.

Requirements for Past Consideration to become Executed:

Pao On v Lan Yiu Long (1980) –
1. Act done at promisor’s request
2. Parties understood act is to be remunerated
3. Contract must otherwise be enforceable

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 **Note: Executed consideration is that the act was performed in exchange for another
promise given whereas with past consideration the act was performed without the
reciprocal promise in mind
General rule: For a promisee to enforce the promise, he must show that consideration has
moved from him

Tweddle v Atkinson (1861) - Court held that Tweedle could not enforce the contract
between the 2 fathers because he is not a party and no consideration flowed from him
Main Rules on
Basically, the rule states that although the promisee must provide consideration, the
Consideration
consideration need not benefit the promisor.

General Rule: Need not be adequate but must be sufficient

Common law will not inquire the fairness to the consideration as long as the parties agree
to it willingly – Chappell & Co Ltd v Nestle Co Ltd (1960) - Chocolate wrappers were
deemed as sufficient consideration
Def: Consideration with legal value
Goods, services, money and property – Clearly sufficient consideration

Forbearance to Sue – A promise to forbear from suing/enforcing a valid claim is a

sufficient consideration - Alliance Bank Ltd v Broom (1864)

The same applies to a compromise of a legal action such as a out of court settlement –
Callisher v Bischoffsheim (1870)
Requirements:
Sufficient
1. The legal action must be reasonable and not frivolous
Consideration
2. Claimant has an honest belief in the chance of success of the claim
3. Claimant has not concealed from the other party any facts, which to his knowledge
might affect its validity.
rd
Performance of existing contractual duty to 3 Party – Sufficient
The Eurymedon (1975) even though the defendant was already contractually bound to a
third party to carry out a duty, the Privy Council still affirmed that good consideration is
present when the plaintiff shipping company made a separate offer to pay the defendant if
they unload the goods from the Eurymedon.
Moral Obligations & Motives – Consideration amounts to nothing more than moral
obligations, thus insufficient

Eastwood v Kenyon (1840) – The court rejected the plaintiff’s view and held that moral
obligation is insufficient consideration for a fresh promise.
Promise which is supported merely by the wishes or motives of the promise – no matter
how exemplary cannot be enforced because it lacks good consideration

Thomas v Thomas (1842) – The court held that the nominal rent was sufficient
consideration but the husband’s wishes were irrelevant; motives are not the same things
as considerations

Vague or insubstantial consideration

White v Bluett (1853) – The court held that Bluett’s promise was nothing more than a
Insufficient
promise “not to bore his father”. As such it was too vague and was insufficient
Consideration
consideration for the alleged discharge by his father.

Performance of existing Public Duty

Collins v Godefroy (1831) – The words of Lord Tenterden, “If it be a duty imposed by law
upon a party regularly subpoenaed to attend from time to time to give his evidence, then a
promise to give him remuneration for loss of time incurred in such attendance is a promise
without consideration

Exception: If the court finds the promisee did something more that required by an existing
public duty, then it may be sufficient - Glassbrook Bros Ltd v Glamorgan City Council
(1925)

Performance of existing Contractual Duty

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 DEPENDS on whether contractual duty is owed to promisor or to third party. If it is to a
third party, then there is sufficient consideration as the benefits created to promisor is not
something he was previously entitled to.

Stilk v Myrick (1809) – It was held that there was no consideration for the captain’s
promise because the remaining crew did what they were contractually required. Two
sailors deserting were within the usual emergencies found in such a voyage

Exception: If “practical benefits” or “avoided detriments” are enjoyed by the promisor

through the promisee performing the duty, then the benefit can be treated as valid
consideration. Williams v Roffey Bros and Nicholls (Contractors) Ltd (1991) – The
English Court of Appeal held that as long as the extra payment was not given under
duress or fraud, the oral promise was enforceable because the defendant obtained
“practical benefits” from the plaintiff’s work. The benefit was that they would not be liable
under the main contract for late completion.

Rule in Pinnel’s Case

General rule: Partial fulfilment of a contractual obligation does not discharge the
promisee’s obligations. Also applies to a DEBT.

Pinnel’s Case (1602)– Payment of a lesser sum on that day in satisfaction of a greater
sum cannot be any satisfaction for the whole
Foakes v Beer (1884) – Promise not to take further action not supported by consideration

Part payment of a debt does not discharge the entire debt unless -
Exception: the part payment was made at request of creditor + payment was made earlier,
at a different place, or in conjunction with some other valuable consideration. Gives
additional value promisor not previously entitled to.
Equitable doctrine – Used when promisor takes back his promise on the grounds that
there is no consideration given by promisee. Once established, promisee may have a valid
defense against a promisor’s claim even though no consideration has been given by
promisee (not under common law principles)

Central London Property Trust v High Trees House Ltd (1947) – elements required to
establish Promissory Estoppel:
1. Parties must have existing legal relationship
2. Promise must be clear & unequivocal and intended to affect the legal relationship
3. Promisee relied upon promise and altered his position
4. Inequitable(unfair) for promisor to go back on his promise

*Note: Once elements of Promissory Estoppel is established, it is tantamount to upholding

a promise even though no consideration flowed from the promisee

Suspensive of Extinctive
Estoppel
Promissory Once Promissory Estoppel is established, the original legal relationship is generally
(exception to no- suspended temporarily for the duration of the promise.
consideration for a
contract to be When the promisor gives reasonable notice of his intention to revert to the original legal
formed) relationship, the original relationship is restored. For rights to certain past events for which
reversal is highly impossible, rights can be extinguished. Central London Property Trust
v High Trees House Ltd (1947) – Right to past rental collections extinguished

Tool Metal Manufacturing Co Ltd v Tungsten Electric Co Ltd (1995) – The House of
Lords affirmed the principle of PE. Tool Metal was entitled to revoke their voluntary
suspension by giving adequate notice to Tungsten Electric. The parties were deemed to
have returned to their original agreement by 1947. (notice given 1945)

Promissory Estoppel can totally extinguish rights of promisor under original agreement
and the promise can become “final and irrevocable if promisee cannot resume his
position” – Ajayi v R T Briscoe (Nigeria) Ltd (1964)

Shield not Sword

Only as a defence against a claim made by a plaintiff, cannot be used to commence a suit
- Combe v Combe (1951) – English Court of Appeal held that PE can only be “used as a
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 shield and not as a sword.” – Assoland Construction Pte Ltd v Malayan Credit
Properties Pte Ltd (1993)
INTENTION TO CREATE LEGAL RELATIONS
The test is whether a reasonable person viewing all the circumstances of the case would
Definition
consider that the promisor intended his promise to have legal consequences
General Rule: Such agreement lack the necessary intention to form a contract
Presumption that parties do NOT intend the agreement to be legally binding
-but it can be rebeuuted
(therefore, they lack the intention to create legal relation)

Balfour v Balfour (1919) - The English Court of Appeal held that the claim failed because
the parties did not intend the promise to be legally binding, contract was motivated by
natural love and affection.

Social & Domestic Jones v padavatton (1969) –a mothers agreement to maintain her adult daughter on the
Agreements condition that the latter studied to become an advocate was not enforceable.
It was merely an informal family arrangement, where parties depended on the others good
faith for the performance of the promise.

Exception: Merritt v Merritt (1970) – The English Court of Appeal found the necessary
intention and held that the wife succeeded in her claim for breach of contract
-presumption can be rebutted by clear evidence, that is
(1)certainty of the terms of agreement, the more certain, the more likely both parties
havecarefully considered the content and effects of agreement
(2)actually reliance, evidence of reliance will suggest that the parties intended the
agreement to be binding
General Presumption: presumption that the parties intend to create legally enforceable
obligations - Edwards v Skyways Ltd (1964)

Honor Clauses – Parties have expressly stated their agreement is not to be legally binding
such agreements are unenforceable because of the absence of the necessary intention -
Rose & Frank Co v J R Crompton & Bros Ltd (1925)

Letter of Comfort, Memorandum of Understanding, Letter of Intent – Not legally binding

Letters of comfort are letters written by one party usually intended to vouch for the
financial soundness or probity of another related party who wishes to enter into a contract
with a third party. If third party is uneasy about entering into contract, the letter of comfort
would act as an additional assurance from the letter’s issuer

Memorandum of understanding is usually a document which records the understanding of

the parties on a proposed commercial project

Letter of intent is simply that it records the intention of parties, usually in connection with a
Commercial
proposed commercial project
Contracts
Kleinwort Benson Ltd v Malaysian Mining Corporation Berhad (1989) – On appeal,
Court only found a moral not legal obligation. The wording of the letter of comfort did not
amount to a warranty of MMC’s future conduct. On this basis, the court saw no need to
apply the usual presumption of intention to create legal relations

Exception: Mohamed Bassatne v Rifaat El Gohary (2004) and Khng Thian Huat v
Riduan Bin Yusof (2005) involving a MOA and LOI respectively. Parties’s conduct had
determined that the respective agreements were indeed binding

Administrative Relationships
Management Corporation Strata Title No 473 v De Beers Jewellery Pte Ltd (2001) –
No intention to create legal relations could exist on either side since De Beers was in the
position of an applicant for a license and the MC was in the position of the issuing
authority.

• The situation as analogous to that which exists when someone applies to a

governmental or statutory body for an approval, for example, a licence to operate
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 a restaurant or a radio or even a permit to construct a building
PRIVITY OF CONTRACT

General Rule/doctrine of privity of contract:

Only parties to a contract can sue and are liable to be sued in respect of rights and
obligations, respectively under the contract.

(1) a third party to the contract, cannot enforce a benefit promised under the contract
(2) contracting parties cannot, by a contract between them, impose a burden on a third
party.
- Price v Easton (1833) – Court held that Price could not succeed because he was not a
party to the contract between the debtor and Easton

rd
Exceptions where 3 Party can acquire contractual rights & liabilities:
Thai Kenaf Co Ltd v Keck Seng (S) Pte Ltd (1993)
• Agency Relationship
o General rule of Agency: Principal, although not a party to the contract, has
a direct contractual relationship with the third party. Conversely, the agent
who is a party to the contract, is not liable for and not entitled to enforce
the contract
• Assignment of Choses in Action
o Rights or liabilities relating to a chose in action under a contract between
parties may be transferred to a third party under a assignment
o Typically, assignment is made with the full consent of three parties
• Letter of Credit

53B of Contracts (Rights of Third Parties) Act (CRTA)

rd
3 Party is able to enforce any term of a contract which it is not a party of when
Privity of contracts • Contract states expressly that he may do so, S2(1)(a) CRTA
• Contract purports to confer a benefit on him, unless on a true construction of the
contract, the contracting parties did not intend the third party to be able to sue,
S2(1)(b) and 2(2) CRTA
• Third party is expressly identified in the contract by name as a member of a class,
or as answering a particular description, although he need not have existed at the
date of the contracts, 2(3) CRTA

Third party who sues under CRTA will have a right to all remedies for breach of contract.
This is so even though the third party gave no consideration, S2(5) CRTA

*Note: CRTA doesn’t apply to:

• Contracts on bills of exchange, promissory notes and other negotiable instruments
• Memoranda and articles of association that bind a company and its members
• Contracts of employment where a third party wishes to enforce a term against an
employee
• Contracts for carriage of goods by sea or for all international carriage of goods by
rail, road or air

Implications of CRTA:
• Enables contracting parties to choose whether or not to confer enforcement rights
to a known third party where this is not already provided by another statue
• Contracting parties may be sued by a total stranger who is not a party to the
contract since the CRTA does not require the third party to be individually names
or even inexistence
• A clause can be used to prevent that that says “A person who is not a party to this
agreement shall have no right under the Contracts (Rights of Third Parties) Act to
enforce any of its terms.”

Chapter 5 – Contract Terms

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PUFFS, REPRESENTATION & TERMS
Statements which have no legal effect whatsoever. They tend to be statements which are
vague because of imprecision/exaggeration
Puffs (No Legal
Effect)
Dimmock v Hallet (1866) – Court held that the description of the land “fertile and
improvable” was a mere puff.
Statement made before or at the time a contract is formed concerning some matter
relating to the contract and is not an integral part of the contract.
Representation
(Not part of the
Contract is not breached if the representation is untrue - Behn v Burness (1863) - In this
contract)
situation, the party may have a remedy under the law of misrepresentation but cannot
initiate an action for breach of contract
Statements which form part of the contract.

Similarity between terms and representations is that they originate as oral and written
statements before a contract is formed.
Terms (Substance
Terms are part of the contract while representations are not. Distinguishing criterion is the
of the contract)
intention of the parties as determined by reasonable person viewing all circumstances.

Terms and representations create different rights and obligations for the contracting party -
Jet Holding Ltd and Others V Cooper Cameron (Singapore) Pte Ltd and Another –
Representations cannot in law be elevated to terms of contract whether express or implied
DISTINGUISHING TERMS FROM REPRESENTATION
Main criterion for distinguishing terms and representations is the intention of the parties –
Definition
Tan Chin Seng & Others v Raffles Town Club Pte Ltd
The closer to time the contract was finally concluded, then it is more likely to be a term
rather than representation

Rationale is that a long interval between the time the statement is made and the point the
When Statement is
contract is formed suggests that statement is relatively unimportant
Made
Routledge v McKay (1954) – The English court of appeal held that there was clear and
significant interval of one week between the making of the statement and the making of
the contract. This indicates that the statement was not a term of the contract
Greater the emphasis, the more likely the statement is a term.
If the statement is so important to one party that they would not have entered into the
Maker’s Emphasis/ contract but for such statement having been made, it is a term.
Importance of the
statement Bannerman v White (1861) – White told Bannerman that he would not even bother to ask
the price if sulphur had been used. The court held that Bannerman was found to have
breached the contract, thus entitling White to repudiate the contract
Where maker of statement has greater knowledge concerning the statement as compared
to the other party, it is more likely that the statement is a term

(it is reasonable to assume that it is not the intention of a person making the statement ,
who has little or no expertise in the area to someone who has expertise in the area, to
expose herself to breach of contract action in case the representation process false.)
Maker’s Special
Oscar Chess Ltd v Williams (1957) – The court of Appeal held that William’s statement
Knowledge
was not a term of the contract because as a private individual, Williams was not in a
position to guarantee the accuracy of the year of registration given

Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd (1965) – The English Court
of Appeal held that there was a breach of contract because the defendant’s statement was
a term of the contract. The seller, a motorcar dealer, was in a better position to know the
true facts regarding the Bentley,
If the maker of the statement invited the other party to verify the truth of the statement
made, then the statement is more likely to be a representation.
Invitation to Verify
The gh/>”?><Mws2z party tells the other to the effect ‘ don’t take my word for it, get an
Statement
independent verification and satisfy yourself’

Maker of statement shows that he does not intend contractual liability to result from his
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 statement.

If maker dissuades the other party from verifying the truth of the statement, then
statement is more likely to be a term.

Ecay v Godfrey (1947) – The statement was held to be a representation

Exception: schawel v reade (1913) sellor said ‘need not look for anything that could
matter with the horse’. Sellor statement was a term.
If a statement was originally made orally and later reduced into writing,
What is said is a representation and not a term, parole evidence could be used to shut out
Written Statement oral statements.
However, court might hold that the parties entered into a contract that was partly oral and
partly written.

EXPRESS TERMS
An express term is a term which has been expressly agreed between the parties. Can be
Express Terms
made orally or in writing
IMPLIED TERMS
An implied term is a term which has not been expressly agreed by the parties but is
nevertheless implied into the contract

Implied by:
1. Court to give efficacy to contract
2. Statute
Definition
Term cannot be implied if the implication of such a term would be plainly against the
express terms of the contact – Tan Hin Leong v Lee Teck Im (2001); Telestop Pte Ltd
v Telecom Equipment Pte Ltd (2004)

For unambiguous terms, they must be given natural meaning as “there is no room for re-
writing or implying terms” Bayerisch Hypo-und Vereinsbank AG v C K Tang Ltd (2004)
Terms can be implied into a contract because such contracts are subject to unwritten
terms hallowed by long usage or custom
By Court – Custom
& Usage Hutton v Warren (1836) – Hutton was entitled to such allowance because it was an
accepted custom that a tenant was bound to a farm for the entire tenancy but upon
quitting, may claim an allowance for seeds and labour
Court will supply a term which it considers as having been intended by the parties so as to
give the contract business efficacy, ensuring that it will proceed on normal business lines.

Requires the court to determine the presumed intention of the parties which may be
gathered from the express words of the contract and the facts and circumstances
surrounding it – Romar Positioning Equipment Pte Ltd v Merriwa Nominees Pty Ltd
(2004)
By Court –
Business Efficacy Test:
Business Efficacy
The Moorcock (1889) – The English Court of Appeal held that even though the defendant
did not give any warranty that the ground below the jetty was safe, it was an implied
undertaking to this effect. Hence the plaintiff succeeded.

Officious Bystander Test:

So obvious it goes without saying that it is an implied term in the contract – Shirlaw v
Southern Foundries (1926) Ltd v Anor (1939)

• Statutory provisions such as the Sale of Goods Act (SGA)

By Statue • Terms implied by statute operate by force of law
• Irrelevant that the parties are unaware of the statute
Classification of Terms
General Rule More important terms tend to generate more serious consequences when breached
Def: Terms which are important, essentially or fundamentally to the contract. They are
statements of fact or promise which go to the root of the contract – Behn v Burness
Conditions
(1863) + The Mihalis Angelo (1917)

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 Breach of Condition: gives injured party the option to affirm the contract, keeping it on foot
or alternatively discharge the contract. He may also claim damages
Def: Warranties are less important terms and constitute secondary obligations, breach of
warranty would not result in breach of root of the contract.

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

Breach of Warranty: does not give the injured party the right to discharge the contract.
Contract remains on foot and the injured party only has a claim in damages

Exception: RDC Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd (2007) – Give effect to the
Warranty
intentions of the contracting parties. If parties shown intention that obligation breached
was to have force of a condition, then “regardless of consequences, the innocent party
would be entitled to terminate the contract”. (Condition-warranty approach first) If
obligation is warranty, then if the consequences of the breach deprive the innocent
party of substantially the whole benefit of the contract, then innocent party is entitled
to terminate the contract notwithstanding that it only constitutes a warranty”.

If parties expressly agree that term is warranty and breach of warranty would never entitle
innocent party to terminate contract, then court would give effect to intention. : Sports
Connection v Deuter Sports (2009)

Def: Terms which can be breached resulting in trivial consequences, as well as those
resulting in serious consequences. (not condition or warranty)

Hong Kong Fir Shipping Co Ltd v Kawasaki Kaisen Kaisha Ltd (1962) – The court
held that the plaintiff breached an innominate term, but the breach was not sufficiently
serious to entitle Kawasaki to repudiate the contract. Kawasaki could only claim damages.
Used in Singapore by Mizuho Coporate Bank Limited v Woori Bank (2004)

Innominate Term Breaching Innominate Term:

• If a breach results in trivial consequences, a remedy in damages should suffice
(treated like a warranty).
• If a breach results in serious consequences, the injured party should be entitled to
treat the contract as discharged (treated like a condition).

Hong Kong Fir Test:

Does the occurrence of the event deprive the injured party who has further undertakings to
perform, of substantially the whole benefit of the contract of which the party should receive
The new singapore 4 situations
approach: -1
synthesis between -2
the condition- -3a
warranty and hong -3b
kong fir approachs
EXEMPTION CLAUSES
A term in the contract, which seeks to exclude the liability of the party relying on the
clause. An exemption clause seeks to exclude liability totally while the limitation of liability
seeks to limit the liability

Party who wishes to rely on an exemption clause must establish the 4 points:
Definition 1. Incorporation– The clause must be incorporated into the contract
2. Construction - Clause, properly construed, must cover the loss of injury which
occurred
3. Unusual Factors- There must not be any extraordinary facts in the case which
prevents the operation of the clause
4. UCTA – The clause must not contravene the UCTA
EC incorporated into a contract in 2 ways: by signature or reasonable sufficiency of notice

Incorporation Signature:
L’Estrange v Graucob (1934) – The court held that the document containing contractual
terms is signed, then in the absence of fraud or misrepresentation. The party signing it is
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 bound, and it is wholly immaterial whether he has read the documents or not

Notice:
When there is no written contract or the contract is not signed, the EC may still be
incorporated into the contract if the person relying on the EC can show that he gave
reasonably sufficient notice of the EC to the injured party

Notice is Affixed: - Notice should be printed on somewhere a reasonable person would

have expected to find contractual terms for EC to be incorporated

Chapelton v Barry Urban District Council (1940) – The English Court of Appeal held
that no reasonable person would expect to find contractual terms on the ticket since it
would be regarded simply as a receipt for money paid.

Notice is Given: - Must be given before or at the time contract was made for EC to be
incorporated

Olley v Marlborough Court Ltd (1949) – The English Court of Appeal held that the
contract was already formed before the couple entered their room and that therefore the
notice given on the bedroom wall was too late

Adequacy of Notice: - Reasonable steps must have been taken to bring notice to the
attention of the injured party for EC to be incorporated. The notice must be sufficiently
conspicuous and legible

Thornton v Shoe Lane Parking Ltd (1971) – The English Court of Appeal held that the
contract was formed when Thornton paid his money into the machine, which later issued
the ticket. For the exemption clause to be incorporated there must have been reasonable
sufficiency of notice prior to or at this time. A notice on the ticket is too late. The
defendant failed to prove reasonable sufficiency of notice.

Thomson v London Midland Scottish Railway Co (1930) – The English Court of Appeal
held that reasonably sufficient notice was given since the ticket made reference, albeit
rather circuitously, to the exemption clause.

i.e. - The above case suggest that as long as the party relying on the exemption clause
has done what is reasonable to bring the notice to the attention of the injured party, he will
be entitled to rely on the clause despite the fact that the injured party may be under some
disability preventing him from understanding the notice

**Note: A different outcome may emerge if the party relying on the clause knows from the
very beginning that the injured part is under some disability.

Geier v Kujawa, Weston & Warne Bros (Transport) Ltd (1970) – The court held that
there was no sufficiency of notice because taxi driver knew of Geier’s inability to read
English but did not take the reasonable step of translating the notice.

Previous Course of Dealings: -If there has been previous sufficient and consistent
course of dealings between the parties which included an exemption clause, current
transaction is the same as previous transaction and then the exemption clause may be
incorporated through the previous course of dealings.

Henry Kendall & Sons v William Lillico & Sons & Ors (1969) - The EC formed part of
the contracts as the terms were “continuously made known to SAPPA by Grimsdale” (But
in this instance, the EC was held to be ineffective from shielding from liability)
Construction The exemption clause, properly construed, must cover the breach in question. Is it worded
What is ‘does it unambiguously? If not, apply the rules of construction:
cover liability’?
Is this term under 2 Rules of Construction:
main purpose rule 1. Contra Proferentum Rule:
or rules in cases of • State that where there is any ambiguity in interpreting a clause, the
negligence construction to be adopted is the one which is least favourable to the person
who put forward the clause
2 rules: • Hollier v Rambler Motors (AMC) Ltd (1972) + Hong Realty Pte Ltd v
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1)does the clause Chuan Keng Mong (1994) + Singapore Telecommunications Ltd v
cover the liability? Starhub Cable Vision Ltd + Houghton v trfalgar insurance 1954

2)Contra 2. Main Purpose Rule:

proferentum • States that there is a general assumption that the parties do not intend an
EC to defeat or be repugnant to the main purpose of a contract.
• EC will generally be ineffective if there is a fundamental breach
• B-Gold Interior Design & Construction v Zurich Insurance (2007)
• Photo Production Ltd v Securicor Transport Ltd (1980) – The House of
Lords later ruled that the clause did include the breach.
If EC uses clear and unambiguous words, it can be effective even in the
case of fundamental breach. Securicor was not liable. Sun Technosystems
Pte Ltd v Federal Express Services (2007) – Spore Court of Appeal: View
the rule simply as a rule of interpretation or construction.
rd
Exemption Clause & 3 Parties
• A third party may take advantage of an EC in a contract to which he is not a party,
subject to requirements contained in the Contracts (Rights of Third Parties) Act
(CRTA).
• New Zealand Shipping Co Ltd v AM Satterrthwaite & Co Ltd (1975) – The
court allowed EC to extend to the 3rd party. Can shelter behind exemption clause
rd
as clause clearly extended protection to them (3 Party provided consideration)
Any unusual factors which may limit the effectiveness of the clause

Curtis v Chemical Cleaning & Dyeing Co (1951) – A misrepresentation to the true

scope of the EC could render the entire clause invalid.
Unusual Factors
Evans (J) & Sons (Portsmouth) Ltf v Andrea Merzario Ltd (1976) – The court held that
the oral assurance created a collateral contract which neutralized the written contract’s EC
and conditions (exception to the parol evidence rule)
UCTA requires exemption clauses to be reasonable if they are to be valid

A person cannot exclude his liability for negligence in relation to personal injury or death –
S2(1) UCTA - Xu Jin Long v Nian Chuan Construction Pte Ltd (2001)

Liability for other loss or damage such as financial loss or property damage can be
excluded if the clause is reasonable –S 2(2) UCTA

Consumer Transactions:
Where transaction is a consumer transaction, EC must be reasonable for it to be valid –
S3 UCTA

Consumers protected by S6 UCTA in relation to sale of goods contracts - A seller cannot

exclude his liability under the SGA by using an exemption clause. This is an absolute
prohibition.
Unfair Contracts
Terms Act (UCTA) Non-Consumer Transactions:
What is If a non-consumer transaction uses a standard written contact and it contains an
‘reasonable’? exemption clause, the exemption clause must be reasonable if it is to be valid – S3 UCTA
S11 (1) UCTA – In evaluating whether an EC is reasonable, court must consider all the
circumstances which:
(a) Were known to, (b) ought reasonable to have been known to; or (c) were in the
contemplation of the parties when the contract was made. Reasonableness must be
judged at the time the contract was made and not at the time breach occurred.

S11 (5) The burden of proving reasonableness falls upon the party seeking to rely on the
exemption clause.

Factors in Establishing Reasonableness (S11 (2) UCTA Second Schedule guidelines):

1. The bargaining strength of Parties - If the bargaining strengths of the parties are
equal, the EC is considered to be reasonable.
2. Whether the customer received an inducement to agree to the term (did the
business offer to provide additional benefits if the customer were to pay a higher
amount?) – if yes à Reasonable, “sweetener” in exchange for accepting EC
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 3. Whether the customer knows or ought to know about the exemption clause – All
factors in the incorporation of EC. If yes à Reasonable (under S11 (1))
4. Whether Compliance with some condition is practicable – Does the EC states that
the business will only be liable if certain condition is breached? i.e. return within 3
days? Limitation liability clause?
5. Whether the goods were ordered specially: If manufactured to customer’s
specifications but causes damage (defects) to customer, then EC reasonable.

George Mitchell (Cherterhall) Ltd v Finney Lock Seeds Ltd (1983) - EC was
unreasonable because among other things the buyer could not discover the breach until
the plants grew whereas the seller was at all times aware

Consmat Singapore (Pte) Ltd v Bank of America National Trust & Savings
Association (1992) - Bank relied on an exemption clause in its standard contract. EC held
valid. Both parties had equal bargaining power

UCTA does not apply to all contracts:

• Contracts of insurance
• Contracts relating to creation/transfer on interest in land
• Contracts relating to the creation/transfer of right or interest in intellectual
properties
• Contracts relation to creation or transfer of securities.

Chapter 6 – Vitiating Factors in Contracts

VITIATING FACTORS
Definition Factors which may prevent a contract from being enforceable and deprive the contract
from its efficacy

1. Incapacity 2. Illegality 3. Misrepresentation 4. Mistake

INCAPACITY – MINOR’S CONTRACT
Category of persons who lack capacity. They are persons who have not reached the age
of majority – 21 years old (18 years old for most contracts)

Rai Bahadur Singh & Anor v Bank of India (1993) – Court found that English Infants
Relief Fact 1874 applied and rendered the letter of set-off void as plaintiffs were minors

Laws in relation to Minors:

Definition • Law is concerned to protect minors from entering contracts which they may not
fully appreciate the consequences of their actions
• Law must also ensure that the other party does not suffer unnecessary hardship if
he has contracted fairly with the minor

General Rule for all contracts: If minor has already performed obligation, then the minor is
generally unable to recover any money paid or goods delivered, unless there has been
total failure of consideration by the other party.
Valid Contracts – Binds minor & the other party. Fully enforceable.

Contract on whole must benefit the minor - if it contains onerous terms prejudicial to
minor, contract may not be binding
Valentini v Canali (1889) – Court held that Valentini could not recover the money
because he had already had the benefit of the house

Valid Contracts Beneficial Contracts for necessaries – Necessaries refer to those goods & services which
the law deems reasonably required by a minor in his particular station in life.

S3 Sales of Good Act – necessaries means goods suitable to the condition in life of the
minor or other person concerned and to his actual requirements at the time of sale and
delivery

Nash v Inman (1908) - Contract was unenforceable because Nash failed to prove that the
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 clothes were necessaries to defendant.

* Note: Necessaries may include luxurious items of utility if they are considered
appropriate for the minor in his position – Peters v Fleming (1840)

Executory Contracts for Necessaries -Complication arises if the contract for necessaries is
still executory on the part of the other party

Nash v Inman (Goods) – The other party must have performed his obligations before the
contract is binding upon the minor.

Roberts v Gray (Services) – Binding upon the minor regardless whether the other party
has performed his obligations or not.

Loans for Necessaries - Person who lends money to a minor is generally unable to
enforce the contract and recover the money

*Note: Financial Institutions in Singapore typically lend money to minors only if minor can
supply a guarantor who will guarantee the loan.

Exception: if money was used to purchase necessaries – Marlow v Pitfeild (1719)

Beneficial Contracts for Employment - The important point is that the contract must benefit
the minor

De Francesco v Barnum (1890) – De Francesco was under no obligation to provide her

with engagements and her pay was totally unsatisfactory. Fry LJ held that the terms of the
deed were unreasonable and not beneficial to the girl and, therefore, unenforceable.
Chaplin v Leslie Frewin (Publishers) Ltd (1966) – Winn LJJ took the view that the
contract was beneficial to Chaplin, stating that “the mud may cling but the profits will be
secured.”
Binds other party and binds minor unless minor repudiate (refuse to accept)

• Minor is entitled to repudiate the contract without any liability on his part any time
during his infancy or within a reasonable period of time after he attains majority.
• Until he repudiates, the contract remains enforceable
Voidable Contracts
Davies v Benyon-Harris (1931) – Minor entered into a lease for flat. Lease was not void
but voidable. Enforceable if repudiated within a reasonable time after attaining majority

Once repudiated, the minor is no longer bound to perform any future obligations. He would
not be entitled to recover any money paid or property transferred by him to the other party
unless there is a total failure of consideration – Steinberg v Scala (Leeds) Ltd (1923)
• If a minor’s contract does not fall within the class of valid or voidable, it would be
ratifiable.
Ratifiable Contracts • Such contracts would not be valid or enforceable against the minor unless he
ratifies it after he attains majority.
• The contract nevertheless binds the other party.
INCAPACITY – MENTALLY UNSOUND AND INTOXICATED PERSONS
Contract with persons stated is valid but may not be enforceable against him if it can be
shown that at the time the contract was made:
1. He was incapable of understanding the nature of the contract;
2. The other party knew or ought to have known of his incapacity.

s 3(2) SGA also applies to mentally unsound and intoxicated persons, where they have
Definition
obtained goods which are necessaries, they may be required to pay a reasonable price for
the goods

Che Som bte Yip & Ors Maha Pte Ltd & Ors (1989) – Court held that brother’s
knowledge of the third plaintiff’s condition was imputed to the bank. Hence the mortgage
was voidable.
ILLEGALITY – ILLEGAL CONTRACTS
Definition Source of law infringed – statute or common law
Gaming & S5 Civil Law Act, contracts of gaming and wagering are generally void by statute. Thus,
Wagering Contracts no legal effect and unenforceable. May involve Betting Act.
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 Def: When the contract contravene some aspect of public policy.

Contract to commit a crime, a tort or a fraud on a third party – Apthorp v Neville & Co
(1907)
Promote sexual immorality such as contracts to lend money to finance a brothel – Ahvena
Ravena Mana Aroogmoogum Chitty v Lim Ah Han, Ah Gee and Chop Lee Watt
Contracts Contrary (1894)
to Public Policy
To benefit a foreign enemy or undermines the relationship with a friendly country –
Regazzoni v KC Sethia (1944) Ltd (1958)

Contract inimical to administration of justice - contract to give false evidence at a trial – R

v Andrews (1973)
Contract to oust the jurisdiction of the courts
Def: Illegal due to statutory provisions which prohibit them. If prohibits formation of
contract, then void from inception. Both no contractual rights. If performance contravenes
statute, then guilty party no contractual rights, innocent party still have rights OR guilty
party pays penalty, both have contractual rights. (Can be express or implied prohibition)

Re Mahmoud and Ispahani (1921) – Wartime regulations prohibited the buying or selling
Contracts Contrary of linseed oil. Court held that the legislature has made a “clear and unequivocal
to Statue declaration… that this particular kind of contract shall not be entered into” and that,
consequently, the contract was void

Exception: If the statutory provision simply imposes a fine for non-compliance, the
likelihood is that non-compliance would not cause the entire contract to fail – Shaw v
Groom (1970)

Def: Agreements under which a business or person agrees to refrain from undertaking
certain types of trade or employment.

Used to prevent a business or person from entering into a field in which the other party
operates – Barang Barang Pte Ltd v Boey Ng San & Others (2002)

General rule: clauses and hence contracts in restraint of trade are unenforceable from
original position unless justifiable, due to overall approach of a market economy based on
fair competition - Asiawerks Global Investment Group Pte Ltd v Ismail bin Syed Ahmad

Exception: All 3 elements must be established for it to be enforceable

1. Legitimate Interest - The restraint must protect some proprietary or legitimate
interest of the covenantee.
• Trade secrets & trade contracts may constitute legitimate interest. Asia
Business Forum Pte Ltd v Long Ai Sin & Another (2003)
• If restraint is intended merely to minimize competition or to prevent an
Contracts in
employee from using the personal skills or knowledge acquired during his
Restraint of Trade
previous employment, then it is likely to be void – Buckman
Laboratories (Asia) Pte Ltd v Lee Wei Hoong (1999)

2. Reasonable Scope - Restraint must be reasonable in terms of its period,

geographical scope and subject matter (must have all 3 aspects)
• Mason v Provident Clothing & Supply Co Ltd (1913) – Restraint void
as area is too large.
• British Reinforce Concrete Engineering Co. Ltd v Schelff (1921) –
Restraint void because scope too broad.

3. Public Interest - must not be contrary to public interest – Asia Polyurethane Mfg
Pte Ltd v Woon Sow Liong (1990)
• Esso Petroleum Co Ltd v Harper’s Garage (Stourtport) Ltd (1968) –
Restraint too long. Test of reasonableness requires a consideration of the
public interest which must be protected in such exclusive dealing
agreements.
General Rule: At common law, illegality is that the contract is void. The law treats the
Effects of Illegality contract as if it had not existed in the first place and no party can sue on the contract

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 Recovering Property - In some cases the court may allow an innocent party to recover
property which would otherwise pass to the defaulting party under the illegal contract.

Tokyo Investment Pte Ltd v Tan Chor Thing (1993) – TCT allowed to recover shares

Recovering Damages - The defaulting party may be prevented from enforcing the contract
by the maxim ex turpi causa non oritur action (action does not arise from a base cause).
However the innocent party may be able to recover damages from the defaulting party.

Archbold’s (Freightage) Ltd v Spanglett (1961) – Court of appeal held that the contract
was illegal in its performance but since Archbold’s was not aware of the illegality, it was
entitled to claim damages

*Note: Ignorance of law would not allow recovery of any kind and the case above is an
ignorance of fact (that Spanglett’s vehicle did not have necessary license)

Severance - illegality may be confined to a part of the contract. Sometimes within the
clause itself particular words can be severed so as to save the rest of the clause –
National Aerated Water Co Pte Ltd v Monarch Co , Inc (2000)

Severance is possible if:

• Promises are severable in nature
• It is possible to sever the void part by deleting the offending words or
clause without adding, substitution, rearranging or
re-drafting the contract (blue pencil test)
• Severance must not change the basic nature of the contract

Goldsoll v Goldman (1915) – Using the blue pencil test, the court severed the other
locations and the reference to real jewellery and allowed the remaining clause to stand
MISREPRESENTATION
A misrepresentation is a false statement of fact made by representor to representee which
Definition
induces and is relied upon by the representee to alter his position
Operative statement must be one of past or existing fact. It cannot be a mere statement of
intention or a statement of some likely future event. Must be made from one contracting
party to the other.

Exception: Statement of intention as to future action could be a false statement of fact if at

the time of making the statement of intention, the representor did not in fact hold that
intention – Tan Chin Seng & Others v Raffles Town Club Pte Ltd (No 2) (2003)

Edgington v Fitzmaurice (1885) – Information in the prospectus is different from the real
intention. Stated intention was not actually held because company raised money for
liabilities instead of improvements.

Statement of Opinion - usually cannot form the basis of a misrepresentation

Bisset v Wilkinson (1927) – The property could not hold that many sheep but that claim
was a statement of opinion as owner had no access to the facts since he has never used it
False Statement of to raise sheeps and did not amount to misrepresentation. UNLESS:
Fact
Tan Kim San v Lim Cher Kia (2001) – Where representor had access to the relevant
facts and has no reasonable grounds to hold the purported opinion.

Silence - does not amount to misrepresentation

Keates v Lord Cadogan (1851) the court held that Lord Cadogan had no duty to disclose
the state of his house, therefore, no misrepresentation

Exceptions in 3 situations:
• What is stated becomes a half-truth by what is left unsaid. i.e. Saying the place is
fully let but did not say the tenants had given notice to quit. This constitutes
misrepresentation – Dimmock v Hallet (1866)
• A change of circumstance arose which rendered a previously truthful statement
misleading – With v O’Flanagan (1936)
• The law imposes a duty is upon one party to disclose facts to the other party. i.e.
Insurance contracts.
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 For a false statement to be a misrepresentation, the statement must induce the
representee to enter into the contract. As long as it’s one of the reasons that make
representee enter into contract.

As long as it is one of the inducing causes; it is immaterial that it is not the sole inducing
cause – Panatron Pte Ltd v Lee Cheow Lee & Another

Tai Kim San v Lim Cher Kia (1884) – The Singapore High Court held that plaintiffs had
Inducement
not been induced by any representations to sell their shares to the defendant. Hence false
statement is not a misrepresentation

A mere opportunity of a chance to investigate the truth of the statement made by the
representor does not deprive the other party to rely on the misrepresentation - Redgrace
v Hurd (1881) Mere fact that the representee had an opportunity to investigate and
ascertain whether a representation is true or false was not sufficient to deprive him of his
right to rely on misrepresentation
Category Remedies
Fraudulent - The representor knows that the Rescission + Damages
statement made is false. It is also known as
the tort of deceit. Rescission is possible even if the false
statement has become a term of the
Representee must prove that there is contract – S2(1) Misrepresentation Act
dishonesty on the part of the representor,
there is no fraud even if the statement is *Note: Once representee chooses to
farfetched, negligent, or ill-conceived. rescind the contract. It becomes void ab
initio, treated as if it has never existed
Derry v Peek (1889) - House of Lords held
that for fraudulent misrepresentation to arise
the false representation must be made
knowingly or without belief in its truth or
recklessly, careless whether it be true or
false. Since none was present, no fraudulent
misrepresentation.
Negligent - Arises when the false statement Rescission (or damages in lieu, whichever
is made by the representor without due care is more equitable s2(2)) + Damages
– S2 (1) Misrepresentation Act

This makes the representor liable even

without fraudulent intent unless he can prove
Categories he has reasonable grounds to believe the
statement to be true. (honestly believe in
truth of statement BUT not REASONABLE)

Howard Marine & Dredging Co Ltd v A

Ogden & Sons (Excavations) Ltd (1978),
The manager was still liable as a reasonable
manager would have checked the shipping
documents and not relied on the Loyds
Register
Innocent - A false statement made in the Rescission (or damages in lieu, whichever
absence of fraud and negligence– Redgrave is more equitable s2(2)) + Indemnity
v Hurd
Indemnity à Obligation whereby 1 person
-Can prove that he honestly believe AND has is held responsible for the liability of
reasonable grounds for the belief. – S2 (1) another. An indemnity is used to help
Misrepresentation Act restore the injured party back to his status
quo ante

Indemnityà representee only can be

compensated for losses arising out of
obligations necessarily created by
contract
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 Rescission is not available when:
1. Contract is affirmed expressly or impliedly by the representee after he discovered
the misrepresentation
2. Reasonable amount of time had lapsed since the discovery
3. Parties cannot be restored to their original position before the contract
4. Court exercises its discretion pursuant to S2(2) Misrepresentation Act to award
damages in lieu of rescission
MISTAKE
Only mistakes which lie at the root of the contract would have that effect. At common law,
Definition
mistake vitiates a contract such that it becomes void ab initio.
Common Mistakes occur when both parties to the contract make the same fundamental
Common
mistake - Couturier v Hastie (1852)
When the parties misunderstand each other and are at cross purposes - Wellmix Organics
Mutual
(International) Pte Ltd v Lau Yu Man (2006), both parties unaware of each other’s mistake
Unilateral Occurs when only one party is mistaken
Arises when a person signs a document that is fundamentally different in character from
that which he contemplated - Lee Siew Chun v Sourgrapes Packaging Products Pte Ltd
(1993)
Non est factum To avoid contract on basis of non est factum, plaintiff must show:
(it’s not my deed)
• The document signed is radically different or totally different in character or
substance from that which he intended to sign
• Had not been careless in signing the document
• He took such care as a person in his position ought to have taken
OTHER VITIATING FACTORS
An agreement entered into under the constraint of threat or actual violence may be held to
be void – Barton v Armstrong (1976)

Economic Duress – Unlawful/Illegitimate commercial pressue. If a party to a commercial

transaction is left with no choice but to agree to certain terms under protest, such duress
may be made void - Atlas Express v Kafco (1989)
Duress
Criteria for determining economic duress:
• Whether defendant did or did not protest
• At time of coercion, did defendant had an alternative course open to him such as an
adequate legal remedy
• Whether defendant was independently advised and
• Whether after entering into contract, the defendant took steps to avoid it
The use of one’s power or authority over another to obtain a benefit or achieve a purpose.

2 types of undue influences:

1. Must be actually proven – to establish:
• That the other person had the capacity to influence the complainant
Undue Influence • Influence was exercised
• Exercise was undue
• Its exercise brought about the transaction
2. Virtue of relationship between parties - law presumes that undue influence is
present and the burden of proof is then on the party complained of having
exercised undue influence
Def: Any agreement which is manifestly inequitable and constitutes an unconscionable
bargain should be set aside
Unconscionable
Bargain
Exception: Singapore Law, Unconscionability is a vitiating factor for contracts involving
performance of bonds Fong Whye Koon v Chan Ah Thong

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 Chapter 7 – Discharge
• Discharge refers to the termination of a contact where parties are relieved of their
Definition obligations under contract.
• Four main ways: Performance, breach, agreement and frustration
PERFORMANCE
Discharging a contract by performing their obligations as stipulated in the contract

Precise Performance Rule – Parties must perform their obligations fully and precisely, if
complete, no liability and full remuneration, if not, LIABLE for breach, resulting in
termination of contract + liable for damages etc + no RIGHTS to remuneration (with
exceptions to rule)
Definition
Cutter v Powell (1795) – The court held that payment was conditional upon the completion
of the voyage; payment even part payment may not be made

In Re Moore & Co and Landauer & Co (1921) – The court held that the buyer was lawfully
entitled to reject the shipment on the basis of less than full and precise performance.
To soften the rule and prevent unfairness

De Minimis Rule
• If the deviation in performance is microscopic, then the contract is deemed to have
been performed fully and precisely. What is microscopic is dependent on the facts
of the case.
• Arcos Ltd v E A Ronaasen & Son (1933) – The House of Lords held that although
the staves were of merchantable quality and could be used to manufacture cement
barrels, the contract was breached because the staves did not correspond to the
description of the goods

Divisible Contracts
• A contract may in certain circumstance be viewed as several independent
obligations. These may be deemed as severable sub-contracts. e.g. Employment
Contracts
Exceptions to the
(depends on intentions of the parties whethe a contract is entire or divisible
Precise
IE: when the contract is broken down to several subpayments)
Performance Rule
• Cutter v Powell (1795) – The employment contract was needed to be completed in
full before payment. (Unfair outcome can be avoided)
• Bolton v Mahadeva (1972) – Whether a contract is an entire or divisible one is a
question of construction. The court of appeal refused to grant Bolton compensation
on a quantum meruit basis because it held that the use of the word lump sum
suggested that the contract was an entire one. Bolton received nothing.

Substantial Performance
• According to the principle in the case, where a promisor has substantially performed
his obligations under a contract, he can claim the agreed payment, less the amount
necessary to make good the defect – Boone v Eyre (1779).

Two Cautionary Remarks:

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 • If the contract is an entire contract (as opposed to a divisible one) and payment is
made conditional upon the performance of the entire contact, then the promisor
may not be able to invoke substantial performance to claim payment.
(doctrine does not apply if complete & precise performance is a precondition to
payment)

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

• There is practical problem of determining what exacts to ‘substantial performance’:

Intention of parties forming contract + whether the degree of completion required
amount to substantial performance (purpose of contract achieved)

Voluntary acceptance of Partial Performance

• When promisee voluntarily accepts the partial performance of the promisor – the
promisor is entitled to reasonable remuneration on a quantum meruit (payment of
reasonable sum for workdone) basis under law of restitution - Empresswood
Enterprise Pte Ltd v Kao Shin Ping (2005)

*Note: However that the promisor may still be liable to the promise in a claim for damages
for having only performed part of the contact

Sumpter v Hedges (1898) – The court did not allow Sumpter’s claim. This is because
Hedges did not have a clear choice of accepting it. It was on his land, so he had to accept it.
If the facts of the case were different, then Sumpter may have succeeded

Prevented Performance
• When a promisor has partially performed part of his obligations but is prevented by
the other party from performing the rest of his obligations, the contract may be
treated as discharged on the basis of prevented performance.
1. Promisor may claim payment to commensurate with the obligations performed on
the basis of quantum meruit(payment of reasonable sum for work done).
2. Or sue for damages for breach of contract
• Planche v Colburn (1831) – It was held that Planche was entitled to reasonable
remuneration based on quantum meruit because the contract was discharged by
Colburn’s action in abandoning the project

BREACH
An actual breach arises when the time of performance for the obligation has arrived and the
Actual Breach
promisor fails to perform it
An anticipatory breach occurs when the time for performance has not arrived but the
promisor by words or conduct has clearly expressed his intention not to perform the
Anticipatory obligation
Breach 1)Renunciation by promisor
2)impossibility of performance caused by promisor (unable to perform by promisor at the
date stipulated)
For the breach to result in the contract being terminated, the breach must amount to a
repudiation of the contract

*Note: Otherwise a breach which does not amount to a repudiation simply entitles the
innocent party to sue for damages

For actual breach to be considered repudiatory it must be either:

Repudiation • Contract clearly and unambiguously provides for right to terminate: RDC (1)
• Renunciation of contract RDC (2)
• A breach of condition (Behn v Burnes (1863)) RDC(3A)
• If breach deprives innocent party of substantially the whole benefit of contract RDC
(3B)
•
Mizuho Corporate Bank Limited v Woori Bank (2004) - No evidence to show either form
of breach. Parties have not expressly agreed that the clause was a condition, neither can it

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 be said that it must be so by necessary implication. Court also fail to see how the breach of
the …clause goes to root of contract or deprived the defendants of substantially the whole
benefit which was the intention of the parties as expressed in the contract that he should
obtain as the consideration for reimbursing the plaintiffs

Fundamental breach arises where the breach of an innominate term brings about serious
consequences such that it deprives a party of substantially the whole benefit which it was
intended the contract should confer RDC Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd
(2007)

Shia Kian Eng v Nakano Singapore (Pte) Ltd (2001) - Even if the defaulting party’s
conduct does amount to a refusal to perform, it does not follow that the innocent party would
be entitled to terminate the contract UNLESS the repudiation deprives the innocent party of
substantially the whole benefit of the subcontract that remains unperformed.

In all cases of breach, whether actual or anticipatory, the repudiation must be unequivocal
(clear)

An honest misapprehension as to one’s obligations under a contact which leads to non-

performance would not amount to repudiation if there is underlying willingness to correct
one’s understanding and fulfil those obligations.

Mersey Steel and Iron Co v Naylor Benson & Co (1884) – The House of Lords held that
there was no repudiation because Mersey Steel was under a genuine misapprehension that
they should not pay for the shipments.

Wong Poh Oi v Gertrude Guok and Another (1966) – The court held that mere non-
payment of an instalment or breach of one term does not necessarily put an end to a
contract. The defendant’s purported repudiation was wrongful
When a repudiatory breach is present, the contract is not automatically discharged, the
innocent party is granted with a right of election as to whether to terminate the contract In
both cases, the innocent party should communicate unequivocally to the other party his
decision

Innocent party can:

• Accept the repudiation (Discharge the contract)
o Acceptance of repudiatory breach
o Claim damages to put him into the position as if the contract has been
performed properly – Hong Fok Realty Pte Ltd v Bima Investment Pte
Ltd (1993)
• Affirm the contract
o Contract remains on foot and both parties must continue to fulfil their
obligations and complete the contract
o Innocent party still retains the right to claim damages for the breach.

Arokiasamy Joseph Clement Louis v Singapore Airlines Ltd (2004) - Although plaintiff
Election was deemed to have repudiated the employment contract, the contract was not discharged
automatically. SIA had elect to accept his repudiation and had thereafter effectively
communicated their acceptance to him by sending a termination letter to his last known
postal address

Affirming After Anticipatory Breach:

§ Innocent party places himself at risk that a supervening event may occur,
discharging the contract by frustration
o Avery v Bowen (1855) – It was held that Bowden’s liability for the
anticipatory repudiation was relieved by war which frustrated the contract.
§ Defaulting party may be relieved of his liability because the frustrating event
discharges the contract, wiping the slate clean
o Clea Shipping Corporation v Bulk Oil International, “The Alaskan
Trader” (1984) – The rationale is, if damages would be a sufficient
compensation, he should not be permitted to perpetuate the contract which
may result in greater detriment to the defaulting party.

*Note: The right to affirm is not unfettered (unrestrained). In the absence of legitimate
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 reasons, the innocent party must accept the anticipatory breach, treat the contract as
discharged and claim damages – White & Carter v Mcgregor (1961) has legitimate
interest, contract remains on foot and entitled damages.
AGREEMENT
A contract may include a term that it would be discharged upon the occurrence of a
stipulated event or at the expiration of a certain period.

Example: a time-limited contract, lease premise

Existing
Agreement
Exception: Certain statutory provisions might modify the right of parties to discharge a
contract by agreement. The Employment Act, for example specifies the minimum periods of
notice required to be given by employers to certain classes of employees in cases of
termination of employment
Def: Contract may be discharged by the parties entering into a fresh agreement seeking to
extinguish the earlier contract

Mutual Release - When the contract is partially or entire executory, the parties may execute
a mutual release which discharges each party from all their obligations under that contract.
Li Hwee Building Construction Pte Ltd v Advanced Construction & Engineering Pte
Ltd (2002)

Unilateral Release - When one party who had performed all his obligations seeks to
discharge the other party who has not performed all his obligations, then the first party may
execute a release in the form of a deed, so that no consideration is required.

Accord and Satisfaction - When one party purchases his release with fresh valuable
consideration provided to the other party, the understanding to do so is the accord and the
Subsequent
consideration provided is the satisfaction. This discharges the earlier contract.
Agreement
(not needed in syllabus)

Variation - Where the contract is altered by a subsequent agreement, supported by fresh

consideration. Depending on the case, the contract may be discharged entirely or amended
by the subsequent agreement.

Waiver - Where one party, at or without the request of the other party voluntarily grant the
other party an indulgence not to perform an obligation under a contract without
consideration passing, the first party has been given a waiver.
§ Usually given in respect of specific modes of performance but not usually in respect
of the whole contract. i.e. an employee consistently late. Employer can prevent by
including the clause “no waiver unless in writing” in the employment contract.
§ Leivest International Pte Ltd v Top Ten Entertainment Pte Ltd (2006) - Court
held that when Top Ten failed to pay the costs and interest on time, Leivest could
have terminated the lease
FRUSTRATION
Refers to the situation where a unforeseen supervening event occurs, for neither party is
responsible, with the result that the very basis of the contract is destroyed so that the
venture to which the parties now find themselves committed is radically different from that
originally contemplated
Definition
Davis Contractors Ltd v Fareham Urban District Council (1956) – The House of Lords
rejected the appellant’s claim as the cost increase did not alter the situation so much that
the task undertaken was radically different from what was originally contemplated by the
parties
Subject matter of the contract was destroyed due to no fault of the parties.
Destruction of Where the destruction of the subject matter defeats the main purpose of the contract.
Subject Matter Taylor v Caldwell (1863) – The hall was destroyed and the court held that the contract was
discharged by frustration.
Def: An event whose occurrence forms the underlying basis of the contract is cancelled or
Non-Occurrence
postponed due to no fault of the parties
of Event

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 The real issue is whether the event which failed to occur could reasonably be considered to
be one which both parties hold to be the very basis of the contract such that if the event did
not take place, the parties would not have contemplated entering into the contract in the first
place.

Krell v Henry (1903) – The Court of Appeal held that the purpose for which the flat was
rented was vanished and contract was thus frustrated

Herne Bay Steamboat v Hutton (1903) – The Court of Appeal held that the contract was
not frustrated. One reason was that a tour of the fleet was still possible although the naval
review was cancelled.
This is usually in the form of an unexpected government action or ruling which prevents the
performance of a contract.

Metropolitan Water Board v Dick, Kerr & Co. (1918) – The House of Lords held that the
Government contract was frustrated as the works was halted by the Minister of Munitions, acting under
Interference statutory powers

Lim Kim Som v Sheriffa Taibah bte Abdul Rahman (1994) - The Singapore Court of
Appeal agreed and held that the contract was frustrated as Government issued an order for
the compulsory acquisition of the property
A contract for personal services may be frustrated by personal incapacity if the incapacity
affects the performance of the contract in a fundamental way. - Possard v Spiers v Pond
Personal (1876)
Incapacity Except in cases of contracts based on personal considerations, the death of a party to a
contract does not affect the enforceability of the contract.
*Note: Contract for services, (not personal ones) will not be treated in a similar way.
The more foreseeable the event the more unlikely the event will be
held to frustrate a contract. However, mere foreseeability of the event
Foreseeability
is no bar to frustration. Tatem Ltd v Gamboa (1939),
HDB v Microfoam Presision Ind Pte Ltd
These clauses which expressly provide for the occurrence of events
such as war or natural disasters which will normally fall within the class
of events which lead to frustration. The effect of such a clause depends
greatly on its construction.
Force Majeure
(act of god) China Resources (S) Pte Ltd v Magenta Resources (s) Pte Ltd
Clause (1997) – The Singapore Court of Appeal held that the force majeure
Exceptions clause applied and that the USSR embassy letter was the ‘next best
Limiting thing’ and therefore adequate evidence of the force majeure.
Frustration
*Note: If an FMC turns out to be an exemption clause, then it would be
subjected under the UCTA.
If frustrating event is the result of voluntary action of one of the parties,
then there is no frustration.

Only deemed frustration if it isapp negligent and unintentional.

Self-Induced
Deliberate carelessness is not frustration.
Frustration
Maritime National Fish v Ocean Trawlers (1935) – The privy council
held that the unavailability of a license was due to the allocative
decision of Maritime National
Frustration automatically discharges a contract. Unlike repudiation which must be accepted
before it can discharge the contract, frustration is effective immediately and requires no
communication or advice from one party to the other.

All outstanding obligations are no longer required to be performed – Fibrosa Spolka

Effects of Akcyjna v Fairbairn Lawson Combe Barbour Ltd (1943)
Frustration
Overall effect of the common law and the statutory provisions are summarised as follows
§ all future obligations of the parties cease
§ money paid prior to time of discharge is recoverable – s2(2) FCA
§ money payable ceases to be payable s2(2) FCA
§ expenses incurred prior to time of discharge can be recovered s2(3) FCA
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 § benefits conferred (other than money) prior to time of discharge can be
compensated with an amount the court considers just (from expenses) s2(3) FCA
§ Value of work done can be recoverable under(if expenses incurred minimal)S4 FCA

Pursuant to s3(5) FCA, the provisions of the legislation apply to all contracts other than:
§ a contract for the carriage of goods by sea
§ certain types of charter-parties
§ a contract of insurance
§ a contract to which s 7 of the SGA applies and
§ a contract for the sale of specific goods where the contract is frustrated because the
goods have perished
Aspects Common law Frustrated contract acts
Future obligations Released released
Accrued obligations Remain Released
Sums paid Not recoverable Recoverable
Saums payable Remain payable No longer payable
Expenses Not applicable Recoverable
benefit Not applicable recoverable

Chapter 8 – Remedies
Remedies are the cures available to the injured party to rectify or compensate for the
Definition
breach of contract
COMMON LAW REMEMDIES – DAMAGES
Damages are the principal common law remedies for a breach of contract. It refers to the
monetary compensation payable by the defaulting party.

Injured party always have right to claim damages for loss resulting from breach of contract
even if he is not entitled to terminate the contract

The monetary sum ordered by a court to compensate such damage. Damages is intended
to place the plaintiff as far as money can do it, in the same position he would be in if the
contract had been performed properly - Robinson v Harman (1848)
Definition
Types:
§ Unliquidated damages: unascertained damages
§ Liquidated damages: pre-estimated damages
§ Nominal damages – nominal sum (usually $2) (for breach but no loss for innocent)
§ General & special damages: general damages can be recovered for suffering while
loss of earnings or actual medical cost are under special damages

Four aspects of damages: Causation, remoteness, mitigation and assessment

Def: It is logical that a plaintiff should not be entitled to recover damages for breach of
contract if as a matter of fact, breach did not cause the loss suffered by the plaintiff.

‘But for’ Test:

Causation § The plaintiff would not have suffered loss but for the breach – Causation in fact
§ Monarch SS Co v Karlshamns Oljefabriker (A/B) (1949) – The House of Lords
held that the effective cause of the delay was the vessel’s unseaworthiness and
hence it was the appellant’s fault. The prohibition by the British authorities was not
the cause of the delay.
The extent of loss can be quite extensive. The concept of remoteness prevents a limitless
scenario. The law considers losses that are remote, although caused by or a consequence
of the breach, to be beyond the scope of compensation.
Remoteness
For damages to be recoverable, the damage must be proximate and not remote – Korea
Jonmyong Trading Co v Sea-Shore Transportation Ptd Ltd & Another (2003)
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 Hadley v Baxendale (1854)
§ First Limb, normal loss – Such damage as may fairly or reasonably be considered
arising naturally, i.e. According to the usual course of things from the breach itself.
§ Second Limb, abnormal loss – Such damages as may reasonably be supposed to
have been in contemplation of both parties at the time they made the contract.

Usual Course of Things - Knowledge of the ordinary practices and exigencies of the
plaintiff’s trade or business is considered to be part of the ‘usual course of things’.
§ Accordingly, the loss arising from normal business activity will usually fall within in
the first limb.
§ Koufos v C Czarnikow Ltd (‘The Heron II) (1969) - The House of Lords held that
Koufos must be imputed to know the ordinary practices and exigencies of
Czarnikow’s business. Koufos was liable under the first limb

Imputed and Actual Knowledge - Both the first limb and the second limb imply that the
defaulting party has some knowledge of the likely loss suffered by the plaintiff. This
knowledge includes imputed knowledge and actual knowledge.
§ Imputed knowledge is knowledge presumed to be known by the parties and is the
subject of the first limb.

§ Actual knowledge is knowledge actually possessed by the parties and is the subject
of the second limb.
o A person with actual knowledge of special circumstances will be liable for
the higher loss which may arise if the breach occurred in those
circumstances.
o Victoria Laundry (Windsor) Ltd v Newman Industries Ltd (1949) – In
the absence of actual knowledge concerning the Ministry of Supply,
Newman Industries would not be liable for the substantial profits foregone
because of the failure to obtain that contract.

Probability of Occurrence - Knowledge of the plaintiff’s likely damage raises the question as
to the defendant’s awareness of the probability of such loss occurring.
§ The defendant must know that the likely loss is a serious possibility or a real danger
§ Correct terminology for rule on remoteness is “reasonable contemplation”

Type of Damage - The defendant need not have in mind the exact damage actually
suffered as long as he is aware of the type or kind of damage in question – Chuan Hup
Marine Ltd v Sembawang Engineering Pte Ltd (1995)

Parsons (Livestock) Ltd v Uttley Ingham & Co Ltd (1978) – The English Court of Appeal
held that the loss fell within the second limb because it within reasonable contemplation of
the parties that the pigs might suffer as a result of the breach.
Def: Mitigation means that a plaintiff cannot recover loss which he could have avoided.

The plaintiff ought to minimize the loss. If he fails to do so, the amount he would be
awarded would be reduced by the amount he would have saved. – British Westinghouse
Electric & Manufactory Co v Underground Electric Railway Co of London (1912)

Ei-Nets Ltd & Another v Yeo Nai Meng (2004) – The burden of proof is upon the
defendant to show that the plaintiff has failed to take reasonable steps to minimize the loss.

Brace v Calder (1895) – What amounts to reasonable steps depends on the circumstances
Mitigation of each case

When a plaintiff who attempts to take reasonable steps to mitigate his loss suffers even
more, he can still recover the additional loss – Melachrino v Nicholl & Knight (1920).

Exception in Anticipatory Breach - If plaintiff chooses to discharge and claim damages,

mitigation rule will apply and he will be required to mitigate his loss. Problem is when he
affirms the contract.
§ In Singapore, there is no obligation on the plaintiff part to mitigate his loss before
there has been any breach which he has accepted as a breach – MP-Bilt Pte Ltd v
Oey Widarto (1999)

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 § In the face of an anticipatory breach, a plaintiff may be entitled to affirm the contract
and incur (and perhaps inflate) expenses, performing obligations which are not
warranted by defaulting parties
§ White & Carter (Councils) Ltd v McGregor (1962) – No attempt was made by
White to mitigate its loss after affirming the contract with McGregor. White & Carter
than sued McGregor for the full contract price. House of Lords held that it was
entitled to succeed.
§ Although against principle of mitigating losses, in this case, White & Carter affirmed
because they had legitimate interest. Affirmation is only available in cases where
the plaintiff has some legitimate interest to protect which cannot be compensated
merely through the payment of damages. i.e. Reputation.
The general principle of assessment is that the injured party is to be placed in the same
financial position he would be in if the contract had been properly performed.

The award of damages is calculated on the benefit which would accrue to the injured party
and not on the cost of performing the obligation by the defaulting party

Expectation Loss (loss of profits) & Reliance Loss(wasted expenditure)

Anglia Television Ltd v Reed (1970) – The court held that Anglia Television was entitled
to recover damages regardless of whether the expenditure (reliance loss) was incurred
before or after the contract was entered into with Reed.

Cullinane v British “Rema” Manufacturing Co Ltd (1954) – Case of double recovery

rejected. Court held that Cullinane could only claim one of them. Or may claim both
expectation and reliance loss as long as the expectation loss is calculated as a net figure
exclusive of expenses

Hong Fok Realty Pte Ltd v Bima Investment Pte Ltd (1993) – Can either sue for the
bargain, (price between the market value and the property at the date of breach) or the
wasted expenditure provided they are within the contemplation of the parties.
Non-pecuniary Losses
Loss covering things such as hurt feelings, anxiety, or loss of reputation arising from breach
of contract. Courts are generally reluctant to award damages for non-pecuniary losses.

Haron bin Mundir v Singapore Amateur Athletic Association (1992) – The plaintiff was
awarded damages, being the amount he would have received from the defendant if he had
won medals at the SEA Games. Claim for non-pecuniary losses was rejected.
Assessment
Exceptions:
A contract whose aim is to provide enjoyment or security is breached giving rise to
disappointment or distress, court held Jarvis was entitled to damages – Jarvis Swan Tours
Ltd (1973)

Liquidated Damages & Penalties

Pre-estimated damages which have been agreed upon by the parties. Generally, the courts
will enforce a liquidated damage clause as long as it is a genuine pre-estimate of loss.

However, if such a clause was imposed to cause fear to the other party, it may not be
enforceable.

Dunlop Pneumatic Tyres Co Ltd v New Garage & Motor Co Ltd (1915) established the
guidelines for construction of the clause:
• If the liquidated damages are extravagant and unconscionable in comparison with
the greatest conceivable loss, then it is likely to be a penalty
• If a single lump sum is payable on the occurrence of one or more breaches, some
of which are serious and others trifling, then it is likely to be a penalty
• The description of the clause as a ‘penalty’ or ‘liquidated damages clause’ is
relevant but not conclusive

Harris Hakim v Allgreen Properties Ltd (2001) – Court of Appeal held that where the LDC
is prescribed by stature, the injured party can only claim the amount stipulated on the
clause; he is not allowed to elect to claim damages at common law nor to recover more
than what he is entitled to under the clause

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

Taxation
The court will deduct an amount representing the plaintiff’s tax liability – Teo Sing Keng v
Sim Ban Kiat (1994).

Interest
Interest will only be awarded if it is a contract provided for payment of interest, (but not a
debt) or parties have impliedly agreed to pay interest under the contract, or if the court
exercises its discretion under paragraph 6 of the First Schedule, Supreme Court of
Judicature Act.

Difficulty in Assessment
• The fact that damages are difficult to assess should not prevent the injured party
from obtaining them. Court may take into account probabilities involved and award
damages accordingly

• Chaplin v Hicks (1911) – The English Court of Appeal held that although there was
no certainty that Chaplin would be among the 12 chosen for employment, she
would still be allowed the damages awarded by the jury.

• Raffles Town Club Pte Ltd v Tan Chin Seng & Others (2005) Court held that
despite the difficulties it must still do its best to assess the loss as RTC had clearly
breached its contractual obligation of providing a premier club to the plaintiffs and to
maintain it as such. Court eventually awarded each plaintiff $3000 for the diminution
in value of membership
EQUITABLE REMEDIES
Equity developed the general rule that the party seeking equitable remedies must come with
‘clean hands’, his conduct in relation to the contract must be irreproachable – Ken Glass
Design Associate Pte Ltd v Wind Power Construction Pte Ltd (2003)
Definition
In certain cases, monetary compensation in the form of damages is not an adequate
remedy
Def: An order of the court requiring the party in breach to perform the contractual
obligations. If the order is disregarded, the defendant could face possibilities for contempt of
a court order.

Damages are Adequate:

Where damages would be an adequate remedy, specific performance may not be available:
Beswick v Beswick (1967)

Damages are Inadequate:

Subject matter is unique and buyer will probably not be satisfied with monetary
compensation – Falcke v Gray (1859)

Specific *Note: Land/Houses are generally unique but it may be possible to get specific performance
Performance
Mutuality
The remedy of SP must be in principle available to both parties. Thus if one of the parties is
a minor, SP is not available and correspondingly, a minor cannot get an order of SP against
an adult.

Supervision
An order for specific performance would require the court to supervise the performance of
obligations on an ongoing basis – specific performance not available E.g. Building Contracts

Contracts for Personal Services:

An order of SP generally would not be granted in contracts of personal services - Warner
Brothers Pictures Inc v Nelson (1937) i.e. slavery
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 Def: Court order forcing the other party to the contract to observe a negative covenant.

Interlocutory or interim (temporary) Injunction

• obtained by a party facing a threat of breach of covenant by the other party
• Seeks to maintain status quo while main legal proceedings are pursued

Perpetual injunction (permanent)

• Granted when the main legal proceedings have shown that the plaintiff has a right
to injunctive remedy

Prohibitory - Is preventive in that it seeks to restrain a person from conduct which he has
Injunction agreed not to do

Mandatory – Is restorative in that it compels action to restore a breach of covenant which

has already occurred

*Note: Mandatory injunction is ordered to enforce a negative covenant which has been
breached; specific performance is ordered to enforce a positive obligation which has not yet
been performed

Mareva Injunction - Where plaintiff suspects that defendant intends to dispose of or remove
assets from the jurisdiction. Mareva injunction freezes defendant’s assets until main legal
proceedings are completed.
Order authorises plaintiff to inspect, photograph and take into custody documents or
property of another person.

Conditions for order -Computerland Corp v Yew Seng Computers Pte Ltd (1991)
Anton Piller Order
• Must be a prima facie case (On first examination, matter appears to be self-evident)
• Damage, potential or actual, must be very serious for the applicant.
• Clear evidence that defendant have in their possession incriminating documents or
things that defendant may destroy before any application can be made.
Claiming damages on the basis of quantum meruit (claim the amount of payment that is
commensurate with the obligations performed).

May be claimed in cases of contract or cases of quasi contract (cases which do not possess
all the necessary elements of a contract yet the law enforces obligations as if they are
contractual obligations)
Quantum Meruit
Gold Coin Ltd v Tay Kim Wee (1987) – Singapore Court of Appeal held that the
respondent could succeed in claiming quantum meruit based in contract as there included
an implied promise to pay commission

Craven-Ellis v Canons Ltd (1936) – Court ordered compensation on a quantum meruit

basis despite the fact that there was no valid contract.
Where money is paid by a plaintiff to a defendant under a contract and the defendant fails
completely to discharge his obligations, the plaintiff has the option of either claiming in
contract for damages for breach or he may elect to terminate the contract on the ground
Refund of Money
that the defendant has repudiated it and sue for the refund of the money in quasi contract –
Paid
Ooi Ching Ching Shirley v Just Gems Ltd (2003)

There must be total failure of consideration

Law provides time limits for parties to seek legal remedies in court. After limitation period,
no person can initiate legal proceedings seeking remedies

Limited Legislation
Accordance to Limitation Act Section 6 states a limitation for a period of 6 years, Time
runs from the date of the contractual breach
Limitations of
Action
Fraud cases: contract runs when the plaintiff discovers the breach or could with reasonable
diligence discovers it – s29 Limitation Act - Ching Mun Fong v Liu Cho Chit (2001) It’s
the plaintiff means of ascertaining the mistake and not what the court eventually decides
that is relevant

For actions in respect of latent injury or damage: the section postpones the commencement
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 of the limitation period to the date on which the plaintiff first had knowledge of his rights to
bring such a claim – Chia Kok Leong & Another v Prosperland Pte Ltd. The plaintiff is
required to institute the action within three years of such commencement date

Laches
Provides for the extinction of a plaintiff’s right to remedies through the effluxion (passing) of
time à Achieved through the doctrine of laches – s32 Limitation Act

Two ingredients to be considered with respect to the doctrine of laches

• Length of the delay
• Whether such delay caused prejudice or injustice
Management Corporation Strata Title No 473 v De Beers Jewellery Pte Ltd (2001)

Tay Joo Sing v Ku Yu Sang (1994) - High Court ruled in favour of KYS ordering TJS to
specifically performing his obligations. On appeal, Court of Appeal held that order for
specific performance should not be made as the legal action was initiated after 25 months

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Chapter 9 – Business Entities(better version)
Incorporated Entities
• Become a separate legal body which has its own legal rights and obligations
• have an existence separate and independent of the people who established
• Corporation can continue even if founders retire or leave
Types
Unincorporated Entities
• Unincorporated entity does not have a separate legal personality
• Law does the distinguish the founders and the entity itself
SOLE PROPRIETORSHIP
Essentially a business owned by a single person. Rights and obligations of the business
become the rights and obligations of the sole proprietor

Definition Benefits
• Ease of set up
• Low cost
• Relatively simple requirements for maintenance
§ Sole proprietor has unlimited liability as far as his business is concerned
Unlimited Liability
§ Personal assets of the sole proprietor can be sought by the unsatisfied creditors
Process
• Application must be first made to the Registrar of Business before commencement
of Business
• Certificate of Registration issued upon registration by Registrar
• Liable to a fine if used an unregistered business name, s12(2) BRA
• Sole Proprietor is unable to enforce any contract entered into with another third
party while using the unregistered business name, s21(1) BRA
• Third party can however enforce contract against the sole proprietor, s 21(5) BRA

Selection of Business Name

Business
• Has wide discretion in selection
Registration
• Must be specified in the application in the Registrar of Business
• Prohibited from carrying out business using an unregistered business name s12 (1)
BRA
• Registration can be refused in the event that the business name to be registered is
identical or resembles an already registered business name or company name.
• Registration of a business name does not grant any proprietary rights to the name
§ Proprietary rights are ownership rights
§ Thus a sole proprietor who uses a business name which infringes upon another
person’s proprietary right in that name will not enjoy protection simply because he
has registered the business name, s12(3) BRA
§ Sole Proprietorship can be dissolved with minimum fuss
§ Formality required is for sole proprietor to send a notice of cessation of business to
the registrar of Businesses within 14 days of ending the business, s 15(1) BRA
Dissolution
§ Bankruptcy or death of a sole proprietor also results in the dissolution of the sole
proprietorship

GENERAL PARTNERSHIPS
A partnership is the relationship which subsists between persons carrying on a business in
common with a view of profit, s1(1) PA
Definition
§ Participation of two or more persons
§ Carrying on a business (must have a commercial element)
A partnership is formed by contract in oral or in writing. Agreement should stipulate the
respective rights and obligations of the partners and any qualifications they wish to effect
upon the general provisions of PA

Illegal Partnerships - formed for an illegal purpose. Automatically dissolved if an event

Formation occurs which make the partnership business unlawful

Number of members - Partnerships cannot have more than 20 members

§ Professional partnerships which are governed by specific legislation such as
accountancy and law may exceed 20: s17(4) CA

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 Property - A corollary principle is that all property bought with partnership
funds is deemed to be partnership property S21 PA

Ng Chu Chong v Ng Swee Choon – Defendant took trade mark from

partnership after leaving. Court held that the trademark was transferred to
the plaintiff when defend left the partnership, including her rights to the
Property
trademark

Creditor cannot execute against partnership property unless the creditor

has a judgement against the firm – S23(1) PA Exception à Creditor may
charge a partner interest in the partnership property to liquidate the
partner’s share of profits to satisfy the outstanding debt – S23(2) PA
General rule: All partner is entitled to participate, S24(5) PA

Management Partners are generally not entitled to remuneration – S24(6) PA

Instead they are entitled to a share of the profits generation
Relationship General rule: Every partner is entitled to share equally in the firm’s profits
among Partners and is liable equally for the firm’s losses, S24 (1) PA
Liability & In practice, partners can agree to bear differing proportions of liability to
Indemnity reflect the amount of capital each initially contributed or the amount of
work each undertook. This is however a internal arrangement: Koh Ewe
Chee v Koh Hua Leong & Another (2003)
A relationship between partners is one of utmost faith

S28 PA –General duty for partners to disclose full info on all things
affecting the partnership

Fiduciary Duty S30 PA - A partner cannot without the consent of his partners engage in
other business which compete against the firm.

If these sections are breached the partner would have to reutn any profits
made – Bentley v Craven (1853)
Partner’s Actions Binding Firm
Partners may or may not have authority to enter into contracts on behalf of
the partnership.
– s6 PA provides that if a person does something he is expressly
authorized to do, other partners would still be liable regardless whether
person is partner.
– s5 PA provides that every partner is an agent of the firm and the other
Binding the partners and act done by him in the usual way of business will bind the
Firm partnership and the other partners, unless:
rd
• He has no authority to do the act in question and the 3 party with
whom he was dealing knew of that, or knew that the person is not
a partner – s5 PA, can discuss s8 PA briefly if it helps or not.
rd
(If 3 party has notice of restrictions placed on partner’s authority)
• Mercantile Credit v Garrot (1962) – Held that firm is bound
because the partner had the usual authority to do what he did.
S9 PA - In contract and debt, a partner is liable jointly with other partners
for all debts and obligations of the firm incurred while he is a partner.
rd
NOTICE MUST BE GIVEN to 3 parties that partner has left. – S36 PA
E.g. notice in a gazette of the company is sufficient.
§ Third party can only bring one legal action against the partners
Joint &
Several S10 PA – The firm is liable for the tortious acts of any partner acting in the
Liability usual course of businesses of the firm, or with the authority of his co-
partners.

S12 PA – Tortious liability is joint & several. Every partner is liable jointly
with his co-partners and also severally for everything for which the firm
becomes liable under s10 PA
Sleeping
Partners & Sleeping Partners: Partners who are not engaged in day to day activities
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 Salaried of the firm, passive investors in which they usually only contribute capital
Partners to the firm and simply await their share of profits
§ Liabilities imposed upon partners generally are also imposed
upon sleeping partners

Salaried partners: Persons who are given the title of partner for the
purposed of dealings with third parties but who are still employees as far
as the partnership is concerned
§ Since a salaried partner is held out as a partner to third parties, he
is liable to third parties as a partner despite the fact that he
remains an employee of the firm: S14 PA
NOTE: S14 PA also applies to persons liable as a partner by “holding out”
through misrepresenting himself as a partner to any party who relied on
the representation to enter into a contract.
Retiring Partners:
A partner who retires remains liable for the partnership debts incurred
before his retirement, unless he enters into an agreement with the
creditors and remaining partners to be discharged from his liability, S17(2)
and (3) PA

Ensure that after retirement, all firm’s clients and the public generally are
notified that he is no longer a partner

Retiring S36 (1) and (2) PA - If no notice is given, a third party may be entitled to
Partners & claim that the retired partner appears to have remained a partner and is
New Partners therefore liable as a partner,

S36 (3) PA - Partners are not liable for the firm’s debt after retirement with
respect to third parties who are unaware of their status as partners,

New Partners:
S24(7) PA - Existing partners must give their consent before a person can
be added into the partnership as a new partner

S17(1) PA - New Partners are generally not liable for partnership debts
incurred prior to them becoming partners
Voluntary Dissolution due to:
§ Partnership was for a fixed term or specific project, at the expiry of that term or
termination of the project: S32 (1)(a) and (b) PA
§ Partnership was for an indefinite period by any partner giving notice to the others:
S32 (1) PA
§ Partnership agreement provides for any other reason for dissolution

Involuntarily Dissolution by the process of law:

§ One of the partners become bankrupt, dies or his share in the partnership property
is charged for his personal debts: S33 (1) and (2) PA
§ An event renders the business of the partnership unlawful S34 PA
§ At the application of a partner, court decrees the partnership to be dissolved
Dissolution because another partner is unable to perform his part of the partnership contract or
is guilty of conduct prejudicial to the partnership business; business can only be
carried on at a loss; or if the court thinks it is just and equitable that the partnership
be dissolved: S35 PA

Consequences:
§ Partnership property is to be applied in payment of partnership debts and liabilities
with balance to be distributed among partners according to their entitlements: S39
PA
§ Statutory provisions apply for the settlement of partnership accounts unless
otherwise specified by the agreement: S44 PA
§ Court may on the application of a partner, make an order for an account of all profits
made by the partnership upon dissolution, Ong Key Eng v Ng Chiow Tong (2001)
LIMITED PARTNERSHIP
Definition Consist of partners who are liable for debt and obligations of a firm and a limited partner
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 who merely contributes towards capital are not reliable for debts and obligations of the firm
beyond his contribution. It is not a separate entity

General Partners- Governed by the PA. Limited Partners – may not interfere with
management S6(2) LPA
Benefits:
§ Firm enjoy less onerous registration & compliance requirements
§ Allow some partners to bear limited liability
§ Attractive business form for investors as it combines limited liability and privacy with
tax transparency

LIMITED LIABILITY PARTNERSHIP

LLP allows partners to incorporate with limited liability while still carrying on business as a
partnership
§ Combines the benefits of a partnership with those of private limited companies
§ Comes with safeguards to minimize abuse and provide protection to parties who
deal with LLP

LLP is a separate legal entity from its partners: S4(1) LLPA

§ Like a company, it has perpetual succession and any change in partners will not
Definition affect its existence, rights or liabilities:S4(2) and (3) LLPA

LLP is being capable of:

§ Suing and being sued in its name
§ Acquiring and holding property in its name
§ Having a common seal in its name
§ Doing such other acts and things in its name, as bodies corporate may lawfully do
and suffer: S5(1) LLPA

§ Registration under the Limited Liability Partnership Act

§ Registration by 2 or more persons associated for carrying on lawful business with
Formation view to profit
§ At least 1 manager ordinarily resident in Singapore
S8(1) and (2) LLPA -Partners will not be held personally liable for any business debts
incurred by the LLP

Tortious Liability:
S8(3) LLPA - A partner may be held personally liable for claims from losses resulting from
his own wrongful act or omission but he shall not be liable personally for the wrongful acts
or omission of any other partners of the LLP

S8(4) LLPA – Where a partner of an LLP is liable to any persons (other than another
partner) as a result of a wrongful act or omission of his, in the course of the business or with
Liability of Partners authority, the LLP is liable to the same extent of the partner.

Binding the firm:

S9(1) LLPA – Every partner is an agent of the LLP and authorized acts binds the LLP

S9(2) LLPA – LLP is not bound by anything done by a partner in dealing with a person if:
a) The partner has in fact no authority to act for the LLP by doing that
b) The person knows that he has no authority or does not know or believe him to be a
partner of the LLP

Retiring and new partners are similar to GP

• Required to keep accounting records and others that will sufficiently explain the
transactions and financial position of the LLP
Business • LLP is not required to submit annual returns to ACRA, instead LLP must submit to
Requirements in the registrar of Limited Liability Partnership an annual return declaration of solvency
LLP or insolvency, again with criminal sanctions for non-compliance: S 24 LLPA
• LLP will be taxed as a partnership,
• Similar to company, dissolution of a LLP is through winding up: S30 LLPA
Conversion of A firm of a private company may convert to LLP by fulfilling the prescribed requirements:
company to LLP S20 and s 21 LLPA
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JOINT VENTURES
A business venture undertaken jointly by two or more parties who agree by contract to
engage in some common undertaking for joint profit by combination of their resources
without, however forming a partnership or corporation in the legal sense

Main Differences between Partnerships and Joint Ventures

Definition • Joint Venture usually does not have joint liability: Each venturer bears his own
liability
• A joint venturer is usually not an agent of the other venturers
• Each venturer has limited authority to act on behalf of the venture contract
• A joint venture contract may allow a joint venture to transfer his interest in the
venture to a third party without the approval of the other venturers
COMPANIES
§ An incorporated business organization registered under the Companies Act (CA)
Definition
§ Regulated by Accounting and Corporate Regulatory Authority (ACRA)
S19(5) CA - Company becomes an artificial person capable of possessing rights and owing
duties independent of its members

Consequences of Corporate Status

• Company can own property in its own name
• Company can enter into contracts and generally exercise rights and owe obligations
Separate Legal
in its own name
Entity
• Assets owned by company are assets of the company and not its members
• Liabilities of the company are liabilities of the company and not its members –
Saloman v A Salomon & Co Ltd (1987)
• Court held that shareholders are not liable for the liabilities of the company
• Company has perpetual succession and continues to exist until it is wound up even
if its members change over time
Liabilities of the company are liabilities of the company and not its members

Exception (Lifting the Corporate Veil):

Veil of incorporation which separates the members from their company is removed or
penetrated so that the acts of the company are deemed to be acts of its members
• S340(1) CA – The business of a company has been carried on with the intention of
defrauding creditors, the persons responsible could be made personally liable for
Liability any or all debts incurred
• S340(2) CA When there is substantial wrongdoing by the company and the
wrongdoing can be attributed to one or more of its members
• S393(3) CA - When the company is wound up or sued and it has a debt which was
knowingly created by a company officer who at that time had no reasonable or
probable expectation that the company could pay the debt

If convicted, that person could be fined, jailed and made personally liable for those debts.
Limited by Shares:
• A share represents the interest of a member (shareholder) in the company which
issued the share
• Right of participation in the company on the terms of the articles of association –
Prudential Assurance Co Ltd v Newman Industries (No 2) (1982)
• Upon winding up, members are liable only up to the amount they have paid (plus
any amount due but unpaid) on the shares they own

Limited by Guarantee:
Types of • Members must stipulate a fixed amount in the company’s memorandum which they
Companies undertake to contribute to the company if it is wound up: S22(1)(e) CA
• Constitutes a guarantee by the members to the company and money is not paid up
immediately
• Used chiefly in situations where the benefits of incorporation are desired but no
business activities are anticipated

Unlimited Company:
• The rarest as they negative. One of the main reasons why companies are used in
business
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 • Used in situations where the benefits of incorporation are desired, but the limitation
of liability is prohibited

Private Company:
S18(1) CA, a private company is defined as a company with share capital whose
memorandum or articles of association:
• Restricts the right to transfer shares
• Limits no more than 50 members

Public Company:
Upon fulfilling various conditions is permitted to raise funds from the public through issuing
shares and debentures and can be publicly listed on stock exchanges

The incorporation process is more complicated and costly compared to partnership

S20(a) CA - there must be at least one member, Member may be natural or artificial such
as another company

Memorandum and Articles of Association (MA & A)

• Memorandum of association of the proposed company must be prepared and
executed
• It becomes the constitutional document of the company, S22(1) CA
Registering
• Draft rely on S22 CA or S23(1)(c) of 3rd Schedule to the CA
Process
Articles of Association is a sister document to the memorandum of association
• Contains rules governing the operation of a company, S35(1) CA
• Govern the appointment of directors, holding of members and directors’ meeting
and method of issuing shares
• To draft rely on articles in Fourth Schedule to the CA

Once MA &A have been executed, these documents together with ancillary papers must be
lodged with the Registrar of Companies: S19(1) CA
Owners of company referred to as ‘members’ and invest in Company’s business

Directors:
S4(1) CA defines officer to include the directors of the company, the company secretary
and other person employed in an executive capacity
• They run and manage the company and are employed by shareholders s157A CA
• Directors may or may not be shareholders
• Company must maintain at its registrar office a register containing details of all its
directors, managers, secretaries and auditors: s 173(1) CA

• Directors have duties to fulfil:

o Duty to act bona fide in the interests of the company
o Duty to act with due care and skill
Structure of o Duty to avoid conflicts of interests
Company o Duty to use powers for proper purposes

Company secretary:
Acts as a main administrative officer of the company responsible for statutory matters
• Every company must have one or more company secretaries, all of whom must be
natural persons who reside in Singapore s 171(1) CA
• He or his agent or clerk must be present at the registered office of the company
during business hours: s 171(3) CA

Officers:
• Company officers function as agents of the company
• Fact that a person is a company officer does not automatically make him an agent
of the company - Dart Sum Timber (Pte) Ltd v Bank of Canton Ltd (1982)
The process which the company is dissolved is known as liquidation or winding up.
Dissolution Liquidation may be voluntary or may be ordered by the court.

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 Voluntary Winding Up:
When members of the company voluntarily decides to liquidate the company
Begins when members of a company pass a resolution at a general meeting: S290 CA

Reasons
o Purpose for which company is incorporated is achieved
o Company is to be reconstructed and its business merged with another
company

If for any reason the liquidator believes that the company’s assets would not be sufficient to
pay off the creditors within the period specified in the declaration of solvency, then he is to
call a meeting of creditors: S295(1)CA

Winding up by Court:
Application is made in form of petition that can be presented by certain persons including
the company itself, or more often a creditor: S253(1) CA

Circumstances which company may be wound up S254(1) CA:

• Company by special resolution has resolved that it be wound up by the court
• Company has no members
• Company is unable to pay its debt which exceed $10,000
• Directors have acted in their own interest rather than in the interest of the members
as a whole
• Period for the company’s existence as stated in its articles or memorandum of
association has expired
• Court is in opinion that it is just and equitable that the company be wound up and
the company is being used for unlawful purpose

Liquidator:
Both require a liquidator who has the duty of gathering the assets of the company, paying
up the liabilities owed to creditors and distributing the surplus if any to the members.
• Liquidator presents a final account showing how winding up has been conducted
and how company’s assets have been disposed
• Liquidator file a return with the Registrar of Companies and the Official Receiver
• In case of winding up by court, upon completion, the liquidator must apply to the
court for an order of dissolution: s 275 CA
• Company is dissolved upon grant of the order: s 276 CA

Chapter 16 – Agency
AG is a person, who through the authority conferred upon him by his P, to establish legal
relations on his principal’s behalf with a third party.
Definition
Resulting contract binds the P and the third party but does not bind the AG
Agency - only one contract of sale, between principal and customer
Agency vs.
Distributorship Distributorship - there are 2 contracts of sale, Distributorship Contract between distributor
and manufacturer and another retail contract between distributor and customer
Employee is acting as an agent if the employer has instructions(authorise) for the employee
Agents, Employees to create legal relationships on his behalf with third parties
& Contractors
Contractor deals with a third party, he does so as a principal
General rule: Agent is not liable to his principal or the third party as long as he acts within
the scope of authority given to him by the principal

Liability of Agent • Any liability flowing from his act flows to the principal who authorized the act

Exception: Liability falls upon the agent personally only if he acts outside the scope of
authority given to him
TYPES OF AGENCY
A document in the form of a deed by which a person (donor) appoints and authorizes
Power of Attorney
another (done) as agent to act on his behalf in respect of certain matters

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 Power of Attorney can be revoked by the donor at any time unless it is an irrevocable Power
of Attorney
A person authorized by his principal to act on behalf of the principal in all matters relating to
General Agent
a specific trade or business
Usually appointed to perform a specific function outside the scope of his general agency
Special Agent
i.e. General Manager given specific authority to scout and purchase new premises for new
business.
Commission agents are those that are paid by their principal for every completed sale
Commission
Agents & Del Del credere agent further guarantees his principal that the third party with whom he
Credere Agents contracts will pay for the goods sold under the contract. Liability shifts to the Del Credere
Agent if third party fails to pay
CREATION OF AGENCY
Agency contract that states the rights & obligations of P and AG. Scope of authority is the
most important aspect of contract as it refers to the AG’s actual authority

Authority can be:

Actual Authority
1. Expressed - specifically expressed, either in oral or writing
2. Implied – AG’s power to do all acts which are within reasonable customs and
usages of the particular trade he is engaged in or which are reasonably incidental
to the discharge of his duties as AG
Ostensible Authority is called “apparent authority” because the agent appears to have
authority when in fact he does not.
• AG has no actual authority
• P has in some way held out to the third party that the AG has the P’s authority to act
– Lim Kok Koon v Tan Cheng Yew & Another

Agency by Estoppel in that P is estopped from denying the agency because of his
representation that the AG has his authority. If AG acts within his ostensible authority, his
action will bind the P to the third party - Freeman & Lockyer v Buckhurst Park Properties
(Mangal) Ltd (1964)

Ostensible 4 Conditions to prove ostensible authority:

Authority • Representation as to AG’s ostensible authority made to third party
• Representation was made by a P or person who had actual authority of P
• Third party was induced by such representation to enter in to the contract
• P has capacity to enter into the contract
• Third party does not know AG lacks actual authority (Jurong Shipyard Pte Ltd
v BNP Paribas)

To prevent third parties from raising the argument of ostensible authority:

• P choose to disclose to third parties the limits of authority granted to their AG

A person may also have both ostensible authority as well as implied authority – Hely-
Hutchinson v Brayhead Ltd (1968)
Ratification is the process through which a P retrospectively confirms or ratifies an AG’s act,
binding the P to the third party as if the AG had actual authority to do so in the first place

Effect of Ratification:
• Grant retrospectively to the agent authority to act on behalf of the principal
• Agent will be deemed to have had actual authority for his act

*Note: Ratification is deemed to have taken effect from the date of the agent’s act, not on
Ratification
date of ratification

Bolton Partners v Lambert (1989) - Purported Withdrawal of offer is ineffective as the

ratification related back to the date of acceptance by the Managing Director, contract was
concluded on that date and accordingly, the offer cannot thereafter be withdrawn

Principal of relating back will not apply if:

• Agent accepts offer with a qualification that the acceptance is ‘subject to ratification’

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 • Third party knows that the agent has no authority from his principal

Unconditional Acceptance will take place at the point of ratification, and in this situation,
offeror can withdraw his offer at any time before the ratification takes place – Warehousing
& Forwarding Co of East Africa Ltd v Jafferali & Sons Ltd (1964)

Conditions for Ratification:

1. P must be named or identifiable by AG
• Keighley, Maxsted & Co v Durant (1901) -There was no contract as agent
had contracted in his own name and had not disclosed he was acting for a
principal

2. P must exist when contract was made by AG

• Kelner v Baxter (1866)
• For companies, under S 41 CA, it allows a company to ratify contracts made on
its behalf prior to its incorporation

3. P must have capacity to enter into & perform the contract at the time the contract
was made & at the time of ratification
• Common law may not enforce a contract entered into by an agent on
behalf of a minor
• Contract is also not enforceable if it amounts to an act which is ultra vires
(invalid excess of authority) on the part of the company – Ashbury
Railway Carriage and Iron Co v Richie (1875)

4. P must ratify within Reasonable Time

• Principal must ratify within a reasonable period after the contract was
made by the agent
• At very least prior to the date when the contract is to be performed
The law deems an agency to exist even if there is no agreement to that effect by the
principal or agent

Agency of Necessity:
• Law recognizes that a person, in an emergency situation should be conferred with
authority to act on behalf of another
• Couturier v Hastie (1852) - Shipmaster who finds his cargo is unexpectedly
perishing is empowered to dispose of his cargo at the nearest port at the best
Operation of Law available price without the authority of the owner

Rationale is that such circumstances require immediate action and communication with the
principal is impossible

Cohabitation – Agency arising from cohabitation

• Based on the premise that a wife has the implied authority from her husband to
manage their home
PRINCIPAL- AGENT RELATIONSHIP
Relationship between an agent and his principal is a fiduciary one. Duties
Definition
of the agent are generally characterized by good faith
General duty to follow the instructions of the principal

Duty to Follow • AG should clarify the intention of P if instructions are unclear

Instruction • There will be a breach of agency contract if AG fails to follow his
P’s instructions and AG is liable for damage to his P – Bertram,
Armstrong & Co v Godfray (1830)
Duties of Agent
AG must discharge his duty with reasonable care and skill
• Standard required is that which a reasonable person would expect
Duty to use
from an agent in that field of activity
Care & Skill
• Agent is expected to use the skill in discharging his duty if he is
engaged due to that particular skill – Keppel v Wheeler (1927)
Duty to Avoid Agent must not place himself in a position where his interest conflict with
Conflicts of his principal’s interest
Interest
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 Exception: if AG has disclosed to P and obtained consent to continue to
act as an AG

1. Agent must not accept a bribe or secret commission

Principal is entitled “account of profits” to claim the bribe or secret
commission from the agent

2. Secret profit is not allowed even if agent acted in good faith and
principal suffered no damage – Hippisley v Knee Brothers
(1905)

3. Agent should not without the knowledge and consent of his

principal become in his own right the counterparty in a transaction
with his principal
• This would place the agent’s interest as a counterparty in
direct conflict with his duty to protect his principal’s
interest – De Bussche v Alt (1878)
Agent has a general duty to perform his obligations and not delegate his
Duty not to responsibility to others – John McCann & Co v Pow (1975)
Delegate • P assumed to have selected the Agent based on the
agent’s personal character and abilities
Duty to keep General duty to keep proper separate accounts for the principal showing
Separate all property belonging to and all transactions undertaken on behalf of his
Accounts principal
Rights of Agent
Right to Remuneration
Principal undertakes to pay the agent a fee for acting on the principal’s behalf when
employing the agent
• Agent can claim the fee only when he has fulfilled his duties – Cain Sales
& Consultancy Pte Ltd v Beyonics Technology Limited(2003)
• Important to ensure that the agency contract states the specific events
which trigger the agent’s right to claim his fee

Right to Indemnity
• Case law generally provides that an agent is entitled to be indemnified by his
principal for all liabilities and disbursements lawfully incurred by him in performing
his duty
• Agent loses this right if the liability is caused by his negligence, breach of duty or if it
arises because he has acted beyond the scope of his authority

Right of Lien
• Agent can lawfully retain custody of the principal’s property until such time as the
amount owing to him has been fully paid

PRINCIPAL – THIRD PARTY RELATIONSHIP

A Principal is bounded generally to a third party for all acts performed by the Principal’s
Agent as long as
• The agent does not exceed his authority
• Agent has ostensible authority
• Principal has lawfully ratified the contract with the third party

General rule applies even if the agent acts fraudulently to the detriment or benefit of the
principal – Lloyd v Grace, Smith & Co (1912) and The Cherry (2003)
General Rules
Fraudulent Agent can create substantial liability for a principal – Lee Feng Steel Pte Ltd v
First Commercial Bank - Lee Feng Steel was liable for the fraud of its agent (DO) committed
against it

Principal may also be liable for his agent’s misrepresentation made to a third party (issue of
name cards by agent). Occurs when Principal knew about misrepresentation and
acquiesced in it or ratified it – Ng Buay Hock & Another v Tan Keng Huat & Another
(1997)

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 General Rule: Principal whose agent acted within the agent’s actual authority but did not
disclose to the third party that he was acting for a principal, P may sue and be sued under
the contract

If any of the 4 qualifications apply, the undisclosed P will not be bound to the third party:
1. AG s authority must not be ostensible authority or one which arose by virtue of
a ratification

2. The AG entered into the contract which implies that he is the P

• Humble v Hunter (1848) - Where an agent executes the contact as
“owner” of a ship, the undisclosed principal which in this case is the ship’s
true owner might not be able to assume his rights under the contract

3. Contract revolves around matters which are unique to the AG or the AG’s
identity is critical to the contract
• Undisclosed Principal may not intervene in the contact subsequently –
Collins v Associated Greyhound Racecourses Ltd (1930)

Undisclosed 4. When an undisclosed P is revealed to the third party, third party can elect either
Principal to sue the AG or P
• Third party cannot change his mind once election is made – only one legal
action is allowed – Trigen Industries Ltd v Sinko Technologies Pte Ltd
& Another (2003)

In Singapore, doctrine has been confirmed in Hong Kong & Shanghai Banking Corp v
San’s Rent a Car Pte Ltd t/a San’s Tours & Car Rentals (1994) and the Rainbow
Spring (2003)
• Undisclosed Principal may sue and be sued on a contract made by an
agent on his behalf acting within the scope of his actual authority
• In entering contract, agent must intend to act on the principal’s behalf
• Agent of an undisclosed principal may also sue and be sued on the contract
• Any defense which third party may have against the agent is available
against his principal
• Terms of contract may, expressly or by implication exclude
o the principal’s right to sue
o His liability to be sued
• Contract itself or circumstance surrounding the contract may show that the
agent is the true and only principal
AGENT – THIRD PARTY RELATIONSHIP
General rule: As long as agent had [1] actual authority or [2] ostensible authority or [3]
principal ratified the agent’s act - Agent owes no liability to third party

Agent Agrees to be Liable

• AG will be held liable if the contract with the third party on its proper construction
shows that the AG agrees to be liable to the third party
• AG signs contract in own name without any reference to his P, the general
presumption is that he is the P
Trade Usage
§ Custom and trade usage have established that an agent’s contract entails
personal liability on the part of the agent

Liability of Agent i.e. Stockbroker who acts as agent on behalf of client will be held liable for transactions
entered into with other brokers on behalf of client
i.e. Air Forwarding Agents are liable for the freight payable to airlines when they arrange for
transportation of their client’s goods – Perishables Transport Co Ltd v N Spyropoulos
(London) Ltd (1964)

Negotiable Instruments
§ Agent who signs a negotiable instrument such as a bill of exchange may be
liable even if he describes himself as an Agent. Bills of Exchange Act provides
for this.
To avoid liability, he should sign with:
§ “For and on behalf of P”, [Agent] as agent
§ “per pro or pp [Principal], [Agent]
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 Non-existent Principal
§ Agent may be liable if he contracts on behalf of a non-existent P.
§ Much depends upon the construction of contract. If contract shows that intention
was for TP to contract only with P, TP actually contracted to no one. No one is liable
to TP – Black v Smallwood (1966)

Undisclosed Principal
§ AG may attract personal liability if he contracts with a third party without disclosing
his P
§ AG who contracts with a third party on behalf of a disclosed but unnamed P can
subsequently reveal himself to be the P and acquire the rights and obligations
under contract – Harper & Co v Vigers (1909)
o If third party is willing to take the liability of an unknown person, it is hard to
suppose that the AG was the one person in the world with whom he was
unwilling to contract.
AG represents himself to have authority when he does not, Third Party may sue the AG for
breach of warranty of authority.

AG’s representation is taken as warranty that he has his P’s authority, if warranty is broken,
there is a breach of warranty of authority within an implied contract

Liability of the person who professes to act as Agent arises if:

§ He is fraudulent
§ He has without fraud untruly represented that he had authority when he had not
§ He innocently misrepresented that he has authority where the fact is either
Breach of Warranty o That he never had authority
of Authority o His original authority has ceased by reason of facts of which he has no
knowledge

Consequences:
§ AG knows he does not have his P’s authority and intentionally represents
otherwise, the third party may also bring an action in the tort of deceit
§ If representation was made carelessly, the third party may also be in a position to
bring an action in the tort of negligent misstatement
§ AG may face concurrent liability in both tort (negligent misstatement) as well as
contract (implied contract) – Fong Maun Yee & Another v Yoong Weng Ho
Robert (1997)
TERMINATION OF AGENCY
Apart from the stipulation in agency contract, it may also be terminated b
§ Full performance of the agency contract
Act of Parties § Breach of contract which amounts to a repudiation
§ The principal revoking the agent’s authority as long as there is no undertaking by
the principal to the contrary
§ Principal or agent becomes bankrupt, dissolved or dies
§ Agency is created with a particular subject matter in mind and the destruction of that
Operation of Law subject matter will terminate the agency through principal of frustration
§ AG or P becomes mentally incompetent – Ch’ng Choon Eng v Phaik Keow
Lucien Gladys (2000).

Chapter 18 – Torts in Business

The law of tort is the set of rules specifying certain actions and omissions as wrongs which
give rise to civil liability

Definition § Based almost entirely on case law

§ Overlaps with some other areas of law
§ Person’s act may be a tort, breach of contract and a criminal offence simultaneously
§ Person who commits a tort is a tortfeasor
xNT ACTS
Person can be negligent at law for doing something he should not have done (act) as well
Definition as for not doing something when he should have (omission)

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 *Note: Can be found to be negligent to total strangers, in contrast to the law of contract
where the privity of contract principle generally prevents third party from enforcing a
contract.
In order to prove liability under tort of negligence, elements need to be established:
§ Duty of Care – Defendant owed the plaintiff a duty of care
Elements of § Breach of that Duty – Defendant breached that duty of care
Negligence In order to then show that breach of duty has lead to liability in negligence:
§ Damage resulting from that breach must be shown – Plaintiff suffered damage as a
result of breach
A Duty of care is imposed upon a person to take reasonable care for his acts and
omissions.

3 categories of cases:
1. Physical damage to a plaintiff’s person or property
2. Pure economic loss
3. Claims based on negligent statement (or negligent misstatement)

Donoghue v Stevenson (1932) - Although the plaintiff could not sue the retailer as she had
no contract with him, she sued the manufacturer for breach of the duty of care. Lord Atkin’s
neighbour principle – “Who then, in law, is my neighbour? The answer seems to be –
persons who are so closely and directly affected by my act that I ought to reasonably to
have them in contemplation as being as affected when I am directing my mind to the acts or
omissions which are called in question.”

Spandeck Engineering (s) Pte Ltd v Defence Science & Technology Agency (2007)—A
single test to determine the imposition of a duty of care in all claims arising out of
negligence irrespective of the type of damages claimed, including claims for pure economic
loss. Using the approach in Spandeck Engineering v DSTA in establishing duty of care:

Preliminary requirement of factual foreseeability

§ Established when it can be shown that “the defendant ought to have known that the
Duty of Care claimant would suffer damage from his carelessness”. Can reasonably foresee
§ Easily established thus not necessary to go into much detail

Legal Proximity
§ Meaning: A sense of closeness between the person who owes and the person who
is owed a duty of care
§ Physical proximity (in the sense of space and time)
§ Circumstantial proximity (in terms of the relationship b/w them)
§ Causal proximity (the closeness or directness of the causal connection or
relationship b/w the particular act or course of conduct and the loss or injury
sustained)
§ If either one of the above is established, a prima facie duty of care exists

Policy Considerations
§ Are there any relevant policy considerations which would negate the prima facie
duty of care?
§ A “catch-all” factor that allow courts to view the facts of the case in its entirety
before deciding whether a duty of care exists.
§ If no negative factors negating the duty of care, does not result in unlimited and
indefinite claims by allowing this claim.
§ If proximity and foreseeability are established, but for some reasons of justice of
public policy, the court may deem it unreasonable to find a duty of care.

Cases for Illustrating Duty of Care

Marc Rich & Co. v Bishop Rock Marine Co Ltd (1996) – The court held that even
assuming there was foreseeability and proximity, it would still not be just and reasonable to
impose a duty of care.
Duty of Care
Hill v Chief Constable of West Yorkshire (1989) – The court held that there was no duty
of care because if such an action would to succeed, the police would embark on defensive
policing which is not in the interest of the public.

Home Office v Dorset Yacht Co Ltd (1970) – Detainees escaped from one of the plaintiff’s
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 property and damaged defendant’s property. The House of Lords held that the Home Office
owed a duty of care to the respondent.

Smith v Littlewoods Organization (1987) – The House of Lords held that defendant did
not owe a duty of care to the plaintiff for the acts of third parties. Defendant was not aware
of any previous acts of vandalism and had no reason to suspect that a fire would be started
in the cinema by vandals.

Spring v Guardian Assurance plc & Others (1994) – Guardian owed Spring a duty of
care in preparing the referral properly. If Guardian had performed its duty properly, it would
have discovered that Spring was not dishonest. Guardian breached this duty and Spring
consequently lost job opportunities.

Rescue Situations - There is no duty upon a bystander to act by protecting another person
or his property when he sees the person or his property in danger
The test for this would be as stated in Blyth v Birmingham Waterworks (1856) as “the
omission to do something which a reasonable man… would do; or doing something which a
prudent and reasonable man would not do.”

The standard of care is the level of care, which is expected to be exhibited in the
defendant’s conduct. It follows that if his conduct does not meet the standard of care, then
he is said to have breached his duty of care.

Factors in Determining Standard of Care

§ Level of Skill
§ Likelihood of Injury
§ Seriousness of Injury
§ Cost of Avoiding Risk

Level of Skill - The skill required is that of the reasonable man in the shoes of the defendant.
If a defendant follows the accepted practice in his profession, there is a strong likelihood
that he has met the standard of care expected of him

Wells v Cooper (1958) – No breach of duty of care as the defendant has met the standard
of care of a reasonably competent amateur carpenter. Professional expertise was not
Breach of Duty required of him

Likelihood of Injury - If the likelihood of injury to the plaintiff is high, then the court will
require a higher standard of care upon the defendant. If the likelihood is low, the standard of
care is lower.

Bolton v Stone (1951) – The House of Lords held that the chances of such accidents are
too small for the cricket club to take steps to prevent them

Seriousness of Injury - The more serious the likely injury, the higher the standard of care is
required of the defendant

Paris v Stepney Borough Council (1951) – The failure to provide goggles for the plaintiff
was a breach of duty because the plaintiff had only one good eye.

Cost of Avoiding Risk - •If the risk of harm is high, the defendant will be expected to take
steps to minimize the risk even if such steps involve substantial cost.

Latimer v AEC Ltd (1953) – The House of Lords held that the plaintiff failed to prove
breach of duty on the part of the defendant. The management had done everything possible
to remove the effects of the flood.
Res Ipsa Loquitur: Alternative way to show defendant has breached his duty of care
The event speaks for itself. This principle states that the breach is so self-evident the fact
the event occurred in it proves the breach. It should be noted that res ipsa loquitur is
usually successful only in exceptional cases where it is obvious that he accident could not
Breach of Duty
have occurred without the negligence of the defendant.

Scott v London & St. Katherine Docks (1865) – The court held that things would not have
occurred if not for the negligence of the defendant. There was no need to establish the fact

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 that the defendant breached the duty of care.

Teng Ah Kow & Another v Ho Sek Chiu & Others (1993) – Court held that they were
liable. The evidence also showed that the third respondent did not take reasonable care in
checking the gas cylinder; hence they were also liable.
The damage suffered by a plaintiff who is making his claim in negligence
must have resulted from the breach of duty by the defendant

Causation in fact: Looks at the defendant’s breach of duty and the

claimant’s damage from the perspective of physical connection
§ BUT-FOR test: If plaintiff would not have suffered damage but for
a certain event, then that event is a cause of the damage.

Causation in law (to argue against causation in fact):

§ Is there a new intervening act which limits legal responsibility?
§ Whether a floodgate will open that exposes the defendant to
unlimited liabilities?
Causation
Barnett v Chelsea & Kensington Hospital (1969) – The court held that
there was a duty of care owed by the hospital and this duty was breached.
However, the doctor’s negligence did not cause the husband’s death
because death would have taken place anyway.

Tan Hun Toe v Harte Denis Mathew (2001) – The court found that Tan
was not negligent during the operation. However, there was negligence in
the post-operative care given to Harte and 60% of Harte’s injury was
attributable to this negligence. Accordingly, Tan was liable for 60% of the
assessed damages. On appeal, Court of Appeal affirmed the findings of
causation and 60% apportionment but raised the overall amount of
damages awarded to Harte.
Resulting Damage The concept is used to limit the scope of the damage, which may be
claimed against a defendant. To test whether the defendant can
reasonably foresee the TYPE OF LOSS caused (not magnitude).

Reasonably Forseeability Test - The Wagon Mound (No 1) (1961)

It was held that the fire was a direct consequence of the defendant’s
breach of duty. However, it was unforeseeable that the fuel oil would burn
in water. Damage was not reasonably foreseeable, thus, the plaintiff’s
claim failed

Bradford v Robinson Rentals Ltd (1967) – The plaintiff suffered frostbite

from a long drive during very cold weather. The court held that injury from
cold weather was foreseeable although frostbite was not. Damages were
Remoteness awarded as that kind of injury is reasonably foreseeable

Egg-Shell Skull Rule - Smith v Leech Brain & Co (1962)

Although it was generally not foreseeable that a burn could cause cancer
and death, the plaintiff’s existing pre-disposition meant that the damage
was not too remote. DON’T HAVE TO FORESEE MAGNITUDE OF LOSS

The plaintiff’s physical weakness exacerbated his injury and the plaintiff
had to accept that.
§ Damage suffered by the plaintiff may be more severe than that
which could reasonably be foreseen by the defendant
§ Nevertheless defendant could still be liable as damage is not too
remote under the Egg- Shell Skull Rule
Defendant who is alleged to be liable for a tort can raise several defenses to avoid liability

Volenti Non Fit Injuria

Defenses
• Enables a defendant to avoid liability completely by arguing that the plaintiff has
consented to the risks involved in the relevant circumstance which led to the tort.
• Morris v Murray (1991) – The plaintiff agreed to the defendant’s proposal to take
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 him on a plane even though the defendant was very drunk. It was held that the
plaintiff had voluntarily assumed the risk so defendant was not liable.

Contributory Negligence
• S3(1) Contributory Negligence and Personal Injuries Act describes the situation
where a defendant can raise the defence of contributory negligence
• This defence can only be raised in situations where the plaintiff’s injury was partly
contributed to by his own fault
• Unlike volenti, contributory negligence is a partial defence
• Sayers v Harlow UDC (1958) – Plaintiff contributed to her own injury. Damages
were reduced by 25%.
Economic loss that flowed from a negligent act is not accompanied by physical injury or
property damage.

Generally, pure economic loss is not recoverable from a negligent act. Only from a
negligent statement.

Spartan Steel & Alloys Ltd v Martin & Co (Contractors) Ltd (1973) – Court held that the
plaintiff could sue for the loss of those materials (direct physical loss) and for the loss of
profits for those materials that were damaged (consequential economic loss). However,
they could not sue for the loss of profits due to the lack of power (pure economic loss).
Pure Economic
*Note: Use Spandeck test for all types of losses whether misstatement or negligence
Loss
Dutton v Bognor Regis Urban District Council (1972) – The damage done here was not
solely economic loss. It was physical damage to the house. Lord Denning MR held that
whether the inspector negligently passes the house as properly built and it collapses and
injures a person or if the owner discovers the defects in time to repair it, the council is liable
in either case. Claim for pure economic loss is possible

Murphy v Brentwood District Council (1990) – The loss sustained by the owner is purely
economic. Such losses are recoverable if they flow from breach of a relevant contractual
duty, but, here again; in the absence of a special relationship of proximity they are not
recoverable in tort.
Claiming damages for suffering from anxiety, distress or psychiatric illness after seeing a
scenario or witnessing or hearing an incident which was negligently caused by a defendant.

*Note: Claims for grief or sorrow are generally not recoverable.

McLoughlin v O’Brian (1983) – The House of Lords held that plaintiff could recover
damages for her trauma from the defendant. Lord Wilberforce stated necessity to consider 3
elements:
• Class of persons whose claims should be recognized (proximity to injured party)
• Proximity of such persons to the accident (time and space)
• Means by which the shock is caused (sight or hearing of the event or its immediate
aftermath)
Nervous Shock/
Psychiatric Harm
Pang Koi Fa v Lim Djoe Phing (1993) – Amarjeet JC held that the plaintiff succeeded in
her claim and awarded damages against the defendant. He stated:
• Claim for nervous shock may be confused with a claim for grief, sorrow, deprivation
and suffering which arises out of necessity for caring for those who may be near
and dear who have suffered injury from a distressing event
• In distinguishing the present case from the ones relating to just grief and suffering, I
must say that here the claim is not exclusively for the loss the plaintiff has suffered
nor the sense of loss she feels.
• Rather, I view it as a claim for the psychiatric illness she now suffers as a result of
the trauma and shock she underwent when her daughter suffered and died from an
operation negligently performed by the defendant and the defendant’s other acts

Primary Victims: Persons who suffers from psychiatric illness as a result of defendant’s act
or omission that caused an immediate fear of physical injury to himself.
Nervous Shock/
Psychiatric Harm
Secondary Victims: Persons who suffers psychiatric illness as a result of witnessing injury to
others.
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NEGLIGENT MISSATEMENT
Negligent misstatement is confined to negligent statements

Professional advisers may owe contractual duties to their clients under their contracts and
also tortuous duties imposed by the law of tort.

Definition When a plaintiff can claim in negligence under both contract and tort, he normally will do so.
If both succeed, the court will grant him damages under one claim only so that double
compensation is not enjoyed

If he can only claim under tort, the plaintiff is known as a “third party” and he has no
contractual relationship with the adviser.
Hedley Byrne & Co Ltd v Heller & Partners Ltd (1964) – Plaintiffs relied on the references
and incurred huge losses. The court held that there was a “special relationship” between the
defendant and the plaintiff which gave rise to a duty of care owed by defendant. If it were
not for the disclaimer, the defendant might be liable for the advice given to the plaintiff.

Factors Determining the Existence of a Special Relationship & Duty of Care -Hedley Byrne
& Co Ltd v Heller & Partners Ltd (1964)
§ Is advisor carrying on Business of providing advice (profess special skills and
possessing subject matter expertise)?
§ Was it reasonable for advisee to rely on advice & suffer loss?
§ Does adviser know or ought to know that advisee will rely on advice without
independent inquiry?
§ It is reasonable to impose a duty of care on advisor? (social/informal = no)

Paid or Gratuitous Advice

Lord Devlin in Hedley Byrne
Payment for information or advice is very good evidence that it is being relied on and the
adviser knows what it is. Where there is no consideration, it will be necessary to exercise
greater care in distinguishing between social and professional relationships and between
those which are of a contractual character and those which are not.

Adviser’s Business
Duty of care can be established even where adviser is not engaged in the business or
providing expert advice.

The only requirement is that the circumstances show that it was reasonable for the advisee
Duty of Care
to rely on the adviser’s skill and judgment and the advice given.

Esso Petroleum & Co. Ltd v Mardon (1976) – It was held that Esso was liable to the
respondent, even though Esso was not in the business of providing the advice given.

Purpose of and Advisee’s Reliance upon the Advice

The court requires that the adviser knows or ought to know that the advisee is likely to rely
upon the advice and that it is generally reasonable for the advisee to do so. If so, there may
be a duty of care

Caparo Industries plc v Dickman & Others (1990) – The House of Lords held that
defendant did not owe a duty of care to Caparo as an individual shareholder. The accounts
the defendants prepared were for the shareholders collectively and not for investors or
individual shareholders. The policy considerations behind the decision were that if the
accountants were held to have owed a duty of care to all investors and shareholders, which
would expose them to unlimited liability.

Ikumene Pte Ltd & Fairlamb v Leong Chee Leng (1993) – The Singapore Court of
Appeal held that auditor did not owe a duty of care to Fairlamb as a shareholder or
guarantor. There was lack of proximity between them because the purpose of the audited
accounted was for presentation to the shareholders in general meeting.

James McNaughton Paper Group Ltd v Hicks Anderson Co (1991) – Even if adviser
knew that his advice would be relied upon by advisee, the adviser will not be liable if it can
be shown that it was reasonable for him to believe that the advisee will not rely solely upon

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 his advice when making his decision

Disclaimers
Like exemption clauses in a contract, disclaimer must be reasonable under UCTA

Smith v Eric S Bush (1990) – Defendants held liable for their negligent misstatements.
Furthermore the disclaimer they had was subjected to the UCTA, and thus invalid. They
owed a duty of care
In respect of professional advisers, the standard of care used in determining whether a
breach of duty has occurred is that of a reasonably competent fellow professional in the
same field

For a professional adviser to breach his duty, he “must show an act of gross ignorance,
Breach of Duty
such as could not have been committed by any other ordinarily informed member of the
profession.” – Cooke v Falconer’s Representatives (1850)

*Note: USE SPANDECK FOR DUTY OF CARE & BREACH OF DUTY

ONLY USE FACTORS OF SPECIAL RELATIONSHIP
1. Adopt high standards of professional practice.
• Performing their responsibilities at the standard set by professional bodies
• Even if professional practice standards are met, this does not guarantee
that there will be no negligence
• Yeo Yoke Mui v Ng Liang Poh (1999) – Yeo had followed Singapore
Minimizing conveyancing practice by sending to Yeo a copy of the road interpretation
Personal Liability plan and explanatory notes. However, a duty of care could still not be
for Professional discharged, Yeo should have gone further to explain the meaning of
Negligence Category 4 and 5 roads and how this would affect the property.

2. Appropriately worded disclaimers have been held to be effective as a mean to avoid

liability.

3. Purchase professional indemnity insurance.

• Negligent Misstatement (Hedley Byrne):
o Requires special relationship (proximity)
o Contract not required
Negligent
o Remedy: Damages
Misstatement vs.
Negligent
•
Negligent Misrepresentation (S2 Misrepresentation Act):
Misrepresentation
o No special relationship required
o Must induce a contract
o Remedy: Rescission & damages
OTHER TORTS IN BUSINESS
Arises when a person seeks to pass off his goods or services as those of another

Involves a person who falsely promotes his products as having the same origin or quality as
the product of another, usually a more well known person or manufacturer or as being
somehow associated with that other product or manufacturer

Reckitt & Coleman Products v Borden Inc (1990) – 3 conditions to establish passing off:
§ Plaintiff must establish there is goodwill or reputation attached to his business and
that it is recognised to be distinctive of the goods or services
§ There must have been a misrepresentation by the defendant that the goods or
Passing Off services offered by him are the same as those offered by the plaintiff
§ Plaintiff must suffer or must be likely to suffer loss.

CDL Hotels International Ltd v Pontiac Marina Pte Ltd (1998) – Goodwill established
and damages awarded.

Lifestyle 199 Pte Ltd v $1.99 Ltd (2000) – Claim failed because title was descriptive of
products. If claim held, injunction would be unfair as it implied ONE.99 could claim a
monopoly on the concept of selling items at $1.99.

Consequences: Injunction, damages, or account of profits may be obtained if established

Defamation Occurs when a statement is published which tends to lower a person’s reputation in the
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 estimation of right thinking members of society generally

Types:
§ Statements made orally are usually called “slander”
§ Written defamatory statements are called “libel”

For statement to be defamatory, it must fulfil 3 elements:

§ It must have been published – i.e. statement made or sent to any person other than
the person who is the subject of the statement, the statement is considered
published.
§ It must be untrue
§ It must have the effect of lowering a person’s reputation generally
Arises when a person seeks to induce another person to breach his contract with a third
party.

Scenario – New manufacturer approaches existing agent of a competing manufacturer to

Inducing Breach of persuade the agent to terminate its agency contract and become the new manufacturer’s
Contract agent.

Consequences – Termination of agency contract is a breach of contract, competing

manufacture can take legal action against new manufacturer (tort). Competing manufacturer
can take legal action against his agent for breach of contract (contract).
Imputed negligence where liability is assigned for an injury to a person who did not cause
the injury but has a particular legal relationship to the person committing the negligent act.

e.g. Employee & Employer

Vicarious Liability
To establish vicarious liability, 3 conditions need to be satisfied:
1. Tortfeasor must be an employee of the master
2. The employee must have committed a tort
3. Tort must have been committed in the course of employment

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