BUSINESS LAW

Question 1

Sham runs a mobile phone retail business. Anticipating a huge demand for the latest 2021 model of the Tianhua
mobile phone, he contracted with TPL, the local supplier of Tianhua phones, for the purchase of 100 units of the
2021 Tianhua phone at a total cost of $40,000, to be delivered in 30 days. 

Sham started accepting pre-orders for the phone from his customers. He advertised the availability of the 2021
Tianhua phone on his Facebook Business page and invited pre-orders at a unit price of $450, cash payment on
delivery. The following exchange of Facebook messages took place between Sham and Goon (Sham’s good
friend).
Goon: do you have the Tianhua 2021 phone in rose gold colour?
Sham: yes, bro.
Goon: ok, I want 20 phones in rose gold. 
Sham: it’s a deal!
One week before the delivery date, TPL informed Sham that they were unable to deliver the phones by the
deadline as agreed unless a surcharge of $2,400 was paid to cover the cost of expediting delivery. Sham was
upset but he agreed to pay the surcharge, as he had already received many pre-orders of the new 2021 phones
from customers. However, things took a turn for the worse the next day when Goon informed Sham that he did
not want the phones anymore. When Sham protested, Goon insisted that there was no contract between them as
he had merely expressed an interest in the phones and anyway, he had not paid.

Meanwhile, TPL managed to deliver the phones to Sham on time. However, when presented with a bill for
$42,400 ($40,000 + $2,400), Sham told TPL that he was not going to pay for the surcharge because he felt it
was unfair for TPL to charge him extra costs. As for the purchase price, Sham said that he could only pay
$30,000 as the demand for the 2021 model had not been as good as he expected, and he was suffering losses
after customers had backed out of their pre-orders. TPL was having liquidity problems at the time and
reluctantly agreed to take the $30,000 in full settlement of the total outstanding. However, a week later, TPL
told Sham that they intended to sue for the outstanding balance.
Required:
Advise Sham whether 
a. He has a binding contract with Goon.
b. He is bound to pay the surcharge to TPL.
c. He is bound to pay the balance of the purchase price to TPL.

Varying a contract (changing it) can be done orally or in writing. Any agreement that varies the terms of
an existing contract must either be supported by “consideration” or be executed as a deed.

What does “consideration” mean? In contract law it is required that some form of reciprocity (form of exchange)
takes place between the two parties to a contract i.e. one party cannot enforce a contract unless he has promised
to deliver something to the other. Therefore, it follows that when varying a contract, in order for the variation of
the agreement to be enforceable, it needs to be supported by consideration. This becomes complicated because it
can often be the case that, when varying a contract, only one party is promising to do something new whilst the
other party is simply re-affirming its obligations in the original agreement.

In the case of Ma Hongjin v. SCP Holdings Pte Ltd (SGCA), the court confirms that the doctrine of
consideration remains a part of Singapore law, and was still a requirement for the variation or modification of
existing contracts.

Economic duress simply refers to the focus of the pressure: rather than threats being made to harm a person, the
threat is directed towards their financial well-being. Most instances of economic duress are indirect: for
example,
‘I will not do business with you unless you reduce your prices by half’. The essence of duress is the ‘do this or
else’ pressure but it does not have to be expressed as a direct threat provided there is evidence of sufficient
compulsion.

Atlas Express Ltd v. Kafko Ltd

 Kafko Ltd (“Kafko”) is a company which business was the distribution and sales of basket
  Kafko signed a contract with Atlas Express Ltd (“Atlas”), a delivery company. The contract established
price of delivery per basket (1.10 pounds per carton)
 The first load fell well below Atlas estimations, comprising only 200 cartons from estimated 400-600
cartons
 Atlas demanded a higher charge and Kafko did not agree to change the price.
 Atlas sent an empty truck and notified Kafko that if the higher charge were not acceptable, the truck
would not deliver. Atlas also brought a document which had written on it the minimum charge of 440
pounds per truck load
 Kafko did not any alternative and could not shift the delivery dates, and Kafko signed the contract.
 Accordingly, Kafko agreed to the new terms but later refused to pay

The judge held that the “revised contract” was not binding for two reasons, namely economic duress and
absence of consideration:

1. The court agreed that there was evidence of economic duress because Kafko’s representative had to
sign it involuntarily, without expressing their true aims and wishes, and with no other practical
alternatives. Moreover, Kafko also had no bargaining power in this deal.
2. In any event, I find that there was no consideration for the new agreement. Atlas was already obliged to
deliver Kafko's goods at the rates agreed under the terms of the original agreement. There was no
consideration for the increased minimum charge of 440 pounds per trailer.

In this case, Sham and TPL was entered in to the contract for the purchase of 100 phones with the total cost of
$40,000, to be delivered in 30 days. Sham had already received many pre-orders of the new 2021 phones from
customers.

One week before the delivery date, TPL informed Sham that they were unable to deliver the phones by the
deadline as agreed unless a surcharge of $2,400 was paid to cover the cost of expediting delivery. Sham had
already received many pre-orders and had no elective choices. TPL being in the position of dominance therefore
Sham had no alternative but to agree to pay such additional surcharge. The absence of choice/alternatives to a
future loss, Sham had to accept TPL demand on the surcharge for the phone to be delivered on schedule.

Furthermore, there was no consideration for the contract as the variation placed Sham in a less favourable
position financially.

As for the purchase price, Sham said that he could only pay $30,000. TPL was having liquidity problems at the
time and reluctantly agreed to take the $30,000 in full settlement of the total outstanding. However, a week later,
TPL told Sham that they intended to sue for the outstanding balance.

Question 2

Chin was walking past the StarTel store when he was handed a promotional brochure advertising StarTel’s
special one-year data plan contract, with unlimited mobile data at a price of $50 per month for the contract
period of 12 months. The brochure stated that this plan came with a free phone and had no early termination
charge. Chin was attracted to the free phone and immediately went into the store to sign up for the plan. He also
thought that the plan was a good bargain because he could terminate the contract at any time before the expiry
of the contract period of one year without incurring any costs. After signing the contract, he went home happily
with his new phone.

Seven months later, Chin sold the phone to a used phone dealer and telephoned StarTel to terminate the data
plan. He was then informed by StarTel that since he was terminating the contract before the expiry of the
contract period of 12 months, he had to pay an early termination charge as specified in the Penalty Clause in the
signed agreement. Chin went to check his drawer and found the signed agreement stapled together with
promotional brochure. He read the documents and noted that there was indeed a discrepancy between the
brochure and the signed agreement. He telephoned StarTel again insisting that he was entitled to rely on the
statement in the brochure that there was “no early termination charge”. StarTel then explained that there was an
error in the brochure and that the brochures had been removed from all their stores when the error was
discovered (after Chin had signed the agreement). It should also be noted that the signed agreement had
specified that ‘This agreement constitutes the entire contract between the parties’.
Chin insists on terminating the contract early.

Required:
Advise Chin whether he can rely on the statement in the brochure to release himself from further obligations in
the contract.