Contracts Paragraphs

FORMATION: OFFER AND ACCEPTANCE...........................................................................................3

OFFER............................................................................................................................................................... 3
ACCEPTANCE.................................................................................................................................................... 4
CONSIDERATION..................................................................................................................................... 6
CONSIDERATION REQUIREMENTS......................................................................................................................6
PRE-EXISTING LEGAL OBLIGATIONS.................................................................................................................6
PROMISSARY ESTOPPEL....................................................................................................................................7
TERMS....................................................................................................................................................... 9
INCORPORATION..............................................................................................................................................10
INTERPRETATION.............................................................................................................................................11
IMPLIED TERMS...............................................................................................................................................12
EXEMPTION CLAUSES......................................................................................................................................13
STATUTES....................................................................................................................................................... 14
PERFORMANCE, BREACH AND TERMINATION...............................................................................15
SITUATION 1....................................................................................................................................................15
SITUATION 2....................................................................................................................................................15
SITUATION 3....................................................................................................................................................18
CONSEQUENCES..............................................................................................................................................19
REMEDIES............................................................................................................................................... 21
GENERAL COMPENSATORY PRINCIPLE............................................................................................................21
LIMITING DOCTRINES......................................................................................................................................23
NON-COMPENSATORY DAMAGES: ACCOUNT OF PROFITS...............................................................................24
SPECIFIC RELIEF..............................................................................................................................................24
PENALTY CLAUSES.........................................................................................................................................26
PRIVITY................................................................................................................................................... 27
B’S REMEDIES AGAINST A..............................................................................................................................27
C’S REMEDIES AGAINST A..............................................................................................................................28
A’S REMEDIES AGAINST C..............................................................................................................................29
CRTPA...........................................................................................................................................................29
EVALUATION OF CRTPA................................................................................................................................31
FRUSTRATION........................................................................................................................................ 33
SUPERVENING IMPOSSIBILITY.........................................................................................................................33
FALLING SHORT OF IMPOSSIBILITY.................................................................................................................34
BARS TO FRUSTRATION...................................................................................................................................35
FRUSTRATED CONTRACTS ACT.......................................................................................................................36
FORCE MAJEURE CLAUSES.............................................................................................................................37
EVALUATION OF FCA.....................................................................................................................................38
MISREPRESENTATION......................................................................................................................... 39
MISREP............................................................................................................................................................39
RESCISSION.....................................................................................................................................................41
DAMAGES........................................................................................................................................................42
EXCLUSION CLAUSES......................................................................................................................................43
EVALUATION OF MISREPRESENTATION ACT...................................................................................................43
MISTAKE................................................................................................................................................. 45
 COMMON MISTAKE.........................................................................................................................................45
MUTUAL MISTAKE..........................................................................................................................................46
UNILATERAL MISTAKE....................................................................................................................................46
RECTIFICATION............................................................................................................................................... 47
NON EST FACTUM...........................................................................................................................................48
EVALUATION OF EQUITY IN MISTAKE.............................................................................................................48
ILLEGALITY........................................................................................................................................... 50
STATUTORY PROHIBITION...............................................................................................................................50
COMMON LAW PROHIBITION...........................................................................................................................51
CONTRACT APPARENTLY LAWFUL..................................................................................................................52
EFFECT OF ILLEGALITY...................................................................................................................................53
SEVERANCE OF CONTRACT.............................................................................................................................54
DURESS.................................................................................................................................................... 55
ILLEGITIMATE PRESSURE................................................................................................................................55
CAUSATION.....................................................................................................................................................56
EVALUATION OF DIFFERENT CASUAL STANDARDS FOR DURESS....................................................................58
UNDUE INFLUENCE............................................................................................................................... 60
CLASS 1 UI..................................................................................................................................................... 60
CLASS 2 IU..................................................................................................................................................... 60
TRANSACTION CALLS FOR EXPLANATION......................................................................................................61
REBUTTING CLASS 2 PRESUMPTION................................................................................................................62
UNDUE INFLUENCE WITH THIRD PARTY.........................................................................................................63
UNCONSCIONABILITY.......................................................................................................................... 64
INFIRMITY.......................................................................................................................................................64
EXPLOITATIVE CONDUCT................................................................................................................................64
FAIR, JUST AND REASONABLE.........................................................................................................................65
EVALUATION OF VITIATING FACTORS.............................................................................................................65
Formation: Offer and Acceptance
FORMATION INTRODUCTION

For a contract to be formed, there must be a valid offer by the offeror and a valid acceptance
by the offeree. There must be a ‘meeting of the minds’ between the contracting parties such
that the offer and the acceptance are ‘mirror images’ of each other. [Gay Choon Ing]

OFFER

An offer must be a “definite promise to be bound”, and must include an intention for the
offeror to be bound should the offer be accepted and for that intention to be communicated to
the offeree [Gay Choon Ing].

ACCEPTANCE

A valid acceptance would be a final and unequivocal express of assent to the offer by the
offeree [Gay Choon Ing].

CERTAINTY AND COMPLETENESS

A valid contract does not need to have all its terms made out with upmost certainty, given
that the contract provides the means for an uncertain term to be ascertained in the future (E.g
market value) [Tan Kok Yong Steve]

Offer

MISTAKEN OFFER

An offeree who is aware that an offer has been made based on a mistake, cannot rely on that
offer since it is not valid [Digilandmall]

MISREPRESENTATION/ FRAUD

An offeror cannot validly contract with another if he knows or ought to know that the offeree
intended to contract with another party and not with the offeror [Tan Kok Yong Steve]

INTENTION THROUGH CONDUCT

The intention to be legally bound by a contracting party can be ascertained through conduct,
such as undergoing preparation for the conditions of the contract [Carbolic Smoke]
 In Carbolic Smoke, this conduct was depositing money into the bank in preparation
for the contract

OFFER TO ANYONE
An offer can be made to an indeterminable amount of people given that there was an
intention to be legally bound by the offeree [Carbolic Smoke].

REQUEST FOR INFORMATION

A request for information does not constitute a valid offer if there was no intention to be
legally bound by it [Harvey v Facey]

GOODS ON DISPLAY

Goods on display for customers to choose from are not generally offers to all that view the
display and are invitations to treat instead, which only invites others to negotiate for the
formation of a contract and is not an offer. The act of bringing the displayed item to the
cashier constitutes a valid offer by the customer. [Boots Cash Chemist, Gay Choon Ing]

TENDERS

A tender, notwithstanding if it was inspected, would be valid if it was sent in accordance to

the terms of the invitation to tender since it indicates an intention to create binding legal
obligations. [Blackpool]

Acceptance

RECEIPT RULE/ELECTRONIC COMMERCE

An acceptance of an offer would generally be valid if the offeree receives a receipt of

acceptance from the offeror. This rule also extends itself to automated receipts in electronic
commerce [Digilandmall]

From Section 11 of the Electronics Transactions Act, electronic communications can be used
as offers and acceptance in the formation of a contract, and a contract shall not be denied
validity or enforceability solely on the ground that an electronic communication was used for
formation.

KNOWLEDGE OF THE OFFER

An acceptance can only be valid if the offeree, at the time of acceptance, was aware of the
offer and acted ‘on the faith of or in reliance upon the offer’ [R v Clarke]

However, the offeree can lack the knowledge of the offer at the time of sending information
for the acceptance, as long as the offeree was aware of the offer at the time when the
acceptance reached the offeror. [Gibbons v Proctor]

PRIVATE VS BUSINESS RELATIONSHIPS

Generally, the courts are less likely to rule for a contract to arise from arrangements or
favours in private relationships such as marriages and friendships since they have lesser
intent to be legally bound, and give rise to a cause of action under contract law. [Balfour,
DeCrus Andrea].
Conversely, the courts are more likely to recognize legally binding contracts in business and
commercial settings since the nature of the relationship creates an intention to be legally
bound. [Gay Choon Ing]

ACCEPTANCE METHODS

There is no mandatory method of acceptance, even if it deviates from the mode of offer as
long as it does not disadvantage any contracting party [Manchester]

ACCEPTANCE BY CONDUCT

Acceptance can be ascertained through conduct, such as the commencement of preparations

for contractual obligations by the offeree, such that there is an implied obligation on the part
of the offeror to not revoke his offer. [Daulia]

 However, this rule only applies if there was an implied ancillary unilateral contract on
the part of the offeree for the conduct to commence [Mobil Oil Australia]

ACCEPTANCE BY SILENCE

An acceptance can be ascertained by silence from the offeree, if the offeree acts according to
its contractual obligations, but without express agreement to the offer [Midlink]

POSTAL ACCEPTANCE RULE

In cases where the acceptance has to be sent through a postal system, the time of acceptance
is the time where the acceptance enters the postal system, and not the time where the offeror
receives the acceptance. This is known as the Postal Acceptance Rule [Adams].

However, the Singapore courts have ruled that the Postal Acceptance Rule need not be
adhered to if the contracting parties had the intention to not use the rule at the time of
contracting [1L30G].

INSTANTANEOUS COMMUNICATION: PLACE OF ACCEPTANCE

The place of acceptance in cases where instantaneous communication occur in two locations
will be the place in which the acceptance was received by the offeror [Entores]

MISCOMMUNICATION IN ACCEPTANCE

In general, any miscommunication in acceptance would favour the offeror if the offeror was
not in fault [Entores]. This is provided that the offeror did request for clarification regarding
miscommunication or ambiguity.

BATTLE OF FORMS

In cases where there are multiple versions of offers being sent between the contracting
parties, if the terms of the offer are being materially altered, each new version sent would
constitute a new counter offer by the other party, and the final counter offer being accepted
would be the final legally binding contract [Butler].
Consideration
CONSIDERATION INTRODUCTION

For a promise by the offeror to the offeree to be enforceable, the offeree must give
consideration to the offeror in exchange. Consideration signifies a return recognized by law
given in exchange for a promise sought to be enforced. [Gay Choon Ing]

Consideration Requirements

CONSIDERATION REQUIRES A NEXUS

The element of request for something to be consideration is necessary to establish a nexus

between the contracting parties [Gay Choon Ing]. Consideration must be requested by the
other party and one cannot choose their own consideration if it is not what the other party
requests for [Combe].

PAST CONSIDERATION IS NOT GOOD CONSIDERATION

In general, past consideration is not good consideration, an act performed before the
agreement will not be good consideration unless three criteria are satisfied. 1) The first act or
promise is requested, 2) it is understood that the act will be paid for in some way and, 3) in
the event that the act and payment happened at the same time, the agreement would have
been legally enforceable. [Pao On]

CONSIDERATION MUST BE OF VALUE

Consideration must be something of value, consisting either in some right, interest, profit or
benefit to one part, or some forbearance, detriment loss or responsibility given, suffered or
undertaken by the other. [Currie]

Forbearance by the promisee can be sufficient valuable consideration, but the forbearance
must be of a legal right [Hamer, White]

Something of little or no economic value can constitute consideration [Chappel].

GOODWILL IS NOT CONSIDERATION

Consideration cannot comprise solely of the prospect of gaining ‘goodwill’ from the other
party [Ma Hongjin].

CONSIDERATION MUST BE SUFFICIENT BUT NEED NOT BE ADEQUATE

The courts have ruled that consideration must be sufficient, determined by the contracting
parties, and need not be adequate to the obligations of the other party [Gay Choon Ing]

Pre-existing Legal Obligations

PRE-EXISTING LEGAL OBLIGATIONS

An act that is a pre-existing legal obligation alone does not constitute consideration.
[Glasbrook]

However, if the promisee acts beyond what they are legally obliged to do, the additional act
can constitute consideration [Ward]

PRE-EXISTING CONTRACTUAL OBLIGATIONS: MORE FOR SAME

An act that is a pre-existing contractual obligation cannot constitute consideration in return

for more than what was initially promised [Stilk]

However, if practical benefit had been given in addition to the pre-existing contractual
obligation, there can be sufficient consideration [Williams]. This practical benefit can be in
the form of helping the promisor avoid penalty fees and inconvenience. Practical benefit must
be something requested by the promisor or at least something that the promisor indicated he
wanted from the renegotiation. [MWB]

PRE-EXISTING CONTRACTUAL OBLIGATIONS: SAME FOR LESS

An act which is lesser than what was promised will not constitute sufficient consideration in
return for what was initially promised [Foakes]

However, if practical benefit had been given in addition to the act that was lesser than what
was promised, there can be sufficient consideration [Fong Holdings]. This practical benefit
can be in the form of recovering what was promised when there was a risk of not recovering
at all, saving of maintenance charges and the potential to contract with another party.
Practical benefit must be something requested by the promisor or at least something that the
promisor indicated he wanted from the renegotiation. [MWB]

GRATUTIOUS PROMISES AND DEEDS

Gratuitous promises where the promisee does not give any consideration in return for
something from the promisor can be legally binding only if it is ‘signed, sealed, and
delivered’, making it a deed [Lim Zhipeng]

Promissary Estoppel

PROMISSARY ESTOPPEL

A contracting party can be estopped by the courts from going back on a prior promise given
three criteria are satisfied. The criteria are; 1) a clear promise was made, 2) the reliance of
one party on the promise, which causes them to act in a different way due to the promise and,
3) the presence of inequity if the promise was broken. [High Trees]

The Singapore courts also stated that detriment to the promisee is not a requirement for
reliance to be ascertained. [Abdul]
Promissary estoppel can only be used as a ‘shield’ and not a ‘sword’, hence it cannot be used
offensively by the promisee against the promisor, and can only be used to recover what the
promisee was previously entitled to, and not more [Hughes].

For policy reasons, the words and promises of banks and private wealth management
corporations should be held to higher standards [L’am Chi Kin David]
Terms
Incorporation

INCORPORATION: TERMS OR REPRESENTATIONS

If a representation is made in the course of dealings for the very purpose of inducing the other
party to act upon it, and actually inducing him to act upon it by entering into the contract, the
representation is prima facie, incorporated as a term of the contract [Dick Bentley]

However, if the party can prove that the representation was an innocent misrepresentation and
he genuinely believed in the facts of that misrepresentation, the term will not be incorporated
into the contract [Oscar Chess]

If something was said 1) is of importance to parties, 2) contains special knowledge [Oscar

Chess], 3) is made at a time closer to conclusion and is 4) written, it will more likely be a
term than a representation.

INCORPORATION BY NOTICE/UNSIGNED DOCUMENTS

Notices or unsigned documents containing terms can only be incorporated into the contract if
enough attention was being drawn to it before the conclusion of the contract [Thornton]

Where a clause is particularly onerous, the party seeking to rely on the clause must show they
have taken reasonable extra steps to bring the clause to the other party’s attention for the
clause to be incorporated into the contract [Interfoto]

Clauses set out in documents that were not intended to be contractual documents, such as
work orders, and signed by parties who lack authority to contract will not be incorporated
into the contract [Huationg]

INCORPORATION: SIGNATURE RULE

If a contract on a written document is assented to by signature, the written terms are

ordinarily binding, regardless of the fact that the signing party did not have knowledge of the
presence of certain terms [L’Estrange]

Furthermore, the Singapore courts have held that there is no need for additional attention to
be drawn towards onerous clauses if they are assented to by signature. If the signed contract
made reference to terms in a separate document through a reference clause, the external terms
are incorporated into the contract, even if the other party was not provided with the separate
document. [Press Automation]

However, clauses that are signed but on documents such as timesheets that were not intended
to be contractual in nature will not be incorporated into the contract [Grogan]

INCORPORATION BY PREVIOUS COURSE OF DEALING

If the contracting parties have had previous course of dealings with each other, terms used in
past dealings can be incorporated into the contract without being mentioned in the latest
dealing. The test to ascertain if terms can be incorporated from previous course of dealings is
whether “at the time of contracting, both parties, as reasonable persons, would have assumed
the inclusion of the [term] in the offer and acceptance” [Vinmar]

The courts will take into account the following factors: 1) the number of previous dealings, 2)
the similarity and consistency of dealings, 3) the nature of the parties and 4) if the terms were
onerous, unusual or unreasonable [Vinmar]

Hollier: 3-5 in 5 years insufficient

Vinmar: 4 in 1 year sufficient

INCORPORATION BY TRADE PRACTICE

Terms can be incorporated into contracts if they reflect established trade practices in a
particular trade. The three requirements for trade practices to be incorporated into a contract
are as follows: 1) The certainty of the trade practice such that there is little ambiguity
regarding what the practice is, 2) the notoriety of the practice and 3) the reasonableness of the
trade practice [Wah Tat Bank]

However, trade practices can also be excluded expressly in contracts, such that they are not
incorporated into the contract [Wah Tat Bank]

Interpretation

INTERPRETATION

The Singapore courts use a two-stage framework to interpret terms in a contract. The first
stage is to determine which extrinsic evidence to be allowed and the second stage is to
interpret the term with all admissible evidence contextually and objectively [Zurich
Insurance]

For the first stage, to be admissible, evidence of context must be relevant, reasonably
available to all the parties and relate to a clear and obvious context [Zurich, Sembcorp].
There are three categories of context that the courts are wary of admitting as context: prior
negotiations, conduct subsequent to contracting and subjective intention [Zurich, Sembcorp]

In the second stage, the courts will interpret the term, with all the admissible evidence,
ascertain the meaning which the term would convey to a reasonable person having all the
background knowledge which would reasonably have been available to the parties in the
situation in which they were at the time of the contract. [West Bromwich]

When determining the objective intentions of the parties, the court should ordinarily start
from the position that the parties did not intend for the terms of the contract to produce an
absurd result [Kam Thai Leong Dennis]

CONTRA PROFERENTUM RULE

The contra proferentum rule is adopted in Singapore, where: in the event of ambiguity
surrounding a term in a contract, the term shall be interpreted against the contracting party
that introduced the term [LTT Global Consultants]
However, the courts will only invoke this rule if there is actual ambiguity within the contract
itself that cannot be resolved by interpreting the term in the context of the overall contract.
Where a term is ambiguous on if it applies to an unforeseen event, the contra proferentem
rule can be applied [Hewlett Packard].

PAROL EVIDENCE RULE

The parol evidence rule prohibits extrinsic evidence to be admitted as evidence for
interpretation on the content of a written contract. When the terms of a contract are in writing,
no extrinsic oral agreement or statement can be used to change the interpretation of the terms
[Evidence Act s 94].

However, where the written contract was not intended to be exhaustive, extrinsic evidence
can be admitted as evidence for the purposes of illuminating the written contract, not to
contradict or change it [Zurich Insurance].

A separate oral agreement as to any matter on which the contract is silent on and which is not
inconsistent with its terms, can be admitted as evidence. [Evidence Act s 94]

Implied Terms

IMPLIED TERMS

Terms not expressly included within the written contract itself can be implied by fact or by
law. However, no terms will be implied if there is a written clause in the contract that
contradicts the implied term [Philips]

TERMS IMPLIED IN FACT

From Sembcorp, the Singapore courts will first ascertain if an implied term is necessary.
There must be a true gap in the contract, where the parties did not contemplate the issue at all.
For “non-true gaps”, where the parties either 1) contemplated but mistakenly thought the gap
was dealt with terms already in the contractor 2) thought they both agreed on one term, but in
fact did not come to a consensus, the courts will not imply a term.

After ascertaining that a true gap exists, the courts will use two tests to determine if an
implied term is necessary.

First, the Business Efficacy Test, where the courts answer the question: Is the term necessary
to reach a minimum efficacy for the contract to work as intended? If the answer is positive,
then a term will be implied [The Moorcock]
Second, the Officious Bystander Test. Where, if an external observer were to suggest for the
term to be expressed in the agreement, both contracting parties would testily suppress the
officious bystander with a common “oh of course”, the term should be implied. [Shirlaw]

The Business Efficacy and Officious Bystander tests are complementary, where the Officious
Bystander Test can help to identify the specific term that need to be implied for business
efficacy [Ng Giap Hon]
TERMS IMPLIED IN COMMON LAW

Terms can also be implied by common law, according to policy considerations. Once
established, these implied terms have precedent value for subsequent contracts of the same
type. For example, there is an implied term in common law for building authorities to
maintain common areas of buildings they manage [Liverpool City Council] and for car
workshops to do repairs and look after cars with reasonable care [Hollier].

However, due to the precedent value, these terms implied in law must be used sparingly [Ng
Giap Hon]

Exemption Clauses

EXEMPTION CLAUSES

The courts take a three-pronged approach to prevent unfair terms in contracts, such as
exemption clauses which limit or exclude liability of one party in the contract. The approach
is as such: 1) Restrictive Incorporation, 2) Restrictive Interpretation, and 3) Statutory
Controls.

Restrictive incorporation entails that clauses which are onerous or unusual, and were not
sufficiently brought to the attention of the contracting party, should not be incorporated into
the contract [Thornton].

Restrictive Interpretation entails that, where an exemption clause does not expressly exclude
liability for negligence, the courts will try to interpret the clause to exclude something other
than negligence unless it is impossible to do so. This can be ascertained in three steps: 1)
whether the clause expressly refers to negligence, 2) whether the clause is wide enough to
cover liability, and 3) whether the clause is wide enough to cover other causes other than
liability. [Canada Steamship]

Lastly, statutory protection in the form of the UTCA and the CPFTA imposes restrictions on
exemption clauses in contracts.
Statutes

CPFTA

The Consumer Protection (Fair Trade) Act (CPFTA) allows for consumers to recover
remedies for unfair contractual practices in consumer contracts.

Section 4 and the Second Schedule defines unfair contractual practice as: 1)
deceiving/misleading conduct, 2) making a false claim, or 3) taking advantage of a consumer
who is unable to understand the transaction, 4) including in the contract conditions that are
harsh, oppressive or excessively one-sided or 5) misleading a consumer regarding material
facts.

Section 6 gives consumer the right to sue for an unfair practice.

Section 7 include remedies available such as: Damages, Specific performance of the contract
and Variation of contract

Section 13 prevents suppliers from excluding the CPFTA from a consumer contract.

The CPFTA assumes that consumers are in a weaker position than the supplier [Speedo].
Whether the supplier’s conduct is misleading or deceptive must be decided objectively, from
the perspective of the reasonable consumer, and the focus is on the effect of the practice on
the consumer and not if there was an intention to deceive by the supplier [Freely].

UCTA

The Unfair Contract Terms Act restricts the validity of exemption clauses, and most of its
provisions only apply to contracts involving business liability since one party must be acting
in the course of a business.

The UTCA targets only certain terms: primarily limitation and exclusion clause. Under
Section 2, an exemption of liability for negligence that causes death or personal injury is of
no effect, and under Section 11, other exemption clauses for negligence must pass the test of
reasonableness.
The test for reasonableness is as follows: 1) Reasonableness is determined at the time the
contract is made, having regard to all the circumstances, 2) The onus is on the person
asserting a reasonable exemption clause to prove reasonableness, 3) Relevant factors include
ability to bear the loss or insure themselves against it, the relative bargaining positions of the
parties, availability of other contract options and the customer’s knowledge of the term.

Even if a party knowingly enters a contract with a restrictive condition he will still be able to
seek the protection of UCTA [Press Automation]. And the courts will take a substance over
form approach in determining if a clause is in fact, an exemption clause [Deutsche Bank].
Performance, Breach and Termination
BREACH OF CONTRACT

A breach of contract occurs when a contracting party fails to perform his contractual
obligations to the standard of duty required under the contract. This standard of duty is a
reasonable one, and should be ascertained according to what the contracting party agreed to
do under the contract at the time of contracting [Thake]

TERMINATION FRAMEWORK

In Singapore, the framework set out in RDC Concrete will be used to determine if the breach
of contract was severe enough to entitle the innocent party to terminate the contract.

Situation 1

SITUATION 1: EXPRESS TERMINATION CLAUSE

Under Situation 1 of the RDC Concrete framework, where the contract clearly and
unambiguously states that, in the event of a certain event or events occurring, the innocent
party will be entitled to terminate the contract. If the literal language of the express
termination clause accurately reflects the intention of the contracting parties to be allowed to
terminate the contract if the event occurs, the clause would empower the innocent party to
terminate [Fu Yuan].

Situation 2

SITUATION 2: SIMPLE REPUDIATION

Under Situation 2 of the RDC Concrete framework, where one party by words or by conduct,
renounces the contract by clearly and unequivocally conveying to the other party that it
would not fulfill its contract obligations, the innocent party will be entitled to terminate the
contract.

Short of an express refusal or declaration, the test is to ascertain whether the actions of the
party in default are such as to lead a reasonable person to conclude that he no longer intends
to be bound by its provisions. [San International]

In San International, a failure to pay for an invoice when demanded early did not constitute a
repudiation. In Alliance Concrete, attempts to renegotiate and vary prices did not amount to
repudiation.
SITUATION 2: PARTIAL REPUDIATION AND ANTICIPATORY BREACH

Under Situation 2 of the RDC Concrete framework, where one party by words or by conduct,
clearly and unequivocally conveys to the other party that it will not fulfill a part of its
contractual obligations ahead of the time for performance, the innocent party will be entitled
to terminate the contract if the anticipatory breach is serious enough.

To ascertain if the anticipatory breach is serious enough, the courts will look at the
repudiating party’s words and conduct to project forward the term that will be breached in the
future. The courts will then use situation 3a and 3b of the RDC Concrete framework to
ascertain if the innocent party can terminate the contract for the anticipatory breach. [RDC
Concrete]

SITUATION 2: ELECTION TO TERMINATE OR AFFIRM

Where the courts rule that the innocent party is entitled to terminate the contract, the innocent
party can elect to choose between terminating the contract or affirming the contract [White]

The innocent party can elect to terminate the contract by a clear and unequivocal statement or
through conduct which comes to the attention of the contract breaker. Silence cannot
typically constitute election to terminate unless the innocent party exhibits conduct that
sufficiently signals for repudiation [Vitol]. This conduct can come in the form of refusal to
complete the innocent party’s contractual obligations or selling the promised goods to a third
party.

The innocent party can rely on any grounds of termination that existed at the time of election,
even if the innocent party was not aware that it existed at the time of breach [Alliance
Concrete].

The innocent party need not elect to terminate or affirm the contract immediately after the
repudiation occurs, and can take time to consider. However, the innocent party, by acting in a
way that is consistent only with a decision to affirm the contract might lead to affirmation by
conduct, removing the option to terminate [Stocznia].
SITUATION 2: AFFIRMATION

In the event of repudiation or breach by one party, the innocent party can elect to affirm the
contract, thereby persisting to perform the contract [White]. The innocent party needs to show
unequivocal conduct that is consistent only with the contract continuing, or expressly stating
the continuation of contract performance to the contract-breaker.

The innocent party can be stopped from affirming the contract if 1) continuing performance
requires the cooperation of the contract breaker, who refuses to cooperate or 2) the contract
breaker shows that the innocent party has no legitimate interest to affirm the contract [White].

It is on the onus of the contract breaker to prove that the innocent party had no legitimate
interest in affirming the contract. The innocent party’s persistence must be “wholly
unreasonable” to have no legitimate interest.

Legitimate interest in continuing performance can constitute: 1) claiming for damages instead
will be speculative or undercompensate the innocent party, 2) the innocent party has a non-
pecuniary interest such as protection of reputation, 3) it is unclear if the contract breaker is
repudiating, or 4) the innocent party has to honour obligations to third parties, or where it is
practically impossible to stop performance [MP Bilt].

If the contract breaker can prove that the innocent party had no legitimate interest in
affirming, the innocent party cannot affirm and must terminate the contract.
Situation 3

SITUATION 3A: CONDITION-WARRANTY APPROACH

Under Situation 3a of the RDC Concrete framework, terms in a contract are classified as
either a condition or a warranty clause. Breach of a condition clause would necessarily entitle
the innocent party to terminate the contract regardless of the consequences of its breach while
a breach of a warranty clause would not necessarily entitle the innocent party to terminate the
contract.

The steps used to determine if a clause is a condition or a warranty are set out in Man
Financial and is as follows:

1) If the term is statutorily classified as a condition under a statute such as the Sale
and Purchase Act.

2) By express provision within the contract, where if the contract expressly states that
the term is a condition.

3) If any precedent cases with similar factual matrixes classified the same term as a
condition.

4) If the contract governs mercantile transactions involving large quantities of goods

and the term is known to be a condition.

5) If the parties, at the time of constructing the contract, intended for the term to be a
condition

The courts will likely rule for a term to be a condition if it satisfies one or more of the steps
set out in Man Financial, thus the innocent party is entitled to terminate for the breach of the
condition term.

If the term is a warranty, the courts will move on to consider Situation 3b.

SITUATION 3B: HONG KONG FIR APPROACH

Under situation 3b of the RDC Concrete framework, the approach in Hong Kong Fir will be
used. If the consequences of breaching that term deprives the innocent party of substantially
the whole benefit of the contract, the innocent party can terminate the contract, regardless if
the term is considered a condition or a warranty.

In Sports Connection, breach of the non-competition clause, which was a warranty clause, did
not substantially deprive the innocent party of the whole benefit of the contract, since the
innocent party was still able to earn most of the targeted revenue. Thus, the innocent party
was not entitled to terminate the contract.

EXCLUDING CLAUSES FOR RIGHT TO TERMINATE

In contracts, parties can expressly exclude the right to terminate for breach, overriding the
usual RDC Concrete framework. Where the term itself states expressly that any breach of it,
regardless of the seriousness of the consequences that follow from that breach, will never
entitle the innocent party to terminate the contract, then the court will give effect to this
particular type of term [Sports Connection].

Consequences

CONSEQUENCES OF TERMINATION

Termination takes effect at the time of the election to terminate, and both parties are
discharged from performing all then-unperformed contractual obligations. The consequences
are for the contract-breaker to pay monetary compensation to the innocent party for the loss
sustained in consequence of their non-performance in the future. [Photo Production]

However, both parties have to uphold their contractual obligations for performance prior to
the breach of contract [Photo Production]

CONSEQUENCES OF AFFIRMATION

After the innocent party affirms the contract, the innocent party must continue to perform its
contractual obligations and loses the right to terminate for all previous breaches [National
Skin Centre].

However, if, after affirmation, the contract breaker re-breaches the contract, a new basis for
election emerges and the innocent party can elect to terminate or affirm the contract again
[National Skin Centre]
ABILITY FOR CONTRACT BREAKER TO CLAIM FOR PARTIAL
PERFORMANCE

The ability for a contract breaker to claim payment from the innocent party for partial
performance of its contractual obligations would depend if those obligations were
independent or dependent obligations.

Independent obligations occur where the innocent party has the obligation to perform
regardless of whether the contract breaker performs his obligations. In such cases, the
contract breaker can still claim payment from the innocent party for partial or imperfect
performance of his obligations [Taylor v Webb]

Dependent obligations occur when the innocent party’s obligation to perform is conditional
upon an event occurring or the contract breaker performing some part of its obligations.

Where these dependent obligations are divisible, payments can be made for each portion of
obligation performed. In Tiong Aik, the court held that the contract breaker could recover
payment for the tons of ore actually supplied when it did not meet the minimum monthly
requirement.

Where these dependent obligations are entire, if the contract breaker does not perform his
entire contractual obligation, he cannot recover payment for any part of the performance
[Cutter].

However, the court may rule that the innocent party is still obliged to pay for imperfect
performance of an entire obligation if there was substantial performance by the contract
breaker. Substantial performance entails that the contract breaker can recover payment for its
performed obligations, offset by the cost of defects and repairing costs due to the imperfect
performance [Hoenig]. In Hoenig, the contractor could recover payment for his work that had
poor workmanship, offset by the amount cost to fix the defects in the work.
Remedies

General Compensatory Principle

GENERAL COMPENSATORY PRINCIPLE INTRODUCTION

The Singapore courts use the general compensatory principle set out in Robinson v Harman,
which places the innocent party in the position where the contract has been performed and
quantify damages from there, enforcing the secondary rights of the innocent party.

GCP: PROOF OF LOSS

The courts will require proof of loss in monetary terms by the innocent party and will demand
cogent evidence but takes a flexible approach depending on the kind of loss incurred. If there
is clearly a loss, the law does not demand that the innocent party prove with complete
certainty the exact amount of damage that he has suffered, unless the loss is a non-pecuniary
loss [Robertson Quay]

GCP: EXPECTATION DAMAGES OF DIFFERENCE IN VALUE AND COST OF

CURE

The general damages arising typically consist of both the difference in value and the cost of
cure. Difference in value refers to the difference in monetary value between the performance
due and the actual performance by the contract breaker. Cost of cure refers to the costs of
repairs and rectification of the defective performance by the contract breaker.

Where the cost of cure greatly exceeds the difference in value or contract price, the courts
may award damages for the “loss of amenity” instead. This is due to the disproportionality
between the cost of cure and the difference in value or contract price itself. The innocent
party must also show a genuine intention to undergo the repairs for the damages to be
reasonable. [Ruxley, Yap Boon Keng Sonny]

GCP: NON-PECUNIARY LOSSES

Non-pecuniary loss in the form of mental distress can only be recoverable in two exceptional
circumstances: 1) The mental distress was directly consequential on physical inconvenience
caused by the breach, or 2) Where an important purpose of the contract was to provide
enjoyment or peace of mind, or to prevent mental distress. However, the general rule is to
treat recovery for non-pecuniary losses with skepticism [Arul].

In general, hurt feelings and loss of reputation are not recoverable under non-pecuniary losses
unless there was physical inconvenience brought about by the breach of contract, especially if
it could make the innocent party better off than he was before contracting [Addis]

However, if an important purpose of the contract was to provide enjoyment or peace of mind
or to prevent mental distress, and the breach did cause mental distress, the innocent party can
recover non-pecuniary losses. Contracts to purchase weekend residences for leisure [Farley]
and country club memberships [Arul, Kay Swee Pin] constitute such contracts.

GCP: LOSS OF CHANCE

Where the innocent party suffered a loss of a chance to obtain something or avoid incurring a
loss, the courts have recognized chance as a species of loss by itself. From Asia Hotel, the
innocent party must show that 1) The breach by the contract breaker caused to loss of chance
through a direct flow of events through the “but for” test and 2) The chance was real or
substantial.

For the chance to be real or substantial, it must not just be speculative [McRae], but can be
less than 50% [MK Distripark]. The loss will then be scaled down in proportion to the full
amount by the probability of the chance occurring. In Chaplin, the court estimated the
probability of the innocent party winning at 25%, and awarded her damages of 25% of the
prize money.

GCP: RELIANCE DAMAGES

Expenditure that the innocent party has incurred in order to perform his part of the contract,
now rendered wasted by the breach, can be recovered under reliance damages. Reliance
damages can only be recovered if there are evidential difficulties in proving the innocent
party’s position as if the contract had been performed as per the general compensatory
principle. The courts will thus put the innocent party in the position where the contract was
never entered into in the first place [Turf Club]

Where the profits to be gained from the contract is too speculative to recover under
expectation damages and loss of chance, the innocent party can recover the wasted
expenditure incurred for the purposes of the contract, including expenses before and after the
contract was entered into [McRae, Anglia]

However, in cases where the innocent party, on reliance of the initial contract, incurs
expenses on improvements that increases the amount of profits the innocent party could earn
under another contract, and that increase in profits is greater than the expenditure, the
innocent party will not be able to recover reliance damages [Omak].

The innocent party will not be entitled to recover both expectation and reliance damages in
fear of double recovery. The innocent party can choose to claim either expectation losses or
reliance losses, but will not be able to claim for reliance losses where he has made a “bad
bargain”, where the reliance loss exceeds the expectation loss [Turf Club]

GCP: CONSEQUENTIAL LOSSES

Consequential losses are further knock-on losses incurred by the innocent party, and
generally are losses incurred as a consequence of the defective or imperfect performance by
the contract breaker. Causation is required to be established to prove that the breach in
contract caused the consequential losses, but the courts use common sense to determine
causation in contract. The limiting doctrines apply to restrict these consequential losses which
are prima facie recoverable [Sunny Metal].
GCP: NOMINAL DAMAGES

The innocent party can recover for nominal damages if they cannot prove losses under the
general compensatory principle, and is not a substantial recovery, but a recovery in name.

GCP: WROTHAM PARK NEGOTIATING DAMAGES

The Singapore courts have recognized the Wrotham Park negotiating damages, which relies
on a hypothetical negotiation occurring between the contracting parties, where the court will
ascertain a portion of the profits the contract breaker gains from a breach of the contract to be
given to the innocent party as damages for the breach [Wrotham Park]

The Singapore courts have categorized Wrotham Park damages under the general
compensatory principle as it protects the innocent party’s interests in performance and
compensates the innocent party for the loss of performance due to the breach [Turf Club].

From Turf Club, here is a three stage framework to ascertain if Wrotham Park damages can
be awarded:

1) Wrotham Park damages are only claimable if orthodox compensatory damages and
specific enforcement are unavailable, and the innocent party is otherwise entitled to
no or nominal damages
2) It applies to breaches of negative covenants as a general rule, but the court left open
the possibility that some positive obligations might be recognized
3) It cannot be be ‘irrational or totally unrealistic’ for parties to have bargained for
release, such as cases that go against public policy

If the innocent party can satisfy all three stages of the framework, the court can award
Wrotham Park damages.

Limiting Doctrines

LIMITING DOCTRINE: REMOTENESS

Under the general compensatory principle, damages can only be recovered if they are not too
remote. For the damages to not be too remote, the parties will have had to be able to
contemplate them at the time of contracting [Hadley].

The ability for the parties to contemplate these losses depends on the knowledge the parties
had, or should have had. The knowledge must pass the two limbed test of 1) imputed
knowledge and 2) actual knowledge.

Imputed knowledge consists of the knowledge of losses that flow as a ‘natural’ consequence
of the breach, according to ‘the usual course of things’. Actual knowledge consists of
knowledge of losses that are due to ‘special or extraordinary facts and circumstances’ of the
innocent party which ‘reasonable person would not objectively taken to know’ [Hadley]
In Out Of The Box, the exorbitant advertising costs for the sale of sports drinks were too
remote to be recoverable since it arose from actual knowledge of the specific business
strategy of the innocent party. In Victoria Laundry, the losses from the highly lucrative
dyeing contracts were not recoverable since they arose from actual knowledge of the
presence of the contracts, not made known to the contract breaker.

LIMITING DOCTRINE: MITIGATION

The limiting doctrine of mitigation applies to losses incurred by the innocent party.

From Asia Star:

1) The innocent party cannot recover for the part of the loss which, if acting reasonable,
could have been avoided. The court does not require the innocent party to take all best
possible measures, and only requires for reasonable measures to be taken, taking into
account the innocent party’s subjective position.
2) The innocent party may recover any expenses incurred in the course of taking
reasonable steps to mitigate his losses, also known as increased losses.
3) The party that goes beyond what the law requires and avoids incurring any loss at all
will not be entitled to recover any damages [British Westinghouse]

LIMITING DOCTRINE: CONTRIBUTORY NEGLIGENCE

Where there is are concurrent tortious and contractual duties of care, the amount of damages
recoverable is reduced in proportion to the contributory negligence of the innocent party
[Vesta, Jet Holdings]. This is governed statutorily under Section 3 of the Contributory
Negligence and Personal Injuries Act (CNPIA), where the court will apportion damages
incurred to the innocent party according to the relative contributory negligence of both
parties.

Non-Compensatory Damages: Account of Profits

NON-COMPENSATORY DAMAGES: ACCOUNT OF PROFITS (AG V BLAKE)

Where the contract breaker earns profits from specifically the breach of his contract, the
innocent party can recover damages in the form of the contract breaker’s profits [AG v
Blake]. However, the Singapore courts have restricted recovery for account of profits to truly
exceptional cases that will likely have no legal basis to happen in Singapore, and there must
be some legitimate public policy interest of the courts to prevent the contract breaker from
gaining profits from his breach [Turf Club]

Specific Relief

SPECIFIC RELIEF: ACTION ON A DEBT/ AGREED SUM

The innocent party can enforce its primary rights of performance from the contract breaker by
enforcing the contract breaker to pay the agreed sum under the contract. The innocent party
only has to show that he has fulfilled his contractual obligations, and thus the contract
breaker’s duty to pay the agreed sum has accrued [Stansfield]
SPECIFIC RELIEF: SPECIFIC PERFORMANCE

The innocent party can enforce its primary rights to compel the contract breaker to
specifically perform the positive obligation promised under the contract. However, specific
performance is subject to bars that limit the innocent party’s right of enforcement.

If damages remain adequate as a remedy to the breach of contract, damages should be used
instead of specific performance [Argyll Stores]. However, in cases regarding unique subject
matters that have a lack of market substitutes, specific performance would more be more
adequate a remedy than damages. Traditionally, specific performance would be traditionally
available for sale of land, since each piece of land is unique [EC Investment].

If specific performance would result in severe hardship towards the contract breaker, the
courts will unlikely rule for specific performance as a remedy. However, this bar is only used
in exceptional cases of extraordinarily severe hardship of the contract breaker [Patel].

Specific performance will not be granted if compelling performance of a contract for personal
service would effectively amount to contracts for slavery.

If specific performance would result in the need for constant supervision by the courts to
resolve disputes on alleged non-performance in a contract between parties with a poor
relationship, specific performance would not be granted [Argyll Stores]

SPECIFIC RELIEF: INJUNCTIONS

Injunctions are a specific enforcement by the innocent party to prevent the contract breaker
from doing something. An employer cannot compel a reluctant employee to continue
working but is entitled to restrain the employee from working for someone else [Tullet]

For employment injunctions where the innocent party enforces an injunction that prevents an
employee from working for a rival employer, the test is whether the employee would now be
unable to earn a living by alternative employment, such that the employee would be
effectively driven to perform the initial contract. If the answer is positive, then the injunction
would not be granted, since it is in substance, a specific performance barred as it is
effectively a contract for unwilling personal service [Warner Brothers]
Penalty Clauses

PENALTY CLAUSES

Where a clause in a contract states for fixed damages to be payable by the contract breaker to
the innocent party in the event of a breach, the courts may strike down the clause as a penalty.
If the clause is triggered by a breach of contract, the courts will have jurisdiction to strike it
down as a penalty, and the contract breaker is not obliged to pay the agreed sum [Denka].

The Singapore courts have endorsed Lord Dunedin’s guidelines in Dunlop. They are as
follows:

1) If the agreed sum is extravagant or unconscionable in comparison with the greatest

loss that could conceivably be proved to have followed from the breach, the clause is
likely a penalty
2) The clause will be held to be a penalty if the breach consists only of the contract
breaker not paying a sum of money, and the sum stipulated is greater than the sum
which ought to have been paid in the first place
3) A clause for a single lump sum of money to be paid regardless of the severity of
breach will direct the clause to be a penalty

Furthermore, the courts will look at the difference in bargaining power between the contract
breaker and the innocent party as well as the purposes of the transaction and the primary
obligation breached. The burden of proof is on the contract breaker to assert that a clause is a
penalty clause. [Denka]
Privity

B’s Remedies Against A

LEGAL BLACKHOLE

 As a result of the privity and damages rule working simultaneously, the claim to
damages disappears into a “legal blackhole” [GUS Property]
 This is because under the privity rule, the third party who suffered substantial losses
may not sue the promisor. Under the damages, rule, the promisee who has the ability
to sue can only sue for nominal damages since the promisee has not suffered the
damages.
 To overcome this blackhole, the courts have devised two approaches: the narrow and
the broad ground exceptions

 The narrow and broad ground approaches cannot be used simultaneously [Family
Food Court]

NARROW GROUND EXCEPTION

 The Singapore Courts have accepted the narrow ground exception to the general rule
in privity [Prosperland].
 Under the narrow ground, the promisee can recover substantial damages under the
condition that the Promisee accounts to the third party for any damages recovered
[The Albazero]
 The narrow ground was extended from goods to building works [Linden Gardens]

 A requirement for the promisee to recover substantial damages under the narrow
ground is that the third party must not have a direct ground of action against the
promisor, since it negates the need for the narrow ground exception [Panatown]
o The Singapore courts have stated that a claim in the tort of negligence is
insufficient to reject the narrow ground [Prosperland]
 This is because it is harder to prove a claim in tort and the measure of
damages are different (reliance damages in tort and expectation
damages in contract)

 The UK courts have also added another requirement, that the contracting parties must
have contemplated that there would be a transfer of performance interests/proprietary
rights from the promisee to the third party after the time of the contract but before the
breach [Panatown]
o However, it is not confirmed if the Singapore courts will adopt this
requirement as well.

BROAD GROUND EXCEPTION

 The promisee may also recover substantial damages through the broad ground
exception. The broad ground exception recognizes the promisee’s loss in performance
 interest, allowing the promisee to recover substantial damages in their own right
[Prosperland]
o The broad ground exception is preferred in Singapore as it is more consistent
with principle [Prosperland]

 To invoke the broad ground exception, apart from the existence of a legal blackhole,
the promisee’s loss in performance interest must pass the test of reasonableness as set
out in Ruxley, to determine that the loss is an actual one. This also prevents the
promisee from getting an unjustified windfall.
o The courts will also take into account if the promisee wants to account for the
damages of the third party under the reasonableness test. However, the
promisee does not need to account any damages to the third party.
o Performance interest can be ascertained by the cost of rectification and the
difference in value of the expected product and the actual product.

DOUBLE LIABILITY

 Due to the exceptions to the legal blackhole, the courts have raised the concern of the
promisor’s double liability to both the promisee and the third party [Panatown]
o To avoid this, the solution is to only allow for one suit against the promisor to
occur at anytime. The promisee should also wait for the third party’s action
against the promisor to occur first, or until the third party expresses an
unwillingness to sue
o Another solution is to claim under the broad ground exception. This is to
discharge the promisor’s responsibility to both the promisee and the 3P,
avoiding the third party from being able to sue the promisor.

SPECIFIC REMEDIES

 The court may order for specific performance by the promisor where damages are not
adequate, where the broad ground exception is not granted. However, this is limited to
where the promisee is both the benefactory and the promisee [Beswick]
 Note: If the executor of the will can claim for damages under broad/narrow ground,
there is no need to claim for specific performance

INJUNCTION/STAY/NEGATIVE OBLIGATIONS

 The court may order for the promisor to enforce a promise not to sue the third party or
to omit from doing something. This may come in the form of an injunction or a stay
of proceedings [Gore]
 The requirements are: 1) for there to be an explicit promise for the omission, and 2)
for the promisee to have a sufficient interest in enforcing the promise not to sue
[Gore]
o This sufficient interest may be a legal obligation to indemnify an employee
[Gore] or for a real possibility of prejudice against the promisee (if the
promisee may get sued by the 3P afterwards) [The Elbe Maru]

C’s Remedies Against A

GENERAL RULE

 The general rule is that a third party to a contract is not entitled to or bound by the
terms of a contract [Dunlop]

JOINT PROMISEE EXCEPTION

 A third party to a contract may be able to enforce rights from it under the joint
promisee exception, where one person provides consideration on behalf of the other
and the third party will still be able to sue [Coulls]
 However, the status of this exception is unclear in Singapore.

COLLATERAL CONTRACT EXCEPTION

 A third party to a contract may enforce rights on the contract if there was a collateral
contract between the promisor and the third party [Shanklin Pier]
 A collateral contract must satisfy the requirements of a regular contract [Jiang
Haiying].
o Consideration must be present, and can be in the form of allowing the
promisor to enter into a contract with the promisee [Shanklin Pier]
o There must be an intention to create legal relations between the promisor and
the third party [Jiang Haiying]

EXCLUSION CLAUSES

 A third party may rely on an exclusion clause in the main contract that excludes him
from liability if the requirements in Scruttons are met.
1) The contract must make it clear that the third party was intended to be
protected by the clause
2) The contract must make it clear that the promisee, in addition to
contracting on his own behalf, was also an agent of the third party
a. This must be explicit, for example in The Eurtmedon: “in entering
into this contract, the carrier... does so not only on his own behalf,
but also as agent and trustee for such servants, agents and
subcontractors”.
3) The promisee has authority from the third party
4) The third party has provided consideration to the promisor

 Alternatively, a third party can rely on a “himalayan clause” to exclude itself from
liability [The Eurymedon]

A’s Remedies Against C

 Where the exclusion clause is between B and C and not A and B

 In bailment situations, the bailee promisor promises to limit the sub-bailee promisee’s
liability through an exclusion clause. The bailor third party then sues the sub bailee.
 If the bailor gave express consent for the good to be passed to the sub-bailee, the sub-
bailee may rely on the exclusion clause. [Morris, Pioneer Container]
CRTPA

EXPRESS CONFERRAL AND IDENTIFICATION

 A third party to a contract may enforce its rights under the contract if there was
express conferral and identification under the CRTPA.
 The contract must expressly confer rights to the third party under s2(1)a, and the third
party must be expressly identified under s2(3).
 Express identification includes identifying the third party by name or as a member of
a class or description. The third party need not be in existence when the contract is
entered into.

 However, if the conferral of rights goes against any clause in the contract or the intent
of the parties, pursuant to s2(4), the third party cannot enforce its rights.

IMPLIED CONFERRAL AND IDENTIFICATION

 A third party to a contract may enforce its rights under the contract if there was an
implied conferral of rights and identification under the CRTPA
 The contract term must purport to confer a benefit on the third party under s2(1)b.
However, if on construction of the contract, contracting parties did not intend the term
to be enforceable by the third party under s2(2), there is no conferral of rights.
 Next, the third party must be identified in the contract by name or a as a member of a
class or description, the third party need not be in existence when the contract is
entered into pursuant to s2(3) of the CRTPA.

 However, if the conferral of rights goes against any clause in the contract or the intent
of the parties, pursuant to s2(4), the third party cannot enforce its rights.

SECTION 2 NOT APPLICABLE

 Pursuant to s7 of the CRTPA, s2 is not applicable for contracts regarding carriage of

goods and cargo.

EXCLUSION CLAUSES AVAILABLE TO 3P

 Pursuant to s2(6) of the CRTPA, a 3P can rely on an exclusion clause in the main
contract between the promisor and the promisee after there has been a conferral of
rights to the 3P
o The promisor then has the right to all defences available to him under s4(2) of
the CRTPA, and the exclusion clause has to pass the test of reasonableness
under s2(2) of the UCTA.

REMEDIES
  After establishing the third party’s rights, the third party can sue for all remedies
available to the promisee as if the third party was a party to the contract pursuant to s5
of the CRTPA.

A AND B’s RESCISSION OR AMENDMENT

 The parties to the contract may not rescind/vary it to extinguish or alter the third
party's entitlement under s2 if:
1) The third party has communicated his assent to the term to the promisor (s
3(1)(a)), which may be by words or conduct, and if sent to the promisor by
post or other means, shall not be regarded as communicated to the
promisor until it is received by him (s 3(2)), or
2) The promisor is aware that the 3P has relied on the term. It does not matter
whether or not the 3P has knowledge of its precise terms. (s 3(1)(b)), or
3) The promisor can reasonably be expected to have foreseen that the 3P
would rely on the term and the 3P has in fact relied on it. It does not matter
whether or not the 3P has knowledge of its precise terms. (s 3(1)(c))

PROMISOR’S DEFENCE

 When proceedings for the enforcement of a term of the contract are brought by a third
party in reliance of section 2 of the CRTPA, the promisor would be available to any
defence or set off that would have been available to him if the proceedings had been
brought by the promisee (s4(4))

PROMISOR’S RELIANCE ON EXCLUSION CLAUSE

 The promisor can also rely on an exclusion clause that exempts the promisor from
liability as a defence under s4(2) and s4(3).

 Pursuant to s8(2) of the CRTPA, where a 3P sues the promisor and the promisor relies
on a exclusion clause, the clause is not subject to the reasonableness test in s2(2) of
the UCTA

PROTECTION OF PROMISOR FROM DOUBLE LIABILITY

 Where the promisee has already recovered from the promisor a sum in respect of
either the third party’s loss or the expense to the promisee of making good to the third
party, the court would reduce any award to the third party to an extent that it thinks
appropriate to take account of the sum recovered by the promisee under s6 of the
CRTPA.

Evaluation of CRTPA

CRTPA Good

 Allows for more third parties to claim (protects 3P)

o Through implied and express conferral of rights in s2
  Clarifies the specific requirements for 3P to be able to claim
o Some confusion in common law regarding SG position (Joint promisee
exception, availability of specific remedy)
o Confusion cleared up under CRTPA

CRTPA Bad

 Undermines freedom of contract

o If contracting parties truly intended to allow 3P rights to the contract, they
would have done so expressly, s2(1)b implied conferral of rights undermines
this freedom of contract
 Rebuttal: However s2(4) does provide for freedom of contract, where
if the conferral of rights goes against any clause in the contract, the
rights will not be conferred, respecting the parties’ intention when
contracting

o S3 prevents variation of contract by contracting parties without 3P’s consent,

which undermines freedom of contract to change contract terms
(impractical/problematic)

 Too broad and uncertain criteria of implied conferral

o Intention at the time of contracting cannot be ascertained for certain, resulting
in implied conferral of rights to 3P when contracting parties actually did not
intend for it

 Objective view of contracting parties’ intention instead of subjective view

o Subjective view should be used instead of objective view since it is the
intention of the contracting parties that really matters

EVALUATION OF PRIVITY AS A DOCTRINE IN PRIVITY NOTES

Frustration
See if frustrating event fits into any of the categories first, if not, apply multi-factorial test

ELEMENTS OF FRUSTRATED CONTRACT

 There are three elements for the test of a frustrated contract [Alliance Concrete]. (1):
there must be the occurrence of a supervening event, (2): the supervening event must
render the performance of the parties’ contractual obligations radically different from
what was originally agreed and (3): the supervening event must have occurred without
the fault of either contracting party.

MULTIFACTORIAL APPROACH FOR RADICAL CHANGE TEST

 The court uses a multifactorial approach to determine if the contractual obligation has
been radically changed due to the supervening event [Alliance Concrete].
Factors taken into account include:
o Terms of the contract itself
o Factual matrix or context
o Parties’ knowledge
o Parties’ expectations
o Parties’ assumptions
o Parties’ contemplations (in particular to risk at the time of contract, at any rate
ascribed mutually and objectively
o Nature of the supervening event
o Parties’ reasonable and objectively ascertainable calculations of the
possibilities of future performance in the new circumstances

Supervening Impossibility

SUPERVENING IMPOSSIBILITY: DESTRUCTION OF SUBJECT-MATTER

 The destruction of the subject-matter of the contract would constitute a frustrating

event as the contractual obligations are now impossible to perform [Taylor]
o In Taylor, the destruction of the music hall to be rented constituted a
frustrating event as the music hall was the subject-matter of the contract
o In Chiang Hong, the destruction of the building on the land that was to be
vacated did not constitute a frustrating event as the building itself was not the
subject-matter of the contract

SUPERVENING IMPOSSIBILITY: UNAVAILABILITY OF SUBJECT-MATTER

 A contract may be frustrated if the subject-matter of the contract becomes unavailable

for the purpose of performance [Lim Kim Som]
o In Lim Kim Som, the contract for the sale of a landed property was frustrated
through unavailability of the subject matter since the government repossessed
the property
SUPERVENING IMPOSSIBILITY: FAILURE OF PARTICULAR SOURCE

 A contract may be frustrated if its subject-matter is to be taken from a particular

source which fails or otherwise becomes unavailable [Alliance Concrete]
o The court in Alliance Concrete set out three scenarios regarding the failure of
a particular source
 (a): Where the source of supply is expressly referred to in the contract,
and that source fails, the contract is generally frustrated
 (b): Where the source of supply is not expressly referred to in the
contract, but intended by only one party, the contract is generally not
frustrated
 (c): Where the source of supply is not expressly referred to in the
contract, but intended by both contracting parties, the contract is
generally frustrated
 In Alliance Concrete, both parties contemplated that sand from
Indonesia was to be used in the preparation of the concrete,
thus the sand ban in Indonesia sufficed to frustrate the contract.

SUPERVENING IMPOSSIBILITY: IMPOSSIBLE METHOD OF PERFORMANCE

 A contract may be discharged if it specifically provides for a particular method of

performance which subsequently becomes impossible [Nicholl]
o In Nicholls, the contract for the sale of a cotton seed which was to be shipped
by a specific steamship was frustrated when the specific steamship was
destroyed.
o However, if the contract specifies alternative methods of performance, the fact
that a particular method of performance becomes impossible would not
generally frustrate the contract.’

SUPERVENING IMPOSSIBILITY: DEATH/INCAPACITATION OF PARTY

 A personal contract that requires personal performance to be rendered or received

may be frustrated on the death or incapacitation of a contracting party [Notcutt]
o In Notcutt, the heart attack of an employee made the performance of his
contractual obligation to work for the employer impossible since it would be
radically different if performed.

Falling Short of Impossibility

FALLING SHORT OF IMPOSSIBLE: PERFORMANCE MORE

BURDENSOME/IMPRACTICAL

 Generally, a mere increase in the cost or impracticability of performance would not

suffice to frustrate a contract since the nature of obligations are not fundamentally
altered [ACS Computers]
o In Davis, a 22% increase in costs and more than twice the contracted duration
was insufficient to frustrate the contract
  But, Singapore courts in ACS Computer have stated that astronomical increase in
costs may be sufficient to frustrate a contract

FALLING SHORT OF IMPOSSIBLE: TEMPORARY UNAVAILABILITY/DELAY

 A temporary unavailability or delay of the subject matter of a contract may frustrate the
contract.
o If the contract can only be performed on the period of time over which the
temporary unavailability occurs, the contract may be frustrated
 In Jackson, the 7 month delay resulted in the voyage being fundamentally
different, as the intended “spring voyage” would become an “autumn
voyage”, thus the contract was frustrated.
o If the contract can still be performed after the period of temporary unavailability
or delay, the contract is not frustrated

FALLING SHORT OF IMPOSSIBILITY: FRUSTRATION OF PURPOSE

 Where a supervening event does not render the contractual performance to be strictly
impossible, however the performance becomes futile as the commonly held purpose
of the contract becomes impossible to achieve, the contract can be frustrated [Krell]
o Frustration of purpose rarely succeeds outside of ‘coronation cases’. In Krell,
people rented flats that overlooked the coronation procession for the
commonly held purpose to watch the procession. When the coronation was
postponed, the contract was frustrated as the purpose for the contract became
impossible to achieve.

FALLING SHORT OF IMPOSSIBILITY: SUPERVENING ILLEGALITY

 A contract may be frustrated if, after its formation, the performance of the contract
becomes illegal.
o In Fibrosa, the contract for the sale and delivery of goods to Gydnia was
frustrated as war broke out and it became illegal to trade with Gydnia, who
was occupied by the enemy country.

Bars to Frustration

BAR TO FRUSTRATION: SELF-INDUCED FRUSTRATION

 A party cannot rely on frustration that arises due to his own conduct or to the conduct
of those for whom he is responsible for
o In Maritime National Fish Farm, since MNF did not select the trawler that
was contracted to OT, and chose to give the license to other trawlers instead,
frustration was self-induced, thus the contract was not frustrated
o However, in the case of Super Servant Two, where there was no real practical
choice by the Defendant, the contract was not frustrated, but it raised the issue
of commercial fairness.
 Some proposed solutions include:
 Impose a “first come first serve” policy, for suppliers to elect to
supply to the contract that was first contracted with
  Pro rata: to supply to all consumers, but based on proportion of
the supply
o (A contracts with B and C for 10 and 20 apples each,
now A only has 3 apples, A gives B 1 apple and C 2
apples)

BAR TO FRUSTRATION: FORESEEABLE EVENT

 The Singapore courts have preferred to treat the foreseeability of the supervening
event as a bar to frustration [ACS Computers]
 A supervening event cannot frustrate a contract if it was foreseeable by the
contracting parties [ACS Computers]
o In ACS Computers, the contracting parties were aware of the fluctuations of
the Russian currency and changes to the Soviet Union before the contract was
entered into, thus the supervening event was foreseeable and the contract was
not frustrated.

EFFECTS OF FRUSTRATION: AUTOMATIC AND PROSPECTIVE DISCHARGE

 Once a contract is frustrated, the contract is automatically and prospectively

discharged. Contractual obligations for both contracting parties are automatically
discharged without need for election and is done so at the time of the supervening
event occurring [Alliance Concrete]

COMMON LAW TOTAL FAILURE OF CONSIDERATION

 Under the common law, sums paid or payable before the discharge of a frustrated
contract would be entitled to recovery in full. However, this only occurs when there is
a total failure of consideration, meaning the no benefit was given and the full sum of
payment was made [Fibrosa]

If only partial failure of consideration, go to FCA

Frustrated Contracts Act

FCA: APPLICABILITY

 Under s3 of the FCA, the applicability of s2 is subject to the contractual provisions of

the contract. s2 cannot operate if it goes against the intention of contracting parties set
out by contractual provisions.

Better to separate the different amounts of money into the different categories

FCA: SUMS PAID OR PAYABLE

 In cases of a partial failure of consideration, the Frustrated Contracts Act (FCA) will
be used instead.
  Under s2(2) of the FCA, all sums already paid before the discharge of the contract are
recoverable and all sums payable after the discharge of the contract cease to be
payable.

 Under s2(3), where a contracting party has already incurred expenses before the
discharge for the purpose of completing the contractual obligations, the incurred
expenses are recoverable as the court deems it to be reasonable. This amount
recoverable must not exceed the actual expenses incurred or the ceiling set under
s2(2) of the FCA.

FCA: NON-MONETARY BENEFIT

 For non-monetary benefits obtained before the discharge of the contract, First, under
2(4)a of the FCA, the court will take into account how much the benefited party has
already recovered under s2(3). If the amount already recovered is high, the court
might lower the amount to be recovered under s2(4).

 Next, BP Exploration identified two stages for the recovery of non-monetary benefits
under s2(4) of the FCA.

 Note: Benefitting party = party giving the non-monetary benefit. Benefited party =
party receiving non-monetary benefit

o Under stage 1, the court will identify and value the non-monetary benefit,
setting a ceiling for stage 2.
 The court will identify the non-monetary benefit. For contracts for
services, the benefit refers to the end product of the services. For
contracts for pure services with no end product, the benefit refers to the
services themselves.
 If the party that received valuable benefit had made efforts that
contributed to valuable benefit, the court must apportion the benefit
between the two parties
 Next, the court will value the benefit from the date of frustration
according to the market price of the benefit. The effect of frustrating
circumstances will also be taken into account.

o Under stage 2, the court will assess the just sum to be awarded to the
benefiting party.
 This is a discretionary exercise and the courts will take into account the
entire circumstance of the contract and contracting parties. If there is a
disproportionately large benefit under stage 1, the just sum awarded
under stage 2 will be lower.
 This sum recoverable cannot exceed the ceiling set in stage 1.

Force Majeure Clauses

FORCE MAEJEURE CLAUSES

  Where the supervening event has been provided for in the contract itself, the contract
will not be frustrated [Holcim]. This often occurs with the presence of force majeure
clauses, which exclude the operation of frustration, provide for a more nuanced
response to the consequence of frustrating events and provide relief for non-
frustrating events.
o Whether a force majeure clause applies to a supervening event depends on the
construction of the clause and the burden of proof lies on the party who wants
to rely on the clause. The courts will also construe force majeure clauses
strictly [RDC Concrete]
 In Holcim, the force majeure clause was applicable as a “disruption” in
supply stated in the clause included cases where the supply is
commercially impractical.

o Suggestions for drafting force majeure clause: Make one party bear all
increase in costs, suspend contract until frustrating event is over etc

Evaluation of FCA

FCA Good

 Upgrade from common law position

o Discuss limitations when there is a partial failure of consideration (Fibrosa)
o FCA clarifies common law positions by distinguishing monetary and non-
monetary benefits

FCA Bad

 Does not clarify common law position

o Determination of frustration is still based on common law
 Court’s discretion uncertain
o S2(3) and s2(4) dependent on court’s discretion, preventing certainty in the
commercial
o Unclear and unsatisfactory
 Does not allow for independent claim of expenses incurred
o S2(3) claim for expenses incurred dependent on s2(2) sums paid/payable
 Does not address force majeure clauses
o Rebuttal: allows for freedom of contract by not restricting force majeure
clauses?
Misrepresentation
Misrep

ELEMENTS OF MISREP

 There are four elements for an actionable misrepresentation to take place. 1) The
statement must be false, 2) the statement must be a statement of fact, 3) the statement
must be addressed to the representee, and 4) the statement must induce them into the
contract

ELEMENT 1: UNAMBIGUOUS FALSE STATEMENT

 The statement made by the representor must be an unambiguous false statement for an
actionable misrepresentation to occur [Broadley Construction]

 In general, silence is insufficient to amount to an unambiguous false statement,

however conduct such as smiling or nodding may constitute an agreement to a false
statement and could be actionable [Broadley Construction]

 Conduct through a series of continuing representations over a period of time before

the contract is signed can amount to misrepresentation [Spice Girls]

 Half-truths can constitute unambiguous false statements if the information that was
omitted was of material importance [Dimmock]

 In the event where a statement becomes false due to a change in circumstances, the
representor has the duty to correct the representation to the representee [With]

ELEMENT 2: STATEMENT OF FACT

 For an actionable misrepresentation, the statement has to be one of fact. Statements of

opinions or future intentions are usually not sufficient for an actionable
misrepresentation.

 A statement of honest opinion is not actionable. [Bisset]

o However, for statements of opinion, if the representor is in a better position
than the representee to know the truth, the court may imply a statement of fact
if the representor has reasonable ground for his opinion [Smith]
o A statement of opinion is also actionable where it is dishonest, or there is no
reasonable basis for it [Esso]

 If the representor has special skill or knowledge, there is a duty of the representor to
take care in ensuring the representation is correct [Esso]

 Statements of future intention or conduct are generally not sufficient for an actionable
misrepresentation [Raffles Town Club]
 o However, if the representor was dishonest when making the statement of
future intention, the misrepresentation is actionable [Edgington]
o Statements of future intentions that are based on an honest belief are not
actionable [Deutsche Bank]

 The Singapore courts have left open the possibility of a statement of law being
actionable in misrepresentation [Kleinwort]

ELEMENT 3: STATEMENT ADDRESSED TO REPRESENTEE

 The statement by the representor must be addressed to the representee to be actionable

[Peek]

ELEMENT 4: STATEMENT INDUCED REPRESENTEE INTO A CONTRACT

 For an actionable misrepresentation, the statement made by the representor must

induce the representee to enter into contract. There is inducement if the representee is
aware of the statement, does not know that the statement is untrue, relied on the
statement and does not have reasonable grounds to doubt the accuracy of the
statement.

 The representee need not wholly believe the misrepresentation, and only have to
prove that the misrepresentation was a material cause of entering into the contract
[Zurich]

 Reliance is ascertained from the point of view of the representee, if the representee
had already made up her mind on entering the contract before the misrepresentation,
there was no inducement [Anna Wee]

 A statement of material fact does not by itself lead to inducement [Lim Koon Park]

 The representee’s failure to examine documents closely or reliance on a consultant are

not bars to claiming misrepresentation [Redgrave, JTC]

 Self-induced misrepresentation is not actionable where the representee unilaterally

makes assumptions [Eng Hui Cheh]

 For fraudulent misrepresentation, proof of fraud is not enough to infer inducement or

reliance. There must have been an intention to induce by the representor and reliance
by the representee [Anna Wee]

TYPES OF MISREPRESENTATION

 There is fraudulent misrepresentation when a false representation is made knowingly,

or without belief in its truth, or recklessly. [Derry]
  There is negligent misrepresentation when the representor owes a duty of care
towards the representee and breaches that duty of care through misrepresentation
[Hedley Byrne]

 Innocent misrepresentation is made without fault of any party.

Rescission

RESCISSION OF CONTRACT

 The representee can rescind the contract ab initio for all types of misrepresentation

 The intention to rescind the contract must be communicated to the representor. In the
event where communication is impossible, the representee may rescind the contract if
he had taken all possible steps to recover the goods or contact the representor [Car
and Universal Finance]

 A contract can still be rescinded if the misrepresentation has become a term to the
contract or the contract has been performed or both, even without fraud occurring
[Misrepresentation Act s1]

BAR TO RESCISSION: AFFIRMATION

 If the representee affirms the contract despite knowing of the misrepresentation,

rescission of the contract is barred [Long]
 It is not necessary for the representee to know of his legal right to rescind [Strait
Colonies]

BAR TO RESCISSION: LAPSE OF REASONABLE TIME

 A lapse of reasonable time may be a bar to rescission for non-fraudulent

misrepresentation as evidence of affirmation [Leaf]
o However, if the bar to rescission leads to an unequitable result, the rescission
would still be allowed [Salt]

BAR TO RESCISSION: INTERVENTION OF 3RD PARTY RIGHTS

 The intervention of 3rd party rights, if it occurred before the rescission, would bar the
rescission of the contract [Car and Universal Finance]

BAR TO RESCISSION: RESTITUTION IMPOSSIBLE

 In the event where the parties cannot be placed in their original positions, rescission is
barred [Alati]
o However, precise rescission to the parties’ original positions is not required,
rescission can occur as long as substantial restitution is possible [Alati]
Damages

DAMAGES

 For fraudulent misrepresentation, all direct, including consequential losses flowing

from the contract can be claimed as damages, even if the loss was not reasonably
foreseeable. [Wishing Star]

 For negligence misrepresentation, damages are subject to the reductions in tort law,
remoteness and contributory negligence

 For innocent misrepresentation, no right to damages are available

o However, the representee is entitled to recover costs incurred in discharging
legal obligations under the contract [Whittington]. These costs must be
obligated under the contract [RBC Properties]

MISREPRESENTATION ACT MEASURE OF DAMAGES

 Once the representor makes a false statement which induces the representee into a
contract, the representee may claim damages as if the misrepresentation was
fraudulent, and the burden of proof is on the representor to prove his honesty and
reasonableness behind the misrepresentation [Misrepresentation Act s2(1)]
o However, if the misrepresentation is not fraudulent, the Singapore courts have
suggested that the measure of damages be one of tort, under negligent
misrepresentation [RBC Properties].
o The UK position on measure of damages for non-fraudulent misrepresentation
is the measure of damages under fraudulent misrepresentation, which has not
been accepted in Singapore.

MISREPRESENTATION ACT DAMAGES OVER RESCISSION

 The court has discretion to order for damages to be paid instead of a rescission of the
contract. The court will take into account the following factors for an equitable result:
1) if the misrepresentation went into the heart of the contract, 2) the loss it will cause
the representor and 3) the loss it will cause to the representee [Misrepresentation Act
s2(2)]
o It has been suggested in William Sindall that the measure of damages under
s2(2) of the Misrepresentation Act be the cost of cure of the contract, but this
position has not been confirmed in Singapore.

o In William Sindall, the nature of the misrepresentation of the rights to land was
relatively minor compared to the sale, and the loss to the representee if the
contract was upheld was much lower than the loss to the representor if the
contract was rescinded, thus damages was awarded instead of rescission.

o In Tiong Swee Eng, the misrepresentation did not go into the heart of the
agreement, as the property omitted from the agreement was only slightly more
than 1% of the total assets. The representee did not suffer any losses and
 rescission would throw parties back into litigation with little likelihood of a
better outcome. Nominal damages were thus ordered instead of rescission.

Exclusion Clauses

MISREPRESENTATION ACT: EXCLUSION CLAUSES

 In general, terms excluding or limiting liability for consequences of a

misrepresentation are not allowed, unless these terms satisfy the test of reasonableness
in the Unfair Contract Terms Act [Misrepresentation Act s3]

 Terms that restrict the authority of agents to make representations are allowed since
they do not directly exclude liability for misrepresentation [Overbrooke Estates]
o Disclaimers of responsibility for agents have to pass the test of reasonableness
in the Unfair Contract Terms Act since they fall under s3 of the
Misrepresentation Act [Cremdean]

 For entire contract clauses, the Singapore courts take a substance over form approach,
and will determine if the substance of the clause essentially excludes or limits liability
for misrepresentation. [Deutsche Bank, First Tower Trustees]
o If the substance of the clause does exclude liability for misrepresentation, the
clause has to pass the test of reasonableness in the Unfair Contract Terms Act.
[Thomas Witter]

Evaluation of Misrepresentation Act

Misrep Act Good

 Provides statutory requirement for Misrepresentation under s2(1)

o Clarifies common law position

 Provides for considerations that courts have to take into account when awarding
damages instead of rescission
o Clarifies when the courts should award and how much to award

Misrep Act Bad

 Was enacted before Heldey Byrne, does not take into account the distinction between
innocent, negligent and fraudulent misrepresentation
o Leads to uncertainty regarding remedies and damages for each type of
misrepresentation
 Friction of fraud
o Measure of damages for non-fraudulent misrepresentation is still the measure
for fraudulent misrepresentation. This is greatly unfair since the damages are
greatly increased
 The burden of proof is not justified in the act compared to the common law
o The burden of proof is on the representor, which makes the act bias towards
the representee without justification
 Uncertainty in the test of reasonableness
o S3 relies on the test of reasonableness in UCTA which creates uncertainty in
the commercial world and too broad of a test to be applied
o Too much room for court’s discretion
Mistake

Common Mistake

COMMON MISTAKE AT COMMON LAW

 In order to invoke a common mistake at common law, the requirements set out in
Olivine have to be met.
o There are 2 pre-conditions for an operative common mistake. (1) There must
be no allocation of risk for the consequences of the mistake and (2) The
mistake must not be either party’s fault.

o There are then 2 requirements: (1) The mistake must be shared and relate to
the facts or law before the contract was concluded and (2) The mistake must
render the contract fundamentally different from what was anticipated

 For a mistake to render a contract fundamentally different, the mistake

must result in ‘a complete difference in substance between what was
supposed to be and what was taken’ [Bell].

o The mistake can be one of fact or law. [Olivine]

 After the conditions have been met for a common mistake at common law, the
contract is void.

COMMON MISTAKE AS TO EXISTENCE OF SUBJECT MATTER

 A common mistake regarding the existence of the subject matter of a contract can
render the contract void [Galloway].
 The parties must have the common mistake of believing the subject matter of the
contract to exist when it does not in fact exist. The subject-matter must also be of
fundamental importance to the contract such that the non-existence of it would render
the result of the contract completely different than what was contracted [Galloway].

 For contracts regarding the sale of the subject-matter, the contract is void if at the time
of contracting, the goods have perished and the seller was unaware if it [Sale of
Goods Act].

COMMON MISTAKE AS TO QUALITY OF SUBJECT MATTER

 A common mistake as to the quality of a subject matter is typically not sufficient to

render a contract void at common law, unless the quality of the subject matter renders
the subject matter fundamentally different in “substance” than what it was believed to
be. This is a strict test [Leaf]

COMMON MISTAKE IN EQUITY

  The Singapore courts have allowed for a common mistake in equity, which would
render a contract voidable [Olivine]. The test for a common mistake in equity is
unclear, but is alluded to have a lower standard than common law, as the
consequences of the mistake are lower [Solle].

Mutual Mistake

MUTUAL MISTAKE AT FORMATION

 A mutual mistake in formation occurs when parties are at cross purposes, there is no
matching offer and acceptance, rendering the contract void at common law [Raffles,
Wellmix]

Unilateral Mistake

UNILATERAL MISTAKE OF IDENTITY

 In cases of a unilateral mistake of identity, a seller sells a good to a rogue on credit

where the rogue fraudulently identifies himself as another person. The rogue then
sells the good to another buyer [Boulton]

MISTAKEN IDENTITY IN WRITING

 For contracts concluded in writing, the presumption is for the seller to intend to
contract with who the rogue claims to be, restricting the terms to those in writing
[Cundy]

 As a result, the mistake is operative, rendering the contract void. The rights to the
goods have not been transferred to the buyer, hence the seller can sue the buyer under
the tort of conversion [Cundy]

MISTAKEN IDENTITY FACE TO FACE

 For contracts concluded face to face, the presumption is for the seller to intend to
contract with the person they interacted with, and not who the rogue claims to be
[Philips]. This presumption is difficult to rebut, even if the seller took steps to
ascertain the rogue’s identity [Lewis]

 As a result, the mistake is inoperative, rendering the contract voidable. The seller can
only claim for fraudulent misrepresentation, however since third party rights are a bar
to rescission, the seller cannot rescind the contract and sue for the goods from the
buyer since the buyer has validly taken title over the goods. The seller is likely unable
to take action against the buyer [Philips, Lewis]

EVALUATION OF MISTAKEN IDENTITY PRESUMPTIONS

 The UKHL has criticized in the distinction between contracts concluded in writing
and in person for mistake identity cases [Shogun Finance]. The dissenting judges held
that the modern world of communication, the distinction between the two is
 impractical and one presumption should hold true for consistency. The dissenting
judges referred for the face-to-face presumption to be used throughout instead.

o However, Lord Nicholls also stated that for policy concerns, the seller should
bear the eventual burden instead of the innocent buyer, hence the presumption
used for contracts concluded in writing should be the only presumption used
[Shogun Finance]

o This dichotomy would effectively remove the need for a mistake of identity
doctrine.

UNILATERAL MISTAKE OF TERMS (COMMON LAW)

 For a unilateral mistake of a term by one party to be operative at common law, the
non-mistaken party must have actual knowledge of this mistake and this knowledge
must render the contract fundamentally different than what was contracted. The
operative mistake would then render the contract void. [Digilandmall]

o Actual knowledge includes willful blindness and is measured on a subjective

basis [Digilanndmall]
o In Digilandmall, a large discrepancy in the price of the printers sufficed as
fundamental knowledge

UNILATERAL MISTAKE OF TERMS (EQUITY)

 For a unilateral mistake of a term by one party to be operative at equity, the non-
mistaken party must have constructive knowledge of the mistake and this knowledge
must be render the contract fundamentally different than what was contracted.
 Additionally, there must be some sort of impropriety by the non-mistaken party. The
operative mistake would render the contract voidable [Digilandmall]

o Constructive knowledge is measured objectively, based on what a reasonable

person in the non-mistaken party’s shoes should have known [Digilandmall]
o The court can impose certain terms as part of the mistaken party’s relief, and
has flexibility in determining the relief [Soulle]
o Carelessness by the mistaken party does not erase the party’s right to relief,
but will be taken into account by the court in determining relief [Digilandmall]

Rectification

RECTIFICATION

 A party to a contract may rectify the contract if there was a mistake in recording the
written agreement. The requirements for rectification are set out in Yap Son On:
o 1) there must be a common continuing intention, that need not amount to an
agreement
o 2) there must be an outward expression of accord by both parties
o 3) the common intention must subsist up to the time of making the written
record
 In Joscelyne, the daughter subsisted the common intention by paying
her father as per the oral agreement after the written agreement, this
was sufficient for rectification by the father.
o 4) by mistake, the written contract does not reflect the common intention

o For a unilateral mistake about the written terms, an additional requirement is

added, for the other party to be aware of the mistake and unconscionably keep
quiet about it [Doo Wan Tsong]
 In Thomas Bates, cited in Doo Wan Tsong, the non-mistaken party’s
conduct must make it inequitable to oppose rectification, and this
criteria is satisfied where the mistake benefits the non-mistaken party.

Non Est Factum

NON EST FACTUM

 The doctrine of non est factum occurs when one party is seriously mistaken about the
agreement he is signing, and will render the contract void.
 However, the doctrine is very narrow and will only apply in exceptional cases. The
two requirements have to be met [Mahidon]:

o 1) there has to be a radical difference between what was signed and what was
thought to be signed
 In Saunders, the fact that the property was signed off to another person
did not radically change the substance of the contract since the
property rights were still signed away.

o 2) the party seeking to rely on the doctrine must proof that he was not
negligent in signing the document
 In Saunders, the elderly woman signing the contract without her
glasses on constituted negligence
 In Mahidon, the brothers took care in signing the contract, and had
relied on the solicitor for his expertise, they were not negligent

Evaluation of Equity in Mistake

Difference between Equity and Common Law

 Lower threshold equity for common mistake because consequence is voidable

contract, not void contract
 Lower threshold for unilateral mistake of terms (constructive knowledge etc)

Equity Good

 Equity is more flexible in granting relief

o Instead of voiding the contract as the only relief for mistake, equity allows for
more fact-specific relief (Such as letting the tenant get to rent first in Soelle)
 Puts onus on the seller to check for fraud instead of an innocent third party (for
Mistaken Identity)
 o Can only be done if the consequence is for a voidable contract (less harsh
consequences)

Equity Bad

 Uncertainty in contracts
o Different ways of claiming with different tresholds
 Too much power in court’s discretion
o Unclear test for common mistake in equity
 Overlap with unconscionability
o Unilateral mistake of terms under equity required some kind of
unconscionability
 Promoting mistake in equity will erode doctrine of mistake in common law
o Most will want to claim under equity since it has lower thresholds
o Merge both common law and equity?
o
Illegality

Statutory Prohibition

EXPRESS STATUTORY PROHIBITION

 A contract may be expressly prohibited by a statute, where there is a direct

contravention of statutory provisions.
 However, there is also a distinction between the conduct of the contracting parties
through the contract and the contract itself. If only the conduct is illegal, the courts are
less willing to prohibit the entirety of the contract. [Ting Siew May]

o In St John Shipping, the act of overloading the vessel was expressly contrary
to the statutory provision, but the contract in its entirety was not prohibited by
the statute.

IMPLIED STATUTORY PROHIBITION

 A contract may be impliedly prohibited by a statute.

 However, a court should not hold that a contract or class of contract was prohibited by
statute unless there was a clear implication or necessary inference that the prohibition
was what the statute intended [Ting Siew May]

 The courts are reluctant to find that contracts are impliedly prohibited by statute due
to the proliferation of administrative and legislative provisions today. [Ting Siew
May]

 The court will also take into account the consequences of holding the contract illegal.

o In instances where the blameworthy party would receive a windfall while the
non-blameworthy party would suffer losses as a result of the contract being
prohibited by statute, the courts are less inclined to hold that the contract is
impliedly prohibited [St John Shipping]
o In St John Shipping, since the fine to be paid under the statutory provision was
lesser than the consequences of holding the contract illegal, the court was
more inclined to hold that the contract was not impliedly prohibited by the
statute.

PROHIBITION BY STATUTE: PARTIES INTENTION IRRELEVANT

 In general, it is irrelevant that the parties did not intend to contravene the statutory
provision, especially where the contract is expressly prohibited by the statute [Re
Mahmoud]

o In Re Mahmoud, although the non-blameworthy party had no intention to

contravene the statute by dealing in linseed oil without a statute, it was held
 that this intention was irrelevant, and the contract was still illegal due to
express prohibition.

PROHIBITION BY STATUTE: ONE-SIDED PROHIBITION

 In the event of a statutory prohibition that only affects one of the parties, the courts
are less inclined to hold the entire contract illegal, and the statutory construction and
purpose will have to be considered [Mohamed v Alaga]

o In Mohamed v Alaga, the subsidiary legislation that prohibited the agreement

to introduce new clients to the law firm only affected the law firm. However,
due to policy concerns to prevent such agreements that undermine the integrity
of the legal industry, the entire contract was still prohibited.

Common Law Prohibition

COMMON LAW PROHIBITION: CONTRACTS TO COMMIT LEGAL WRONGS

 Contracts to commit legal wrongs are prohibited under common law. Such examples
include contracts to commit murder, rig share prices, commit torts etc [Ting Siew
May]

COMMON LAW PROHIBITION: CONTRARY TO PUBLIC MORALITY

 Contracts that are contrary to public morality can be prohibited under common law,
however this is dependent on the attitudes of society at the material time [Pearce v
Brooks]
o In Armhouse Lee, the contract to advertise sex chat lines in magazines were
held to be distasteful but not sufficiently immoral to render the contract illegal,
since at that time, there was no generally accepted moral code against such
services.
o This is in contrast to Pearce v Brooks. The contract to hire a coach for the
purposes of prostitution, where the coachbuilder was aware of this purpose,
was held to be sufficiently contrary to public morality at that time, and thus
the contract was illegal.

COMMON LAW PROHIBITION: PREJUDICIAL TO THE PROPER

ADMINISTRATION OF JUSTICE

 Contracts that obstruct the proper administration of justice are prohibited under
common law. Such examples include:

o Stiflling prosecutions.

o Maintenance:
 Where a person assists or encourages litigation by another, without
having any legitimate interest in the litigation or other justification.

o Champerty [Otech]:
  An agreement by one person to support litigation brought by another,
in return for a share of proceeds recovered in that action.

o Contracts that oust the jurisdiction of courts. But note acceptance of arbitration
clauses and “conclusive evidence” clauses
 In Beckkett, the Court of Appeal stated that conclusive evidence
clauses are not illegal per se, but the clause has to be challenged on the
basis of the UCTA

COMMON LAW PROHIBITION: CONTRACTS PREJUDICIAL TO THE STATUS

OF MARRIAGE

 Contracts that are prejudicial to the status of marriage can be prohibited under
common law. Such examples include pre-nuptial agreements that negate the marriage
(agreement to not consummate the marriage etc) and even agreements on post-divorce
asset allocations [Kwong Sin Hwa]

Contract Apparently Lawful

CONTRACT APPARENTLY LAWFUL: UNLAWFUL INTENTION

 The contract, on its face, is lawful and can be performed lawfully. However, at the
time of entering the contract, one or both of the parties has an unlawful objective or
purpose, the contract is thus prohibited at common law [Ting Siew May]
 This includes contracts entered into with the intention of using the contract subject
matter for an illegal purpose and contracts entered into with the intention of using the
contractual documentation for an illegal purpose.

o In Ting Siew May, the option to purchase the residential property was prima
facie lawful. However, the parties intended to achieve the unlawful purpose of
gaining a higher than allowed loan amount by backdating the option which
was illegal by MAS rules. Thus the contract was void and unenforceable
 The fact that the sellers wanted to withdraw the option before it was
exercised due to a change in conscience did not matter. It does not
matter if the illegal purpose was not actually carried out

o In Pearce v Brooks, the coach was rented for an illegal purpose of prostitution.

CONTRACT APPARENTLY LAWFUL: TO BE PERFORMED ILLEGALLY

 Contracts that are entered into with the intention that it would be performed illegally
are prohibited under common law [Ting Siew May]

o However, the court will take into account the centrality of the illegal
performance to the contract.
 In ParkingEye, the illegal performance through the deceitful letters
was not central to the performance of the contract which was to collect
overstaying charges, it was a minor mode of performance of the
 contract. This illegal performance was also not necessary for the
performance of the contract. Thus, the effect of illegality did not render
the contract void and unenforceable.

 Just use proportionality approach unless facts are similar to ParkingEye

CONTRACT APPARENTLY LAWFUL: SUBSEQUENTLY ILLEGAL

PERFORMANCE

 A contract that was entered into with the intention to be performed legally and which
subsequently was performed illegally would generally not be rendered void and
unenforceable by illegality. This is because the courts are less willing to punish
parties to a contract who had no illegal intention when entering the contract, but
subsequently unwittingly performed it illegally under common law [St John Shipping]

o However, where the party seeking to enforce the contract had knowledge of
and participated in the subsequent illegal performance, the contract would be
void and unenforceable.
 In Ashmore, the manager watched the lorry being overloaded, knowing
that it was being overloaded did not prevent the overloading, which
was non-compliant with the regulations. This sufficed for the
subsequent illegality to render the contract void and unenforceable

 After the development of the proportionality approach in Ting Siew May, the
distinction between initial illegal performance and subsequent illegal performance has
been said to be artificial [ParkingEye]

 Just use proportionality approach unless facts are similar to Ashmore

Effect of Illegality

EFFECT OF ILLEGALITY: STATUTORY PROHIBITION

 For contracts that are prohibited by statutes, the contract is generally void unless the
statutory provision provides for consequences of the contract in the event of a
contravention [Ochroid]

EFFECT OF ILLEGALITY: COMMON LAW GENERAL CASES

 For contracts that are prohibited under the common law and fall under the general
categories such as (committing legal wrongs/ contrary to public morality/ prejudicial
to the proper administration of justice/ prejudicial to the status of marriage), the
contract is generally void [Ting Siew May]

EFFECT OF ILLEGALITY: COMMON LAW EXCEPTIONAL CASES

TING SIEW MAY PROPORTIONALITY APPROACH
  In deciding whether the courts should hold the contract to be void and unenforceable
when prohibited under the common law for exceptional cases, the courts will use the
approach in Ting Siew May to determine if denying the contract would be a
proportionate to the illegality.

o This is because the nature and gravity of the illegality may vary, the
relationship between the illegality and the contract may be highly variable and
the knowledge and intentions of parties may differ [Ting Siew May]

 The court will take into account the following factors:

o Whether allowing the remedy (refusing illegality) would undermine the
purpose of the prohibiting rule
o The nature and gravity of the illegality by both sides contracting parties
o The remoteness or centrality of the illegality to the contract
o The object, intent and conduct of the parties
o Consequences of denying the claim
o How far refusal of the remedy furthers one or more of the specific policy
underlying the defence of illegality [ParkingEye]

 In Ting Siew May, since the illegality of the parties were circumventing the very
objective of the regulations, the nature and gravity of the illegality was large. The
illegal purpose was not trivial, and the illegality was central to the option since it was
an integral step in carrying out the transaction. Refusing to enforce the contract would
not lead to serious adverse consequences to either party. Thus, the court held that the
contract was void.

ABILITY TO CLAIM CONTRACT PRICE

 Under Ochroid/Ting Siew May, a claimant could attempt to seek restitutionary

recovery under three avenues, namely (1) where the claimant is less blameworthy, (2)
where the claimant has timeously repudiated the illegality, or (3) under an
independent cause of action such as unjust enrichment, subject to the principle of
stultification

Severance of Contract

SEVERANCE OF CONTRACT

 If only one part of the contract is illegal, then it may be possible to salvage the legal
parts of the contract by severing the illegal parts.
 However, this is often impossible to do as the illegality often taints the entirety of the
contract
 The general rule for severance of contracts are:
o Severance can only excise terms, it cannot add to or rewrite the contract
o Severance cannot change the nature of the contract
o Severance cannot remove all or substantially all of the consideration for the
contract [Man Financial]
Duress
ELEMENTS OF DURESS

For duress to be established, there must be [The Universe Sentinel]:

1) Illegitimate pressure by the perpetrator to the victim
a. Threats of unlawful actions are prima facie illegitimate [The Universal
Sentinel]
i. A threat to commit tort is sufficient [The Universal Sentinel]
2) Causation, where this pressure amounts to compulsion of the will of the victim

In EC Investments and Times Travel, the courts emphasized that the doctrine of duress should
be narrow to protect the certainty of contracts.

Illegitimate Pressure

ILLEGITIMATE PRESSURE: DURESS TO THE PERSON/PROPERTY

 Threats to cause harm to the victim’s person or property are illegitimate pressure
o Threats to inflict bodily harm to the victim are sufficient [Barton v Armstrong]
o This harm includes damage to a person’s reputation and embarrassment [Tam
Tak Chuen]
o Threats to property such as burning the victim’s house down and slashing a
valuable picture are sufficient as well [The Siboen]

ILLEGITIMATE PRESSURE: ECONOMIC DURESS

Assess reasonableness of threat and demand!!

 A threat to breach a contract or terminate an existing contract may amount to

illegitimate pressure if it was done without good faith [The Atlantic Baron]
o In Sharon Global, although there was a threat to terminate the contract, it was
not proven to be done in bad faith or with an exploitative motive, thus there
was no illegitimate pressure
o In Huyton, the perpetrator took a reasonable stance in requesting for a
compromise agreement, thus there was no bad faith

 Commercial pressure must amount to a coercion of will and vitiated consent to be

illegitimate pressure [Pao On]

 In deciding whether the economic duress was illegitimate, the court must look at the
eventual terms that the parties contract on

o Whether they were extravagant or unconscionable, as well the process which

the parties used to arrive at those terms.

ILLEGITIMATE PRESSURE: LAWFUL ACT DURESS

A lawful act of duress may be illegitimate [Tam Tak Chuen]:

Assess reasonableness of threat and demand!!

 where the threat is an abuse of legal process

 where the demand is not made in good faith

o In CTN Cash, the perpetrator acted in good faith as they were under an honest
but mistaken belief and merely exerting commercial pressure, taking
advantage of its stronger bargaining position. There was no illegitimate
pressure

 where the demand is unreasonable

o In Tam Tak Chuen, the demand for the victim’s shares to be sold at a severely
unfair price made the demand unreasonable and manifestly disadvantageous to
the victim

o In R v AG, the threat of returning the soldiers to their parent units was not
unreasonable

 where the threat is considered unconscionable in the light of all the circumstances

o In Tam Tak Chuen, the victim was ‘sprung” upon with the threat at night in a
way that was calculated to unnerve the victim, making the threat more
unconscionable.

If the threat by the perpetrator is one of lawful action, but the demand is of an unfair nature, it
would constitute duress [Thorne]
 Blackmail is often an unfair demand supported by a threat to do something lawful

Causation

CAUSATION: UNLAWFUL ACT DURESS

For unlawful act duress to persons, Barton has reversed the burden of proof to be on the
perpetrator to prove that there was no causation.

The Singapore standard of proof for causation is for the perpetrator to show that the duress
was not a reason for the victim to enter into the contract [Tam Tak Chuen]

The factors that have to be considered to disprove causation are [Pao On, Tam Tak Chuen]:

 Whether the victim protested before complying with the demand

 Did the victim have any other practical alternative courses of action available?
 o In Tam Tak Chuen, the victim had no practical alternatives but to enter into the
agreement since his public and private life were threatened, furthermore, any
alternatives were not going to be accepted by the perpetrator.
o In Atlas Express, since the victim was a much smaller company than the
perpetrator, there was no other practical alternative for the victim such as
another legal remedy.

 Was the victim independently advised?

o This was applied in EC Investments, where the victim had advice from his
solicitor, and understood what he was entering into

 After entering into the contract, did the victim take steps to avoid it?

CAUSATION: ECONOMIC DURESS

Although EC Investments departed from the UK position for economic duress, generally, the
burden of proof is on the victim to prove that there was causation between the illegitimate
pressure and the victim entering the contract [Sharon Global]. (This is because EC
Investments did not provide sufficient justification to depart from the general position, aside
from citing Tam Tak Chuen, it would be more consistent to adopt the burden of proof in
Sharon Global instead).

The standard of proof is the “but for” test and the “no practical alternative test” [Huyton, Pao
On]. EC Investments have suggested that the standard to prove causation would be more
stringent on the victim if the pressure was more illegitimate.

The factors in Pao On should also be considered in determining causation:

 Whether the victim protested before complying with the demand

 Did the victim have any other practical alternative courses of action available?
o In Tam Tak Chuen, the victim had no practical alternatives but to enter into the
agreement since his public and private life were threatened, furthermore, any
alternatives were not going to be accepted by the perpetrator.
o In Atlas Express, since the victim was a much smaller company than the
perpetrator, there was no other practical alternative for the victim such as
another legal remedy.

 Was the victim independently advised?

o This was applied in EC Investments, where the victim had advice from his
solicitor, and understood what he was entering into

 After entering into the contract, did the victim take steps to avoid it?

CAUSATION: LAWFUL ACT DURESS

The general position in Singapore is for the burden to be on the victim to show causation
(Tam Tak Chuen has reversed this burden, but did not provide sufficient justification in doing
so, as such it would be more consistent with the general position with regards to Duress to
retain the burden of proof to be on the victim).

The Singapore position in Tam Tak Chuen regarding the standard of proof is for the duress to
be a reason for the agreement to be entered into. However, the UK position is for the
illegitimate pressure to be a sufficiently significant reason for the contract to be entered into
[Huyton]. In order to distinguish unlawful acts of duress (which are arguably more
unconscionable) with lawful acts of duress, I will be using the UK standard of a “sufficiently
significant reason” (This is because the standard of proof for lawful acts of duress should be
higher than unlawful act duress with lower unconscionability)

The factors in Pao On should also be considered in determining causation [Tam Tak Chuen]:

 Whether the victim protested before complying with the demand

 Did the victim have any other practical alternative courses of action available?
o In Tam Tak Chuen, the victim had no practical alternatives but to enter into the
agreement since his public and private life were threatened, furthermore, any
alternatives were not going to be accepted by the perpetrator.
o In Atlas Express, since the victim was a much smaller company than the
perpetrator, there was no other practical alternative for the victim such as
another legal remedy.

 Was the victim independently advised?

o This was applied in EC Investments, where the victim had advice from his
solicitor, and understood what he was entering into

 After entering into the contract, did the victim take steps to avoid it?

Evaluation of Different Casual Standards for Duress

 Discuss the different causal standards (both UK and SG position)

Different Standards Good

 Different types of Duress based on culpability

o Unlawful duress to persons/property highest culpability
 Hence BOP shifted to perpetrator to rebut
 Standard is much lower: a reason
 Highest culpability, should make it easier for victim to claim

o Economic Duress/Lawful Act Duress lower culpability

 BOP to victim
 Standard is higher
 In line with narrow doctrine of Duress [EC Investments, Times Travel]
 Since these types of duress are not that culpable, the standard should
be higher in order for the contract to be void

 Making the standards the same results in absurdity

 o Which standard to take?
 If take standard for unlawful act duress
 Watershed of cases
 Too many cases that fall under doctrine of Duress
 Contradicts narrow doctrine
 If take standard for economic/lawful act duress
 Too low of a standard to take into account high culpability of
unlawful act duress?

o Uncertainty and inequitable

 Either every case can fall under duress or extremely difficult to
establish duress
 Undermining Freedom of Contract
 Allows for post-contract regret to seep into Duress

Different Standards Bad

 Confusing SG stance
o Difficult to justify why different standards
o Artificial distinctions
 Overlaps between economic and lawful act duress?

 Ultimately the same standard

o Whether BOP shifts or not and whether standards are different, the courts still
have discretion and will take into account all the factors
o Standards are arbitrary and its ultimately up to courts’ discretion
Undue Influence
ELEMENTS OF UI

To show that undue influence was exercised by the stronger party on the weaker party, the
three elements set out in BCCI v Aboody must be satisfied.
1) The stronger party must have the capacity to influence the weaker party
2) This influence was unduly exercised
3) This undue influence caused the weaker party to enter into a contract
a. This causation is proved through the “but for” test.
i. However, if, on a balance of probabilities, the weaker party would still
have entered into the contract without the undue influence, this
element is not satisfied. [BCCI v Aboody]

If the undue influence is established the contract is now voidable (GO TO RESCISSION &
BARS TO RESCISSION)

Class 1 UI

CLASS 1 UI

Actual undue influence can be proved through direct evidence under Class 1 undue influence
[BOM v BOK].

To prove such direct evidence, there must be some sort of reprehensible conduct established
by objectively apparent, overt and visible indicators.
 Examples of reprehensible conduct include: Unfair, improper conduct, coercion form
outside or overreaching cheating, with or without a special relationship [BOM v BOK]

 In BOM v BOK, there was actual evidence of the wife’s bullying and badgering of the
husband, especially since he was a lonely and emotionally vulnerable man, and the
wife threatened to kick him out of the house, sufficing to make out Class 1 undue
influence.
 In Sujanani Thakur, all major decisions of the son’s life was made by his parents and
not himself. The father was domineering and son’s will was overwhelmed by father in
signing the loan, which sufficed to show actual undue influence

The heart of the inquiry is whether the stronger party has exercised such domination over the
weaker party’s mind such that the weaker party’s independence of decision was substantially
or even totally undermined. [BOM v BOK]

Suspicion of undue influence does not make it impossible for the weaker party to be
susceptible to influence [BOM v BOK]

An exploitation of the knowledge of a criminal activity would suffice to be class 1 undue

influence [Times Travel]
Class 2 IU

CLASS 2A UI

Presumed undue influence can be proven under Class 2 undue influence [BOM v BOK].
The elements for class 2 undue influence set out in BOM v BOK are:
1) A relationship of trust and confidence exists,
2) The transaction is one that calls for an explanation.

For class 2A undue influence, the first element of a relationship of trust and confidence is
irrebuttably presumed when there is a fiduciary relationship present [BOM v BOK]
 Such relationships include:

o Parent and child

 Not for adult children if they have conducted their lives as independent
adults for decades [Sujanani Thakur]

o Religious advisor and disciple [BCCI v Aboody]

o Solicitor and client [BOM v BOK]
o Doctor and patient [BCCI v Aboody]
o But not: husband-wife, child-parent, sibling-sibling, employer-employee

INSERT TRANSACTION CALLS FOR EXPLANATION

CLASS 2B UI

Presumed undue influence can be proven under Class 2 undue influence [BOM v BOK].
The elements for class 2 undue influence set out in BOM v BOK are:
1) A relationship of trust and confidence exists,
2) The transaction is one that calls for an explanation.

For class 2B undue influence, the weaker party has to prove that there was a relationship of
trust and confidence with the stronger party.

 A relationship of trust and confidence can be proven if the weaker party trusted the
stronger party too look after their affairs and interests and make financial decisions,
and may include cases where a vulnerable person was exploited [Etridge]

 In Credit Lyonnais Bank, the weaker party, as a junior employee, accustomed to

working closely with the employer, signed a highly onerous transaction at the request
of the employer which sufficed to prove a relationship of trust and confidence.

INSERT TRANSACTION CALLS FOR EXPLANATION

Transaction Calls For Explanation

TRANSACTION CALLS FOR AN EXPLANATION

For a transaction to call for an explanation, the following factors must be taken into account
[Allcard v Skinner]:

1) The size of the transaction

2) How onerous/ manifestly disadvantageous it is to the weaker party

a. In Sujanani Thankkur, the deed of guarantee was extremely onerous to the son
since the sum of debt was large and he has no means of paying them off and
the son had no financial interest in the business.

3) The motives and history behind the transaction

4) The nature of the relationship between parties

a. In Etridge, the wife was loyal to and supportive to her husband, and relied on
her husband to make financial decisions, this supported the inference that the
transaction called for an explanation

The contract need not benefit the stronger party, but could benefit a third party as well. In
BOM v BOK, the deed benefitted the stronger party’s infant child.

A deed of guarantee by itself is insufficient to amount to a transaction that calls for an

explanation since wives frequently enter into such deeds for the benefit of their husbands
[Etridge]

Rebutting Class 2 Presumption

REBUTTING CLASS 2 PRESUMPTION OF UI

When the presumption of undue influence has been invoked by satisfying the two elements
under class 2 undue influence, the onus is on the stronger party to rebut this presumption
[Etridge]

The stronger party can rebut the presumption based on the following:

(a) There was no misuse/abuse of the stronger party’s dominant position

(b) The weaker party understood what he was doing and was in a position to exercise
free and independent judgment. The relevant factors are:
(a) Background, qualifications, personality of weaker party
(b) Complexity of transaction
(a) Was the transaction too complex for the weaker party to
comprehend the true degree of unfairness?
(c) Reliance on legal advice.
(a) This is heavily fact-dependent – how simple was the
transaction/ was the lawyer fully informed of the degree of
influence/ degree of substantive unfairness?
 (d) Alternative benign explanations for transaction other than undue
influence
If the stronger party can rebut the class 2 presumption of undue influence, the contract is
upheld.

Undue Influence with Third Party

UNDUE INFLUENCE EXERCISED BY THIRD PARTY

In a situation where the stronger party unduly influences the weaker party to enter into a
contract with a 3P (commonly a bank), the contract between the weaker party and the 3P can
only be voidable if the 3P has been “infected” by the undue influence.

The bank is “infected” by the undue influence if it is “put on inquiry” of the undue influence
exercised by the stronger party [Etridge]. The factors to be considered are:

 The nature of the relationship between parties and if it presents a real risk of undue
influence
o In Barclays Bank, an “emotional relationship” between cohabitees reposes
trust and confidence in the stronger party, leading to a real risk of undue
influence
 If there were “Red flags” in the transaction
o A one-sided nature of transaction that is very disadvantageous to the weaker
party is sufficient.

 In general, where a wife is put on surety for the husband’s loan, the bank is put on
inquiry [Etridge]

 Factors to determine if a bank has been “put on inquiry” are similar to the factors for a
transaction calls for explanation under Class 2 undue influence but with a lower
threshold [Etridge]

Once the bank is “put on inquiry”, the bank now has to show that it had taken further steps to
neutralise the claim that the contract was vitiated by undue influence.

 In general, reasonable steps must be taken to nullify the effects of the undue
influence, ensuring that the weaker party understands the nature and risks of the
transaction. These steps include:
o Communicating directly with the weaker party, ensuring that the risks of the
transaction have been explained to the weaker party in a manner that she can
understand [Etridge, OCBC v Tan Teck Hong]
o Giving relevant financial information to the weaker party’s solicitors [Etridge]
o Getting a written confirmation from the weaker party’s solicitors that she has
been legally advised before proceeding [Etridge]

 If the bank is able to show that sufficient steps have been taken, the contract will be
upheld. Otherwise, the contract is voidable.
Unconscionability
ELEMENTS OF UNCONSCIONABILITY

To establish unconscionability, the following elements must be satisfied [BOM v BOK]:

1) The weaker party must suffer from an infirmity
2) The infirmity was exploited by the stronger party in procuring the transaction.

The burden is then on the stronger party to prove that the transaction was “fair, just and
reasonable”.

Infirmity

INFIRMITY

The weaker party has to prove that he suffers from an infirmity. This infirmity must have or
ought to be known by the stronger party [BOM v BOK]

 Physical, mental and/or emotional circumstances must be of sufficient gravity to

affect weaker party’s ability to “conserve his own interests” to constitute an infirmity
[BOM v BOK]
o In Fong Whye Koon, the weaker party being old and illiterate and not knowing
of the large undervalue of her flat sufficed to be an infirmity.
o In Boustany, the landlady being “quite slow” and not controlling her own
finances sufficed to be an infirmity.
o In BOM v BOK, acute grief of the weaker party was sufficient to be an
infirmity

 Traditionally, if one is “poor and ignorant”, this would satisfy the infirmity
requirement [Fry v Lane]

o “poor” has been interpreted to be a person of the lower income group and
“ignorant” interpreted to be a person less highly educated in relation to the
transaction [Cresswell]

Exploitative Conduct

EXPLOITATIVE CONDUCT

The weaker party then has to prove that the stronger party exploited the weaker party’s
infirmity in procuring the contract.

 This depends on the conduct of the stronger party, if he

o Took the initiative in the transaction
o Sought to conclude transaction with undue haste
o Appreciated the other party’s weakness or disability
 Used that knowledge to his advantage
 o Allowed the other party to labour under a misapprehension as to the true
nature of the transaction
o Bargained with the weaker party unconscionably [Boustany]

 A mere fact of relational imbalance between the parties or personal weakness is not
enough
o Only when the stronger party had knowledge of this and deliberately took
advantage of the imbalance
 In Hart v O’Connor, there was no unconscionability as the purchaser
acted with complete innocence throughout, unaware of the vendor’s
infirmity

 A large undervalue of the transaction and a lack of independent legal advice are “very
important factors” for the court to consider if exploitative conduct occurred [BOM v
BOK]

 The conduct of the stronger party must result in a grossly unfair outcome for
unconscionability to be established

 In Boustany, the tenant waited until the landlady’s brother, who took care of her
finances, was overseas before convincing the landlady to sign a grossly unfair tenancy
agreement. This sufficed to be exploitative conduct for unconscionability.

 In Fong Whye Koon, the buyer knowing of the undervalue and deliberately insisting
on upholding the unfair transaction sufficed to be exploitative conduct.

Fair, Just and Reasonable

FAIR, JUST AND REASONABLE

Once the two elements of unconscionability are established, the burden is on the stronger
party to prove that the transaction was “fair, just and reasonable” [BOM v BOK]

 This is generally an “extremely difficult task” for the stronger party [BOM v BOK]
o In Fong Whye Koon, the buyer keeping a “stony silence” regarding the
circumstances of the transaction allowed the court to draw a negative
inference and establish unconscionability.

Evaluation of Vitiating Factors

Different Vitiating Factors Good

Different focuses
 Duress focuses on the unreasonableness of the threat and the demand
 Undue influence focuses on the influence exercised on the weaker party and for class
2, on the relationship between the parties
 Unconscionability focuses on the infirmity of the weaker party

Duress and Class 1 Undue Influence

  Should be differentiated
 UI focusses on the relationship between parties while Duress focuses on the
objectionable conduct of the stronger party [BOM at 146]
 Duress requires threats and demands, which might not be a requirement under UI
o Class 1 UI only needs some sort of “bullying” or “badgering” and influence
unconscionability exercised. This does not equate to some threat being made
o In BOM, threats were not necessarily made, the focus was on the bullying.
This is in comparison to Tam Tak Chuen, where there were very clear threats
being made, which points towards duress (while there was no clear
relationship to influence per se)

Duress and Unconscionability

 Should be differentiated
 Duress focuses on the unreasonableness of the threat and demand while
unconscionability focuses on the presence of an infirmity and exploitation of that
infirmity.
 Duress requires threats and demands, which is not a requirement under
unconscionability
o In Boustany where unconscionability was found, there was no threat made the
landlady. If the doctrine was combined, Boustany would not fulfill the test for
duress
 Unconscionability requires an infirmity and an exploitation of that infirmity
o In Tam Tak Chuen, the victim cannot be said to have an infirmity. Although he
had an affair with his nurse, this does not reduce mean that his mental
circumstances equates to an infirmity. Tam Tak Chuen would also not satisfy
the test for Unconscionability
 Unconscionability allows for weaker parties with and infirmity to void the contract.
Duress allows for parties who have been threatened/demanded to void the contract.
These should be distinguished and are not the same

Unconscionability and Class 1 Undue Influence

 Arguably the most indistinguishable pair of vitiating factors

 However, infirmity in Unconscionability is not equal to reprehensible conduct in
Class 1 UI
o One can have an absence of infirmity but still be subject to reprehensible
conduct, satisfying the test for Class 1 UI but not Unconscionability
 Unconscionability is arguably harder to prove than Undue Influence
o Presence of two elements that have to be satisfied: Infirmity and Exploitation
o Can be argued that Class 1 UI only requires overt evidence of the exploitation
element through reprehensible conduct
 Focuses are different
o Unconscionability on the infirmity and exploitation
o UI on reprehensible conduct

Class 2 UI and Unconscionability and Duress

 Greatly distinguishable
 Class 2 UI focuses on protecting fiduciary relationships and relationships of trust and
confidence
  There is an overt focus on the relationship between parties instead of the
reprehensible conduct (through Transaction calls for an explanation)
 Class 2 UI does not require threats/demands under Duress
 Class 2 UI does not require an infirmity (a relationship is sufficient)

Policy reasons to differentiate

 An umbrella doctrine combining all the vitiating factors would be too impractical.
o Confusing as to which standard to apply
o Imposing a broader standard based on unconscionability for example, would
allow cases of overt duress to slip through the loopholes and the contract not
be vitiated even though the threats and demands were unreasonable
o Imposing a stricter standard based on class 2 undue influence for example,
would allow cases of overt unconscionability to slip through the loopholes
since there was no infirmity although there was an overtly exploitative
relationship
 Uncertainty
o Stated in BOM at [133]
o “the broad doctrine of unconscionability as set out in Amadio is, in our
respectful view, phrased in too broad a manner inasmuch as it affords the
court too much scope to decide on a subjective basis and ought therefore to be
rejected.”
o Too much power in courts’ discretion, which is extremely subjective and
leaves the law in a limbo state
 This threatens certainty in contracts, especially in commercial settings
 An umbrella doctrine would eventually collapse into the same differentiated factors as
we have now
o Stated in BOM at [179]
o The courts would naturally interpret an umbrella doctrine into different classes
of cases (with different tests and thresholds), collapsing the doctrine back into
the differentiated ones

Umbrella Doctrine Good

Artificial differences between the vitiating factors

 Especially in Class 1 UI and Unconscionability
o Criteria for both in reprehensible conduct are strikingly similar
o Examples of cases that satisfy both criteria: BOM
 Simply different ways of phrasing for essentially the same tests (that the weaker party
is exploited by the stronger party)

Inefficiency
 In the event that a party fails to establish one vitiating factor, they will move on to the
next vitiating factor and sue again
 This is an arduous and wasteful process, and a waste of courts resources
 Allows for vexatious litigants to sue multiple times under the guise of different
vitiating factors