BSP1004 Business Law Summarised Notes
BSP1004 Business Law Summarised Notes BSP1004
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INTRODUCTION TO LEGAL ENVIRONMENT OF BUSINESS CHAPTER 1 Criminal Burden of proof Action Civil Burden of proof Methods of resolving civil Legislationgt Statues or acts made by Parliament Civil law mean only legislation Case lawCommon lawgt once a case has been decided future cases bound by same decision Matters which harm society or which are against public interest or safety are made criminal pursuant to various statutes such as the Penal Code or public health actsale of food act eg Piracy murder suicidal kidnap hurt nape theft robbery defamation sexual offences and fraudulent deeds Theft is one of the criminal offences under The Penal Code of Singapore which sets out general principles of the criminal law of Singapore Theft is against public interest and safety because there is breakingin to private property and stealing the assets Section 379 of the Penal Code makes simple theft an offence punishable with imprisonment of up to three years or with ne or both Speeding is a criminal matter because speeding beyond prescribed speed limit on the road is illegal and the public prosecutor may prosecute him for driving recklessly under the road traffic act or Section 279 of the Penal Code If a prosecution takes place and the court nds that the case against the defendant has been proved beyond reasonable doubt the accused person would be adjudged guilty If the police do not want to act or do not have the authority to act under section 133 of the Criminal Procedure Code an aggrieved party may le for a quotmagistrate39s complaintquot himself and the matter may proceed from there Concerned with regulating private rights and obligations between parties Even if there is a legal wrong a business may not necessary take legal action as it may not have suffered a loss and the avenues provided for seeking redress are too much of a hassle rather maintain a continuing relationship If the court nds that the plaintiff has proved his case on the disputes Litigation Mediation Arbitration balance of probabilities the defendant will be made liable and may have to compensate the plaintiff in the form of damages Court of Appeal Supreme Court hears appeal from the High Cou High Court Supreme Court monetary value of the matter being disputed is above 250000 hears appeal from lower level courts and tribunals Subordinate Court civil actions can be commenced if the value of the claim being disputed is below certain stated amounts One of the main advantages of litigation is its nalityunlike other dispute resolution methods where the element of nality may be lacking Further to commence litigation the consent of the other party does not have to be obtained However litigation could involve a lot of moneytakes timeand tends to be acrimonious and creates a winlose situationno continuing relationship There is also no privacy proceedings can be reported in the press Hence the goodwill of a business could be badly affected if a decision against it is made and this is reported in the press It is also not possible to pick and choose the judge unlike otherstechnica expertise There may be problems enforcing a court judgment in other countries less countries unlike 1958 New York Arbitration Convention Not able to claim back all legal fees Mediation can be conducted through the Singapore Mediation Centre Both parties must agree to submit their dispute to mediation Mediation is relatively cheap and disputes can be mediated in a relatively short time Also there is privacy and the proceedings cannot be reported in the press unlike litigation In addition mediation is amicable and works towards creating a winwin situation In mediation at the SMC the mediator is a professional who could have technical expertise in the matter being disputed with the hope that the decision he gives would be more in accord with commercial reality and faster judgment because of his knowledge Another type of mediation can be conducted at the Primary Dispute Resolution Centre at the Subordinate Courts which is completely free but have to be referred by the court after you le for trial The difference from SMC is that the mediator is a judge Small Claims Tribunal Methods of enforcing civil judgement 5 Bankruptcy Bankruptcy Act of the Subordinate Courts makes it less likely to go back on their word However the main disadvantage is that it may not be nal if an agreement cannot be reached Mediator does not decide who is rightwrong does not pass a binding judgment Arbitration is conducted at the Singapore International Arbitration Centre can arbitration as this centre can be used for resolution of both international and domestic disputes Arbitration is relatively faster and cheaper than litigation though not necessarily so Like mediation there is privacy and the proceedings cannot be reported in the press Also the parties may be able to choose an arbitrator that has relevant technical expertise with the hope that the decision he gives would be more in accord with commercial reality In addition an arbitration award may be enforced domestically and internationally in over 140 countries pursuant to the 1958 New York Arbitration Convention on the Recognition and Enforcement of Foreign Arbitral Award unlike litigation The main difference from mediation is that judgment passed is nal However there may be very limited grounds on which an appeal can be made to courts against an arbitral award Further unlike litigation both parties to the dispute must agree to arbitration In practice if the parties have not preagreed in their contract that they would go for arbitration it is highly unlikely that they will subsequently agree to go as it might be viewed as more costly or less favorable than litigation Therefore should provide for expressly in contract Arbitration Clause Claims relating to 1 contracts of sale of goods and provision of services 2 claims relating damage to property 3 claims relating to contracts for lease of residential premises that do not exceed 2 years Claims must be for 10000 or less Up to 20000 if both parties agree Inexpensive fast no lawyer fees Possible for a plaintiff to win a case and yet suffer a net loss because he has to pay the balance of his lawyer39s fees This is especially true of small claims If an award or judgment is made against the defendant but the defendant does not pay the award or judgment would be of little value to the plaintiff Thus he would try to extract payment from him by using one of the means provided by the law A bankruptcy petition may be presented by a creditor as stated against an individual or against an partnership rm SS7 where there is an inability to pay debts Conditions There is a presumption of inability to pay debts if a statutory demand made for the repayment of the debt owed to the creditor has not been satis ed within a period of 21 days or if the creditor has obtained judgment against a person and the creditor is not otherwise able to enforce that judgment against that person S62 Must not be less than 10000 S61 Debtor must have some connection to Singapore domiciled in sg or have property S60 Has at any time within the period of one year immediately preceding the date of the making of the application been ordinarily resident or has had a place of residence in Singapore or carried on business in Singapore S601C Of cial Assignee is to gather the assets of the debtor register the claims of the creditors and distribute among those creditors Malaysian39s bankruptcy department will help Singapore of cial assignee to gather the assets vice versa This only applies between Singapore and Malaysia Not so for other countries cause very expensive to do so and may not be practical Exemptions of assets By virtue of S78 certain assets are exempted Clothing bedding furniture household items and other provisions necessary for satisfying the basic domestic need HDB 551 of Housing and Development Act and CPF contributions 524 of the Central Provident Fund Act If stay private can leave for you to rent HDB Cannot take rented item Restrictions Passport impounded and cannot leave the country without the permission of the 0A 5116 Cannot obtain credit of 500 or more from anyone without disclosing that he is an undischarged bankrupt 5141 If the bankrupt is fully employed portion of income may be taken to pay creditors 5109 By virtue of the Companies Act and the Business Registration Act he cannot take Writ of seizure and sale Ga rnishee Order Insurance part in management Cannot practice certain professions and be Member of Parliament Termination It may be annulled if it is proved that the debts are repaid 5123 Or the court may an order of discharge either absolutely or conditionally 5124 depending on cause of bankruptcy whether it was due to his recklessness and whether the person adjudged a bankrupt continued to trade knowing or having reason to believe himself to be insolvent unable to pay Of cial Assignee may grant a certi cate of discharge But before he can do so virtue of 5125 three years must have lapsed since the commencement of the bankruptcy and the amount of debts proven must be less than 500000 5125 By virtue of 5127 the discharged bankrupt would be relieved from the restrictions application and from any debts proven in bankruptcy that are yet to be repaid Disadvantage Costly may not be able to secure all if he is unsecure debtorno guaranteescollateral You may only get paid the OA pays other creditors Voluntarv arrandement Debtor to enter into a voluntary agreement with creditors agrees to matters such as extending time for payment or payment by installments Creditors getting back a larger portion of what they are owed Debtors avoid bankruptcy and its consequences Debt repayment scheme for debts lt100k PART VI Bankruptcy Act Seizure and sale of the judgment debtor39s property pursuant to a court order Court judgment is expensive and not cost effective Useful if he39s someone poor and won39t be able to compensate Creditor may get a court order to garnish monies in bank accounts to satisfy the judgment debt What if he doesn39t want to sue but he wants to claim from insurance Under normal insurance policy this should be applicable It39s important because it may affect his decision whether to go ahead with the civil action if he can claim from insurance Not advisable to civil act if he already bought insurance On Can the government bring a civil action against a business and can a civil action be brought against it Government can sue and be sued in terms of contracts Eg sue Microsoft in US for being a monopoly under the competition act for anticompetitive behaviour Can you sue government like it is a private company Yes cause must have some accountability What is the act that tells you the act that you can sue the government if there is a contract It39s the government proceeding act The government can both sue and be sued for business disputes On A business engages a law rm to institute a legal action When the nal bill comes the business feels that the law rm has overcharged What can the business do Is there anything else the business could have done before engaging the law rm If a business feels that it has been overcharged it may have its bill quottaxedquot in court that is have the bill examined by the court to see if that is indeed the case or it may bring the matter to the Law Society of Singapore which runs a mediationarbitration services in relation to this Formal mediation section with you and the lawyer The business could have agreed on the fee before hand or request for an exact breakdown of the lawyer s charges be it hourly charges retainer fee or disbursements Try to get your lawyer to give you an estimate On If after all the legal avenues for redress have been exhausted such as bankruptcy assuming the creditors have not been fully repaid is there anything else they can do at that stage What s the implication of your answer on a business In future all the money he earned will be used to pay back The DA will have access to his funds On Is there anything they could have done earlier including some sort of insuranceetc search the web to protect themselves or minimize the risks Screen though prospective applicant39s and company39s nancial records proof of past earnings and previous income Screen though prospective applicant39s available personal assets and business assets Insist on a collateral for the loan ie insist loan is secured by some form of asset which has a value higher than the loan amount Check the applicant39s past credit record available online Or can diversify Don39t lend all to him lower the risk TYPES OF BUSINESS ORGANIZATIONS CHAPTER 10 Sole Proprietors hip Business Registration Act Partnershi p Partnership Act Registration Registration with ACRA is fast and cheap If the person intending to carry on the business does not register it that would amount to an offence 527 In addition rights under or arising out of any contract cannot be enforced on him However the other party to the contract can enforce it 5215 Not a separate entitv Sole proprietorship is not separate from the creater Thus whatever debts that are incurred by the business belong to the sole proprietor so that if there are insufficient assets in the business the sole proprietor39s personal assets may be seized to satisfy the business debts Dissolution May be dissolved voluntarily or involuntarily Evaluation Though easy to set up run and dissolve the sole proprietor is not protected or shielded from business debts and thus there is some risk involved De nes a partnership as a relation that subsists between persons carrying on business in common with a view of pro t 51 Partnership agreement can be entered into orally Has to be registered Min no of partners is 2 max is 20 5173 Not a separate entitv Partnership is not a separate liability Partners can be made personally liable for the debts of the rm and their personal assets can be seized However in relation to personal debts incurred by partners creditors can only claim the debtor39s share of the partnership assets If it forces the partnership to crumble consider other alternatives Suing and being sued The liability of partners in relation to torts is quotjoint and severalquot 512 The effect of this rule is that once a partner is sued the claimant may still sue the other partners if the claim remains unsatis ed or not fully satis ed 5242 provides that the rm must indemnify every partner in respect of payments made or liabilities incurred by him in the ordinary and proper course of the business of the rm In the event that one partner is sued and that partner personally pays the creditor of the rm that partner can claim a contribution from the other partners Rather than suing individual partners pursuant to the Rules of the Supreme Court Order 77 an action may be brought in the name of the rm Thus even though the partnership is not a separate legal entity the rm can procedurally sue and be sued in its own name lncomino and outgoing partners 5172 provides that the partner who is retiring or leaving will still be liable for partnership debts incurred by the partnership before his departure 5173 to release him to liabilities 5171 new partner would not be liable for debts incurred by the partnership Relationship between partners Partners are agents and are responsible for the actions of one another 5201 provides that all property originally brought into the partnership and all property acquired on account of the rm or for the purposes of the partnership shall be deemed partnership property and be applied by the partners exclusively for the purposes of the partnership If one partner misappropriates partnership property he may be liable under the tort of conversion or may have to account for any pro ts as a result of using partnership property Also 5241 states that unless there is agreement to the contrary pro ts and losses are to be shared equally In addition 5242 provides that the rm must indemnify every partner in respect of payments made or liabilities incurred by him in the ordinary and proper course of the business of the rm With regards to management of the partnership 5245 provides that every partner has the right to take part in the management of the rm 5248 provides that ordinary matters may be decided by the majority of partners but that in order to change the nature of the partnership business the consent of all the partners must be obtained With regards to remuneration 5246 provides that every partner is not entitled to any remuneration for his services as there will be a distribution of pro ts and there is no presumption of any regular salary In terms of expulsion of partners 525 provides that no majority of members can expel a partner unless the contract provides otherwise If no contract dissolve the partnership Finally partners owe each other duciary duties of good faith 529 of provides that a partner has to account for any bene t derived by him without the consent of the other partners from any transaction concerning the partnership S30 provides that a partner who competes with the partnership without the approval of the other partners is accountable for the pro ts made Any breach of these sections would result in the partner returning any pro ts made or bene ts derived by virtue of the case of Bentley v Craven 1853 Partner39s liability for the actions of other partners A partner of a rm may have actual implied or apparent authority to enter into contracts on behalf of the partnership ACTUAL IMPLIEDEXPRESSED or APPARENT Actual authority refers to authority that the partner has been expressly conferred with by the other partners By virtue of S6 if the partner does something he is expressly authorized to do so the partnership and all the partners will be bound Implied authority refers to authority that a partner would usually have SS provides that every partner is an agent of the rm and the other partners and any act done by him in the usual way of business will bind the partnership and the other partners unless he had no authority to do the act in question and the person with whom he was dealing knows of that or does not believe him to be a partner Thus all partners can be made accountable for debt incurred by a partner acting in the usual way of business Case law provides for some guidelines as to what is in the usual way of business For example partners have the usual authority to employ employees and receive money in respect of debts due to the rm In Mercantile Credit Co ltd v Garrot 1962 the court held that it does not matter that P did not have the actual authority as M was unaware of this lack of authority Eg Buying something more expensive than usual may not be an Limited Partnershi p Limited Partnership Act Companies Companies Act expected authority Ultimately this is still a question of fact for the court to decide However partner has no implied authority to enter into a deed or guarantee on behalf of the rm without the consent of the other partners Apparent authority arises if the rm represents to another person that the partner in question has the authority to do certain acts and that other person relies on that representation as provided by 5361 Eg The agent giving out name card is already a representation by the company cause company print it or company does advertisement BUT representation by agent itself no namecard is never enough for apparent authority In addition to contractual liability with third parties there could be tortious liability Under 510 any wrongful act or omission done by the partner in the ordinary course of business of the rm binds the rm This is by virtue of the case of United States Trading Co Pte Ltd v Ting Boon Aun 2008 where the other partners was held liable as he could not establish that it was not in the course of the partnership business to obtain loans On the other hand in Lim Kok Koon v ian Cheng Yew 2004 the court held that it was not within the ordinary scope of business of a lawyer to act as a personal trustee and hence the rm was not liable What is determined as the ordinary course of business of the rm is a question of fact for the court to decide Dissolution Automatic dissolution if a partner gives notice to dissolve it A partner dies or A partner is made a bankrupt There are several ways of dissolving partnerships such as by agreement nonjudicial dissolution and judicial dissolution ln judicial dissolution the partnership may be dissolved by the court as set out in S35 For example S35b provides that where one partner is guilty of conduct which is prejudicial to the carrying on the partnership business the partnership may be dissolved S35c provides that where one partner willfully or persistently commits a breach of the partnership agreement the partnership may be dissolved S35e provides that partnership may also be dissolved if it is just and reasonable to do so in the circumstances Registration Limited Liability Partnershi p Limited Liability Partnership Slightly more complex as compared to registering a partnership Partners Limited partnership must have at least one quotgeneralquot partner and one quotlimitedquot partner 532 A quotgeneralquot partner would be liable for all the debts and obligations of the LP 533 A quotlimitedquot partner would not be liable beyond the agreed contribution solely by reason of his being a limited partner of the limited partnership 534 However in exchange for this limited liability the quotlimitedquot partner cannot take part in the management of the limited partnership and does not have the right to bind the limited partnership 561 Not a separate entity 5imiiar to a partnership is not a separate legal entity Evaluation Attractive to an angel investor who just wants to make an investment without incurring more liability than what he invested or agreed to If the quotlimitedquot partner has not contributed his capital the creditor can only claim what he has agreed to contribute Registration 2 important documents have to be lodged Memorandum of Association and Articles of Association Separate entity Company is separate from its owners Company can own property in its own name Debts of the company belong to the company and not to the member by virtue of the case of Saloman VA Saloman amp Co Ltd 1897 However there are some narrow exception to this rule to prevent abuses For instance 53401 states that when the company is being wound up or is being sued and it appears that business of the company is carried on with the intention to defraud creditors or for any fradulent purpose the persons reponsible shall be personally liable for the debts of the company 53393 effectively provides that if debts are incurred irresponsibin with no reasonable or probable expectation of the debts being settled though there may be an absence of fraudulent intent there could be personal liability Suing and being sued Act The proper person to institute an action against would be the company If there were rights to be enforced the proper person to institute the action to enforce those rights would be the company The members cannot institute an action to enforce the rights of the company However there are some exceptions By virtue of 5216A a member is allowed to bring an action on behalf of the company and the court may allow it if it considers it in the company39s interest that such action should continue If the majority committed some fraud on the company and use their power to prevent the company from bringing an action against them the minority may be able to bring an action on behalf of the copany This is by virtue of the case of Cook v Deeks 1916 where the court allowed the other director to make the defendants account for the pro ts made Also by virtue of the case of Ting Sing Ning v Ting Chek Swee 2008 allowed a director with minority shares to bring an action on behalf of the company against other directors with majority shares who had allegedly breached their duciary duties Evaluation Better if you intend to do franchise or open more outlets Better position to raise nance Taxation rebates for new companies Franchise of FampB gt More liable to face law suits from consumers because it is something that can be consumed Potential law suit More risky and more potential liability better to set up company or LLP Similiarities with a partnership According to First Schedule to the Limited Liability Parternship Act eg unless contract provides otherwise every partner has a equal share of pro ts equal say in management etc Similiarities with a company Separate legal entity S4 Can sue and be sued in its own name 55 limited liability S8 A partner of a LLP is not personally liability by way of indemni cation contribution or otherwise for an obligation incurred by a limited liability partnership solely by reason of being a partner of the limited liability partnership 58 Evaluation Ideal for people who want to have the informality of running a business which is characteristic of partnerships but who are at the same time want limited liability which is characteristic of companies COMPANY LAW MEMBERS amp DIRECTORS CHAPTER 11 Members Companies Act quotMembersquot refers to shareholders whose names appear on the register of members By virtue of 5157A of the Companies Act and usually the articles of association of a company as well as Article 73 of Table A 4th Schedule to the Companies Act directors have the power to manage the company and disobey resolutions for actions that are purely management decision This is by virtue of the case of Automatic Self Ceaning Filter Syndicate Co Ltd v Cunningham 1906 where the court held that since the directors were conferred the power to determine such issues under the articles of association the members could not interfere and cannot tell the directors what to do This is to minimize distruptions in the company39s operations If you allow resolution there will be dispute and if it ends up in court the judgment made is binding and may not be of the best interest of the company he is not a businessman While generally they cannot take on management decisions members may embark on certain courses of action if they are unhappy over management decisions Firstly the articles of association would usually allow the members to remove the directors by ordinary resolutionmore than 50 of the votes such as Article 69 of Table A But this is not possible in the case of public companies section 152 Thusmembers may remove the directors with the hope that the new directors Directors Disquali cat ion appointed would make more agreeable decisions In additional members theoretically also have the option of altering the articles of association if they manage to garner the requisite number of votes to confer particular powers on themselves Practically if they are unhappy than can just sell their stake in the company and invest someone else But even if he wanted to sell it is a private company it is not istedunknown and not so liquid hard to nd buyers Though they cannot manage the company the Companies Act and the article of association may provide that members must approve certain decisions Eg company issue shares 5161 and dispose property 5160 or amend the memorandum or AOA 526 and S37 Riqht to enforce the memorandum and article of association S39 provides that members can enforce the terms of the memorandum and articles of association against the company and vice versa and also against other members They have the right to the balance on dissolution and usually not have the right to demand dividends Riqht to amend the memorandum and article of association 526 provides that the memorandum of a company may be amended by a special resolution more than 75 of the votes Right to attend meetings and vote 51751 provides that AGM must be held once every calendar year Failing to hold an AGM is an offence under 51754 Members have the opportunity to query the directors on the performance of the company and other issues Appointment of auditors must also be done 5205 Riqht to information By receiving such information the members would be able to assess whether the company is being run in a proper fashion Disquali cation Directors may be disquali ed on various grounds Reason is because the company39s liability is usually limited there is some need to offer some form of protection to creditors Directors39 duties Section 148 Section 1481 provides that an undischarged bankrupt whether he was adjudged bankrupt by a Singapore Court or a foreign court having jurisdiction in bankruptcy cannot be a director or indirectly take part in the management of a company Rationale being that if a person cannot manage his own affairs he should not be managing the affairs of a company The disquali cation is automatic and the person who disobeys the disquali cation will be guilty of an offence However by virtue of Sl482 the disquali cation may be lifted if the leave of court or the written permission of the 0A is obtained Or if already paid off his debts or applied a discharge order from Court and is approved he will be considered a discharged bankrupt Section 149 Section 1491 allows the minister of of cial receiver to make an application to court asking for a disquali cation order in certain circumstances Disquali cation is not automatic For 5149 to be triggered the circumstances must be that the director was a director of a company which became insolvent while he was a director or within 3 years of him ceasing to be one and the director39s conduct was such as to make him un t to be a director matters considered are in Sl496 eg whether the director breached his duciary or other duties whether the director misapplied any money and whether the director39s conduct contributed to the company39s insolvency If the court is satis ed that the conditions are satis ed a disquali cation order for up to 5 years may be imposed However disquali cation under 5149 is not automatic meaning if no one makes an application to court asking for a disquali cation order he will still be able to continue as a director Or if he has already served his 5 years of disquali cation Section 154 Section 1541 provides that if a person has been guilty of an offence in Singapore or elsewhere involving fraud or dishonesty punishable on conviction with imprisonment of 3 months or more he is automatically disquali ed for 5 years from being a director or taking part in the management of a company Section 1542 provides that if a person has committed any offence in Singapore in connection with the formation or management of the company or any offence under 157 or 339 he may be disquali ed for up to 5 years If the offence is a technical one and not one that involves a purposeful intent to defraud others the court may decide not to disqualify him Section 155 Requires various documents and notices to be led with the Registry of Companies A person who is persistent in default in delivering or ling returns notices or other documents to the Registrar will be automatically subjected to a ve year disquali cation a Duties imposed by case law ONLY CIVIL LIABILITY Duty to avoid con ict of interest A director owes duciary duties to the company and as such should not place himself in a position whereby his duties to the company and his personal interest con ict By virtue of the case of Furs Ltd v Tomkies 1935 the court held that Tomkies was to return this money to the company as he had obtained it in breach of his duciary duties agreeing to a lesser sum of money By virtue of the case Canadian Aero Service Ltd v O Maley 1973 since there was a con ict of interest and the company lost the opportunity the defendants were liable to pay damages By virtue of the case Industrial Development Consultants Ltd v Coley 1972 the director was made accountable for the pro t even if the company does not suffer a loss Fiduciary duties A legal obligation of one party to act in the best interest of another Duty to act for proner purpose Powers have to be used for proper purposes By virtue of the case of Howard Smith Ltd v Ampo Petroleum Ltd 1974 the court held that the powers of the directors had not been exercised for a proper purpose By virtue of the case of Punt v Symons amp Co Ltd 1903 the court held that this duty was breached when the directors issued new shares for the purpose of having suf cient voting power to amend the articles of association of the company in queonn Dutv to act in the best interests of the companv Directors must act in the best interests of the company Re W amp M Roith Ltd 1967 court held that enough though this was in the interest of the wife it was not in the best interest of the company and hence the company did not have to pay it Chew Kong Huat v Ricwi Singapore Pte ltd 2001 court held that they entered contracts with another company which they are the only shareholders and had interest in There was con ict of interest as well If any of the abovementioned duciary duties are breached various consequences may follow The director may have to account for the pro ts he made return any property he obtained in breach of those duties or pay damages to the company for its losses Any act done also declared invalid If the company enters a contract with a 3rd party in breach of a duciary duty the contract may be set aside if the 3rd party know or ought to have known the breach Dutv to act with due care skill and dilioence By virtue of the case of Re City Equitable Fire Insurance Co Ltd 1925 a director has the duty to act with due care skill and diligence If this duty is breached and the company suffers losses the director could be liable If they delegate their duties to someone to whom a reasonable person would not have delegated their duties there could be liabilities Even if there is proper delegation but the director fails to supervise by virtue of the case of Re Barrings pc 1999 there could still be liability b Duties imposed by the Companies Act Breaches of these duties may involve civil or criminal or both civil and criminal liabilities Section 156 Section 1561 of the Companies Act provides that when a company enters into a transaction or is proposing to enter into a transaction and a director has directly or indirectly an interest in that transaction he must declare the nature of his interest at the meeting of directors as soon as the relevant facts have come to his knowledge Only need to declare to the company that he is director not shareholder Section 1562 states that interest shall be taken to mean material interest Section 1568 provides that interest of the director includes interest of his family Section 15610 provides that the breach of Section 156 results in the commission of an offence by virtue of the case of Yeo Geok Seng v Public Prosecutor 2000 the court held that there was a breach of 5156 and hence he was convicted and ned Section 157 Section 1571 states that a director must act honestly and use reasonable diligence in the discharge of his duties The term quotact honestlyquot covers a multitude of matters such as that the director must act in the best interest of the company must not place himself in a position of con ict of interests and must not use his powers for improper purposes The term quotreasonable diligencequot is apt to cover due care skill and diligence Section 1572 states an of cer shall not make improper use of any information acquired by virtue of his of ce to gain an advantage for himself or any other person or to cause detriment to the company Section 1573 states if 5157 is breached the director would have to return pro ts made by him or be liable for losses suffered by the company and that he would be guilty of an offence civil andor criminal This is by virtue of the case of Lim Weng Kee v PP 2002 it was held that he was in breach of 51571 in that he did not act with reasonable diligence and hence he was convicted and ned Section 162 Section 1621 provides that a company other than an exempt private company shall not make a loan or provide a guarantee or any security in respect of a loan to a director Section 1622 extends the term quotdirectorquot to include his family Section 1623 provides that the directors who authorize any transaction in breach of 5162 would be liable for any losses suffered by the company and further Section 1624 provides that they will be guilty of an offence Section 1621 of the Companies Act provides that a company shall not make a loan or provide a guarantee or any security in respect of a loan to a director unless 1The act is to provide such a director with funds to meet expenditure incurred or to be incurred by him for the purposes of the company or for the purpose of enabling him properly to perform his duties as an of cer of the company 2 If the members approve and the purpose of the transaction is to place with the director who is a full time employee funds to purchase a home 3 If it is a loan given to a director who is a fulltime employee and the loan is in accordance with a loan scheme which open to all employees of the company 4lf a loan is made to a director of a company in the ordinary course of business Section 1623 extends 5162 to situations where the loan guarantee or security is given to another company in which the director has a material interest Thus 5163 would be breached and the directors who authorize the loan would be guilty of an offence under Sl637 Section 168 Section 1681 provides that any compensation for loss of of ce of the director has to be approached by the members Section 169 Section 169 effectively provides that any emoluments given to directors such as directors39 fees and allowances have to be approved by the members c Duties imposed by the Securities and Futures Act Section 2181 prohibits insider trading and provides that if a person connected to a corporation possesses information concerning that corporation that is not generally available to the public and is such that a reasonable person would expect it to have a material effect on the price of securities of that corporation then he is prohibited from buying or selling any such securities Section 219 provides that even persons not connected to the corporation but in possession of pricesensitive information can come under similar prohibitions If Section 218 or 219 is breached that could result in criminal liability Section 221 provides that a person who contravenes Section 218 and 219 shall be guilty of an offence and shall be liable on conviction to a ne not exceeding 250000 or to imprisonment for a term not exceeding 7 years or both By virtue of the case of Public Prosecutor v Koh Soe Khoon 2006 the defendant was the managing director of a listed company and has con dential pricesensitive information relating to the higher net pro t and dividend rates of the company Before the information was made public he bought more of the company39s shares The defendant was later charged with insider trading show how information is con dential and has material effect on price Alternatively he can be liable by virtue of Section 232 in which the MAS may bring a civil claim for a quotcivil penaltyquot to be imposed against any person who has contravened 5218 or 5219 However since 5232 involves a civil claim it would suf ce to establish on the balance of probabilities that a contravention had taken place This is unlike criminal proceedings pursuant to 5221 where it must be established beyond reasonable doubt that a contravention had take place In addition the person who contravened 5218 or 219 could face civil liability to a person who has contemporaneously with the contravention subscribed for purchased or sold securities and who has suffered a loss This is by virtue of Section 234 Thus he can bring a civil action against X to claim the difference between the price he paidreceived and the price at which the shares would have been transacted at after the information had been made public 52346 provides for a maximum amount that is recoverable under this section the amount recoverable is restricted to the amount of pro ts gained or losses avoided by the contravener d Assuming someone is disquali ed from acting as directors on the can they continue to run another business organisation which is not a company ie SP P LP or LLP All cannot act as director of company Undischarged bankrupt generally cannot take part in the management of a business whether as a sole proprietor partner or limited partner or LLP Section 26 of the Business Registration Act and section 29 of the Limited Partnership Act Section 33 of the Limited Liability Partnership Act Can run a SPPLP but not LLP LLP chapter 163A section 37 person subjected to disquali cation of 149151 CA he shall not be as managers of LLP And SPPLP has unlimited liability so he will be liable for his actions for all the debts of these entities Serve as a safeguard therefore no disquali cation CONTRACT LAW ESSENTIALS OF A CONTRACT CHAPTER 2 Essentials In order for a contract to be enforceable in law there must of Contract be four elements present 1 Offer 2 Acceptance 3 Consideration or it must be a document under seal and 4 Intention to create legal relations If any of those four elements are missing there will not be a valid contract Offer By virtue of the case of Preston Corpn Sdn Bhd v Edward Leong 1982 an offer was de ned as an imitation of willing by an offeror to enter into a legally binding contract lts terms either expressly or impliedly must indicate that it is to be binding on the offeror as soon as it has been accepted by the offeree ITT This is opposed to an Invitation To Treat I39IT HT is an offer to negotiate or an offer to receive offers and is not an indication by the offeror that he is willing to be bound should the other party be interested in proceeding further For example by virtue of the case of Pharmaceutical Society of Great Britain v Boots Cash Chemicals the court held that the display of goods on an open shelf in a shop was a mere invitation to treat The court also held that it was the customer who made the offer when he went to the cash desk and the sale or contract was made when the cashier accepted the customer39s offer For example by virtue of the case of Patridge v Crittenden it was held that an advertisement is an ITT Following this it can be generally stated that advertisements catalogues and menus would generally only amount to l39lTs as it would be unreasonable to expect the advertiser to always have suf cient stocks of the items advertised unless Terminatio n of offer 1 Withdrawa I Revocation 2 Rejection Counter offer 3 Expiry Time lapse 4 Death of offerer 5 Acceptanc e he states so or it appears otherwise Also it the case of Harris v Nickerson 1873 it was held that if the event promised in the advertisement is not held the advertiser would not be liable for breach of contract because there is no contract to begin with with the plaintiff However exceptional advertisements in the form of unilateral contracts where only one party makes a promise by virtue of the case of Carill v Carboic Smoke Ball Co since the other party would have embarked on a course of action it would be very unfair for the advertiser to turn around and state that the advertisement was an ITT and that he does not have to accept the other party39s offer An offer may be terminated by revocation lapse of time when the offer is subject to an unsatis ed condition and rejection For a revocation to be valid the revocation has to be communicated to the offeree This is by virtue of the case of Byrne v Van Tienhoven 1880 the court held that since by then the plaintiffs had accepted the defendants39 offer there was a binding contract Also by virtue of the case of Dickinson v Dodds 1876 the offeree need not receive the notice of revocation directly from the offeror himself and even if the offeror stated that the offer would be open till a certain time he would not be bound to keep the offer open until that time and can revoke it prior to that However in unilateral contracts once performance has begun the offeror may not be able to revoke the offer Another way in which the offer may come to an end is by the lapse of time If the offeree purports to accept after the express time stated in the contract there will be no contract Even if there is no express time stated in the contract by virtue of the case of Ramsgate Victoria Hotel Co v Monte ore the court held that the defendant39s offer was terminated by the lapse of time expiry and hence there was no binding contract What a reasonable amount of time is depends on the facts of each case If the offer is subject to a condition and the condition is not satis ed the offer cannot be accepted Or offer terminated by death Offence is aware of death but if involves personal service after terminates even if difference Acceptanc e 1 UnquaH e d No conditionin 9 2 Must be Communic ated to offerer exceptions a postal rule b agreement not aware An offer is also terminated upon rejection by the offeree Once the offeree rejects the offer he cannot subsequently insist on accepting it It must be noted that if the offeree makes a counteroffer that is an offer which is inconsistent with the original offer as new terms are introduced the counteroffer has the effect of rejecting the original offer This is by virtue of the case of Hyde v Wrench 1840 However if the offeree is not making a counteroffer but just asking for more information he is not rejecting the original offer and hence the original offer is still valid Hence whether or not there is a counteroffer is a question of fact for the court to decide The next requirement would be an acceptance of the offer Valid acceptance must be communicated properly In order to be effective acceptance must be on the same terms as the offer Method of acceptance Acceptance to be made orally or in writing positive act of conduct If the contract provides that acceptance may only be made by a particular mode such as email then acceptance can only be by that mode If no mandatory mode the mode is valid only if it39s reasonable By virtue of the case of Fethouse v Bindey 1862 the court held that the offeror cannot impose silence on the offeree and so there was no contract However if both the offeree and offeror agree that silence can amount to acceptance then silence can indeed amount to acceptance It is possible for the offeror to waive the requirement of communication of acceptance By virtue of the case of Carill v Carboic Smoke Ball Co the court held that the offeror had impliedly dispensed with the reuquirement for the offeree to communicate her acceptance to the offeror and so there was still a valid contract Assuming the contract does not have a speci c provision governing the matter the general rule is that acceptance is effective only when received as shown in Entores Ltd v Miles Far East Corpn 1955 This also applies to other means of communication such as telexes and facsimile transmissions By virtue of the case of Considerat ion Promisor vs Promisee Rules 1 Cannot be past 2 Must have monetary value need not be adequate Brimnes Tenax Steamship Co Ltd v Owners of the Motor Vessel quotBrimnesquot 1974 it suggests that if the message is received during of ce hours acceptance would be effective when it is received into the machine regardless of whether the offeror had read the message To the general rule that acceptance is effective when received there is one wellestablished exception which is the postal rule This is by virtue of the case of Adams v Lindsel 1818 the court held that the acceptance was effective when the letter was posted and so there was a contract This rule applies in Singapore However if the offeror states in the contract that acceptance would only be effective if he receives the letter then acceptance would only be effective upon receipt or eg the company has free cancellation policy within certain days 5132 of the Electronic Transactions Act provides that unless the parties have agreed to otherwise where the addressee has designated an information system for the receipt of electronic records receipt is deemed to have occurred when the message enters into that system When the message is sent to a nondesignated information system receipt takes place when the addresses retrieves the message For there to be a valid offer and acceptance or a valid agreement all essential terms must be agreed upon This is by virtue of the case of ScammeI v Ouston 1941 where the court held that the terms were too vague and as the parties had not agreed to the essential terms the court held there was no binding contract However though essential terms may not have been spelt out in the contract if the terms can be ascertained by reference to previous dealing between the parties or by reference to the normal course in the trade there will be no uncertainty and there will be valid contract by virtue of the case of Hias amp Co Ltd vArcos Ltd 1932 The next essential of a valid contract would be consideration unless the contract is by seal or deed where there is generally no need for consideration A promisee can enforce a promisor39s promise if he has done or agreed to do something in return for that promise Executed consideration means that the promisee has performed his side of obligations Executory Intention consideration is when it is yet to be performed However both parties must provide consideration Consideration need not be aeduate By virtue of the case of Chapel amp Co v Neste Co Ltd 1960 as long as something is done or a promise had been made to do something it does not matter what its value is or whether it is commensurate with what that party is getting in return Thus essentially this means that the court will not help you get out of a bad bargain Consideration cannot be past Consideration must be part of the deal agreement or exchange If after the transaction is completed and one party subsequently promises another something in return when previously nothing in return was expected consideration would be past and cannot be enforced This is shown in the case of Re McArde 1951 However when one party does something at another party39s request and both parties envisage payment all along consideration is not past This is by virtue of the case of Pao 0n v Lau Ying Long 1980 Consideration completed not for the promise Consideration must move from the promisee If a person is not a party to the contract in that he is not the offeror or offeree then he cannot sue on the contract even if the contract is essentially for his bene t Exceptions under quotParties to the contractquot Consideration need not move to the promisor What one party promises to do need not go to bene t the other but can bene t someone else instead This is why a bank gets a guarantee from one person to guarantee a loan advanced to another that guarantee can be enforced Consideration cannot be insuf cient By virtue of the case of Collins v Godfroy 1831 where one party is already under a public duty to perform what he subsequently agrees to do by contract consideration will be insuf cient However if one party does more than is expected of him under his public duty there would be consideration as shown in the case of Gasbrook Brothers v Glamorgan Country Conci 1925 When one party is under an existing contractual obligation to another to perform something but thereafter that party demands more to perform the very same obligation there to Create Legal Relations PRESUMPT ION 1 domestic amp social content no intention Can overturn 2 Bizcom me rcial context With intentions Variation of Contract will be no fresh or further consideration for the new demand as that party is in effect not doing anything extra This is show in Stik v Myrick 1809 However if a party to a contract does more than what he is contractually obliged to do there would be fresh consideration by virtue of the case of Hartley v Ponsoby 1857 As such the court held that the subsequent promise resulted in a new contract being formed and it was held enforceable Finally there must be intention to create legal relations In domestic situations it is presumed that there are no intentions to create legal relations Even for close friends by virtue of the case of De Cruz Andrea Heidi v Guangzhou Yuzhitang Health Products Co Ltd 2003 where the court held that as the fellow actor was just doing her a favour and as they were very close friends there was no intention to create legal relations However there can be exceptional situations where the parties intend to create legal relations even in domestic situations such as where the parties are not in good rs In commercial situations there is usually a presumption that the parties intend to create legal relations However sometimes the parties may not intend to create legal relations No intention to create legal relations because they already know it39s illegal and assumes that the companies involved do not want to create legal relations contract already illegal by statute If the contract itself clearly allows for variation the variation will generally be binding However if the original contract itself does not clearly provide for variations then for the variation to be valid rstly both parties must agree offer and acceptance to the changes Secondly one of the following must be present a Fresh consideration Both parties get something in return for agreeing to the change bSeaordeed If by seal or deed generally there is no further requirement that there would be fresh consideration and so the variation would be legally enforceable c Williams v Roffey quotExceptionquot By virtue of the case of Williams v Roffey Bros and Nicholl5 Contractor Ltd 1991 the plaintiff honestly could not do the job on time as he was in nancial dif culties and he did not induce the changes because he fraudulently wanted to claim more Further the defendants avoided a disbene t since it there was a delay they would have become liable to the owners under the main contract The court held that as the plaintiff was not fraudulent or seeking to improve his nancial position and as the defendant avoided the negative commercial consequences of breaking a contract with an important customer they were bound to make payment as promised Thus the court held that if changes are made to the contract without dishonestly or fraud and the party being sued has got a practical bene t or avoided a disbene t the changes may be upheld d Promissory estoppel If a contracting party had made a clear and unambiguous promise and the other party has relied on the promise and if the court is of the view that it is very unfair or inequitable in the circumstances for the party making the promise to go back on his promise he may be stopped from going back on his promise This is by virtue of the case of Central London Property Trust Ltd v High Trees House Ltd 1947 However if back to normal state they can claim back or recover the differences But williams vs roffey exception unable to sustain pay cut pay has prevented them from being red Contract will be valid Promissory estoppel They have relied on the variation for other business decisions So it is unfair to the rm if the employees went back on their promise Similar to the case they can recover their original pay after they got out of their nancial dif culties CONTRACT LAW TERMS OF CONTRACT CHAPTER 3 Express terms llf there Le a breach W39I Iether can terminate the v A contract depende en faete39ra lilke Generally be orally agreed to between the parties or may be written The Parol evidence rule codi ed in the Evidence Act states that once an agreement has been reduced to writing generally evidence cannot be raised to contradict vary add or to subtract from writtn agreement to ensure those ntain e conclusive By virtue of the 39 gfgrgjgggml ontrea 1969 the court held at be admitted to vary or Mlathehmadmdmm ms of the contract Express magma In 4amnlm n wl39lu39l39LIUIll Em 39L CI ITITII39 UT warranty cannet autematically terminate cs are the consequences an serieue are te deprive in ecth part at atErrataattalligpT the benefit at the contract Implied terms Breach of express or implied terms terms generally need not be fair but they are invalid if the clause is against a statutory provision or against public policy or is subjected to judicial control Similiar in the case of Zurich Insurance Singapore Pte Ltd v B Gold Interior Design amp Construction Pte Ltd 2008 it was held that extrinsic evidence was not admissible to add to vary or contradict a term in the insurance policy in question Exception is that one party had misrepresented what the terms in the written contract actually stated than oral evidence of what the party said may be admitted by virtue of the case of EXkusiv Auto Services Pte Ltd v Chan Yong Chua Eric 1996 Implied term may be implied by custom court or statutes Eg Mall will make best effortprecautions to make it a safe environment If there is longstanding well established and reasonable custom in that trade or industry that custom may be implied into the contract Terms may also be implied by statute For instance under the SGA each time a person buys goods certain terms are automatically implied into the contract of sale such as that the goods must be of satisfactory quality Terms implied by court has 2 category Terms implied by facts and terms implied by law Terms implied by facts are based on the presumed intention of the parties and one test that has been used by courts to imply on this basis is the quotof cious bystander testquot by virtue of the Shirlaw v Southern Foundaries Ltd 1939 This means that considering the intention of both parties the term to be implied is so obvious that it goes without saying Another test is the quotbusiness ef cacyquot test as observed in The Moorcok 1889 Is it necessary to imply the term in order to give the contract business ef cacyeffect Ideal if you pass both otherwise just 1 not suf ce if one of the 2 tests satis ed is suf cient by virtue of the case of Forefront Median Technology Pte Ltd v Modern Pak Pte Ltd 2006 Terms implied by law means that once a law had been implied that sets a precedent for all future cases of that particular type However it must be pointed out that courts will not imply terms which are contrary to the express terms of a contract If an express or implied term has been breached the innocent party may be able to sue for damages By virtue of the case of RDC Concrete Pte Ltd v Sato Kogyo S Pte Ltd 2007 the Court of Appeal held that whether the innocent party can terminate the contract depends on 4 factors Firstly the contract may clearly state that in the event of a certain breach the innocent party can terminate the contract Secondly if the party in breach renounces the contract by clearly conveying to the innocent party that he will not perform his contractual obligations at all the innocent party can treat the contract as ended Thirdly if the party in breach has breached a quotconditionquot of the contract as contrast to a quotwarrantyquot the innocent party can terminate the contract regardless of the consequences of the breach Conditions are terms which are important essential or fundamental to the contract They are statements of fact or promise which go to the root of the contract Whether a term can be classi ed as a condition depends on various factors such as the intention of the parties as gathered from the factual matrix and whether past cases have held the term to be a condition by virtue of the case of Sports Connection Private Limited v Deuter a Illaea the centract clllearl39rir V atate yum can terminate lfclr that breach an sue fair chesea if any lf there ia a breach h is the hteache clause a Whethercantenhinatethre JV A A I CUMdItI H can terminate er centrect depends cm factura like warrantyr cannut autematicahr terminate c Are the canaeqluencea E senicuua as to deprive inncicent pam39 infquot anlitretantfalI llr the benefit at the contract I innocent party of substantially the whole bene t which it was intended than the innocent party should obtain from the contract the innocent party can terminate the contract By virtue of the case of Hongkong Fir Shipping Co Exclusion of Limitation Clause v Kawasaki Kaisen Kaisha 1962 the court held that the plaintiff could nonetheless terminate the contract if the consequences of the breach were such that they substantially deprived the innocent part of the whole bene t of the contract If the innocent party wrongfully terminates the contract when he does not have a right to do so he could end up being liable Thus the contract should expressly and clearly provide that if certain speci c breaches occur the innocent party would have the right to terminate the contract as shown in Fu Yuan Foodstuff Manufacturer Pte Ltd v Methodist Welfare Services 2009 A clause through which a party tries to exclude or limit his liability for breach Validity depends on many factors such as 1When was the clause introduced If it was introduced after the contract was made it would not form part of the contract and hence it would not be valid by virtue of the case of Oley v Marborough Court Ltd 1949 where the court held that the exclusion clause was not valid as it was introduced after the contract had been formed Similarly by virtue of the case of Thornton v Shoe Lan Parking Ltd 1971 the plaintiff drove into an automatic car park whereupon after slotting money into the machine a ticket was issued to him by the machine The court held that the acceptance has take place when the customer put the money into the slot machine The contract was formed at that time Since the ticket was introduced subsequent to that it was not binding Contract against public poHcy Restrict of trade However even if the clause is not part of the contract by virtue of the case of Spuring v Bradshaw 1956 the court held that even though the exclusion clause in this case was ineffective as it was introduced after the contract because similar documents containing exclusion clause were used in previous occasions the defendant was bound by them 2Was there reasonable notice of the clause Must be reasonably visibly By virtue of the case of lnterfoto Picture Library Ltd v Stiletto Visual Programmes Ltd 1989 the court held that if the clause is unusual more steps must be taken to bring it to the attention of the other party And since the plaintiffs could not reply on the particular clause because it was highly unusual and adequate notice of it not given Pace where is it found Must be contained in a document in which the parties can reasonably expect to nd contractual terms lndirect reference By virtue of the case of Thompson v London Midand amp Scottish Raiyway 1930 the court held that the contract referred to an exclusion clause that was available from another place thus there was reasonable noUce Language 3 Is the clause valid under the Unfair Contract Terms Act UCTA Section 21 provides that a person cannot exclude or restrict liability for negligence in relation to personal injury or death Section 22 provides that he cannot also exclude or restrict liability for negligence in relation to other losses UNLESS the clause satis es the requirement of reasonableness Section 3 provides that when one party deals as a consumer or on the other39s written standard terms liability for breach of contract cannot be excluded or restricted unless the term satis es the requirement of reasonableness According to the Second Schedule of UCTA the guidelines for reasonableness test a Bargaining strength of the parties If they have equal bargaining strength it is likely that they could have negotiated the terms and so the exclusion of limitation clause is likely to be considered to be reasonable This is shown in the case of Consmat Singapore Pte Ltd vAmerica National Trust and Savings Association 1992 the court held that the reason was reasonable for among other reasons both the parties in question were commercial organizations with equality of bargaining power b Who could have taken our insurance more easily If the party tying to exclude liability could have taken out insurance more easily to cover the loss as compared to the other party the clause is less likely to be reasonable But the carpark may have to claim a larger amount so it may be easier for the driver to claim just for himself But the insurance may not cover personal belongings c Does the innocent party know of the exemption clause If the exclusion or limitation clause is common or is used often in the trade or if the parties has a previous course of dealings in which such clauses were used the court might be inclined to hold that the customer would or should have known about the existence and extent of the clause and point towards the clause being reasonable ROT CLAUSE As long as sale of business involve sale of goodwill there is a legitimate reason to have ROT clause Pg8385 Such restraints are unenforceable unless they are reasonable in the circumstances and with regard to public interest Restraints on emplovees There must be a legitimate interest to be protected such as the employee have access to trade secretshighly con dential information and canor can he pull over customers The clause cannot be too wide in terms of time area and scope of restraint Once any of the 3 is invalid the whole clause is invalid Too long Only need 12years to set up goodwill Restriction longer than that would be too long Too wide highly anticompetitive With virtue of the case of Commercial Plastics Ltd v Vincent 1964 the court held that the restraint was too wide in that it did not have a geographical limitation and it extended to all business in the calendaring eld even though his knowledge was only in relation to calendaring for adhesive tapes UCTA does not apply to insurance interest in law patent copyrights securities CONTRACT LAW FACTORS AFFECTING THE VALIDITY OF A CONTRACT CHAPTER 4 1 Even if a contract has all the essential elements and terms a contract may be declared unenforceable if some vitiating Destroy or impair the legal validity of factors are present such as incapacity illegality against public policy misrepresentation duress undue in uence and mistake Incapacity Minority By virtue of 535 of the Civil Law Act the age of majority in Singapore is now 18 and persons less than 18 are referred to as minors or infants Generally contracts entered by such persons are not binding against them However the minor can always institute an action against other party who breached the contract Some exceptions are Necessary goods or services Necessary goods are not restricted to basic necessities but extend to goods that are reasonably necessary given the minor39s station in life and considering his requirements at the time of sale and delivery By virtue of the case of Nash v lnman 1908 the court held that it was not a necessity as he already had an ample supply of clothes If the goods are considered necessaries the minor would have to pay a quotreasonable pricequot 53 of SGA for them which may not necessarily be the contract price Even if the goods or services supplied are necessaries if the minor has already performed his side of the obligations generally he cannot get out of it as shown in the case of Vaentini v Canai 1889 Also under 53 of Minors39 Contracts Act if the contract is unenforceable against the minor but the minor has received some property pursuant to the contract the court has the discretion to ask the minor to return the property Incapacity Mentally unsound and VoidVoidable intoxicated Person Rati able contracts Bene cial contracts of employment Voidable contracts lllegality By virtue of the case of Che 50m btw Yip v Maha Pte Ltd Natura 1989 if the person who is suffering from the disability is person incapable of understanding the nature of the contract human being age of majority 18 Sound mind Mis Represent ation In order to succeed must prove 1 statement of fact not law opinion advertisers puff 2 False 3 Made from 1 party to other 4 Statement must induce party to enter into contract know about falsehood and the other party to the contract knows or ought to know of this disability the contract is voidable Contract is illegal either by virtue of a statute under common law against Public Policy Eg restriction to carry out lawful trade no law to prevent one to carry out business against administration of justice eg bribery is illegal to commit a crime eg Hire driver to act as accomplice of crime or case law generally it will not be enforceable Statutory illegality may be expressed or implied If the statute speci cally states that any contract entered into in breach of the provisions of that statute would be unenforceable then the illegality would be express A statute may also imply illegality For example if a statute requires a taking out of a license and a license is not obtained whether that would make the contract illegal depends on factors such as whether the purpose of the license was merely to raise revenue for the government or whether the object of the statute in requiring the license was to protect the public By virtue of the case of Smith v Mawhood 1845 the court held that the purpose of the licensing of tobacconist was merely to raise revenue and so the contract was not illegal By virtue of the case of Cope v Rowands 1836 the court held that the purpose of requiring brokers to be licensed was to protect the public and hence the court held that the contract was implicitly illegal under the statue Once the contract is illegal in its inception either by virtue of case low or statute it is totally not valid Thus for instance money paid cannot be recovered and money payable need not be paid However if the parties are not both equally at fault the innocent party may be able to recover money paid or property transferred as shown in Tokyo Investment Pte Lts v 72in Chor Thing 1993 Misrepresentation is a false statement of material fact that induces the formation of the contract Representation To be actionable the representation that has turned out to be false has to be a statement of existing fact or past event If it were a statement of opinion it would not be a statement of existing fact or past event Thus by virtue of the case of Bisset v Wilkinson 1927 the court held that the market did not actually believe in the truth of the opinion or if it can be established that a reasonable man having the maker39s knowledge could not have honestly held such an opinion an action for misrepresentation may lie Also as shown in Smith v Land and House Property Corpn 1884 even though the vendor was just giving his opinion since he honestly could not have believed in the truth of the statement the court held there was a misrepresentation Statement of future intention cannot give rise to misrepresentation However exceptionally where it can be established that the maker did not actually believe in the statement of future intention an action for misrepresentation may lie In Edgington v Fitzmaurice 1885 the court held that a the company knew the statement of future intention was false the court stated that there was an actionable misrepresentation Statement of party39s intention or 3rd part39s intention If the statement were merely quotsales talkquot an action for misrepresentation would not lie as a reasonable person would not have taken such statements seriously SHence By virtue of the case of Keates v Lord Cadogan 1851 keeping quiet does not amount to a misrepresentation because the court held that the seller was under no obligation to make the disclosure and it39s important for each party to nd out instead of expecting the other party to voluntarily disclose relevant information Exceptions There is a duty to speak up which arises when There is a duty of good faith partnersdirections duty of utmost good faith insurance contractsDECLARE there is a distortion of truth a If a half truth is offered by virtue of the case of Dimmock v HaIett 1866 the court held that he was liable for the misrepresentation b If the maker makes a statement in the course of negotiations that he believes is true but before the contract is made comes to realise that the statement is not true then he is duty bound to make this known to the other party By virtue of the case of With v O39Fanagan 1836 c In contracts where there is a duciary duty partnersdirectors d In contracts of uberrimae dei lnducement To be actionable the misrepresentation must have induced the formation of the contract However by virtue of the case of Edgington v Fitzmaurice 1885 the court held that the misrepresentation need not be the sole factor that induces the formation of the contract However if it can be proved that there was no reliance on the false statement given by the maker there would be no inducement By virtue of the case of Smith v Chadwick 1884 and Attwood v Small 1838 If the person relying on the representation is given an opportunity to verify the truth of the statement but he does not make use of that opportunity it would appear that does not deprive him of his right to sue for misrepresentation This is by virtue of the case of Redgrave v Hurd 1881 Where the court held that it was no defence that a prudent man would have taken steps to veri the truth Types of misrepresentation There are three types of misrepresentation namely fraudulent negligent and innocent By virtue of the case of Derry v Oeek 1889 misrepresentation is fraudulent if the maker knew it was false or did not believe in the truth of the statement or was recklessly careless whether the statement was true or falsel Misrepresentation is negligent if it was made without having reasonable grounds for its belief By virtue of the case of Marine amp Dredging Co v A Ogden amp Sons Exca va tions Ltd 1 978 Duress force fear of force threaten or physical harm Economic duress Fear of loss of amp must be unlawful or pressure Duress amp undue in uence Parties should be able to enter into contracts on their own free will The misrepresentation is innocent is there reasonable grounds for its belief are Remedies for misrepresentation Rescission If there is misrepresentation the innocent party may rescind the contract which means terminating the contract and returning the parties to the position they were before the contract However there are certain bars to rescission such as a Af rmation of the contract b Lapse of reasonable time By virtue of the case of Leaf v International Galleries 1950 if a reasonable time has lapsed since the misrepresentation the representee might lose the right to rescind the contract What is reasonable time would depend on the facts of each case If you delay means that you are ne and accepted the contract Thus if you can39t rescind you can still sue for damages c Restitutio in integrum impossible not possible to return the parties to the original position before the contract Damages Fraudulentgt able to sue for damages if he has suffered some losses Negligentgt by virtue of 522 of the Misrepresentation Act the court has power to disallow rescission and in its place grant damages lnnocentgt innocent party may also be able to rescind the contract by virtue of 522 of the Misrepresentation Act the court has power to disallow rescission and in its place grant damages Excluding liability for misrepresentation Under section3 of Misrepresentation Act for such a clause to be valid it has to be reasonable Or can consider quotentire agreement clause However it is more reasonable from court39s pov to only exclude liability for negligent and innocent instead of all misrepresentations Undue In uence In uence to enter into contract such that party is unable to exercise free will Mistake Not so impt Fundament al to contract 1 party knew of mistake OR both parties By virtue of the case of Pao 0n v Lau Yiu Long 1980 the court held that factors which were relevant in determining whether commercial pressure exerted was legitimate includes aWhether the innocent party had no alternative course open to him and was left with no choice but to agree to the terms b Whether the innocent party agreed to the terms under protest c Whether there was lack of good faith on the part of the party exerting the pressure All 3 YES means economic duress f duress is established the innocent party may be able to rescind the contract However if the innocent party af rms the contract he may lose his right to rescind the contract By virtue of the case of North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd 1979 the court held that even though in principle there was economic duress because the plaintiffs had not taken steps soon enough to avoid the changes to the contract they had lost their right to sue for economic duress A contract may be entered into under the undue in uence of another such that in actual fact the party subject to the undue in uence has not truly consented or his consent has not been obtained by unacceptable means If so the contact can be set aside as shown in lnche Noriah v Shaik Allie bin Omar 1929 Some relevant evidentiaerr factors in determining whether there is undue influence include What is the nature of relationship What is the background of the party under undue influence Was the party under undue influence givlen independent legal advice Did the party under influence suffer a detriment Did the party exercising undue influence receive a benefit Susilawati v American Express Bank ltd 2008 Relationship of trust Parentchild Religions advisor disciple Doctorpatient lawyerclient l presumption of trust No relationship of trust must prove undue in uence Generally the mistake must be shared by both parties know of mista ke By virtue of the case of Hartog v Colin amp Shields 1939 the court dismissed the buyer39s action as the buyer was aware of the seller39s mistake Also in Chwee Kin Keong v Digiandmacom Pte Ltd the court held that the appellants knew or ought to have known of the mistake and hence the respondents were held not liable must relate to Further the mistake fundamental something quotnon est factumquot or quotmistake as to signed documentsquot If a person signs a document he may nonetheless be bound unless he can establish that he was not negligent in signing the document was fundamentally different from what he thought he was signing By virtue of the case of Goh jong Cheng v MB Melwani 1991 the court held that as the document she thought she was signing was totally different from what she actually signed and as she could not have read the document the court held that the transaction could be set aside on the ground of mistake CONTRACT LAW TERMINATION OF A CONTRACT CHAPTER 5 Terminatio n of Contract Performan ce This question deals with contract law There are four ways a contract can be terminated They are performance agreement repudiatory or fundamental breach and frustration Even if the contract is completed if it turns out that there is some breach the innocent party has the right to bring an action for breach of contract If a party to the contract has not completely his obligations under the contract he cannot seek any payment from the other party under the virtue of the case of Cutter v Powell 1796 the court held that since the voyage was not completed the payment was not due Also in Ocean Projects Inc v Utatech Pte Ltd 2004 the court held that the court held that the defendants were not entitled to any payment for shipping the goods from Agreement Repudiator y or Funda men tal Breach Houston to Singapore However there are several exceptions that payment is conditional upon complete performance Substantial performance If there is no complete performance but there is substantial performance the party performing may nonetheless be able to claim the contract price less the cost of making good any omissions or defects in execution as shown in the case of Hoening v Isaacs 1952 The substantial performance must not make him worse off Divisible contracts Certain contracts may be divisible into stages and so after each stage is completed the party performing would be entitled to payment Prevented performance If one party has begun performing his obligations but has been prevented by the other from continuing the party who has performed part of the contract may nonetheless be entitled to payment on a quantum meruit basis that is payment based on the value of services rendered as shown in Panche v Coburn 1831 Acceptance of partial performance If one party has not completely performed his obligations and the other party by words or action intimidates that he accepts the incomplete performance the party who has not completely performed the contract may nonetheless be able to claim on a quantum meruit basis However there will be no acceptance if the other party to the contract has no choice but to accept the incomplete performance By virtue of the case of Sumper v Hedges 1898 the court held that Sumpter need not be paid as Hedges had no choice but to accept the partially completed structure Hedges could not reasonably be expected to knock it down or leave it standing on his land in its partially completed state Acceptance must be of free choice A contract may come to end before agreement between the 2 parties This can come about in 2 ways its expiry by Frustration original contract provides for it original contract does not provide for it but both parties subsequently agree to terminatehowever if the new agreement to terminate is not under seal or deed there is a need for consideration for both parties Another way that a contract may come to an end is by repudiatory or fundamental breach committed by one of the parties to the contract Repudiation occurs when one party by words or action intimates to the other that he no longer intends to go ahead with or be breached by the contract Repudiation may be actual or anticipatory Actual when the date for performance is due Anticipatory when the date for performance is yet to be due Even if there is no due date it cannot be anticipatory because work has already begun and you cannot expect it to be uncompleted forever In the case of anticipatory breach by virtue of the cash of Hochester v De La Tour 1853 the court held that the innocent party may institute an action immediately if so wishes and does not have to wait for the commencement date of the contract Fundamental breach occurs when one party without expressly or implicitly repudiating the contract commits a fundamental breach of the contract such as breach of condition It is not always easy to tell if a breach is repudiatory or fundamental Thus they should always try to expressly specify what amounts to a repudiatory or fundamental breach in the contract Also it is not compulsory for the innocent party to terminate the contract He can either terminate the contract or decide to keep it alive and af rm it However with virtue of the case of Avery v Bowden 1855 the court held that if the innocent party decides to keep the contract alive then it is kept alive with all the ensuing consequences The nal way in which a contract may come to an end is by frustration Frustration is the happening of an unexpected event beyond the control of the parties Foreseeabili ty Selfinduced Force majeu re after the making of the contract but before the completion of the contract which makes further performance of the contract either illegal impossible or radically different from what was originally envisaged by the parties Must also consider whether it is of custom practice to terminate early Illegal Impossibility Impossibility relates to the subject matter of the contract being destroyed before completion of the contract as shown in the case of Taylor v Caldwell 1869 where the court held that the contract was discharged by frustration and hence the defendant was not liable for the losses incurred by the plaintiff Can also be result of death of personal incapacity as shown in Condor v The Barron Knights Ltd 1996 Impossibility also arise if the contract states that it must be ful lled in a particular manner and that becomes impossible as shown in Nichol amp Knight v Ashton Edridge amp Co 1901 However if the method stated in the contract is not exclusive or mandatory or if the contract does not state any method and there are alternative methods the contract may not be frustrated as shown in Tsakirogou amp Co Ltd v Nobee and Thori GmbH 1962 Radicallv different from what was orioinallv envisaged Unless both parties understand the purpose to be the very basis of the contract the fact that one party entered into the contract for a particular purpose and that purpose is no longer attainable will not frustrate the contract Unless if both parties construed the purpose to be the very basic of the contract by virtue of the case of Krel v Henry 1903 then there might be frustration Another issue is that if there are labor shortages or price increases it would not make the contract radically different from what was originally envisaged This is by virtue of the case of Tsakirogou amp Co Ltd v Nobee and Thor GmbH 1962 even though it cost nearly double the amount of money to make shipment through the Cape of Good Hope as compared to making shipment through the Suez Canal the court held that that did not frustrate the contract Similarly David Contractors Pte Ltd v Farcham UDC 1956 the contractors argued that the contract was frustrated by labor shortage and increase in cost However Payment the court held that the contract was not frustrated Only unless if the cost increases are so extreme as to be astronomical then there could be frustration Labor shortage can also be selfinduced Also if the parties foresaw a particular event or could have reasonably foreseen that a particular event would occur and nonetheless decided to go ahead with the contract and that event occurs making performance impossible the doctrine of frustration would not apply In addition frustration cannot be successfully raised if it is selfinduced as provided in the case of Maritime National Fish Ltd v Ocean Trawler51935 Similiar by virtue of j Lauritzen AS v Wijsmuler Bl The Super Servant Two 1990 the court held that since they could have assigned Super Servant One to this contract but decide not to do so frustration was self induced A clause in the contract which relieves them of liability should some unexpected event occur Unforeseen circumstances It should not be covering market uctuations It39s those like riots oods act of god Not market rates change It must be something unforeseen and out of their control Perhaps have a price variation clause to allow revision of changes when there is change in market rate A force majeure clause can widen or narrow down what amounts to frustration in law Further once frustration applies the contract is discharged and the parties are relieved of their obligations However under a force majeure clause it is possible for the parties to provide that the contract is suspended for a period of time instead of being immediately discharged So if the event clears up before the end of the stated period the contract is not discharged There is a presumption that the clause is to be restricted to supervening events which arise without the fault of either party as shown in RDC Concrete Pte Ltd v Sato Kogyo S Pte Ltd 2007 For the rest under Section22 of the Frustrated Contracts Act any sum paid before the frustrating event can be recovered and any sum payable after the frustrating event need not be paid The general rule is that in frustration losses lie where they fall So any money paid before the frustrating event cannot be recovered any money payable remains payable unless there is a total failure of consideration Applies contracts of insurance carriage of goods by sea etc However if one party incurred an expense for the purpose of performing the contract Section22 before the discharge or the other party obtained a bene t from the performance of the contract before the discharge of the contract Section23 the court has the discretion to make an adjustment CONTRACT LAW REMEDIES FOR BREACH OF CONTRACT CHAPTER 6 LIMITATION OF ACTIONS PARTIES TO THE CONTRACT PG 49 Remedies Damages Unliquidat ed The more common remedies for breach of contract are Damages Speci c performance and Injunctions Unliquidated damages refer to damages that have not been pre agreed to by the parties to the contract and are hence determined by the court Loss must be proved To claim unliquidated damages it generally must be proved that some loss has been suffered If it cannot be proved that a loss has been suffered then the plaintiff would only be entitled to nominal damages However there are so exceptions For instead in Chia Kok Leong v Prosperand Pte Ltd 2005 even though the developer did not suffered any loss the court allowed the develop39s actions The court reasoned that if the developer was not allowed to succeed in their action the architect would have been away to get away with their wrong without compensating anyone Aim To put the plaintiff in the position he would be if the contract had been properly performed So generally only the losses suffered by the plaintiff as a result of the contract not being properly performed can be claimed and not the pro ts made by the defendant This is by virtue of the case of Teacher v Calder 1889 where the court held that the plaintiff could only recover the losses her suffered as a result of the contract having not been performed and not the pro ts made However the exception is that if the parties are in a duciary relationship with virtue of the case of Attorney General v Blake 2001 there can be a duty to account for the pro ts Expectation loss Loss of pro ts A claim may also be based on expectation or reliance loss This refers to what the plaintiff would have expected to get if the contract had been properly performed mainly loss of pro ts By virtue of the case of Chapin v Hieks 1991 the court held that though there no certainty and losses may be speculative if the plaintiff can prove that he had a chance of obtaining it he can sue for the loss of that chance The more the plaintiff manage to prove that he was likely to have attained the thing in question the more he is likely to be able to claim the nearer the date to entering contract the more certain Reliance loss Wasted expenditure Reliance loss refers to wasted expenditure incurred by the plaintiff prior to the breach By virtue of the case of Anglia Television Ltd v Reed 1972 if the facts are such that if the contract had been properly performed the plaintiff would not have been left with expenditure that is wasted the court held that the plaintiff could claim for these loss as reliance loss or wasted expenditure Eg manpower and rentlabor costs advertising cost Can claim both expectation loss and reliance But if this results in overcompensation or double compensation then it is not possible Incidental loss or consequential loss Incidental losses can be claimed as well because if the contract had been properly performed they would not have been incurred For example the expenses incurred in sourcing for another supplier when the original supplier is unable to perform his obligations can be claimed eg higher price But if the price is lower only entitled for nominal damages Punitive damages Punitive damages are damages that are intended to punish the defendant for his conduct But punitive damages are not awarded in Singapore Damaoes for iniured feelinds By virtue of the case of Haron bin Mundir v Singapore Amateur Athletic Association 1992 the court could held that damages for injured feelings loss of reputation distress or disappointment could not be awarded in a breach of contract action However if the very purpose of the contract were to provide pleasure relaxation or peace of mind it may be possible to claim for such losses By virtue of the case of jarvis v Swan Tours Ltd 1973ln the case of Farley vSkinner 2002 the court held that it would suf ce if the purpose was a major or important aspect of the contract Limitation on rioht to claim unliduidated damages 1 Remoteness If the damages are considered too remote then they cannot be claimed Reason being is that there must be some limit on the defendant39s liability The test for remoteness was laid down in Hadley v Baxendae 1854 Firstly damages would not be too remote if they arose naturally meaning in the usual course of things such damages would have been incurred By virtue of the Damages Liquidated damages clause Pay an agreed sum in the event of breach of contract Depos s same case exceptional loss can only be claimed if it was within the contemplation of the parties at the time of the contract but highly unlikely Also in the same case the court held that the loss was not a natural or usual loss for that particular industry because it was not common for mills to remain idle as mills would usually have spare shafts Since the loss was not natural or usual and since loss was not within the contemplation of the parties it was held to be too remote 2 Mitigation Further the party must mitigate his losses meaning he must have taken reasonable steps to minimize his losses If he did not take reasonable steps ASAP he might receive less or even no damages This is by virtue of the case of Brace v Calder 1895 where the court held that as the plaintiff should have mitigated his loss by accepting the employer39s reasonable offer of re employment he was entitled to nominal damages only If no mitigation the damage will snowball 3Causann If the plaintiff39s loss is not caused by the defendant39s breach then it clearly cannot be claimed Parties to the contract may sometimes preagree that if a certain breach were to occur a certain amount of damages will be payable However there is also a possibility of abuse in which the party with the stronger bargaining power may impose a very extravagant sum totally out of proportion to any possible loss that can occur The basic rule is that if the sum stated in the contract can be considered to be genuine preestimate of the loss it will be binding on the parties After you claim liquidated cannot claim unliquidated unfair cause already had agreement Useful clause but can be abuse eg Credit card Late payment interest rates Whether or not the court will nd it to be a pregenuine estimate depends on whether the sum stated is extravagant compared to the greatest loss that can possibly follow from the breach and whether a single sum is payable regardless of the extent of the breach reasonable amount payable In Dunop Pneumatic 7yre Co Ltd v New Garage amp Motor Co Ltd and pa rt payments Non monetary remedies Injunctions Speci c performan ce Limitation s of actions 1915 the court held that it was a genuine preestimate By virtue of the case of Ford Motor Co vArmstrong 1915 the court held that considering the amount of money and the fact that a single sum was payable regardless of the extent of the breach the clause was not a genuine preestimate By virtue of the case of T2 Networks Pte Ltd v Nasioncom Sdn Bhd 2008 the losses that has to be paid would always have been lower than what was stated in the liquidated damage clause in the contract OVERESTIMATED thus the court held that the liquidated damages clause was not a genuine preestimate Once a clause is declared to be a genuine preestimate by the court by virtue of the case of Cellulose Acetate Silk Co Ltd v Widnes Foundry Ltd 1993 only what is stated in the clause can be recovered and not the actual loss On the other hand if the clause is a penalty exceptionally harsh and designed to punish then it is invalid and it is greater than the actual loss then only the actual loss can be claimed However in the less likely event that it is a penalty and yet is less than the actual loss then plaintiff has a choice of claiming either the sum stated in the contract or the actual loss The injured party must prove actual loss to claim for the breach have to sue for damages in court If it is a deposit in the sense that it is required as a guarantee for performance it will generally be forfeited unless the contract states otherwise or unless the amount of the deposit is excessive If the payment is a deposit the innocent party who suffers damage over and above the amount of the deposit may make a claim for those damages as well If it is a part payment of advanced payment it will be refundable unless the contract states otherwise Though a refund has to be made the innocent party can still sue the party in breach for damages actually suffered Whether a particular payment was intended to be deposit or part payment depends on the intention of the parties Good to have non refundable deposit clause in the contract Yes it is wise as he can at least recover back some money Because claim damages will take very long time so they will help offset Furthermore there will be administration losses to reselling which cannot be claimed in the liquidated loss this will also help to offset remedies of breach of contract Court order immediate amp urgent only available if damages is not adequate Enforce a positive obligation severe consequences Criminal offence eg Infringement of trademark prohibit further use of trademark and sue for pro ts earned Another common discretionary remedy is an injunction which is a court order forcing a party to observe a negative covenant as shown in Warner Brothers Pictures Inc v Nelson 1937 Speci c performance is an order of the court requiring the party in breach to perform the contractual obligations In deciding whether or not to grant it courts consider various matters such as a Damages are adequate If damages are adequate by virtue of the case of Lee Chee Wei v 72in Hor Peow Victor 2007 the court may not grant an order for speci c performance In situations such as antique cars damages may not be adequate and it would also be dif cult to quantify his losses thus speci c performance may be granted bd Not granted for contracts of personal service employment contracts cannot force someone to do something wrongly resigned does not apply to contract of personal service apply to unique goods like land If there is a great delay in bringing an action evidence necessary to determine the issues litigated may become unavailable and parties39 and witnesses39 recollection of events may become inaccurate By virtue of the Limitation Act the law provides that after a certain period of time an action may not be brought Under this Act the general rule is that the claim had to be made within 6 years from the date the course of action accrued that is within the 6 years from the date of the breach section 6 In the case of fraudmistake six years begins to run from the date the plaintiff discovers the fraud or mistake or could have discovered the fraud or mistake with reasonable diligence section 29 An unreasonable delay in seeking these remedies pursuant to the quotdoctrine of lachesquot section 32 there is a possibility that they may not be granted Parties to the Contract It is a general rule of law that only parties to the contract may sue and be sued on the contract Exceptions a The Contract Rights of Third Parties Act By virtue of section 21 a third party to the contract can enforce a term of the contract if the contract expressly provides for it or if the term purports to confer a bene t on him By virtue of section 23 for the third party to be able to sue the third party must be expressly identi ed by name as a member of a class or as answering a particular description However there are some exceptions Section 22 provides that section 21 if on the proper construction of the contract it appears that the parties did not intend the term to be enforceable by the third party b Assignment and novation Assignment refers to transfer of the rights under the contract In relation to liabilities if one party wishes to transfer his liability as opposed to rights consent is required Assignment and novation must be distinguished from sub contracting cAgency Contract is between the principle and the 3rd party If the person is not agent but independent contractor no contract between 3rd party and the principle PRODUCT LIABILITY amp AGENCY CHAPTER 7 amp 9 Sale of goods act Implied Terms Section 12 Section 13 Only applies to quotSale of goodsquot The obligation imposed by the Sale of Goods Act are automatically imposed into every contract of sale Section 12 Section 121 provides that it is an implied condition that the seller has the right to sell or good or in the case of an agreement to sell will have the right to sell when property or ownership is to pass the buyer Since this term is a condition if it is breached the buyer can repudiate the contract reject the goods and in addition sue for damages if any This is by virtue of the case of Rowand v Dival 1923 where the court held that section 121 was breached and Rowland was entitled to get his purchase price back Section 122 provides that it is an implied warranty that the goods will be free from any charges or encumbrances not made known to the buyer before the contract This section also further provides that the buyer must enjoy quiet possession of the goods not pirated and by virtue of the case of Microbeads v Vinhurst the court held that there was breach of section 122 and the buyer may sue the seller for breach If section 12 is breached since it is an implied warranty breach of it will only give rise to damages Section 13 Section 13 provides that where there is a contract for the sale of goods by description it is an implied term that the goods will Section 14 correspond with the description By virtue of section 133 a sale of good does not cease to be a sale of description just because the goods are exposed for sale and selected by the buyer However for section 13 to be successfully invoked it would appear the buyer must have relied on the description By virtue of the case of Harington amp Leinster Enterprises Ltd v Christopher Hul Fine Art Ltd 1991 the court held that section 13 was not breached as the buyer did not reply on the seller39s description rather he relied on his own judgment By virtue of the case of Re Moore amp Co Ltd and Landauer amp Co Ltd 1921 it is still unclear whether section 13 is capable of applying to all sorts of descriptions or only descriptions that are vital or important If section 13 was breached the buyer would have the right to repudiate the contract reject the goods and sue for damages if any Section 14 Section 14 only applies when the seller is selling in the course of business always state it before start Section 142 states that when the selling in the course of business it is an implied term that goods supplied under the contract will be of satisfactory quality Section 142A states that goods would be deemed to be satisfactory if a reasonable person would regard the good as satisfactory considering the description price and all other relevant circumstances as shown in the case of National Foods Ltd v Pars Ram Brothers Pte Ltd 2007 It is not the mere functionality of the good that determines whether they are satisfactory All relevant factors must be taken into account By virtue of the case of Rogers v Parish Ltd 1987 where the buyer bought a new car which turned out to be faulty but could still be driven The court held that there was a breach of section 142 even though the car had some defects in the body work but could still be driven The court held that the buyer must not only be able to drive the car but must also be able to take pride in the car and be able to drive it with the appropriate degree of comfort Section 15 Loss of right to reject easy of handling and reliability Section 1423 lists certain factors that may make a good unsatisfactory lssues relating to appearance and nish Minor Defects Durability Issues Safety Issues DurabilitySafety issues must see whether there was adequate warning for safety also must see whether the manufacturers are aware negligence in checking did they provide adequate warnings side effects etc Section 142C provides that section 142 does not apply if the defects were drawn to the buyer39s attention before the contract was made or if the buyer examined the goods before the contract and that examination ought to have revealed the defects Means that whether someone else carrying out a similar examination would have discovered the defect If section 142 is breached the buyer can reject the goods andor sue for damages Section 143 provides that when the seller is selling in the course of business and the buyer expressly or by implication makes known to the seller any particular purpose for which the goods are bought there is an implied term that the goods must be reasonably t for that purpose Implied purpose refers to obvious or common purpose By virtue of the case of Grant v Australian Knitting Mills Ltd 1936 where the buyer bought a pair of underwear and due to a presence of a chemical in it he developed a rash that turned into dermatitis The court held that there was a breach of sections 142 and section 143 It is added that even though the buyer had not expressly make known the purpose for buying the goods nonetheless the purpose was implied If the buyer wants the goods for a particular purpose that is not obvious he should make it known to the seller so that can have the bene t of the section By virtue of the case of Grif ths v Peter Conway Ltd 1939 if the buyer does not do that section 143 may not be applicable In this case since the buyer did not expressly inform the seller that the coat must be t for someone with abnormally sensitive skin and since the coast was otherwise reasonably t for normal persons section 143 was held not to have been breached However section 143 does not apply if the buyer does not reply Excluding liability imposed by the sale ofgoods act CFTA High Court Decision UCTA Liability of manufactu res and or if it39s unreasonable for the buyer to rely on the seller39s skill and judgment If section 143 is breached the buyer can reject the goods andor sue for damages Section 15 Section 15 provides that in a contract or sale by sample it is implied that the bulk will correspond with the sample in quality This is by virtue of the case of Ceramic Brickwods S Pte Ltd v Asia Tech Construction amp Engineering Pte Ltd 1996 where the court held that the buyers were right in rejecting the bricks on account of section 15 though there was no breach of section 142 Some exceptions to buyer39s right to reject Firstly section 35 of the Sales of Goods Act provides that the buyer would be deemed to have accepted the goods if he does any act in relation to the goods which is inconsistent with the ownership of the seller or if he intimated to the seller that he has so accepted the goods or if he keeps the goods for more than a reasonable period of time without informing the seller that he has rejected them What is reasonable would depend on the facts of each case Once the buyer is deemed to have accepted the goods he would lose his right to reject the good not using it in the usual purpose Section 15A provides that for nonconsumer sales if the breach of section 131415 is so slight that it would be unreasonable for the buyer to reject the goods than he cannot do so and can only sue for damages if any But this section can be overridden by agreement between the parties such as an express provision to the contrary in the contract Under Section 61 of the Unfair Contract Terms Act it is provided that any clause trying to exclude liability for breach of Section12 of the Sales of Goods Act is totally invalid Under Section 62 it is provided that in consumer sales any attempt to exclude liability for breach of section 131415 would beinvaHd Consumer if buyer does not make contract in the course of business others seler makes contract in the course of business goods normally for private use or consumption Under Section 63 it is provided that in nonconsumer sales liability for breach of section 131415 may be excluded if it is reasonable TB pg 70 bargaining strength etc By virtue of High Court Decision 1995 and the case of Darwish M KF Gobaishi v House ofHung Pte Ltd it is held that when there is a breach of Sales of Good Act the clause quotGoods sold cannot be returnedquot will be ineffective By virtue of Consumer Protection Fair Trading Act defects reported within 6 months of purchase rebuttable presumption that defect existed at time of delivery seller cannot exclude explication of this law by notice that it does not give refund or that item is quotsold as it isquot However it applies only to contracts made on or after 1 Sept 2012 otherwise hard to prove that the defect during the point of delivery good to state whether CFTA applies meaning whether its consumer or non If there is a breach of any of the sections above the retailer would be able to sue the manufacturer in turn for the breach By virtue of the case Britestone Pte Ltd v Smith amp Associates Far East Ltd 2007 the court held that the sourcing company has breached section 13 of the Sale of Goods Act and as a result the distributor had to pay damages to the third party it was held that the distributor could in turn claim those damages from the sourcing company Consumers may be able to directly deal with the manufacturer even though there is no direct contract between them One such situation is where there is a guarantee or warranty Consumers can sue the manufacturer in negligence that has resulted in personal injurydeathproperty destroyed or damaged even if there is no contract between them Another way is where there is a collateral or indirect contract between them This is by virtue of the case of Shankin Pier Ltd v Dete Products Ltd 1951 where the court held that if the manufacturer gives some assurances to the consumer about the product and as a result of that the consumer buys it from the retailer there might be a collateral contract between the manufacturer and the consumer By virtue of the case of TV Media Pte Ltd v De Cruz Andrea Heidi the court allowed the consumer to bring an action against the distributor and importer and held them liable in negligence Agency Formation of agency Duties of the agent Agency arises when one person known as the agent acts on behalf of another known as the principal and creates legal consequences between the principal and a third party Thus there will be a contract between the principal and the third party However if the intermediary is not acting as an agent but is acting as an independent contractor then there would not be a direct contract between the principal and the third party This is by virtue of the case of Corten Furniture v Merzario Pte Ltd 1992 where the court held that the defendants were independent contractors and not agents of the plaintiffs and so there was no contract between the plaintiffs and the shipping company a Express appointment One person may be expressly appointed to act on behalf of another a Duty to follow instruction Agent is obliged to act in accordance with the instructions given by the principal By virtue of the case of Turpin v Bilton 1843 the court held that the agent was liable for not following the instructions of the principal and was liable in damages Similarly by virtue of the case of Betram Armstrong amp Co v Godfray 1830 the court held that since the stockbroker failed to follow the principal39s instructions he was liable for the resulting losses However there are exceptions If it is impossible to carry out or if it is illegal to carry out the instructions of the principal the agent would not be liable if he fails to do 50 b Duty to act with due care and skill Agent must act with reasonable care and skill By virtue of the case of Insurance Singapore Pte Ltd v B Gold Interior Design amp Construction Pte Ltd 2008 the court held that the agent had breached the duty and thus the principal may be able to recover damages Also by virtue of the case of Keppel v Wheeler 1927 the court held that the agents were negligent and they are ordered to pay the difference in price to the vendor c Duty to account d Delegation of duty Rights of the agent Principal 3rd Party Relationsh ip Since the agency relationship is based on the con dence the principal places on the agent the agent cannot delegate his duties to another without the express or implied consent of the principal If there is such an unauthorised delegation the agent may be liable to the principal for having breached his duty not to delegate Further no contractual relationship will be created between the principal and the subagent and the principal would generally not be bound by what the subagent does This is by virtue of the case of McCann amp Co v Pow 1975 the court held that as the delegation to subagents was not authorised the court held that the vendor did not have to pay commission to the agent when the sale went through However exceptions are it is a purely administrative matter or it is usual in that particular trade to delegate or if the principal at the very beginning of the agency relationship is aware that the agent is going to delegate e Fiduciarv duties i Con ict of duty and interest an agent should not place himself in a position where his duty and interests con ict unless he makes full disclosure to the principal and the principal consents If this rule is breached and the principal has suffered some loss the principal would be able to recover that loss Further even if he has suffered no loss but the agent has make some pro ts by virtue of the case of De Bussche v Alt 1878 the principal would be able to claim those pro ts a Remuneration If the agent has not performed what he has been instructed to do or where he has been instructed to act in a particular manner and he has not done so by virtue of the case of Mason v Clifton 1863 he would not be entitled to any remuneration Contract can spring up between the principal and the 3rd party only if the agent has actual authority to act on behalf of the principal the agent has no actual authority but the principal rati ed the agent39s actions the agent has apparent or ostensible authority to act on behalf of the principal a Actual authority Refers to the authority the agent actually has Can be expressly conferred with Or implied authority which is the authority that is usually associated with a job that is customary in a given trade or eld Agent also has the implied authority to do whatever is reasonable incidental or necessary to ful l what he has been expressly authorised to do However by virtue of the Next of kin of Ramu Vanniyar Ravichandran v Fongsoon Enterprises Pte Ltd 2008 the exact limits of such implied authority would very much depend on the facts of each case If not actual because you didnt follow his instruction but you may have apparent because you are give exclusive rights b Rati cation 1 Principal must be identi ed If the agent does not disclose that he is acting on behalf of another and if it appears that he is acting on his own name it would not be possible for the principal to ratify the agent39s acts subsequently 2 Principal must exist at the time the agent made the contract 3 Principal must have the capacity to enter into the contract at the time the contract is entered into 4 Rati cation has to take place within a reasonable time to be valid c Apparent or ostensible authority Also known as agency by estoppel and it arises when the principal represents in some way to the 3rd party that the agent is authorised to act in a certain fashion and the third party relies on that representation In such circumstances the principal would be stopped from denying that the agent has no authority to bind the principal Thus employees often post notices in newspapers stating that the named person is no longer an emploee and is not authorised to act on behalf of the company If the agent represent that he has authority to act on behalf of the principal and it turns out that he is in fact not so authorised the third party who relies on that representation and suffers a loss may sue the agent for breach of warranty of authority Agent can be liable for breach of warrant of authority even if the agent innocent thought that he had authority Generally only parties to the contract can sue and be sued However in the following cases are X and Y parties to the contract aZ sells hand phones and is the authorized agent for Y a mobile phone service provider X goes to Z shop and buys a phone and signs up to receive mobile phone service from Y Is there a contract between X and Y Yes there is As Z is the authorized agent of Y when the agent enters into a contract on behalf of Y which is known as the principal it creates legal consequences between the principal and the third party There is also a contract between customer and service provider b Z is a maid agency Y is a maid X goes to the maid agency and chooses Y Is there a contract between X and Y Yes also X and Y The employer is the one who guarantee the bene t to the maid How does Z come in Z is an agent his responsibilities is just to match X and Y As long as he has completed his responsibilities the contract is between X and Y Parties in the middle is probably just agent Initially there is contract between X and Z Z to help X to nd a maid There39s also contract between employer and agency LAW OF TORTS CHAPTER 13 Assault amp Battery Defamation Deceit Conversion Conversion Passing Off Vicarious Liability Negligence Tort of Negligence refers to carelessness For there to be liability in negligence negligence there does not have to be a contract between the parties but the following 4 factors must be established 1 defendant owed the plaintiff a duty of care 2 defendant breached that duty of care 3 defendant39s breach caused the plaintiff39s loss 4 loss is not too remote Duty of care y DUt IOf care Old law X The first element to be established IS that the defendant must owe the plaintiff a duty of care By virtue of the case of nei hbour g Donoghue v Stevenson 1932 the friend could not sue the principle In close proximity or anyone that may be affected by your actions retailer as she has no contract with him but she sought to sue the manufacturer and the court held that the manufacturer owed her a duty of care By virtue of the case of Spandeck Enginerring S Pte Ltd v Defence Science amp Technology Agency 2007 the Court of Appeal held that a single test should apply in deciding whether there was a duty of care in all claims arising out of negligence and that this was a twostage However before that the court held that it had to satisfy itself whether factually speaking it was foreseeable that the defendant39s actions or omissions could cause damage to the plaintiff Once met a the relationship between the parties must be close and proximate proximity refers to a close and direct relationship between the parties so that one party ought to have had the other in contemplation when carrying out or omissions suffer loss impacts b there not be any policy considerations negating a duty of care Public policy if there would some public considerations that negate the nding of a duty of care then it would not be just and reasonable to impose a duty of care By virtue of the case of Mare Rich amp Co v Bishop Rock Marine Co Ltd 1996 the court held that even assuming there was proximity between the parties it was not just and reasonable to impose a duty of care because marine classi cation societies were nonpro t organizations that act in public interest to promote the welfare of the people and property at sea lf faced with the possibility of litigation such societies could just refuse to carry out urgent or problematic inspections and that would not be in the interest of the public eg policepublic policy Mention neighbour principle must take reasonable care to avoid injuring people who are so close and directly affected by my act But possible to perform There are some wellestablished areas where the plaintiff would have little dif culty in establishing a duty of care Eg Owners of premises owe a duty of care to visitors and employers owe a duty to employees Some areas may or not give rise to a duty of duty Negligent misstatements By virtue of the Hedey Byrne amp Co Ltd v Heler amp Partners Ltd quot Reasonable manquot standards Breach of duty 1964 the court held that liability can arise over a negligent misstatements However there is a possibility of unlimited liability and hence courts are more hesitant to nd a duty of care and loathe to impose such unlimited liability By virtue of the case of Caparo Industries pc v Dickman 1990 the defendants audited the accounts of a company known as Fidelity Based on the accounts the plaintiff Caparo bought shares in Fidelity and successfully launched a takeover bid However there was an error in the accounts in that it showed a huge pro t when in fact there was a loss The court held that even though it was foreseeable there was not a sufficient degree of proximity between the parties and so there was no duty of care The accounts were prepared for the shareholders collectively for them to assess how the company was doing but it was not prepared for investors or individual shareholders The court also held that if the accountants were held to have owed a duty of care to all investors and shareholders than would have exposed them to unlimited liability Further by virtue of the same case and the case of Smith v Eric 5 Bush 1989 the court stated that in order for there to be to be a suf cient degree of proximity before liability for a negligent misstatement can arise the following conditions must be present athe defendant must know the purpose for which the advice is required bthe defendant must know that the advice will be communicated to the plaintiff cthe defendant must know that the plaintiff is likely to reply on the information dthe plaintiff must have relied on the information to his detriment Bank in this case can have contractual claims on the accounts for negligence Can sue for both contractual and tort but court will only grant 1 Pure economic loss Pure economic loss refers to economic loss that ows from a negligent act that is not accompanied by physical injury or property damage By virtue of the case of RSP Architects Planners amp Engineers v Ocean Front Pte Ltd 1996 thus in Singapore even if there is no physical injury or property damage there can be duty of care in respect of pure economic loss provided that there is very close proximity Ca usation Cause amp Effect Damages remoteness between the parties and it is not a case of unlimited liability However if there is no contract there could be other situations of very close proximity between the parties Breach of duty of care Once it is established that there is a duty of care the plaintiff has to establish that there is a breach of that duty By virtue of the case of Byth v Birmingham Waterworks 1856 the court held that breaching the duty of care meant the quotomission to do something which a reasonable man would do or doing something which a prudent and reasonable man would not doquot However it determining what a reasonable person would or would not have done if the defendant professes to have a particular skill or knowledge by virtue of the case of Phillips v William Whitley Ltd 1939 then the question becomes what another person with a similar skill of skill or knowledge would have done in the circumstances Further in determining what a reasonable person would or would not have done the court might have to embark on a balancing act weighing and balancing many factors such as the likelihood of danger and the severity of the danger if it results on the other hand and the cost of averting the danger By virtue of the case of Latimer VAEC Ltd 1953 the court held that since there was nothing else the defendants could have done short of closing the factory which would have been too costly and considering the risk of injury was slight the court held that the defendants had not breached Res ipsa loquitor If the plaintiff does not know or cannot reasonably be expected to know the cause of the accident or damage but the thing causing the damage or accident was under the control of the defendant and the damage or accident is one that does not ordinarily occur unless there is negligence on the part of the defendant the concept of res ipsa loquitur may be raised By virtue of the case of Ward v Tesco Stores Ltd 1976 the court held that since the supermarket was under the control of the defendant and as such accidents do not normally occur unless there was negligence the plaintiff managed to raise res ipsa loquitor The defendant had to show that it was not due to lack of care on their part that the accident occurred If the defendant did not manage to do so the court will hold Defences that negligence has been established Causann Once it is established that there is a duty of care and that it has been breached the next element that needs to be established is that the defendant39s breach has caused the plaintiff39s loss This means that even though the defendant owed a duty of care and he breached it if the loss the plaintiff is suing for is not caused by the defendant the defendant would not be liable However if there is a new intervening act or quotnovus actus interveniesquot which breaks the chain of causation such as where the damage caused by the defendant is exacerbated by some unreasonable action on the part of the plaintiff the quotbut forquot test may not be determinative By virtue of the case of Mckew v Holland and Hannens and Cubitts 1969 the court held that the employer39s initial negligence did not cause the plaintiff39s subsequent injury it was caused by the plaintiff own unreasonable behavior thus breaking the chain of causann Damaoesremoteness Reasonablv Foreseeable Even if the defendant has breached a duty of care owed to the plaintiff and that breach has caused loss to the plaintiff it does not follow that the plaintiff can claim for all ensuing losses The test for determining whether the loss is too remote is generally whether the loss is reasonably foreseeable By virtue of the case of Wagon Mound 1 1961 the court held that in order for damages not to be too remote they must be reasonably foreseeable and that on the facts the damages were not reasonably foreseeable In relation to the test of reasonably foreseeability by virtue of Bradford v Robinson Rentals Ltd 1967 usually what has to foreseen is the kind of harm and not the extent of harm In relation to damages that the defendant has to take the plaintiff as he nds him this is known as the quotthinskullquot rule By virtue of the case of Smith v Leeds Brain amp Co 1962 even if the condition caused will not usually happen to another person the court held that the defendants were liable as they had to take the plaintiff the condition he was Not that important Contributory negligence Tort of passing off Trademark infringement Goodwill Pass off MY good as YOUR good as YOUR good has Good will Misrepresenta tion Likely to suffer loss If the plaintiff also contributed to the loss the damages he can claim from the defendant may be reduced pursuant to section 31 of the Contributory Negligence and Personal Injuries Act By virtue of Sayers v Harlow UDC 1958lt the court held that the plaintiff contributed to her injury and hence her damages were reduced by 25 Plaintiff himself contributed to the injury injury will not be so serious if he did not have wear a helmet Voluntary assumption of risk If the plaintiff voluntarily assumes the risk that a tort may be committed against him the defendant may use this as a defence By virtue of the case of Morris v Murrary 1991 the court held that the plaintiff had voluntarily assumed risk and so the defendant was not liable Exclusion of liabilitv Even though there may not be a contract between the parties the defendants may try to exclude liability by means of a clause or notice Whether such clauses are valid must be judged against the Unfair Contract Terms Act Section 21 states that a clause which tries to exclude liability for death or personal injury arising out of negligence is totally invalid Section 22 provides that in relation to liability for other losses such as property damage or economic loss a clause will be upheld if it is reasonable According to the Second Schedule of UCTA the guidelines for reasonableness test a Bargaining strength of the parties if they have equal bargaining strength it is likely that they could have negotiated the terms and so the exclusion of limitation clause is likely to be considered to be reasonable This is shown in the case of Consmat Singapore Pte Ltd v America National Trust and Savings Association 1992 the court held that the reason was reasonable for among other reasons both the parties in question were commercial organizations with equality of bargaining power May not have to be size perhaps if they have been dealing for years more likely to have equal bargaining power b Who could have taken our insurance more easily If the party tying to exclude liability could have taken out insurance more easily to cover the loss as compared to the other party the clause is less likely to be reasonable Organization claim more compared to individual claim small sum Tort of Vicarious Liability c Does the innocent party know of the exemption clause If the exclusion or limitation clause is common or is used often in the trade or if the parties has a previous course of dealings in which such clauses were used the court might be inclined to hold that the customer would or should have known about the existence and extent of the clause and point towards the clause being reasonable If cannot take exclusion clause can consider having a Professional indemnity insurance that helps protect professional advice and serviceproviding individuals and companies from bearing the full cost of defending against a negligence claim made by a client and damages awarded in such a civil lawsuit The tort of passing off seeks to protect against certain types of unfair competition By virtue of the case of Reckil amp Coleman Products v Borden Inc 1990 the plaintiff must generally establish that the following 3 conditions there is goodwill or reputation attached to his business there is a misrepresentation by the defendant that the goods or services offered by him are the same as those offered by the plaintiff he has suffered or is likely to suffer loss By virtue of the case of CDL Hotels International Ltd v Pontiac Marina Pte Ltd 1998 the court held that even though at that stage the developments had not started their actual operations because of largescale advertising carried out by the plaintiffs the plaintiffs had acquired goodwill Misrepresentation can come in various forms By virtue of the case of Lifestyle 199 Pte Ltd v S199 Pte Ltd 2000 the court that if the plaintiff39s business name is merely descriptive of his products and the defendant takes steps to distinguish his products from that of the plaintiffs there is unlikely to be a misrepresentation Plaintiffs must suffer losses or must be likely to suffer losses By virtue of the case of CDL Hotels International Ltd v Pontiac Marina Pte Ltd the court found that there was a real likelihood of loss and upheld the plaintiff39s claim If passing off is established an injunction may be obtained The employerprincipal can be vicariously liable for employee39sagent39s actions if a The employeeagent must be legally at fault AND b The action that give rise to legal liability on the part of the employee must have taken place in the course of his employment By virtue of the case of Lister v Hesey Hall Ltd 2001 the test is to see if there is a close connection between the nature of the employment and the employee39s wrongdoing If there is such a close connection then even if the act is done intentionally negligently recklessly fraudulently or against the express orders of the employer the employer can be made vicariously liable By virtue of the case of Samn v Government of Malaysia 1976 the court held that the employers were not vicariously liable as the act was not done in the course of employment If an employer is held vicariously liable he has a right in turn to institute an action against his employee to get an indemnity or reimbursement He may also be able to terminate the contract of employment depending on the circumstances On top of vicarious liability a employee may be primarily liable for not providing adequate training or guidelines for daily work tasks Did it place adequate sign etc By virtue of the case of Management Corporation Strata Tite Plan No 2297 v Seasons Park Ltd 2005 the court held that a person who engages an independent contractor to do some work is not vicariously liable for his actions done in the course of his work o UNCISG only applies if both countries have signed the convention and hardly use UNCISG as incoterms are used Actual Q Apparent authoritv agencv relationship Principal agent third party contract between principal amp 3ml pa rty Can the 3ml party sue the principal IS the contract between principal amp third party valid Must the principal pay the 3ml party Can the 3ml party sue the agent Is the agent liable to the 3quot I party If an agent claims that he is an agent he is guaranteeing that he has the authority to act as an agent If he doesn t have the authority he has breached his warranty of authority allowing the 3ml party to sue the agent Authority of agent a Agent b Apparent
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