CONTRACT - VITIATING FACTORS (Pg 141)

There are 4 main factors, which can affect the enforceability of a contract.

Incapacity (Pg 142) lack of capacity which may characterize a contracting party
Rationa ! - To protect societys young form imprudent bargains - To place the responsibility on adults who contract with minors to exercise prudence, caution Ag! o" Ma#ority Raj Bahadur Singh & Anor v Bank of India (1993) 2 years s35 Civil Law A ! (Ca" #3) ! minor who has attained " can now enter into most agreements and bring#defend legal proceedings as if minor was of full age in connection with acting as$ . %irector of company, manager of &&' 2. %rawer#drawee of bill of exchange (. )ole*proprietor or partner of business 4. 'artner of &imited 'artnership +. &andlord#tenant of leases less than ( years ,ut the minor cannot enter into purchase, sale, mortgage, assignment of settlement of any land or lease for more than ( years. App ication - -inor can always enforce contract .sue adult/ - !dult can only sue minor in 0alid 1ontracts Va i$ Contracts ,inds both minor and other party I" %inor &as pai$ "or t&! goo$' &! cannot r!co(!r t&! %oni!s pai$ .'g 44/ $al%n!i v Canali (1&&9) 2hen an infant has paid for something and has consumed or used it, it is contrary to natural 3ustice that he should reco0er back the money which he has paid Minors (Pg 142) )!n!"icia Contracts "or N!c!ssari!s * +,!c-t!$ contract .'g 4+/ s3(3) Sal% of 'oods A ! 4oods suitable to the condition in life of the minor concerned and to his actual re5uirements at the time of the sale and deli0ery (ash v In)an (19*&) contract unenforceable because 6ash failed to pro0e that the clothes were suitable to his actual re5uirements at the time of sale and deli0ery/ +%!%rs v ,l%)ings (1&#*) 7lemmings bought gold watch and chains which could constitute necessaries gi0en his position as the eldest son of a gentleman of fortune who was also a -ember of 'arliament/ s3(-) Sal% of 'oods A ! pro0ides that a minor must pay 8a reasonable price9 for the goods which ha0e been 8sold and deli0ered9 to the minor +,!c-tory Contracts "or N!c!ssari!s .'g 4:/ Goo$s. (ash v In)an (19*&) the other party must ha0e performed his obligations before the contract is binding upon the minor S!r(ic!s. Ro.%rs v 'ra/ (1913) binding upon the minor regardless whether the other party has performed his obligations or not )!n!"icia Contracts "or +%p oy%!nt .'g 4;/ s1- 0)"lo/)%n! A ! ! person below the age of 2 years shall<be competent to enter into a contract of ser0ice<=pro0ided that> no contract of ser0ice<shall be enforceable against =that> person<unless it is for his benefit 1% ,ran %s o v Barnu) (1&9*) terms of the deed not beneficial to ,arnum .-n!n"orc!a/ !/ Cha"lin v L%sli% ,r%win (+u.lish%rs) L!d (1922) 3 contract was beneficial o0erall as it enabled 1haplin to get a start as an author and earn money e0en though there were certain disad0antageous aspects .book showed him as a ?depra0ed creature/ . !n"orc!a/ !)

0oans "or N!c!ssari!s .'g 4:/ 7inancial @nstitutions in )ingapore typically lend money to minors only if minor can supply a guarantor who will guarantee the loan. s- 4inors5 Con!ra ! A ! guarantee is enforceable e0en if the underlying loan agreement is unenforceable Voi$a/ ! Contracts ,inds other party and binds minor unless minor repudiate Voi$a/ ! not Voi$ .'g 4"/ -inor is entitled to repudiate the contract without any liability on his part any time during his infancy or within a reasonable period of time after he attains ma3ority. Antil he repudiates, the contract remains enforceable. 1avi%s v B%n/on67arris (1931) minor entered lease for flat R!asona/ ! ti%! "or r!p-$iation o" a (oi$a/ ! contract .'g 4"/ 2hat amounts to reasonable time within to repudiate a 0oidable contract is a 5uestion of fact which depends on the circumstance of the case. +""!ct o" r!p-$iation o" a (oi$a/ ! contract .'g 4"/ Bnce repudiated, the minor is no longer bound to perform any future obligations. Ce would not be entitled to reco0er any money paid or property transferred by him to the other party unless there is a total failure of consideration$ S!%in.%rg v S ala (L%%ds) L!d (19-3) Rati"ia/ ! Contracts ,inds other party and binds minor only if minor ratifies .'g 4"/ @f a minors contract does not within the class of 0alid or 0oidable, it would be ratifiable. )uch contracts would not be 0alid or enforceable against the minor unless he ratifies it after he attains ma3ority. The contract ne0ertheless binds the other party. R!stit-tion o" Prop!rty I%prop!r y O/tain!$ .'g 4D/ s3(1) 4inors5 Con!ra !s A ! the court may, if it is 3ust and e5uitable to do so, re5uire the minor to transfer to the adult any property ac5uired by the minor under the contract, or any property representing it. @n 0oidable and ratifiable contracts, this pro0ides a partia r!%!$y to a person who enters into a contract with a minor where he can at least reco0er the property from the minor M!nta y 1nso-n$ an$ Into,icat!$ P!rsons (Pg 142) 1ontract with persons stated is 0alid but may not be enforceable against him if it can be shown that at the time the contract was made$ - he was incapable of understanding the nature of the contractE - the other party knew or ought to ha0e known of his incapacity. s3(-) Sal% of 'oods A ! also applies to mentally unsound and intoxicated persons. 2hen they ha0e obtained goods which are necessaries, they may be re5uired to pay a reasonable price for the goods$ Ch% So) .!% 8i" & 9rs 4aha +!% L!d & 9rs (19&9)

Minors (Pg 142)

I !ga ity (Pg 134) 2hen the source of law is infringed whether statute or common law
Ga%ing an$ 5ag!ring .'g + / s5 Civil Law A !, all contracts of gaming and wagering are generally 0oid by statute. Thus, no legal effect and cannot be enforced Contracts Contrary to P-/ ic Po icy .'g +2/ 2hen the contract contra0enes some aspect of public policy. Fg. To commit a crime, contract which promotes sexual immorality, contract which benefits a foreign enemy or undermines the relationship with a friendly country, contract inimical to administration of 3ustice, contract to oust the 3urisdiction of the courts Contracts I !ga in P!r"or%anc! .'g +2/ )ome contracts are illegal because stat-tory pro(isions prohibit them. 2hen the legislatures intention is to prohibit a type of contract is clear from the statute, the contract may be 0oid and unenforceable by all the parties, whether or not they are aware of the statutory illegality Constraints in R!straint o" Tra$! .'g +(/ 4eneral rule is that all Gestraint of Trade .GBT/ clauses are illegal and 0oid prima facie, and it is for the co0enantor to pro0e otherwise$ Asiaw%rks 'lo.al Inv%s!)%n! 'rou" +!% L!d v Is)ail .in S/%d Ah)ad & Ano!h%r (-**#) To be 0alid, an GBT clause must fulfil the following ( criteria$

I !ga Contracts (Pg 131)

16 0!giti%at! Int!r!st .'g +4/ The restraint must protect some proprietary or legitimate interest of the co0enantee. Tra$! S!cr!ts an$ tra$! contracts may constitute legitimate interests$ Asia Busin%ss ,oru) +!% L!d v Long Ai Sin & Ano!h%r (-**3): ! restraint intended merely to %ini%i7! co%p!tition or to pre0ent an employee from using personal skills or knowledge ac5uired during his pre0ious employment is then likely to be 0oid$ S!ra!% h S/s!%)s L!d v (/a) Chiu Shin & 9!h%rs (-**5) 26 R!asona/ ! Scop! .'g ++/ The restraint must be reasonable in terms of its period, geographical scope and sub3ect matter. F0en where a legitimate proprietary interest is shown, the court will ensure that the co0enant in GBT 8goes no further than what is necessary to protect the interest concerned9$ 4an ,inan ial (S) +!% L!d v ;ong Bark Chuan 1avid (-**&) 4ason v +rovid%n! Clo!hing & Su""l/ Co L!d (1913) ar!a too large .0oid/ Asiaw%rks v Is)ail .in S/%d Ah)ad & Ano!h%r (-**#) clause to be read narrowly .scop!/ 86 P-/ ic Int!r!st .'g +:/ Gestraint must not be contrary#in3urious to public interest 0sso +%!rol%u) Co L!d v 7ar"%r5s 'arag% (S!our!"or!) L!d (192&) The Couse of &ords held that the 2 year solus agreement was unreasonable whereas the four*year fi0e*month solus agreement was reasonable. The test of reasonableness re5uires a consideration of the public interest which must be protected in such exclusi0e dealing agreements. G!n!ra +""!ct .'g +:/ !t common law, the general effect of illegality is that the contract is 0oid. The law treats the contract as if it had not existed in the first place and no party can sue on the contract. R!co(!ring Prop!rty .'g +;/ @n some cases the court may allow an innocent party to reco0er property which would otherwise pass to the defaulting party under the illegal contract. Siow Soon <i) & 9!h%rs v Li) 0ng B%ng (-**#) The test to apply to determine whether the court should assist a plaintiff to enforce an agreement was whether the plaintiff was able to establish his cause of action independently of the illegality. @n this case, the culprit was really the first appellant, and he should not be allowed to rely on an illegal scheme hatched by himself, and unknown to the respondent, to deny the latter his 3ust entitlement. =ok/u Inv%s!)%n! v =an Chor =hing (1993) T1T allowed to reco0er the shares R!co(!ring :a%ag!s .'g +"/ The defaulting party may be pre0ented from enforcing the contract by the maxim %> !ur"i ausa non ori!ur a !ion .an action does not arise from a base cause/. Cowe0er the innocent party may be able to reco0er damages from the defaulting party Ar h.old5s (,r%igh!ag%) L!d v S"angl%!! L!d (1921) The Fnglish 1ourt of !ppeal held that the contract was illegal in its performance but, since !rchbolds was not aware of the illegality, it was entitled to claim damages. The lack of awareness of the illegality is different from ignorance of law. <oon S%ng Cons!ru !ion +!% L!d v Ch%na. Con!ra !or +!% L!d and Ano!h%r (-**&) @f both parties are in "ari d%li !o .e5ually at fault/, then neither can establish a cause of action against the other without relying on its own wrongdoing, thus neither party obtains a remedy. S!(!ranc!s .'g +D/ )ometimes within the clause itself particular words can be se0ered so as to sa0e the rest of the clause. 4enerally, se0erance is possible in cases of illegality if$ a/ the promises are se0erable in nature b/ it is possible to se0er the 0oid part by deleting the offending words or clause without adding, substituting, rearranging or re*drafting the contract .BL?0 +0(CIL =0S=/ c/ )e0erance must not change the basic nature of the contract. 'oldsoll v 'old)an (1915) using the blue pencil test, the court se0ered the other locations and the reference to real 3ewellery and allowed the remaining clause to stand

I !ga Contracts (Pg 131)

+""!cts o" I !ga ity (Pg 139)

Misr!pr!s!ntation (Pg 132) 2hen the source of law is infringed whether statue or common law. !
misrepresentation is a false statement of fact made by one party .representor/ to another .representee/ which induces and is relied upon by the representee to alter his position. Stat!%!nt o" Fact @n a claim for misrepresentation, the operati0e statement must be one of past or existing fact, that is 0erifiable and#or capable of scientific proof. Not p-"" Not stat!%!nt o" int!ntion @t cannot be a statement of some likely future e0ent, although in certain circumstances, a statement of intention as to future action could be a false statement of fact if, at the time of making the statement of intention, the representor did not in "act hold the intention. 0dging!on v ,i!@)auri % (1&&5) @f it can be ascertained, =the state of a mans mind> is as much as fact as anything else. ! misrepresentation as to the state of a mans mind is, therefore, a misstatement of fact. =i""%r Cor" +!% L!d v A=C Cor"ora!ion (-**B) The plaintiff had not asserted that the defendant had no intention of keeping its word when the alleged representation was made, nor had the plaintiff adduced e0idence in relation to this issue. Not stat!%!nt o" opinion ! statement of opinion usually cannot form the basis of a misrepresentation unless the representor had access to the rele0ant facts and had no reasonable ground for holding such an opinion. Biss%! v ;ilkinson (19-B) The property cannot hold that much sheep but that claim was a statement of opinion and did not amount to misrepresentation. Fa s! Stat!%!nt o" Fact (Pg 192) =ai <i) San v Li) Ch%r <ia (-**1) 2here the facts are not e5ually well known to both sides, then a statement of opinion by the one who knows the facts best in0ol0es 0ery often a statement of a material fact, for he impliedly states that he knows facts which 3ustify his opinion .co%parati(! ;no< !$g! o" parti!s) Not stat!%!nt o" a< !n erroneous statement of law is normally not capable of founding a claim in misrepresentation. Ignoran!ia l%>is non %> usa! ignorance of law is not a defence. Not si !nc! )ilence in itself does not amount to misrepresentation. <%a!%s v Lord Cadogan (1&51) 1ourt held that &ord 1adogan had no duty to disclose the state of his house, therefore, no misrepresentation. Cowe0er, silence may amount to misrepresentation if a. @t becomes a &a "-tr-t& by what is left unsaid .a half*truth is a whole*lie/ 1i))o k v 7all%!! (1&22) )eller said that the place was fully let but did not say the tenants had gi0en notice to 5uit. The unsaid facts turned the stated facts into half*truths and this constituted misrepresentation. =rans6world (Alu)iniu)) L!d v Corn%ld%r China (Singa"or%) (-**3) ! mere silence could not, of itself, constitute willful conduct designed to decei0e or mislead. The misrepresentation of statements comes from a willful suppression of material and important facts thereby rendering the statements untrue. b. a c&ang! o" circ-%stanc! arose which rendered a pre0iously truthful statement misleading$ ;i!h v 95,lanagan (1932) c. a $-ty is i%pos!$ upon one party to disclose facts to the other party, as in fiduciary contracts such as insurance contracts.

In$-c!%!nt 0dging!on v ,i!@)auri % (1&&5), reaffirmed by the )ingapore 1ourt of !ppeal in +ana!ron +!% L!d v L%% Ch%ow L%% & Ano!h%r (-**1) 7or a false statement to be a misrepresentation, the statement must induce the representee to enter into the contract. !s long as it is one of the inducing causes, it is immaterial that it is not the sole inducing cause. =ai <i) San v Li) Ch%r <ia (-**1) The )ingapore Cigh 1ourt held that the plaintiffs had not been induced by any representations to sell their shares to the defendant. ! misrepresentation is considered to be harmless if, amongst other things, a plaintiff did not allow it to affect his 3udgment. Opport-nity to In(!stigat! t&! Tr-t& R%dgrav% v 7urd (1&&1) The mere fact that the representee had an opportunity to in0estigate and ascertain whether a representation was true or false was not sufficient to depri0e him of his right to rely on the misrepresentation. Aurong =own Cor" v ;ishing S!ar L!d ((o -) (-**5) ! person who has made a false representation cannot escape its conse5uences 3ust because the innocent party has made his own in5uiry or due diligence, unless the innocent party has come to learn of the misrepresentation before entering into the contract or does not rely on the misrepresentation when entering into the contract. Fra-$- !nt Misr!pr!s!ntation .'g :+/ The false statement is made by the representor knowing that it is false. @t is also known as the tort of deceit. Anless a representee can show that there is dishonesty on the part of the representor, there is no fraud e0en if the statement is far fetched, negligent, or ill*concei0ed. $%llasa)/ Lakshi)i v 4u!husa)/ Su""iah 1avid (-**3) The )ingapore Cigh 1ourt has held that 8whene0er fraud or deceit is alleged, a high degree of proof is re5uired on he who asserts9 1%rr/ v +%%k (1&&9) 7or fraudulent misrepresentation to arise, the false representation must be made knowingly, or without belief in its truth, or recklessly, careless whether it be true or false. 6one of these elements were present in this case, thus there was no fraudulent misrepresentation +ana!ron +!% L!d v L%% Ch%ow L%% & Ano!h%r (-**1) The 1ourt of !ppeal held that the trial 3udges findings satisfied the essential re5uirements of law on fraudulent misrepresentation as laid down in Derry v Peek. .%isr!pr!s!ntation/ Cat!gori!s o" Misr!p6 (Pg 193) N!g ig!nt Misr!pr!s!ntation .'g ::/ 6egligent misrepresentation arises when the false statement is made by the representor without due care. s-(1) 4isr%"r%s%n!a!ion A ! ! representor who makes a false statement without fraudulent intent would still be liable unless he can pro0e that he has reasonable grounds to belie0e and did belie0e the statement to be true. 7oward 4arin% & 1r%dging Co L!d v A 9gd%n & Sons (0> ava!ions) L!d (19B&) !lthough the manager made the statement honestly, he had no reasonable grounds for the figure gi0en. ! reasonable manager would ha0e checked the shipping documents and not relied on the &loyds Gegister. Innoc!nt Misr!pr!s!ntation .'g :;/ @nnocent misrepresentation arises where the representor made the false statement without fraud and without fault. .burden of proof lies on the representor/ R%dgrav% v 7urd (1&&1) ,ecause there was no fraud or negligence on the part of Gedgra0e, the misrepresentation was an innocent one and the contract was rescinded.

In$-c!%!nt (Pg 194)

R!scission .'g :"/ s1 4isr%"r%s%n!a!ion A ! Gescission is a0ailable in all ( types of misrepresentation, e0en if the false statement has become a term of the contract. Bnce representee chooses to rescind the contract, it becomes 0oid a. ini!io, meaning that it is treated as if is has ne0er existed. The representee must gi0e notice of rescission to the other party R%s ission is no! "ossi.l% wh%n$ a. The contract is a""ir%!$ expressly or impliedly by the representee after he disco0ered the misrepresentation, although the court would not hold that a contract had been affirmed without 0ery clear e0idence to this effect$ Aurong =own Cor" v ;ishing S!ar L!d ((o -) (-**5) b. ! r!asona/ ! a%o-nt o" ti%! &as aps!$ since the disco0ery of the misrepresentation L%af v In!%rna!ional 'all%ri%s (195*) The defendant only disco0ered the truth after + years, and the court held that the right to rescind had long been lost. c. The parties cannot be restored to their original position before the contract . r%s!i!u!ion in in!%gru) i%possi/ !) d. The court exercises its discretion pursuant to s-(-) 4isr%"r%s%n!a!ion A ! to award damages in lieu of rescission :a%ag!s .'g :"/ %amages is the monetary compensation ordered by a court re5uiring the defaulting party to pay money to the in3ured party. Co))on Law allows damages for fraudulent misrepresentation. s-(1) 4isr%"r%s%n!a!ion A ! allows the court to award damages for negligent misrepresentation. s-(-) 4isr%"r%s%n!a!ion A ! grants to the court a discretion to order $a%ag!s in i!- o" r!scission for both negligent and innocent misrepresentation. In$!%nity .'g :"/ !n @ndemnity is an obligation whereby one person is held responsible for the liability of another person. !n indemnity is used to help restore the in3ured party to his s!a!us Cuo an!% .the position he was in beforehand/. @ndemnity is a0ailable in cases of innocent misrepresentation. Nonr! ianc! C a-s! (Pg 19=) Non-r! ianc! c a-s! .'g :D/ 9ri%n! C%n!r% Inv%s!)%n! L!d and Ano!h%r v So i%!% '%n%ral% (-**B) The )ingapore Cigh 1ourt has held that a non*reliance clause which pre0ents the representee from establishing reliance on the representation can be effecti0e to exclude the representors liability for misrepresentation, sub3ect to the reasonableness test expressed in s11(1) UCTA.

R!%!$i!s o" Misr!p6 (Pg 19=)

Mista;! (Pg 1>4)

Co%%on M-t-a 1ni at!ra 1ommon mistake occurs when both parties to the contract make the same fundamental mistake. Cou!uri%r v 7as!i% (1&5-) -utual mistake occurs when the parties misunderstand each other and are at cross purposes. Bnly when one party is mistaken. 6on est factum means 8it is not my deed9. !rises when a person signs a document that is fundamentally different in character from that which he contemplated. L%% Sir% Chun v Sourgra"%s +a kaging +rodu !s +!% L!d (1993): To a0oid a contract on the this basis, the plaintiff must show a. the document signed is radically different or totally different in character or substance from that which he intended to sign b. he had not been careless in signing the document c. he took such care as a person in his position ought to ha0e taken.

Non !st "act-%

Ot&!r Vitiating Factors (Pg 1>2)

@f a person is forced to enter into a contract as a result of actual 0iolence or threats of actual 0iolence, the contract would be unenforceable. Bar!on v Ar)s!rong (19B2) Fconomic %uress refers to unlawful or illegitimate commercial pressure. @f a party to a commercial transaction is left with no choice but to agree to certain terms and agrees to those terms under protest such economic duress may be made out. A!las 0>"r%ss L!d v <af o L!d (19&9) The party must ha0e ob3ected in the first place .protest/ and take steps asap to a0oid changes to the contract. @f not they would lose their right as in (or!h 9 %an Shi""ing Co L!d v 7/undai Cons!ru !ion Co L!d (19B9) ! situation when the contract may not be entered into by ones own free will. Andue influence seeks to pre0ent 0ictimization. In h% (oriah v Shaik Alli% .in 9)ar (19-9) . Andue influence is also presumed in some relationships like solicitors and clients, doctors and patient. Cusband and wife is not pr!s-%!$ and must be pro0ed. 1n$-! In" -!nc! Li) '%ok 7ian v Li) 'uan Chin (199#) 2hen it is presumed, the presumed party has the burden of pro0ing that there is no undue influence. Bn the other hand, when presumption is absent, the alleging party has the burden of pro0ing it by establishing$ a. that the other party had the capacity to influence the complainant b. the influence was exercised c. its exercise was undue d. its exercise brought about the transaction

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