Contract Exam Notes - Caselist SEM 1 PDF

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Contract Law Case List Semester 1
Law of Contract (National University of Singapore)
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Contract Law CaseList (Semester 1)

FORMATION & ENFORCEABILITY
1. OFFER
1.1 Objectivity and mistaken offers
 Protect honest and reasonable man
 If mistake, no intention to create contract in first place/ no nexus
 Hard to identify subjective intentions, therefore, objectively ascertained
Smith v Hughes [1871] 1 LR 6 QB 597
 Buyer thought was old oats, seller was selling new oats.
 If seller knew of mistake of buyer? = no contract
 If seller did not know buyer wanted old oats = contract exists
Hartog v Colin & Shields [1939] 3 All ER 566
 Buyer ‘must have known’ of seller’s mistake of ‘per piece’ vs ‘per pound’
 Objectivity applied here
Tribune Investment Trust Inc v Soosan Trading Co Ltd [2000] 3 SLR 405
 Dicta ‘to ensure reasonable expectation of honest men not disappointed, test of
inferring ad idem is objective. Thus, the language used by one party, whtever
his real intention may be, is to be construed in the sense in which it would
reasonably be understood by the other’
Chwee Kin Keong and Others v Digilandmall.com Pte Ltd [2004] 2 SLR 594
 Buyers ‘must have known’. Objective approach requires imputed knowledge of
mistake. Actual knowledge of mistake is irrelevant.
Scriven Bros v Hindley [1913] 3 KB 564
 If buyers misled sellers, no contract.
 Confusion of shipping mark of crate, hemp v tow.
 No nexus. Different goods in mind of two parties.
Raffles v Wichelhaus (1864) 2 H & C 906
 Latent ambiguity, no contract. Same name ship case
 Objectivity had ‘run out’
1.2 Offers and invitations to treat

 To distinguish between offer and ITT, consider:
o Protection of reasonable expectations of parties
o Certainty
o Protect consumers
o Space to negotiate w/o being locked in
Harvey v. Facey (1893)
 Request for info is not an offer
Storer v. Manchester City Council [1974] 1 WLR 1403
 ITT = willingness to embark on negotiations
 Offer = willingness to be bound
 Df’s instruction was seen ‘objectively’ to denote an intention to be bound by
terms of agreement. Therefore, considered as offer and not ITT.
Gibson v. Manchester City Council [1978] 1 WLR] 520
 Df only invited Pf to make ‘formal application’, no ‘intention to be bound’.
 Df’s letter classified as ITT
Spencer v. Harding (1869-70) LR 5 CP 561
 Advertisement for tenders is not a contract for sale to highest bidder
 Bid = offer.
Pharmaceutical Society of GB v. Boots Cash Chemists [1952] 2 QB 795

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 Display of goods/advertisements = ITT

 Customers make offer at cashier, cashier accepts
o To prevent customers being bound the moment they pick up item
o Allows seller to retain freedom, place for bargain, not compulsory sale
o Prevent seller from incurring obligation to sell even if out of stock
Fisher v Bell [1961] 1 QB 394
 Display of goods = ITT
 Illegal knife for sale
Partridge v Cittenden [1968] 1 WLR 1204
 Illegal birds advertised as for sale
 Merely ITT, did not break statute
Chapelton v. Barry UDC [1940] 1KB 532
 Display taken to be an offer due to policy reasons
o There was intention for Df to be bound
o Df could not reject money Pf gave once he picked deck chair and
demonstrated intention to hire it
 Treating display as offer allowed court to accelerate point of contract formation
in order to keep out a harsh exclusion clause which was introduced later
Carlill v Carbolic Smoke Ball Co. [1893] 1 QB 256
 Advertisement taken to be an offer due to policy reasons
 $1000 shows intention to be bound, treated as unilateral contract
Chwee Kin Keong and Others v Digilandmall.com Pte Ltd [2005] 1 SLR 502.
 Dicta: Online shopping/advertisements are treated as ITT
 Supported by Electronic Transactions act
Thornton v. Shoe Lane Parking Ltd [1971] 2QB 163.
 Machine makes a standing offer
 Acceptance takes place when user prompts machine to issue a ticket
 Terms cannot be added after acceptance
Blackpool & Fylde Aero Club v Blackpool Borough Council [1990] 3 All ER 25
 By default, invitation to tender = ITT, submission of tender = Offer,
Acceptance of tender = Acceptance
 In this case, apply 2 contact analyses.
o Implied offer to consider each tender submitted as long as submissions
were made on time (unilateral contract)
o Failing to consider Pf’s tender, Df breached unilateral contract
Hiap Huat Pottery (S) Pte Ltd v TV Media Pte Ltd [1999] 1 SLR 14
 A collateral contract exists only when a main transaction had been entered into.
Ang Sin Hock v Khoo Eng Lim [2010] 3SLR 179
 Presence of collateral contract. Although leads to uncertainty but will result in
‘just’ outcome
The Barranduna [1985] 2 Lloyd’s Rep 419
 Quotations are merely ITT
1.3 Termination of offer

Dickinson v Dodds [1876] 2 Ch D 463

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 Revocation through 3P is valid.

 Mellish Lj: “once the person to whom the offer was made knows that the
property has been sold to someone else, it is too late for him to accept the
offer”
Financings Ltd v Stimson [1962] 1 WLR 1184
 Courts can imply a condition into the offer such that the offer will lapse if it is
not, at the time of the acceptance, in substantially the same condition as it was
when the offer was made
 Car stolen and damaged before Pf signed agreement
 Pf not in position to accept because the condition on which it was made no
longer held
Dysart Timbers Limited v Roderick William Nielsen [2009] NZSC 43
 NZSC held that offer can lapse if there was fundamental change in basis of offer
 Same principle as Stimson
Norwest Holdings Pte Ltd (in liquidation) v Newport Mining Ltd [2010] SGHC 144
 Courts can imply a condition into the offer such that the offer will lapse if it is
not, at the time of the acceptance, in substantially the same condition as it was
when the offer was made
 Pf agreed 2hrs after EQ w/o knowledge of EQ occurring
 In this case, Pf agreed before the supervening event; contrast with Stimson
 Courts still held that change in conditions terminated the offer. (policy)
2. ACCEPTANCE
Inland Revenue Commissioners v Fry [2001] STC 1715
 Df sent cheque with note that he paid his taxes in full (cheque was less than
owed balance)
 Pf cashed cheque. No acceptance, Pf succeeded in claiming the balance.
 No meeting of minds, cashing of cheque did not amount to acceptance of Df’s
note
2.1 Correspondence of acceptance with offer

Hyde v. Wrench (1840) 3 Beau 334
 Counter-offer kills original offer. Initial offer cannot be accepted again
 However need to distinguish counter offer from request for info
Stevenson, Jaques &Co v. McLean [1880] 5 QBD 346
 Request of info does not kill original offer
Brogden v. Metropolitan Railway Co (1876-77) LR 2App Cas 666
 Battle of Forms – last shot approach. Acceptance by conduct
 Pf’s amendment to contract was counter offer. Df accepted by conduct
 Can argue Df trying to wriggle out of bad contract?
Butler v. Ex-Cell-O Corporation (England) Ltd [1979] 1 WLR 401
 Battle of Forms – last shot approach. Acceptance by conduct
 Accompanying letter not deemed as counter offer, simply a means of identifying
the order
 Policy here, Courts interpreted accompanying letter to not be counter offer
 No nexus here!
Tekdata Interconnections Ltd v Amphenol Ltd [2009] EWCA Civ 1209, [2009] All
ER (D) 208 (Nov)
 Dicta: It always depends on an assessment of what the parties must objectively

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be taken to have intended…traditional offer and acceptance analysis is to be

applied in battle of the forms cases.
2.2 Nexus (causal connection) between offer and acceptance

 Acceptance must be made in response to a known offer and not to any other
incentive. No acceptance if performance in ignorance of the offer.
Tinn v. Hoffman (1893) 29 LT 271
 Cross-offers do not amount to a valid contract where there was no nexus
 2 exactly same offers does not equate to contract
R v. Clarke (1927) 40 CLR 227
 No nexus if one’s performance was done not as a result of the reward
 Pf gave information to absolve himself instead of for the reward
Gibbons v. Proctor (1891) 4 LT 594
 Pf did not know of reward when he supplied info to fellow officer
 Pf knew of the reward before it reached the superintendent
 Arguably no nexus, but policy allows claim
 Pf was meritorious claimant
Williams v. Carwardine (1833) 5 C & P 566
 Pf signed statement to “ease conscience”
 Court found that Pf ‘must have known’ of the reward.
 Arguably no nexus, but claimant was meritorious
2.3 Method of acceptance

Manchester Diocesan Council for Education v. Commercial and General Investments
Ltd [1970] 1 WLR 242
 Mode of acceptance other than that prescribed by parties permitted
 Mode of acceptance specificd in tender form not sole permitted means of
acceptance
 Df not disadvantaged by notification from surveyor
 Pf made the prescription and therefore can waive compliance to it
Felthouse v. Bindley (1862) 11 CBNS 869
 No acceptance by silence
Compare with acceptance by conduct Brogden v. Metropolitan Railway Co (1876-77)
LR 2App Cas 666
 Dicta: when an offer is made to another party, [where] there is a request express
or implied that he must signify his acceptance by doing some particular thing,
then as soon as he does that thing, he is bound
2.4 Communication of acceptance

Adams v. Lindsell [1818] 1 B and Ald 681
 Postal acceptance rule: Offeror is bound when offeree posts his acceptance
Household Fire & Carriage Accident Insurance Co Ltd v. Grant [1879] 4 Ex.D 216

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 Offeror is bound before he knows of the acceptance, even if its arrival is

delayed and even if he never accepts it
Byrne v. Van Tienhoven [1880] 5 CPD 344
 Offeror cannot revoke his offer after offeree’s acceptance is posted.
 Postal Acceptance rule does not apply to revocations (revocations need to be
received by offeree)
Holwell Securities Ltd v. Hughes [1974] 1 All ER 161
 Postal acceptance rule not applied
 “option shall be exercisable by notice in writing to Df”
 Pf posted acceptance but never arrived
 Requirement of “notice in writing” was implied to require actual notice which
was not satisfied
 Possible to opt out of Postal Rule
Brinkibon Ltd v. Stahag Stahl und Stahlwarenhandels GmbH [1982] 1 All ER 293
 Dicta: “no universal rue can cover all such cases; they must be resolved by
reference to an intention of the parties by sound business practice and in some
cass by a judgement where the risks should lie”
Entores v. Miles Far East Corp [1953] 2 QB 327
 If face to face acceptance drowned out, offeree must repeat acceptance
 If telephone goes dead before acceptance completed, offeree must telephone
back to complete acceptance
 If offeror does not catch clear and audible words of an acceptance but does not
bother to ask for repeat, it is his own fault and he will be bound
Tenax SS Co Ltd v. The Brimnes [1975] QB 929
 Revocation must be brought to the mind of the person to whom the offer is
made
 Df sent revocation outside office hours
 By the time Pf received revocation, contract has already been concluded
 Df in position to bear risk of telex outside office hours
2.5 Unilateral contracts

Carlill v. Carbolic Smoke Ball Co [1893] 1 QB 256
 Advertisement amounted to a unilateral contract to customers of ball
 Pf accept offer when she use ball as instructed
 When she caught flu, she fulfilled the performance criteria of contract
Errington v. Errington [1952] 1 KB 290
 Upon offeree’s performance, offeror is not allowed to revoke offer of unilateral
contract
 Father’s promise was unilateral contract that can not be revoked once couple
commenced performance provided that their performance was not left
‘incomplete and unperformed”
Daulia Ltd v Four Millbank Nominees Ltd [1978] Ch 231
 General obligation on the offeror not to revoke the offer once the offeree has
started performance
Dickson Trading (S) Pte Ltd v Transmarco Ltd [1989] 2 MLJ 408 at 414
 General obligation on the offeror not to revoke the offer once the offeree has
started performance
Luxor (Eastborne) Ltd v. Cooper [1941] AC 108
 Offeror allowed to revoke offer of unilateral contract where offeree is

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reasonably expected to contemplate such risk

 Common understanding that estate agents that “the risk in the hope of a
substantial remuneration for comparatively small exertion”
Mobil Oil Australia Ltd v Lyndel Nominees Pty Ltd [1998] 205 FCA
 Offeror allowed to revoke offer of unilateral contract where refusal to do so
would result in the offeror being bound to the offer at all times (policy)
 General rule of revocation of unilateral offers cannot be applied when the
consequence is that the offeror is forever bound and unable to revoke the offer
2.7 Alternative approach to formation

Gibson v. Manchester City Council (1978) at 523:
 Dicta: It is a mistake to think that all contracts can be analysed into the form of
offer and acceptance…
 …you should look at the correspondence as a whole and at the conduct of the
parties and see therefrom whether the parties have come to an agreement on
everything that was material.”
Butler v Ex-Cell-O Corporation at 404-5
 Dicta: The better way is for the courts to determine reasonable compromise on
the disputed terms if the parties are agreed on all material terms.
 Even if terms used by parties are mutually contradictory, it should be possible
for a court to ‘scrap’ the terms and replace them by a reasonable implication
Projection Pte Ltd v The Tai Ping Insurance Co Ltd [2001] 1 SLR(R) 798
 Approved Lord Denning in Gibson
 ‘examine the whole of documents in the case and decide from them whether the
parties did reach an agreement upon all material terms in such circumstances
that the proper inference is that they agreed to be bound by those terms from
that time onwards’
 Ensure parties intentions. But to what extent? Raise question of Interpretation as
well
3. CERTAINTY & COMPLETENESS

3.1 Vagueness and incompleteness
Nicolene Ltd v. Simmonds [1953] 1QB 543
 Vague clause severed to uphold remaining parts of the contract, as long as it
does not ‘impair the sense or reasonableness of the contract as a whole’
 If the parties clearly regard themselves a s bound, not fair to allow one party to
claim ‘vague’ terms and escape ‘bad bargain’
May and Butcher v. R [1934] 2 KB 17
 An agreement to enter into an agreement, if it involves a critical part of the
contract, is not a contract and will be void for uncertainty
 Df agreed to sell Pf tentage at a price to be agreed at another date
 No contract since a ‘critical part’ of the contract, price, is left undetermined
Hillas v. Arcos (1932) 147 LT 503h

 Resolution of uncertainty by previous dealing, custom of trade and standard of
reasonableness
 Df tried to escape bad bargain by claiming no enforceable meaning could be
deduced from ‘fair specification’
 Uncertainty cured by reference to the parties previous dealing, the custom of the

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timber trade and the standard of reasonableness

Foley v. Classique Coaches [1934] 2 KB 1
 Resolution of uncertainty by previous dealing and standard of reasonableness
 Pf had agreement with Df that it buys petrol ‘at a price to be agreed by the
parties in writing from time to time’
 Court enforced this agreement as one to buy fuel at a reasonable price
G Percy Trentham Ltd v. Archital Luxfer Ltd [1993] 1 Lloyd’s Rep 25
 Where sufficient intention to be bound can be inferred from reliance of the
parties on the contract, it will be “difficult to submit the contract is void for
vagueness or uncertainty. Specifically, the fact that the transaction is executed
makes it easier to imply a term resolving the uncertainty, or, alternatively, it
may make it possible to treat a matter not finalized in negotiations as
inessential.”
Scammell and Nephew Ltd v. Ouston [1941] AC 251
 Contract void for uncertainty
 ‘Hire purchase terms’ held to be too vague
Sudbrook Trading Estate Ltd v. Eggleton [1983] 1AC 444
 Court substituted own criteria in place of an agreed mechanism, where the
mechanism was not essential to the contract
 HL held that a workable criterion, neutral umpire, was not ‘essential’ to
contract.
 Substituted its own machinery by ordering an inquiry into the fair value of the
premises
Tan Yeow Khoon v Tan Yeow Tat [1998] 2 SLR(R) 19
 ‘in a contract for sale at evaluation, the court can direct an inquiry to ascertain
the price “not only where the parties fail to provide the machinery, but also
when the machinery provided had broken down: provided of course that on the
true construction of the contract, the agreed machinery was subsidiary to the
ascertainment of the proper price and was not of the essence of the contract.
The question whether the prescribed machinery was of the essence of the
contract is a matter of construction.
 Raises doubt on whether parties even need to agree on price for contract to even
be ‘certain’. Contrast with May v Butcher.
Walford v. Miles [1992] 1 All ER 453
 Lock-in agreement void for uncertainty; agreeing to agree is too uncertain for
courts to find an enforceable contract
o Inconsistent with contract as self-interested activity
o Difficult in determining when breach occurred; “good faith” vague?
o Damages for brech hard to quantify
 Lock-out agreement (not to negotiate with 3rd party) enforceable if there is a
time limit
Pitt v. PHH Asset Management Ltd [1993] 4 All ER 961

 Lock-out agreement (not to negotiate with 3rd party) enforceable if there is a
time limit
Petromec Inc v Petroleo Brasileiro SA Petrobras [2006] EWCA Civ 1038
 In dicta, Longmore LJ does not consider that Walford Miles binds the cpourt to
hold that the express obligation to negotiate is completely without legal
substance.

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3.2 Conditional agreements: ‘subject to contract’

 No binding contract if it is a precondition of the existence of the contract, so that
one or both parties retain the power to refrain from taking the stipulated step
and prevent the formation of the contract
 Binding contract if it merely indicates the manner of performance of an already
enforceable contract so that the parties’ expectations are protected even if one
refuses to take the next step.
A-G v Humphreys Estate [1987] HKLR 427
 ‘it is invariably a question of construction whether the execution of a further
contract is a condition or a term of the bargain or a mere expression of the
parties’ desire as to how the transaction already agreed should in fact proceed
to completion’
Teo Teo Lee v Ong Swee Lan [2002] 4 SLR 344, at [61]
 Conditional agreement found to be binding
 Pf sent offer of lease with ‘subject to tenancy agreement’ and deposit
 Memo was binding, ‘subject of tenancy’ was an expression of desire to draw up
a formal document. Deposit was significant amount too (construction)
Storer v. Manchester CC (as above)
 ‘court may be slow to assist a party who has deliberately discouraged the other
from dealing elsewhere by encouraging the belief that contract has been
conclude, while trying to retain its own discretion to back out’
RTS Flexible Systems Ltd v Molkerei Alois Muller GmbH & Co KG (2010) UKSC 14
(SC)
 Letter of intent taken to be enforceable, where parties have commenced
performance
 Parties no sign contract, but commenced performance using a letter of intent
(subject to contract)
 Even if certain terms not finalized, an objective appraisal of words and conduct
can lead to the conclusion that they had not intended agreement of such terms
to be a precondition to a concluded and legally binding agreement
3.3 Restitutionary award in the absence of a contract

 Where there is no valid contract but parties went ahead in their performance, the
courts would find a claim in restitution to resolve disputes
BSC v Cleveland [1984] 1 All ER 504; Ball 99 LQR 572
 Parties commenced performance on agreement even though only ’letter of
intent’
 Claim in unjust enrichment allowed based on restitution
Regalian Properties Plc V London Docklands Development Corporation [1995]

1WLR 212.
 Restiutionary award not found where work was done at the risk of the
performing party
 Fair risk allocation – preparatory work was done with such risks in mind, no
restitutionary award granted
4. INTENTION TO CREATE LEGAL RELATIONS

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4.1 Family and social agreements

 Generally unenforceable
o Floodgates
o Courts supposed to promote market transactions
o Freedom from contract – limit state intrusion into private lives of
citizens
Jones v. Padavatton [1969] 1 WLR 328
 Presumption that parents and children do not intend to create legal relations
between each other
 No intention to create legal relations as parties were in good terms
 Mother wants daughter to pass bar in exchange for house
Fleming v. Beeves [1994] 1 NZLR 385 at 389
 New Zealand approach tend to adopt a more fact sensitive approach instead of
using the English presumption that parent-child no intention to create legal
relations
Balfour v. Balfour [1919] 2 KB 571
 Presumption that married parties do not intend to create legal relations between
each other
 Husband provided allowance for wife, husband stopped paying
 Lack of consideration and lack of intention to create legal relations
Radmacher v Granatino [2010] UKSC 42
 Prenuptial agreement originally deemed to be contrary to public policy as it
encouraged divorce
 UKSC held that in future cases ‘court should give effect to the nuptial
agreement that is freely entered into by each party with a full appreciation of
its implications unless in the circumstances prevailing it would not be fair to
hold the parties to their agreement
Choo Tiong Hin v Choo Hock Swee [1959] M.L.J. 67
 General presumptions applies in Singapore
 ‘the agreement alleged by the applicants, even if proved, were not intended to
create legal relations, and were therefore not binding in law as contracts’
De Cruz Andrea Heidi v Guangzhou Yuzhitang Health Products Co Ltd and Others
[2003] 4 SLR 682 at [196]-[199]
 5th Df who sold medicine to Pf was a friend
 No intention to create legal intentions (objective test- based on fact pattern)
Hadley v. Kemp [1999] EMLR 589
 Presumption that friends do not intend to create legal relations between each
other
 Friends in a band and dispute arose
 At time of agreement, they form band not just for business but also because they
loved making music together
McPhail v Bourne [2008] EWHCA 1235
 Another friendship and band case
4.2 Commercial agreements

 General presumption that parties intend to create legal relations
 Exceptions
o Honour clause
o Letters of comfort
o Letters of intent

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o Subject to contract
Edwards v. Skyways Ltd [1964] 1 WLR 349
 Court found that employer’s promise to pay a sum to employees made
redundant was contractually enforceable although it was described as ‘ex
gratia’; by favour
Rose and Frank Co v. JR Crompton and Bros Ltd (1925)
 Honour clauses evince an intention not to enter into a legally binding contract
 Honour clause: ‘the arrangement is not entered into as a legal agreement and
shall not be subject to legal jurisdiction in the Law Courts and it is only a
definite expression and record of the purpose and intention of the tree parties
concerned’
Kleinwort Benson Ltd v Malaysian Mining Corp Bhd [1989] 1 All ER 785
 Comfort letters do not intend to create legal relations
Petrosin Corp Pte Ltd v Clough Engineering Ltd [2005] SGHC 170
 ‘subject to contract’ = no intention to create legal intentions
 mere negotiations only
5. CONSIDERATION
 Something that must be given in exchange for a promise.
 In order to enforce an undertaking, a party must give something stipulated by
the other as the price of his undertaking
5.1 The requirement of nexus

Combe v Combe [1951] 2 KB 215
 No consideration if no nexus
 No consideration if benefit conferred on promisor was not requested by
promisor
 Husband promise to pay wife, wife sought to enforece promise based on
consideration that she did not apply for maintenance
Alliance Bank v Broom (1864) 2 Dr & Sim 289
 No consideration if no nexus
 Courts prepared to implay a request for forbearance even if it was not explicitly
requested
 Courts invented consideration – Pf not suing Df was valid consideration
In re McArdle, Decd [1951] Ch. 669
 Past consideration is no good consideration
 Promise made after consideration was performed
 Promsie not enforceable
Pao On v Lau Yiu Long [1980] A.C. 614

 Exception to the rule that past consideration is not good consideration
o He performed original act at promisor’s request
o It was understood or implied that promise would be rewarded for the
act
o Eventual promise is one which would have been enforceable if made at
the time of the act
Sim Tony v Lim Ah Gee [1995] 2 S.L.R. 466
 Pao On criteria applied in SG

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5.2 The requirement of ‘value’

Currie v Misa (1875) LR 10 EX 153:
 ‘a valuable consideration, in the sense of the law, may consist either in some
right, interest, profit or benefit to one party, or some forbearance, detriment,
loss or responsibility given, suffered or undertaken by the other.’
Chappell & Co v Nestle [1960] AC 87
 Trivial consideration seen to have value
 ‘Wrappers were valid consideration because they had value in Nestle’s
marketing strategy’
 Policy – unfair for Nestle to retain whole benefit without paying owners of the
copyright.
 Where it is desirable courts are prepared to resort to the request conception of
value to overcome apparent absence of factual benefit/detriment
Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548
 Trivial consideration seen to have no value
 Chips were worthless, merely a convenient mechanism for facilitating gambling
 Policy – wanted to protect victims of theft
 Applied backwards reasoning
5.3 Intangible consideration

 General rule: intangible consideration = insufficient
White v Bluett (1853) 23 LJ Ex 36
 Promise not to complain not recognized as valid consideration
 Policy – Consideration was unmeritorious?
Hamer v Sidway (1891) 124 NY 538
 Promise which involves one right seen as valid consideration
 Abstinence from liquor, tobacco, swearing and gambling is a consideration
Ward v Byham [1956] 1 WLR 496
 Promise which involves one’s right seen as valid consideration
 Policy – imputed benefit to the father to have child ‘well looked after and
happy’
Thomas v Thomas (1842) 2 QB 851
 Motive not valid consideration
 Only widow’s promise to pay rent and make repairs were of value and
constituted good consideration
Compromise and forebearance to sue

Haigh v Brooks (1839) 10 Ad & El 309
 Giving righ to sue can be sufficient consideration even if that right is not certain
provided:
o Claim had some chance of success
o Person had intended to enforce the claim
Cook v Wright (1861) 1B & S 559
 Promise not to sue; although with no legal right, if made bona fide, can be
consideration
Wade v Simeon (1846) 2 CB 548
 Promise not to enforce a valid claim is good consideration for a promise given

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in return, as is a promise not to enforce a claim which is doubtful in law

 A promise not to enforce a claim which is known to be invalid is not good
consideration for a promise given in return
5.4 Pre-existing duties
Glasbrook Bros. v Glamorgan C.C. [1925] A.C. 270
 Duties over and above what is required by public law is good consideration
 Extra protection from police = consideration
 Policy – public service open for bid? Undesirable
Shadwell v Shadwell (1860) 9 CB (NS) 159
 Duties owed to 3P is good consideration
 Good consideration dspite nephew already contractually obligated to marry girl
Pao On v Lau Yiu Long [1980] A.C. 614
 Duties owed to 3P is good consideration
Stilk v Myrick (1809) 2 Camp. 317
 ‘Same for more’ no good consideration
 Sailors already obligated to sail ship home, therefore no consideration
 Policy – Fear of duress and opportunistic exploitation by crew at sea
Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 Q.B.1
 Exception to ‘same for more’ - Practical benefit is good consideration
 Element of practical benefit
o A entered into valid contract with B
o Before A has completely performed, B doubts if A would be able to
perform his side of the bargain
o B promises A additional payment in return for A’s promise to perform
his contractual obligations on time
o As a result of B’s promise, B obtains benefit or obviates disbenefit
o B’s promise not given as result of economic duress or fraud
o Benefit to B is capable of being consideration for B’s promise and the
promise is legally binding
Sea-Land Service Inc v Cheong Fook Chee Vincent [1994] 3 SLR 631
 Narrow approach to ‘practical benefit’ in Singapore
 No request by appellant that respondent should complete his last month o
employment, no practical benefit derived by appellant
Bob Teo Seng Kee v Arianecorp Limited [2008] SGHC 81
 Practical benefit applied
 There was consideration as Df derived a practical benefit from the payment
 Acknowledged DigilandMall – modern law easy to find consideration
Sunny Metal & Engineering Pte Ltd v Ng Khim Ming Eric [2007] 1 SLR 853
 Acknowledged that consideration is easy to find
 Roffey Bros - ‘factual benefit’ sufficient, need not be ‘legal benefit’
 Wong Fook Heng – consideration must be sufficient, need not be adequate
 Possible alternatives – PE, economic duress, undue influence
 Leave the future of consideration in Singapore open
Foakes v Beer (1884) 9 App. Cas. 605
 Less for same no good consideration (part performance) practical benefit
argument not considered
 Practical benefit not valid consideration in context of part-performance
 Policy – Dr Foakes set trap for Ms Beer
In re Selectmove [1995] 1 WLR 474
 Less for same not good consideration, practical benefit argument not considered

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 Company bankrupt, pay less better than pay none

D & C Builders v Rees [1966] 2 QB 617
 Less for same not good consideration
 Policy – Df’s wife behaved very badly
 ‘Where there has been true accord under which the creditor voluntarily agrees to
accept a lesser sum in satisfaction, and the debtor acts upon the accord by
paying the lesser sum and the creditor accepts it, it is inequitable for the
creditor afterwards to insist on the balance’ (PE)
6. PROMISSORY ESTOPPEL
 Generally suspensory of promisor’s right
 Only operates defensively
Hughes v Metropolitan Railway Company (1877) 2 App. Cas. 439
 Initiation of negotiation was an implied promise from the landlord not to
enforce their strict legal rights with respect to the time limit on their repairs,
and the tenant acted on their promise to their detriment
 ‘If the parties who have entered into definite and distinct terms involving certain
legal results…afterwards by their own act or with their own consent enter
upon a course of negotiation which has the effect of leading one of the parties
to suppose that the strict rights arising under the contract will not be enforced,
or will be kept in suspense, or held in abeyance, the person ho otherwise might
have enforced those rights will not be allowed to enforce them where it would
be inequitable having regard to the dealings which have thus taken place
between the parties’
Central London Property Trust Ltd v High Trees House Ltd [1947] 1 K.B. 130
 Pf leased flats, war broke out, Pf agreed to discount rent
 Pf allowed to claim for full rent after war ended, previous claims will be
estopped
 Df’s reliance need not be detrimental for PE to be invoked
6.1 Clear promise

Woodhouse AC Ltd v Nigerian Produce Ltd [1972] AC 741
 Must be clear and unequivocal promise or a representation as to a future
conduct which indicates the promisor’s intention not to insist on his strict legal
rights against the promise
 Promise need not be express but may be implied from circumstance as per
Hughes v Metropolitian
6.2 Reliance: change of position

 Promisee must have relied on the promise
o Promise must have committed himself to a course of action he would
not have otherwise adopted
o Promisee would be prejudiced if the promisor were to resile from the
promise
The Post Chaser [1982] 1 All E.R. 19, 25-27
 PE invoked unsuccessfully, seller not prejudiced by buyer’s change of position,
and hence did not rely on buyer’s change of position
 No reliance as it was not inequitable for the buyer to enforce its original rights
since the seller was not prejudiced by it

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Alan v El Nasr [1972] 2 WLR 800

 Detrimental reliance not required for PE. Only needs to show promisor changed
position
 In this case, promisee derived a benefit instead
Abdul Jalil bin Ahmad bin Talib and others v A Formation Construction Pte Ltd
[2006] 4 SLR 778
 PE was invoked successfully because it would be inequitable for trustees to
change their position as it would prejudice the Df’s, who had relied on the
promise by changing their own position
 Local application of PE
Lam Chi Kin David v Deutsche Bank AG [2010] 2 SLR 896, [55]
 Detriment understood as
o Expenditure of time and money
o Incurring ay liability
o Change of position
o The deprivation of benefit
Collier v Wright [2007] EWCA Civ 1329

 Reformulations of PE, 3 requirements and effect of PE
o If debtor offers to pay part only of amount he owes
o Creditor voluntarily accepts
o In reliance of creditor’s acceptance the debtor pays part of the amount
he owes in full
o Creditor will be bound by PE to accept that sum in full and final
satisfaction of the whole debt
6.3 Inequitable to go back on the promise

 Depends on time lag
o Post Chaser; time lag too short, promise could be restored to original
position
 Circumstances surrounding the relieving promise
D & C Builders v Rees [1966] 2 QB 617
 Surrounding circumstances will be considered deciding whether to invoke PE
 Df’s wife offers 300, Pf no choice but to accept
 Shows PE and Consideration operates in same territory
 Wife behaved badly and help creditor to ransom
 Court rejects PE
6.4 The extent of enforcement: suspensory or extinctive?

Ajayi v Briscoe [1964] 1 W.L.R. 1326
 ‘when one party in absence of fresh consideration agrees not to enforce his
rights, an equity will be raised in favour of the other party’
 ‘this equity however is subject to qualifications:
o that the other party has altered his position
o promisor can resile from his promise on giving reasonable notice
(suspensory reuirement)
o promise only becomes final and irrevocable if the promise cannot
resume his position (extinctinve requirement)

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QBE Insurance (International) Ltd v Winterthur Insurance (Far East) Pte Ltd [2005]
1 SLR 711
 promisor’s rights extinguished under PE
 Df’s detrimental reliance on Pf’s silence by not seeking to resist the claim
 PE has extinguished Pf’s rights to claim from Df
6.5 Only operates defensively: ‘shield not a sword’

 Can enforce promises of the ‘same for less’
 Cannot enforce promises of ‘more for the same’
 Cannot create new legal rights independent of parties’ pre-existing legal r/s
 Cannot create new causes of actions
Combe v Combe [1951] 2 K.B. 215
 PE cannot create new cause of action
 Wife’s reliance not requested by husband = no consideration
 PE could not avail her since it could not create new causes of action where none
existed before
Long Foo Yit & Anor v Mobil Oil Singapore Pte Ltd [1997] SGHC 323
 Sg case showing that PE cannot be used as a sword; only a shield
 Pf tried to use PE to create new causes of action
Crabb v Arun D.C. [1979] Ch 179
 Where an interest in land is involved, PE can operate as a sword to create a new
cause of action (proprietary estoppel)
 Inequitable for Df to renege on its promise which had induced Pf’s detrimental
reliance to purchase the land locked land
 Inconsistency of estoppel? Arbitrary distinction?
Amalgamated Investment v Texas Commerce Int. Bank [1981] 3 All ER 577
 ‘estoppel is only a rule of evidence, estoppel cannot give rise to a cause of
action, estoppel cannot do away with the need for consideration, and so forth.
All these can now be seen to merge into one general principle shorn of
limitations’ – Denning
Walton’s Stores v Maher (1988) 164 C.L.R. 387
 PE used as sword in Aus
 Courts found binding contract because Pf was estopped from denying the
existence of one. Pf’s argument that the parties had no pre-existing legal
relationship was rejected
 Made it clear that not all acts of reliance will give rise to PE, there must be
‘something more’ that makes it unconscionable for promisor to go back on his
promise
 Equity seen to soften the rigors of strict law
Baird Textile Holdings Ltd v Marks and Spencer Plc [2002] 1 All ER (Comm) 737
 Explains Walton Stores by referring to PE as bridging the gap in formalities and
not in consideration
 Walton stores there was an agreement only stopped by lack of formalities
 Does not contradict English Position of non-enforceability of informal
gratuitous promises
7. CONSIDERATION: AN ASSESSMENT

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Sunny Metal & Engineering Pte Ltd v Ng Khim Ming Eric [2007] 1 SLR 853
 Admitted that in modern law it is easy to locate some element of consideration
between contracting parties
 Consideration problems
o Inconsistent with intention of the parties
o Over-inclusive in enforcing non-bargains as bargains
o Under-inclusive in failing to enforce some undertakings that deserve
enforcement
o Overly technical, artificial and internally incoherent
Chwee Kin Keong and Others v Digilandmall.com Pte Ltd [2004] 2 SLR 594
 Suggested that modern law shold shed the pretence of searching for
consideration to uphold commercial transactions. The marrow of contractual
relationship should be the parties’ intention to create legal relations.
 Problems:
o ITCRL criteria is too elastic and not an easier to apply
o Even if intention can be proved, hard to determine the extent to which
parties intend to be bound
Antons Trawling Co Ltd v Smith [2003] 2 NZLR 23
 Replaced consideration in contract modification with a test of intention
 NZCA adopted approach of enforcing a ‘more for the same’ in the absence of
contrary ‘policy reasons’
Gay Choon Ing v Loh Sze Ti Terence Peter [2009] SGCA 3
 Acknowledges problem of consideration, but still remains good law in
Singapore; deliberately left it open to ensure fair/just outcome
 If consideration is to be reformed, alternatives must be well established
o Undue influence
o Economic Duress
o PE – shield/sword

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TERMS OF THE CONTRACT

I EXPRESS TERMS
 Stated by parties during negotiation or written in contractual document
 Distinguished from implied term
 Term can also be express even if it is not reduced to writing – part written, part
oral
1 Terms versus representations
 Term: within the contract, creates legal obligation for whose breach an
appropriate action lies at common law; promise for which promisor assumes
contractual obligation
 Representation: Before a contract concluded, may or may not give rise to legal
obligations e.g misrepresentation; induce representee to enter into contract
Heilbut, Symons & Co v Buckleton [1913] AC 30
 ‘It is, my Lords, of the greatest importance, in my opinion, that this House
should maintain in its full integrity the principle that a person is not liable in
damages for an innocent misrepresentation, no matter in what way or under
what form the attack is made. In the present case the statement was made in
answer to an inquiry for information. There is nothing which can by any
possibility be taken as evidence of an intention on the part of either or both of
the parties that there should be a contractual liability in respect of the accuracy
of the statement. It is a representation as to a specific thing and nothing more.’
 Test of intentions to differentiate term and representation
Bannerman v. White (1861) 10 CBNS 844
 When statement was made close to the transaction, it is more likely to be a term
 2 days between making statement and formation of contract = term
 Pf is position to know that Df’s intention of not wanting sulphur in his hops
Oscar Chess Ltd v. Williams, [1957] 1 All ER 325
 Distinction between term and representation – objective intentions of parties
 Affirmation w/o warranty is only a representation; warranty is required to make
up a term
 If seller states fact that should be within his k, and seller is ignorant, intending
that the buyer act on it, it is easy to infer a warranty
 If a seller states a fact and makes it clear he has no K, but he got it elsewhere, it
is not easy to imply a warranty
 In current case, seller’s statement of age of car merely belief and not a
contractual promise
Dick Bentley Productions Ltd v. Harold Smith (Motors) Ltd, [1965] 2 All ER 65.
 Distinction between term and representation; term found
 Representation = warranty when representation was intended to be acted on
 Representation = no warranty when seller can show it is innocent
misrepresentation and it would not be reasonable to bind him to it
 Differentiates from Oscar Chess as in this case seller is in a position to know or
at least find out the history of the car. (Test of intention)
Routledge v McKay [1954] 1 WLR 615
 Where statement made further from transaction it is less likely to be a term
 7 day interval between making statement and formation of contract = no term
 Df merely passed on info from registration book = similar to Oscar Chess
2 Was the Term Incorporated into the Written Contract?

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By signature
L’Estrange v. Graucob, [1934] 2 KB 394 (BBF 345)
 Incorporation of term by signature
 In the absence of fraud or misrepresentation, party signing is bound by terms
whether he reads it or not as long as he knows it is a contract which governs
the relations between him and the other party
Consmat Singapore (Pte) Ltd v. Bank of America National Trust & Savings
Association, [1992] 2 SLR(R) 195
 Sg’s stance same as UK
*Press Automation Technology Pte Ltd v. Trans-Link Exhibition Forwarding Pte Ltd,
[2003] 1 SLR(R) 712.
 Principle of drawing attention to onerous and unusual conditions not applicable
where there was a signed contract with explicit incorporation clause
notwithstanding that the contracting party did not have a copy of the
incorporated conditions and had not read them
 Terms incorporated by reference
 In Sg, it is sufficient as long as it was signed with k that it was a contractual
document
 Canadian approach of requiring the party relying on the document to believe
that the signor really did assent to its contents not followed in Sg
 Tension between commercial convenience vs true assent
By notice in unsigned documents

Parker v. South Eastern Railway Co, (1877) 2 CPD 416
 Where reasonable notice is given, term is more likely to be incorporated into the
contract
 In absence of signature, there must be evidence independent of the agreement
itself to prove that Df has assented to it, once it is proven that the Df has
assented to it, it is immaterial that Df had not read agreement and did not
know of its content
 Scenarios:
o Person receive ticket did not see or know there was writing = not
bound; as no reasonable notice
o Person receive ticket knew there was writing and knew or believed that
the writing contained conditions = bound; similar to signature,
immaterial whether he read it
o Person receive ticket knew there was writing but did not know or
believe it contained condition = bound if the delivering of the ticket to
him in such a manner that he could see there was writing on it and
there was reasonable notice that the writing contained conditions
Thornton v. Shoe Lane Parking Ltd, [1971] 2 QB 163
 Reasonable notice must be given at or before the time of contracting
 Additional terms printed within the carpark after receiving ticket cannot bind Pf
 Red Hand rule also mentioned
Interfoto Picture Library Ltd v. Stiletto Visual Programmes Ltd, [1989] 1 QB 433
 Red Hand Rule; onerous clauses must be pointed out

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 ‘If one condition in a set of printed conditions is particularly onerous or unusual,

the party seeking to enforce it must show that the particular condition was
fairly brought to the attention of the other party’
Press Automation Technology Pte Ltd v. Trans-Link Exhibition Forwarding Pte Ltd,
[2003] 1 SLR(R) 712, [39]
 where onerous term is explicit and contract is signed, reasonable notice is not
required
 principle od drawing attention to onerous and unusual condition is not
applicable where the signed contract with an explicit incorporation clause
notwithstanding that the contracting party did not have a copy of the
incorporated conditions and had not read them
Hakko Products Pte Ltd v. Danzas (Singapore) Pte Ltd, [1999] 1 SLR(R) 651
 Application of red hand rule in Sg
 Incorporating clause was in very small print and illegible, not brought to Pf’s
attention. Therefore, not part of the contract
By previous course of dealing or trade usage

 Arbitrary decision of how frequent is frequent
British Crane Hire Corporation Ltd v Ipswich Plant Hire Ltd [1975] QB 303
 Frequency of dealing merely illustrative of common understanding, low
frequency does not immediately mean that term not incorporated
 Courts found that form was incorporated even though they had only dealt on 2
previous occasions
 Number not important; there must be evidence that the parties had a common
understanding of the transactions
o Parties both in trade
o Parties equal bargaining power
o Terms relied on were habitually used in trade
Hollier v. Rambler Motors (AMC) Ltd [1972] 2 QB 71 (BBF 978)
 Where frequency of dealing is insufficient, unlikely to find incorporation of
clause into contract
 3-4 transactions in 5 years insufficient to enforce the incorporation of exemption
clause
 Probably due to unequal bargaining power
MGA International Pte Ltd v. Wajilam Exports (Singapore) Pte Ltd, [2010] SGHC
319
 Consistency with conduct
 SGHC explicitly states that there had to be both consistency and continuous
notice
 No matter the number of previous transactions, there must be evidence that the
parties had a common understanding of those transactions
 Suggest that there can be incorporation even if there is no previous dealings
3 The Parole Evidence Rule

Zurich Insurance (Singapore) Pte Ltd v. B-Gold Interior Design & Construction Pte
Ltd [2008] 3 SLR(R) 1029

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 Parol evidence rule in Singapore, s93 & 94 embodies ‘thin’ version of the parol
evidence rule
 “…parol testimony cannot be received to contradict, vary, add to or subtract
from, the terms of a valid written instrument [i.e. the thin definition of the
parol evidence rule].”
 “When parties have deliberately put their mutual engagements into writing, in
such language as imports a legal obligation, it is only reasonable to presume,
that they have introduced into the written instrument every material term and
circumstance; and, consequently, all parol testimony of conversations held
between the parties, or of declarations made by either of them, whether before,
or after, or at the time of, the completion of the contract, will be rejected.”
 “…such evidence…would inevitably tend, in many instances, to substitute a
new and different contract for the one really agreed upon, and would thus,
without any corresponding benefit, work infinite mischief and wrong.”
4. Collateral terms and collateral contracts
City and Westminster Properties (1934) Ltd v. Mudd [1959] Ch. 129
 collateral contract could override contrary stipulation in the main contract
Mendelssohn v. Normand Ltd [1976] 1 WLR 1078
 The court was asked whether a term on a notice board at a car park might have
been incorporated into a contract where it was not obvious as the driver came
in but was obvious when paying for parking at the end, and where the plaintiff
had parked often before.
 Held Lord Denning: ‘He may have seen the notice, but he had never read it.
Such a notice is not imported into the contract unless it is brought home to the
party so prominently that he must be taken to have known of it and agreed
with it.’
Couchman v. Hill, [1947] KB 554
 Device of the collateral contract, collateral contract overrides exception clause
in main contract
 Main Contract had exception clause, oral collateral contract overrides exception
clause in main contract
Ang Sin Hock v. Khoo Eng Lim, [2010] 3 SLR 179, [78]–[81]
 A collateral contract can exist even if a main transaction has not been entered
into
 Spirit of collateral contract is to achieve a just and fair result in the case at hand;
spirit of equity
 But collateral contracts are still susceptible to all legal ingredients necessary to
constitute a valid contract
II INTERPRETATION OF TERMS
1. The Contextual Approach to Contractual Interpretation
Investors Compensation Scheme Ltd v. West Bromwich Building Society

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[1998] 1 WLR 896

 Interpretation = ascertainment of the meaning which the document would
convey to a reasonable person with relevant background information
 Background information = includes anything reasonably available to parties
except prior negotiations and subjective meanings
Chartbrook Ltd v. Persimmon Homes Ltd, [2009] 1 AC 1101
 Allowed anything that would have affected the way in which the language of
the document would have been understood by a reasonable man
 But rejected all prior negotiations
o Uncertain – flood of evidence
o Quality of evidence, all agreed terms in contract already, but what abut
battle of forms cases?
2. Singaporean adoption of contextual approach: Evidence Act
Zurich Insurance (Singapore) Pte Ltd v. B-Gold Interior Design & Construction Pte
Ltd, [2008] 3 SLR(R) 1029
 Essence and attributes of the document

The court's treatment of extrinsic evidence at various stages of the analytical
process may differ depending on the nature of the document. In general, the court
ought to be more reluctant to allow extrinsic evidence to affect standard form
contracts and commercial documents.
 Parol Evidence Rule

If the court is satisfied that the parties intended to embody their entire agreement
in a written contract, no extrinsic evidence is admissible to contradict, vary, add
to, or subtract from its terms (based on Parol Evidence Rule in S93 and s94 of
Evidence Act). But in determining whether the parties so intended, our courts may
look at extrinsic evidence and apply the normal objective test, subject to a
rebuttable presumption that a contract which is complete on its face was intended
to contain all the terms of the parties' agreement. In other words, where a contract
is complete on its face, the language of the contract constitutes prima facie proof
of the parties' intentions.
 Extrinsic evidence admissible for interpretation

Extrinsic evidence is admissible under proviso (f) to s 94 to aid in the
interpretation of the written words. Our courts now adopt, via this proviso, the
modern contextual approach to interpretation. Ambiguity is not a prerequisite for
the admissibility of extrinsic evidence under proviso (f) to s 94.
 Requirements
The extrinsic evidence in question is admissible so long as it is relevant,
reasonably available to all the contracting parties and relates to a clear or obvious
context. Objective test applies here. Thus, the extrinsic evidence must always go
towards proof of what the parties, from an objective viewpoint, ultimately agreed
upon. No absolute or rigid prohibition against evidence of previous negotiations or
subsequent conduct, although, in the normal case, such evidence is likely to be
inadmissible for non-compliance with the three requirements.
 Latent ambiguity

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Where extrinsic evidence in question leads to possible alternative interpretations

of the written words (i.e. latent ambiguity), court may give effect to alternative
interpretations, subject to s94 of Evidence Act.
 Parol Evidence Rule v contextual approach

A court should always be careful to ensure that extrinsic evidence is used to
explain and illuminate the written words, and not to contradict or vary them.
Where the court concludes that the parties have used the wrong words
Sembcorp Marine Ltd v PPL Holdings Pte Ltd and another [2013] SGCA 43
(1) “Interpretation” was the process of ascertaining the meaning of expressions in a

contract. Such a process necessarily fell short where there was a gap in a contract
because where a contract was silent on a particular issue, there would plainly be no
language to which an appropriate meaning could be ascribed. The implication of
terms in fact was the process by which the court filled a gap in the contract to give
effect to the parties’ presumed intentions: at [27] to [29]. However, there is no
doctrine in contract law that requires all gaps to be filled, only presumed intentions.
(2) “Construction” of a contract referred to the composite process that sought to

ascertain the parties’ intentions, both actual and presumed, arising from the contract
as a whole without necessarily being confined to the specific words used.
Construction encompassed both the interpretation of express terms as well as the
implication of terms to fill gaps. Rectification too might be seen as part of the process
of construction as it was a mechanism by which the parties’ true common intentions
were given effect to: at [31].
(3) The Evidence Act (Cap97, 1997Rev Ed) (“EA”) only governed the admissibility
of evidence. It was not concerned with and so did not prescribe rules of contractual
construction. The province of the EA was the treatment of evidence, and this was
conceptually independent and distinct from rules of contractual construction. Rules of
evidence under the EA did not prescribe how a contract should be interpreted and
construed: at [40] to [43].
 Extrinsic evidence cannot be deployed as a pretext to contradict or vary the

contractual language
 Extrinsic evidence which was relevant and reasonably available to all
contracting parties and which would go towards establishing the relevant
context of the contract would be admissible
(4) The EA, through s 94(f), permitted the admissibility of extrinsic evidence of
surrounding circumstances. Parol evidence of the drafter’s subjective intention did not
constitute such surrounding circumstances: at [53] to [64].
 Evidence of surrounding circumstance is admissible without restriction

o Facts and circumstances which were in the mind of the drafter when he
used those words
 Ambiguity is required before the court would be permitted to admit parol

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evidence of the drafter’s intentions

 If surrounding circumstances are sufficient to resolve the interpretative
exercise, there would be no ambiguity and such parol evidence should not be
admitted.
(5) The utility of the contextual approach was to place the court in the best possible
position to ascertain the parties’ objective intentions by interpreting the expressions
used by the parties in the relevant instrument in their proper context; it was not a
license to admit all manner of extrinsic evidence. Thus, parties had to plead with
specificity (a) each fact of the factual matrix that they wished to rely on in support of
their construction of the contract; (b) the factual circumstances in which the facts in
(a) were known to both or all the relevant parties; and (c) the effect which such facts
would have on their contended construction. The obligation of parties to disclose
evidence would be limited by the extent to which the evidence was relevant to the
facts pleaded in (a) and (b).
In general, extrinsic facts that were placed before the court in a manner that was not
consistent with the above requirements would not be accorded any weight when a
court was construing a contract. Adverse cost consequences might also be imposed,
where appropriate: at [72] to [74].
(a) First, the admissibility of extrinsic evidence generally is governed by the rules of
evidence and not by the rules of contractual interpretation (which are governed by the
substantive law of contract).
(b) Second, the rules governing the admissibility of extrinsic evidence in Singapore
are to be found first in the EA, then in the common law.
(c) Third, the general admissibility of extrinsic evidence under s94(f) of the EA must
be read together with the exclusionary provisions of the EA, in particular, ss 95 and
96.
(d) Fourth, extrinsic evidence of surrounding circumstances is generally admissible

under s 94(f). However, it was and properly remains the position that extrinsic
evidence in the form of parol evidence of the drafter’s intentions is generally
inadmissible unless it can in some way be brought within the exceptions in ss 97 to
100.
Fico Sports Inc Pte Ltd v. Thong Hup Gardens Pte Ltd, [2011] 1 SLR 40
 Court applied Zurich Insurance requirement to take into account essence and
attributes of document
 “The first thing that the court has to do according to Zurich Insurance is to take
into account the essence and attributes of the document being examined. In this
case, the document to be interpreted is a tenancy agreement which is a formal
contract involving land and which normally contains the demise of the land
concerned and the conditions on which the tenant is to hold it as well as the
matters to be observed by the landlord...
3. Extrinsic evidence of prior negotiations and subsequent conduct
Chartbrook Ltd v. Persimmon Homes Ltd, [2009] 1 AC 1101

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 prior negotiations and subsequent conduct are not allowed

 prior negotiations
o uncertain, flood of evidence (wtf)
o quality of evidence – what is agreed between parties should already be
written down
o lead to what the parties intended, battle of forms?
 Subsequent conduct
o Not concerned with what parties did after contract concluded
o Performance is consistent with intentions
 Follows Zurich insurance. Accepted possibility of admitting extrinsic evidence.
No absolute or rigid prohibition against evidence of previous negotiations or
subsequent conduct. Although, in the normal case, such evidence is likely to
be inadmissible for non-compliance with the requirements
4. The Contra proferentem rule
When applied to exception clauses (or one-sided/onerous terms: Zurich Insurance),

means that the exception clause will be construed or interpreted strictly against the
party proffering or relying upon it, and that if there is any doubt or ambiguity in the
terms of the clause itself, such doubt or ambiguity will be resolved against the party
seeking to rely on the clause.
LTT Global Consultants v. BMC Academy Pte Ltd, [2011] SGHC 80

Two stages in application of contra proferentem rule
 First stage:
Determining the existence of ambiguity which cannot be resolved by interpreting
the term in the context of the overall contract (i.e. when contextual approach to
interpretation fails)
 In this case no problem because dictionary definitions demonstrate that “bi-
monthly” is inherently ambiguous
 Second stage:
Identifying the person (“the proferens) against whom the clause is interpreted.
The proferens could be either the person who seeks to rely on the term or the person
who proposed the term for inclusion in the contract.
 In this case, first way of identifying not applicable since both parties sought to rely
on the term (albeit on different interpretations).
The ‘Neptune Agate’, [1994] 3 SLR(R) 272, [57]
 Exclusion clause will be construed narrowly, against the party seeking to rely on it
 Contra proferentem construction would not appear when such clauses are “clear
and unambiguous.”
 Limitation clause was deemed clear enough
 Case drew distinction between exclusion clauses and limitation clauses
 Limitation clauses should be construed contra proferentem, it is enough that they
must be clear and unambiguous, they would not be regareded by the courts with
the same hostility
Levison v. Farin, [1978] 2 All ER 1149, 1156
 Contra proferentem is irrelevant where the clause emerged as a result of joint

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efforts
5. Contra proferentem rule in context of negligence
Canada Steamship Lines Ltd v. R, [1952] 1 All ER 305, 310
Laid down principles in applying contra proferentem rule in context of negligence.

Test to determine if contra proferentem rule should apply in a negligence case:
 (i) If the clause contains language which expressly exempts the person in whose
favour it is made (hereafter called the proferens) from the consequence of the
negligence of his own servants, effect must be given to that provision.
[If a clause contains language which expressly exempts the party relying on
the exclusion clause from the consequences of his own negligence then
(subject to UCTA) effect must be given to the clause. If it does not, court will
go on to apply second and third limbs.]
 (ii) If there is no express reference to negligence, the court must consider whether
the words used are wide enough, in their ordinary meaning, to cover negligence
on the part of the servants of the proferens.
[Court must consider whether the words are wide enough, in their ordinary
meaning, to cover negligence on the part of the party relying on the exclusion
clause. If a doubt arises as to whether the words are wide enough, the doubt
must be resolved against the party relying on the clause. If satisfied, court
will go on to apply third limb.]
 (iii) If the words used are wide enough for the above purpose, the court must then
consider whether “the head of damage may be based on some ground other than
that of negligence”…The “other ground” must not be so fanciful or remote that
the proferens cannot be supposed to have desired protection against it, but, subject
to this qualification, the existence of a possible head of damage other than that of
negligence is fatal to the proferens even if the words use are, prima facie, wide
enough to cover negligence on the part of his servants.
[Court must consider whether the exclusion clause may cover some kind of
liability other than negligence (e.g. liability incurred through no fault of Df). If
there is such a liability, the clause will generally be held not to extend to
negligently inflicted loss.]
NOTE: IF, AFTER THREE STAGES, DETERMINED THAT CLAUSE

EXLUDES LIABILITY NEGLIGENCE, GO ON TO UCTA s 2(2).
Marina Centre Holdings Pte Ltd v. Pars Carpet Gallery Pte Ltd, [1997] 2 SLR(R)
897
 Applied Canadian Steamship framework in Singapore
 First stage = failed, no express exclusion of liability from negligence
 Second stage = passed, still covered negligence.
 Third stage = passed, no other heads of potential liabilities
 Court did not construe contra proferentem. As long as well drafted and does not

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flout s2(2) of UCTA, can siam negligence liability. WOW
III IMPLIED TERMS

MP-Bilt Pte Ltd v. Oey Widarto, [1999] 1 SLR(R) 908, [16]:
“An implied term is a fictional device conceived by the courts as a term the parties
had in their mind in order to make the contract workable. It is a fundamental
assumption or basic sense on which the written contract before the court is deemed
to have been made. By definition, it is complementary to the written contract. An
implied term, therefore, cannot go counter to and destroy a sense or term that is
already in the contract. Parties cannot have two contracts, one written and the other
implied, contradicting each other.”
Policy Tensions =
 protecting consumers by implying SGA vs freedom of contract, parliament
adding terms to contract
 necessity (courts cannot rewrite contract based on its own sense of right and
wrong) vs not reasonable (denning’s attempt to into reasonableness as
sufficient requirement)
1. Terms Implied By Custom or Usage

 adhoc gap filler
 general default rules for contracts of that industry
Cunliffe-Owen v. Teather & Greenwood, [1967] 1 WLR 1421
Requirements for terms implied by custom:
 Certain: clearly established in the case law or otherwise identifiable and
consistent
 Notorious: so well-known by those doing business in the particular trade or place
and such that an outsider making inquiries could discover
 Recognised as binding: compliance with it comes from a sense of legal
obligation rather than as a matter of choice or commercial convenience
 Reasonable
 ***Not contradicted by the express terms or the nature of the contract – the
court will not give effect to a custom or usage which is inconsistent with the
express terms of the contract between the parties themselves
Plaza Singapura (Pte) Ltd v. Cosdel (S) Pte Ltd, [1990] 2 SLR(R) 22 [11]-[12]
 Need to show number of cases to prove custom or usage.
 CA quoted the case of Re Matthews, ex parte Powell:
 “…in order to establish a custom it must be proved to have existed so long, and to
have been so extensively acted upon, that the ordinary creditors of the debtor in
his trade may be reasonably presumed to have known it.”
 In the case, the mere fact that a signed letter agreeing that the “consignment
arrangement is a common practice in the retail trade for goods similar to ours”
was not sufficient proof of custom:
 “None of the addressees of the letters were called to testify on what they had
confirmed, and none were cross-examined on the common practice of
consignment trade. Hence, so far as they are concerned, the letters are purely a
piece of hearsay evidence and are inadmissible to prove the truth of what was

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stated therein. Cosdel therefore had not adduced any evidence to establish the
alleged trade custom of consignment trade on which it relied.”
Kim Eng Securities Pte Ltd v Goh Teng Poh Karen, [2011] SGHC 201, [66]– [74]
The evidence showed that the requirement of an indemnity was applied to

everyone in the plaintiff performing the same tasks as the defendant. Such a
practice was obviously known to the defendant and complied with by her when
she provided the security.
 Seems to impose a requirement of constructive knowledge before a custom or
trade practice will be found to imply a term.
 However, Andrew Phang (in 1990) suggested that having regard to the broad
general development over time, it is highly unlikely that custom will generally
play a significant role in the Singapore context: “the case law, coupled with the
industrialisation and modernisation of Singapore, bodes ill for any significant
revival of local custom and usage in Singapore.
IV
2. Terms Implied in Fact
 no value as precedent, fact sensitive
 implied only if necessary to fill up gaps
The Moorcock, (1889) 14 PD 64
Business efficacy test
Now, an implied warranty, or, as it is called, a covenant in law, as
distinguished from an express contract or express warranty, really is in all
cases founded on the presumed intention of the parties, and upon reason.
The implication which the law draws from what must obviously have been
the intention of the parties, the law draws with the object of giving efficacy
to the transaction and preventing such a failure of consideration as cannot
have been within the contemplation of either side; and I believe if one were
to take all the cases, and there are many, of implied warranties or covenants in
law, it will be found that in all of them the law is raising an implication from
the presumed intention of the parties with the object to giving to the
transaction such efficacy as both parties must have intended that at all events
it should have. In business transactions such as this, what the law desires to
effect by the implication is to give such business efficacy to the transaction
as must have been intended at all events by both parties who are business
men; not to impose on one side all the perils of the transaction, or to
emancipate one side form all the chances of failure, but to make each party
promise in law as much, at all events, as it must have been in the
contemplation of both parties that he should be responsible for in respect of
those perils or chances.
Shirlaw v. Southern Foundaries, (1926) Ltd (1939) 2 KB 206

Officious Bystander Test
MacKinnon LJ: “If, while parties were making their bargain, an officious
bystander were to suggest some express provision for it in their agreement,
they would testily suppress him with a common ‘Oh, of course!’”

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Attorney General of Belize v. Belize Telecom Ltd, [2009] 1 WLR 1988

Not followed in Singapore*
“It follows that in every case in which it is said that some provision ought to
be implied in an instrument, the question for the court is whether such a
provision would spell out in express words what the instrument, read against
the relevant background, would reasonably be understood to mean. It will be
noticed from Lord Pearson’s speech that this question can be reformulated in
various ways which a court may find helpful in providing an answer—the
implied term must “go without saying”, it must be “necessary to give business
efficacy to the contract” and so on—but these are not in the Board’s opinion to
be treated as different or additional tests. There is only one question: is that
what the instrument, read as a whole against the relevant background,
would reasonably be understood to mean?”
Foo Jong Peng v Phua Kiah Mai [2012] 4 SLR 1267

 Singapore does not endorse the Belize test, complementary test of BE + OB
remains
o Implication of terms does not involve the concept of interpretation, it
entails a specific form or conception of interpretation which is separate
and distinct from the more general process of interpretation
o Process of implication necessarily involves a situation where it is
precisely because express terms are missing that court is compelled to
ascertain the presumed intention of the parties
o Although Belize is helpful in reminding us of the importance of the
general concept of interpretation, we would reject the test in so far as it
suggest that BE and OB are not central to the implication of terms
o On the contrary, both these tests are an integeral as well as
indispensable part of the law relating o implied terms in Singapore
 Intention is of utmost importance in finding implied terms
o Search for presumed intention of contracting parties
o Court should not and cannot substitute its view as to that intention
o Intention may be presumed but court cannot be presumptuous
o Cannot rewrite intention for the parties
 Court should not imply terms too easily
o Where there is an express term covering the situation at hand, the court
will not imply a term which contradicts that particular express term
o This is especially so in implication in fact, where OB + BE + necessity
(6) Not all gaps in a contract are “true” gaps in the sense that they could be remedied
by the implication of a term. The court would only imply a term into the contract if
the gap arose because the parties had not contemplated the issue: at [94].
 3 ways for gap to arise

1. Parties did not contemplate the issue at all and so left a gap
2. Parties contemplated the issue but chose not to provide a term for it
because they mistaken thought that the express term of the contract had
adequately addressed it

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3. Parties contemplated the issue but chose not to provide ay term for it
because they could not agree on a solution
 Thinks that only scenario (1) allows the courts to even consider if it will imply
a term into the parties contract
 Scenario (3) is not a proper instance for implication because the parties had
actually considered the gap but were unable to agree and therefore left the gap
as it was. To imply a term would go against their actual intentions
 Scenario (2) is not proper, what drives the scenario is NOT the parties
presumed intention but rather objectively ascertained actual intentions;
appropriate remedy for this situation should be equity
(7) The business efficacy and officious bystander tests used in conjunction and
complementarily remained the prevailing approach for the implication of terms under
Singapore law. While business efficacy was the normative basis for the implication
the term and the test was helpful in identifying the existence of a lacuna, it did not
assist in identifying just what more was needed on the basis of the parties’ presumed
intentions to fill the gap with any degree of precision. That was where the officious
bystander test served an instrumental function: at [91] and [98].
3. Terms Implied in Law

Scally v. Southern Health and Social Services Board, [1991] 3 WLR 778
 Only where it is necessary will courts imply a term in law; however what
amounts to necessity? More than reasonable
 Term derived from a collective bargain negotiated by the employee’
representatives and a trade unions
 Plaintiffs were not informed of this right and claimed damages for breach of
contract
 What are this wider considerations? Given this problem of what is necessary,
courts shifted back to reasonableness
Jet Holding Ltd v. Cooper Cameron (Singapore) Pte Ltd, [2006] 3 SLR(R) 769, [93]
 Category of ‘terms implied in law’ is not without its disadvantages.
 Certain measure of uncertainty will always be an integral part of the judicial
process and hence the law itself
 Formed the theoretical and practical basis for statutory implied terms.
 Unlike implied in FACT, terms implied in LAW are based on broader rationales
of public policy in general and reasonableness in particular
 Terms implied in fact are one-off (ad hoc fillers), terms implied in law would
apply to all contracts of a certain type
Liverpool City Council v. Irwin, [1977] AC 239
 Only when it is necessary will the courts imply a term in law, rejected
Denning’s view of reasonableness
 Test is not reasonableness but necessity
Chua Choon Cheng v. Allgreen Properties Ltd, [2009] 3 SLR(R) 724
 Implied in law is mainly concerned with considerations of fairness and policy
rather than the intentions of the parties per se
 Test is reasonableness, but does not mean any reasonable term will be implied
in a contract
Crossley v. Faithful & Gould Holdings Ltd, [2004] 4 All ER 447, [36]
 Terms will be implied in law where reasonable
 Rather than focus on the elusive concept of necessity, it is better to look at

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reasonableness, fairness and the balancing of competing policy considerations

Ng Giap Hon v. Westcomb Securities Pte Ltd, [2009] 3 SLR(R) 518, [47]- [59]
 No implied term of good faith in Singapore
 Fledgling doctrine in Singapore and English Contract Law
 Until theoretical foundations and structures are settled, courts should not
endorse an implied duty of good faith to be implied into a contract
Yam Seng Pte Ltd v International Trade Corporation Ltd [2013] All ER 11H
 UKHC found that in certain circumstances, courts may be willing to find an
implied duty of good faith in contractual relationships governed by English
law
 Implied a “good faith” obligation
o Must be of “relational contract”
o Long term contracts
 Goes against adversarial nature of contract law
 Court found that the implied obligation will be decided on a case by case basis
(term implied in fact?)
 Good faith is fidelity to the contractual purpose, reasonable commercial
standards of fair dealing
Hamsard 3147 Ltd V Boots UK Ltd [2013] EWHC 3251
 Court rejected the notion that in commercial contracts there may be a presumed
intention of the parties that there is a general obligation of good faith
 Whilst there may be an implied term not to do anything to frustrate the purpose
of the agreement, a term cannot be implied to oblige a party to take positive
steps to the detriment of its own commercial interesys
Emirates Trading Agency v Prime Minerals Exports Private Ltd [2014] EWHC 2104
(Comm)
 Agreement to submit dispute to “friendly discussion” was enforceable
 “friendly discussions” obligated the parties to conduct “good faith” negotiations
4. Terms Implied By Statute
 Implied into the contract regardless of parties’ intentions and parties cannot
contract out of implication of these terms
Chai Cher Watt (trading as Chuang Aik Engineering Works) v SDL Technologies Pte
Ltd [2012] 1 SLR 152
 Application of s13, SGA
 Sale by description, implied condition that the goods will correspond with the
description
 Drill was shorter than what was described
Ng Giap Hon v. Westcomb Securities Pte Ltd [2009] 3 SLR(R) 518
 Terms implied in law formed both the theoretical and practical basis for
statutory implied terms such as SGA
EXCLUSION CLAUSES AND OTHER UNFAIR TERMS

1. OVERVIEW
1.1 Definition of exception clauses
 Exemption Clause = attempts to totally exclude contractual liability
 Limitation clause = attempts to limit contractual liability
Emjay Enterprises Pte Ltd v. Skylift Consolidator (Pte) Ltd (Direct Services (HK) Ltd,
third party), [2006] 2 SLR(R) 268, [11]
 Distinction between exclusion and limitation clauses upheld
 Whether such clauses deal with liability or quantum of damages

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 Distinction between exclusion and limitation clause approved

o Exemption clauses prevent liability from arising in the first place,
effect on damages is a by-product
o Allowing a limitation of liability clause to affect the amount of
damages claimable would lead to excessive uncertainty and "legal hair-
splitting". This was because limitation of liability clauses could shade
into the realm of total or the near-total exclusion of liability, and would
require the courts to decide if a particular exception clause was,
especially in marginal cases, truly a limitation clause or a total
exclusion of liability clause "in disguise”.
1.2 Common Law techniques

Ailsa Craig Fishing Co v. Malvern Fishing Co, [1983] 1 WLR 964
 Distinction was drawn between clauses of total exclusion and clauses of
limitation
 Stricter in terms of construction for the former category
The Suisse Atlantique [1967] 1 AC 361

 Rule of construction approach applied, rule of law approach not followed
Rule of Construction Approach
 Question of construction of relevant clause to see whether liability may be
excluded even for a fundamental breach
 Depends on interpretation of exception clause to see if it covers fact situation
at hand.
 Does not apply automatically as a rule of law; depends on facts (less strict
approach).
 Under this approach, the court’s task, regardless of the consequences of the
breach, is merely to construe the exception clause in the context of the
contract as a whole in order to ascertain whether or not the contracting
parties intended that the clause in question cover the events that have actually
happened.
  Doctrine of fundamental breach was a rule of construction not a rule of law
  i.e. the more serious the breach, the clearer the words that have to be used
in order to exclude liability for the breach
Photo Productions Ltd v Securicor Transport Ltd [1980] AC 827 (BBF 990)
 rule of construction approach applied
  Court distinguished between primary obligations (obligations parties
agreed to perform in contract) and secondary obligations (obligations to pay
damages in breach of contract), and held that even if it was accepted that
fundamental breach could render the contract ineffective, it does not remove
the secondary obligation. Exception clause can be preserved even with
fundamental breach.
  Affirmed Suisse Atlantique that it was a question of construction whether
exception clause covered secondary obligation to pay damages
Parker Distributors (Singapore) Pte Ltd v A/S D/S Svenborg & D/S af 1912 A/S
[1983] 2 MLJ 26, [1983-1984] SLR(R) 94

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 Singapore followed Photo Production

third party), [2006] 2 SLR(R) 268, [15]
 Rule of construction approach applied and law clarified
“Whether or not the exception clause in question does in fact cover such liability is
not an automatic rule of law as such but, rather, a matter of construction of the
contract. In other words, the court's task is to construe the exception clause concerned
in the context of the contract as a whole in order to ascertain whether the contracting
parties intended that the exception clause cover the events that have actually
happened. If they did, then the exception clause would be given effect to by the court,
notwithstanding the fact that a fundamental breach has occurred. This is because, to
re-emphasise a crucial point, the intention of the parties is the touchstone.”
Sun Technosystems Pte Ltd v. Federal Express Services (M) Sdn Bhd, [2007] 1
SLR(R) 411
 Rule of construction approach upheld
 Affirmed Emjay
 “…the doctrine of fundamental breach as a "rule of construction" (as opposed
to the doctrine as a "rule of law") ensures that whether or not a particular
exception clause is valid or not depends on the construction of that exception
clause in the context of the contract as a whole in order to ascertain whether or
not the contracting parties intended the clause to cover the events that have
actually happened - even if these events give rise to a fundamental breach.”
 “This doctrine (of fundamental breach as a "rule of construction") underscores
the importance of the concept of freedom of contract and is consonant with
modern trade and commerce.”
 Protection of consumer not mitigated by UCTA. No longer need the “more
draconian doctrine” of fundamental breach as a “rule of law”.
 Affirmed Parker Distributors over Sze Hai Tong, noting that CA was not bound
by PC
Evaluation of Rule of Construction Approach

 Rule of construction approach is really concerned with interpreting exception
clause
 Same problems of uncertainty but at least objectively gives effect to parties’
intentions
 Continued relevance of “fundamental breach” – presumption that parties do not
want exception clauses to cover serious breaches
o Big Mac on Suisse Atlantique: “This reflects the ordinary, common sense
perception that one party is unlikely to agree that the other party can
breach the contract in a fundamental respect without incurring any liability
for doing so.”
 Also, note that the Rule of Construction approach is adopted in other

Commonwealth jurisdictions; it is accepted in
o Australia
o HK
o Canada (somewhat)

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Status of Rule of Law / Fundamental Breach Approach

 Given that the Rule of Construction approach is now the main approach, the
Fundamental Breach approach is now only of significance insofar as it impacts
on the construction of the exception clause in question:
o It will still constitute a relatively weighty factor against construing the
clause as applying to the (fundamental) breach concerned, for it is
reasonable to suppose (at least as a prima facie assumption) that parties do
not generally intend exception clauses in their contract to exclude or
restrict liability for as serous a breach as a fundamental breach.
2. Unfair Contract Terms Act (UCTA)

 UCTA does not deal with contract terms that are unfair, but rather, it imposes
restrictions on the extent to which civil liability for breach of contract, or for
negligence, or other breach of duty, can be avoided by means of contract terms
 UCTA approaches UCTA in 2 main ways
o Either exception clause becomes wholly inoperative
 E.g. personal injury, death
o Exception clauses operative, provided that it passes the test of
reasonableness
 E.g. contractual liability
 Underlying aims of UCTA
o Protect vulnerable consumers
o Protect those who contracts on standard terms prescribed by their
contracting partners
o Prevent parties from restricting liability for claims relating to
negligence/personal injury/death
 Conflicting policy considerations
o Freedom to contract; courts should not be rewriting a contract
o Sanctity of contract
R & B Customs Brokers Co Ltd v United Dominions Trust Ltd [1988] 1 All ER 847
(BBF 997)
 Judicial interpretation of “dealing as consumer”
 To be “in the course of a business”, transaction must either:
o Be integral, and not just incidental, to the business activity, OR
o Be of a type that is regularly carried out by the buyer
 These were not found on the facts

 Fairness considerations – while some small firms may have little more bargaining
power than consumers, this definition of dealing as a consumer will apply even to
large and sophisticated buyers who have considerable bargaining power that could
be used to obtain better terms because while it will only count as a consumer if it
makes occasional purchases of the type of goods in question, there is nothing to
prevent it being a very large customer of the seller for other purchases (i.e.
“threatening” effect)

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 Contrast the later case of Stevenson v Rogers – fisherman who sold boat to Pf said
to be in business of sale (even though he was not in business of selling ships!).
Broader definition taken: “unless the transaction was a purely private sale of
goods outside the confines of the business”. Case was distinguished because it
involved Sale of Goods Act instead, so CA held that the word “business” meant
differently. But is this a fairer definition which Singapore should employ?
Anti-Corrosion Pte Ltd v. Berger Paints Singapore Pte Ltd, [2010] SGHC 351, [21]
 Local context do not agree
 Court found Df to be more likely to be a commercial party that had power to
bargain and get concessions from the plaintiff unlike the average consumer the
UCTA was meant to protect
third party), [2006] 2 SLR(R) 268, [11]
11 As already alluded to above, my focus, in accordance with the specific
facts before me in the present proceedings, is on a limitation of liability clause
- as opposed to a total exclusion of liability clause. I should observe,
parenthetically, that this is why I choose to adopt the more generic
terminology, "exception clauses", when referring to such clauses as a whole.
This terminology originated, as far as I know, in the seminal treatise in the
area by Prof Brian Coote, Exception Clauses (Sweet & Maxwell, 1964).
Indeed, I shall have occasion to return to this brilliant work again later.
United Overseas Bank Ltd v. Mohamed Arif, [1994] 1 SLR(R) 530, [56]
Clause in the agreement provided that the bank has the discretion to refuse to execute
"customer's oral instructions or any part thereof without incurring any responsibility
for loss, liability or expenses arising out of such refusal".
Court held that this was not an exception; the clause simply provided, as a term of the
contract, that the bank is not obliged to act on oral instructions.
Philips Products Ltd v. Hyland, [1987] 2 All ER 620 (MK 456)
 Transfer of liability clause found to be an exception clause covered by the
UCTA, even though it was argued that it merely divided and allocated
obligations
Slade LJ, on how transfer of liability clause amounted to an exception clause:
 “A transfer of liability from A to B necessarily and inevitably involves the
exclusion of liability so far as A is concerned…
 On the particular facts of this case, the effect of the clause, if valid, is to negative a
common law liability in tort which would otherwise admittedly fall on the plant
owner. The effect of the clause making the ‘hirer alone responsible for all claims’
necessarily connotes that by the clause the plant owners’ responsibility is
excluded…
 There is no mystique about ‘exclusion’ or ‘restriction’ clauses. To decide whether
a person ‘excludes’ liability by reference to a contract term, you look at the
effect of the term. You look at its substance. The effect here is beyond doubt.
[The defendants] do most certainly purport to exclude their liability for negligence
by reference to the clause.
Avorora Fine Arts Investment Ltd v Christie, Manson & Woods Ltd [2012] EWHC
2198

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 Despite terms and conditions not expressly mentioning negligence, terms made it
clear that Df did not accept any liability to the buyer, aside from the express
warranty
 Court found that these terms passed the reasonableness terms under section 2 of
UCTA, because a substantial remedy was provided to the buyer by way of a
warranty claim
 From Df’s perspective, offering this warranty provided it with a quantifiable risk
Thompson v. Lohan, [1987] 2 All ER 631 (MK 462)
 Transfer of liability clause rendered inoperative by UCTA
Question is not whether the party relying on the clause was seeking to exempt liability
(this was plainly so in both cases). Rather, it is whether the exemption excluded
liability against the victim of the negligence.
 If yes, as in Phillips Products, then UCTA applies.
 If no, as in Thompson, then UCTA will not apply.
Section 2 only controls clauses, which exclude liability to the victims of negligence
by transferring liability to them. It does not apply to terms that transfer liability to
someone else other than the victim of negligence.
Is this a desirable outcome? Shouldn’t the result be the same whether the property,
which is damaged, belongs to the Pfs or not?
  Underlying idea should be whether the risk has been fairly allocated?
Kenwell & Co Pte Ltd v. Southern Ocean Shipbuilding Co Pte Ltd, [1998] 2 SLR(R)
583, [52]
52 Section 11(5) contains an important provision that it is for the party who seeks
to rely on an exclusion or limitation term to show that it satisfies the requirement of
reasonableness. So, such a term is prima facie regarded as unreasonable unless the
party who seeks to rely on it shows to the satisfaction of the court that it satisfies the
requirement of reasonableness. This means, in the words of sub-s (1), that it was a fair
and reasonable term to be included in the contract, having regard to the circumstances
which were, or ought reasonably to have been, known to or in the contemplation of
the parties when the contract was made.
Smith v. Eric S Bush (a firm) [1989] 2 All ER 514
 Court decided that the exclusion clause failed in reasonableness
 Purchase of private house by Mrs Smith was bound to be one of the most
expensive in a lifetime, and it was more reasonable that a professional
surveyor bear the risk of liability
 Again just simple application of facts to the reasonableness factor matrix
Lee Chee Wei v. Tan Hor Peow Victor, [2007] 3 SLR(R) 537
 underlying factors for reasonableness adopted in Singapore
 “Without prejudice to the generality of the guidelines contained in the Second
Schedule to the UCTA, the degree of reasonableness of the entire agreement
clause may then depend on, inter alia:
o (a) the relative equality of bargaining power between the parties;
o (b) whether a party received an inducement to agree to the term, or
in accepting it has an opportunity of entering into a similar contract
with other persons without having to accept a similar term;
o (c) whether the aggrieved party knew or ought reasonably to have
known of the existence of the term (having regard, among other

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things, to any custom of the trade and any previous course of dealing
between the parties); and
o (d) whether it was reasonable or practicable at the time of the
contract to expect compliance with the clause.”
Jiang Ou v. EFG Bank AG, [2011] SGHC 149, [115]:
 where equal bargaining power is found, less likely for UCTA to strike out
application of the clause; clause is reasonable where equal bargaining power is
found
 affirmed Lord Wilberforce in Photo Production
o equal bargaining power should preclude judicial intervention
Consmat Singapore (Pte) Ltd v. Bank of America National Trust & Savings
Association, [1992] 2 SLR(R) 195
 where both parties are commercial entities, more likely to find equal bargaining
power between them
Kenwell & Co Pte Ltd v. Southern Ocean Shipbuilding Co Pte Ltd, [1998] 2 SLR(R)
583
 fact that both contracting parties are commercial entities is only indicative, and
not conclusive, that they had contracted on equal footing
Ri Jong Son v. Development Bank of Singapore Ltd, [1998] 3 SLR 64
 fact that one party was not a commercial entity is merely indicative, and not
conclusive, that they had contracted on unequal footing
Tjoa Elis v. United Overseas Bank Ltd), [2003] 1 SLR(R) 747
 lack of reasonable alternative does not automatically lead to conclusion that the
clause is unreasonable
Oversea-Chinese Banking Corporation Ltd v. The Timekeeper Singapore Pte Ltd,
[1997] 1 SLR(R) 392
 where there is no protest, it is more likely that a clause will be deemed
reasonable
 reasonable allocation of risk > absence of alternative
Jiang Ou v. EFG Bank AG, [2011] SGHC 149, [121]–[122]
121 While it is extraordinarily unlikely that a customer seeking to open a bank
account would knowingly agree to a term which expressly excludes liability for fraud
of the employees of a bank, the question of whether such a clause is unreasonable by
reason of UCTA turns on the relevant factors identified (ie, unfair bargaining power
(commercial, individual, non-corporate customer), inducement and knowledge of the
clause in question) as well as public policy considerations.
122 Individuals and corporations entrust banks and employees of banks with their
savings and investments. Public confidence in the banking system is therefore
fundamental to the integrity of the system and is no doubt founded upon mutual trust
and a reasonable expectation of honest dealings by employees of banks. Shifting the
attendant risk and liability for the fraud or wilful misconduct of employees of banks
by way of conclusive evidence clauses, strikes at the very heart of the presumed
integrity of the system. The negative impact on public confidence and trust in the
modern banking system would, in my view, render such clauses to be unreasonable
under UCTA as well as void as a matter of public policy.
CONSUMER PROTECTION (FAIR TRADING) ACT (CAP 52A, 2009 REV

ED)
Freely Ltd v. Ong Kaili, [2010] 2 SLR 1065, [45]

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45 Given the foregoing, this would now be an appropriate juncture to summarise,

what in my view are some (ie, non-exhaustive) principles applicable to s 4(a) of the
CPFTA, bearing in mind the differences in wording between this provision, s 52 of
the Australian Trade Practices Act 1974, s 9 of the New Zealand Fair Trading Act
1986 and any similarity with the SCPA:
(a) whether conduct has been misleading or deceptive under s 4(a) of the
CPFTA, which specifically refers to the word "reasonable", has to be tested
objectively, in relation to one or more identified sections of the public, the
Court considering all who fall within an identified section of the public,
including the astute and the gullible, the intelligent and the not so intelligent,
the well educated as well as the poorly educated, men and women of various
ages pursuing a variety of vocations;
(b) it would appear, from a plain reading of s 4(a) of the CPFTA which
makes no express reference to knowledge or intention, that an intention or
knowledge to mislead or deceive (ie, a fault element) is not a necessary
ingredient. The emphasis in s 4(a) of the CPFTA is on the effect on a
reasonable consumer rather than on the state of mind or knowledge of the
supplier. In this case, the absence of a state of mind requirement gives s 4(a)
of the CPFTA a wider ambit than other analogous common law causes of
action, viz, fraudulent and negligent misrepresentation, which are founded on
the fault of the defendant. That said, while the supplier's state of mind is not an
essential element in the notion of misleading or deceptive conduct, a decision
as to whether the supplier's conduct conveyed a misleading or deceitful
meaning may involve consideration of whether the maker of the statement had
a particular state of mind when the statement was made (ie, it is probative in
establishing whether s 4(a) of the CPFTA has been breached).
(c) That the emphasis in s 4(a) of the CPFTA is on the effect on a
reasonable consumer is consistent with Parliament's underlying philosophy
behind the enactment of the CPFTA (see [25] above), viz, that there should be
a balancing of the interests of consumers against that of businesses and
traders. If the emphasis in s 4(a) of the CPFTA was on the effect on any
consumer, not only would this be inimical to the principle of caveat emptor
emphasised by Parliament, this would also be contrary to its intention in
ensuring that "[t]here should be business certainty and not undue costs in
complying with [the CPFTA]".
(d) Pursuant to s 5(3)(a) of the CPFTA, it would appear that a supplier who
has engaged in an unfair practice may be excused by acting reasonably
although the CPFTA offers no guidance as to what is or is not reasonable.

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FRUSTRATION I. WHAT CONSTITUTES FRUSTRATION?

1. Meaning of Frustration
Paradine v Jane (1647) Aleyn 26.
 Absolute obligation; no longer upheld
 Does not allow frustration, must provide for in contract
J Lauritzen v Wijsmuller (“The Super Servant II”) [1990] 1 Lloyd’s Rep 1.
 The essence of frustration is that it should not be due to the act or election of the
party seeking to rely on it ... A frustrating event must be some outside event or
extraneous change of situation ... A frustrating event must take place without
blame or fault on the side of the party seeking to rely on it.”
National Carriers v Panalpina [1981] AC 675.
: ‘... frustration occurs whenever the law recognises that without default of either
party a contractual obligation has become incapable of being performed because
the circumstances in which performance is called for would render it a thing
radically different from that which was undertaken by the contract. Non haec
in foedera veni. It was not this that I promised to do’.”
Glahe International Expo v ACS Computer Pte Ltd [1999] 1 SLR(R) 945.
“Whereas a force majeure clause is an agreement as to how to resolve outstanding
obligations upon the onset of a foreseeable event, the doctrine of frustration
concerns the treatment of contractual obligations upon the onset of an
unforeseeable event. The law on frustration is well settled. A contract is
considered frustrated when a supervening event (which has not been expressly
provided for in the contract) takes place, the consequence of which is that the
nature of the parties' (or one party's) obligations is so fundamentally or radically
altered that the contract can no longer justly be said to be the same as that which
was originally entered into by the parties”.
Adani Wilmar v Rabobank Nederland [2002] 4 SLR 217.

“A contract is said to be frustrated when something renders it physically or
commercially impossible to be fulfilled, or transforms the obligation to perform
into a radically different obligation.”
Alliance Concrete Singapore Pte Ltd v Sato Kogyo (S) Pte Ltd [2014] SGCA 35
 The doctrine of frustration is yet another doctrine which permits a contracting
party to argue successfully that the parties ought no longer to be bound by their
contract. That involves a situation where there is no wrongdoing on the part of
either of the parties. The justification for departing from the norm of the sanctity
of contract lies outside the contract (and the parties thereto). It is not fault-based;
it discharges both parties automatically by operation of law. Under the doctrine of
frustration, both parties are automatically discharged from their contract by
operation of law because, without the default of either party, a supervening event
that has occurred after the formation of the contract renders a contractual
obligation radically or fundamentally different from what has been agreed in the
contract.
2. Juridical Basis:
National Carriers v Panalpina [1981] AC 675.
(i) Implied term
 Term implied in fact, officious bystander asking for parties’ intention upon
frustrating event

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 Logically difficult to see how parties could even impliedly have provided for
something which they neither expected nor foresaw
(ii) Total failure of consideration
 Not satisfactory if there was part performance from both sides
(iii) Just and reasonable solution
 Does not provide for theoretical basis, no framework
 Courts dislike uncertainty
(iv) Foundation of the contract
 If there is a foundation of the contract, wtf is it?
(v) Construction of the contract/radical change in obligation
 frustration occurs whenever the law recognises that without default of either
party a contractual obligation has become incapable of being performed
because the circumstances in which performance is called for would
render it a thing radically different from that which was undertaken by
the contract. Non haec in foedera veni. It was not this that I promised to do’.”
 Accepted theory, done by construing the contract to ascertain its true meaning
Davis Contractors Ltd v Fareham UDC [1956] AC 696.
 Same shit as above
Edwinton Commercial Corporation, Global Tradeways Ltd v Tsavliris Russ
(Worldwide Salvage & Towage) Ltd (The “Sea Angel”) [2007] EWCA Civ 547,
[2007] 2 Lloyd’s Rep 517.
 Factors to be considered are
o Terms of the contract, its matrix and context
o Parties k, expectations, assumptions in particular to risk
o Nature of supervening event
o Parties reasonably and objectively ascertainable calculations as to the
possibilities of future performance in the new circumstances
o Test of radically different = not readily invoked, to avoid people
escaping from bad bargains, people should be bound by their
contractual promises
Islamic Republic of Iran Shipping Lines v Steamship Mutual Underwriting
Association (Bermuda) Ltd [2010] EWHC 2661 (Comm), [2011] 1 Lloyd’s Rep 195.
 The first, consisting of the terms of the contract, its matrix or context, and the
parties’ knowledge, expectations, assumptions, and contemplations, in
particular as to risk, as at the time of entry into the contract so far as these can
be ascribed mutually objectively, he labelled ‘ex ante factors’.
 The others (the nature of the supervening event and the parties’ reasonable and
objectively ascertainable calculations as to the possibility of future
performance in the new circumstances) he stated were ‘post contractual’.”
3. When Can Frustration Discharge a Contract?
(i) Supervening illegality:
Fibrosa v Fairbairn [1943] AC 32
 Supervening illegality frustrates contract
 War discharged contract by frustration due to a change of crcumstances which
dictated a finding of illegality
(ii) Supervening impossibility:
(a) destruction of subject matter:
Taylor v Caldwell (1863) 3 B & S 826
 Destruction of subject matter rendering contract impossible to perform, thus

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frustrating contract
 Music hall burnt down by fire
Kong Swee Eng v Rolles Rudolf Jurgen August [2011] 1 SLR 873.
 Mere insolvency does not amount to destruction of the company’s shares, does
not render the contract impossible to perform, hence does not amount to
frustration
 Clear case of preventing people from escaping bad bargains. Insolvency means
buyer need not buy a insolvent firm’s shares
 Shares were neither destroyed nor changed, it is not enough to demonstrate that
the event may have had a detrimental effect upon the value of the shares
(b) death/incapacity of contracting party in a personal contract

Notcutt v Universal Equipment Co [1986] 3 All ER 582
 Personal incapacity frustrates personal contracts
 Only affects personal contracts, which requires personal performance of one or
both of the contracting parties
(iii)Frustration of purpose/adventure:
Jackson v The Union Marine Insurance (1874) LR 10 CP 125
 Common purpose of both parties frustrated
 Vessel used for spring harvest, but due to repair, will miss the harvesting
Krell v Henry [1903] 2 KB 740
 Frustration found where key purpose of contract ceases to exist
 If the cancellation of king was done before contract conclude, will be a common
mistake instead
 Treated narrowly and frustration in general will not be applied if it upsets te
allocation of risks between parties
cf Herne Bay Steamboat Co v Hutton [1903] 2 KB 683
 Frustration not found where only one of various purposes of contract ceases to
exist
 Discretion by the court to find/not find frustration if the need arises
 Foundation was not a shared one (naval review cancelled, fleet remained)
Amalgamated Investment & Property Co Ltd v John Walker & Son Ltd [1977] 1 WLR
164; [1976] 3 All ER 509
 Frustration not found where only one of various pruposes of contract ceases to
exist
 P wanted to buy for redevelopment, planning authority designated area as
historical interest, value of land dropped drastically
 Limitation of Krell Principle
o While the sole purpose was indeed for redevelopment of the property,
doing so would undermine risk allocation between the parties
 No warranty to protect property from being redeveloped
 Risk that property might be designated was one that all buyers
assumed
o Caveat emptor
(iv)“Something radically different from that which was in the contemplation of

the parties at the time of entry into the contract”.
Davis Contractors Ltd v Fareham UDC [1956] AC 696

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 Radical change required to invoke frustration

 P promised to build in 8 mnths, took 2 mnths due to labour shortage
 D paid original, P wanted frustration to get more quantum meruit in absence of
contract, since D is unjustly enriched
 Frustration occurs where law recognizes that without the fault of either party, a
contractual obligation has become incapable of being performed because
the circumstances in which performance is called for would render it a thing
radically different from that which was undertaken by the contract.
 Situation must be very severe, labour shortage merely renders a contract more
onerous. There is a weighing factor involved.
Shenyin Wangou – APS Pte Ltd v Commerzbank [2001] 4 SLR 275.
 Radical change frustrating contract
 Msian govt wiped out value of all off-shore ringgit
 Frustration must be approached by constructing the contract
o Implementation of economic control was a frustrating event because it
caused the complete eradication of the off-shore market for MYR
without the fault of the parties and thus rendered performance
impossible
o Was not foreseeable, more than just onerous, comlete eradication
rendering a radically different obligation
Singapore Woodcraft v Mok Ah Sai [1979] 2 MLJ 166.
 correct legal test for deciding whether a contract has been frustrated has been
laid down in the majority judgement in Davis Contractors
 question is whether the contract which they did make is, on its true construction,
wide enough to apply to new situations (implication + interpretation)
4. What Does Not Constitute Frustration
(i) Increased costs for performance
Davis Contractors Ltd v Fareham UDC [1956] AC 696.
 Increased costs for performances not a ground to frustrate a contract, merely
makes it onerous
Holcim v Precise Development [2011] 2 SLR 106, [2011] SGCA 1.
 Mere increase in price will not constitute a frustrating event. Only if increase in
price is astronomical
Glahe International Expo AG v ACS Computer Pte Ltd [1999] 2 SLR 620.
 Mere change in profitability or an increase of the burden upon a party under a
contract is not enough to discharge him from performance of the contract. The
obligation must be fundamentally altered
 Matter of construction ‘ whether there has been a radical change in the
obligation or the actual effect of the promise of the parties construed in the
light of the new circumstances. Was performance fundamentally different in a
commercial sense
MP-Bilt Pte Ltd v Edy Yumianto [1999] 4 SLR 241.
 One’s personal financial position does not frustrate a contract, even if it has
been altered by a supervening event
 Prevent people from getting out of bad bargains
 When he commits himself to the purchase of the flat, he must assume the risk
that he may run into financial difficulties and fortify himself with some
contingency plans
Cf. Staffordshire Area Health Authority v South Staffordshire Waterworks Co [1978]
3 All ER 769, [1978] 1 WLR 1387.

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 Astronomical increase in costs would frustrate contract as it radically alters

obligations
 Due to inflation, cost was 20X
 Majority in CA held that in indefinite duration, there was an implied term that
either party was entitled to terminate the contract with reasonable notice
 Only Denning argued astronomical, probably do not want to lay down rule that
20x = astronomical; protect town council (policy reasons)
Alliance Concrete Singapore Pte Ltd v Sato Kogyo (S) Pte Ltd [2013] SGHC 127.
 Sand ban did not alter the contract fundamentally
 Still capable of being performed
 Alliance Concrete made 22mill profits because of sand ban. Court did not want
not entertain Alliance for being a douche
(ii) Different method of performance necessary
Tsakiroglou & Co Ltd v Noblee Thorl Gmbh [1962] AC 93.
 Different methods of performance which does not give rise to a radical change
in obligations does not amount to frustration
 No frustration even if it requires a longer route through the Cape of Good Hope
 Longer route would not be commercially or radically different from using Suez
Canal
 Foreseeable that war would break out; distinguish from Fibrosa, fibrosa had no
alternative way of performance
(iii) Failure of a particular source
Blackburn Bobbin Co Ltd v TW Allen Ltd [1918] 2 KB 467.
 Failure of a particular source does not frustrate a contract, in absence of radical
change in obligations
 No frustration where buyer does not know how goods are sourced
 Only if expressly stated or clear that the source was crucial, then contract will
be frustrated
 Risk allocation policy at work; buyer should not be prejudiced, seller can
allocate risk
II. PRINCIPLES LIMITING OPERATION OF FRUSTRATION DOCTRINE

1. No Self-Induced Frustration
Maritime National Fish Ltd v Ocean Trawlers Ltd [1935] AC 524.
 Purposely under apply for licenses of boats, then claim frustration
 Pf elected to allocate licenses in this manner, he could have allocated license to
Df’s boat instead
 Must be without fault of either side
J Lauritzen AS v Wijsmuller BV (The “Super Servant II”) [1990] 1 Lloyd’s Rep 1.
 No self-induced frustration
 Non-perofrmance was due to D’s election to use SS2 and not SS1
 Although D had other contracts to fulfil with SS1, it bears the risk of entering
into multiple contracts.
 D has control over how many contracts it enters into, policy reasons necessitate
that it bears the risk
 Contract should have said that it will be performed by SS2 to allow frustration
 But, nothing in frustration says that person can only enter into a single
contract
o Can enter as many as they want
o Should not bar him from relying on frustration

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o Main consideration is that the person relying on it is without fault

 Tension of risk allocation and fair outcome to D
Yee Seng Plantations v Kerajaan Negeri Trengganu [2000] 3 MLJ 699.

 Deliberate act of non-compliance indicates self induced frustration
 Not a supervening event
2. Foreseen or Foreseeable Events

Assumption of risk by parties e.g. by contractual provision.
 Generally if parties had foreseen the alleged frustrating event, it would appear to
follow that they must be taken to have assumed the risk of the event happening
Ocean Tramp Tankers Corporation v V/O Soufracht (The “Eugenia”) [1964] 2 QB
226.
 Lord Denning’s flexible approach
o If parties did not foresee, can readily infer they made no provision for
it
o If they did foresee it, you would expect them to have made provisions
for it
o Parties have foreseen the danger ahead, and yet made no provision for
it in the contract
Lim Kim Som v Sheriffa Taibah bte Abdul Rahman [1994] 1 SLR 393.
 Parties foreseen or should have foreseen, the latter makes frustration harder to
invoke
 Denied the should have foreseen approach
Cf. Walton Harvey v Walker and Homfrays [1931] 1 Ch 274
 Foreseeable events do not amount to frustration
 Display advert in hotel for 7 yrs, before 7 yers, government acquired the hotel
 Parties contemplated for this event, but did not provide for it in the contract,
they cannot rely on the doctrine of frustration
E Johnson (Barbados) Ltd v NSR Ltd [1997] AC 400 (PC, Barbados)
 Foreseeable events do not amount to frustration
 When parties enter into a contract for the sale of land, the risk is transferred to
the purchaser
 Assumed that purchaser has agreed to the normal risks incidential to land
ownership
 Risk of interference with land owning rights by govt is always foreseeable
RDC Concrete v Sato Kogyo [2007] 4 SLR 413.
 Doctrine of frustration concerns the treatment of contractual obligations from
the onset of an unforeseeable event
 Prevalent practice of incorporating force majeure clauses into commercial
contracts today stems largely from the blunt nature of the doctrine of
frustration as a tool to allocate loss
 Frustration is difficult to invoke, FM allows for more nuanced response instead
d of auto discharge of contract
Glahe International Expo v ACS Computer Pte Ltd [1999] 1 SLR(R) 945.
 Fm is a clause as to how to resolve outstanding obligations upon the onset of a
foreseeable event
 doctrine of frustration concerns the treatment of contractual obligations upon the
onset of an unforeseeable event that radically alters the contract and is caused

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by neither fault of the parties

HDB v Microform Precision Industries [2003] SGHC 214.
 Doctrine of frustration is limited by the facts of each case.
 No frustration of the contract just because the risk delievers the harm that it had
been carrying
3. Contractual Provision by the Parties (e.g, force majeure clauses)

 Courts will adopt a restrictive approach in the interpretation of such clauses so
as to avoid unfair outcomes
 Again back to the unfair bargaining power, reasonableness policy considerations
Metropolitan Water Board v Dick Kerr [1918] AC 119
 Fm clauses are subject to the scrutiny of the courts, and only used where
applicable
 Even though clauses was inherently wide, it was only construed to cover
temporary difficulties, and not fundamental changes
RDC Concrete Pte Ltd v Sato Kogyo [2007] 4 SLR 413.
 FM clauses are subject to the scrutiny of the courts and only used where
applicable
 Reasonable steps must be taken to prevent FM event from occurring. Parties
seeking to rely on FM clauses must show that it falls within the event
o D was not entitled to rely on FM clause in the contract to exempt itself
from liability to PF because the clause required market raw material
shortages to stem from a cause beyond the supplier’s control
o Raw materials still available in the market, although at higher price
o Df was unable to prove that plat breakdowns were unforeseen or
beyond its control, or that it had undertaken reasonable steps to avoid
or that it had undertaken reasonable steps to avoid or mitigate the
consequences of a plant breakdown – had two other plants but chose
not to use them
 A FM clause is an agreement as to how outstanding obligations should be
resolved upon the onset of a foreseeable event, the doctrine of frustration
concerns the treatment of contractual obligations from the onset of an
unforeseeable event
 Principles relating to frustration are still relevant to the construction and
interpretation of FM clauses
 Differences between FM and frustration: nature of relief, FM = flexible,
frustration = discharge
 Parties are free to exclude the doctrine of frustration via a FM clause, and the
courts will give effect if the clause concerned are clear and unambiguous
 Difficult to drat a FM which completely shuts out frustration
 Party relying on FM clause must show that it brought itself within the clause
concerned and taken all reasonable steps to avoid its operation or mitigate its
results
Holcim (Singapore) Pte Ltd v Kwan Yong Construction Pte Ltd [2009] 2 SLR(R) 193.
 Contract frustrated, even minister said it was unforeseeable
 FM clause was not ambiguous; covered sand ban
o 3 The Purchaser must provide sufficient advance notice in
confirming each order. The Supplier shall be under no obligation to
supply the concrete if the said supply has been disrupted by virtue of
inclement weather, strikes, labour disputes, machinery breakdowns,

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riots, and shortage of materials, Acts of God or any other factors

arising through circumstances beyond the control of the Supplier.
Holcim (Singapore) Pte Ltd v Precise Development Pte Ltd [2011] 2 SLR 106.
 “Disrupt” in FM clause depends on considerations of commercial
practicability
 Events that did not prevent the literal performance of a contract would render
continued performance commercially impracticable
 Fm allowed since Appellant took reasonable steps to avoid the FM
o Appellants willing to sell below cost price
o Respondent unwilling to co-operate with Appellant
 Reaffirmed mere increase does not mean frustration, must be astronomical
(Tsakiroglou)
Bank Line Ltd v Arthur Capel & Co [1919] AC 435.

 Courts adopt restrictive approach to interpreting provisions for supervening
events. Clause must cover the event in a full and complete way
 Even if foreseen and written in FM, can still be held inoperable? WTF?
Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction Pte
Ltd [2008] SGCA 27.
 What FM means depends on the true construction of the clause as a whole in the
context of the entire contract and in light of all relevant circumstances
Sembcorp Marine Ltd v PPL Holdings Pte Ltd [2013] SGCA 43.
Summary of FM
 Approach from true construction of the contractual clause
 Fm will supersede frustration if applicable
 If FM not applicable, frustration applies = discharge
 FM clauses are construed strictly
 Difficult for Fm to shut out frustration completely
 Burden of proof on party seeking to use clause to show it applies
 Role of foreseeability unclear
o Foreseeability does not auto oust frustration since there must be Fm
clause
o Even if have FM clause, if not drafted properly, still frustrate
o But the more foreseeable the event is, the more likely parties will be
held to have contractually allocated the risk of its occurrence, thus
contract will remain binding despite event occurring
III. EFFECTS OF FRUSTRATION

1. Common Law
Chandler v Webster [1904] 1 KB 493 (overruled by HL in Fibrosa v Fairbairn)
 Earlier rule is losses lie where they fell; overrule even in common law
 Frustration does not rescind a contract ab initio, there is no total failure of
consideration and thus no recovery
 Loss lies where it falls
 Overruled in firbrosa
o Money paid was only recoverable upon a total failure of consideration
o If Pf had received any part of the performance for which they had
contracted, they would not have been entitled to recover

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o Law did not protect interest of the recipient of the money. Df had acted
to their detriment in manufacturing the machinery, but such
detrimental reliance did not give them a claim or entitle them to set off
their expenditure against Pf’s claim for recovery
o Did not improve position of arty who has performed services prior to
the frustration of the contract
2. Statutory Reform
Frustrated Contracts Act (Cap 115, 1985 Rev Ed)
 2(2)
o Money paid pre-frustration becomes recoverable.
o Money payable post-frustration ceases to be payable.
o Recipient/payee may retain or recover for expenses incurred (capped
at amount of expenses).
 2(3)
Recovery for valuable “benefit” obtained by the other party (includes partial
performance; non-monetary benefits) – services
Steps Involved
 Identify and value the “benefit”
 Assess a “just sum” for recovery (but remember that the value of the
“benefit” represents the maximum ceiling for recovery)
BP Exploration Co (Libya) Ltd v Hunt (No 2) [1979] 1 WLR 783.
 Application of FCA, prevent unjust enrichment on the proportioning of damages
 Stage 1: Identification and valuation of the Df’s benefit
 In appropriate cases (as in the present), the benefit is the end product of the
services (Goff J held that on true construction of the Act [s 1(3) and s 1(3)(b)],
Df’s benefit must, in an appropriate case, be identified as the end product of
the Pf’s services, despite the difficulties which this construction creates. Ideal
if legislature had intended it to be the value of the services instead, since at
present…[see third point]) (In cases involving goods, then goods themselves
are the benefit.)
 But in some cases the services will have no end product (e.g. surveying,
transporting goods). Goff J did not explain what the value was in these cases,
but plausible that the value will be the value of the services themselves (“In
each case, it is necessary to ask the question: what benefit has the Df obtained
by reason of the Pf’s contractual performance?”)
 However, where the end product is destroyed by frustrating event, the effect of
s 1(3)(b) [Singapore s 2(3)(b)] is to reduce the award to nil because value of
the benefit has been reduced to zero by the frustrating event.
 Stage 2: Award of the just sum
 Purpose behind FCA is “the prevention of unjust enrichment of the defendant
at the plaintiff’s expense”
 Thus, assessment should be similar to that undertaken by a court in a quantum
meruit claim under the law of restitution
 However, on appeal, CA seemed reject this approach in favour of a broader
one. Lawton LJ: “what is just is what the trial judge thinks is just”. An

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appellate court is not entitled to interfere with the assessment of the just sum
by the trial judge “unless it is so plainly wrong that it cannot be just”.
 Thus, CA’s approach gives untrammelled discretion to the trial judge (However,
CA did not lay down guidelines to assist trial judges in the exercise of their
discretion. )
Criticism of FCA
“It must be concluded that [s 2(3)] is shoddily drafted and that it produces results
which are, in principle, undesirable. A benefit should be identified as the value of
the services and not the end product of the services. The focus of the Act is upon
the prevention of unjust enrichment … and consequently it does not address itself
to the recovery of reliance losses which do not result in a benefit to the other
party, nor does it seek to apportion the losses between the parties. In failing to
address itself to these issues, the [FCA] is sadly deficient”
1. Principle of the Act is to prevent unjust enrichment
 Act does not apportion losses between parties
 While Act confers discretion upon the court, it is not a discretion that relates
explicitly to the apportionment of losses
 In all cases court must first identify the benefit which Df has obtained at
expense of Pf
 Discretion thus relates only to the proportion of that benefit which is
recoverable by the Pf
 Therefore, discretion is only exercisable within a framework which seeks to
prevent unjust enrichment
2. Section 2(2)
 Differs from Fibrosa in two respects
o Recovery not confined to cases in which there has been total failure of
consideration. Money paid is recoverable even upon partial failure of
consideration.
o Proviso gives court a discretion to allow the payee to retain some or all
of the prepayment that has been made. However, court has refused to
confine that discretion by seeking to articulate the principles upon
which the exercise of the discretion is based.
3. Section 2(3)
 Goff J’s interpretation of “valuable benefit” – in “an appropriate case”, benefit
is to be identified with the “end product” of the Pf’s services and not with the
services themselves. Effect of this is that in unfortunate consequences where
the effect of the frustrating event is to destroy the work of the Pf, there is no
end product and thus nothing to value.
 Result may be unfortunate, but again, Act does not seek to apportion losses.
 Thus, Pf can only recover where Df has received a benefit as a result of the
work he has done. Consequence of identifying benefit with the end product is
to narrow the concept of benefit that underpins the Act so that reliance
expenditure which does not result in an end product will not be recoverable
under s 2(3).
 Three-stage approach

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o Idenfitication of benefit – goods, or in the case of the provision of

services, the end product of these services
o Valuation of benefit
o Court must decide on what is a “just sum”
 “Just sum” cannot exceed value of benefit conferred
 Goff J took approach similar to restitutionary claim while in
CA Lawton LJ stated that it was up to discretion of trial judge
 Hence, very difficult to predict what will constitute a “just
sum”
“In this respect it is perhaps fortunate that a frustrated contract is a comparative rarity
in commercial practice. This being the case, the Act rarely comes into play and so the
deficiencies in the Act and in the reasoning of the Court of Appeal in BP v Hunt
rarely come to light.”

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BREACH AND ITS CONSEQUENCES

 “A breach of contract is committed when a party without lawful excuse fails or
refuses to perform what is due from him under the contract, or performs
defectively or incapacitates himself from performing.”
o Not every failure to perform = breach, must be without lawful excuse
o Strict liability for breach
o Discharge of contract upon breach only is necessary; contracts will try
to enforce contracts
SGA
 When condition to be treated as warranty
 11. (2) Whether a stipulation in a contract of sale is a condition, the breach of
which may give rise to a right to treat the contract as repudiated, or a warranty,
the breach of which may give rise to a claim for damages but not to a right to
reject the goods and treat the contract as repudiated, depends in each case on
the construction of the contract; and a stipulation may be a condition, though
called a warranty in the contract.
I. CONSEQUENCES OF BREACH
Photo Production Ltd v Securicor Transport Ltd [1980] AC 827.
 Parties to a contract are free to determine for themselves what primary
obligations they will accept
 Breaches of primary obligations give rise to substituted or secondary
obligations on the part of the party in default, and, in some cases, may
entitle the other party to be relieved from further performance of his own
primary obligations
 Every failure to perform a primary obligation is a breach of contract
 Secondary obligation is then to pay monetary compensation to losses
suffered in consequence of the breach, but the unperformed primary
obligations still remain, subject to 2 exceptions which allows the innocent
party to elect to discharge the contract
o First: fundamental breach, where defaulting party’s failure to
perform a primary obligation deprives substantially the whole benefit
which both parties intended him to obtain from the contract, thus
allowing the innocent party to discharge the contract
o Second: breach of condition, which both parties have agreed that a
breach of which gives rise to the right to terminate, regardless of the
gravity of the event
o If such an election is made by the innocent party, the remaining
primary obligations of the contract becomes discharged, and the
contract is repudiated
 General secondary obligation
o Damages
o No right to discharge contract
o Arises due to breach of warranty
 Anticipatory secondary obligations
o Right to damages
o Right to discharge contract
o Arises due to breach of condition or fundamental breach

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II. CLAIMS BY THE DEFAULTING PARTY

(A) Entire Contract / Obligation
Cutter v Powell (1795) 6 Term Rep 320, 101 ER 573.
 Entire contract obligations, party in breach will not be allowed to claim unless
he fulfills full performance
 Shipmate died before ship reach destination; no claim allowed
 Promise by D depended on a condition precedent to be performed by P’s
husband and this condition precedent must have been wholly performed before
a claim would be allowed
 Case was seen as harsh, better dealt by frustration? Employer unjustly enriched!
(B) Divisible Contract
Taylor v Laird (1856) 1 H&N 266, 25 LJ Ex 329, 156 ER 1206
 Divisible contracts, party in breach can claim to the extent of his consideration
 Allowed to claim for duration he worked, none withstanding that he bailed
halfway
 Courts today are more likely to divide obligations in order to prevent the
possibility of other party being unjustly enriched?
Tong Aik (Far East) Ltd v Eastern Minerals & Trading (1959) Ltd [1963] MLJ 322.
 Divisible contracts, party in breach can claim to the extent of his consideration,
distinction between entire and divisible contracts
 Contracts are indivisible where the consideration is one and entire, or where it is
stated or can be gathered by necessary inference that no consideration is to
pass from one party till the whole obligations of the other party have been
completed; but where no such intention can be gathered, and the contract
resolves itself into a number of considerations for a number of acts, as in the
case of periodical payments for a number of services which do not form one
complete whole, the contract is divisible
 In an indivisible or entire contract, the right to payment does not arise until the
contract has been completely performed; but if there has been substantial
performance, a claim will be allowed subject to any counterclaim or set-off for
omissions or defects in execution
 Pollock on Contracts
o “A contract which can be fulfilled only as a whole, so that failure in
any part is failure in the whole, is said to be entire. A contract of which
the performance can be separated, so that failure in one part affects the
parties rights as to that part only, is said to be divisible.”
(C) Substantive Performance

 Substantial performance occurs when actual performance falls not far short of
the required performance. Essentially, a party in breach can claim if they have
substantially performed their obligations, unless their breach goes to the root
of the contract.
 Claim will be allowed subject to any counterclaim or set-off for omissions or
defects in execution
 Treitel thinks that there are qualitative and quantitative obligations, instead of
examining the contract for divisible consideration, a better approach would be
to look at the obligation instead?

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Building & Estates v AM Connor [1958] MLJ 173.

 Substantive performance: party in breach can claim to the extent of his
consideration
 D claimed construction was defective and refused to pay
 Contract seen as substantially completed, granted full payment subject to
deductions for defects and damages
Hoenig v Isaacs [1952] 2 All ER 176.
 Substantive performance, party in breach can claim to the extent of his
consideration
 D employed P to decorate flat. Some defects in decoration and D refused to pay
 D liable to pay for balance after deducting for defective performance, P had
substantially performed his obligations under the contract
 Lump sum contract does not mean entire performance was a condition
precedent to payment
 When contract provides for specific sum to be paid on completion of specified
work, courts will lean against the construction of the contract which would
deprive contractor of any payment at all simply because there are some defects
or omissions
 Only occasion that no need payment upon breach is when the breach goes to the
root of the contract
Bolton v Mahadeva [1972] 1 WLR 1009.
 P agreed to install central heating
 Heating was uneven and released fumes
 P not entitled to claim, courts refused to find substantial performance
 Substantial performance not allowed = general ineffectiveness of it for its
primary purpose
(D) Restitutionary Claim
Acceptance of partial performance: Quantum meruit (services) / Quantum
valebat (goods)
 Acceptance of partial performance quantum meruit for services and quantum
valebat for goods
 Restitution will be allowed for the defaulting party who renders incomplete
performance only if the aggrieved party has freely accepted the partial
performance or has otherwise waived the need for complete performance
 Basis rest on unjust enrichment
 Focus here is different from focus in substantial performance which questions
whether the aggrieved party has accepted partial performance, rather than
questioning whether the performance has been substantial
 Claims under restitution are not substantial as they would have been claimed
under head of substantive performance
Sumpter v Hedges [1898] 1 QB 673.
 P built something halfway, could not continue due to financial troubles
 P left behind materials, D used them to finish project
 D had to pay P the value of materials he left behind, but not liable for the
halfway done building
 For quantum meruit to succeed, circumstances must be such as to give an option
to the Df to take or not to take the benefit of the work done
 Df is not bound to keep unfinished a building which in an incomplete state
would be a nuisance on his land
 Df had no choice but to finish the building as the incomplete building would

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have been a nuisance on his land; he did not freely accept partial performance
Foo Song Mee v Ho Kiau Seng [2011] SGCA 45.
 Distinction between contractual and restitutionary quantum meruit
 Claims based on quantum meruit can be found upon contract or restitution
 Former relates to cases where there is a contract for the supply of services
though this same contract lacks a term on the quantum of the remuneration
 Latter relates to cases where there is no contract at all
 Where there is an express or implied contract which is silent on the quantum of
remuneration or where there is a contract which states that there should be
remuneration but does not fix the quantum, the claim in quantum meruit will
be contractual in nature
 Where the basis is to correct unjust enrichment, it will be restitutionary in nature
 There cannot be a claim in quantum meruit if there exists a contract for an
agreed sum and there cannot be a claim in restitution parallel to an
inconsistent contractual promise between the parties.
Incontrovertible Benefit(?)
 If the innocent party cannot argue that he has received no benefit from the party
in breach, he would have to pay for the benefit received.
 Objective benefits can be subjectively devalued as per (Sumpter v Hedges), but
this doesn’t mean part performance will never suffice as grounds for a claim in
restitution
 If recipient of part performance has gained a readily realizable benefit or has
been saved expenses which he must have incurred, then it is possible that the
part performer can be entitled to claim in restitution
Hain SS Co Ltd v Tate & Lyle Ltd (1936) 41 Com Cas 350
 Where a party cannot deny that he has received a benefit from the contracting
party, a claim may be made on his part
 “Let me put a quite possible case: A steamer carrying a cargo of frozen meat
from Australia to England deviates by calling at a port outside the usual or
permitted route: it is only the matter of a few hours extra steaming: no trouble
ensues except the trifling delay. The cargo is duly delivered in England at the
agreed port.
 The goods owner has had for all practical purposes the benefit of all that his
contract required; he has had the advantages, of the use of a valuable ship, her
crew, fuel, refrigeration and appliances, canal dues, port charges, stevedoring.
The shipowner may be technically a wrongdoer in the sense that he has once
deviated, but otherwise over a long period he has been performing the
exacting and costly duties of a carrier at sea.
 I cannot help thinking that epithets like "unlawful" and "unauthorised" are not
apt to describe such services; it may be that by the maritime law the
relationship of carrier and goods owner still continues despite the deviation,
though subject to the modifications consequent on the deviation. Nor can I
help feeling that the court would not be slow to infer an obligation when the
goods are received at destination to pay, not indeed the contract freight, but
a reasonable remuneration”
III. AGGRIEVED PARTY’S RIGHT TO TERMINATE

Right to terminate in “4 situations”.

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RDC Concrete v Sato Kogyo [2007] 4 SLR(R) 413.

1. Express reference to the right to terminate and what will entitle the innocent party
to terminate the contract
 Operates independently of all other situation
 Situation 2, 3a and 3b are not relevant
2. Party in breach renounces the contract but clearly conveying to the innocent party
that it will not perform its contractual obligations at all; quaere whether innocent
party can terminate the contract if the party in breach deliberately chooses to
perform its part of the contract in a manner that amounts to a substantial breach
 Operates independently of 1,3a and 3b
3. Construction of Contract
a. Condition warranty approach, applied before 3b
b. Hongkong Fir approach; party in breach has committed a breach, the
consequences of which will deprive the innocent party of substantially the
whole benefit which it has intended that the innocent party should obtain
from the contract
 A term which is not a condition would necessarily become an intermediate term,
subject to HK fir approach, later criticized and warranties are recognized in Sports
Connection (Phang thinks that there will never virtually be a situation where a
breach of a term would always result in trivial consequences…wtf? He think he
who?)
Sembcorp Marine Ltd v PPL Holdings Pte Ltd [2013] SGCA 43.
 Reaffirmed RDC and Man Financial
Sports Connection v Deuter Sports [2009] 3 SLR 883.
 Criticized RDC Concrete, in cases parties have explicitly agreed that the term
breached is a warranty.
 Given that they intended the term to be a warranty, their intention should be given
effect to and term concerned should be conferred the legal effect of a warranty.
Man Financial (S) Pte Ltd v Wong Bark Chuan David [2008] 1 SLR 663.
 Reaffirmed the four situations in RDC
IV. CONDITION – WARRANTY APPROACH
“Situation 3(a)” of RDC Concrete
 Breach of condition = right to terminate
 Breach of warranty = no right to terminate
 Promotes certainty, focus on nature of term breached
In re an arbitration between Moore and Company, Limited and Landauer and
Company [1921] 2 KB 519
 Implied condition that goods must match description was breached, buyers had
right to reject
 SGA s13(1) where there is a contract for the sale of goods by description, there
is an implied condition that the goods will correspond with the description
Arcos v Ronaasen [1933] 1 AC 470
 Wood did not correspond with dimensions specified, implied condition of SGA
s13 was breached, allowed to terminate contract
 Does not look at whether there was substantial compliance
Reardon Smith Line v Yngvar Hansen-Tangen [1976] 1 WLR 989.
 Criticized Moore and Arcos
 Found them to be excessively technical and due for fresh examination
 Ask whether a particular item in a description constitutes a substantial

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ingredient of the “identity” of the thing sold, and only if it does to treat it as a
 General law of contract has developed, along much more rational lines, in
attending to the nature and gravity of a breach or departure rather than in
accepting rigid categories which do or do not automatically give a right to
rescind.
 Promoting the cause that buyers should accept half fucked shit?
V.
FACTORS RELEVANT TO CLASSIFIYING A TERM AS “CONDITION”
“Situation 3(a)” of RDC Concrete (again)
 Relevant factors to consider in classifying a term as a condition
 No magical formula, a factor approach based on factual matrix.
 Again looking at the construction of the contract
(a) The first factor: Where a statute classifies a specific contractual term as a
"condition"
The first of the established factors mentioned above (at [160]) is very specific: Where
a statute (or, more often, a particular provision within a statute) classifies a specific
contractual term as a "condition", then that term will, of course, be a condition. The
paradigm model is the Sale of Goods Act … This last-mentioned Act is, in fact, the
classic statutory embodiment of the condition-warranty approach inasmuch as it
classifies various contractual terms as conditions and warranties, respectively…
(b) The second factor: Where the contractual term itself expressly states that it
is a "condition"
The second factor is an ostensibly obvious one: Where the contractual term itself
expressly states that it is a "condition", then that term would generally be held by this
court to be a condition.
However, we have added the word "ostensibly" because, even in what appear to be
very clear-cut situations, there is case law that suggests that the express use of the
word "condition" might (on occasion, at least) be insufficient to render that term a
condition in law. In this regard, the House of Lords decision of L Schuler AG v
Wickman Machine Tool Sales Ltd [1974] AC 235 ("Schuler") comes readily to mind.
In that case, the majority of the House held that, although the word "condition" was
expressly utilised, that word was being utilised not as a term of legal art, but, rather, in
a lay sense.
It is our view that the majority of the House in Schuler were, in substance and effect,
applying the Hongkong Fir approach instead (which, it will be recalled, falls under
Situation 3(b) and, more importantly, relates to the actual nature and consequences of
the breach instead).
Indeed, it might well have been the fact situation in Schuler which prompted the
majority of the House to adopt what was, in substance and effect, the Hongkong Fir
approach instead.

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We also observed in RDC Concrete (especially at [110]) that general House of Lords
decisions after Schuler in fact supported the approach that we adopted in that case:
see, for example, Bunge Corporation, New York v Tradax Export SA, Panama [1981]
1 WLR 711 ("Bunge") and Torvald Klaveness A/S v Arni Maritime Corporation
[1994] 1 WLR 1456.
(c) The third factor: The availability of a prior precedent
The third factor is whether a prior precedent is available. An oft-cited illustration in

this regard is the English Court of Appeal decision of Maredelanto Compania
Naviera SA v Bergbau-Handel GmbH [1971] 1 QB 164 ("The Mihalis Angelos"),
where the court held (at 194, 199-200 and 205-206) that an "expected readiness"
clause was a condition on the ground, inter alia, that the same conclusion had been
reached in by its own previous decision (in Finnish Government v H Ford & Co, Ltd
(1921) 6 Ll L Rep 188).
With respect, reliance on a prior precedent, whilst practically convenient, does not
really address the issue of principle inasmuch as there would, in our view, still need to
be an inquiry as to whether or not the analysis and reasoning in the prior precedent
passed muster in principle.
(d) The fourth factor: Mercantile transactions
The fourth factor centres on the importance placed on certainty and predictability in
the context of mercantile transactions. Case law suggests that courts are more likely to
classify contractual terms as conditions in this particular context, especially where
they relate to timing (see, for example, Bunge and The Mihalis Angelos).
(e) Summary of the relevant factors under the condition-warranty approach
 The aforementioned factors are important. But, they are not exhaustive and the
categories of factors are not closed. The actual decision as to whether or not a
contractual term is a condition would depend very much on the particular
factual matrix before the court.
BS&N Ltd (BVI) v Micado Shipping Ltd (Malta) (The “Seaflower” (No.1)) [2001]
C.L.C. 421, [2001] 1 Lloyd’s Law Rep 341.
 Relevant factors to designate a term as a condition
1. Expressly provided by statute
2. Categorized as the result of previous judicial decision
3. Designated in the contract or if the consequences of its breach, that is, the
right of the innocent party to treat himself as discharged, are provided for
expressly in the contract
4. Nature of the contract or the subject matter or the circumstances of the case
lead to the conclusion that the parties must, by necessary implication, have
intended that the innocent party would be discharged from further
performance of his obligations in the event that the term was not fully and
precisely complied with
5. Otherisw, a term of a contract will be considered to be an intermediate term
(HK FIR approach)

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(A) Classification as “condition” / “warranty” by Construction of Contract.

Bentsen v Taylor [1893] 2 QB 274.
 Construction of contract approach to determine if a term is a condition or
warranty
o Check whether the breach of which would sound only in damages
(warranty)
o Or whether it is that kind of promise the performance of which is made
a condition precedent to all further demands under the contract by the
person who made the promise against the other party - a promise the
failure to perform which gives the opposite party the right to terminate
(condition)
 Only can be achieved by looking at the contract in the light of surrounding
circumstances, and ascertaining the parties intentions (interpretation)
Section 11(2) SGA.
 Whether a stipulation in a contract of sale is a condition, the breach of which
may give rise to a right to treat the contract as repudiated, or a warranty, the
breach of which may give rise to a claim for damages but not to a right to
reject the goods and treat the contract as repudiated, depends in each case on
the construction of the contract; and a stipulation may be a condition, though
called a warranty in the contract.
(B) Classification as “condition” / “warranty” by Statute
Cehave N.V. v. Bremer Handelsgesellschaft (The “Hansa Nord”) [1976] QB 44.
 Condition - warranty approach
 Buyers not entitled to reject becaue the clause that “shipment to be made in
good condition” was not a condition, but merely an innominate term
 If you want to draft contract, better make it explicit
 S11 does not treat all terms as either condition or warranty, s62 preserves any
common law principles; innominate terms aka HK fir
Section 61(1) SGA.
In this Act, unless the context otherwise requires — "warranty" means an agreement
with reference to goods which are the subject of a contract of sale, but collateral to the
main purpose of such contract, the breach of which gives rise to a claim for damages,
but not to a right to reject the goods and treat the contract as repudiated.”.
Mere “warranties” implied into sale of goods contracts by ss 12(2)-(5) SGA.

12. (2) In a contract of sale, other than one to which subsection (3) applies, there is
also an implied warranty that —
(a) the goods are free, and will remain free until the time when the property is
to pass, from any charge or encumbrance not disclosed or known to the buyer
before the contract is made; and
(b) the buyer will enjoy quiet possession of the goods except so far as it may
be disturbed by the owner or other person entitled to the benefit of any charge
or encumbrance so disclosed or known.
(3). This subsection applies to a contract of sale in the case of which there appears
from the contract or is to be inferred from its circumstances an intention that the
seller should transfer only such title as he or a third person may have.

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(4). In a contract to which subsection (3) applies, there is an implied warranty that all
charges or encumbrances known to the seller and not known to the buyer have been
disclosed to the buyer before the contract is made.
(5). In a contract to which subsection (3) applies, there is also an implied warranty
that none of the following will disturb the buyer’s quiet possession of the goods,
namely —
(a) the seller;
(b) in a case where the parties to the contract intend that the seller should
transfer only such title as a third person may have, that person;
(c) anyone claiming through or under the seller or that third person otherwise
than under a charge or encumbrance disclosed or known to the buyer before
the contract is made.”
“Conditions” implied into sale of goods contracts by SGA:
section 12(1) (seller’s right to sell),
section 13(1) (goods will correspond with description),
section 14(2) (goods of satisfactory quality),
section 14(3) (goods reasonably fit for buyer’s particular, disclosed, purpose),
VI.
section 15(2) (bulk of goods will correspond with sample in quality).
Section 11SGA.
Section 15A SGA (restricting non-consumer buyer’s right to unreasonably reject
goods for slight breach).
(C) Classification as “condition” by Judicial Precedent
Bunge Corporation New York v Tradax Export SA [1981] 1 WLR 711.
 Broadly speaking, time will be considered the essence in “mercantile” contracts.
The relevant clause falls squarely within these principles, and such authority
as there is supports its status as a condition.
 Judicial Precedent denoting time as a “condition”
 Prevents parties from delaying upon breach to ascertain whether they can
terminate, adds certainty to agreements
 In this context, it is clearly essential that both parties should know precisely
what their obligations are, most especially because the ability of the seller to
fulfill his obligation may well be totally dependent on punctual performance
by the buyer
Maredelanto Compania Naviera v Bergbau-Handel GmbH (The “Mihalis

Angelos”) [1971] 1 QB 164.
 Judicial precedent classifying as condition helps to ensure certainty in the law
 Helps shipowners and charterers to know when a contractual obligation of this
nature is under consideration, that they can end the contract if breach is proven
 Do not have to ask whether the breach went to the root of the contract (HK Fir)
 Eventually, judicial precedents should be codified into statutes as seen in s10 of
SGA
Hartley v Hymans [1920] 3 KB 475.
 Basically affirmed everything above regarding time.
Section 10 SGA.
Unless a different intention appears from the terms of the contract, stipulations as to
time of payment are not of the essence of a contract of sale.

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(2) Whether any other stipulation as to time is or is not of the essence of the contract
depends on the terms of the contract
(D) Classification as “condition” in Mercantile Context
 173 The fourth factor centres on the importance placed on certainty and
predictability in the context of mercantile transactions. Case law suggests that
courts are more likely to classify contractual terms as conditions in this
particular context, especially where they relate to timing (see, for example,
Bunge and The Mihalis Angelos).
Bunge Corporation New York v Tradax Export SA [1981] 1 WLR 711.
 In conclusion, the statement of the law in Halsbury's Laws of England …
appears to me to be correct, in particular in asserting (1) that the court will
require precise compliance with stipulations as to time wherever the
circumstances of the case indicate that this would fulfil the intention of the
parties, and (2) that broadly speaking time will be considered of the essence in
"mercantile" contracts … The relevant clause falls squarely within these
principles, and such authority as there is supports its status as a condition… In
this present context it is clearly essential that both buyer and seller (who may
change roles in the next series of contracts, or even in the same chain of
contracts) should know precisely what their obligations are, most especially
because the ability of the seller to fulfil his obligation may well be totally
dependent on punctual performance by the buyer”.
Maredelanto Compania Naviera v Bergbau-Handel GmbH (The “Mihalis Angelos”)
[1971] 1 QB 164.
 Time is of the essence, gives rise to redictability and certainty, which facilitates
mercantile transactions
 Charter’s motivation to terminate the clause was irrelevant. All that was
required was that there was a breach of a condition
(E) Classification as “condition” by Parties’ Agreement

L Schuler AG v Wickman Machine Tools Sales Ltd [1973] 2 All ER 39.
 Use of word condition does not mean that the term is a condition. It must be in
line with the parties’ intentions/agreement
 Clause 7(b) of the agreement provided that “It shall be a condition of this
agreement that (i) [Wickman] shall send its representatives to visit [the six
large UK motor manufacturers] at least once in every week for the purpose of
soliciting orders for panel presses…”
 Clause 11(a) provided that either party might determine the agreement by
notice in writing if “(i) the other shall have committed a material breach of its
obligations hereunder and shall have failed to remedy the same within sixty
days of being required in writing so to do…”
 D failed to make weekly visits on a few occasions. P terminated agreement,
claiming that D was in breach of a condition under clause 7(b)
 Usage of the word “condition” is still subject to parties’ intentions (Lord Reid)

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o “Use of the word ‘condition; is an indication-even a strong

indication-of such an intention but it is by no means conclusive.
The fact that a particular construction leads to a very unreasonable
result must be a relevant consideration. The more unreasonable the
result, the more unlikely it is that the parties can have intended it, and
even if they do intend it the more necessary it is that they shall make
that intention abundantly clear.”
o Cl7(b) alone appears to create a condition since it is so expressly
described. Very likely that standing alone, it could be held to be a
condition.
o Problem was inter-relationship between cl7(b) and cl11. Present
situation fell within both clauses. If cl7(b) prevailed then Pf could
terminate immediately, but if cl11 prevailed then right to terminate
could only be exercise after expiry of notice period.
o Two issues:
 Whether or not events fell within cl11 at all – how do you
remedy past events? But Lord Reid concluded that breach
could be remedied by prevent future recurrence.
 What then are the remedial consequences? Lord Wilberforce
concluded that cl7(b) did not confer right for immediate
termination (i.e. not a condition). Rather, a breach of cl7(b) was
automatically a material breach for the purposes of cl11 and
thus gave Pf the right to invoke machinery of cl11.
 Criticized in Man Financial; Do not rely!
 Badly drafted contract, in well drafted contract, it would usually reflect the
underlying intentions of the parties
 Exceptional case, flies in the face of logic
 Where the contractual term itself expressly states that it is a condition, then the
term would generally be held to be a condition
 Believes that Schuler were in substance applyin HK Fir, and relates to the nature
and consequences of the breach (sit 3b)
 Lord Willberforce warned against rewriting the clear intention of the contracting
parties that the term concerned be a “condition” in the strict legal sense of the
word (sit 3a)
 SGCA thinks that intention of the parties (sit 3a) should take precedence since
HK fir is conventionally associated with fairness, however it is equally true
that a sense of fairness also features when the condition-warranty approach is
applied inasmuch as it is fair to hold the contracting parties to their original
bargain
 Basically preventing sit3a and 3b from being indistinguishable
“INTERMEDIATE” / INNOMINATE” TERM APPROACH “Situation 3(b)” of

RDC Concrete
 Harsh categorizing of the condition-warranty approach has led to the
recognition of “intermediate” or “innominate” terms
 Breach of an intermediate or innominate term does not automatically gives party
right to terminate; whether such right arises depends on the seriousness of the
consequences
 Aggrieved party can only terminate only if such breach deprives the aggrieved

lOMoARcPSD|4880004
party of “substantially the whole benefit” which it was the intention of the
parties as expressed in the contract that he should obtain as the consideration
for performing those undertakings
 Focus on nature and consequences of the breach
Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha [1962] 2 QB 26, [1961] 2
All ER 257.
 Development of the innominate term
 Clause was not condition, neither was it so trivial as to deem it as a warranty,
nevertheless it was an intermediate term which did not deprive the innocent
party of substantially the whole benefit of the contract
 Test: does the occurrence of the event deprive the party who ha further
undertakings still to perform of substantially the whole benefit which it was
the intention of the parties as expressed in the contract that he should obtain as
the consideration for performing those undertakings
 In this case, scope of “unseaworthiness” was very large, solution is hence not to
consider whether clause was a condition or warranty, but rather to consider the
effects
 In case where there are many degrees of seaworthiness or a intermediate term,
instead of looking at scope of seaworthiness or the intermediate term, better to
look at the degree of it and the consequences of that degree
Cehave N.V. v. Bremer Handelsgesellschaft (The “Hansa Nord”) [1976] QB 44.
 Breach of an innominate term; court found “shipment to be made in good
condition” being an innominate term rather than a condition
 Courts should not be over ready unless required by statute or authority to find
that a term is a condition. This is because contracts are made to be performed
and not to be avoided according to the whims of market fluctuations
 Where there is a free choice between 2 possible constructions, courts should
prefer the one that will ensure performance
 Buyer was trying to get out of bad bargain in this case
Federal Commerce and Navigation v Molena Alpha Inc (The “Nanfri”) [1979] AC
757.
 Breach of innominate term which allowed repudiation
 Pre-paid freight bulls are essential to charters’ trade, anticipatory breach of
contract amounted to a repudiatory breach as it went to the root of the contract
 Rare occasion where breach of an innominate term allowed repudiation
Alliance Concrete Singapore Pte Ltd v Comfort Resources Pte Ltd [2009] 4 SLR(R)
602.
 Breach of an innominate term
 D bought sand from P, P consistently under-order and paid late. P wanted to
terminate. Contract required minimum order and prompt payment.
 No right to terminate, sit1 and 2 did not apply. 3a did not apply because prompt
payment is not a condition. Time is essence with regards to delivery of goods
but not payment
 3b did not apply because there were no substantial loss
Cousins Scott William v The Royal Bank of Scotland plc [2010] SGHC 73.
 Breach of an innominate term, and problems with having to ascertain the
consequences of the breach under sit 3b, as opposed to other situations
 No right to rescind as breach of confidentiality wa not too serious as to deprive
RBS of substantially the whle benefit of the contract

lOMoARcPSD|4880004
 In determining whether a breach has deprived Df of the substantial benefit of

the contract, inquiry is focused not on the potential loss of the breach but the
actual loss. Parties have to “wait and see” what the nature and consequences
of the breach actually are.
 Pf’s breach did not deprive Df of substantially the whole benefit of the
Redundancy Agreement
o Although he intially breached the confidentiality obligation, he
subsequently deleted them on the same day when instructed and further
reinforced his confidentiality obligation by executing a Statutory
Declaration
o Breach did not cause any loss to Df
o In fact, judge found that Df did in fact receive substantially the whole
benefit of the Redundancy Agreement
 Thus, Df did not have the right to terminate Redundancy Agreement and was
merely entitled to sue for damages
 However, Steven Chong JC also held that he was not suggesting that a breach
of a confidentiality clause in a redundancy agreement can never amount to
repudiatory breach – have to refer to terms of the agreement and effect of the
breach
 Employer’s early discovery of the breach precluded his right to terminate?
WTF? If he waited for the breach to eventuate, then allowed to terminate since
it will strike at the root of the contract?
EXPRESS “TERMINATION” CLAUSES “Situation 1” of RDC Concrete

 Deals with situations where the contract clearly or unambiguously states that,
where certain events occur, the innocent party will be entitled to terminate the
contract
 Subject to construction and a implicit standard of reasonableness (similar to that
of UCTA)
Chua Chian Ya v Music & Movements [2010] 1 SLR 607.
 P allowed to terminate because D breached claise 10,12; clear examples of an
express termination clause, which falls under RDC situation 1
 Clause 12: in event that D fails to account and make payment or fails to perform
any obligations required under the contract and in the event that such failure is
not cured within 30 days after written notice is served, P may elect to cancel or
terminate the agreement without prejudice to any rights or claims it may have
Rice v Great Yarmouth Borough Council The Times 26/7/2000, 2000 Westlaw
823961.
 Express termination clause not followed by courts
 “if contractor commits a breach of any obligations under contract…the council
may without prejudice to any accrued rights or remedies under the contract,
terminate the contractor’s employment under the contract by notice in writing
having immediate effect”
 Clause does not characterize any particular term as a condition or indicate which
terms are to be considered so important upon any breach will justify
termination. It appears to visit the same draconian consequences upon any
breach, however small, of any obligation, however small.
 Contract should not be interpreted in a way that defeats its commercial purpose
 Term would entitle Df to terminate the contract at any time for any breach of
any term flies in the face commercial common sense

lOMoARcPSD|4880004
 Implicit requirement of reasonableness even if expressly stated? Too much

interference with freedom to contract? Probably because there is a mismatch
of bargaining power here.
Fu Yuan Foodstuff v Methodist Welfare Services [2009] 3 SLR 925.
 D contracted with P to provide catering services
 Cl 3.2 permitted D to terminate without notice should P breach cl 2.7
 Cl 2.7 states that P shall comply with all Singapore laws and regulations,
especially with regard to food establishments and employment of staff
 D allowed to repudiate contract because of breach of cl2.7, which allowed
repudiation under cl3.2
 Unlike Rice, Court gave effect because it is reflected the parties intentions as
ascertained from the context concerned, there was no need to read down the
contract; did not defy commercial sense… really?
“Loss of Bargain” Damages
 While express reference clauses if upheld, will definitely give rise to terminate
the contract, issues of whether innocent party is allowed to be given full
damages depends on whether there is a concurrent common law right to do.
Refer to Damages.
Sports Connection v Deuter Sports GmbH [2009] 3 SLR(R) 883.
 P exclusive distributor of D; parties signed non-competition clause
 P accepted breach nut contended breach was no so serious as to entitle D to
terminate agreement
 D allowed to terminate, but not to claim full damages, as non-compete clause
was not a condition
 Courts found parties had no intention of treating it as a condition, where a
breach of it would give rise to terminate the agreement
 D would not have been substantially deprived of the whole benefit of the
contract if P was in breach of non-competition clause
 Sit1 entails same legal effect as a condition, this is only with regards to there
termination of the contract
 Does not necessarily mean that from remedial perspective, the innocent party is
also entitled to full measures of damage if there has, in fact, been no breach
which would have entitled it to terminate the contract at common law (sit
1,2,3a/3b should be considered in isolation)
Lombard North Central v Butterworth [1987] QB 527.
 Example of sit 1, with concurrent common law right
 D breached 2 clauses. One clause stipulated that punctuality in payment was of
the essence (condition; right to damages)
 One clauses provided right to terminate in event of late payment
 Breach of condition, D’s breach was repudiatory in nature, giving rise to a right
to terminate the contract for P
Financings Ltd v Baldock [1963] 2 QB 104.
 Example of sit 1, w/o concurrent common law right.
 Breached an express termination clause, but did not breach condition – therefore
not entitled to loss of bargain of damages
 Contract was terminated under an express termination clause without a
concurrent right under common law, they could only recover unpaid
installments for the two months; not entitled to expectation interests in terms
of damages.
 No repudiation under common law

lOMoARcPSD|4880004
 In absence of express contractual provisions to the contrary, the non-payment of

the 2 installments would not themselves go to the root of the contract. (not 3b)
Tan Wee Fong v Denieru Tatsu F&B Holdings [2010] 2 SLR 298.
 Restatement of law under sit1 in SG
 Differences in remedial consequences under 2 scenarios
 Party terminates pursuant to express contractual provisions but has no
concurrent right to terminate at common law
o Only remedy available to aggrieved party is recovery of damages for
unperformed accrued obligations up to date of termination
o Aggrieved party not entitled to claim loss of bargain damages having
terminated solely to an express contractual provisions to do so
o Financings Ltd V Baldock
 Party who had terminated pursuant to express contractual provisions had a
concurrent right to do so under common law
o Entitled to recover loss of bargain damages
o Lomabard North Central Plc v Butterworth
 Use Man Financial factors to determine if a term would normally be considered
as a condition or merely a warranty at common law, term is not automatically
classified as a condition simply because the parties have stipulated that it so.
Max Media FZ LLC v Nimbus Media Pte Ltd [2010] 2 SLR 677, [2010] SGHC 30.
 Evaluation and criticism regarding Sit1 of RDC
 Damages for of bargain may be recoverable only if there is a concurrent
repudiatory breach under common law
 W/o repudiatory breach under cl, aggrieved party may not claim for damages
arising after a contract’s termination, although he will still be entitled to
recover damages in respect of the loss he suffered at or before the date of
termination
 If sit 1 is substantially the same as sit3a, then this bifurcated principle would
make no sense
 It is artificial to ask what is the nature of a term under cl where there is within
the contract an express provision stating that breach of that term would give
the innocent party the right to terminate
Stocznia Gdynia v Gearbulk Holdings [2009] EWCA Civ 75, [2009] 3 WLR 677.
 General summary of Express Termination Clauses in UK, similar to SG
approach
 “It must be borne in mind that all that is required for acceptance of a
repudiation at common law is for the injured party to communicate clearly and
unequivocally his intention to treat the contract as discharged: see Vitol SA v
Norelf Ltd [1996] AC 800.
 If the contract and the general law provide the injured party with alternative
rights which have different consequences, as was held to be the case in the
Dalkia case [2006] 1 Lloyd’s Rep 599, he will necessarily have to elect
between them and the precise terms in which he informs the other party of his
decision will be significant, but where the contract provides a right to
terminate which corresponds to a right under the general law (because the
breach goes to the root of the contract or the parties have agreed that it
should be treated as doing so) no election is necessary.
 In such cases it is sufficient for the injured party simply to make it clear that
he is treating the contract as discharged: see the Dalkia case [2006 If he

lOMoARcPSD|4880004
gives a bad reason for doing so, his action is none the less effective if the
circumstances support it
AGGRIEVED PARTY’S “ELECTION” TO TERMINATE

 Breach of contract, even a repudiatory one, does not itself bring the contract to
an end, rather it confers on the aggrieved party a right of election, a choice
whether
o To accept repudiation and terminate the contract
o Affirm the contract and continue with performance
Geys v Societe Generale, London Branch [2012] UKSC 63.
 A repudiatory breach of an employment contract does not operate to terminate
the contract automatically, innocent party is required to accept the repudiation
to effect termination
 A party seeking to terminate an employment contract is required to notify the
other party that it is doing so in clear and unambiguous terms
Vitol SA v Norelf Ltd [1996] AC 810.
 An act of acceptance of repudiation requires no particular form; a
communication does not have to be couched in the language of acceptance
 Sufficient that communication or conduct clearly and unequivocally conveys to
the repudiating party that the aggrieved party is treating the contract at an end
Photo Production v Securicor Transport [1980] AC 827.
 Same as below
Heyman v Darwins Ltd [1942] AC 256.
 Repudiated contract is terminated prospectively and not retrospectively
 Rights accrued prior to termination remains intact
Campbell v Frisbee [2002] EWCA Civ 1374.
 Confidentiality clauses survive even after termination, if intended by the parties
to do so
Yukong Line v Rendsberg Investments [1996] 2 Lloyd’s Rep 604.
 Law does not require an injured party to snatch at a repudiation and he does not
automatically lose his right to treat the contract as discharged merely by
calling on the other to reconsider his position and recognize his obligation
 In cases of continuing repudiation, aggrieved party who has elected to affirm the
contract after the first breach may not be able to treat the continuing non-
performance as a fresh act of repudiation
o Although there cannot be acceptance of the breach once the
repudiation has been spent, innocent party may be able to terminate
notwithstanding earlier affirmation if continued refusal of the
defaulting party amounts to further repudiatory conduct
Peyman v Lanjani [1985] Ch 457.
 Election to affirm must be unequivocal
 Aggrieved party will be held to have affirmed unless he has k of the facts giving
rise to the breach; and it has been suggested that he must also know of his
right to choose between affirmation and termination
 Party may be estopped from denying affirmation if the other party acts on his
apparent affirmation
The Hannah Bluementhal [1983] 1 All Er 34
 Abandonment; termination of a contract can be effected by the entry of the
parties, expressly or by necessary inference from conduct, into a fresh contract

lOMoARcPSD|4880004
for mutual release from their obligations under the contract said to be
abandoned
 An argument that mere inactivity of the parties could be construed as an implied
agreement to rescind the agreement failed.
Motor Oil Hellas (Corinth) Refineries v Shipping Corp of India (The
“Kanchenjunga”) [1990] 1 Lloyd’s Rep 391.
 Equitable estoppel occurs when a person having legal right against another,
unequivocally represents that he does not intend to enforce those legal rights;
if in such circumstances, the other party acts or desists from acting, in reliance
upon that representation, with the effect that it would be inequitable for the
representor therefore to enforce to enforce his legal rights inconsistently with
his representation he will to that extent be estopped from doing so.
Johnson v Agnew [1980] AC 367
 The aggrieved party who has elected to affirm the contract after the first breach
may be able to treat the continuing non-performance as a fresh act of
repudiation
 Although there cannot be acceptance of the breach once a repudiation has been
spent, an aggrieved party may be able to terminate a contract notwithstanding
earlier affirmation if continued refusal of the defaulting party amounts to
further repudiatory conduct
Safehaven v Springbrook (1998) 71 P&CR 59
 Same as above
Stocznia Gdanska v Latvian Shipping Company (No. 2) [2002] 2 Lloyd’s Rep 436,
[2002] EWCA Civ 889.
 Since election to affirm or terminate is generally irrevocable, there is 3rd option
 He can wait and see; reasonable period of time in which to decide whether to
terminate or affirm
 Period depends on the facts, doing nothing for too long = assume affirm
 If aggrieved party wishes to call on defaulting party to perform but not wish to
held to have lost his right to terminate or affirm, he must reserve his rights
Allen v Robles [1969] 3 All ER 154.
 Lapse of time will operate against them if thereby there was some prejudice to
the DF or in some way rights of 3rd party intervened or if the delay was of
sucha length as to be evidence that they had in truth decided to accept liability
Orix Capital Ltd v Personal Representative(s) of the Estate of Lim Chor Pee [2009]
SGHC 201, [2009] 4 SLR(R) 1062.
 Once contract is terminated, cannot be revived
 Must create new contract
Can one party terminate, where both parties have been in breach?
Alliance Concrete Singapore v Comfort Resources [2009] 4 SLR(R) 602.
 When A and B both breach the contract
 A is entitled to treat B as having wrongfully repudiated the k between them and
does so, it does not avail B to point to A’s past breach of contract, whatever
their nature
o B assumed to have affirmed, therefore cannot rely on A’s past breach
 A’s breach would only assist B if it was still continuing when A purported to
treat B as having repudiated the contract, and if the effect of A’s subsisting

lOMoARcPSD|4880004
breach was such as to preclude A from claiming B had committed a

repudiatory breach
o B would have to show that A, being in breach of an obligation in the
nature of a condition precedent was therefore not entitled to rely on B’s
breach as repudiation
 Essentially see who breached first and work from there.
RENUNCIATION / REPUDIATION / ANTICIPATORY BREACH

(“Situation 2” of RDC Concrete)
 This is where the party in breach, b its words or conduct, simply renounces the
contract inasmuch as it clearly conveys to the innocent party that it will not
perform its contractual obligations at all
Affinity between Doctrine of “Anticipatory Breach”
and RDC Concrete “Situation 2” (Renunciation / Repudiation)
Meaning of “Renunciation” / “Repudiation”
 Renunciation before the time fixed for performance is itself a breach, labeled as
‘anticipatory breach’
San International v Keppel Engineering [1998] 3 SLR(R) 447.
 Karthigesu JA: “The law on repudiatory breach or renunciation can be
summarised as follows: A renunciation of contract occurs when one party by
words or conduct evinces an intention not to perform or expressly declares that
he is or will be unable to perform his obligations in some material respect.
Short of an express refusal or declaration the test is to ascertain whether the
action or actions of the party in default are such as to lead a reasonable
person to conclude that he no longer intends to be bound by its provisions.
The party in default may intend in fact to fulfil the contract but may be
determined to do so only in a manner substantially inconsistent with his
obligations, or may refuse to perform the contract unless the other party
complies with certain conditions not required by its terms: Chitty on Contracts
vol 1 at para 24-016.”.
Econ Piling v GTE Construction [2009] SGHC 213
 “Where a party, by his words or conduct, simply renounces his contract
inasmuch as he clearly conveys to the other party to the contract that he will
not perform his contractual obligations at all, the other party is entitled to
terminate the contract. Further recognition of the principle can be found in
the following passage of Chitty on Contracts, vol 1 (Sweet & Maxwell, 30th
Ed, 2008) (at 24-018):
‘… An absolute refusal by one party to perform his side of the contract
will entitle the other party to treat himself as discharged, as will also a
clear and unambiguous assertion by one party that he will be unable to
perform when the time for performance should arrive. Short of such an
express refusal or declaration, however, the test is to ascertain whether
the action or actions of the party in default are such as to lead a
reasonable person to conclude that he no longer intends to be bound by its
provisions. The renunciation is then evidenced by conduct…’.”
“Anticipatory Breach” which Entitles Aggrieved Party to Terminate

 anticipatory breach is said to occur before performance is due, a party either
renounces the contract or disables himself from performing it

lOMoARcPSD|4880004
 renunciation requires a clear and absolute refusal to perform. This need nt be

express, but can take the form of conduct indicating that a party is unwilling,
even though able, to perform
 Disablement need not be deliberate, in the sense that there may be an
anticipatory breach even though it was not the defaulting party’s intention to
disable himself from performing, but disablement must be due to the party’s
own act or default.
 Such disablement is most clearly illustrated by cases where a party does an act
which is certain to prevent performance, for e.g. disposing elsewhere the
specific thing which forms the subject matter of the contract
“Anticipatory Breach” by Renunciation (“Situation 2” of RDC Concrete)
 Upon a defaulting party’s anticipatory breach before time of performance,
innocent party has the right to elect without having to wait for the defaulting
party’s performance to fall due, to immediately terminate and claim damages
for breach of contract
Hochster v De la Tour (1853) 2 El & Bl 678
 Acceptance of repudiation can be immediate
 P does not need to wait for time of performance due, to sue D
Frost v Knight (1871-72) LR 7 Ex 111
 Principle in Hochester applicable to promise to marry, D refused to marry P, did
not need for D’s father to die (stipulated time of performance)
 Promisee if he pleases may treat the notice of intention as inoperative and await
the time when the contract is to be executed, and then hold the other party
responsible for all consequences of non-performance, but in that he keeps the
contract alive the benefit of the other party as well as his own, he remains
subject to all his own obligations and liabilities under it, and enables the other
party not only to complete the contract, but also to take advantage of any
supervening circumstances (frustration) which would justify him in declining
it
 Promisee may also treat the repudiation of the other party as a wrongful putting
an end to the contract and may at once bring his action as on a breach of it, in
such action, he will be entitled to such damages as would have arisen from the
non-performance of the contract at the appointed time
 Hochester founded on principle that the announcement of contracting party of
his intention not to fulfill the contract amounts to a breach, and it is for the
common benefit of both parties that the contract shall be taken to be broken as
to all its incidents, including non-performance at the appointed time; as by an
action being brought at once, and he dmagaes consequent on non-perofrmance
being assessed at the earliest moment, many of the injurious effects of such
non-performance may possibly be averted or mitigated
Where the anticipatory breach concerns a contractual term, say a condition, but
the consequences do not pass the test of a discharging breach prescribed in Hong
Kong Fir.
RDC Concrete v Sato Kogyo [2007] 4 SLR(R) 413.

lOMoARcPSD|4880004
 95 There is also a suggestion in a leading textbook that where a contracting

party deliberately chooses and is, indeed, “determined” to perform its part of
the contract “only in a manner substantially inconsistent with his obligations”
(“substantial breach”) then that, too, will also justify the innocent party’s
termination of the contract (see Sir Guenter Treitel, The Law of Contract
(Sweet & Maxwell, 11th Ed, 2003) at p 809 (and the authorities cited
therein)). With respect, however, and having regard to the substance of (and,
more importantly, controversy in relationship between) Situations 3(a) and
3(b) below, the preferable view, in our opinion, appears to be that whether or
not the innocent party is entitled to terminate the contract concerned will
depend, in the final analysis, upon whether or not the tests pursuant to
Situations 3(a) and 3(b) below are satisfied and in the manner or order
proposed below (i.e. see the table of the 4 situations).
 96 We acknowledge, however, that there is some merit in Prof Treitel’s
suggestion inasmuch as it can be argued that if the defaulting party chooses to
perform the contract in a manner substantially inconsistent with its contractual
obligations, it is, in substance and effect, renouncing the contract concerned…
It is interesting to note, however, that if the approach proffered below is
adopted, the same result would, in substance, be achieved. In other words, and
anticipating somewhat in advance the analysis that is to follow, if the party in
breach had breached a condition of the contract, the innocent party would be
entitled to terminate the contract but if the party in breach had breached a
warranty instead, the innocent party would still be entitled to terminate the
contract if there had been a substantial breach.
San International v Keppel Engineering [1998] 3 SLR(R) 447.
 Karthigesu JA: “Not every intimation of an intention not to perform or of an
inability to perform some part of a contract will amount to a renunciation. In
the case of an entire and indivisible contract, a refusal to perform any part of
the agreement will normally entitle the innocent party to treat the contract as
discharged. Otherwise, a renunciation of some but not all the obligations under
a contract will not entitle the innocent party to rescind the contract unless the
renunciation amounts to a breach of a condition of the contract or deprive him
of substantially the whole benefit which it was the intention of the parties that
he should obtain from the obligations of the parties under the contract then
remaining unperformed: Federal Commerce and Navigation Ltd v Molena
Alpha Inc; The Nanfri, The Benfri, The Lorfri [1979] 1 All ER 307; Afovos
Shipping Co SA v Pagnan; The Afovos [1983] 1 All ER 449.
Federal Commerce and Navigation v Molena Alpha Inc (The “Nanfri”) [1979] AC
757.
 Breach of an innominate term which allowed repudiation
 Owners of vessel threatened breach would issue “claused” bills of lading instead
of bills with “freight” pre-paid. The term was not a condition, but an
innominate term
 Pre-paid freight were essential to charter’s trade, anticipatory breach of contract
amounted to a repudiatory breach as it went to the root of the contract
 Rare occasion where a breach of an innominate term allowed repudiation

lOMoARcPSD|4880004
Chua Chay Lee v Premier Properties Ltd [2000] 2 SLR(R) 464, [2000] SGCA 34.
 I do not say that it is necessary to show that the party alleged to have repudiated
should have an actual intention not to fulfil the contract. He may intend in fact
to fulfil it, but may be determined to do so only in a manner substantially
inconsistent with his obligations and not in any other way. (Ross T Smyth &
Co Ltd v TD Bailey, Son & Co ..., per LordWright) such as to deprive 'the
charterers of substantially the whole benefit which it was the intention of the
parties ... that the charterers should obtain from the further performance of
their own contractual undertakings'. (Hongkong Fir Shipping Co Ltd v
Kawasaki Kisen Kaisha Ltd per Diplock LJ.)
 Repudiation can be shown in case where the repudiating parties performs, but in
away that is substantially inconsistent with the contract
Does the doctrine of anticipatory breach apply to executed contracts?
The “STX Mumbai” [2014] 3 SLR 1116
(2) A repudiatory breach entitled the innocent party a right to terminate the contract.
Repudiatory breach arose where a party by its words or conduct renounced its
contractual obligations. It might also be committed when one party acted in such a
way as to make it impossible for it to perform its contractual obligations. Both
scenarios constituted anticipatory breach if they occurred before the arrival of the time
of performance: at [26] to [30].
(3) Insolvency did not by itself repudiate the contract. The exception was where the
contract provided for insolvency as an event of default or where an acceleration of
payment clause was available: at [37] and [53].
(4) The plaintiff was not entitled to rely on STX Pan Ocean's insolvency for the
purposes of issuing the letter of demand for early payment. First, short of lifting the
corporate veil, insolvency could not be imputed to the defendant which was a separate
legal entity. Secondly, even if the defendant were insolvent, an act of insolvency was
insufficient to evince an intention not to perform the contract. Since the letter of
demand was without legal basis, the non-receipt of payment could not be construed as
a renunciation of the defendant's contractual obligation: at [32] to [43].
(5) The plaintiff's alternative ground based on the defendant's prospective inability
to make payment by reason of STX Pan Ocean's insolvency was also legally
unsustainable: at [44].
(6) An insolvent party might still be capable of completing a contract. This principle
applied to both executed and executory contracts alike. Impossibility of performance
might have arisen from a running contract that required continuing performance over
a period of time, but the present case was clearly distinguishable as the defendant had
only an obligation to make payment on a fixed date: at [45] to [50], [54] and [55].
Incapacitating Oneself from Performing

 A person may repudiate a contract by incapacitating himself from performing it
 E.g. sell of specific good to 3rd party
 A person entitled to make a choice as to the method of performance does not
incapacitate himself merely by declaring that he will perform in an impossible
way
 E.g. seller of generic goods does not repudiate by telling buyer he will make
delivery from non-existent source. He is only in breach if he fails or refuses to
do so
Bowdell v Parsons (1808) 10 East 359

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 Seller’s act of disposing and selling rest of the hay to other persons disqualified
him from delivering to buyer
 Buyer allowed to sue straight away since seller repudiated the contract
Lovelock v Franklin (1846) 8 QB 371
 Same as above, seller incapacitated himself from performing the contract by
selling goods
Omninum D’ Enterprises v Sutherland [1919] 1 KB 618
 Df chartered a ship to Pf which it then sold free from the charter engagement
before date for performance
 Df had put it out of his power to perform the charter he had made
 Df claims that he did not repudiate since the ex-owners might be able to get the
old owners to agree to let them have the vessel back to perform the
charter..wtf?
 Repudiation
The Vladimir Ilich [1975] 1 Lloyd Rep 322
 Notice names a non-existent vessel, seller unable to perform his contract
 Repudiation
Performance Inconsistent with Contractual Obligation
Relevance of bona fide belief?
 Establishing a breach does not depend on whether a party has been in fault,
since it is strict liability
 Some cases, however, appear to have regard to good faith of party in breach
when deciding whether or not he had committed a repudiatory breach entitling
the other to terminate
Vaswani v Italian Motors [1996] 1 WLR 270.
 Relevance of good faith, despite strict liability approach regarding breach
 Demanded P to pay, genuinely believing that this was amount due, although
this was not
 P did not pay, D treated it as repudiation and suspended P’s deposit
 D did not repudiate contract
 Effect of Vaswani is to put buyer in difficult position when seller threatens non-
performance
o If buyer no pay when faced with erroneous but good faith demand by
seller for an increased price, buyer might not be able to establish
repudiatory breach by seller
o Courts are sometimes reluctant to conclude that a party acting in good
faith has repudiated a contract, this is not easy to reconcile with the
principle that a bad faith is not required for establishing a breach of
contract
o Ng Giap Hon casted doubt on doctrine good faith, therefore, Vaswani
should be treated as exceptional to its facts
Federal Commerce & Navigation v Molena Alpha (The “Nanfri”) [1979] AC 757.
 But if conduct of one party goes beyond asserting his own view (possibly
erroneous) regarding the effect of the contract, and amounts to threatening a
breach of contract with serious consequences, his subjective desire to carry on
with the contract cannot prevent the other party from terminating the contract.
 So although Courts may be reluctant to find repudiation when defaulting party has
acted in good faith, where defaulting party performs in a manner which is not

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consistent with the terms of the contact, it is no defence for him to show that he
acted in good faith.
Eminence Property Developments Ltd v Heaney [2010] EWCA Civ 1168, [2011] 2
All ER (Comm) 223.
 The central question to be asked in cases of this type is whether, looking at all the
circumstances objectively, that is from the perspective of the of a reasonable man
in the position of the innocent party, the contract-breaker has clearly shown an
intention to abandon and altogether refuse to perform the contract (Eminence
Property Developments Ltd v Heaney [2010] EWCA Civ 1168, [2011] 2 All ER
(Comm) 223). The answer given by a court to that question will depend very
heavily on the facts of the individual case. In some cases the court has concluded
that there is a repudiatory breach (see, for example, Federal Commerce &
Navigation v Molena Alpha (The ‘Nanfri’)), while in others the court has
concluded that there was no repudiatory breach (see, for example, Woodar
Investment v Wimpey Construction). The motive of the contract-breaker may be
taken into account if it reflects something of which the innocent party was, or a
reasonable person in his position would have been, aware and throws light on
the way the alleged repudiatory act would be viewed by such a reasonable
person.
Election by Aggrieved Party
 Aggrieved party can generally enforce the contract against the interests of the
party in breach. Innocent party does not have to act reasonably
 Contractual obligations need to be taken seriously. But isn’t this wasteful and
harsh in certain occasions?
White and Carter (Councils) Ltd v McGregor [1962] AC 413
 No obligation to accept repudiatory breach
 Town council did not allow advertising company to repudiate; contract
enforceable, went ahead and placed random ads (3:2 majority)
 Lord Reid (Majority)
o Aggrieved party allowed to affirm even if his performance is unwanted, no
obligation to accept repudiatory breach provided:
 He can perform contract unilaterally
 Has legitimate interest in performing and no duty to mitigate since
damages were not involved
o Equitable principle or public policy requiring the limitation of contractual
rights of innocent party, if it can be shown that a person has no legitimate
interest, financial or otherwise, in performing the contract rather than
claiming damages, he ought not to be allowed to saddle the other party
with an additional burden with no benefit to himself
 Lord Morton (Dissenting)
o “it is well established that repudiation by one party does not put an end to
a contract…”
o “The present case is one in which specific implement could not be
decreed, since the only obligation of the respondent under the contract was
to pay a sum of money for services to be rendered by the appellants. Yet
the appellants are claiming a kind of inverted specific implement of the
contract. They first insist on performing their part of the contract, against
the will of the other party, and then claim that he must perform his part ad
pay the contract price for unwanted services… having incurred no expense
at date of the repudiation… but deliberately went on to incur expense and

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perform unwanted services with the intention of creating a money debt

which did not exist at the date of the repudiation”
 Heavily criticized from economic perspective, council had executed a contract
which the other party did not want
 Repudiation in good faith should have been allowed
Hochster v De la Tour (1853) 2 El & Bl 678, 118 ER 922.
 Acceptance of repudiation can be immediate; or can wait and see if the guy will
perform at time of performance
Vitol SA v Norelf Ltd (The “Santa Clara”) [1996] 3 WLR 105.
 Acceptance of repudiation must be communicated to party in breach
 An act of acceptance of a repudiation requires no particular form
o A communication does not have to be couched in the language of
acceptance.
o It is sufficient that the communication or conduct clearly and
unequivocally conveys to the repudiating party that the aggrieved party
is treating the contract as at an end... the aggrieved party need not
personally, or by an agent, notify the repudiating party of his election
to treat the contract at an end.
o It is sufficient that the fact of the election comes to the repudiating
party’s attention.”
 No rule that mere failure to perform cannot constitute an acceptance, but it
does not follow that the courts will always conclude that a failure to perform
will always be sufficient to constitute an acceptance (Lord Steyn: everything
depends on “the particular contractual relationship and the particular
circumstances of the case”)
MP-Bilt Pte Ltd v Oey Widarto [1999] 1 SLR(R) 908, [1999] SGHC 70.
 No obligation to accept repudiatory breach in SG; with restrictions
 Applied White and Carter subject to 3 limitations
o Cannot apply retrospectively to accrued debts. Accrued debts can be
sued for even after acceptance of repudiation
o Does not apply where innocent party cannot reasonably perform his
obligation without co-operation of repudiating party; no specific
performance allowed
o Innocent party must have legitimate interest to protect when affirming
the contract upon repudiation
Obligation of Aggrieved Party
 Victim of anticipatory breach does not have to accept the repudiation by
terminating the contract
 Can choose to wait and see whtehr repudiating party will perform when the time
of performance arrives
 However, the aggrieved party must himself tender performance as usual, and
might be exposed to risks of subsequent supervening circumstances
Fercometal SARL v Mediterranean Shipping Co SA (The “Simona”) [1988] 3 WLR
200.
 If aggrieved party fails to perform, he will himself be in breach when the time
comes, giving the other party the right to terminate
 Exception is where the repudiating party made it clear that he is not interested in
receiving performance, and the aggrieved party does not tender, repudiating

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party will then be estopped from complaining

 When A repudiates his contractual obligations, B can
 Affirm the contract
 Treat it as discharged
 Affirm the contract and yet be absolved from tendering further
performance unless and until A gives reasonable notice that he is once
again able and willing to perform.
 Leaving contract alive will allow repudiating party to take advantage of any
subsequent circumstances that may excuse him

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REMEDIES
Teacher v Calder (1889) 1 F (HL) 39
 General rule is to compensate the aggrieved party for the loss he has suffered
 Not to deprive the defaulting party of the gain he has obtained as a result of the
breach
o Subject to exceptional cases, see AG v Blake
Surrey CC v Bredero Homes Ltd [1993] 3 All ER 705, CA
 Starting principle is that aggrieved party ought to be compensated for loss of his
positive or expectation interests
o Put the aggrieved party in the same financial position as if the contract
had been fully performed
 Law protects the negative interest of the aggrieved party
o If party is unable to establish the value of a loss of bargain, he may
seek compensation in respect of his reliance losses
o Compensate aggrieved party for expenses incurred and losses suffered
in reliance of the contract
 Protect aggrieved party’s restitutionary interest
o Object of such an ward is not to compensate the Pf for a loss, but to
deprive the Df the benefit he gained by the breach of contract
o E.g claim for return of goods sold and delivered where buyer
repudiated hisobligation to pay
Friis v Casetech Trading Pte Ltd [2000] 2 SLR(R) 511
 Disgorgement principle is recognized in SG will be explored in detail below
Thahir Kartika Ratna v PT Pertambangan Minyak dan Gas Bumi Negara
(Pertamina) [1994] 3 SLR(R) 312; [1994] SGCA 105
 Exception to general compensatory rule
 Where there is a breach of fiduciary duty, fiduciary is required to cough up his
profits
o Principal is entitled to restitutionary damages
Wrotham Park Estate Co Ltd v Parkside Homes Ltd [1974]
1 Damages awarded are intended to compensate the claimant for the court's decision
not to grant relief in the form of an order for specific performance or an
injunction.
2 The court will award an amount of damages which represents the sum that the
claimant might reasonably have demanded from the defendant as
compensation for allowing it to breach the relevant contractual provision. The
court assesses this by reference to a "hypothetical negotiation" carried out
between the parties at the date of breach.
3 At the "hypothetical negotiation" both parties are assumed to act reasonably and the
fact that the parties would never have reached a deal in reality is irrelevant.
Although these damages are awarded in place of relief e.g. an injunction, it is not a
prerequisite to their being awarded that either (i) the claimant applied for the
injunction in the case or (ii) there was any prospect of such application succeeding.
Attorney-General v Blake [2001] 1 AC 268
 Exception to compensatory principle rule
 Spy who betrayed govt and published book
 Factors for departing from compensatory principle
o Inadequacy of remedies

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 Will not apply in general contracts

 Exceptional circumstance
 Secret service not profit org, secrets already revealed
o Legitimate interest
 Govt has legit interest in preventing spy from making money
from state secrets
o Demands of practical justice
 When a breach so requires, court should be able to grant
discretionary remedy of requiring a defendant to account to the
Pf for the benefits he has received from his breach of the K
o Look at circumstances
 No exhaustive factors
2. Expectation Interest
 What the innocent party lost due to his assumption that the contract would be
performed
Robinson v Harman (1848) 1 Ex 850
 Party must be placed in the same situation, with respect to damages, as if the
contract had been performed
Gunac Enterprises (Pte) Ltd v Utraco Pte Ltd [1994] 3 SLR(R) 889; [1994] SGCA
129
 Expectation interest damages meant to compensate and protect innocent part’s
expectation interests
 Damages not meant to enrich the innocent party
 As far as possible, innocent party is to be put in as good a position as if the
contract had been performed
Ruxley Electronics v Forsyth [1996] AC 344
 Expectation measure and application of loss of amenity
 Object of contract was to provide amenity, damage may include loss of amenity
 Cost of cure should not be awarded if it would be disproportionate to the loss of
amenity
 Cost of cure = 20k, loss of amenity = 2.5k
 Court must consider reasonableness and common sense in deciding to award
cost of cure or diminution in value basis
o Repairs lead to little benefit to Df
o Cost of repair
o Both considerations made it unreasonable
 Intention of parties to carry out repairs will be considered
 Reasonable = cost of cure, unreasonable = diminution in value + loss of amenity
 Compromise performance interest
 What if parties expressly contracted breach = damages for cost of cure?
Yap Boon Keng Sonny v Pacific Prince International Pte Ltd [2009] 1 SLR(R) 385;
[2008] SGHC 161
 Look at entire contractual objective and not just the objective of the individual
specifications
 Entire specification was to construct a house that was suitable for Pf to occupy
 Smaller house does not make them unfit for their purpose
 Loss of amenity not a substantial extent that it would be reasonable to
reconstruct the bedrooms in question

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Addis v Gramophone Co Ltd [1909] AC 488

 General rule, non-pecuniary losses not recoverable
 No claim for harsh and humiliating treatment
 Consistent with tort law
Jarvis v Swans Tours [1973] QB 233
 Exception to non recovery of non pecuniary losses
 Purpose of contract was to provided entertainment and enjoyment
 Breach frustrated purpose of K
 But wait, isn’t Ruxley also about enjoyment of a pool? Does the Judge
objectively decide the value of the amenity derived by the Pfs?
Heywood v Wellers [1976] 2 QB 101

 Exception to non-recovery of non-pecuniary losses
 ‘very thing principle’, law firm’s very thing to prevent Pf from being harassed
 within the contemplation of the contracting parties that a foreseeable result of a
breach will cause vexation, frustration or ditress. And if a breach led to that
‘very thing’, damages are recoverable
Farley v Skinner (No.2) [2002] 2 AC 732, [2001] UKHL 49
 if contract has many objectives, as long as it is an important object of the
contract to give pleasure, damages can be awarded
 wtf la, what is important object, see mood just say see mood la
 P wanted house away from airport
 Df surveyor told P that house will not have noise, when it is not true
 Main contract was for house and not the noise
Kay Swee Pin v Singapore Island Country Club [2008] SGHC 143
 Reiteration of important object of non-pecuniary rule in Singapore
 Applied Farley v Skinner
 Country Club case
 Must be directly related to the economic effect of breach
 Must not lead to floodgates
o SICC constitutes a k that has central focus on the provision of pleasure,
enjoyment and other mental benefits
 Perhaps better to just see from a remoteness point of view instead of drawing
out exceptions?
 Better stance suggested by Phang = all losses from breach, including mental
distress, are recoverable, subject to rule of remoteness!
Alfred McAlpine Construction Ltd v Panatown Ltd. [2001] 1 AC 518
 See Privity
Chia Kok Leong v Prosperland [2005] 2 SLR(R) 484; [2005] SGCA 12
 See Privity
Family Food Court v Seah Boon Lock [2008] 4 SLR(R) 272; [2008] SGCA 31
 Broad ground allows promise to recover substantial damages on hos own accord
on the basis that he is recovering for his own loss
 Narrow ground permits the promise to recover substantial damages on behalf of
the third party
 Broad ground more consistent with principle; both accepted in Singapore
Arul Chandran v Gartshore & Ors [2000] 1 SLR(R) 436
 Non-percunairy losses not recovered

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 P was wrongly removed. P wanted embarrassment, humiliation and damage to

reputation
 Rule that distress is not allowed is one of policy and applies nonwithstanding
the foreseeability of the distress
 Does not sit well with Farley v Skinner, both cases it is foreseeable that it will
happen
I DAMAGES
1. Compensatory principle
Johnson v Agnew [1980] AC 367
 Damages to be assessed on date of breach of contract
 For repudiatory breach, assessment is normally at date when innocent party
accepts repudiation
The Hansa Nord [1975] 3 All ER 739
 Shipmemt was damaged during journey
 Time of assessment was at arrival because that was the time when buyer was
made aware of the damage and could do something about it
Radford v De Froberville [1977] 1 WLR 1262
 Damages calculated at commencement of legal proceedings
 Courts are willing to compromise for the innocent party electing to “wait and
see” if the party announcing breach will eventually carry out its performance
 Based on what date the Pf could reasonably be expected to mitigate the damage
by seeking an laternative to performance of the contractual obligation
 Owing to duty to mitigates losses
Golden Strait Corp v. Nippon Yusen Kubishika Kaisha (“The GoldenVictory”) [2007]
2 AC 353, [2007] UKHL 12
 Supervening event which could discharge a contract, occurring after the
acceptance of repudiation was taken into account in assessing damages
 Compensation principle becomes the overriding principle, exception
 3:2 Damages allowed from repudiation up till frustrating event; even if without
frustrating event will be allowed more damages; principle of never
overcompensating
 Minority concerned with certainty
 Incentivize defaulting party to delay in hope of frustrating event? If charterers
paid damages before frustration, the original party would have gotten more
damages
4. Reliance interest
 Expenses incurred in preparing to perform or in part performance of the
contract, which has in the circumstance been rendered useless by the
breach
Anglia Television Ltd v Reed [1972] 1 QB 60
 Reliance interest covers wasted expenditure after contract was concluded
and before the breach
 Also includes expenditure incurred before the contract which would be
reasonably have been in the contemplation of the parties as likely to be
wasted if the contract had been broken (remoteness principle)
 Pf in this case has an election to claim for loss of profits (expectation) or
wasted expenditure (reliance)
 He must choose one of them, not both
 If he cannot prove loss of profits are, he can claim for reliance interest

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McRae v Commonwealth Disposals Commission (1950) 84 CLR 377

 Where expectation interests are too speculative, onl reliance losses will be
awarded
 Speculative nature of enterprise made it imposible for the Pfs to quantify their
expectations with any degree of precision
 McKendrick noted that Mcrae is rare, courts ill be reluctant to conclude that P’s
expectation are so speculative that they cannot be valued
C & P Haulage Co Ltd v Middleton [1983] 1 WLR 1461

 Reliance losses should not place a party in a better position than if the contract
was performed
 P added fixtures that he would have to abandon at the end of his lease anyways
 Therefore, breach caused him no loss in terms of fixtures
 A claimant could not recover his reliance losses where it would enable him to
escape from his bad bargain or reverse contractual allocation of risk
 Only situation that aggrieved party can escape bad bargain is when there is total
failure of consideration – P’s claim is one in restitution and so there is no
objection to the reversal of contractual allocation of risk
CCC (London) Films Ltd v Impact Quadrant Films Ltd [1985] QB 16
 P has unfettered discretion to choose between expectation and reliance losses
 Onus is on Df to prove that Pf entered into a bad bargain and should not be
allowed to recover for reliance losses, because he would never have been able
to recover expenditure even if contract had been performed anyway
Van Der Horst Engineering Pte Ltd v Rotol Singapore Ltd [2006] 2 SLR(R) 586
 Anglia accepted in Singapore
 P has unfettered discretion between expectation and reliance losses
 It was within reasonable contemplation that if SOA was breached, Pf’s
expenditure in preparation would be wasted
 Entering into SOA, Pf expected to derive a benefit from Df’s performance of the
SOA
 Even if benefit not easily reducible to a monetary figure, this should not
preclude recoupment of expenses incurred if k was breached
Out of the Box Pte Ltd v Wanin Industries Pte Ltd [2012] 3 SLR 428, [2012] SGHC
95
 Pf designed sports drink, Df faultily manufactured the drinks
 Pf wanted to claim for advertising costs
 Some advertising was from redeemed credits of the advertising agency, was not
allowed to claim for credits since the Pf will not use the ‘cost of cure’ and re-
advertise, instead compensated for “loss of amenity” = loss of value of
advertising services
 Rebuttable presumption on Df can avoid paying Pf if proven that the gains
would never cover expenses even if no breach
 Onus on Df cause it was the contract breaker
 But Pf did not prove their loss, not even an imprecise estimate. Therefore, the
credit claim disallowed
 Value of work rendered by 3party cannot be used to rebut loss suffered by Pf, as
long as Pf can produce invoices for the services rendered and therefore loss
incurred, Pf will be allowed to claim, even if the services by 3p seem

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‘overpriced’
 Df could not prove that Pf could never recover his reliance interests(Van der
Hoost)
5. Restitution interest
 Df has received benefit
 Enrichment was at Pf’s expense
 Df was unjustly enriched
 Only allowed in restrictive circumstances
Fibrosa v Fairbairn [1943] AC 32
 Claim in restitution for total failure of consideration
 Court allowed recovery of advance payment to Pf under unjust restitution
 Note that this case is about frustration, so no breach, k lawfully terminated
Sumpter v Hedges [1898] 1 QB 673
 Quantum meruit and quantum valebat
 Quantum meruit must be accepted, even half fuck building, no choice to reject
 No Quantum Meruit, since Pf bopian, restitution allowed for materials left
behind
Attorney-General v Blake [2001] 1 AC 268
 Disgorgement of profits
 Fiduciary relationship-special interest in enforcing obligations
o Inadequacy of remedies
o Legitimates interest
o Consider all circumstances
o Demands of practical justice
Esso v Niad [2001] EWHC Ch 458
 Disgorgement of profits, akin to fiduciary relationship
 No double claim for compensatory damages and account of profits
o Compensatory damages was an inadequate remedy for esso,
impossible to attribute lost sales to the breach
o Obligation to implement and maintain recommended pump prices was
fundamental to the agreement concluded between the parties
o Esso had legitimate interest in preventing Df from profiting from his
breach of obligation
Wrotham Park Estate Co v Parkside Homes Ltd [1974] 1 WLR 798
 Partial disgorgement of defaulting party’s gains
 Df made extra profits by building more units beyond restrictive covenant
contained in the contract
 Unjust that Df’s should be left undisturbed possession of the fruits of their
wrongdoing
 Damage awarded should be a reasonable sum that the Pf would have accepted in
order to release the Df from the covenant
 Lost opportunity for Pf to re-negotiate for licensing fee
Experience Hendrix Llc v PPX Enterprises Inc [2003] EWCA Civ 323
 Partial disgorgement of profits

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 Df granted license for master tracks outside k

 Unjust that Df avoid paying royalities, but breach not severe enough to oder full
account of all profits
 Df should pay reasonable sum as quid pro quo (more or less equal exchange or
substitution)
 Element of artificiality in the process, overlook fact that Pf might NEVER have
given permission for the licenses
 Instead courts look at commercial value of the right infringed and it enabled the
court to assess sum payable b reference to fees that in other contexts be
demanded and paid between willing parties
Friis v Casetech Trading Pte Ltd [2000] 2 SLR(R) 511
 Disgorgement of profits claim disallowed, concept recognized in Singapore
 This was a breach duly remedied by an award of damages, if damages are
inadequate then look at restitution
 Damages for breach are compensatory and not to punish by disgorging
 Also Df was not unjustly enriched in this case, they actually made a loss
ABB Holdings Pte Ltd v Sher Hock Guan Charles [2010] SGHC 267
 No double claim under restitution and disgorgement of profit and compensatory
or restitutionary
 Remedies of resitutionary damages and acct of profits are from a practical
perspective similar
 Backdoor approach for double compensation if both can be claimed
6. Damages for loss of a chance
 Can be sought if cannot prove expectation (modified expectation interest)
 Plaintiff can recover damages for loss of a chance (discounted damages)
Chaplin v Hicks [1911] 2 KB 786
 Claim for loss of chance allowed
 Discount of damages allowed
McRae v Commonwealth Disposals Commission (1950) 84 CLR 377
 Expectation interests too speculative, loss of chance not allowed
 This case sibei guailan
MK DistriPark Pte Ltd v Pedder Warehousing & Logistics Pte Ltd [2013] 3 SLR 433
(4) The test for determining if the loss of chance doctrine applied was two-fold:
(a) whether the breach caused the loss of a chance; and
(b) whether the chance lost was a real and substantial one.
So long as the chance to gain JTC approval for the Sublease was a real and substantial
chance, it did not matter that Pedder's chance of obtaining JTC approval was not
proven on a balance of probabilities. A real and substantial chance was a chance
which was more than speculative; it could even be rated at or below a 50% chance.].
Asia Hotel Investments Ltd v Starwood Asia Pacific Management Pte Ltd [2005] 1
SLR(R) 661; [2004] SGCA 37 (Impt case for loss of chance)
 Loss of a chance allowed; majority allowed, Yong Pung How dissented
 Pf needed to accomplish 4 steps to buy hotel
 Cited Chaplins Hicks, once causation established, need not show that on BOP it
had chance that the expectation will come to fruition
 Df helped Narula secure acquisition, burden of Df to show that even without its
help, narula would have succeeded (causation need to be disporved by Df)
o Did the breach by Df cause the Pf to lose a chance?
 Yes, only Pf and Narulas wanted to buy; causation established
o Was the Chance a real; substantial one, or just speculative (McRae)

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 YPH’s dissent
o Pf’s chance to acquire rest on 4 factos
o Thinks that for financial loss of loss of chance, causation must be
proved on BOP, i.e. more than 50% (similar to tort law)
o Pf failed to prove that Df had not breached NCA, Pf would have had
the chance to secure, (3 other factors)
o 3rd Party actions would determine odds of Pf
o Where the alleged loss was contingent upon the hypothetical acts of
the plaintiff, the plaintiff had to prove that he would have acted in such
a way as to put himself on track to obtain the benefits of the chance.
The plaintiff had to prove this on a balance of probabilities, and not (as
the appellant contended) on a mere "loss of real or measurable chance"
standard. One could not take the plaintiff's word alone as proof of this
intention. The surrounding facts and objective evidence had to be
scrutinised to see if he would have proceeded to take that necessary
step or steps to put himself on course to secure the chance which he
had allegedly lost. The fact that his claim was for a loss of chance
should not place him on a better footing compared to plaintiffs for
other claims
o the other 3 factors, which were necessary to proceed. Not proven
beyond BOP
o The approach of the majority of the court, that the appellant was
entitled to "stay by the sidelines" and wait till the deal with the Narulas
fell through, was speculative and unnecessarily indulgent towards the
appellant. It was impossible to say that the breach had caused the
appellant to lose a real and substantial chance to acquire the Lai Sun
stake without indulging in unnecessary speculation
Robertson Quay Investment Pte Ltd v Steen Consultants Pte Ltd [2008] 2 SLR(R)
623; [2008] SGCA 8
 When faced with a loss that is speculative, no need to prove with 100%
certainty the exact amount of damage, just need to submit the most cogent
evidence on the estimate of the loss
 Rule that Estimate is enough was followed in outofthebox
Out of the Box Pte Ltd v Wanin Industries Pte Ltd [2012] 3 SLR 428; [2012] SGHC
95
 Df claims that advertising reliance losses by Pf to be too speculative
 Sg follows Hadley v Baxendale
 2nd limb applied, had the parties thought about the issue, they would have agreed
that the Df should be liable for the advertising costs
 Policy consideration pivoted on risk allocation
6. Remoteness of damage
Hadley v Baxendale (1854) 9 Exch 341, 156 ER 145
 Damage not too remote when it is:
o Damage that arises naturally, in the usual course of things from the
breach of contract
 Imputed k
o Damage that was within contemplation of the parties at the time of the
making o the contract, given the parties actual knowledge of the facts

lOMoARcPSD|4880004
or circumstances; i.e if you ask them, they will say yes, the Df should
be liable for damages
o Actual k, just need to disclose information, no need for other party to
actually act on it
 Must be careful of this limb, may end up rewriting contract for
parties
 Distinguished from tort law which is reasonably foreseeable
 K is narrower than tort
Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB 528
 Application of Hadley
 P wanted to use boiler for biz, also P had a lucrative contract with 3p.
 Df failed to deliver on time, P sued for normal business and lucrative k
 Df only liable for normal loss, not for lucrative k
 Not within reasonable contemplation of both parties
 If this is so, only difference between losses was one of extent and not of kind,
law generally does not require the extent of loss to be foreseen
 Law cannot ignore the extent of economic loss in contract cases because parties
enter into a contract to make a profit, so the kind of loss in contract cases is
always foreseeable.
 What exactly must be reasonably contemplated? The loss in general or loss in
extent?
Koufos v C Czarnikow Ltd, The Heron II [1969] 1 AC 350
 In contract party who wishes to protect himself from a risk which is unsual can
direct the other parties’ attention to it before contract is made
 In tort, a party has no opportunity for the injured party to protect himself, and
the tortfeasor cannot complain if he has to pay for unusual but foreseeable
damage
 Liability in contract is narrower than tort, mere foreseeability is insufficient
because of the chance of risk allocation in the contract formation
 Ship arrived late, value of goods fell, ship-owner held liable for loss
 Decisionin Hadley v Baxendale makes it clear that a type of damage which
was plainly foreseeable as a real possibility but which would only occur in
a small minority of cases cannot be regarded as arising in the usual course
of things or be supposed to have been in the contemplation of the parties:
the parties are not supposed to contemplate as grounds for the recovery of
damage any types of loss or damage which, on the knowledge available to the
defendant, would appear to him as only likely to occur in a small minority of
cases.
 In such cases, it is not enough that Pf’s loss was directly caused by Df’s
breach of contract. The crucial question is whether on the information
available to the defendant when the contract was made, he should, or the
reasonable man in his position would, have realised that such loss was
sufficiently likely to result from the breach of contract to make it proper to
hold that the loss flowed naturally from the breach or that loss of that kind
should have been within this contemplation.
Robertson Quay Investment Pte Ltd v Steen Consultants Pte Ltd [2008] 2 SLR(R)
623; [2008] SGCA 8
 Acceptance of Hadley in Singapore

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First limb (imputed knowledge)
 Knowledge is imputed when it the kind or type of knowledge that everyone, as

reasonable people, must be taken to know.
 Everyone must, as reasonable people, be taken to know of damage which flows
“naturally” from a breach of contract.
 Therefore, no need for Pf to prove actual knowledge on part of Df where such
“natural” or “ordinary” damage is concerned. Such loss is presumed to have
been within the contemplation of the parties.
Second limb (actual knowledge)
 Second limb “concerns “special” or “non-natural” damage that results from a

breach of contract.
 A relatively more stringent criterion of knowledge is here required in order that
the damage will not be found to be too remote in law – Df must have had actual
knowledge of the special circumstances which are outside the usual course of
things because it would be unfair to impute such knowledge.
 The test for actual knowledge is an objective test.
Criticisms of Hadley
 Limitation of rule in Hadley was made evident in The Heron II where learned law
lords were unable to reach a general consensus on the requisite degree of
probability pursuant to the rule in Hadley, although they were unanimous in
rejecting the phrase “on the cards” in Victoria Laundry. “Semantic hairsplitting”.
 But CA refused to attempt to define the precise of probability required to satisfy
the threshold of “reasonable contemplation” because assessment of damages is not
an exact science to begin with
 In light of these difficulties, NZCA has deviated from this approach, instead
adopting a discretionary approach (which included reasonable contemplation as
one of various factors considered) which is ultimately aimed at achieving a just
outcome. Also held that remoteness in tort and contract should be the same.
 SGCA rejected this approach – Difficult to balance indeterminate number of
considerations of uncertain weight.
 Further, test of remoteness in tort and contract should not be the same – cited
reasons from The Heron II (see above). The rationale for having a wider sphere of
liability in tort is that Pfs in a tort action do not generally have the opportunity to
disclose unusual losses, as contract Pfs do. But, where the parties are in a
contractual relationship, the Pf has had the opportunity to disclose any unusual
losses and so he should not be allowed to avail himself of the wider tort rule.
General Summary
 Limb 1 relies on imputed knowledge, which is imputed simply because it is
the kind of knowledge that everyone, as reasonable people, must be taken to
know. This is necessarily objective in nature
 Limb 2 relies on subjective, or actual knowledge of the defendant. It looks at
whether the defendant knows of the special circumstances which are outside
the usual course of things.
 In both limbs, reasonable contemplation is an important element, which gives
rise to the issue of the degree of possibility required (that the knowledge was
in the reasonable contemplation of the parties). Reasonable contemplation is

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NOT reasonable foreseeability, the former is used in contractual liability while

the latter is used in tortious liability, with the distinction based on the nature
and function of contract law. Nevertheless, the courts have not defined the
precise degree of probability required to satisfy this threshold of reasonable
contemplation.
7. Assumption of responsibility
Transfield Shipping Inc v Mercator Shipping Inc (“The Achilleas”)
[2009] 1 AC 61, [2008] 2 Lloyd's Rep 275 15
 Assumption of responsibility to limit damages
 UK split over use of AOR
 AOR is an attempt to give effect to presumed intention of the parties
 Cf. traditional Hadley approach – don’t care abt AOR and just reasonably
contemplation
o Type of loss v extent of loss
 Courts should not speculate, if did not expressly contract for, why bother abt
AOR?
 AOR not ratio decideni in the case!
MFM Restaurants Pte Ltd v Fish & Co Restaurants Pte Ltd [2010] SGCA 36
 AOR rejected in Singapore
 Hadley limbs are sufficient
 Problems with AOR
o Theoretical and conceptual difficulties, remoteness is a doctrine which
limits strict liability, adopting the approach will remove the cap on the
limits of the fulfillment of th claimant’s expectation interest, defeats
purpose of remoteness; i.e. if I AOR, I will be liable for every freaking
thing..wtf
o Uncertainty, owing to subjective nature of AOR
o AOR is already incorporated in Hadley
 Limb 1 = AOR of the Df. Imputation is justified on the ground
that any reasonable man in Df’s position would have assumed
the resp of the breach
 Limb 2 = since Df had the relevant k, he would have
reasonably foreseen it, based on implied undertaking that df
will bear the enhanced loss
 Also, if contract has express undertaking by the Df to be
responsible for all actual losses suffered by Df’s breach, Df
need not have the relevant k to be liable for enhanced losses
under limb 2 (AOR can be express)
Out the Box v Wanin Industries [2013] 2 SLR 363 SGCA
36 When one turns to examine the question of remoteness, in our view, it simply

lOMoARcPSD|4880004
does not help to frame the question as one concerning the contractual assumption of
risk or the true interpretation of the contract because that is an altogether separate
inquiry which generally does not bear directly on the question of remoteness (except
to the extent that it might constitute a factor which is to be taken into consideration in
ascertaining whether - especially pursuant to the second limb of the rule in Hadley v
Baxendale ([14] supra) - the damage is indeed too remote based on the relevant facts).
7. Mitigation
 Victim is expected to mitigate losses, failure will lead to no compensation
 Pf must take reasonable steps to minimize loss
Payzu v Saunders [1919] 2 KB 581
 Failure to mitigate loss serves as a bar to reclaiming damages
 Pfs not allowed to recover because of their rejection of Df’s offer to supply silk
on cash terms, constitutes a failure to mitigate their loss
 Generally reasonable to expect a party to consider and accept a reasonable offer
made by the party in breach of contract
The Solholt [1983] 1 Lloyd’s Rep 605
 Failure to mitigate serves as a bar to claiming damages
 Buyers lawfully terminated because of late delievery, Sellers later sold for
higher price
 Buyers want the diff between market rate and contract price
 Buyers damages not allowed, because of failure to mitigate
 Criticism
o Rendered buyer’s right to reject illusory
o Entitled sellers to retain profits attributed to rise in mkt prce (unjust
enrichment)
 Doctrine of mitigation does not apply to innocent party’s right to elect brtween
affirming or terminating the contract following a repudiatory breach
 Innocent party need not affirm to mitigate losses
 The moment the innocent party terminates, he will be bound to mitigate
 Town Council ought to have mitigated its losses by not going ahead and
advertise?
 A claim in debt is a claim that the debtor owes to the creditor a liquidated sum
of money. Such a claim is not subject to the requirement that the creditor
must mitigate his loss. Either the debtor owes the sum of money to the
creditor or he does not.
 A claim in damages, on the other hand, is an unliquidated claim to be
compensated for the loss that the innocent party has suffered as a result of the
breach of contract. A claimant who brings a claim for damages is under a
“duty” to mitigate his losses, in the sense that he cannot recover that
portion of his loss that is attributable to his failure to mitigate.
 Clause 8 of the contract was critical in reaching the conclusion that the claim
was one in debt because the effect of the clause was to declare that the entire
price for the three-year period was “immediately due and payable”. The claim
was therefore for a debt that was owed rather than for the loss of an
entitlement to an income stream over a period of years.
 If it were a claim in damages, then Pf would have been subject to the
requirement that they take reasonable steps to mitigate their loss (through

lOMoARcPSD|4880004
seeking to find other people to take over the advertising space vacated by the
Df).
MP-Bilt Pte Ltd v Oey Widarto [1999] 1 SLR(R) 908; [1999] SGHC 70
 Doctrine of mitigation does not apply to innocent party’s right to affirm or
terminate
 Innocent party not required to act reasonably, free to act ashe judges to be
in his best interest
 Contract breaker has no right to force the innocent party to accept
repudiation if the innocent party can complete the perform unilaterally, i.e.
without co-operation of contract breaker e.g. White v Carter
British Westinghouse Co Ltd v Underground Electric Railways Co [1912] AC 673
 If innocent party takes steps to mitigate and is so successful as to profit,
courts will take it into consideration when awarding damages
 Pf broke contract, Df mitigated and counter claimed. Df’s counter claim
was not allowed because mitigation too successful that Df profited and
wiped out losses from the breach
9. Contributory negligence
 Damages may be reduced if there was contributory negligence on innocent
party’s part
 Not applicable to every breach of contractual duty
 Three different contractual duties:
o Breach of a strict contractual duty (strict liability)
[Df’s liability arises from a breach of a contractual provision which does
not depend on a failure to take reasonable care]
o Breach of a duty of care imposed by the contract, no corresponding
duty in tort
[Df’s liability arises from an express contractual obligation to take care
which does not correspond to any duty which would exist independently
of the contract]
o Breach of a contractual duty of care and a duty of care in tort (i.e.
where the breach also constitutes a tort)
[Df’s liability for breach of contract is the same as, and coextensive with,
a liability in tort independently of the existence of a contract]
 At present, contributory negligence can operate as a defence only in the
third category (Forsikringsaktieselskapet Vesta v Butcher)
Forsikringsaktieselskapet Vesta v Butcher [1986] 2 All ER 488

 P insured D. D was negligent and breached contract
 D’s insurance claim from P is reduced owing to CN
 Tort of negligence in place here; failure to take due reasonable care
Barclays Bank v Fairclough Building Ltd [1995] QB 214
 Contributory negligence is no defence to a claim which was made out strictly in
contract only
Fong Maun Yee v Yoong Weng Ho Robert [1997] 1 SLR(R) 751; [1997] SGCA 62

lOMoARcPSD|4880004
 CN only relevant in Contract when there is concurrent duty of tort; position

affirmed in SG
 Pf’s failure to disclose suspicion to Df contributed to his losses
 Pf was lawyer, should has suspected something was amiss when property was
abnormally cheap
Jet Holding Ltd v Cooper Cameron (Singapore) Pte Ltd [2006] 3 SLR(R) 769; [2006]
SGCA 20
 Pf engaged Df for repairs, Df employed negligent 3P
 Pf sued Df, Df sought indemnity from 3P
 3p argued CN, Court found implied duty on Df part to supply plan drawings
 Df’s failure to supply drawings, lead to Df’s CN.
II. SPECIFIC REMEDIES

1.Action for an agreed sum/Action on a debt
 Not calculating losses, just asking for agreed price of goods delievered or for
agreed price of services rendered
 Agreed sum need not be a genuine pre-estiamte of V’s losses
 Agreed sum to be paid according to the bargain made between the parties
 No need to calculate losses, the Court’s task is somewhat easier
 Action for agreed sum, not subject to mitigation, but subject to co-operation by
other party and legitimate interest
 For agreed sum there are 2 qualifications
o Co-operation; if innocent party is unable to complete and earn the
contract price without the co-operation of the breaching party
o Legitimate interest; if it can be shown that a person has no legitimate
interest, financial or otherwise, he ought not to saddle the other arty
with an additional burden with no benefit to himself, but really what is
legitimate interest?
Stansfield Business International Pte Ltd v Vithya Sri Sumathis [1998] 3 SLR(R) 927;
[1998] SGHC 423
 Action in agreed sum not dependent on breach of contract
 Pf enrolled in Df’s sch, contract states that if Pf leaves halfway, Pf shall be
bound to pay for the full fees of the course
 Pf pulled out, Df sued. Df succeeded
 Even though no breach in leaving, Df gets a claim for the sum agreed in the
contract. There is no estimation of loss here, merely enforcing a contractual
clause that was expressly entered into
 Agreed sum cannot be penalty unless payable upon breach
Indulge Food Pte Ltd v Torabi Marashi Bahram [2010] 2 SLR 540
 Whether performance interest and reciporicty are conditions to the
enforceability of an accrued debt
 Agreed sum is ... a debt is a definite sum of money fixed by the agreement of
the parties as payable by one party to the other in return for the performance of
a specified obligation by the other party or on the occurrence of some
specified event or condition; whereas damages may be claimed from a party
who has broken his primary contractual obligation in some way other than by
failure to pay such a debt.

lOMoARcPSD|4880004
 The plaintiff who claims payment of a debt need not prove anything beyond
the occurrence of the event or condition on the occurrence of which the debt
became due. He need prove no loss; the rules as to remoteness of damage and
mitigation of loss are irrelevant; and unless the event on which the payment is
due is a breach of some other contractual obligation owed by the one party to
the other the law on penalties does not apply to the agreed sum. It is not
necessary that the amount of the debt should be ascertained at the date of the
contract; it is sufficient if it is ascertainable when payment is due.
 Reciprocity is concerned with situations where each side has breached the
contract and has obligations to perform in the future. Therefore, you must
proof that you are likely to perform
o 2 exceptions to reciprocity
 Df cannot insist on reciprocity to the extent that the lack of it is
caused by the Df himself
 Breach which does not go to the root of the contract may not
constitute sufficient grounds for resisting performance or
payment
2. Specific performance
 Equitable remedy at court’s discretion
Beswick v Beswick [1968] AC 58
 SP granted
 Uncle give nephew business so nephew can support Auntie, Nephew breached
 Sp more appropriate since damages will not be adequate compensation
 Aunt suffered no loss, hence Aunt only allowed nominal damages;
 Nephew would be unjustly enriched
Co-operative Insurance Society v Argyll Stores [1998] AC 1
 Sp granted when damages are inadequate remedy
 In sale of real property, SP is a usual remedy
Patel v Ali [1984] Ch 283
 Sp refused where undue hardship is caused
 D had a sob story. Courts think that SP will cause her undue hardship
 However, “mere pecuniary difficulties…afford no excuse from performance
of a contract”.
 Hardship can only supply an excuse for resisting performance of a contract for
the sale of immovable property in extraordinary and persuasive
circumstances. A person of full capacity who sells or buys a house takes the
risk of hardship to himself and his dependents
 What was unique in this decision was that there was the additional element of
delay by the Pfs. Goulding J seemed to put a lot of weight on this factor:
 “This is where, to my mind, great importance attaches to the immense delay in
the present case, not attributable to the Df’s conduct. Even after issue of the
writ, she could not complete, if she had wanted to, without the concurrence of
the absent Mr Ahmed. Thus, in a sense, she can say she is being asked to do
what she had never bargained for, namely to complete the sale after more than
four years, after all the unforeseeable changes that such a period entails. I
think that in this way she can fairly assert that specific performance would
inflict on her a “hardship amounting to injustice”.”
 Mckendick thinks that hardship can never be the sole reason, courts will look
for other reasons; rightly so

lOMoARcPSD|4880004
E C Investment Holding Pte Ltd v Ridout Residence Pte Ltd [2011] SGCA 50
 If hands not clean, no SP; reason is it is an equitable remedy
 As regards the question of whether ECI should be granted specific performance
of the Sale Agreement, this court was of the view that the transaction was not
"unclean" just because of the extremely low purchase price of the Property.
 Neither had ECI suppressed material information nor approached the court with
"unclean hands" when it was late in making discovery. However, this court
was of the view that damages would be an adequate remedy for ECI as it was
quite content to forego its right to acquire the Property if the compensation
offered to it was right. Moreover, ECI implicitly permitted Ridout to look for
other buyers as ECI knew that Ridout/Anwar had no other means to pay the
compensation demanded except by selling the Property to another person.
ECI's failure or omission to apply for a stay of the transfer of the Property to
Thomas Chan following the judgment of the court below (although such
failure or omission would not ipso facto disentitle it from seeking specific
performance of the Property) constituted a factor which this court could take
into account in determining fairness and in exercising its discretion to grant or
refuse specific performance.
 Another significant factor in refusing to grant specific performance in favour of
ECI was the fact that it would be unfair and cause great hardship to Orion
which had a charge over the balance of the sale proceeds of the Property after
satisfaction of HLF's prior interest
Co-operative Insurance Society v Argyll Stores [1998] AC 1
 Damages not appropriate remedy, Sp refused where constant supervision
required
 Sp will be forcing Df to run a business, difference from sale of real property
 Possibility of wasteful litigation over compliance, if Df’s business running
subject to complaints, it will lead to wasteful litigation
 Not in public’s interest to force people to run business at a loss
 Better for Df to pay damages and end suit
 In SP, judges will balance policies and decide to an equitable outcome
3.Injunction
 Order from court to have wrongdoing to not do something
 Final inunction = end of trial
 Interlocutory injunction = during course of trial
 Quia timet injunction stops a person from doing something before the
act is even done
 Has same effect as SP! Forces party to honour contract since not
working for others is as good as working with original contracting part,
Sp!
Warner Brothers Pictures, Incorporated v Nelson [1937] 1 KB 209
 Df breached contract to only perform for WB
 Injunction granted
 Allowed to grant injunction as long as it does not force her to remain idle or

lOMoARcPSD|4880004
undue hardship in performing the contract

 Df was intelligent and had alternative ways to find employment
 Court giving effect to parties’ intention in the contract
Tullett Prebon (Singapore) Ltd v Chua Leong Chuan Simon [2005] 4 SLR(R) 344
 Employee wanted to quit before employment contract expired
 Injunction allowed, employer could not compel employee to work for him but
can compel him from working for somebody else
 Giving effect to parties’ intentions in the contract
III. AGREED REMEDIES

 Expressly contracted by the parties
 Still scrutinized by the court
1.Liquidated damages clauses and the rule against penalties
 Instead of leaving courts to evaluate damages, party may agree on a sum
(liquidated damages)
 Enforceability of LD depends on rule on penalties; must be genuine pre-
estimate of the loss
 If clause is penalty, innocent party must prove breach with expectation or
reliance interests
 If clause is LD, just need to prove breach and will get the agreed damages
Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79
 LD and rule against penalties
 Usage of ‘penalty’ and ‘LD’ not conclusive, depends on construction of the
clause
 Won’t this rewrite parties’ intentions?
 Essence of penalty is in terrorem of the offending party,
o Extravagant and unconscionable in amount in comparison with the
greatest loss that could conceivably e proved to have followed from the
breach
o Sum stipulated more than the sum ought to have been paid
o Presumption that is penalty when a lump sum is made payable on the
occurrence of one or more or all of several events, some of which may
occasion serious and others trifling damage
 LD is genuine pre-estimate
Philips Hong Kong Limited v The Attorney General of Hong Kong [1993] 1 HKLR
269; (1993) 61 BLR 41
 Additional threshold added to Dunlop for commercial parties; both need to be
proved to be penalty
o unequal bargaining power
o extravagant clause
 Clause in this case were LD, losses would be substantial if there was reach, but
virtually impossible to calculate precisely in advance; formula was reasonable
and genuine
 This adds certainty cause it will be harder o find penalty; furthermore parties
express intentions should be allowed
Hong Leong Finance Ltd v Tan Gin Huay [1999] 1 SLR(R) 755; [1999] SGCA 18
 Penalty clause
 Default interes of 18% was held to be fixed in terrorem, manifestly extravagant

lOMoARcPSD|4880004
and was out fo all proportion in comparison with the greatest loss that could
conceivably be proved to have followed from the breach
 Back to principles, damages are to compensate innocent parties, not to enrich
them
CLAAS Medical Centre Pte Ltd v Ng Boon Ching [2010] 2 SLR 386; [2010] SGCA 3
67 Therefore, the question to be considered is not whether there are possible
circumstances where a lesser loss would be suffered but whether the sum is so
extravagant, having regard to the range of damages which the innocent party was
likely to suffer, that it could not constitute a genuine estimate of the damages that he
could have suffered. Here, we would reiterate the point made in [58] above that the
restriction listed under cl 11(a) should not be read literally wrenched out of its
context. We would emphasise that the Respondent had the burden of showing that the
specified liquidated sum was so extravagant that it could not constitute a genuine pre-
estimate of the damages which the Appellant could suffer on account of him setting
up a practice in aesthetic medicine in competition with the Appellant. The Appellant
has not adduced any evidence to that effect. On the contrary, as can be seen from [65]
above, the sum of $1m could be a genuine pre-estimate of the damages which the
Appellant could suffer if the Respondent were to have breached cl 11(a)(i). We would
further underscore the fact that cl 11(c) prescribed a lower sum of $700,000 as the
liquidated damages payable for a similar breach by any of the seven doctors. This
shows that the parties had carefully considered and calibrated the liquidated damages
payable and the higher amount payable by the Respondent reflected the greater
expertise and goodwill which the Respondent has in the field of aesthetic medicine.
Pun Serge v Joy Head Investments Ltd [2010] 4 SLR 478; [2010] SGHC 182
The essence of liquidated damages was a genuine covenanted pre-estimate of damage.
Whether a sum stipulated was liquidated damages or an unenforceable penalty clause
was a question of construction to be decided upon the terms and inherent
circumstances of each particular contract. On the facts here it was clear that the
amount payable under the Performance Bond was grossly disproportionate to the
alleged harm visited upon the defendant by a few days' delay in completion.
Separately, the defendant had also failed to show how its suggested test for
"commercial justification", heretofore untested in the Singapore courts, was
preferable
Stansfield Business International Pte Ltd v Vithya Sri Sumathis [1998] 3 SLR(R) 927;
[1998] SGHC 423
 Rule against penalty only applicable for a breach not an agreed sum
 Not breach in that case, hence agreed sum, therefore need to conform to te
extravagance test of penalty
Andrews v Australia and New Zealand Banking Group Ltd [2012] HCA 30
 Courts will consider the qn of penalty v LD as substantive question
2.Deposits
 Sum of money paid as guarantee that the contract shall be performed
 Rule against penalty does not apply for deposits
 Deposit is to be distinguished from an advance payment, latter is merely
payment as part of the price
Dies v British and International Mining and Finance Co [1939] 1 KB 724
 Pf made pre-payment of 100k. Pf breached, Dfs terminated and Pf sued to
recover 100k
 Pf was entitled to recover, subject to the rights of Dfs to recover damages for the
breach

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 Initial payment was a conditional one, I was conditional upon subsequent

performance of the contract and when the condition failed because of
termination of the contract subsequent upon the Pf’s breach of contract, Df’s
right to retain the money simultaneously failed = part payment and not deposit
 A deposit is a sum of money paid as guarantee that the contract shall be
performed, generally irrecoverable
o Advance payment is mreley payment of part of the price, generally
recoverable
o Where contract is neutral, will be taken as part payment
Workers Trust & Merchant Bank Ltd v Dojap Investments Ltd [1993] AC 573
 Forfeiture of deposit denied where it is disproportionate to the actual losses
suffered, deposit was 25% of purchase price
 Vendors not entailed to retain the deposit and ordered that it be repaid to the
purchaser after subtracting from it any loss which the vendors could prove that
they have suffered
 Deposit subject to reasonableness or explain the special circumstance to make it
reasonable
 But what the fuck is reasonable, rewriting contract much?
Tan Wee Fong v Denieru Tatsu F&B Holdings (S) Pte Ltd [2010] 2 SLR 298; [2009]
SGHC 290
 Ambit of equitable relief against forfeitures in Sg is uncertain, i.e. give chance if
deposit is unreasonable
 Tension of uncertainty, grant of equitable relief, contractual sanctity
 Contracts involving sale of land (proprietary interests)
o Firm
o Relief against forfeiture available
 Contracts involving sale of goods (possessory interests)
o Probably
 Other contracts (no proprietary or possessory interests)
o Unclear
Pacific Rim Investments Pte Ltd v Lam Seng Tiong [1995] 2 SLR(R) 643
 Power to grant relief was confined to contracts connected with interests in land
Triangle Auto Pte Ltd v Zheng Zi Construction Pte Ltd [2000] 3 SLR(R) 594
 Power extended to cases involving sale of goods
Metro Alliance Holdings & Equities Corp v WestLB AG [2008] 1 SLR(R) 139
 Left open whether relief from forfeiture might be granted in contracts
unconnected with any interests in land
 Equity demands justice v contractual sanctity of commercial contracts
Union Eagle Ltd v Golden Achievement Ltd [1997] AC 514
 Rejected Court’s jurisdiction to grant relief against contractual penalties and
forfeitures was ‘unlimited and unfettered’

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What are the differences between an offer and an invitation to treat?

What are the differences between an offer and an invitation to treat?

What are the key considerations in determining whether a sum stipulated in a contract is liquidated damages or a penalty?

What are the key considerations in determining whether a sum stipulated in a contract is liquidated damages or a penalty?

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Contract Law Case List Semester 1

Law of Contract (National University of Singapore)

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Contract Law CaseList (Semester 1)

1.2 Offers and invitations to treat

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 Display of goods/advertisements = ITT

1.3 Termination of offer

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 Revocation through 3P is valid.

2.1 Correspondence of acceptance with offer

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be taken to have intended…traditional offer and acceptance analysis is to be

2.2 Nexus (causal connection) between offer and acceptance

2.3 Method of acceptance

2.4 Communication of acceptance

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 Offeror is bound before he knows of the acceptance, even if its arrival is

2.5 Unilateral contracts

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reasonably expected to contemplate such risk

2.7 Alternative approach to formation

3. CERTAINTY & COMPLETENESS

Hillas v. Arcos (1932) 147 LT 503h

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timber trade and the standard of reasonableness

Pitt v. PHH Asset Management Ltd [1993] 4 All ER 961

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3.2 Conditional agreements: ‘subject to contract’

3.3 Restitutionary award in the absence of a contract

Regalian Properties Plc V London Docklands Development Corporation [1995]

4. INTENTION TO CREATE LEGAL RELATIONS

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4.1 Family and social agreements

4.2 Commercial agreements

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5.1 The requirement of nexus

Pao On v Lau Yiu Long [1980] A.C. 614

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5.2 The requirement of ‘value’

5.3 Intangible consideration

Compromise and forebearance to sue

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in return, as is a promise not to enforce a claim which is doubtful in law

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 Company bankrupt, pay less better than pay none

6.1 Clear promise

6.2 Reliance: change of position

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Alan v El Nasr [1972] 2 WLR 800

Collier v Wright [2007] EWCA Civ 1329

6.3 Inequitable to go back on the promise

6.4 The extent of enforcement: suspensory or extinctive?

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