Chapter 2 - Terms of Contract & Contracting Out

Question 1

TERMS OF CONTRACT

Answer 1

1) Express terms
2) Implied terms
3) Entire agreement clause
4) Exclusion clause
5) Contracting out

Question 2

EXPRESS TERMS

terms vs representation - effect

Answer 2

• terms: binding on the party, non-fulfilment amounts to breach.
• representation: does not binding, non-fulfilment amounts to misrepresentation or breach of collateral warranty.

Question 3

EXPRESS TERMS

terms vs representation - test to identify

Answer 3

• purpose of making the statement

- by whom & in what capacity the statement is made

Question 4

EXPRESS TERMS

term vs representation - cases

Answer 4

1) Purpose of making statement - Dick Bentley Productions v Harold Smith:

• If the statement is made for the purpose of inducing the other party to enter into the contract & he actually enters the contract;
• It is prima facie to infer that the statement is intended as terms.

2) By whom & in what capacity - Tan Chong & Sons Motor v Alan McKnight:

• The statement is made by a salesman in his capacity as salesman in the course of his employment.
• It would be a great mischief in law if it could not be relied upon.

Question 5

EXPRESS TERMS

conditional terms vs warranty - distinction

Answer 5

Tan Chong & Sons Motor Bhd v Alan McKnight:

• Breach of condition: repudiate + sue for damages;
• Breach of warranty: cannot repudiate, only sue for damages for non-performance.

Question 6

EXPRESS TERMS

conditional terms vs warranty - how to determine

Answer 6

Ching Yik Development Sdn Bhd v Setapak Heights Development Sdn Bhd:

• Fundamental terms: condition term which its breach goes to the root of contract, condition, can repudiate & sue for damages.
• Subsidiary terms: warranty which its breach does not go to the root of contract, cannot repudiate & can only claim for damages.

Question 7

IMPLIED TERMS

Overview

Answer 7

1) types of implied terms
2) inferred from evidence
3) implied by operation of law
4) implied by custom or usage

Question 8

IMPLIED TERMS

Types of implied terms

Answer 8

Sababumi Sandakan Sdn Bhd v Datuk Yap Pak Leong:

• Inferred from evidence;
• Implied by operation of law;
• Implied by custom or usage.

Question 9

IMPLIED TERMS

Inferred from evidence

Answer 9

Sababumi Sandakan Sdn Bhd v Datuk Yap Pak Leong:

1) Officious bystander test - Shirlaw v Southern Foundries:

• The term is so obvious;
• i.e. it goes w/o saying that it should be included.

2) Business efficacy test - Luxur (Eastbourne) Ltd & Ors v Cooper:
- The term is so necessary to give business efficacy to the transaction.

Question 10

IMPLIED TERMS

Implied by operation of law

Answer 10

E.g S.15 SOGA:

• when there is a description of goods, it is an implied condition that goods sold shall correspond to the description.

Question 11

IMPLIED TERMS

Implied by custom or usage

Answer 11

1) Test - common knowledge - Pembangunan Mahamurni v Jururus Ladang Sdn Bhd:

• subject of common / general knowledge;
• accepted by public w/o qualifications or contentions.

2) Test - NCR - Preston Corporation Sdn Bhd v Edward Leong & Ors:
- The custom or usage must be recognised with notoriety, certainty & reasonableness.
3) Test - must not be inconsistent - Cheng Keng Hong v Govt. of Federation of Malaya:
- Custom, trade or usage which are inconsistent with the express terms MAY NOT be implied.

Question 12

ENTIRE AGREEMENT CLAUSE

Effect

Answer 12

Macronet Sdn Bhd v RHB Bank Sdn Bhd:

• preclude the party from proving the actual existence of pre-contractual representation;
• as well as oral agreements.

Question 13

ENTIRE AGREEMENT CLAUSE

EAC & collateral contract

Answer 13

Aset Nusantara Sdn Bhd v Ekran Berhad & Anor:

• EAC is a complete defence to the existence of collateral contract.

Question 14

EXCLUSION CLAUSE

Conditions for exclusion clause - BSNIC

Answer 14

1) B - Before - Thornton v Shoelane Parking:
- notice must be given BEFORE or in contemporaneous with the making of the contract.
2) SN - Sufficient Notice - MAS Bhd v Malini Nathan:
- Notice given must be reasonably sufficient.
3) I - Incorporated - Chapelton v Berry UDC:
- Exclusion clause must be incorporated in the contractual document.
4) C - clear - Rutlet v Palmer:

• Exemption clause must be clear, unambiguous, & explicit.
• Contra preferentum rule will apply when interpreting the clause.

Question 15

EXCLUSION CLAUSE

EC & negligent conduct

Answer 15

Canada Steamship Line Ltd v The King:

• Clear words must be used to exclude negligence.
• If there is no express words to exclude negligence, court will analyse whether it is wide enough to cover negligence.
• If it is not wide enough, whether it can be based on other damages besides negligence.

Question 16

EXCLUSION CLAUSE

EC & restriction of remedy

FC, 2019

Answer 16

CIMB Bank v Anthony Lawrence Bourke:

• EC that provides for absolute restriction of a party’s right to claim for all forms of damages will offend S.29;
• It is invalid & unenforceable.

Question 17

EXCLUSION CLAUSE

EC & fundamental breach

Answer 17

1) Chartered Bank of India, Australia & China v British India Steam Navigation Co Ltd:
- EC shall have the effect if the clause is clear & unambiguous.
2) cf. Sze Tau Hong Bank Ltd v Rambler Cycle Co Ltd:
- Court cannot allow fundamental breach to pass by the reason of existence of exclusion clause.

Question 18

CONTRACTING OUT

The law

Answer 18

Ooi Boon Leong v Citibank NA:

• Parties can contract out;
• Any prohibition should be expressed.