Lecture 9: Transfer of Title to Land: Contract Stage (1)

Question 1

Formation of Contract

Answer 1

1. Offer & Acceptance: Offer vs IOT
   - Pharmaceutical Society of Great Britain v Boots: incapable of being an offer as display of goods is just inviting the public to make an offer to buy
   - IOT: Advertisements, Tenders (Government Land Sales), Auctions
   - Acceptance: Absolute, unqualified, unconditional, match terms of offer
2. Consideration: 2 parties making promises –> legally enforceable promises
   - Chappell v Nestle Co Ltd: Consideration need not be adequate –> price of the property may not reflect the actual value –> Concept of Freedom of Contract, where parties can enter into any price and agreement provided that there is no duress, fraud, cheating, misrepresentation, false information given to mislead the person
3. Intention to create legal relations
4. Formality: Section 6A(d) of Civil Law Act: No action shall be brought upon any contract for the sale or other disposition of immoveable property unless agreement of some memorandum or note thereof, is in writing, signed by the party to be charged

Question 2

Substage (i): Option to Purchase (OTP)

Answer 2

Document that contains an irrevocable offer to sell the property upon certain terms –> 3P (Parties (seller & buyer), Price, Property) & Additional items mode of exercising option

• OTP granted by seller to buyer –> seller proposed an offer to buyer to sell his property at stated price, provided buyer indicates his acceptance by a certain date
• Buyer will be granted 14 days to consider about this big commitment –> after 14 days need to give seller consideration/option fee (1% of purchase price)
• This is an equitable interest in land –> must be in writing and both parties need to consent & sign document relating to granting of OTP

Question 3

OTP: Effect on Seller and Buyer

Answer 3

• Buyer: has choice to decide whether he wants to continue with the purchase
• Seller: Obliged and bound to wait for 14 days as 1% consideration has been given from B to S for this purpose –> conditional offer upon accepting

Spiro v Glencrown Properties Ltd (1991)

• The granting of option imposes no obligation on the purchaser & an obligation on the vendor which is contingent on the exercise on option.
• When option is exercised, vendor and purchaser come under obligations to perform as if they had concluded an ordinary contract of sale
• From the point of view of purchaser, the option is an irrevocable offer, while from that of a vendor, it is a conditional contract –> terms spelt on OTP whether they want to proceed or not –> vendor is bound to sell to another buyer once he gives the OTP and also bound to not be able to offer to anyone else during this period –> buyer will secure the purchase by fulfilling conditions set by the option, which is the option fee & exercising OTP within time period

Question 4

Substage (ii): Exercising the Option

Answer 4

Buyer wants to proceed with the purchase upon exercising the OTP within the sitpukated time and agreed manner –> sale and purchase comes into existence –> no backing out of contract –> if back out, breach and specific performance as remedy

Question 5

Issues arising from exercising of OTP

Answer 5

1. Option requires a formal contract of sale to be entered into
   JT Chanrai Pte Ltd v Consolidated Hotels: purchaser exercised option and paid the option fee of 10% of purchase price but he failed to sign acceptance –> conditions of acceptance was not matched the terms in OTP & not delivered within the option period –> deposit forfeited by vendor
2. Prelim Enquries and Legal Requisitions
   - in-principle agreement already made –> several conditions within contract not fulfilled –> contract will not proceed –> as such investigation is necessary by buyer’s solicitors due to principles of caveat emptor

• a. Make request & enquiries to the government departments to make sure that property has a good title
• b. Obtain satisfactory replies to legal requisitions to make sure the property is not affected by encumbrances
  : “subject to satisfactory replies” = clause in Sale and purchase contract to protect buyer –> court has to make a decision on whether response of government is satisfactory or not, then buyer will be compelled to proceed with sale through specific performance

: Chu Yik Man v Rajagopal: Whether damage can be given to buyer for 14% reduction of property space? Is this a satisfactory reply? Could the buyer rescind the contract?
Held: after court considered all relevant factors & apply objective standard as to what was reasonable –> the loss of 14% of property space was too significant to simply ignore –> buyer will not be getting value for what he paid for it if sale if forced on buyer –> reply to requisition was unsatisfactory –> sale agreement can be rescinded & seller had to return the 10% deposit to buyer and both seller and buyer are free of obligation to buy and sell

: Sheriffa v Lim Kim Som: Compulsory Land Acquisition

Question 6

Terms of Contract

Answer 6

1. Express
2. Implied: Special Terms and Conditions
   - Law Society’s Conditions of Sale 2012
   - Terms in the Housing Developers (Control and Licensing Act)
   - Sale of Commercial Property Act

Question 7

Subject to Contract

Answer 7

Parties may agree to terms “subject to contract”, in the form of:
- A draft contract
- An exchange of correspondence
and then begin to perform some of the obligations envisaged without ever concluding the anticipated formal agreement

So the parties may have already concluded an oral or written contract and a formal contract is expected to be entered into subsequently

Maybe unclear whether the parties have in fact

1. Concluded a contract on the terms set out in the pre-contractual documentation
2. Whether they concluded a contract on some more limited terms
3. Whether there is no binding contract at all until the final contract is drafted out

Tai Tong Realty v Galstaun (1973) 
- Option agreement contained following 
terms:
(i) Phrase “subject to contract”
(ii) Agreed price of property
(iii) Parties names
(iv) Requirement as to exercise of option by 
signing and paying 10% of purchase price
• Option was exercised, 10% paid, yet
• Court took strict traditional approach 
• held no contract due to words “subject to 
contract”

UK’s Position: Use of the “subject to contract” label will
normally prevent the creation of a binding agreement, as it indicates a lack of intention to create legal relations, it can be overridden by other circumstances
• Courts will determine the question of whether parties intended to be bound before execution of a full formal
agreement based on an objective assessment of their words and conduct

SG’s Position: OCBC Capital Investment Asia v Wong Hua Choon (2012) Singapore Court of Appeal
- Held: Whether or not a binding contract has
been reached depends on the true intention of parties, as indicated by objective evidence of the case.
- If an agreement has been entered into, parties cannot avoid being bound by its terms merely by putting a label of “subject to contract” or by requiring the execution of subsequent documentation
- Parties seeking to defer the formation of a contract should make it clear in the terms that there is no agreement until the execution of a written contract, and
that such execution is a condition precedent of the contract.
- The term subject to contract will not be enough to negate the existence of contract.

Question 8

Vitiating Factors

Answer 8

Void: No right arise out of contract
Voidable: Affirm/Rescind

1. Mistake: can get document to be rectified
2. Incapcity: less than 21 years old –> have to hold property in trust for minor
3. Illegality: Resdiepential Property Act
4. Duress & Undue Influence
5. Misrepresentation: Caveat Emptor –> buyer has to make all inquiries and ensure that he is getting value for money
   - Untrue statement/fact: silence can be capable of being an untruth/fact if buyer has asked seller about it.
   - Adressed to party misled (buyer) & induced buyer to enter into contract
   a. Fradulent: False statement made knowingly –> can rescind/affirm the contract
   b. Negligence
   c. Innocent: seller believes its true –> damages
   d. Disclaimer and Exemption clause: Unfair Contract Terms Act –> test of reasonableness

Question 9

Discharge of Contract

Answer 9

1. Performance: buyer has taken possession
2. Breach
3. Express clause in contract
4. Doctrine of Frustration:
   - Sheriffa v Lim Kim Som: Compulsory land Acquisition –> title would vest in state –> Lim would be buying something unuseable and unsaleable –> he would not be obtaining what he had bargained for as a buyer –> contract was frustrated