UCTA

Question 1

UCTA Function

Answer 1

Deals with clauses that attempt to exclude or restrict liability, may render ECs ineffective or subject them to a requirement of reasonableness

Question 2

UCTA Purpose

Answer 2

Protect contracting parties who are in a vulnerable position vis-a-vis a party in an advantageous position, whether it is a consumer in relation to a business, or a business-to-business transaction where one party imposes standard terms on the other

Question 3

Section 1 of the act covers (A) definition of negligence, (B) Scope only for business liability, (C) Exclusion of certain contracts from scope of act

Answer 3

A. Negligence

(1) Assumes liability arises on the part of the defendant because of a breach of an obligation to use reasonable care. This means that if there is an EC that negates the existence of a duty of care, it will be outside the scope of the Act because a duty of care did not arise in the first place, there can be no breach that he can be liable for. (BASIS CLAUSE vs EC)
(2) Negligence encompasses contractual negligence and tortious negligence - even in the absence of a contract between parties, one can be found liable.
(3) Does not matter if breach was inadvertent or intentional, or if liability arose directly of vicariously.

B. UCTA only applies to attempts to exclude or restrict business liability. A purely private sale is outside the scope of UCTA

C. Certain contracts are excluded from UCTA, referred to in Schedule 1

Question 4

UCTA Section 2 - Avoidance of liability for negligence, breach of contract, etc.

A. Applies to both contract terms and notices
B. Only applies to attempts to exclude liability for negligence
C. Only applies to clauses which ‘exclude or restrict’ liability
D. Cannot exclude liability for death or personal injury caused by negligence
E. Terms or notices excluding liability in negligence is valid only if it satisfies requirement of reasonableness
E. Defence of “volenti non fit injuria” will not work

Answer 4

A. UCTA applies to both contract terms and notices, and so it encompasses non-contractual notices

B. Only applies to attempts to exclude liability for negligence as defined in s1 - breach of obligation to exercise reasonable care. S2 will not apply to attempts to exclude or restrict strict liability.

C. Only applies to clauses which ‘exclude or restrict’ liability, and not applicable to clauses that ‘transfers’ liability from one party to another.

D. Not possible to exclude liability for death or personal injury caused by negligence

E. Terms or notices excluding liability in negligence is valid only if it satisfies requirement of reasonableness

F. It is extremely difficult for defendant to make out defence that claimant was aware and consented to the risk of suffering injury and has no claim.

Question 5

UCTA Section 3 - Liability arising in contract.

Regulates attempts to exclude or restrict liability for breach of contract.

1. Which two types of contract does it apply to?
2. Clauses that seek to exclude or restrict liability for breach of contract are subject to reasonableness test (section 3(2)(a))

Answer 5

1. For “deals as consumer” and “deals… on the other’s written standard terms of business” - gateway to the application of UCTA to commercial contracts.
   (a) Standard terms of business must be what the party that advances them uses habitually when they contract.
   (b) deals meaning “making a deal/contract”
   (c) “other’s” have to be the standard terms usually used by the party in question. If the party uses a model form, it has to be shown that the model form is their habitual practice.
   (d) not clear if “written” has to be 100% in written form.
2. Clauses that seek to exclude or restrict liability for breach of contract are subject to reasonableness test (section 3(2)(a))
3. Section 3(2)(b) applies when a party claims to be entitled to:
   (a) render a performance substantially different from what is reasonably expected of him - “reasonably expected” may look outside the contract and examine the facts and representation to ascertain what was reasonably expected
   (b) render no performance - which supposedly may be a party relying on a widely drafted force majeure clause

Question 6

Rendering no performance - Singapore case vaguely close?

Answer 6

United Overseas Bank Ltd v. Mohamed Arif [1994]

UOB had a clause that gave the bank discretion not to act on the oral instructions of its customers.
The court said this clause did not fall under the purview of this section - that the clause simply indicated that the bank was not obliged to act on oral instructions, and this was not rendering “no performance of contractual obligations”

Question 7

UCTA Section 4 - Unreasonable indemnity clauses

Answer 7

Indemnity clauses against a party who is a consumer will only be valid if it satisfies requirement of reasonableness.

If there is an indemnity clause, say, for the hire of a vehicle, not to a consumer but to a business, the clause will not fall under section 4, but if they are regulated at all, may fall under section 2. (Phillips Products Ltd v Hyland (1987))

Question 8

UCTA Section 5 - Liability arising from sale or supply of goods - guarantee of consumer goods

Answer 8

Manufacturer/distributor cannot exclude or restrict liability for loss or damage arising from defects in goods while in consumer use by reference to a guarantee of goods, if the loss/damage results from negligence of person concerned in distribution/manufacture of goods.

Question 9

UCTA Section 6 and 7 - Liability arising from sale or supply of goods - Sale and hire-purchase AND Miscellaneous contracts under which goods pass

Answer 9

S6: Relevant for sale of goods and contracts of hire-purchase.
S7: Other contracts where possession or ownership of goods passes to another party - e.g. contracts of hire, for work and materials, exchange

If buyer is dealing as consumer, liability for breach of implied terms cannot be excluded
If buyer is NOT dealing as consumer, liability can be excluded provided term satisfies requirement of reasonableness.

Question 10

Section 9 - Effect of Breach

Answer 10

Confirms that fundamental breach is not a “rule of law” and exclusionary clauses in a contract that has been terminated or repudiated may still be relied on if it satisfies the requirement of reasonableness.

Question 11

UCTA Section 10 - Evasion by means of secondary conduct

Answer 11

Essentially means that rights arising in favour of A under a contract between A and B cannot be affected by terms of a secondary contract between A and C which may try to take away or inhibit the exercise of those rights (e.g. a term in contract between manufacturer and buyer cannot affect the rights of the buyer under the Sale of Goods Act against the retailer from whom he purchases the goods)

Question 12

UCTA Section 11 - REASONABLENESS TEST !!!!

Answer 12

(1) establishes that the RT is to be applied at time of entry into the contract, and not the time of the breach of contract - to examine reasonableness and fairness of allocation of rights and responsibilities of parties at contract formation
(2) - for contracts that full under s6-7 (sale, hire-purchase, misc), the court must take into account Schedule 2.
(3) RT for notices is different from RT to contract terms. RT for notices is that it must be fair and reasonable to rely on the notice, and court must have regard to circumstances obtaining when liability arose or would have arisen if not for the notice.
(4) - Court must take into account (a) resources the party could expect to be available to him to meet liability (should it arise) and (b) insurance coverage when there are clauses that seek to limit rather than exclude liability
(5) Burden of proof on the party who asserts that the term/notice is reasonable.

Question 13

Factors for Reasonableness

Answer 13

(1) Meaning of clause - DETERMINE SCOPE —> DETERMINE REASONABLENESS
Court may break clause down into constituent sentences/parts to actually determine what it is excluding.

(2) Equality of bargaining powers. Greater equality —> Reasonableness
Especially if both are commercial parties w access to legal advice, then likely to be considered reasonable (size of business does not matter)

(3) Regard to the clause as a whole. EC tested at moment of entry, so the court will see how reasonable the clause is by looking at a range of events that EC could realistically apply to as the RT. If EC is phrased too widely, then it’ll be tested at weakest part - likely to be invalidated.
Court will also not sever or modify a part of the EC, so the EC as a whole will stand or fall (unless clause can be split into constituent parts)

(4) Availability of Insurance. Court will see if insurance is available to parties, especially vis-a-vis limitation clauses, but the actual insurance position of parties do not matter
(5) Non-enforcement of clause in practice may render the EC legally unreasonable. Parties who relax enforcement of EC in fear of losing business may be considered good evidence for court to invalidate EC
(6) Not advisable to include two very different types of loss in the same LC. Makes the LC too wide, and one part of it may cover a type of damage that may be unreasonable to the courts. Same issue as (3)
(7) LC more likely to pass RT than EC. However, figure set in LC cannot be arbitrary, and must be set realistically to reflect various factors such as insurance, turnover of parties, value of contract, etc.

Question 14

UCTA Section 12 “Dealing as consumer”

Two requirements?

Answer 14

(1) Consumer must not contract is the cause of business nor hold himself as doing so
(2 Other party must make contract in course of business

Therefore, does not apply to private contracts between two private parties.

According to R&B Customs Brokers Co v United Dominions Trust Ltd - A company may be considered a consumer if contract is not integral to their business or not a regular course of dealing for their business

Question 15

UCTA Section 13: Varieties of Exemption Clauses

Answer 15

It is to be applied alongside sections 2, 5-7, and not independently.
Limits possibility of evasion for well-advised parties and artful drafting of their ECs, by regulating attempts to evade clutches of UCTA.

Good example is Phillips Products Ltd v Hyland.
May be used to consider a Basis Clause, or a transfer liability clause as an EC/LC (think alongside S2)

Question 16

Schedule 1 - what contracts are excluded?

Answer 16

Excludes contracts from control in s2-s4 for

(1) Insurance contracts
(2) Contracts related to creation/transfer of interests in land, or termination of such interest
(3) Contracts related to creation/transfer of intellectual property… etc.

Also says that 2(1) and 2(2) do not extend to employment contracts, except in favour of the employee

Question 17

Schedule 2 - What are factors to consider?

Answer 17

1. Relative strength of bargaining parties
2. Whether customer received inducement to agree to the term
3. Whether customer knew or ought to reasonably know of existence/extent of the term

ETC….

Question 18

Consumer Protection (Fair Trading) Act (CPFTA) - gist of it? What’s the relevant case?

Answer 18

It is to apply to consumer contracts. Serves as a protective framework that consumers can rely on to seek recourse against vendors/suppliers over and above any rights they may already have under general law (the usual contractual and tortious remedies) I.E. TARGETS UNFAIR PRACTICES (refer to s4 and Second Schedule)

Section 13 says CPFTA will prevail notwithstanding any agreement or term to the contrary (i.e. rendered void if inconsistent with the act)
Likewise, any waiver/release given of any right, benefit or protection conferred under CPFTA will be void.
Under s7(4)(e), Small Claims Tribunal will have the powers to vary the contract between supplier and consumer I.E. REWRITE THE CONTRACT

Relevant case is Speedo Motoring Pte Ltd v Ong Gek Sing (2014)
Seller argued that buyer opted out of extended warranty (therefore buyer could not make claims for a sub-par quality car sold), but the court held that buyer could rely on CPFTA, because the buyer is generally in a weaker bargaining position

Question 19

When does UCTA bite?

Answer 19

When it has been demonstrated that D is in some way liable to claimant, e.g. an obligation exists

Question 20

Basis clause v Exclusion clause - significance in this?

Answer 20

UCTA cares for the substance, not the form.

Basis clauses attempting to allocate and define obligations and duties to EXCLUDE OR RESTRICT LIABILITY (unreasonably) will not work under UCTA. UCTA does not expressly target ECs, but generally, any attempts to exclude or restrict liability, obligation or duty - 13(1) and s3.

Question 21

What case in Singapore exemplifies the “substance, not form”

Answer 21

Deutsche Bank AG v Chang Tse Wen

The Court engaged in a clarification that basis clauses attempting to define and allocate obligation and duties of parties are NOT NECESSARILY different in substance from explicit ECs - 13(1) - no material distinction drawn in the UCTA.
Also used the UK cases of
Phillips Products Ltd v Hyland (Basis clause trying to transfer liability to the hirer, rather than the company) and Smith v Eric S Bush (Basis clause in notice saying that surveyor does not owe a duty) to support this position

Question 22

What does Lee Chee Wei v Victor Tan have to do with the RT in Singapore?

Answer 22

In LCW v VT, the court considered that an entire agreement clause is also subject to RT, because RT is substantively an attempt to exclude certain “rights” to admit extrinsic evidence (and they drew the distinction between admitting EE vs contextual approach for interpretation with factual matrix - the latter is not excluded by an entire agreement clause). Essentially, it drew from the factors in the Second Schedule of UCTA.

Question 23

Is the RT very focused on the relative bargaining position in the contractual relationship? Which case supports this?

Answer 23

Smith v Eric S Bush

Again, it focused on a non-contractual notice that had a basis clause saying company has no obligation of a duty of care to customers.
Court held that this clause was unreasonable, and reasoned it based on unequal bargaining power:
- Purchaser was in financial difficulty, cannot possibly affords a surveyor to valuate the property
- Relied on company to properly survey the house - their expertise. And this task was a simple job, but they did it negligently.
- Financial difficulty of purchaser - was ruined by this - cannot afford to buy another house
- Surveyor would be insured anyway!

This is very similar to Wilberforce’s approach in Photo Production - He was unwilling to intervene in contracts between parties of equal bargaining power. Respect for the freedom to negotiate.

Question 24

Singaporean triple threat of Bank exclusion clauses.. or conclusive evidence clauses?

Answer 24

Consumat Singapore v American National Trust
Tjoa Elis v UOB
Jian Ou v EFG Bank

Question 25

Reiterate what happened in the Triple Threat Bank Cases - First Consumat

Answer 25

In Consumat, one of the sub-issues was whether the bank’s EC was reasonable in placing the risk of managing against forgeries/fraudulent cheques on the customer, to check his bank statement within a period of time, otherwise the bank will assume the lack of any notice as conclusive evidence.
Court held that the EC was reasonable as both were commercial entities doing business:
1. equal bargaining power. P had free choice of banks, entered general agreement on their own free will, were free to negotiate with D for a variation of terms
2. Period of response was not considered short - 7 days is sufficient for a commercial organisation with resources and means of verifying statements to notify the bank promptly
3. Forgeries are difficult for bank to detect
4. Different from Interfoto, bank did not need to draw notice to the clause… P signed the agreement, and that was sufficient to show that they were aware.

Question 26

Next, what happened in Tjoa Elis v UOB

Answer 26

Similar fact pattern as Consumat, Court held that exception clause was reasonable, that if bank did not receive objection within 14 days, contents would be deemed authorized by customer and used as conclusive evidence.
Because customer is in better position to manage risk of forgery.
However, if bank had inadvertently and unilaterally made wrong debit without purported instruction, it my not be allowed to rely on the EC as it would be unreasonable and against public policy. SIMILAR TO Jian Ou v EFG Bank

Question 27

Jian Ou v EFG Bank

Answer 27

EFG Bank attempted to offer an interpretation of their EC to exclude liability for fraudulent conduct by employee.
Courts rejected that, as PP reasons run foul of reasonableness test.
1. Unequal bargaining power is non-commercial customer and bank relationship
2. Unreasonable to put risk of fraud and misconduct on the customer, when bank is in a better position to manage it
3. Public confidence in the banking system is fundamental, essential for PP reasons to maintain that mutual trust and reasonable expectation of honest dealings by employees of banks