Vitiating Factors

Question 1

What are the four main factors that can affect the enforceability of a contract?

Answer 1

Incapacity, Illegality, Misrepresentation and Mistake

Question 2

Define Incapacity

Answer 2

Incapacity refers to the lack of capacity which may characterize a contracting party. As a general rule, to form a valid contract, the parties must have capacity to do so.

Question 3

What are the two category for incapacity?

Answer 3

Minor and Mentally unsound and intoxicated persons

Question 4

Under Minors, what are the four sub-category?

Answer 4

Valid contract, voidable contract, ratifiable contracts and r emedies

Question 5

Under valid contract, what are the three sub-categories?

Answer 5

Beneficial contracts for necessaries, Loans for necessaries & Beneficial Contracts for Employment

Question 6

Explain case study for beneficial contracts for necessaries

Answer 6

Nash V Inman (Minor gets into contract for necessaries, the minor’s contract is valid and enforceable

Peters V Fleming ( Luxurious items of utility can be considered for necessaries)

Question 7

Explain case study for Loans for necessaries

Answer 7

Maslow V Pitfeild
A person who lends money to a minor is generally unable to enforce the contract and recover the
money from the minor. However, if the money was used by the minor to purchase necessaries, the effect is reversed and the
minors’ contract is valid.

Question 8

Explain the cases for employment

Answer 8

A contract of service involving a minor is fully binding on both parties if the contract is beneficial to the minor

1. De Francesco V Barnum (A girl entered in a deed of apprenticeship with de francesco to learn stage dancing. The contract stated that the girl cannot marry and would not accept
   other engagements without her approval. Yet she was under no obligation to provide the girl with engagements. The terms were not beneficial to the girl and the contract is unenforceable
2. Chaplin V Leslie Frewin
   A minor agreed to have his biography written by
   ghost writers and earning royalties in return. The book turned out to show him as a ‘depraved
   creature’.The contract helped the minor to start out as an author and earn money. Hence the contract is
   beneficial to him as a whole and the minor is bound by the contract.

Question 9

What is the exception for beneficial contract for necessaries

Answer 9

1. If the necessaries are goods, the other party must have performed his obligations before the contract
   is binding on the minor. NASH V INMAN
2. If the necessaries are services, the contract is binding on the minor regardless whether the other party
   has performed his obligation or not. ROBERTS V GRAY

Question 10

Under Voidable Contract, explain the case study

Answer 10

Cases where Minor faces recurring future obligations

Davies V Benyon Harris ( A minor entered into a lease for a flat. 3 years later after he attained
majority, the landlord sued him for unpaid rent. The lease was voidable and is binding unless he repuidated the lease within a reasonable time after attaining majority

Question 11

Explain Ratifiable Contract

Answer 11

If a minors’ contract is neither a valid nor a voidable contract, it is then ratifiable contract. in a ratifiable contract, the contract is not enforceable against the minor unless the minor ratifies it
after he attains majority

Question 12

Explain Remedies

Answer 12

1. For a valid minors’ contract, the contract binds both the minor and the other party and os fully enforceable
2. For invalid/void minors’ contract
   If the minor has already performed his obligations in the minors’ contract, the minor is unable to return back to his original position unless there is total failure of consideration by the other party

Valentini V Canali
A minor contracted to lease a house from Canali for £102. He paid £68 and occupied the house for a few months. He later claimed the contract was not binding and sought to recover the £68. The minor already had the benefit of the house, hence he cannot recover the money

Question 13

Explain mentally unsound and intoxicated person and its exception

Answer 13

If a contract is made to/by one who is mentally unsound or intoxicated, the contract can be unenforceable in
court even if the contract is valid.
The facts must show that:
1. He is incapable of understanding the nature of the contract and
2. The other party knew or ought to have known of his incapacity

Exception: If the person obtained goods which are necessaries, the contract is valid and enforceable, even if he was intoxicated or mentally unsound (Che Som Bte Yip V Maha PTE LTD)

Question 14

How many cateogries are there under Illegality and name them

Answer 14

4

1. Gaming and Wagering
2. Contracts contrary to public policy
3. Contracts contrary to statue
4. Contracts in Restraint of Trade

Question 15

Explain gaming and wagering

Answer 15

All wagering and gaming contracts are generally void.

Exceptions are betting on horse racing that is authorised by Singapore Totalisator Board Act and Gambling in Casinos authorized by Casino Control Act

Question 16

Explain Contracts Contrary to Public Policy and its relevant case study

Answer 16

1. If contract involves committing a crime, a tort or fraud on a third part, it contravenes some aspect of public policy and is illegal (Anthorp V Neville & CO - a contract to publish a libel)
   2) If the contract promotes sexual immorality (Ahvena V Lim Ah Han - lend money to finance a brothel)
   3) If the contract benefits an enemy country or undermines a relationship with a friendly country (Regazzoni V KC Sethia)
   4) If the contract obstructs the administration of justice (R V Andrews - Give false evidence in court)
   5) If the contract seeks to oust the jurisdiction of the court (Baker V Jones - Contract giving only the council the right to make final decisions on questions of the law of its association)

Question 17

What are the four sub-headings for contracts contrary to statute?

Answer 17

1) Statute expressly prohibits contract
2) Statute impliedly prohibits contracts
3) Statute prohibits unlawful conduct of a contract
4) Statute penalizes unlawful conduct of a contract

Question 18

Explain Contract Contrary to statue from its heading and its relevant case study

Answer 18

1) Statute expressly prohibits contract
If a statute expressly disallows a certain contract, the contract is illegal. treat the contract like it never exist and a good example is gaming and wagering

2) Statue impliedly prohibits contracts
The statute allows the certain contract but subject to certain requirement (Intention) - MahMoud and Ispahani - Wartime regulations prohibited the buying and selling of linseed oil
unless both parties have a license. A buyer without a license contracted to buy linseed oil from a seller, but
repudiated the contract saying that he in fact did not have a license. The contract is void

3) Statute prohibits unlawful conduct of a contract

If the statute allows the contract but subjected to requirements, yet the contract’s performance failed to fulfill that requirement, the contract is tainted with illegality

ST John Shipping Corp V Joseph Rank - A statute allows the contracts for shipping goods but
regulates the amount of load on ships. By overloading the ship, the contract is tainted with illegality, but it
does not render the contract void. Hence, the ship owner is still entitled to claim the freight specified in the
contract.

Exception (Must show both) - If the recovery proceedings can be made without relying on the illegality and the innocent party has no intent to break the law or does know that the contract is illegal. If both points are met, the property is recoverable

Exception: If both parties are at equal fault, the innocent part cannot recover damage

4) Statute penalizes unlawful conduct of a contract
f the statue allows the contract but subjected to requirements, and the statue is penal in nature (imposes a
fine on the wrongdoer), the contract is not affected by illegality even if the contract’s performance failed to fulfill that requirement
(Taxi Driver)

Question 19

What are the 3 criteria that must be fulfiled for the ROT to be valid?

Answer 19

1. Must protect the proprietary or legitimate interest of the convenantee
2. Must be reasonable in duration, scope and subject matter
3. Must not be contrary to public interest

Question 20

Explain ROT and what does it stand for

Answer 20

Restraint of Trade (ROT) Contracts are agreements under which a business or person agrees to refrain from
undertaking certain types of trade or employment. Usually such agreements are used to prevent a business or
person from entering into a field in which the other party operates.

Question 21

Explain the three criteria of ROT and its relevant case study and exceptions

Answer 21

1. Legitimate Interest
   If there is a legitimate interest to safeguard, the first criteria is met.

Exception #1 If the clause is solely intended to minimise competition, it can be seen as an unreasonable
restraint of trade (Stratech Systems V Nyam Chui Shin - restraining the employee from joining another company for 9 months. Stratech was unable to provide any legitimate interest that require protection by a restraint. The court ruled that the clause was made to inhibit competition in business and was held invalid

Exception#2 : Herbert Morris V Saxelby If the restraint is intended to prevent an employee from using his personal skills or
knowledge acquired during his previous employment, the restraint is likely to be void

2. Reasonable Scope

If the clause is too wide, it goes further than what is necessary to protect the interest concerned (Mason V Provident Clothing & Supply - A restraint of trade clause prohibited a
worker from entering into a similar business 25 miles from London was held to be void because the
area of restraint was 1000 times larger than the area he was employed.)

If the clause is too narrow, the clause will not cover the issue in question
(Asiawerk Global investment group V Ismail - A restraint of trade clause prohibited a worker from competing with any “business carried on by the
company”. The company taps and exports pine resin, while the worker purported to set up a cocoa business. The court read scope of the clause narrowly to mean only the actual business already undertaken by the company

3. Public Interest
   (Asia Polyurethane MFG V Woon Sow Liong - if there are many other business in the market, the public good is not deprived)

(ESSO Petroleum V Harper’s garage - if the restraint has significant impact on trading arrangements such that it reduces competition generally, the court may declare the clause to be void)

Question 22

Define Blue Pencil Test and its condition

Answer 22

By using the Blue Pencil Test, the party relying on the clause can confine the illegality to only part of the contract.

Severance is possible if 3 conditions are all met

1) Promises are severable in nature
2) It is possible to sever the void part by deleting the offending words with adding, substituting or re arranging the contract

3) The severance must not change the nature of the contract

Question 23

Explain the case study for blue pencil test

Answer 23

Goldsoll V Goldman

When the owner of an imitation jewelry business in London sold it
to a buyer, he covenanted that he would not: “for the period of two years, either solely or
jointly… carry on the business of a vendor or dealer in real of imitation jewelry in the country of
London, England, Scotland… or any part of the UK…

The clause was unreasonable, but by using the blue pencil test, the court severed the other
locations and reference to real jewelry and allowed the remaining clause to stand

Question 24

Define misrepresentation and the three conditions it must satisfy to be a misrepresentation.

Answer 24

A misrepresentation is a false statement of fact made by one party (representor) to another (representee)
which induces and is relied upon by the representee to alter his position thus causing representee loss

1) The representation is a false statement of a past or existing fact
2. The statement must be made from the representor to the representee
3. The statement induced the representee into the contract

Question 25

What are the three categories for Misrepresentation?

Answer 25

1) False statement of fact
2) From 1 party to another
3) Inducement

Question 26

State the sub category for false statement of fact and support it with case study

Answer 26

1. False statement of intention

However, a statement of intention to a future action can be a false statement of fact if the representor did not
intend hold that intention at all. (Edgington V Fitzmaurice - A company issued a prospectus stating that the money raised was used to
improve buildings when the real intention was to pay off some debts. The stated intention was not held, hence it was a misrepresentation)

2. Representor had access to the facts

If the representor had access to the relevant facts and has no reasonable ground to hold such an opinion, his statement of opinion can be a false statement of fact. (Bisset V Wilkinson - A seller of a farm which was never used to raise sheep told the buyer that the
farm could sustain 2,000 sheep when in fact, the farm cannot do so. Seller has no access to facts and The statement was only an opinion
of the capacity of the farm.)

3. Silence

Silence does not amount to misrepresentation as representor has no duty to disclose information (Keates V Lord Cadogan - The defendant’s house was in poor condition and he kept silent about it
when Keates wanted to rent it.)

Exception 1: Half Truth (Dimmock V Hallett - If the seller of a land tells the buyer that the land is fully let and did not
mention that the tenants were given notice to quit, the unsaid fact becomes a misrepresentation.)

Exception 2: Change in circumstances (With V O’ Flanagan - Dr O’Flanagan said truthfully that his medical practice had takings of £2000 pa.
However later on, the takings were only £5 a week because O’Flanagan had become ill. The contract was
signed with With to buy the medical practice, but O’Flanagan did not disclose the change in circumstances.)

Exception 3: If the law imposes a duty to disclose facts, any form of silence would constitute a misrepresentation.
( Fiduciary contracts of insurance)

Question 27

What is the three conditions for misrepresentation?

Answer 27

1) False statement of fact
2) From 1 party to another
3) Inducement

Question 28

State the sub category for inducement and support it with case study

Answer 28

As long as the false statement is one of the inducing causes, it amounts to a misrepresentation.
Even if the representee has the opportunity to investigate the truth, it still amounts to a
misrepresentation.

Redgrave V Hurd - When Redgrave sold his house together with his law practice to Hurd, Redgrave had misrepresented the value of his practice. Although Hurd had the opportunity to check, he didn’t do so. The opportunity to check did not deprive Hurd of his right to rely on the misrepresentation, hence there was a misrepresentation.

Exception: If the representee has come to learn of the misrepresentation before entering into the contract, or
does not rely on the misrepresentation to enter into the contract, the false statement would not be the
inducing cause.

Question 29

What are the three categories of misrepresentation? Explain with relevant case study

Answer 29

1. Fraudulent Misrep
   If the representor knows that the statement was false, the misrepresentation is then a fraudulent
   one. As set under Derry V Peek, for a misrepresentation to be fraudulent, it must be either be made knowingly, be made without belief in its truth, be made carelessly or recklessly whether it be true or false
2. Negligent Misrep
   If the representor made the false statement without due care, it is then a negligent
   misrepresentation. (HOWARD MARINE V OGDEN (1978) Ogden chartered barges from HM to dispose soil into the sea.
   HM stated the wrong holding capacity for the barges as they had based it on the wrong register.
   HM had no reasonable grounds to believe the stated figures when he could have checked
   the shipping documents. Hence HM is liable for negligent misrepresentation.)
3. Innocent Misrep
   If the representor made the false statement believing that the statement is true, it is then an innocent
   misrepresentation,

Question 30

Explain remedies for misrepresentation

Answer 30

1. Damages
   For fraudulent misrepresentations, damages will be awarded under the law of tort of intentional
   conduct. For negligent misrepresentations, the representee will be awarded damages for all losses caused by
   the misrepresentation, which are not too remote. (For example, a tenant and a landlord contract. The landlord makes a negligent misrep saying the
   sewages are clean when in fact it is not. As a result, the tenant’s poultry died and his manager got
   sick.)
2. Indemnity
   For innocent misrepresentation only, an indemnity can be awarded to the injured party to help
   restore him to the position he was beforehand. ( For example, a tenant and a landlord contract. The landlord makes a negligent misrep saying the
   sewages are clean when in fact it is not. As a result, the tenant’s poultry died and his manager got
   sick.)
3. Rescission
   A rescission is the restoration of both parties to their original positions before the contract
   was set. The representee must give reasonable notice to rescission. Once the representee elects to
   terminate the contract, the contract is rescinded. Rescission is final and cannot be
   withdrawn. Rescission is not available when the contract is affirmed by the representee, a reasonable amount of time has lapsed since the discovery of misrepresentation, the parties cannot be restore to their original positions

Question 31

What are the four categories under Mistake? Explain

Answer 31

1. Common: Common mistake occurs when both parties to the contract make the same fundamental mistake. (Couturier V Hastie)
2. Mutual: Mutual mistake occurs when the parties misunderstand each other and are at cross purposes.
3. Unilateral: Only when one party is mistaken (Chwee Kin Keong V Digilandmall.com)
4. Non Est Factum (It is not my deed)
   ”. Arises when a person signs a document that is fundamentally
   different in character from that which he contemplated. (Lee sire Chun V Sourgrapes)

To avoid contract on this basis, the plaintiff must show the document signed is radically different from that which he intended to sign, he had not been careless in signing the document. he took such care as a person in his position ought to have taken

Question 32

What are the other vitiating factors?

Answer 32

1. Duress
2. Undue Influence
3. Unconscionable Bargain

Question 33

Explain the other vitiating factors and cite with relevant case study

Answer 33

1. Duress: If a person is forced to enter into a contract as a result of actual violence or threats of actual violence, the
   contract would be unenforceable. Economic Duress refers to unlawful or illegitimate commercial pressure. (Atlas Express V Kafco)

Criteria for economic duress:
1) Whether the defendant did or did not protest
2) Whether, at the time of coercion, the defendant had an alternative course open to him such as an
adequate legal remedy
3) Whether the defendant was independently advised
4) Whether after entering the contract, the defendant took steps to avoid it

Question 33

Explain the other vitiating factors and cite with relevant case study

Answer 33

1. Duress: If a person is forced to enter into a contract as a result of actual violence or threats of actual violence, the
   contract would be unenforceable. Economic Duress refers to unlawful or illegitimate commercial pressure. (Atlas Express V Kafco)

Criteria for economic duress:
1) Whether the defendant did or did not protest
2) Whether, at the time of coercion, the defendant had an alternative course open to him such as an
adequate legal remedy
3) Whether the defendant was independently advised
4) Whether after entering the contract, the defendant took steps to avoid it

The party must objected in the first place and take steps asap to avoid changes. If not they lose their right (North Ocean Shipping V Hyundai Construction)

2. Undue Influence:Undue influence is the unconscientious use of one’s power or authority over another to obtain a benefit or
   achieve a purpose by exerting improper pressure.

2 Types of undue influences :
1) Undue influence must be actually proven
2) By virtue of the relationship between the parties, the law automatically presumes that undue influence is
present and the burden of proof is then on the party complained of having exercised undue influence to
show that no undue influence in fact has been exercised.

Undue influence is also presumed in some relationships like solicitors and clients, doctors and patient
LIM GEOK HIAN V LIM GUAN CHIN (1994) Brother and sister is not presumed and must be proved.
1) To establish undue influence, the person who raises the complaint must establish the following:
a. that the other party had the capacity to influence the complainant
b. the influence was exercised
c. its exercise was undue
d. its exercise brought about the transaction

2) When it is presumed, the presumed party has the burden of proving that there is no undue influence.

3) Unconscionable Bargain :
Vague concept suggests that any agreement which is manifestly inequitable and constitutes an
unconscionable bargain should be set aside.This can be an exception under Singapore law and does in fact constitute a vitiating factor for contracts involving performance bonds.

Question 34

What is the criteria for economic duress

Answer 34

1) Whether the defendant did or did not protest
2) Whether, at the time of coercion, the defendant had an alternative course open to him such as an
adequate legal remedy
3) Whether the defendant was independently advised
4) Whether after entering the contract, the defendant took steps to avoid it

Question 35

What are the two type of undue influence

Answer 35

1) Undue influence must be actually proven
2) By virtue of the relationship between the parties, the law automatically presumes that undue influence is
present and the burden of proof is then on the party complained of having exercised undue influence to
show that no undue influence in fact has been exercised.