Vitiating Factors

Question 1

What is a Restraint of Trade Clause (ROTC) ?

Answer 1

Agreements under which a party agrees to refrain from undertaking certain types of trade and employment

Question 2

When will a ROTC be enforceable?

Answer 2

1. ROTC protects covenantee’s legitimate interest e.g., goodwill, trade secrets, trade contacts, a stable and trained workforce
2. ROTC is reasonable in scope (time period, geographical location, subject matter)
3. ROTC does not go against public interest (for covenantor to prove)

Question 3

Under what conditions will a ROTC be severed and saved from being void?

Answer 3

1. The promises are severable in nature
2. It is possible to sever the void parts of the ROTC without adding, substituting, re-arranging or re-drafting the contract (Blue Pencil Test)
3. Severance does not change the basic nature of the contract (Man Financial v Wong Bark Chuan David)

Question 4

What constitutes a misrepresentation?

Answer 4

A false statement made by the representor to the representee, which caused him to rely on the false statement to alter his position and induced him to enter the contract, resulting in the representee suffering losses

Question 5

Can a statement of intention and statement of opinion be considered as a false statement of fact?

Answer 5

Statement of intention: Can be considered a false statement of fact if at the time when the statement was made, the maker of the statement did not hold the intention (Tan Chin Seng & Others v Raffles Town Club Pte Ltd)
Statement of opinion: Can be considered a false statement of fact if maker of statement had access to relevant facts and had no reasonable grounds to hold that statement, and he did not hold that opinion (Bisset v Wilkinson)

Question 6

Can silence amount to misrepresentation?

Answer 6

No, unless:
1. Silence makes the statement a half-truth (Dimmock v Hallett)
2. A change of circumstances arose, rendering a previously truthful statement misleading (With v O’ Flanagan)
3. Legal disposition present to disclose information e.g., insurance contracts

Question 7

What are the two types of inducements?

Answer 7

1. Materiality (Objective) Test: Will a reasonable man be induced to enter into the contract by the misrepresentation?
2. Actual (Subjective) Inducement: Prove that the false statement, no matter how far-fetched, played an important role in inducing the representee to enter the contract

Question 8

What are the different types of misrepresentation?

Answer 8

1. Fraudulent Misrepresentation
   Representor made the statement knowing that it is false, had no reasonable grounds to believe that it is true, and made the statement carelessly (Derry v Peek)
2. Negligent Misrepresentation
   Representor made the statement believing that it is true, but had no reasonable grounds to believe that it is true (S2(1) MA) (Howard Marine v Ogden)
3. Innocent Misrepresentation
   Representor made the statement believing that it is true, and had reasonable grounds to believe that it is true (RBC Properties v Defu Furniture)

Question 9

What happens after rescission of contract?

Answer 9

Contract is said to be voidable. After termination, the contract is considered void ab initial (void from the beginning), which requires both parties to regain their position prior to the contract (restitutio in integrum)

Question 10

What are the limitations of rescission of contract?

Answer 10

1. Contract is affirmed expressly/impliedly after discovery of misrepresentation
2. A reasonable amount of time had lapsed after discovery of misrepresentation?
3. Parties cannot regain their position prior to entering the contract (restitutio in integrum impossible)
4. Third party rights arose before rescission

Question 11

State S2(1) Misrepresentation Act

Answer 11

A representor who makes a false statement without fraudulent intentions is still liable unless he can prove that he believed the statement to be true and had reasonable grounds to believe that it is true

Question 12

How to determine which kind of misrepresentation is present?

Answer 12

1. Prove fraudulent misrepresentation (requires high degree of proof)
2. If unable to prove fraudulent misrepresentation, representor is liable (S2(1) MA)
3. If representor believes statement is true, and has reasonable grounds to prove that it is true, it is innocent misrepresentation
4. If no fraudulent intentions and not innocent misrepresentation, it is negligent misrepresentation

Question 13

State S3 Misrepresentation Act

Answer 13

If the contract contains a term which seeks to exclude or limit
(a) liability to which a party of a contract may be subjected to by reason of any misrepresentation made by him prior to the contract
(b) remedy available to injured party resulting from such misrepresentation
unless it satisfies the requirement of reasonableness in S11(1) UCTA