Vitiating Factors

Question 1

3 main vitiating factors

Answer 1

1. Incapacity
   - Minors
   - Insane/drunken persons
2. Illegality
   - Statutory illegality
   - Contracts contrary to public policy
3. Misrepresentation
   - 3 types of misrep & its remedies

Question 2

Incapacity

Answer 2

Generally, if the parties do not have the capacity to form a contract, the contract is invalid.

• Minors (below 18)
• Mentally unsound/Drunken persons

Question 3

Incapacity (Minors)

Answer 3

3 types of minors’ contracts:

1. Valid contracts
   a) Contracts for necessaries
   b) Loans for necessaries
   c) Beneficial contracts for employment
2. Voidable contracts
   - cases where Minor faces recurring obligations
3. Ratifiable contracts
   - residual class, if contract is not valid nor voidable.

Question 4

Minors - age 18 or 21?

Answer 4

The age of majority in Singapore is 21 years, but minors above 18 are given contractual capacity in certain commercial activities under the Civil Law Act

Question 5

Incapacity- Minors - Valid Contracts

Answer 5

a) Contract for Necessaries
- Valid (binding on both parties)
- not all necessities are necessaries. necessaries are things reasonably required by the minor in his particular station in life.
𝐍𝐚𝐬𝐡 𝐯 𝐈𝐦𝐚𝐧
where clothes were not a necessary since minor had ample of clothes, thus contract is not enforceable.

• Includes basic necessities and even luxurious iterms if appropriate for minor in his position.
  𝐏𝐞𝐭𝐞𝐫𝐬 𝐯 𝐅𝐥𝐞𝐦𝐢𝐧𝐠
  where luxury items can be necessaries, making the contract enforceable.

Under s3 of SOGA, if the goods are a necessary, the minor has to pay for goods BUT only at a reasonable price.

b) Loans for necessaries
- a person who lends money to a minor is generally unable to enforce the contract and recover the money from the minor
- UNLESS the money borrowed is used to purchase necessaries, then contract is valid

c) Beneficial contracts of employment
- Contract must, on the whole, be beneficial to minor, then the contract will be fully binding on both parties.
- Vice versa
𝐂𝐡𝐚𝐩𝐥𝐢𝐧 𝐯 𝐋𝐞𝐬𝐥𝐢𝐞 𝐅𝐫𝐞𝐰𝐢𝐧 (𝐏𝐮𝐛𝐥𝐢𝐬𝐡𝐞𝐫𝐬) 𝐋𝐭𝐝
where a contract helped out a minor to start out as an author and earn money despite showing him as a “depraved creature”, was considered valid.

Question 6

Incapacity - Minors - Voidable Contracts

Answer 6

Binds other party and binds minor unless minor repudiates
- cases where there are recurring future obligations.
- Minor is entitled to repudiate the contract without any liability during his infancy or a reasonable time after attaining majority.
𝐃𝐚𝐯𝐢𝐞𝐬 𝐯 𝐁𝐞𝐧𝐲𝐨𝐧-𝐇𝐚𝐫𝐫𝐢𝐬
where minor, after attaining majority, did not repudiate after a reasonable time and was thus liable to pay rent.

Question 7

Incapacity - Minors - Ratifiable Contracts

Answer 7

Binds other party and binds minor ONLY if minor ratifies after attaining majority.

• eg; contract for goods and services that are not necessaries are ratifiable contracts.
• Be it ratified or not, the other party is bound by it.
• Ratification can be express or by conduct.

Question 8

Incapacity - Minors - Remedies

Answer 8

Regardless of valid/voidable contracts, if minor has executed his obligations, minor is unable to return to his own original position unless there is total failure of consideration by the other party.

• Under s3 of the Minors’ Contract Act, if a voidable/ratifiable contract becomes unenforceable, the other party can recover any property improperly obtained by the minor by the virtue of an unenforceable contract.

Question 9

Incapacity - Insane or drunken persons

Answer 9

Facts must show that:
1) must be mentally unsound or drunk that could not understand the nature of the contract;
AND
2) other contracting party knew of incapacity.

If the mentally unsound/drunken person has obtained necessaries, the contract is valid and is enforceable. He must pay a reasonable price for the goods.

Question 10

Illegality

Answer 10

a) Gaming & wagering contracts
b) Contracts contrary to Public Policy
c) Contracts contrary to statute
d) Contracts in Restraints of Trade

Question 11

Illegality - Gaming & Wagering

Answer 11

As a general rule, money paid or won under a wagering or gaming contract cannot be recovered.

Exception:

• Horse betting is authorised by Singapore Totalisator Board Act
• Gambling in casinos is authorised by the Casino Control Act

Question 12

Illegality - Contracts Contrary to Public Policy

Answer 12

if the contract

a) includes committing a crime, tort or fraud on a 3rd party.
b) promotes sexual immorality
c) benefits an enemy country or undermines a relationship with a friendly country.
d) obstucts administration of justice
e) oust the jurisdiction of the Courts

Illegality means the contract is treated like it never existed/

Question 13

Illegality - Contracts Contrary to Statute

Answer 13

1) Prohibits formation of contract
- contract illegal as formed
- void from inception
- no party has contractual rights

2) Performance contravenes statute
- only innocent party has contractual rights
- where statute is criminal, guilty party pays penalty but the contract is unaffected.
[wrongdoer alr penalised, not fair for him to lose contract as well :( }
eg; speeding taxi.

Question 14

Illegality - Contracts in Restraint of Trade

Answer 14

They are contracts that restrict liberty of person to carry on trade, business or profession.

For ROT to be valid, ALL 3 must be fulfilled:

1) restraint is necessary to protect a legitimate interest
- in the case of employment contracts, main interest is to safeguard confidential information, trade secrets or contacts obtained from employment
- in the case of sale of business, main interest is goodwill

BUT not justified if merely to prevent competition or stop employee from using personal skill

2) restraint must be reasonable in scope
- reasonable in terms of time, period of restraint, geographical area and activities restrained
𝐂𝐋𝐀𝐀𝐒 𝐌𝐞𝐝𝐢𝐜𝐚𝐥 𝐂𝐞𝐧𝐭𝐫𝐞 𝐏𝐭𝐞 𝐋𝐭𝐝 𝐯 𝐍𝐠 𝐁𝐨𝐨𝐧 𝐂𝐡𝐢𝐧𝐠
- where the geographical area and time period for ROT was reasonable but the subject matter was too large in scope but was held to be severable, thus clause was not invalidated.

3) restraint must not be contrary to public interest
eg; if restraint reduces competition generally, it would be contrary to public interest.

IF ALL NOT MET, check if severance of clause is possible -> blue pencil test

Question 15

Blue Pencil Test

Answer 15

By using the blue pencil test, the party relying on the clause can confine the illegality to only part of the contract. If so, contract is valid and enforceable.
Severance is possible only if
- The promises are severable in nature
- Possible to sever void part without re-arranging, adding or substituing the contract
= severance does not change the nature of contract.

Question 16

Misrepresentation

Answer 16

A misrepresentation is a false statement of fact made by one party to another, which induces representee to alter his position.

For a false representation to be a misrep, it must satisfy BOTH conditions:
1) false statement of fact made by one party to another
𝗧𝗮𝗻 𝗖𝗵𝗶𝗻 𝗦𝗲𝗻𝗴 & 𝗢𝘁𝗵𝗲𝗿𝘀 𝘃 𝗥𝗮𝗳𝗳𝗹𝗲𝘀 𝗧𝗼𝘄𝗻 𝗖𝗹𝘂𝗯 𝗣𝘁𝗲 𝗟𝘁𝗱
where RTC was promoted as an exclusive and premier club, and P sued as it was not exclusive since it had > 18k members. P’s claim failed but RTC breached its obligation of delivering a premier club.

• clear and unambiguous statement
• statement of opinion is NOT a statement of fact
• statement of intention/unkept promise is NOT a statement of fact
  GENERAL RULE:
  the representation must take an active form, hence, silence is NOT normally a representation
  𝐊𝐞𝐚𝐭𝐞𝐬 𝐯 𝐋𝐨𝐫𝐝 𝐂𝐚𝐝𝐨𝐠𝐚𝐧
  where D had no duty to disclose that the house was in a poor condition and silence did not amount to a misrep.

Exception 1: if silence amounts to another statement to be a half-truth, it can amount to a misrep
𝐃𝐢𝐦𝐦𝐨𝐜𝐤 𝐯 𝐇𝐚𝐥𝐥𝐞𝐭
where seller told buyer that land was fully under tenancy but kept silent that tenants gave notice to quit, which amounted to a misrep.

Exception 2: If there was a change in circumstances which rendered a previously truthful statement to be misleading.

Exception 3: where there is a duty to disclose facts, any form of silence would be a misrep. (eg; insurance contracts)

2) and which INDUCES and is relied upon by the representee to alter his position
- does not have to be the main factor in inducing, as long as he relies on it
𝐄𝐝𝐠𝐢𝐧𝐠𝐭𝐨𝐧 𝐯 𝐅𝐢𝐭𝐳𝐦𝐚𝐮𝐫𝐢𝐜𝐞
where the company lied in saying that the money raised will be used to improve buildings when it was actually used to pay off debts. Hence, misrep.

Exception:
if representee learnt ab misrep before entering into contract/ does not rely on misrep to enter into contract, statement would not amount to a misrep since it is not an inducing cause.

Question 17

Categories of Misrep

Answer 17

1) Fraudulent misrep
- made a statement knowing that its false.
- Representee must show that there is dishonestly from the representor

Remedies:
recession + damages

2) Negligent misrep
- statement was made without due car (without verifying/ without reasonable grounds)

Remedies:
Recission (or damages in lieu) + damages

3) Innocent misrep
- statement was made believing that the statment is true, among reasonable grounds AND not fraud/negligent

Remedies:
Recession (or damages in lieu) + indemnity

Question 18

Rescission

Answer 18

• Contract is treated as if it never existed. Parties are put back into their original position before the contract was made.
• The represented must give reasonable notice to rescission.
• Rescission is final and cannot be withdrawn.

Loss of right to rescind:

• Affirmation: where representee has chosen to affirm and continue with the contract.
• Lapse of time: where a reasonable amount of time has lapsed after the discovery of misrep.
• Restitutio In Integrum Impossible: where it is not possible to restore both parties back to their original positions before the contract was made.

Question 19

Damages

Answer 19

For fraudulent misreps, damages awarded under law of tort of international conduct.

For negligent misreps, representee will be awarded damages for all lossess caused by the misrep, which are not too remote.

For negligent and innocent misreps, the Court can exercise its discretion under s2(2) of the Misrepresentation Act to award damages in lieu of rescission.

Question 20

Indemnity

Answer 20

• representor is held responsible for loss or liability of representee arising out of the contract induced by misrep.
• generally not as much money as damages bc damages has a wider scope.
• Compensated only for losses arising out of the required obligations by the contract which was induced by misrep.

Question 21

𝐍𝐚𝐬𝐡 𝐯 𝐈𝐦𝐚𝐧

Answer 21

Incapacity-Minor-Contract for necessaries

where minor had ample clothes and thus, the purchase of clothes was not deemed as a necessary

Question 22

𝐏𝐞𝐭𝐞𝐫𝐬 𝐯 𝐅𝐥𝐞𝐦𝐢𝐧𝐠

Answer 22

Incapacity-Minor-Contract for necessaries

where luxurious items were deemed as a necessary for the minor

Question 23

𝐂𝐡𝐚𝐩𝐥𝐢𝐧 𝐯 𝐋𝐞𝐬𝐥𝐢𝐞 𝐅𝐫𝐞𝐰𝐢𝐧 (𝐏𝐮𝐛𝐥𝐢𝐬𝐡𝐞𝐫𝐬) 𝐋𝐭𝐝

Answer 23

Incapacity-Minor-Beneficial contracts of employment
where contract helped out a minor to start off as an author and earn money even though the book wrote him out to be a “depraved creature”, was still valid

Question 24

𝐃𝐚𝐯𝐢𝐞𝐬 𝐯 𝐁𝐞𝐧𝐲𝐨𝐧-𝐇𝐚𝐫𝐫𝐢𝐬

Answer 24

Incapacity-Minors-Voidable contracts
where minor, after attaining majority, did not repudiate his contract after a reasonable time has lapsed, thus making the contract valid and still liable to rent

Question 25

𝐂𝐋𝐀𝐀𝐒 𝐌𝐞𝐝𝐢𝐜𝐚𝐥 𝐂𝐞𝐧𝐭𝐫𝐞 𝐏𝐭𝐞 𝐋𝐭𝐝 𝐯 𝐍𝐠 𝐁𝐨𝐨𝐧 𝐂𝐡𝐢𝐧𝐠

Answer 25

Illegality-Contract of ROT
where the ROT was reasonable in terms of geographical scope, time period, but the scope of the subject matter was too large and held to be severable, thus clause was not invalidated.

Question 26

𝐓𝐚𝐧 𝐂𝐡𝐢𝐧 𝐒𝐞𝐧𝐠 & 𝐎𝐭𝐡𝐞𝐫𝐬 𝐯 𝐑𝐚𝐟𝐟𝐥𝐞𝐬 𝐓𝐨𝐰𝐧 𝐂𝐥𝐮𝐛 𝐏𝐭𝐞 𝐋𝐭𝐝

Answer 26

Misrepresentation-False statement of fact
where RTC was promoted as an exclusive and premier club, and P sued as it was not exclusive since it had > 18k members. P’s claim failed but RTC breached its obligation of delivering a premier club.

Question 27

𝐃𝐢𝐦𝐦𝐨𝐜𝐤 𝐯 𝐇𝐚𝐥𝐥𝐞𝐭

Answer 27

Misrepresentation-Silence- Half-truth

where seller told the buyer that the land was fully let but did not tell him that the tenants gave notice to move out.

Question 28

𝐄𝐝𝐠𝐢𝐧𝐠𝐭𝐨𝐧 𝐯 𝐅𝐢𝐭𝐳𝐦𝐚𝐮𝐫𝐢𝐜𝐞

Answer 28

Misrepresentation-False statement of intention
where company lied in saying that the money raised would be used to improve buildings but in fact, it was used to pay off its debts. Hence, misrep.