Question 1

Mason was walking home along Geylang Ave 10 when a stranger approached him. The stranger introduced himself as Jaws, the “friendly neighbourhood financial planner.” Facing financial difficulties, Mason was interested to hear out what Jaws had to offer. Jaws was willing to loan Mason $10,000 at a monthly interest rate of 5%. Jaws claimed that it was, “better than the local banks by 1% (unsaid, 1% per annum).”

Hearing that it was such a good offer, Mason decided to take up the loan. He signed on all the necessary contractual documents and walked away with $9,500 cash, with $500 as its first payment to Jaws for interest.

In the meanwhile Jaws is convicted and sentenced to an imprisonment term for having conducted money lending business at Geylang Avenue 10 without a valid licence. Upon his release from prison Jaws went to Mason’s home for the collection of his loan. Mason refused to pay any money, claiming that after attending his Contract Law classes in UniSIM, he came to realize that there is no valid contract as there was a presence of vitiating factor – mistake. Advise Mason.

Answer 1

To answer this question we have to understand the provisions of the Contract law in Singapore. Contract law in Singapore is based on the common law of contract in England. Common law is essentially that law which is largely based on the judgments pronounced by the Judges and with time it changes with new judgments.

A contract is an agreement between two or more parties that carves out terms and conditions that both the parties have to abide by so as to make the instrument legally enforceable. A contract is formed when one person makes an offer and the other person accepts it. However, if a mistake is committed in law while getting into the contract, then the contract may be held to be void or voidable. Mistake can be of two kinds that are generally referred to as mistake of fact and mistake of law. In this particular case, Jaws misrepresented himself as a lawful money lender and under that impression Mason agreed to get into the contract with Jaws.

Under the common law of Singapore, if one or both parties enter into a contract under misapprehension, then the contract may be termed void or voidable (Chandran, 2006). Mistake of fact can be a ground to rescind the contract. Unilateral mistakes as to identity of the party tend to make the contract voidable. For example, if A agrees to sell something to B by misrepresenting himself to be a money lender, the contract is affected by B’s unilateral mistake as to A’s true identity provided that it is clear that A’s identity is material. In such a situation, B, the mistaken party would have the right to set aside the contract. In the present situation Jaws misrepresented himself as the money lender, even though he did not have the licence. This amounts to not only misrepresentation, but also fraud. In Brennan v Bolt Burdon (2004) the Court of Appeal held that a mistake of law can void a contract. It has been stated by Slade that the condition precedent is implied into the offer and acceptance so that there is no commitment to contract unless the assumptions are true[1].

Under equity, even if a mistake is not sufficiently fundamental to render a contract void at common law, it may still be set aside provided that the mistake is sufficiently serious. This two prong approach was recently approved by the Singapore Court of Appeals in Chwee Kin Keong v Digilandmall.com Pte Ltd[2].   This new position is in sharp contrast to that in England as held in Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd[3].

In the present case Mason can also seek damages for the misrepresentation conducted by Jaws. At common law, damages may be awarded for fraudulent misrepresentation when it is made: (1) knowingly, (2) without belief in its truth, or (3) recklessly, careless whether it be true or false. A misrepresentation is essentially a false statement of fact, which induces the representee to enter into a contract with the representor. According to the court in Derry v Peek (1889)[4], a fraudulent misrepresentation is one that has been made knowing that it was false or without belief in its truth or made recklessly without care whether it was true or not. The remedies for fraudulent and negligent misrepresentation are damages and rescission of the contract[5] while the remedy for an innocent misrepresentation is rescission (or damages in lieu of rescission) and indemnity, as held in Smith New Court Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd [6]. Thus, from the above discussion it is evident that Mason can apply for damages and rescind the contract.

Question 2

Sharon places a sign in the window of his black Porsche which reads, “For Sale – $50,000 only! Normal price – $400,000! Low mileage, 2008 model – full service history and records available.” In response to the notice, Kevin speaks to Sharon about the car. Kevin tells Sharon that he intends to buy the car for his wife and new born son. After examining the car and its service history and records, Kevin purchased it from Sharon for $50,000.

Within the next few weeks, Kevin spent an additional $8,000 retrofitting the interiors of the car. 2 months later, Kevin saw an old copy of newspaper, featuring a picture of his Porsche in connection with a serial murderer. It transpired that the previous owner of the vehicle before was the serial killer who hid the bodies of his victims in the car. It was also discovered that the car was a 2007 model. Once the background of the car was known, Kevin’s wife refused to go into the vehicle. She claimed that it is not “healthy” for their new born son to be in the car.

While Sharon knew of the car’s history, she said nothing of this to Kevin. Kevin felt that there was a breach of contract and wants to seek legal remedies. Advise Kevin.

Answer 2

In any form of contract entered into by two parties there has to be an offer with a subsequent acceptance. In the famous Carlill v Carbolic Smoke Ball case[7] it has been held that by placing a sign on the window at shops or by placing sale signs it amounts to an invitation to offer or treat and not an offer as such. However, in Partridge v Crittenden[8], it has been held that the intention to get into a legal relation can amount to an offer which has to be decided from the circumstances of the case. In this present case when Sharon places a sign in the Porsche car with the sale price, it amounts to an invitation to offer from buyers who are interested in buying the car. Kevin bought the car from Sharon, specifically mentioning that the car was meant for his wife and their new born son.

Subsequently, when the car is sold, it is found that the car had a past history which Sharon had hid from Kevin while selling the car. This amounts to misrepresentation under the Misrepresentation Act, s 2(1).

In IFE Fund SA v. Goldman Sachs International (2006)[9], Toulson J held that if a seller of a car said to the buyer, “I have serviced the car since it was new, and it has only one owner and the clock reading is accurate”, those statements would amount to representation and would amount be misrepresentation subsequently if found untrue.   It has been held in Smith v Hughes[10] (1871) that if a claimant purchased oats believing them to be old oats when in fact they were new oats, then no damages can be sought as the representation and mistake was neither fundamental to the contract, nor was it shared. The learned Judge held that if the misrepresentation does not go to the root of the contract then damages cannot be claimed. Similarly, in Oscar Chess Ltd. v. Williams (1957)[11] it has been held that when the claimant purchased a car which both believed to be a 1948 model, when it was in fact a less valuable 1939 model. The learned judge held that no damages can be given for innocent misrepresentation. However, in this case, Sharon knew about the past history of the car and still she hid it from Kevin. The misrepresentation becomes material to the terms of the contract as Kevin had specifically mentioned that the car was meant for his wife and new born son. It has been held by the Singapore Court of Appeals in Chwee Kin Keong v Digilandmall.com Pte Ltd[12] that if the misrepresentation is material to the contract then damages can be claimed for the breach of contract. The misrepresentation in this case is material, in the sense that it relates to buying the car whose model is not only old but it also has a history of a serial murderer hiding victims’ bodies in it. This information would have definitely influenced any reasonable person’s decision in buying the car and entering into the contract. This definitely amounts to breach of contract when Kevin found out the details of the history of the car.

A breach of contract occurs when the terms of the contract are not fulfilled. A breach of contract opens the gateway to a menu of remedies which an innocent party, meeting the qualifying conditions; can claim (Wishart, 2008). In this particular case can claim monetary compensation for the breach of contract. Under S 2 (1) of the Misrepresentation Act (Cap 390, 1994 Rev Ed) if a party gets into a contract on the basis of a negligent misrepresentation then he can claim damages. In this case Kevin acted on the misrepresentation of Sharon and thereby he is liable to ask for damages upto $50,000 + $8000 that he had spent on retrofitting the interiors of the car. Kevin can also seek further damages for the misrepresentation of Sharon.

Question 3

May was a Director for a private school – Institute of Commerce. Part of her job was to source for the purchase of a piece land for the school. A few weeks later, May finds a plot of land in Serangoon suitable for the school’s development. Acting as an agent on behalf of the school, she bought the land at an inflated price of $900,000. Unknown to the school and its Board of Directors, May had pocketed $200,000 of commission over the land sale. She had also failed to disclose that the land was purchased from her husband, Mason.

A few days prior to the sale of land to the Institute of Commerce, Mason actually transacted with the original land owner and bought the Serangoon plot of land for $400,000. When the Institute of Commerce discovered of Mason’s role in the transaction, they felt that May was in breach of her contractual duties as an agent and director of her office. Advise May.

Answer 3

In this particular case, May acts as the agent of Institute of Commerce school. Under the common law of Singapore, agency is defined as the relationship which arises where one person known as the agent acts for another known as the principal. Through the acts of the agent, the principal and the third party get into a contractual relationship with one another and this is the work of the agent. Agents have several power, which includes buying property or land for the principal and also the power to dispose of property of the principal to a third party. In agency, the principal has authorized the agent to act on his behalf and the agent has agreed to do the required the acts. The agent becomes an extension of the principal and is capable of doing all acts and even altering the principal’s legal position by his acts and getting into contracts with third parties that binds the principal or effecting a binding disposal of the principal’s property.

In this case, it was May’s job to source for the purchase of a piece land for the school and she was given the power by the principal Institute of Commerce to undertake any activity with regard to purchasing of land for the school. She went to her husband Mason and bought the land at an inflated price of $900,000. However, there is no proof to showcase the actual worth of the land was much below than that. In this case, May was acting as the agent of the school and she had all the right to enter into a contract with any third party. May was also the Director of the Instititute of Commerce but within that capacity she can be held liable for actions that were committed by her.

In this particular case, May was in a contractual relationship with the school. The school had given May, explicit authority to buy land and it can be proved from the judgments given in Garnac Grain Co Ltd v Faure & Fairclough Ltd.[13] and Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd[14] that the agent cannot be held liable for his acts that he does within the power assigned to him. In this case, even though May’s husband Mason was involved in the transaction of buying the land for Institute of Commerce, however, May cannot be held liable for anything. Mason had bought the Serangoon plot of land for $400,000. However, while selling it he would definitely make some profit. If there has been any collusion on the part of May and Mason then it cannot affect the agent and principal relationship of May and the Institute of Commerce.

Ratification of the agent’s act is also required. If ratification does not take place within such time, the principal loses the right to ratify. This has been held in Metropolitan Asylums Board v Kingham & Sons[15]; Re Portuguese Consolidated Copper Mines, Ltd[16]that the Principal must ratify the acts of the agent within reasonable time, which will depend on the nature of the contract and the circumstances of each case.

In this particular case, May pocketed $200,000 of commission over the land sale and this has to be accounted for. She would have to return this money to the Institute of Commerce because any kind of bribe taking by the agent is strictly prohibited under Singapore law. If the agent receives a secret bribe, the agent must account for this to the principal and this has been held in the leading case of Mahesan v Malaysian Government Officers Co-operative Housing Society Ltd[17]. This is only liability of May’s part.

 

Bibliography

Chandran, Ravi. (2006). Introduction to Business Law in Singapore. McGraw-Hill.

Koh, Pearlie. (2004). Basic Principles of Singapore Business Law. Thomson Learning. Singapore.

Wishart, Mindy (2008). Contract Law. Oxford University Press.

 

[1]C Slade “The Myth of Mistake in the English Law of Contract” (1954) 70 LQR 385, 399.

[2] [2005] 1 SLR 502

[3] [2003] QB 679

[4] [1889] 14 App Cas 337

[5]  Misrepresentation Act, s 2(1)

[6] [1996] UKHL 3

[7] [1893] 1 QB 256

[8] [1968] 2 All ER 421

[9][2006] EWHC 2887 (Comm) ; [2007] 1 Lloyd’s Rep 264.

[10] [1871] LR 6 QB 597

[11] [1957] 1 WLR 370

[12] [2005] 1 SLR 502

[13] [1967] 1 Lloyd’s Rep 495 at pp 508-509

[14] [1964] 2 QB 480

[15] [1890] 6 T.L.R. 217 at p 218

[16] [1890] 45 ChD 16 at pp 31, 34

[17] [1975] 1 MLJ 77

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