Factors that prevent a contract from being enforceable Vitiating factors

Misrepresentation.

*Pre-contractual representations generally do not have any legal effect, except contractual misrepresentation.

This question deals with the law of contractual misrepresentation. In order for the statements to amount to misrepresentation, A (representee) will need to show that the statement is a statement of fact, B (representor) must have addressed the statement to A (representee) and induced A (representee) to enter into the contract. Lastly, the statement must be false and resulted in loss suffered by A. (representee)

The following statements were made by B.

Statement 1: ______Statement 2: ______

1. Statement of fact

As a statement of fact, it must be a verifiable fact and scientifically capable of proof, and it must not be a law, an intention, about the future, an opinion or a commendatory puff. Statement 1 is likely to be an existing fact since the questions of derivation and testing are scientifically verifiable. (Refer to case laws if other situations apply) However, Statement 2 is not a statement of fact because ______.

/Commendatory puffs are not capable of scientific verification, and hence they are not regarded as statement of facts. And thus in this case, ______, it is not a misrepresentation.

/Generally, a promise of intention or prediction cannot be actionable in misrepresentation because at the time the statement was made, it cannot be said for sure whether it is true or false. However, a statement of intention as to future action could be a false statement of fact if, at the time of making the statement of intention, the representor did not in fact hold that intention. (Edgington v Fitzmaurice (1885) ) . Since in this case __________, hence it is/is not a misrepresentation.

/Similarly, an erroneous statement of law is normally not capable of founding a claim in misrepresentation, on the premise that everyone must know the law. Hence ___ (facts of case), thus it is/is not a misrepresentation.

/Generally, law of misrepresentation does not render mere expression of opinion actionable in misrepresentation. However, should the representor making the statement have a high capacity, it would be likely regarded as a statement of fact by the law. Since in this case B (representor) has high/low capacity given that he is ____, the statement is/is not a statement of fact.

2. Addressed to representee

The statement has been addressed to A since _________. It does not matter that the statement is not addressed to A specifically, as long as it was addressed even to the world at large, it has still been addressed to A.

3. Inducement

*Dealing with pre-contractual statements, because those formed after contracts have no inducement

Next, for the false statement to be a misrepresentation, the statement must induce the representee to enter into the contract (Attwood v Small (1838) ) . However, the statement does not have to be the sole inducing cause (Edgington v Fitzmaurice (1885) ) . On the facts, A relied on ____ to enter into the contract which amounts to sufficient inducement.

(NOT AWARE OF STATEMENT = NO INDUCEMENT According to Horsfall v Thomas, the court held that if the representee did not know of the representation, then he cannot be induced into the contract.)

Mere Opportunity to verify truth of facts if not taken, claim in misrepresentation is still valid as seen in Redgrave v Hurd (1881). Additionally, according to Panatron Pte Ltd v Lee Cheow Lee & Another, the court held that once inducement were established, it is no defence that representee acted incautiously and failed to take those steps to verify the truth of the representations which a prudent man would have taken. Furthermore, according to Jurong Town Corp v Wishing Star Ltd (No 2), the court observed that even if representee did take steps to verify the truth, there may still be reliance and inducement. Hence, in this case, the claim in misrepresentation is still valid even with the opportunity to verify the truth.

The general rule is that silence does not amount to misrepresentation (Keates v Lord Cadogan). Silence may, however, amount to misrepresentation where:(a) silence amounts to a partial non-disclosure if what is stated becomes a half-truth by what is left unsaid. (Dimmock v Hallett (1866) ) .(b) A change in circumstances arose which rendered a previously truthful statement misleading (With v O’Flanagan (1936) ).(c) The law imposes a duty upon one party to disclose the facts to the other party where “Uberrimei Fidei” – utmost good faith is required. (E.g. insurance contracts)

4. Statement must be false

Statement is obviously false because __________.

5. Representee suffered a loss

Losses has clearly been suffered as A ______________.

*After justifying that it is a misrep, then go into pigeon-holing the type of misrep.

Types of misrepresentation.

Fraudulent. According to case law Darry v Peek (1889), Fraud is established where it is proved that a false statement is made knowingly, without belief in its truth or recklessly and careless as to whether it be true of false. In this case it seems that B has made the statement _____ which will amount to a fraudulent misrepresentation. However as the judge is often slow to hold someone fraudulent, and the onus is on A (representee) to prove that there is such fraud, A may consider claiming negligent misrepresentation.

Negligent misrepresentation arises when the false statement is made by the representor without due care, as seen in case law Howard Marine v Ogden (1978). According to S2(1) Misrepresentation Act, the presumption is that the representation is negligent and the onus is on the representor to prove that he had reasonable grounds to believe and did believe up to the time the contract (points where statement and contract was made representor had reasonable grounds to

believe) was made that the facts represented were true and if so, it would be considered as innocent misrepresentation. In this case, _______, the burden shifts to B to prove that they had reasonable grounds for believing the truth of the statement up until the time the contract was made. Given that the facts of the case are _______, we can say that it is/is not negligent misrepresentation.

Innocent misrepresentation is where a statement is made in the absence of fraud and fault, with the representor making the statement with the honest belief and having reasonable grounds to believe in its truth. In this case, it seems like B had reasonable grounds for believing the truth of statement but nevertheless statement was false. It was a statement honestly made which hence will amount to innocent misrepresentation.

Upon establishment of the Fraudulent misrepresentation, A will have the right to rescind (once rescind, cannot change the mind!) the contract and sue for damages under S2(1) Misrepresentation Act. Rescission will require both parties to be restored to the position they were in as if the contract was not entered. Hence, several obstacles may hinder rescission such as in this case _______. (below)

Upon establishment of the Negligent misrepresentation, A will have the right to rescind (once rescind, cannot change the mind!) the contract and sue for damages under S2(1) Misrepresentation Act. Rescission will require both parties to be restored to the position they were in as if the contract was not entered. Hence, several obstacles may hinder rescission such as in this case _______. (below) (After establishing the absence of obstacles to rescission…) However one thing to note is that the court may take away A’s right to rescind and award damages instead under S2(2) Misrepresentation Act. This occurs where the innocent party had the right to rescind but the court feels that rescission is too severe and award damages in lieu, if it feels that it would be equitable to do so. (*right to rescind will be taken away if the court feels that rescission will cause undue hardship to the representor)

Upon establishment of the Innocent misrepresentation, A will have the right to rescind (once rescind, cannot change the mind!), and also the right to claim indemnity (compensation only for the loss A suffered due to the obligation imposed on you due to the contract use only if have!) and/or rescind the contract. Rescission will require both parties to be restored to the position they were in

as if the contract was not entered. Hence, several obstacles may hinder rescission such as in this case _______. (below) (After establishing the absence of obstacles to rescission…) However one thing to note is that the court may take away A’s right to rescind and award damages instead under S2(2) Misrepresentation Act. This occurs where the innocent party had the right to rescind but the court feels that rescission is too severe and award damages in lieu, if it feels that it would be equitable to do so. (*right to rescind will be taken away if the court feels that rescission will cause undue hardship to the representor)

Obstacles to rescission:

1. Lapse of reasonable time (Leaf v International Gallaries (1950))2. Act inconsistent with ownership – modifying it, using it3. Restitutio in integrum impossible – parties cannot be restored to original position4. Court takes away the right to rescind and awards damages in lieu under S2(2) of the

Misrepresentation Act (e.g. will cause undue hardship to representor/ too grave to rescind) *Must first be given the right to rescind

5. Third party eights affected (e.g. representee sold it to 3rd party – cannot rescind and affect 3rd party)

6. Affirmation – knows of misrepresentation but continues with contract

Extra: Damages is monetary compensation ordered by a court to be awarded to the innocent party for the consequences suffered: S2 (1) Misrepresentation Act. In this case, such damages include the reliance cost and expectation cost incurred to by a new perfume. It should be note that since it is difficult to quantify the loss of reputation, Debbie may not be able to claim damages from it.

Exclusion of liability for misrep invalid unless reasonable under UCTA framework, Orient Centre Investments Ltd and Another v Societe Generale (2007).

ILLEGALITY.

As B have flouted the provisions in the _______, this is a case of statutory illegality. In order to determine whether A is able to refuse payment to B for their service, we have to examine the construction of the statutory provision which prohibits the illegal contract. The two types of statutory illegality are the contract being illegal at the outset and the contract being illegal due to performance.

If the contract is illegal at the outset, it would be void regardless if all parties are aware of the statutory illegality as seen in Re Mahmoud & Ispahani (1921). The parliament’s intention was to strike at the root of contract and prevent parties from entering into it. If so, A will not be obliged to pay B. In this case, A has ______ which shows that the contract was illegal at the outset.

However, the contract between A and B is for B to ____. This is clearly not an illegal contract.

Whereas, it was the performance of the contract that was illegal. B has _____. This contravenes the ______. Applying the case of St John Shipping Corporation V Joseph Rant Ltd (1957), the unlawful performance on an otherwise lawful contract does not necessarily render the entire contract void.

Due to _______, where a fine was imposed for non-compliance, it is likely that non-compliance would not cause the entire contract to fail as seen in Shaw v Groom (1970). The _____ clearly intended only to prohibit B’s conduct of _____ and not to prohibit the contract between A and B. Hence, B will likely face criminal sanction but both parties’ contractual rights and obligations will remain unaffected by the illegality and A will still have to pay B.

However, if in the case where A is required to ____ and causing extra cost to be incurred, he will be able to recover the damages as he was unaware of the illegality as in the case of Archbolds (Freightage) Ltd v Spanglett Ltd (1961). But if both parties are in equal fault, neither can establish a cause of action against the other without relying on its own wrongdoing, hence neither party obtains a remedy (Koon Sen Contruction Pte Ltd v Chenab Contractor Pte Ltd and Another (2008))

Restraint of trade.

A restraint of trade agreement is defined as “one in which a party (covenantor – ex employee) agrees with any other party (covenantee – ex employer) to restrict his liberty in future to carry on trade or business with other persons not parties to the contract in such manner as he (covenantee) chooses.”. The restraint of trade in this case is _______.

As a principle, all restraint of trade clauses are illegal and void because of contrary to public policy as stated in Nordenfeit (1894) unless these two requirements are fulfilled.

Firstly, the convenantee must prove that the clause is reasonable between them to protect the legitimate interests of the covenantee as seen in Stratech Systems Ltd v Nyam Chiu Shin & Others (2005). Several conditions are to be met (refer to below). In this case, there is legitimate reason for B to _____ as it will ______.

Guidelines/conditions

1. Time – how long is the restraint2. Space – where is the restraint3. Scope – how wide is the restraint4. Nature of employment5. Subject matter – personal skills, knowledge, trade secrets, intellectual property rights,

goodwill of business etc.

Once the first requirement is fulfilled, the clause is prima facie reasonable unless the covenantor shows that the clause is injurious to public interests. The clause should not restrict competition, have a significant impact on trading agreements, deprive someone of “rice-bowl”, affect treaties, or result in a monopoly. In this case, the clause seems to ____.

In the event that the clause is unreasonable, the court can be invited to apply “Blue Pencil” rule which allows the court to delete and not add to the clause as long as the clause remains to make sense. After applying the “Blue Pencil” rule, the clause might read ______, and thus this would be enforceable.

Incapacity - Minor

Minors are persons who have not reached the age of majority of 21 years. In Singapore, under the Civil Law Act amended in 2009, contracts entered into by minors who have attained the age of 18 years have the same effect as if they were contracts entered into by persons of full age and such minors are allowed to bring certain legal proceedings and actions in their own names as if they were of full age. Here, they can carry out certain business-related activities. Other than contracts for such commercial activities, contracts entered into by minors are generally unenforceable.

In this case, A is _ (age), he is considered a minor. Besides, since they have not attained the age of 18, they will not fall under the Civil Law Act amended in 2009.

The exceptions are the three types of minor’s contracts which are valid contracts, voidable contracts and ratifiable contracts.

Valid contracts bind both the minor and other party. Thus, they are fully enforceable. The contract on the whole must benefit the minor. Such contracts include beneficial contracts for necessaries and beneficial contracts of employment.

Beneficial contracts for necessaries

*Minors have yet to perform their obligations, perform already cannot claim – Valentini v Canali (1889) because already enjoyed/consumed the benefit.

S3 Sale of Goods Act defines necessaries as goods suitable to the condition in life of the minor or other person concerned to his actual requirements at the time of the sale and delivery. However, not all necessities are necessaries, if the minor had already ample supply of that necessity. (Nash v Inman (1908)). It should also be note that, according to Peters v Fleming (1840), necessaries can be a luxurious item if they are considered appropriate for minor in his position.

Hence in this case, _____ can be considered as necessaries given that ________, and thus the contract is fully enforceable.

Beneficial contracts for employment

*Minors have yet to perform their obligations, perform already cannot claim – Valentini v Canali (1889) because already enjoyed/consumed the benefit.

The main rule for contract for service will be binding upon the minor if the contract is on the whole beneficial to him. A contract not beneficial to the minor will be unenforceable (De Francesco v Barnum (1980) ).

Hence in this case given that the contract is/is not wholly beneficial towards A (minor), the contract is enforceable/unenforceable.

Voidable contracts are valid and binding upon the other party (the major) and the minor, unless the minor repudiates. The minor is entitled to repudiate the contract without any liability on his

party any time during his infancy or within a reasonable period after he attains majority. Such a contract typically arises when a minor acquires an interest in a subject matter (i.e. lease, shares, and partnership) where the minor faces recurring obligations (Davies v Beynon-Harris did not repudiate within reasonable time, hence held a liable).

Ratifiable contracts are not valid or enforceable against the minor unless he ratifies after he attains majority. The contract nevertheless binds the other party.

For voidable and ratifiable contracts, the legislature compels a minor to return property improperly obtained by him by virtue of an unenforceable contract under s3 of Minors’ Contracts Act.