Study Guide HIGHER EDUCATION HIGHER EDUCATION ACADEMY

Study Guide
HIGHER EDUCATION HIGHER EDUCATION
ACADEMY INSTITUTE
Diploma Programme
Commercial Law
v2.0
Copyright © 2021 Kaplan Singapore. All rights reserved.
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Kaplan Desired Graduate Attributes
Through the reading of this module, Kaplan
Singapore intends to:
• Instill in students the value of lifelong and self-

directed learning by stimulating intellectual
curiosity, creative and critical thinking and an
awareness of cultural diversity;
• Assist students in developing professional
attributes, ethical values, social skills and
strategies that will nurture success in both their
professional and personal lives;
• Foster integrity, commitment, responsibility and a
sense of service to the communi ty;
• Prepare students to meet the ever-changing
needs of their communities both now and in the
future; and
• Promote innovative and effective teaching.
Culminating from these institutional values and
educational goals, Kaplan Singapore’s Desired
Graduate Attributes are:
Inquiry and criticality: Graduates will be able to
critically collect, evaluate and apply information and
data in order to make decisions in a wide variety of
professional situations. This attribute is demonstrated
when students:
• Undertake, evaluate and apply appropriate
research, theories, concepts and tools to
investigate problems and find solutions;
• Exercise critical thinking and independent
judgement to assess situations and determine
solutions; and

• Have an informed respect for the principles,
methods, values and boundaries of their profession
and the capacity to question these.
Ethicality and discernment: Graduates will be able to
assess situations and respond in an ethically, socially
and professionally responsible manner. This attributed
is demonstrated when students:
• Act responsibly, ethically and with integrity in their
profession;
• Hold personal values and beliefs and participate
in the broad discussion of these values and beliefs
while respecting the views of others;
• Understand the broad local and global economic,
political, social and environmental systems and
their impact as appropriate to their discipline and
profession; and
• Acknowledge personal responsibility for their own
judgments and behaviour
Ability to communicate well: Graduates will
recognise the importance and value of communication
in the learning and professional environment. This
attributed is demonstrated when students:
• Create and present knowledge, arguments and
ideas confidently and effectively using a variety of
methods and technologies;
• Recognise the wide range of possible audiences
for information and respond with communication
strategies appropriate to those audiences; and

• Work collaboratively with people from diverse
backgrounds and be aware of the different roles
of team members and to function within that team.
Independent and reflective practitioner
• Graduates will be able to work independently and
be self-directed learners with the capacity and
motivation for continued professional learning and
development; and
• They will be able to critically reflect on their own
practice and evaluate and understand current
capacity and further development needs
Embedded within the desired graduate attributes are
the following skills:
• Conduct research.
• Analyse, organise and present data and
information.
• Think and read critically.
• Make an oral presentation.
• Intellectual curiosity and awareness of culture and
diversity.
• Develop professional ethos and practice that will
foster success in career and life.
• Meet the ever changing needs of communities
now and in the future.
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Table of Contents
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Kaplan Desired Graduate Attributes
Table of Contents

About this module
Instructions to Students
Scheme of Work
Assessment Matters
Topic 1
Introduction to Law
Topic 2
The Law of Contract: Offer & Acceptance
Topic 3
The Law of Contract: Consideration & Intention to Create Legal
Relations
Topic 4
Terms of a Contract
Topic 5
Exemption Clauses
Topic 6
Factors Vitiating a Contract
Topic 7
Discharge of Contract & Remedies for Breach of Contract
Topic 8
The Law of Tort
Topic 9
Sale of Goods
Topic 10
Business Organisations 101

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About this module
Commercial law is the body of law that governs the
broad areas of business, consumer transactions,
and commerce. The application of commercial law
has developed a specific set of laws that apply to
commercial activities, pursuits, and transactions.
All businesses use commercial law to create
wealth, and to identify and mitigate risks.
Included in the discussions are the Law of Torts,
essential in understanding non-contractual
obligations of individuals and organisations;
the Sales of Goods transactions, an important
facet in mercantile transactions; and Business
Organisations, the legal entities that exist to
facilitate business.
This broad study in commercial law will equip
the student with a comprehensive understanding
of the laws, i.e. rights and obligations, central to
consumer and business transactions, so vital to
the success of any thriving economy.
Module Learning Outcomes
Upon successful completion of this module, the
student should be able to:

• Describe the sources of law.
• Explain the elements necessary to create a
legally-binding contract.
• Evaluate the importance of terms of a
contract.
• Navigate through the factors that could
render a contract void or voidable.
• Distinguish between a breach of contract
and frustration of contract.
• Appreciate the various remedies available in
a breach of contract.
• Demonstrate an understanding of tort law
and its effects on business.
• Address the legalities involved in sale of
goods transactions.
• Understand and compare the various
business entities in Singapore.
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Activity Sheets

It is imperative that you sincerely attempt all the
activities in class and document your responses
faithfully. These activity sheets are specially
designed to scaffold your learning; working
through the tasks is an integral part of
developing the desired skills.
Also, by making your thinking visible through the
activity sheets, it is then possible for your lecturer
to provide you with growth producing feedback
so that you may improve your performance or
have your doubts clarified.
Instructions to Students
How to use this study guide
This study guide consists of written notes that
form the main treatise of the subject matter of
this module. You are strongly advised to study
these notes carefully and thoroughly, as well
as, examine the sources that have been cited.
Written quiz and examination will not test beyond
the scope of the contents found in the study guide.
However, in order to fully address the
assessment requirements of the assignment, you
will need to research beyond the confines of the
study guide. Nevertheless, the materials herein
are still a sound basis from which to build the
assignment.
Further supporting materials
The study guide is supplemented by the following:

• Reproduced PowerPoint slides used by the
lecturers
• Activity sheets
PowerPoint Slides
The PowerPoint slides are meant for the lecturers
to signpost the flow of the lesson and for you to
have a visual focus when in class. Outside of
class, they can also serve to help you recall the
activities that took place during the respective
lessons so that you might be reminded of key
learning points.
However, the PowerPoint slides must NOT
replace the need for you to read the written
notes in the study guide. The slides alone are
INSUFFICIENT for you to gain the necessary
understanding of the subject matter. As such,
they will NOT prepare you adequately for the
various summative assessment components.
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Overview of Learning Resources
Recommended Reading:

Other Suggested Reading:
Other Sources:
See Proquest and Newslink databases linked to
your Elearn LMS homepage. The National Library
Board on North Bridge Road (databases are for
Singaporean/PR only).
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Scheme of Work
SESSION
TOPICS
FT PT
1 1 Topic 01 Introduction to Law
2 Topic 02 The Law of Contract: Offer & Acceptance
3 2 Topic 03 The Law of Contract: Consideration & Intention to
Create Legal
Relations
4 Topic 04 Terms of a Contract
5 3 Topic 05 Exemption Clauses
6 Recap of Topics 1-5
Discussion of Assignment Brief

7 4 Topic 06 Factors Vitiating a Contract (part 1)
8 Topic 06 Factors Vitiating a Contract (part 2)
9 5 Topic 07 Discharge of Contract & Remedies for Breach of
Contract (part 1)
10 Topic 07 Discharge of Contract & Remedies for Breach of
Contract (part 2)
11 6 Topic 08 The Law of Tort (part 1)
12 Topic 08 The Law of Tort (part 2)
13 7 Topic 09 Sale of Goods
14 Topic 10 Business Organisations
Recap of Topics 6-10
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Assessment Matters
Assessment Overview
Assessment 1: Continuous Assessment
(Quiz)
Weighting: 20%

Date: To be confirmed
Duration: 10 minutes per quiz
Test Format: 5 MCQs per topic
Assessment 2: Examination
Weighting: 80%
Duration: 2 hours
Date: To be confirmed
Format: 2 Case Studies
4 Short Answer Questions
Important Policies
Penalties for Plagiarism
Plagiarism in any form is not tolerated by
Kaplan Singapore. That said, direct quotations
and general similarities of common terms and
language mean the E-Learn LMS will often pick
up every small similarity so the likelihood of a
Turnitin Similarity report recording a result of 0%
is unrealistic. After all, no technology is perfect
and there is the need for some direct quotation
(provided you reference using APA guidelines,
of course) and to use commonly accepted terms
and language.
TOP TIP:
The surest way to succeed is to ensure all work
is correctly referenced. Keep a copy of the
Kaplan Singapore Academic Works and
APA Guide handy when you are typing your
assignments and use it to guide you as to
correct referencing, citation and other aspects of
academic writing.

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Penalties for late submissions
Kaplan Singapore prepares students for the
realities of the workforce and further education by
requiring students to meet deadlines and submit
all work on time. As such, students are required
to seek approval and penalties will be imposed
on late assignment submissions in accordance
with the table below and cited in the Programme
Handbook:
No of days late Penalty
1 – 5 days 10% deduction per day from the
marks attained by students.
After 5 days Assignments that are submitted
more than 5 days after the due
date will not be accepted and it
will be deemed as “No Submis-
sion”. Student will be required to
re-module.
Assignments and Kaplan Learning Management
System
Kaplan Singapore School of Diploma

Studies requires you to submit Assignments
through the Learning Management System (E-
Learn LMS). When submitted, your
assignment is checked for plagiarism by
software called Turnitin linked to the E-Learn
LMS. The software is intended to provide one
more tool to improve the quality of academic
writing and as such will be compulsory for use.
It is important to note that this is merely one of
many tools available to you and that final
decisions about the quality of your work rest with
your lecturer.
Assigment Submission: How to Use E-Learn
LMS for Assignment Submission
1. You will be enrolled by the School of
Diploma Studies Programme Management
into the E-Learn LMS system only after your
fee payment is confirmed.
2. You will be sent your USER NAME and
PASSWORD via email.
3. Reset your password as prompted.
4. Enter the site at the following address:
https://elearn-diploma.kaplan.com.sg
5. To submit assignment please refer to the
LMS Manual
Please refer to your Student Handbook for more
details on Penalties for Plagiarism, Misconduct,
Examinations Rules and Regulations. Should
you have any queries, please contact

[email protected]
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Topic 1
Introduction to Computers
Topic 2
Cache Memory
Topic 3
Internal Memory
Topic 4
External Memory
Topic 5
Number Systems
Topic 6
Matrices
Topic 7
Introduction to Problem Solving
Topic 8
MATLAB Environment
Topic 9
MATLAB Functions

Topic 10
Control Structures
Topic 11
Control Structures
Topic 12
Plotting
Topic 13
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Study Guide
Topic 1 – Introduction To Law
What is Law?
Law is a system of rules, usually enforced through a set of
institutions. Law regulates the
behaviour of individuals, and well as offers rules and
regulations that govern all organisations.
It shapes politics, economics and society in numerous ways, and
serves as the foremost social

mediator in the relationships between all parties in a country.
(The word “parties” is generally
a term used in law to describe either a person or an
organisation. Therefore, it is not
uncommon to hear of term “parties to a contract” or “parties in
a dispute”.)
It is therefore no surprise to anyone that law governs a wide
variety of social activities. For
example, contract law regulates all commercial transactions
such as buying a bus ticket or a
meal to entering in an employment contract or cell phone
contract. All these are legally-binding
contracts. Another example would be property law, which
defines rights and obligations
related to the transfer and title of real estate between parties.
There is also tort law, which
protects the rights of parties even in the absence of any
contract, and which allows a claim for
compensation should a party’s rights be violated by another.
Laws are grouped into “public law” and “private law”. Public
law governs the relationship
between individuals and the state. Falling into this category are
constitutional law,

administrative law and criminal law. Private law governs the
relationships between individuals,
such as the law of contracts and the law of tort.
Commercial law (also known as business law) is the body of
law which governs businesses
and commercial transactions. It is often considered to be a
branch of civil law and deals both
with issues of private law and public law.
What do we need law?
Laws are very important for human beings to live a dignified
and secured lifestyle. Laws
generally provide us a sense of security. A society lives in
comfort knowing that there are
laws to keep them safe, that their rights are protected, as well as
ensure that legally-binding
contracts are observed by all parties.
Laws also serve as deterrence for those who would commit
crimes. For example, murderers,
thieves, and others with no moral code to live by must be
deterred from harming others. If
we did not have laws, chaos would prevail.
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The rule of law
The Rule of Law, in its most basic form, is the principle that no
one is above the law. Most
legal systems are based on this principle. It provides that
governments and individuals can
only act in accordance with publicly-known laws. These laws
must be adopted and enforced
in a manner that is consistent with established conventions,
traditions and procedures.
It has been said that the Rule of Law cannot exist without a
transparent legal system; the
main components being a clear set of laws that are freely and
easily accessible to all, strong
enforcement structures, and an independent judiciary to protect
citizens against the arbitrary
use of power by the state, individuals or any other organisation.
Categories of law

Law can be divided into civil law and criminal law.
• Civil law
Civil Law deals with legal relationship between private
individuals (commercial or
personal injury disputes, for example). Typically, one-person
(the plaintiff) will claim
that the other person’s (the defendant) actions caused him/her
harm, and file a civil
suit against that person seeking compensation (i.e. damages) for
that harm caused.
• Criminal law
Criminal Law is designed to prevent citizens from deliberately
harming each other and
involves actions that have been declared illegal by the state
(murder, theft, assault,
etc.). In a criminal case, the State (represented by the Public
Prosecutor) brings a
defendant (who is accused of having committed an offence) to
trial, and a guilty verdict
usually results in imprisonment, a fine, or both.

Sources of Law
Before engaging in the discussion on the sources of laws in
Singapore, we need to briefly
examine Singapore’s history.
Modern Singapore was founded by Sir Stamford Raffles in
1819. It immediately served as a
trading post of the British Empire. In 1867, the colonies in
Southeast Asia were reorganised
and Singapore came under the direct control of Britain as part
of the Straits Settlements.
During World War II, the country was occupied by Japan, but
returned to British control as a
separate crown colony following Japan’s defeat and surrender in
1945. Self-governance was
obtained in 1959 and in 1963, Singapore became part of the new
federation of Malaysia, which
included Malaya, North Borneo and Sarawak. Singapore was
expelled from the federation two
years later (due to ideological differences) and became an
independent country.
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As a former British colony, the legal system in Singapore is
based on the English common
law. There are (generally) four sources of law in Singapore: the
constitution, legislation,
subsidiary legislation and legal decisions made by judges.
• The Constitution
The Constitution enshrines the fundamental rights of the
individual. It also comprises
the fundamental principles and basic framework for the three
organs of state – the
Executive (which consists of the President, Prime Minister and
other ministers
responsible for government affairs and accountable to the
Parliament), the Legislature
(which consists of the President and Parliament with its
legislative authority
responsible for enacting legislation) and the Judiciary (the
various courts of law which
operate independent of the Executive and Legislature).

• Legislation
Legislation or statutory laws are written laws enacted by the
Singapore Parliament or
other bodies that had power to pass such laws in the past in
Singapore. These are
called statutes.
o Statutes
A statute is a formal written enactment of a country’s
parliament. Typically, statutes
command or prohibit something, or declare policy.
A statute of the Singapore Parliament begins its life as a Bill. In
order for a Bill to
become law, it must go through three readings and it must be
passed by a majority
of votes in Parliament. Even after the Third Reading, a Bill doe s
not become law
until it goes the Presidential Council of Minority Rights to
ensure that does not
discriminate against any racial or religious minority. The
President must also

assent to the Bill and it must be published in the Gazette.
Some examples of Acts are the Sale of Goods Act (Cap 393,
1999 Rev Ed), the
Companies Act (Cap 50, 2006 Rev Ed), and more recently, the
Covid-19
(Temporary Measures) Act 2020.
• Subsidiary Legislation
Subsidiary legislation or delegated legislation refers to written
law made by ministers,
government agencies or statutory boards under the authority of
a statute (often called
its “Parent Act”) or other lawful authority, and not directly by
Parliament.
Delegated legislation frees up members of parliament to deal
with broad issues of
policy, leaving it to the experts to fill in the gaps. There are
various review and scrutiny
committees attached to parliament to examine delegated
legislation to make sure that
it doesn’t go beyond the authority given under the enabling
legislation.

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Some examples of subsidiary legislation are Environmental
Public Health (Public
Cleansing) Regulations made under the Environmental Public
Health Act (Cap. 95,
2002 Rev. Ed.) and Rapid Transit Systems Regulations (Cap.
263A, 1997 Rev. Ed.).
• Judge-made Law (Common Law)
More traditionally called “common law”, judge-made law refers
to court judgments
which are considered a source of law. Such a court judgement is
called a “judicial
precedent”. Judicial precedents derive their force from the
doctrine of stare decisis,
also known as the doctrine of binding precedent. According to
this doctrine, the
decisions of higher courts are (generally) binding on lower
courts and courts at the

same level when cases come before these courts with similar
facts. Thus, judgments
of the Court of Appeal are binding on the High Court, and
judgments of both of these
superior courts are binding on State Courts.
According to the doctrine of stare decisis, only the ratio
decidendi (that is, the legal
principle that determines the outcome) of a case is binding.
Other principles expressed
during proceedings in court, such as the obiter dicta (a judge's
expression of opinion
uttered in court or in a written judgement, but not essential to
the decision) are not
binding.
For example, in Pharmaceutical Society of Great Britain v Boots
Cash Chemicals
(1952), where a pharmacy - whose medicines were displayed on
shelves - was
accused of offering to sell medicines without a prescription.
The court held that goods
placed on shop shelves constituted an invitation to treat, not an
offer. An invitation to

treat is where a shop (business) invites customers to make an
offer to buy, which may
be accepted or rejected by the shop. Therefore, no offence was
committed by the
pharmacy.
This decision, the judicial precedent, was followed in the case
of Fisher v Bell (1961)
where the court held that a display of an offensive weapon
(flick knife) did not
constitute an offer for sale but was merely an invitation to treat.
Statutory Interpretation
Statutory Interpretation is the process by which judges are
called to interpret the Acts of
Parliament (statutes). When interpreting a statute, the judges
seek to determine the intention
of parliament, or the reason for parliament passing the law.
Sometimes the words of a statute
have a plain and straightforward meaning, which allows for the
statute to be interpreted easily.
But in most cases, however, there is some ambiguity; i.e. the
statute can be interpreted in

more than one way, or the statute is vague and unclear. Under
such a circumstance, the judge
will have to decide on the meaning of the statute or the
intention of parliament, and this is
done by applying the facts of relevant cases to the relevant
statute. An example of where the
language was unclear can be seen in the case of Twining v
Myers (1982), where the court
has to decide whether roller skates amounted to a “vehicle”
within the meaning of the relevant
statute.
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So, the problems with interpreting statues is that judges have to
decide what parliament meant
by a particular piece of legislation, and they do this by
generally applying certain rules or
canons. These canons are not hard and fast rules but a mixture
of common-sense
presumptions about the law, as well as legal techniques in
giving full effect to the words under

consideration. The four general approaches are:
1) The Literal Rule
This approach assumes that the intention of Parliament can be
found in the statute itself
in that the words are read in their plain and ordinary meaning.
However, when there is
ambiguity, adoption of this rule may lead to absurd results, i.e.
the sale and/or purchase
of drugs are illegal in Singapore (absurdity; prescription drugs
are not illegal). Thus, only
where the words clearly unambiguously state the intention of
Parliament can the Literal
Rule be used.
2) The Golden Rule
The general principal underlying the Golden Rule is that a
statute must be construed to
avoid manifest absurdity or contradiction with itself. See the
case below.
In re Sigsworth (1935)

The Golden Rule was applied to prevent a murderer from
inheriting an estate on the intestacy
of his victim although he was (as her son) her only heir (Literal
Rule here clearly could not be
applied).
3) The Mischief Rule (also known as the Purposive Approach)
Known sometimes as the Rule in Heydon’s Case (1584), the
Mischief Rule considers the
state of the law before the enactment (statute) in question and
the “mischief” (or defect)
which Parliament intended to cure with the enactment or
amendment. See the case below.
In Gardiner v Sevenoaks (1950)
The purpose of the Act was to provide for the safe storage of
inflammable material wherever
it might be stored on “premises”. Notice was served on the
Plaintiff who stored such material
in a cave to comply with safety rules. The Plaintiff argued that
“premises” did not include a
cave. The court, in applying the Mischief Rule held that

“premises” included the cave,
considering the intention of the Act (enactment).
The canons are not used exclusively. No judge will adopt one
particular approach. Depending
on the facts of the case before him and the words with which he
has to interpret, the judge
may adopt on or a combination of the three canons.
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The canons include the following rules (or maxims of
interpretation) which assist the courts in
determining the meaning of particular words. These are:
The Ejusdem Generic Rule: Where specific words are followed
by general words, it will be
presumed that the general words cover only the same kinds of
things specifically mentioned.
For example, “traffic signs and other devices” were held in
Evans v Cross (1938) to mean all

signals, warning sign posts, direction posts and not the white
line on the road since all the
specific devices referred to were more in the nature of signs
seen at eye level or higher.
The Noscitur a Sociis rule: Doubtful words are interpreted by
looking at the other words which
they are associated with. For example: “public places” will take
on a different meaning when
read with “parks and recreational spaces” than “government
buildings.
The Expressio unius est exclusion alterius rule: An express
mention of one thing impliedly
excludes anything else. So, a statutory rule on domestic animals
would exclude wild animals
and other sea wild life.
The Court System in Singapore
The Chief Justice, who is appointed by the President, is the
head of the Judiciary.
The Judiciary is made up of the Supreme Court and the State
Courts.

The Supreme Court hears both civil and criminal matters and is
separated into the Court of
Appeal and the High Court.
The State Courts consist of District Courts and the Magistrates'
Courts.
A Senior District Judge overlooks the State Courts.
The Supreme Court
▪ The Court of Appeal
As its name suggests, the Court of Appeal hears appeals from
the decisions of the High
Court in both civil and criminal matters. It is the Chief Justice
and Judges of Appeal who
sit in the Court of Appeal. The Court of Appeal is usually made
up of three judges (the
Chief Justice and two Judges of Appeal). However, on certain
occasions there may be
less than or more than three judges.

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▪ The High Court
It is the Chief Justice and Judges of the High Court (which can
in certain instances
include a Judge of Appeal or subject matter experts to provide
assistance in certain
cases) who comprise the High Court. Normally all proceedings
are heard before a
single judge.
The High Court hears both criminal and civil cases, as well as
appeals from the
decisions of District Courts and Magistrates' Courts. In
addition, it hears proceedings
concerning admiralty matters, company winding-up, bankruptcy
and applications for the
admission of advocates and solicitors.
The High Court has general supervisory and revisionary
jurisdiction over all State

Courts in any civil or criminal matter. In general, the High
Court deals with matters
where the value of the subject matter of the claim exceeds
$250,000. It has jurisdiction
to try all offences committed in Singapore and in certain cases,
try offences committed
outside Singapore as well. The High Court tries criminal cases
whose punishment
involves the death penalty or more than 10 years of
imprisonment.
The Singapore International Commercial Court (SICC) is a
division of the High
Court designed to deal with transnational commercial disputes.
Established on 5
January 2015, this court has the jurisdiction to hear and try an
action if:
o the claim in the action is of an international and commercial
nature;
o the parties to the action have submitted to the SICC’s
jurisdiction under a
written jurisdiction agreement; and

o the parties to the action do not seek any relief in the form of,
or connected with,
a prerogative order (including a mandatory order, a prohibiting
order, a
quashing order or an order for review of detention).
The SICC may also hear cases which are transferred from the
High Court.
The State Courts
Originally called the Subordinate Courts, they were renamed
“State Courts” on 7 March 2014.
The State Courts comprise the District and Magistrate Courts —
both of which oversee civil
and criminal matters that do not fall under the jurisdiction of
the Supreme Court. Over 90% of
all judicial cases in Singapore are heard in the State Courts.
District judges and magistrates are appointed by the President
of the Republic of Singapore
upon the recommendation of the Chief Justice.

Appeals against decisions in the State Courts are made to the
Supreme Court.
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• District Court
Civil cases involving claims of between $60,000 and $250,000,
or up to $500,000 for
road traffic accident claims or claims for personal injuries
arising out of industrial
accidents. For criminal matters, the District Court hear cases
where the maximum
imprisonment term does not exceed 10 years, or which are
punishable with a fine only.
• Magistrates Courts
Civil cases involving claims not exceeding $60,000 are dealt
with by the Magistrates
Court. For criminal matters, Magistrates’ Courts hear cases
where the maximum
imprisonment term does not exceed 5 years, or which are

punishable with a fine only.
• Specialised Courts
Apart from the District and Magistrate Courts, the State Court
system has the following
specialised courts:
o Coroner’s Court: This court holds inquiries to ascertain the
cause of a
person’s death and determines if anyone is criminally
responsible where the
death results from unnatural causes.
o Community Court: This court deal with cases such as
offenders with mental
disabilities, animal abusers, and cases that affect race relations.
o Family Justice Courts: These courts, which comprise the
Family Division of
the High Court, the Family Courts and the Youth Courts, deal
with matters such
as divorce, family violence, adoption and guardianship cases,
youth cases and

probate matters.
o Syariah Court: This court administers and resolves marriage
and divorce
disputes between parties who have married under the provisions
of Muslim
Law.
o Community Justice and Tribunals System: This venue
generally hears
matters on employment claims and issues, community disputes,
harassment
cases, and small claims.
o Community Disputes Resolution Tribunal: This tribunal hears
cases
involving disputes between neighbours.
o Small Claims Tribunal: This tribunal deals with resolution of
small claims
between consumers and suppliers, contracts arising from the
sale of goods or
provision of services, and lease of residential premises not
exceeding 2 years.

o Copyright Tribunal: This tribunal deals with disputes between
copyright
owners and the users of that copyrighted material.
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o The Employment Claims Tribunal: This tribunal provides
employees and
employers with a speedy and low-cost forum to resolve their
salary-related
disputes and wrongful dismissal disputes.
o Traffic Court: As its name suggests, this court hears matters
on traffic offences
and related offences.
Methods for Resolving Business Disputes
Going to Court can be an expensive as well as time-consuming
process, depending on the
parties’ course of action. We now examine the alternative
methods to going to court to resolve
disputes.

The State Courts Centre for Dispute Resolution (SCCDR) was
established in March 2015.
This centre employs a judge-led Court Dispute Resolution
(CDR) process to ensure that cases
in the State Courts are managed effectively. It also conducts
mediation, neutral evaluation,
conciliation and arbitration to facilitate the resolution of civil
matters without the need for a
trial. These methods are also less costly methods of resolving
disputes. These methods,
however, do not apply to criminal cases.
• Mediation is a structured, interactive process where an
impartial third-party will assist
disputing parties in resolving conflict through the use of
specialized communication
and negotiation techniques. All participants in mediation are
encouraged to actively
participate in the process. Mediation is a “party-centred”
process in that it is focused
primarily upon the needs, rights, and interests of the parties.
• Neutral Evaluation is conducted by an unbiased third party,

such as a former judge
or senior counsel, known as an “evaluator” who will review the
case and provide an
early assessment of the merits of the case. The parties, with
their respective lawyers,
will present their case and the key evidence to this evaluator,
who will then provide his
best estimate of the parties' likelihood of success at trial.
• Conciliation is a court dispute resolution process for parties in
a case to resolve their
dispute without going for a trial in Court. It allows each party
to seek guidance from the
Judge during the conciliation session to come up with an
optimal settlement for all
parties.
• Arbitration is a process where parties agree to resolve the
dispute by bringing the
matter before a neutral third party, i.e. an arbitrator, for
decision. During an arbitration
hearing, both parties, with their respective lawyers, will present
their case to the
arbitrator, who, after hearing all the parties, will come to a

decision. This decision by
the arbitrator is legally binding even if one or both of the
parties does not agree with it.
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Enforcement of Court Judgments and Orders in Singapore
After winning a lawsuit in one of the courts mentioned above,
the party who wins the case is
known as the “judgment creditor”, and the party who loses is
called the “judgement debtor”.
The judgment creditor must enforce his court judgment or order
in order to obtain the relief
he/she is seeking against the judgment debtor. By not taking
action to conduct enforcement,
the court judgment or order will not take effect.
The following are some of the different types of enforcement
options available to a judgment
creditor:

• Small Claims Tribunals (SCT) – Order of Tribunal
An order of tribunal obtained from the SCT ordering money
payments to be made by
the respondent (or judgment debtor) will generally be coupled
with a deadline for
payment. If the respondent does not pay, the judgment creditor
will have to take up
separate enforcement proceedings against the judgment debtor.
• Writ of Seizure and Sale
A writ of seizure and sale authorises the bailiff to seize and sell
movable property
belonging to the judgment debtor to pay the judgment creditor.
• Writ of Delivery
A writ of delivery is a court order requiring the judgment debtor
to deliver movable
property to the judgment creditor to satisfy the judgement debt.
• Garnishee Proceedings

Where a third-party owes money to the judgment debtor (such
as an employer), a
garnishee proceeding can be taken out so that the garnishee
must pay the money to
the judgment creditor instead of the judgment debtor.
• Committal Order
Where the judgment debtor fails to obey a court order, the
judgment creditor can apply
to court to have the judgment debtor sanctioned with fine or
imprisonment.
• Bankruptcy and Winding Up Applications
Where the judgment debtor cannot pay the debts owed, the
judgment creditor can
apply for bankruptcy or winding up proceedings against the
debtor depending on
whether the debtor is an individual or a company.
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General information on Court Procedures
- The person making the claim is the Plaintiff.
- The person being served or against whom the claim is made is
the Defendant.
- Depending on the nature and amount of the claim a suit is
filed in the appropriate Court.
- If the Defendant wishes to settle the claim and not dispute it,
he can contact the Plaintiff or
the Plaintiff's lawyer for an out-of-court settlement. If not, the
Court will set a date to hear
both sides and evaluate all evidence and proof.
- There can still be an out-of-court settlement at this point.
- Once a ruling is made, it is enforceable.
- If the parties refuse to comply, the Court can issue a writ of
seizure and sale. This allows
the claiming party to seize the assets and sell them to recover
his compensation.
- The Court's judgment can be contested by making an appeal to
the High Court.
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Class Activity
Get into small groups and discuss the following:
1) Discuss the possibility that rights of Singapore citizens, as
enshrined in the Constitution
of Singapore can be curtailed or removed.
2) Would you agree that litigation is still the best method of
resolving business disputes
in Singapore?
3) Suggest reasons for Specialised Courts.
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Topic 2 – The Law Of Contract: Offer & Acceptance
Introduction
A contract is a legally binding agreement between two or more
persons. For example, if you

buy a meal, purchase any goods, buy a house, engage a builder
to carry out work on your
house, borrow money, order goods or machinery from a
manufacturer, or sign up for a
telephone plan, these are all types of contracts.
The law of contracts is vital to the law which affects consumers.
It is a complex area and is
governed both by the general law – that is, laws which have
evolved from decisions made
over the years by judges, and laws introduced by the courts and
parliament.
Who can make a contract?
Generally, a person is able to make a contract when they reach
18 years of age. However,
there are some circumstances when a person who is younger
than 18 will be bound by a
contract into which he or she has entered.
A person who is mentally ill or intellectually disabled at the
time may not be bound by a contract
entered into.
What makes a contract?
A contract involves certain basic elements:

• Offer – a willingness by one party to enter into a legal
relationship with another party,
• Acceptance (of that offer) – the party to whom the offer is
addressed accepts that
offer,
• Consideration – an exchange between the parties of some
benefit or something of
value; for example, a party pays a sum of money for goods
supplied by another party,
the exchange would be that one party receives the goods while
the other receives the
money, and
• An intention to enter into legal relations – that is, the parties
intended to enter into
a legally binding agreement (although this is often not
specifically stated, it is usually
implied).
All four elements must exist for there to be a legally-binding
contract.
Who decides the terms of a contract?
Generally, the terms of a contract are for the parties to decide.
However, the law may “imply”
terms into the contract. An example of an implied term is that

food sold by a hawker is fit for
human consumption.
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Does a contract have to be in writing?
Generally, contracts do not have to be in writing. A contract can
be made in writing (as is usual
in commercial transactions) or it can be verbal (such as ordering
food from at a hawker centre).
Are you bound by a clause you did not read?
If you sign a written contract, then generally you are bound by
all of its terms even if you did
not read or understand them.
There are various types of contracts which you may come across
in everyday life which do
not require your signature, for example, a car park ticket or a
dry-cleaning docket which has
clauses printed on the back. Generally, the rule is that you are

bound by the clauses if you
have read them or if you knew they were there but did not
bother to read them, or if the other
person took reasonable steps to draw them to your attention.
It is important that you read all the terms of a contract before
you enter into it, and you should
not sign any document until you are fully aware of what its
terms and conditions are and what
they mean.
What happens if the terms of a contract are broken?
Once you make a contract you will be committing a breach of
contract if you do not comply
fully with the terms, or if you change your mind and decide not
to perform your side of the
contract. If a party breaches a contract, the following remedies
are available:
• Damages – monetary compensation payable by the party who
broke the contract to
the other party who suffers the breach of contract,
• Specific performance – a court order demanding that the party
keeps to the contract,

• Injunction – a court order preventing a party from breaking
the contract.
The Offer
In Preston Corporation Sdn Bhd v Edward Leong (1982), an
offer was defined as:
“An offer is an intimation of willingness by an offeror to enter
into a legally binding
contract. Its terms either expressly or impliedly must indicate
that it is to be binding on
the offeror as soon as it has been accepted by the offeree.”
The party making the offer is the offeror, and the party
receiving the offer is the offeree.
An offer must be a definite promise to be bound by specific
terms, and ascertainable.
An offer cannot be vague. In Gunthing v Lynn (1831), the
offeror offered to buy a horse “if
it was lucky”. The court held that such as offer was too vague.
When an offer is made to a party (the offeree) and no one el se,
only that party can accept the

offer.
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Offers may also be made to the world at large or to a certain
group of persons. For example,
if an advertisement is placed in the newspapers offering a
reward for the finding and returning
of a lost dog, this is said to amount to an offer made to the
world at large. It can be accepted,
and the reward claimed by the person who finds this lost dog.
This principle was established
in:
Carlill v Carbolic Smoke Ball Co (1893).
FACTS: Mrs Carlill saw a newspaper ad stating that the
manufacturers of a smoke ball
would pay £100 to anybody who bought the smoke ball, used it
correctly and still got
the flu. Mrs Carlill bought a smoke ball, used it correctly and
still got the flu. Mrs Carlill

wanted to claim the £100, but the company refused to pay
claiming the advertisement
was not an offer.
HELD: The court held the wording of the advertisement did
amount to an offer, and
that by buying and using the smoke ball, Mrs Carlill had
accepted that offer. The
company was made to pay the reward to Mrs Carlill.
Offers must be distinguished from the following:
1) An Invitation to Treat. An offer must be distinguished from
an invitation to treat (i.e.
an invitation to make an offer). An invitation to treat is not an
offer which is capable of
being turned into a contract by acceptance. An invitation to
treat is a mere invitation by
one party to another to make an offer.
Some examples of invitation to treat
• Placing goods in a shop window
• Goods displayed in a catalogue.
• Goods displayed on shelves.

In these situations, it is the customer who must make the offer
to buy. The following
cases illustrate the point that an advertisement is not considered
an offer.
Pharmaceutical Society of Great Britain v Boots Cash
Chemicals (1952)
FACTS: When Boots became a self-service pharmacy, problems
arose because of
the need for certain drugs to be sold under a pharmacists’
supervision. If customers
were serving themselves, the question that arose was whether
the sale of goods was
unsupervised. The court had to decide at what stage the contract
was formed.
HELD: The court held that goods placed on shop shelves
constituted an invitation to
treat. The customer was offering to buy the medicine at the
checkout at which point
the assistant would accept or reject the customers offer. In this
case, there was always
a pharmacist at the checkout, and thereby the pharmacy was not
selling medicines

and drugs without a pharmacists’ supervision.
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Similarly, the display of goods with a price tag on the shop
window is only an invitation
to treat, or an invitation to make an offer. It is not an offer. In
the case of Fisher v Bell
(1961) it was held that a display of an offensive weapon (flick
knife) for sale did not
constitute an offer for sale but was merely an invitation to treat.
2) Declaration of Intention. In Harris v Nickerson (1873) it was
established that an
advertisement that goods will be put up for auction does not
constitute an offer to any
person that the goods will actually be put up, and that the
advertiser is, therefore, free
to withdraw the goods from the auction at any time prior to the
auction. The court held
that a declaration of intention does not create a binding contract
with those who acted

upon it.
So the use of the word ‘offer’ is not conclusive. For example, a
prospectus offering to
sell cars or shares in a company is merely an invitation to treat.
This would be the
same for auctions (in which the auctioneer is making an
invitation to treat, and the
bidder making the offer), as well as tenders (in which
companies invite tenders for a
project – the tender is the offer).
3) Provision of Information. In some cases, a communication
may not be an offer but
a mere response to a request for information. This principle was
established in the
case of Harvey v Facey (1893).
FACTS: Facey (D) was in negotiations with the Mayor and
Council of Kingston
regarding the sale of his store. Harvey (P) sent Facey a telegram
stating: “Will you sell
us Bumper Hall Pen? Telegraph lowest cash price-answer paid.”
On the same day,

Facey sent Harvey a reply by telegram stating: “Lowest price
for Bumper Hall Pen
£900.” Harvey sent Facey another telegram agreeing to purchase
the property at the
asking price. D refused to sell, and P sued for specific
performance and an injunction
to prevent Kingston from taking the property.
HELD: A mere statement of the minimum selling price is an
invitation to treat and not
an offer to sell.
Termination of an Offer
An offer may be accepted as long as it is still being made.
The general principle is that an offer cannot be terminated once
it has been accepted.
The offer may be terminated in the following manners:
• Lapse of time: An offer may state a specific time for
acceptance. Example: “Offer valid
for one month only” and “Offer expires 31 December 2020.” If

there is no specific time
mentioned, the law will presume an offer to have lapsed after a
reasonable time.
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In Ramsgate Victoria Hotel v Montefiore (1866), the defendant
applied for hotel
shares, but the acceptance came only after 5 months. By then
the defendant had
already lost interest in the shares. Taken to court by the sellers
in question, the court
held that 5 months was not a reasonable time, and therefore the
defendant’s offer had
lapsed.
• Counteroffer: Where an offeree makes an alternative offer to
the offer made to him,
this amounts to a counter-offer which effectively destroys the
original offer. When this
happens, it is now the offeree who is making the offer. (In a
sense, counteroffer could

be taken as bargaining, and in most cases, for a lower price.)
In Hyde v Wrench (1840), where in response to an offer to sell
a farm at a certain
price, the plaintiff made an offer to buy at a lower price. This
offer was refused and
subsequently, the plaintiffs sought to accept the initial offer.
The seller refused and the
matter was brought to court. The court held that the seller was
not bound to sell the
farm to the plaintiff as the plaintiff’s counteroffer destroyed the
seller’s original offer to
sell the farm.
• Death of Offeror: An offer terminates upon the death of the
offeror if the offeree has
notice of the offeror’s death. If the offeree has no notice of the
offeror’s death, then
whether or not the offer can be accepted would likely depend on
the nature of the offer.
If the offer was for a personal service, then the offer “dies”
with the offeror; if the offer
related to something tangible, then it is likely that the offer
could still be capable of
acceptance.

• Revocation of the Offer by Offeror: An offer may be revoked
by the offeror at any
time before acceptance.
In Routledge v Grant (1828) there was an offer made to buy the
house, giving the
offeree 6 weeks to accept. However, the offeror withdrew his
offer before the 6 weeks.
The court held that the offeror had a right to do so, declaring
that an offer was revocable
at any time before acceptance.
However, for revocation to be effective, the following
requirements must be met:
o Revocation must be communicated
In Byrne v Van Tienhoven (1880), the defendants made an offer
to the plaintiffs
by post. Following this on the 8th of October, they posted a
letter revoking the offer.
This letter reached the plaintiffs on the 20th of October.
Meanwhile, the plaintiffs

accepted the defendants’ offer on the 11th of October in
ignorance of the
revocation.
The court held that revocation was effective only on the 20th of
October and, since
by then the plaintiffs had accepted the defendants’ offer, there
was a binding
contract.
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o Notice of revocation need not come from the offeror himself
In Dickinson v Dodds (1876), the defendant gave the plaintiff
an offer to sell his
house and the offer was to be left open until 9 am on Friday, the
12th of June. On
Thursday, the defendant sold the house to someone else and
another person
informed the plaintiff of this sale. Despite this, the plaintiff
tried to hand over a

formal letter of acceptance before 9 am on the 12th of June.
The court held that since the plaintiff knew that the defendant
had sold the property
to someone else, the offer was withdrawn and could not be
accepted.
The Acceptance
An agreement comes into existence when the offer is accepted.
However, the acceptance
must be made while the offer is still in force, i.e. before it has
lapsed, been revoked or
rejected. And this acceptance must be communicated.
Once acceptance is complete, the offer cannot be revoked; to do
so would constitute a breach
of contract.
Principles of Acceptance
• An acceptance of an offer may be express (orally or in
writing), or implied by
conduct.

• Acceptance must be positive and not passive. The party
accepting the contract must
actively accept an offer. He cannot be deemed to have accepted
the offer by his doing
nothing.
In Felthouse v Bindley (1862), the plaintiff offered to buy his
nephew’s horse and
stated, “If I hear no more about him, I consider the horse mine”
at a certain price. The
nephew made no reply, and the horse was sold to someone else.
The plaintiff sued.
The court held the offeror cannot impose silence on the offeree
and so there was no
contract. If the rule were otherwise, that could lead to abuse.
For instance, a business
could send goods to a person’s home and state in an
accompanying document that if
it did not hear from that person in by a specific time, it would
take it that the person has
accepted the goods. This is, of course, unacceptable. Therefore,
silence can never
be taken to be acceptance.

• Acceptance must be unqualified. An introduction of new terms
to the offer amounts
to a counteroffer and consequently a revocation of the original
offer.
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In Neale v Merrett (1930), A offered land to B for $280 cash. B
paid $80 and offered
to pay the remaining $200 in $50 instalments. When the matter
was brought before
the court, the court held that there was no acceptance. The
normal terms are that the
entire price is payable as a single sum. Unilaterally deciding to
pay by instalments
amounts to a variation of the terms of the original offer, and
therefore a
revocation of the offer.
• Acceptance must be communicated. The general rule is that
acceptance must

actually be received by the offeror. Generally, to avoid
complications, offerors specify
the mode of communications of acceptance required. For
example, he may specify
that “written acceptance must be received at his office by 3pm
and no later”. This
means that the acceptance must be made in writing, and it must
physically reach the
offeror’s office by 3pm; any other form of acceptance or delay
would render the
acceptance invalid.
If the acceptance us to be in writing, it must be received by the
offeror; if it is to be
orally, it must be heard by the offeror: Entores Ltd v Miles Far
East Corp. (1955).
If the offer specifies a method of acceptance (such as by
WhatsApp or email),
acceptance must be by that method specified by the offeror. The
failure to keep to the
specified method of acceptance would result in no acceptance
being offered: Yates
Building Co. Ltd v R.J. Pulleyn & Sons (York) Ltd (1975)

Exceptions to Communication of Acceptance
There are three situations in which acceptance need not be
communicated to or
received by the offeror:
o Waiver of Communication
(As seen above) in Carlill v Carbolic Smokeball, the offer was
made to the
world at large. Here, communication of acceptance was
dispensed with. So
long as someone bought the smokeball, used it according to the
directions, he
is deemed to have accepted the offer.
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o Silence

This can only apply where parties have agreed that the offeree’s
silence is to
be construed as his acceptance. For this to be effective, both
parties must
agree to it. For example, if both parties agree that the offeree
will have a
positive obligation to communicate only if he wishes to reject
the offer, then
silence would amount to acceptance: Southern Ocean
Shipbuilding v
Deutsche Bank AG (1993). Contrast this with Felthouse v
Bindley
(discussed earlier). If the offeror, without the consent of the
offeree, imposes a
condition that the offeree’s silence would be taken as
acceptance, then, such
a condition would not be enforceable.
o The Postal Rule
The Postal Rule (also known as the “mailbox rule” or
“deposited acceptance
rule”) provides that the contract is formed when a properly
prepaid and properly

addressed letter of acceptance is posted: Adams v Lindsell
(1818).
However, care must be taken when applying The Postal Rule. It
should be
applied only in circumstances where it is clear that the parties
agreed that the
acceptance be sent by post.
In Quenerduaine v Cole (1893) it was held that an offer made by
telegram
gives rise to the presumption that a speedy reply is expected, so
posting in
such a situation does not attract the application of The Postal
Rule.
Electronic Communications of Acceptance
Here we consider acceptance by e-mails or online acceptances.
In relation to e-mails or online
acceptances, the question is whether the general rule should
apply (i.e. that acceptance must
be received) or the postal rule (i.e. once notification of
acceptance is properly posted) should

apply, assuming such issues have not been addressed in the
contract. The matter is yet to be
authoritatively settled, and there are arguments going both
ways.
In the event that it is held that acceptance is effective upon
receipt, the question might also
arise as to what is meant by receipt. In this regard, reference
must be made to the Electronic
Transactions Act (Cap 88, 2011 Rev Ed). Under section 13 of
the said Act, if the message
is sent to an electronic address that was designated by the
addressee, receipt occurs when
the message is capable of being retrieved by that addressee; and
where message is sent to
a non-designated electronic address, receipt occurs when the
message becomes capable of
being retrieved by the addressee and that addressee becomes
aware that the message has
been sent to that address.
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Subject to Contract
It is possible for an agreement to be made “subject to contract”.
This phrase simply means
that the offeree is agreeable to the terms of the offer but
proposes that the parties negotiate a
formal contract on the basis of the offer.
In Yap Eng Thong v Faber Union (1973), the court found the
agreement to sell a house
“subject to contract” was not binding.
And in Chillingworth v Esche (1924), C and D signed an
agreement for the purchase of a
house by D “subject to a proper contract” to be prepared by C’s
solicitors. A contract was
prepared by C’s solicitors and approved by D’s solicitors, but D
refused to sign it. The court
held that there was no contract as the agreement was
conditional.
Making negotiations “subject to contract” is a very useful tool
to ensure that everyone is only

bound to the contract when they sign the contract and not
before.
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Class Activity
1) Would you suggest that taxis and buses plying the roads are
making an offer, or are
potential commuters making the offer to board these public
transport vehicles?
2) Why would you suggest that silence cannot be acceptance?
3) When Horace lost his dog, which wandered off in the
neighbourhood, he placed an
advertisement in the newspapers suggesting that if anyone who
found his dog and
returned it to him, he would receive a reward of $500. Does this
amount to an offer?

How can it be accepted?
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Topic 3 – The Law of Contract: Consideration & Intention to
Create Legal
Relations
Introduction
Having understood what constitutes a valid offer, how it is
made and how it can be accepted;
the student must now grasp the other two components necessary
to form a legally binding
contract – consideration and the intention to create legal
relations.
Consideration
Consideration is the third necessary ingredient to form a legally
binding agreement – i.e. a
contract.

Consideration is essential for all contracts (except for those
under seal, such as a deed;
these are still binding notwithstanding the absence of
consideration). Consideration can be
viewed as the exchange between the parties to a contract. For
example, if A agrees to sell
his book to B for $50, then consideration for selling that book is
$50; so A gets the $50 and B
gets the book (the exchange). In another example, in an
employer-employee relationship, the
consideration between these parties is that the employer gets
work done by the employee,
and the employee gets a wage (i.e. a salary consideration) in
exchange.
In Currie v Misa (1875) consideration was defined as:
“……some right, interest, profit or benefit accruing to one
party, or some forbearance,
detriment, loss or responsibility given, suffered or undertaken
by the other”.
Further, in Chappell v Nestle (1960), the court held that “a
contracting party can stipulate

what consideration he chooses……….”
Types of consideration:
• Executed consideration
An executed consideration is an act done by one party in
exchange for a promise
made or an act done by the other. When the act constituting the
consideration is
completely performed, the consideration is said to be executed.
For example, where A offers a reward of $500 to anyone who
finds and returns his lost
cell phone, his promise becomes binding the moment B
performs the act; i.e. finding
and returning the lost cell phone.
It should be noted that in the above example, A is not bound to
pay anything to anyone
until that thing he requests is done.
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• Executory consideration
An executory consideration is a promise made by one party in
made or an act done by the other. Where the consideration is a
promise to be
performed in the future, it is executory. A promise is an
executory consideration
that something will be done in the future.
An example of this would be where a customer orders goods
which a shopkeeper
undertakes to obtain from the manufacturer. The shopkeeper
promises to supply the
goods, and the customer promises to accept and pay for them.
Neither has done
anything but each has given a promise.
• Past consideration
Past consideration refers to an act performed prior to, and to

that extent
independent of, the promises being exchanged. In other words,
the action that was
performed was not done in contemplation of, or in response to,
a promise given.
Consequently, the general rule is that past consideration is not
valid consideration.
The case of Roscorla v Thomas (1842) illustrates this point. At
T’s request, R bought
T’s horse for $30. After the sale, T promised R that the horse
was “sound and free of
vice”. The horse proved to be vicious. The court held that the
defendant’s (T) promise
was made after the transaction had already been concluded and
was therefore past
consideration.
Rules of Consideration:
1) Consideration must move from the promise.
(The promisor is the one making the promise; the promisee is
the one receiving the

promise.)
The person to whom the promise is made must furnish the
consideration. It must
always be remembered that a contract is a bargain. If a person
gives no consideration
for a promise, he cannot sue on that promise whether or not he
is the person to whom
the promise is made. The case below illustrates this point:
Tweedle v Atkinson (1861)
FACTS: A young couple married, and their fathers subsequently
entered into a
contract which provided that each father was to pay a specified
sum to the young
husband, Tweedle, and that he would be entitled to sue for the
money. The fathers
later died. Tweedle, under the terms of the agreement made
between the fathers, sued
the executors for one of the fathers for the money due to him.
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HELD: The court held that Tweedle could not enforce the
contract between the two
fathers because a) he was not a party to the contract, and b) no
consideration moved
from him.
The rule that consideration must move from the promisee is
often associated with the
rule of Privity of Contract. This rule states that unless a person
is actually a party to
the contract, he cannot sue.
In Beswick v Beswick (1967), P, a coal merchant, entered into a
written agreement
with his nephew, J. Under the terms of the agreement, which
was a contract of sale of
P’s business to J, it provided that upon the death of P, J should
pay P’s widow an
annuity of $5 per week. P died and J refused to pay her. The
widow brought legal
proceedings against the nephew. The court held that she could
not enforce the

obligation of J to pay her the annuity because she was not a
partly to the contract made
between her husband and his nephew.
New approach to the dilemma in Beswick’s case
This position just described in Beswick and Beswick has
changed with the enactment
of the Contracts (Rights of Third Parties) Act 2001. Simply put,
the Act allows a third
party (who is not a part of the contract) to enforce the contract
if that third party is
named or is reasonably identifiable in that contract.
So, taking the situation in Beswick v Beswick, whereby the only
reason why Mr
Beswick and his nephew contracted was for the benefit of Mrs
Beswick. Under this
Act, and if the case was before the courts today, Mrs Beswick
would be able to enforce
the performance of the contract in her own right. Therefore, the
Act realises the
intentions of the parties.

This new approach has been welcomed by many as a relief from
the strictness of the
doctrine of privity.
2) Consideration must be sufficient, but it need not be adequate
Consideration is sufficient if it is something that is of economic
value such as
money or some other item with a monetary value. So, for
example, a promise made
gratuitously, or one made on account of love and affection or
out of a moral obligation
is not enforceable as it was given without sufficient
consideration.
However, whilst the law requires sufficient consideration, it
does not require the
consideration to be adequate. In other words, the law does not
require that the
consideration given for a promise measures up, economically or
financially, to the
promise given. So, if A offers to sell B a $100 book for $2, the
consideration is valid.
The case of Chappell v Nestle (1959) illustrates the point that

consideration is
sufficient if it has some value, although it may be nominal.
COMMERCIAL LAW
There are at least two reasons why the law does not require
consideration to be
adequate. The first is that the law would not interfere with the
bargain made by the
parties. The fact that one party pays too little or too much in
is, generally, not a matter of concern to the court. The second is
that it is undesirable
for the court to be drawn into such an inquiry as it would mean
that the court would
have to develop a system of price control for a whole range of
transactions. This is
neither practical nor consistent with its main objective of
administering the law.
3) Consideration must be legal

A criminal act is not consideration.
4) Consideration must be certain
Consideration cannot be vague. It must amount to something
that is capable of
expression in economic terms.
In White v Bluett (1853), Bluett, when sued by his father’s
executors for an outstanding
debt to his father, claimed that his father had promised to
discharge him from it in return
for him stopping complaining about property distribution. The
Court held that the
cessation of complaints was of no economic value; thus,
Bluett’s father had received
no real consideration for the promise, and Bluett was still liable
for the outstanding
debt.
5) Other issues with consideration
a. Performance of Existing Duty to Promisor

There may be insufficient consideration where the promisee is
under an
existing duty to the promisor to perform an act which is to be
the purported
consideration.
The case of Stilk v Myrick (1809) illustrates this point. Stilk
was a seaman on
a ship sailing from London to the Baltic. During the voyage,
two seamen
deserted the ship. The captain promised the crew that wages of
the deserting
sailors would be divided among them if they worked to bring
the ship home.
Stilk sought to claim the extra wages. The court held that there
was no
consideration for the captain’s promise because the remaining
crew did what
they were contractually required. Desertion of a few sailors was
considered
within the usual emergencies of such a voyage.
Contrast this case with Hartley v Ponsonby (1857). In this case
a number of

sailors had deserted that the ship became unseaworthy, and
Hartley was
required to do much more than he was originally contracted to
do. The court
found there was sufficient consideration here.
COMMERCIAL LAW
In 1991 the rule in Stilk v Myrick was qualified in its
application. The court held
in Williams v Roffey Bros and Nicholls (1991) that “…in
certain
circumstances, discharging an existing duty owed to the
promisor may, in
certain circumstances, constitute good consideration for a fresh
promise”.
Below are the facts of the case.
Williams v Roffey Bros and Nicholls (1991)
FACTS: The Roffey Brothers entered into a contract to

refurbish a block of flats
for a fixed price of £20,000. They sub-contracted carpentry
work to Williams. It
became apparent that Williams was threatened by financial
difficulties and
would not be able to complete his work on time. This would
have breached a
term in the main contract, incurring a penalty. Roffey Brothers
offered to pay
Williams an additional £575 for each flat completed. Williams
continued to work
on this basis, but soon it became apparent that Roffey Brothers
were not going
to pay the additional money. He ceased work and sued Roffey
Brothers for the
extra money, for the eight flats he had completed after the
promise of additional
payment. The defendants argued that there was no fresh
consideration given
for their oral promise.
HELD: The Court of Appeal held that Roffey Brothers must pay
Williams the
extra money because the defendants obtained “practical

benefits” from
Williams’ work – this benefit was that they would not be liable
under the main
contract for late completion.
b. Performance of Existing Public Duty
There would be no consideration if the person performs the duty
he is
supposed to; e.g. as a policeman or other public servant, or as
one who is
summoned to give evidence in the interest of justice: Collins v
Godefroy
(1831).
However, while there is no consideration if one performs an
existing obligation,
should an extra service be rendered, there is consideration.
In Glasbrook Brothers v Glanmoran City Council (1925), there
was an
industrial dispute in which the mine owners agreed to pay for
special police
guard. Later they refused to pay, arguing that the policemen

were under a
public duty to protect property and lives. The court held that the
police did do
extra work over and above what they were supposed to by
providing that extra
protection; this was consideration for extra pay.
COMMERCIAL LAW
c. Payment of a Lesser Sum
Part payment of a debt is no consideration for discharge of the
whole
debt. For example, if a sum of money is owed by A to B, A must
pay the full
sum. If A wishes to pay a lesser sum, he must offer further
consideration. This
is sometimes known as the Rule in Pinnel’s Case, which was
subsequently
confirmed by the House of Lords in Foakes v Beer (1884). In
2001, the rule
was endorsed in Singapore by the District Court in the case of

Euro-Asia
Realty v Mayfair Investment.
However, there are some exceptions to the Rule in Pinnel’s
Case:
o Payment of a smaller sum before the due day at the creditor’s
request is
valid consideration;
o Payment of a smaller sum, at a different place at the creditor’s
request is
valid consideration; and
o Payment of a smaller sum accompanied, at the creditor’s
request, by
delivery of a chattel (a product) is valid. (Note: part payment by
cheque,
where full payment was due by another means, is not
consideration [D &
C Builders Ltd v Rees]).
Promissory Estoppel
An agreement without consideration intended to create legal

relations, which to the knowledge
of the promisor has been acted upon by the promisee, although
it cannot be enforced, is
binding on the promisor so that he will not be allowed to act
inconsistently with it. In other
words, a party is stopped from going back on his/her promise
when he/she knows that that
promise has been acted upon by the other party. This is the
equitable principle of promissory
estoppel.
The principle was used in Central London Property Trust v High
Trees (1947):
FACTS: In 1939, Y let out a block of flats to X for $2500 per
annum. During World War
Two (1939 to 1945), it became difficult to let the flats out and
Y agreed in writing to reduce
rent by half, i.e. $1250, per annum. The reduced rent was paid
from 1940 to 1945. After
1945 the flats were fully rented out and Y demanded full $2500
for all future rentals and
also sought to recover the difference between the amount paid
and the actual contractual

figure during 1940 to 1945.
HELD: The court held that Y was entitled to the future but not
to past rent. He was
estopped from going back on his promise. Where one party to a
contract waives his legal
right, another party, relying and acting on the waiver, acts to his
detriment, the party
waiving his right is estopped from denying he has waived his
rights.
It should however be noted that the equitable principle of
promissory estoppel applies only to
promises made voluntarily and to existing rights.
COMMERCIAL LAW
Shield not a sword
Another point to note is that promissory estoppel can only be
used “as a shield and not a
sword”. This means that it can only be used as a defence against
a claim made by a plaintiff.

Promissory estoppel cannot be used to commence a suit.
The case of Combe v Combe (1951) establishes this point:
FACTS: After obtaining a divorce, a husband promised his wife
$100 per year as an
allowance. Relying on this promise, the wife chose not to obtain
a formal court order for
maintenance. The husband failed to pay, and the wife sued on
the basis of the promise.
HELD: The Court of Appeal rejected the wife’s claim on the
principle that promissory
estoppel can only be “used as a shield and not as a sword”.
Intention to Create Legal Relations
This is the final element necessary for there to be a valid
contract. If the intention is absent,
then the promise may not create any binding obligation at all.
In determining whether the promisor has the intention to create
legal relations, the law applies
an objective test: Whether a reasonable person viewing all the

circumstances of the case
would consider that the promisor intended his promise to have
legal consequences.
Further, the party who asserts that the agreement was made
without any intention to create
legal relations must prove that this; he who asserts must prove.
Situations in which the intention to create legal relations fall
into two categories: Domestic
Agreements and Commercial Agreements.
Domestic Agreements
Agreements of purely domestic (family) or social nature are
generally not intended to create
legal relations, and therefore not binding in law. Such
agreements are intended to rely on
bonds of mutual trust and affection. Many kinds of domestic
and social agreements are
unenforceable on the basis of public policy, for instance
between children and parents.
Balfour v Balfour (1919)

FACTS: This case involved a husband and wife. The husband
was due to return to
Ceylon where he had employment, but the wife, on medical
advice was to remain in
England. The husband promised to pay the wife £30 per month
until she was able to
join him in Ceylon. Later the parties separated and were
divorced. The wife brought
this action for the money her husband had promised to pay to
her but had failed to do
so.
COMMERCIAL LAW
HELD: The parties did not intend the promise to be legally
enforceable; the claim by
the wife failed.
In De Cruz Andrea Heidi v Guangzhou Yuzhitang Health
Products Co Ltd (2003), the
plaintiff consumed some Slim 10 pills and suffered liver

damage. She brought an action
against various parties including the defendant. She had asked
the defendant to buy the pills
for her as a favour, and the question arose whether there was a
contract between the
defendant and the plaintiff, in particular whether there was an
intention to create legal
relations.
The court held that as the defendant was just doing her a favour,
coupled with the fact that
both the plaintiff and defendant were very close friends, there
was no intention to create legal
relations.
However, even if the parties are in a domestic or social
relationship and do intend that their
agreement to have legal consequences, an enforceable contract
is concluded:
Merrit v Merrit (1970)
FACTS: A husband and wife separated. They then met to make
arrangements for the
future. After this the husband agreed to pay £40 per month

maintenance, out of which
the wife would pay the mortgage. When the mortgage was paid
off it was agreed he
would transfer the house from joint names to the wife's name.
He wrote this down and
signed the paper, but later refused to transfer the house.
HELD: When the agreement was made, the husband and wife
were no longer living
together; therefore, they must have intended the agreement to be
binding, as they
would base their future actions on it. This intention was
evidenced by the writing and
therefore the husband had to transfer the house to the wife.
Commercial Agreements
In commercial agreements there is a general presumption that
the parties do intend to make
their agreement a legally enforceable contract. This
presumption flows partly from the desire
of the law to give efficacy to agreements made in a commercial
context.

In Foo Jong Long Dennis v Ang Yee Lim Lawrence and anor
(2016), the court concluded
that since the parties were dealing in a commercial capacity, a
presumption arose that the
parties intended to create legal relations. This presumption was
not rebutted as the contract
stated that the parties “agreed” to perform the contract, and
even set out their liabilities to each
other in the event of a breach of contract.
In some situations, however, the parties may agree that their
agreement, although couched in
legal terms, shall not be binding in law but shall be binding “in
honour” only. Such agreements
are generally not enforceable and are also called “honour
clauses”.
COMMERCIAL LAW
Rose and Frank v J R Crompton and Brothers Ltd (1925)
FACTS: Rose and Frank Co. was the sole U.S. distributor of

J.R. Crompton's carbon
paper products. In 1913, the parties signed a new document
which included this
clause: “This arrangement is not entered into, nor is this
memorandum written, as a
formal or legal agreement and shall not be subject to legal
jurisdiction in the law courts
..., but it is only a definite expression and record of the purpose
and intention of the
three parties concerned to which they each honourably pledge
themselves with the
fullest confidence, based upon past business with each other,
that it will be carried
through by each of the three parties with mutual loyalty and
friendly co-operation.”
The relationship between the two parties broke down as J.R.
Crompton refused to
supply some of the orders of the plaintiff. Rose and Frank Co.
sued on enforcement of
the agreement.
HELD: The agreement was not legally binding because the
clause clearly and
expressly stated their intention that it would not give rise to

legal relations.
In other situations, a company could assume a “moral” but not
legal obligation to help another;
an agreement of this type will be deemed to have no contractual
effect. Called Letters of
Comfort, these are letters written by one party unusually
intended to vouch for the financial
soundness of another related party who wishes to enter into a
contract with a third party.
Kleinwort Benson v Malaysia Mining Corp (1989)
FACTS: The plaintiff bank agreed with the defendants to lend
money to a subsidiary
of the defendants. As part of the arrangement, the defendants
gave the plaintiffs a
letter of comfort which stated that it was the company's policy
to ensure that the
business of its subsidiary is at all times in a position to meet its
liabilities. The subsidiary
went into liquidation and the plaintiffs claimed payment from
the defendants.
HELD: The letters of comfort were statements of the company's

present policy, and
not contractual promises as to future conduct. They were not
intended to create legal
relations and gave rise to no more than a moral responsibility on
the part of the
defendants to meet the subsidiary's debt.
COMMERCIAL LAW
Class Activity
1) What do you understand when it is said that “whilst the law

requires sufficient
consideration, it does not require the consideration to be
adequate”?
2) Would you presume an intention to create legal relations
exists between friends who
become partners in a business?
3) Would a marriage amount to a legally-binding contract?
COMMERCIAL LAW
Topic 4 – Terms Of A Contract
Introduction
Having studied the four essential components of a valid
contract, students will now examine
both the express terms and implied terms of a contract, i.e. the
heart of the contract. But before
engaging in the discussion on terms, it is important to note that
terms should be distinguished

from advertising puffs, which have no legal effect.
Express Terms
Generally, every transaction one makes is a contract: whether it
is to buy property, an
employment contract, a contact for the sale of goods, etc. The
express undertakings and
promises contained in any contract are known as the terms of
the contract. Parties are free
to negotiate and agree with just about any term they wish and
have it as part of the contract,
as long as the terms negotiated are not against public policy or
contravene any statute.
The heart of any contract is its terms. Terms are the promises
and undertakings given by
each party to the other. Failure to keep to the terms generally
constitutes a breach of
contract. The party suffering the breach would generally be
entitled to sue for damages.
Terms of the contract must be distinguished from
representations or pre-contractual

negotiations, which are made before the contract is entered into
and are generally not intended
to form an integral part of it. Two cases demonstrate this
application:
In Routledge v McKay (1954), (a case involving the sale of a
motorcycle) R entered
into negotiations with M to purchase M’s motorcycle. M told R
that the model was a
1942 model; it eventually turned out to be a 1930 model
motorcycle.
The issue was whether there was a contract to purchase a 1942
model or a 1930
model; or whether the age of the motorcycle was irrelevant. The
written contract
between R and M for the sale of the bike was made without
reference to its age.
The court held that the statement about the date was a pre-
contractual representation,
and the plaintiff could not sue for damages for breach of
contract. It was also said in
this case that the fact that a verbal statement is not subsequently
included in a written

contract, will suggest that it is not to be treated as a part of the
contract.
In Bannerman v White (1861), the plaintiff was a buyer of hops
and asked the seller
whether sulphur had been used in their cultivation. He added
that if sulphur had been
used, he would not even bother to ask the price. The seller duly
assured the plaintiff
that sulphur had not been used. It later transpired that sulphur
had been used, and the
plaintiff brought an action for breach of contract.
COMMERCIAL LAW
The court held that the assurance given by the seller was a
condition of the contract
because without that assurance, the plaintiff would not have
entered into a contract
with the seller.
In situations where the maker of the statement has greater

knowledge concerning the
statement as compared to the other party, it is more likely that
the statement is a term. The
rationale behind this is that the other party to whom the
statement is made will be dependent
upon the maker of the statement for its accuracy. Two cases
illustrate this point:
In Oscar Chess Ltd v Williams (1957), W sold his Morris car to
the plaintiff, O, a
motor car dealer. He told the plaintiff that the car was a 1948
model on the basis that
the registration book showed that it was first registered in 1948.
In fact, unknown to
both of them, the registration book had been tampered with and
the car was actually a
1938 model. When it was discovered that the car was a 1938
model, O sued for breach
of contract.
The court held that W’s statement was not a term of the contract
because, as a private
individual, W was not in a position to guarantee the accuracy of
the year of registration.

In Dick Bentley Productions v Harold Smith (Motors) Ltd
(1965), the defendant
motor car dealer told the plaintiff that a Bentley he was to buy
had done 20,000 miles,
when in fact it had done 100,000 miles. After the plaintiff
bought the car, he discovered
the true mileage and sued for breach of contract.
The court held that there was a breach of contract in this case
because the defendant’s
statement, given that he was a car dealer, was a term of the
contract.
[Note: In Oscar Chess v Williams, the seller, an individual,
honestly believed his
statement and had no way of knowing otherwise. In the Dick
Bentley case, the seller,
a motor car dealer, was in a better position to know the true
facts regarding the
Bentley.]
The Parol Evidence Rule

This rule states that once an agreement has been reduced in
writing, generally, evidence
cannot be introduced to contradict, vary, add to, or i n any way
modify the written agreement.
The reason for this is because, if it were otherwise, it would
defeat the purpose of a written
contract because parties of that contract would be adding and
subtracting at will.
In Hawrish v Bank of Montreal (1969), where oral terms of an
agreement could not be
reconciled with the written terms of that agreement, the court
held that oral evidence could not
be admitted to vary or contradict the express terms of the
contract.
Similarly, in Zurich Insurance (Singapore) Pte Ltd v B-Gold
Interior Design &
Construction Pte Ltd (2008), the court held that extrinsic
evidence was not admissible to add
to, vary, or contradict the terms of an agreement.
COMMERCIAL LAW

An exception to the Parol Evidence Rule is where one party
misrepresents the terms in a
written contract to the other party; under this circumstance, oral
evidence of what that party
said may be admitted
In Exklusiv Auto Services Pte Ltd v Chan Yong Chua Eric
(1996), a customer placed an
order to buy a new car and signed an agreement. The sales
representative told the customer
that if he cancelled the order, he would only lose his deposit.
However, the written agreement
stated otherwise. The customer then cancelled the order, and the
customer contended that all
he would be liable for was the deposit. As a result of the
misrepresentation, the court upheld
his argument, allowing the oral statement made by the sales
representative to override the
express term in the contract.
While the terms discussed thus far are express terms, it is
important to note that terms can
also be implied.

Implied Terms
An implied term is a term which has not been expressly agreed
by the parties but is
nevertheless implied into the contract. Such terms are generally
implied (understood to exist)
in order to make a contract workable. For example, when
ordering a plate of chicken rice,
one just places the order for what he/she wants (express term).
One does not have to tell the
seller to ensure that the food is not contaminated (implied
term). Or say an employment
contract; there would be terms on the duties, benefits,
entitlements, etc. listed in the terms
(express), but there would not be a term that allows that
employee to use the washroom
(implied).
Implied terms can be implied into a contract by a custom, by a
court, or by a statute.
• Terms implied by custom

These are unwritten terms that are long standing, well-
established and particular
to a trade or industry. A bank dishonouring a cheque that is
more than six months old
is a prime example.
• Terms implied by the courts
The court sometimes implies a term into a contract to ensure
business efficacy; the
court will supply a term which it considers as having been
intended by the parties. The
court will presume the intention of the parties using what’s
termed as the “officious
bystander test”. This test is simply where an officious
bystander, who had observed
the negotiation and/or concluding of the contract, had
intervened to remind the parties
that in formulating their contract they failed to mention a
particular point to which the
parties would have replied, “of course...we did not trouble to
say that; it is too clear.”
COMMERCIAL LAW

The Moorcock (1889)
FACTS: Owners of a wharf agreed that ship should be moored
alongside to unload
cargo. Both wharfingers and ship owners knew that at low tide
the ship would ground
on the mud at the bottom. At ebb tide the ship rested on a ridge
concealed beneath
the mud and suffered damage.
HELD: It was an implied term, though not expressed, that the
ground alongside the
wharf was safe at low tide since both parties knew that the ship
must rest on it.
• Terms implied by statute
Terms can also be implied by statute such as the Sale of Goods
Act, which seek to
protect the interests of buyers of goods. Terms implied by statue
have the force of law,
and it is irrelevant that the parties are unaware of the statute.

For example, one of the key provisions in the Sale of Goods Act
1979 is section 12,
which states that the person selling the goods has the legal right
to sell them.
Condition and Warranty
Having examined express and implied terms of the contract, we
now address how the terms
can be classified as either a condition or a warranty. This
distinction is important because
the legal consequences for breaching a condition and breaching
a warranty are different.
A breach of condition gives the injured party the option to
affirm the contract or discharge the
contract. In either case he may also sue for damages.
A breach of warranty does not give the injured party the right to
discharge the contract. The
contract remains in force and the injured party can only sue for
damages.
• Condition

A condition is a vital term of a contract which goes to the root
of the contract.
If a condition is breached, it entitles the injured party to rescind
the contract and claim
damages for non-performance.
In Wallis v Pratt (1910), a condition was defined as “an
obligation which goes so
directly to the substance of the contract, or, in other words, is
so essential to its very
nature, that its non-performance may fairly be considered by the
other party as a
substantial failure to perform the contract.”
COMMERCIAL LAW
• Warranty
A warranty is not a vital term in a contract, but one which is
merely subsidiary, a breach
of which gives no right to rescind the contract but only an

action for damages for the
loss which the injured party has suffered as the result of the
breach. Failure to perform
it does not go to the substance of the contract.
However, whether a term is a condition, or a warranty depends
on its importance in a given
situation. The two cases illustrate how similar fact situations
can give rise to different
interpretations on the nature of the terms of a contract.
In Poussard v Spiers (1876), the plaintiff (P) agreed to sing in
an opera throughout a series
of performances but failed to appear on the Opening Night and
next few days due to illness.
The producers engaged a substitute for the whole run and when
P recovered, the producers
refused her services to sing for the remaining performances. It
was held by the court that
failure to sing on the Opening Night was a breach of condition
which entitled producers to treat
contract as being discharged.
Compare this case with Bettini v Gye (1876). In this case the

plaintiff agreed to sing for the
defendant, who was the director of Italian Opera in England,
during certain dates and was to
arrive in London 6 days before the commencement of the
engagement for rehearsals.
However, he arrived only 2 days before commencement, and the
defendant refused to be
bound by the contract. In this case, the court held that the
stipulation to arrive 6 days earlier
was not a condition, and that rehearsal clause was only
subsidiary to main purpose of the
contract; the contract could not be rescinded but producer could
claim damages if he could
prove loss.
The distinction between conditions and warranties are important
because of their
consequences, and/or severity of damages.
Innominate Terms
Innominate terms (or intermediate terms) combine the nature of
a condition and warranty in

so far as in some events of breach of such undertaking may even
entitle the innocent party to
rescind the contract, and in other events the breach entitles him
only to claim damages but
does not entitle him to rescind the contract:
In Hong Kong Fir Shipping Co v Kawasaki Kaisen Kaisha
(1962), Kawasaki chartered a
ship to the plaintiffs. It was a term in the contract that the ship
was “in every way fitted for
ordinary cargo service”. Unfortunately, the crew was
insufficient in number and incompetent,
and so this term was breached. The question was whether the
breach entitled the plaintiff to
terminate the charter.
COMMERCIAL LAW
The court held that the term in question would cover both trivial
matters such as a missing
nail, and serious matters such as the whole ship being
unseaworthy. Thus, it could not be

classified as a condition or warranty (such a term was
subsequently coined as an “innominate”
term). The court further held that the plaintiff could,
nonetheless, terminate the contract if the
consequences of the breach were such that they substantially
deprived the innocent party
of the whole benefit of the contract. On the facts, as the
consequences of the breach were
not that serious, the plaintiffs could not terminate the charter.
They could only claim damages.
Therefore, unlike a breach of condition, breach of an
innominate term does not automatically
entitle the injured party to discharge the contract. If the breach
and its consequences are not
serious, the breach of an innominate term will be treated like a
breach of warranty. If the
breach and its consequences are serious, the breach of an
innominate term will be treated
like a breach of condition.
COMMERCIAL LAW

Class Activity
1) Explain the difference between express terms and implied
terms. Give examples.
2) With regards to implied terms, would you consider them
necessary in contracts?
3) When Alfred ordered laksa from a stall at a food court, he
was given a bowl with yellow
noodles and laksa gravy. Using your understanding of
conditions and warranties,
would Alfred be able to reject the laksa?
COMMERCIAL LAW
Topic 5 – Exemption Clauses
Introduction

In relation to breach of contract, contracts often contain clauses
that try to exclude or limit
liability in the event of a breach of contract, i.e. such clauses
are, in effect, intended to be used
as a defence for breach of contract.
However, parties are free to include exemption clauses into
their contracts as long as the
clauses are not against public policy or are prohibited by law
(common law and statutes). For
example: a term exempting a party from liability in the event of
his committing fraud against
the other party to the contract is void because it infringes public
policy.
Exemption clauses will be examined here under statute and
common law.
Exemption Clauses under Statute
The Unfair Contract Terms Act (UCTA) is a statute designed to
protect consumers who may
be prejudiced by the weaker bargaining positions they occupy in
most consumer transactions.

Main Provisions of the UCTA 1977
• The prohibitions and restrictions which the Act provides for
apply only to business
liability (liability arising in the course of business (s 1 (3)).
• Any contract term excluding or restricting liability for death
or personal injury
resulting from negligence is void (s 2 (1)).
• In the case of other kinds of loss or damage, contract terms
aimed at excluding or
restricting liability are void unless they satisfy the “requirement
of reasonableness”
(s 2 (2))
• Section 3 provides that where one party deals as a consumer or
on the other’s written
standard terms (i.e. standard term contracts are contracts which
cannot be
negotiated), liability for breach of contract cannot be excluded
or restricted unless the
terms satisfy the requirement of reasonableness.

The Requirement of Reasonableness
Guidelines for the application of the requirement of
reasonableness are provided in Schedule
2 of the UCTA 1977 Act. The Guidelines state that the
following factors shall be taken into
consideration:
a) The bargaining strength of the parties: If the bargaining
strength of the parties are
equal, it is likely that the exclusion clause will be reasonable as
between the parties;
COMMERCIAL LAW
https://sso.agc.gov.sg/Act/UCTA1977
b) Whether the customer received any inducement to agree to
the exclusion clause, or
had an opportunity of entering into a similar contract with other
persons without having
to agree to a similar clause;

c) Whether the customer knew, or ought reasonably to have
known, of the clause;
d) Where the clause excludes or restricts a liability if some
condition is not complied with,
whether it was reasonable at the time of the contract to expect
that compliance with
that condition would be practicable;
e) Insurance of the goods in question: If the party relying on the
exclusion clause
needs to take out insurance to cover liability, that clause could
be unreasonable.
The following two cases with similar facts illustrate the
operation of the UCTA. The first case,
Green v Cade (1978) was decided before the UCTA came into
effect, whereas George
Mitchell v Finney Lock Seeds (1983) was decided after the
UCTA became law.
Green v Cade (1978)
FACTS: A contract on standard written terms provided for the
sale of seed potatoes

by potato merchants to farmers. There were 2 main disclaimer
clauses which:
a) Excluded liability if the buyers did not give notice of defect
within 3 days of
delivery and
b) Restricted the sellers’ liability for any consequential loss,
limiting that liability to
amount of contract price.
The potatoes were planted and proved to be infected with virus.
The farmers sued for
damages.
HELD: That the 1st clause was not reasonable but 2nd clause,
which had been in use
for many years with the approval of the negotiating bodies
representing potato
merchants and farmers was reasonable.
George Mitchell v Finney Lock Seeds (1983)
FACTS: A group of farmers ordered 30 lbs of cabbage seed
from the sellers and

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