Nick's Notes - Contract (Part 2)

Nicholas Tong Wei Jie
Table of Contents
Privity ........................................................................................................................................................................... 5
General ...................................................................................................................................................................................... 5
General principles ..................................................................................................................................................................................... 5
Enforcing a promise ................................................................................................................................................................................. 5
Rationale ....................................................................................................................................................................................................... 5
Criticism ........................................................................................................................................................................................................ 5
S1a: Promise by A to B in favour of C ............................................................................................................................... 5
General ........................................................................................................................................................................................................... 5
Exceptions .................................................................................................................................................................................................... 6
1. Collateral contracts ............................................................................................................................................................................................... 6
2. Agency ........................................................................................................................................................................................................................ 6
3. Assignment ............................................................................................................................................................................................................... 7
4. Trust ............................................................................................................................................................................................................................ 7
5. Statute ......................................................................................................................................................................................................................... 7
6. Tort .............................................................................................................................................................................................................................. 8
7. Joint promisee situation ..................................................................................................................................................................................... 8
Remedies ...................................................................................................................................................................................................... 8
1. Damages .................................................................................................................................................................................................................... 8
2. Specific performance ......................................................................................................................................................................................... 13
S1b: Promise by A to B to except C from liability ..................................................................................................... 13
General ......................................................................................................................................................................................................... 13
Exceptions .................................................................................................................................................................................................. 13
Ways to circumvent privity rule/avoid Scruttons .................................................................................................................... 14
1. Establishing unilateral or collateral contract between 3P and promisor ................................................................................... 14
2. Exemption clause may negate a duty of care in tort owed by 3P to promisor ......................................................................... 15
S1c: Promise by A to B not to sue C ............................................................................................................................... 15
General ......................................................................................................................................................................................................... 15
S2: Promise by A to B that imposes a burden on C .................................................................................................. 16
General ......................................................................................................................................................................................................... 16
Exceptions .................................................................................................................................................................................................. 16
1. Restrictive convenant ........................................................................................................................................................................................ 16
2. Bailment ................................................................................................................................................................................................................... 17
Impact of CRTPA ........................................................................................................................ Error! Bookmark not defined.
Important note ......................................................................................................................................................................................... 18
Criticisms of doctrine of privity ..................................................................................................................................... 18
Contracts (Rights of Third Parties) Acts ..................................................................................................................... 18
General ......................................................................................................................................................................................................... 18
Content ........................................................................................................................................................................................................ 18
Right of third party to enforce contractual term ........................................................................................................................................ 18
Variation and rescission of contract ................................................................................................................................................................ 20
Defences available to promisor .......................................................................................................................................................................... 20
Statutory and common law exceptions remain preserved .................................................................................................................... 20
Analysis ....................................................................................................................................................................................................... 20
1. CRTPA makes it easier for 3P to enforce provisions in a contract in his own right ............................................................... 20
2. Black Hole ............................................................................................................................................................................................................... 22
3. Problems with CRTPA ....................................................................................................................................................................................... 23
Misrepresentation ................................................................................................................................................ 25

General ................................................................................................................................................................................... 25
A. Elements of an actionable misrepresentation ..................................................................................................... 25
1 ...................................................................................................................................................................................................................... 25
I. Half truth .................................................................................................................................................................................................................. 25
II. Conduct .................................................................................................................................................................................................................... 25
III. Change of circumstances ................................................................................................................................................................................ 25
IV. Mere silence ......................................................................................................................................................................................................... 26
2. Statement of fact ................................................................................................................................................................................. 26
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General .......................................................................................................................................................................................................................... 26

I. Statements of opinion ......................................................................................................................................................................................... 26
II. Statement of intention ...................................................................................................................................................................................... 27
3. Statement induces partly misled to enter into the contract ............................................................................................ 28
General .......................................................................................................................................................................................................................... 28
B. Categories of Misrepresentation (mens rea) ........................................................................................................ 30
1. Fraudulent misrepresentation ..................................................................................................................................................... 30
2. Negligent misrepresentation ........................................................................................................................................................ 31
3. Innocent misrepresentation .......................................................................................................................................................... 31
4. Statutory Misrepresentation ......................................................................................................................................................... 32
C. Remedies for Misrepresentation: Recission ......................................................................................................... 32
General ......................................................................................................................................................................................................... 32
Bars to rescission .................................................................................................................................................................................... 32
1. Affirmation ............................................................................................................................................................................................................. 32
2. Restitutio in integrum (mutual restitution) impossible ..................................................................................................................... 33
3. Injury to innocent third parties ..................................................................................................................................................................... 33
4. Lapse of time .......................................................................................................................................................................................................... 33
D. Remedies for Misrepresentation: Damages .......................................................................................................... 34
Common law ............................................................................................................................................................................................. 34
Damages for fraud .................................................................................................................................................................................. 34
E. Statutory Remedy: Misrepresentation Act (Cap 390) ........................................................................................ 34
Section 1 ...................................................................................................................................................................................................... 34
Removal of certain bars to rescission for innocent misrepresentation ........................................................................................... 34
Section 2(1): Damages for misrepresentation ........................................................................................................................... 35
Interpretation ............................................................................................................................................................................................................ 35
Analysis/Advantages .............................................................................................................................................................................................. 35
Section 2(2): Damages in lieu of rescission ................................................................................................................................. 37
Interpretation ............................................................................................................................................................................................................ 37
Measure of Damages under S2(2) ....................................................................................................... Error! Bookmark not defined.
Analysis ......................................................................................................................................................................................................................... 38
Section 3: Exclusion clauses ............................................................................................................................................................... 38
Avoidance of provision excluding liability for misrepresentation ....................................... Error! Bookmark not defined.
Analysis ......................................................................................................................................................................................................................... 40
Combination of Claims .......................................................................................................................................................................... 41
Mistake ...................................................................................................................................................................... 42
General ................................................................................................................................................................................... 42
Introduction .............................................................................................................................................................................................. 42
Policy conflicts .......................................................................................................................................................................................... 42
S1: Mutual mistake ............................................................................................................................................................. 42
S2: Unilateral mistake ....................................................................................................................................................... 43
General ......................................................................................................................................................................................................... 43
Mistake as to Identity ............................................................................................................................................................................ 43
General .......................................................................................................................................................................................................................... 43
‘Identity-‐attribute’ paradigm .............................................................................................................................................................................. 43
Mistake as to Terms ............................................................................................................................................................................... 47
General .......................................................................................................................................................................................................................... 47
S3: Common mistake ......................................................................................................................................................... 48
General ......................................................................................................................................................................................................... 48
Mistake as to existence of subject matter ..................................................................................................................................... 50
Mistake as to quality .............................................................................................................................................................................. 50
Mistake in Equity ................................................................................................................................................................ 51
Illegality .................................................................................................................................................................... 54
General ................................................................................................................................................................................... 54
Principles behind courts not upholding illegal contracts ..................................................................................... 54
Categories of illegality ....................................................................................................................................................... 54
Statutory illegality .................................................................................................................................................................................. 54
Common-‐law illegality .......................................................................................................................................................................... 55
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Q1: Enforcement .................................................................................................................................................................. 55

1. Illegal contract (formation) ............................................................................................................................................................................. 56
2. Illegal purpose or performance ..................................................................................................................................................................... 56
3. Severance ................................................................................................................................................................................................................ 57
Q2: Restitution ..................................................................................................................................................................... 58
1. Collateral contract ............................................................................................................................................................................................... 58
2. Fraudulent misrepresentation ....................................................................................................................................................................... 58
3. Restitution .............................................................................................................................................................................................................. 59
Restraint of Trade ............................................................................................................................................................... 61
How to Approach General Illegality Hypos: ............................................................................................................... 63
Duress ....................................................................................................................................................................... 65
General ................................................................................................................................................................................... 65
Introduction .............................................................................................................................................................................................. 65
Justification ................................................................................................................................................................................................ 65
Inadequacy of the overborne will theory ....................................................................................................................................................... 65
Shift to focus on illegitimate pressure ............................................................................................................................................................. 65
S1: Duress to Person .......................................................................................................................................................... 65
#1: Illegitimate pressure ....................................................................................................................................................................................... 65
#2: Causation: a cause ............................................................................................................................................................................................ 66
S2: Duress to Property ...................................................................................................................................................... 66
1: Illegitimate pressure .......................................................................................................................................................................................... 66
#2: Causation: significant cause ......................................................................................................................................................................... 66
S3: Economic Duress .......................................................................................................................................................... 66
Introduction .............................................................................................................................................................................................. 66
Policy considerations ............................................................................................................................................................................ 66
Anti-‐enforcement or pro-‐duress ........................................................................................................................................................................ 66
Pro-‐enforcement or anti-‐duress ........................................................................................................................................................................ 67
Current causation-‐led approach ....................................................................................................................................................... 67
‘But for’ test ................................................................................................................................................................................................................. 67
Criticisms ..................................................................................................................................................................................................................... 67
Alternative approaches based on illegitimate pressure ........................................................................................................ 68
1. Good faith ................................................................................................................................................................................................................ 68
2. McK: All threats to breach = illegitimate pressure + causation set at ‘a’ reason ..................................................................... 69
3. No practicable alternative ............................................................................................................................................................................... 69
The demand ............................................................................................................................................................................................... 69
1. Fairness of renegotiated contract ................................................................................................................................................................. 69
2. Fairness of original contract ........................................................................................................................................................................... 69
S4: Lawful Act Duress ........................................................................................................................................................ 70
General ......................................................................................................................................................................................................... 70
Lawful pressure which is legitimate ............................................................................................................................................... 70
Lawful pressure which is illegitimate ............................................................................................................................................ 70
Case: E C Investment (on Duress) .................................................................................................................................. 71
Undue Influence ..................................................................................................................................................... 76
General ................................................................................................................................................................................... 76
Introduction .............................................................................................................................................................................................. 76
Justification ................................................................................................................................................................................................ 76
1. Punish Df’s unconscientious conduct ......................................................................................................................................................... 76
2. Defective consent ................................................................................................................................................................................................. 76
3. Failure to protect ................................................................................................................................................................................................. 77
OLD: Undue Influence (Allcard v Skinner) ................................................................................................................. 77
NEW: Undue Influence (Etridge) .................................................................................................................................... 77
What’s new? Restatement of the law ............................................................................................................................................. 77
Basis for invoking this doctrine ......................................................................................................................................................................... 77
The burden of proof ................................................................................................................................................................................................ 77
Manifestly disadvantageous transaction ....................................................................................................................................................... 78
Categorising undue influence is not helpful ................................................................................................................................................. 78
Distinction between Class 2(A) and 2(B) be dropped .............................................................................................................................. 78
Procedures of proving UI in new formulation under Etridge ............................................................................................................... 78
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S1: Failure to protect by overt pressure ....................................................................................................................................... 79

Relational pressure .................................................................................................................................................................................................. 79
S2: Failure to protect by omission ................................................................................................................................................... 79
1a) The ‘automatic’ categories of influence relationships ...................................................................................................................... 79
1b) Proved relationships of influence ............................................................................................................................................................. 80
2. A transaction calling for explanation .......................................................................................................................................................... 81
3. Rebutting the presumption ............................................................................................................................................................................. 82
Remedy – Rescission .......................................................................................................................................................... 83
Bars to rescission ..................................................................................................................................................................................................... 83
The defence of change of position ..................................................................................................................................................................... 83
No partial rescission ............................................................................................................................................................................................... 84
Improvident Guarantees/Securities ............................................................................................................... 85
Issues & Justification ......................................................................................................................................................... 85
Justification for ANTI-‐RELIEF ............................................................................................................................................................ 85
Justification for PRO-‐RELIEF .............................................................................................................................................................. 85
General ................................................................................................................................................................................... 85
A. Pre-‐O’Brien (strict rule) .................................................................................................................................................................. 85
B. O’Brien (radical extension) ............................................................................................................................................................ 85
C. Etridge (commercial certainty over private interests) ...................................................................................................... 86
1. Wrongdoing by debtor inducing guarantor’s agreement .................................................................................................................. 86
Can G prove a vitiating factor against PD? ..................................................................................................................................................... 86
2. Lender’s notice Does L know that a) guarantee is non-‐commercial and b) guarantee is for PD’s benefit and not for
G’s .................................................................................................................................................................................................................................... 86
3. Lender’s failure to take reasonable steps ................................................................................................................................................. 87
Singapore’s approach ........................................................................................................................................................ 88
Remedy: Rescission ............................................................................................................................................................ 90
Defence of change of position ............................................................................................................................................................................. 90
Partial rescission ...................................................................................................................................................................................................... 91
Basis of doctrine .................................................................................................................................................................. 91
Unconscionability .................................................................................................................................................. 92
General ................................................................................................................................................................................... 92
Basis of doctrine .................................................................................................................................................................. 92
Element 1: Improvident transaction ............................................................................................................................ 93
Element 2: Bargaining impairment .............................................................................................................................. 93
Element 3: Unconscionable conduct ............................................................................................................................ 93
Element 4: Absence of adequate advice ...................................................................................................................... 94
Australia’s approach .......................................................................................................................................................... 94
Singapore’s approach ........................................................................................................................................................ 94
Statutory Relief: CPFTA ..................................................................................................................................................... 95
Consumer Protection (Fair Trading) Act 2003 (Cap 53) ....................................................................................................... 96
Case: E C Investment (on Unconscionability) ............................................................................................................ 96
Vitiating Factors In Contract Law – ................................................................................................................. 98
Some Key Concepts & Developments .............................................................................................................. 98
Introduction ......................................................................................................................................................................... 98
On Umbrella Doctrine of Unfairness ............................................................................................................................ 98
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Privity
General
General principles
Two general principles govern the privity of contract: 1) a third party cannot acquire rights to a contract to which
he is not a party (conferring of benefits), and 2) a third party cannot be subject to the burden of a contract to
which he is not a party (imposition of obligations).
Enforcing a promise
To enforce a promise, a person must generally show: 1) promise was made to him (privity), and 2) consideration for
the promise moved from him (consideration). Difference between privity and consideration is that for privity, it is
about who can enforce or sue on a contract, whereas for consideration, it is about which contractual promises are
enforceable. Both requirements must be satisfied in order for a party to sustain an action in contract.
Rationale
1. *Certainty and fairness for promisor
a. Undesirable for promisor to be liable to two actions (from promisee and third party)
b. Limits potential liability of contracting party (third party claimants)
c. Clear demarcation of scope of contractual rights and obligations that may arise
2. *Basis of contractual rights
a. Exclusive nature of contractual relationship
b. Contractual rights and obligations are personal to those who created them
3. Lack of consideration from third party; doctrine of consideration seeks to ensure justice of reciprocity
4. Unjust that a person can sue on a contract yet not be sued upon it
5. It would affect the rights of contracting parties to vary or terminate contracts if third parties were allowed to
enforce contracts made for their benefit
6. Perceived injustice of privity doctrine avoided by creating exceptions
Criticism
1. Black hole of privity: Third party who suffered loss cannot sue while promisee who suffered no loss can sue
but may only obtain nominal damages because he has suffered no real loss
a. Injustice to third party because promisor can resile promise and get away scot-free
2. Parties may have intended to confer a benefit/contractual right to third party (Tweddle v Atkinson)
3. Numerous exceptions to privity rule (to avoid injustice) makes the doctrine complicated i.e. exemption clauses
4. Creates difficulties for commercial life because contracts often involve third parties
S1a: Promise by A to B in favour of C

General
C cannot sue on the promise because 1) he is not a party to the contract and 2) no consideration was provided by him
(Tweddle v Atkinson – Df and Pf's father contracted to pay sums to Pf upon Pf's marriage with Df's daughter – clause
in contract allowed Pf to sue for those sum – held that promise could not be enforced – no consideration; Dunlop v
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Selfridge – Pf sold goods to intermediate company on condition that coy would not sell them below list price – Pf
agreed that coy could give discounts to customers if coy obtained written undertaking that customer would observe list
price – coy sold goods to Df who sold goods at price lower than list price – Df claimed that Pf were not privy to
contract while Pf claimed coy was acting as an agent of Pf – held Df not liable – no consideration moved from Pf to
Df, no evidence of agency– two exceptions (trust and agency) stated in this case).
Analysis
MCW: The twin requirements of privity and consideration generally point in the same direction. Contrast Treitel,
who suggests that they may be independent.
Whether there is one rule or two rules makes very little practical value. One rule may be sufficient but we may not
necessarily have to get to the bottom of this issue.
Exceptions
Privity rule prevents 3P from enforcing contract, but analytical tools exist to alleviate any harshness. Two
ways: 1a) Giving 3P direct rights against Promisor in other ways, or by 1b) creating genuine exceptions to the
privity rule; 2) Giving Promisee appropriate remedies against Promisor.
1. Collateral contracts
Situation in which third party is, in fact, not a third party, but party to another contract with the party who failed to
carry out his promise (Shanklin Pier – Df paint manufacturers represented to Pf owners of pier that paint was suitable
for use in repainting of pier and would last for 7-10 years – in reliance on the representation, Pf instructed contractors
they had employed to repaint pier using Df's paint – paint unsuitable, lasted considerably less than promise – Pf
sought an action against Df who claimed warranty did not give rise to action – Pf allowed to recover damages –
although main contract was between Pf and contractor, a collateral contract exised between Pf and Df).
2. Agency
An agency relationship arises where one party, the agent, is authorised by another, the principal, to negotiate and
to enter into contracts on behalf of the principal. Once an agency relationship is created, the agent is thereby
authorised to commit principal to contractual relationships with third parties.
Not an exception to doctrine of privity

When the agent 1) discloses to the third party that he is acting as an agent of a principal and he 2) concludes the
contract within the scope of his authority, the general rule is that the contract is made between the principal
and the third party, and the agent cannot sue or be sued on the contract. Such a transaction is generally not
regarded as an exception to doctrine of privity because the function of the agent is to negotiate the contract on behalf
of his principal and once he has done that he 'drops out of the picture', leaving his principal as the true party to the
contract.
Exception to doctrine of privity
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Undisclosed principals may, in certain limited circumstances (see Treitel, 2007, paras 16-056-16-060) sue and be sued
on a contract. The ability of a principal to ratify the unauthorised act of his agent is also said to be an exception to the
doctrine of privity (see Treitel, 2007, paras 16-042-16-052).
3. Assignment
A contracting party is allowed to transfer, or assign, his rights under a contract to a third party, subject to the following
rules:
• Only contractual rights (e.g. benefits) can be assigned, not liablities
• Assignments are either equitable or statutory in nature, not contractual
o 3P cannot have better rights than promisee
• Not all contractual rights are assignable
o Contract may prohibit or limit extent of assignment
o Mere right to sue for damages is not assignable unless the assignee has a genuine commercial
or financial interest in taking the assignment
o Law may not give effect to an assignment of rights under contract involving personal relationship
• Assignee acquires all the contractual rights of assignor
• Burden of a contract cannot be assigned without consent of the other party to the contract
Benefits of a contract may be transferred to a third party when the original party (promisee) withdraws from the
contract and is replaced by the third party. The third party can sue on the contact against the promisor.
Example
A owes a sum of money to B, repayable over a three-year period. B decides that he does not want to wait for
three years for repayment in full and sells to C his rights (i.e. assignment) against A in return for a cash
payment from C. This way, B gets access to instant cash and C makes a profit by paying B a percentage (e.g.
85%) of the debt owed by A and by recovering the debt from A over a three-year period.
4. Trust
A promisee may agree to hold his contractual right to sue the promisor on trust for the third party and, as a
beneficiary under a trust, the third party acquires a property right which he can assert against someone, such as the
promisor, who interferes with it. There must exist a clear intention to create a trust.
Example
A, the promisor, contracts with B, his trustee, in favour of C, his beneficiary. The basis of C’s claim (the third
party) is his equitable interest in the subject matter. He does not rely on the contract made between A and B.
5. Statute
Statutory exceptions exist to the doctrine of privity, particularly in insurance situations e.g. third-party rights
against insurer where the policyholder causes an accident (Section 9(1), Motor Vehicles (3rd Party Risks and
Compensation) Act).
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6. Tort
3P may be able to sue in tort.
7. Joint promisee situation
Obiter suggestion by Australian High Court that where there were joint promisees, they did not have to furnish the
consideration separately as consideration was furnished on behalf of them all (Coulls v Bagot's Executor & Trustee).
Remedies
Essentially, 4 grounds on which damages can be recovered on:
1. Loss of amenity (Jackson v Horizon Holidays, qualified by Woodar v Wimpey)
2. Narrow ground (SG – Prosperland; UK – The Albazero; Linden Gardens; Darlington; Panatown)
3. Broad ground (SG – Prosperland; UK – Linden Gardens)
4. Specific performance
1. Damages
When assessing damages, the question to be asked is: What loss has the promisee suffered? Are substantial damages
(non-nominal damages) available to the promisee? Ascertainment of damages becomes difficult because, often, the
promisee does not suffer any loss.
1. Loss of amenity
Jackson v Horizon Holidays
Contracting party can sue and recover damages in respect of a loss suffered by a third party to the contract by
adding on third party’s losses to the promisee’s loss (Jackson v Horizon Holidays – Pf and family went on
holiday conducted by Df – promises in package went unfulfilled – CA held Df liable for damages with
respect to losses suffered by both Pf AND 3P (family) – note that judges were divded on the basis
on which damages were awarded: for the innocent party’s own loss or for the innocent party AND his family’s
loss – James LJ: Pf was allowed to claim damages for his own loss – Denning LJ: Pf was being compensated
for loss of the whole family).
Woodar v Wimpey
A party which is neither an agent nor trustee for the 3P, or has itself sustained any loss, cannot recover
substantial damages for losses suffered by 3P (Woodar Investment Development v Wimpey– Df agreed to buy
land from Pf – contract stated that upon completion of the purchase, Df would pay further sum of money to 3P
– Pf claimed repudiatory breach by Df and claimed damages, including sum owed to 3P – HL held that there
was no repudiatory breach, and that assuming that there was Pf could not claim substantial damages
wrt additional sum – disapproved of Denning’s interpretation rule but approved of decision; classified as a
broad decision on measure of damages (augmentation of promisee’s distress), avoidance of legal black hole).
• However, left a loophole: differentiated between social/pleasure contracts and commercial contracts,
so for the former it is still possible to apply the Jackson rule
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Narrow ground – recover for 3P, held in trust

Generally, no substantial damages will be awarded since Pf has not suffered any loss. Unless Pf is able to establish
that he has incurred a loss with respect to the 3P’s loss e.g. repairing the defect or that he can reasonably be
expected to do so. Also, there must not exist a cause of action between third party and promisor.
 Modern restatement of the rule in Dunlop v Lambert by Lord Diplock in Albazero:
o The only way in which I find it possible to rationalise the rule in Dunlop v. Lambert so that it may fit
into the pattern of the English law is to treat it as an application of the principle, accepted also in
relation to policies of insurance upon goods, that in a commercial context concerning goods
where it is in the contemplation of the parties that the proprietary interests in the goods
may be transferred from one owner to another after the contract has been entered into
and before the breach which causes loss or damage to the goods, an original party to the
contract, if such be the intention of them both, is to be treated in law as having entered
into the contract for the benefit of all persons who have or may acquire an interest in
the goods before they are lost or damaged, and is entitled to recover by way of damages
for breach of contract the actual loss sustained by those for whose benefit the contract
is entered into.
 Extension of Diplock’s refinement to construction context in Linden Gardens:
• In such a case, it seems to me proper, as in the case of the carriage of goods by land, to treat the
parties as having entered into the contract on the footing that Corporation would be entitled to
enforce contractual rights for the benefit of those who suffered from defective performance but who,
under the terms of the contract, could not acquire any right to hold McAlpine liable for breach. It is
truly a case in which the rule provides “a remedy where no other would be available to a person
sustaining loss which under a rational legal system ought to be compensated by the person who has
caused it
 The narrow ground was extended even further in Darlington ([32] supra), where it was applied (also in the
construction context) even though proprietary interest in the contractual subject matter in that case had
always been vested in – and remained with – the third party (and not the plaintiff/promisee). This extension
was endorsed by the House of Lords in Panatown ([32] supra), although the majority held that the narrow
ground did not apply on the particular facts of the case.
2. Narrow ground – in summary

 Family Food Court
1. Requirement that parties contemplated that the proprietary interests in the goods may be transferred from
one owner to another after the contract has been entered into and before the breach which causes loss or
damage to the goods (The Albazero; Linden Gardens; Darlington; Panatown)
2. Must account to the third party for such damages (Panatown)
3. Rationale is to ensure that there is no “legal black hole” into which Pf’s claim disappears à therefore,
requirement that third party has no direct cause of action against promisor (The Albazero; Linden Gardens;
Panatown; Prosperland)
o Can a tort claim fill up this legal black hole? Family Food Court says NO.
§ It seems to us that Lord Browne‑Wilkinson had in mind a contractual remedy. [If] the person
who in fact suffers the loss should eventually sue for the loss in tort, he would not be enforcing
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contractual rights. It would be for the more limited purpose of obtaining damages due to
negligence, at [43]
§ Two points are made patently clear from the above passage. First, the narrow ground is only
applicable in the context of a breach of contract; specifically, where the person who
suffers loss as a result of the breach of contract (ie, the third party) has no contractual
remedy to recover substantial damages against the defendant/promisor (this point is, in fact,
implicit in our discussion thus far above). It does not apply in every other (non-contractual)
situation where a person sustains loss but has no recourse against the person who caused it.
Second, an alternative cause of action in tort that may be available to the third
party does not mean that the “legal black hole” mentioned at [31] above is
eradicated or filled up. A claim in tort (subject to all the usual limitations and
defences in tort) is not the same as a claim in contract, and, thus, the existence of an
alternative cause of action in tort does not render the narrow ground inapplicable.
3. Broad ground – recover for promisee himself

Pf’s contractual expectations have not been fulfilled, thus Pf is able to claim for losses other than his own,
provided benefits to 3P were stipulated in the contract. The concept of performance interest is introduced.
Main problem is unjust enrichment – he doesn't have to give to 3P thus windfall.
 First recognised in Linden Gardens by Lord Griffiths
 Subsequently recognised by Lord Goff and Lord Millet in Panatown (dissenting judges), and Lord Browne-
Wilkinson (majority – agreed with rule, but not its application in that case)
o Lord Clyde and Lord Jauncey did not expressly disprove of broad ground, but adopted a more
restricted approach to promisee’s right to recover substantial damages
 Endorsed in Singapore by Prakash J in Prosperland HC and subsequently by CA in Prosperland
Broad ground is not concerned with filling up any legal black hole. Rationale of Lord Griffiths’ wider
principle is essentially that if a party engages a builder to perform specified work, and the builder fails to render the
contractual service the employer suffers a loss. He suffers a loss of bargain or of expectation interest. And that
loss can be recovered on the basis of what it would cost to put right the defects.
 Main difference between broad and narrow is that for the former, the promisee is recovering substantial
damages for its own loss and not on behalf of the third party
 Similar with narrow ground in that it applies only in the context of a breach of contract
 Performance interest claimed by promisee must be a genuine one
a. Courts will apply an objective test of reasonableness to curb what would otherwise be a windfall
accruing to promisee (Ruxley) à legal control mechanism
i. Usual control mechanisms of causation, remoteness (different from Hadley v Baxendale),
mitigation of loss and requirement of certainty of loss
b. Controversy as to whether or not promisee must demonstrate intention to use damages to
realise performance interest
c. Related issue is whether it must be shown that he has already carried out repairs or
intends to do so before he is entitled to claim for substantial damages
i. On the basis of the broad ground that a plaintiff recovers substantial damages for the loss in
not getting what he contracted for, that should not be a prerequisite before such damages may
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be claimed. If, for example, an owner of a house were to engage a contractor to erect a koi
pond and it was so badly done that it was of no use and the owner decided to abandon the
project, there is no reason why he must have proceeded with the repairs, or intended so to do,
before he may claim for substantial damages. At the end of the day, the entire circumstances
of the case must be considered to determine whether the claim made was reasonable or was
made with a view to obtaining an uncovenanted benefit
Case law development

Albacruz v Albazero ('The Albazero')
The Albazero exception is such that the promisee is allowed to claim for 3P loss, held in trust for 3P. The
original situation was loss or damage to goods in contracts of carriage of goods by sea where parties
contemplated that promisee would transfer ownership of the goods, carried by the shipper, to the third party
after the contracts' formation but before its beginning. Interesting issue is that there is a change in ownership
– not the owner at the time of the breach. Contemplation by both parties that ownership would change.
Extension of rule to 1) defective performance in building contracts; 2) even without a contemplated transfer
in ownership.
**Alfred McAlpine Construction v Panatown

A promisee may generally only sue and recover damages in respect of his own loss and not the loss suffered by
a 3P (reaffirmation by Alfred McAlpine Construction v Panatown – Df (Alfred McAlpine) and Pf
(Panatown) entered into contract for construction of a building on land owned by UIPL – Pf and UIPL part of
same group of companies – building work defectively done and UIPL suffered loss – Panatown, instead of
UIPL, brought action against Df for breach of contract – can the Albazero exception be applied? – HL held
that promisee was not allowed to recover substantial damages – 3P had a duty of care deed with
promisor, so constructual structure meant 3P had a direct cause of action against promisor, hence presence of
direct remedy proved fatal to application of narrow ground of recovery – no more legal black hole).
With respect to its own loss, promisee Panatown did not incur an expenditure making good the defects
(neither did it have the intention to do so) and its interest in performance lay only in the provision of
a service to the 3P.
Majority view – narrow ground approach

Pf have to 1) demonstrate that they have incurred expenditure in making good the defects in
the construction works OR to 2) demonstrate that they can be reasonably expected to do so.
UIPL had its own right of action against McAlpine under duty of care deed, hence no justification
for holding that Pfs Panatown were entitled to recover damages on UIPL's behalf.
Panatown's performance interest lay in provision of service to UIPL, and the duty of care deed
protected this interest. Therefore, no 'expectation loss' to Pfs Panatown and thus no potential
problem of double liability. If there had been no duty of care deed, court would find for Pf.
Minority view – broad ground approach
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Allowing the contracting party to recover damages for the benefit of a third party is not an exceptino
to the rule on privity but a means of circumventing it. Df's breach had defeated Panatown's
performance interest. Thus, broad ground approach adopted – recognised performance interest as
being claimable. Substantial damages recoverable because Pf has not received performance which he
was entitled to receive under the contract. Performance of a contractual obligation may have an
economic value of its own.
Lord Goff: The general rule that a party is only entitled to recover substantial damages for breach of
contract in respect of his own loss, and not therefore in respect of loss suffered by a third party was
most clearly stated in the opinion of Lord Diplock in The Albazero. However, contracts involving third
parties are commonplace in the family and commercial contexts, and the rule could deprive
contracting party of any effective remedy in the case where a contract is intended to confer a benefit
but NOT an enforceable right on a 3P. Authority for supposed rule is very thin and its existence has
been doubted by distinguished writers e.g. Professor G H Treitel "Damages in Respesct of a Third
Party's Loss" (1998) 114 LQR 527 and by Mr Duncan Wallace QC "Third Party Damage: No Legal
Black Hole?" (1999) 115 LQR 394.
Overview
Reaffirms general rule that promisee can only recover damages in respect of his own losses and
not that of the third party. Justification: “Object [of compensation] is to make good a loss. It is
inherent in the concept of compensation that only the person who has suffered the loss is entitled to
have it made good by compensation. Compensation for a 3rd party’s loss is a contradiction in terms. It
is impossible to justify the recovery of compensatory damages by a person who has not suffered the
loss in respect of which they are awarded unless he is accountable for them to the person who has.”
Brought into prominence the narrow and broad grounds approaches.
**Chia Kok Leong v Prosperland

Allowed promisee to recover substantial damages on narrow AND broad ground (Chia Kok Leong v
Prosperland). Developer of condo sued contractor and architect for defective work – by the time action was
brought, developer was no longer the owner because it has since been sold – narrow ground was satisfied
because management corporation did not have any rights against the architects; promisee could thus sue
against contractor and architect (McAlpine rule) – broad ground was satisfied too; recognised performance
interest; allowed promisee to claim for performance interest even though financially he did not lose anything
– problem with the idea of double recovery, especially under the Contract (Rights of Third Parties) Act,
when both promisee and 3P sue; solution can be found under judgement.
• Narrow ground: requirement of contemplation of transfer of ownership is contested in common
law and in Prosperland. More important is that there has to be a black hole.
o Damages: held in trust for 3P
• Tort: action in tort is inferior compared to one in contract
o Essentially disagreed with HL decision in Panatown
• Lord Goff: 3P claim is derivative, hence promisee's claim would extinguish 3P's claim
• Lord Millet: joint proceedings
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Solution to double liability issue

Endorsed practical solution offered by Lord Millet in Panatown. “Since performance of the primary
obligation to do the work would have discharged the liability to both parties, so must performance of
the secondary obligation to pay damages. Payment of damages to either must pro tanto discharge the
liability to both. The problem, in my view, is not one of double recovery, but of ensuring that the
damages are paid to the right party.”
2. Specific performance
Specific performance is allowed in cases where it would do a "more perfect and complete justice" than an award of
damages (Beswick v Beswick – elderly coal merchant sold business to nephew, on the condition that nephew would
continue paying annuities to aunt after death – aunt sued as executor of merchant's estate and in her
personal capacity – succeeded in specific performance in her capacity as administratrix – primary
damages inadequate)
S1b: Promise by A to B to except C from liability

General
Since doctrine of privity prevents 3P from acquiring contractual rights under a contract to which they are not a pary of,
likewise, the doctrine of privity prevents 3P from taking advantage of exclusions in the main contract when sued in
tort.
Exceptions
Adler v Dickson ("The Himalaya") [1955] QB
Pf first-class passenger got injured while boarding the gangway due to negligence of crew – ticket contained
exemption clause protecting company but not its servants – held that company's servants were
liable – it was possible for P&O to incorporate a clause excluding its employees from liability, but it had not
done so
Himalaya clause: Court of Appeal declared that in the carriage of passengers as well as in the carriage of goods
the law permitted a carrier to stipulate not only for himself, but also for those whom he
engaged to carry out the contract. It was held as well that the stipulation might be express or implied.
Scruttons v Midland [1962] AC

Pf/Df(stevedores)/carriers – bill of lading limited liability of carrier in event of loss, damage or delay – Df
tried to rely on bill of lading to limit liability to £500 – HL held that Df could not rely on limitation
clause as they were not parties to the contract.
There can be a contract between Pf and Df made through the agency of the carriers provided that
the following Lord Reid's 4 criteria were met: 1) intention to protect 3P from liability; 2) promisee
contracting on its own behalf and acting as 3P's agent at the same time; 3) promisee has the
authority of 3P to act as 3P's agent; 4) consideration must move from the third party.
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• (2) issue of agency: at the time of contracting, does contracting party have to be specific or general
about the sub-contractor/agent? Courts generous. As long as there is contemplation in general, it
passes.
• (3): authority or ratifies
• (4): performance = good consideration = existing duty?
Policy conflicts in Adler, Scruttons

Justification for not allowing 3P to adopt benefit of an exemption clause in a contract which he is not the
party to is similar to the justification of doctrine of privity i.e. sanctity of contract between two parties which was
mutually entered into, rights and obligations to be exclusive; tortfeasor should not be allowed to take shelter behind
an exclusion clause in a contract he is not party to.
On the other hand, promisor should not have an easy way circumventing exemption clause which he agreed to by
suing 3P in tort for full damage. Undesirable in commercial context as the whole idea of exemption clause is a
risk allocation exercise under which promisor agrees to bear the cost of certain risks eventuating.
Following the Scruttons rule would defeat intention or commercial expectations of parties.
Ways to circumvent privity rule/avoid Scruttons

1. Establishing unilateral or collateral contract between 3P and promisor
The courts are more relaxed with the Scruttons formula after The Eurymedon [1975] AC was decided, giving
rise to expectations of commercial parties and bringing in artificiality of reasoning.
The Eurymedon [1975] AC – unilateral contract

Stevedores negligently damaged a drilling machine in the court of unloading – Bill of lading
incorproated a one-year time bar, and a Hamalaya clause which extended the benefit of defence and
immunities to independent contractors employed by carrier – Privy Council held that the one year time
bar AND “Himalaya clause” protected stevedores – referred to Lord Reid’s four criteria – contract
formed between Pf (shipper) and stevedores through combination of agency and collateral contract reasoning
– thus a new and direct, unilateral contract arose between shipper and stevedores – main contract (bill of
lading between shipper and carrier) / sub-contract (contract between carrier and stevedores) / collateral
contract (implied contract between shipper and stevedores).
Analysis – unilateral/collateral contract; does performance of existing duty constitute good

consideration?
Shippers made stevedores a unilateral offer via carriers on terms of the bill of lading to exempt them
from liability – offer was accepted when stevedores performed act of unloading goods – consideration
was provided when stevedores performed existing duty to carrier to unload goods – consideration was
good because the undertaking of the collateral-unilateral contract exposed stevedores to a second
course of action from Pf – thus establishment of contract removes problem of privity.
The New York Star [1981] WLR – bilateral contract
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Stevedores unloaded a parcel of goods onto wharf and stored it in a warehouse – through negligence, goods
were stolen from warehouse – issue was whether carriers still acted as agents for stevedores even though
goods were unloaded long before they were stolen – Privy Council held that stevedores were protected
by the Himalaya clause – Pf normally collected goods from warehouse instead of wharf – as long as acts
are related to performance of contractual obligation owed by 3P to promisee, the Himalaya clause would apply
Burke v Mersey Docks [1986]

Pf purchased motorcycles and stored them at Df's docks to await shipment – contract between Pf and Df
included Himalaya clause – Df's employees' negligence in unloading another vessel caused damage to
Pf's goods – Held that stevedores were not protected – damage was caused not in the process of
fulfilling contractual obligations but in an entirely unrelated incident
Evaluation
• Upholds the intentions and honest expectations of the parties created in the contractual
structure, where risk has been allocated between parties via exemption clauses. Use of collateral-
agency analysis is for contracts relating to carriage of goods
• Does any allow promisor of an exemption clause to get around the exemption clause easily and sue the
3P in tort for full damages
• But may not be easy to identify the offer made by promisor to 3P to exempt 3P from liability (Lord
Rei'ds first requirement in Scruttons of clear intention to protect 3P from liability)
• Artificiality of analysis: 3P may not have been aware of the offer by the promisor of immunity – recall
that acceptance must be made to a known offer i.e. 3P must have known of offer at he time of
performance of act
• Onerous in that conditions of agency must still be proven
2. Exemption clause may negate a duty of care in tort owed by 3P to promisor
Norwich City Council v Harvey

1) Employment contract between promisor and promisee provided that construction was at the sole risk of the
promisor with regards loss or damage by fire – also provided that promisor would maintain 2) adequate
insurance against risk – employee of 3P sub-contractor started fire negligently – held that contract
structure was such that risk of damage by fire was to be borne by promisor employer. Even if 3P
was not privy to contract, it is only just and reasonable that the clear basis on which all parties contracted on
should be allowed to stand even if fire was caused negligently by 3P – factual matrix is not carriage of goods
type situation like Scruttons, Eurymedon etc; express provision of insurance courage was strong indicator of
risk allocation
S1c: Promise by A to B not to sue C

General
The promisee may assist the third party by seeking a stay of action commenced by the promisor against the third party.
Analagous to injunction/specific performance.
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Gore v Van der Lann [1967] QB

Pf applied for a pass to ride free on company bus – company made it clear that pass operated only as a license
and was given on condition that the company or its servants were not liable for any injuiry – Pf injured while
boarding bus, sued Df bus conductor for negligence – company took out an application stay proceedings,
arguing that in obtaining the pass the Pf had promised to exempt bus conductor from liability – CA held that
clause was caught by statute – s 151 of UK Road Traffic Act 1960: the free pass was a contract that
attempted to negate liability for personal injury, hence voided – application for a stay dismissed because
1) no clear, unambiguous promise by Pf not to sue bus conductor; 2) company did not have
sufficient interest in enforcing Pf's promise not to sue bus conductor because there was no legal obligation
to indemnify employee against his liability to Pf in negligence. If there was no contract and free pass
was indeed a license, application for a stay might be upheld if above 2 conditions were fulfilled.
Snelling v John Snelling Ltd [1973] QB

Promisor – brother leaving | promisee – two brothers | third party – company being sued
Three brothers were shareholders of a company which owed each of them money – contract made stating that
in the event of any director resigning, he would immeidately forfeit all money due to him from company – one
brother resigned and brought an action against company for payment of money owed to him – two
brothers joined as co-Df and counterclaimed for a declaration that sums due to the brother from the company
had been forfeited – held Pf's claim dismissed – 1) clear implicit undertaking by Pf not to sue company; 2)
other directors had sufficient interest in the financial health of family company in enforcement of promise
even though they were under no obligation to indemnify company
The Elbe Maru [1978]

Owners of goods undertook not to make any claims against carrier and its subcontractors for
loading/unloading – goods were stolen while under subcontractors' custody – owners sued
subcontractors – court granted a stay of proceedings – for a stay to be granted, there must be 1)
a clear and unambiguous promise not to sue; 2) real possibility of prejudice to promisee if
action is not stayed – in this case, (1) was condition stated in contract and for (2) carriers would be open to
action for indemnity from subcontractors and would hence suffer financial loss
S2: Promise by A to B that imposes a burden on C

General
The rule that contract parties cannot, by their contract, impose burdens on third parties has two main aspects. They
generally cannot 1) impose a burden on the 3P to do something, nor 2) deprive a 3P of some right or restrict his
freedom of action.
Exceptions
1. Restrictive convenant
Generally, a promise made by a Promisor to a Promisee will not be binding on anyone else unless it creates an
interest in property, eg restrictive covenant (rights which run with the land to which they are attached).
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2. Bailment
Bailment describes a legal relationship in common law where physical possession of personal property, or chattel, is
transferred from one person (the 'bailor') to another person (the 'bailee') who subsequently has possession of the
property. It arises when a person gives property to someone else for safekeeping.
A bailment of goods typically involves an owner of goods (the ̳bailor‘) passing possession, but not ownership, of the
goods to the bailee, who may then entrust those goods onwards to a sub-bailee on terms found in a sub-bailment
contract between the bailee and the sub-bailee. One of the terms of a sub-bailment may exempt or limit the sub-
bailee‘s legal liability towards the bailee. If the goods are damaged by the sub-bailee, and the bailor wants to sue the
sub-bailee directly, the question here is whether the bailor, who is a third party to the contract between the bailee and
the sub- bailee, is bound by the exemption or limitation clause found in that contract.
In bailment situations, Bella the bailee Promisor promises Edward, the sub-bailee Promisee, to exclude or limit the
Edward‟s liability as a sub-bailee. If the sub-bailee Promisee is sued by Jacob the bailor, a 3P, can the Promisee rely
on such an exemption or limitation clause which found in a contract between the Promisor and the Promisee? In other
words, is the bailor 3P saddled with the burden of the exemption clause which would restrict his ability
to sue the sub-bailee Promisee directly?
Bailment relationships – sub-bailee takes the goods on certain terms only:

Morris v Martin [1966] QB
Bailor sent mink coat to furrier to be cleaned – furrier did not lean furs himself and delievered it for cleaning
to Df – one of Df's servants stole the coat – contract between furrier and Df contained an exemption
clause, which Df sought to rely on: "all goods belonging to customers whether upon or in the company's
premises or care or in course of transit to or from the company's premises are held or transported at the
customer's risk and the company shall not be responsible for loss or damage however caused" – CA held that
exemption clause covered goods belonging to the bailee and not to bailor customers such as
the Pf – furthermore, theft occurred after processing of coat whereas clause only covered loss of or damage to
goods during processing – However, if it did apply, Df could rely on it as Pf had agreed that furrier
could send coat to Df and hence had impliedly consented to the terms of the sub-bailment – suggests that
an awareness of the sub-bailment could be basis of decision.
The Pioneer Container [1994] AC

Pf contracted for carriage of goods from Taiwan to Hong Kong – carrier was permitted by owner to sub-
contract "on any terms" – Df took possession of goods under bills of lading providing that any
dispute was exclusively to be determined in Taiwan – goods lost, Pf sued in HK, contending that it
was not bound by the exclusive jurisdiction clause because there was no contract between it and Df – PC held
that Pf was bound by the exclusive jurisdiction clause – bailor is bound to terms of a sub-bailment
only if he has expressly or impliedly consented to those terms (consent to subcontract and to subbail
"on any terms" was wide enough authorisation to constitute express consent to the clause)
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Important note
Distinguish bailment (Situation 4) from promise by A to B to exempt C from liability (Situation 2)
• Bailment
o Sub-bailee (contracting party) seeks to rely on clause in contract between bailee and sub-bailee to
exempt or limit liability to bailor (3P) – 3P suing
• Promise by A to B to exempt C from liability
o 3P seeks to rely on clause in contract between two parties to exempt/limit liability – 3P being sued
Criticisms of doctrine of privity

1. Failed to give effect to expressed intentions of the parties (Tweddle v Atkinson)
2. Unduly complex: a number of exceptions had grown up to the doctrine and some of them were extremely
artificial (e.g. trust of the promise device and the use made of the collateral contract; contorted reasoning of
PC in The Eurymedon also demonstrated unnecessary complexities which could arise in seeking to give
effect to the intention of the contracting parties)
3. Commercially inconvenient, e.g. The Eurymedon situation, commercial transactions such as insurance and
carriage of goods by sea
4. Unjust results: Tweddle v Atkinson
Contracts (Rights of Third Parties) Acts

General
The Act 1) enables parties to a contract to make it enforceable by a third party. Parties are able to 2) contract whether a
third party has an enforceable right and, if so, the extent of that right. Third party’s rights are hence derived from the
parties’ intentions as embodied in the contract. CRTPA was not intended to be an exhaustive replacement of
common law exceptions to the doctrine of privity. Rather, the statute complements the common law doctrine of
privity by providing an additional statutory exception to the privity rule.
Content
Right of third party to enforce contractual term
S 2(1)(a) and (b), s 2(2) – tests of enforceability

Right of third party to enforce contractual term
2. —(1) Subject to the provisions of this Act, a person who is not a party to a contract (referred to in this Act as a third
party) may, in his own right, enforce a term of the contract if —
(a) the contract expressly provides that he may; or
(b) subject to subsection (2), the term purports to confer a benefit on him.
(2) Subsection (1) (b) shall not apply if, on a proper construction of the contract, it appears that the parties did not
intend the term to be enforceable by the third party.
Third party can enforce contractual term as long as 1) it has been expressly provided for (section 2(1)(a), e.g.
Himalaya clauses) OR 2) there exists an implied term which confers benefit on a third party (section s 2(1)(b)),
unless on true construction the contract says otherwise (section s 2(2)).
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The Laemthong Glory

Bill of lading relating to chartered goods had not arrived at prospective receiver’s (A) hands by the time the
goods arrived at destination – A sought to indemnify the charterers (B) and B’s servants or agents – held that
the indemnity, on its true construction, purported to confer the benefit of indemnity to the
shipowner (C) under s 1(1)(b) of UK Act because C had acted as one of B’s agent – presumption not
rebutted under s 1(2) therefore C could enforce A’s promise of indemnity
*CLAAS Medical Centre v Ng Boon Ching (SGCA)

Shareholders’ agreement under which doctors agreed to restraint of trade provision – agreement stated
that LD to be made payable to 3P company in the event of default – held that s 2(1)(b) was
satisfied because it was clear from the contract that the parties intended the LD clause to inure for the
company, thus LD to be made payable to company – s 2(2), burden of proof lay on defaulter to prove that on a
proper construction of the contract, parties did not intend clause to be enforceable by 3P – court opined
that s 2(1)(b) and s 2(2) sought to distinguish between intended and incidental beneficiaries,
with latter not being able to sue to enforce term
 11.13 On appeal, the Court of Appeal overturned the decision below on the point as to whether the
contracting parties had intended that the third party not be entitled to bring legal proceedings directly
against the plaintiff - CLAAS Medical Centre Pte Ltd v Ng Boon Ching [2010] SGCA 3. Accepting the
trial judge's analysis of the operation of s 2(1)(b) of the Contracts (Rights of Third Parties) Act (Cap
53B, 2002 Rev Ed), the Court of Appeal nevertheless reversed the finding in the court below that its
operation had been rebutted by the presence of an inconsistent intention on the part of the
contracting parties.
 11.14 In its grounds of decision handed down on 1 February 2010, the Court of Appeal reasoned as
follows (CLAAS Medical Centre Pte Ltd v NgBoon Ching [2010] SGCA 3 at [33]). Given s 3 of the Act:
o ... the mere fact that a term in the contract permits the parties to terminate it does not
ipsofacto mean that benefits conferred therein on a third party is [sic] not intended to be
enforced by the third party. Of particular significance is s3(3) which provides that for the
parties to override the rights acquired by the third party pursuant to the latter's assent or
reliance, the contract must expressly provide that the parties may rescind or vary the contract
without the consent of the third party. If the mere presence of a reservation of a right to the
contracting parties to terminate or vary the contract would amount to there being no
intention to confer on a named third party a right to sue for the benefits conferred thereunder,
then there would not have been any need to have those elaborate provisions in s 3.
Mere presence of 1) reservation of right by contracting parties to terminate contract or 2) vary the terms of the
contract does not ipso facto amount to there being no intention to confer 3P a right to enforce the
term – because provisions in s 3 elaborate on interplay between crystallization of 3P rights and rights of
contracting party to vary or rescind contract – 3P right crystallised under s 3(1)(a) when company sent notice
to shareholders assenting to and acknowledging the LD clause
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Variation and rescission of contract
S 3(1) – crystallization of third party rights

Variation and rescission of contract
3. —(1) Subject to this section, where a third party has a right under section 2 to enforce a term of the contract, the
parties to the contract may not, by agreement, rescind the contract, or vary it in such a way as to extinguish or alter the
third party’s entitlement under that right, without his consent if —
(a) the third party has communicated his assent to the term to the promisor;
(b) the promisor is aware that the third party has relied on the term (whether or not the third party has
knowledge of its precise terms) (actual reliance + actual knowledge); or
(c) the promisor can reasonably be expected to have foreseen that the third party would rely on the term and
the third party has in fact relied on it (whether or not the third party has knowledge of its precise terms)
(actual reliance + reasonably foreseeable to promisor).
Defences available to promisor
• S 4(2) doesn't allow for counter-claims as it has been recognised by the Law Commission that it would have
been too much of a burden on a 3P if counterclaims are allowed to be brought up
• Difference between s 4(2) and 4(3) is that it doesn't have to arise from the contract, but the contract
expressly allows it to be brought in
• S 4(4): raise defences against 3P AND allows counter-claims
Statutory and common law exceptions remain preserved
S 8(2) – 3P cannot invoke s 2(2) of UCTA to strike down an exemption clause

 Invalidity of an exemption clause which excludes negligence liability for the promissor only affects promisee
and not third parties?
S 8(4) – A third party shall not, by virtue of section 2 (5) or 4 (4) or (6), be treated as a party to the contract for the
purposes of any other written law
• A third party shall not be treated as a party to the contract for the purposes of any other written law
o Implications for FCA, UCTA
Analysis
1. CRTPA makes it easier for 3P to enforce provisions in a contract in his own right
• Rule of privity at common law: a party cannot obtain or derive enforceable contractual rights under a
contract to which he is not a party to (Tweddle v Atkinson, Dunlop)
• Exceptions to the rule of privity are limited and narrow in scope
o Promisee contracts with the promisor as an agent for 3P
o Promisee holds contractual right on trust for 3P beneficiary
o Promisee assigns contractual rights to 3P
o Combination of agency and implied unilateral (collateral) contract analysis in cases involving
exemption clauses in favour of the 3P (“Himalayan clauses”) (Scruttons, Eurymedon)
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• Implied collateral contract analysis not a true “exception” to the rule because the analysis seeks to
establish a direct contractual relationship between the promisee and the 3P
o Consideration still required! (3P performance of pre-existing contractual duty owed to promisee)
o Evidential difficulty in establishing Scruttons formula – agency between 3P and promisee, and that
the contract between promisor and promisee makes it clear that parties intended to protect 3P
because of contra proferentum rule: exemption clause construed strictly against party seeking to
rely on it (e.g. Scruttons)
o Seemingly narrow scope of application for such cases, confined to loading/carriage of goods cases
involving 3P stevedores where such a trading/business structure was common in the industry
• 3P right of enforcement under CRTPA is a statutory one and not strictly speaking a contractual one
o CRTPA not intended to abolish or replace common law exceptions to privity rule, instead serves as an
additional option for a 3P in enforcing rights under a contract to which he is not privy to
o has the effect of directly circumventing privity rule
• CRTPA features which make it easier for 3P to attain right of enforcement as compared to exceptions
to privity rule at common law
o No requirement that 3P needs to furnish consideration
§ at common law, consideration and privity need to be fulfilled before an action in contract can
be sustained!
o s2(1)(b) No need for 3P to acquire enforcement rights by way of express provision, as long as can show
that a benefit of any kind is purported by the contract to be conferred on the 3P, presumption that
parties intended for 3P to acquire enforcement rights is raised.
o s2(2) The onus of rebutting this presumption lies squarely with the promisor who must show at least
that the parties did not intend to give 3P right of enforcement. In practice, this presumption is likely
to be hard to displace, making it even easier for promisee to attain statutory right of enforcement.
o s3 provides limits to the ability of contractual parties to vary terms of a contract in a way which
extinguishes or alters entitlement of the 3P under the right. In other words, subject to any overriding
express provision in the contract (s3(3)), contracting parties cannot change the contract in a way
which affects the 3P without 3P’s consent after the crystallization of the 3P right under situations
prescribed in s3(1).
o Promisor has certain defences available under s4 but balance ostensibly tilts in favour of 3P because
having to raise a defence against a 3P’s right of enforcement is half the battle lost!
• Examples
o Himalayan clauses which purport to exempt 3P from liability in cases involving loading/carriage of
goods – 3P can acquire statutory right of enforcement under s2(1)(b) by way of an unrebutted
presumption because the exemption clause purports to confer the benefit of exempting the 3P from
liability for losses arising from the loading/carriage of goods. Subject only to defence of
reasonableness as per UCTA because s4(4) allows promisor to raise this defence.
• CRTPA provides more straightforward response to allow 3P to enforce exemption clause
directly! Need not go to the extent of using somewhat contrived analysis of a direct
contractual relationship.
• Artificiality of implied collateral contract reasoning: 3P’s acceptance must be made
to a known offer by the promisor of the unilateral contract! 3Ps generally will not be aware of
such an offer by the promisor.
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o Beswick v Beswick – likely that 3P would have obtained right of enforcement of the annuity by raising
presumption that parties intended for 3P to acquire right of enforcement s2(1)(b) – UK Law Reform
Committee of the opinion that this presumption is unlikely to be rebutted under s2(2). Thus, 3P
would have been able to enforce annuity by suing in her own capacity as a 3P even
without the need to sue in her capacity as administratrix of promisee’s estate.
o Promise not to sue 3P! At common law, privity rule bars 3P from enforcing promise, thus he needs
to rely on the promisee to enforce promise and obtain stay of proceedings (Gore v Van der Lann).
Even then, promisee needs to show that (1) there was a clear and unambiguous promise not to sue,
and that (2) the promisee has sufficient interest in enforcing the promise or that there is a real
possibility of prejudice to the promisee if the stay of proceedings is not obtained (The Elbe Maru).
Under CRTPA, 3P may be able to directly enforce promise not to sue as opposed to relying on
promisee for assistance!
2. Black Hole
• What is the legal black hole? Situation where 3P suffers loss following promisor’s breach of contract, but
promisor cannot be made liable for substantial damages
• Net result of the interplay between privity rule and damages rule
o Privity rule: 3P cannot derive or obtain enforceable contractual rights under a contract to which he
is a non-party (Tweddle v Atkinson)
o Damages rule: promisee may only recover damages as compensation for his own losses and not that
of the 3P save the exceptions of trust and agency (Woodar v Wimpey)
• Therefore, unless a promisee can show that he has suffered real loss (e.g. legal obligation to
indemnify 3P OR incurring expenditure making good the promisor’s default), he can only
recover nominal damages
• Possible for action in tort by 3P against promisor
o BUT: Considered inferior to action in contract! (Prosperland) Thus, Family Food Court states
that the remedy under tort action is a poor substitute for contractual remedies (also, it won’t be
enforcing contractual rights)
o 1) More difficult to prove fault-based requirements, 2) defences in tort available
• Narrow and broad approaches have been developed as parallel contractual grounds of recovery of substantial
damages by the promisee which will substantially fill the black hole.
• Narrow Ground of Recovery
o Albazero principle allows promisee to recover substantial damages with respect to 3P’s losses under
very narrow circumstances
o (1) contract between promisor and promisee must have contemplated a transfer of proprietary
interest from promisee to 3P after formation and before breach resulting in loss
• the law regards the promisee as having entered into the contract for the benefit of all future
3Ps who may acquire proprietary interest
o (2) There must not exist a direct cause of action by the 3P against the promisee akin to one in contract
• for this purpose an action in tort for PEL is considered inferior to an action in contract
(Prosperland)
• Broad Ground of Recovery
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o DOES NOT DIRECTLY FILL BLACK HOLE

o Rejected by Panatown, but endorsed in Singapore by SGCA in Prosperland
o Allows promisee to recover substantial damages for his defeated performance interest!
o Promisee did not receive the performance which he was entitled to under the bargain. Measure of
damages under broad ground of recovery is that of the cost of obtaining actual performance (cost of
cure) (Prosperland)
o Independent of any 3P loss as well as any 3P action against promisor (Prosperland)
o Indirectly fills the black hole! This can be seen when the question of double liability is raised:
court’s concern is to ensure that damages are paid to the right party, for payment of damages to one
party must pro tanto discharge the promisor for liability owed to both parties (Panatown). Solutions
to double liability include consolidation of actions and joining parties to proceedings.
• SUBMIT: that CRTPA will have a non-marginal impact on 3P enforceability of rights!!
o NOTE relation to ease of 3P enforcement rights:
• Narrow and Broad grounds – 3P has to DEPEND on promisee to bring an action against
promisor
o CRTPA allows 3P to DIRECTLY recover substantial damages s2(5)
• Conferral of direct cause of action on 3P against promisor marginalizes the narrow ground of recovery!
o BUT: narrow ground of recovery caters only for very narrow species of contracts involving
transfer of proprietary interest e.g. construction projects or sale of goods involving chain
contracts
o Scope of recovery under s2(1)(b) is much wider than narrow ground because test of 3P enforceability
is passed as long as contract purports to confer any kind of identifiable benefit to the 3P!
Presumption raised by s2(1)(b) is practically difficult to displace.
3. Problems with CRTPA
• s2(3) – express identification of 3rd party whom the benefit is purported to be conferred upon: current
requirement is (1) name, (2) member of a class or (3) conforming to particular description. What degree of
certainty/clarity is required?
o BURTON: requirement is generally such that as long as the promisor is not exposed to open-ended
liability
• s2(2) – rebutting the presumption raised in s2(1)(b) that parties intended for 3P to acquire right of
enforcement by purporting to confer benefit on 3P: how is the presumption rebutted? Lack of judicial
experience with such cases!
o e.g. what do we make of contractual silence i.e. nothing said about giving 3P a right of enforcement?
o Weight to be accorded to other factors? e.g. alternative avenues for recourse, lack of specificity in the
contract and/or 3P identified? Industrial practice?
• Is the statutory right of enforcement accorded to the 3P by CRTPA too generous to the 3P?
o Presumption of parties’ intention to allow 3P to acquire right of enforcement is practically easy to
achieve (any kind of benefit) and difficult to rebut!
o Absent any express provision to the contrary, CRTPA provides for crystallization of 3P rights such that
it limits parties’ abilities to vary the terms of the contract in a way that extinguishes or alters
entitlement under the 3P right!
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o Relaxation of both privity and consideration rule – circumventing the 3P’s inability to sustain
an action in contract by giving a statutory avenue for enforcement
• s6 – protection of promisor from over-liability: currently provides for court to offset 3P’s recovery if award has
already been made to promisee with respect to 3P’s loss. what happens if an award has been made to the
promisee with respect to HIS OWN loss (i.e. broad ground of recovery – substantial damages for loss of
performance interest)?
o Theoretically speaking, same measures can be adopted by courts in the case of preventing double
liability where promisee recovers substantial damages for his own loss – court’s concern should be
ensuring that damages are paid to the right party, payment of damages should pro tanto discharge the
promisor’s liability to both the promisee and the 3P.
o i.e. consolidate actions, join parties to proceedings.
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Misrepresentation
General
A misleading statement made during negotiations leading to a contract may fall within one of three categories: 1)
puff (commendatory expression which tends to be vague and extravagant, and hence would not ground any form of
liability); 2) representation (may be intended by neither party to have contractual effect, but nevertheless may
seriously affect the inclination of one party to enter into the contract); 3) term (if the party making the statement
undertakes or guarantees that it is true).
An actionable representation is a false statement of fact which materially induces representee into
entering the contract.
A. Elements of an actionable misrepresentation

1. A false unambiguous statement
I. Half truth
Partial non-disclosure may constitute a misrepresentation. Half truth encompasses statements of facts that are
literally true but convey a false impression when coupled with willful suppression of other facts. Suppression of
material facts can render that which is stated false (Dimmock v Hallett (1866) – seller of land told a purchaser that all
the farms on the land were fully let, but omitted to mention that the tenants had given notice to quit – may even be
considered a puff)
II. Conduct
Conduct from which a positive statement can be implied may amount to a misrepresentation (Spice Girls v Aprilia
World Service (2002) – AWS had sponsorship deal with SGL, but before contract was signed, one of the members told
the band that she was going to leave – SGL did not tell AWS that until contract was signed – held that the conduct of
the group (numerous photoshoots as a group and letters stating commitments of entire SG to the contract) was a
continuing representation that SGL did not know of any intention by any member to leave – but this was false
because when all these were made, SGL knew that GH had an intention to leave – thus, actionable
misrepresentation )
III. Change of circumstances
General
At common law, there is generally no duty of disclosure i.e. "acting in good faith" when contracting parties deal with
each other (Walford v Miles) with the exception of fiduciary relationships or uberrimae fidei (‘utmost good faith’)
contracts e.g. insurance. Vast majority operate under the principle of caveat emptor (‘let the buyers beware’).
Actionable misrepresentation
1) Failure to correct statements that become false after they have been made or 2) failure to disclose a change in
material circumstances give rise to actionable misrepresentation (With v O'Flanagan – Pf negotiated with Df to
take over his medical practice – Df represented that the takings were £2000 per annum – while true, it fell
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significantly after Df fell ill – Held that contract was rescinded for misrepresentation – Burton Ong: comes
closest to duty to act in good faith – only applies where representator KNOWS of a change in circumstances | Spice
Girls v Aprilia World Service (2002) – before contract was signed, one of the members informed Spice Girls Ltd that
she was leaving – held Spice Girls Ltd owned a duty to inform Aprilia of the change in circumstances –
not only did SGL not inform AWS of the change in circumstances, they affirmed and "gave added force" to the past
statement of fact which they knew had subsequently been falsified).
This also applies to cases where representations which, at the time of making it, the representor bona fide believes to
be true but subsequently discovers it to be false.
IV. Mere silence
Mere silence does not constitute a misrepresentation (Trans-World (Aluminium) Ltd v Cornelder China (Singapore)
(SGHC-2003) – "… nothing in general law which requires that commercial transactions of this nature be carried on in
a completely open way or requiring full disclosure at all times..." – "Misrepresentation by silence entails more than
mere silence. A mere silence could not, of itself, constitute willful conduct designed to deceive or
mislead. The misrepresentation of statements comes from a willful suppression of material and important facts
thereby rendering the statements untrue" – only in exceptional cases will mere silence constitute a
misrepresentation e.g. 1) contracts uberrimae fidae such as insurance contracts or where there is a 2) fiduciary
relationship)
2. Statement of fact
General
A statement is one of fact or opinion/intention depending on 1) words used and also on the 2) context and relative
position of the maker of the statement.
Statements of opinion can constitute actionable misrepresentation if they are made: 1) fraudulently (maker of
statement did not hold the opinion that he made), or 2) without reasonable grounds by a maker of statement of
opinion who has special skill or expertise over representee (Smith – misrepresentation on the basis of a false
(implied) statement of fact relating to reasonable grounds justifying the opinion).
Statements of intention can constitute actionable misrepresentation if 1) it was made fraudulently (Edginton), or
2) the maker of the statement lacked the capacity to carry out the intention – misrep. on the basis of a false
(implied) statement of fact relating to capacity to carry out the intention.
I. Statements of opinion
General
Generally a statement of opinion is not regarded as a statement of fact and thus is not actionable for misrepresentation.
Approach to take is to first consider if it is an opinion and next if it is present or past fact.
Exceptions
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A) Information asymmetry
However in cases of information asymmetry, statements of opinion may be regarded as statements of fact
which give rise to actionable representation if it was not made on reasonable grounds (Smith v Land & House
Property Corporation (1884) – Pf advertised hotel for sale, stating it was let to a "most desirable tenant" –
tenant was in fact in arrears with his rent at that time – Df agreed to purchase hotel but then refused to
complete – Pf sued for specific performance – held that statement was a representation – there
will be an operative misrepresentation if it is shown that the representor had no reasonable grounds for that
opinion or failed to investigate the facts that gave rise to it – Bowen LJ: where facts are equally well known to
both parties, what one of them says to the other is frequently nothing but an expression of opinion… But if the
facts are not equally known to both sides, then a statement of opinion by the one who knows the facts best
involves very often a statement of a material fact, for he impliedly states that he knows facts which
justify his opinion).
Erroneous statement of opinion is usually not actionable unless 1) fraud was involved or there was 2) no
reasonable basis for the opinion (Bisset v Wilkinson (NZPC-1927) – seller of land said land ‘had a carrying
capacity of 2000 sheep’ – both buyer and seller had equal knowledge about sheep rearing on the land, thus PC
held that seller was merely expressing his opinion – held statement was merely an opinion, not a
statement of fact – main difference is whether both parties had equal knowledge).
B) Party professing to possess special skill à more resources and in position to check
Where a party professing to possess special skill or expertise in relation to subject matter of his statement of
opinion, courts will imply that maker of statement is subject to a duty to make the statement of
opinion with reasonable skill and care (Esso Petroleum v Mardon (1976 QB) – Pf acquired site for
development as petrol-filling station – calculations showed estimated annual consumption of petrol would be
200,000 gallons – after site was acquired, local planning authority required changes to station layout, thus
lowering annual consumption of petrol – through lack of care, Pf failed to revise their estimation – Pf
negotiated with Df for tenancy of station, giving original estimation – Df subsequently had only an annual
consumption of 70,000 gallons and was unable to pay for petrol supplied – held Pf liable for damages for
misrep – would have been liable for breach of a collateral warranty, but not found by trial judge
even though CA felt it existed - Lord Denning: special knowledge or skill = duty to use reasonable care to see
that representation is correct)
Analysis
The underlying theme is whether, based on relativity of knowledge (either because of special skill or special
knowledge), representor had a reasonable basis for making the statement.
II. Statement of intention
General
Statements of intention always imply a statement of fact which accurately represents the representor's actual state of
mind at the point of making the representation (past/present) (Edginton v Fitzmaurice (1885) – directors
issued prospectus for issue of debentures to raise money – misrepresented the intended use of the money –
Bowen LJ: It is true that it is very difficult to prove what the state of a man's mind at a particular time is, but, if it can
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be ascertained, it is as much a fact as anything else. A misrepresentation as to the state of a man's mind is, therefore, a
misstatement of fact – the case stands for the proposition that misrepresentation need not be the sole
inducement to enter into the contract as long as it DID influence the claimant i.e. statements contained in
prospectus as to intended use of money + oral statement that claimant was entitled to first charge on property of
company).
Actionable misrepresentation
It usually does not give rise to actionable misrepresentation (Kleinwort Benson v Malaysia Mining Corp –
letter of comfort from Df coy to Pf bank that it would ensure its subsidiary is at all times financially able to meet its
obligation – held no misrep. – statement was a statement of present policy and not a promise as to future conduct –
rationale for not making statement of intention actionable is to avoid creating unnecessary liability just because
a representor made a truthful statement of his present intention only to change his mind subsequently (assuming
absence of binding promise not to change mind;
Wales v Wadham – Df previously married to Pf, stated that she would not remarry after divorce – Pf then promised a
sum of money to Df – Df later remarried – Pf sought to rescind contract on grounds that Df had induced him to enter
into the contract by her false and fraudulent misrepresentation that she had conscientious scruples against remarraige
following divorce – held no misrep. – Tudor J: A statement of intention is not a representation of existing fact,
unless the person making it does not honestly hold the intention he is expressing, in which case there is a
misrepresentation of fact in relation to the state of that person's mind;
Tan Chin Seng v Raffles Town Club – promise of a "premier club" made – agents made representations that there were
certain advantages with being a founder member of the club and that such membership would be exclusive – Pf relied
on these representations and purchased membership only to find that there were far too many members admitted –
held that statement as to exclusivity of club was a statement as to the future, not a statement of fact – a
statement as to the future is a promise and hence cannot be actionable unless part of a contract – a representation
relates to some existing or past fact… contains no element of futurity (Andrew Phang)) unless there is some
dishonesty involved i.e. the representor fraudulently mis-states his present intention (Edginton) or he lacks the
capacity to fulfill the intention.
3. Statement induces partly misled to enter into the contract

General
General
Question of fact; causation issue. Standard of causation is easily satisfied. This refers to the causal link between
statement and representee entering into the contract. Representation must form a real inducement to the
party to whom it is addressed. It need not be the sole nor predominant inducement as long as it is material.
Elements of inducement
Role of materiality: either 1) serves as evidence of inducement or 2) independent, objective test which serves to sieve
out unworthy claims (unless fraudulent)
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Inducement can be inferred from 1) materiality of the statement to the contract as a whole (objective) and 2)
representor’s intention to induce (subjective). The test of materiality is whether any reasonable person in the
representee’s position would have considered the statement as unimportant (Jurong Town Corp v Wishing Star (SG-
2005)).
Is the test of materiality an important element?

The position remains unclear. Treitel considers it an important element whereas McKendrick doubts its
efficacy. Perhaps what could be said is that if it can be shown, it will certainly help the Pf’s case but it is not
absolutely clear if it is a necessary element.
Issue #1: Whether Pf’s own investigation represents bar to claiming misrepresentation
Mere failure to examine documents/discover false representation when representee had a chance to is not necessarily
a bar to claiming misrepresentation
Redgrave v Hurd (1881) – Pf induced Df to enter into contract for purchase of house and his practice as a
solicitor – Pf misstated value of his practice, Df only took cursory view at documents – Df later refused to
complete the purchase of the house – Pf sued for specific performance – Df counterclaimed for rescission of
contract and return of deposit – held that Df was allowed to rescind contract for misrepresentation
regardless of his own carelessness – two important propositions: 1) no defence for representor to claim
that representee had opportunity to verify truth of statement but chose not to, and 2) a representee
does not need to show that he relied on statement; as long as it is a material representation, law will presume
inducement (presumption can be defeated by showing that representee had knowledge of facts to the
contrary);
1. Has it been restricted by ruling in Smith v Bush? If it is reasonable for a representee to take the
opportunity to test accuracy of representation or unreasonable to rely on it, his claim in negligent
misrep will fail; position should, a fortiori, be the same as innocent misrep (Treitel)
Leow Chin Hua v Ng Poh Buan (SGHC-2005) – Pf lost investment in company – sought to recover loss from
Df on ground that he was induced to invest by latter’s fraudulent misrepresentation of facts as to company’s
annual net profit – held that Df not liable on 2 grounds (endorsed Redgrave): 1) Pf conducted his own
investigation and did not rely on Df’s representation; 2) company’s annual net profit not even on Pf’s
mind at point in time of investment;
Jurong Town Corp v Wishing Star (SGCA-2005) – tender documents in a construction contract were found to
be untrue – Df terminated contract for misrep. and breach of contract – Pf brought action for damages for
wrongful termination – held that Pf were liable for misrep. – a person who had made a false
representation could not escape its consequences just because the innocent party had made his own inquiry
or due diligence (overruled Leow) à even if investigations were negligent, they could still sue
Basically, the new rule is that you can do your own investigation: if it is wrong/careless, you
won’t be barred; if it is true and you rely, you will be barred.
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Treitel: in certain circumstances, representee is supposed to check or do his or her own investigations e.g. commercial transactions, but
this is not the general view.
Inducement is a question of fact. Burden of proof rests upon the party misled.
Analysis: Failure to verify may reduce a representee’s damage for contributory negligence.
Issue #2: Whether self-induced misrepresentation is actionable

Self-induced misrepresentation is not actionable (Eng Hui Cheh v Opera Galleries - representee alleged that
art gallery represented that an item was the only one on sale in the open market – received a different edition of the
item and sued for misrepresentation of exclusivity – held that on a balance of probabilities, representor did
not make a statement of fact at all – dicta: in pleading misrepresentation, representee cannot be under a
unilateral mistake induced by mere silence because they would amount to a self-induced misrepresentation which is a
contradiction in terms – accepts that mere silence per se generally cannot constitute actionable misrep. as per Trans-
World Alumninum).
Defences of representor
Representor can show that there was no inducement where: 1) representee was unaware of the existence of the
statement; 2) representee knew of the untruth of the statement; 3) representee did not rely on the statement (Question
of degree? Leow Chin Hua; cf Jurong Town Corp -???); or 4) claimant had reasonable grounds to doubt the accuracy of
the statement.
B. Categories of Misrepresentation (mens rea)

Types of misrepresentation will affect the range of actions and the types of remedies available to the representee.
Remedies under Misrepresentation Act considered superior to remedies in tort.
1. Fraudulent misrepresentation (very hard to prove)

Nick: Essentially, a test to prove dishonesty.
Fraud is committed when it is shown that a false representation has been made 1) knowingly, 2) without belief in
its truth, or 3) recklessly, careless whether it be true of false (Derry v Peek (1889) – Df obtained statutory right to run
trams by animal power or, if consent of Board of Trade was obtained, by steam or mechanical power – Df believed that
Board would give this consent as a matter of course, as they had already submitted plans to Board without objection –
issued prospectus saying that company had right to run trams by steam or mechanical power – Pf took up shares in
company on faith of the representation – BoT ultimately refused to consent – Pf sued in tort of deceit – held that
Pf’s action failed – Lord Herschell: (offered above definition). Although I have treated the second and third as
distinct cases, I think the third is but an instance of the second, for one who makes a statement under such
circumstances can have no real belief in the truth of what he states – making a false statement through want of care
falls far short of fraud; so too does a false representation honestly believed, though on insufficient grounds).
Negligent misrepresentation will not amount to deceit, however gross the negligence may be. On the other hand, it is
not necessary to prove that there is a clear knowledge that the statement made was false in order to constitute fraud.
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What is essential is the absence of any belief in its truth. Motive of the person making the representation is
irrelevant.
2. Negligent misrepresentation
Negligent misrepresentation made by one party to the other preparatory to entering into a contract can give rise to an
action for damages in tort for negligent misstatement if 1) the person making it has or professes to have special
knowledge or skill in respect of the facts stated, or 2) the representation is to be regarded as neither casual nor
unconsidered, but is intended to be relied on (Hedley Byrne principle). The burden of proving negligence rests on the
party alleging the misrepresentation.
Hedley Byrne principle

Liability in tort for negligent misstatements was first recognised in Hedley Byrne v Heller, where it recognised the
following factors in determining whether a duty of care would arise between Pf and Df: 1) the skill and judgement of
maker of statement; 2) whether there is reasonable reliance on the representation by the representee; and 3) whether
maker of the statement voluntarily assumes responsibility for making the statement. As a general rule, a duty of care is
unlikely to arise in respect of statements made on social or casual occasions (Yap Boon Keng Sonny at [158]; Chaudry
v Prabhakar).
To establish a duty of care with regards to pure economic loss, the Spandeck test is used, with a threshold requirement
of factual foreseeability and a 2-stage test of proximity and policy considerations. The indications of proximity for
economic loss in Singapore was set out by the Court of Appeal in Spandeck v DSTA - that of a voluntary
assumption of responsibility and reasonable reliance. These 2 factors of proximity were also present in to
establish a duty of care to avoid economic loss sustained on reliance of the negligent misrepresentation of the
defendant in Yap Boon Keng and Hedley Byrne. Some factors that will affect the finding of the twin criteria include the
purpose of the statement (Caparo), the context in which the statement was made (Hedley), as well as any special skill
possessed by the defendant that the plaintiff relied on (Hedley).
However, there might be policy considerations that negate a finding of a duty of care, as unlike Caparo, the advice was
given as a favour and the courts might not want to find a duty of care to defendants dispensing free advice. However,
the courts might view Charles as a vulnerable claimant similar to Smith, which coupled with Singapore’s aim to
be a financial hub, might convince the courts to find a duty of care for this situation, and let Charles’s claim for pure
economic loss resulting from negligent misstatements.
3. Innocent misrepresentation
Innocent misrepresentation occurs when the representor had reasonable grounds for believing that his or her
false statement was true.
Damages are not recoverable at common law for innocent misrepresentation (but see Misrepresentation Act, s 2(2))
(Redgrave v Hurd; Whittington v Seale-Hayne (1990) – Pf poultry farmers were induced to take a lease by the Df’s
innocent oral mispresentation that premises were sanitary – water supply was contaminated, manager fell ill and
poultry died – Pfs claimed recission of lease and indemnity – compelled by local council to renew drains – held
contract rescinded, allowed recovery only for rent, rates and renewal of drains (these were expenses
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incurred as “obligations created by the contract” or necessarily arising out of occupation of the property) – cannot
claim for damages as there was no obligation to carry on a poultry farm on the leased premises).
4. Statutory Misrepresentation
Section 2(1) Misrepresentation Act:
Where a person has entered into a contract after a misrepresentation has been made to him by another party thereto
and as a result thereof he has suffered loss, then, if the person making the misrepresentation would be liable to
damages in respect thereof had the misrepresentation been made fraudulently, that person shall be so
liable notwithstanding that the misrepresentation was not made fraudulently, unless he proves that he had reasonable
ground to believe and did believe up to the time the contract was made that the facts represented were true.
“Reasonable ground to believe” might suggest that the duty imposed upon the representor is equivalent to the
duty of care in negligence.
C. Remedies for Misrepresentation: Recission

General
Misrepresentation Breach of contract
Rescission is the principal remedy for all types of Damages are the primary remedy for breach of contract
misrepresentations. Damages available under s2(1) as of right. However, not all breaches give rise to a right
provided proviso is satisfied. to terminate contract (only breach of terms which are
important, or breach with sufficiently severe
consequences)
Contract voidable at representee’s election Termination of contract upon innocent party’s
election
Aims to restore parties to pre-contractual position Primary aim to put parties in a position as if contract
had been performed
Rescission sets aside contract for all purposes Termination discharges parties from prospective
prospectively and retrospectively obligations
The innocent party can rescind the contract ab initio so long as there are no bars to rescission (Alati v Kruger (1955)).
Recission may be accompanied by indemnity order awarded by the courts to allow representee to recover
necessary expenses incurred and to restore him to pre-contractual state (Whittington) – this is not the
same as awarding damages to compensate for loss. It is available for all types of misrepresentations (Redgrave).
Intention to rescind must be communicated to representor (notice not always necessary) (Car and Universal Finance v
Caldwell).
Bars to rescission
1. Affirmation
If an innocent party affirms the contract after becoming aware of the falsity of the representation, the right to
rescind is lost (Long v Lloyd (1958) – Pf induced to purchase lorry by Df’s representation that it was “in excellent
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condition” – on first journey after sale, Pf noticed several serious defects – Df was informed and offered to pay half the
cost of some repairs – on next long journey, lorry broke down completely – Pf claimed to rescind contract – held Pf
not allowed to rescind as second journey constitute an affirmation; Pf already had knowledge that
representation was untrue).
2. Restitutio in integrum (mutual restitution) impossible
General
Rescission is only possible if both parties can be placed in their original positions.
Qualification
Precise restitution is not needed, and the court can use its power to do substantial justice (Vadasz v Pioneer
Concrete (1995) ALR – V owed Df concrete supplies firm money – V promised to warranty future debts accrued in
return for concrete supplied on credit – V signed agreement without reading, but agreement was warranty for all debts
past and future – HCA held that there was misrep, but to grant full recission would be inequitable
because V had enjoyed benefit of credit based on his warranty – partial rescission of warranty for past debts only was
granted – McK: criticizes the oft-held view that rescission is denied when restitution in integrum is impossible –
argues that case law suggests that primary concern of courts is simply whether claimant will be unjustly
enriched because of recission – technically, nothing can go back to pre-contractual state: courts simply seek to
ensure that claimant compensates Df if he has made use of goods up until point of recsission).
3. Injury to innocent third parties
Since the contract is voidable and not void, being valid until rescinded, if third parties bona fide without
notice and for value acquire rights in the subject-matter of the contract, those rights are valid against the party misled,
provided that rescission does not take place before the 3rd party acquires the rights (Car and Universal Finance v
Caldwell – Df fraudulently induced to sell car to a purchaser – when cheque was dishonoured, Df immediately
informed police but purchaser had already absconded – purchaser subsequently sold the car which came into the
hands of the Pf – held Pf had no claim to the vehicle – Df had effectively rescinded contract before 3rd party
acquired proprietary interest even though this was not communicated to the purchaser – as rescission was deemed to
have occurred before 3rd party purchaser acquired the vehicle, there was no bar to rescission).
Burton Ong: Courts are less likely to apply this rule strictly in misrepresentations involving fraud.
4. Lapse of time
Lapse of time may, in certain circumstances, bar the right to rescind e.g. treated as evidence of affirmation
where party misled fails to exercise the right to rescind for a considerable time after discovering the
representation to be untrue (not applicable to cases of fraudulent misrepresentation) (Leaf v International
Galleries (1950) KB – Pf bought a picture from Df, who innocent represented to him at time of purchase to have been
painted by Constable – five years later when Pf tried to sell it, discovered this was untrue – Pf tried to return the
painting and recover his money but Df refused – held that the right to rescind had been lost – purchaser has to
either verify or disprove the representation within a reasonable amount of time – policy reasons: contracts cannot
be subject to possibility of rescission indefinitely.
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D. Remedies for Misrepresentation: Damages

Common law
Type of
Rule Obiter dicta
Misrep.
Damages not subject to
In order to sustain an action of deceit, there must be proof of fraud (Derry v Peek – see above). remoteness principle as per
All actual losses directly flowing from the fraud are recoverable even if they could not have tort of negligence so as to 1) deter
Fraudulent
been reasonably foreseen (Wishing Star v JTC – liberal approach to damages in cases fraud and 2) to be fair (bear risk
involving fraud) of misfortunes directly caused by
fraud)
There exists liability in tort for negligent misrepresentation as long as special relationship
Negligent premised on reasonable reliance and assumption of responsibility is established and breached
(Hedley Byrne). However, only losses that are foreseeable can be recovered (Wagon Mound 1).
Common law provides no right to damages for innocent misrepresentations (but cf.
Innocent
Misrepresentation Act) because no wrong is committed
Damages for fraud

• Causation is assumed as long as representee entered contract (s 2(1) of Misrepresentation Act).
• No remoteness limit – all damages, foreseeable or otherwise, are recoverable.
• Loss of opportunity claimable
• Contributory negligence does not apply
• Case law: Smith New Court v Scrimgeour Vickers (AC-1997) – example of pleading misrepresentation because
of bad bargain
o Pf fraudulently induced by Df to purchase shares at £23m when market price was £21.8m –
unconnected flaw in company reduced market price to £12.25m – shares eventually sold at £11.75m –
held: damages awarded to Pf – correct measure is the difference between price paid and amount
subsequently realized on sale.
E. Statutory Remedy: Misrepresentation Act (Cap 390)

Comparisons with CL remedies
Innocent misrepresentation: No tort, thus no remedy
Fraudulent/negligent misrepresentation: tort, but damages are for tort, not contract (which are usually inferior
to)
Section 1
Removal of certain bars to rescission for innocent misrepresentation
S 1. – Where a person has entered into a contract after a misrepresentation has been made to him, and —
(a) the misrepresentation has become a term of the contract; or
(b) the contract has been performed,
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or both, then, if otherwise he would be entitled to rescind the contract without alleging fraud, he shall be so entitled,
subject to the provisions of this Act, notwithstanding the matters mentioned in paragraphs (a) and (b).
Interpretation
1) Section 1 provides access to rescission remedy for misrepresentation even if misrepresentation was
incorporated as a term of the contract (choice of framing alternative actions in breach of contract or
misrepresentation).
2) Innocent party may seek damages for breach of contract OR rescission and damages under s 2
Section 2(1): Damages for misrepresentation

2(1). — Where a person has entered into a contract after a misrepresentation has been made to him by another party
thereto and as a result thereof he has suffered loss, then, if the person making the misrepresentation would be liable to
damages in respect thereof had the misrepresentation been made fraudulently, that person shall be so liable
notwithstanding that the misrepresentation was not made fraudulently, unless he proves that he had reasonable
ground to believe and did believe up to the time the contract was made that the facts represented were true.
Interpretation
1) Section 2(1) creates statutory right to damages for contracting party induced into contracts by
misrepresentation
2) Burton Ong: Drafting was intended to supplement fraudulent misrepresentation cases such that non-
fraudulent cases had a statutory right to damages too
Analysis/Advantages
1. Representee need not prove fraud or negligence by representor in making of statement: only have to
prove elements of actionable representation (ADVANTAGE 1) i.e. false statement of fact materially inducing
representee into entering contract
a. Act was enacted to provide statutory remedy for negligent misstatements prior to Hedley Byrne
b. There is no necessity for Hedley Byrne relationship to ground liability as long as contract is
established
2. Burden of proof reversed (ADVANTAGE 2) under s 2(1): representor liable unless he proves he had 1)
reasonable ground to believe and 2) did believe that the facts represented were true
a. Criticism: Very difficult to disprove. Even in the case of Howard Marine, where reliance was placed
on Lloyd’s Register**, the barge owners were would liable in tort for damages under s 2(1) of
Misrep Act because burden had not been discharged because the marine manager had not shown any
objectively reasonable ground for disregarding the figure of deadweight capacity in the ship’s
documents and for preferring the Lloyd’s Register incorrect figure
3. Measure of damages similar to tort (restoring claimant to pre-contractual state) but “shall be so liable”
(statutory interpretation by Royscott) interpreted to allow recovery for ALL consequential losses
(ADVANTAGE 3) flowing from entering the contract (damages for fraudulent misrepresentation in action
for deceit)
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a. Allows for recovery of all damages directly flowing from a non-fraudulent misrepresentation even if
not foreseeable (Royscot Trust v Rogerson (QB-1991) Df car dealer agreed to a car on hire-
purchaser to customer – Df misstated transaction price and deposit price in his proposal to Pf finance
company – Pf was induced by misrep. to purchase car from dealer and enter into a hire-purchase
agreement with the customer - Hire-purchaser ceased to pay instalments and dishonestly sold car –
Pf claimed damages for innocent misrep. under s2(1) - held that the loss of unpaid instalments
was recoverable under s 2(1) – regardless of whether sale by hire-purchaser was foreseeable –
equated measure of damages to that in fraudulent misrepresentation (“deceit rule [for
damages] applied to [non-fraudulent misrepresentation] by virtue of fiction of fraud”)
b. Criticism of Royscot’s interpretation of s 2(1)
i. Interpretation of “so liable” – establishes liability only and not measure of damages
1. Fiction of fraud should only be used to establish liability, not damages
2. Even in Royscot Trust, damages would be recoverable on the facts of the case; need
not rely on s 2(1)
3. Law Reform Report: generosity was intended (see Mindy-Chen)
4. Smith New Court (fraud): HL noted strong criticism laid against decision in Royscot
Trust – did not overrule the case – did express some doubt about the loose
wording of the statute
ii. Effect is to treat the foolish but honest men as if he were dishonest
1. Not a fair solution to apply deceit measure of damages rather the negligence measure
for fools or careless representors treated like fraudsters
a. In Royscot Trust, car-dealer was not guilty of fraud but was treated as such
iii. Out of step with modern developments
1. Product of Law Reform Committee’s report, published in 1942 when it was not
thought to be the ‘general function of the civil law to grade the damages which an
injured person may recover in accordance with the moral guilty of the defendant’.
a. Unlikely that the legislature really intended unintentional misrepresentation
to attract the same moral opprobrium as deceit and s(2) signals legislature’s
intention to differentiate between them
2. Out of step with modern developments: The Wagon Mound (No 1) tied liability to
foreseeability while Hedley Byrne recognized lesser liability for negligent
misrepresentation than for deceit, showing that the law has come to reflect the
relative degree of moral fault in damages awards
iv. Render the tort of deceit less important where contractual relationships are
concern – much easier to recover damages under s 2(1) because of the above 3 advantages
4. Date of transaction rule: usually looks at date of transaction but sometimes, in the interest of justice or
fairness, the date would be shifted e.g. where representee is locked-in and cannot get out of contract
5. Mitigation: Duty to mitigate even if fraudulent (Smith New Court)
a. How far should representee mitigate by? Based on reasonableness.
b. So in the case of the tutorial, if it is more reasonable to go for the more expensive option (official place
for repair/treatment or for better general treatment), then it’s alright
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Section 2(2): Damages in lieu of rescission

Interpretation
S2(2) – Where a person has entered into a contract after a misrepresentation has been made to him otherwise than
fraudulently, and he would be entitled, by reason of the misrepresentation, to rescind the contract, then, if it is claimed,
in any proceedings arising out of the contract, that the contract ought to be or has been rescinded, the court or
arbitrator may declare the contract subsisting and award damages in lieu of rescission, if of opinion that
it would be equitable to do so, having regard to the nature of the misrepresentation and the loss that would be caused
by it if the contract were upheld, as well as to the loss that rescission would cause to the other party.
Interpretation
Except in cases of fraud, the court has a discretion (claimant cannot elect for damages) to refuse to allow
rescission and to award damages in lieu of rescission. Restricts access to recission in cases where it is
inequitable to deprive non-fraudulent representor of his entire bargain.
Inequity is based on seriousness of the act.
Analysis
Loss caused by the misrepresentation as a result of upholding the contract, and NOT the loss caused
by entering into the contract s2(1).
 Rationale of s2(2) is so that it will not be too harsh to representor to be deprived of the whole benefit of the
bargain on account of a minor misrepresentation.
o Prevents representee from using a misrepresentation as a pretext for escaping a bad bargain
(William Sindall)
 Comparison exercise between loss to representee if contract was upheld vs. loss to representor if contract was
rescinded
 Measure of damages is that of loss caused by misrepresentation if the contract was upheld
 S2(3) requires damages awarded under s2(2) to take into consideration any damages awarded under s2(1) –
ensures that representee is not over-compensated
 BURTON ONG: in a contract for sale of land, loss suffered by representee if contract upheld is the difference
in value between the value that the representee was misled into thinking and the actual value of the land at
that point in time
 May cause problems especially because of fluctuating land values
William Sindall Plc v Cambridgeshire CC [1994] 1 WLR 1016

Plaintiff agreed to buy land for development at £5m - Defendants informed plaintiff that there were no rights of
easement or public rights that would affect the property other than those mentioned in the contract - Defendants later
discovered a private foul sewer under the site, by which time the site was worth less than half the purchase price -
Plaintiff sought to rescind the contract - Held: no misrepresentation, but the court went on to consider the event that
there was a misrepresentation and whether damages under s2(2) would be awarded
 *Per Hoffman LJ, to consider the following matters:
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à Nature of the misrepresentation – in the context of a 5m sale of land, a misrepresentation which

would cost 18,000 to put right was unlikely to have interfered with the development or resale of the
property was a matter of relatively minor importance
à Loss caused by the misrepresentation if the contract was upheld – cost of diverting the sewer would be
£18,000, award of damages (cost of cure)
à Loss to the representor if contract was rescinded – hardship may be caused to deprive the representor
of the whole benefit of the bargain on account of a minor misrepresentation
à NET RESULT: vast disproportion between loss caused to representee due to misrepresentation and
loss caused to representor by rescission
 Award of damages under s2(2) in this case would coincide with cost of cure measure because cost of
rectifying defect was easily quantified
 **Suggestions for award of damages under s2(2)
à Difference in value between what the plaintiff was misled into believing he was acquiring and the
value of what he in fact received at the point in time of entering the contract
à Cost of remedying the defect, or alternatively the reduced market value attributable to the defect
together with additional compensation
à Damage caused by the property not being what it was represented to be
 NOTE: damages under s2(2) should never exceed what the claimant would have got for breach
of contract had the representation been a term (expectation loss)
à So as not to exaggerate the anomaly that a misrepresentation, no matter how minor, gives rise to
rescission while if it were a term it may only give rise to a claim for modest damages
Meta-Analysis
• Damages in lieu of rescission if equitable to do so; based on following factors in William Sindall:
1. Nature of the misrepresentation (fraud is different à cannot use s 2(2))
2. Loss that would be caused to the representee if the contract were upheld
3. Loss that rescission would cause to the representor
• Right to rescission must still subsist
• Measure of damages: some suggestions in William Sindall
o Cost of cure
o Diminution in value
• S 2(3) requires any s 2(2) awards to be taken into account in making s 2(1) awards: in case of double liability?
o Suggests that s 2(2) offers lower damages than 2(1)
• Would external factors such as fall in market value affect judicial decision in electing to award s 2(2)
o In William v Sindhall, it did.
Section 3: Exclusion clauses

A party to a contract is entitled, by means of an appropriately-drafted exemption clause, to limit or exclude his liability
for misrepresentation, except in cases of fraud, where liability cannot be excluded at common law.
S3(1) of Misrepresentation Act subjects liability clause for misrepresentation to test of reasonableness under
UCTA which the representor must prove:
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“If a contract contains a term which would exclude or restrict —

(a) any liability to which a party to a contract may be subject by reason of any misrepresentation made by
him before the contract was made; or
(b) any remedy available to another party to the contract by reason of such a misrepresentation,
that term shall be of no effect except in so far as it satisfies the requirement of reasonableness as stated in
section 11 (1) of the Unfair Contract Terms Act, and it is for those claiming that the term satisfies that
requirement to show that it does.”
 The court is empowered to give effect to it if it is a fair and reasonable term to be included in the contract
à Having regard to all the circumstances which were, or ought reasonably to have been, known to or in
the contemplation of the parties when the contract was made
• Clauses which purport to negate any element of actionable misrepresentation is caught by s3(1)
o e.g. “neither party has relied on any statement made…” – nullifies the inducement aspect
• Basically, such clauses are prima facie invalid, unless the representor can establish their reasonableness,
having regard to circumstances.
Overbrooke Estates v Glencombe Properties [1974] 1 WLR 1335

 Auctioneer sold property belonging to plaintiffs to defendants
 In the course of doing so, he made a misrepresentation as to local authority plans with respect to the property
 Defendants refused to proceed with the sale because of the misrepresentation
 Plaintiffs brought an action for specific performance of the contract, and relied on a term in the conditions of
sale which stated that the auctioneer had no authority to make any representation in relation to the property
 Held: even if there was a misrepresentation, the clause was valid in limiting the authority of the auctioneer
 Section 3 does not operate to qualify the right of a principal publicly to limit the authority of an agent, and was
therefore inapplicable
 “No agent authority” clauses are not caught by s3. Rationale: to protect the principal, allowing principal to
disclaim all responsibility for agent’s statements.
Issue #1: Entire Agreement Clause

 Effect is to attempt to exclude liability for pre-contractual misrepresentations which may have induced other
party into entering contract
 Substance vs. form?
o Substance over form à essentially exclusive
 Cremdean and Thomas Witter where courts considered the substance of entire agreement clause and
subjected it to controls in s3 because the clause effectively excluded the representor from the
representee’s relief
o Cannot allow ingenous drafting to pass à would reduce act to nothing
o Cremdean Properties v Nash (1977) – If purchaser can prove that despite the clause he did in fact rely
on the misrepresentation, this clause would also be caught by the Act, since it effectively excluded his
remedy – clauses which purports to deny an essential element of misrepresentation e.g. that the
representee did not rely on statements cannot preclude a claim for misrepresentation if the
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representee can prove the existence of the essential element – such a clause will be caught by s3 since
it effectively excluded the representor’s liability for misrepresentation – looks at substance)
o Thomas Witter (1996) – Df negotiated sale of a carpet company to PF – Df negligent misrepresented a
special one-off expense in their accounts – sale contract included a provision stating that P
acknowledged it had not been induced to enter into the agreement by any representation or warranty
– Pf sued for negligent misrepresentation – held, Pf’s claim succeed – clause purported to exclude all
forms of misrepresentation, include fraudulent misrepresentation, and hence was caught under s3
 BUT see Watford Electronics v Sanderson: “The parties agree that terms and conditions represent the entire
agreement… no statement or representations made by either party have been relied upon by
the other in agreeing to enter into the contract.” – HELD that acknowledgement of non-reliance of this type
held not to be in substance an exclusion clause to which s3 operates (looking at form only), although such a
clause could give rise to an evidential estoppel to prevent representee from asserting that he relied on the
statement.
 McKendrick: debate may not be significant in cases involving parties of equal bargaining power because clause
is likely to pass reasonable test. More significant where the parties are not of equal bargaining power.
 Singapore’s position as per Ng Giap Hon v Westcomb Securities (SGCA-2009) on whether entire
agreement clause would prevent implication of terms:
o Where entire agreement clause provides for implied terms, then it is not prevented
o Where entire agreement clause DOES NOT provide for implied terms, it may be implied for the
following reasons:
1. Implied terms, by its nature, would not have been contemplated by parties in the first place
2. If term implied in law (for type of contract) instead of in fact (for ad hoc), it would follow that the
term implied in law would not have been contemplated since it is not premised on the
presumed intention of the parties.
3. Implied term cannot be implied if it is inconsistent with an express term
4. IF implied term necessary to make express terms work, then implied term might not be
excluded by entire agreement clause
o However, to exclude implied terms, parties must:
§ Express such effect in clear and unambiguous language
§ Where language of entire agreement clause is in substance an exception clause, the
entire agreement clause is also subjected to restraints on exemption clauses and UCTA
Analysis
• Generally, term excluding/limiting liability for consequences of a misrepresentation not allowed, unless
term satisfies requirement of reasonableness in UCTA (s11)
o Bargaining power
o Advice of solicitor
o Presence of negotiators
• Problem lies in distingushing between clauses defining liability and clauses excluding/limiting
liability
o Term restricting authority of agent (Overbrooke Estates v Glencombe Properties)
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o Disclaimer of responsibility for statements by agent (Cremdean Properties v Nash – held that it was
an exclusion clause, thus subject to test of reasonableness under UCTA)
o Entire agreement clauses (A clause that states that written contract constitutes the entire agreement
and that "no statement or representation made by either party have been relied upon by the other in
agreeing to enter the contract.")
Combination of Claims
 General Rule: can combine claims as long as each item of loss is claimed only once, and claims are not
inconsistent with one another
à Can choose to rescind and claim reliance damages if any
à Can choose to affirm and claim damages for breach of contract, but these damages will not be
claimable if choose to rescind
 Section 2(3) of Misrepresentation Act
à Section 2(2) allows damages in lieu of rescission even if representor is liable under s2(1)
à But assessment of s2(1) liability should take into account any award of s2(2) damages
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Mistake
General
Introduction
Like misrepresentation, mistake is concerned with defects in the formative process. An operative mistake would
render the contract from even coming into existence. Generally, there are three kinds of mistake: 1) unilateral
mistake, where one party has made a mistake (usually unconscionably); 2) mutual mistake, where both parties
are mistaken but make different mistakes such that they are at cross-purposes (usually genuine
misunderstanding); and 3) common mistake, where both parties make the same mistake (usually both innocent).
Policy conflicts
On one hand, relief should be available to protect a mistaken party who enters into a transaction under which
actual performance is so different from what he intended, to the extent that he 1) only agreed to performance
required under the mistaken belief, or 2) he would not have entered into contract had he known of the
mistake. This factors in considerations of fairness to the mistaken party.
On the other hand, doctrine of mistake should be kept as narrow as possible because the general orientation of
the common law is to uphold and not destroy apparent contracts. This is to promote certainty in commercial
transactions: liberal use of doctrine of mistake would allow parties to 1) escape bad bargains easily, thus undermining
sanctity of contract (Tamplin v James (1879) – buyer mistook size of land for sale even though it was stated clearly –
refused to complete sale – seller sought specific performance – held specific performance granted – caveat
emptor principle upheld); 2) fairness to innocent third parties i.e. bona fide purchaser for value dependent on
existence of contract should be considered too.
S1: Mutual mistake

MCW: Each party makes a different mistaken assumption about the same matter (can also be seen or resolved as two unilateral mistakes
where contract should be voided if claimant’s mistake is sufficiently fundamental.
The effect of a mutual mistake is such that there is no consensus ad idem on an objective level, thus a contract is
prevented from coming into existence at all (Raffles v Wichelhaus (1864) – two ships called Peerless – Df buyer
referring to Peerless which sailed in Oct while Pf referred to Peerless which sailed in Dec – held for buyer, contract
voided).
This can be dealt with by normal contracting rules of offer and acceptance without invoking the doctrine of
mistake (Wellmix Organics v Lau Yu Man (SGCA-2006) – Pf counsel intended for Df to file and serve its affidavits of
evidence-in-chief (AEIC) – Df counsel intended for an exchange of AEICs – held that there was no consensus ad
idem and a lack of coincidence between offer and acceptance, thus no contract formed – also decided on
unilateral mistake because of existing judicial philosophy to try and minimize use of mutual mistake, leaving
only common and unilateral mistake). Court applies the objective theory of contract and holds that the intention of a
party must be inferred from their words and conduct as interpreted by a reasonable person in the other party’s
position.
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S2: Unilateral mistake

General
The general rule states that even if one party makes a unilateral mistake known to the other party while entering into
the contract, the contract is valid if objectively speaking their intentions show agreement (Smith v Hughes; Statoil
ASA v LD Energy Services).
It is trite law that, as a general rule, a party to a contract is bound even though he may have made a mistake in entering
into the contract. The law looks at the objective facts to determine whether a contract has come into being. The real
motive or intention of the parties is irrelevant, although it can be used in determining if knowledge or mistake was
present (Digilandmall).
One party is not bound to disclose to the other all material circumstances (Walford v Miles).
Even if it is known that the other party is contracting under a misapprehension, general rule is that there is no duty
to correct mistaken party. Misrepresentation by silence cannot entail mere silence without more (Transworld),
each party must protect itself from the consequences of its own mistake (Tamplin v James).
Main Categories of Exception to Unilateral Mistakes

 Mistake as to Terms
 Mistake as to Identity
à Written communications (inter absentes)
à Face-to-face transactions (inter praesentes)
• Objective ambiguity leading to no contract
o e.g. Raffles v Wichelhaus – no way of telling which sailing of Ex Peerless
o Scriven Bros v. Hindley – unilateral mistake induced by autioneer’s carelessness in catalogue
§ CHIN TET YONG: Scriven Bros seems to support the proposition that induced mistake can
displace rule of objective agreement
Mistake as to Identity
General
The main idea is to show that A did not intend to deal with B but intended to deal with C. It is not enough to
show that A would not have dealt with B. In a three-party situation, can the mistaken retrieve his property from the
innocent third party? The legal response to this question is beset by ‘illogical and sometimes barely
perceptible distinctions’ (Shogun Finance), and this is largely due to the inconsistent application of competing
doctrines (law on objectivity, mistake and fraud) and that of competing policies (fraud vs allocation of risk vs public
interest).
‘Identity-attribute’ paradigm
The general rule is that a mistake as to the identity of the other party will only void a contract if it goes to the other
party’s ‘identity’ as opposed to merely the ‘attributes’ e.g. as to solvency, character, or social position. This is
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analogous to the troublesome ‘substance-qualities’ paradigm distinguished in a contract’s subject matter in

common mistake. However, such a distinction has been dismissed by Lord Denning as mere myth.
MCW: The problem is that the identity of a person or a contract’s subject matter is an accumulation of their respective attributes or qualities.
Moreover, just as a ‘mere’ quality may be so essential that its absence voids the contract in common mistake, the same must apply to a person’s
attributes.
Four sometimes contradictory ‘rules’ guide the courts in making the identity-attribute distinction: 1) objectivity, 2)
written contracts, 3) non-existence of identity assumed, and 4) face-to-face dealings.
1. Objectivity: you cannot accept an offer meant for someone else

The objective test of formation prevents a party from accepting an offer knowing that it was not intended to be made
to him (Boulton v Jones (1857) – written order – mistaken party J only intended to deal with previous owner
because of existence of set-off (account where J can deduct sums owed to him) – held contract was void for
mistake), unless the identity of the other contracting party is non-essential e.g. retailers/auctioneers generally not
concerned with identity of shopper/bidder (Dennant v Skinner).
2. Written contracts
The contract is void if A mistook B for another existing and identifiable party, C, and B knew it (Cundy v Lindsay
(1878) – L received order for goods from Blenkarn who copied signature of Blenkiron & Co, with whom L had
previous dealings with – L sent goods to B who send them on to C – L sued for return of goods – HL held that
contract was void for mistake; Shogun Finance v Hudson (2003) – applied Cundy – S sold car to R
(fraudster) who posed as a ‘Mr Patel’ and verified it with driver license – R then sold it to H – HL allowed for
recovery of car from third party because buyer’s identity named in agreement was of crucial importance to Pf)
3. Non-existence of identity assumed

A’s mistake as to B’s identity will only void their contract if A mistook B for another existing and identifiable party, C.
If A merely believes that B is C, who is non-existent or unidentifiable, the contract is only voidable (King’s Norton
Metal Co v Edridge – Pf received order for goods from “Hallam” – “Hallam” consisted solely of a fraudulent person
named Wallis – Pf sold goods to Wallis who sold goods to Df – Pf sued to recover goods from Df, claiming that the
contract was void – held contract voidable – Pf had intended to contract with writer of the letter).
MCW: It is difficult to see why offeree and third party’s rights should depend on whether A mistook B for another real entity or not. Is there a
significant difference between A believing ‘B to be not B’, and by implication someone else, and A believing ‘B to be C, mistakenly believing that C
exists’?
4. Face-to-face dealings
Where the parties deal with each other face to face (inter praesentes) (as opposed to written communications or
inter absentes), the law presumes that the mistaken party intended to deal with the party standing before him. The
contract is only voidable, thus bone fide third party purchasers who obtain title before contract is rescinded are
protected.
Phillips v Brooks (1919) – frauster represented himself as Sir George Bullough and gave his address – Pf knew
of Sir George’s reputation and checked that Sir George lived at that address – fraudster allowed to take the
ring and later pledged it to Df – held that contract was voidable – mistake was a mistake as to attribute of
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creditworthiness and not to identity because 1) jeweler prepared to sell to fraudster individually as a casual
customer and 2) mention of Sir George’s name only affected method of payment.
Ingram v Little (QB-1961) – Pf joint owners of car advertised it for sale – rogue visited them and offered to buy
car – rogue called himself Hutchinson, gave initials and address – one of the Pf ascertained from telephone
directory that such a person did live at the address – held that contract void for mistake to identity –
circumstances indicated that Pf were concerned with identity of contracting party – open for criticism.
 Hard cases make bad law
 Dissent by Devlin J: f2f presumption + creditworthiness/identity parallels PvB and LvA
o Losses should be apportioned
o Creditworthiness: risk that you bear
 Compared with tiara heirloom example (economic vs sentimentality)
Lewis v Avery (QB-1972) – Pf advertised car for sale – rogue posing as Richard Greene made an offer – Pf
wanted to wait till cheque was cleared before handing over car – Greene produced ‘proof’ that he was Richard
Greene in the form of a special pass – Pf satisfied and allowed rogue to take car – cheque useless, rogue sold
car to innocent Df – held that contract was voidable, thus Pf could not recover his car.
How do we reconcile Ingram with Lewis/Phillips?

Ingram was structurally similar to Lewis but the courts provided diametrically opposing rulings. Furthermore,
all the sellers took steps to check the alleged identity of the buyers: there is no difference between the merits of
the respective seller’s claims. Conflict appears to have been resolved in favour of voidability unless contract
is in writing. HL held in Shogan Finance that presumption against a contract being void for mistaken
identity in face-to-face dealings is a strong one (two of their Lordships even doubted the possibility
of rebutting this presumption although Lord Walker was prepared to accept it in wholly exceptionally
cases e.g. fraudster impersonates a person known to the mistaken party whose senses are impaired).
Nick: Ingram appears to be based on policy rather than on principle because the Ingram sisters were poor and the court felt sympathetic.
Such an unjustifiable doctrine is unlikely to be invoked again except in rare cases.
5. Shogan Finance v Hudson (UKHL-2003)

Brief
The rogue had expressed an interest in purchasing a Mitsubishi Shogun car from a motor dealer. The rogue pretended to be a Mr Durlabh Patel, had
given Mr Patel’s address and had produced Mr Patel’s stolen driving licence as proof of his identity. The dealer agreed the price for the car (£22,250)
and had then faxed a draft hire purchase agreement to the claimant finance company with a copy of the driving licence. The written hire purchase
had been signed by the rogue, forging the signature on Mr Patel’s driving licence. It also stated that it was to take effect as an offer by “the customer
named overleaf”, and Mr Patel was named as the customer. The finance company checked Mr Patel’s credit rating and approved the finance. The
dealer therefore allowed the rogue to take possession of the vehicle whereupon the rogue sold the car to Hudson, a purchaser in good faith, for
£17,000. [Note that the dealer sells the car to the finance company which then “hires” it to the purchaser].
The finance company brought a claim against the defendant, Hudson, for damages in the tort of conversion and the defendant counterclaimed that
he had acquired good title in accordance with section 27 of the Hire Purchase Act 1964. If the rogue was a “debtor” under the hire purchase
agreement for the purposes of section 27 then the defendant would have acquired good title. The judge at first instance held that the defendant was
not a “debtor” and the majority of the Court of Appeal agreed on the basis that the hire purchase agreement had not been made with the rogue but
with Mr Patel, the person whose identity he had taken. The real Mr Patel could not be liable on such an agreement because his signature had been
forged so that the defendant was not protected. The majority of the Court of Appeal rejected the defendant’s alternative argument that
this was a face-to-face contract made between the rogue and the finance company via the dealer as agent, thereby raising the presumption that the
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finance company intended to deal with the rogue, as the person present. The basis for this rejection was that the dealer was not the agent for the
finance company.
HL ruling
On appeal to the House of Lords held: dismissing the appeal (3:2; Lords Nicholls and Millett dissenting) that the written agreement was
made between the finance company and the real Mr Patel. However, this was a nullity because it had been made without Mr Patel’s
authority. There was no valid contract between the rogue and the finance company. Accordingly the defendant was not protected by section 27 as he
was not the “debtor”.
(Majority) Lord Hobhouse

This issue before the House was limited to one of construction of the written hire purchase agreement. The written contract explicitly
named Mr Patel and was described as an offer by Mr Patel to the finance company. Therefore, the finance company’s acceptance related to that offer.
Only the finance company and Mr Patel could be parties to the agreement. In accordance with the parol evidence rule, oral evidence
was not admissible to contradict the terms of the writing in order to demonstrate that in accordance with the face-to-face presumption the rogue
was the true “debtor”.
(Majority) Lord Phillips and Walker

Formulated the issue as one of offer and acceptance objectively determined (written document) (so that in this respect their position
accords with that of Lord Hobhouse):
(1) Affirmed the presumption in face-to-face dealings that you intend to deal with the person who is physically present. This raised the
question of what constitutes a face-to-face dealing. Lord Walker considered that it might include telephone dealings. (It seems to
follow that Ingram v Little is wrongly decided).
(2) This presumption did not apply to contracts made by means of written documents, including contracts made by post, email and
the present situation. In these cases the offer and acceptance issue turned on the written documents. [However, this doesn’t
address the question of what is the position where the offeror doesn’t exist? This is dealt with in King’s Norton Metal Co Ltd
v Edridge, Merrett & Co Ltd (1897) 14 TLR 98 [Casebook page 80] : intention to deal with the writer of the letter] .
Lords Phillips and Walker rejected the opinion of Sedley LJ dissenting in the Court of Appeal that this was a face-to-face dealing conducted
through the dealer as agent for the finance company. It appears that this was because the parties were expressly named in the written
document.
Comment: Followed Cundy v Lindsay. There is a clear policy element in the result achieved in the majority speeches due to the perception
that finance companies granting hire purchase facilities to car buyers need to be protected against fraud. If it was conceivable that they might end up
in a position of losing both the car and the finance despite having carried out credit checks, this might prove to be a disincentive to
lending in such circumstances. The primacy of the written document (taken literally) is evident in the speeches of the majority – and
accords with the distinction (albeit arbitrary on occasions) in the previous law between postal contracts (Cundy v Lindsay – void) and face to face
contracts (Lewis v Averay – voidable). This distinction has been reinforced by the decision of the House of Lords.
(Dissenting) Lord Nicholls and Millett

The dissenting speeches focus on the arbitrary distinction discussed above and the fact that, as the Court of Appeal had pointed out, the law in
this area is unsatisfactory and full of anomalies. In particular, it had been hoped that the House of Lords would clear up the apparent
anomaly between contracts made by post and face-to-face dealings. The context for contract formation is often a matter of chance and
may well be determined by the rogue. However, if anything, this anomaly has been reinforced by the majority position.
Lords Nicholls and Millett therefore favoured a more general principle to replace the presumption and the decision in Cundy v
Lindsay:
The suggested formulation is that “[a] person is presumed to intend to contract with the person with whom he is actually dealing” (per
Lord Nicholls [36]). However, what is meant by “dealing” in this context? And is this tantamount to adopting Lord Denning’s
advocated position that mistakes as to identity should render the contract voidable in all cases so that the loss will fall on the
vendor or finance company rather than an “innocent” purchaser from the rogue (the degrees of innocence debate)?
Comment: The dissenting speeches also highlight the difficulty that exists in relying upon the name given in a written document: does this name
refer to the rogue pretending to be the real Mr Patel or to the real Mr Patel? This means that the majority approach is not necessarily as
clear as they assert. Although, as mentioned above, this is probably the simplest conclusion to achieve the policy objective, it may not stand up to
close scrutiny at the theoretical level.
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Difficulty with Shogun is the all-or-nothing approach in which mistaken party recovers in full or nothing at all. Suggestion for using a loss
allocation approach was rejected by Law Reform Commission due to uncertainty and complexity.
Burton Ong: (Policy) More appropriate for loss to be borne by the person who takes the risk inherent in parting with his goods before
receiving payment than by the 3rd party purchaser.
The result of Shogun Finance Ltd v Hudson is that the area of mistake to identity retains the 'face to face' distinction. This is that contracts of
immediate vicinity differ from contracts made over distance. Such a distinction has been labelled "artificial and unfair"[5] to third parties,
who bear the entire loss, where - at least in the instant case - it is argued that Shogun Finance Ltd had far better means to uncover the rogue's
fraud, than the independent purchaser[6]; in any case, the original seller is usually in the better position to protect and insure against
such risks[7].
Mistake as to Terms
General
General rule is that if one party makes a unilateral mistake as to the terms of the contract and the non-mistaken party
knows of the mistake, the law will not recognise that a contract has come into existence. (Statoil ASA v LD Energy
Services).
BURTON ONG: no correspondence between offer and acceptance because the non-mistaken party knows that the mistaken party is contracting on
a term which is different from what the non-mistaken party intended
Smith v Hughes (QB-1871) – old oats vs new oats – generally, caveat emptor applies where buyer has full opportunity
of inspecting and chooses to act on his own judgement – position otherwise if seller said or did anything to deceive
buyer – held new trial to held
Statoil ASA (EWHC-2008) – follows Smith v Hughes – General rule at common law is that if one party has made a
mistake as to the terms of the contract and that mistake is known to the other party, then the contract is not binding.
The reasoning is that although the parties appear objectively to have agreed to terms, it is clear that they are not in
agreement. Therefore the normal rule of looking only at the objective agreement of the aprties is displaced and the
court admits evidence to show what each side subjectively intended to agree by way of terms – distinction between
mistake as to fact and mistake as to term (law) – Pf tried to resile from settlement but there was no mistake as
to term of contract – mistaken date not a term of settlement agreement – hence Jan 2007 agreement valid – BUT
subsequent oral agreement to pay a greater sum superseding settlement agreement on Mar 2007 was
held valid too, so Pf would be entitled to the balance of demurrage as sought
N: General rule = objective (is there agreement?). But if court finds doubt to agreement, admits evidence to ascertain subjective intentions.
N: regarding the distinction between mistake as to fact and mistake as to law, can it be said that such distinctions no longer play a determinative
role as per the abolishment of such distinctions in the law of restitution and misrepresentation in Kleinwort Benson?
Hartog v Colin & Shields – sale of hare skins on per pound basis instead of per piece – H cannot snap up offer when he
is aware that CS has made a mistake relating to offer terms – prior negotiations conducted on basis of price per piece;
disparity in prices – held contract void for mistake
Chwee Kin Keong v Digilandmall.com (SGCA-2005) – prices of laser printers mistakenly altered on website – mistake
as to fundamental term of contract i.e. price – buyers knew sellers made a mistake – stark difference between posted
price and markets price – buyers were well-educated proefssionals – circumstances in which purchase was made –
held contract void for mistake – regarding nature knowledge required for contract to be void under ambit of
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common law doctrine of unilateral mistake: either actual knowledge or “Nelsonian knowledge” (wilful blindness
to the obvious)
Wellmix Organics v Lau Yu Man (SGHC-2006) – Actual knowledge of mistake by non-mistaken party required to
vitiate contract – constructive knowledge only suffices to invoke equity
S3: Common mistake

MCW: Doctrine on shared mistaken assumptions
General
Parties do not deny that an agreement exists but one party seeks to be discharged due to the fundamental common
mistake at the time of formation. Leading cases on the modern law are Bell v Lever Brothers Ltd (1932) and Great
Peace Shipping (2002). Both were denied relief for mistake.
Comment: Doctrine of common mistake kept narrow to ensure that parties do not easily get out of bad bargains – mainly non-existence of subject-
matter and mistake as to title (ownership). Mistake as to quality seldom does. Doctrine is inapplicable if contract expressly or impliedly provides for
risk allocation i.e. who bears the risk of the relevant mistake.
Bell v Lever Bros (UKHL-1932) – Employers signed compensation agreement with employees to terminate
employment contracts as part of corporate reorganisation – unknown to both parties, employee’s misconduct
had entitled employers to terminate employment contracts for breach of conduct – employers contended that
common mistaken belief that the employment contract was terminable only be agreement avoided the
compensation agreement – mutual mistake? – held that contract will only be void on the grounds of mistake
if the mistake is fundamental. Even if a mistake is of fundamental quality, it is of no effect unless it
relates to some assumption which both parties regard as essential
Lord Atkin Lord Thankerton Lord Warrington (minority)

o He first considers cases of mistake as to title – o Firstly, he was convinced that this was o The question is whether the error
eg. Cooper v Phibbs (the case where transfer of NOT a case of misrepresentation – which was merely a “material element” or
title of fishery was void because the transferee would have entitled rescission. an assumption of “fundamental
was actually a tenant for life and both parties o Next, this is not a case of mistake of character” that “goes to the root of
did not know this) – to stand for the existence of subject-matter since the the matter”.
proposition tt such a contract is unenforceable employment contracts DID exist at the o He concludes that it WAS
but not void. time of agreement. fundamental:
o Similarly for mistake as to quality, there is a o Instead this can only be a case of the Pfs o “[The assumption] was one which,
contract but a material breach. terminating the contract one way, when having regard to the matter on
o Also, this is not a case of mistake as to identity they were probably able to terminate in which the parties were negotiating
of subject matter. another way: – namely, the terms on which the
o In the present case, he characterised it as an o “There are many other cases service agreements were to be
agreement to terminate an existing contract. to the same effect, but I think prematurely determined and the
Such an agreement is not nullified just because that it is true to say that in all compensation to be paid therefor,
the existing contract is already breached: of them it either appeared on was in my opinion as fundamental
o “The contract released is the the face of the contract that the to the bargain as any error one can
identical contract in both cases, and matter as to which the mistake imagine.”
the party paying for release gets existed was an essential and o So the contract is not a contract of
exactly what he bargains for” integral element of the subject- employment, BUT a contract for
o He then examines an alternate argument matter of the contract, or it termination. Thus, the existence of
proffered – tt there the courts can imply a was an inevitable inference dishonest behaviour becomes
condition precedent to the formation of from the nature of the contract fundamental.
contract ie. tt there must be no breach of duty that all the parties so regarded
before the severance agreement can take effect. it”.
o But this would leave the law with too o This is probably how Cooper v Phibbs
much uncertainty bcoz how do must be distinguished. In Cooper, one
courts decide when such a condition can only sell a property if one owns it.
ought to be implied? Since the buyer turned out to be the one
o “A condition would not be implied owning it, there was no way that the
unless the new state of facts makes property could be transferred. Such a
the contract something different in transfer is naturali ratione inutilis (‘by
kind from the contract in the natural reason useless’).
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original state of facts…”, which o In this case there is simply insufficient

doesn’t seem the case here. cause to justify voiding the contract.
Commentary – how do we make sense of this decision?
o Big McK
o Academic MacMillan rejects the argument tt the mistake merely made the deal less desirable to the Pf. In fact, the Pf would never
have offered the deal to Bell and Snelling had they known. (Quare: But is it similar to Phibbs where a transfer of title was logically
impossible?)
o The sum of the mistake is pretty significant such tt it cannot be easily accepted why the majority in the HL said it was not
fundamental. But MacMillan (2003) argues tt the decision must be seen in light of its unique facts:
1. Mistake was not the primary ground, fraud was. Hence during trial, counsel did not thoroughly present arguments abt mistake.
2. At that time, the judicial attitude was somewhat of a high-water mark for contractual certainty.
3. Further, the HL had a ‘good picture’ of the two Dfs. They were exonerated of fraud and had come clean to the Co. once they
knew of their error.
4. It would probably be too harsh to deprive Bell and Snelling their severance à they had made A LOT of $ for the Co. and turned
in from loss to profit + the amt of $ they pocketed was minor compared to how much they stood to lose from the severance +
Bell was already too old to work.
(Yet, MacMillan points out tt the Pf had not commenced action simply cause it wanted the money back. It was a matter of
principle because it wanted the rest of employees to know tt even senior managers must conform to rules about propriety and
honesty)
• CF&F says tt this case is no authority for any general principle of common mistake.
• Anson – discredits the diff btw ‘quality’ and ‘substance’. Instead the bar seemed to have been drawn at whether the assumption was so
fundamental as to be impossible to perform.
Elements to be proved to avoid contract for common mistake as per Great Peace Shipping v Tsavliris
(EWCA-2003) (salvors hired vessel for purpose of salvage – both parties under common mistake that vessel was in
close proximity (35 miles) when it was actually 400 miles away – salvors attempted to avoid contract only after they
realise another vessel which was nearer was available for hire instead of immediately after discovering the true state of
affairs – held contract not void because actual distance between hired and stricken vessel not so great as to render
contractual performance impossible) at [76]:
i. There must be a common assumption as to the existence of a state of affairs
ii. There must be no warranty by either party that that state of affairs exists
iii. The non-existence of the state of affairs must not be attributable to the fault of either party
iv. The non-existence of the state of affairs must render performance of contract impossible
v. The state of affairs may be the existence, or a vital attribute of the consideration to be provided or
circumstances which must subsist if performance of the contractual adventure is to be possible
This can be collectively summarised as a three-step inquiry as per MCW: 1) Construction – risk of mistake was not
allocated to either party; 2) Fault – party was not at fault e.g. by making a very unreasonable mistake or inducing
the other party’s mistake; 3) Fundamentality – mistaken common assumption was so serious as to make
performance ‘impossible’. Approach mirrors that adopted by Steyn J in Associated Japanese Bank.
Fault
McRae v CDC (HCA-1951) – neither wrecked oil tanker nor reef existed – contract subsisted – CDC cannot
avoid contract on ground of common mistake as to existence of subject matter because it was at fault – on true
construction, contract included promise by CDC that tanker existed in position specified.
Condition precedent
Rather than allocating risk of mistake to one or other party, contract may provide, expressly or impliedly, that
the parties’ obligations will only arise if an assumed state of affairs is true, so that no obligations arise if this
condition precedent is not satisfied (Associated Japanese Bank – express condition precendent that
guarantee was for lease of existing machines).
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Mistake as to existence of subject matter

The non-existence of the subject matter of the contract which is mistakenly thought to exist (res extincta) will
normally negate the essential purpose of a contract or the means for achieving it.
s6 of Sale of Goods Act and

McRae v Commonwealth Disposals Commission (1951, HCA)
Couturier v. Hastie (1856, HL)
The decision in Couterier • Dfs sold a wreck to the Pfs, claiming tt the wreck contained oil.
• The case involved a sale of a shipment of corn from Salonica to UK. When Pfs tried to salvage the vessel, they realise it wasn’t there and
Unknown to both parties, the corn had deteriorated such tt the it never existed.
master of the ship sold it. • When Pfs sued for breach, the Dfs arg tt there was no contract
• Since the corn no longer existed at the time of contract, is there because it was void for mistake.
still a contract? • HCA gave judgement for Pfs – contract not void, Dfs liable in
• The Df tried valiantly to argue tt the Pf buyer was purchasing the breach.
‘rights of the seller under the shipping document’. But HL rejected o In Couturier, BOTH parties were labouring
this. under the shared assumption tt the corn was still
• HL simply said tt the purchase was one for corn, the corn no longer in existence. But here the Dfs had actually
exists and so there must be judgement for the buyers. ‘Mistake’ was promised tt the tanker was in existence.
never mentioned. o Thus the Dfs assume the risk tt the tanker might not
• This just leaves lawyers to postulate the interpretation to take: be in existence and they breached a term of the contract.
(i) A mistake as to existence of subject-matter of a contract No mistake.
inevitably renders a contract void.
(ii) Contract is void because there is an implied condition Q: How would McRae be decided in England?
precedent tt the goods must be capable of being sold • Probably the same since the result is just – the Dfs did promise sth
before they are sold. (adopted by Lord Denning in Solle v tt they did not deliver. ECA in Great Peace endorsed the decision.
Butcher) • However, what about s.6 of SGA? Does this decision not go against
à But when will courts imply such a condition? We don’t that?
know. o One way to reconcile is that the tanker had not
(iii) Whether a contract is void depends on the construction “perished” since it never existed.
of the contract. (adopted by HCA in McRae) o Another way is to argue that s.6 can be displaced if
parties expressly contract to exclude it.
Section 6 of SGA (Cap 393): o The third way is to see tt the two parties had entered
6. Where there is a contract for the sale of specific goods, and the goods into a separate collateral contract tt promised the
without the knowledge of the seller have perished at the time when the existence of the tanker. But the consideration from the
contract is made, the contract is void. Pfs would then be the entry into the main contract
**This provision was the result of Couterier. But interpretation (i) above (which would be void). Can entry into a void contract be
is not a convincing interpretation of that case because ‘mistake’ was consideration?
never considered. Instead the case focussed on the construction of the
contract.
Mistake as to quality
Mistake as to existence of subject matter would render performance of contract physical impossible. This is not
necessarily so with mistake as to essential quality of subject matter. Here, ‘impossibility’ of performance is measured
by the extent of deviation from the ‘substance of the contract’ which is, in turn, determined by the parties’
common purpose.
Courts have been quite strict when it comes to mistake of quality and they rarely void a contract on this ground (Leaf v
International Galleries (ECA-1950) – both parties believed the painting was a Constable when it wasn’t – held not
void; Oscar Chess v Williams (1957) – mistake as to model of car i.e. 1948 model turned out to be 1939 model not
sufficiently fundamental to void contract). In general, it is almost impossible to void a contract simply on
mistake as to quality, especially after the strict test in Great Peace.
HOW DO WE APPLY THE TEST FOR COMMON MISTAKE?

- While the genesis of the doctrine is murky, there is general consensus that the test is whether the mistake is ‘an essential and integral element of
the subject matter of the contract’ (Lord Thankerton in Bell). But how do we APPLY this test?
Prof Trietel (2003, p.292) Lord Phillips’ approach in Great Peace
• He proposed the following simple test: i. There must be a common assumption as to the existence of a state of
• ‘imagine you ask the parties, immediately after they made affairs
the contract, what its subject-matter was. If, in spite of the ii. There must be no warranty by either party tt that state of affairs
mistake, they would give the right answer the contract is exists
valid at law.’ iii. That non-existence must not be due to any party’s fault
• Such a test is satisfactory in most cases but it does not iv. That non-existence makes performance impossible
explain Leaf, for the parties clearly would not say ‘I bought a v. That state of affairs must be (a) the existence / vital attribute of the
painting’ but ‘I bought a Constable painting’. consideration provided OR (b) circumstances which must subsist if
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performance is to be possible.
Great Peace Shipping Ltd v. Tsavliris Salvage (International) Ltd (2002, ECA)
Facts
• One of the Df’s ships was in trouble and they were told by the Pfs (owner of Great Peace) tt GP was only 35 miles away. Dfs hired GP for rescue
but it turned out the GP was actually 410 miles away.
• Dfs then hired another ship to rescue and sought to cancel the contract of hire. Pfs sued to recover contract price.
• Dfs argue tt contract was vitiated by common mistake as to the true location of the vessel.
Judgement (unanimously held tt Pfs could claim)

• He first objects to the ‘implied term’ approach bcoz it the parties were working under an assumption, it would be unrealistic to ask whether the
parties would agree to be bound even when the assumption was mistaken. There is no sensible way to answer this question.
• Held that in this case, the fact tt the two vessels were further than expected did not render the contract impossible of
performance.
• When they realised the GP was so far away, they did not immediately cancel the hire. This shows tt the GP could still be used to provide some
sort of escort service for the stricken vessel. In fact, had they not been able to find a closer vessel, they would have to rely on GP, so the service
that GP offered them was not so essentially diff afterall.
Three key points to note about this case:

1. Parallels were drawn btw common mistake and frustration (esp requirements (iii) & (iv) above) BUT the bar (to ‘impossibility’) for
common mistake is even higher: “Circumstances where a contract is void as a result of common mistake are likely to be less common
than instances of frustration” à Esp for (iii) because it is interpreted to include whether any party has undertaken the risk that the
contract may prove impossible to perform.
2. Importance of construction of contract à it is essentially a matter of construction esp when determining if any party has undertaken the
risk. This explains why the decision in McRae, while on the face not satisfying s.6 of SGA, actually can be reconciled. On the construction
of the contract, risks were to be borne by one party, which displaces the default rule of s.6.
3. The whole test can be simplified into two key stages – (a) whether the contract was impossible of performance and (b)
whether any party has taken responsibility for the subsistence of that particular state of affairs.
Evaluation
• Should the doctrine be so narrow? In frustration, sth ‘radically different’ will suffice. Should common mistake be lowered to be more in line
with frustration?
Mistake in Equity
MISTAKE AT COMMON LAW MISTAKE AT EQUITY
Narrow doctrine: general thrust is to uphold Wider and more flexible doctrine to
than destroy apparent contracts. Operative supplement common law and mitigate the
common mistake only allowed under highly harsh rigour of its stringent doctrine
exceptional and uncontemplated circumstances. (Associated Jap. Bank)
(AJB, Ho Seng Construction)
High threshold afforded to mistake which Formulation of “fundamental mistake” wider

rendered contract void + no fault than common law + no fault
Effect of mistake: void – contract is a nullity Effect of mistake: contract voidable

from the beginning
Remedially inflexible Remedial flexibility: rescission on terms or

rectification or specific performance
Major Proponent is Lord Denning | Leading case: Solle v Butcher (1950, ECA)
• Landlord and tenant contracted under common mistaken belief that rent was not pegged by statute – tenant himself let out flats at rates above
statutory peg – Pf tenant sued Df landlord claiming that the max rent was pegged
• ECA held 2-1 that the lease shd be set aside ‘on terms’ (meaning that the court creates terms on which the parties agree to set aside the
contract).
• Denning LJ – set aside the contract for mistake in equity.
• Bucknill LJ concurred with Denning but on the ground tt the repairs had made the flat a different flat (bcoz the Df would not have refurbished
the flat if he knew of the mistake)
• Jenkins LJ – dissented and held that there was no common mistake of fact, but a mistake of law and at that time a mistake of law does not
allow you to set aside a contract.
Three key differences btw mistake in equity and at common law

1. Scope of the doctrine in equity is wider (Note tt Denning LJ wanted to restrict the scope of mistake at common law because it was very
drastic)
• A contract can be set aside in equity if 1) the mistake is fundamental and the party setting it aside is 2) not at fault.
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• Alternatively, the court can do so when ‘it was unconscientious for the other party to avail himself of the legal advantage which
he had obtained’.
2. In equity, contract voidable but not void.
à so tt innocent 3rd P rights can be protected too.
3. Courts have greater flexibility to remedies in equity.
à As in Solle, where the contract was set aside ‘on terms’.
Associated Japanese Bank v Credit du Nord SA (EWCA- Great Peace Shipping v Tsavliris (EWCA-2003) –
1989) – Relationship between mistake at common law and equity stricter view on equitable jurisdiction and casts doubt on Solle
Facts: B contracted to sell 4 machines to AJB and then lease back 1. Solle overruled on the grounds that it was a irreconcilable with
from AJB. Df = CdN provided guarantee for B’s payments. B House of Lords decision in Bell
defaulted; AJB sued for guarantee. CdN argue tt (1i) there was a a. Inconceivable that House of Lords in Bell overlooked an
condition precedent tt the machines exist or (2) the agreement was equitable jurisdiction
void for common mistake. CdN succeeded on (1). b. Solle did not supplement the common law as much as
outflank and contradict it
Dictum on how to apply mistake 2. Restores coherence in this area of law: uncertain and unfavourable
Before the courts can consider mistake, must first think for not promoting security of transaction
• Does the contract provide who to bear the risk (either a. No clear authority for more expansive equitable
expressly or by implied condition precedent)? jurisdiction
• Then the court must first consider a plea of common law b. Difficulty in distinguishing Lord Denning’s test of
mistake. If that succeeds, no question in equity arises. If it “fundamental” common mistake in equity (Solle) vs.
fails, then a plea of mistake in equity is to be considered. existence of a quality of the subject matter which makes the
thing without the quality “essentially different” from parties’
The following principles have generally held true in this area: contemplation (Bell)
1. The law shd uphold, rather than destroy contracts. 3. *Equity should not be employed in a case of common mistake where
2. The new circumstances must be wholly exceptional and the effect of the mistake is just to make the contract a bad bargain for
unexpected. one of the parties!
3. The mistake must be substantially shared by both parties. a. Generally, equity is invoked only where it is
4. The mistake must render the subject matter radically unconscionable for the party seeking to uphold the
different. contract to insist on his strict legal rights at common law and
5. Was the party (seeking to rely on the mistake) reasonable avail himself of the advantages – combination of inequitable
to make that assumption? conduct vis-à-vis the other party and benefit/detriment
(Chong Sze Pak)
Steyn J: “A narrow doctrine of common law mistake (as enunciated b. BURTON: consider the dynamics of the parties – where
in Bell v. Lever Bros Ltd), supplemented by the more flexible common mistake is concerned, both parties are usually
doctrine of mistake in equity (as developed in Solle v Butcher and not at fault!
later cases), seems to me to be an entirely sensible and satisfactory c. Great Peace: harsh and narrow doctrine of common mistake
state of the law.” at common law should be supplemented by other equitable
doctrines like misrepresentation
4. Calls for legislative reform to allow for greater flexibility to law of
mistake
a. Similar to Frustrated Contracts Act – loss apportionment
mechanism upon the draconian effect of Frustration
5. Was Great Peace correct? Future of equitable jurisdiction for common
mistakes
a. The decision in GP was probably just and the observation tt
Solle cannot reconcile with Bell is correct too.
b. Although ECA cannot overrule its own decision, many courts
will be disinclined to follow Solle now.
c. Read MCW's counterpoints esp. proportionality of legal
response, uncertainty and authority
HOW IS THE ISSUE VIEWED IN SINGAPORE?
PHANG J. in Wellmix Organics
Digilandmall (SGCA-2005) [56] – [80] (International) Pte Ltd v Lau Yu Man
(2006, SGHC, [55] – [77])
• Acknowledged tt Bell stood for idea that mistake must be very fundamental (strengthened Facts
by observing tt even the judges in dissent did not question this rule, but instead applied it • A case on the filing of ‘consent unless orders’.
differently) Such orders are contracts btw two litigating
• **Digilandmall, CA regarded the view that equitable intervention would create parties to agree to file affidavits of EIC in
unacceptable uncertainty as exaggerated (at [81]) and affirmed the continued protracted proceedings. So they will agree by
existence of an equitable jurisdiction for mistake after Great Peace when both parties must file their affidavits. If
• Actual knowledge on part of non-mistaken party will render contract void: common they fail to file, the court registrar will issue
law doctrine, not equity, applies (at [80]) ‘unless’ orders.
• However, courts have been exercising equitable jurisdiction previously. Though the Judgement
decision in Solle and Bell are irreconcilable, courts should not throw the baby that is • No breach of ‘consent unless’ orders because
equity out with the bathwater: no such agreement was struck. The
“We would be loath to hold that there is no equitable jurisdiction in the courts with agreement was void because of a mutual
regard to unilateral mistake just because it may be difficult to delineate the mistake, and in the alternative, a unilateral
scope or extent of that jurisdiction” at [74] mistake as well.
• Acknowledged the suggestion by Lord Hoffman in William Sindall Plc v • Issues
Cambridgeshire County Council tt common law rule apply to mistake as to o The element of ‘impropriety’
subject-matter and equity to other wider mistakes. utilises the concept of
• However, SGCA cautioned against too simplistic an approach: unconscionability which is itself
“Equity is dynamic. A great attribute, thus an advantage, of equity, is its flexibility to unsettled and may give rise to
achieve the ends of justice.” At [77] unintended side-effects if
“That fear (of uncertainty) is more apparent than real. The courts here, as well as applied to unilateral mistake in
in other common law countries, have been applying equitable principles equity (at [72])
from time immemorial. While certainty is desirable, it is not an object o Preferable to have one doctrine in
which should prevail in all circumstances, even against the dictates of unilateral mistake having the
justice.” At [81] same test, differing only in
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consequences (at [71])

How to apply the above to constructive knowledge in unilateral mistake?
1. Can common law doctrine of unilateral mistake apply? If yes, contract is
void and equity has no room.
2. If no, and there is evidence of 1) constructive knowledge on the non-mistaken
party, coupled with “sharp practice” or 2) “impropriety”, the courts may choose to
void the contract because it is unconscionable for the non-mistaken party to insist
on performance.
BURTON ONG: Following Digilandmall, does equity

1. Relax the knowledge requirement (constructive, as opposed to actual, knowledge of
mistake as to term), OR
2. Intervene on a fundamentally different basis altogether? i.e. unconscionability of non-
mistaken party’s conduct, no requirement as to go so far to say that no correspondence
between offer and acceptance??
o **See Chong Sze Pak v Har Meng Wo [1998] SGHC: court alludes to
equitable doctrine of unilateral mistake – “equity will intervene to grant
relief where a party is mistaken as to the terms of the offer... if in the
opinion of the court it is unconscientious for the other party to avail
himself of the legal advantage obtained.”
o **But in Statoil ASA v Louis Dreyfus Services (EWHC-2008),
Aikens J (at [105]): "The Great Peace decision strongly suggests
that there is no such jurisdiction in the case of a unilateral
mistake. If there is no such jurisdiction in the case of a common
mistake, I fear I am unable to see how, in logic, one can devise a
rationale for an equitable jurisdiction in the case of a unilateral
mistake, at least where there has been no misrepresentation by the other
party."
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Illegality
General
The general rule in illegality is ex turpi causa non oritur action ("from a dishonourable cause an action does not arise").
Thus courts would not enforce a contract or permit recovery of benefits under a contract which is illegal.
The illegality doctrine relates to contracts which are illegal or contrary to public policy (hereafter ‘illegal
contracts’). Contracts may be tainted because 1) making such contracts is itself prohibited, or more usually, because
its 2) means (the method of performance) is illegal; or 3) the contract’s ends (purposes) are illegal.
Contracts which become illegal by changes in the law subsequent to formation are dealt with by the doctrine of
frustration (see ch 8). On one view, the illegality doctrine represents the most open and direct interference
with contract parties’ freedom to determine the substance of their contracts. An alternative view is that it
designates the class of ‘unworthy’ contracts to which the law will not lend its support or force
Two main questions that this topic seeks to answer: 1) Enforcement: Can a party (innocent or otherwise) enforce his
rights under an illegal contract? 2) Restitution: Can a party (innocent or otherwise) recover benefits conferred to
the other party? A peculiar observation about the issue of ex turpi causa is that it is always the Df (unabashedly)
admitting to the illegality to 'get away from the contract'.
Principles behind courts not upholding illegal contracts

PRINCIPLES BEHIND COURTS NOT UPHOLDING ILLEGAL CONTRACTS
2. Promote the objects of 3. Deter people from
4. Prevent gains from
1. Uphold the integrity of the courts the law that has been entering into illegal
wrongdoing
infringed. contracts
• Dignity of the courts would be offended • For every law, the courts • Seeks to make it a • While the law does not
if it were seen assisting one’s generally send the message hazardous enterprise for want the Pf to gain
wrongdoing. tt they must be complied parties to enter into such from his wrongdoing, it
• Lord Goff in Tinsley admits that: “(ex with. It would be illegal contracts by is also acutely aware of
turpi causa) is not a principle of hypocritical if courts are ‘punishing them’. the need to prevent
justice, it is a principle of policy, seen as ‘endorsing’ the • But isn’t deterrence and the Df from getting
whose application is indiscriminate flouting of these laws. punishment is usually the benefits when it does
and so can lead to unfair consequences • But isn’t another object of function of the not deserve to.
as between parties” the law also to enforce criminal law and not
• The rejoinder is that not all illegal contracts and hold the civil law?
acts will tarnish the image of the parties to their
courts. For serious crimes yes but for bargains?
some trivial regulatory offences, it can
hardly be said that the court’s
reputation will be hurt.
Categories of illegality
Statutory illegality
A contract may be illegal because its formation, purpose, or performance contravenes some statute or the common law.
It is difficult to generalise about the wide range of statutory prohibitions although they are often designed
to secure fair trading conditions, safeguard property and personal safety, and prevent competitive markets from being
undermined.
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Some examples:
1. S 6 of Financial Advisers Act (says tt if you give financial advise in the course of a business without
license, it is illegal)
a. BUT when read with s 30 of that Act, Parliament expressly says the contract is not void. (a case
where Parliament EXPRESSLY says it does not prohibit the contract)
2. S 14 of HOTA says clearly tt contract for human organs is void
3. S 5 of Moneylenders Act – no unlicensed moneylending
a. BUT s 14 says loan is unenforceable (Contract not void by unenforceable)
Common-law illegality
The common law prohibits some types of contracts because it is 'contrary to public policy'. The tricky thing is htat
courts must actually develop their own concepts of public policy and explain why such contracts are
barred.
1. Contract to commit a crime or defraud the revenue authorities

2. *Agreements contrary to good morals
• Pearce v Brooks (1866) à Prostitute rent carriage for her ‘professional uses’ – did not pay up – Pf lender
could not claim because it was against good morals.
• Armhouse Lee Ltd v Chappell (1996) à Df operated telephone sex chatlines and owed $ to Pf advertising Co.
– Held Pf could claim as it was not so immoral that it must be illegal under common law (Note tt Df was
very devious for he was actually trying to cheat his creditors – read my lect notes)
• Be mindful that conceptions of morality do change over time.
3. *Agreements in restraint of trade (see later)
4. *Agreements that undermine family life
• Lowe v Peers (1768) – agreement to restrain a party from marrying is unenforceable.
• Brodie v Brodie (1917) – agreement by two parties prior to marriage that after getting married they will
separate and not lie together was held unenforceable.
• Kwong Sin Hwa v Lau Lee Yen (local case, 1993) – (agreement to not consummate until Chinese
ceremony was enforceable but H simply wanted to annul the marriage).
o Impt for the comment tt “Marriage status is … of great public concern. It is intolerable for the law on
marriage to be played with …”
• Note that notions of what undermines family life differs from society to society
5. Agreements to pervert the course of justice (eg. give false evidence) or manipulating the legal system
Q1: Enforcement
The law’s approach to the enforceability of illegal contracts can be divided into three principal categories:
1. Contracts which are illegal per se (at formation);
2. Contracts which are not illegal per se, but further an illegal purpose; and
3. Contracts which are not illegal per se, but involve some illegality in their performance.
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1. Illegal contract (formation)
Many of the examples have been mentioned above. As a general rule, such contracts are unenforceable, regardless
of relative knowledge or intention of parties.
• In re Mahmoud and Ispahani (1921), statute require buyer to have a permit to buy seed oil. Seller inquired if buyer
had the licence and the buyer lied. Seller could not recover for price owed because ECA held tt statute was
one that expressly prohibits such contracts so contract was illegal per se.
• Mohamed v Alaga & Co (2000) involved an oral contract by M to introduce refugees to A (and act as translator) in
exchange for half the legal aid fees A could claim for work in respect of the refugee’s immigration and asylum
applications. The contract was unenforceable by reference to legislation preventing solicitors from sharing their
fees.
o However, the Court of Appeal allowed M’s claim for quantum meruit (the value of services) because the
parties were not equally to blame. A had knowingly disregarded the professional conduct rules, while
M had been unaware of any impropriety in the arrangement.
2. Illegal purpose or performance
• No blanket rule that all such contracts are unenforceable (unless there is some statute that expressly prohibits illegal
performance of a type of contract)
o McK proposes the test of asking whether the purpose behind the rule that has been contravened requires that the
contract should be unenforceable.
• Depends on which of the following scenarios it fits into.
• **Devlin LJ in Archbolds stated the relevant principles quite clearly // Devlin LJ in St John Shipping
1. If contract is prohibited expressly or impliedly by statute = contract is void ab initio
2. If, at the time of contracting, there is an intention to perform unlawfully, the contract is unenforceable by those who
have that intention.
3. A pltf cannot recover under a contract if, to prove his claim, he has to rely on his own illegal conduct - irrespective of his
innocence or ignorance.
4.
Both parties share
Where there is one innocent and one guilty party
illegal purpose
• Both parties THE INNOCENT PARTY THE GUILTY PARTY
may have an • Generally, the innocent party has a • Surprisingly, in some cases the guilty party too
illegal purpose stronger claim. is allowed to recover.
when entering
into the contract (a) IP does not know of illegality at all (a) Does not need to rely + public policy reasons
or intend that it • Archbolds v Spanglett Ltd (1961) – • In St John Shipping v Joseph Rank Ltd (1957) -
should be carriage of consignment of whisky – Df Contract for carriage of goods by sea; ship was
performed in an carrier did not use licensed vehicle + overloaded - contravened statute. Consignees
illegal way. negligently caused whisky to be stolen – (Df) refused to pay freight (to Pf carriers) on
• Usually not Pf sued and could recover because he grounds of illegal performance – held Pf allowed
enforceable – did not need to rely on illegality + Pf did to claim
eg. Pearce v not know of it at all.
Brooks where the Recovery allowed because:
carriage vendor (b) IP does not need to rely on the illegality to i. Firstly, this was not a contract that was
knew of the claim *Impt factor expressly or impliedly prohibited by statute.
purpose it was to • Marles v Philip Trant & Sons Ltd (1954) - • Hence, such regulatory offences can be
be used for. Illegality arose btw Df merchant and Pf unknowingly flouted in e course of perf.
farmer. It was a very technical illegality ii. Secondly, Pf does not need to rely on illegality
– in those days, when you sold seeds you to claim.
must write a certificate with the • He just needs to show that goods have
description of seeds. been delivered from A to B w/o
• Pf paid for spring seeds that turned out to damage.
be winter seeds – crop failed. iii. **Depriving Pf recovery would be way out of
• Allowed to recover because Lord Denning proportion to damage caused
held tt Pf does not need to rely on • There was a fear tt if recovery was denied,
illegality to prove his claim. He simply all consignees can refuse payment – lost of
needs to show that he contracted for £50K (when add profit from overloading
spring and got winter seeds instead. was only £2K)
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• Booysen: This is a contentious issue, • Also, a fine was alr imposed under e statute
usually can be interpreted both sides as and it would be ‘curious’ if the Pf were
seen in Marles (majority says Pf did not punished twice (although Devlin J. did
need to rely; minority says Pf does in fact feel fine was inadequate but that was a
have to rely on illegality for contractual change for Parliament to make).
performance) • Lastly, the public pocket is not enriched if
• Implies a discretionary element (or it's Pf was refused recovery. It would
just the Lord Denning factor – award perpetuate undeserved enrichment.
remedy to claimant) (McK seems to suggest tt ECA should have placed
more weight on the fact tt Carriers might have
(c) But when ‘innocent party’ knows and overloaded deliberately for profit-making) à
‘approves’ of illegal performance = no purpose vs performance
recovery
• Mere knowledge is insufficient; must (b) Illegality is too remote
have active participation too 21st Century Logistics v. Madysen (2004)
• Ashmore, Benson, Pease v Dawson (1973) • 21 C was incorporated to commit VAT fraud by
– carriage of goods – Df overloaded lorry selling computers (and charging VAT) but not
but Pf had supervised the loading – reporting the VAT to IR authorities.
lorry overturned and Pf’s goods damaged • M = customer, who discovered the fraud and
• Court construed Pf’s supervision as refused to pay. Pf = 21C sued for contract price.
knowledge and approval akin to ‘passive • RECOVERY ALLOWED because fraud was too
participation’ in the illegal performance remote.
• Held that Pf could not recovery o Contract was for sale of goods; it facilitated
the fraud but there was no fraud until
How to reconcile with St John Shipping? VAT was unpaid
• At the time of contracting, the o (Policy) If the claim was denied, M would
parties were intending to perform receive a windfall and 21C would not
illegally discharge ther VAT
• Shipper guilty party was already penalised
under statute – issue of double recovery Siow Soon Kim v Lim Eng Beng [2004] SCA
o But is penalty sufficient? • Claim by a partner for his share of p’ship assets
including monies in an account that had been set up
Distinguish ignorance of facts and ignorance to evade tax. Claimant was not a party to this
of law arrangement but became aware of it later. Q was
Ignorance of facts whether it precluded his claim.
• Where contract is prohibited, ignorance is • Held: recovery allowed
not an excuse (Mahmoud and Ispahani) • The business of the p’ship was legitimate; the
• Where performance is illegal: Ashmore contract sued on was not illegal and the
Benson required knowledge anf monies were not obtained illegally
participation (such as assent) to precude • It was not illegal to put the monies into a separate
Pf from claiming account and the claimant was not aware of the
• If the illegality is serious, mere knowledge illegal purpose until later à purpose vs performance
should be a bar (Buckley)
Ignorance of law
• Generally no excuse: Archbolds – "both
parties are presumed to know the law
3. Severance
General
One last way in which courts can enforce a part of the contract is by severance – where illegality is confined to a
distinct clause(s) in the contract, court may be willing to remove the illegal portion by severing it.
Bars to severance
1. The illegal part can be cut out without distorting the meaning of the remaining contract (the ‘blue pencil’
rule, Goldsoll v Goldman (1915));
2. The illegality does not form one party’s whole or main consideration for the contract (otherwise the other
party would be compelled to perform for no or virtually no consideration, Bennett v Bennett (1952)); and
3. Severance would not leave a substantially different contract from that which the parties agreed (Attwood v
Lamont (1920)).
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Taylor v Bhail [UK-1996] – School headmaster contracted with a builder to do repairs to the school – cost would be
covered by insurance. They colluded to inflate the cost of repairs by £1000. Builder sued the headmaster for payment
/damages; headmaster raised the illegality – Contractor claimed that the £1000 fraud could be severed from the
contract – Held: no severance – the entire contract was tainted; the legal portion and the illegal portion were
indivisible.
Q2: Restitution
If a party cannot enforce his rights under an illegal contract, there are certain extra-contractual avenues to seek to
recover losses incurred or benefits conferred on the other party: 1) Collateral contract; 2) Fraudulent
misrepresentation; and 3) restitution, subject to conditions i.e. only if party a) is not in pari delicto, b) reject
illegal purpose in time, or c) can establish property rights without relying on contract.
1. Collateral contract
The defaulting party could have promised something under a separate (express or implied) collateral contract and
innocent party can sue under that contract instead.
• Strongman v Sincock (1955) – Df architect stated that he would get license for building but did not – Pf builder
could not sue under building contract for illegality.
o Denning LJ held tt where a Pf was not guilty of ‘culpable negligence’, Pf could recover because Df had
made a collateral warranty tt he would apply for the permits. In this case, builder clearly not at fault
and architect had ‘no merits at all’.
§ Essentially, the builders were innocent people misled by architect who had 'no merits at all'
o Creates a backdoor problem: effectively the same remedy by just calling it a collateral contract
§ Birkett LJ was not unconcerned that this solution may be allowing enforcement through the
backdoor, but dismissed such concerns as there will not be many such cases.
• Archbolds v Spanglett – whisky transport case – Devlin LJ suggest an argument tt there was an implied
warranty tt the vehicle is properly licensed.
o Some academics concerned tt this made become a ‘backdoor’ for recovery. Hence, Trietel suggests
that the collateral contract remedy should only be available if it would 1) not incentivise illegal conduct
and the 2) innocent party was not careless/relatively innocent (// Denning dicta in Strongman).
2. Fraudulent misrepresentation
This recovery is independent of the contract being sued under. Could also be in tort.
Fraud
• Shelley v Paddock (1980) – couple posing as ‘property agents’ defrauded old lady of her money to buy a house
(that did not belong to them) in Spain – Pf old lady flouted exchange control regulations – contract illegal but
recovery allowed because Dfs clearly dishonest.
o Lord Denning: Pf didn't know of illegality (ignorance of law), while Dfs were dishonest. She should recover
and it was fair and just that Dfs should not keep their 'unlawful gains'.
o Lord Brandon: expressed doubts but did not dissent à most likely because of backdoor problem: too easy
to enforce the contract by relying on external rights i.e. tort)
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• Mahmoud & Ispahani: Scrutton LJ hints at a possible claim for deceit
Negligent misrepresentation
• Mohamed v Alaga – Somali translator case – interlocutory hearing, don't know outcome – Pf granted leave to
amend claim and claim damages in tort (negligent misrep.) – breach of a duty to disclose that the
agreement was prohibited
o But Lord Bingham expressed doubts about the success of the amended claim, because of backdoor
problem
3. Restitution
Definition
For claims in restitution, the ground of recovery is the normal grounds of restitution like mistake or duress,
and illegality is a defence to the restitutionary claim. For restitution, contract must be entirely ‘washed away’ first.
Generally, claim for restitution are broadly based on unjust enrichment – Pf has to prove that Df was unjustly
enriched at Pf's expense.
Rather than seek to enforce an illegal contract, a party may seek restitution of benefits he has conferred on the
defdt under the contract. The illegality can be raised by the defdt as a defence - the general rule is that benefits
conferred under an illegal contract are irrecoverable, subject to following three exceptions.
(B) TIMEOUS REJECTION / (C) ESTABLISH TITLE TO PROPERTY W/O

(A) NOT IN PARI DELICTO
LOCUS POENITENTIAE RELYING ON ILLEGALITY
• IF the Pf is less blameworthy that • If party rejects the contract Legal, Common-law Title
the Df, he will be allowed to before the illegal • Singh v Ali – title to lorry had transferred to Pf
recover. performance, a claim in notwithstanding the illegal contract
restitution may be granted. • Lord Denning: ‘the transferor, having fully
**When is Pf less blameworthy? • This is the only area where achieved his unworthy end, cannot be
(i) PF was pressured into entering you can reveal your allowed to turn round and repudiate the
the contract illegality means by which he did it…And the transferee,
(ii) Pf was unaware of the illegality • Rationale: encourage people having obtained the property, can assert his
(iii) Pf belongs to the class of to refrain from illegal title to it against all the world, not because he
persons that the statute broken performance of contract / has any merit of his own, but because there is
was enacted to protect return from the dark side no one who can assert a better title to it.’
(Booysen) • Further, if the law were not to deny the
Kiriri Cotton v Dewani [1960] • If illegality is particularly plaintiff, it would leave the Df in possession of
• D rented a flat from KC and paid a repugnant, even a change of both the lorry and the money he received for
premium for the lease - contrary to heart may not permit it.
legislation. recovery • Note tt Singh is contract illegal in purpose and
• Here, neither party knew they had not illegal per se.
done anything illegal (mistake of 1. How soon must the reject Equity: Presumption of Resulting Trust
law). be? • When A transfers property to B, they can
• D later sought to recover the • If there is complete openly declare that B is holding it on trust for
premium. KC objected and argue tt illegal perf, no recovery. A.
D had aided the commission of the But some cases have • Because Eng law does not generally recognize
offence. suggested tt if illegal perf gratuitous gifts, even if there is no such
• Recovery allowed – Not in pari was only partial, recovery declaration, the law will presume a resulting
delicto because duty to know the can be allowed. trust that B is holding it on trust for A.
law was more squarely on KC than
on D + statute enacted to protect 2. How genuine must the • Tinsley v Milligan (1994, HL but not
tenants like D. Would be ironic if D rejection be? (What if it is not unanimous) – Lesbian lovers – M transferred
had no remedy. out of remorse but purely tt property to T’s name to defraud social services
he didn’t need to cheat – M later repented – M evicted T from
Tokyo Investment v Tan [SG-1993] anymore?) property – T claim for her right to property.
• Tan sought to recover his shraes • Tribe v Tribe (1996) – • Claim rejected because M paid for property
from Tokyo (futures brokers) who Father transferred and there was a presumption of resulting trust
were holding htem as security for money to Son to avoid tt T was only the transferee holding it on trust
Tan's brother's trading activities. paying creditors – he for the beneficiary.
• However, Tokyo was unlicensed – later settled w creditors • M does not need to rely on illegality to estb
breach of legislation (so illegal purpose not her title.
• Contract rendered carried out) and sought o Majority: consistency (property
illegal/prohibited to recover $ from son. rights more important)
• Held, construing Parliament's • Genuine repentance o Minority: clean hands equitable
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intention, a commodity trading is not required. Father maxim

contract with a unlicensed broker repented because his
was prohibited – i.e. no scheme was no longer • Chee Stephanie v Chang Yue Shoon (2010) –
enforcement rights flowed from it necessary. transfer of money – recovery allowed because
• Tan could however recover his presumption of resulting trust.
shares: • Shi Fang v Koh Pee Huat
o He was not in pari delicto [1996] – Father
with brokers – legislation transferred house to son
intended to protect to avoid estate duty – but
investors like Tan who did IRAS was not deceived –
not know brokers were Applying Tribe,
unlicensed recovery can be
allowed. (locus
Claim in quantum meruit poenitentiae was not
Taylor v Bhail actually pleaded but one Equity: Presumption of Advancement
• Builder and headmaster of sch can see it’s a consistent • Presumption trumps presumption of resulting
collude to make false insurance result) trust
claim • When husband transfers prop to wife or father
• No quantum meruit allowed • *Obiter in Aqua Art [30] to son, there is a presumption that the
(No mention was made of in pari – [32] see below property belongs to the transferee. (opp of
delicto in this case, but if you resulting trust)
analyse through the angle of Kiriri, • Chettiar v Chettiar (1962) and Shi Fang v.
it is consistent because (1) the Koh Pee Huat (1996) – similar facts – F
builder and headmaster were transfers property to S to defraud public
clearly of equal blame and (2) this authorities – presumption of advancement in
statute is not made to protect the both.
claimant. • In Chettiar, F seeks property back and denied
because F has to disclose the illegality in order
Mohamed v Alaga to rebut the presumption of advancement.
• Alternative claim in restitution • In Shi Fang, wife seeks share of property (not
for translation services rendered. father) and S simply has to rebut the
Parties not equally to blame and presumption. He just had to declare that he
there was no need to rely on illegal was holding it on trust, and hence no need to
contract rely on illegality to rebut the presumption.
**What if Pf WAS in pari delicto? Reform?

• Most recent decision of SGCA in • Some argue tt it is too arbitrary that recovery
Aqua Art v Goodman – Phang hinges on which presumption arises, rather
JA suggest tt if the Pf was truly than relative blameworthiness. HCA in
mistaken as to the facts causing the Nelson v. Nelson (1995) applied
contract to be illegal, a claim in discretionary approach and departed from
restitution is permissible even if Tinsley.
the Pf was in pari delicto. • Eng law experimented with discretionary
approach but rejected it.
• Singapore in 2002 drafted the Illegal
Transactions (Relef) Act to grant courts some
discretion to grant relief, having regard to
listed factors.
*Repentance or timely repudiation, as per Aqua Art

• One major controversy centres around the ostensibly different approaches adopted in the two leading English decisions of Taylor v
Bowers (1876) 1 QBD 291 ("Taylor") and Kearley v Thomson (1890) 24 QBD 742 ("Kearley"), the latter of which appears to adopt a
stricter approach towards recovery. It is clear, however, from the leading judgment of Fry LJ in Kearley (at 746) that the very doctrine
itself was not received with any sort of legal warmth to begin with. On the other hand, it has been perceptively pointed out that Taylor
involved an arrangement that was not wholly executory but that the same result could nevertheless have been achieved via yet another
legal route (viz, an independent cause of action). Returning to the apparent conflict between Taylor and Kearley, it has been
suggested (correctly, in our view) that both decisions are in fact consistent with each other if it is borne in mind that the focus
ought to be on whether the illegal purpose - as opposed to the performance - of the contract had been substantially achieved
(see, for example, Treitel ([24] supra) at para 11-137;), with the result that any apparent conflict between these two decisions becomes one
which can be resolved based on the different facts, as opposed to any difference in legal approach as such; and for later
decisions, see, for example, the English Court of Appeal decisions of Tribe v Tribe [1996] Ch 107 ("Tribe") and Collier v Collier [2002]
BPIR 1057; as well as the English High Court decision of Q v Q [2009] 1 FLR 935).
• The other major controversy centres around the issue as to whether in order for "repentance" to be successful, it must be both genuine
and voluntary, with the result that, where the contracting party concerned had no choice but to repent because the fulfilment of the
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illegal purpose was no longer possible owing to external circumstances beyond the control of the parties, the doctrine will not apply (see
the leading English decision of Bigos v Bousted [1951] 1 All ER 92 ("Bigos")). However, in the more recent English Court of Appeal
decision of Tribe, only voluntariness - as opposed to the genuineness - of repentance was emphasised. There may well be an overlap
between - or even coincidence of - these two elements, depending on the fact situation concerned. Indeed, if the relevant legal
proposition is that the concept of genuineness is unnecessary in so far as it connotes a subjective feeling of remorse on the part of
the party concerned (and cf Goff and Jones at para 24-008), there may well be no practical difficulties inasmuch as the concept of
voluntariness means that, on the facts of cases such as Bigos, the result would be the same (see Enonchong at p 339; but cf per Millett LJ
in Tribe at 135).
Restraint of Trade
GENERAL PRINCIPLES
In practice, this is the most important head of illegality in modern Restraints of trade are prima facie illegal, but they will be
times. A contract or convenant in restraint of trade is an upheld if
undertaking whereby one party agrees 1) to restrict his 3. They are reasonable in the interests of the parties,
freedom to trade or conduct his profession or business 4. They are reasonable in the interests of the public, and
(what); 2) in a particular locality (where); 3) for a specified 5. The party imposing the restraint must have a legitimate
period of time (when). proprietary interest to protect. Onus of proving
reasonableness is on the party imposing the
restraint.
REASONABLENESS LEGITIMATE PROPRIETARY INTEREST

• The public interest in controlling • Sale of a business - goodwill
unreasonable restraints of trade was • Employment - not exhaustive
recognised in eg Nordenfelt and Mason v o Trade secrets – highly confidential information belonging to the
PCS employer, ie information not freely available
o Twin test of reasonableness: • Distinguish trade secrets from an employee’s
‘The public have an interest in own talent or knowledge which he is free to use even
every person’s carrying on his if he has acquired his skills from the employer
trade freely: so has the o Trade connections – ‘knowledge of (and influence over) the
individual.’ (Lord Macnaghten in customers of the employer’ (Phang JA in ManF).
Mason) o Maintenance of a stable and well-trained workforce
• Man Financial: keep the public interest (ManF).
aspect of reasonableness distinct from the
individual interest. The public interest ManF:
factor takes into account ‘the impact of local
circumstances’ • Other proprietary interests (at [94]):
o The present appeal does not - at least, not directly - involve either
o Example - a restraint which (if
of the two legitimate proprietary interests traditionally protected
upheld) would give one party a
within the employment context as briefly described above (viz,
monopoly on certain business in
trade secrets and trade connection). It is important to emphasise,
Singapore - not in the public
right at the outset, that apart from trade secrets and trade
interest
connection, other legitimate proprietary interests may also
• Reasonableness of a restraint based on exist and be protected by the courts in this particular context,
following factors as per CLAAS at [59-61] although they must obviously be legally justified.
o Area of restraint, • Extension of proprietary interests to maintenance of stable workforce
o Duration of restraint, (affirm Brereton J dicta in Cactus Imaging Pty Limited v Glenn Peters
o Activities restrained, and [2006] NSWSC 717 at [55]):
o Consideration for the restraint o But apart from protection against misuse of confidential
information, does an employer have a protectable interest in staff
(ManF)
connection - that is, in maintaining a stable trained workforce?
The cases denying that there is any such legitimate interest
SEVERANCE emphasise that an employer does not own the workforce, as if
employees were akin to stock-in-trade. That is self-evident, but
• Cases show that severance of an
nor does an employer own the customers, who are also
unreasonable restraint is possible: eg
not akin to stock-in-trade; yet a connection with
– Nordenfelt: at pp 560 – 1; Mason: customers is unquestionably amenable to protection by
p 745; CLAAS at [68 – 70] covenant. The employees, along with the suppliers and
– Man Financial v David Wong: 2 the customers, make up the three relations upon which
possibilities the profitability of a business depends. The customers
• ‘Cut out’ severs an entire are not property, but their connection with the business
clause - not possible if it adds value to the business and is recognised as deserving
represents the main of protection in the proprietor's legitimate interest.
consideration given for Similarly, employees are not property, but, all else being
the promise equal, a business with a stable trained workforce will be
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• ‘Cut down’ applies within more attractive to a purchaser and command a higher
a clause and is subject to price than one with a workforce which is unstable,
the blue pencil test disruptive or poorly trained, just as a loyal and satisfied
• Smile Dental: court refused to rescue an clientele makes a business more attractive and valuable.
unreasonable restraint by severance - In my opinion, staff connection constitutes part of the
employer should have an incentive to be intangible benefits, which may give a business value over
reasonable in first place and above the value of the assets employed in it, and thus
comprises part of its goodwill. It is amenable to
protection by a covenant in a manner similar to
customer connection, even in the absence of protectable
confidences.
Doctrine applies to three principle types of contracts: 1) employment, 2) sales of businesses and 3) exclusive dealing agreements.
Cases reflect a stricter approach to restraints in employment contracts than sales of business with goodwill. Categories are
not "closed". It is recognised that a blanket rule against restraints is too rigid and may actually interfere with free trade: a)
hard to get a good sale price for your business and b) inhibits employer's deployment of employee. Law thus recognised a need to
relax it.
EXCLUSIVE DEALING
EMPLOYMENT CONTRACTS SALES OF BUSINESSES
AGREEMENTS
• Cf. proprietary legitimate interest (see • A buyer of a business may also • Historically, common law
above) purchase the goodwill of the business recognized exclusive
(ie. branding and connections tt the distribution clauses and did
Mason v Provident Clothing and Supply (1913) business has built up) not usually subject them
• M worked as salesman – contract prevented • Generally court are less hostile to RoT doctrine
him from working in same business within toward restraint clauses of this sort • The main issue in such cases is
25 miles of London for 3 yrs – Held not because the 1) buyer is actually whether the clause is even
enforceable bec. Employee did not paying good money for the subject to the RoT doctrine.
acquire any trade secrets and PCS was not goodwill. Plus, “there is likely to be
justified to restrain the use of his skills in 2) more equality of bargaining Esso Petroleum v. Harper’s Garage
such a wide area. power in the case of the sale of a (1968)
business” (Man Financial). • Esso provided finance to
Man Financial v David Wong (2008, SGCA) • The same factors of reasonableness garages in return for them only
• MF negotiated terms of severance (and as in employment contracts apply as selling Esso petroleum – one
not employment) that DW could not poach well but the standard depends contract was a 5yr restrain, the
MF’s employees for a duration of 7mths. largely on facts of the case other was a 21 year restrain.
• Issue: is maintenance of a stable workforce o HL held tt RoT
a ‘legitimate interest’. Court: Yes, it can be Nordenfelt v Maxim Nordenfelt Guns doctrine could
depending on the facts of the case. (1894) apply. Majority held
o Here, it was agreed in good faith • N sold his armament business to a the restraint doctrine
and equal bargaining power. Co. & agreed not to engage in same applied if a prior right
The period of restraint was business worldwide for 25 yrs. Court or freedom was given
actually proposed by DW. Cl. held it was reasonable up – here, it was the
Only covered senior employees considering the very limited no. of right to sell other
who worked with DW and not all manufacturers in that industry and brands of petrol
employees – Thus, clause small client base. o 21 yr restrain was too
enforceable. unreasonable but 5
CLAAS Medical v. Ng Boon Ching year restrain
(2010, SGCA) upheld.
Smile Inc Dental Surgeons Pte Ltd v Lui Andrew
• CLAAS acquired med practice o Lord Wilberforce
Stewart [2011] SGHC 266
started by Dr Ng – restrained him for (minority) however
• Dr Lui was employed by Smile; contract 3 yrs from setting up biz or felt tt RoT does not
included: Non-compete cl, a non- practicing aesthetic medicine in Sgp apply to contracts
solicitation cl and non-dealing cl + cannot solicit CLAAS’s customers that have been
• Lui resigned and set up a rival business and employees. accepted practice in
down the road o Court held that it was commerce because
Held: reasonable to restrain in a sale they pass the
o Smile had a legitimate proprietary of business and that Area and public interest
interest in their existing patients Time were reasonable given Dr test.
o Non-compete cl had 2 aims: 1)to Ng’s longstanding reputation +
make it inconvenient for existing Dr Ng himself suggested the Shell Eastern Petroleum v Chuan
patients to move with Lui and 2) to time period. Hong Auto [1995] SGHC
avoid competition for new patients – o However, the activities • Preferred view of Lord
no legitimate prop interest in new restrained were too wide for Dr Wiberforce in Esso
patients Ng only practiced a particular Petroleum (but strictly
area of aesthetic medicine but speaking, obiter)
o The cl was also unreasonable: the area
clause restrained all areas of it –
was too wide (3 km radius of a Smile
the court considered National Aerated Water Co v
clinic) – it applied to clinics where Liu
severance. Monarch Co [2000] SGCA
never worked AND it was of unlimited
o Employee non-solicitation cl. NAW could only sell Kickapoo
duration •
was widely drafted but can be and no other brands – Court
o Non-solicitation and non-dealing construed sensibly.
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cl’s – also unreasonable: unlimited o Customer non-solicitation cl. held yes RoT must be
duration, applied to patients at clinics allowed to stand. considered bec. NAW had
where Liu didn’t work, too vague given up a right
SCOPE OF RESTRAINT DOCTRINE ENFORCEMENT

Mano Vikrant Singh v Cargill [SGHC-2011] • Injunction
• Forfeiture of bonus if leave & compete: not a RoT o Eg Nordenfelt;
o Does not prohibit competition - there is a disincentive to leave and compete but Mason
employee has a choice whether to leave or preserve his bonus rights. • Damages
• Loyalty payment – lost if leave: not a RoT o Eg CLAAS –
o Competition not prohibited, aims to promote loyalty, also gives a disincentive to leave and upheld a
compete. liquidated
• Balancing exercise – must not ignore policy in favour of freedom of contract. damages clause
• Here, if the clause were in RoT – would have held it to be unreasonable for breach of
o Duration and area too wide. the restraint
• Defence to
Shroeder Music Publishing v Macaulay [1974] HL payment of
• One-sided agreement between a songwriter and music publisher. Held: void, contrary to public severance pay
policy. o Eg Man
Financial
Chua Chian Ya v Music & Movements (SGCA-2009)
• Agreement for sale and promotion of songwriter’s work. Held: not void.
• Restraint doctrine protects freedom to make a living – here, Chua was trying to escape a bad bargain.
• SCA distinguished Shroeder – extreme facts.
Man Financial (SGCA-2008)

• Where restraints of trade are agreed in settlement of a dispute, the policy in favour of upholding
agreements should prima facie prevail over the restraint doctrine
How to Approach General Illegality Hypos:

1. Always consider what type of illegality it is first. If it is statute, interpret which category of illegality specific
contract falls under.
a. Is it prohibited? (void ab initio)
b. Or is it illegal in performance/purpose?
2. Generally if contract is illegal, it will be unenforceable. But common law has developed several exceptions or
mitigating considerations:
a. If both parties share illegal purpose, usually unenforceable (Pearce v Brooks)
b. If one party innocent, IP has a strong claim:
i. If IP does not know of illegality at all (Archbolds)
ii. If IP does not need to rely on illegality to claim (Marles)
iii. But if innocent knows AND approves of illegal performance = no recovery (Ashmore Benson)
1. Knowledge alone is insufficient. Must have active participation
c. Even guilty party is allowed to claim
i. If GP does not need to rely on illegality (St John Shipping)
ii. If illegality is too remote (21C; Siow Soon Kim)
3. Courts could also enforce contract by utilising other legal mechanisms
a. Severance
i. 'blue pencil' rule (can only delete, cannot add; brings up the interesting problem of cutting
figures written in text form)
ii. Illegality does not form one party's main consideration
iii. Would not leave substantially different contract
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iv. Considerations: Policy à if purpose was dishonest/undermines statutory law/taints the

whole contract (Taylor v Bhaird)
b. Collateral contract
i. Courts could find that the defaulting party promised something under a separate
(express/implied) collateral contract
ii. Arbitrary tool, really, for courts to achieve justice through purportedly legal means
(Strongman v Sincock; Archbolds) à Again, the Denning Factor
iii. Counter: backdoor problem à effectively same remedy dressed in in collateral contract form
c. Tortual measures: Fraudulent/negligent misrepresentation
i. If fraud or dishonesty is involved, aggrieved party could try and claim under
Misrepresentation Act because all consequential losses upon fraud are claimable (Shelley v
Paddock; Mahmoud & Ispahani hints at possibly claim in tort of deceit) à Again, the Denning
Factor
ii. Negligent misrep claim weaker but may still be possible (Mohamed v Alaga given leave to try
to claim but Lord Bingham expressed doubts because of backdoor problem)
4. If common law fails, or if contract is voided (prohibition by statute), seek recourse in equity
a. Not in pari delicto aka less blameworthy (Kiriri Cotton; Tokyo Investment)
i. Pf pressured into entering contract (negotiating power?)
ii. Pf unaware of illegality
iii. Pf belongs to class of persons that statute broken was enacted to protect (based on
interpretation if it is not expressly stated à remember the terrier case in tutorial
iv. EVEN IF party is in pari delicto, Andrew Phang JA in Aqua Art is willing to extend it to party
who is mistaken
b. Timeous rejection (the only place where you could reveal your illegality to enforce a contract)
i. As long as party rejects contract before illegal purpose, claim in restitution may be granted
(Tribe v Tribe; Shi Fang v Koh Pee Huat; Colombo)
c. Establishing title to property without relying on illegality
i. Legal title transferred (Singh v Ali)
ii. Presumption of Resulting Trust (law does not generally recognise gratuitous gifts) (Tinsley v
Milligan; Stephanie Chee)
1. Majority in Tinsley à Consistency more important; rights invested in property more
important than equity maxims
2. Minority in Tinsley à Equity maxims: require clean hands
iii. Presumption of Advancement (supercedes presumption of resulting trust where special legal
relationships are identified i.e. husband-wife, father-son) (Chettiar v Chettiar; Shi Fang)
iv. Discretionary approach by HCA in Nelson v Nelson à presumptions too arbitrary (for
example, 1h before marriage, P of RT – 1h after marriage, P of Adv)
1. Based on seriousness of illegality (serious or technical; is the act morally wrong?)
2. Could uphold claims and then order return of unjust enrichments (Nelson?)
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Duress
General
Introduction
Contract law has always put limits on the lawful means used to persuade another to enter into a contract. If I force you
to sign a contract by putting a gun to your head, the law will refuse to help me enforce that contract: you can call it off
at your option, subject to the usual bars to rescission. Four categories of actionable duress exist: law on duress to the
person and to property is relatively settled whereas economic duress and lawful act duress remain unclear.
Justification
Inadequacy of the overborne will theory
• Initially, duress was explained in terms of the victim’s will being overborne and thus his consent is vitiated.
• But Prof Atiyah argued in 1982 that in fact a victim’s choice in a situation of duress is no less real. There is still
an intention to make that choice. In the sense, Hobson’s choice is still a choice nonetheless.
• Lord Wilberforce observes in Barton v Armstrong that in life we make many choices under pressure, and the
existence of pressure does not mean we have no choice (eg. interest rate by the banks is set beyond our choice)
Shift to focus on illegitimate pressure
• The doctrine was then explained not on the fact that there was pressure, but the law regards the pressure as
illegitimate
• Universe Tankships Inc of Monrovia v International Transport Workers Federation (1983, HL) (ship did not hold
a ‘blue certificate’ entitling ships to be exempted from blacking – as a result of blacking by ITF, no tugs were
available so the ship could not sail – the ITF demanded payments of $80,000 as backpay for crew of ship
contribution of $6480 to ITF’s welfare funds – shipowners wanted to recover $6480 on grounds of economic
duress – held, contracted set aside for economic duress)
i. the enforcing party must be blameworthy (in tt he must know he is applying duress);
ii. the duress makes contracts voidable but not void (victim has given consent but law treats the consent as
revocable) and
iii. the standard of causation is not so high since the law vitiates the contract not on the amount of pressure
exerted but on the pressure being illegitimate.
S1: Duress to Person

#1: Illegitimate pressure
As long as threaten violence to you or detain you (or someone in a close relationship with you) to induce your consent,
(Barton v Armstrong (1976) - Pf and Df contracted for Df to buy Pf’s shares in a company – Pf alleged that Df had
coerced him intro contrating by threatening to have him murdered – held, contract voidable for duress)
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#2: Causation: a cause
Enough if the threat contributed in any way to his decision to contract = duress! (Barton v Armstrong). Burden is on
threatener to prove that threats or unlawful pressure did not contribute at all to the other party’s decision to contract
S2: Duress to Property

1: Illegitimate pressure
• As long as threaten to damage, take, or keep your property (Astley v Reynolds (1731) – Pf pawned goods to Df –
Df refused to allow Pf to redeem goods unless he paid interest – Pf paid interest to retrieve goods, then brought an
action to recover excess which he had paid over the legal interest which Df was entitled to charge – held, Pf
allowed to claim)
• Money, not property, would also constitute illegitimate pressure (Crescendo Management)
#2: Causation: significant cause
• In duress to goods cases, Pf must show that the threat was a ‘significant cause’ (Dimskal Shipping Co SA v ITWF
(1992))
• In practice, this causation requriement is easily met (Astley v Reynolds)
S3: Economic Duress

Introduction
Since The Siboen and The Sibotre (1976), courts have accepted that economic duress may be as coercive and worthy of
relief as duress to the person or proeprty. Most important practical application of economic duress is in area of one-
sided contract modifications, where one party threatens to breach existing contract unless the other agrees to
a) pay more for original performance or b) accept less performance than was originally due.
Traditionally, such actions would be rejected by doctrine of consideration. But

i. Promissory estoppel doctrine can enforce promises of the ‘same for less’ in limited circumstances. But not
if promisee had applied illegitimate pressure à not be inequitable for promisor to renege on promise
ii. Williams v Roffey Bros enlarged consideration requirement by notion of ‘practical benefit’.
iii. Leaves economic duress to control limits of renegotiations of ‘more for the same’
a. Further, court in Gay Choon Ing (SGCA-2009) stated that if doctrine of consideration was
abolished, doctrine of economic duress can be a possible alternative)
Policy considerations
Anti-enforcement or pro-duress
1. Promote certainty and security of contracts

2. Preventing opportunistic exploitation
a. Should not take advantage of my urgent need,
b. my difficulty in finding substitute performance, or
c. the fact that your breach may cause me losses that may not be adequately compensated in law
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d. Inadequacy of contractual remedies exacerbated if you becomes insolvent, so ironically this

suggests why renegotiations in the face of impending insolvency should warrant some recognition (pro-
enforcement)
Pro-enforcement or anti-duress
1. Significant change of circumstances subsequent to contract formation, although insufficient to frustrate the
contract may make performance extremely difficult for one party à cannot complete contractual
performance without adjustments / no incentive to complete
2. If performance is not viable without renegotiation, then concern for protection of victim would also support
renegotiation.
a. If a party in difficulty is better off breaching contract to cut losses (William v Roffey Bros), then
he would have no incentive to continue performance.
3. Economic efficiency/minimise wastages à reasonable negotiations
Current causation-led approach

‘But for’ test
A threat to breach an existing contract would be treated as illegitimate pressure. Stronger causal connection
required for economic duress is justifiable because economic duress is less serious than duress to the person
or property. Mance J in Huyton v Cremer suggested that the minimum is the ‘but for’ test. Moreover, claimant should
also show that he had no practicable alternative but to submit to the demand, although this is not an ‘inflexible third
essential ingredient’.
Criticisms
1. Inconclusive: in Pao On, Lord Scarman proposed an alternative test based on whether victim a) protested; b)
had a practicable alternative; c) was independently advised; and d) acted promptly to avoid renegotiation.
Inconclusive because V may not protest if he sees no point in it or if he wish not to antagonise coercing party.
2. Not explaining outcome of cases: The degree of pressure facing victims does not distinguish the cases
where economic duress was found, from those where it was rejected
a. Contracts set aside for duress
i. Atlas Express v Kafco (1989) – A carrier company mistakenly underquoted by half the price
for carrying K’s goods – on realising mistake, A refused to make delivery unless K agreed to
double payment – K agreed due to difficulties in finding substitute performance and possible
loss of lucrative contract
ii. Adam Opel v Mitras Automotive (2007) – AO manufacturer of vans informed M of ceasure to
obtain parts from M in future – M demanded compensation and increase in price of parts to
be supplied – AO renegotiated until only had 24h worth of supplies remaining – had to agree
to M’s demands
b. Duress rejected
i. The Siboen and the Sibotre (1976) – charterers told shipowners that possible liquidation
unless charter price significantly reduced – owners agreed because of unlikelihood of finding
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alternative charterers but later claimed duress – court found no duress, only
commercial pressure
ii. Pao On v Lau Yiu Long – parties agreed to exchange shares in their companies – P agreed not
to sell 60% of shares for a year to avoid triggering fall in value and L agreed to protect P
against any fall in thir value below $2.50 by agreeing to buy back those shares at a fixed price
– when P realised they could be compelled to sell at $2.50 even if shares increased in value,
refused to proceed unless L replaced buy-back agreement with a guarantee by way of imdenity
– in the end, shares actually fell in value – L refused to honour either arrangement, alleging
want of consideration and voidable for economic duress – held, bound by contract to
indemnify, commercial pressure, not economic duress.
iii. DSND Subsea – V could have terminated contract and looked for alternative vessels – no
duress
Alternative approaches based on illegitimate pressure

Instead of the unsatisfactory causation-led approach to economic duress cases, the focus of the inquiry should witch to
th eillegitimacy of the pressure applied with the causation requirement stabilised at the level of the ‘but for’
standard. Three variants are identifiable:
1. Good faith
General
Party who threatens to breach in good faith should not be regarded as applying illegitimate pressure (DSND
Subsea Ltd at [131-132]). Consistent with idea that variations negotiated in bad faith are unenforceable as a 1) bad
faith compromise and 2) may amount to repudiation of original contract.
Precise scope?
However, precise scope not clear. Burrows suggest: illegitimate if concerned to exploit claimant’s weakness
rather than solving financial or other problems of the Df. Two further qualificaitons provided: a threat should
not be illegitimate if 1) threat is a reaction to circumstances that almost constitute frustration and 2) if it merely
corrects what was always a bad bargain.
Criticisms
1. Judicial scepticism: Mance J in Huyton v Cremer describes good faith approach as ‘by no means
uncontentious’, adding that it is ‘difficult to accept that illegitimate pressure applied by a party who believes
bona fide in his case could never give grounds for relief against an apparent compromise’.
2. Failure to explain finding of duress in many cases where good faith was present because the coercing
party 1) badly miscalculated and so underpriced contract by half (Atlas v Kafco) or 2) lost on the real value of
the contract price due to currency devaluation (The Atlantic Baron).
3. Inconsistent with competing policies: good faith policy suppresses competing policies such as
responsibility on contract formation and preserving the security and certainty of contracts
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2. McK: All threats to breach = illegitimate pressure + causation set at ‘a’ reason
While good faith approach is under-inclusive (duress can rarely be applied if shown that it is done in good faith),
McKendrick’s proposal is over-inclusive and avoids too many renegotiations (duress always applies). Based on
the idea that 1) courts should uphold integrity of original contract and English law 2) does not distinguish good faith
from bad faith threats to breach (South Carribean Trading).
3. No practicable alternative
Where difficulties threaten the performing party’s economic survival so that performance is practically
impossible without some renegotiation, it is appropriate to uphold a reasonable and consensual modification. Third
approach suggests that it should be illegitimate pressure for a party to threaten breach if 1) he can perform
without modification (non-performance would be self-induced); and it should be legitimate for a party to
renegotiate to his advantage if he has 2) no practicable alternative but to do so to complete contractual
performance.
This approach strikes the right balance between relevant competing policies:
1. Protects victim’s interest in receiving performance when its substitute right to sue an insolvent party for
non-performance would be worthless
2. Avoids economic wastage + encourages cooperation and compromise
3. Minimises threat to sanctity of original contract
4. Explains the case
The demand
Orthodox position is that in the context of the transaction, substantive fairness is irrelevant to cases of duress.
However, it has force (behind the label of ‘the demand’) as evidence of the 1) illegitimacy of the threat and of the
2) causal effect of a threat.
1. Fairness of renegotiated contract
Lord Scarman in Universe Tankships: legitimacy of pressure depends on nature of threat and nature of demand.
Duress is not just concerned with procedural unfairness (can a party threaten breach of contract or not?) –
substantive fairness (of renegotiated contract) also a factor.
Example: even where threatening party has no practicable alternative to renegotiation, he should only be
allowed to seek such reasonable modification as is necessary to give him incentive to complete
his contractual performance. If more is demanded, then he does have a practicable alternative, namely, to ask
for less; his threat is illegitimate.
2. Fairness of original contract
Courts do take into account substantive fairness of original contract (William v Roffey Bros – originally
underpriced, so no question of duress; Pao On – duress denied in order to avoid the unfairness of leaving P
without protection that parties originally intended), but correcting substantive unfairness alone will not
legitimise a threat to breach (Atlas v Kafco).
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S4: Lawful Act Duress

General
Possibility of lawful act duress means that the basis for discriminating between acceptable and unacceptable pressures
is not positive law but social morality. However, if lawful pressures are exempt, those who devise outrageous
but technically lawful means of compulsion must always escape. Thus, courts have accepted that categories
of duress are not closed and that a lawful threat may be illegitimate (CTN Cash and Carry v Gallaher), although it
must at least be ‘immoral or unconscionable’ (Alf Vaughan v Royscot Trust).
Lawful pressure which is legitimate

1. Threat not to contract: implicit in all contractual negotiations, therefore difficult to see how it can be
objectionable in the absence of a doctrine of inequality of bargaining power or substantive unfairness (Smith v
Charlick – duress rejected even where monopoly selling wheat threatened to stop trading with S).
2. Refusal to waive existing contractual obligation: Alf Vaughan (A bought cars from R but went into receivership
with 34k debt owed to hire-purchase agreement – R lawfully terminated contract and threatened recovery of
cars (entitled) unless 82k was paid – A’s receivers paid – no duress)
3. Exercise of right for legitimate purpose: R v Her Majesty’s AG for England and Wales (soldier breached
confidentality agreement, attempted to publish account - submitted that agreement was voidable for duress
because Crown threatened to return him from elite to regular unit unless he signed it – held, Crown’s threat
lawful, had discretion to transfer soldiers, and reasonable for security reasons
4. Compromises of claim: advantages obtained from threats to sue to enforce honest, even if mistaken, claim,
particularly in commercial context (CTN Cash and Carry v Gallaher – G delivered C’s orders of cigarettes to wrong
warehouse – stolen – G nevertheless mistakenly demanded payment from C and threatened to withdraw C’s
future credit facility – held, no duress because of good faith – lawful act duress would not be found lightly in
commercial dealings where certainty is paramount)
MCW: in commercial context, lawfulness of threat correlates very strongly with legitimacy of threat, overriding even clear bad faith as in Smith v
Charlick and Alf Vaughan. But CTN Cash and Carry appears to be wrongly decided – had elements of unjust enrichment. Legitimacy of demand
should be relevant to legitimacy of pressure since as per Lord Scarman in Universe Tankships, duress can exist “even if the threat is one of
lawful action: whether it does so depends upon the nature of the demand.”
Lawful pressure which is illegitimate

1. Blackmail: Lord Scarman in Universe Tankships stated that blackmail is often a demand supported by a threat to
do what is lawful e.g. to report criminal conduct to the police. In many cases, therefore, what has to be
justified is not the threat, but the demand. Blackmail is unlawful under the Theft Act 1968, s 2(1).
2. Relief in salvage cases: threats not to rescue life or property on ship in distress unless extortionate terms are
agreed to would subject agreement to duress (The Port Caledonia – two ships sheltering from a storm in harbour
when one was dragged dangerously close to the other – master of rescue tug: £1000 or no rope – sum set aside,
substituted with £200 for rescue services rendered)
3. Cases involving threats to harm the threatened party or his loved ones: threatening prosecution (Williams v
Bayley)
MCW: in non-commercial context, question of whether lawful threat has been used to further a proper purpose is a useful starting point in
deciding whether it is illegitimate in the context of duress. However, since the pursuit of profit is prima facie a legitimate purpose in a
- Page 70 of 98 -
capitalist society, intervention (duress) in commercial contracts induced by lawful threats is difficult to justify. Thus lawful act duress is unlikely
to have significant scope beyond relationships which are deemed by the law to warrant special protection, e.g. those in need of rescue or vulnerable
parties.
Case: E C Investment (on Duress)
42 It has long been recognised that a party may be able to avoid a contract for duress where he entered it because of a wrongful or
illegitimate threat or pressure by the other party, normally because the threat left him with no practical alternative: see Chitty on
Contracts vol 1 (Sweet & Maxwell, 13th Ed) ("Chitty") at para 7-001. The traditional categories of illegitimate pressure or threats
were those of violence to the victim's person or a threat to destroy or damage property or, (after some doubt), a threat to seize or
detain goods wrongfully, (see eg, Maskell v Horner [1915] 3 KB 106; Occidental Worldwide Investment Corp v Skibs A/S Avanti
[1976] 1 Lloyd's Rep 293 ("Occidental Worldwide Investment Corp") at 335; Dimskal Shipping Co SA v International Transport
Workers Federation [1992] 2 AC 152, overruling Skeate v Beale (1840) 11 Ad & E 983; Chitty at para 7-012). These traditional
categories seldom trouble the courts today. The older analyses justifying duress as having one's will overborne, or acting
involuntarily or not having a free choice, have since Director of Public Prosecutions for Northern Ireland v Lynch [1975] AC 653
given way to the more flexible and realistic concept of not having no choice at all, but leaving the party with a choice between two
evils or choosing unwillingly in circumstances which prevents the law from accepting what has happened as a valid contract in law:
per Lord Wilberforce at 680 or, in the words of Lord Simon at 695, it "... deflects without destroying the will of one of the
contracting parties ... thereby making the contract voidable". This change inevitably led to the question whether economic duress
was a possible vitiating factor in contracts.
43 One year later, Kerr J was able to state in Occidental Worldwide Investment Corp v Skibs A/S Avanti at 333-334 that it could.
The learned judge was of the view that duress was not necessarily limited to cases of threats to the person or in relation to goods but
the true question was ultimately whether or not the agreement in question was to be regarded as having been concluded voluntarily.
In that case a slump in charter rates occurred soon after charter parties were entered into. The charterers used strong coercive
threats of allowing themselves to go bankrupt, as they had no substantial assets (which was untrue), if the owners did not re-
negotiate charter hire. On the facts, Kerr J held at 336 that even though the owners were acting under great pressure when they
entered into the re-negotiated terms, it was only commercial pressure and not under anything which could in law be regarded as a
coercion of will so as to vitiate the consent. Kerr J took into account the fact that the owner made no protest in entering into the re-
negotiated terms and had at all times treated the agreement then reached as binding. The plea of duress thus failed (although the
defence of fraudulent misrepresentation succeeded). This decision, recognising economic duress as a ground to avoid a contract,
was followed three years later in North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd [1979] QB 705 ("North Ocean
Shipping Co Ltd") at 718-719 where shipbuilders renegotiated a 10% increase in the price for construction of a vessel with a threat
to break their contract when they had no basis to do so. The owners feared losing a lucrative charter if there was a delay in delivery
of the vessel and reluctantly agreed, reserving all their rights. Mocatta J held at 719-720 that this amounted to economic duress
entitling the owners to set aside the renegotiated rates, but on the facts, there had been a subsequent waiver of the right to avoid the
re-negotiated contract. Accordingly the owners' claim failed.
44 In Pao On v Lau Yiu Long [1980] AC 614, the Privy Council, on appeal from the Court of Appeal of Hong Kong, considered
the applicability of economic duress as a ground for rendering a contract entered into between commercial parties voidable. Lord
Scarman, who delivered the judgment of the Privy Council, stated at 634:
[J]ustice requires that men, who have negotiated at arm's length, be held to their bargains unless it can be shown that their consent
was vitiated by fraud, mistake or duress. If a promise is induced by coercion of a man's will, the doctrine of duress suffices to do
justice. The party coerced, if he chooses and acts in time, can avoid the contract. If there is no coercion, there can be no reason
for avoiding the contract where there is shown to be a real consideration which is otherwise legal.
Lord Scarman stated at 635-636 that there is nothing contrary to principle in recognising economic duress as a factor which may
render a contract voidable, provided always that the basis of such recognition is that it must amount to a coercion of will, which
vitiates consent. Lord Scarman emphasised that commercial pressure is not sufficient and in determining whether there is a
coercion of the will, it is material to consider the following factors:
(a) whether the person alleged to have been coerced did or did not protest;
(b) whether, at the time he was allegedly coerced into making the contract, he did or did not have an alternative course
open to him such as an adequate legal remedy;
(c) whether he was independently advised; and
(d) whether after entering the contract he took steps to avoid it.
45 In Universe Tankships Inc of Monrovia v International Transport Workers Federation [1983] 1 AC 366
("Universe Tankships Inc of Monrovia"), Lord Diplock stated at 384 the rationale for the doctrine of economic duress but declined
to elaborate on what would amount to legitimate commercial pressure which did not give rise to duress:
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It is, however, in my view crucial to the decision of the instant appeal to identify the rationale of this development of the
common law. It is not that the party seeking to avoid the contract which he has entered into with another party, or to
recover money that he has paid to another party in response to a demand, did not know the nature or the precise terms of
the contract at the time when he entered into it or did not understand the purpose for which the payment was demanded.
The rationale is that his apparent consent was induced by pressure exercised upon him by that other party which the
law does not regard as legitimate, with the consequence that the consent is treated in law as revocable unless
approbated either expressly or by implication after the illegitimate pressure has ceased to operate on his mind. It is a
rationale similar to that which underlies the avoidability of contracts entered into and the recovery of money exacted
under colour of office, or under undue influence or in consequence of threats of physical duress.
Commercial pressure, in some degree, exists, wherever one party to a commercial transaction is in a stronger bargaining position
than the other party. It is not, however, in my view, necessary, nor would it be appropriate in the instant appeal, to enter into the
general question of the kinds of circumstances, if any, in which, commercial pressure, even though it amounts to a coercion of the
will of a party in the weaker bargaining position, may be treated as legitimate and, accordingly, as not giving rise to any legal right
of duress ...
46 Economic duress as a vitiating factor in contracts has also been adopted in Singapore. In Third World Development
Ltd v Atang Latief [1990] 1 SLR(R) 96, the Court of Appeal was able to say at [17]: "Assuming that there was some pressure -
commercial pressure - exerted on the appellant at the time of his execution of the undertaking, such pressure does not constitute
economic duress unless it amounts to a coercion of his will which vitiates consent ..." referring to the Pao On decision.
Some 11 years later, in Sharon Global Solutions Pte Ltd v LG International (Singapore) Pte Ltd [2001] 2 SLR(R) 233,
Kan Ting Chiu J noted at [30] that economic duress as a ground for avoiding contractual obligations is still in its formative stage of
development and the acts that constitute economic duress and the effect they must have on the receiving party have not been
defined with certainty or finality. Kan J was of the opinion that in determining whether a case of economic duress has been made
out, it is necessary to consider all the circumstances of the case, including the state of mind of the parties.
47 In Wu Yang Construction Group Ltd v Zhejiang Jinyi Group Co Ltd [2006] 4 SLR(R) 451 ("Wu Yang Construction
Group Ltd"), a case on the tort of conspiracy and use of unlawful means, Andrew Phang Boon Leong J (as he then was), rejected the
older analysis of the overborne will theory and adopted, obiter, at [78], Prof Atiyah's view of "coercion" or "vitiation of consent"
from the "... perspective of pressure that so distorts the voluntariness of the consent of the party that is the alleged victim
of economic duress that the law regards such pressure as illegitimate. And what the law regards as illegitimate becomes, from that
particular perspective, situations where there has in effect been no consent at all". The learned judge then referred to the Court of
Appeal decision noted above, Third World Development Ltd v Atang Latief, which cites with approval the Occidental Worldwide
Investment Corp ([42] supra) and Pao On cases, and states that the concept of vitiation of consent should now be read in light of
the Commonwealth precedents; this includes the New South Wales Court of Appeal decision in Crescendo Management Pty
Ltd v Westpac Banking Corp (1988) 19 NSWLR 40, another Privy Council case on appeal from New Zealand, R v Her Majesty's
Attorney-General for England and Wales [2003] UKPC 22 and Dimskal Shipping Co SA v International Transport Workers
Federation ([42] supra). The learned judge also said at [77] that there is a close analogy with the tort of conspiracy with its
two-fold formulation of an unlawful act and "lawful act duress". Where acts are lawful in themselves, it would be
"extremely difficult" to prove economic duress simply because the doctrine of economic duress generally requires proof of
illegitimate pressure, as opposed to mere commercial pressure. This is something that was taken up in a more recent case.
48 In Tam Tak Chuen v Khairul bin Abdul Rahman [2009] 2 SLR(R) 240 ("Tam Tak Chuen"), Judith Prakash J cited at
[22] Universe Tankships Inc of Monrovia ([45] supra) where Lord Scarman stated that there are two elements in the wrong of
duress:
(a) pressure amounting to compulsion of the will of the victim; and
(b) the illegitimacy of the pressure exerted.
With regards to the second element, ie, what constitutes an illegitimate pressure or threat, Prakash J cited Nelson Enonchong,
Duress, Undue Influence and Unconscionable Dealing (Sweet & Maxwell, 2006) ("Enonchong") at para 3-031:
terms secured as a result of the threat of lawful action are so 'manifestly disadvantageous' to the complainant as to
make it unconscionable for the defendant to retain the benefit of them.
Prakash J further considered at [50] the categories listed in Enonchong of circumstances which indicate when a threat of lawful
action is illegitimate:
50 ... Enonchong ([22] supra) classifies the circumstances which, according to the authorities, indicate that when a threat of
lawful action that is not unlawful is illegitimate. These categories are:
(a) where the threat is an abuse of legal process;
(b) where the demand is not made bona fide;
(c) where the demand is unreasonable; and

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(d) where the threat is considered unconscionable in the light of all the circumstances.
After listing the categories, Enonchong goes on to warn (at para 3-022):
It should be noted that the general approach of the courts in this context is one of caution. Bearing in mind the need for
certainty in the commercial bargaining process, the English courts will not lightly find that a threat of lawful action in the
commercial context is unacceptable and therefore illegitimate so that the transaction is voidable for duress. As Steyn LJ warned in
the CTN Cash and Carry case, the law should not "set its sights too highly when the critical inquiry is not whether the conduct is
lawful but whether it is morally or socially acceptable." Therefore cases where a threat of lawful action that is not unlawful in
itself will be regarded as illegitimate so as to constitute duress will be "relatively rare".
Prakash J held at [62] that once the plaintiff had proved that illegitimate pressure had been exercised on him, it was up to the
defendant to prove that the pressure had not contributed to the plaintiff's decision to execute the agreement. With respect, I adopt
these principles espoused by Kan J, Phang J (as he then was) and Prakash J as correct statements of the law of contract in
Singapore in relation to duress, with one caveat.
49 I do not think Enonchong's basis at para 3-031 cited above should be adopted without a great degree of caution. The
proposition that if the threat comprises lawful action, but the terms secured "... are so 'manifestly disadvantageous' as to make it
unconscionable for the defendant to retain the benefit of it ..." [emphasis added], if accepted, would open the door to uncertainty. It
comes too close to re-writing disadvantageous contracts. We should not regress to those days where equity is measured by the
length of the Lord Chancellor's foot. Whilst I accept that doctrines like unjust enrichment are useful tools in equity's armoury to
prevent injustice, unconscionability has not been accepted in Singapore as a separate ground for vitiating a contract.
Unconscionability should remain in equity and discretionary remedies, including calls on performance guarantees or bonds. It is
worth repeating the warning of Enonchong that courts must approach the issue of duress with caution because of the
need for certainty in commercial contracts and the bargaining process. It has been said time and again that our courts
are always mindful of the need for contractual certainty and predictability, especially in commercial contracts, see eg, Zurich
Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction Pte Ltd [2008] 3 SLR(R) 1029 ("Zurich Insurance") at
[111] and Forefront Medical Technology (Pte) Ltd v Modern-Pak Pte Ltd [2006] 1 SLR(R) 927 at [26]. We are not yet in Utopia and
so there remains a distinct and discernible difference between what is "illegitimate" and what is "unconscionable" and it is worth
remembering that what is unconscionable is not necessarily illegitimate.
50 I therefore cannot accept Prof Tan SC's suggestion that the Wu Yang Construction Group Ltd case ([47] supra) should be read
to suggest a wider concept of duress than cases like that of Universe Tankships Inc of Monrovia. Consider the facts of Williams v
Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1, where a main contractor, refurbishing a block of flats, entered into a
subcontract for the carpentry work with a subcontractor for £20,000. As is not uncommon, the subcontractor got into financial
difficulty after carrying out some of the work, partly due to the fact that he underpriced for the work and partly because of his
inability to properly supervise his labour workforce. There was little doubt that the subcontractor would be delayed in completing
his subcontract works. The main contractor knew that if the subcontractor delayed him, he would suffer hefty liquidated damages
under his main contract with the owner of the block of flats. The main contractor called for a meeting with the subcontractor and
agreed to pay the subcontractor an extra £10,300 at the rate of £575 extra per flat to ensure the main contractor's completion date
is not delayed. After the subcontractor completed eight more flats, the main contractor only paid a further £1,500. The
subcontractor sued the main contractor who argued that the subcontractor furnished no consideration for the
promise of extra payment. Equally this could be said to be duress vitiating the agreement to make the additional payment. The
English Court of Appeal held that the main contractor had obtained a practical benefit as a result of the subcontractor's promise to
complete on time and that was sufficient consideration. But would it be different if it was the subcontractor who called the
main contractor for the meeting? Why should it depend on who called the meeting if the message passed was the
same - "if you do not pay me more, I will be in delay or may not be able to complete my work at all". How different then would this
be from the threat in Occidental Worldwide Investment Corp ([42] supra) or North Ocean Shipping Co Ltd ([43] supra)? These
kinds of situations arise all the time in construction contracts.
51 There should therefore be two elements kept firmly in mind for actionable duress. As held by Prakash J in the Tam Tak Chuen
case ([48] supra), first, pressure amounting to compulsion of the will of the victim, and secondly, the illegitimacy of the pressure
exerted. I do not say that lawful pressure can never amount to duress, for that would be constraining the doctrine unjustifiably
bearing in mind why it was developed in the first place, but it certainly will be a very rare case indeed for a contract to be set aside
for duress when only lawful means or pressure was used.
52 Thirdly, lawful commercial pressure must never be mistaken for "duress" capable of avoiding a contract. The learned author in
Treitel, The Law of Contract (Sweet & Maxwell, 12th Ed, 2007) at para 10-005 sets out some helpful comments in distinguishing
between "commercial pressure" and "unfair exploitation":
The aim of the courts is to distinguish between agreements which are the result of mere 'commercial pressure', and those
which are the consequence of unfair exploitation. This is not an easy distinction to apply in practice and it is, perhaps, for
this reason that the passage from Lord Goff has been said to 'leave room for flexibility in the characterisation of
illegitimate pressure and of the relevant causal link'. Thus, some cases in which duress has not been established may be
best explained on the basis that the threat to break the original contract was not illegitimate in the circumstances, while
in others the illegitimate pressure created by the threat may not have amounted to 'a significant cause' of the
decision to enter into the further contract. Indeed, the two factors may also be said to be interdependent in the sense that
the more illegitimate the pressure the lower the causal threshold. This may explain why, for duress of the
person, it need only be proved that the threat was one reason why the contract was entered into, whereas
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for economic duress the minimum requirement before it can be said that the threat was a significant
cause is to satisfy the 'but for' test, i.e. that the agreement would not have been made at all or on the
terms it was made. [emphasis added]
Lastly, the question then of whether a transaction was entered into as a result of duress is a question of fact, taking into account
all the circumstances of the case. It is apt to remember the approach espoused by Dyson J in DSND Subsea Ltd v Petroleum
Geo-Services ASA [2000] BLR 530 at 545:
In determining whether there has been illegitimate pressure, the court takes into account a range of factors. These
include whether there has been an actual or threatened breach of contract; whether the person allegedly exerting the
pressure has acted in good or bad faith; whether the victim had any realistic practical alternative but to submit to the
pressure; whether the victim protested at the time; and whether he affirmed and sought to rely on the contract. These are
all relevant factors. Illegitimate pressure must be distinguished from the rough and tumble of the pressures of normal
commercial bargaining.
53 Turning to the present case, in all the circumstances of the case, did the pressure amount to compulsion of AA's will and was
that pressure illegitimate such that AA's consent was vitiated? Since AA is the only shareholder and director of the 1st Defendant, I
treat AA as being synonymous with the 1st Defendant and where appropriate, references to AA will include the 1st Defendant.
54 The following paragraphs also contain my further findings of fact if not already been made above.
55 If the Plaintiff had agreed to lend AA $2m with the Property as security, delayed matters to the last minute and when AA
turned up to pick up his cheque he was then presented with a loan agreement, a smaller sum of $1.5m and an option to sell the
Property to the Plaintiff for $20m (instead of $22m) which was even below the forced sale value, and it was by then too late for AA
to refuse and look for other sources of funds, then applying the above authorities, there may have been sufficient illegitimate
pressure and coercion of AA's will to set aside the option to purchase the Property at $20m. I emphasise the word "may".
56 The fact is that AA had been unsuccessful in raising a loan and was coming under increasing pressure to reduce his loan with
HLF. I have made my findings on how the Colliers Valuation ended up in LSH and the Plaintiff's hands. On AA's own lawyer's
evidence, AA had told him that he had negotiated a plan to raise money using the Property (see [32] above). CS Lee structured the
deal with his draft option and deed of dettlement and this was sent to YS Low two days before the 5 June 2009 meeting. YS Low
said, and I accept his evidence, that he discussed these documents, and I find that this includes the structure of the deal, with AA.
YS Low also confirmed that AA understood his advice (see Notes of Evidence, 8 July 2010, p 79). AA says he passed the drafts to
Panthradil and in the car on the way to the meeting on 5 June 2009, Panthradil explained to him the effect of the documents.
Under cross-examination Panthradil said that he received the draft option and draft deed of dettlement on or after 3 June 2009 and
upon reading them, said to AA: "Hey, Pak, this looks like you're selling the property". Panthradil said AA's response was: "No, I will
clear it before that. Its just the structure to enable the borrowing", (see Notes of Evidence, 9 July 2010, p 130 lines 14-18). I accept
Panthradil's evidence over AA's version. Panthradil said when he saw the cancellation and the factoring in of the interest he saw the
documents as a secured loan structure. Panthradil said they were desperate for funds because no one was going to lend AA $2m
"clean". I therefore find that AA intended to use the Property as security for the loan.
57 As for the 5 June 2009 meeting, Panthradil says the figure was $22m (for the 1st Option) and to borrow $2m. That was what
YS Low also said in response to the drafts sent to him on 3 June 2009. However, it should be nonetheless noted that the drafts first
sent by CS Lee to YS Low stated $2m for the "option" and $20m as the purchase price under the option and there was no
subsequent agreement between the lawyers to revise those figures. There was therefore no agreement on these figures prior to the
meeting on 5 June 2009.
58 AA is a seasoned businessman who has been through much in his business career. The figures were not final when the meeting
commenced on 5 June 2009. There was no promise or agreement. A deal had been proposed, the drafts had been with AA's lawyer
and his CFO. I find that they were there to negotiate. During the course of the meeting, searches had been made and the actions
against AA were tabled. Based on the information on the searches, CS Lee stepped out of the meeting room to discuss this with his
clients, KC Tan and Melvin. Subsequently, AA did negotiate with KC Tan and Melvin alone in a break-out meeting, but when he
returned to the main meeting, he had his CFO and his lawyer with him. A number of witnesses heard them ask him if he was sure of
what he was doing and he was confident he could settle the "loan" in one, or at the maximum, two months and therefore cancel the
1st Option given to the Plaintiff. There was certainly no protest or suggestion of illegitimate pressure from AA or his advisers or that
some understanding had been breached.
59 The fact that AA was very desperate for funds and that fact was known to the Plaintiff only meant that they had the upper hand
in the negotiations. That was a legitimate commercial advantage and not pressure because the Plaintiff was not obliged to lend
AA money: see CTN Cash and Carry Ltd v Gallaher Ltd [1994] 4 All ER 714, where a threat by a supplier, who enjoyed a
monopoly in the distribution of certain goods, not to provide the buyer with urgently needed credit facilities in future transactions if
certain payment, which it genuinely believed was owing to them, was not paid was held not to constitute duress. Holding otherwise
would mean that many hard pressed debtors would be able to avoid contractual obligations on this ground. That fact
alone cannot amount to unlawful exploitation or illegitimate pressure. The truth is, and I so find, that AA entered into this
transaction and signed the 1st Option and Deed of Settlement because he was confident he could repay that sum within one or two
months. AA had the benefit of advice from his lawyer and his CFO, both of whom were also with him at the 5 June 2009 meeting.
He understood what he was signing. I therefore cannot see how there is any duress in this case that could vitiate the contract or that
there is any illegitimate coercion which vitiated the will.
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60 At this stage, it suffices for me to hold that what was entered into was a secured loan with a twist, the security could be
enforced at a price that had no relation to and was below the then forced sale value indicated on the Colliers Valuation. I will deal
with this in detail later but this brings us to whether this agreement is "unconscionable" and if so, can it be set aside as a matter of
contract law.
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Undue Influence
General
Introduction
MCW points out that there is a fiction of equality and a reality of inequality: 1) fiction of equality – no contract can
stand if the law requires exact equality in bargaining power, and 2) reality of inequality – but the law cannot be blind
to the fact that there are cases where people are clearly less able to make decisions. Neither can be entirely satisfied
and the law sees an interplay between these two considerations.
Justification
1. Punish Df’s unconscientious conduct
Dominant view and accepted by recent leading cases as per Royal Bank of Scotland v Etridge No.2 (2001, HL)
(“Etridge”): doctrine ensures that a person does not abuse the influence he has over another.
6 The issues raised by these appeals make it necessary to go back to first principles. Undue influence is one of the grounds
of relief developed by the courts of equity as a court of conscience. The objective is to ensure that the influence of one person
over another is not abused. In everyday life people constantly seek to influence the decisions of others. They seek to persuade those with
whom they are dealing to enter into transactions, whether great or small. The law has set limits to the means properly
employable for this purpose. To this end the common law developed a principle of duress. Originally this was narrow in its scope,
restricted to the more blatant forms of physical coercion, such as personal violence.
7 Here, as elsewhere in the law, equity supplemented the common law. Equity extended the reach of the law to other
unacceptable forms of persuasion. The law will investigate the manner in which the intention to enter into the transaction was
secured: "how the intention was produced", in the oft repeated words of Lord Eldon LC, from as long ago as 1807 (Huguenin v
Baseley 14 Yes 273, 300). If the intention was produced by an unacceptable means, the law will not permit the transaction to
stand. The means used is regarded as an exercise of improper or "undue" influence, and hence unacceptable, whenever the consent thus
procured ought not fairly to be treated as the expression of a person's free will. It is impossible to be more precise or definitive. The
circumstances in which one person acquires influence over another, and the manner in which influence may be exercised, vary too widely
to permit of any more specific criterion.
But in Allcard v Skinner (Pf joined Df’s nunnery – in accordance with its rules, Pf gave her property to sisterhood –
six years after leaving the nunnery, Pf brought an action to reclaim property – held, contract voidable for undue
influence but Pf not allowed to reclaim her property) à Df = Mother Superior of nunnery had not acted
unconscionably but money given by Pf nun was still forced to be returned.
2. Defective consent
Birks and Chin (1955) argue that the basis of the doctrine is to relief a claimant for his ‘morbid dependency’ on the
Df: “too much influence, too much to be compatible with the general presumption that adults all have the
standard common law capacity to manage their own affairs”. But the law only relieves an extreme loss of
autonomy.
Criticism
• How does the law discern what is inappropriate level of dependency?
• Artificial – the nun in Allcard who gave away her possessions may have been naïve but her consent was still
real. Can the law really say those who donate to their religion are ‘impaired’ in exercising their autonomy?
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o The judgement of Lindley LJ in Allcard also contradicts this: ‘though [the Pf was] infactuated, there is no
evidence… [of] imbecility as to justify the inference that she was unable to…manage her own affairs’
3. Failure to protect
In Allcard, the undue influence doctrine was described to rest on ‘a fetter placed upon the conscience of the
[trusted party]’. In Etridge: Df ‘preferred his own interests’, ‘failing to protect the claimant’s interests’. There is
a distinct change in language from the other 2 bases à here the Df’s conduct is characterised as an omission, a
failure to protect the claimant’s interests.
OLD: Undue Influence (Allcard v Skinner)

Two distinct classes:
Class 1 (Actual UI) – Df positively/expressly used some pressure to influence the Pf
Class 2 (Presumed UI) – Pf and Df share a relationship such that there is a presumption that the Df had influence
over the donor.
Within Class 2, two further classes:

Class 2A – relationships where influence is automatically presumed
Class 2B – relationships where the victim ‘generally reposed trust and confidence’ in the other
• Barclays Bank v O’Brien (1993) (Df wife agreed to mortgage house as security for overdraft facilities
extended by Pf bank to company which husband, but not wife, had interest in – held, contract voidable
for UI) – presumed UI is only satisfied when there is evidence of a manifestly disadvantageous
transaction
• This presumption is only rebutted by the Df’s proof that Pf made a free and independent choice (eg. by
having recourse to independent advisers)
NEW: Undue Influence (Etridge)

What’s new? Restatement of the law
Basis for invoking this doctrine
Lord Nicholls – prevent abuse of influence; this is a child of equity.
The burden of proof
• The burden is on the Pf at all times. ‘Presumed UI’ is just an evidential presumption (that lowers the
evidence needed to discharge the same said burden of proof) – a court is inferring actual UI from the
circumstances of their relationship
• For the presumption to be invoked, (i) prove of relationship and (ii) manifestly disadvantageous
transaction
• In Lord Hobhouse judgement, he adds that Class 2 merely establishes that there is a legally-recognised
relationship where one reposes trust in the other. A court must still (on the circumstances) find whether
there was such an abuse of trust and the fact that there is a transaction tt needs explaining is a relevant factor
to making that finding of abuse.
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Manifestly disadvantageous transaction
• Also characterised as “a transaction which calls for explanation”

• This requirement is necessary because the law does not treat with suspect ALL gifts between parties in a
relationship of influence.
Categorising undue influence is not helpful
Lord Clyde opined that classifying categories of UI may lead to confusion because they are not easy to define
and the names of the categories may be misleading.
• 92 …It was observed in Allcard v Skinner (1887) 36 Ch 145 that "no court has ever attempted to define undue influence" (Lindley L], at p 183).
It is something which can be more easily recognised when found than exhaustively analysed in the abstract. Correspondingly
the attempt to build up classes or categories may lead to confusion. The confusion is aggravated if the names used to identify the classes do not
bear their actual meaning. Thus on the face of it a division into cases of "actual" and "presumed" undue influence appears illogical. It appears
to confuse 1) definition and proof. There is also room for uncertainty whether the presumption is of the 2) existence of an influence or
of its quality as being undue. I would also dispute the utility of the further sophistication of subdividing "presumed undue influence" into
further categories. All these classifications to my mind add mystery rather than illumination.
• 93 There is a considerable variety in the particular methods by which undue influence may be brought to bear on the grantor of a deed. They
include cases of coercion, domination, victimisation and all the insidious techniques of persuasion. Certainly it can be recognised that in the
case of certain relationships it will be relatively easier to establish that undue influence has been at work than in other cases where that sinister
conclusion is not necessarily to be drawn with such ease. English law has identified certain relationships where the conclusion can prima facie
be drawn so easily as to establish a presumption of undue influence. But this is simply a matter of evidence and proof. In other cases the
grantor of the deed will require to fortify the case by evidence, for example, of the pressure which was unfairly applied by the stronger party to
the relationship, or the abuse of a trusting and confidential relationship resulting in for the one party a disadvantage and for the other a
collateral benefit beyond what might be expected from the relationship of the parties. At the end of the day, after trial, there will either
be proof of undue influence or that proof will fail and it will be found that there was no undue influence. In the former case,
whatever the relationship of the parties and however the influence was exerted, there will be found to have been an actual case of undue
influence. In the latter there will be none.
Distinction between Class 2(A) and 2(B) be dropped
• Lord Hobhouse advocated dropping Class 2(B) because the court must be made to find that one had reposed
trust in the other with regard to the particular investment/ decision/ transfer
• It is not sufficient for someone to ‘generally’ repose trust – “A wife may be happy to trust her husband to make
the right decision in relation to some matters but not others”
• Thus there are only two categories
(i) overt exertion of UI or
(ii) where there is a legally-recognised special relationship, a failure to protect the interests of the
donee
• Lord Scott adds the pt that 2(B) may confuse ppl into thinking that where there are such relationships reposing
general trust, there is no need to find abuse of trust. This is not true.
Procedures of proving UI in new formulation under Etridge
#1: If it is not a relationship reposing trust, must prove overt undue influence.
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• So long as overt undue influence is found, there is no need to show special relationship or manifestly
disadvantageous transaction
#2: Is there a relationship reposing trust (either automatic in establish categories or

proved by parties)?
• If YES, courts then decide if there was abuse of trust (evidence of manifestly disadvantageous
transaction VS evidence of independent decision)
• If YES again, courts would then grant relief
S1: Failure to protect by overt pressure

Relational pressure
Once we move the cases dealing with threats to prosecute and to disclose into the category of lawful act duress, we are
left with cases involving the Df’s overt exploitation of claimant’s relational motivation for consenting.
1. Threats to abandon
• Langton v Langton – knew father afraid of institutionalisation – threaten to do so unless he give them his
property
2. Excessive control + secrecy and exclusion of others
• Re Killick v Pountney – K was P’s lodger; later his health failed – P took over K’s $$ and papers, banned K
from contact with his relatives by threatening not to let K come home fr hospital – K’s will left a lot of $ for P.
3. Bullying, confrontation, harassment
• Clarke v Prus (1995) – Old man young wife – her requests for gifts turned into verbal onslaughts and
harassment.
• Drew v Daniel (2005) – Dan coerced aged aunt to give him some benefit through a distressing conversation
and threat to sue her – Judge found actual UI because of Pf’s vulnerability and fear of confrontation and
business naivety.
Although in Etridge it was said that if overt UI is found, no need to show relationship of influence or mainfest
disadvantage, these two factors can be relevant in factoring whether there was overt UI in the first place. (MCW
p.371/2)
S2: Failure to protect by omission

Requirements: 1) Relationship of influence (automatic or proved) and 2) questionable transaction (manifest
disadvantage).
1a) The ‘automatic’ categories of influence relationships
Common relationships of influence

• Parent-child; guardian-ward; solicitor-client; doctor-patient; trustee-beneficiary
• Husband-wife is not an automatic presumption.
• For the automatic category, it is a legal presumption and not merely an evidential one.
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• Because these categories overlap greatly with fiduciary duty, normally a Pf can just sue under breach of
fiduciary duty. Thus, UI’s significance is more in proved influence relationships (MCW).
Presumptions
The irrebuttable legal presumption triggered by these relationships must be ‘distinguished sharply’ from the
evidential presumption just discussed. However, the presumption is not that the designated relationships raised a
presumption of indue influence (Barclays Bank v O’Brien). Rather it is that the relationships is one of influence over
the claimant; the claimant need only prove the existence of the specified relationship, not that he actually
reposed trust and confidence in the other party (Etridge, at [18]). To raise a presumption of undue influence,
claimant must also show that their transaction called for an explanation.
• Rajabali Jumabhoy v Ameerali R Jumabhoy (1997, SGHC) – Technically there was a presumption since father/son
relationship, but “there should be a limit to the application of the presumption depending on the respective ages
and positions in life of the parent and child”. As son was grown up and capable of making decision, this
presumption was weakened. Court held no UI bec. presumption is weak + no act of coercion on part of father.
• MCW: Even in these cases, it should be possible to rebut the presumption of undue influence by specific
evidence that his particular relationship is not one of influence. People are not as obedient and
compliant in status relationships as they were when this category was developed. Thus, Lord Clyde’s view that
Class 2A simply raises a rebuttable evidential presumption on very strong facts is preferable.
1b) Proved relationships of influence
No set categories but usually marked by a rather exclusive relationship such that the Pf woud let his guard down
and expect conscientious advice from Df.
1. Look to past dealings

No need for ‘blind, unquestioning trust’, so long as in past dealings. Typical examples include: wife and husband
(BCCI v Aboody 1990); customer and a bank (Lloyds Bank v Bundy); and pop singer and his manager
(O’Sullivan v Management Agency and Music Ltd 1985).
2. PF’s illness/ frailty/incompetence/inexperience

The Pf’s frailty at that time will be considered à eg. Tufton v Sperni
Possibly some overlap with unconscionable bargains.
3. One-off dealings
A relationship of influence may even arise in a one-off dealing. (Tufton v Sperni – T wanted to set up Muslim centre, S
sold his house for twice the market value to T – UI found – Evershed MR: If it is an altruistic or charitable objective,
the law presumes a relationship that reposes trust amongst all the collaborators for such a project).
4. Unfairness of transaction
Unfairness of transaction provides strong evidence of a relationship of influence. Alternatively, substantive unfairness
can be seen as narrowing the potential width of ‘relationships of influence’ (Credit Lyonnais v Burch (1997) – young
junior employee acted as guarantor for employer’s overdraft, mortgaged her house – solicitor did not explain full
potential and extent of liability, or give any independent advice – held, contract voidable for undue influence).
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Millett LJ: The mere fact that a transaction is improvident or manifestly disadvantageous to one party is not sufficient by itself to
give rise to a presumption that it has been obtained by the exercise of undue influence; but where it is obtained by a party between whom
and the complainant there is a relationship like that of employer and junior employee which is easily capable of developing into a
relationship of trust and confidence, the nature of the transaction may be sufficient to justify the inference that such a development
has taken place; and where the transaction is so extravagantly improvident that it is virtually inexplicable on any other basis, the
inference will be readily drawn.
Conversely, no inference will be drawn if an apparently disadvantageous transaction is explicable (Re

Brocklehurst’s Estate (1978) - elderly aristocrat gratuitously gave Df 99-yr lease of the shooting rights in his estate –
held, no duress, act was explicable due to close friendship between the parties and donor’s desire to
deliberately reduce estate’s value before it is inherited by detested nephew).
2. A transaction calling for explanation
General principle is that the disadvantage must be obvious to any reasonable person who has considered the
transacation at the time with the knowledge of all the relevant facts (and not upon ‘fine and close evaluation of its
benefits and detriments’) (BCCI v Aboody).
1. Significant impact on Pf’s future autonomy

• Transactions entailing such an extreme degree of improvidence that they threaten the claimant’s future autonomy
will ‘call for an explanation’. This is why most undue influence cases involve the loss of the claimant’s home or of
the vast proportion of the claimant’s wealth. -
o Eg. Allcard (nun had no more possessions left); Hammond v Osborn (old man’s ‘gift’ represented almost
92% of all his assets)
2. Inconsistent with parties’ relationship

• Credit Lyonnais à young employee guaranteed the debts of her employer and even mortgaged her home – not
very logical considering it was employer-employee r/s
3. Undermining claimant’s relationship with others who have claims on his bounty
• Randall v Randall (2004) – court set aside gifts of land made by an elderly woman to her nephew because they
were
1. Inconsistent with her desire to protect her beloved donkeys living on part of the land,
2. Made no provision for, or effectively disinherited, other close relatives including the nephew’s
own mother who lived on part of the land,
3. Divested her of all the property in the twilight of her life where she would need extra care and
4. Were so large as not to be reasonably accounted for on the grounds of ordinary motives
4. Explicability of any apparent improvidence

Contracts which are not obviously unfair at the time of formation are unobjectionable even if made between people in
close relationships. Conversely, transactions which appear very improvident may not be so on closer examination, or
may otherwise be satisfactorily explained (Re Brocklehurst’s Estate).
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3. Rebutting the presumption
To rebut the evidential presumption of undue influence raised by the claimant’s proof of a relationship of influence
and a transaction calling for explanation, the Df must show that the claimant’s consent to the transaction was ‘full, free
and informed’. The usual way is by showing that the claimant received adequate independent advice, although
this is unnecessary if it can be proved otherwise (Inche Noriah v Omar (1929) – elderly illiterate woman made
gift of property to nephew – lawyer advised her but did not know that gift represented the whole of her
property – held, contract voidable for undue influence).
Claimant’s understanding of the transaction is necessary but not sufficient (Etridge per Lord Nicholls).
Lord Nicholls: [20]….In the normal course, advice from a solicitor or other outside advisor can be expected to bring home to a
complainant a proper understanding of what he or she is about to do. But a person may understand fully the implications of a proposed
transaction, for instance, a substantial gift, and yet still be acting under the undue influence of another. Proof of outside advice does
not, of itself, necessarily show that the subsequent completion of the transaction was free from the exercise of undue
influence. Whether it will be proper to infer that outside advice had an emancipating effect, so that the transaction was not brought
about by the exercise of undue influence, is a question of fact to be decided having regard to all the evidence in the case.
A weighty piece of evidence in determining whether the inference is rebutted is the extent of unfairness
(inexplicability) in the transaction. A court may infer from the degree of disadvantage to the claimant that:
1. Claimant’s refusal to get or follow independent advice indicates continuing impact of undue influence (Bank of
Montreal v Stuart – wife completely cleaned out by acting as surety for her husband – claimed that she acted
of her own will and that she would have scorned to consult anyone - court held undue influence, and that
wife’s declarations show how deep-rooted and lasting the influence of her husband was)
2. Inadequate advice (Inche Noriah v Omar – advice failed to meet requirements of adequacy: (i) independent,
(ii) given with knowledge of Pf’s vulnerability and material aspects of the negotiation, (iii)
effectively communicated to the Pf, and (iv) competent in only supporting transactions that can sensibly be
entered into by a party free of influence.)
3. Claimant did not fully understand transaction (Hammond v Osborn – CA described H’s gift as an act of
generosity wholly out of proportion to the kindness shown to him – Ward LJ: inconceivable that
the deceased, who was prudently investing for his future, would have saddled himself with a debt he could not
pay).
4. Stronger party’s failure to protect claimant’s interest (Hammond v Osborn – scale of gift cast a sinister light
on O’s failure to either recommend that H obtain independent advice or draw his attention to the scale of his
gift, the proportion of his liquid assets that it represented and the relatively small amount that he was left
with)
Proper function of the rebuttal is to determine whether the Df had successfully shifted his obligation to
protect the claimant’s welfare to a third party (the independent advisor).
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Remedy – Rescission
Bars to rescission
Contracts and gifts tainted by undue influence are voidable and may be rescinded at the claimant’s option. Bars to
rescission are the same as that of misrepresentation.
1. Affirmation of contract (Mitchell v Homfray)
2. Lapse of time (Allcard v Skinner – donor’s delay of six years between leaving the sisterhood and intiaiting her
claim barred her claim)
3. Third party acquires an interest in subject matter of contract as a good faith purchaser (Bainbrigge v Brown
and Bridgeman v Green)
4. Restitutio in integrum (mutual restitution) impossible
a. Impossibility of precise mutual restoration should not bar rescission; it should be enough that return
is made in money’s worth if it cannot be done in kind. Model case yet to be fully followed, O’Sullivan v
Management Agency and Music Ltd where a fully performed contract to manage an inexperienced
pop musician was rescinded for presumed undue influence, although manager’s services could not be
returned in kind and the musician had achieved considerable fame and fortune. Manager had to
return musciian’s copyright in songs and account for profit made form agreement, but was allowed to
deduct a sum in recognition of the contribution that his skill and work had resulted in musician’s
success. If conversion into money is allowed, mutual restitution is never impossible, subject to
quantification difficulties.
The defence of change of position
Principle of ‘practical justice’ basically entails that the award to be returned to a plaintiff who was unduely
influenced would constitute only a proportion of original sum (Cheese v Thomas – great-uncle and great-
nephew jointly bought an asset to benefit both parties and then asset fell in value – court ordered the loss to be borne
by both parties in proportion to their contributions – on rescission for undue influence, greater-uncle only
awarded what was left of his share – reason is that great-nephew was not morally reprehensible, acted with good faith
to provide great uncle with home). Equity operates on both sides.
MCW argues that this case should be interpreted as an application of the change of position defence, which reduces
claimant’s recovery on rescission to protect a good faith defendant’s expenditure in reliance on the
security of his receipt. Defence available in the law of unjust enrichment.
Consistent with dicta in Allcard v Skinner to the effect that had novice nun not been barred by her delay,
she would have recovered only so much as had not already been spent on the charitable purpose of the
convent. Therefore, to ensure that restitution on rescission does not unduly disrupt people’s dealings
with what they honestly believe to be theirs, good faith defendants (Allcard v Skinner; Cheese v Thomas)
are only required to return what is left.
RBS v Etridge [2001] 3 WLR 1021

‘[144]… If contractual consent has been procured by undue influence or misrepresentation for which a party to the
contract is responsible, the other party, the victim, is entitled, subject to the usual defences of change of position,
affirmation, delay etc, to avoid the contract…’
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No partial rescission
Principle of no partial rescission set out in Glanville v Glanville (EWHC-2002):

"In this case I have no power to vary what Mr Glanville did so as to provide Jean [his second wife]
with somewhere to live…while ensuring that the value of the house passes to Mr Glanville's family
after Jean’s death. If I had the power to do that I believe that it could be achieved, but the law of
undue influence does not give me any power to do it.’
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Improvident Guarantees/Securities
Undue Influence (with Third Parties?)
Issues & Justification

Where a wife is induced to guarantee the debts of her husband or his company by the husband’s undue influence,
misrepresentation, or pressure, can the lender enforce the guarantee against the wife?
Justification for ANTI-RELIEF

1. Wife should take responsibility for her apparent agreement to the guarantee
2. Wife may stand to benefit from loan to husband, esp if she is financially dependent on him
3. It is the primary debtor and not the lender who has behaved reprehensibly
4. Such lending is socially and economically useful by unlocking wealth tied up in family home for commercial
purposes; lenders will be reluctant to lend if they lack confidence in the enforceability of their securities
Justification for PRO-RELIEF

1. Marriage relationship provides scope for abuse (Etridge at [36])
2. Guarantor is usually peripheral to loan negotiations; often brought in only at the last moment thus in
no real position to assess wisdom of her guarantee in the context of overall dealings
3. Lender is, or ought to be, aware of the risk of abuse
4. Guarantor’s economic interests is linked to, but not identical with, the primary debtor’s; it may
be wholly improvident for her to support a further loan (chance of saving business small vs aggravated risk of
losing family house)
5. Homelessness should be avoided
General
Three-step legal response:
A. Pre-O’Brien (strict rule)

Guarantee voidable only if:
1. Debtor acted as lender’s agent in procuring guarantor’s consent (Avon Finance v Bridger – crooked son of Df
asked them to sign their house as a charge without explaining nature of transaction – son did not pay loan and
PF wanted to enforce guarantee against Df – held, contract rescinded – concept of “agency” stretched
in order to protect innocent party), or if
2. Lender had actual notice of debtor’s unconscientious conduct (BCCI v Aboody)
Both are unusual and difficult to prove.
B. O’Brien (radical extension)

Rule radically extended to include constructive or imputed notice. Accordingly, a guarantee is unenforceable if
the lender has constructive knowledge of any actual impropriety in the debtor’s inducement of guarantor’s consent
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UNLESS lender has taken reasonable steps to ensure that guarantor’s consent was properly obtained
(O’Brien at 195).
Clear principles but uncertain application led to mass litigation (floodgates).
C. Etridge (commercial certainty over private interests)

Between private and commercial interests, HL tilted balance towards commercial certainty in favour of the
banks. Laid down clear, simple and practically operable minimum requirements which would ensure enforceability of
guarantee at [2].
1. Wrongdoing by debtor inducing guarantor’s agreement

Can G prove a vitiating factor against PD?
First prove misrepresentation, undue influence or other legal or equitable wrongdoing. Etridge cautions against being
too ready to find this in husband and wife cases.
Relationship of husband and wife raises no automatic presumption that the relationship is one of influence [19]
[28] In a narrow sense, such a transaction plainly ('manifestly') is disadvantageous to the wife. She undertakes a serious financial
obligation, and in return she personally receives nothing. But that would be to take an unrealistically blinkered view of such a
transaction… If the husband's business is the source of the family income, the wife has a lively interest in doing what she can to support
the business. A wife's affection and self-interest run hand-in-hand in inclining her to join with her husband in charging
the matrimonial home… to obtain the financial facilities needed by the business.
[159]. …[we should not] regard a relationship of trust and confidence between a wife and husband as something special
rather than as the norm… [even if] a wife doubts the wisdom of her husband's financial or business decisions, … I would regard her
support as a natural and admirable consequence of the relationship of a mutually loyal married couple. The proposition that if a wife,
who generally reposes trust and confidence in her husband, agrees to become surety to support his debts or his business
enterprises a presumption of undue influence arises is one that I am unable to accept.
Essentially, more restrictive approach taken by Etridge:

1. What may be expected of a reasonable husband in the circumstances should not, without more, be
castigated as undue influence
2. Degree of hyperbole only natural
3. Should not regard relationship of trust and confidence as special rather than norm
2. Lender’s notice
Does L know that a) guarantee is non-commercial and
b) guarantee is for PD’s benefit and not for G’s
• Either actual knowledge or

• Constructive knowledge
o O’Brien’s two-stage test for lender’s constructive notice is: a) debtor-guarantor relationship was of a
‘sexual or emotional’ nature; b) loan is for debtor’s benefit.
o Etridge’s refined two-stage test is: a) debtor-guarantor relationship was non-commercial; b) loan is for
debtor’s benefit.
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Knowledge of (1) and (2) alerts lender to initiate an administrative procedure that does not require difficult and
sensitive judgement calls.
3. Lender’s failure to take reasonable steps
Ordinary situations
Lord Nicholls elaborated on Lord Browne-Wilkinson’s guidelines in O’Brien:
1. Firstly, bank must check directly with the surety the name of the solicitor she wishes to act for
her, and to explain to the surety the conclusive effect of the solicitor’s certificate.
a. Concern here is with 1) quality of legal advice and 2) its independence
2. Secondly, recognising that banks are often unwilling to warn surety of financial risks directly,
Lord Nicholls required banks to provide such information to the solicitor advising the surety
a. Include information such as principal debtor’s borrowings and current overdraft facility
3. Thirdly, where a bank has cause to believe that the surety is labouring under some undue influence or
misrepresentation exercised by the debtor, it has to inform the solicitor of its suspicions.
4. Finally, bank has to obtain the solicitor’s written confirmation.
Solicitor’s duty
1. Explain nature and effect of the guarantee in a meaningful, rather than merely formal, way
2. Emphasise the seriousness of risk of her being made a bankrupt or losing her home
3. Discuss her financial means, value of property being charged, and the availability of other assets out of
which repayment may be met
4. State clearly that she has a choice whether to proceed and ask whether she wishes him to renegotiate
particular terms (e.g. lower her liability)
Essentially, solicitor’s duty is to ensure client understands the nature and effect of transaction and not that there
was the absence of undue influence. If solicitor believes that transaction is not in guarantor’s best
interest, just have to give advice, don’t have to veto, unless it is glaringly obvious that wife is being
grieviously wronged.
Exceptional situations
Lender must take further steps when he knows facts that heighten the risk of undue influence, duress or
misrepresentation by debtor. Facts may arise from:
1. Lender: past dealings with debtor and guarantee, or knowledge or suspicion that guarantor has not
received proper advice
2. Guarantor: conduct reveals a misunderstanding of transaction
3. Debtor: Refusal to disclose financial information to guarantor
What about presence of particularly onerous features of the transaction? Would it point to case being
‘exceptional’? E.g. guarantee being unlimited or merely postponing the inevitable collapse of business.
Mixed views:
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• Lord Hobhouse & CA in Credit Lyonnais: YES.

• Lord Millet: YES, extra-judicially, a guarantee should be set aside, inter alia, if it is
a) Inexplicable except by presence of undue influence; or
b) Bank is aware and knows that the surety and solicitor is unaware of facts which makes transaction
excessively improvident; or
c) Security taken is disproportionately disadvantageous and more onerous than situation justifies
• Lord Nicholls: NO. Not the solicitor’s job to veto a disadvantageous transaction to the guarantor so
long as he gives reasoned advice to that effect. Nevertheless, solicitor should decline to act if it was
‘glaringly obvious that the wife is being grievously wronged’.
In these exceptional cases, lenders proceed at their own risk. Court will determine whether reasonable
steps have been taken in response to heightened suspicion.
Singapore’s approach
• OCBC v Chng Sock Lee (SGHC-2001) (Df mother and son guaranteed debt of father which Pf bank later wanted
to enforce – Df raised undue influence, provided evidence that father was abusive and violent – court held no
undue influence –
o LEGAL:
§ #1: No relationship of influence: family members knew that they were signing guarantee for
their own company, expecting to make profit – high degree of trust and confidence required for
ROI to be proved (cf. Standard Chartered Bank v Uniden).
§ #2: Guarantee was not a transaction which called for explanation/manifestly
disadvantageous – loans for family enterprise common
§ #3: Bank did not have constructive knowledge – solicitor did not observe any sign of
physical coercion or pressure, or that father had dominating personality (cf Etridge where role of
solicitor only considered in examining whether lender took reasonable steps to ensure guarantor
understood what he was doing)
o POLICY: SG courts will not find undue influence in improvident guarantees easily because there are a
large number of family business in the economy which rely on using their houses/wives
securities as guarantees for business – if courts overly protect wives/guarantors, banks will be
unwilling to loan finances to family businesses which will be detrimental to SG’s economy –
therefore, pro-commercial context as per Etridge)
• Standard Chartered Bank v Uniden Systems (SGHC-2003) (Wife agreed to guarantee credit facilities of
husband’s company – alleged presumed undue influence (Class 2B) – court described wife has completely
subservient and fully trusting of husband in whatever he asked her to do or sign – held, no undue influence –
o LEGAL:
§ #1: No express discussion of relationship of undue influence although court seems to strongly
suggest that such a relationship existed
§ #2: Wife’s signing of guarantee was not a transaction which was manifestly
disadvantageous to wife – shared common economic interests + normal in SG for husband-
wife teams to run businesses together
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§ #3: Court seems to require bad faith

§ #4: Bank was not put on constructive notice of undue influence because no unusual conduct
between husband and wife observed (cf Etridge where CK satisfied as long as lender knows that 1)
G-D relationship is a non-commercial one AND that 2) loan is for debtor’s benefit)
• Hong Leong Finance Ltd v Tay Keow Neo (SGHC-1991) (court held no UI between employer-
employee because guarantee was entered into due to employee’s “unflinching loyalty” and trust in their employer
and not because they were coerced into signing – focus on lack of bad faith as main ground for denying
UI – inconsistent with authority (Allcard v Skinner) + fact that UI can be proven by inference (Jennings v Cairns)
• Contrast: Bank of India v Sujanani Thakur Rochiram & Ors [1999] SGHC 185
• Pek Nam Kee v Peh Lam Kong [1994] SGHC 163
Main points of difference between Etridge and Singaporean cases:

1. Necessity for wrongdoing and bad faith
2. Class 2A automatic presumption of relationship of influence is rebuttable.
3. Degree of dependence and trust necessary to prove a relationship of influence.
4. What transactions call for an explanation
5. Significance of the claimant’s knowledge of terms and willingness to contract in rebutting undue influence.
6. When lenders are put on notice such that they must act reasonably.
Main points of difference between Etridge and Singapore cases

UNITED KINGDOM SINGAPORE
ACTUAL UNDUE INFLUENCE – GENERALLY NO SIGN OF DEVIATION
BCCI v Aboody: claimant relying on actual undue influence must In Singapore, undue influence has been found to be exercised in a
prove that undue influence was exercised by the ascendant party and case where the ascendant party threatened indefinite delay in the
induced the claimant to entering the contract. distribution of a will concerned and offered rewards and benefits to
• Bullying and harassment (Clarke v Prus, Drew v Daniel), induce the claimant into entering the contract (Pek Nam Kee v Peh
• Threats to abandon the claimant (Langton v Langton, Bank of Lam Kong).
Scotland v Bennett) and
• Threats of excessive control, secrecy and exclusion (Re Killick).
PRESUMED UNDUE INFLUENCE
• Based on Etridge, claimant may raise presumption of undue Singapore decisions have largely adopted similar elements with the
influence and shift onus of rebutting it to ascendant party, failing addition of the examination of blameworthiness of ascendant party.
which court will uphold a finding of undue influence.
• To do this, claimant must prove 1) relationship of trust and
confidence, and 2) transaction which calls for explanation or
which is manifestly disadvantageous to claimant.
NECESSITY FOR WRONGDOING AND BAD FAITH IN SINGAPORE
• Proof of the unimpeachable conduct of the ascendant party is However, a line of Singapore cases has examined the conduct of the
generally not an answer to a claim of undue influence (Jennings ascendant party; whether his acts were motivated by good faith
v Cairns). seemed to affect the outcome of a finding of undue influence.
• Undue influence can still be found on this basis of the • Standard Chartered Bank v Uniden: court took into account the
presumption raised (Allcard v Skinner). fact that husband provided well for family, bought several
properties in joint names, and bought wife a car. Held, no UI.
• Hong Leong Finance v Tay Keow Neo: court apparently decided
based on employees agreeing to guarantee employer’s debt
because of unflinching loyalty and trust. Held, no UI.
With respect, this deviation can be criticized on the grounds that an
analysis of the ascendant party’s conduct in a case of presumed
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undue influence is unnecessary and goes against authority.
CLASS 2A AUTOMATIC PRESUMPTION OF RELATIONSHIP OF INFLUENCE IS REBUTTABLE – INCONSISTENT WITH UK
Etridge: automatic presumption of existence of influence raised in UK case law is silent on whether automatic presumption may be
certain finite relationships – such as doctor-‐patient, solicitor-‐client, rebutted; the Singapore case of Rajabali v Ameerali took the initiative
parent-‐child, guardian-‐ward, and trustee-‐beneficiary – because these to assert that such a presumption of influence is not cast in stone and
relationships usually characterized as one where a party is vulnerable is always open for rebuttal upon evidence proving to the contrary.
and dependent on the other.
HIGHER DEGREE OF DEPENDENCE AND TRUST NECESSARY TO PROVE RELATIONSHIP OF INFLUENCE – STRICTER THAN UK
UK has generally stipulated that there need not exist a blind, While Singapore cases have not addressed this requirement explicitly,
unquestioning faith; it suffices that the claimant generally reposed material facts indicate that Singapore requires a much higher
trust and confidence in the ascendant party. Satisfied in a variety of degree of dependence, trust and/or confidence between parties in
relationships: order for influence to be found.
• Bank-‐customer (Lloyd’s Bank v Bundy) • Standard Chartered Bank v Uniden: no express finding of
• Employer-‐employee (Credit Lyonnais v Burch) existence of influence, but inferred that one can be found
• Husband-‐wife (BCCI v Aboody) because wife was described as completely subservient who had
• Grand-‐uncle-‐grand-‐nephew (Cheese v Thomas) full and unwavering faith in her husband and whatever he asked
her to do or sign
• OCBC v Chng: no relationship of influence found even though
ascendant father was described as having dominant personality
(because claimants knew they were signing up for a chance of
profiting)
APPLICATION OF WHEN TRANSACTIONS CALL FOR AN EXPLANATION IS SEEN IN CULTURAL CONTEXT
• Etridge: inexplicable transaction on the basis of parties’ In Singapore, the imbued traditional Asian value of collective sharing
relationships + extreme disadvantage obvious to reasonable is reflected in judicial treatment of cases of guarantees.
person having relevant background knowledge (BCCI v Aboody) • Standard Chartered Bank v Uniden; OCBC v Chng: guarantees
• This element is undoubtedly coloured by social norms and taken out in respect of commercial loans which benefited
practices and must be seen in light of cultural contexts. husband-‐wife businesses or family enterprises were viewed as
common and unexceptional in Singapore context
• Such guarantees likely to be viewed differently in UK given that
individualism is generally more prevalent, and collective
sharing, even for family/husband-‐wife enterprise, may well
constitute transacting calling for an explanation (cf BCCI v
Aboody where wife took out guarantee with respect to
husband’s debt)
WHEN LENDER IS PUT ON NOTICE
• Etridge: all that is needed to put the bank on constructive notice In Singapore, lender has constructive knowledge if there are
of debtor’s inequitable conduct in inducing the subservient ostensible observations of coercion or unusual conduct between
party’s agreement is knowledge that 1) relationship is non-‐ parties (Standard Chartered Bank v Uniden, OCBC v Chng).
commercial, and 2) transaction is for debtor’s benefit.
• The Etridge approach is commendable for being simple, certain
and realistic, for it is not easy to observe ostensible features of
pressure given that the pressure and coercion may happen in
the privacy of homes and it may be inappropriate for lenders to
quiz the parties on the finer aspects of their relationship,
including sexual and emotional ties.
Remedy: Rescission
Subject to usual bars. Two issues warrant particular mention:
Defence of change of position
Restitutionary defence of change of position. along with other bars, will operate to qualify the claimants’ right to
rescission.
Bad faith
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Since bad faith parties are disqualified from the defence, it should only be available (if at all) in ‘ordinary’ cases where
lender knows no facts that suggest a heightened risk that guarantor’s consent was improperly obtained.
Pro tanto
Since defence operate pro tanto (reducing claimant’s restitution by amount of defendant’s change of position), it could
logically allow lenders to retain a charge for the sum lent to debtors in reliance on the enforceability of the
guarantees. This would totally undermine the little protection remaining to guarantors. Defence not mentioned in
O’Brien, nor has it been applied.
Partial rescission
Courts have no power to award partial rescission (TSB Bank plc v Camfield (1995) – woman induced by husband’s
innocent misrepresentation (that her maximum liability would be £15,000 when it was unlimited) to charge her
interest in their home to secure his debts – charge voidable because bank failed to take reasonable steps in
the circumstances – at first instance, charge was partially rescinded – but CA set aside charge completely
saying that rescission is an all or nothing process.
Basis of doctrine
Three questionable explanations have been put forward in support of the non-commercial guarantees doctrine:
1. Undue influence: In Etridge, Lord Hobhouse suggested that the relevant law is undue influence. Indeed,
this area of law is often discussed under the heading of undue influence in leading texts. However, the
position of contract parties is generally unaffected by the wrongdoing of third parties; why
should the primary debtor’s undue influence (or misrepresentation or duress) taint the lender’s contract?
2. A doctrine confined to its own special facts
a. [43]… These are tripartite transactions. They involve the debtor as well as the creditor and the
guarantor. The guarantor enters into the transaction at the request of the debtor. The guarantor
assumes obligations. (One-sided) On the face of the transaction the guarantor usually
receives no benefit in return, unless the guarantee is being given on a commercial basis. Leaving
aside cases where the relationship between the surety and the debtor is commercial, a guarantee
transaction is one-sided so far as the guarantor is concerned. The creditor knows this. Thus the
decision in O'Brien is directed at a class of contracts which has special features of its own…”
b. This tells us when the doctrine applies, but not why it applies only in those circumstanes.
3. Unconscionable transaction (see Unconscionability)
- Page 91 of 98 -
Unconscionability
General
Difference from other unfair vitiating factors: 1) different from duress in not requiring application of illegitimate
pressure; 2) different from undue influence in not requiring a relationship of influence between the parties.
Stated requirements for relief in leading modern case of Boustany v Pigott (1993) (P elderly, “slow” woman leased
premises to B for less than one-sixth of the market value – B, knowing Ps affairs were being managed by her cousin G,
invited P to tea party whilst G was away and then secured P’s agreement to lease – B gave P ride to a solicitor where
transaction was concluded with undue haste and against the solicitor’s advice – seems clear that the harshness of
the transaction convinced court of B’s moral culpability – held, contract set aside for UI)
1. Claimant must be under an operating bargaining impairment, placing it at a serious disadvantage vis-à-
vis the other party
2. Defendant must have exploited the claimant’s weakness in a morally culpable manner
3. Resulting transaction is manifestly improvident to claimant
4. Claimant lacked adequate advice
Examples where contracts were set aside as unconscionable:

• Poor man entitled to a share of an estate worth £1700 sold it for 200 guineas (~£210) (Evans v Llewelin)
• Two brothers, advised by inexperienced solicitor also acting for defendant, sold their reversionary interests at
significantly below market value (Fry v Lane)
• An elderly man, ill and intellectually not gifted, sold his property for an inadequate consideration in undue haste
and without independent advice (Clark v Malpas)
• Wife, in the process of divorce, transferred her share in the matrimonial home to her husband without
independent advice and for inadequate consideration (Cresswell v Potter; Backhouse v Backhouse)
• 84yo widow with senile dementia sold paintings worth £6000 for £40 to a dealer (Ayres v Hazelgrove)
Basis of doctrine
• Older cases emphasise the impaired consent of the ‘poor and ignorant’ claimant (Fry v Lane)
• Prevailing view is the prevention of unconscionable conduct (Boustany v Pigott)
MCW argues that concern to protect vulnerable non-commercial parties from manifest substantive
unfairness provides best explanation for relief granted.
• Substantive unfairness is a necessary condition for relief
• Substantive unfairness ithe best predictor of unconscionability; like undue influence, direct evidence of
procedural unfairness is usually ambiguous at best, absent at worst.
• Substantive unfairness determines our conception of procedural unfairness.
- Page 92 of 98 -
Element 1: Improvident transaction

Where unconscionability has been concluded, it is often difficult to put your finger on precisely what the defendant has
done wrong and why claimant warrants special protection. But the extreme unfairness of the transaction will
usually be clear. Analogous to transactions which call for an explanation, mere undervalue is insufficient. It must be
overreaching and oppressive or entail such substantial undervalue that it ‘shocks the conscience of the court’
(Alec Lobb (Garages) Ltd v Total Oil (Great Britain) Ltd (1983)).
A contract may be:

1. Objectively unfair: in its extreme deviation from the market value of the subject matter transacted
2. Subjectively unfair: absent significant deviation from market value, contract may still be totally
inappropriate for claimant in his particular circumstances e.g. sale of family heirloom at market value.
3. Socially inappropriate: overlaps with undue influence; describes contracts which fall outside the range of
transactions that rational and self-interested individuals are normally expected to make. A non-commercial
guarantee of another’s debt may not be objectively unfair (depends on terms of loan) but it is by
definition subjectively unfair to guarantors who bear risk without receiving any direct benefit. Issue is
whether transaction is inappropriate in view of the guarantor-debtor relationship:
a. Employer-employee (Credit Lyonnais v Burch): YES, inappropriate.
b. Parent-children (Portman Building Society v Dusangh): NO, unexceptional and capable of reasonable
explanation on basis of parental affection
c. Uncle-nephew (Bridgewater v Leahy): CONTROVERSIAL-YES, farmer regretted having no sons
sold his substantial holdings to favoured nephew for half its market value, thereby substantially
disinheriting his wife and foru daughters – court found unconscionability
Element 2: Bargaining impairment

Short of mental incapacity, what kind of condition warrants protection? Originally meant to protect expectant heirs
who traded their uncertain future expectancies for more certain and immediate gains, often at considerable under-
value (Earl of Aylesford v Morris). From this, protection was extended to those designed as ‘poor and ignorant’ (Fry v
Lane), which has been stretched to encompass members ‘of the lower income group’ and the ‘less highly educated’
(Cresswell v Potter).
Essentially, as per Blomely v Ryan,

'The circumstances adversely affecting a party are of great variety and can hardly be
satisfactorily classified. Among them are poverty or need of any kind, sickness, age, sex, infirmity of body
or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where...[this] is
necessary.
Element 3: Unconscionable conduct

Standard falls short of actual fraud; constructive fraud is sufficient.
• Active victimization: taking initiative in transaction. Haste in concluding it, contributing to a misapprehension
without creating it and low-level pressure on claimant to agree
- Page 93 of 98 -
• Passive victimization: acceptance of a highly advantageous bargain at the expense of a claimant known to be
impaired, without bringing to the notice of that other party the true nature of the transaction and the need for
advice (Cresswell v Potter). Knowledge of impairment may be constructive (Ayres v Hazelgrove). See Boustany v
Pigott.
Element 4: Absence of adequate advice

Like undue influence, the transaction is not saved simply because 1) defendant has recommended independent
advice, if the claimant’s refusal to obtain advice is interpreted by the court as evidence of the seriousness of his
impairment (Bank of Montreal v Stuart); or 2) the claimant has received independent advice if the court
concludes (usually from harshness of transaction) that the advice was inadequate (Fry v Lane).
Credit Lyonnais v Burch clearly shows relationship between a grossly unfair outcome and the
independent advice element: if contract is overtly and substantially unfair, no amount of independent advice
would prevent the invocation of unconscionability because no competent solicitor would have advised the claimant to
enter into the guarantee in the terms that he or she did and that the disregarding of any advice must be due to some
impairment.
In Credit Lyonnais, the solicitor wrote to B twice. Court held that it is not enough simply to take reasonable
steps to meet suspicion that claimant may have been impaired. The result of the steps must be such as it would
reasonably allay any such suspicion i.e. disclosing extent of B’s potential liability.
Australia’s approach
• Commercial Bank of Australia v Amadio (1983) (Pf elderly couple with limited command of English mortgaged
house as security for son’s company account with bank – company went into liquidation – Pf sought to set aside
contract – held contract voidable for unconscionability – where a party to a transaction is under a special
disability in dealing with the other party, such that there is an absence of any reasonable degree of equality
between them, and that disability was sufficiently evident to the stronger party, then it is prima facie unfair or
“unconscientious” that he procure or accept the weaker party’s assent to the transaction – Burden of proof on
stronger party to show that it is fair, just and reasonable)
Singapore’s approach
• Lim Geok Hian v Lim Guan Chin (SGHC-1994) (Pf brother was highly educated whereas Df sister was
not – prior to father’s death, brother induced sister to sign agreement that in event that either inherited entire
property, they would divide it equally – property left entirely to sister – Pf sought enforcement of agreement –
held, not voidable for unconscionability, but contract set aside for misrepresentation – confirmed 3-
prong test in Fry and Cresswell: 1) poverty and ignorance, 2) sale at an undervalue, 3) lack of independent advice –
in this case, although Df had established (1) and (3), she clearly understood and intended the legal effect of the
agreement – (1) did not place her at any disadvantage, and she expected Pf to receive entire property, thus thought
she would benefit)
• Fong Whye Koon v Chan Ah Thong (SGHC-1996) (Df illiterate old lady wished to sell property, Pf
contracted to purchase property at significant undervalue – Df later refused to proceed with sale, Pf sought
- Page 94 of 98 -
specific performance – held, contract voidable for unconscionability – transaction clearly unconscionable
on the facts: 1) fact grossly undervalued, 2) Df obviously ignorant of real value of property, 3) Df had acted without
proper advice – therefore, prima facie unconscionable, onus on stronger party to show that transaction is fair, just
and reasonable)
• Rajabali Jumabhoy v Ameerali R Jumabhoy (SGCA-1997) (Prakesh J recognized that unconscionability can be a
useful jurisprudential tool, but Australian position too wide and may undermine common law position – need
to find middle ground
• E C Investment Holding Pte Ltd v Ridout Residence Pte Ltd (SGCA-2011)
o [61] … If the doctrine of economic duress is still in its formative stage of development, then it will be all the more so for the doctrine
of unconscionability: see Gay Choon Ing v Loh Sze Ti Terence Peter and another appeal [2009] 2 SLR(R) 332 at [112] and [114].
o [62] Prof Tan SC bravely submitted that this was an appropriate time to cautiously recognise and apply this doctrine. There exists
a broad doctrine of unconscionability in Commonwealth jurisdictions … where unconscionability is used to set aside contracts in a
far broader range of situations than under English law….
o [63] The starting point for the doctrine of unconscionability in contract law is Cresswell v Potter [1978] 1 WLR 255 where
Megarry J stated at 257 that three requirements had to be met in order to set aside a contract on the ground of unconscionability:
§ whether the plaintiff was poor and ignorant;
§ whether the sale was at a considerable undervalue; and
§ whether the vendor had independent advice.
o [64] In Rajabali Jumabhoy and others v Ameerali R Jumabhoy and others [1997] 2 SLR(R) 296 …. Prakash J cited Megarry J..
§ 198 Whilst I accept the force of the criticism that continuing to apply the first criterion in Megarry J's test would allow
the doctrine of unconscionability to be invoked by only a small minority of people in modern Singapore and thus deprive
the courts of what can be a useful jurisprudential tool, I have some difficulty with adopting the Australian position. The
common law is clear: inequality of bargaining power as between the parties to a contract is not in itself sufficient to
have the contract subsequently set aside. The problem with phrases like "special disability" and "special
disadvantage" (used by Mason J in Amadio's case) is that they are so wide (as the illustrations given by
Fullagar J themselves indicate) that that common law principle can be quite easily undermined by their
application.
o [65] Prakash J was concerned that the uncertain concept of “special disability” recognised by the Australian courts would
undermine contractual certainty, which forms the bedrock of all commercial contracts in Singapore. I respectfully agree.
The common law ensures that parties are not allowed to simply rely upon their inferior bargaining power to
subsequently set aside disadvantageous agreements freely entered into when things go awry. Judge also said at [195]:
§ This does not mean that the court will set aside a contract merely because one party, in a somewhat stronger bargaining
position than the other, has driven a hard bargain. The court will not rewrite an improvident contract where there is no
disability on either side.
o [66] I do not think unconscionability as a vitiating factor in contract forms any part of Singapore law, in spite of the
rather tentative comments, undoubtedly dicta, of the Court of Appeal in Gay Choon Ing, at least not until the time comes for an
abandonment of the doctrine of consideration in favour of doctrines like economic duress, undue influence and unconscionability.
We already have the doctrines of undue influence, constructive fraud in equity and even non est factum in
contract for the protection of the weak, the elderly, the very young and the ignorant. To do more and put forward a
fledgling doctrine of unconscionability, without some considered, comprehensive and rational basis, and which the Court of Appeal
itself recognises is not without its own specific difficulties (at [114]), would be in my respectful view to inject unacceptable
uncertainty in commercial contracts and in the expectations of men of commerce. Where this is needed it is best left to
Parliament. Hence we have the Unfair Contracts Terms Act and no doubt in time to come, we will have specific consumer
legislation, as in other Commonwealth countries.
o [67] No unconscionable bargain on the facts.
Statutory Relief: CPFTA

The Consumer Protection (Fair Trading) Act (Cap 53) shares impulses similar to those which fuel the court’s equitable
jurisdiction.
- Page 95 of 98 -
Consumer Protection (Fair Trading) Act 2003 (Cap 53)

Key concept: “unfair practice”:
4. (1) It is unfair practice for a supplier, in a consumer transaction or proposed consumer transaction involving goods
or services, to…
(c) take advantage of a consumer if the person knows or should reasonably be expected to know that the consumer ---
(i) is not in a position to protect his or her interests; or
(ii) is not reasonably able to understand the character, nature, language or effect of the transaction or
proposed transaction or any matter related to the transaction; or
(d) without limiting the generality of paragraphs (a) to (c), do anything specified in the Second Schedule.”
Second Schedule includes the following “Specific Unfair Practices”:

11. Taking advantage of a consumer by including in a consumer agreement terms or conditions that are harsh,
oppressive or excessively one-sided so as to be unconscionable.
12. Taking advantage of a consumer by exerting undue pressure or undue influence on the consumer to enter into a
transaction involving goods or services.
Case: E C Investment (on Unconscionability)
61 The facts relied upon by the defendant in seeking to establish the defence of unconscionability largely overlaps with those
relied upon for the defence of duress. If the doctrine of economic duress is still in its formative stage of development, then it will be
all the more so for the doctrine of unconscionability: see Gay Choon Ing v Loh Sze Ti Terence Peter [2009] 2 SLR(R) 332 ("Gay
Choon Ing") at [112] and [114].
62 Prof Tan SC bravely submitted that this was an appropriate time to cautiously recognise and apply this doctrine. There exists a
broad doctrine of unconscionability in Commonwealth jurisdictions like Canada, Australia, New Zealand, and as well in the USA,
where unconscionability is used to set aside contracts in a far broader range of situations than under English law. In Canada,
unconscionability is found when there is "... proof of inequality in the position of the parties arising out of the ignorance, need or
distress of the weaker, which left him in the power of the stronger ...": see Morrison v Coast Finances Ltd (1965) 55 DLR (2d) 710 at
713 (BCCA), or when "... the transaction, seen as a whole is sufficiently divergent from community standards of commercial
morality that it should be rescinded ...": see Harry v Kreutziger (1978) 95 DLR (3d) 231 (BCCA). In Australia, the doctrine of
unconscionability is broader in two respects than in Canada in that it is not always necessary for the weaker party to have suffered
detriment from the bargain and the Canadian grounds of ignorance, need or distress are replaced by a longer and open ended list:
see Blomley v Ryan (1956) 99 CLR 362. However Australian law requires the stronger party to know the weaker party's
disadvantage and to take advantage of it, see Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447. The doctrine in New
Zealand is closer to the Australian position: see Hart v O'Connor [1985] 2 All ER 880. In the USA, the doctrine is enshrined in
Section 2-302 of the Uniform Commercial Code and it is often treated as part of their common law if the Code is inapplicable.
63 The starting point for the doctrine of unconscionability in contract law is Cresswell v Potter [1978] 1 WLR 255 where Megarry
J stated at 257 that three requirements had to be met in order to set aside a contract on the ground of unconscionability:
(a) whether the plaintiff was poor and ignorant;
(b) whether the sale was at a considerable undervalue; and
(c) whether the vendor had independent advice.
Few would quarrel with the above formulation of the doctrine. However, Megarry J stated that the euphemisms of the 20th century
may require the word "poor" to be replaced by "a member of the lower income group" or the like, and the word "ignorant" by "less
highly educated" and he added that the three requirements were not the only circumstances which would suffice but that there may
be circumstances of oppression or abuse of confidence which would invoke the aid of equity.
64 In Rajabali Jumabhoy v Ameerali R Jumabhoy [1997] 2 SLR(R) 296, Prakash J was concerned with whether an option to
purchase shares in a company granted to its director was liable to be set aside on the ground of, inter alia, unconscionability.
Prakash J cited Megarry J and rejected the defendants' submission on this issue at [197]-[198]:
- Page 96 of 98 -
197 The first and third defendants, realising that the description 'poor and ignorant' even though updated in modern terms to 'less
well-off and less highly educated' could not by any stretch of imagination be applied to Yusuf and Mustafa, have urged upon me that
I should follow the Australian jurisprudence and discard them altogether and instead have regard to whether these men were under
a 'special disability'. This term was used by Deane J of the High Court of Australia in the case of Commercial Bank of Australia Ltd
v Amadio (1983) 151 CLR 447 in the following passage appearing at 474 of his judgment:
The equitable principles relating to relief against unconscionable dealing and the principles relating to undue influence are closely
related. The two doctrines are, however, distinct. Undue influence, like common law duress, looks to the quality of the consent or
assent of the weaker party ... Unconscionable dealing looks to the conduct of the stronger party in attempting to enforce, or retain
the benefit of, a dealing with a person under a special disability in circumstances where it is not consistent with equity or good
conscience that he should do so. The adverse circumstances which may constitute a special disability for the purposes of the
principles relating to relief may take a wide variety of forms and are not susceptible to being comprehensively catalogued. In
Blomley v Ryan, Fullagar J listed some examples of such disability: "poverty or need of any kind, sickness, age, sex, infirmity of
body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is
necessary." As Fullagar J remarked, the common characteristic of such adverse circumstances "seems to be that they have the effect
of placing one party at a serious disadvantage vis-a-vis the other".
198 Whilst I accept the force of the criticism that continuing to apply the first criterion in Megarry J's test would allow the
doctrine of unconscionability to be invoked by only a small minority of people in modern Singapore and thus deprive the courts of
what can be a useful jurisprudential tool, I have some difficulty with adopting the Australian position. The common law is clear:
inequality of bargaining power as between the parties to a contract is not in itself sufficient to have the contract subsequently set
aside. The problem with phrases like 'special disability' and 'special disadvantage' (used by Mason J in Amadio's case) is that they
are so wide (as the illustrations given by Fullagar J themselves indicate) that that common law principle can be quite easily
undermined by their application. I think that whilst it would be too limiting in the modern world to always insist on plaintiffs
making a claim of unconscionability qualifying as poor and ignorant, one cannot, in the absence of these disadvantages, proceed on
unconscionability unless, as Megarry J also pointed out, there are such circumstances of oppression or abuse of confidence present
as would cry out for the intervention of a court of equity.
65 Prakash J was concerned that the uncertain concept of "special disability" recognised by the Australian courts would
undermine contractual certainty, which forms the bedrock of all commercial contracts in Singapore. I respectfully agree. The
common law ensures that parties are not allowed to simply rely upon their inferior bargaining power to subsequently set aside
disadvantageous agreements freely entered into when things go awry. I also respectfully agree with what the learned judge said at
[195]:
This does not mean that the court will set aside a contract merely because one party, in a somewhat stronger bargaining position
than the other, has driven a hard bargain. The court will not rewrite an improvident contract where there is no disability on either
side. See White and Carter (Councils) Ltd v McGregor [1962] AC 413.
66 I do not think unconscionability as a vitiating factor in contract forms any part of Singapore law, in spite of the rather tentative
comments, undoubtedly dicta, of the Court of Appeal in Gay Choon Ing ([61] supra), at least not until the time comes for an
abandonment of the doctrine of consideration in favour of doctrines like economic duress, undue influence and unconscionability.
We already have the doctrines of undue influence, constructive fraud in equity and even non est factum in contract for the
protection of the weak, the elderly, the very young and the ignorant. To do more and put forward a fledgling doctrine of
unconscionability, without some considered, comprehensive and rational basis, and which the Court of Appeal itself recognises is
not without its own specific difficulties (at [114]), would be in my respectful view to inject unacceptable uncertainty in commercial
contracts and in the expectations of men of commerce. Where this is needed it is best left to Parliament. Hence we have the Unfair
Contracts Terms Act and no doubt in time to come, we will have specific consumer legislation, as in other Commonwealth
countries.
67 AA cannot by any standard be said to be "poor and ignorant". He entered into the agreement with the Plaintiff having had the
benefit of legal advice. He had his CFO on hand. In any case, AA fails to meet two of Megarry J's three criteria. Even though he was
facing severe financial difficulties, a fact which the Plaintiff was clearly aware of, this would not entitle him to the defence of
unconscionability as set out in Cresswell v Potter ([63] supra).
- Page 97 of 98 -
Vitiating Factors In Contract Law –

Some Key Concepts & Developments
By Andrew Phang
Introduction
• Constant need to achieve a balance between certainty and fairness in the law of contract
o Vitiating factors tend to focus on the latter (with the former constituting, at most, just one conception of
fairness, amongst others)
o Legal doctrine does not exist in a vacuum and is insufficient (in and of itself) to ensure that justice is
achieved
• Tension between procedural and substantive fairness
o Former looks more to the procedures laid down by the rules whilst latter looks to the spirit of justice that
is manifested in a fair and just result or outcome
o But tension is more apparent than real – cannot divorce procedural from substantive fairness
o Residuary wariness in responding to the issue of substantive fairness directly given that it is susceptible to
the arguekmnt from subjecitivtiy or relaitivity and that it would therefore be best to confine arguments to
the procedural or doctrinal spheres
On Umbrella Doctrine of Unfairness

• Danger of releasing the “floodgates of discretion”
o Phang argues that courts generally have no choice but to exercise discretion even in caes where rule or
principle of law concerned is ostensibly settled
o Problem also with whether such discretion is constrained, is logical and is consistent with our intuitive
sense of justice
o Chief obstacle appears to be that of relativity or subjectivity
• May suffer same problems with closest rival of the “good faith” doctrine, which is that its precise structure is still
the subject of no small amount of controversy and debate
o Phang argues that his umbrella doctrine of unconscionability is less radical given the close linkages
amongst economic duress, undue influence and unconscionability
- Page 98 of 98 -

Nick&#39;s Notes - Contract (Part 2)

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Nicholas Tong Wei Jie

Misrepresentation ................................................................................................................................................ 25

General .......................................................................................................................................................................................................................... 26

Q1: Enforcement .................................................................................................................................................................. 55

S1: Failure to protect by overt pressure ....................................................................................................................................... 79

S1a: Promise by A to B in favour of C

Not an exception to doctrine of privity

Exception to doctrine of privity

3P may be able to sue in tort.

7. Joint promisee situation

Narrow ground – recover for 3P, held in trust

2. Narrow ground – in summary

3. Broad ground – recover for promisee himself

Case law development

**Alfred McAlpine Construction v Panatown

Majority view – narrow ground approach

Minority view – broad ground approach

**Chia Kok Leong v Prosperland

Solution to double liability issue

S1b: Promise by A to B to except C from liability

Scruttons v Midland [1962] AC

Policy conflicts in Adler, Scruttons

Ways to circumvent privity rule/avoid Scruttons

The Eurymedon [1975] AC – unilateral contract

Analysis – unilateral/collateral contract; does performance of existing duty constitute good

The New York Star [1981] WLR – bilateral contract

Burke v Mersey Docks [1986]

2. Exemption clause may negate a duty of care in tort owed by 3P to promisor

Norwich City Council v Harvey

S1c: Promise by A to B not to sue C

Gore v Van der Lann [1967] QB

Snelling v John Snelling Ltd [1973] QB

The Elbe Maru [1978]

S2: Promise by A to B that imposes a burden on C

Bailment relationships – sub-bailee takes the goods on certain terms only:

The Pioneer Container [1994] AC

Criticisms of doctrine of privity

Contracts (Rights of Third Parties) Acts

S 2(1)(a) and (b), s 2(2) – tests of enforceability

The Laemthong Glory

*CLAAS Medical Centre v Ng Boon Ching (SGCA)

Variation and rescission of contract

S 3(1) – crystallization of third party rights

Defences available to promisor

Statutory and common law exceptions remain preserved

S 8(2) – 3P cannot invoke s 2(2) of UCTA to strike down an exemption clause

o DOES NOT DIRECTLY FILL BLACK HOLE

3. Problems with CRTPA

A. Elements of an actionable misrepresentation

III. Change of circumstances

IV. Mere silence

II. Statement of intention

3. Statement induces partly misled to enter into the contract

Is the test of materiality an important element?

Issue #2: Whether self-induced misrepresentation is actionable

B. Categories of Misrepresentation (mens rea)

1. Fraudulent misrepresentation (very hard to prove)

Hedley Byrne principle

C. Remedies for Misrepresentation: Recission

2. Restitutio in integrum (mutual restitution) impossible

3. Injury to innocent third parties

D. Remedies for Misrepresentation: Damages

Damages for fraud

E. Statutory Remedy: Misrepresentation Act (Cap 390)

Nick's Notes - Contract (Part 2)

Nick's Notes - Contract (Part 2)