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Factors Vitiating a Contract Even if a contract has all the essential elements and terms, it may still be declared

unenforceable if some vitiating factor is present. There are various vitiating factors such as incapacity, illegality, public policy, misrepresentation, duress, undue influence, mistake and unconscionability. In this incident, insert point will likely vitiate the contract. Incapacity Incapacity can be in the form of minority, intoxication or mental illness. Enforcing the contract against a party suffering from incapacity may be fraught with difficulties. Minority In Singapore the age of majority is 18 by virtue of section 35 of the Civil Law Act. In law, persons less that 18 are referred to as minors or infants and contracts entered by minors are not enforceable against the minor. In view of this rule, a business may wish to ascertain whether the other party has attained the age of majority, especially when granting credit. The rule is to protect the minor and not make it difficult for him. (In this case, name is x years of age thus he is a minor under the law and contracts entered by minors are not enforceable against the minor.) However, there are several major exceptions to this rule. Major exception 1 If the contract results in the provision of necessary goods or services, the contract would be enforceable against the minor. If the rule were otherwise, the minor may find himself in a position of not being able to acquire necessary goods and services. Necessary goods are not restricted to basic necessities. They extend to goods that are reasonably necessary given the minors station in life and considering his requirements at the time of sale in delivery. This was illustrated in Nash v Inman (1908) and Peters v Fleming (1840). (Insert point) If the goods are considered necessaries, the minor would have to pay a reasonable price for them, which may not necessarily be the contract price. Necessaries can also extend to services, such as educational or medical services. In Roberts v Gray (1913), the minor in question entered into a contract with Roberts, who was a leading billiard player, to accompany him on a world tour and learn from him. Roberts incurred expenditures in making the necessary arrangements. Later the minor repudiated the contract. The court treated the contract as a contract for the provision of necessaries and held it was enforceable against the minor. (Insert point) If the services are considered necessaries, the minor would have to pay a reasonable price for them. If goods or services supplied are not necessaries, then the minor would not be bound by the contract unless he ratifies it upon reaching majority. However, two points must be pointed out.

Firstly, even if the goods or services supplied are not necessaries, if the minor had already performed his side of the obligations (paid for the goods or services), the infant cannot get out of it. As stated in Valentini v Canali (1889), when an infant has paid for something and has consumed or used it, it is contrary to natural justice he should recover back the money which he has paid. Thus in this case (insert point). Secondly, under section 3 of the Minors Contracts Act, if the contract is unenforceable against the minor, but the minor has received some property pursuant to the contract, the court has the discretion to ask the minor to return the property, or any other property representing it, to the other party to the contract. Major exception 2 If the contract results in the beneficial contracts of employment, the contract would be enforceable against the minor as they enable him to earn a living. However in the unlikely event that it is not beneficial, it would not be binding, unless the minor ratifies it upon reaching majority. This is illustrated in De Francesco v Barnum (1890). (Insert point) Major Exception 3 Certain contracts which the minor acquires an interest in a subject matter that exposes him to continuing or recurring obligations such as contracts of leases, partnerships or contracts to acquire shares, are voidable. They are valid on the minor unless he repudiates or terminates them during his infancy or at a reasonable time after he attains his majority. This is illustrated in Davies v Beynon-Harris (1931). What a reasonable time is would depend on the facts of the case. However, once terminated, future obligations cease. As for obligations which accrued before the repudiation, the authorities are unsettled but it is clear that whatever has been paid cannot be recovered unless there is a total failure of consideration such that the minor gets nothing in return. Major Exception 4 Contracts, which do not fall under the category of necessities, employment, or voidable contracts would not be binding on the minor until he ratifies them; that is, he agrees to be bound by them after he attains majority. Such ratification can be express or can be implied from conduct. (Insert point) Thus a contract of sale involving goods that are not necessaries would fall under this category. Such contracts carry a great risk, as they are not binding on the minor unless he ratifies them. To guard against this, the other party to the contract may require that some adult provide a guarantee. Even if the minor may not be bound, by virtue of section 2 of the Minors Contracts Act, the guarantee would be enforceable against the adult. Mentally unsound and intoxicated persons The law offers special protection to the mentally unsound or intoxicated. In these cases, if the person who is suffering from the disability is incapable of understanding the nature of the contract and the other party knows or ought to

know the disability, the contract is voidable at the option of the person suffering from the disability. This is clearly illustrated in the case of Che Som bte Yip v Maha Pte Ltd (1989). Illegality If a contract is considered to be illegal either by virtue of a statute or case law, generally it will not be enforceable. Statutory illegality may be express or implied. If the statute specifically states that any contract entered into in breach of the provisions of the statute would be unenforceable, then the illegality would be express. An example of this is section 14 of the Moneylenders Act 2008, which states that a loan granted by an unlicensed moneylender shall be unenforceable. A statute may also imply illegality. Whether it would be implied would depend on various factors. In this regard, if a statute requires the taking out of a license and a license is not obtained, whether that would make the contract illegal would depend on the factors such as whether the purpose of the license was merely to raise revenue for the government or whether the object of the statue in requiring the license was to protect the public. This matter is illustrated in Smith v Mawhood (1845) and Cope v Rowlands (1836). (Insert point) As stated, illegality may also be imposed by case law, and it has been held in court that (insert relevant case from below) A contract to commit a crime or tort is illegal. Thus, (insert point) the contract would be illegal and unenforceable. A contract that is sexually immoral is illegal. In Pearce v Brooks (1886), the plaintiffs let out on hire a coach to a prostitute knowing that it would be used by her to ply her trade. When the coach was returned in a damaged state, the plaintiff tried to sue the prostitute. The court held that the plaintiffs could not as the contract was illegal in that it promoted sexual immorality. (Insert point) A contract prejudicial to the administration of justice is illegal. Thus for instance, if X contracts with Y to give false evidence in court, that contract would be illegal and unenforceable. (Insert point) A contract to corrupt public life is illegal. Thus for instance, if X enters into a contract with Y under which X is to give Y a stated sum of money if Y would appoint X to a public office, the contract would be illegal and unenforceable. (Insert point) A contract to defraud the revenue is illegal. Thus for instance, if X enters into a contract with his auditors to misstate the accounts so as to reduce his tax liability, that contract would be illegal and unenforceable. (Insert point) Effect of illegality Once the contract is illegal in its inception either by virtue of case law or statute, it is totally not valid. No action would lie for damages and if one party has made

profits, the other party cannot ask for any account of those profits. Furthermore, any money paid or property transferred cannot be recovered. However, to the rule that any money paid or property transferred cannot be recovered, there are certain exceptions. Firstly, where both parties are not equally at fault, the innocent party may be able to recover the money paid or property transferred. This was illustrated in Tokyo Investments Pte Ltd v Tan Chor Thing (1993). Secondly, where one party to an executor contract, that is a contract, which is yet to be substantially performed, fully repents (genuinely and voluntarily) before performance, he may be able to recover money or property transferred. Thirdly, where is it is possible to make a claim entirely independent of the illegal contract, it may be possible to recover money or property transferred. This is witnessed in the case of Amar Singh v Kulubya (1964). (Property Law) Contracts against Public Policy If a contract is against public policy, problems of enforceability may arise. A contract, which contains restraint of trade clause, can be a contract against public policy. A restraint of trade clause may take many forms but essentially under such a clause, one party seeks to restrict the other party to the contract in terms of what the other party can do later on with his business or profession. For contracts with restraint clauses to be upheld, the restraints must be reasonable as between the parties themselves and with regard to public interest (Man Financial (S) Ptd Ltd v Wong Bark Chuan David (2008). In relation to the clause being reasonable between the parties, certain factors must be noted. For a restraint on employees to be reasonable between the parties, the employer must firstly have a legitimate interest to be to be protected. If the employee had access to trade secrets or is in a position to pull over customers or other employees, the employer may have a legitimate interest. In relation to the phrase trade secrets, it can extend to highly confidential information. Thus in Lansing Linde Ltd v Kerr (1991), the court held that plans for the development of new products could amount to trade secrets. (Insert point) The restraint must be reasonable in terms of time, area and scope of restraint. The wider it is, the more likely it is for it to be unreasonable. In Commercial Plastics Ltd v Vincent (1964), the court held that restraint was too wide in that it did not have a geographical limitation and it extended to all businesses in the calendaring field even though the defendants expertise was in in relation to calendaring of adhesive tapes. (Insert point) Restraint will not be upheld. For a restraint on sale of business to be reasonable between the parties, the buyer of the business must have a legitimate interest to be protected. This would usually be present since the buyer would have paid a price into which the goodwill of the business would have been factored. Thus it would be legitimate for the plaintiff to expect that the seller would not set up a business in

competition to the one he had sold. Nonetheless, for these restraints to be valid, they must be reasonable in terms of time, areas and scope of restraint. This was illustrated in British Reinforced Concrete Engineering Co Ltd v Scheff (1921). (Insert point) For a restraint to sell only a particular product to be reasonable between the parties, it would depend on the facts of the case as highlighted in Esso Petroleum Co Ltd v Harpers Garage (Stourport) Ltd (1968). (Insert point) For a restraint on services to be reasonable between the parties, it would depend on the facts of the case as was highlighted in Schroeder Music Publishing Co Ltd v Macaulay (1974). In addition to being reasonable as between the parties, for all such restraints to be upheld, they must not be against public interest as was illustrated in Thomas Cowan v Orme (1961). The court ruled that it was not in the public interest for the restraint clause to be upheld. Effect of Invalid restraints If the restraint is invalid, it cannot be enforced. However, two points must be noted. Firstly, if the restraint clause was unreasonably wide, the court may be able to run a blue pencil through it, deleting the unreasonable parts. If this is possible, the rest of the restraints would still be enforceable. (Goldsoll v Goldman (1914)) However, the court will do this only if it is possible to do so without adding or altering words. (Attwood v Lamont (1920)) Secondly, if the restraint can be severed from the rest of the contract, the rest of the contract can still be enforced. Misrepresentation If a statement is not a term of a contract and it is made prior to the contract, but it induces the formation of the contract, the innocent party may sue for misrepresentation if the statement turns out to be false. It is important to make sure that the statement is not a mere puff or sales talk but an existing fact. To be actionable To be actionable, the representation that has turned out to be false has to be a statement of existing fact or past event. If it were a statement of opinion, it would not be a statement of existing fact or past event. These statements of opinion will not give rise to misrepresentation. This was illustrated in Bisset v Wilkinson (1927), where the court held that since the maker was just giving his opinion and not stating a positive fact, there was no actionable misrepresentation. Generally too, statements of future intention, since they do not relate to existing or past facts, cannot give rise to misrepresentation. However, exceptionally where it can be established for instance the maker did not actually believe in the statement of future intention, an action for misrepresentation may lie. In Edgington v Fitzmaurice (1885) for instance, the company issued a prospectus, which invited a loan from the public and stated that the loan was to be used for

improving new buildings and extending the business. This was not true, as the company had intended to use the loan to meet existing liabilities. As the company knew the statement of future was false, the court stated that there was an actionable misrepresentation. Silence As a positive statement about an existing or past fact has to be made, keeping quiet does not amount to a misrepresentation. In Keates v Lord Cadogan (1851), the court held that the seller was under no obligation to make the disclosure about the condition of his house. However, exceptionally, silence may amount to misrepresentation if a half truth is offered. If what the maker stated is true, but on considering the undisclosed facts on the whole, the statement gives a very misleading picture, then silence may amount to misrepresentation. This was illustrated in Dimmock v Hallett (1866). However, exceptionally, silence may amount to misrepresentation if the maker realizes the statement is not true before the contract is made. If a maker makes a statement in the course of negotiations that he believes is true, but before the contract is made, comes to realize that the statement is not true, then he is duty bound to make this known to the other party. This was illustrated in With v OFlanagan (1936). However, exceptionally, silence may amount to misrepresentation if it is a contract of uberrimae fidei (good faith). In certain contracts such as insurance, there is a general duty of good faith on the parties and in such circumstances; silence may amount to a misrepresentation. If material facts have not been disclosed which are known or ought to have been known, then silence can amount to misrepresentation in such contracts. Further, in such instances, the issue will turn upon on whether the non-disclosure related to material fact and not whether the loss was connected to the non-disclosure. (Death related to accident but insurance company will be able to avoid the policy on the ground of misrepresentation) However, exceptionally, silence may amount to misrepresentation if it is a contract where there is a fiduciary duty. In certain contracts, one party may owe the other fiduciary duties or might be placed in a position of trust. In such contracts, silence may also amount to a misrepresentation. (Partnership) Connection between text and question In this case, (X represented to Y that he checked with HDB and his checks show that a new HDB town is coming up within 1 kilometre of the dental business within the next 2 years. Since he mentioned the fact that he checked with HDB, it is not considered his opinion or mere puff or sales talk but an existing fact.) However, (when he said that business will double, it can be considered his opinion.)

Furthermore, to be actionable, the misrepresentation must have induced the formation of the contract. However, the misrepresentation need not be the sole factor that induces the formation of the contract. In Edgington v Fitzmaurice (1885) for instance, the plaintiff was induced to enter into a contract with the company because of a false statement in the prospectus, as well as his own erroneous belief that he would have some security over the companys property for the loan he was advancing. The court held that though the false statement given by the company was not the sole reason to induce the formation of the contract, it was still possible to sue for misrepresentation. (Although Xs statement was not the sole reason for Y to induce the formation of the contract, as he had considered enter misrepresentation, it is still possible for Y to sue for misrepresentation but it is a question of fact for the court to decide. It is also important to note that if the person relying on the information is given an opportunity to verify the truth of the statement, but he does not make use of the opportunity, it would appear that does not deprive him of his right to sue for misrepresentation. This principle is derived from Redgrave v Hurd (1881) and is reiterated in Panatron v Lee Chow Lee (2001). It is important to identify what type of misrepresentation Y is charging X with. There are three types of misrepresentation. They are fraudulent, negligent and lastly innocent. The misrepresentation is fraudulent if, as stated in Derry v Peek (1889), the maker knew it was false or did not believe in the truth of the statement or was recklessly careless whether the statement was true or false. For instance, in Panatron v Lee Chow Lee (2001), where the second appellant induced the respondents to invest in Panatron by stating that the company was profitable, when in fact he knew that not to be the case, the court held that the misrepresentation was fraudulent. In this case since Kevin made no enquiry with HDB and made the statement knowing that it was false, it could be considered as a fraudulent misrepresentation. The action for fraudulent misrepresentation would have to be framed under the tort of deceit. However, it is for the court to decide. The misrepresentation is negligent if it is made without having reasonable grounds for its belief. This is illustrated in Howard Marine Dredging Co Ltd v A Ogden & Sons (Excavations) Ltd (1978) where the court held that in the circumstances a reasonable manager would have checked the shipping documents and not the Lloyds register, and, though honestly made, there was no reasonable grounds for the belief. If the misrepresentation made is negligent, the action can be framed either under the tort of negligence or under the Misrepresentation Act. For negligent misrepresentation, the position is similar to fraudulent misrepresentation, though by virtue of section 2(2) of the Misrepresentation Act, the court has the power to disallow rescission and in its place, grant damages. Lastly, misrepresentation is innocent if there are reasonable grounds for its belief. If the misrepresentation made is innocent, the action would have to be framed under the Misrepresentation Act. For innocent misrepresentation the party may be able to an indemnity. In relation to innocent misrepresentation, the

innocent party may be able to rescind the contract. However, in relation to rescission, again by virtue of section 2(2) of the Misrepresentation Act, the court has the power to disallow rescission and in its place, grant damages. Whether Ycan rescind the contract and get back his money depends on a few different issues. Firstly, Y must make it clear to X that he no longer wishes to be bound by the contract. Furthermore, he must do so before a reasonable amount of time has lapsed since the misrepresentation. What is reasonable time would depend on the facts of each case. If the court decides that it is too long, rescission will not be an option. Another thing that must be considered is whether restitution in integrum is possible. In this case, it is possible to return the parties to the original position before the contract so rescission is still an option. However, if a third party has acquired for value an interest in the subject matter of the contract, Y may not be able to rescind the contract. However, there is no mention of a third party so Y should be able to rescind the contract with regards to this matter. (Conclusion & Personal view) Duress If a person is forced to enter into a contract as a result of actual violence or threats of actual violence, there might be duress and the contract might be unenforceable. This is highlighted in Barton v Armstrong (1967). (Optional) Introduction - Economic duress can be defined as wrongful or unlawful conduct that creates fear of economic hardship, which prevents the exercise of free will in engaging in a business transaction. It is difficult to say if economic duress or commercial pressure is legitimate or illegitimate. In Pao On v Lau Yiu Long (1980), the court held that some factors which were relevant in determining whether the pressure exerted was illegitimate included whether the innocent party had an alternative course open to him or was left with no choice but to agree to the terms, whether the innocent agreed to the terms under protest and whether the innocent party agreed to the terms under process and whether the innocent party received independent legal advice. Furthermore, it would follow from Sharon Global Solutions Pte Ltd v LG International (Singapore) Pte Ltd (2001) that whether the party who is alleged to have exercised duress was exploiting the situation (or acting in bad faith) could also be a relevant factor. (Insert point) If duress is established, the innocent party may be able to rescind the contract. However, if the innocent party affirms the contract, he may lose his right to

rescind the contract as is derived from North Ocean Shipping Co Ltd v Hyundai Construction Pte Ltd (1979). Thus, X should not affirm the contract by paying the excess. There is also no fresh consideration in this contract thus will be no variation to the contract. (Insert consideration notes) (Conclusion & Personal view) Undue Influence If a party to the contract entered into the contract under the undue influence of another, the contract can be set aside. This is illustrated in Inche Noriah v Shaik Allie bin Omar (1929). Generally, the party alleging undue influence has to prove it. However, in certain situations such as, as between solicitor and client or doctor and patient, undue influence is presumed and it the onus is on the party against whom the presumption applies to rebut the presumption. Some factors which are relevant in proving that there is undue influence include, whether there is a relationship of trust and confidence between the parties such as that one party was relying on the other, whether the party relying on the other understood the nature of the transaction, given his background, whether the party relying on the other suffered a manifest disadvantage, whether the party who is alleged to have exercised undue influence obtained an unfair advantage, and whether the party relying on the other received independent legal advise which made it clear to him the effect of what he was doing. (Insert point) (Conclusion & Personal view) Mistake For a mistake to be made out, generally the mistake must be shared by both parties. This is illustrated in Hartog v Colin & Shields (1939) and similarly in Chwee Kin Keong v Digilandmall.com Pte Ltd (2005) where the court held that the appellants knew or ought to have know of the mistake, and hence the respondents were held not liable. Further, in order to establish mistake, the mistake must relate to something fundamental. However, the law in this area is very unsettled and the exact ambits of what can be considered fundamental are far from clear. It would appear from Chwee Kin Keong v Digilandmall.com Pte Ltd (2005) that where there is some unconscionable conduct, sharp practice or impropriety on the part of one of the parties, it would be easier to establish that the mistake is fundamental in nature. When a person signs a document, he is bound by what he signs. However, exceptionally, if he can establish that the document, which he signed, is fundamentally different from what he though he was signing and he was not negligent in not reading what he signed, mistake may be made out. The case of

Saunders v Anglia Building Society (1971) illustrates the point and the case can be contrasted with Goh Jong Cheng v MB Melwani (1991). For a contract to be set aside due to mistake in a signed document, the document, which is signed, must be fundamentally different. (Insert point) (Conclusion & Personal view) Unconscionability As stated in Alec Lobb (Garages) Ltd v Total Oil (Great Britain) Ltd (1983), the courts would only interfere in exceptional cases where as a matter of common fairness it was not right that the strong should be allowed to push the weak to the wall. The idea behind the doctrine is to prevent victimization and abuse. In Singapore, the concept of unconscionability was endorsed in Pek Nam Kee v Peh Lam Kong (1996). However, the doctrine still needs to be clarified. (Insert point) (Conclusion & Personal view)