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LAW OF CONCTRACT
Introduction
Definition of Contract
A legally binding agreement
...


Contract defined by Sec
...

Specific Legislation - Contract Act 1950 - but English
law still applicable by virtue of Civil Law Act
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 To secure expectation created by a promise of future
performance or expectation will be paid for its breach
...


 Facilitate forward planning of the transaction in terms
of cost and value, responsibilities of parties and
preparation for contingencies
...


Contract therefore is the instrument by which separate &
conflicting interests of the parties can be reconciled &
brought to common goal
...
Mutual assent to sufficiently certain
terms (called offer and acceptance)
...
A bargained for exchange of value
(called consideration)
3
...

These are special contracts:



Sale of Goods Act
Consumer Protection Act

Simple Contracts
There is no general rule in English law that a contract must be in writing, can be made verbally or by
actions
...
In many situations people do not realise that
they are making a contract
...
This can be useful later if there is disagreement about the contract
...


Types of Contract
Executed & Executory contracts

Unilateral



Only one party makes a promise (the offeror)

Executed contract is where nothing remains
to be done by either party
...




Bilateral & Unilateral contracts


Bilateral means there is two way interaction
in the contract
...

Unilateral means that promise is given to a
large group where only those who meet the
conditions can be said to accept
...

Acceptance – occurs when lost kitten is
returned
...
v Witham pay £100
to walk from London to York
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The offeree does not enter into any promises: he
either fulfils the condition or he does not
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Bilateral
Consists of an exchange of promises
...

Acceptance - ‘I will pay $ 500 for you car
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OFFER
An offer is an expression by
one party of his assent to
certain definitive terms,
which looks forward to
acceptance by the other to
the exact same terms
...
2 (a) - offer or proposal - when a person signify his
willingness to do or abstain from doing anything
...

Must be a definite promise to be bound - provided that certain
specific terms are accepted
...


Willingness to Be Bound
To count as an offer, the statement must show a willingness to be bound
...
The Council had
sent Storer a communication that they
intended would be binding upon his
acceptance
...


Carlill v Carbolic Smoke Ball (1893)
def
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Mrs Carlill, after seeing advert, bought, used & was
promptly down with influenza
...
for the
£100
...
argued, interalia-offer cannot be to ‘whole
world’
...


An Invitation to Treat
Def: an indication that inviter is willing to enter into
negotiations but is not yet prepared to be bound
...
A response to an invitation to
treat doesn’t lead to an agreement; the response itself
may be an offer
...
This is judged objectively
...

Goods displayed on shelves in a selfservice shop
...

An invitation to council tenants to
buy their property
...

Lots at an auction
...
Goods on the shelves are mere invitations to treat, ie an invitation
to customer to make an offer for the goods
...

In an advertisement  Partridge vs Crittenden (1968)
- an advertisement “bramblefinch cocks & hens-25s’’
held to be an ITT
...
No intention to be an offer
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Lefkowitz v Great Metropolis Stores
(1957), advert stated “Saturday 9 am
sharp
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First come first served
...
’
Court held this was a unilateral offer
...


Grainger & Sons v Gough (1896) – held price lists,
catalogues and brochures were ITT
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B) Auction Sale


In Payne vs Cave (1789) - held that auctioneer’s request was an invitation to treat
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Acceptance - the fall of the hammer at which point the contract is made
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

If auction is stated ‘without reserve’- ie
...
However if auction is held, it must be ‘without
reserve’ Warlow vs Harrison (1859) and Barry v Davies (2000)
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Also held in Harvela, a referential bid, ie ‘highest other bid plus 10% was not a valid bid
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Blackpool and Fylde Aero Club v Blackpool BC (1990)

D) Timetables & Tickets for Transport
Whether an invitation or an offer – depends on each case
...

Wilkie v London Passenger Transport Board – bus company makes an offer, passenger accepts when
gets properly on board = contract
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Bus co
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Passenger accepts offer by keeping ticket without objection
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Once accepted, the
contract is clinched
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Sec
...

R v
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Taylor v Laird (1856)
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Held: owners no need to pay for
his help - offer not communicated to them so no opportunity to
accept or reject
...
May be made to a particular person, a group or
whole world
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TERMINATION OF OFFER
Revocation must also be communicated – Fitch vs Snedaker
Revocation of proposal possible if acceptance is not complete
...
6 - A proposal may be withdrawn under four circumstances:





By communication of notice of revocation by proposer to other party – Bryne vs
Tienhoven
By lapse of time (prescribed or reasonable) – Ramsgate Victoria Hotel vs Montefiore
By failure of acceptor to fulfill a condition precedent to acceptance – Hyde vs Wrench
By death or mental disorder of the proposer if such fact comes to the knowledge of the
acceptor before acceptance – Bradbury vs Morgan

Termination of Law
An offer may be terminated in the following ways:
•

Revocation
...
e
...

However a person may buy a promise to keep an offer for a fixed period
...
Within 6 weeks, defendant
withdrew his offer
...
There’s no contract
...
Plaintiff received letter on October 11 & accepted
by telegram
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Held: there was a contract since revocation not communicated
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Offer was open till
12 June
...
On 12
June, plaintiff handed to the defendant a letter of acceptance
...

•

Refusal or Counter Offer

Counter-offer is a rejection of the original offer
...
Plaintiff made a
counter-offer for £950, which defendant rejected
...
Held:
there is no contract because the original offer has be rejected
...
Their quotation included details of their standard terms
...
Claimant acknowledged acceptance by returning a tear-off slip
from the order form
...
The claimant had
accepted this by returning the tear-off slip
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Such a request may be a
request as to whether or
not other terms would be
acceptable – it is not a
counter-offer
...


•

Claimant enquired whether he would agree to delivery ad over 2
months
...
Meanwhile the defendant
had sold the iron to a third party
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Lapse of Time

The offer will terminate at the end of the period stated in the offer or if no period is fixed, it will
terminate after a reasonable time
...

At the end of November the company sent him an acceptance by issue of a letter of allotment &
requested payment of the balance due
...
Held: The offer was valid for a reasonable time only & 5 months was too long
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The form, issued by claimants, stated that the agreement would be binding only upon
signature by them
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On 24 March the
car was stolen from the premises of the dealer & was recovered badly damaged
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They sued defendant for breach of contract
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His signing of agreement was actually an offer to contract with the claimant
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ELEMENTS OF CONTRACT
1
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2(a) - offer/proposal - when a person signify his willingness to do / abstain from doing anything
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Must be a definite promise to be bound - provided that certain specific terms are accepted
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Sec
...

R v
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Offer can be made to a particular person or to the general public
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Carbolic Smoke Ball - offer made to the rest of the world but the contract is made
with that limited portion of the public who come forward and perform the condition
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Examples of ITT:
•
•
•
•

Advertisements in the paper for the post of a doctor - ITT
Auctioneer inviting a bid – ITT (but a bidder making a bid is an offer)
Catalogue advertising goods for sale
Goods on display in a shop

Boots Cash Chemist Ltd – sale of poison under pharmacist supervision
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2
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Acceptance can be expressed or implied (inferred from conduct)
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Any modification / variation to the offer is a counter - proposal and is equivalent to rejection
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Wrench - offer £1000, accept £950
Stevenson v
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Bindley
Exception : - proposer dispense with it

- acceptance in form of performance

Acceptance must be within reasonable time - Sec
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Sec 4 - Acceptance through post - an exception to the general rule that acceptance must be
communicated – a
...
a
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Sec 4 - communication of acceptance is complete
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Intention to Create Legal Relation
Not provided by Contract Act but by case laws
...

Sometimes can be imputed from the nature of the agreement, for e
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Intention is particularly relevant when it comes to cases where legal contracts are not normally made
like in domestic arrangements – Balfour v
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Bull

4
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•

Sec 2 (d) defined what consideration is
...
Beh Hock

Exception to the rule that agreement without
compensation is void - Section 26:
•
•
•
•

agreement made on account of natural
love and affection
agreement to compensate for past
voluntary act
agreement to compensate act the
promisor legally compelled to do
agreement to pay a statute barred debt
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Verikataramaya consideration provided by mother
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Part payment from the full amount is valid
consideration
...
Certainty
At common law - two aspects
of uncertainty:



due to language used
...


The terms of an agreement cannot be vague but must be certain
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Intentions
of the parties will be frustrated because of uncertainty and the
court will usually not interfere
...
30 - ‘agreements,
the meaning of which is not certain, or capable of being made
certain, are void
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Suah Thian - ‘lease at $35
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Capacity
Parties to a contract should be competent to contract, which means have the legal capacity to do so
...
Tan Hee Juan
Sec
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Age of Majority Act 1971 – Age of majority is 18 years old
Exception:






contract for necessaries Nash v Inman
scholarship Govt
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Gurcharan Singh
Marriage contracts
insurance
Apprenticeship

Sound mind – Sec
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capable of understanding it and forming rational judgement as to its
effect upon his interest
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PRIVY OF CONTRACT
After a valid contract has been formed - to whom does the obligation extend? What are the limits of
the contractual agreement?
The general rule under common law - no one but the parties to a contract can be entitled to it, or
bound by it
...
Easton - payment of debt on behalf of another
Dunlop Pneumatic Tyre v
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Contract cannot impose liability on third party
e
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relationship between building owner - contractor - sub contractor
...


CONTENTS OF A CONTRACT
1
...


i)

Express terms - has been specifically agreed upon by
the parties -orally, in writing or both
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Custom & usage pertaining to a
particular transaction
...



ii)

Must satisfy - notoriety, certainty
and reasonableness

Implied terms - term that is read into the contract by
the court
...


Statutory Provision

Statutes that imply terms into a contract:
•
•
•

Sales of Goods Act 1957
Hire - Purchase Act 1967
National Land Code 1965

Courts, based by intentions of the parties
Yong Ung Kai v
...
The officious bystander test i
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“ oh,
of course!”
...
Conditions & Warranties
Sec 12 (2) SOGA - condition - ‘a stipulation essential to
the main purpose of the contract, the breach of which gives
rise to a right to treat the contract as repudiated’
...


Sec 12 (3) SOGA - warranty - ‘ a stipulation collateral to
the main purpose of the contract, breach of which gives
rise to claim for damages but not a right to reject the
goods / repudiate the contract
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Definition of both terms - given by
Sales of Goods Act 1957

3
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Common in standard contract - the operation of which depends on the
construction of the contract
...

“ negligence: need clear & unambiguous words to exclude liability
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If clause is ambiguous: will be interpreted to the disadvantage of
the party who will benefit from clause
...
T
...
Wu and Company

There are some statutes which modify the effect of the exemption clause to provide more protection
to consumers
...


FREE CONSENT
1
...


Def: ‘committing or threatening to commit any act
forbidden by Penal Code, or the unlawful detaining of
any person / property with intention of causing any
person to enter into an agreement’
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2
...

4
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Coercion

Kesarmal v
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Coercion - Sec 15
Undue influence - Sec 16
Fraud - Sec 17
Misrepresentation - Sec 18
Mistake - Sec 21, 22 and 23

Chin Nam Bee Development – payment of extra $4000
under threats to cancel booking of houses
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2
...
’

Exist when ‘the relations subsisting between the parties
are such that one of the parties is in the position to
dominate the will of the other and uses that position to
obtain an unfair advantage over the other’
...
g
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Loughnan
Stand in fiduciary relation to the other –e
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: religious leader –follower, solicitor-client Allcard v
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Williamson
Made contract with a mentally incapacitated person by reason of age, illness or distress
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Shaikh Allie

•

Burden of proving not under influence - on the person in position to dominate
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Fraud
Sec 17- Acts that constitute fraud:
•
•

•
•
•

Suggestion of fact that is not
true
Active concealment of fact Horsfall v
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Promise made without intent
to perform it
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Any acts the law declares to
be fraudulent
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Generally – silence does not constitute fraud - the misled
party has the duty to exercise ordinary diligence
...

Duty to exercise ordinary diligence applies to fraud by silence
only – not other cases of fraud
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Brown - number of rubber trees
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Misrepresentation
To be actionable:
•
•
•

•

There must be false
representation - Keates
v
...
Wilkinson
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Gurney
...
Small

Refers to certain false statement of existing or past fact made by a
person before or at the time of making the contract which induces a
party to enter into a contract
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Like fraud - when there is a duty to disclose - silence may amount to
misrepresentation
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Tan Chye Chew v
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5
...
21 of the Contract Act - ‘where both the
parties under the agreement are under a
mistake as to a matter of fact essential to the
agreement, the agreement is void’ - for lack
of free consent
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Sec 23 - mistake as to one party (unilateral) contract is valid
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Turner - annuity for a dead person
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Williams identity of charter parties
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Panama
Royal Mail
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Possibility of performing the contract
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Ochsner
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VOID & ILLLEGAL CONTRACT
Sec 2 (g) - Contract which is not enforceable by law
...
e
...
Krishnan – attempts to transfer TOL land
of such nature as to defeat the law - Tan Bing Hock – attempts to assign logging rights
fraudulent -Palaniappa Chettiar
involves / implies injury to person / property
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Contracts under Sec 27, 28 and 29 not void in toto - severable
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Udoh – paid
$1500 as deposit for lease of
padi land which was illegal
Yeep Mooi v
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Sec 25 - any part of a single consideration / any part of
several consideration unlawful Chung Khiaw Bank Ltd
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Sec 27 - agreement in restraint of marriage
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Anthony Wilson – restrained from practicing as lawyer
within five miles from KB for two years
Sec 29 - agreement to restraint legal proceeding
Corporation Royal Exchange v
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Sec 31 - agreement by way of wager
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by Performance
Performance must be strictly in accordance
with terms of the contract
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When time is of the essence - Sec 56

Performance by third party - Sec 41
•
•

Letchumi Ammal – terms of contract that
requires personal performance must be
done by promisor
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Nik Zainab – if a
promisee accepts performance from a third
party, cannot afterwards enforce it against
promisor
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by Consent / Agreement
Contract created by consent can
be extinguished by consent either
express or implied
...

E
...
discharged at the occurrence
of an event (waiver, release,
novation or rescission)
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Sec 64 - every promisee may dispense with or remit, wholly or
in part, the performance of the promise made to him, or may
extend the time for such performance, or may accept instead
of it any satisfaction which he thinks fit
...
by Impossibilities / Frustration
Two categories of impossibility of contract
...
A contract is frustrated when there is a
change in the circumstances which renders a contract legally or physically impossible of
performance – not merely difficult or more onerous
...

In applying the rule - court will examine the circumstances surrounding the frustration, including
whether it is self-induced or not
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ii
...

iv
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Caldwell
...
Krell
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Supervening illegality - Lee Kin v
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Effect of frustration - automatically end the contract
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4
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Visuvalingam
Ban Hong Joo Mine Ltd
...

Chen & Yap

Sec 40 - ‘When a party to a contract has refused to perform, or
disabled himself from performing, his promise in its entirety, the
promisee to the contract, unless he has signified, by words or
conduct, his acquiescence in its continuance
...

Sec 65 - ‘when a person at whose option a contract is voidable rescinds it, the other thereto need not
perform any promise therein contained in which he is promisor
...
’

REMEDIES
There are several remedies provided by law to give relief to party not in default in breach of contract
...
Rescission
As dealt with in previous part under Sec 40
...
Damages
Damages are granted to a party as
compensation for the damage, loss
or injury done / suffered through
breach of contract - but damage
can’t be too remote or indirect
...

•
•

Sec 74 - ‘when a contract has been broken, the party who
suffers is entitled to receive
...
which naturally arose in the usual course of things
or which the parties knew, when they made the contract, to
be likely to result from the breach’
...


Sec 75 - ‘When a contract has been broken, if a sum is named in the contract as the amount to be
paid in case of such breach…or any other stipulation by way of penalty…the party complaining of
the breach is entitled to receive…reasonable compensation not exceeding the sum named or the
penalty stipulated for
...

Nevertheless, party seeking damages is also under the duty to mitigate the loss - Kabatasan Timber
Extraction Co
...
Specific Relief
The Specific Relief Act provides for the remedy of specific performance - discretionary by nature
...

Sec 11 in trust cases and where no adequate relief
...

Sec 20 - circumstances where no SP can be enforced:






where money is adequate relief
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contract dependent on personal qualification
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contract with uncertain terms
...

contract made by trustee in excess / breach of their power
contract made on behalf of public or private corporation in excess of its power
...

contract which a material part of the subject matter has ceased to exist even before the
contract is made

4
...

Sec 50 of SRA provides for two types of injunctions:
i
...


Used by a party to maintain status quo of a
subject matter pending full trail of case
...
May be granted at any period during
a suit
...
Can be mandatory injunction or
a restraining order
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Perpetual Injunction
...

No injunction where the contract
cannot specifically enforced

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