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Vin
cent
is
th
e owner of
the
soon-to-open d
enta
l clinic called “Alb
a
Dental”
.To promote
Alba
Dental,Vincent
decided to
hire
a popular
social media
influencer
,
Sally,
to provide publicity
for the
clinic.
In his
early
pre
-contractual
discussions with
Sally,
Vincent empha
sised thathe
wanted her to broadcast a
video of
her tour of
the clinic
on
so
cial media so
that “it would feel
like people are walking through the clinic and meeting the team together with
(Sally)
”.
He also
expressed that the broadcast must be followed up by frequent social media posts
“to keep Alba
Dental’s brand on people’s minds
and lips
”. Vincent was
keen to market
the business
aggressively and early so
that the dental practice
can
hit the ground running
and quickly build
a strong customer base
. Under the contract
(between Vincent and Sally)
,
Sally was
supposed
to visit Alba De
ntal within
the opening week for
a teeth
whitening
treatment
.
Part of t
he contract also
stated as follows:
4
.
Promotional obligations
4.1
On the date of Sally’s
first dental
treatment,
it shall
be a condition of
this contract that
Sally shall
record
a video of her
tour of Alba Dental
and upload it
onto Facebook. The video duration shall be
at least
8
minutes long.
4.2 Sally shall also
create and publish
at least
10
original
posts
on Facebook
to promote Alba Dental
within 7 calendar day
s
from the date
of her first dental treatment. Each subsequent post shall be made
no
later
than
2 calendar days after
the last
post.
On the second day
after the clinic started operations
,
Sally visited Alba Dental for
her teeth whitening treatment
, and she
recorded a 10
-minute video of her tour of the clinic.
Later that
day, she uploaded the video onto Facebook
, and she also
created and published
4 original posts
on Facebook.
This generated
significant interest
among Sally’s online following, and
resulted
in increased boo
kings at Alba Dental
the next day.
However, after
Sally made the initial
4 Facebook posts
, she did not make any further posts on
Facebook within the next 7 calendar days
. Vincent
was also
unable to contact her.
Having seen the
initial positive
results of
the marketing campaign,
Vincent was anxious to keep
the social media publicity going.
Vincent had a limited marketing budget,
and he thought that
he might be able to
divert his
marketing funds to
engage
another
social media influencer if he
can terminate
the contract with
Sally. Compare and contrast
conditions and warranties, and
analyse
whether
Vincent is entitled to
terminate the contract with
Sally based on the
given
scenario
. In your answer, you should
also discuss and
apply the modern
Singapore
appro
ach as shown in the Court of Appeal decision in
RDC Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd (2007)
.
BUS201 CONTRACT AND AGENCY
LAW
Week 3: Contract Terms
Learning Outcomes for SU3
• Explain what a term is.
• Explain why terms constitute the heart of a contract.
• Compare and contrast terms with pre-contractual statements
such as representations and puffs.
• Recognise the difference between express terms and implied
terms.
• Explain the nature of conditions, warranties and innominate
terms.
• Differentiate the three meanings of “warranty”.
• Identify an exemption clause and analyse its legal impact.
• Demonstrate the validity of commonly used exemption clauses
by applying the legal rules in relation to them.
• Terms, Representations & Puffs
• Guidelines to Distinguish Term from
Representation
• Express vs Implied Terms
Term
A term is a promise or undertaking made by one contracting party
to the other.
It is important to distinguish terms from representations and puffs.
Terms
Representations
Mere Puffs
• Terms are undertakings made by
contracting parties to each other.
• Representations are statements made
before or during contract formation which
have legal effect but are not terms.
• Unlike terms or representations, puffs have
no legal effect at all.
If a term is not fulfilled breach of contract
If a representation is not fulfilled misrepresentation.
Guidelines to distinguish Terms from Representations
Terms and Representations have different legal effects, it is necessary to
distinguish them.
Main criterion: Intention of the parties – whether they intend for the
statement to have contractual effect.
Guidelines for ascertaining parties’ intention:
Likely to be a term
If the statement is made closer to the time the contract
is made
If more emphasis is given to the statement
If the maker has special knowledge
If the statement is reduced into writing
Likely to be a representation
If the other party is invited to verify the statement
Example of Guideline : Maker’s Special Knowledge
Where the maker has special knowledge concerning the statement as
compared to the other party, the statement is more likely to be a term.
Oscar Chess Ltd v Williams
(1957)
Dick Bentley Productions Ltd v
Harold Smith (Motors) Ltd (1965)
Williams sold his car to a dealer
and said it was a 1948 Morris. He
did not know that the registration
book was tempered with and that
the car was actually a 1939 model.
The motor car dealer sold a
Bentley to the plaintiff and said that
the car had only done 20,000 miles
when it had in fact done 100,000
miles.
Court : The seller is a lay person
who is not in a position to
guarantee the accuracy of the
registration book. The statement
was therefore not a term.
Court : The seller is a motor car
dealer who is in a position to find
out the history of the car. The
statement was a term.
Express or Implied Terms
An express term is one which has been openly and expressly agreed upon
between the contracting parties. Additionally, a contract can have implied
terms through one of the following ways :
Custom and Usage
• To be implied in a contract, a custom must be well-known and of
universal practice by people in that trade.
Business Efficacy
• Courts will imply terms if they are necessary for business efficacy.
Statutes
• Certain contracts are governed by specific legislation which
prescribe terms to be implied into the contract
Class Activity – Reflection Question
Why does the law need to prescribe
different legal consequences for
terms and representations?
Class Activity – Case Scenario
Annie is the HR Manager of Super Shipping Pte Ltd (SSPL). She is negotiating a cruise holiday for
100 employees of SSPL with Bobby of Supershiok Holidays.
(a) Identify the different types of statements expressly made, i.e. which are puffs, terms or
representations?
(b) What could be the implied terms?
Bobby: Annie, if SSPL books the Supershiok holiday package, we will make sure that the
employees will work their guts out forever for SSPL after returning from the cruise. We have good
singers who have a wide repertoire of songs from Bee Gees to Beyonce.
Annie: What is the price of the package?
Bobby: S$300.00 per person, subject to a minimum of 100 person. Compared to other companies,
we provide the best entertainment as we get the best musicians from overseas to provide
entertainment.
Annie: How about the rooms? What about the swimming pool?
Bobby: The rooms all come with a balcony. The rooms are clean, with fresh daily flower
arrangements. You can check out the rooms, if you like.
Annie: It doesn’t really matter. What is the speed of the cruise ship?
Bobby: It is about 25 knots per hour. By the way, Supershiok Holidays will not be responsible for
any loss or damage to property or for any injuries and/or loss of life to any passengers arising
from any accident on board the cruise ship.
Annie: What about the mode of payment?
Bobby: You need to pay 50% upon booking the package and the balance 2 days before the cruise.
Annie: Done. I will arrange for payment from my finance department.
Class Activity – Distinguishing terms and
representations
John and Betty are discussing the possibility of setting up a Peranakan food and
beverage (F&B) outlet together. Betty is a chef and is trying to convince John to join
her as an investor. Betty has prepared an investment contract, and is currently
discussing the terms with John. John asked Betty, “Are your specialty dishes based
on authentic Peranakan recipes?” Betty answered, “Of course! Not only are they
authentic, they are based on my grandmother’s secret recipes and are the best
Peranakan dishes in Singapore. If you don’t believe me, go ask our mutual friend,
Paul who is an expert on Peranakan cuisine”. John has tried Betty’s dishes and found
them delicious though he does not know much about Peranakan food. John did not
ask for Paul’s views and decided to go ahead and sign the contract to invest in Betty’s
restaurant business. Unfortunately, the business fared poorly as it turned out that
many customers felt the dishes were not sufficiently authentic.
Analyse the pre-contractual statements made by Betty, and determine whether they
constitute puffs, terms or representations.
•
•
•
•
Conditions
Warranties
Innominate Terms
Singapore Approach
Traditional approach to classification
The status of a term will determine the seriousness if that term is
breached.
A condition is an important, essential or fundamental term which if
breached, gives the other contracting party an option to affirm or
discharge the contract.
A warranty is a less important term which if breached, gives the party only
a right to claim damages.
Condition vs Warranty
Poussard v. Spiers (1876)
Mdm Poussard was engaged
to perform in an operetta for
3 months. She fell ill for a
week and missed the first 3
nights of performance.
Term : Must appear for the opening
night.
Producers of the show hired another
singer for the role and refused to have
Poussard back for the show.
Court : The opening night is the most
important night for theatre. Performing
on the first night is a condition of the
contract. Poussard’s breach entitled
the producer to discharge the
contract.
Bettini v Gye (1876)
Mr Bettini fell ill and missed
3 days of rehearsal but was
ready to perform on opening
night onwards. He was
engaged to perform for 15
weeks.
Term : Must appear for the
rehearsals six days before start of
the concert.
The producer refused to have Bettini
back for the show.
Court : Attending the rehearsals was
a not an important term of the
contract and is a warranty. The
producer could claim for damages
but was not entitled to repudiate the
contract.
Innominate Term
Innominate terms are terms which cannot be classified as either
conditions or warranties at the time the contract is formed.
The law adopts a “wait and see” approach to decide on their
importance.
If breach of an innominate term deprives the injured party of
substantially the entire benefit of the contract, the law will treat the
term like a condition i.e. injured party will have option to discharge
the contract.
Singapore Approach
RDC Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd & Another
Appeal (2007)
Note: This approach was also recently applied in the Singapore Court of Appeal decision of CAA
Technologies Pte Ltd v Newcon Builders Pte Ltd (2017).
•
Intention of the Parties: The court held that in deciding whether an innocent party is
entitled to terminate the contract for breach, the foremost consideration is to give effect
to the intentions of the contracting parties. It follows that where parties intended the
term to have the force of a condition, the innocent party would be entitled to terminate
the contract.
•
Consequences of the breach: If, however, the term breached is a warranty, it does not
mean that the innocent party will never be able to terminate the contract. The court will
still examine the consequences of the breach, and if they are such as “to deprive the
innocent party of substantially the whole benefit” of the contract, then the innocent
party would be entitled to terminate the contract, notwithstanding that it only
constitutes a warranty.
Class Activity – Reflection Question
Do you think innominate terms
create too much uncertainty for the
contracting parties?
Class Activity – Distinguishing conditions, warranties and
innominate terms
An up-and-coming singer, Miss Yanny, was asked to grace a sponsored event, and
perform a few of her famous hit songs. The sponsor, ABC Company, had entered into a
contract with Miss Yanny to be their brand ambassador (for which she will be paid a
hefty sponsorship fee), which set out the following terms:
•
It shall be a condition of this contract that Miss Yanny shall perform no less than 3 songs during the
sponsored event, “ABC – We are there for you”.
•
Miss Yanny shall also be required to attend the rehearsal one week before the event.
•
Miss Yanny is also required to attend the “meet and greet” session with fans after the event.
A week before the event, Miss Yanny did not feel well. She did not attend the
rehearsal. She recovered just before the event, and after the second song, she felt
breathless, and she stopped and went backstage. She decided to leave the event early,
therefore missing the “meet and greet” session.
Analyse whether each of the terms of the contract is a condition, warranty or
innominate term, and advise ABC Company if they have the right to terminate their
sponsorship contract with Miss Yanny.
Class Activity – Class Discussion
Julia, a Malaysian, came to Singapore for a spinal fusion surgery. After the
surgery, she agreed to rent an apartment from Near East Pte Ltd for 1
month for the purpose of recuperating before flying home. The tenancy
agreement included the following term:
‘A one-bedroom apartment with a good support mattress’.
Upon moving in, Julia found that the mattress was too soft and it
aggravated her back pain.
Identify the nature of the term (i.e. whether it is a condition, warranty or
innominate term). Briefly explain the remedy that Julia has against Near
East Pte Ltd for the breach.
20
•
•
•
•
•
Exemption Clause
Incorporation
Construction
Unusual Factors
UCTA
Exemption Clause
An exemption clause is a clause that seeks to exclude
the liability of the party relying on the clause. In order
to be valid and effective, it must satisfy the following
factors :
Incorporation
Construction
Unusual Factors
Unfair Contract Terms Act
Incorporation
By Signature
By Notice
Any exemption clause contained in a
written contract becomes
automatically incorporated once the
contract is signed.
Where there are no written contracts or
if the contracts are not signed, person
relying on exclusion clause must show
that he gave reasonably sufficient notice.
This depends on :
In Press Automation Technology Pte Ltd v Trans-Link
Exhibition Forwarding Pte Ltd (2003), the Court of
Appeal held that an exclusion clause is validly
incorporated into a signed contract notwithstanding
that the party (resisting its effect) did not have the
chance to read it. This principle has recently been
affirmed in Bintai Kidenko Pte Ltd v Samsung C&T
Corp (2019).
Where was the notice found or affixed
(location)?
When was the notice given (timing)?
Was the notice sufficiently conspicuous
and legible (clarity)?
Was there a previous course of dealings
which constitute as notice?
Incorporation by Notice
Location
Timing
Clarity
Previous course of
dealing
Is the document of a
type on which a
reasonable person
would be expected to
find contractual terms?
Is the notice brought to
the attention of the
other party either
before or at the time
the contract is made?
Is the notice
sufficiently
conspicuous, clear and
legible?
Is there a previous
course of dealing
which incorporated the
exemption clause, and
the present contract is
therefore similarly
bound?
Chapelton v Barry UDC
(1940)
Olley v Marlborough
(1949)
Thornton v Shoe Lane
Parking (1971)
Henry Kendall & Sons
v William Lillico (1969)
Huationg Contractor
Pte Ltd v Choon Lai
Kuen (2020)
Construction
The exemption clause must be construed (i.e. interpreted)
to assess whether it covers the breach in question.
Two rules of construction are used to judge the
effectiveness of a clause :
Contra Proferentum Rule : If there is any ambiguity in
the clause, it shall be interpreted in a manner that is
least favourable to the party relying on it.
Main Purpose Rule : The general presumption is that
parties do not intend an exemption clause to defeat the
main purpose of the contract.
Unusual Factors
Presence of any unusual factor surrounding the exemption clause at the
time of the contract can cause the clause to be ineffective.
Curtis v. Chemical Cleaning (1951)
“This or these articles is accepted on
condition that the company is not liable for
any damage howsoever arising, or delay.“
Curtis brought her satin dress for cleaning.
She signed the receipt which contained
the above clause and was told that it only
applied to damage to sequins and beads.
This restriction was not true.
Court : The exemption clause was
invalidated by the misrepresentation.
Evans (J) & Son Ltd v Andrea Mezario
Ltd (1976)
Defendants gave oral assurance that the
goods would be stored below deck during
the sea voyage. However, the goods were
placed above deck and were washed
overboard during a storm.
The printed forwarding form allowed
Defendants to carry cargo above deck.
Court : The printed clause was overridden
by the oral assurance.
Unfair Contract Terms Act (UCTA)
An exemption clause will be neutralized if it contravenes relevant
provisions of the UCTA (Cap 396).
Exemption Clauses which
exclude liability for death
or personal injury are void
: Section 2(1).
Exemption Clauses which
exclude liability for other losses
or damages are valid if they
meet the “reasonableness”
requirement : Section 2(2).
Notice
Notice
Adult supervision is required.
The Management is not
responsible for death or
personal injuries caused by
use of this playground’s
equipment.
The Management cannot
accept liability for damage or
theft of vehicles or their
contents.
PARK AT YOUR OWN RISK
PLAY AT YOUR OWN RISK
Reasonableness under
Second Schedule of UCTA
Factors to be taken into consideration when ascertaining whether a clause is
reasonable :
Bargaining positions of the parties
: if the party relying on the clause is in a stronger bargaining position, the clause is more
likely to be unreasonable.
Inducement to accept exemption clause
: if inducement is given to accept the clause, it is more likely to be reasonable since the
customer has already received a “sweetener” for accepting the clause.
Knowledge of presence of exemption clause
: if the injured party has prior knowledge of the clause, it is more likely to be reasonable.
Whether compliance with condition in clause is practicable
: if compliance is impracticable, it is more likely to be unreasonable.
Whether goods were specially ordered
: (Arguable) if goods are specially tailored to the customer’s specifications, the clause is
more likely to be reasonable.
UCTA also applies to B2B contracts
Section 3 of the UCTA applies as between contracting parties where one of
them deals as consumer or on the other’s written standard terms of business.
In such cases, as against that party, the other party cannot, when in breach of
contract, exclude or restrict his liability except in so far as the contract term
satisfies the requirement of reasonableness.
In such business-to-business (B2B) contracts, the concept of “relative
bargaining position of the parties” (which is also mentioned as one of the
guidelines in the Second Schedule of the UCTA) becomes more pronounced,
and should be carefully considered.
Some illustrative cases:
Metro (Pte) Ltd v Wormald Security (SEA) Pte Ltd (1981)
Anti-Corrosion Pte Ltd v Berger Paints Singapore Pte Ltd (2010)
Optional further reading: Ter Kah Leng, “Assessing the Reasonableness
of Exception Clauses” (2011) 23 SAcLJ 577-606.
Exemption Clause
In order to be valid, an exemption clause must:
Incorporation
• Be incorporated into the contract by signature or notice.
Construction
• Be construed to see if it covers the liability in question.
Unusual Factors
• Not have any unusual factors that may undermine its
operation.
Unfair Contract Term Act
• Not contravene the relevant provisions of the UCTA.
Class Activity – Reflection Question
Has the law managed to balance the interests of
those who seek to rely on exemption clauses
and those who have to be bound by them?
Class Activity – Case Scenario
David, an expatriate living in Singapore and working as a Software Engineer, drove
his car to ABC Hotel in Serangoon Road to attend a wedding reception.
In front of the ticketing machine, and before entry to the open-air car park, there
is a board with a notice in large red letters. The notice also appears in small print
on the front of the paper ticket which is issued by the ticketing machine.
The notice reads, “Park at your own risk. The owners and management of this car
park accept no responsibility for any loss or damage suffered by any vehicle or
person who use or park their vehicle in this car park, regardless how such loss or
damage is caused, whether by any act, omission, negligence or otherwise on the
part of the owners, management or their employees and agents”.
As David was late and he did not want to miss the pre-dinner cocktails, he does
not bother to read the notice or the ticket and simply enters the car park and
parks his vehicle.
After the wedding reception, David returned to his car. At the parking lot, a huge
tree branch had fallen onto his car and caused the car to be damaged.
David decided to seek full compensation for the damages to his car from ABC
Hotel which operates and manages the car park.
(Note: You may assume that ABC Hotel was negligent in failing to maintain the
trees, and this resulted in the fallen tree branch which caused damage to the car.)
a.
Advise ABC Hotel as to whether they can rely on the
exemption clause to defeat David’s claim.
b.
Assuming the tree had fallen when David was inside the
car and he had suffered personal injuries, can ABC Hotel
rely on the exemption clause to defeat his claim for
compensation for the injuries?
END OF STUDY UNIT 3
NEXT WEEK – VITIATING FACTORS
