BUS201 Exam Notes with examples PDF

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Summary

Nature and Role of Law: The core function of law is to prescribe rights and obligations. Courts are set up to enforce these rights and obligations. Legal System: laws, institutions and culture. Rule of Law: Law provides the legitimacy for government powers and acts as constraint. Legal Traditions: A...

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Nature and Role of Law: -

The core function of law is to prescribe rights and obligations. Courts are set up to enforce these rights and obligations. Legal System: laws, institutions and culture. Rule of Law: Law provides the legitimacy for government powers and acts as constraint.

Legal Traditions: -

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A legal system can be classified based on its legal tradition. Two leading legal systems: Civil Law and Common Law. o Civil Law System  A civil law system codifies all its laws.  The codes are comprehensive – substantive and procedural laws which govern any given situation.  All rights and obligations are set out in the codes.  The judge looks to the code and its provisions to make and justify his rulings. o Common Law System  A common law system relies on the development of the law through judicial decisions known as “case law”.  Although laws may also be codified into statutes, case law is also an important source of law.  Countries with common law systems look to English Court decisions for guidance  A distinctive feature of a common law system is the principle of binding precedents (stare decisis, in Latin to mean “stand by things that have been settled”).  This principle requires a lower court to follow or be bound by earlier decisions made by a higher court within the same hierarchy, if the disputes are similar.  Put it another way, the decision of the higher court is termed “binding authority” for the lower court within the same legal system.  This helps to entrench sound legal principles and offers certainty to users  The lower court is bound by the main legal rationale known as the ratio decidendi in the higher court’s decision. This means that the lower court must follow the same legal reasoning - even if it disagrees with the higher court’s reasoning - to decide the outcome of the case it is judging.  Any other legal reasoning which did not form the basis of the higher court’s decision is known as the obiter dictum. o Lower courts are not bound by these dicta but may be persuaded to follow the reasoning. Similarly, decisions from higher courts that are not within the same hierarchy can be treated as being “persuasive authority”. Jurisdiction o Geographical  In geographical terms, jurisdiction is the boundary within which a law can exert its influence (territorial limitations).  Exceptionally, a country may pass laws which have extraterritorial jurisdiction.  In some instances, the laws of a jurisdiction may extend beyond its physical borders. o Source and limit of Authority

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Refers to the reach of the law in a more abstract sense, which describes the limit of authority of the court. For example, in Singapore,  Magistrate’s Court : $60,000  District Court : $250,000  High Court : No limit

A contract is an agreement giving rise to rights and obligations which are recognized and enforceable by law. Types of Contracts: 1. Simple Contracts a. Oral i. Problem: if there is a dispute, it is difficult to ascertain the precise terms of the contract. ii. According to the “parol evidence rule”, oral (parol) evidence will not be admitted in a court action to add to, vary, amend or contradict a written contract.  This rule is codified in Singapore by ss 93-94 Evidence Act.  S 94 Evidence Act recognises that there are exceptions to the parol evidence rule, where in certain situations, the rule will be waived and oral evidence may be admitted to alter the terms of a written contract. a. Case law example: Sembcorp Marine Ltd v PPL Holdings Pte Ltd (2013) b. Written i. It is useful as it provides evidence of the parties’ contractual obligations. ii. Case law example: Forefront Medical Technology (Pte) Ltd v Modern-Pak Pte Ltd (2006)  Potential contracting parties must understand that if they choose not to reduce their agreement into writing, they must suffer the legal consequences of not doing so.  The best objective evidence is a written agreement that does not fall afoul of any vitiating factors. iii. Certain transactions require a written contract by the law. For example, the assignment of copyright and transfer of real property must be in writing to be enforceable.  This rule is imposed by s 6 Civil Law Act. 2. Special Contracts a. Written All contracts are agreements, but not all agreements are contracts.

4 Key elements of a contract: 1. Offer  An offer is an expression made by one party (Offeror) to another party (Offeree) communicating the offeror’s willingness to perform a promise. The intention is that, if the offer is accepted by the offeree, there will be a binding agreement between them.  Can be made orally, in writing or by conduct. The offer is only effective if it is communicated to the offeree. An offer turns into an agreement, immediately upon acceptance.  An expression which falls short of an offer is known as “invitation to treat”. Purported acceptance of an invitation to treat does not result in an agreement and lead to a contract. i. Usually, advertisements, catalogues, price lists, display of goods, auctions, tenders and provision of information are regarded as invitations to treat. ii. Case law example: Partridge v Crittenden (1968) – on Advertisement (See page 59 on TB)  Exemption Case Law Example: Carlill v Carbolic Smoke Ball (1892) – Unilateral Contract a. The advertisement in this case was held by the court to be an offer and not merely an invitation to treat. It was an offer made to the “world” in the form of a promise in return for an act to be carried out by the offeree. Although made to the “world”, the contract is made with the limited portion of the public who come forward and perform the act. b. An offer which is made to the whole world is open for anyone to accept. An unilateral contract is a contract brought into existence by the act of one party in response to a conditional promise by another: Harvela Investments Ltd v Royal Trust Co of Canada (CI) Ltd & Ors (1984) iii. Case law example: Chwee Kin Keong & Others v Digilandmall.com Pte Ltd (2004) , Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd (1952) – on Display of goods (refer to page 59 of TB)  Display of goods is not an offer so a customer who picks up the goods or places them into a basket is not accepting an offer to sell. The offer to buy is made by the customer when he brings the goods to the payment counter and pays. No sale is effected until the offer to buy is accepted by the acceptance of the price.  Termination of Offer: An offer can come to an end in several ways. Once an offer is terminated, it can no longer be accepted, and no contract will be formed. An offer can be terminated in the following way: i. Withdrawal or Revocation  An offeror can withdraw or revoke his offer any time before it is accepted. It must be communicated to the offeree. This means that the offeree must receive notice of the withdrawal/revocation in order for the offer to be effectively terminated.  Though it appears unfair, an offeror who promises to keep his offer open for a fixed period can withdraw/revoke it before the deadline is up. An offeror is entitled to withdraw his offer unless there is a separate contract between him and the offeree to keep the offer open (known as an “option”). ii. Rejection of counter-offer

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An offer is terminated when an offeree rejects it or makes a counter-offer. The law requires acceptance to conform to the terms of the offer iii. Lapsing of the Offer  If an offer is expressed to be open for a specific period of time, it will lapse upon expiration of that period. If no time frame is prescribed, an offer will lapse after a reasonable period of time has passed. iv. Failure of Condition  If an offer is made subject to a condition, it will lapse if the condition fails or can no longer be met. The condition may either be expressly stated or it may be implied into the offer. v. Death  An offer is generally terminated upon the death of either the offeror or the offeree. 2. Acceptance  An acceptance is an unqualified assent to the offer made. It can be made orally, in writing or by conduct. An acceptance must be final and unconditional.  If the offeree states that he accepts the offer subject to a change in one of the offer terms, there is no acceptance. – Case law example: Stuttgart Auto Pte Ltd v Ng Shwu Yong (2005)  Legal rules for acceptance: i. Must be unqualified – Acceptance must mirror the terms of the offer ii. Must be communicated – Acceptance must be communicated to the offeror  Receipt Rule : communication only if it is received by the offeror (ie heard or seen). a. Exemption: i. Waiver – where the offeror waives requirement of communication/acceptance (in unilateral contracts – because it is usually accepted by conduct) ii. Silence – where both parties have a prior agreement that silence on the part of offeree means acceptance iii. Postal Acceptance – where parties agree to acceptance by post, acceptance is deemed to take effect upon posting.  Electronic Communications i. Electronic communications are essentially just another form of communication so fundamental contract rules regarding offer and acceptance still apply to e-contracts. However, contracting parties must be careful as to how to adapt the contracting rules to electronic contracts. 3. Consideration  Consideration is the price or compensation for the promise made by the parties.  A contract is an exchange of promises between two parties, so each party must provide consideration for the promise given.  Legal rules: i. Must move from promisee but need not move to promisor - The promisee must pay a price to acquire the right to enforce the promise. ii. Must be sufficient but need not be adequate - The price must be “sufficient” in the eyes of the law but the law will not decide if it is adequate to commensurate with the promise.

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Sufficient: Goods, services, money, property – are good consideration or valuable consideration, promise to forbear from suing or enforcing a valid claim, Performance of existing contractual duty to a third party  Not sufficient: Discharge of an existing duty owed to promisor, Discharge of existing public duties, Moral duties, Vague or insubstantial promises  Types of consideration: i. Executory - refers to consideration which is forthcoming and not yet performed ii. Executed - refers to consideration already performed in anticipation of the promise iii. Past Consideration - refers to consideration prior to and independent of the promise i.e. not given in exchange for the promise  Promissory Estoppel i. Promissory estoppel is a legal principle that a promise is enforceable by law, even if made without formal consideration, when a promisor has made a promise to a promisee who then relies on that promise to his subsequent detriment. ii. Under the doctrine of promissory estoppel, a promise that is not reinforced by consideration may nevertheless be enforceable. The doctrine of promissory estoppel helps to stop the promisor from withdrawing on his promise despite not receiving consideration. iii. Conditions:  the promisor and promisee have a pre-existing legal relationship;  there was a clear and unequivocal promise which affects the legal relationship;  the promisee relied on the promise and altered his position; and  it is inequitable to allow the promisor to go back on this promise. iv. Promissory estoppel can only be used “as a shield not as a sword”. – it can only be raised as a defence against a claim made by plaintiff, and not to commence a suit. 4. Intention to create legal relations  This is the common intention between parties that promises made to each other are to be legally enforceable.  This element would have an agreement which is not a contract in the strict sense unless it is the common intention of the parties that it should be legally enforceable. If there is no intention to create legal relations in a contract, the contract could be subject to a lawsuit.  In order to objectively assess the presence of such intention, the cases are classified into two categories with their respective presumptions: i. Commercial agreements - The law presumes the presence of an intention to create legal relations between parties; unless there is evidence to rebut this presumption.  Rebuttable Presumption: a. Use of “honour clause” which expressly states that agreement is not to be legally binding. b. Documents which fall short of a contract eg. Letters of Intent, Letters of Support/Comfort, Memoranda of Understanding * But whether or not there is binding effect (i.e. whether presumption is rebutted) depends on wording of document and circumstances under which it is created. ii. Social & domestic agreements – The law presumes the absence of an intention to crate legal relations between parties; unless there is evidence to rebut this presumption.

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This covers situations where agreements are made between friends or family members. There is a general presumption that such agreements lack the necessary intention to form a contract. Case law example: Balfour v Balfour (1919)

Pre-contractual Statements: 1. Puffs – Statements that has no legal effect whatsoever. They tend to be statements which are vague because of imprecision or exaggeration. a. Case law example: Dimmock v Hallet (1866) 2. Representation – Statements made before or at the time a contract is formed concerning some matter relating to the contract. Although it may be in writing, it is not an integral part of the contract. Consequently, the contract is not breached if the representation is untrue (misrepresentation). a. Case law example: Behn v Burness (1863) 3. Term – A promise or undertaking made by one contracting party to the other. Terms form part of a contract. It can be implied or expressed. If a term is not fulfilled, there will be a breach of contract. a. Expressed Term i. An express term is one which has been openly and expressly agreed upon between the contracting parties. ii. Expressed terms can be oral or written, or a combination of both. b. Implied Term i. Provision in a contract that is not directly stated in written or spoken words but is introduced into the contract (1) by the courts as necessary to give effect to the obvious intentions of the contracting parties, or (2) by a statute such as sale of goods acts ii. Implied terms are invisible, they are not stated in the contract, you have no choice to agree to it or not. iii. A contract can have implied terms through one of the following ways: 1. Custom and Usage a. Contracts made in certain industries are subject to terms which reflect the custom and usages, even if parties are silent or made no reference. 2. Business Efficacy a. Courts will imply terms to promote business efficacy. 3. Statutes a. Certain contracts are governed by specific legislation which prescribe terms to be implied into the contract Distinguish Terms from Representations: -

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It is more likely to be a term if: o The statement is made closer to the time the contract is made o More emphasis is given to the statement o The maker possesses special knowledge o The statement is reduced into writing It is more likely to be a representation if: o The other party is invited to verify the statement

Classification of Terms: 1. Condition a. 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. b. It is an essential or fundamental term of the contract which goes to the root of that contract. 2. Warranty

a. A warranty is a less important term which if breached, gives the party only a right to claim damages. b. It is secondary in nature and does not go to the root of the contract. 3. Innominate a. Innominate terms are terms which cannot be classified as either conditions or warranties at the time the contract is formed. b. The importance of the term is determined by the seriousness when the term is breached. c. 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. Exemption Clause: -

An exemption clause is a term in a contract which seeks to exclude the liability of the party relying on the clause. In other words, an exemption clause is a clause that excludes the liability of a party who is in breach of contract. In order to be valid and effective, it must satisfy the following factors: o Incorporation  By Signature  Any exemption clause contained in a written contract becomes automatically incorporated once the contract is signed.  Case law example: L’Estrange v. Graucob (1934) o Graucob relied on an exemption clause in the contract which L’Estrange had signed. The clause was in small but legible print. o Court: The party who signed the contract is bound even if he has not read the document unless there is fraud or misrepresentation.  By Notice  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 : o Where was the notice found or affixed (location)?  Case law example: Chapelton v Barry UDC (1940) o When was the notice given (timing)?  Case law example: Olley v Marlborough (1949) o Was the notice sufficiently conspicuous and legible (clarity)?  Case law example: Thornton v Shoe Lane Parking (1971) o Was there a previous course of dealings which constitute as notice?  Case law example: Henry Kendall & Sons v Williams Lillico (1969) o 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 o Unusual Factors

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Presence of any unusual factor surrounding the exemption clause at the time of the contract can cause the clause to be ineffective. Unfair Contract Term Act  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).  Factors to be taken into consideration when ascertaining whether a clause is reasonable:  Bargaining positions of the parties: o 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: o 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: o 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: o if compliance is impracticable, it is more likely to be unreasonable.  Whether goods were specially ordered: o (Arguable) if goods are specially tailored to the customer’s specifications, the clause is more likely to be reasonable.

Vitiating Factors: -

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Even if a contract is validly formed, it may be unenforceable due to the presence of vitiating factors. A vitiating factor can render a contract either void or voidable. o A void contract is a nullity from the start (void ab initio).  Contract must be “unwound” i.e. refund monies paid and return properties transferred to restore parties to original position.  Contracting parties have no choice. o A voidable contract is valid and binding, but one party has the option of voiding it.  Contract is valid unless voided.  One party has the right to decide. Th...