Discussion Questions
Question 1
Sam attended the soft launch of the sales of Twins, an elite new condominium located in the
prestigious Marina Bay area. At the launch, a brief presentation of Twins was made to the
attendees by the developer. Among other things, Twins was described to be within 2 kilometres
in radius from the premier primary school in the Downtown area. Sam hopes to enrol his son in
that school. Staying near the school will greatly increase his chance of getting his son a place in
the premier school. Sam immediately paid a deposit and signed the Sale and Purchase
Agreement for a unit of Twins. Sam could have checked with the school if the Twins would be
within 2 kilometres but he did not do so before signing the agreement.
Subsequently, Sam finds out that Twins is situated beyond the 2 kilometres radius from the
school. When Sam checks the Sale and Purchase Agreement, there is no mention that Twins is
within 2 km in radius from the premier school. Sam regrets buying the condominium unit. Sam
now wishes to bring an action against the developer for misrepresentation.
Facts
Sam attended the soft launch of condominium, and the developer made a brief
presentation
The developer describe the condominium is 2 kilometres in radius frim the premier
primary school in Downtown
Sam hopes to enrol his son in that school
Sam immediately paid a deposit and signed the SPA. He could have checked the distance
before signing the agreement
Sam finds out the school is beyond 2 kilometres radius
The SPA did not mention that the condominium is within 2 kilometres radius from the
premier primary school
A misrepresentation is a false statement of a material fact made by one party which affects the
other party's decision in agreeing to a contract.
Required
1.1 Has the developer made any false statement (or statements, if more than one) that
is/are capable of giving rise to operative misrepresentation?
To prove misrepresentation, there element to establish as follow:
a. False statement of fact
The statement is specific
The statement is not an opinion or a prediction about the future
A reasonable persons understand it as a fact
b. The statement is false, the statement must be objectively wrong
c. Inducement, this means that the party signed the contract while relying on the
statement
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In the case of Smith v Land and House Property Corp, the vendor advertised a property
for sale, stating that “it was let to Mr Frederick Fleck, a most desirable tenant ... thus
offering a first class investment". In fact Mr Fleck was in arrears and close to bankruptcy.
Nevertheless, the Court of Appeal held that since the vendor was in a position to know
the true facts, his statement was a statement of fact rather than of opinion, hence a
misrepresentation.
An opinion can also be a representation if the person making it has special knowledge,
particularly in a trade or industry.
In this case, the developer has a special knowledge on the location of the condominium
and the surrounding. The developer also described the radius of the condominium to
the premier primary school before Sam making of the contract and signed the SPA.
1.2 What type of misrepresentation is the developer guilty of?
The developer describe the condominium is 2 kilometres in radius from the
premier primary school in Downtown
A misrepresentation can be:
1. Fraudulent misrepresentation, the maker of the statement knows the statement is
false;
2. Negligent misrepresentation, the maker of the statement had no reasonable
grounds to believe the statement was true. The maker is failing to take reasonable
care; or
3. Innocent misrepresentation, the maker of the statement had reasonable a ground
to believe it was true (but it was false). An untrue statement which the maker
reasonably and honestly believed was true at the time statement was made.
Howard Marine & Dredging Co Ltd v A Ogden & Sons (Excavations) Ltd, 1978
The defendant used the Lloyd’s list to adopt a representation about the capacity
of one of his ships prior to the formation of ac charter party
The Lloyd’s list was wrong
Based on the aforementioned case, the manager was still liable for negligent
misrepresentation as a reasonable manager would have checked the shipping
documents and not relied on the Lloyds Register, i.e. he thus did not have reasonable
grounds for believing state to be true since he had the skill and knowledge to check. The
Court of Appeal accepted that Howard Marine & Dredging Co Ltd (‘Howard”) was not
fraudulent but Howard was liable under section 2(1) because Howard could not prove
that he had not been negligent.
Based on the fact above, the developer is guilty of negligent misrepresentation which
occurs in cases where one party states a careless claim, or does not have enough reason
to believe that a statement is true.
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1.3 Assume that developer is guilty of a negligent misrepresentation. Can Sam ask the Court
to cancel the sale and allow him to claim a refund of the purchase price?
The type of negligent misrepresentation is a false statement made by a person who had
no reasonable grounds for believing it to be true. Instead of direct lies, negligent
misrepresentations are careless statements of fact that are untrue. When selling or
marketing, each party has a duty to make sure that reasonable care is exercised when
making representations of fact. The remedy for negligent misrepresentation is contract
rescission, forcing the seller to take back the property and reverse the transaction and
possibly damages, and damages.
Negligent misrepresentation under the Misrepresentation Act
The misrepresentation act being a favourable avenue as to a claim for negligent
misrepresentation due to the burden of proof being reversed. In this case there was no
“special relationship” therefore under section 2(1) of the Misrepresentation Act 1967,
where a statement is made carelessly or without reasonable grounds for believing its
truth.
Recission
The effect of rescission, where available, is to put the parties back in the position they
were in before the contract was made.
In the case of Salt v Stratstone Specialist Ltd, the Court of Appeal usefully emphasised
that rescission is the primary remedy for misrepresentation (whether that
misrepresentation be fraudulent, negligent, or innocent).
However, rescission is not available in certain circumstances, including where the
contract has been affirmed by the innocent party, third party rights have intervened, an
excessive time has elapsed, or the subject of the contract cannot be restored, rendering
it impossible to restore the parties to their original positions.
Damages
Damages under the Misrepresentation Act 1967
In other words, damages seek
to place the innocent party in
the position he would
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be in had he not entered into
the transaction
In other words, damages seek
to place the innocent party in
the position he would
be in had he not entered into
the transaction
Section 2(1) of the Misrepresentation Act 1967 makes damages available for negligent
misrepresentation. In the case of Royscott Trust v Rogerson confirmed that the principle
in fraudulent misrepresentation relating to tortious damages applied also in negligent
misrepresentation. Nevertheless, Misrepresentation Act 1967 states that the same
remedies are available where the statement was made negligently as if it were made
fraudulently. The burden of proof lies on the defendant and may only prove negligent
behaviour to get the same damages as for a claim for fraud, without having to prove
that there is fraud.
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Question 2
Ben and Jan are veterinarians at an animal hospital located in the Bukit Timah area called Vets R
Us. Vets R Us provides the full range of pet healthcare services, including emergency surgery,
hospitalisation of animals and recuperative care. Jan hired Ben 5 years ago when she needed help
with the practice that she started. Ben’s employment contract contains the following clause:
“In the event of termination of employment, Ben undertakes not to:
1. Work as a vet or animal surgeon or enter into partnership with any
other competing veterinary clinic, surgery or hospital in Singapore for
a period of twelve (12) months, and
2. Open a veterinary clinic, surgery or hospital or any related business
within a 5km radius of Vets R Us for a period of twelve (12) months.”
Ben wants to leave and immediately open a veterinary clinic near Vets R Us.
Required
2.1. What kind of agreement did Ben enter into with Jan?
Contracts in restraint of trade are defined in Cheshire, Fifoot and Furmston as “a contract
in restraint of trade is one by which a party restricts his future liberty to carry on his trade,
business or profession in such manner and with such persons as he chooses.”
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In this case, the application of covenants in restraint of trade is in the contract of
employment.
2.2. What is the legal effect of the above clause?
The above clause consider as a non-compete clause which restricts the employee freedom
to work in the employer’s area of business or the employer’s competitors. On the other
hand, a non-compete clause is ineffective unless it is a reasonable protection of the
employer’s legitimate interests.
In the case of Man Financial, the appellant was a brokerage company while the
respondent was the appellant’s former managing director. The court was concerned with
the following clause:
‒ A non-competition clause which prevented the respondent (employee) from
participating in or rendering advice to the appellant’s competitors for 7 months.
With respect to the non-competition clause, the court found that it was unreasonable
restraint of trade as there was no legitimate proprietary interest to be protected. The
scope of the activities prohibited was also wide to be reasonable.
In case of Smile Inc, the appellant was a chain of dental clinics while the respondent was
former employee to the appellant as a dental surgeon. The court concerned with the
clause of:
‒ A clause which prohibited the respondent from practicing with in a 3 km radius from
any of the appellant clinics (“Radial Clause”).
The court found that the Radial Clause was void for being anti-competitive.
The term must seek to protect some legitimate interest of the employer. The employer
must satisfy the reasonableness of the restraint, as follows:
a. Reasonableness as regards the parties to the contract
The restraint of trade can only be regarded as reasonable if it is designed only to
protect the legitimate interest of the employer. However, this will be vary from
case to case. In the contract of employment, an employer may not legitimately
able to prevent a former employee from acting in competition with the employer,
is able to prevent the former employee from making use of trade secrets acquired
during a period of employment. In other scenario, the employer can prevent a
former employee from soliciting the former employer’s customers.
b. Reasonableness as regards the public interest
c. Other factors influencing the degree of reasonableness
a) The duration of the restraint
b) The area of the restraint
2.3. Is there any rule or law that Jan can invoke to allow her to enforce the clause against Ben?
Jan can only enforce a restraint of trade clause to the extent that is reasonably to protect
the business interest. However, Jan must consider two issues to apply non-compete clause
as a restraint covenants:
a) Legitimate interest that the clause protect
A restrictive covenant will only be enforceable if it protects a legitimate
business interest, otherwise it will be regarded as an unlawful restraint of
trade.
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In Smile Inc case, the company provided dental treatment and the employee
was its associate dentist. He resigned to set up his own practice and many of
the company’s former patients, who had been treated by the employee, left
to become patients at his new practice.
In considering whether the company had a legitimate proprietary interest to
protect, the court observed that the company was seeking to protect its
customer connections and, therefore, had to show that the employee had an
influence over its customers. The court also took into account whether the
company had an institutional hold over its customers that would mitigate the
employee’s personal influence. The court concluded that the company had a
legitimate proprietary interest to protect because the main contact for the
patients would be the employee and that, as long as they were happy with his
services, they would be inclined to follow him to a competing clinic.
The interest commonly recognized by courts is the protection of customer or
client relationships. The personal relationships and “goodwill” cultivated
between an employee and the employer’s customers are generally
considered the property of the employer. Non-compete agreements are often
sought where the employee has ongoing contact with customers over a
prolonged time period, such that she becomes the “face of the company” to
those customers. As a result, many states allow an employer to protect those
customer relationships with a non-compete agreement, on the ground that it
would be unfair to allow the employee to compete with his former employer
using customer relationships that he cultivated on his former employer’s
behalf and at his former employer’s expense. In the healthcare context, this
rule equates with a medical practice’s interest in protecting its patient base,
when most patients associate the medical practice with their personal
physician.
b) Whether the clause reasonably protect Jan interest:
i. What activity it prohibits the employee from doing
The clause should only restrict activities that might reasonably affect
the trade connections built up by the employee.
ii. How long the prohibition is
The duration of the restraint should only be long enough for the
danger of interference by the employee to wear away.
iii. What geographical area the prohibition applies to
A clause is more likely to be reasonable if it restricts competition only
in countries or cities where the employee has significant customer
contact. Generally, if the clause applies to the whole of Singapore,
this is reasonable since Singapore is a small country. But if the
employee has worked only in Singapore and the clause prevents him
from using his experience in Singapore, the clause may well be
unreasonable.
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Enforcing restrictive covenants
In the event that an employee or ex-employee is in breach of a valid restrictive
covenant there are two remedies available to the employer:
Injunction – an injunction will prevent the employee or ex-employee from
competing with the employer or soliciting the employers’ customers and
employees.
Damages – where the employer has suffered a financial loss as a result of
the employee’s or ex-employee’s breach, he may claim damages in
addition to applying for an injunction.
Question 3
12-2-6 Store is a retail liquor shop licensed to sell liquor except within the hours of midnight and
6am. Not knowing the law, Boozer was partying late one night with his friends when he ran out
of beer. He rushed down to his neighbourhood 12-2-6 Store shortly after midnight and bought a
carton of beer. Just when the sale had been completed, the police raided the store and
confiscated the carton of beer. Boozer demanded a refund, but the shopkeeper refused to give
him his money back. The shopkeeper has since been prosecuted and fined for an offence under
the law but that is another story altogether.
Required
In light of the statutory law (see below), what is the status of Boozer’s contract with the store?
Is he legally entitled to a refund of his money from the store?
CUSTOMS ACT
(CHAPTER 70, SECTION 143)
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CUSTOMS (LIQUORS LICENSING) REGULATIONS
Rg 3
REVISED EDITION 2009
(31st August 2009)
[19th September 1980]
Prohibition of sale or consumption of liquor
25. No person shall, at any premises licensed to sell intoxicating liquor and during the hours
as set out in the Third Schedule —
(a) sell or offer for sale any intoxicating liquor;
(b) keep open the premises for the sale of any intoxicating liquor; or
(c) allow any intoxicating liquor to be consumed on the premises.
