Contract Terms I

▪ Puffs are statements which are vague because of imprecision or exaggeration.

- Puffs have no legal effect whatsoever, no remedy given even if false.
- Example: Advertisement stating that this is the “best restaurant in town” will
probably constitute a puff or food packaging stating that “it’ll taste like heaven”.

Puffs (No legal effect) Dimmock v Hallet (1866) Hallett won a bid at an auction for a piece of land, only to
later discover that it was not “very fertile and improbable”, as described in the sales
particulars. Therefore, he sued on the grounds of misrepresentation. Held: The
description of land as being “fertile and improvable” was a mere puff and should not
have taken it as a positive representation of fact.

▪ A representation is a statement 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 (not part of
contact).
- If the representation is untrue, the contract is not breached but can be sued for
misinterpretation.
Behn v Burness (1863) The plaintiff, a shipowner, sued the defendant, who had
Representation (Not part of
the contract) chartered a ship from him, for not loading. The charter party stated that the ship was
“now in the port of Amsterdam,” when in fact it was not. Held: Parties can only take
action under law of misrepresentation and have remedy but cannot initiate action for
breach of contract.
 Before the contract is accepted by the promisee party, there must be
communication between the promisor and the promise
 Then, a contract is formed (see Lecture 3/ week 3)

Terms (Part of the Contract) ▪ Terms are statements which form part of the contract.
- Terms are the promises and undertakings given by each party to the other.
- Similar to representations as both originate as oral or written statements made
before contract is formed.
▪ If a term is breached, the party can initiate an action for breach of contract.
- Issue arises when it is not signed and acknowledged in the contract
▪ A representation cannot be a term
Jet Holding Ltd and Others v Cooper Cameron (Singapore) Pte LTD and Another Held:
Representations cannot in law be elevated to terms of contract whether expressed or
 implied.
-

Guidelines to distinguish terms from representations (Is it a ‘term’ or a ‘contract’)

Paramount Test: Contractual intention at the time of formation of contract
 Capacity of maker of statement
 Time
 Assurance/ emphasis
 Invitation to verify
 Written statement

▪ The main criteria for distinguishing terms & representations is the intention of the parties
ascertained objectively.
- Tan Chin Seng v Raffles Town Club Pte Ltd (2002) During the launch of a club owned and
managed by D, certain representations as to the club were made through a number of
agents. These agents made representations that there were certain advantages with being a
founder member of the club, and that such membership would be exclusive. Relying on
Basic Test: (is there
intention?) these representations, P signed up as founder members. After the club opened, P
experienced crowdedness at the club premises. It was subsequently discovered that the
club had admitted almost 19,000 founder members. P sued for misrepresentation and
breach of contract. The trial judge dismissed their action and they appealed. Held:
Representations cannot in law be elevated to terms of contract whether expressed or
implied

Basic Test

Low Kin Kok (alias Low Kong Song Song) v Lee Chiow Seng (2014) The case concerned a failed
investment project undertaken by the P and D. The Ps’ claim in breach of contract was
confined to a supposed subsequent agreement between the parties to enable the P to
recover their investments. This could be characterised as either being an agreement to vary
the original contract, or an agreement to rescind the original contract and enter into a new
contract. However, because no written agreement had been signed by the parties throughout
the course of their entire working relationship, the court had to consider the oral accounts
and ascertain the exact ambit of agreement, if any. The court found that, apart from the
evidential difficulty in reconstructing exactly what transpired between the parties, there is
also the challenge of distinguishing representations and terms. Held: objective test is to be
used to ascertain whether a statement is a mere representation or a term, and the test is
concerned with what would appear to a reasonable person to be the parties’ intention in the
particular circumstances of the case.
 ▪ Basic test: whether, on objective basis, the contracting parties intended that there be
contractual liability in respect of the statement.

▪ If the statement was made closer to the time the contract was finally concluded, it is more likely
to be a term.
- The long interval before the contract is formed suggests that the statement is relatively
unimportant.
- If a term is breached, the party can initiate an action for breach of contract whereas an
action under misrepresentation can only amount to rescission.
Routledge v McKay (1954) Routledge was interested in purchasing McKay’s motorcycle.
TIME/ McKay told Routledge that the motorcycle was a 1942 model. They entered into a written
When Statement
was Made contract one week later. Later, Routledge discovered that the motorcycle was an older model.
He sued claiming a breach of contract. Held: There was clear and significant interval of one
week between the making of the statement and the making of the contract. This indicates
that the statement was not a term of the contract (the court had considered the significant
time lapse between making of statement and making of contract).

As time progresses, it erodes the significance and value of the contract party receiving the
contract might lose interest/ forgets over time.

▪ The greater the emphasis, the more likely the statement is a term.
- A greater emphasis suggests that the statement is important (if seller unsure – eg. sulphur
or not, and said he unsure, that means not a term).
- If a term is breached, the party can initiate an action for breach of contract whereas an
action under misrepresentation can only amount to rescission.
Assurance/
Maker's Emphasis Bannerman v White (1861) In negotiations for the sale of hops used for brewing beer, White
asked if any sulphur was used to grow the hops. Bannerman replied “no”. White emphasized
that he would not even bother to ask the price if sulphur had been used. They went into a
contract and later on, White found traces of sulphur in the hops. Held: The query regarding
Sulphur was a condition and acts as a term to the contract.

Maker's Special ▪ If the maker of the statement has greater/special knowledge concerning the statement as
Knowledge
compared to the other party, it is more likely that the statement is a term.
- The other party will be dependent upon the maker of the statement for its accuracy.
- Must look at situation: if you go buy gold (you are the layman) and the seller got more
expertise. If both parties are diamond merchants and one say that is high quality diamond
then the statement is not a term.
- If a term is breached, the party can initiate an action for breach of contract whereas an
 action under misrepresentation can only amount to rescission.

Oscar Chess Ltd v Williams (1957) Williams sold his car to a motor car dealer. He told the
dealer that the car was a 1948 model as showed on the registration book. It was later realised
that the book was tampered with and the car was actually a 1939 model. The dealer sued for
breach of contract. Held: William’s statement was not a term of the contract because as a
private individual, Williams was not in a position to guarantee the accuracy of the year of
Maker's Special registration given. Here, the seller, an individual, honestly believed his statement and had no
Knowledge way of knowing otherwise.

Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd (1965) The motor car dealer told
Dick that the car had done only 20,000 miles when in fact it had done 100,000 miles. Dick
bought the car, found out the true mileage later on and sued. Held: The seller, a motorcar
dealer, was in a better position to know the true facts regarding the Bentley. Hence, the D’s
statement was a term of the contract and there was a breach of contract.
▪ If the maker of the statement invited the other party to verify the truth of the statement made,
then the statement is more likely to be a representation.
- By inviting the other party to conduct an independent assessment, the maker of the
statement shows that he does not intend contractual liability to result from his statement.
 Must be a genuine invitation to verify, not aggressive (aggressive means no invitation): eg.
seller “confirm 22k gold, YOU DON’T BELIEVE ME IS IT? YOU GO CHECK LA GO!”. This is a
term.
Ecay v Godfrey (1947) A seller of a boat told a buyer that the boat was sound. He expressly
Invitation to Verify
Statement gave the buyer the opportunity to survey the boat. Held: The suggestion by the seller that the
buyer independently survey the boat was material in deciding whether there was any
intention that the statement be a term of contract. The statement was held to be a
representation.
▪ Inversely, if the maker of the statement dissuades the other party to verify the truth of the
statement made, then the statement is more likely to be a term.
- Shows that he fears contractual liability to result from his statement.
▪ If a term is breached, the party can initiate an action for breach of contract whereas an action
under misrepresentation can only amount to rescission.
 ▪ If a statement was originally made orally and later reduced into writing, then it is more likely to
have become a term of the contract.
- Where there is a written contract, all the terms of the contract are presumed to be
contained within the written document.
- Conversely, all non-written statements are presumed not to form part of the contract.
Written Statement - If a term is breached, the party can initiate an action for breach of contract whereas an
action under misrepresentation can only amount to rescission.

The Parol Evidence Rule

▪ Codified under s94 of the Evidence Act in Singapore , oral evidence will not be admitted in a court
The Parol Evidence
Rule: It prohibits either action to add to, vary, amend or contradict a written contract. S94: “ When the terms of any such
party from attempting contract, grant or other disposition of property, or any matter required by law to be reduced to the
to displace the
contents of the written form of a document, have been proved according to section 93, no evidence of any oral agreement
contract by reference or statement shall be admitted as between the parties to any such instrument or their
to evidence outside of
(or extrinsic to) the representatives in interest for the purpose of contradicting, varying, adding to, or subtracting from
document. its terms subject to the following provisions.”

▪ Parol Evidence Rule is also used to exclude evidence not orally made, for example, evidence of
terms recorded in another document not specifically referred to in the written contract.
▪ This Rule is needed if not written contract may not be worth the paper it is written on, and
uncertainty will result.
▪ EXCEPTION OF PAROL RULE S93 EA: Secondary evidences is allowed such as inter alia, certified,
electronic or other types of copies of the original document. “ when the terms of the contract…
have been reduced by… the both parties to the form of a document,… no evidence shall be given in
proof of the terms of such contract … except the document itself, or secondary evidence”.
Pre-requisite:
- To use PER, need to argue that the entire written contract comprises all the terms of the
agreement.
EG. “entire agreement clause” is inserted into the written contract, this is an express
indication that the parties intend the written document to embody the entire contract.
The Singapore Court of Appeal in Lee Chee Wei held that entire agreement clauses generally
promote certainty as they “define and confine the parties’ rights and obligations within the
four corners of the written document whereby preluding any attempt to qualify or supplement
 the document by reference to pre-contractual representations.
- Need to have a written contract to use PER.
▪ s93: if have written contract means show written contact (written k can only be proved by the
written document)
- if contract split into 3 document, then all 3 document must be proved
94: if you say that this is a written contract, then u cannot use other evidence as terms. These extra
things can explain but cannot add, vary, subtract, or contradict the written form

Exception (other evidence can be included)

The Parol Evidence
Rule - s94(a): Errors or defects in the written contract due to mistake, fraud, duress, or illegality or
was affected by a lack of consideration.
· if got evidence that say contract is fraud, can use! Even if it is not written.
- s94(b): a prior valid agreement that is incorrectly reflected in the written instrument in
question.
· Collateral Contract: related agreement, if it does not contradict or change the main
contract.
- s94(c): permits a proof of a separate oral agreement that lays down a condition precedent
for the attaching of any obligation in a written contract.
- s94(d): permits a party to adduce extrinsic evidence of a subsequent oral agreement to
rescind or modify any term(s) of an existing written contract, if there is no law requiring the
subsequent modification to be in writing.
- s94(e): language used in the instrument has a particular meaning, for example, by custom or
usage in a particular trade, industry or region, evidence of that meaning is admissible
- s94(f): Extrinsic evidence only admissible where words of a written contract were ambiguous.
It may help to explain/interpret written words in the document but cannot add, vary,
subtract, contradict the written form.
▪ If evidences show, the presumption that the written document forms the entire contract can be
rebutted.
Engelin Teh Practice LLC V Wee Soon Kim Anthony (2004) Court rejected a client’s contention that a
written contract on costs with a law firm had been varied orally with the managing partner of the
firm. This is because the client was relying on parole evidence to contradict the written contract.

Express and Implied Terms

▪ If a term which has been expressly agreed (stated) between the parties, the term is an
express term. (term that is articulated by the party)
Express Terms
- An express term can be made orally or in writing but it’s stated in some way
▪ Implied term cannot contradict the expressed term
 ▪ An implied term is a term which has not been expressly agreed (not stated) by the

Implied Terms parties but is nevertheless implied into the contract.

Cheah Peng Hock v Luzhou Bio-Chem Technology Pte Ptd (2013)
▪ A term is implied in fact when it is implied into the contract in
Implied by Court/
Parliament (Facts) order to give effect to what is deemed by the court to be the
unexpressed intention of the parties.
▪ All 3 must be satisfied for implied term to exist: Sembcorp Marine
v PPL Holdings (2013)
a. First step is to ascertain how the gap in the contract arises.
Implication will be considered only if the court discerns that
the gap arose because the parties DID NOT contemplate the
gap.
· Gap means no expressed term because people never
think about it.
· Examples where a true gap does not exist:
1. The parties had considered the issue but choose not
to include an express term in the contract because
they mistakenly thought that the existing express
terms already covered the issue
2. The parties had considered the issue but chose not
to include an express term because they were
unable to agree on how to deal with this issue.
The court reasoned that the proper remedy for the
parties’ mistaken belief (1) is to seek a rectification
of the contract. Should not imply the terms as it will
go against their actual intentions.
b. Applies the business efficacy test. At the second step, court
considers whether it is necessary in the business or
commercial sense to imply a term in order to give the
contract efficacy.
· Must imply some sort of term of this kind, in order for
the business to function (Business Efficacy Test eg.
Moorcock example how safe is it to dock the ship)
Business Efficacy: This means that the court will supply a term which
it considers must have been intended by the parties, so as to ensure
that their contract will proceed on normal business lines. This
requires the court to determine the presumed intentions of the
parties, which may be gathered from the “express words of the
contract and the facts and circumstances surrounding it.”
Business Efficacy test
 The Moorcock (1889) – The English Court of Appeal held that even
though the defendant did not give any warranty that the ground
below the jetty was safe, there was in implied undertaking to this
effect. Hence the plaintiff succeeded.

c. Applies the “official bystander test”. Finally, court considers

the specific term to be implied. By applying the officious
bystander test, if the term is so obvious that it goes without
saying, the term passes the test and is an implied term

Officious bystander test – Prima facie, that which in any contract is

left to be implied and need not be expressed is something so obvious
that it goes without saying.”

“Officious”: someone who is assertive of authority

**The Business Efficacy test and Officious Bystander test are used
together
Shirlaw v Southern Foundries (1926) Ltd v Anor (1939)
Energy Shipping Co Ltd v UDL Shipping (Singapore) Pte Ltd (1995) –
The above tests were used in the case. However, whichever test is
adopted, the important point to be implied must be necessary to
ensure business efficacy does not mean that a court will exercise its
discretion.
Judges are reluctant to apply this rule as they may go beyond the
intention of the contract.

▪ Example for the 3 steps: You order grilled prawn at some high-class
place. Then when you went to pay cashier say $300. The issue now
is $300 for 6 grilled prawn is like expensive. If they never say
anything about the price then (a) is satisfied. (b) is satisfied
because business confirm have a pricing system for it to work.
▪ Example for the 3 steps: Go doctor in SG and the doctor never put
the degree in the clinic = not expressed. Implied term that “doctors
should have degree…?” (a) no contemplate hence (a) satisfied. (b)
satisfied because Singapore doctor must have degree. (c) confirm
satisfied because oh of course must have degree

NOTE: Any term implied in fact for a particular contract does not set a
precedent for future contracts of the same type.
Implied Terms ▪ The term can be implied because such contracts are subject to
Implied by Custom/
Customary Implied unwritten terms hallowed by long usage or custom/ must be a
Terms custom
1) Custom or usage refers to the particular market or industry in
 which parties’ partake business in.
2) If term falls within the customs and practices of the business,
the term is implied into the contract.
3) For a custom to be implied into a contract, a custom must be
a usage that is sufficiently uniform and accepted by the
relevant community as being applicable , in the absence of
express agreement.
4) If a term is breached, the party can initiate an action for
breach of contract.
5) In the case of Singapore, our relatively short but rapid pace of
development dissuades the court from liberal exercise of their
discretion to imply terms on the grounds of customary usage.
Hutton v Warren (1836) Hutton was a tenant on Warren’s farm.
Warren gave Hutton 6 months’ notice to quit. As requested by
Warren, Hutton continued to cultivate the land during this
period. Upon quitting, Hutton requested for payment for seed &
labour which he had foregone before the harvest. Held: Hutton
was entitled to such payment as it is an accepted custom that
the tenant was bound to a farm for the entire tenancy but may
claim an allowance for seeds and labour upon quitting.
Bernard Desker Gary & Others v Thwaites Racing Pte Ltd Held:
ARTS term was not a universal practice of all trainers hence,
there was no implied term.
▪ Terms can also be implied by statute.
Implied by Statute/
Statutory Implied 1) Terms implied by statute operate by force of law
Terms 2) It is irrelevant that the parties are unaware of the statute.
▪ Implied terms by statute
1) Is not trying to anticipate and provide for the intentions of the
parties.
2) The terms implied by the sale of goods legislation attempt to
provide coherence and a framework to a type of contract that
is entered into thousands of day. These implied terms will
allow seller to price goods by reference to the risk exposure
created by the implied terms, and allow the buyer and seller
to routinely engage in sales without wasting time in
hammering out the details.
EG. S 12(1) SGA implies a condition that the seller has a right
to sell the goods.
 ▪
Three factors for the approach of the courts to the
implication of terms in law:
1) The court is not concerned about giving effect to the
presumed intention of the contracting parties when it implies
a term in law. Unlike the case of a term implied in fact, the
court implies a term in law based on wider considerations of
fairness and policy for that defined class of contracts.

Implied by Law 2) A term that is implied in law will be implied in all future
contracts within a defined class, unless the express terms of
the contract provide otherwise.
3) When implying a term in law, the court is in effect imposing
on the parties what it considers to be the most reasonable in
the circumstances, although reasonableness of the term is not
the only factor considered in deciding whether it should be
implied.

Classification of Terms

Differences between Condition & Warranty

Condition: Termination and/or damages of contract
Warranty: You can’t terminate the contract. Accept the damages, but the law can compensate your losses

▪ Conditions are terms which are important, essential and fundamental to the
contract.
▪ The intention of the parties would determine whether the statement is a term or
not.
Definition
1) Ali hired Bata to transport fragile items. Bata specialises in handling fragile
items. Since the intention of both parties involves hiring and providing a

Condition professional service, the statement “to pack and protect goods in a suitable
manner” would be a term to the contract.
▪ A breach of a condition is a repudiatory breach.
1) Terminate Contact or sue for damages, or both

Legal Effect 2) The injured party receives damages.

3) Gives the injured party the option to affirm or discharge the contract.
▪ To discharge is to cease all obligations from date of breach.
▪ A warranty is a term that is less important and gives rise to secondary obligations.

Warranty Definition 1) The law generally takes that time and dates in the contract are considered to be
representations. This is because many contracts have time and dates. Hence,
 the date is only a warranty.
· Exception: if goods had to be transported in time for the exhibition.
(Based on a reasonable man test,) A reasonable man would argue that
the date is crucial in this case (date = term).
▪ Condition or Warranty depends on intention of parties. Some factors to consider
1) Language of contract
2) Nature of transaction
3) Prior case precedent
4) Term implied by statute does it indicate if C or W

Legal Effect Trivial Consequences

▪ A breach of warranty is a simple breach.
1) Sue for damages only
2) The injured party only has claims in damages.
3) The injured party does not have the rights to affirm or discharge the contract.
Bettini v Gye (1876) Gye contracted Bettini to sing in England. The contract
included a term that required Bettini to take part in rehearsals at least 6 days
prior to the concert. However, Bettini fell ill and could not participate in the
rehearsals. Gye refused to continue with the contract and Bettini sued. Held: The
rehearsal clause is not vital to the contract and is a warranty. Bettini’s breach of
warranty did not entitle Gye to repudiate the contract. The contract remains, but
Gye can claim damages for the breach of warranty.
Serious Consequences
▪ If the breach of warranty entailed serious consequences, it might be a repudiatory
breach.
1) The injured party may have the right to affirm or discharge the contract.
2) To discharge is to cease all obligations from date of breach.
3) Nevertheless, damages are awarded.
4) Example: You buy fridge from courts and delivery is 12-4pm on 4Feb. Assuming
haven’t pay $2000 and contract made last week, and u see Harvey Norman sell
$1500

Obiter Dictum in RDC Concrete Pte Ltd v Sata Kogyo (S) Pte Ltd (2007) – 90-
114
▪ (Quote RDC Concrete case) Terminate when: Termination of contract has 4
situations
1) (sit 1) Term breached and contract clearly says innocent party can terminate
2) (sit 2) Party in breach renounces the contract (I will not perform), innocent
 party can terminate
3) (sit 3a) Fundamental breach: parties has breached any Condition (Condition –
warranty Approach)
· if parties intend to designate that term to be so
important that any breach, regardless of the actual consequences of
breach, would entitle the innocent party to terminate contract
4) (sit 3b) Hong Kong Fir Approach, where consequences deprive innocent party
of substantially the whole benefit which it was intended that the innocent
party should obtain from the conduct.
*(a) must be applied before (b)
 Innominate terms are terms that have not been expressly designated or
stated by the parties to be important terms (‘conditions’) or minor terms
(‘warranties’), and they cannot be immediately categorised as either type
simply by looking at their content because it is possible to envisage both
serious as well as extremely trivial breaches of the term.
 An innominate term is one that comprises of varying obligations, some of
which leads to more serious obligations some of which less serious, and is
hard to classify.
o If the statement comprises of varying obligations, it is an innominate
term. (determine whether serious/not serious and state legal effect)

 Use Hong Kong Fir Approach to argue it is Innominate term.

Definition o Focus on nature & consequence of breach to decide on remedies
Innominate o Did the breach deprive the innocent party of substantially the
Terms
whole benefit under the contract?)
Hongkong Fir shipping Co Ltd v Kawasaki Kaisen Kaisha Ltd (1962) Kawasaki
chartered Fir’s ship, but the ship’s engine-room crew was insufficient in number.
Fir admitted it had breached the term which required the ship to be seaworthy.
Kawasaki repudiated the contract and refused to pay. Held: Fir breached an
innominate term, but the breach was not sufficiently serious to entitle Kawasaki
to repudiate the contract. Kawasaki could only claim damages.
 Party in breach has committed a breach
 And the consequences will affect the innocent party/ innocent party is
substantially deprived of the whole benefit ‘
 Hong Kong Fir should be applied after the Condition-Warranty approach

▪ Look at actual consequences

Legal Effect 1) The court need to first apply the Condition-Warranty

Approach
 2) If the term is neither a condition nor warranty but, rather an
innominate term, the court need to consider whether the
breach has deprived the innocent party of substantially the
whole of the benefit he was intended to obtain.
3) If yes -> the remedies for the breach of contract should
follow
4) If no -> the remedies for a breach of warranty would follow
Trivial Consequence
▪ If the consequence of the breach is trivial, the breach is a simple breach.
- The injured party only has claims in damages.
- The injured party does not have the rights to affirm or discharge the contract.
Serious Consequences (Did the breach deprive the innocent party of substantially the
whole benefit under the contract?)
▪ If the breach deprives the injured party of substantially the whole benefit, the breach
is a repudiatory breach.
- The injured party receives damages.
- Gives the injured party the option to affirm or discharge the contract.
▪ To discharge is to cease all obligations from date of breach.