CASE REVIEW : LAW OF CONTRACT II

NAME : MUHAMMAD AFIQ QIWAMUDDIN BIN MUSTAPHA SHAKRI

MATRIC NO. : 1325479
TUTORIAL SESSION : MONDAY, 2.00PM TO 3.00PM (MM 3.13)
[2005] 1 SLR 502
CHWEE KIN KEONG & ANOR V DIGILANDMALL.COM PTE LTD
1.

FACTS OF THE CASE (SUMMARY)

Digilandmall.com Pte Ltd (Respondent) is a Singapore company selling IT
products. Respondent also established its own website and at the same
time controlled and operated another website owned by Hewlett Packard
(HP). On 8 January 2008, due to an error committed by one Samuel Teo of
Digiland International Ltd (DIL), the price of a Hewlett Packard laser printer
described as, HPC 9660A Color LaserJet 4600 (the printer) was accidentally
altered from $3,854 to $66 only. This mistake was not noted by any of the
employees of respondent until the orders were placed by Chwee Kin Keong
and others (Apellants). Before that, On 13 January 2003 at 1.17 a.m. the
first appellant was informed about the extraordinary low price regarding
this printer. He later spreaded such unbelievable to the second appellant
and third appellant who later caused this information to reach fourth, fifth,
and sixth appellants. On the same day, around 9.15 a.m. the error was
discovered when a prospective customers checked with the an employee
of the respondent. Due to the error, respondent informed all the
purchasers that it would not honour the orders via e-mail on 14 January
2003. Appellants who did not agreed with that information instituted a
proceedings against the respondents to enforce the contracts that have
been made between them pursuant to the purchase orders placed by them
through the Internet. On the lower court, the trial jugde managed to prove
that the appellants had actual or constructive knowledge regarding the
mistake in the price of the printer. Thus, trial judge held that the contract
void under the common law as the appellant already have constructive
knowledge which is considered sufficient in the present case. Later,
appellant appealed on the decision of the trial judge at the lower court
which later brought the before the Court Of Appeal. The argument arose
here is regarding the requisite knowledge of the respondents mistake,
whether it is sufficient for just constructive knowledge or it must be an
actual knowledge.

2.

DECISION
The appeal was dismissed on the ground that the appellants have the
constructive knowledge regarding the mistake done by the respondent.
Besides that, the fact that the appellants have a very credible background
provide better support to say that this factor should be take into account.

Plus, the appellants intention to seek profit from purchasing the printer is
another additional factor to show the appellants have a good constructive
knowledge regarding the mistake done by the respondent and took an
opportunity over it.
3.

PRINCIPLE
Constructive knowledge is sufficient to render the contract void on the
ground of unilateral mistake. But, it is important to mention that additional
factors such as credibility of the person and other surrounding
circumstances must also be taken into account as constructive knowledge
alone cannot render the contract to be void

4.

CRITICAL ANALYSIS

a)

REFERRED AND FOLLOWED CASES / DEPARTURED FROM OTHER CASES

The learned judges in this case has referred to many cases. But, things to
be noted that the court inclined to follow few cases. The examples are :

Associated Japanese Bank (International) Ltd v Crdit du Nord SA

[1989] 1 WLR 255
-

Can-Dive Services v Pacific Coast Energy Corp (2000) 74 BCLR (3d)

English and Scottish Mercantile Investment Company, Limited, The v

Brunton [1892] 2 QB 700

OT Africa Line Ltd v Vickers Plc [1996] 1 Lloyd's Rep 700

30

Interesting point to be noted that this court distinguished itself from the
case of Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd
[2003] QB 679. This distinguished case was regarding one vessel which
was in distress in its journey. In the Court Of Appeal, the trial judge
mentioned it is unquestionable that there is no room for rescission in
equity of a contract which is void. It is distinguishable that both case are
different. It is because the referred case is a common mistakes case
whereas the present case is related to unilateral case. But, the judge
agreed that actually the law itself is already came with an equitable
jurisdiction. Hence, instead of applying separate doctrine of law and
doctrine of equity, the learned judge inclined to find the equity in the law
itself. the learned judge was in an opinion to rationalise the legislation so
that it can be applied in this present case and later provides just and fair
judgement for the parties involved.
In discussing on unilateral mistake, the learned judge agreed with
exception of the principle that the contract will binding when a party made
a mistake in that particular contract. the exception mentioned that the
contract will not be binding if the non-mistaken party already knew that
there is mistake committed by the mistaken party. It is because there is no

consensus ad idem (meeting of minds) between them which futher deny

the objective the contract that apparently does not correspond with reality.
This opinion by the learned judge by on the principle guided in case of
Smith v Hughes (1871) LR 6 QB 597 which also promoted in the case of
Shogun Finance Ltd v Hudson [2004] 1 AC 919 where the court reconstruct
the point that the exception is occured when the offeree knows that the
offeror does not intend the terms of the offer to be natural meaning of the
words.

It is also must be noted that this court also distinguished itself from the
when suggestion made by the majority judgement in case of Taylor v
Johnson [1983] 151 CLR 422 tend to suggest that the contract would not
be void even where the non-mistaken party knew of a fundamental
mistake. The present court in an opinion that when a non-mistaken party
who knew that there must be something wrong with the contract continues
to affirm such transactions and act as nothing happened, the conduct itself
is already against the concept of equity which came along with the law. It
is a point to stress out that the party involves in such commercial dealings
should act with sincere conduct and did not perform any act which may
cause the other party to suffer loss which is not due to their lack of care.
Although mistake usually come along with carelessness, but it is not the
argument in this case as the mistake sometimes may happened in a
technical manner.
Something that is crucial to be noted that this court has departured itself
from the judgement by Denning LJ in case of Solle v Butcher [1950] 1 KB
671. In this reported case, the learned Denning LJ seemed to have
conflated the law with equity. Lord Denning also suggested the application
of equitable jurisdiction in the case of mistake. However, the court in the
present case believe that there is no jurisdiction in equity to grant a
rescission of a contract on the ground of common mistake where the
contract was valid and enforceable on ordinary principles of contract law.
As mentioned earlier, the learned judges in present case tried to rationalise
the legislation as they strongly believe that the law is already came with
the equitable principles.

b)

PRESENT CASE
In present case, the trial judge was inclined to prove that a constructive
knowledge may render a contract to be void under unilateral mistake
subjected to circumstancial evidences. Despite of using the doctrine of
equitable jurisdiction which they believe already covered by the law itself,
the learned judges managed to prove that constructive knowledge may be
affirmed as actual knowledge which the appellants had subject to the
surrounding evidence. This constructive knowledge made the state of a
persons mind as the question of fact. Thus, to prove the existence of this

actual knowledge, the learned judges went for a reasoning process where
it may considered what a reasonable man will be think of as he/she is in
similar position. Court went for Nelsonian Knowledge which meant
shutting ones eyes to the obvious. The learned judge also applied what is
mentioned in the case of OT Africa Line Ltd v Vickers Plc [1996] 1 Lloyds
Rep 700, that there must be a real reason to suppose the existence of a
mistake. But, it still depend on the circumstances of the present case.
After evaluating all appellants, courts came into conclusion that all the
appellants knew about the mistake or at least they have the constructive
knowledge regarding the mistake. The presence of surrounding evidences
later strengthen that there is existence of real knowledge regarding the
mistake committed by the mistaken party. The elements of opportunistic
and profit-seeking is manifested in the appellants which drive them to
proceed with such contract although they apparently knew that there is
something wrong or mistake happened in the transaction.
5.

CONCLUSION
All three learned judges in the Court of Appeal were in the same position as
they agreed unanimously to dismiss the plaintiffs appeal except in the
issue related to the cost of trial where they will bear 90% from the actual
cost, different with the previous judgement. The three learned judges came
into conclusion by finding and utilising the available evidence to suit with
the law as they believe that the law is already came with equity to provide
the best outcome for any parties.

CASE REVIEW : LAW OF CONTRACT II

NAME : MUHAMMAD AFIQ QIWAMUDDIN BIN MUSTAPHA SHAKRI
MATRIC NO. : 1325479
TUTORIAL SESSION : MONDAY, 2.00PM TO 3.00PM (MM 3.13)
[2008] 2 LLOYDS REP. 685
STATOIL ASA V LOUIS DREYFUS ENERGY SERVICES LP
1.

FACTS OF THE CASE (SUMMARY)

The plaintiff (Statoil ASA) is the seller for 32,000 tons of liquid propane gas (LPG).
The defendant (Louis Dreyfus Energy Services LP) is the buyer of the said items.
The plaintiff chatered a vessel called Harriette N to carry the 32,000 tons of LPG
bought by the defendant to several possible ranges of discharge ports. The
negotiation regarding the sale and purchase of the said items is done under the
cif contract (cost, insurance and freight). This negotiation is done by the plaintiff
and the defendant through a middle-man named Mr. Andersen who is also a
broker. Upon finalising the contract, the defendant issued a condition under the
heading of Demurrage which mentioned that the demurrage claim shall be
submitted by the seller within 90 days after the completion of discharge. This
conditions issued that the claim will be barred if the seller brought it after the
expiration of 90 days. However, this condition later is excluded from the real
agreement without any parties mentioning to reinsert this condition. This
agreement is agreed by both parties. The vessel which carried 32,000 tons of LPG
started to discharge first parcel (23-25 September 2006), second parcel (11-13
October 2006) and lastly third parcel (23-24 October 2006). The owner of the
vessels sent a first demurrage statement to the plaintiff after discharging second
parcel. Erroneously, one Mr. Rostrup calculated the demurrage claim that Statoil
was to make on Louis Dreyfus Energy Services LP up to 16 October 2006 only. His
conduct actually caused him to neglect the discharge of the last parcel. On 13
November 2006, the demurrage claim was sent to one Mr Hodge of Louis Dreyfus
Energy Services LP together with supporting documents. This Mr Hodge managed
to figure out this error committed regarding the calculation in demurrage claim.
He later decided to keep silent regarding this issue and just waiting for the other

party who submitted this demurrage claim to realise it on his own. As for this
reason, the demurrage claim which amount to US$137,694.50 is agreed by both
parties on 26 January 2007 and was paid on later date, 2 February 2007. Upon
receiving information regarding the real date of completion of discharge from the
vessels owner on the date of payment, one Mr. Rostrup wrote a letter to Mr.
Hodge to clarify this issue of mistake happened between them and asked for the
revision on the demurrage claim (actual sum is US$549,360.96). Mr. Hodge
reluctant to agree on the revision. Later, Mr. Rostrup had a telephone
conversation with Mr. Hodge who later agreed to pay remaining sum
(US$435,833.12) if the plaintiff considered to do the adjustment and reduction for
six hours which related to the laytime. Later, Mr. Rostrup managed to concede
the six hours but Mr. Hodge suddenly refused to do so and contended that there
is no oral agreement between him and on Mr. Rostrup. He also argued that the
demurrage claim brought by the plaintiffs representatives is barred by the time
limitation. The plaintiff brought a claim before the court against the defendant to
claim the remaining balance (US$435,833.12) of the demurrage as it alleged to
be due.
2.

DECISION

The learned judge allowed the plaintiffs claim for the remaining balance based
on the real existence of the oral agreement between one Mr. Rostrup and Mr.
Hodge made on 19 March 2007 which actually has superseded that agreement
made on 26 January 2007.
3.

PRINCIPLE

The court does not recognised the existence of such equitable jurisdiction that
allowed an agreement to be voidable in equity for unilateral mistake as to a fact
or state of affairs which the basis upon which the terms of the contracts are
agreed. The learned judge succeeded in the best way to evaluate all the available
evidences provided by both parties in order to reach to a just and fair conclusion.
Instead of granting rescission based on equity principle, available evidences was
used optimumly. Also stressing on the fact of negligence on the claimants party,
court expressly mentioned that equitable principles are not applicable in the
present case as it may render the justice and truth to be vitiated.
4.

CRITICAL ANALYSIS

a)

REFERRED AND FOLLOWED CASES / DEPARTURED FROM OTHER CASES

The learned judge in this case referred to few cases in the judgement.
Among the referred cases are :
- Chwee Kin Keong v Digilandmall.com Pte Ltd [2005] 1 SLR 502
- Smith v Hughes [1871] LR 6 QB 597
- Solle v Butcher (CA) [1950] 1 KB 671

In the judgement, the learned judge Mr Justice Aikens has discussed a few
cases in an extensive manner. For example, the learned judge did so when
he was discussing the statement made by Andrew Smith J in Huyton SA v
Distribuidora Internacional De Productos Agricolas SA de CV [2003] 2
Lloyds Rep 780. This case is about the Plaintiff (Huyton) who entered into
a contract on the mistaken belief that the goods were stored at
warehouses owned or leased by particular party and not in the factory. As
the common law will refuse to hold that the contract is not binding, the
learned judge in this mentioned case inclined to accept that there is an
equitable jurisdiction of the court to set aside a contract on grounds of
unilateral mistake. However, he mentioned that this jurisdiction was
limited by and subject to a number of considerations. Mr. Justice Aikens
expressly mentioned that he had disagree with the conclusion in the
mentioned case. It is because he believe that when a party did a mistake
related to the fact or state of affairs which is the basis upon which the
terms of the contract are agreed, but the assumption is not part of terms of
contract, hence there is no room for such equitable jurisdiction to be
applied.
The learned judge Mr. Justice Aikens also mentioned the case of Great
Peace Shipping Ltd v Tsavliris Salvage (International) Ltd [2002] Lloyds
Rep 653 in his judgement. Based on his statement, he was inclined to
follow this case which expressly stated that there is no such equitable
jurisdiction in the case of a unilateral mistake.
The learned judge has followed one of the case, Smith v Hughes (1871) LR
6 QB 597 which the finding of this case proved that when one party made
a mistake of fact of which he relied on it to enter into the contract, but the
fact itself is not a part of the contract, the contract will be binding
eventhough the other party knows about the mistake in the contract.
b)

PRESENT CASE
Based on this present case, few issues managed to be answered by the
learned judge. They are :
I.

Whether the contract term between plaintiff and defendant

contained a demurrage time bar clause?
Based on the court finding, it is very obvious that this stipulation
was not mentioned in the final contract which have been prepared
by the plaintiff on 11 August 2006 and sent to the defendant to one
Ms Zak on 20 September 2006. Besides that, upon introducing the
demurrage time bar clause by the defendant, the plaintiff replied
under the heading of demurrage the figures and letters :
USD40,000 PDPR. The court on a view that this email replied by
the plaintiff to show that such it rejected the proposed demurrage
time bar clause. Furthermore, upon finalising this contract Ms Zak
did not mentioned about anything which entitled the re-introduction
of the demurrage time bar clause. Thus, this considered as the

II.

III.

defendant fully appreciates this contract although without any

demurrage time bar clause in it. Hence, the court was in opinion that
there is no demurrage time bar clause in this contract
Whether the agreement of 26 January 2007 as to demurrage
payable not binding on Statoil because of its unilateral mistake?
This issue is the one which have been discussed extensively by the
court. In the first place, it must be clear that this mistake happened
was actually happened due to the negligence conduct of Mr.
Rostrup. Based on the evidence given, he impliedly admitted that he
was the one who careless in his conduct of business. Based on the
case referred by the learned judge, Huyton SA v Distribuidora
Internacional De Productos Agricolas SA de CV [2003] 2 Lloyds Rep
780 the court in a view that opinion made by Andrew Smith J cannot
be applied as the court did not agree that there is an equitable
jurisdiction when a party made a mistake related to the fact which
the essence upon which the terms in the contract are agreed, but
this essence is not part of the terms of contract.
In this issue, court agreed with the judge in Smith v Hughes (1871)
LR 6 QB 597 that the mistake of this type of fact will not rendered
the contract to be non-binding. To affirm this view, court further
agreed with the case of Great Peace Shipping Ltd v Tsavliris
Salvage (International) Ltd [2002] Lloyds Rep 653 which mentioned
that there is no such jurisdiction in the case of a unilateral mistake.
The additional fact that this conduct of mistake is caused from the
negligents conduct by the Mr. Rostrup, court came into conclusion
that the contract is still binding.
Whether there is an existence of oral agreement between Mr.
Rostrup and Mr. Hodge on 19 March 2007 that the Defendant would
pay demurrage in the sum of US$539,460.96?
This issue was really focusing on the telephone conversation
between Mr. Rostrup and Mr. Hodge related to the full sum of
demurrage claim that should be made by the plaintiff to the
defendant. The discussion also concentrated on the start of the
laytime. It is found that Mr. Rostrup agreed to concede that laytime
between midnight and 6.00 would not be counted as Mr. Hodge
agreed to pay the full amount for demurrage claim due to the
fullfillment the condition. Later, Mr. Rostrup wanted to proceed as
agreed but suddenly Mr. Hodge claimed that there is no such
agreement between them. The learned judge inclined to believe in
evidence brought up by Mr. Rostrup. Besides that, the silent position
by Mr. Hodge after Mr. Rostrup emailed him and wrote a letter to
him. Due to this action, court considered that agreement is tacitly
aprroved as there is no objection on behalf of Mr. Hodge. Thus, it is
concluded that there is an existence of oral agreement between Mr.
Rostrup and Mr. Hodge.

IV.

5.

If there was no agreement on 19 March 2007, can Statoil now

advance a claim for the balance of the demurrage?
The agreement on 19 March 2007 is in existence and there is no
demurrage time bar clause which prohibits the plaintiff from
claiming the remaining balance of demurrage. Hence, this issue is
clarified based on the answer given in first issue and third issue.

CONCLUSION
Equitable jurisdiction is not the best solution to grant a rescission of a
contract where one party has made unilateral mistake as to the facts or
state of affairs which is the basis upon which the terms of the contract are
agreed. In addition, this facts are not the term of contract. Due to the
presence of negligence which constituted the mistake done by the said
party, it is obvious that the application of equitable jurisdiction will deny
the real objectives of law which is to help to restitute or give compensation
the party who is not in any false action. If it is applied, the law is deemed
to be a protection for such stupidity act and carelessness conduct by a
party who are not aware and really concerned in managing his/her
conduct. However, in this case the learned judge allowed the claimants
claim not based on the equitable jurisdiction. It is rather be done by the
maximum utilisation of available evidence which later save the party from
his own negligence conduct.