Tutorial 7

(i) Howcan Pte Ltd enters into a contract of sale with Panda Ltd in China for the sale of perishable
goods, F.O.B (free on board: ie: buyer has to make the shipping and other arrangements).
Howcan Pte Ltd then gets Sure Can Trust Pte Ltd to transport perishable goods from China to
Singapore. The ship is supposed to transit via Vietnam. The goods are shipped out of China, but
due to improper planning on the part of Sure Can Trust Pte Ltd, they are wrongly dispatched in
Vietnam and further, Sure Can Trust Pte Ltd has not bothered to remedy the situation. Howcan
Pte Ltd managed to trace the goods, but by that time, the goods have already gone bad. Howcan
Pte Ltd is thinking of writing off its losses instead of suing Sure Can Trust Pte Ltd as the latter is
in liquidation. However meanwhile, the liquidator of Sue Can Trust Ltd wants payment for
shipping the goods from China to Vietnam.
(a) Is Sure Can Trust Ltd entitled to any payment?
(b) From a business/practical point of view, how could Howcan Pte Ltd have protected itself?
(c) What if the contract required shipment to Howcan Pte Ltd’s warehouse in Singapore, but the
goods were left in the port upon arrival in Singapore and Howcan Pte Ltd then manages to get
the goods to the warehouse within time at its own cost?

(a) Sure Can is not entitled to any payment. This is due to them not having completely performing
their obligations under the contract. Thus they will be unable to seek any payment from the Howcan.

In this scenario, they were tasked to transport perishable goods from China to Singapore, however,
they failed to ensure that the goods arrived in Singapore and thus failed in completing the contract. Since
payment is conditional to the successful voyage which did not materialize, they are not entitled to any
payment. This case is similar to Ocean Projects Inc v Ultatech Pte Ltd (1994). The court held that the
defendant were not entitled to any payment for shipping the goods.

Sure Can might try and argue that:

i) Substantial Performance
There is unlikely to be any valid argument for substantial performance, since Sure Can
failed to adequately plan for the goods to be transferred correctly, nor did they make an
effort to remedy the situation when it went wrong. Thus, this argument is not valid. Journey
from China to Vietnam.
ii) Divisible Contracts
Certain contracts may be divisible into stages, such that after each stage payment would be
due. However, the nature of shipping contracts is such that it is indivisible and is
conditional to the successful delivery of the goods. Thus this argument is also likely
invalid. No separate payment for each part.
iii) Acceptance of Partial Performance
Not likely to succeed. Howcan traced down the goods by which time the goods have
already perished. There was no indication of acceptance of the partial performance by
Howcan side. They had no choice but to accept that the goods had perished. Thus this is
also unlikely to succeed.

No likely to be able to claim frustration as frustration is self-induced.

It is unlikely that Sure Can would be able to claim any payment from the contract.

(b) Howcan could have bought insurance for the goods, such that if the goods was unable to be
delivered on time or in the right situation they would have been able to claim insurance for the loss of
goods.

They could also expressly written in the contract the terms which would result in a breach and the
consequences of the breach. For example, in this scenario, what would constitute a breach. Time frame?
Late delivery? Missing goods? Unacceptable conditions of goods? Also, what damages would they be able
to claim from Sure Can.

Howcan should have done their due diligence before engaging into a contract with Sure Can. They
could have checked the companies track record on goods delivered. Moreover, they should have checked
the financial positioning of Sure Can before agreeing to a contract with them. If Sure Can financial
statements showed them in a poor financial situation, it would be unadvisable to engage their services as
they would be unable to claim monetary damages from them in the event of a breach.

(c) Surecan would be able to claim partial payment of the goods as it would try to argue that there was
substantial performance in that they successfully delivered the goods from China to Singapore’s port.
Moreover, there was an acceptance of partial performance when How Can took over the goods at the port
and delivered to its own warehouse. Howcan might have implied through those actions that they accepted
that Surecan partial performance.

In this scenario, Sure Can would be able to claim the contract price less the cost of making good
any omission, in this case, the delivery of goods from the port to Surecan’s warehouse.

However, there might be an argument for Howcan that they had no choice but to accept the goods
in the condition it was presented to them. The goods were left at the port and to prevent the goods from
expiring, Howcan had no choice but to accept the incomplete performance. This is similar to the Sumpster
v Hedges case whereby the defendant was not given an option, as it was not reasonable for them to not
accept the partial performance. In this case, the court would prevent Surecan from suing for any payment.

2. FM Pte Ltd agrees to supply Nead Pte Ltd, with goods in one months’ time as Nead Pte Ltd only needs
the goods in one months’ time. Nead Pte Ltd does not know whether FM Pte Ltd already has a supply of
those goods or needs to get them from somewhere. Subsequently, FM Pte Ltd’s supplier fails to supply him
with the goods.

(a) Is FM Pte Ltd liable to Nead Pte Ltd or can it successfully plead frustration assuming the contract
is silent on such issues?
(b) Would your answer be different if there was a force-majeure clause?

(a) It might be able to plead frustration. Frustration is the happening of an unexpected event beyond
the control of the contract, which makes further performance of the contract illegal, impossible or radically
different from what was originally envisioned by the parties. If he is able to plead frustration, the parties
will be excused from performing their obligations and the contract will automatically be terminated.

Thus we consider the following factors in deciding if the frustration is plausible based on
impossibility. This occurs if the person or object involve cease to exist in the process of carrying out the
contract. In this scenario, FM might try to plead frustration as the supply of the goods came from a third
party and since the 3rd party was unable to supply the goods, he did not have possession of the goods and
the contract was impossible to be carried out. However, this would only occur if the contract specifically
stated where the supply of goods had to come from. Inferring from the question, Nead does not seem to
specify that the goods had to arrive from a specific supplier. Bearing that in mind, FM could have gotten
the goods from an alternative supplier. Thus it was not ‘impossible’ for the contract to have taken place.
Similar to the case Blackburn Bobbin Co Ltd v TW Allen Ltd (1918), the court held that the seller could
not plead frustration when he was unable to produce the supplies in time because as far as the buyer is
concerned, he would not have known that seller lacked the supplies at the point of signing the contract.

Moreover, it would not be able to plead frustration based on foreseeability. FM knew a month
ahead of time then it needed to supply goods to Nead. There was no occurrence of an unexpected event
which was radically different from what the parties originally envisaged.

If there was only 1 supplier of the goods and the supplier would not be able to supply the goods,
Nead would not have been able to obtain the goods and it could argue frustration.

(b) Had there been the force majeure clause and the clause expressly states that FM is relieved of it
duties to fulfill it contract with Nead should it be unable to supply the goods due to a fault of its supplier,
then FM would be not be liable. The clause aims to relieves the party at fault of liability should some
unexpected event occur. Nead would be able to widen what amounts to frustration in law. Thus Nead would
be able to state that being unable to get the goods from the 3 rd party would prevent it from being liable.
However, under the clause, it is possible for both sides to provide that the contract is suspended for a stated
amount of time instead of being immediately discharged. Thus if the event clears up before the end of the
time period, the contract might not be discharged and Nead would still have to provide the goods to FM.

When considering the force majeure clause, have to look at what is stated in the clause. If the
clause applies to the event, then we will follow the terms of the clause. If force majeure clause does not
operate, then we will look at termination of the contract. Apply the frustrated contract act to the contract.

Frustration Force Majeure Clause Frustrated Contract Act

3.Bambang an Indonesian company entered into a contract on the 1 st of September to sell and ship goods to
Mirlyon, a Singaporean company. The contract provides that the goods are to be shipped from Indonesia by
September 10. Bambang is intending to use Port Jarpadee which is near its warehouse. However, there are
strikes in Port Japardee throughout September making it impossible to send the goods from there.
Assuming Singapore law governs the contract,
(a) Will Bambang be in breach of contract if it does not ship the goods as a result of this?
(b) What if there was a force majeure clause in the contract which stated:

(i)The contract would be suspended if there were strikes, riots or civil disturbances which make it
impossible to ship the goods out of Port Japardee and
(ii) Such a suspension would be for a period of 8 weeks. If the strikes, riots or civil disturbances cleared up
before the end of the 8 weeks, the time for the performance of the contract would be extended. Otherwise
the contract would be discharged.

(a) Bambang would still be in a breach of contract as a result of this. This is due to it being unable to
plead frustration and that it is unable to carry out the contract resulting in the voiding of the contract.

Frustration is the happening of an unexpected event beyond the control of the contract, which makes further
performance of the contract illegal, impossible or radically different from what was originally envisioned
by the parties. If he is able to plead frustration, the parties will be excused from performing their
obligations and the contract will automatically be terminated.

In this scenario, Bambang would attempt to plead frustration due to impossibility. For a contract to be
rendered impossible, the contract must state that it must be fulfilled in a particular manner and that
becomes impossible. In this case, the contract stated that the goods have to be shipped from Indonesia by
September 10. Although there were strikes in Port Japardee which did not allow them to ship out the goods
from there, they could have decided to use a different port in the region which was still operating and thus
fulfill the contract agreement. In Tsakiroglou & Co Ltd v Noblee and Thorl GmbH (1962), the court held
that the contract was not frustrated as there was an alternative route available. Likewise, there are
alternative ports for Bambang to have shipped the goods to Singapore and the contract would not have been
frustrated. Even in the scenario whereby it would have cost more to have shipped the goods from an
alternative port, the contract is not considered to have been frustrated.

However, if the nearest port was too far away such that it was feasibly impossible for Bambang to have
moved the goods to the port and deliver it to Singapore on time, the contract might be considered to be
frustrated. This is due to the fact that there were no alternative ports which allowed Bambang to have
carried out the contract. Similar to the case of Nicholl & Knight v Ashton Edridge & Co (1901), it was
impossible for the contract to be fulfilled within the time frame stated in the contract given the
circumstances. 10 days might be considered to be a short amount of time and it would be reasonable to
expect that it would not be possible to find an alternative port in the region, transfer the goods to that port,
ship out the goods and ensure that it arrives in Singapore before the 10th.

Another thing the courts might consider is foreseeability. Sine the contract was agreed on the 1 st of
September and the strikes had already started occurring since the start of September, the court might find
that the parties involved could have forseen that Bambang would not be able to ship out the goods via Port
Jarpardee, yet they decided to go ahead with the contract. In such a scenario, frustration would not be able
to apply as the events were foreseeable.

(b) The Force Majeure clause helps to relieve the service provide of liabilities in the event some
unexpected event happens. This clause helps to specify the conditions which would amount to frustration
and allows the contract to be suspended for a period of time instead of being discharged.

In this case, the contract would be suspended for a period of 8 weeks according to the Force
Majeure clause. The resulting effect would be as stated in the clause itself. The suspension would last a
total of 8 weeks and if the situation permits for the shipping of goods out of the port before the end of the 8
weeks, the contract would still be valid and Bambang would have to ship the goods after the strikes have
stopped. However, if the strikes last for a period longer than 8 weeks and Bambang is unable to ship the
goods out of the port, the contract would be considered to be discharged and there would be no breach of
contract by Bambang.

4. Able Pte Ltd, a company involved in renovation agrees to renovate Mr Oh Noh’s house. But after
the hacking had started, the company realizes there is no way it can finish on time, as it has over
committed itself by doing many other renovations in many other places at the same time. It is also
short of workers. So Able Pte Ltd completely stops renovating Mr Oh Noh’s house as it is the least
profitable project of the lot.
(a) Is the company excused by reason of frustration if it does not perform the contract?
(b) If 2 months have passed and no further work has been done, despite Mr Oh Noh’s repeated
calls – what are Mr Oh Noh’s rights?
(c) Is the company entitled to any payment for the hacking?

(a) No it is not excused by frustration.

Frustration relates to the happening of events which are beyond the control of the parties involved.
If the event has been brought about because of the conduct of one of the parties, the contract cannot be
considered to be terminated due to frustration as the frustration is a self-induced one.

This was shown in the case of Maritime National Fish Ltd v Ocean Trawlers Ltd (1935), whereby
the judge ruled that the frustration was self-induced by the service provider and the fulfillment of the
contract only became impossible due to the actions of the service provider.

Likewise, the reason why Able Pte Ltd would be unable to fulfill its obligations to renovate finish
Mr Oh Naoh’s house was due to their own action of taking up too many projects, leaving it short of
workers to complete all of their projects The frustration is self-induced and cannot be used to
terminate the contract. The court would still find them liable for the completion of the contract.

Moreover, it has been proven in other cases that labour shortages or price increases do not amount
to frustration as it does not fulfill the argument that it would make the contract radically different from
what was originally envisaged. In the case Davis Contractors Ltd v Fareham UDC (1956), the court ruled
that shortage was labour and increase costs did not amount to frustration. Able could hire more workers to
cope with the workers’ shortage and fulfill the contract thus, the obligations are not impossible to fulfill.

(b) Oh Noh has the right to sue Able for damages.

Oh No can argue to the court that there is repudiatory breach to the contract. Repudiatory occurs
when one party by words or action imitates to the other party that he no longer intends to go ahead
or be bounded by the contract. It can be either anticipatory or actual in nature.

It would be considered actual if there was a deadline in the contract which stated the date whereby
the contract would have to be completed by. If this deadline has passed and no further work has been done,
Able would have considered to have committed an actual breach, which anticipatory would occur when
Able informs Oh Noh that he intends to breach the contract before the deadline of the contract itself.

In this scenario, Oh Noh has made multiple calls to Able, yet Able does not continue the
renovations. Oh Noh could argue that there was anticipatory breach even if the deadline has not passed as
Able actions seem to suggest that they do not have an intention to fulfill their obligations. This would allow
Oh Noh terminate the contract and carry out legal actions against Able as it has breached the contract terms.

However, since there is a repudiatory breach, is it not compulsory for Able Pte Ltd to terminate the
contract. It can choose to keep it alive and affirm it, and be kept alive with all the ensuing consequences.
Mr Oh Noh can still be able to sue Able Pte Ltd later for damages unless he has "waived" his rights to
do so. For example, Mr Oh Noh promised to pay more for the increased labor cost and Able Ptd Ltd has
relied on the promise, and if the court is of the view that it is very unfair or inequitable to go back on his
promise, he may be stopped from going back on his promise.
 Notice from Able that they would not be able to complete the contract.

(c) Able would try to argue that even though the contract was not full fulfilled, there was considerable
work done and they deserved some form of payment.

(i) Substantial Performance

Able would argue that even without complete fulfillment of the renovation work, there was
still substantial performance done in terms of hacking. This would unlikely to work base on
2 reasons. Firstly, they had only just begun the renovation works and it might not constitute
substantial performance done. Secondly, for renovation works the obligation under the
contract is likely to be an entire one and it would not be possible to make a partial claim in
this regard.
(ii) Divisible Contract
Certain contracts might be divisible into stages and after each stage, the party performing
would be entitled to payment. This might be able to succeed as renovation contracts tend to
be divisible and payment is made at each stage of the renovation. Thus, Able might be able to
claim payment for completing the hackings stage of the renovation works.
(iii) Prevented Performance
There was no prevention on performance, as Oh Noh did not prevent Able from carrying out
the renovation works.
(iv) Acceptance of Partial Performance
If one party by word or action intimates that he accepts the incomplete performance, the
servie provider who has not fulfilled the contract may be able to claim on a quantum meruit
bases. However, in this situation, Oh Noh has made it very clear that he does not accept
the partial fulfillment in the contract as shown by his repeated calls to Able. Even in the
scenario that Oh Noh engages another contractor to finish the work done, that does not
constitute an acceptance of the partial performance. According to Sumpster v Hedges (1898),
the court held that contractor need not be paid as Hedges had no choice to accept the partially
completed structure as he could not possible leave it in it uncompleted state. Likewise, Oh
Noh could not possibly leave the house in its uncompleted state.

5. Faedup Pte Ltd is a big company and has outsourced the cleaning of its premises to At Your Service Pte
Ltd (AYS). AYS sends 20 workers to clean Faedup’s premises on a daily basis. Faedup pays AYS about
20% more than the market price, thinking that AYS must be good. The contract is for a period of 2 years.
However, Faedup finds the cleaning services done are not very satisfactory. The workers sometimes arrive
late. Further, they are often found idling or playing with their mobile phones instead of working. In
addition, though the rubbish is cleared everyday and the place is mopped/vaccumed daily, everything is just
done very superficially. While looking up the company details now, Faedup also realizes that AYS has been
advertising that it has a certain international certification, but that, this is not true. Faedup wants to know
whether it can use this ground too, to get out of the contract. In any case what are some of the things
Faedup should do before entering into a new contract with another company for the cleaning services in
future? (modified exam question).
1. They must discharge the contract with AYS or invalidated by misrepresentation, before it can make a
new contract with another company.
2. Can they discharge the contract?

Firstly, we shall discuss the issue on whether Faedup is able to terminate the contract based on the poor
performance of the cleaning service.

A contract may come to an end in the event that there is a fundamental breach committed by one party to
the contract. In this scenario, what constitutes a fundamental breach would be when AYS commits a breach
of condition to the contract, such that the contract is unable to be fulfilled.

If the contract had expressly stated that there was a minimum standard of cleanliness that had to be
adhered to or that there the workers are expected to perform or behave in a certain manner and this
terms were conditions to the contract, Faedup would be able to terminate the contract. This is because
any breach to a contract’s conditions would amount to invalidating the contract.

Even in the scenario whereby the contract did not expressly state that these were conditions, if the breach
resulted in depriving the innocent party of enjoying the whole benefit of the contract, he would be allowed
to terminate the contract. This was seen in the case of Hong Kong Fir Shipping Co v Kawasako Kaisen
Kaisha (1962). However, this is unlikely to apply in this scenario as AYS still ensured that the rubbish was
cleared everyday and the place was still superficially clean. Thus Faedup is still enjoying certain benefits
from the contract.

In the scenario that it was not expressly stated in the contract the minimum standard of cleanliness or
acceptable employee behavior, Faedup might be able to rely on implied terms of the contract to argue a
breach of contract. However, this is unlikely to succeed. A cleaning service contract would imply that the
place is generally clean and AYS was able to ensure that. Unless it was expressly stated that there had to be
a minimum standard of cleanliness which had to be maintained, it would be unlikely that there was a breach
of implied terms.

Thus in conclusion, based on fundamental breach to the contract, Faedup has to prove that it was expressly
stated that in the contract agreed, that there was a minimum standard of cleanliness which had to be
maintained and this was considered to be a contract condition or that the cleaners had to adhere to a certain
behavioral standard. If they were able to do so, they would be able to terminate the contract.

AYS has international certification which is considered a part of the contract. Since it does not from part of
the contract, there is no breach.

With regards to the false advertising, we would have to consider whether there was misrepresentation on
the part of AYS.

For it to be considered a misrepresentation, it has to be a statement of fact. In this case, by stating that they
had certain international certification, it would indicate that there was indeed a statement of fact. And this
could constitute a misrepresentation.

Next, we have to look at whether this misrepresentation resulted in the formation of the contract. Faedup
must have known of the fact that AYS was advertising this international certification prior to signing the
contract. Faedup then has to show that it was because of this misrepresentation by AYS which induced it
into forming the contract. It need not be the sole reason for the contract formation, however, if was one of
the reasons which induced them to agree to the contract with AYS then it is able to prove misrepresentation.
However, if AYS is able to prove that Faedup did not rely on this information and in no way was it
influenced by this particular advertisement, then Faedup cannot claim misrepresentation. This
follows the case of Smith v Chadwick (1838) whereby the plaintiff was proven he was not influenced by
the misrepresentation.

In the event that misrepresentation is proven, we have to consider the consequences of it. We firstly have to
label the misrepresentation as either Fraudulent, Negligent or Innocent. In this case, it is likely that it was a
fraudulent misrepresentation as it was a blatant lie to boost the companies’ credentials and make it
more attractive.

Faedup would be able to rescind the contract if all the above scenarios are fulfilled. They would be able to
terminate the contract and return the parties to the position they were before the contract. In addition,
Faedup would be able to sue for damages if they had indeed suffer some form of damages which they are
able to prove they suffered due to the contract formation

Unlikely to prove misrepresentation as Faedup only found out about the misrepresentation after the
formation of the contract.

It should clearly state in the contract the terms and conditions, such that in the event of such an issue
happening, it would be easy for the contract to be terminated or for damages to be had. It should also have
done background research into the company before making any contract and agreements. The contract
should also have explicitly stated that conditions which would amount to a breach and that in the event of a
breach, termination would be the result.

6. Staack Pte Ltd engaged Reepof Pte Ltd to transport goods to Malaysia. The contract is for a period of
two years and does not expressly provide for earlier termination. After two months, the market rates from
transporting to Malaysia drop by 30%. Staack Pte Ltd wants to get out of the contract and get another
company to do the transporting as it will be much cheaper. Advice Staack Pte Ltd. From a legal/business
viewpoint what could Staack Pte Ltd have done to protect itself?

Staack would not be able to get out of the contract via frustration. The courts have repeatedly rules that
labour shortages or price inceases do not amount to frustration due to the contract being different from what
was originally envisaged In the case of Davis Contractors Ltd v Foreham UDC (1956) the court ruled that
the contract was not frustrated even though cost of carrying out the services had increased. Thus even
though Staack would suffer a loss of income due to it having to pay the costs which were higher than the
market rate, the difference in cost are not so extreme and astronomical such that it amounts to the contract
being frustrated.

Staack could have a Force Majeure clause in the contract which would relieve them of the liability and give
them an escape clause in the event of the cost increasing due to an unforeseen event taking place. For
example, riots/natural disaster. Under the clause, it could have stated that in the event that this happens, it
would allow Staack to readjust the price of the contract.

Staack could also have negotiated a deal which would allow the early termination of the contract if it gives
prior notice to Reepof. It is not uncommon for most contracts to have an early termination clause or opt-out
clause provided they have informed the other party an agreed time period in advance.

Staack could also have inserted a clause which would allow the contract to be readjusted in price so as to
remain competitive with the market rates Perhaps the contract could have stated that the rates would be
revisited every 6 months and there is a formula pegged to the market rate expressly stated in the contract
which would prevent any disagreements.

7. Search web sites for legal/contractual terms. Can you find an example of the following:

(a) a force majeure clause

Note: such exercises are important to understand and appreciate that what you are studying is not
something just theoretical but arises in real life.