Contract Law

A contract is an agreement — in speech or in writing — made between voluntary parties to create a legal obligation.

Think of the Option to Purchase (HDB/private), Sale and Purchase Agreement, Lease Agreement, Sole Agency Agreement, Commission Agreement.

A contract is valid and enforceable when it has:

• Intention to create legal relations
• Offer(s)
• Acceptance
• Consideration ($)

Intention to create legal relations

Creation of legal relations — an agreement is only enforceable if parties intended it, as deemed by the court.

Commercial agreements, unless expressly stated otherwise, are presumed to create legal relations.

Social and domestic agreements are not presumed so.

“Subject to contract” means no intention to create legal relations, not a contract until final agreement. (think Letter of Intent for Lease)

Offer

Offer — a promise to be bound to terms, communicated and conveyed. The offeror promises, and is bound once the offeree accepts.

Invitation to treat — NOT AN OFFER.
It indicates that someone is prepared to receive offers.

• Auction
  • the bidder makes the offer
• Advertisement
  • the buyer makes the offer
• Product display
  • the customer makes the offer
• Invitation for tender
  • the party who tenders makes the offer

Unilateral contract — a one-way agreement, only one party is obligated. The other has an option. (think Option to Purchase.)

Bilateral contract — a two-way agreement, with both parties agreeing to a certain promises.

Counter-offer rejects the offer, happens when offeree changes the terms of the offer in the acceptance, and reverses the roles as offeree becomes offeror.

Offers can be terminated by:

• Withdrawal/Revocation
  • by either party, requires communication
• Rejection of an offer
  • includes counter-offer
• Conditions unmet
  • if there were conditions with the offer
• Lapse
  • an expressed or reasonable time
• Death of offeror
  • once known to the offeree
  • any offers that are personal is rendered terminated by either party’s death.

Acceptance must be unconditional (no counter-offer) and communicated (silence = no) and in mode specified (if any).

• within the Option Period,
• exercise the Option
  • sign the Acceptance Copy
  • deliver to seller(‘s lawyer)
    • by hand
    • by post
      • posting time is the acceptance time

Waived — when all parties agree to something that is outside the contract.

Consideration is something of value, usually money. Each party must receive something of value for the promise. (real estate, real money. no services for property.)

Consideration must:

• Move from promisee to promisor
• Be current (past consideration is no consideration)
• Be sufficient, but need not be adequate. (it needs to be enough, but it doesn’t have to be fair/equal. I guess $10,000 as dowry or $1 for property might be good examples.)

Gifts must be in writing, signed sealed delivered, without consideration. And past consideration is no consideration.

Real estate contracts that must be in writing (paper or electronic), in a deed in English:

• conveyance
• interest in land
• lease (seven years or longer)

A valid contract will have details, written or typed, in single or multiple documents, that include:

• Parties
• Property
• Price
• Provisions (optional, but common law may require this)

Option to Purchase (OTP)

Option — right.

The Option to Purchase is the right to buy, to demand the seller’s property title, to demand the seller goes to legal completion.

Options can be assigned or transferred [“and/or nominee(s)”], but HDB and developer Option to Purchase agreements do not allow for a nominee. A new Option is needed from the seller, with seller’s consent.

The buyer:

• Pays the seller the option money, a percentage of the agreed sale price
• Exercises the right in the Option period (14 days) by signing the acceptance copy and pays another percentage of the sale price
• pays to seller if no Stakeholder Clause, otherwise to seller’s solicitor’s conveyancing account, or Singapore Academy of Law.

(The buyer then has equitable interest, lawyer lodging a caveat, and the seller is holding the property on unregistered trust.)

(practising RES: HDB OTPs are ≤$1,000 then ≤$4,000, maximum $5,000, while private property OTPs are maximum 5%, with the split negotiable between buyer and seller.)

When the seller gives the option, it’s an offer. Until the option money is paid, the seller can withdraw the offer.

Once the option money is paid, the OTP is a unilateral contract. The buyer can walk away, but the seller must sell. If the buyer walks, the seller keeps the money, no legal action needed.

Subject to contract requires a formal contract or condition to be met:

• Parties are bound and will create the same deal in a formal contract
  • Letter of Intent –> Tenancy Agreement
• Parties have agreed but execution is conditional
  • subject to required government approval
• Parties agreed to agree… deal not concluded until formal contract is drawn
  • OTP ≠ Sale and Purchase Agreement (until option is exercised)

Capacity — parties must have the capacity to ender into a legally binding contract:

• Void if minor under 21 years old (for property transactions)
• Void if suffering a mental illness and incapable of understanding nature of contract

Also void if agreement violates the law.

OTP can be annulled by the buyer if their lawyer writes to the government for legal requisitions and does not receive a satisfactory reply. Deposits returned.

Terms, Conditions, Warranties, Representation

Terms are contractual obligations. Express if written, implied if unstated but forms a provision of the contract.

Condition — Breaching a condition allows the other party to end the contract (refuse to do their part) or claim damages (continue but sue).

Warranty — Breaching a warranty only allows the other party to continue and sue.

Representation — not a term in the contract.

Term versus Representation:

• Knowledge (expert versus not)
• Reliance (did one party rely on what was said?)
• Strength of statement (oh the modal verbs of must, might…)
• Timing (close to the contract?)

Vitiating factors

to vitiate — to make ineffective, to invalidate

Vitiating factors include mistake, misrepresentation, duress, undue influence.

Mistakes can be:

• Unilateral
  • one idiot mistaken party
• Common
  • both made the same mistake
• Mutual
  • both made a different mistake

non est factum — not my deed, a plea raised against a contract. A careful party signs a document that is fundamentally different to what they believe they are signing. Usually unsuccessful.

Misrepresentation:

• A statement of fact (not opinion)
• that’s false
• material enough (to sway decision) and
• addressed to the innocent party.

Fraudulent misrepresentation is made with the intent to deceive with false knowledge.

Negligent misrepresentation is made without proper checks.

Innocent misrepresentation is made with the belief that it is true and with reasonable grounds.

Caveat emptor — let the buyer beware. A prospective buyer must examine the property themselves and bear their own risk. (Assuming misrepresentation did not happen.)

Misrepresentation allows aggrieved party to
rescind contract.

Duress — The buyer has no choice in the decision. Usually physical or economic duress.

Undue influence — An unfair advantage where one party has the position to dominate the will of another.

Contract discharge or void(able)

Contracts can come to an end by performance, agreement, frustration, breach.

Performance — both parties have performed their obligations.

Agreement:

• a term allows it
• a condition not met
• novation
  • a new contact to end the old one
• release and discharge
• variation
  • release, retain, add obligations

Frustration requires all four conditions:

1. Unforeseeable event (force majeure, BOOM)
2. Performance made impossible to no fault of either (death)
3. Change in law
4. Radical difference from agreement (purpose of contract destroyed)

If seller dies, the buyer can rescind the contract or wait (months to two years) for:

• dies with will — grant of probate
• dies without will — letters of administration.

Breach. Of terms yes, of conditions yes or damages, of warranties no.

Contracts can be:

• Void
  • does not exist, like the vacuum of space
• Voidable
  • vitiating factor exists and is recognised, and the parties can choose to benefit / ignore and continue
• Unenforceable
  • a valid contract that the courts will not enforce. Think illegal.

Remedies for breach

Damages a monetary sum awarded by the court for compensation. Amount depends on:

• Innocent party suffering actual loss
• Remoteness of defendant to the consequences of breach
• Measure of damages in monetary terms.

Liquidated damages are amounts already stated in contract.

Specific performance to do something, rarely awarded, usually damages paid.

Injunction is an order by the court to do or stop doing something. Also rare.

Contract clauses

Limitation clause limits damages. (expiration dates)

Disclaimer clause prevents ones from being sued due to printing mistakes. (on every website and ad)

Indemnity clause — you indemnify me for breach of contract or tort [injury due to carelessness]. (you’re airbnb-ing here so)

Exclusion clause recognises potential breach of contract and then excuses liability for breach. (you sent this to me to work on so)

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