Chapter 4 - Voidable Contracts

Question 1

VOIDABLE CONTRACTS

Overview

Answer 1

1) Coercion
2) Undue influence
3) Fraud
4) Misrepresentation
5) Mistake

Question 2

COERCION

Overview

Answer 2

1) The law
2) Duress & economic duress
3) Inequality of bargaining power
4) Effect of coercion

Question 3

COERCION

The law

Answer 3

S.15 CA

Question 4

COERCION

Duress & economic duress

Answer 4

1) Duress - OCBC Securities (Melaka) Sdn Bhd v Koh Kee Huat:

• Although not provided under S.15, the concept of duress & coercion has been used interchangeably;
• To import the concept of economic duress, test in Pao On v Lau Yiu Long must be satisfied.

2) Economic duress - Pao On v Lau Yiu Long:

• whether alternative COA exists;
• whether the coerced party protested;
• whether the coerced party had independent advices;
• whether after entering into the contract the coerced party took steps to avoid it.

Question 5

COERCION

inequality of bargaining power

Answer 5

Saad bin Marwi v Chan Hwa Hua & Anor:

• Judge had given recognition to the doctrine of inequality of bargaining power.
• OTF, it is held that the agreement was an unconscionable bargain & unenforceable.

Question 6

COERCION

effect of coercion

Answer 6

• voidable - S.19(1)
• rescission - S.65
• restitutionary - S.66

Question 7

UNDUE INFLUENCE

overview

Answer 7

1) UI at common law
2) UI under CA
3) test for UI
4) factors for domination of will
5) factors for presumed domination of will
6) rebutting presumption
7) effect of undue influence
8) Relief for undue influence

Question 8

UNDUE INFLUENCE

At common law

Answer 8

Allcard v Skinner:

• Actual undue influence: court is satisfied that the gift was the result of influence expressly used by donee for the purpose;
• Presumed undue influence: based on the existence of r/ship between the donor & donee;
• unless it is proved that the gift was voluntary, court may set aside the gift based on presumed UI.

Question 9

UNDUE INFLUENCE

Under CA

Answer 9

S.16

• S.16(1): position + use of the position.
• S.16(2): position to dominate may be presumed.

Question 10

UNDUE INFLUENCE

test for UI

Answer 10

Saw Gaik Beow v Cheong Yew Weng:

• exceptional circumstances;
• transaction was to the manifest disadvantage of the person subjected to the dominating influence.

Question 11

UNDUE INFLUENCE

factors to determine domination of will

Answer 11

Polygram Records Sdn Bhd v The Search:

• physical & financial constitution of the P may be helpful to determine whether he is in the position to be dominated.

Question 12

UNDUE INFLUENCE

factors to determine presumed domination of will

Answer 12

Rajabali Jumabhoy v Ameeralu R Jumbhoy:

• Existence of a particular relation of trust & confidence;
• Transaction was manifestly disadvantageous to the person subject to the influence;
• burden shifts to D to prove that no undue influence has been exercised.

Question 13

UNDUE INFLUENCE

rebutting presumption

Answer 13

Inche Noriah v Shaik Allie Omar:

• Transaction is entered with independent legal advices;
• Transaction is entered with P knowing the consequences.

Question 14

UNDUE INFLUENCE

effect of undue influence

Answer 14

Tengku Abdullah v Mohd Latiff Mohd Shah:

• contract becomes invalid between parties;
• invalid against other person.

Question 15

UNDUE INFLUENCE

relief

Answer 15

S.20:

• ctt may be set-aside.

Question 16

FRAUD

Overview

Answer 16

1) At common law
2) Under CA
3) Breach of duty to disclose
4) Equitable fraud
5) Effect of fraud
6) Relief for fraud
7) Caveat emptor principle & fraud

Question 17

FRAUD

At common law

Answer 17

Derry v Peek:

False representation is made by:

• knowingly it is false; or
• without belief in its truth; or
• recklessly, carelessly whether it is true or false.

Question 18

FRAUD

under CA

Answer 18

S.17

Question 19

FRAUD

Breach of duty to disclose

Answer 19

1) Question to ask:

• is there a duty to disclose;
• is the non-disclosure material;
• is the material non-disclosure fraudulent;

2) Duty to disclose:
- Partnership - Simms v Conlon & Anor: there is duty to disclose in partnership agreement.
- Insurance - Leong Kum Whay v QBE Insurance: there is duty to disclose in insurance contract.
- Agent - Lau Kee Ko & Anor v Paw Ngi Siu: property or land agent has a duty to disclose the material facts.
- Sales of motor vehicle - Lau Hee Teah v Hargill Engineering Sdn Bhd: NO duty to disclose in contract for sales of motor vehicle.
3) Whether non-disclosure is material and fraudulent:

• to be determined within S.17; and
• standard of proof in Sinnaiyah & Sons v Damai Setia Sdn Bhd.

Question 20

FRAUD

Equitable fraud

Answer 20

Takako Sakao v Ng Pek Yuen & Anor:

• No need to prove actual intention to deceive;
• suffice if there is relationship of trust & confidence, implied or expressed.

Question 21

FRAUD

Effect of fraud

Answer 21

Voidable - S.19(1)

Question 22

FRAUD

Relief for fraud

Answer 22

1) Affirm - S.19(2):
- affirm & insist on correct representation has been made;
2) Rescind - S.65:
- rescission & claim for restitution under S.66.

Question 23

FRAUD

Caveat emptor principle

Answer 23

Weber v Brown:

• explanation to S.19 does not apply to fraud.
• i.e. CE principle does not apply to fraud.

Question 24

MISREPRESENTATION

Overview

Answer 24

1) General requirements
2) Fraudulent misrep
3) Effect of fraudulent misrep
4) Remedies for fraudulent misrep
5) Innocent misrep
6) Remedies for innocent misrep
7) Breach of collateral warranty
8) Negligent misrep

Question 25

MISREPRESENTATION General requirements

Answer 25

1) S.18 2) Sim Thong Realty Sdn Bhd v Teh Kim Dar: - Fact; - Address; - False; - Material.

Question 26

MISREPRESENTATION Fraudulent misrep

Answer 26

Kheng Chwee Lian v Wong Tak Thong: - Both S.17 & S.18 are relied to prove fraudulent misrep; - i.e. intention to deceive under S.17 and ingredients of misrep under S.18 is necessary

Question 27

MISREPRESENTATION Effect of fraudulent misrep

Answer 27

1) S.19(1) - voidable: - Rescission S.65 + restitution S.66 + damages at tort of deceit; or - Affirm + position that representation has not been made - S.19(2) 2) Abdul Razak bin Abu Samah v Shah Alam Properties - Rescission: damages assessed at tort of deceit, nothing is taken off mitigation. Representee is put at position he would have been if he had no reliance on the fraudulent misrep. - Affirmation: insist that the contract is performed & representee is put in position where he would have been if the representation had not been made.

Question 28

MISREPRESENTATION Innocent misrep

Answer 28

1) S.17(c): - innocently make a mistake as to sustance of the thing which is the subject of the agreement. 2) Abdul Razak bin Abu Samah v Shah Alam Properties: - The mind is free from deceit & inadvertence.

Question 29

MISREPRESENTATION Remedies for innocent misrep

Answer 29

1) Remedies - Abdul Razak bin Abu Samah v Shah Alam Properties: - Representee is entitled to rescission; - In some cases, he may be entitled to indemnity; - But he is not entitled to damages. 2) Right to rescind - Admiral Cove Development Sdn Bhd v Balakrishnan a/l Devaraj: - Right to rescind: only at equity, bars to rescission applies; - May only rescind if the contract is still executory; - And restitution is possible.

Question 30

MISREP Breach of collateral warranty

Answer 30

Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd: - Party may plead breach of collateral warranty as an alternative to innocent misrepresentation. - It will entitle the P to damages. Conditions for the cause of action: - Representation is made in course of dealings; - For the purpose of inducing the entry into the contract; - It actually has induced him to enter into the contract.

Question 31

MISREP Negligent misrep

Answer 31

1) Ingredients: - Existence of duty of care; - Breach of duty of care. 2) Must specify the existence of relationship - Selangor Rubber Estates Ltd v Cradock: - Must specify the relationship under which the duty arose. 3) Remedies for negligent misrepresentation - Sim Thong Realty v Teh Kim Dar: - Assessment of damages in tort of negligence. - P must plead & prove special relationship that gives rise to duty of care & other elements that constitute tort of negligence.

Question 32

MISTAKE Overview

Answer 32

1) Both parties 2) Mutual mistake 3) Effect of mistake by both parties 4) relief for mistake by both parties 5) Mistake by one party 6) Effect of mistake by one party 7) Defence for mistake

Question 33

MISTAKE Both parties

Answer 33

1) The law: - S.21 2) Associated Japanese Bank (International) Ltd v Credit du Nord: - Substantially shared; - Relates to facts; - Radically different; - Reasonable grounds. 3) example - M Pakiam v YP Devathanjam: - when parties is at cross-purpose, there is no binding contract as there is no consensus ad idem; - i.e. no consent to same thing in same sense.

Question 34

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Answer 34

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Question 35

MISTAKE Effect of mistake by both parties

Answer 35

S.21: - agreement becomes void.

Question 36

MISTAKE Relief for mistake by both parties

Answer 36

1) The law: - S.30 SRA 2) Thay Tho Bok v Segar Oil Palm Estates Sdn Bhd: - can be rectified if there is clear proof that the contract was entered through fraud and mistake; - burden is on the party claiming for rectification.

Question 37

MISTAKE mistake by one party

Answer 37

1) S.23: | - as to the matter of fact.

Question 38

MISTAKE effect of mistake by one party

Answer 38

Hasham v Zenab: - General rule: not voidable, i.e. valid. - Exception - can rescind if: 1) mistake was induced by innocent misrep; 2) mistake was induced by some other misleading conduct on his part; 3) mistake is caused by fraud, misrep, or misleading conduct by the other contracting party.

Question 39

MISTAKE defence of mistake

Answer 39

Saunders v Anglia Building Society (Galie v Lee & Anor): - defence that the person sought to be held liable did not in fact sign the document; - i.e. illiterate, incapacity to understand the purpose of signing. - laziness or negligent is not an excuse.