Wednesday, March 31, 2010

Contract - Discharge

Discharge

Contract creates obligations. These obligations however do not exist indefinitely. Until these obligations are discharge however they will continue to exist. In this part of contract we looked at some of the rules that determined the discharge of contractual obligations.

The first very simply is the discharge of the obligation by performance. That is doing what you were suppose to do according to the contract in the first place. In performing your obligation the law states that you have to perform the obligations precisely. This is known as the doctrine of precise performance. This rule however has several exceptions namely – the de minimis principle, divisible contract, substantial performance, prevented performance and acceptance of partial performance.

The next is the event of a breach of the original obligation. By breaching the obligation, the original contractual obligation is discharged but may give rise to a subsequent liability to compensate the other party in damages.

The next is by agreement and here we look at instances where parties agree to the discharge either by an existing term in the contract that may allow a party to “exit” a contractual obligation by say – giving notice or paying a certain sum of monies. Alternatively parties may enter into a subsequent agreement to discharge themselves from further obligations in the contract.

Finally we looked at Frustration as a means of discharging contractual obligations. Frustration is an event that both parties were unable to foresee – it is very much a freak incident that frustrates the performance of a contract – making it impossible. According to Davies Contractors v Fareham UDC a frustrating event is one that both parties could not have foreseen and were not responsible for and had made the performance of the contract impossible. Once frustrated the situation is dealt with by the Frustrated Contract Act or the common law position in Fibrosa Spolka.

Tuesday, March 30, 2010

LSFM - Death & Relationship Breakdown

The main points in this part of the course is to introduce to students issues that may arise affecting investments in 3 specific events:-

A. Death

It certain that ll of us will die - question is when. In the event of death how will our assets (including our investments) be distributed? The law deals with it in 2 ways - first if we have made no express provisions by way of a will, the assets will be distributed in accordance with the Intestate Succession Act. If we do not wish our assets to be so distributed, the law allows us to make a will (governed largely by the Wills Act) which allows us to nominate our beneficiaries rather than leave it to the law AND to somewhat control its distribution (if you want to) by introducing conditions by way of a testamentary trust. eg - my assets to my son provided he reaches the age of 30.

B. Incapacity

Whilst not a certainty as death, it affect many people. Incapacity by way of brain damage or physical incapacity caused perhaps by a stroke or dementia. In such an event, the law would require that the beneficiary or interested party make an application to the court to apply for a committee of the person. This would require a court action and may be lengthy and costly. To prevent such procedure, the law allows us to appoint our representative even before the event by way of a enduring power of attorney. This is regulated by the Enduring Power of Attorney Act of 2002 in Australia and in Singapore recently by the Mental Capacity Act.

C. Relationship Breakdown

We say a Divorce. The rate of divorce whilst not a certainty is approximately 3 in every 10. So in the divorce how do the courts distribute our assets. In Singapore the Womens Charter provides for a equitable division of all matrimonial assets i e. assets acquired, used or improved during marriage. To prevent any further court bashing, the law recognizes parties attempts to rationalize things before it gets bad by way of a Pre Nuptial Agreement. This was recognized in Singapore as recently as 2007 in TQ v TR. In Australia - it has been recognized since 2002.

See

http://www.sal.org.sg/digitallibrary/Lists/SAL%20Journal/Attachments/427/2007-19-SAcLJ-397-Ong.pdf


So this week was a week when we looked at the ways the laws deal with our assets in certain circumstance.

Regards

SK

Monday, March 22, 2010

Vitiating Factors - Commercial Law

We took almost 2 weeks to complete this part of the course. Vitiating factors are important issues. These rules allow a party to "exit" from the contract due to a variety of reasons. Many of theses reasons concern the capacity of the contracting party - either because the party is too young or he was forced into the contract or was under a mistaken belief as to the existence of certain facts. These are the vitiating factors in contract and in chapters 6 we looked at 7 factors.

Illegality - the courts do not recognize agreements which are either illegal or immoral or purely because of certain public policies refuse to recognize and enforce such agreements. On the purely criminal sense - the court will refuse to recognize criminal contracts such as a contract to kill someone or to traffic drugs or to assist in the financing of a illegal brothel or even gaming contracts. On the policy rationale, the court will not enforce restraint of trade clauses which tends to inhibit competition which tends to be contrary to public policy to encourage open and free competition.

Minority - in this respect the angel is that the law feel that minors may not be able to make sensible commercial decisions and hence a protection is offered to them who make unnecessary purchases. The definition you find in the Sale of Goods Act and in Nash v Inman are of interesting insight into how the law regulates minor contract.

Misrepresentation - is all about people entering into contracts on false representations made either fraudulently, negligently or innocently. The rules on misrepresentations are fairly clear.

Mistake - one of the more complicated set of rules concern the issue of mistake. The rules makes it clear that Common Mistake and Mutual Mistakes will vitiate a contract. the problem area is in unilateral contract where our focus was on the following:

Mistake on the identity : see Shogun Finance
Mistake on document : Non Est Factum : See Saunders v Anglia BS
Unilateral mistake : where the innocent party is aware the mistaken party had made an error : See the Digiland Mall case.

The final leg of vitiating factors saw us looking at some factors which tend to have an effect on the freewill of the party either because he was forced into the agreement physically (duress), economically or by influence. And finallyw e looked at circumstances when the courts will champion parties to a contract who had been taken advantaged off.

It is interesting to see what circumstances the courts will allow or acknowledge as reasons the law will allow as excuses to withdraw from a contractual bargain.

SK

Tuesday, March 16, 2010

Law of Investement & FM (Issues on investement in Property)

I shuffled lectures 8 to 7 and this may have caught soem of you off guard particularly those not listening in class. the Big picture as I was painting it was as follows:-



In lecture 6 =- we looked at lending and borrowing as whole. In the lending and borrowing, we visited issues on security and we learnt that we could take security over real estate by way of a mortgage - whihc then leads us to lecture 7.



A good legal regime in real estate provides investor confidence both from the buyer point of you and the lender - the lender so that he can take good secured colaterals over the real estate. If the legal regime is bad - confidence low, people will shy away from real estate. so from a buyers perspective - a good legal regime will provide confidence that the assets that he has acquire is actually his and he able to deal with it in such a way as he pleases.



We therefore introduced several concepts in lecture 7 :



1) The Torrens Systems of land registration which depended largely on the requirement of registering your rights and once registered they become indefeasible.



2) The meaning of indefeasible and how it has been tetsed by a series of cases;



3) A torrens system mortgage - providing ease and confidence in securing your real estate in return for loans and the use of Caveats in securing future legal interest;



4) The regulation of strata title properties and the role of the Body Corporate;



5) Purchasing off plan properties - the benefit and risk;



6) The manner of holding properties - Joint Tenancy v Tenants in Common





You can find most of the materials in your text book and the slides but I found the followoing links useful in soem of the above topics:-



On the torrens system title:

http://en.wikipedia.org/wiki/Torrens_title





On off plan purchases:



http://www.lawyersconveyancing.com.au/plan.asp


On strata titled properties:-

http://docs.google.com/viewer?a=v&q=cache:dSIx9xSzIJgJ:lib.iiu.edu.my/mom2/cm/content/view/view.jsp%3Fkey%3D7N3Zz2ZM3Q9paHINBH9whIa3hmXOhiy920060712151923312+strata+title+legislation&hl=en&pid=bl&srcid=ADGEESjbdRahVPFD_8gdjajqFWWBSOJtoOp46fiovEhE6OQK44HzrlIbB2ghjULch4RgeXdRqrQc_NH_4HFkwnT9QQgutZf018KgbgZ78jXjLhsypUzSqPSA2vYWwD-GGTSHZAsMjsrd&sig=AHIEtbQT9YyqtayrbPDirBtTuePit_4fMQ

Enjoy.

SK


Monday, March 8, 2010

Carlill V The Carbolic Smokeball Company

The Carbolic Smoke Ball Company made a product called the "smoke ball". It claimed to be a cure for influenza and a number of other diseases. The smoke ball was a rubber ball with a tube attached. It was filled with carbolic acid (phenol). The tube was then inserted into the user's nose. It was squeezed at the bottom to release the vapours into the nose of the user. This would cause the nose to run, and hopefully flush out the viral infection.

The Company published advertisements in the Pall Mall Gazette and other newspapers on November 13, 1891, claiming that it would pay £100 to anyone who got sick with influenza after using its product according to the instructions set out in the advertisement.

“£100[1] reward will be paid by the Carbolic Smoke Ball Company to any person who contracts the increasing epidemic influenza colds, or any disease caused by taking cold, after having used the ball three times daily for two weeks, according to the printed directions supplied with each ball.

£1000 is deposited with the Alliance Bank, Regent Street, showing our sincerity in the matter.

During the last epidemic of influenza many thousand carbolic smoke balls were sold as preventives against this disease, and in no ascertained case was the disease contracted by those using the carbolic smoke ball.

One carbolic smoke ball will last a family several months, making it the cheapest remedy in the world at the price, 10s. post free. The ball can be refilled at a cost of 5s. Address: “Carbolic Smoke Ball Company, “27, Princes Street, Hanover Square, London.”

Mrs Louisa Elizabeth Carlill saw the advertisement, bought one of the balls and used three times daily for nearly two months until she contracted the flu on January 17, 1892. She claimed £100 from the Carbolic Smoke Ball Company. They ignored two letters from her husband, who had trained as a solicitor. On a third request for her reward, they replied with an anonymous letter that if it is used properly the company had complete confidence in the smoke ball's efficacy, but "to protect themselves against all fraudulent claims" they would need her to come to their office to use the ball each day and checked by the secretary. Mrs Carlill brought a claim to court. The barristers representing her argued that the advertisement and her reliance on it was a contract between her and the company, and so they ought to pay. The company argued it was not a serious contract.


JUDGEMENT

The Carbolic Smoke Ball Company, despite being represented by HH Asquith, lost its argument at the Queen's Bench. It appealed straight away. The Court of Appeal unanimously rejected the company's arguments and held that there was a fully binding contract for £100 with Mrs Carlill. Among the reasons given by the three judges were (1) that the advert was a unilateral offer to all the world (2) that satisfying conditions for using the smokeball constituted acceptance of the offer (3) that purchasing or merely using the smokeball constituted good consideration, because it was a distinct detriment incurred at the behest of the company and, furthermore, more people buying smokeballs by relying on the advert was a clear benefit to Carbolic (4) that the company's claim that £1000 was deposited at the Alliance Bank showed the serious intention to be legally bound. The judgments of the court were as follows.[

Law of Investments & Financial Markets (Lecture 6)

Sorry for the silence. it has been quite a week and my installment for this week is long overdue.

Lecture 6 was really the commencement of our lectures on Investments. Lecture 1- 5 were really on the Financial Markets and in this lecture we start a series of 6 lectures on various topics on investments.

Debt v Equity
Here we start by explaining the difference between a debt and equity. In debt we do not participate in the risk of the business whilst in equity we do. You need to know the difference between the two. For many large organizations knowing the right balance between the amount of debt and the amount of equity makes the world of difference.

Debentures
A debenture is the document that evidences a debt just like shares evidence your equity. The issuance of a debenture is guarded by a set of rules of regulations design to ensure that the stakeholders are properly informed and protected.

Charges
A charge is legal mechanism designed to give lenders a way to secure their loan. A charge is taken on assets of a company pledged to the lender as security on the loan. Once pledged, it is intended that the lender has priority over the assets charged and the borrower unable to sell the assets or pledge the assets without first obtaining the lenders consent. Charges over the borrowers assets could include their real estate (these are referred to as mortgages and will be dealt with in the next lecture) or other fix assets (Fix charges) or they could also include charges over a class of assets that are constantly moving such as inventory in which case the law has created the floating charges to secure such transitory assets. It is important that you know the difference between the 2 and their relative priority an also the use of a Negative Pledge to further secure the interest of the lender. Try the link below - its quite a interesting write up on floating charges :

link http://en.wikipedia.org/wiki/Floating_charge

Guarantees
When a loan is dependent purely on guarantees - we say the loan is unsecured ie. with no security. A guarantee is a promise to pay in the event of a default. The law is however concerned in the event the guarantee is provided for by a third party with no economic interest in the loan. In certain cases such as wife's providing guarantees for the husbands loans, the law has imposed on the lender a higher degree of care in taking such guarantees. (Yerkey v Jones) It is ultimately the vulnerability of certain third party guarantors that the law seeks to ensure adequate protection from the bank who will always be keen to lend.

So week 6 is really about lending and the various types of security the lenders can have from secured charges over the fix assets to relatively weaker "security" by way of guarantees by third parties.

In week 7 we will be looking at the security over real estate.

Have a pleasant week and keep practising your tutorial questions.

SK




Saturday, March 6, 2010

Commercial Law - Terms of Contract

What a hot week it has been. I hope you have been hydrating and drinking lots of fluid.

This week we looked at issues involving terms of the contract ie. what did parties agree upon. What were the promises they had exchanged. The difficulty here in many cases is trying to determine if the promises (terms) in question were in fact agreed upon or incororated into the contract. In a contract there maybe many terms that are agreed upon -some of these terms are easy to determine and some more difficult.

Point 1 (Pre Contractual Statements)

We startd by looking at the issue of pre contractual statemenst - statements made before the contract was made. Some of these become terms, some remain as representations and some are merely puffs or inconsequential statements. Your text suggests some guidelines on how representations become terms - I sugges you have a quick read there.

Point 2 (Express Terms)

We explored the fact that terms are incorporated into a contract eexpressly (expressed terms) or implied terms. Express terms are terms which parties agreed upon expressly - either orally or in writing. The probelm that may arise is the inconsistencies in what was said orally and what was writen. You must be mindful of the Parol Evidence Rule.

Point 3 (Common Law Implied Terms)

We then started thinking about how terms are implied into the agreement. They are implied by the court using the common law or implied by legislations. The common law uses a "business efficasy" test as shown in The Moorcock or the "officious bystander" test as shown in Shirlaw v Southern Foundries.

Point 4 (Statutory Implied Terms)

Whilst there ae many legislations that regulate certain types of contract, we explored only the Sale of Goods Act which is an English Legislation but applicable in Singapore. Here we looked speifically at some of the sellers responsibilities. They were :

Sections 12 - duty to pass good title
Sections 13 - duty to sell goods that corresponds with the description
Sections 14(2) - duty to sell goods of satisfactory quality
Sections 14(3) - duty to sell goods that is fit forits intended purpose
Sections 15 - duty to sell goods that matches its sampe.


Point 5 (Condition & Warranty)

Terms of a contract are of different qualities - some important and some less important. If an important terms is breached - you have the rights to repudiate the contract - such terms are considered Conditions are fundemental terms that go to the root of the problem. Less important terms are labeled Warranties - breach of which entitles you only to damages -w hich means you haveto keep the goods and can only claim compensation.

There are however terms that we cannot know if they were conditions or warranties and is depedant purely on the extent of the breach. These type of terms are known as Innominate terms and was discussed at length in the Hong Fir Case.

Point 6

Finally we looked at Exclusion Clauses. These are terms of a contract intended to exclude or limit the liability of a party. There are generally 2 parts to this subject.

The first is the point of incorporation. Whether the clause has bee incorporated into the agreement by way of a written contract, notice on a document that a reasonable person will expect to find a contractual term Chapelton v Barry UDC or reasonable notice (Olley Marlborough Court)

The second is whether the UCTA restricts or limits the scope of the exclsion clause. In ths respect Sections 6 of the UCTA is relevant and the definition of a consumer transaction in Section 12 of UCTA.

Next week we will be looking at some vitiating factors.

Enjoy the rest of the week.

SK

Monday, March 1, 2010

Law of Investement & Financial Markets

Hey LFM students,

This is my first post on the subject. Please do not confuse yourselves with the Commercial Law post - which you would be happy to have cleared.

Ben has completed lectures 1 - 4 and I will be taking over 5 - 11 and 12 as revision. Its important that you keep abreast of the progress of the lectures because even though it will be an open book exam - the test is really your efforts in thinking of the many issues which we would have introduced to you over the 12 week period. The task is to think and analyze the topics that we have covered.

Lecture 1 -4 had you thinking of the financial markets and the importance of the the FM to our economy. In 2009 MTI estimates that Financial Services will account for 13.5% of our GDP estimated at about S$256b. So the regulation of this sector is crucial to our economy. Any set backs in terms of poorly regulated financial products or poorly regulated financial services will severely affect our economy and ultimately the country.

So I hope you will think about the reasons for regulations and the manner in which the laws of our respective countries are attempting to regulate this important sector of our economy. The regulations made have been both a statutory efforts as well as the prevailing common laws of negligence, contract and trust. The statutory efforts of both Australia and Singapore has also focused on the alternative resolution efforts in the form of mediation and alternative dispute resolution centers as well as promoting internal resolution.

In Lecture 5 - we introduced to you a kind of financial product known as Managed Investments Schemes. (MIS) In Singapore we refer to these schemes as the Collective Investment Schemes. These schemes allow a collective effort by groups of people to pool their resources to professional and trusted entities to managed their resources to achieve financial gains. An example would be Unit Trust. Unit Trust has been extremely robust in the Singapore Financial markets offering investors a huge array of products from Tech Stocks to Property Stocks to REITS.

MIS or CIS however has a potential risk in that it depends largely on the fundamental principle of "trust". In this sense the investor trusts their monies with a central entity to manage their monies for them. If this central entity (known as the Responsible Entity) is not trustworthy, the investors may be at risk. So rather than leaving it to market forces to determine this, the laws have taken to regulating this segment.

You will therefore be required to think about -

1) What is a trust and why and how has the common law dealt with this issues;

2) What is a MIS - how is it defined and why is it defined like this;

3) Who is the Responsible Entity - what qualities does her posses and why?

4) What are the registration requirements and why do you think these are required.

5) What is the MIS is not registered?


Its really about regulating MIS. MIS is important - we need it and at the same time we need to regulate it. Do you think however that our laws have done enough or too much in their regulating efforts?

Hope you enjoyed it and continue to think about it. In our next lecture we will be looking at the issues of raising funds and I look forward to some exciting stories of lending and guarantees.

Have a good week. Please let me have your comments or questions if any.

SK