Legal Scenarios - Contract Law Assignment

Scenario 1: Rescinding a contract

Read the following scenarios, and answer all the questions. Where appropriate, support your answers with relevant case law and/or statute. 

Some research on the relevant laws is necessary.

Each question carries 10 marks, 30 marks in total. The total word count for all questions should not exceed 1500 words. 

1) In January this year, he entered into negotiations with Philip, a car dealer, for the sale of a car. Philip told Bill that the car was two years old, accident free, and that it had only done 10,000 miles. Bill, relying on Philip’s statements, purchased the car. A month later, Bill discovered that the car’s registration book and speedometer had been tampered with; the car was actually seven years old, had done 120,000 miles and had been involved in a serious accident which caused a crack in the chassis. 

Bill now wishes to rescind the contract with Philip. 

2) Part of Bill’s job at DBS was to offer credit references to companies and casinos that require such information before extending credit lines to their potential customers. The Singapore Casino (TSC) required such a credit reference from DBS of one of its customers, Sheik Khan, in order accept cheques from that customer to gamble on its premises. Sheik Khan told TSC that he held an account with DBS. Given the nature of the transaction TSC did not contact DBS in its own name, but did so via an associated company (Bellesen). Bill, without doing a proper check, assumed that Bellesen meant Sheik Ali Khan, who indeed had a substantial amount with DBS. Bill confirmed the credit worthiness of Sheik Khan of up to $3 million. In reality, Sheik Khan had a mere $10 in his account with DBS. Relying on the reference, TSC accepted a $3-million cheque from Sheik Khan and granted him a credit facility of $3 million dollars to gamble at the casino. In two days (before the cheque was cleared), Sheik Khan won $600,000. He collected his winnings and had disappeared. The cheque he issued to TSC has been subsequently dishonoured.

TSC intends to hold DBS accountable for its losses (through the principle of vicarious liability). 

3) Bill’s employment contract with the DBS contained a restraint of trade clause which stipulated that in the event of him leaving his employment with DBS, he will not work “in competition with DBS for one year in Singapore”. Before he resigned from DBS in March, Bill registered a company, Investments Inc. to sell his financial advisory services. When he resigned from DBS, he immediately became the Managing Director of Investments Inc. and commenced operations that offered financial advisory services to finance companies that were in direct competition with DBS. DBS claims that Bill is in breach of contract but Bill says that Investments Inc. is in competition with DBS, not him, citing the principle of separate legal entity. 

Nonetheless, DBS is commencing legal action against Bill for breach of his employment contract. 

1. Can Bill rescind the contract with Philip with regards to the purchase of the car? 

2. Is there a possibility that TSC would succeed in an action against DBS given that the (incorrect) information was not given to it directly but through an associated company (Bellesen)? 

3. Would DBS be able to succeed in restraining Bill (and Investments Inc.) from selling financial advisory services to DBS’ competitors?