Business Law

Nanyang Polytechnic

School of Business Management

2009/10 Semester 1 - BM0742 Business Law

Tutorial 6 – Suggested Answers

Question 1

On 1 September 2008, Samuel enters into an agreement to sell his house to Boris at a price of $1 million. On the same day, Boris pays Samuel a 10% deposit of $100,000. Under the contract of sale, the transfer of legal ownership of the house is to take place on 1 December 2008 upon which payment of the balance $900,000 will be due. On 1 November 2008, the government unexpectedly issues a notice stating that it will be acquiring Samuel’s house as the land is required for redevelopment purposes.

(a) Explain briefly the meaning of “frustration” in the context of contract law.

* Frustration refers to a situation where after the contract is formed, it becomes illegal or impossible to carry out due to an unexpected event beyond the parties’ control. The effect of frustration is that the contract is discharged (comes to an end).

(b) State any three situations where contracts are deemed frustrated at common law.

Under the common law, contracts may be frustrated in the following situations:-

* Destruction of the subject matter of contract - Taylor v Caldwell

* Death, incapacity or serious illness of a party to a contract for the provision of personal services - Condor v Barron Knights Ltd

* Where the government acquires the subject matter of the contract - Singapore Woodcraft Manufacturing Ltd v Mok Ah Sai

* Change in the law making the contract illegal - Czarnikow Ltd v Rolimpex

(c) Explain briefly whether Boris will be able to sue Samuel for breach of contract.

* The issue is whether Boris can sue Samuel for breach of contract.

* Applying the law, after the contract of sale is signed, the government unexpectedly acquires Samuel’s house and ownership of the house can no longer be transferred to Boris. This is an event which is beyond the control of both parties. The...