2011 Contract Law 2

Presentation Problem 1 (for Presentation in Week 4)

Betty owns a small shop selling exclusively pink accessories and cosmetics “For Girls
Only.” As the shop has very limited storage space, Betty relies on her numerous suppliers
for frequent and correct deliveries. Recently Betty has been having problems with some
of them…

Betty has a long-term contract with PowderPuff Ltd for the bi-monthly delivery of pink
ribbons made of organic cotton. The contract is to run for another 2 years. The said
ribbons cannot be sourced locally and must be imported from the US. According to the
contract Betty is to inform PowderPuff at least 30 days in advance of any delivery date of
the desired number of ribbons. In the last delivery, PowderPuff have only supplied half of
the requested ribbons. Betty decides not to pay the relevant invoice and not to place any
further orders. She completely disregards that fact that she had informed PowderPuff
about the required number of ribbons only 13 days before the planned delivery. She sends
PowderPuff a letter: “I regard your last delivery as a repudiation of our agreement. I
herewith accept your repudiation. You will be hearing from my lawyers soon.”

The relationship with Danny D. the supplier of pink nail polish is also strained.
According, to their agreement Danny D. is to make weekly deliveries of 500 bottles of
nail polish packed in 50 boxes of 10 each. To Betty’s surprise the last delivery is 11
bottles short and arrives in 2 boxes. Betty is furious – not only because of the short
delivery but also because the big boxes are more difficult to carry and store. In an
emotional moment, Betty sends Danny D an email: “I shall not pay you!” One week later,
Danny D. sends an invoice for the full amount...

There also seems to be a problem with one of the customers: Ms Yummy, who ordered a
box of 100 marshmallow-flavored lipsticks, has not been responding to emails requesting
her to pick up the ordered goods. After more than 2 weeks pass, Betty is growing more
and more desperate as she was expecting a hefty profit form this transaction. The prices
of marshmallow-flavored lipstick are falling and Ms Yummy is not picking up her
phone…

Secretly, Betty is beginning to hate pink. She contacts Lizzy, who runs a garage
customizing bikes and choppers. Betty asks Lizzy to repaint Betty’s Harley from baby
pink to raven black. The job is actually quite complex as it requires the complete
disassembly of the bike, stripping the old paint and multiple layers of new paint. Betty
tells Lizzy that the paint job is not very urgent but that she would like to have the bike
done some time before Chinese New Year, which at the time of contracting is still 2
months away. 1 week before CNY, Betty visits Lizzy and realizes that the latter has not
even commenced the job yet…. It seems that the bike will not be ready in time.
 A. Oral presentation

Advise Betty on her legal position with respect to each supplier, the customer and
Lizzy.
Do not discuss the Sale of Goods Act.

The oral presentation should not take more than 35 minutes in total. If you are using
Powerpoint slides, one hard copy must be handed up during the seminar, before you start
your oral presentation.

You should think about how to organise and distribute the arguments fairly among
yourselves.

B. Written presentation

Based on your reading of the facts and issues raised in the problem above:
Advise each of the suppliers, the customer and Lizzy on their legal position with
respect to Betty.
Do not discuss the Sale of Goods Act.

• Maximum page length: 10 pages (A4, double spaced, 12 point). Papers must be
properly referenced and appropriately footnoted. It is recommended that you
consult the Singapore Academy of Law style guide.
• Deadline for submission: E-mailed to your prof’s SMU e-mail account by 8 am
on the day of the oral presentation.
You will be expected to lead the questioning of the team making the oral presentation.
This will be taken into account for your overall class performance grading.

A. For teams not involved in either the oral or written presentation for the week

Based on your reading of the facts and issues raised above, produce a skeletal argument
which discusses the respective rights and liabilities of Betty towards the suppliers, the
customer and Lizzy. Do not discuss the Sale of Goods Act.

• Maximum page length: 2 pages (bullet points acceptable).

• Deadline for submission: E-mailed to the Teaching Assistant’s SMU e-mail
account by 8 am on the day of the oral presentation.
• This paper may be taken into consideration in the assessment of the overall marks
for the team presentation
• You are individually encouraged to participate in the questioning of the team
making the oral presentation. This will be taken into account for your overall
class performance grading.
• Make sure that your team members’ names appear within the memo submitted.

1. Powderpuff Girls
Parties: Betty & Powderpuff
Objective: Betty would like to terminate the contract.
Issue: Can Betty terminate the contract?

Law: In Alliance Concrete Singapore Pte Ltd v Comfort Resources Pte Ltd, Andrew
Phang JA took the position that the fact that a party who has elected to terminate
performance of a contract was, at the relevant time, in breach of contract does not
necessarily operate to impede the effectiveness of the election.

Application to facts:
1. Is Betty in breach?
Yes, because she did not inform Powderpuff Ltd of her order 13 days in advance
2. If she is, is her breach a continuing one in the nature of a condition precedent?
Continuing - no
Condition precedent - yes; considering how the ribbons must be imported, it would be
reasonable to infer that informing P within the stipulated time period must take place in
order to allow them to order the imported ribbons.

Conclusion: Betty is not entitled to terminate because of her own breach. In the event
that Betty is not able to resolve the dispute amicably with PowderPuff Ltd, both parties
will be liable for the respective breaches.

2. Danny needs a Manicure

Parties: Betty & Danny D
Objective: Betty does not want to pay for the 2 huge boxes of nail polish.
Issue: Can Danny D claim that he has substantially performed and recover payment?

Substantial Performance
According to the cases of Hoenig v Isaacs and Bolton v Mahadeva,
A) Danny D failed to supply Betty with 50 boxes of 10 bottles of nail polish in each box
1. Primary purpose was to ensure that she could store them conveniently. Betty has a
small shop with very limited storage space and she might not be able to store 2 huge
boxes. Primary purpose of the contract was not met.
2. Cost of remedy: Arguably, it would not cost Danny D a huge sum to repackage the
bottles.

B) Danny D failed to supply 11 bottles of nail polish.

1. Primary purpose: The demand for nail polish could be very precise (i.e. exactly 500).
Betty relied on her suppliers for frequent and exact deliveries, and any shortfall would
constitute detriment.
2. Cost of remedy: In significant in comparison with the 500 bottles ordered.

Since the primary purpose for each breach has not been satisfied, the cost of remedy is
not significant, and Danny D has not substantially performed. Therefore, he cannot
recover payment.

However, Betty would probably want to pay for the delivery, considering that a) she sent
the email in the heat of the moment, and b) she would not have sufficient nail polish for
that week. Additionally, we would advise her that her failure to pay would constitute a
breach.

3. Yummy Marshmellows!

Objective: Betty would want to elect to affirm the contract, and claim the debt from Ms
Yummy
Issue: Can Betty choose to affirm the contract and recover the debt?
Ms Yummy is in breach as she has not paid for the ordered goods and has not picked
them up (due for 2 weeks). In this case, Betty does not want to recover damages from
Ms Yummy but rather she wants to recover the debt owed, which is greater.

As in the case of Clea Shipping v. Bulk Oil Ltd, The Alaskan Trader, one possess an
“unfettered right” to elect to affirm the contract. Applying this, Betty has a right to elect to
affirm the contract.

According to White and Carter (Councils) v. McGregor, there is no need for the innocent
party to mitigate his loss if he chooses to keep the contract afoot. However, this right is
subject to two conditions. Betty is not permitted to continue with the contract if:
a) Cooperation is required from Ms Yummy
b) Ms Yummy shows that Betty has no legitimate interest in performing the contract
rather than claiming damages

Applying the law to the present case:

a) Cooperation is not required of Ms Yummy as the obligations (payment and sale) are
independent
b) As Betty is expecting a hefty profit from this transaction, it is likely that she does not
have many contracts of this nature. Hence, she would probably have a legitimate
interest in performing the sale.

(Note: Lord Keith in McGregor discusses the application of the law to the sale of goods
under the SOGA 1983. This is, however, not within the scope of the present outline.)

Therefore, Betty would be able to affirm the contract and affirm the debt.

4. Lizzy, the Biker

Issues:

1) Whether Lizzy’s conduct amounts to a repudiation?

2) If so, should Betty affirm or terminate the contract?

1. No - As agreed, Lizzy has until CNY to perform. At this point in time, she still has a
week left to fulfil her contractual obligations. Thus, despite not having started the job, it
would not be advisable for Betty to take this as a repudiation and attempt to sue Lizzy.

2. If Betty treats Lizzy’s conduct as evincing an intention to repudiate, she may be be

wrongfully repudiating the contract and she herself will be liable for damages. Unless
Betty is completely sure that Lizzy will be unable to perform by CNY, Betty should affirm
the contract and sue for breach after the time of performance has lapsed.