Contract and Business Law

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CONTRACT & AGENCY LAW

END-OF-COURSE ASSESSMENT

JULY 2012 PRESENTATION

Submission Date: 08 Sept 2012

Question 1:

Legal issues:

As there are different parts to “Clause 8” in the employment contract which Julia as an employee has signed with Calypso Private Limited, we shall examine four separate legal issues.

The first legal issue is whether Calypso is able to enforce part (a) of Clause 8 which states that Julia shall not be directly or indirectly be engaged in any capacity (whether as an employee, consultant, or director) with any business that is selling all types of sports medication, anywhere in the world.

The second legal issue is whether Calypso is able to enforce part (b) of Clause 8 which states that Julia shall not solicit the business of any person who is or has been a customer of the Company, for the purpose of competing with the businesses of the Company.

The third legal issue is whether Calypso is able to enforce part (c) of Clause 8 which states that Julia shall not entice away any employee of the Company to work for a business that sells sports medication anywhere in the world.

The fourth legal issue is whether Calypso is able to enforce all three sections of Clause 8 (part a, b, and c) for the entire duration of 10 years after the cessation or termination of the employee’s employment with the company.

Legal Principles:

Under law, there are 4 main vitiating factors which may prevent a contract from being enforceable; mainly being Incapacity, Illegality, Misrepresentation and Mistake.1.1

Incapacity refers to the lack of capacity to enter into a contract as the party involved may not have sufficient understanding of the consequences of making the agreement. People who are minors (under 21 years of age in Singapore), of unsound mind or intoxicated are considered to lack capacity to enter into a contract.1.2

Illegality can also make a contract void and unenforceable. There are mainly 4 types of contracts which are deemed illegal, namely:

1) Gaming & wagering contracts – Under section 5 of the “Civil Law Act”, all contracts by way of gaming or wagering is null and void, whether by parol or in writing.1.3

(2) Contracts which are contrary to public policy – Contract which contravene some aspect of public policy, such as promoting sexual immorality or inimical to the administration of justice such as a contract to give false evidence in court, are held to be illegal.

(3) Contracts which are contrary to statute – Contract which are illegal in performance, such as a contract to smuggle cigarettes into Singapore, will be considered void and illegal.

(4) Contracts in restraint of trade – Contracts which seeks to minimize or prevent competition are considered a restraint of trade agreement. Generally, clauses or contracts in restraint of trade agreements are considered void to enable a market economy in which there is fair competition.1.4

However, there are certain situations in which a restraint of trade clause may be enforceable if, given the interests of the parties involved and the general public, the restraint is considered reasonable.1.5

In Singapore, the Competition Act enacted in 2004 generally prohibits three main types of anti-competition behavior, namely:

i. Agreements which prevent, restrict or distort competition in Singapore;

ii. Abuse of a dominant position in the market; and

iii. Mergers and Acquisitions which lessen competition substantially in Singapore. 1.6

However, there are some situations in which restraint of trade clauses may be valid and enforceable. If they fulfill three criteria being (i) legitimate interest (ii) reasonable scope and (iii) public interest, as further elaborated below, a restraint of trade clause can be valid under the common law. 1.7

i. Legitimate interest

The Singapore Court of...
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