LAW REFORM (FRUSTRATED CONTRACTS) BILL

[Mr Speaker in the Chair]

Order for Second Reading read.

2.31 p.m.

The Attorney-General (Mr E. P. Shanks): Mr Speaker, Sir, I rise to move, "That the Bill be now read a Second time."

The Common Law principle that a person, who has bound himself by a contract to do something, cannot escape liability for damages even though the contract becomes impossible for him to perform has in days gone by led to hardships and even in some cases to absurdities. The doctrine that on frustration of a contract, by impossibility of performance, the loss lies where it falls, is misleading and often unjust. It is wrong to have a position where no adjustment can be made after the moment of frustration of a contract. In equity each particular case should be dealt with on its own merits and facts, and that is what this Bill seeks to establish for all contracts except those special types mentioned in subsection (5) of clause 3.

For strictly mercantile contracts, the principles of this Bill already apply by reason of section 5 of the Civil Law Ordinance which imports the English Law for mercantile and similar purposes into Singapore, and so gives effect to the Frustrated Contracts Act of 1943 of the United Kingdom on which this Bill is based.

This Bill will give general application to the modern principles of the United Kingdom, 1943, Act, which the Federation of Malaya has already adopted, and will enable the Courts to make adjustments between parties to a contract that can no longer be continued. In some respects it will re-establish a principle of ancient Roman Law in which a doctrine of restitution found favour.

Clause 2 of the Bill provides in substance that all sums paid before the frustrating event shall be recoverable or, if not paid shall cease to be payable. But this general right may be qualified in the discretion of the Court if the party to whom the money is payable, or has been paid, has himself incurred expenses in the performance of the contract. If he has received payment, he may be allowed to retain the whole or part of what he has received; if he has received nothing he may be allowed to recover the whole or part of any expenses to which he is being put.

Provision for the adjustment of benefits, expenses, and cost of work done, is made in subsection (3) of clause 2, but excluding contracts of insurance. The further provisions in clause 2 provide in subsection (4) that in assessing expenses the Court may have regard to overhead charges and cost of work, but subsection (5) expressly excludes money paid for insurance - that is not to be included in the computation or assessment or reassessment of values.

Clause 3 starts by providing that the Bill, when enacted, will apply to contracts, the time of discharge of which is on or after the first of January this year. It goes on to provide that the Bill binds the Crown, and allows a freedom to contract-out. This is desirable because if in a particular contract special provision is made for the event of frustration then that special provision made in the contract should supervene, and the provisions of this Bill will be unnecessary.

Certain types of contract are expressly excluded, notably charter-parties and insurance and contracts to which a section of the Sale of Goods Act applies. Those Sale of Goods contracts which are excluded are agreements for the sale of specific goods where the goods perish without any fault on the part of either the seller or the buyer. Insurance is expressly excluded, partly because, by the very nature of the contract, it is not right that there should be any adjustment if the event insured against does in fact happen. If a person insures against sickness, say, on the 1st January, and if on the 1st February of that same year falls sick, or dies, it would not be right, having regard to the risk run by the insurance company, to let him receive back 11/12ths of the premium that he paid.

The Bill which was published on 12th December has not, so far as I know, been adversely criticised by anyone. It has the support of the Bar Committee and of the Trade Advisory Council, and I have no hesitation in commending it to this House.

Sir, I beg to move.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole Assembly.

Assembly immediately resolved itself into a Committee on the Bill. [Mr Shanks].

Bill considered in Committee.

[Mr Speaker in the Chair]

2.40 p.m.

Clause 1-

The Chairman: There is a note of an alteration,

In page 1, line 5, to leave out "1958" and insert "1959".

That will be done.

Clause 1 ordered to stand part of the Bill.

Clauses 2 and 3 ordered to stand part of the Bill.

Bill reported without Amendment; read the Third time and passed.