Law of contract: RES practice questions

Section 1 removes specified bars to rescission for innocent misrepresentation, including the fact that the contract has been performed. If the buyer would otherwise be entitled to rescind without alleging fraud, performance alone does not defeat that entitlement. The provision remains subject to the Act: for example, section 2(2) provides a discretion to award damages in lieu of rescission in its stated circumstances. The answer therefore rejects the seller's absolute argument without saying that discovery automatically voids the sale or that every completed sale must be unwound. A misrepresentation need not be classified as a contractual condition for section 1 to apply.

A right to compensation and a right to discharge are distinct consequences of breach. Singapore Law Watch paragraphs 8.8.9–8.8.12 explain that recoverable loss may support compensatory damages, but actual breach of a warranty does not give the innocent party an election to discharge. The facts settle the legal classification and exclude repudiation or a separate termination clause. The contract therefore continues, while the buyer may claim the recoverable financial loss. The fact that the obligation is ancillary does not make its breach legally remediless.

Broadley at paragraph 28 treats silence cautiously: passive non-disclosure rarely amounts to a representation, although the relationship or surrounding circumstances can create a duty to speak or give silence positive content. The question excludes those features for the particular fact. Its importance to the buyer is not by itself enough to create an actionable representation. This limited conclusion does not make caveat emptor a defence to active deception, nor remove duties that arise in other circumstances. No warranty about every material fact arises merely from signing.

Section 2(1) can impose damages liability even though a representation was not made fraudulently, where its other requirements are satisfied. Its defence expressly places the burden on the representor to prove reasonable grounds for belief and actual belief continuing up to the time the contract was made. Honest belief is not the whole test, and reasonable grounds cannot replace actual belief. A buyer's opportunity to investigate does not establish either part of the seller's statutory defence.

The relevant rule requires more than a diagnosis: the person must have been unable to understand the transaction, and the other party must have known or ought reasonably to have known of that incapacity. Both requirements are established here. The legal consequence is that the agreement may be avoided at the affected owner's option, with court-sanctioned assistance where necessary. This illustrates a voidable contract: it is valid until set aside, rather than automatically void from inception. There is no writing defect on these facts, and signing as an adult does not remove the specified ground for avoidance.