Terms of Contract Part 1 PDF

Terms of Contract Pt II Dr. Nurul Hidayat Ab Rahman TABLE OF CONTENTS 01 Implied Terms 02 COLLATERAL CONTRACTS 03 Entire Agreement Clauses  RECAP Quiz 1...

Terms of Contract Pt II Dr. Nurul Hidayat Ab Rahman TABLE OF CONTENTS 01 Implied Terms 02 COLLATERAL CONTRACTS 03 Entire Agreement Clauses  RECAP Quiz 1 It is vital to be able to distinguish between terms and mere representations. In relation to this, which one of the following statements is true? a) Generally, statements of opinion tend not to amount to representations or terms of the contract. b) If a party makes a representation that turns out to be untrue, the other party can obtain a remedy by commencing an action for breach of contract. c) When determining whether or not a statement amounts to a term or representation, the courts will examine the subjective intentions of the parties. d) The importance of the statement is irrelevant in determining whether it is a term or a representation.  RECAP Quiz 2 When determining whether a statement is a term or a mere representation, the court will take into account a number of factors. Which one of the following is NOT a relevant factor? a) The timing of the statement - - b) The importance of the statement c) The knowledge of the parties d) The complexity and length of the statement IMPLIED Terms Express vs Implied Terms  What is an implied term? Implied terms are terms that have not been expressly agreed = by the parties but apply anyway. This may be because the parties have decided to record = only the most important terms, leaving others to be understood, or because the parties have not considered that a particular situation would arise. The courts have traditionally implied a term into a contract by: usage and custom; previous - course of dealings; intention of the parties; statute; and common law. Implied 3. They can arise from Terms? various sources. 1. Implied terms in contract law refer to terms that are not expressly stated in the & - contract but are nonetheless understood 4. The parties' intentions, statutory to be part of the agreement. ⑧ provisions, common law principles, industry customs, or previous dealings between the parties. 2. These terms are inferred by the courts to - give business - efficacy to the contract or to reflect the presumed intentions of the parties. - Implied terms are crucial for ensuring that 5. Implied terms play a significant role in contract - contracts are complete, fair, and workable, even - interpretation and enforcement, filling in gaps and ensuring - - if certain details were not explicitly discussed or written down by the parties. that contracts operate effectively in accordance with the - parties' reasonable expectations.  Implied terms in contracts are essential for ensuring the completeness and efficacy of agreements. The concept of - implied terms arises when parties unintentionally overlook - certain terms that are crucial for the contract's operation. In - such cases, courts may step in to fill the gap to give business efficacy to the transaction. - There are several types of implied terms recognized by courts: Terms implied by the court based on the intention of the parties: These are terms that the court infers from the - circumstances - surrounding the contract, aiming to fulfill the presumed intentions of the parties involved. - Terms implied by operation of law: These terms are not explicitly stated in the contract but are imposed - by law to ensure fairness and justice. They may include terms derived from statutes or previous legal precedents. - - - Terms implied by custom or usage of any market or trade: In some cases, industry customs or trade practices may dictate certain terms that are considered standard within a particular market or trade. Courts may imply such terms into contracts based on the prevailing customs or usages. Terms implied from previous course of dealings between the parties: When parties have a history of interactions or previous contracts, the courts may imply terms from those past dealings into the - - current contract, especially if they have become standard practices - between the parties.  It's important to note that while the Contracts Act 1950 may not explicitly address implied terms, the common law principles still apply, allowing courts to interpret and imply terms when necessary to ensure fairness and effectiveness in contractual agreements. Terms Implied by the Ct. Terms implied by the court in contracts are determined through specific criteria and tests to ensure that they accurately reflect the parties' - intentions and are necessary for the contract's effectiveness. - Canon of Construction: It is a fundamental principle of contract interpretation that if a contract expressly states a - term, there is typically no need to imply any additional - terms related to the same subject matter. A lease contract - for a commercial property: The contract clearly states the rent amount, lease duration, and tenant responsibilities -- for property upkeep. The contract doesn't mention parking. The tenant assumes they're - entitled to - two parking spaces. However, since parking isn't mentioned, the court would likely rule that the contract's terms - prevail. The absence of a parking provision means parking spaces - - weren't intended - to be included. There's no need to imply- additional terms about parking. Implied Terms Criteria: The court may imply a term into a contract if it is evident - from the language of the contract and the circumstances surrounding its formation that the - parties must have intended the inclusion of that term.  Implied Terms Criteria: The court may imply a term into a contract if it is evident from the language of the contract and the circumstances surrounding its formation that the parties - must have intended the inclusion of that term. &C 1. A contract to sell a house: It lists the price, address, and closing date, but says nothing - about the roof's condition. 2. During the property tour, the seller doesn't mention any issues with - the roof, and the buyer assumes it's fine. - 3. After buying the house, the buyer finds leaks in the roof. They - argue that it was implied the roof would be in good condition. - 4. In this case: - The contract doesn't talk about the roof. During the tour, the seller didn't mention any problems with it. - 5. Considering these points, a court might decide that both parties probably meant for - the roof to be in good shape when they made the - deal. So, they might imply a term saying the roof should be in good condition. - Conditions for Implication: The Federal Court in the case of Sababumi Sandakan Sdn Bhd v Datuk Yap Pak Leong outlined two conditions that must be fulfilled for the court to imply a term into a contract:- ü The implied term represents the obvious but unexpressed intention of the parties. - ü The implied term is necessary to give business efficacy to the contract. The two criteria mentioned above, the obvious or officious bystander test and the business efficacy test, often overlap and are applied cumulatively. Both - tests must be satisfied before the court will infer an implied term. An implied term is deemed necessary for the contract's - - operation, and thus, the element of business efficacy is - - inseparable from the determination of an implied term. - The purpose of these tests is to enable the court to TERMS IMPLIED BY THE COURT ARE assess whether the implied term contended for is CAREFULLY ASSESSED BASED ON SPECIFIC indeed a term that the parties to the contract must have - intended to include in the agreement. - CRITERIA AND TESTS Summary Quiz 3: Which one of the following statements correctly describes the difference between express and implied terms? a) Express terms are regarded as conditions, breach of which allows the innocent party to terminate the contract. Conversely, implied terms are regarded as warranties only, permitting the innocent party to recover damages only. b) Express terms are in writing, whereas implied terms usually derive from oral negotiations. c) Express terms are more important than implied terms. d) Express terms are terms that the parties have specifically negotiated should form part of the contract. Implied terms are terms added to the contract by the law or based upon the facts of the case.  OBVIOUS/OFFICIOUS BYSTANDER - TEST A method used by courts to determine whether a term should be implied into a contract. - When applying the "obvious" or "officious bystander" test, the court considers whether a term is so obviously necessary for the - contract to function properly that it would be assumed by both - parties, even though it's not explicitly stated in the contract. - The court asks whether the term is This test is subjective because it depends - something so fundamental that if on what the parties would have - someone suggested including it during & - considered obvious at the time of making - - negotiations, both parties would have the contract. - immediately agreed without hesitation. In the case of Yong Ung Kai v Enting, the written agreement for the sale of timber didn't mention the need for a license from the Forest Department to cut down the timber. The defendant attempted to obtain - - the license but failed. - - The court applied the "obvious" or "officious bystander" test and - concluded that there- was an implied term in the contract requiring the obtaining of a license. It reasoned that obtaining a license was so crucial - - to the sale of timber that both parties must have intended it to be a term - of the agreement, even though it wasn't explicitly stated. - - It's essential to note that the court won't imply a term just - because it seems reasonable or - because one party might have - insisted on it if they had considered it. The term - # must be so crucial to the contract that both parties would have agreed to it without hesitation. ⑨  BUSINESS EFFICACY TEST When applying the business efficacy test, the court assesses whether a term is If a contract is impractical or necessary to give the impossible to perform without a certain term, the court may imply contract the intended that -term to make the contract O feasible and achieve the parties' - result or outcome. intended goals. - This means that the term is essential for the contract to function as the parties It's important to note that the court doesn't imply terms to make the would have contract -fairer or better; rather, it focuses on ensuring the contract reasonably expected. can function as intended by the - parties. If the contract would be unworkable - without the term, it may be implied into the agreement.  BUSINESS EFFICACY TEST - 1. In the case of Akitek Tenggara Sdn Bhd v Mid Valley City Sdn Bhd, the court implied a term allowing either party to terminate the agreement upon giving reasonable notice. This was because the - - nature of the agreement and the practices of the architectural profession made such a term necessary for the contract to achieve its intended purpose. 2. Conversely, in Hishceed Corp Sdn Bhd v Warisan Harta Sabah Sdn Bhd, the court declined to imply a term related to economic downturn as a basis for contract termination. The court found that such a term - wasn't necessary for the contract's efficacy, given the circumstances of the case. The court won't imply a term if it's not necessary for the contract's operation / if it's not something both parties would have reasonably expected to be included. Terms implied by the OPERATION OF LAW are those that are automatically included in certain types of contracts due to legal principles or statutes. These implied terms INCORPORATION INTO STATUTE are derived from decided cases, and Some implied terms have been codified into statutes. For ② - subsequent courts - example, section 14(a) and section 16 of the Sale of Goods Act typically adopt these 1957 include implied conditions regarding the right to sell goods decisions as a matter and the fitness and merchantability of goods. - of course, rather than deciding anew whether the inference should be drawn. Eastern Supply Co v Kerr THE court dealt with the sale of a second-hand EXAMPLE: car. Despite the absence of an express term, Terms implied by the 1. In contracts of employment, there are implied terms that the court considered the implied condition - - operation of law are the employee will serve faithfully and not act against the - under the Sale of Goods Act regarding the specific terms that - employer's interests, and that the employer will provide a merchantability - of the car. The court found that - - - courts have - safe system of work. the buyer had not proven that the car was - - determined will arise - 2. Many specific - implied terms have been incorporated into unroadworthy, and even if there was a breach based on certain - - statutes, such as the Sale of Goods Act 1957, the Hire- of implied - conditions, the buyer's failure to -factual situations. - Purchase Act 1967, the National Land Code 1965, the - reject the car within a reasonable time led to Industrial Relations Act 1967, and the Employment Act acceptance of the car, making him bound by - 1955. the contract. Case Preston Corporation Sdn Bhd v Edward Leong Printers claimed ownership of film positives of books they reproduced based on a trade usage. However, the court held that the printers failed to prove the alleged trade usage and that it seemed unreasonable. The court reasoned that it conflicted with common sense and fairness that a person who paid for a service should not be deprived of ownership of the product they paid for. Trade usages must Evidence of trade usage be reasonable and may be admissible to consistent with the supplement a written overall terms of the contract, but it must be contract. They consistent with the cannot contradict contract's terms and the express terms of cannot override them. the agreement. TERMS BEING IMPORTED FROM A PREVIOUS COURSE OF DEALINGS BETWEEN PARTIES 1 2 When parties engage in multiple transactions over a period of time, In subsequent contracts, terms their past interactions and conduct from these prior dealings may be can establish a pattern or course of imported or implied into the new dealings. agreement, even if not explicitly stated. This is done to maintain consistency and fairness based on the parties' established practices.  YONG & CO V WEE HOOD TECK DEVELOPMENT CORPORATION CASE 1 Case II 1. Yong & Co (appellants), a law firm, acted for both developers and a financier (respondent) in various transactions. The financier Popular Industries Limited v Eastern Garment claimed breach of contract and negligence against the appellants. Manufacturing Sdn Bhd: 2. The appellants had previously acted for the financier in several transactions, sending bills and receipts and incorporating the Popular Industries Limited (plaintiffs) and Eastern Garment financier's company. There was evidence of a consistent Manufacturing Sdn Bhd (defendants) had a series of contracts professional relationship between the parties. for the delivery of goods. The plaintiffs claimed damages for non- delivery of goods, alleging loss of profits. The defendants argued 3. The court inferred from the parties' past interactions that a that they were discharged from their obligations due to the solicitor-client relationship had been established between the plaintiffs' failure to provide letters of credit. appellants and the financier, despite the absence of a formal retainer agreement. The court examined the parties' past transactions and found that, historically, the plaintiffs had opened letters of credit after being 4. The court held that a retainer existed by implication, imposing on informed by the defendants of shipment dates. This practice had the appellants the duty to protect the financier's interests. The been followed for 16 years without any issues. appellants were found liable for breach of contract due to their failure to fulfill this duty. Based on the consistent course of dealings, the court inferred that the defendants had an obligation to inform the plaintiffs of IN BOTH EXAMPLES, THE COURTS LOOKED AT THE shipment dates before the plaintiffs were required to open letters PARTIES' PRIOR DEALINGS TO INTERPRET THE of credit. TERMS OF THE CURRENT CONTRACTS. BY IMPORTING TERMS FROM PAST INTERACTIONS, THE As the defendants failed to inform the plaintiffs of shipment dates COURTS ENSURED CONSISTENCY AND FAIRNESS as per the established practice, they were deemed to be in BASED ON THE PARTIES' ESTABLISHED PRACTICES breach of contract. The plaintiffs were not obligated to open AND OBLIGATIONS. THIS DEMONSTRATES HOW A letters of credit until this condition was fulfilled, and the PREVIOUS COURSE OF DEALINGS BETWEEN PARTIES defendants were held liable for damages. CAN INFLUENCE THE TERMS AND OBLIGATIONS IN SUBSEQUENT CONTRACTS. Quiz 4: Elen enters into a contract with Simon. She signs the contract, but does not read its terms. Simon performs the contract negligently, but points to an exclusion clause that excludes his liability for negligence. Elen states that she knows nothing about this clause. Based on the information provided, can Simon rely on the exclusion clause? a) Yes b) No Quiz 5: Georgina enters into a contract with Claire, but does not sign any document. At the time they agree to enter into the contract, Claire provides Georgina with a copy of the terms that will govern the contract. Georgina does not read them. A day later, Georgina discovers a limitation clause in the contract and claims that it is not part of the contract and cannot be relied on. Is Georgina correct? a) Yes b) No COLLATERAL CONTRACTS  Collateral Contracts The doctrine of collateral contracts is a legal concept that allows oral statements or assurances made before the formation of a contract to be treated as a separate contract, collateral to the main written agreement. This doctrine serves to overcome the limitations imposed by the parol evidence rule, which generally prohibits the admission of oral evidence to contradict, vary, add to, or subtract from the terms of a written agreement. Key Aspects:- 01 02 03 Parol Evidence Rule: The parol Purpose of Collateral Contracts: Admissibility of Evidence: Despite the parol evidence rule, embodied in Collateral contracts are used to O Section 92 of the Evidence Act address situations where one evidence rule, evidence of oral assurances - - may be admitted if it constitutes a collateral - 1950, prohibits the admission of party relies on oral assurances - - oral evidence that contradicts or made by the other party during - contract. Section 92(b) of the Evidence Act varies the terms of a written negotiations, even though those - - agreement. - assurances are not included in 1950 allows separate oral agreements on - - matters not addressed in the written document, - the written contract. It allows the - - courts to recognize and enforce - if they are not inconsistent with its terms. these oral promises as separate - agreements. -  04 Inducement and Consideration: For a collateral 06 contract to be enforceable, it must meet the requirements of a valid contract, including offer, Case: Tan Swee Hoe Co Ltd v Ali Hussain - acceptance, consideration, and intention to Bros and J Evans & Son (Portsmouth) Ltd v - create legal relations. The oral assurance must Andrea Merzario Ltd illustrate how courts have induced the other party to enter the main have upheld oral assurances as collateral contract, and there must be adequate contracts, overriding conflicting terms in the - consideration exchanged. written agreements. - 05 Enforceability: Courts recognize collateral contracts when it's - evident that one party entered into or refrained from - entering into the main contract based on the oral assurance. - The oral promise, even if it contradicts the written = agreement, is enforceable as a separate contract. Quiz 6 What is the parol evidence rule? a) The parol evidence rule provides that a party may never adduce evidence that seeks to add to, vary or contradict the content of a written document. b) The parol evidence rule presumes that a written document contains all the terms of a contract, but there are situations where this presumption can be rebutted and a party will be permitted to adduce evidence that adds to, varies or contradicts the content of a written document. c) The parol evidence rule provides that parties are free to adduce evidence that seeks to add to, vary or contradict a written document. d) The parol evidence rule provides that an oral contract is not usually binding. Quiz 7 The parol evidence rule is not absolute and is subject to a number of exceptions and qualifications. Which one of the following is not a valid exception or qualification? a) The courts will always allow extrinsic evidence to be adduced if the contract is contained in a deed. b) Where the court is of the opinion that the written agreement was not intended to represent the full extent of the agreement between the parties. c) Where the contract contains implied terms. - d) Where there is evidence casting doubt on the validity of the contract.  proof of the representation and reliance on it In the context of collateral contracts, the burden of proof rests- on the party alleging the existence of the oral assurance or promise made during negotiations. This means that the party relying on the collateral contract must provide sufficient evidence - - to convince the court of its existence. A - 1. Burden of Proof: The party seeking to 3. Suspicion Towards Collateral establish the existence of a collateral Contracts: The law views collateral contract bears the burden of proving it to the contracts with suspicion, especially satisfaction of the court. This requires - when their sole purpose is to vary or presenting credible evidence to support the - add to the terms of the main written claim that an oral assurance or promise was - contract. Courts are cautious when made during negotiations. - considering claims of collateral - contracts, particularly if they 2. Strict Proof - contradict the formal written Requirement: Courts - -documents. typically require strict proof of collateral Evaluation of Evidence: The more contracts. This means that formal and comprehensive the written contract, the more the terms of the alleged suspicious the court may be of collateral contract must be attempts to establish collateral - clearly and convincingly - contracts. Courts carefully demonstrated, and any evaluate the evidence presented - to determine whether the alleged contrary intentions of the - collateral contract is credible and parties must be clearly - consistent with the main contract. - shown.  In Tan Khien Toong v In SamaWorld Asia Sdn Bhd Hoong Bee & Co, the v RHB Bank Bhd, the Court of Appeal emphasized the Supreme Court need for strict proof of upheld the principle collateral - contracts and viewed attempts to that the burden of establish them with proof lies with the suspicion, especially when they contradict formal party alleging the written documents. existence of the collateral contract. The respondents Industrial & Agricultural failed to prove the Distribution Sdn Bhd v payment and oral Golden Sands Construction Sdn Bhd promise they claimed The High Court reiterated that the burden of proving the induced them to existence of a collateral contract lies with the party alleging it. The defendant failed to provide sufficient enter into the contract. evidence to establish the existence of the alleged collateral warranty.  Prima facie inference that the representation was intended as part of the contract If during the negotiations for a contract, a party makes the - representation for the very purpose of inducing the other party to act on it, and it actually induces him to act on it - by entering into the contract, it is prima facie ground for the court to infer that the - representation was intended to form part of the contract.  Tan Chong & Sons Motor Co (Sdn) Bhd v Alan McKnight The respondent, a squadron leader in the Royal Australian Air Force, sought to purchase a car with the benefit of duty exemption in Malaysia and Australia. To - - qualify for this exemption, the car- had to comply with Australian Design Regulations. The respondent agreed - - to purchase a car from the appellants based on the - representation made by the appellant's salesman that - the car conformed to these regulations. - However, upon receiving the car, it was discovered that -it did not meet the required regulations, causing the respondent to suffer financial losses and lose the fiscal advantage of importing the car duty-free into Australia. As a result, the respondent claimed damages for - breach of warranty. Decision The former Federal Court upheld the decision, with Salleh Abas FJ providing a test to determine whether words and conduct amount to a warranty. If a representation is made during - negotiations for a contract with the purpose of inducing the - other party to act on it, and it actually induces them to enter into - the contract, it is prima facie ground for inferring that the representation was intended as a warranty. In this case, the representations made by the salesman led the respondent to purchase the car, and these representations were not innocent but rather deceitful or outright lies.  Cont. The court also emphasized the salesman's ostensible authority to make such representations in the course of selling a car. It was considered essential for business efficacy that an intending purchaser could rely on representations made by a salesman in the course of their employment. The court clarified that the primary purpose of proving the pre-contract Regarding the statement was not to admissibility of contradict, vary, add, or statements made under subtract from the terms section 92 of the of the Buyer's Order but Evidence Act 1950... to prove the existence of a separate contractual promise, namely, the warranty. Thus, while such proof The prohibition against may result in a conflict the admissibility of between the warranty evidence under section and the terms of the 92 only applies when all subsequent contract, it the terms of the is allowed under the contract are written into provisions of section 92. the agreement. Therefore, where some terms are oral and some are written, oral - evidence can be admitted to prove the orally agreed terms.  COLLATERAL CONTRACT MAY CONTRADICT THE MAIN CONTRACT 1. In the legal context, a collateral contract refers to an additional agreement made alongside the main contract, usually during the negotiation phase, which serves to induce one party to enter into the main contract. 2. Collateral contracts can sometimes contradict the terms of the main contract. 3. The significance of this concept lies in how courts treat such contradictory agreements and their impact on the rights and obligations of the parties involved. RAJA AZLAN SHAH CJ IN TAN SEE HOE CO LTD V 1. Tan Chong & Sons Motor Co (Sdn) Bhd v Alan ALI HUSSAIN BROS HIGHLIGHTS THE McKnight, Salleh Abas FJ elaborated on this RECOGNITION THAT COLLATERAL AGREEMENTS principle. CAN COEXIST WITH THE MAIN CONTRACT, EVEN IF THEY CONTRADICT IT. THIS INDICATES A 2. The court emphasized that when oral GROWING ACKNOWLEDGMENT WITHIN LEGAL representations conflict with or defy the terms of JURISPRUDENCE THAT ORAL PROMISES MADE the written contract, the oral assurances should DURING CONTRACT NEGOTIATIONS CAN HOLD take precedence. SIGNIFICANT WEIGHT, POTENTIALLY SUPERSEDING WRITTEN TERMS. 3. This means that the oral promises, if they induced one party to enter into the contract, must override any inconsistent terms in the written agreement. 4. Consequently, the printed conditions of the written contract are disregarded in favor of the oral This approach is essential for holding assurances. accountable the party who made the pre- contractual statements or promises. By giving overriding effect to the oral representations, the court ensures that the party responsible for inducing the contract is held to their commitments, even if those commitments contradict the formal terms of the written agreement.  CC-MC (Collateral-Main) In legal terms, a collateral contract is intrinsically linked to the main contract, existing alongside it rather than independently. It does not replace or substitute the main contract but instead grants additional rights or obligations However, these additional rights must be related to the rights and duties outlined in the that are not explicitly stated in the main contract. 80% 70% main contract. In the case of Industrial & Agricultural Distribution Sdn Bhd v Golden Sands Construction Sdn Bhd, the dispute arose over the alleged existence of an oral collateral warranty regarding the return of excavators. The plaintiff contended that there could not be a collateral contract without the main contract being in existence. A collateral contract, by its nature, coexists with the main contract and does not nullify or alter it. Instead, it supplements the main contract with additional terms or assurances. The court emphasized that accepting the defendant's argument regarding the alleged collateral contract would essentially render the main contract meaningless. If the defendant were allowed to return the excavators without any financial obligation, it would undermine the fundamental terms of the main contract, transforming it into a conditional contract or effectively canceling it altogether. The court clarified that In this case, the alleged promise Such a promise, if Furthermore, a breach of a collateral contracts typically by the plaintiff to allow the accepted as a collateral collateral contract typically pertain to warranties rather than defendant to return the contract, would stretch gives rise to a claim for excavators went beyond the damages rather than the right fundamental terms of the main scope of a collateral contract. the concept beyond its to repudiate the contract. contract. legitimate boundaries.  In this context, the court They supplement rather than In summary, the case illustrates concluded that the defendant's replace the main contract, and assertion based on collateral that collateral contracts are any alleged collateral contract intimately linked to the main contract or warranty was must be consistent with the unfounded, and therefore, the contract and cannot exist purpose and scope of the main independently. defense failed. contract to be legally valid.  ENTIRE AGREEMENT CLAUSES  entire agreement Case II Tan Swee Hoe Co Ltd v Ali Hussain Bros Case I Macronet Sdn Bhd v RHB Bank Sdn Bhd Its purpose is to prevent uncertainties or disputes arising from statements made during negotiations but not included in the final written contract. An entire agreement clause is a provision inserted into a contract to clarify that only the terms explicitly laid out in the written document, and not any prior oral statements or agreements, bind the parties. MACRONET SDN BHD V RHB BANK SDN BHD Facts 1. The plaintiffs entered into an agreement to purchase shares in X company but failed to pay the balance of the purchase price on time. The defendants, who owned the shares, terminated the agreement. The plaintiffs argued that there were pre-contractual representations and an oral agreement to postpone their payment obligation until the restructuring of X company was completed, relying on exceptions to section 92 of the Evidence Act 1950. 2. However, the written agreement contained an entire agreement clause stating that it constituted the entire agreement between the parties, and any variation must be made in writing and agreed to by both parties. The plaintiffs contended that the exceptions to section 92 should allow the admission of the pre-contractual representations and oral agreement.  Judgement 1. The High Court held that by agreeing to the entire agreement clause, the parties intended to exclude any attempts to vary the agreement through oral statements, which could only be done through the exceptions to section 92. Therefore, the plaintiffs In summary, the entire agreement could not rely on the pre-contractual clause in the written contract served representations or oral agreement. to restrict the parties from relying on oral representations or attempting to vary the terms of the contract 2. Furthermore, the court considered whether the through oral agreements. entire agreement clause precluded the existence of a collateral warranty, as seen in the case of Tan Swee Hoe Co Ltd v Ali Hussain Bros. The High Court concluded that the entire agreement clause It also prevented the formation of rendered the collateral warranty ineffective, leading collateral warranties that to the valid termination of the agreement by the contradicted the terms of the written defendants. contract. Therefore, the plaintiffs' claims based on pre-contractual representations and oral agreements were dismissed by the court.  UTAMA MERCHANT BANK BHD V As a result of such DATO' MOHD NADZMI MOHD clauses, any promises or SALLEH assurances made during Facts& Judgement negotiations would not hold any contractual 1. The High Court considered loan agreements weight. Essentially, the between the plaintiff bank and the defendant, which entire agreement clause contained an "Entire Agreement Clause." served as a complete 2. This clause essentially stipulated that the written defense against any agreement constituted the entire understanding claims based on oral between the parties regarding the matters dealt with in the agreement, superseding any prior representations or agreements, whether oral or written. warranties, providing a comprehensive answer to 3. It also stated that the parties did not enter into the agreement relying on any other representations or such defenses in law. warranties not expressly contained in the agreement. 4. The High Court interpreted this clause as clear and binding, noting that its effect was to prevent any attempt to vary the written agreement through oral statements or agreements. 5. It also dismissed any attempts by the defendant to establish collateral warranties or representations, emphasizing that the full terms of the contract were to be found solely in the written documents.  Master Strike Sdn Bhd v Sterling Heights Sdn Bhd The Court of Appeal affirmed the significance of the entire agreement clause, ruling that it constituted a binding agreement between the parties regarding all matters mentioned in the contract. This meant that the contract did not allow for any implied terms or considerations outside of what was explicitly stated in the written agreement. Inntrepreneur Pub Co Ltd v East Crown Ltd The English court provided insights into the purpose and effect of entire agreement clauses. The English court expressed that the primary objective of an entire agreement clause is to prevent parties from searching through past negotiations to find remarks or statements on which to base claims, such as the existence of a collateral warranty. Such remarks or statements, often forgotten or difficult to recall, could lead to uncertainties and risks for contracting parties.  1. The entire agreement clause serves to 3. In essence, the entire agreement clause eliminate the need for such searches and the functions as an acknowledgment by the associated risks by establishing a binding parties that the agreement constitutes the agreement between the parties that the full entire understanding between them, and that contractual terms are contained within the all contractual terms are contained within the document containing the clause and written agreement. nowhere else. Entire 4. This provision serves to 2. Therefore, any promises or assurances made Agreement streamline the contractual during negotiations, which might otherwise relationship, minimize have effect as collateral warranties, are uncertainties, and prevent rendered without contractual force unless disputes arising from extraneous explicitly reflected in the written document. oral statements or agreements made during negotiations.  Aset Nusantara Sdn Bhd v Ekran Berhad The High Court dismissed the argument of a collateral contract due to the presence of an entire agreement clause in the documents signed by the parties. Despite amendments to critical terms, the entire agreement clauses remained intact, clearly indicating the parties' intention that the written agreements represented the entire agreement between them. The clauses prevented the parties from referring back to oral or collateral agreements to dispute or contradict the written agreements. The court emphasized that the inclusion of entire agreement clauses was a conscious decision made by parties who were astute businessmen, indicating their intention to bind themselves solely to the terms contained within the written agreements. This deliberate choice rendered Therefore, the clauses served any oral promises or collateral as a complete answer to any contracts arising from defense based on collateral negotiations without contracts. contractual force. It ensures that parties are bound only by the terms This approach by the courts is explicitly laid out in the written consistent with commercial agreements they sign, thereby reality and aims to uphold the minimizing uncertainties and rule of law. potential disputes arising from extraneous oral statements or agreements.  Solid Investments Ltd v Alcatel- Lucent (M) Sdn Bhd 2 Such clauses are deemed ineffective in excluding claims for 1 misrepresentation or fraud, as recognizing them would go The Federal Court clarified that against public policy. entire agreement clauses operate only between the contracting parties and do not preclude the formation of collateral contracts between one party and a non- party to the principal contract. 4 …safeguarding against unfair or oppressive conduct, 3 demonstrating the courts' Overall, the courts' approach to commitment to maintaining entire agreement clauses reflects fairness and justice in commercial a balance between upholding transactions. contractual agreements and….