If you are caught in an unfair contract, you can engage a lawyer to take a look at the contract to see if it falls foul of this law. If I am not mistaken, the requirement for fair contract goes beyond the concept of "caveat emptor". The other party is required to give fair terms for the contract.
Here are some legal points about contract law in Singapore.
I like to ask volunteers (especially those with legal training) to do some research and send your views to kinlian@gmail.com.
10 comments:
yes, especially the contract signed with brokage firm to exempt their responsibility for advise.
Any legal peson can help us take a look?
Thanks!
Just want to add that Singapore consumers should not always assume that the law is always "caveat emptor" or buyer beware.
I believe Singapore's Consumer Protection and Fair Trading Act shifts some of the legal burden to the sellers. Creating a "Seller be Fair" legal type of framework.
But having said that, please continue to exercise extreme caution, especially with expensive and complicated financial products.
Our country's culture favour economic efficiency over the individual. Our en-bloc laws (for example) is a clear reflection of where the heart of our nation truly lies.
A contract term from a brokerage exempt from advice is fair as long as they don't provide advice and it's execution only. That's how brokerage commission can come so low as half percent. If a client wants advice, sign up for full service but be prepared to pay more. If a client is on basic service paying minimal commission, and the broker gives advice, that broker is stupid. Hokkien says kay kiang 假厉害. Mandarin says chi li bu tao hao 吃力不讨好. Go become a full service advice broker better.
Hi Anon. November 13, 8:30 AM
"Contract Law" is not the only arm in Law. There are others, Equity Law etc.
In "Contract Law", there is also a "contra proferendum rule" which deals with "who drafted the Contract" and how "interpretation" may be interpreted against the party who drafted it" and in favour of the other party, even though the other party signed these contractual documents.
Whether this rule would apply depends on whether a clause has been added in the Contract to exclude or negate it and the decision of the Court to use it for interpretation.
But we have other adverse precedence in practice in Singapore along the line of "doctrine of caveat emptor".
For instance, even statutes and regulations exclude our Authorities from responsibity even though the same set of statutes and regulations require entities to make submissions and seek "approval" from the Authorities. Particualrly for projects in the construction industry. So the Authorities must approved the plans but they are not responsible for this action because our statutes state so. In the construction, this checking is 'pushed back' to Consultants. But this is not available in the financial industry or simply FAs are not doing the proper job.
In similar argument, particualrly if the "interpretation" is "too pro-corporate" as some are arguing here, then this "contra proferendum rule" may not be handy and available.
In Contracts, expressed terms take priority and any implication of "implied terms" by the Court is only to give efficacy to the contract and Courts are reluctant to apply 'implied terms".
What is left is "equity in law". That is a contract actually treat both parties equally and protects both parties, and cannot be one-sided...subject to Resonableness Test.
Whether judges are perfectly fair or pro-corporate is an issue. And we also have "complications" from corporate lawyers and the legal process itself.
Note : I am only para-trained in Contracts.
To: C.H. Yak
Many commentators here are either vehemently anti-insurance or pro-insurance. Understandable since this is Mr. T.K.L. blog.
Insurance is mostly based on contract law. I pay you a consideration (regular premiums) and in return, on the happenstance of an event, you pay me a lump sum.
That's basically a contract. We may even call it a bet or wager, but formalised, legalised, worded and signed into contract form, it's a legal contract.
FINANCIAL ADVISERS ACT
(CAP. 110)
GUIDELINES ON STANDARDS OF CONDUCT FOR FINANCIAL ADVISERS
Warnings, Exclusions and Disclaimers
6.4 A financial adviser should draw the client’s attention to the
warnings, exclusions and disclaimers in all documents, advertising materials and literature relating to an investment product it is
recommending to the client.
Clear, Adequate and Not False or Misleading
6.5 A financial adviser should ensure at all times that any
representation made and information provided to the client is clear, adequate and not false or misleading.
Fact and Opinion
6.6 A financial adviser should distinguish between facts and opinion in its presentation of recommendations to the client.
These need not be wriiten into the Contract. They are clearly written in the FINANCIAL ADVISERS ACT
(CAP. 110)
I feel frustration when I see products advertised with claims that are either clearly misleading or in some cases completely untrue.
UK land investment products and skin care and beauty products are two obvious areas where this happens. I have no doubt if i were to read the contract it would have a clause that protects the company from legal action and explain the prodcut may not work at all. Most people dont read contracts they read the advertising and dream of a better life.
I think Singapore could lead the way in having advertising and marketing restrictions that require the company to have a portion of their advertising show the most likley outcome from a purchase of a product or service, instead of the most optmistic outcome.
This now a requirement for tobacco products but could be extended to other areas.
Drink advertisiers show a constant stream of happy,upbeat successful beautiful mid twenties as what you will be if you drink their product regularly.
Perhaps they should have a portion of their advertising showing vomit covered teenage girls lying in the street (a sight that sadly seems to be more common) and fat blotchy middle aged people waiting for a new liver.
Land Banking products would be required to show the proportion of people investing in similar products over the last five years who would have gained or lost compared with just leaving the money under the bed.
I am sure many of you are familiar with the below 'defence' of the insurance agents when they know what they sold to the clients is wrong, inappropriate and not of reasonable basis. And usually it is a situation created by the agents to push products and the product advice option 3 is ticked to make it look like it is ticked by customers.The below are the 'reasons' cited by agents that supposedly motivate the customers to buy.
1.the customers want it one, waht.
2.the customers chose it
3.the customers want to see cash early, waht.
4.no return the customers don't want
5.the customers want to cover for whole life
6. the customer is risk averse
7. the customers want something to force them to save.
8. the customer must have the same as his friend or his sister or Mrs How Lian.
The above are some samples of what the insurance agents claimed to be the customers' reasons and 'objectives' to buy and that the agents reluctantly and helplessly agree to the wishes of the customers.
The truth is the agents have no intention of helping the customers to meet their financial needs from the start. The agents knew what product he or she wanted to sell. The sales pitch was painstakingly rehearsed and geared towards selling the product.
The products to be sold are predictable. They are whole life or endowment or products that earn the agents high commission.
It is nothing wrong if the financial circumstances and the need analysis point to wholelife or endowment as BEST solution to their clients' needs but in all likelihood the analysis and the clients' financial situation don't.
Section 27 of the FAA clearly states all recommendations MUST be of REASONABLE BASIS.
The fact that if the agents conduct the need analysis it is unlikely that they will be able to 'recommend' wholelife or endwoment products. These product cannot be justified or of reasonable basis.
To circumvent the section 27 the agents will find ways to dodge the fact find and avoid need analysis.
Therefore the agents claim they are helpless becuase the customers insist their 'way' and die die want the product as they 'think' that the product is suitable for them.
In this case MAS would consider the customers as savvy as the choice of the product is NOT the recommendation of the agents.Then the customers would be better off by buying direct from a portal without having to pay the commission as there is NO advice.
In one of their speeches MAS had recommended to insurers setting up portals for customers who are savvy
to buy direct without having to pay the commission. Why pay commission for form filling, right?
In US and Australia this is becoming popular and there are insurers and more insurers joining the fray.It makes a lot of sense that savvy customers should have direct access to no load insurance products and funds.
I hope MAS will take the cue from these jurisdictions and give the green light for more of these financial outfits to provide the no load products to savvy customers, customers who don't need advice or are looking for products only to meet their needs they already know..All information and disclosure about the products are to be found in their website or prospectus or brochures to help these savvy customers to make informed decision.In this case Caveat Emptor can be applied. Buy at your own risk.
I hope the next guidelines will have this incorporated. This should be the turning point and defining moment for the industry.
The industry will be professionalized and can be at par with other professions as law and medicine.
Consumers should not be taken in easily by advertising and marketing materials.
In Contracts these tools are merely "invitaion to treat" and does not really bind the parties to the contract.
Simple illustration, if you see an electronics distributor advertising to sell a digital camera at S$10.00 with standard one year warranty. You can go to the distributor to buy this product exactly the product it was illustrated in the advertisement at S$10.00. But the distributor is not obliged to sell that digital camera you at S$10.00 as was advertised. This is because it is just "an invitation to treat"...and not a contract.
But if they indeed sell you at $10.00 when you visited the shop and with this product came a warranty card for 1 year and the shop affixed the company stamp on it and you agreed to buy this serviceable digital camera at $10.00 with one year warranty, and pay $10.00 and the shop accepted, the transaction or contract is completed.
But if the shop while giving you the standard one year warranty card (with company chop affixed), had the valid one-year warranty clause changed to 6 months or even stamped it as "deleted" while giving you the same warranty card, the seller must draw the your attention to the "warnings, exclusions and disclaimers in all documents, advertising materials" that the standard one year warranty is no more valid.
If not even after you pay at $10.00or whatever higher or lower price you agreed with the seller with the amended warranty card, this contract particularly the warranty clause is actually invalid.
In similar light, an FA (including insurance agents) is expected to highlight such "Warnings, Exclusions and Disclaimers" in the procedural transaction of a financial product, while observing other GUIDELINES ON STANDARDS OF CONDUCT FOR FINANCIAL ADVISERS under the FINANCIAL ADVISERS ACT CAP. 110. Hence, he has also a "fiduciary" duty of care as a would be "professional" in this business.
The "CONTRACT" itself is just a contractual document. It often comes in handy only when there is a complication (even a very basic contract. Quite often without any complications, it is forgotten by both parties after transcation or expiry of the valid clauses.
But if say one has bought the digital camera as in the above case, and noted that the one year warranty was "deliberately altered" and the seller had particularly failed to highlight this "alteration" of the warranty clause, and it was discovered while you were about to post it out, you could simply have gone back to the seller to reject this "contract", get the $10.00 back, but return his "serviceable camera". The seller cannot refuse by saying the contract was completed even if parties had signed 10 volumes of other terms and conditions.
An FA has an onus and is expected to perform even more professionally because he is not an "electronics saleman" but someone governed by the GUIDELINES ON STANDARDS OF CONDUCT FOR FINANCIAL ADVISERS under the FINANCIAL ADVISERS ACT CAP. 110. He owes a "fiduciary" duty of care to his clients.
The above relates CONTRACTS to CODE of PRACTICES & STATUTES AND REGULATIONS. We have also the UFCT Acts and also Agency Laws.
If an FA has already done his part dutifully and professionally, then any default could be traced to his "boss".
As in the digital camera case if the seller 's boss refused to take back the camera and return the $10.00 to you, you can simply file a police report and complain to the Small Claim Tribunal, etc.
Without informing the client about "Warnings, Exclusions and Disclaimers", this is irresponsible and is so close to committing "fraud".
In my opinion the insurance agents should be regulated more stringently than the 'kachang Puteh' salesmen becuase the damage by insurance agents is far more extensive and serious.
The Kachang Puteh salesmen damage to the client is a one off.In this line before the sale the customers have a chance to see, touch and smell and if the 'kachang' is bad after the sale being made it can be exchanged , replaced or money back or even if it causes the diarhhea it can be immediately known and action can be taken.
The damage caused by insurance agents is less obvious until and unless it is reviewed by a third party quickly before more losses incurred. The problem is the insurance product cannot be seen., touched or tested and the outcome is only known after a long time till it is often too late.
In other words at the point of the purchase the customers have to depend on the words of the agents.
As said before so long a human intermediary is involved it is very dangerous. If you get an incompetent human the deal is screwed up. If you get a dishonest one it is also screwed up. And if you get an honest one but incompetent the screw up is even worse. It is like being conned by a con artist whom the customers trust or a relative whom the customers think would not harm them.
For the above reasons a safe guideline must be used and enforced by regulator. The approach must be need based liken to the doctor's approach to his patient. An algorithm of steps to be adhered.
First verbal investigation to identify the needs and objectives and concerns, followed by examining the circumstances, history of illness, then analysis before prescription of products or recommendations or medicine. The product is NOT known until after the examination. MAS must make this approach compulsory.
If the insurance agents think that they can dodge or circumvent the procedural steps they risk being caught.The insurance agents' supervisors will be the immediate auditor and if he or she colludes with the agents then he or she is liable for any consequences too.
This safeguard and other safeguards above the supervisors is necessary to nip it in the bud before bigger damages are done.
MAS must enforce and without the enforcement the FAA will be a dead letter like 377A of the penal code.
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