Contract Law

Citation(2006) 7 SAL Ann Rev 171
Published date01 December 2006
Date01 December 2006
Formation of contract
Certainty and completeness

10.1 The issue of contract formation arose in the unusual context of civil procedure in Wellmix Organics (International) Pte Ltd v Lau Yu Man[2006] 2 SLR 117 (see also para 10.60 on ‘Mistake’). The plaintiff in this case unsuccessfully sought to enforce a consent unless order against the defendant. Andrew Phang Boon Leong J (as he then was) emphasised that, keeping in view its very drastic consequence of depriving a party of his cause of action, such an order will only be established where the terms of the agreement are clear and unambiguous. It was clear on the facts that the parties had not adequately expressed any intention to enter into such an agreement, and even if there was a possibility of an agreement, such agreement must fail because the parties were not in fact ad idem. Significantly, Phang J also laid stress on the critical importance of assessing the evidence objectively in ascertaining the parties” intention.

10.2 Although certainty and contractual intention are clearly distinct elements of contract formation, arguments in relation to both these elements are often raised in conjunction and do frequently overlap. This was observed by Andrew Ang J in Chua Kim Leng (Cai Jinling) v Phillip Securities Pte Ltd

[2006] SGHC 221, who found on the facts of that case that an oral agreement for the payment of commissions existed between the plaintiff and defendant. This conclusion is unsurprising given that the plaintiff had in fact fulfilled her promise under the agreement and the defendant had by its conduct accepted its obligation to remunerate the plaintiff for her services. The fact that the agreement did not spell out detailed provisions as to the host of contingencies that could have arisen did not render the agreement too vague and uncertain to enforce, nor was it realistic to insist that the requisite contractual intention was lacking in the face of such evidence.

10.3 In CS Bored Pile System Pte Ltd v Evan Lim & Co Pte Ltd[2006] 2 SLR 1, Choo Han Teck J was also satisfied that an oral agreement had been formed between the plaintiff subcontractor and the defendant main contractor. Choo J observed (at [6]) that ‘it is not unusual that in construction contracts some terms and conditions might have to be worked out subsequently to the formation of the contract, but as long as the nature and general structure of the agreement is clear, that agreement is enforceable in law’.

10.4 The foregoing cases may be contrasted with GYC Financial Planning v Prudential Assurance Company Singapore (Pte) Ltd[2006] 2 SLR 865, where an alleged oral contract failed on both the grounds of uncertainty and lack of intention to create a binding contract. Here, the alleged agreement was for the provision of marketing of financial products over an extended period of time. As such activities are closely regulated by the Monetary Authority of Singapore, the absence of detailed provisions tailored to ensure strict compliance with the legal and regulatory restrictions militated against the finding of a binding agreement. See also Otech Pakistan Pvt Ltd v Clough Engineering Ltd[2006] 3 SLR 1, where an allegation that the parties” negotiations amounted to an oral variation of an antecedent contract failed.

Consideration

10.5 In Sunny Metal & Engineering Pte Ltd v Ng Khim Ming Eric[2007] 1 SLR 853, Andrew Phang Boon Leong J (as he then was) questioned (albeit in an obiter capacity) whether the doctrine of consideration still served any useful role in validating contracts. Citing the earlier and similar observations by V K Rajah JC (as he then was) in Chwee Kin Keong v Digilandmall.com Pte Ltd[2004] 2 SLR 594 at [139], Phang J observed (at [29]) that although the case for dispensing with the requirement for consideration is strongest in purely commercial transactions, the same may be true even of non-commercial transactions principally because the usefulness of the doctrine

has been substantially blunted by the controversial English Court of Appeal decision in Williams v Roffey Bros & Nicholls (Contractors) Ltd[1991] 1 QB 1. As Phang J explained at [30]:

… the combined effect of Williams v Roffey Bros & Nicholls (Contractors) Ltd (to the effect that a factual, as opposed to a legal, benefit or detriment is sufficient consideration) and the well-established proposition that consideration must be sufficient but need not be adequate (see, for example, the Singapore Court of Appeal decision of Wong Fook Heng v Amixco Asia Pte Ltd[1992] 2 SLR 342 at 348, [23]) is that (as Rajah JC has pointed out in Digilandmall (see [28] above)) it will, absent exceptional circumstances, be all too easy to locate some element of consideration between contracting parties. This would render the requirement of consideration otiose or redundant, at least for the most part. On the other hand, there are other possible alternatives available that can perform the tasks that the doctrine of consideration is intended to effect. These include the requirement of writing, as well as the doctrines of promissory estoppel, economic duress and undue influence (for these two last-mentioned doctrines, in the context of the modification of existing legal obligations).

10.6 It is true indeed that commercial transactions are rarely defeated for lack of consideration. Thus, an attempt to invalidate an assignment of debt on the ground of lack of consideration failed in Leun Wah Electric Co (Pte) Ltd v Sigma Cable Co (Pte) Ltd[2006] 3 SLR 227. In this case, the plaintiff raised the somewhat surprising argument that as the assignment was made only as a partial payment for debts owed by the plaintiff to the defendant, it was insufficient consideration. Rejecting this argument, Choo Han Teck J found that the assignment, which was made in lieu of cash payment, was clearly good consideration for the defendant”s agreement to discharge part of the debts owed to it by the plaintiff. Similarly, the argument that a compromise agreement was unsupported by consideration and hence unenforceable also failed in Abdul Jalil bin Ahmad bin Talib v A Formation Construction Pte Ltd[2006] 4 SLR 778. Judith Prakash J found that the defendant in this case had furnished consideration when, pursuant to the compromise agreement, it gave up its rights to dispute the plaintiff”s claims. It was immaterial that the defendant”s claim might have been weak, as long as the defendant believed in good faith that it had reasonable grounds for making the claim.

Estoppel

10.7 It was held in Abdul Jalil bin Ahmad bin Talib v A Formation Construction Pte Ltd[2006] 4 SLR 778 (‘Abdul Jalil’) (see also para 10.6 on ‘Consideration’ above and para 10.40 on ‘Capacity’ below) that the plaintiff

lessor was estopped from going back on its promise to waive the payment of certain rental arrears as the defendant had, in reliance on the promise, paid other moneys due in accordance with the plaintiff”s requirements, and incurred further expense in completing the redevelopment works on the subject property. Significantly, Judith Prakash J adopted (at [44]), citing Chitty on Contracts (H G Beale gen ed) (Sweet & Maxwell, 29th Ed, 2004) at para 3—135), the English position that ‘detriment of any kind … is not an essential requirement [of promissory estoppel] and all that is necessary is that the promisee should have acted in reliance on the promise in such a way as to make it inequitable to allow the promisor to act inconsistently with it’. These observations are of undoubted significance, particularly in view of the more equivocal position taken by the Singapore High Court in Fu Loong Lithographer Pte Ltd v Mun Hean Realty Pte Ltd[1989] SLR 300. In that case, Grimberg JC appeared, on the one hand, to have endorsed the requirement for detriment as a necessary element of the doctrine but adopted (at p 309), on the other hand, a broad definition of ‘detriment’ as ‘the injustice to the promisee which would result if the promisor were allowed to recede from the promise’ (citing Spencer Bower and Turner on Estoppel by Representation (3rd Ed)). Taken literally, this has the effect of equating ‘detriment’ with ‘inequity’ (another essential element of the doctrine), and does not confine the concept to the demonstration of some prejudice or disadvantage suffered in reliance on the promisor”s representation. Notwithstanding this broad approach, however, Grimberg JC then proceeded to refer specifically to the prejudice suffered by the defendant to explain why the requirement for ‘detriment’ had been satisfied. Thus, the decision in Fu Loong Lithographer Pte Ltd v Mun Hean Realty Pte Ltd is, at best, ambiguous on this issue of detriment.

10.8 In contrast, Prakash J in Abdul Jalil appears to have unequivocally excluded the requirement for prejudice as an essential element of the doctrine. That said, however, it should be noted that the element of prejudice was also established in Abdul Jalil, as the promisee in that case had incurred expense in reliance on the relevant representation.

10.9 The doctrine of estoppel by convention was applied by the High Court in Candid Water Cooler Pte Ltd v United Overseas Bank Ltd[2006] 3 SLR 216 with the result that contracting parties who had acted on the assumption that the condition precedent to the completion of the sale and purchase of a property had been fulfilled were bound by the completion date so determined even if it subsequently transpired that both parties were in fact unable, through no fault of either party, to complete the transaction on the date contemplated. See also Spandeck Engineering Pte Ltd v Defence Science & Technology Agency

[2007] 1 SLR 720, where the doctrine was similarly applied. For a decision in which an attempt to plead estoppel by convention failed, see Chew Tong Seng v Chew Cheng Quee[2006] SGHC 149.

The terms of the contract
Construction of terms

10.10 The objective approach to the construction...

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