Contract Law

Citation(2005) 6 SAL Ann Rev 160
Date01 December 2005
Published date01 December 2005
Formation of contract
Offer and acceptance

9.1 The rudimentary principle that a contract is only concluded upon the unconditional acceptance of an offer was applied in Koon Seng Construction Pte Ltd v Siem Seng Hing & Co (Pte) Ltd[2005] SGHC 8, where the alleged contract failed in the absence of an unqualified acceptance.

Certainty and completeness

9.2 The question whether an unsigned memorandum of understanding (‘MOU’) could amount to an oral agreement arose in Petrosin Corp Pte Ltd v Clough Engineering Ltd[2005] SGHC 170. In this case, the plaintiff had assisted the defendant in securing a construction project in Pakistan on the understanding that it would be appointed as the latter”s subcontractor for the project, on terms allegedly contained in the MOU. Tay Yong Kwang J held (at [90]—[91]) that the MOU did not amount to an oral agreement as the parties were not ad idem as regards its content and had intended to be bound only by a signed written contract.

9.3 Tay J proceeded to observe (at [92], obiter) that if the parties” agreement had in fact been established, the MOU would have placed the defendant under certain obligations, such as to co-operate with the plaintiff

in working out the terms of the subcontract. This would have been so even though the mechanics of how such obligations were to be performed were not fully set out. Tay J further observed (ibid) that ‘[the] document in question may have been termed an MOU instead of a contract or agreement … but nomenclature alone does not a contract make or unmake’. These observations may be indicative of greater judicial willingness to contemplate a more moderate approach towards the recognition of pre-contractual ‘good faith’ obligations than that traditionally represented by the English decision of Walford v Miles[1992] 2 AC 128.

9.4 The interesting question which arose in Yip Jenn Yeuan v Ng Ah Chen[2005] SGHC 21 was whether a settlement agreement as regards liability (but not quantum) in respect of a tort claim could form the basis of a separate action in contract. Choo Han Teck J held that it did not. Whilst the parties” agreement on liability would have been binding on the defendant if the plaintiff had pursued the tort claim, it did not confer on the plaintiff a separate right in contract. An ‘agreement’ which did not specify the quantum of damage — an essential term of the contract — or a particular mechanism for determining the same was incomplete and therefore unenforceable.

Identification of contracting parties

9.5 In the unreported decision of Advantest Corporate Office (Singapore) Pte Ltd v SL Link Co Ltd[2005] SGHC 75, a dispute arose as to whether the plaintiffs (‘Advantest’) had entered into a contract with SL Link Co Ltd (‘SL Link’) (a company registered in Taiwan) or Solar Link Co Ltd. The complication arose from the fact that both Solar Link Co Ltd and SL Link were Taiwan-registered companies. In consequence, their official registered names were in Mandarin. The critical difference was that Solar Link Co Ltd was in liquidation at all material times.

9.6 In prior dealings, the plaintiffs had received invoices bearing SL Link”s name in Mandarin and its Taiwanese company registration number, but also bearing the English name ‘Solar Link Co Ltd’. In subsequent negotiations with the plaintiffs, the representatives of the counter-party to the contract exchanged business cards. On one side, they bore the name ‘Solar Link Co Ltd’. On the other, they bore the Mandarin name of SL Link. Joint presentations were also made, purportedly on behalf of SL Link (using its Mandarin name), although the English name ‘Solar Link Co Ltd’ was also applied to it. Ultimately, two agreements were finalised. The first ‘Appointment Agreement’ was drafted in Mandarin and named SL Link (in

Mandarin) as a party. Among others, this agreement was executed by the chair of SL Link”s board of directors. Following this, a second ‘Manufacturing Agreement’ was executed, but in English. As SL Link referred to itself in English as ‘Solar Link Co Ltd’, the Manufacturing Agreement named Solar Link Co Ltd as one of the parties.

9.7 At [26], the trial judge accepted the evidence of the managing director of the plaintiffs that it had always been represented to him that the name of the counter-parties in English was Solar Link Co Ltd. However, there was no finding as to the subjective state of mind of the counter-party”s representatives. Since the issue was whether, on an objective basis, the plaintiffs contracted with SL Link or Solar Link Co Ltd, it followed that the subjective intentions of the parties were not critical. Plainly, given the evidence and the findings of the court, the counter-party was SL Link.

9.8 In similar vein, in C S Geotechnic Pte Ltd v Neocorp Innovations Pte Ltd[2005] SGHC 116 (see para 9.22 below on ‘Estoppel’), it was held that where there was clear evidence that a party had entered into a contract with the intention of being bound, it could not plead that it was not a true party to the agreement because it had contracted on another”s behalf.

Contract formation and formalities in cyberspace

9.9 The High Court made landmark rulings in SM Integrated Transware Pte Ltd v Schenker Singapore (Pte) Ltd[2005] 2 SLR 651 (see para 9.43 below on ‘Implied Terms’ and paras 9.88—9.95 below on ‘Mitigation’) when it had to decide whether an alleged agreement for lease negotiated orally and through e-mail exchanges constituted an enforceable contract. In this case, the defendant (the lessee) argued that there was no concluded contract because the parties had not signed any written agreement for a lease, and that the negotiations were conducted on a ‘subject to contract’ basis. Rejecting these contentions, Judith Prakash J found that the parties had negotiated with a view to create binding obligations, and had in fact agreed to the essential terms of the lease as evidenced by a number of e-mail correspondences.

9.10 More significantly, the defendant argued that any such lease, even if it existed, was not enforceable because it did not meet the formal requirements of s 6(d) of the Civil Law Act (Cap 43, 1999 Rev Ed) (‘CLA’). This provision required agreements relating to the sale or disposition of immovable property, or any interest therein, to be evidenced by a written memorandum or note signed by the person to be charged. The relevant

e-mails, the defendant contended, were not a sufficient memorandum and were also not signed by the defendant. It sought to fortify its case by reference to s 4(1)(d) of the Electronic Transactions Act (Cap 88, 1999 Rev Ed) (‘ETA’). Although ss 7 and 8 of the ETA respectively anticipated that electronic records and signatures could in general satisfy legal requirements for written information and signatures, the application of these provisions was specifically excluded by s 4(1)(d) of the ETA in respect of contracts relating to immovable property. The effect of this exclusion, the defendant submitted, was that s 4(1)(d) of the ETA had rendered e-mails and other electronic records incapable of satisfying the formal requirements of s 6(d) of the CLA.

9.11 Prakash J disagreed with the defendant. As the primary purpose of the ETA was to facilitate commerce by enabling reliance on electronic communication in commerce, it should not be interpreted to disable such reliance. The learned judge was of the view that s 4(1) of the ETA merely disapplied the provisions of the ETA for purposes of establishing the formality requirements relating to the excluded contracts; it did not negate the evidential value of electronic communications at common law. The question whether an e-mail could satisfy the formal requirements of s 6(d) of the CLA was to be determined by construing that provision, quite apart from the ETA.

9.12 Turning to s 6(d) of the CLA, Prakash J arrived at the following conclusions:

(a) Two specific e-mails exchanged by the parties constituted a sufficient memorandum for the purposes of s 6(d) of the CLA because these e-mails evidenced their agreement to the essential terms of the lease. It was well-established that such a memorandum did not have to be in a single document (at [73]).

(b) The e-mails satisfied the requirement for ‘writing’ (as defined in s 2 of the Interpretation Act (Cap 1, 2002 Rev Ed)) because they contained words which could be displayed in a ‘visible form’. Such an interpretation had the effect of updating statutory language to reflect technological changes since its legislation, and, more importantly, addressed the mischief underlying s 6(d) of the CLA. In Prakash J”s words (at [80]):

The aim of the Statute of Frauds was to help protect people and their property against fraud and sharp practice by legislating that certain types of contracts could not be enforced unless there was

written evidence of their existence and their terms. Recognising electronic correspondence as being ‘writing’ for the purpose of s 6(d) of the CLA, would be entirely consonant with the aim of the CLA and its predecessor, the Statute of Frauds, as long as the existence of the writing can be proved.

(c) A memorandum may be regarded as having been ‘signed’, for purposes of s 6(d) of the CLA, if it appeared in such form as was sufficient to authenticate the identity of the author. This could take the form of handwritten or printed signatures. In the case of the latter, no real distinction could be drawn between a typewritten signature, and one that was typed onto and sent with an e-mail (at [91]). Significantly, Prakash J went further and held that even if the author”s name had not been appended to the body of an e-mail message, it was ‘signed’ because the author”s name appeared next to his e-mail address at the head of the message (at [92]).

9.13 Given the phenomenal extent to which the electronic and digital platforms have replaced paper as a communication medium, the importance of SM...

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