Climax Manufacturing Co Ltd v Colles Paragon Converters (S) Pte Ltd

JudgeJudith Prakash J
Judgment Date23 September 1998
Neutral Citation[1998] SGHC 315
Citation[1998] SGHC 315
Defendant CounselPhilip Lam (Foo & Liew)
Published date19 September 2003
Plaintiff CounselKhor Wee Siong (Khor Thiam Beng & Partners)
Date23 September 1998
Docket NumberSuit No 199 of 1997
CourtHigh Court (Singapore)
Subject MatterCivil Procedure,Summary judgment,Whether words mean parties wish not to be contractually bound,Contract,Contractual terms,Whether contract void for uncertainty,Construction of contract pursuant to O 14 r 12 Rules of Court,Interpretation of words "to be agreed",Whether interpretation of words can be done in isolation,Whether contract constitutes agreement to negotiate in good faith

The question involved in this appeal is whether an agreement which the parties hereto entered into on 8 January 1996 is a valid and legally binding document or, as the plaintiffs term it, an `illusory agreement`. This is a question of construction and has come before the court on an application made by the plaintiffs pursuant to O 14 r 12.


The defendants are manufacturers of repositional adhesive memo pads. Their product is, apparently, equivalent to the `POST IT` memo pads produced by 3M. The difference is that the defendants` pads are pre-printed and the combined printing, cutting, and stacking system designed and developed by the defendants can produce these pre-printed pads at a cost comparable to the blank pads marketed by 3M. The heart of the defendants` system lies in the machine they have designed to do the job.

In 1995, the defendants were seeking a business partner to help them penetrate the Hong Kong and China markets.
They were given the name of Climax Paper Converters Ltd (`Climax Paper`), a company operating in Hong Kong, by the Singapore Trade Development Board. In October 1995, the defendants followed up this lead by writing to Climax Paper and telling the latter that they were looking for distributors in Hong Kong. They stated they were keen on marketing, as a turnkey project, the technical know-how required to convert and print on special repositional adhesive paper. This would involve selling the machine developed for this process and the know-how to convert and market the product.

The plaintiffs, a company related to Climax Paper, found the defendants` proposition interesting.
On 24 November 1995 their Chief Executive Officer, one Mr Fung Kin Yuen Kenneth, visited the defendants at their factory in Singapore and was given a 20-minute demonstration of one of the defendants` machines. Mr Fung appeared to be satisfied with his inspection of the machine and the demonstration and the parties decided to go ahead with the project. Subsequently, they signed a memorandum of understanding in which they expressed the desire of the plaintiffs to acquire the technology and production know-how in respect of the conversion of repositional adhesive raw materials which the defendants owned and the intention of the parties to enter into a joint venture agreement for such purpose.

On 30 November 1995 the defendants sent the plaintiffs an agreement, which they had pre-signed, for execution by the plaintiffs.
The plaintiffs were not happy with the terms of the agreement and, on 15 December 1995, they wrote to the defendants giving their detailed comments on its various clauses. One of these comments was that they wished the defendants to amend the agreement by adding the `name, specification, machine number and photo for the Machine`. The `Machine` in question was described in cl 2.2 as `one (1) unit 2-colour Web Offset Printing Machine dedicated to the printing of Repositional Adhesive Memo Pads`.

The defendants proceeded to redraft the agreement.
They did not, however, add all the particulars which the plaintiffs had requested in relation to the Machine. Their position, as communicated by their letter of 26 December 1995 to the plaintiffs, was that as the Machine was specific for the use of printing on the repositional adhesive memo pads, the name, model type etc had no significance in the agreement. Their letter read:

This machine is specific for the use of printing on the Repositional Adhesive Memo Pads. The name, model type etc have no significance in this Agreement. We will however provide you a [SERIAL NUMBER] for your machine.

The machine is designed for the printing of Repositional Adhesive Memo Pads. We will give ample opportunity for the Distributor`s operator to work on the machine. We have already given [Mr Fung] an opportunity to view the actual production of re-positional adhesive memo pads. It is because of [Mr Fung`s] viewing and physical sighting of the machine that we are now in this position in finalising this Agreement.

On 8 January 1996, the defendants` Chief Executive Officer, Mr Goh Kiat Chye, accompanied by a colleague, went to Hong Kong to meet Mr Fung.
They took with them the amended agreement for execution. The agreement was signed that day after Mr Fung had made some hand-written amendments to it. This case arose from one of these amendments.

The clause in question is cl 2.2.
In the agreement as originally typed by the defendants it reads:

Supply of raw material plus one (1) unit 2-Colour Web Offset Printing Machine dedicated to the printing of Re-positional Adhesive Memo Pads (the Machine) The specifications of the Machine is (sic) attached hereto.

The sentence `the specifications of the Machine is attached hereto` had not appeared in the document sent to the plaintiffs in November 1995 but had been added after the defendants had received the plaintiffs` comments in December as had been the schedule with the specifications.
This amendment was not, however, sufficient for the plaintiffs and in the document that was signed the additional words `to be agreed by both parties` have been hand-written at the end of that sentence and this amendment has been initialled by both parties.

The plaintiffs` position is that they were very concerned about the completeness of the specifications of the Machine and that there was a lot of information that they as purchasers would require before buying the Machine.
In his affidavit Mr Fung states that he refused to execute the agreement unless Mr Goh agreed to provide further and better specifications of the Machine which were satisfactory to the plaintiffs. On Mr Goh`s acceptance of this position, cl 2.2 was amended by hand to include the term that specifications were to be agreed by both parties.

The defendants` position is that the plaintiffs` alleged concern about the completeness of the specifications was never expressed to them.
Mr Goh in his affidavit denied that Mr Fung had told him that the plaintiffs would not sign the agreement unless Mr Goh agreed to furnish further and better specifications to the plaintiffs` satisfaction.

Clause 7 of the agreement which dealt with payment provided that upon signing of the agreement the plaintiffs were to pay the defendants 30% of the contract price of $500,000.
The remaining 70% was to be paid by letter of credit and the plaintiffs were to forthwith establish such a letter of credit in favour of the defendants.

After the signing on 8 January, there was quite a lot of correspondence between the parties.
These letters dealt both with the issue of the specifications and with the payment by the plaintiffs of the down payment of 30% and their establishment of the letter of credit. On 25 January 1996, the plaintiffs asked the defendants to send them details of the Machine at their earliest convenience. They wanted the specifications, model number, delivery terms and schedule, unit price and its instruction manual, part list and circuit diagram. The defendants replied the same day with a certain amount of information. The plaintiffs considered the information supplied inadequate and asked for the specifications again. The defendants sent copies of their earlier letter to the plaintiffs and correspondence continued.

There is no need at this stage to go into all the details of the correspondence.
Suffice it to say that on 6 February 1996, the plaintiffs paid the defendants $150,000 being the 30% down payment. They did not then or thereafter, despite various requests from the defendants, establish the letter of credit for the remaining $350,000. The defendants considered this failure to be a repudiation of the agreement on the part of the plaintiffs and, on 10 June 1996, they purported to accept the plaintiffs` repudiatory breach of the agreement.

The plaintiffs commenced this action in January 1997 for the return of the $150,000 downpayment made.
The basis of their action was that the agreement was void for uncertainty because it provided for the specifications `to be agreed by both parties`. The plaintiffs also put their case on the alternative ground of breach of an implied term to supply certain information relating to the machine so that the plaintiffs could assess the suitability of the Machine to their needs and the ease of the maintenance of the Machine before deciding whether or not to agree...

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5 books & journal articles
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