Compaq Computer Asia Pte Ltd v Computer Interface (S) Pte Ltd

Judgment Date28 May 2004
Date28 May 2004
Docket NumberCivil Appeal No 130 of 2003
CourtCourt of Appeal (Singapore)
Compaq Computer Asia Pte Ltd
Computer Interface (S) Pte Ltd

[2004] SGCA 23

Yong Pung How CJ


Chao Hick Tin JA


Judith Prakash J

Civil Appeal No 130 of 2003

Court of Appeal

Contract–Formation–Certainty of terms–Letter of award expressed to be “subject to final terms and conditions being agreed”–Whether letter of award constituted binding contract between parties–Whether performance on faith of letter of award indicated binding contract existed

Reuters Singapore (“RS”) provided international news and financial information to its customers through television terminals installed at its customers' premises. The contract for the installation, servicing and maintenance of hardware and software (“field services”) from 1 July 2000, was put up for competitive bidding. Compaq Computer Asia Pte Ltd (“Compaq”) submitted the lowest bid and subsequently proposed a “partnership arrangement” with Computer Interface (S) Pte Ltd (“CIS”), which had previously provided the field services for RS. On 26 May 2000, Compaq and CIS signed a non-binding memorandum of understanding (“MOU”) stipulating that CIS would provide the field services as a subcontractor of Compaq. The MOU also envisaged the conclusion of a formal sub-contract between Compaq and CIS within 30 days, ie by 30 June 2000. RS then orally awarded the tender to Compaq. However, Compaq and CIS failed to conclude a formal sub-contract by 30 June 2000. Instead, Compaq issued CIS a letter of award (“LOA”) to confirm the agreement, “subject to final terms and conditions being agreed”. Under the LOA, the parties agreed to sign a formal agreement by 14 July 2000, or some other target date. CIS signed the LOA and, from 1 July 2000, provided the field services to RS on Compaq's behalf. Although CIS repeatedly pressed Compaq to finalise the sub-contract, this never occurred. Nevertheless, CIS continued to provide the field services on the basis of the LOA for some 18 months until Compaq suddenly terminated the arrangement. This was in response to CIS' rejection of Compaq's proposed new operating model. CIS then brought an action against Compaq, claiming damages for breach of contract. The judge found that the LOA constituted a binding contract, as all material terms and conditions had been agreed upon. The fact that CIS rendered the field services for 18 months was also a strong indicator that there was a binding contract. Compaq appealed, contending that the LOA could not have evidenced a binding agreement as it was expressly “subject to final terms and conditions being agreed”.

Held, allowing the appeal:

(1) For there to have been a binding contract, there must have been a final and unqualified expression of assent to contract. In this case, the LOA was qualified, as the plain meaning of the phrase “subject to final terms and conditions being agreed” was that the award was conditional upon the final terms and conditions being agreed. There was also nothing to indicate what the nature of these “final terms and conditions” were. Moreover, the LOA did not set out all the essential terms of the arrangement, as vital issues such as payment terms, exclusion of liability, insurance or termination were not addressed: at [32] and [36].

(2) There were authorities which showed that where parties had acted upon the faith of a written document, the court would be inclined to assume that the document embodied a firm contract. However, this would not apply where there was contrary intention. In the present case, such a contrary intention was indicated in the LOA, which stated that the attached schedules “will form part of the agreement”, indicating an agreement in the future. When the LOA provided that “ [b]y accepting this LOA, CIS agrees to commence the project on the terms stated [in] the schedules”, it was clearly a proposal for an interim arrangement pending the finalisation of the written agreement: at [31], [39] to [40].

(3) It seemed clear from the LOA that although CIS had been selected to be the subcontractor, there were terms on which the parties had yet to agree, and only upon the execution of a written agreement would there be a contract between the parties. In the meantime, CIS should carry out the field services on the terms set out in the attached schedules: at [44].

Aircharter World Pte Ltd v Kontena Nasional Bhd [1999] 2 SLR (R) 440; [1999] 3 SLR 1 (folld)

Alpenstow Ltd v Regalian Properties plc [1985] 1 WLR 721; [1985] 2 All ER 545 (refd)

British Steel Corp v Cleveland Bridge and Engineering Co Ltd [1984] 1 All ER 504 (folld)

James Miller & Partners Ltd v Whitworth Street Estates (Manchester) Ltd [1970] AC 583 (refd)

Lockett v Norman-Wright [1925] Ch 56 (refd)

Reardon Smith Line Ltd v Yngvar Hansen-Tangen [1976] 1 WLR 989 (refd)

Sweet & Maxwell Ltd v Universal News Services Ltd [1964] 2 QB 699 (distd)

Philip Tay (Rajah & Tann) for the appellant

Harpal Singh (Harpal Mahtani Partnership) for the respondent.

Judgment reserved.

Chao Hick Tin JA

(delivering the judgment of the court):

1 This appeal raises a construction issue as to whether a letter from the defendant-appellant Compaq Computer Asia Pte Ltd (“Compaq”) to the plaintiff-respondent Computer Interface Singapore Pte Ltd (“CIS”) constituted a binding contract between the parties. The judge found that the letter evidenced a firm contract. The appellant disputes that and has pursued the matter before us.

The background

2 The facts leading to the issue of the letter are of some importance to a better understanding of the construction point and we shall allude to them in some detail. Reuters Singapore (“RS”), whose parent company is in London, is in the business of providing international news and financial information to subscribers (“customers”) through television terminals installed at customers' premises. Before 1993, RS had a technical division which provided services relating to the installation, servicing and maintenance of hardware and software (“field services”) at the customers' premises. In 1993, RS decided to outsource the provision of such field services and close down its technical division. Some employees from that division left RS to form the respondent company, CIS, to provide the field services to the customers of RS. At the time, RS held 25% of the issued shares in CIS. From then on, under successive periodic contracts with RS, CIS provided field services to RS's customers.

3 In December 1999, RS notified CIS that upon the expiry of the then current term, ie 30 June 2000, and pursuant to directions from its parent company, RS would be subcontracting the provision of the field services by competitive bidding. The contract would be for a three-year period. To maintain impartiality in the bidding process, RS withdrew from CIS and sold its CIS shares back to CIS.

4 Pursuant to the new system, five companies were invited by RS to tender for the field services, namely, IBM, Siemens, Gentronics, Compaq and CIS.

5 At the same time, in view of the change in the system of awarding contract for the field services, RS was anxious that the services to be provided to its customers should not in any circumstances be disrupted. To ensure that, RS requested the other four companies to explore the possibility of working with CIS in providing the services. Compaq was amenable to the suggestion and its director, one Mr Lawrence Mok (“Mok”), got in touch with the managing director of CIS, Mr Bala Supramaniam (“Supramaniam”). However, the discussion did not lead to any concrete result, leaving the two parties to submit their separate bids for the contract.

6 As it turned out, the bids of Compaq and CIS were the two lowest. Even so, RS thought that their bids were still high and they were asked to review the matter and submit fresh bids. They duly complied. Eventually Compaq's bid was the lower of the two. However, the managing director of RS, Mr Dennis Lim (“Lim”), was still uncomfortable in awarding the contract to Compaq. He wanted to be sure that the services provided to customers would not be compromised. A presentation was made by Compaq. There, one of the proposals of Compaq was that it would provide the field services in conjunction with CIS. This proposal was acceptable to RS. On 18 May 2000, RS issued to Compaq a conditional letter of intent and some of the conditions were:

(a) Compaq would...

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