Contract Law

Citation(2020) 21 SAL Ann Rev 403
Date01 December 2020
Publication year2020
Published date01 December 2020
I. Formation of a contract
A. Offer and acceptance
(1) Single point in time of offer and acceptance

13.1 As a preliminary point, it is clear that there has to be a single point in time of offer and acceptance, that is, when the necessary consensus ad idem was reached. The High Court in Day, Ashley Francis v Yeo Chin Huat Anthony1 explained that this was needed to give commercial certainty to the parties. The court further noted that, while the Court of Appeal had stated in Projection Pte Ltd v The Tai Ping Insurance Co Ltd2 that the traditional offer and acceptance analysis was not helpful in the case of continuing negotiations, the court still effectively applied the traditional offer and acceptance analysis in finding that the offer there was acceptance on a specific date. Thus, as the Court of Appeal explained

in Gay Choon Ing v Loh Sze Ti Terence Peter3 (“Gay Choon Ing”), there was no need to depart from the traditional analysis in cases of continuing negotiations. Rather, what was needed is a more nuanced understanding of the context of the agreement by looking through the whole course of negotiations.

13.2 The High Court also explained that, as a corollary of the requirement that a contract had to have a precise point of agreement, a reasonably certain date of formation had to be pleaded. Consistent with the rationale behind the need for a specific date for consensus ad idem, this was to set the scope of the issue contested and to give notice to the other party.

(2) Relevance of commercial realities in offer and acceptance

13.3 The Court of Appeal decision of Independent State of Papua New Guinea v PNG Sustainable Development Program Ltd4 provides a good example of how the courts will examine the commercial realities in ascertaining whether a contract had been formed. In that case, Ok Tedi Mining Limited (“OTML”) was incorporated to develop the Ok Tedi mine in the Western Province of Papua New Guinea. It had four shareholders including the appellant, the Independent State of Papua New Guinea, and BHP Minerals Holdings Pty Ltd (“BHP”). Due to the environmental damage caused by the mine, BHP expressed its intention to shut down the mine prematurely. OTML's shareholders thereafter commenced negotiations to facilitate BHP's exit from OTML without affecting the mining operations.

13.4 Pursuant to these negotiations, an agreement recorded in a suite of contracts was reached between OTML and BHP. BHP would divest its entire shareholding in OTML to a special purpose vehicle, which would apply income from the mine to promote sustainable development. To effect this arrangement, the respondent PNG Sustainable Development Program Ltd was incorporated in Singapore on 20 October 2001. However, the appellant later argued that, beyond these written agreements, it was also party, together with BHP and the respondent, to an overarching partly oral and partly written agreement. The issue before the Court of Appeal was whether such an agreement existed.

13.5 The Court of Appeal affirmed the High Court's finding that such an agreement did not exist. In doing so, the court noted that the OTML negotiations involved sophisticated and well-resourced parties.

As such, it was implausible that they would have intended to leave some things out of their written agreements. This commercial reality therefore pointed away from the existence of a partly oral agreement, when it was more probable that the parties would have intended to contain all their agreements in the suite of contracts.
(3) Offer and acceptance in context of sale and purchase of domain name

13.6 The High Court decision of 3 Corporate Services Pte Ltd v Grabtaxi Holdings Pte Ltd5 (“Grabtaxi”) provides a useful example of contractual formation in the context of the sale and purchase of a domain name. The plaintiff's sole director and shareholder, Mark Ho, had offered to sell the domain name, “”, to the defendant for US$250,000. After discussing internally, the defendant sent an offer letter to the plaintiff, confirming its intention to purchase the domain price at the asking price, subject to certain preconditions, such as that it was to be followed by a formal sale and purchase agreement and an escrow agreement. Importantly, one of the preconditions provided that the plaintiff shall not sell or assign the domain name to anyone other than the defendant. The court read this precondition as implying that the plaintiff owned the domain name at the time of acceptance, failing which the plaintiff certainly could not sell or assign the domain name in the first place. One Ashwyn signed the offer letter on behalf of the plaintiff, which Mark then forwarded to the defendant. The defendant signed the letter and returned it to Mark.

13.7 The defendant followed up by sending a draft sale and purchase agreement and escrow agreement to Mark. Ashwyn again signed the sale and purchase agreement, which Mark forwarded to the defendant. However, by then, the defendant discovered that the plaintiff, along with another company, had registered more than 1,000 domain names between themselves. The defendant decided not to proceed with the purchase of the domain name. The plaintiff sued the defendant, alleging that the offer letter constituted a valid and enforceable contract for the transfer of the domain name to the latter for US$250,000.

13.8 The High Court held for two reasons that the plaintiff had failed to prove that there was a valid and enforceable contract by way of the offer letter. First, Ashwyn was not a proper party to accept the offer on behalf of the plaintiff. He was an employee of an entirely different company. While that company and the plaintiff had a common shareholder in Mark, that was not sufficient to lift the corporate veil and hold that Ashwyn

was really accepting on behalf of the plaintiff. In any case, Ashwyn was neither a director nor shareholder of either company. However, it may be questioned whether this is a sufficient ground for invalidating the “contract” since a company may always appoint a third party as its agent and may also ratify an unauthorised agent's act. Indeed, the fact that the plaintiff chose to sue on the offer letter may be evidence of ratification. Second, contrary to the precondition mentioned above, neither Mark nor the plaintiff had owned the domain name. Rather, Ashwyn was the sole owner, and he did not hold the domain name on trust for Mark or the plaintiff. As such, it was not possible in this case for the plaintiff to enforce the offer letter since it was never the owner of the domain name, since the court had read into the contract a precondition that the plaintiff must be the owner of the domain name.

13.9 Grabtaxi therefore provides a useful illustration of the application of basic principles of offer and acceptance in a novel situation concerning the sale of a domain name. In this specific context, it was important who actually owned the domain name being sold. This was important because, as mentioned above, the court had read into the contract a precondition that the plaintiff actually owned the domain name. However, in many instances, it is perfectly legitimate for a vendor to contract to sell something that he may not own, such as in the case of a middleman in a chain of trades. Returning to the context of this case, this was an important point given the precondition that was read into the contract, considering that the ownership of domain names may sometimes be registered to individuals and not to a company that may eventually enter into such sale and purchase agreements.

B. Consideration
(1) Pleading requirements for consideration

13.10 In Ng Kong Yeam v Kay Swee Pin6 (“Ng Kong Yeam”) the Court of Appeal held that even if a party did not plead that a contractual claim should be dismissed due to lack of consideration, this did not prevent the court from concluding that there was no contract due to the lack of consideration. Following cases including Toh Wee Ping Benjamin v Grande Corp Pte Ltd,7 it is established law that while material facts must be pleaded, the legal considerations to be drawn from them, such as whether there was consideration, need not.

13.11 The pleading principle in Ng Kong Yeam was also applied by the Court of Appeal in Lim Zhipeng v Seow Suat Thin.8 In that case, the appellate creditor made a loan of about S$500,000 to the debtor. The debtor ran into financial difficulties and was made a bankrupt by an institutional creditor. As the debtor could not repay his loan to the appellant, he asked his mother, the respondent in the present case, to be a guarantor for his debts to the appellant. The appellant and respondent signed a document entitled “Deed of Guarantee” in September 2017, under which the respondent agreed to guarantee the debtor's debt owed to the appellant, and also to pay off the outstanding sum in tranches. After paying off S$40,000, the respondent stopped paying. In light of her default, the appellant took out the present action against her.

13.12 The High Court had dismissed the appellant's claim on the basis that the guarantee was unenforceable as a deed. Because the court also found that no consideration had been furnished, the guarantee could not be enforced against the respondent. The Court of Appeal disagreed with the High Court's conclusion, even though it agreed that the guarantee was not enforceable as a deed. The Court of Appeal reasoned that the sealing requirement was a necessary condition before a document could be enforced as a deed, even if a physical seal was not needed. This would be the case if the document was executed with the clear intention of delivering it as the deed of the party executing it. Applying these principles to the present case, it was not fatal that there was no physical manifestation of a seal on the guarantee. However, there was no evidence that the respondent had intended to execute a deed. Her desire to help her...

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