First Quarter 2013

DevelopmentsinSingaporeContractLaw
in2012
Asst Professor Goh Yihan, Faculty of Law, National University of
Singapore

Introduction
In this article, we look back at the more significant contractual cases to be decided
in Singapore in 2012, and in so doing, we observe the developments in Singapore
contract law.
The cases considered here deal with issues of contractual formation, contractual
terms, as well as remedies for breach of contract.

Formation of Contract
Offer and Acceptance
As a preliminary point, it should be noted that whether or not there is an offer
and acceptance depends on an objective interpretation of the facts of the case
concerned.

In ATS Specialized Inc (trading as ATA Wind Energy Services) v LAP Projects (Asia)
Pte Ltd [2012] SGHC 173, the issue was whether there had been a tripartite set-off
agreement beetween the relevant parties. Belinda Ang Saw Ean J rightly held that
the correct approach to find a contract from the parties correspondence is based
on the parties intention as objectively ascertained.

Formation of set-off
agreement

In Lim Koon Park v Yap Jin Meng Bryan [2012] SGHC 159, one issue was whether
the parties had formed a contract after lengthy negotiations. The High Court
rightly accepted that it is the objective approach that applies. However, the Court
also stated that the traditional offer and acceptance analysis should be applied in
a modified manner. This holding has raised some degree of discussion,

Modified application of
traditional offer and
acceptance model

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especially since the Court of Appeal in Gay Choon Ing v Loh Sze Ti Terrence Peter
[2009] 2 SLR(R) 332, in contrast, held that the traditional analysis should apply.

In Chia Kim Huay v Saw Shu Mawa Min Min [2012] SGHC 172, the High Court held
that ordinary contractual principles apply to offers to settle under the regime of
O22A of the Rules of Court, to the extent that they are not inconsistent with what
the Rules of Court expressly provide. This must be correct as Parliament can
choose to overrule aspects of the common law via legislation, such as the Rules of
Court. However, the Court did find that the Rules of Court did not provide for
when an offer will survive an offerees death. In that regard, the common law rule
applies the offer will survive if it is not personal in nature.

Formation of offers to settle

Past Consideration
The Court of Appeal decision of Rainforest Trading Ltd v State Bank of India
Singapore [2012] 2 SLR 713 reaffirmed the rule that past consideration is not good
consideration. Where it operates, the rule has the effect of preventing an
otherwise valid contract from being formed. However, as the Court noted, the
potential harshness of the rule is mitigated by an apparent exception, which
consists of three requirements:
(a)

the act must have been done at the promisors request;

(b)

the parties must have understood that the act was to be

remunerated; and

(c)

such remuneration must have been legally enforceable if it had

been promised in advance.

Application of and exception

to the rule of past
consideration

The Court of Appeal in Rainforest Trading also pointed out that it would generally
be difficult to argue that a legitimate commercial transaction was unenforceable
simply because the consideration provided was past.

Whilst consideration is generally easily found, it was not found in ATS Specialized
Inc (trading as ATA Wind Energy Services) v LAP Projects (Asia) Pte Ltd (discussed
earlier). The High Court stated that the requirement for consideration has not
been abolished. Indeed, the Court of Appeal in the seminal decision of Gay Choon
Ing had actually affirmed that consideration is still a standard requirement for the
formation of a contract.

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Continued endorsement of
the requirement of
consideration

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Promissory Estoppel
The doctrine of promissory estoppel was successfully applied in Oriental
Investments (SH) Pte Ltd v Catalla Investments Pte Ltd [2012] SGHC 245. The High
Court held that promissory estoppel will apply if (a) the promisor made a clear
and unequivocal promise; (b) the promisee acted in reliance on the promise; and
(c) as a result of the reliance the promisee suffered detriment.

The test for promissory

estoppel

Certainty and Completeness

In OCBC Capital Investment Asia Ltd v Wong Hua Choon [2012] SGCA 54, on appeal
from the High Court, the Court of Appeal affirmed the basic principles on the
effect of a subject to contract clause. The general view is that it raises a
presumption that no binding contract has been concluded. However, the
inclusion of such a clause is not determinative, and the presumption that a
contract has not been concluded can be displaced.

Subject to contract
clauses

In HSBC Institutional Trust Services (Singapore) Ltd (trustee of Starhill Global Real
Estate Investment Trust) v Toshin Development Singapore Pte Ltd [2012] SGCA 48, the
Court of Appeal held that a contractual clause directing the parties to endeavour
to agree in good faith within an existing contractual framework was not void for
uncertainty as the contractual framework provided a basis for the parties to
negotiate in good faith. This required the parties to be commercially honest with
each other, and not hide information that the other would reasonably expect to be
disclosed.

Agreements to endeavour to
cooperate in good faith

Terms of Contract
Terms Implied in Fact
The Court of Appeal in Foo Jong Peng v Phua Kiah Mai [2012] SGCA 55 rejected the
proposition that the implication of terms is to be approached as an exercise in the
interpretation (or construction) of the instrument as a whole, finding such an
approach to be too uncertain in its application The Court of Appeal, however,
accepted that the process of the implication of terms does involve interpretation,
albeit a specific form of interpretation which is separate and distinct from the
general interpretation of express terms.

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The relevance of
interpretation in the
implication of terms

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Terms Implied in Law

In Lim Suat Hua v Singapore HealthPartners Pte Ltd [2012] 2 SLR 805, a term was
implied into an employment contract to allow the employer to claim against the
employee for leave taken in excess of entitlement. This appears to have been a
term implied by law as the Court couched its reasoning in general terms.

Contractual Discretion
In Edwards Jason Glenn v Australia and New Zealand Banking Group Ltd [2012] SGHC
61, the High Court reaffirmed the well-established principle that contractual
discretion is generally not unfettered, and that such discretion must be exercised
honestly and in good faith for the purposes for which it was conferred.

Honesty and good faith in

contractual discretion

Contractual Interpretation
In Ashlock William Grover v SetClear Pte Ltd [2012] 2 SLR 625, the Court of Appeal
restated that the contextual interpretation of a contract does not involve an
inquiry into the parties subjective states, but instead involves an objective
judgment based on the identified matters.

The test and framework for

contractual interpretation

The Court of Appeal in Master Marine AS v Labroy Offshore Ltd [2012] 3 SLR 125
affirmed the two-step analytical framework in Zurich Insurance (Singapore) Pte Ltd
v B-Gold Interior Design & Construction Pte Ltd [2008] 3 SLR(R) 1029 concerning the
interpretation of contracts in Singapore. The first step is to consider whether the
extrinsic evidence sought to be adduced can in fact be admitted. The second step
concerns the task of interpretation. This involves the application of the contextual
approach under the terms of proviso (f) of s 94 of the Evidence Act.

Exception Clauses
In Kay Lim Construction & Trading Pte Ltd v Soon Douglas (Pte) Ltd [2013] 1 SLR 1,
the High Court held that it is a matter of interpretation to decide whether the
relevant exception clause operated to exclude the particular liability that had
arisen. In interpreting such clauses, the courts adopt a strict approach (which
encompasses the contra proferentum rule), although they are not free to reject the
application of such clauses where the words used are clear and unambiguous.
The Court also applied, without much controversy, the Unfair Contract Terms

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Interpreting the scope and

operation of exception clauses

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Act.

Restraint of Trade Clauses

The Court of Appeal in Mano Vikrant Singh v. Cargill TSF Asia Pte Ltd [2012] 4 SLR
371 held that certain clauses which required employees to forfeit their bonuses if
they joined a competitor were in restraint of trade and would have to be justified
by reasonableness. It held so because it regarded the forfeiture of a benefit that
had accrued to an employee to be in restraint of trade.

Remedies
The Singapore Court of Appeal has in Out of the Box Pte Ltd v Wanin Industries Pte
Ltd [2013] SGCA 15 reaffirmed the applicability of the orthodox test for
remoteness as embodied in Hadley v Baxendale. In doing so, the Court of Appeal
again rejected the assumption of responsibility test (articulated in 2009 English
decision of The Achilleas) to determine whether damages are too remote in a
contractual claim.
The following are several key points from the decision:

The Court of Appeal drew a clear distinction between interpretation and

remoteness. In its view, it is important to distinguish between cases that
concern the interpretation of a contract to identify the specific nature of
the obligation undertaken, and cases that are concerned with matters of
remoteness.

When deciding whether claimed damages are too remote, the Court
would consider the relevant facts, specifically:
(a)

the facts that bear on the question of the liability for the damages
that subsequently ensue upon the defendants breach;

(b)

the circumstances in which those facts came to the defendants

knowledge;

(c)

in the light of those circumstances, the extent to which such

knowledge should be taken into account when assessing the
defendants liability; and

(d)

having regard to the knowledge that may properly be attributed

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Applicability of the
traditional test for
remoteness of damages

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to the defendant at the time of the contract, what would have

been foreseeable at that time to the reasonable person in his
position to be the not unlikely consequences of his breach.

The Court of Appeal also provided an analytical framework for questions

of remoteness:
(a)

First, what are the specific damages that have been claimed?

(b)

Second, what are the facts that would have had a bearing on
whether these damages would have been within the reasonable
contemplation of the parties had they considered this at the time
of the contract?

(c)

Third, what are the facts that have been pleaded and proved
either to have in fact been known or to be taken to have been
known by the defendant at the time of the contract?

(d)

Fourth, what are the circumstances in which those facts were

brought home to the defendant?

(e)

Finally, in the light of the defendants knowledge and the

circumstances in which that knowledge arose, would the
damages in question have been considered by a reasonable
person in the situation of the defendant at the time of the contract
to be foreseeable as a not unlikely consequence that he should be
liable for?

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