Court of Appeal
The Singapore courts have often held that the incorporation of terms into a contract requires an objective assessment of the parties' intentions at the time of entering into the agreement.
In balancing fairness between two businesspeople dealing at arm's length, the courts are generally reluctant to incorporate terms into parties' contracts unless both parties reasonably assumed its inclusion. This was illustrated in a recent Singapore High Court decision,(1) which was affirmed by the Singapore Court of Appeal.(2)
Nambu PVD Pte Ltd (Nambu) and UBTS Pte Ltd (UBTS) entered into a contract for UBTS to transport a prefabricated vertical drain machine (the machine). The vehicle from UBTS that carried the machine caught fire during the course of the carriage, and the machine was damaged. Nambu sued UBTS for the fire damage to the machine, which UBTS had contracted to transport.
UBTS contended that the fire was not due to negligence on its part. It also relied on excluding and limiting conditions in:
- UBTS's standard terms and conditions (the UBTS T&Cs); and
- the standard terms and conditions of the Singapore Logistics Association (SLA) (the SLA T&Cs).
UBTS argued that both the UBTS T&Cs and the SLA T&Cs had been incorporated in the contract between the parties (the subject contract).
The High Court found that the UBTS T&Cs and the SLA T&Cs had not been incorporated in the subject contract. UBTS appealed against this finding.
The Court of Appeal upheld the High Court's decision.
In coming to its decision, the Court considered whether the parties had incorporated the T&Cs at the time of contract formation or through their previous course of dealings.
UBTS's first argument that the T&Cs had been incorporated at the time of contract formation was rejected, as UBTS's Mr Yen and Nambu's Mr Park had orally agreed to the subject contract for the transport of the machine. It was only after the machine had been damaged that UBTS had issued a delivery order (DO) and invoice for that contract, including the T&Cs.
The Court applied the test in Vinmar Overseas (Singapore) Pte Ltd v PTT International Trading Pte Ltd(3) – that is, whether the circumstances were such that, at the time of contracting, both parties, as reasonable persons, would have assumed the inclusion of the terms in the offer and acceptance. The Court found that the DO and invoice had come too late to introduce the T&Cs into the subject contract.
Turning to UBTS's second argument – namely, that the number of dealings between the parties and their proximity in time was relevant to establishing the incorporation of the T&Cs by a course of dealings. Although it was common for Mr Yen and Mr Park to conclude contracts by oral agreements and for UBTS to subsequently issue DOs and invoices to Nambu, the Court found that there was no course of dealings that incorporated the T&Cs because:
- some DOs had UBTS T&Cs and some did not. This showed that the dealings were not consistent or unequivocal; and
- the DOs were not contractual documents. They were not intended to supplement the terms of the contract that had already been formed. They were issued merely to verify the work done. In other words, the parties did not view the DOs as being part of their contractual dealings.
Several practical pointers arise from the decision in Nambu. Parties are advised to put forward a full set of their commercial terms for agreement prior to contract formation. Where there is an existing or anticipated course of dealings between parties on broadly similar terms, parties should include and adhere to clear and consistent contractual clauses during their dealings. Ultimately, when deciding whether a term has been incorporated, the courts will ask whether both parties as reasonable persons would have assumed the inclusion of the terms in the offer and acceptance.
For further information on this topic please contact Maureen Poh or Joanna Chuah at Helmsman LLC by telephone (+65 6816 6660) or email ([email protected] or [email protected]). The Helmsman LLC website can be accessed at www.helmsmanlaw.com.
(1) Nambu PVD Pte Ltd v UBTS Pte Ltd  SGHC 20.
(2) Nambu PVD Pte Ltd v UBTS Pte Ltd and another appeal  SGCA 98.