A contract is formed where there is:
- a valid offer and acceptance;
- intention to create legal relations; and
- certainty of terms and completeness of agreement.
Contracts may be made in writing, orally, or by conduct.i Offer and acceptance
An offer is 'an expression of willingness to contract made with the intention (actual or apparent) that it shall become binding on the person making it as soon as it is accepted by the person to whom it is addressed'. The intention of the offeror to be bound, upon the offeree's acceptance, is to be objectively ascertained. An offer is to be contrasted with an 'invitation to treat', which is 'an attempt to initiate negotiations, to induce offers'. An 'invitation to treat' includes advertisements, priced goods on display and invitations to tender.
An offer may be retracted if it has not been accepted. This may be done, amongst others, by the offeror's express revocation, the offeree's rejection (which includes an offeree's counter-offer), and lapse of time.
An acceptance is a 'final and unqualified expression of assent to the terms of an offer' that must be communicated to the offeror. There must be exact correspondence between the terms of the offer and the terms of acceptance for the acceptance to be effective.
The Electronic Transactions Act (Cap 88) provides that offer and acceptance may be expressed by means of electronic communications.ii Consideration
Unless executed as a deed, a contract must be supported by consideration to be binding. Consideration is 'something of value' which is requested for by the promisor and is given by the promisee in exchange for the promisor's promise. It need not be adequate or proportionate, but it must be legally sufficient.
In general, past consideration is not valid consideration, unless there is in effect a single contemporaneous transaction where the act said to constitute the consideration was done at the promisor's request on the understanding that the past act was to be remunerated.
A controversial issue that often arises is whether performance of a pre-existing contractual obligation is sufficient consideration. The English Court of Appeal in Williams v. Roffey Bros & Nicholls (Contractors) Ltd held that a promisor's obtaining of a practical benefit or avoidance of a practical disbenefit from the promisee's performance of a pre-existing contractual obligation owed to the promisor constituted good consideration for a promise to pay more for contracted-for performance. This approach was ostensibly applied by the Singapore Court of Appeal in Sea-Land Service Inc v. Cheong Fook Chee Vincent. However, the question of whether a promisee's performance of a pre-existing contractual obligation owed to the promisor constitutes good consideration in support of the promisor's promise to accept less is still an open one under Singapore law.iii Intention to create legal relations
Parties must have objectively intended the contract to have legal effect. It is generally presumed that parties in social and domestic arrangements do not intend to create legal relations. Conversely, where parties are in business and commercial arrangements, it is presumed that they intend to create legal relations.iv Certainty of terms and completeness of agreement
For a contract to be valid and enforceable, there must be certainty as to the material terms of a contract, and the contract must be complete. Parties may, however, conclude a binding contract even if there are terms yet to be agreed, if they have demonstrated that they still intend to be bound despite the remaining unsettled terms.v Form
Although contracts may be made orally, there are statutory rules which govern the form of specific categories of contracts. For example, a contract for the sale of immovable property is unenforceable unless it is evidenced in signed writing.vi Third party beneficiaries
The Contract (Right of Third Parties) Act (Cap 53B) confers on a third party to a contract (entered into on or after 1 January 2002) a statutory right to enforce a term in the contract where:
- the contract expressly provides that he may do so; or
- the term purports to confer a benefit on him and a proper construction of the contract does not show that this is contrary to the intention of the parties to the contract.
The third party must be expressly identified by name, class or description.vii Alternative methods of establishing commercial rights and obligations
Where there is no enforceable contract between parties, depending on the facts, parties to the purported contract may still be able to assert their rights against the other.viii Unjust enrichment
A claim may be brought in unjust enrichment where:
- the defendant has been enriched or benefited;
- the enrichment was at the expense of the claimant;
- one of the unjust factors is established; and
- there is no defence available.
An example of when a claim in unjust enrichment may be brought is where a party has delivered goods or performed a service pursuant to an unenforceable contract.ix Promissory estoppel
The court may also give effect to a non-contractual promise by relying on the doctrine of promissory estoppel where there is:
- a clear and unequivocal promise by the promisor as to his or her future conduct, whether by words or conduct;
- reliance on the promise by the promisee; and
- detriment suffered by the promisee as a result of the reliance.
This doctrine cannot, however, be used as an independent cause of action.