Breach of contract claims
A breach of contract occurs when a contracting party, without lawful excuse, fails to perform their contractual obligations.31
A breach generally entitles the innocent party to damages based on an expectation measure. In addition, a breach would entitle an innocent party to treat the contract as terminated in the following four situations:32
- where the contractual term in question clearly and unambiguously states that, should an event or certain events occur, the innocent party would be entitled to terminate the contract;
- where the party in breach of contract, by its words or conduct, simply renounces the contract inasmuch as it clearly conveys to the innocent party that it will not perform its contractual obligations at all;
- where the term breached is a condition (as opposed to a warranty) of the contract, the innocent party is entitled to terminate the contract; and
- where the breach of a term deprives the innocent party of substantially the whole benefit that it was intended to obtain from the contract.
A breach of a contract may also be anticipatory in nature. This is when a party makes it clear, by way of words or conduct, to the other party before the time performance is due that they have no intention of performing all or part of their obligations under the contract.33
The burden of proving the breach, and that causation between the breach and the damages suffered, lies with the claimant.
Defences to enforcement
Some common defences to a claim for breaches of contract are set out below.i No contract to begin with
A party may allege that a valid contract was never formed for lack of any of the elements of offer and acceptance, consideration, or intention to create legal relations.
For example, a sham agreement which was created to deceive third parties, but was not intended to create enforceable legal obligations, cannot be enforced.34ii Disputing the alleged breach
A party may dispute that a breach occurred. This includes disputing the facts of the alleged breach or advancing a certain interpretation of the relevant contractual terms.iii Contract has been discharged: force majeure and frustration
Unlike civil law jurisdictions, Singapore law does not recognise the doctrine of force majeure. However, if a contract has a force majeure clause, providing that parties are to be excused from performance of the contract upon the occurrence of events beyond the control of parties, the court will give effect to the clause. The scope and effect of the clause would depend on the wording of the clause in question.
A party may rely on the doctrine of frustration. Where a supervening event, occurring through no fault of either party after the contract has been entered into, renders the contractual obligations of parties radically or fundamentally different from what was envisaged when the contract was agreed to, the contract comes to an end automatically. A defendant would only succeed in establishing this defence in exceptional circumstances.iv Undue influence
Contracts created by undue influence are voidable at the election of the innocent party. Undue influence occurs when a person abuses his or her dominant position or relationship of trust and confidence to procure the other party's consent to the contract.
There are two classes of undue influence: actual undue influence (Class 1) and presumed undue influence (Class 2).
Under Class 1 undue influence, the claimant must show that: (1) the defendant had the capacity to influence him or her; (2) the influence was exercised; (3) the said exercise of influence was undue; and (4) the said exercise of influence brought about the transaction.35
Under Class 2 undue influence, the claimant only need demonstrate that: (1) there was a relationship of trust and confidence between parties; (2) the relationship was such that it could be presumed that the defendant abused the claimant's trust and confidence in influencing the claimant to enter into the transaction in question; and (3) the transaction was one that calls for an explanation.36v Mistake
A mistake is when one or both parties enter into a contract under a misapprehension of the basis or a critical aspect of the transaction. A mistake may result in the contract being void or voidable. There are two common types of mistake: common mistake and unilateral mistake.
A common mistake occurs when both parties have entered into an agreement based on a mistaken assumption or belief. In this case, the contract may be held void if the following conditions are met:37
- there must have been no allocation of risk to either party of the consequences occasioned by the mistake;
- the mistake concerned must not be attributable to the fault of either party;
- the mistake must be shared by both parties and relate to facts or law before the contract was concluded; and
- the mistake must render the subject matter of the contract fundamentally different from the subject matter that the parties contracted on as constituting the basis of their contract.
The doctrine of common mistake in equity, albeit abolished in English law, continues to apply in Singapore.38 If a mistake is not sufficiently fundamental to render a contract void under common law, it may still be set aside if the mistake is sufficiently serious39 under the doctrine of common mistake in equity.40
In contrast to a common mistake, a unilateral mistake occurs when one party is mistaken about a critical term of the contract and the other party is aware of the said mistake or has constructive knowledge of the said mistake. In this case, the contract may be invalidated.vi Illegality and public policy
A contract which is prohibited under statute or an established head of common law public policy is considered void and unenforceable. Heads of common law public policies include but are not limited to contracts to deceive public authorities and contracts to commit a crime.41vii Limitation period
Section 6(1) of the Limitation Act requires that an action founded on contract be brought within six years of the date of the cause of action accrued.42
Most recently, the Court of Appeal held in Esben Finance Ltd and others v. Wong Hou-Liang Neil43 that, on the present reading of the Limitation Act, claims in unjust enrichment 'lay outside the Limitation Act'.44 As such, there is presently no statutory limitation to claims founded on unjust enrichment, even though these claims may relate to a contract between the parties; for example, a claim for the return of money paid on a void contract or on the basis of failure of consideration.
As for claims for fraud or mistake, the limitation period only starts when the claimant has discovered or could with reasonable diligence have discovered the fraud or mistake.45