An extract from The Complex Commercial Litigation Law Review, 2nd Edition

Breach of contract claims

A breach of contract is committed when a party to a contract unlawfully fails to perform his or her contractual obligation(s) or does not comply with a term of, or standard required by, the contract. A breach may also take the form of an anticipatory breach, where a party makes it clear to the other party by his words or conduct, before the time for performance is due, that he has no intention to perform all or part of his obligations under the contract. The innocent party is entitled to bring a claim for damages for losses caused by the breach.

A breach does not always entitle the innocent party to terminate the contract. But where the breach takes the form of a repudiatory breach, the innocent party may (in addition to seeking damages) elect to accept the repudiation and treat the contract as terminated. A repudiatory breach arises:

  1. when the defaulting party renounces the contract in a manner that clearly conveys to the innocent party that he will not perform his contractual obligations at all;
  2. where the breach is of a condition, (i.e., a term that the parties had intended to designate with such importance) so that any breach, regardless of its actual consequences, would entitle the innocent party to terminate the contract; or
  3. where the breach deprives the innocent party of substantially the whole benefit which parties had intended that he should obtain from the contract.

Where a claim is brought for damages caused by the breach, the burden is on the claiming party to prove causation between the breach and the loss he has suffered.

Defences to enforcement

Apart from challenging an allegation of breach on the facts, there are a number of ways in which parties may avoid enforcement of contractual obligations or challenge claims of breach of contract in Singapore. Broadly, among other things, parties may seek to argue that:

  1. they have been discharged from performing their contractual obligations;
  2. the contract is void;
  3. the contract is voidable and that it should be rescinded or set aside; or
  4. the limitation period has expired. Examples are set out below.
i Discharge of the contract

A contract may be discharged by an express force majeure clause in the contract, where parties agree that they are to be excused from performance upon the occurrence of events that are beyond the control of the parties.

By the operation of law, a contract may also be automatically discharged where it is frustrated, and the parties are no longer bound to perform contractual obligations after the frustrating event. The doctrine of frustration applies where there is a supervening event which occurs (through no fault of any party) after the formation of the contract and renders a contractual obligation radically or fundamentally different from what has been agreed in the contract. The doctrine is a narrow one that only applies in exceptional circumstances.

ii The contract is voidMistake at common law

A contract may be void if the parties have shared a common mistake – not attributable to the fault of any party and the risk of which is not allocated to one party – as to the facts or law before the contract was concluded, and where the mistake renders the subject matter of the contract fundamentally different from the subject-matter which constituted the basis of the contract.

If only one party is mistaken, the mistaken party may rely on the doctrine of unilateral mistake to argue that the contract is void. Two types of unilateral mistake are recognised:

  1. a mistake as to the terms of the contract, which must be sufficiently fundamental or important, and where the other party is aware of the mistake; and
  2. a mistake as to the identity of the other contracting party.
Illegality and public policy

A contract may be void for illegality if it is prohibited by statute or an established category of common law public policy (which includes contracts to commit a crime, tort or fraud). If the contract is not unlawful per se under common law, but entered into with the object of committing an illegal act, it may be void if that is a proportionate response to the illegality.

A contract may also be unenforceable on the ground of foreign illegality if:

  1. its object or purpose involves doing an act that would violate the law of a foreign friendly state; or
  2. if the performance of the contract is unlawful under the law of the country where the contract is to be performed.
iii The contract is voidableMistake in equity

Although abolished in English law, the doctrine of common mistake in equity is presently still part of Singapore law. A contract founded on common mistake may be voidable in equity, even if it does not satisfy and is thus not void by the common law doctrine of common mistake.

The Singapore courts have recognised the existence of unilateral mistake in equity. For this doctrine to apply, the party seeking to establish it must show that:

  1. the unilateral mistake was fundamental;
  2. the non-mistaken party had constructive knowledge of the unilateral mistake; and
  3. there was some element of impropriety on the part of the non-mistaken party.

This differs from the doctrine of unilateral mistake at common law in that constructive, as opposed to actual, notice of the mistake may be sufficient.

iv The party seeking relief in equity must do so with 'clean hands'Duress

A contract may be avoided on the ground that it was made under duress. Duress may be made out where there is illegitimate pressure directed at the victim which amounts to the compulsion of the victim's will, and includes physical and economic duress. Pressure is illegitimate where there is a threat of unlawful action, or where a threat of lawful action results in terms that are so manifestly disadvantageous that it is unconscionable for the defendant to retain the benefit of those terms.

Limitation

A breach of contract claim must be brought within six years from the date the cause of action accrued. In cases involving fraud or mistake, the limitation period only begins to run at the time where the claimant has discovered or could with reasonable diligence have discovered the fraud or mistake.