All questions

Contract formation

Under Singapore law, a contract may be made orally, in writing, or by conduct. The elements of a validly formed contract are:

  1. offer and acceptance;
  2. consideration; and
  3. intention to create legal relations.
i Offer and acceptance

An offer is an expression of willingness to be bound by a clear set of terms as soon as it is accepted by the person to whom it is addressed.2 An offer therefore requires an intention to be bound should the offer be accepted and communication of the offer to the offeree.3

An effective acceptance consists of a final and unqualified acceptance of the terms of an offer which has been communicated to the offeror.4

Whether an offer has been validly made and accepted is determined by an objective interpretation of the facts of the case, including the words used by parties,5 conduct of parties,6 and surrounding circumstances when the offer or acceptance was made.7

Parties may also be bound by expressions of offer and acceptance made by third parties who have been expressly or impliedly authorised to do so, or who, because of the principal's actions, have the appearance of authority.

ii Consideration

Consideration is 'something of value that is given in exchange for the counterparty's promise or performance'.8 Consideration must be requested by the promisor.9 An act done prior to and independently of a promise cannot be regarded as valid consideration for the promise as it is not done in exchange for the promise.10 The court will not question the sufficiency of the consideration, as long as it is established to be of value to the promisor. In addition, an agreement may be enforced in the absence of consideration if it has been executed as a deed. This requires the settlor to fulfil the formalities of 'signing, sealing, and delivering' the document.

A question that has arisen in courts in certain Commonwealth jurisdictions recently is whether the requirement of consideration for variation or modifications of contract should be dispensed with.11 The Singapore Court of Appeal in Ma Hongjin v. SCP Holdings Pte Ltd12 has answered this issue in the negative. Consideration therefore remains a requirement for variation or modification of a contract. Parties are, however, at liberty to 'exclude the requirement for consideration for the variation of contract by unambiguously stating so at the point that contract is formed'.13

iii Intention to create legal relations

Both parties to a transaction must intend for it to have legal effect,14 which means that the aggrieved party could invoke the assistance of the court if the agreement was not honoured.15

A presumption to create legal relations arises in an agreement made in a commercial context.16 On the contrary, where an agreement is made in a domestic context, there is a presumption that parties did not intend to create legal obligations.17

iv Contracts which must be evidenced in writing

The law requires that certain contracts be evidenced in writing to be enforceable.18 In particular, any contract for the sale or other disposition of land (or any interest in land) must be evidenced in writing. The requirement of being 'evidenced in writing' has been generously interpreted by the Singapore courts and includes chat applications and text messages, as long as the parties' intentions are clear.19