Legal Rights in Contractual Disputes

Overview of Contractual Disputes in Singapore

A contractual dispute, also known as a breach of contract, occurs when a party, without valid justification, fails to carry out their obligation as stated in the agreement. It is vital to note that a contractual dispute assumes that a valid and legally binding contract exists in the first place.

Examples of a breach of contract include:

• Late performance
• Non-performance (i.e. refuses to perform what they have promised to do)
• Defective performance (i.e. failing to fulfil a promised objective)
• Going against the contract (i.e. doing something they have promised not to do)

However, not every case of performance failure constitutes a breach of contract. There are two elements that need to be satisfied for the failure to be considered a breach: The party failed to perform a contractual obligation, and there is no valid justification for the party’s failure.

Elements of Breach of Contract

Party failed to perform a contractual obligation

In most cases, contract obligations are stated in a written agreement known as express terms.

To determine if there has been a breach of contract, one must first know what the express term means. The court will first interpret the meaning of the express term as intended by the contracting parties and then decide whether there has been a breach of contract based on the evidence available.

Besides express terms, there are other sources of contractual obligations. They include:

• Common trade usage
• Implied terms (terms that are “read into” by the court to fill a gap in the contract; a term may only be implied if the contracting parties did not contemplate the gap in the contract and the term is necessary for the contract to work)
• Statute (e.g. Sale of Goods Act)

No valid justification for the party’s failure to perform

Any excuses for the party’s failure to perform must be provided either in the contract or by law.

For instance, if the contract has a price adjustment clause stating that a supplier of a good is allowed to make reasonable adjustments to the contract price if they experience difficulty obtaining raw materials, it would be considered a breach of contract if the supplier refuses to perform their obligation due to another buyer agreeing to pay a higher price, as this excuse is not provided for in the clause.

Remedies for Breach of Contract

There are four remedies for breach of contract:

Termination of contract

A breach of contract may allow the innocent party to terminate the contract. If the innocent party proceeds to do so, both parties will be discharged from all contractual obligations.

However, not all contracts can be terminated. It depends on how the term is stated in the initial contract.

Monetary compensation (or Damages)

By default, the innocent party is entitled to damages for losses suffered as a result of the breach of contract. However, the innocent party must prove to the court that they have taken reasonable steps to mitigate their losses.

Specific performance

The court may grant an order of specific performance to compel the defaulting party to perform their contractual obligation. However, the court will not grant this order in every breach of contract suit. It is typically only granted when monetary compensation is not considered an adequate remedy to the breach of contract.

Examples when an order of specific performance is granted include contracts that involve the sale and purchase of a house, land, limited-edition goods or art sculptures.

Prohibitory injunction

A prohibitory injunction is an order granted by the court to compel the defaulting party to fulfil their promise of not doing something. Similar to specific performance, it is only granted when monetary compensation is deemed inadequate to remedy the breach of contract.

Resolving a Breach of Contract Dispute

In addition to remedies, there are also four ways to resolve breach of contract disputes.

Court proceedings or Arbitration

These are the formal ways of resolving a breach of contract dispute. However, because of the level of formality involved, they tend to be more expensive and lengthy.

Private mediation

Private mediation focuses on reaching an amicable or win-win settlement for both parties.

Employees who fall under the Employment Act

For employees who are governed under the Employment Act, the Ministry of Manpower is an option to deal with disputes regarding employment matters.

Small claim tribunals

The Small Claim Tribunals handle claims up to $20,000 or, if parties have consented, up to $30,000. It is a relatively quicker, cheaper, and less formal mode of dispute resolution. Take note that parties are not required to be represented by lawyers.

FAQs on Contractual Disputes

How can you avoid contractual disputes?

To avoid contractual disputes, the parties should put any agreements in writing. If both parties are clear on their obligations when the contract is signed, the likelihood of conflicts in the future will be low.

It is also advisable to engage a lawyer to review your agreement as you may not be aware of onerous terms that may have been incorporated into the contract.

What can I do if I do not wish to make my dispute public?

If you do not wish to make your dispute public, you can consider resolving the dispute through arbitration.

Arbitration is a process where you and the other party can choose and appoint one or more arbitrators to decide the outcome of your dispute. It takes place in private and parties to the arbitration and arbitrators are obliged to maintain confidentiality on all matters regarding the arbitration proceedings.

The arbitrator’s identity is usually determined in advance when the parties agree to resolve any future disputes by arbitration in their contract. Take note that the decision made by the arbitrator is legally binding.

However, if your contract lacks an arbitration clause or if the other party does not wish to proceed with arbitration, you may not be able to keep your dispute private and would need to resolve your dispute in Court.

Is an overseas agreement enforceable in Singapore?

Generally yes. However, if the agreement is against the laws of Singapore, it may not be enforceable. For instance, if the agreement requires you to be a party of an illegal activity, such an agreement would not be enforceable in Singapore.

Conclusion

It is advisable to engage a lawyer if you are involved in a dispute concerning a breach of contract. Your lawyer will be able to guide you through the different methods of resolving the conflict and advise you on the best course of action for your particular situation.