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BREACH AND ITS CONSEQUENCES

2.

BREACH & DISCHARGE

A breach of contract is committed when a party without


lawful excuse fails or refuses to perform what is due from him under
the contract, or performs defectively or incapacitates himself from
performing. (Treitel, p832/828).
Lawful excuses:
Two examples are given below.1
Discharge: Frustration & Termination for Breach
Discharge by Termination for Breach of Condition (s
11(2)_SGA).
(1)A seller acting in breach of a condition 2 under a sale of goods
contract,
Delivered goods not in conformity with contractual
requirements. Terms implied by SGA3. The buyer lawfully
elects to reject the goods and terminate the contract; 4
thereby discharging the buyer of his obligation to pay the
price
before the buyers payment obligation matures.5
Discharge by Frustration (s 7 SGA).
(2)A seller contracted to sell specific goods to the buyer but,
subsequent to the contract, without any fault on the sellers or
buyers part, those goods perish before the risk passes to the
buyer.6
The contract is avoided7 by operation of law, thereby
discharging the sellers obligation to deliver the goods and
also discharging the buyers obligation to pay the price before
the buyers payment obligation matures.8

Based on the Sale of Goods Act (Cap 393, 1999 Rev Ed) (the SGA).
Sections 11(1), 11(2) and 61(1) (warranty) of the SGA.
3
Implied condition that goods will correspond with the description where there is a sale by description
(s 13(1)). Implied condition that the bulk of goods will correspond with the sample in quality where
there is a sale by sample (s 15(2)(a)). Implied condition that goods supplied will be of satisfactory
quality where the seller sells in the course of business (ss 14(2)). Implied condition that goods supplied
are reasonably fit for the buyers particular, disclosed, purpose, where the seller sells in the course of
business and the buyer reasonably relies on the sellers skill or judgment (s14(3)). Implied condition
that seller has right to sell the goods (s 12(1) SGA).
4
Sections 11(1), 11(2), 35, 35A and 53(1) SGA.
5
Unless otherwise agreed, delivery of goods and payment of price are concurrent obligations: The
seller must be ready and willing to give possession of the goods to the buyer in exchange for the price
and the buyer must be ready and willing to pay the price in exchange for possession of the goods (s 28
SGA).
6
Generally, under a contract for the sale of specific goods, property in the goods passes from seller to
buyer at such time when intended (s 17); and, unless otherwise agreed, risk passes to the buyer when
property passes (s 20). (Note, however, the usual presumption that property in specific goods passes to
the buyer at the time when the contract is made (s18 r1 SGA).)
7
This avoidance is effected by s 7 SGA and is usually regarded as an instance of frustration.
8
Unless otherwise agreed, delivery of goods and payment of price are concurrent obligations (s 28
SGA).
2

3.

CONSEQUENCES OF BREACH

Every breach of contract gives the aggrieved / innocent party


a remedy in damages (monetary compensation), whether
substantial or merely nominal.

Some breaches give the aggrieved party a right to elect to


terminate the contract and discharge himself from his further
obligations under the contract.

The guilty party may not be able to enforce some of the


aggrieved partys obligations under the contract if aggrieved
partys further obligations have been discharged by
termination.
It might be because performance of those obligations of the
aggrieved party, as ordered, are conditional upon the
defaulting partys prior performance. E.g. the aggrieved party
may be obliged by contract to perform only after the
defaulting partys performance; or the aggrieved and
defaulting partys mutual obligations might be concurrent.
Therefore aggrieved party not yet obliged to perform

* Photo Production Ltd v Securicor Transport Ltd [1980] AC 827 (Lord


Diplock)
(BBF 611):

Parties to a contract are free to determine for themselves what primary


obligations they will accept. Expressly said is better, but usually implied.
Rare cases: court enforces a primary obligation by decreeing specific
performance of it.

Usually: Substituted/secondary obligations are implied by law. May relieve


innocent party from further performance of his own primary obligations.
Generally common law, but sometimes statute.

Failure to perform a primary obligation is a breach of contract. Secondary


obligation implied in law is to compensate loss sustained by innocent in
consequence of the breach.

The primary obligations of both parties remain unchanged except:


1) Result of failure has the effect of depriving the other party of substantially
the whole benefit which it was the intention of the parties that he should
obtain from the contract.
2) Breach of Condition.

Then the parties may elect to terminate.

Where such an election is made:

(a) Implied in law: general secondary obligation: monetary compensation to


the other party for the loss sustained by him in consequence of their
non-performance in the future, substituting primary obligation.
(b) Implied in law a anticipatory secondary obligation": unperformed
primary obligations of the innocent are discharged. Unless modified by
express words of contract. This is done in common law except for
condition, which may also be implied in statute.

4.

Law may also imply a fresh set of obligations to one another. (e.g.
Bailor/bailee)

**AGGRIEVED PARTYS RIGHT TO TERMINATE**

What are the circumstances under which an aggrieved party would


have the right to elect to terminate a contract? This is an important
issue because, despite his right to sue for damages, an aggrieved
party may sometimes find that the most effective remedy he has
against a defaulting party is his right to terminate; yet one must
tread very carefully. A party who purports to terminate a contract
when he does not have the right to do so will himself be acting in
breach of contract.
* RDC Concrete v Sato Kogyo [2007] 4 SLR(R) 413 (Phang JA)
esp [89-113] Right to terminate in 4 situations tabulated at
[113].
Situations entitling an innocent party to terminate the contract at
common law
SITUATI CIRCUMSTANCES IN WHICH TERMINATION IS LEGALLY JUSTIFIED
ON

I EXPRESS REFERENCE TO THE RIGHT TO TERMINATE AND WHAT WILL ENTITLE THE INNOCENT
PARTY TO TERMINATE THE CONTRACT
1
The contractual term breached clearly states that, in the event of certain
event or events occurring, the innocent party is entitled to terminate the
contract.
II NO EXPRESS REFERENCE TO THE RIGHT TO TERMINATE AND WHAT WILL ENTITLE THE
INNOCENT PARTY TO TERMINATE THE CONTRACT
2
Party in breach renounces the contract by clearly conveying to the
innocent party that it will not perform its contractual obligations at all.

3(a)
3(b)

Quaere whether the innocent party can terminate the contract if the party
in breach deliberately chooses to perform its part of the contract in a
manner that amounts to a substantial breach.
Condition-warranty approach - Party in breach has breached a condition of
the contract (as opposed to a warranty).
Hongkong Fir approach apply only after condition-warranty
Party in breach which has committed a breach, the consequences of
which will deprive the innocent party of substantially the whole
benefit which it was intended that the innocent party should obtain from
the contract.

A. Phang, Recent Developments in Singapore Contract Law The


Search for Principle (2011) 28 JCL 3 at pp.11-15.
Sembcorp Marine Ltd v PPL Holdings Pte Ltd [2013] SGCA 43 at
[136]-[138] (Sundaresh Menon CJ):
Was not important enough to be a condition. Nor deprive the party
not in default of substantially the whole benefit.
* Man Financial (S) Pte Ltd v Wong Bark Chuan David [2008] 1 SLR
663 (Phang JA) esp [152][174] conditions.
As stated in RDC Concrete, 4 situations for the innocent party to elect to treat
the contract as discharged as a result of the other party's breach.
1.

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 (see RDC Concrete at [91]).
2. where the party in breach of contract ("the guilty party"), 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
(see RDC Concrete at [93]).
3a. where the term breached is a condition of the contract. Under what has been
termed the "condition-warranty approach", the innocent party is entitled to
terminate the contract if the term which is breached is a condition (as opposed to
a warranty): see RDC Concrete at [97]. The focus here, unlike that in the next
situation discussed below, is not so much on the (actual) consequences of the
breach, but, rather, on the nature of the term breached.
3b. where the breach of a term deprives the innocent party of substantially the
whole benefit which it was intended to obtain from the contract (see RDC
Concrete at [99]). (This approach is also commonly termed the "Hongkong Fir
approach" after the leading English Court of Appeal decision of Hongkong Fir
Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26; see especially id at
70.) The focus here, unlike that in Situation 3(a), is not so much on the nature of
the term breached, but, rather, on the nature and consequences of the breach.
If the term is a condition, then the innocent party would be entitled to terminate
the contract. However, if the term is a warranty (instead of a condition), then the
court should nevertheless proceed to apply the approach in Situation 3(b) (viz, the
Hongkong Fir approach) [emphasis in original].
As RDC Concrete did not elaborate on an important aspect of the conditionwarranty approach embodied in Situation 3(a), namely, what factors are relevant
in ascertaining whether or not a given contractual term is a condition, a
consideration of this issue at this juncture is apposite.

The issue when an aggrieved party has the right to terminate has
been dealt with at length in the important local Court of Appeal
decisions RDC Concrete, Man Financial and Sports Connection.
5.

CONDITION WARRANTY APPROACH


Situation 3(a) of RDC Concrete

It is trite that under English contract law


a breach of any condition in a contract gives the aggrieved
party the right to elect to terminate further performance of
the contract; and
the beach of a mere warranty gives no right to terminate,
regardless of whether the consequences of the breach were
serious.
Section 13(1) Sale of Goods Act (Cap 393, 1999) (the SGA):

13(1). Where there is a contract for the sale of goods by description, there is an
implied condition that the goods will correspond with the description.

In re an arbitration between Moore and Company, Limited and


Landauer and Company [1921] 2 KB 519

Sold correct amount, but not packaged according to description.


Held, that this was a sale of goods by description, and as the goods contracted to
be sold were mixed with goods of a different description the buyers were entitled
to reject the whole consignment.
Atkin LJ: It appears to me to be clear that the stipulation in the contract that
there shall be 21/2 dozen tins in a case is part of the description of the goods.
There is, therefore, an implied condition that the goods when tendered shall
correspond with the description. That condition was broken, and there was a right
to reject.

Arcos v Ronaasen [1933] 1 AC 470

Description must really match the article


Barrel staves.
Variation in the length and in the breadth of the staves allowed for in contract, but
none in the thickness specifically require inch.
Held, that the buyers were entitled to reject the goods for non-conformity with
contractual description in relation to thickness (even though they could be used
for making barrels).
Lord Buckmaster: If the article they have purchased is not in fact the article that
has been delivered, they are entitled to reject it, even though it is the commercial
equivalent of that which they have bought.
Lord Atkin: The simple question is whether the goods when shipped complied
with the implied condition (see the Sale of Goods Act, 1893, s. 13) that they
should correspond with the description. ...
It was contended that in all commercial contracts the question was whether there
was a "substantial" compliance with the contract: there always must be some
margin: and it is for the tribunal of fact to determine whether the margin is
exceeded or not. I cannot agree. If the written contract specifies conditions of
weight, measurement and the like, those conditions must be complied with. A ton
does not mean about a ton, or a yard about a yard. Still less when you descend to
minute measurements does 1/2 inch mean about 1/2 inch. If the seller wants a
margin he must and in my experience does stipulate for it.

In re Moore and Arcos have been criticised on the ground that the
goods tendered in both cases were perfectly suitable for the buyers
purpose in both cases, suggesting that the buyers rejected the
goods tendered because their market price had fallen and the
buyers wanted to get out of a bad bargain.

Reardon Smith Line v Yngvar Hansen-Tangen [1976] 1 WLR 989

Lord Wilberforce: In the first place, I am not prepared to accept that authorities
as to, "description" in sale of goods cases are to be extended, or applied, to such
a contract as we have here. Some of these cases either in themselves (In re
Moore and Co. and Landauer and Co. [1921] 2 KB 519) or as they have been
interpreted (e.g. Behn v. Burness (1863) 3 B. & S. 751)
I find to be excessively technical.
Even if a strict and technical view must be taken as regards the description of
unascertained future goods (e.g., commodities) as to which each detail of the
description must be assumed to be vital.
It it just as important to ask whether a particular item in a description constitutes
a substantial ingredient of the "identity" of the thing sold, and only if it does to
treat it as a condition (see Couchman v. Hill [1947] KB 554, 559, per Scott L.J.).
Roskill L.J. in Cehave N.V. v. Bremer Handelsgesellschaft m.b.H. [1976] Q.B. 44,
71:
"Sale of goods law is but one branch of the general law of contract. It is desirable
that the same legal principles should apply to the law of contract as a whole,"
Devlin J. in Cargo Ships "El-Yam" Ltd. v. Invoer-en Transport Onderneming
"Invotra" N.V. [1958] 1 Lloyd's Rep. 39, 52. The general law of contract has
developed, along much more rational lines (e.g., [1962] 2 QB 26), in attending to
the nature and gravity of a breach or departure rather than in accepting rigid
categories which do or do not automatically give a right to rescind, and if the
choice were between extending cases under the Sale of Goods Act 1893 into other
fields, or allowing more modern doctrine to infect those cases, my preference
would be clear.

Under what circumstances will a term be classified as a warranty


under Singapore law?
* RDC Concrete v Sato Kogyo [2007] 4 SLR(R) 413 at [107-110]
(Phang JA) Restatement will result in the concept of the warranty,
as we know it, being effectively effaced;
virtually never be a
situation in which there would be a term, the breach of which would
always result in only trivial consequences. A term which was not a
condition would necessarily become an intermediate term, subject
to the Hongkong Fir approach.
* Sports Connection v Deuter Sports [2009] 3 SLR 883
(Phang JA) esp [27-64] warranties.
The courts are slow to conclude that that the parties intended to use
the word warranty in this technical sense. This being the case,
unless the term states clearly that any breach, regardless of the
seriousness of the consequences, will never entitle the innocent
party to terminate the contract, it is unlikely that the courts will
conclude that the term is a warranty in its technical sense (Sports
Connection Pte Ltd v Deuter Sports GmbH [2009] SGCA 22, [2009] 3
SLR 883). If the term is not a warranty it is likely to be treated as an
intermediate or innominate term and the entitlement to terminate
will depend largely upon the consequences of the breach (RDC
Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd [2007] 4 SLR 413).

6.
FACTORS RELEVANT TO CLASSIFIYING
CONDITION
Situation 3(a) of RDC Concrete (again)

TERM

AS

Whilst it may be clear that breach of a condition gives an aggrieved


party the right to terminate, the real difficulty lies in determining
whether the particular term which has been breached was actually a
condition.
* Man Financial (S) Pte Ltd v Wong Bark Chuan David [2008] 1 SLR
663 (Phang JA) esp [152][174].
The condition-warranty approach - relevant factors in ascertaining
whether or not a given contractual term is a "condition"
(a)

Introduction

As RDC Concrete did not elaborate on an important aspect of the


condition-warranty approach embodied in Situation 3(a), namely, what
factors are relevant in ascertaining whether or not a given contractual
term is a condition, a consideration of this issue at this juncture is
apposite.
It is important to note at the outset that there is no magical formula
(comprising a certain fixed number of factors or criteria) that would enable
a court to ascertain whether or not a given contractual term is a condition.
This is not unexpected, given the very nature of the inquiry itself (which
would include a countless number of permutations and variations,
depending on the respective factual matrices and, more importantly, the
intentions of the respective contracting parties themselves). However, as
is inherent within the very nature of common law development, certain
factors that might (depending, as just mentioned, on the precise factual
matrix concerned) assist the court in this regard have been developed.
At bottom, the focus is on ascertaining the intention of the contracting
parties themselves by construing the actual contract itself (including the
contractual term concerned) in the light of the surrounding circumstances
as a whole (see the classic exposition on this point by Bowen LJ (as he then
was) in the oft-cited English Court of Appeal decision of Bentson v Taylor,
Sons & Co (No 2) [1893] 2 QB 274 at 281).
(b) The first factor: Where a statute classifies a specific contractual term
as a "condition"
Statutory provision classifies a specific contractual term as a "condition",
then that term will, of course, be a condition. The paradigm model is the
Sale of Goods Act (which embodies condition-warranty approach).
(c) The second factor: Where the contractual term itself expressly states
that it is a "condition"
The second factor is an ostensibly obvious one: Where the contractual
term itself expressly states that it is a "condition", then that term would
generally be held by this court to be a condition.
Case law exception: express use of the word "condition" might (on
occasion, at least) be insufficient to render that term a condition in law.

L Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235 ("Schuler")


HL decision: Although the word "condition" was expressly utilised, it was
used in lay sense.
Majority reasoning in Schuler was preoccupied with the consequences of
the breach of contract, rather than a focus on intention of the parties the
nature of the term. Indeed, there is a reference by Lord Kilbrandon to the
"grotesque consequences" (id at 272) of holding the term breached to be a
"condition" in the strict legal sense of the word.
Majority of the House in Schuler were applying the Hongkong Fir approach
instead and, more importantly, relates to the actual nature and
consequences of the breach instead). Indeed, there is a very powerful
dissenting judgment by Lord Wilberforce (see Schuler at 262-263), who
warned against rewriting, in effect, what was the clear intention of the
contracting parties that the term concerned be a "condition" in the strict
legal sense of the word (in accordance with the substance and spirit of the
condition-warranty approach under Situation 3(a)).
Indeed, it might well have been the fact situation in Schuler which
prompted the majority of the House to adopt what was, in substance and
effect, the Hongkong Fir approach instead. The intention of the parties
(pursuant to the condition-warranty approach) ought to take precedence
for, as we pointed out in RDC Concrete ([152] supra) at [100], although the
Hongkong Fir approach is conventionally associated with a sense of
fairness (in that it allows termination of a contract only if the nature and
consequences of the breach are so serious as to deprive the innocent party
of substantially the whole of the benefit of the contract which it was
intended to obtain from the contract), it is equally true that a sense of
fairness (albeit from a different perspective) also features when the
condition-warranty approach is applied inasmuch as it is fair to hold the
contracting parties to their original bargain.
We also observed in RDC Concrete (especially at [110]) that general House
of Lords decisions after Schuler in fact supported the approach that we
adopted in that case (in particular, our stance that the condition-warranty
approach in Situation 3(a) should take precedence over the Hongkong Fir
approach in Situation 3(b) in so far as it ought to be ascertained, first,
whether or not the contractual term concerned is a condition): see, for
example, Bunge Corporation, New York v Tradax Export SA, Panama [1981]
1 WLR 711 ("Bunge") and Torvald Klaveness A/S v Arni Maritime
Corporation [1994] 1 WLR 1456.
(d)

The third factor: The availability of a prior precedent

The third factor is whether a prior precedent is available. An oft-cited


illustration in this regard is the English Court of Appeal decision of
Maredelanto Compania Naviera SA v Bergbau-Handel GmbH [1971] 1 QB
164 ("The Mihalis Angelos"), same conclusion had been reached in by its
own previous decision (in Finnish Government v H Ford & Co, Ltd (1921) 6
Ll L Rep 188) that expected readiness was a condition.
Reliance on a prior precedent is convenient. But must still analyse and
understand the principle in the precedent. Practice Statement (Judicial
Precedent)[1994] 2 SLR 689. SGCA can do whatever it damn well pleases.
(e)

The fourth factor: Mercantile transactions

The fourth factor centres on the importance placed on certainty and


predictability in the context of mercantile transactions. Case law suggests
that courts are more likely to classify contractual terms as conditions in
this particular context, especially where they relate to timing (see, for
example, Bunge and The Mihalis Angelos).
(f) Summary of the relevant factors under the condition-warranty
approach
In the final analysis, the focus is on ascertaining the intention of the
contracting parties themselves by construing the actual contract itself
(including the contractual term concerned) in the light of the surrounding
circumstances
as
a
whole
(see
also
[161]
above).

BS&N Ltd (BVI) v Micado Shipping Ltd (Malta) (The Seaflower


(No.1))
[2001] C.L.C. 421, [2001] 1 Lloyds Law Rep 341 at [42]:
Conclusion. The conclusion to be drawn from these cases is that a
term of a contract will be held to be a condition:

(i) if it is expressly so provided by statute;


(ii) if it has been so categorised as the result of previous judicial
decision (although it has been said that some of the decisions
on this matter are excessively technical and are open to reexamination by the House of Lords);

(iii) if it is so designated in the contract or if the consequences


of its breach, that is, the right of the innocent party to treat
himself as discharged, are provided for expressly in the
contract; or

(iv) if the nature of the contract or the subject-matter or the


circumstances of the case lead to the conclusion that the parties
must, by necessary implication, have intended that the innocent
party would be discharged from further performance of his
obligations in the event that the term was not fully and precisely
complied with.

Otherwise a term of a contract will be considered to be an intermediate


term. Failure to perform such a term will ordinarily entitle the party not
in default to treat himself as discharged only if the effect of breach of
the term deprives him of substantially the whole benefit which it was
intended that he should obtain from the contract.

Classification as condition / warranty by Construction of


Contract
Bentsen v Taylor [1893] 2 QB 274 at 280-281 (Bowen LJ):
Tells you that court construes as warranty or condition. Very difficult
to tell
difficult to decide as a matter of construction whether a representation
becomes a condition or a warranty.

1) Ask: what extent the accuracy of the statement would be likely to


2)

affect the substance and foundation of the adventure which the


contract is intended to carry out?
effect of a breach of such a condition would be on the substance and
foundation of the adventure (not just on the breach)

Section 11(2) SGA:


Labels are inconclusive.
(2) Warranty or Condition, depends in each case on the construction of the
contract; and a stipulation may be a condition, though called a warranty in the
contract.

Classification as condition / warranty by Statute


Most convenient
Section 61(1) SGA:
61(1). In this Act, unless the context otherwise requires "warranty" means an
agreement with reference to goods which are the subject of a contract of sale, but
collateral to the main purpose of such contract, the breach of which gives rise to a
claim for damages, but not to a right to reject the goods and treat the contract as
repudiated..

Mere warranties implied into sale of goods contracts by ss 12(2)(5) SGA:


No encumbrance- goods is not
No right to reject the contract.

12(2). In a contract of sale, other than one to which subsection (3)


applies, there is also an implied warranty that
(a) no encumbrance
(b) the buyer will enjoy quiet possession of the goods except so far
as it may be disturbed by the owner or other person entitled to the
benefit of any charge or encumbrance so disclosed or known.
12(3). This subsection applies to a contract of sale in the case of which
there appears from the contract or is to be inferred from its circumstances
an intention that the seller should transfer only such title as he or a third
person may have.
12(4). Under (3) All encumbrances known by the seller must be made
known to buyer
12(5). Under (3) there is also an implied warranty that none of the
following will disturb the buyers quiet possession of the goods, namely
(a) the seller;
(b) the third party who the seller is selling for;
(c) People claiming through a and b under a charge or
encumbrance disclosed or known to the buyer before the contract is
made.

Conditions implied into sale of goods contracts by SGA:


section 12(1) (sellers right to sell),
section 13(1) (goods will correspond with description),
section 14(2) (goods of satisfactory quality),
section 14(3) (goods reasonably fit for buyers particular, disclosed,
purpose),
section 15(2) (bulk of goods will correspond with sample in quality).

10

In general, more important term is classified as Condition, less


important is warranty.
Section 13(1): even if breach is quite slight, can still break the
contract.
A innocent party can choose to dismiss it as a warranty
Parties may vary implied terms.
If consumer, you can
S 15 A: Limits buyers right to reject goods in non-consumer
contracts where breach is so slight that it would be unreasonable for
the buyer to reject

Section 11SGA:

11(1). The buyer may waive the conditions owed by the seller, may treat it as a
warranty.
11(2). Condition or warranty depends in each case on the construction of the
contract; and a stipulation may be a condition, though called a warranty in the
contract.

Section 15A SGA, restricting non-consumer


unreasonably reject goods for slight breach:

buyers

right

to

15A(1). Where in the case of a contract of sale


(a) the buyer would, apart from this subsection, have the right to
reject goods by reason of a breach on the part of the seller of a
condition implied by section 13, 14 or 15; but
(b) the breach is so slight that it would be unreasonable for the
buyer to reject them,
then, if the buyer does not deal as consumer, the breach is not to be
treated as a breach of condition but may be treated as a breach of
warranty.
15A(2). This section applies unless a contrary intention appears in, or is to
be implied from, the contract.
15A(3). It is for the seller to show that a breach fell within subsection (1)
(b).

* Cehave N.V. v. Bremer Handelsgesellschaft m.b.H. (The Hansa


Nord) [1976] Q.B. 44 (MK 782 / 778, BBF 570-571) (Roskill LJ)
Rejected citrus pulp pellets; shipment to be made in good
condition not condition.
Section 11 SGA does not compel courts to treat all terms in a sale of
goods contract as either a condition or warranty. Preservation of
common law by section 62 SGA. Courts may hold some terms in a
sale of goods contract to be intermediate terms.
Classification as condition by Judicial Precedent
Where particular type of clause has been classified as condition,
then classify it as condition.
Bunge Corporation New York v Tradax Export SA [1981] 1 WLR 711
(Lord Wilberforce) (MK784 / 780, BBF576)
Following the Grain and Feed Trade Association Ltd.'s (GAFTA) standard form of
contract 119, clause 7 "Period of delivery - during [May 1975] at buyers' call.
Buyers shall give at least [15] days' notice of probable readiness of vessel(s)"
Notice was given only 10 days. Held, that clause 7 was a condition of the contract.

11

Sellers entitled to terminate and claim damages even though did not go deprive
sellers of substantially whole benefit.
Lord Wilberforce: Fallacy in attempting to apply this [Hong Kong Fir] analysis to a
time clause such as the present in a mercantile contract, which is totally
different in character.
Issues:

Whats the importance both parties attached towards this breach.


In the absence of expressed agreement, what consequence ought to be
attached to it having regard to the contract as a whole.

Problem:

Exposes parties to an argument whether this delay would have left time for
the seller to provide the goods (1 day 2 days 3 days?).
Difficult for supplier to know when he can provide.

Reduces certainty, increases number of arbitrations.

Damages become extremely difficult to quantify.

I am clear that the submission is unacceptable in law. HongKong Fir approach


gives way to things specified as conditions.
It remains true, as Lord Roskill has pointed out in Cehave N.V. v. Bremer
Handelsgesellschaft m.b.H. (The Hansa Nord) [1976] QB 44, that the courts
should not be too ready to interpret contractual clauses as conditions. And
I have myself commended, and continue to commend, the greater
flexibility in the law of contracts to which Hong Kong Fir points the way
(Reardon Smith Line Ltd. v. Yngvar Hansen-Tangen [1976] 1 WLR 989). But
I do not doubt that, in suitable cases, the courts should not be reluctant, if
the intentions of the parties as shown by the contract so indicate, to hold
that an obligation has the force of a condition, and that indeed they should
usually do so in the case of time clauses in mercantile contracts. To such
cases the "gravity of the breach" approach of the Hong Kong Fir case
would be unsuitable.
In conclusion, the statement of the law in Halsbury's Laws of England
appears to me to be correct, in particular in asserting (1) that the court will
require precise compliance with stipulations as to time wherever the
circumstances of the case indicate that this would fulfil the intention of the
parties, and (2) that broadly speaking time will be considered of the
essence in "mercantile" contracts The relevant clause falls squarely
within these principles, and such authority as there is supports its status as
a condition In this present context it is clearly essential that both buyer
and seller (who may change roles in the next series of contracts, or even in
the same chain of contracts) should know precisely what their obligations
are, most especially because the ability of the seller to fulfil his obligation
may well be totally dependent on punctual performance by the buyer.

* Maredelanto Compania Naviera v Bergbau-Handel GmbH (The


Mihalis Angelos) [1971] 1 QB 164 (MK780 / 776, BBF 576) (Megaw
LJ)
vessel expected ready to load ... about 1 July 1965 a condition.
Charterers motivation to terminate irrelevant.

12

Charterer entitled to rely on breach of condition, despite having


given invalid reason.
Megaw LJ: First, it tends towards certainty in the law. One of the essential
elements of law is some measure of uniformity. One of the important
elements of the law is predictability. At any rate in commercial law, there
are obvious and substantial advantages in having, where possible, a firm
and definite rule for a particular class of legal relationship: for example, as
here, the legal categorisation of a particular, definable type of contractual
clause in common use. It is surely much better, both for shipowners and
charterers (and, incidentally, for their advisers), when a contractual
obligation of this nature is under consideration, and still more when they
are faced with the necessity for an urgent decision as to the effects of a
suspected breach of it, to be able to say categorically: "If a breach is
proved, then the charterer can put an end to the contract," rather than
that they should be left to ponder whether or not the courts would be
likely, in the particular case, when the evidence has been heard, to decide
that in the particular circumstances the breach was or was not such as "to
go to the root of the contract." Where justice does not require greater
flexibility, there is everything to be said for, and nothing against, a degree
of rigidity in legal principle.

Section 10 SGA:
10(1). Unless a different intention appears from the terms of the contract,
stipulations as to time of payment are not of the essence of a contract of
sale.
(2) Whether any other stipulation as to time is or is not of the essence of
the contract depends on the terms of the contract.
(3) In a contract of sale, month prima facie means calendar month.

Hartley v Hymans [1920] 3 KB 475 (McCardie J):


Now, if time for delivery be of the essence of the contract, as in the

present case, it follows that a vendor who has failed to deliver within the
stipulated period cannot prima facie call upon the buyer to accept delivery
after that period has expired. He has himself failed to fulfil the bargain and
the buyer can plead the seller's default and assert that he was not ready
and willing to carry out his contract. That this is so seems clear. It is, I take
it, the essential juristic result when time is of the essence of the contract.
... In the present case, it is to be noted, the plaintiff relies on the
defendant's letters, and he pleads those letters in the statement of claim
as evidence of and as constituting an agreement for an extension of time
for delivery, or a waiver of the contract time...
Now, if the present be a case of waiver I should hold that the defendant
had undoubtedly waived the condition that the goods should be delivered
by November 15, inasmuch as long after that date he demanded and
received deliveries under the contract.
...In my view the facts and documents here clearly call for one or more
juristic bases upon which to support the plaintiff's claim. I shall hold: (1.)
That here the defendant waived his right to insist that the contract period
terminated on November 15, 1918. The waiver is evidenced by writing,
and I rule that it binds the defendant even though it took place after
November 15. Waiver is not a cause of action, but a man may be debarred
by the doctrine of waiver from asserting that an original condition
precedent is still operative and binding. In view, moreover, of the fact that
the plaintiff acted (at great expense to himself) upon the footing that the
waiver had taken place, it would, I conceive, be wrong to allow the
defendant to insist on the terms of the original contract as to time.

13

(2.) I hold that (in so far as estoppel differs from waiver) the defendant is
estopped from saying that the period for delivery expired on November 15,
1918, or from asserting that the contract ceased to be valid on that date.
Inasmuch as the defendant led the plaintiff to believe by letter, as well as
conduct, that the contract was still subsisting, and inasmuch as the
plaintiff acted on that belief at serious expense to himself, it would be
unjust to allow the defendant to assert that the delivery period ended on
November 15. ...
(3.) I hold that upon the letters passing between the parties I can, and
ought to, imply a new agreement that the contract period should be
extended beyond November 15, 1918 - i.e., until the defendant had given
a notice to the plaintiff requiring delivery within a reasonable period. I here
imply such agreement..

Classification as condition in Mercantile Context


* Man Financial (S) Pte Ltd v Wong Bark Chuan David [2008] 1 SLR
663.

Phang JA: The fourth factor centres on the importance placed on certainty
and predictability in the context of mercantile transactions. Case law
suggests that courts are more likely to classify contractual terms as
conditions in this particular context, especially where they relate to timing
(see, for example, Bunge and The Mihalis Angelos).

Bunge Corporation New York v Tradax Export SA [1981] 1 WLR 711


(MK784 / 780, BBF576).
Lord Wilberforce: In conclusion, the statement of the law in Halsbury's Laws of
England appears to me to be correct, in particular in asserting (1) that the court
will require precise compliance with stipulations as to time wherever the
circumstances of the case indicate that this would fulfil the intention of the
parties, and (2) that broadly speaking time will be considered of the essence in
"mercantile" contracts The relevant clause falls squarely within these
principles, and such authority as there is supports its status as a condition In
this present context it is clearly essential that both buyer and seller (who may
change roles in the next series of contracts, or even in the same chain of
contracts) should know precisely what their obligations are.

* Maredelanto Compania Naviera v Bergbau-Handel GmbH (The


Mihalis Angelos) [1971] 1 QB 164 (MK780 / 776, BBF 572) (Megaw
LJ)
vessel expected ready to load ... about 1 July 1965 a condition.
Charterers motivation to terminate irrelevant.
Charterer entitled to rely on breach of condition, despite having
given invalid reason.
Classification as condition by Parties Agreement
* L Schuler AG v Wickman Machine Tools Sales Ltd [1973] 2 All ER
39 (MK 761 / 7571, BBF 599) (Lord Reid and Lord Wilberforce
(dissent)).
* Man Financial (S) Pte Ltd v Wong Bark Chuan David [2008] 1 SLR
663 (Phang JA) esp [165][170].
Phang JA: (c) The second factor: Where the contractual term itself expressly
states that it is a "condition"

14

The second factor is an ostensibly obvious one: Where the contractual


term itself expressly states that it is a "condition", then that term would
generally be held by this court to be a condition.
However, we have added the word "ostensibly" because, even in what
appear to be very clear-cut situations, there is case law that suggests that
the express use of the word "condition" might (on occasion, at least) be
insufficient to render that term a condition in law. In this regard, the House
of Lords decision of L Schuler AG v Wickman Machine Tool Sales Ltd [1974]
AC 235 ("Schuler") comes readily to mind. In that case, the majority of the
House held that, although the word "condition" was expressly utilised, that
word was being utilised not as a term of legal art, but, rather, in a lay
sense.
At first blush, the approach adopted by the majority in Schuler is not a
wholly untenable one. After all, it is true that the same word (here,
"condition") can take on different meanings depending on the context in
which it is used. With respect, however, a close analysis of the reasoning of
the majority in Schuler demonstrates a preoccupation with the
consequences of the breach of contract in that case, rather than a focus (in
accordance with the condition-warranty approach in Situation 3(a)) on the
nature of the term breached. Indeed, there is a reference by Lord
Kilbrandon (who was one of the majority judges) to the "grotesque
consequences" (id at 272) of holding the term breached to be a "condition"
in the strict legal sense of the word.
It is our view that the majority of the House in Schuler were, in substance
and effect, applying the Hongkong Fir approach instead (which, it will be
recalled, falls under Situation 3(b) and, more importantly, relates to the
actual nature and consequences of the breach instead). Indeed, there is a
very powerful (and, in our view, persuasive) dissenting judgment by Lord
Wilberforce (see Schuler at 262-263), who warned against rewriting, in
effect, what was the clear intention of the contracting parties that the term
concerned be a "condition" in the strict legal sense of the word (in
accordance with the substance and spirit of the condition-warranty
approach under Situation 3(a)).
Indeed, it might well have been the fact situation in Schuler which
prompted the majority of the House to adopt what was, in substance and
effect, the Hongkong Fir approach instead. With respect, however, the
intention of the parties (pursuant to the condition-warranty approach)
ought to take precedence for, as we pointed out in RDC Concrete ([152]
supra) at [100], although the Hongkong Fir approach is conventionally
associated with a sense of fairness (in that it allows termination of a
contract only if the nature and consequences of the breach are so serious
as to deprive the innocent party of substantially the whole of the benefit of
the contract which it was intended to obtain from the contract), it is
equally true that a sense of fairness (albeit from a different perspective)
also features when the condition-warranty approach is applied inasmuch
as it is fair to hold the contracting parties to their original bargain.
We also observed in RDC Concrete (especially at [110]) that general House
of Lords decisions after Schuler in fact supported the approach that we
adopted in that case (in particular, our stance that the condition-warranty
approach in Situation 3(a) should take precedence over the Hongkong Fir
approach in Situation 3(b) in so far as it ought to be ascertained, first,
whether or not the contractual term concerned is a condition): see, for
example, Bunge Corporation, New York v Tradax Export SA, Panama [1981]

15

1 WLR 711 ("Bunge") and Torvald Klaveness A/S v Arni Maritime


Corporation [1994] 1 WLR 1465.

7.

INTERMEDIATE / INNOMINATE TERM APPROACH


Situation 3(b) of RDC Concrete

The condition-warranty approach promotes certainty in that the


result flowing from breach is clear. Once there is a breach of
condition, it follows that the aggrieved party has the right to
terminate, despite the consequences of breach being slight;
likewise, breaching a mere warranty gives no right to terminate
despite the consequences being serious. The sometimes harsh
results of classifying a breached term under the condition-warranty
approach has led to the recognition of intermediate or
innominate terms.
The breach of an intermediate or innominate term does not
automatically give an aggrieved party the right to terminate;
whether such right arises depends on the seriousness of the
consequences. In short, where an intermediate term has been
breached, the aggrieved party has a right to terminate only if such
breach deprives the aggrieved party of substantially the whole
benefit which it was the intention of the parties as expressed in the
contract that he should obtain as the consideration for performing
those undertakings (Hong Kong Fir, Diplock LJ).
* Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha [1962] 2
QB 26,
[1961] 2 All ER 257 (MK 775 / 770, BBF 567) (Diplock LJ)
seaworthiness under 24-mth charterparty, requiring vessel to be
in every way fitted for ordinary cargo service; seaworthiness of
vessel not condition.
* Cehave N.V. v. Bremer Handelsgesellschaft m.b.H. (The Hansa
Nord) [1976] Q.B. 44 (MK 782 / 778, BBF 570-571) (Roskill LJ)
Rejected citrus pulp pellets; shipment to be made in good
condition not condition.
* Federal Commerce and Navigation v Molena Alpha Inc (The
Nanfri)
[1979] AC 757 esp 778-779 (Lord Wilberforce)
Owners of vessel announced threatened breach; owner will
issue claused bills of lading instead of bills with freight prepaid. Term breached not a condition; innominate term.
Renunciation or repudiatory breach going to root of contract;
depriving charterers of substantially the whole benefit of
contract.
Alliance Concrete Singapore Pte Ltd v Comfort Resources Pte Ltd
[2009] 4 SLR(R) 602 (Phang JA) esp [54]-[57].
Cousins Scott William v The Royal Bank of Scotland plc [2010] SGHC
73 at [61-65]
Steven Chong JC: In determining whether the breach had deprived the
defendant of the substantial benefit of the Redundancy Agreement,
counsel for the defendant accepted that the inquiry is focussed not on the
potential loss of the breach but the actual loss, if any. The parties have to

16

wait and see what the nature and consequences of the breach actually
are. See RDC Concrete Pte Ltd at [99] to [110].
It is indisputable that the plaintiff did not substantially breach the
Redundancy Agreement. Although he initially breached the confidentiality
obligation in forwarding the two emails, he subsequently deleted them on
the same day when he was instructed to do so by the defendant. There is
no dispute that the breach did not cause any loss whatsoever to the
defendant. Thereafter the plaintiff, at the request of the defendant,
reinforced his confidentiality obligation by executing a Statutory
Declaration.
On the evidence, I find that the plaintiffs breach did not deprive the
defendant of substantially the whole benefit of the Redundancy
Agreement. On the contrary, I find that the defendant did in fact receive
substantially the whole benefit of the Redundancy Agreement.
In the circumstances, I find that while the plaintiff did breach his
confidentiality obligation, the breach was not repudiatory in nature so as to
entitle the defendant to terminate the Redundancy Agreement. Such a
breach merely entitles the defendant to a claim in damages. However as
the defendant has not suffered any loss arising from the forwarding of the
two emails, I will only award nominal damages to the defendant on
account of this breach. Accordingly, I find that the sum of $455,085.39
payable by the defendant under the Redundancy Agreement is due and
owing to the plaintiff.
In coming to this decision, I must stress that I am not suggesting that a
breach of a confidentiality clause in a redundancy agreement can never
amount to a repudiatory breach. This was a submission which the plaintiff
made in his closing. In my opinion, the question of whether a breach of a
confidentiality clause can amount to a repudiatory breach of a redundancy
agreement can only be answered by reference to the terms of the
agreement and the effect of the breach. I have no doubt that an employer
can, with appropriately robust drafting, achieve the result that has eluded
the defendant in this case.

8.

EXPRESS TERMINATION CLAUSES


Situation 1 of RDC Concrete

Chua Chian Ya v Music & Movements [2010] 1 SLR 607 at [35]


(Phang JA)

Clause 10 (Statement of Accounts & Audits):


10.1 A statement of all accounts shall be provided and delivered to the Writer
by the Publisher whether or not any royalties or fees are then due to the Writer,
and all monies due thereunder pursuant to Paragraph 6 hereof [viz, the provision
on royalties] shall be paid by the Publisher to the Writer, by bank order or in
cheque, in Singapore Dollars.
10.2 The Writer or its representative shall have the right to inspect all books,
records and other documents of the Publisher related to the Compositions, at the
place of business of the Publisher, during usual business hours, and upon
reasonable notice; all costs of such inspection shall be paid by the Writer;
provided, however, that if more than ten (10%) percent of difference between the
rendered statements by the Publisher and the result of [the] said inspection has
occurred, all costs (except travelling and living costs) of such inspection shall be
paid by the Publisher. These audit costs may never exceed an amount equal to
the amount of underpayment.
Clause 12 (Suspension & Termination):
In the event that the Publisher fails to account and make payment hereunder or
fails to perform any obligations required hereunder and in the event that such
failure is not cured within thirty (30) days after written notice has been served on

17

the Publisher, or in the event that the Publisher becomes inactive, ceases doing
music publishing business or ... [goes] into compulsory liquidation or bankruptcy,
then and in any such events the Writer, in addition to such other rights or
remedies which it may have at law or otherwise under this agreement, may elect
to cancel or terminate this agreement without prejudice to any rights or claims it
may have, and then all right[s] in and to the Composition[s] ... shall revert to the
Writer and the Publisher may not thereafter exercise any rights hereunder.
This is a clear example of Express Termination Clause.
Phang JA: Hence, there was nothing to show that true and complete
statements of account were in fact provided by M&M. There was, as far as
the evidence on record shows, a clear breach of cl 10 of the Principal
Agreement, which entitled Chua to terminate the agreement pursuant to cl
12 thereof and to recover the rights in the Compositions. Clause 12 of the
Principal Agreement is, in fact, a clear example of an express termination
clause which falls under "Situation 1" as outlined by this court in RDC
Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd [2007] 4 SLR(R) 413 at [91]
(reference may also be made to the recent decisions of this court in Sports
Connection Pte Ltd v Deuter Sports GmbH [2009] 3 SLR(R) 883 at [51]-[56]
and Fu Yuan Foodstuff Manufacturer Pte Ltd v Methodist Welfare Services
[2009] 3 SLR(R) 925 at [27]-[36]).

Rice v Great Yarmouth Borough Council The Times 26/7/2000, 2000


Westlaw 823961 [17]-[28] (MK 789 / 785) (Hale LJ):
The most significant provision is contained in Clause 23, headed
Termination:

. If the contractor: 23.2.1 commits a breach of any of its obligations


under the Contract; the Council may, without prejudice to any
accrued rights or remedies under the Contract, terminate the
Contractor's employment under the Contract by notice in writing
having immediate effect.
There is no commercial common sense in reading this literally. Refused to believe
this is what parties meant.
If the Contractor's employment is terminated as provided in
Condition 23.2 and is not reinstated, the Council shall: 23.3.1
cease to be under any obligation to make further payment until the
costs, loss and/or damage resulting from or arising out of the
termination of the Contractor's employment shall have been
calculated and provided such calculation shows a sum or sums due
to the Contractor
For the reasons which the judge gave, the notion that this term would
entitle the council to terminate a contract such as this at any time for any
breach of any term flies in the face of commercial common sense.
However, Mr Mann also argues that the judge should first have considered
which terms of the contract had been broken and whether they were such
important terms as to give rise to a right to terminate. He identified a core
obligation in each contract, either in the exact terms of clause 6.1 or
something very similar to it:
During the contract period the contractor shall provide the Service
in a proper skilful and workmanlike manner, to the contract
standard and to the entire satisfaction of the authorised officer.

18

The difficulty with that argument is that this is a classic example of an


innominate term: one which can be broken in so many different ways and
with such varying consequences that the parties cannot be taken to have
intended that any breach should entitle the innocent party to terminate
the whole contract.

Fu Yuan Foodstuff v Methodist Welfare Services [2009] 3 SLR 925 at


[28-36]
Referred to Rice. Singapore taking different path.
Referred to a specific provision, and the provision was really about
compliance to Singapore establishments.
Dispute was about foreign workers.
Fully reflected the parties intentions.
Or: as a charitable organisation, they wanted to keep to laws of
Singapore.
Phang JA: In our view, this case fell squarely within "Situation 1" in RDC
Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd [2007] 4 SLR(R) 413 ("RDC
Concrete") at [91], ie, a situation where the contract clearly and
unambiguously states that, should a certain event or events occur, the
innocent party will be entitled to terminate the contract. Clause 3.2 of the
Agreement expressly stipulated that the respondent would have the right
to immediately terminate "should the [appellant] breach any item under
[cl] ... 2.7". Since there was, as we had earlier found, a breach of cl 2.7.2 of
the Agreement, the right to terminate the Agreement immediately arose
pursuant to cl 3.2. ...
Unlike the approach adopted in Rice, we gave full effect to the termination
clause concerned (here, cl 3.2 read with cl 2.7.2) as it in fact reflected the
parties intentions. Indeed, if a termination clause is clearly drafted, its
literal language ought to accurately reflect the intentions of the parties.
This is precisely the situation here. Let us elaborate.
The respondent in this appeal is a charitable organisation. It is therefore
understandable that it would not wish to be implicated in any impropriety
or criminal offence. ... The Judge further found that the appellant must
also have been aware that the employment law relating to foreign workers
would be a major concern of the Home as it would hardly want to be an
accessory to the breach of Singapores labour laws (ibid). In the
circumstances, giving effect to the literal language of cl 3.2 of the
Agreement (to the effect that any breach of cl 2.7 of the same would justify
termination of the Agreement) is wholly consistent with the intentions of
the parties as ascertained from the context concerned. In other words, the
literal language of cl 3.2 (in particular the words breach any item under
[cl] ... 2.7) accurately reflected the intentions of the parties (but contrast
this with Rice where it was held that a literal interpretation of the
termination clause flouted business common sense).
In the circumstances, therefore, there is no need (as was the situation in
Rice) to read down cl 3.2. The process of reading down the scope of a
termination clause is, of course, one of the legal mechanisms utilised by
the courts in order to control termination clauses. Such an approach was,
as we have seen, utilised in Rice. However, as we have explained above,
there is no need to adopt this approach in the present appeal as, unlike the
situation in Rice, the termination clause here was consistent with the
commercial reality between the parties which centred on their desire to
comply with the employment laws of Singapore. Indeed, each termination
clause must be analysed by reference to the precise language utilised by
the parties in the context in which they entered into the contract, bearing
in mind the fact that the ultimate aim of the court is to give effect to the

19

intentions of the parties as embodied within the wording of the termination


clause in question.

MK (5th ed, 2012) at pp.792-793:


Two points of significance emerge from this case [Rice v Great
Yarmouth]. The first is that, in deciding whether or not there has
been a repudiatory breach of contract, it is permissible to take a
cumulative approach and have regard to the range of breaches
committed by the party in breach. The second and much more
important point relates to the interpretation of clause 23.2.1
adopted by the Court of Appeal. It held that it gave the Council the
right to terminate the contract only on the occurrence of a
repudiatory breach of contract. There are two substantial objections
to this interpretation. First, the Council had a right to terminate
under the general law on the occurrence of a repudiatory breach so
why insert a clause into the contract if its only effect was to
replicate a right that already existed under general law? Secondly,
the Court of Appeal failed to give sufficient weight to the word any
in the clause (if the contractor commits a breach of any of its
obligations under the contract, the Council may ... terminate the
contractors employment). The response of the Court of Appeal to
this objection was that the notion that this term entitled the Council
to terminate the contract at any time for any breach of any term
flew in the face of commercial common sense. It is difficult to resist
the conclusion that the Court of Appeal allowed its perception of
commercial common sense to override the ordinary meaning of the
words in the contract (contrast Looney v Trafigura Beheer BV [2011]
EWHC 125 (Ch), [2011] All ER (D) 17 (Feb), where it was held that
the defendants had an unfettered right to terminate provided that
they paid the relevant termination fee). Further, the effect of doing
so was to expose the Council to a claim for substantial damages for
wrongful termination.
This decision gives rise to significant drafting difficulties. Termination
clauses are regularly used in practice and this decision caused a
degree of consternation among practitioners. Is it possible to draft a
clause which gives a right to terminate the contract when the
breach is not repudiatory at common law? ... A party who wishes to
have the benefit of a wider right to terminate might be better
advised to stipulate that the right to terminate arises in the event of
any breach (whether or not that breach is repudiatory). Great
Yarmouth is an important case because it demonstrates the
importance of drafting issues and the important role that
interpretation of clauses can play in the development of the law.
Judges can wield significant power through the process of
interpretation. It is difficult to resist the conclusion of the Court of
Appeal of Singapore in Fu Yuan Foodstuff ... that the Court of Appeal
in Great Yarmouth read down the scope of the termination clause
in order to control its operation. The legitimacy of this restrictive
approach to interpretation is open to question.
Loss of Bargain Damages
* Sports Connection v Deuter Sports GmbH [2009] 3 SLR(R) 883 esp
[55]
Difference between Termination clause vs Breach
20

Termination clause: No compensation


Beach of condition: Compensation
Phang JA: It should, however, be noted, at this juncture, that whilst
Situation 1 entails (in substance) the same legal effect as a condition
(pursuant to the condition-warranty approach), this is only with regard to
the termination of the contract. However, this does not necessarily mean
that, from a remedial perspective, the innocent party is also entitled to the
full measure of damages if there has, in fact, been no breach which would
have entitled it to terminate the contract at common law (see the English
Court of Appeal decision of Financings Ltd v Baldock [1963] 2 QB 104
("Financings") as well as the High Court of Australia decision of Shevill v
The Builders Licensing Board (1982) 149 CLR 620; but cf Afovos Shipping
and (more importantly) the English Court of Appeal decision of Lombard
North Central Plc v Butterworth [1987] QB 527 ("Lombard") (which
demonstrates that the effect of Financings could be avoided by
appropriate drafting and which is noted in G H Treitel, "Damages on
Rescission for Breach of Contract" [1987] LMCLQ 143 as well Hugh Beale,
"Penalties in Termination Provisions" (1988) 104 LQR 355); reference may
also be made to Stocznia Gdynia SA as well as Carter on Termination
Clauses ([53] supra) and Brian R Opeskin, "Damages for Breach of Contract
Terminated Under Express Terms (1990) 106 LQR 293); indeed, even if the
contract itself stipulates the damages recoverable, the term concerned
might still be unenforceable as constituting a penalty clause (see, for
example, Financings and Lombard).

Lombard North Central v Butterworth [1987] QB 527 (BBF605)


Contract for Hire. Payment by installments. Clause that punctual
payment of each payment of the essence. 2(a) This means late
payment is a breach.
Can claim lost profits, loss of bargain damages, future 12 months.
Innocent party can end the contract. If its a termination
Financings Ltd v Baldock [1963] 2 QB 104 (MK772 / 768, BBF604)
Termination Clause: Should the hirer fail to pay in 10 days, then
owner can terminate hiring. Court held could not claim for future.
Tan Wee Fong v Denieru Tatsu F&B Holdings [2010] 2 SLR 298 esp
[30-33]
Belinda Ang J: At this juncture it is useful as a reminder to view the
difference in remedial consequences under two scenarios. The first
scenario is where a party terminates pursuant to express contractual
provisions but has no concurrent right to terminate at the common law,
and the only remedy available to the innocent party is the recovery of
damages for unperformed accrued obligations up to the date of
termination. In other words, the innocent party is not entitled to claim loss
of bargain damages having terminated pursuant solely to an express
contractual provision to do so. Authority for this legal proposition may be
traced to the decision in Financings Ltd v Baldock ("Financings"). In that
case, the English Court of Appeal held that a clause for payment by the
hirer of two-thirds of the total hiring costs in the event of the termination of
the agreement by the owner for non-payment of rent was void as a penalty
clause. In those circumstances, the owner having elected to terminate the
hiring for non-payment of two instalments of hire cannot claim damages
for any loss after the date of termination. The defendant hirer paid the
initial 100 but made no further payments. When the instalments were two
months in arrears the plaintiff owner terminated the contract under an

21

express contractual provision which entitled it to terminate if the hirer


failed to pay any instalment within 10 days of the due date, repossessed
the truck and eventually sold it for 140. Lord Denning MR succinctly
stated the position thus (at 114):
Suffice it to say that in this case there was no repudiation [under
common law], but only non-payment, for which the plaintiffs
themselves, under an express stipulation in that behalf, terminated
the agreement. In that situation they can only recover the unpaid
instalments with interest.
In Financings, the hirer had at the date on which the owners exercised
their option to terminate the contract said nothing to indicate his
unwillingness or his inability to pay either these or any future instalments.
In the absence of any express contractual provision to the contrary, the
non-payment of the two instalments would not of themselves go to the
root of the contract or evince an intention on the part of the hirer no longer
to be bound by the contract (ie, the facts do not fall within Situations 2 or
3(b) identified in RDC Concrete ([26] supra)). Thus, the owners only had a
right to terminate under express contractual provisions; no right to
terminate had arisen under the common law. In the result, the owners
were only entitled to recover damages for unperformed obligations which
had accrued at the date of the termination.
The second scenario is where the party who had terminated pursuant to
express contractual provisions had a concurrent right to do so under the
common law, and as such, he would be entitled, in principle, to recover
loss of bargain damages. As Lombard North Central Plc v Butterworth
("Lombard") illustrates, the non-payment there breached a condition of
prompt payment. The defendant leased equipment from the plaintiff under
an agreement that provided for the payment of rentals at quarterly
intervals on a specified day. Clause 2(a) of the contract stipulated that
punctuality in making payments "is of the essence". Clause 5(a)
additionally provided for a right to terminate in the event of default in
punctual payment by the lessee. The court found that because of cl 5(a),
the lessee's delay in making payment was a repudiatory breach. As a
result, the owner's right to terminate had arisen under both express
contractual provisions and the common law. The court thus allowed the
claimant to recover loss of bargain damages. In Lombard, the inclusion of
cl 5(a) had led to the conclusion that cl 2(a) was a condition, and because
a condition had been breached, the innocent party was entitled to
terminate under the common law, and thus could recover loss of bargain
damages. As noted (at [32] above), there was no repudiatory breach in
Financings to give rise to a right to terminate under the common law which
would have allowed the court to reach the same conclusion as that in
Lombard.
Chitty on Contract at para 22-049 helpfully summarised the legal position
as follows: Thus, where a contracting party terminates further
performance of the contract pursuant to a term of the contract, and the
breach which has caused it to exercise that power is not a repudiatory
breach, the party exercising the right to terminate may only be entitled to
recover damages in respect of the loss which it has suffered at the date of
termination and not for loss of bargain damages. Where, however, the
breach is also repudiatory and that repudiatory breach has been accepted,
loss of bargain damages can be recovered by accepting the contractual
right to do so or by accepting the other party's repudiation of the contract.

22

Hence, whether the defendant could recover loss of bargain damages


depended on the existence of a concurrent right to terminate under the
common law.

Max Media FZ LLC v Nimbus Media Pte Ltd [2010] 2 SLR 677, [2010]
SGHC 30 at [35]
Andrew Ang J: Currently, where a contract is terminated pursuant to an
express provision alone, ie, under Situation 1, damages for loss of bargain
may be recoverable only if there is a concurrent repudiatory breach under
common law: see Lord Nicholls' speech in Lombard ([31] supra) at 546
which was reaffirmed by the Court of Appeal in Sports Connection at [55]
(see also Tan Wee Fong v Denieru Tatsu F&B Holdings (S) Pte Ltd [2009]
SGHC 290 at [31]-[35]). On the other hand, without a repudiatory breach
under common law, the innocent party may not claim for damages arising
after the contract's termination (see generally Financings ([31] supra)),
although it will still be entitled to recover damages in respect of the loss it
suffered at or before the date of termination. But if Situation 1 is
substantially the same as Situation 3(a), then this bifurcated principle
would make no sense. It is artificial to ask what is the nature of a term
under common law where there is within the contract an express provision
stating that the breach of that term would give the innocent party the right
to terminate. This quandary was also recognised in Brian R Opeskin's
article, "Damages for Breach of Contract Terminated under Express Terms"
[1990] LQR 106 (Apr) 293.

Under current English law, whether an aggrieved party who elects to


terminate a contract for breach is entitled to claim damages for the
loss of the entire bargain depends on whether he had only an
express contractual termination right or a concurrent common law
right to terminate (say, for breach of condition, or for repudiatory
breach of an intermediate term going to the root of the contract by
depriving the aggrieved party of substantially the entire benefit of
the contract). This seems to have been accepted as the position
under Singapore law (Sports Connection v Deuter Sports; Tan Wee
Fong v Denieru Tatsu; Max Media v Nimbus).
Hence, an owner who had the right to terminate a hire-purchase
contract pursuant only to an express termination clause was entitled
only to outstanding hire charges which had already accrued prior to
the termination date, and not to the loss of the entire bargain
encompassing future hire charges (Financings v Baldock). On the
other hand, if the owner had a right to terminate at common law
because of a repudiatory breach of an intermediate term or a breach
of condition (say, the term breached was a condition because it was
expressed to be of the essence of the contract), then he would be
entitled to damages for loss of the entire bargain (Lombard North v
Butterworth). Where an aggrieved party has a right to terminate
pursuant to an express termination clause as well as a concurrent
common law right to terminate, his invocation of the express
termination clause may also be effective as a termination for
common law repudiation; thus entitling him to damages for the loss
of the entire bargain (Stocznia Gdynia v Gearbulk).

23

*Stocznia Gdynia v Gearbulk Holdings [2009] EWCA Civ 75, [2009] 3


WLR 677 esp [44-45] (Moore-Bick LJ) Contract for sale of ship;
seller committing common law repudiatory breach by non-delivery.
Contract contained express termination clause. Purchasers letter
gave notice to terminate invoking express termination clause.
Notice effective to terminate both for common law repudiation and
under express termination clause; purchaser entitled to damages for
loss of bargain.
Moore-Bick LJ: It must be borne in mind that all that is required for
acceptance of a repudiation at common law is for the injured party to
communicate clearly and unequivocally his intention to treat the contract
as discharged: see Vitol SA v Norelf Ltd [1996] AC 800, 810 g -811 b, per
Lord Steyn. If the contract and the general law provide the injured party
with alternative rights which have different consequences, as was held to
be the case in the Dalkia case [2006] 1 Lloyds Rep 599, he will necessarily
have to elect between them and the precise terms in which he informs the
other party of his decision will be significant, but where the contract
provides a right to terminate which corresponds to a right under the
general law (because the breach goes to the root of the contract or the
parties have agreed that it should be treated as doing so) no election is
necessary. In such cases it is sufficient for the injured party simply to make
it clear that he is treating the contract as discharged: see the Dalkia case
[2006] 1 Lloyds Rep 599, para 143, per Clarke J. If he gives a bad reason
for doing so, his action is none the less effective if the circumstances
support it. That, as I understand it, is what Rix LJ was saying in Stocznia
Gdanska SA v Latvian Shipping Co [2002] 2 Lloyds Rep 436, para 32, with
which I respectfully agree.
In the present case the parties accept, and indeed the arbitrator has found,
that the breaches on the part of the yard which entitled Gearbulk to
terminate the contracts were in each case sufficient to amount to a
repudiation. I accept Mr Dunning's submission that in its letters of 7
November 2003 and 4 August 2004 Gearbulk purported to terminate the
contract pursuant to article 10.1(b) and (c) and not under the general law,
but each of the letters made it clear that it was treating the contract as
discharged and in those circumstances each was sufficient to amount to an
acceptance of the yard's repudiation. In its letter of 30 November 2004
Gearbulk sought to rely on both. Mr Dunning said that letter was equivocal
as between reliance on the terms of the contract and reliance on the
general law. Perhaps it was, but it was quite unequivocal as to Gearbulk's
intention to treat the contract as discharged and that was all that was
necessary.

9.

AGGRIEVED PARTYS ELECTION TO TERMINATE

A breach of contract, even a repudiatory one, does not itself bring


the contract to an end; rather it confers on the aggrieved party a
right of election, a choice whether
(i)
to accept the repudiation and terminate the contract; or
(ii)
to affirm the contract and continue with performance.
If the aggrieved party elects to terminate the contract, he must
generally notify the defaulting party of his choice; and mere silence
is generally insufficient to amount to acceptance of repudiation. (MK
798/792)

24

Geys v Societe Generale, London Branch [2013] 1 AC 523; [2012]


UKSC 63 (Lord Sumption dissenting).
(Employment contract; repudiatory breach; not automatically
terminated upon breach; terminated when innocent party elects to
accept repudiation).
Vitol SA v Norelf Ltd [1996] AC 810 at 810:

Lord Steyn: An Act of acceptance of a repudiation requires no particular


form: a communication does not have to be couched in the language of
acceptance. It is sufficient that the communication or conduct clearly and
unequivocally conveys to the repudiating party that the aggrieved party is
treating the contract as at an end.

By accepting a repudiatory breach, the aggrieved party brings the


contract to an end; however, the contract is terminated
prospectively rather than retrospectively. Both parties are
discharged from their future primary obligations under the contract,
but rights accrued prior to termination remain intact (Photo
Production v Securicor Transport [1980] AC 827). Termination and
discharge with prospective effect in this sense, is unlike rescission
ab initio which purports to unwind a contract retrospectively. In fact,
it is possible for some clauses in a contract to survive its
termination; for example, arbitration clauses (Heyman v Darwins Ltd
[1942] AC 256) or perhaps even confidentiality clauses (Campbell v
Frisbee [2002] EWCA Civ 1374) might possibly survive termination if
intended by the parties to do so. (MK 799/793)
It has been said that the law does not require an injured party to
snatch at a repudiation and he does not automatically lose his right
to treat the contract as discharged merely by calling on the other to
reconsider his position and recognise his obligation (Yukong Line v
Rendsberg Investments [1996] 2 Lloyds Rep 604 (Moore-Bick J)).
Nonetheless, if the aggrieved party elects to affirm the contract, he
loses his right to terminate; the right of election, once exercised, is
not revocable. The general rule is that an election to affirm must be
unequivocal. The aggrieved party will not be held to have affirmed
unless he had knowledge of the facts giving rise to the breach; and
it has been suggested that he must also know of his right to choose
between affirmation and termination. (MK 799/793)
Although there is authority that a party will not be held to have
elected to affirm unless he knew not only of the breach but also of
his right to terminate (Peyman v Lanjani [1985] Ch 457), he might
nonetheless be estopped (regardless of his knowledge of his right)
from denying affirmation if the other party acts on his apparent
affirmation (The Hannah Blumenthal [1983] 1 All ER 34). (BBF 616)
Motor Oil Hellas (Corinth) Refineries v Shipping Corp of India (The
Kanchenjunga) [1990] 1 Lloyds Rep 391 at 399 (BBF 616)
Lord Goff: Election is to be contrasted with equitable estoppel, a principle
associated with the leading case of Hughes v Metropolitan Railway Co
(1877) 2 App Cas 439. Equitable estoppel occurs where a person, having
legal rights against another, unequivocally represents (by words or
conduct) that he does not intend to enforce those legal rights; if in such
circumstances the other party acts, or desists from acting, in reliance upon
that representation, with the effect that it would be inequitable for the
representor thereafter to enforce his legal rights inconsistently with his
representation, he will to that extent be precluded from doing so.

25

There is an important similarity between the two principles, election and


equitable estoppel, in that each requires an unequivocal representation,
perhaps because each may involve a loss, permanent or temporary, of the
relevant party's rights. But there are important differences as well. In the
context of a contract, the principle of election applies when a state of
affairs comes into existence in which one party becomes entitled to
exercise a right, and has to choose whether to exercise the right or not. His
election has generally to be an informed choice, made with facts giving
rise to the right. His election once made is final; it is not dependent upon
reliance on it by the other party. On the other hand, equitable estoppel
requires an unequivocal representation by one party that he will not insist
upon his legal rights against the other party, and such reliance by the
representee as will render it inequitable for the representor to go back on
his representation. No question arises of any particular knowledge on the
part of the representor, and the estoppel may be suspensory only.
Furthermore, the representation itself is different in character in the two
cases. The party making his election is communicating his choice whether
or not to exercise a right which has become available to him. The party to
an equitable estoppel is representing that he will not in future enforce his
legal rights. His representation is therefore in the nature of a promise
which, though unsupported by consideration, can have legal
consequences; hence it is sometimes referred to as promissory estoppel.

There may be an exception to the rule that an election to affirm,


once exercised, is irrevocable. In cases of continuing repudiatory
conduct by the defaulting party: The aggrieved party who has
elected to affirm the contract after the first breach may be able to
treat the continuing non-performance as a fresh act of repudiation
(Johnson v Agnew [1980] AC 367; Safehaven v Springbok (1998) 71
P&CR 59). Although there cannot be acceptance of the breach once
a repudiation has been spent, an aggrieved party may be able to
terminate a contract (notwithstanding earlier affirmation) if
continued refusal of the defaulting party amounts to further
repudiatory conduct. (MK 800/794)
A repudiatory breach can put the aggrieved party in a difficult
position: He might be reluctant to terminate or affirm hastily, given
that the election is generally irrevocable. It appears that there might
yet be a third option, between affirmation and termination, open
to an aggrieved party:
(iii) He has a reasonable period of time in which to decide
whether to terminate or affirm (Stocznia Gdanska).
The period allowed depends on the facts, but will evidently not be
too long because a party who does nothing for too long will be held
to have affirmed the contract. If the aggrieved party wishes to call
upon the defaulting party to perform, but does not wish to be held
to have lost his right to terminate via affirmation, he must expressly
reserve his rights. (MK 800/794)
Stocznia Gdanska v Latvian Shipping Company (No. 2) [2002] 2
Lloyds Rep 436, [2002] EWCA Civ 889 at [87].
Rix LJ: In my judgment, there is of course a middle ground between
acceptance of repudiation and affirmation of the contract, and that is the
period when the innocent party is making up his mind what to do. If he
does nothing for too long, there may come a time when the law will treat
him as having affirmed. If he maintains the contract in being for the
moment, while reserving his right to treat it as repudiated if his contract
partner persists in his repudiation, then he has not yet elected. As long as

26

the contract remains alive, the innocent party runs the risk that a merely
anticipatory repudiatory breach, a thing writ in water until acceptance,
can be overtaken by another event which prejudices the innocent partys
rights under the contract such as frustration or even his own breach. He
also runs the risk, if that is the right word, that the party in repudiation will
resume performance of the contract and thus end any continuing right in
the innocent party to elect to accept the former repudiation as terminating
the contract.

Allen v Robles [1969] 3 All ER 154 (BBF 615)

Fenton Atkinson LJ: The lapse of time would only operate against them if
thereby there was some prejudice to the defendant or if in some way rights
of third parties intervened or if their delay was ... of such a length as to be
evidence that they had in truth decided to accept liability. None of these
possibilities arise here.

There could be a distinction between waiving the right to terminate


for breach of condition and waiving right to terminate for
repudiatory breach:
Aero-Gate Pte Ltd v Engen Marine Engineering Pte Ltd [2013] 4 SLR
409; [2013] SGHC 148, Vinodh Coomaraswamy J at [122]-[124]. See
also [34]-[42] on clarification of the concepts of waiver, election
and affirmation.
Once a contract has been terminated by the aggrieved partys
election, it cannot be revived even by the parties agreement.
Instead, such a fresh agreement may constitute a new contract.
Orix Capital Ltd v Personal Representative(s) of the Estate of Lim
Chor Pee
[2009] SGHC 201, [2009] 4 SLR(R) 1062 esp [28-30]

Judith Prakash J: It is clear from the texts and also accords with
commonsense that once a contract has been terminated, it comes to an
end and is not capable of being revived, even by the parties' agreement.
Instead, when there is such an agreement, what the parties create is a new
contract. In this case, the Lease ended on 7 July 2005 when the plaintiff
exercised its right of election and chose to terminate the Lease rather than
to allow it to continue to run. Having done this, the plaintiff was then
entitled to exercise all its remedies accruing under the Lease. The plaintiff
chose not to do this. Instead, at LCP's request and on the basis that certain
new terms were agreed to, it entered into a new contract in respect of the
lease of the Copiers. The plaintiff may have thought that it was reviving
the Lease but this was not the legal consequence of its action.

Can one party terminate, where both parties have been in breach?
Alliance Concrete Singapore v Comfort Resources [2009] 4 SLR(R)
602 at [44-46]

Phang JA: There appears to be a dearth of case law authority with regard
to the situation where both parties are in breach of contract and one party
seeks to terminate the contract. ... The applicable legal principles were, in
fact, considered by this court in Jet Holding Ltd v Cooper Cameron
(Singapore) Pte Ltd [2006] 3 SLR(R) 769 ("Jet Holding"), as follows (at [98][99]):

27

98. This situation (where both parties are in breach of contract) has
not, to the best of our knowledge, received much treatment in the
case law. However, the following observations by Kerr LJ in the
English Court of Appeal decision of State Trading Corporation of
India Ltd v M Golodetz Ltd [1989] 2 Lloyd's Rep 277 at 286 are
apposite:
The fact that in the present case both parties had committed
breaches before one of them elected to treat the contract as
repudiated appears to me to make no difference whatever;
nor the fact that (assumedly) both had been breaches of
condition. If A is entitled to treat B as having wrongfully
repudiated the contract between them and does so, then it
does not avail B to point to A's past breaches of contract,
whatever their nature. A breach by A would only assist B if it
was still continuing when A purported to treat B as having
repudiated the contract and [this emphasis is in the original
text] if the effect of A's subsisting breach was such as to
preclude A from claiming that B had committed a
repudiatory breach. In other words, B would have to show
that A, being in breach of an obligation in the nature of a
condition precedent, was therefore not entitled to rely on B's
breach as a repudiation.
99. The observations just quoted are both logical and principled. ...
In the English Court of Appeal decision of Lidl UK GmbH v Hertford Foods
Ltd [2001] EWCA Civ 938 ("Lidl"), a dispute arose with respect to a
contract for the supply of corned beef in 340g tins or units. The seller
agreed to supply 1,036,800 units to the buyer between March and end of
June 1997. The seller delivered 11,700 units by 25 April 1997. However,
the seller failed to make any further deliveries after 25 April 1997 due to a
severe shortage of raw materials. On the basis that invoices became
payable within 50 days, the first of the invoices raised by the seller
became due for payment on 9 May 1997. However, the buyer refused to
make payment by relying on a clause in the contract which allowed the
buyer to deduct from outstanding payments any loss and expenses
incurred by the buyer due to the seller's failure to deliver the goods at the
stipulated time. The buyer further withheld payment to cover any potential
further costs which might be incurred although this was not provided for in
the contract. The seller refused to resume deliveries until all moneys owing
for goods already delivered had been paid in full. The seller then purported
to terminate the contract on the grounds of non-payment by the buyer.
The Court of Appeal disposed of the argument that the seller's breach of
contract in not making sufficient deliveries disentitled it from terminating
for the buyer's breach by non-payment by relying on the principle
enunciated by Kerr LJ in State Trading Corporation of India Ltd v M
Golodetz Ltd [1989] 2 Lloyd's Rep 277 ("Golodetz") (as set out in Jet
Holding (see above at [46]). However, on the facts, it was held that the
seller was not entitled to terminate the contract. This was because the
breach by the buyer did not amount to a repudiation of the contract and
the seller did not have the right to terminate the contract even if the seller
had not itself been in breach of contract.

10.

RENUNCIATION / REPUDIATION / ANTICIPATORY BREACH


(Situation 2 of RDC Concrete)

28

Man Financial (S) Pte Ltd v Wong Bark Chuan David [2008] 1 SLR
663 at [155]

Phang JA: As stated in RDC Concrete, there are four situations which
entitle the innocent party (here, the appellant) to elect to treat the
contract as discharged as a result of the other party's (here, the
respondent's) breach. The second ("Situation 2") is where the party in
breach of contract ("the guilty party"), 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 (see RDC
Concrete at [93]).

Affinity between Doctrine of Anticipatory Breach


and RDC Concrete Situation 2 (Renunciation / Repudiation)
Renunciation (also called repudiation) occurs when one party by
words or conduct evinces an intention not to perform part or all of
the contract. Renunciation at or after the time of performance
amounts to actual breach or impossibility. Renunciation before the
time fixed for performance is itself a breach (although labelled as
anticipatory breach, suggesting that the breach is to come), and
if sufficiently serious, entitles the aggrieved party to terminate the
contract at once and claim damages for the loss of the contract.
(Chen-Wishart 514/458)

Meaning of Renunciation / Repudiation


* San International v Keppel Engineering [1998] 3 SLR(R) 447 at [20]

Karthigesu JA: The law on repudiatory breach or renunciation can be


summarised as follows: A renunciation of contract occurs when one party
by words or conduct evinces an intention not to perform or expressly
declares that he is or will be unable to perform his obligations in some
material respect. Short of an express refusal or declaration the test is to
ascertain whether the action or actions of the party in default are such as
to lead a reasonable person to conclude that he no longer intends to be
bound by its provisions. The party in default may intend in fact to fulfil the
contract but may be determined to do so only in a manner substantially
inconsistent with his obligations, or may refuse to perform the contract
unless the other party complies with certain conditions not required by its
terms: Chitty on Contracts vol 1 at para 24-016..

Econ Piling v GTE Construction [2009] SGHC 213 at [30]

Judith Prakash J: The conduct of GTE was such as to permit Econ to


walk away from the JV Agreement. This holding is based on the legal
principle which was recognised in RDC Concrete and that is that
where a party, by his words or conduct, simply renounces his contract
inasmuch as he clearly conveys to the other party to the contract that
he will not perform his contractual obligations at all, that the other
party is entitled to terminate the contract. Further recognition of the
principle can be found in the following passage of Chitty on Contracts,
vol 1 (Sweet & Maxwell, 30th Ed, 2008) (at 24-018): An absolute
refusal by one party to perform his side of the contract will entitle the
other party to treat himself as discharged, as will also a clear and
unambiguous assertion by one party that he will be unable to perform

29

when the time for performance should arrive. Short of such an express
refusal or declaration, however, the test is to ascertain whether the
action or actions of the party in default are such as to lead a
reasonable person to conclude that he no longer intends to be bound
by its provisions. The renunciation is then evidenced by conduct.

Anticipatory Breach which Entitles Aggrieved Party to


Terminate
An anticipatory breach is said to occur when, before performance is
due, a party either renounces the contract or disables himself from
performing it.
Renunciation (or repudiation) requires a clear and absolute refusal
to perform. This need not be express but can take the form of
conduct indicating that a party is unwilling, even though able, to
perform.
Disablement need not be deliberate, in the sense that there may be
an anticipatory breach even though it was not the defaulting partys
intention to disable himself from performing, but disablement must
be due to the partys own act or default. Such disablement is most
clearly illustrated by cases where a party does an act which is
certain to prevent performance, for example, by disposing
elsewhere of the specific thing which forms the subject-matter of
the contract. (Treitel 845)
Anticipatory Breach by Renunciation
(Situation 2 of RDC Concrete)
This typically occurs before the time of performance has arrived,
where a party indicates in advance that he will not perform when
the time arrives. What we are looking for is a renunciation or
repudiatory conduct comprising:
words or conduct evincing an intention not to perform or
an express declaration that he is or will be unable to perform
his obligations in some material respect
(San International v Keppel, per Karthigesu JA).
Upon a defaulting partys anticipatory breach (or renunication /
repudiation) before time of performance, the aggrieved party has
the right to elect, without having to wait for the defaulting partys
performance to fall due, to immediately terminate and claim
damages for breach of contract.
* Hochster v De la Tour (1853) 2 El & Bl 678 (MK801 / 795, BBF5813) (Lord Campbell CJ)

Employment contract; repudiated by employer before specified date of


engagement. Employee may sue for damages immediately, without waiting until
specified date for performance. Employee must himself remain ready and willing
to perform until specified date.

30

Frost v Knight (1871-72) LR 7 Ex 111


The defendant promised to marry the plaintiff so soon as his (defendant's) father
should die (as the father opposed such marriage). During the father's lifetime the
defendant refused absolutely to marry the plaintiff. Held, the plaintiff could sue
even though the defendant's father being still alive. The principle of Hochster v.
De la Tour was applicable to the case of such a promise to marry, and that a
breach of contract had been committed on which the plaintiff could sue.
Cockburn CJ: The law with reference to a contract to be performed at a
future time, where the party bound to performance announces prior to the
time his intention not to perform it, as established by the cases of
Hochster v. De la Tour and The Danube and Black Sea Co. v. Xenos on the
one hand, and Avery v. Bowden, Reid v. Hoskins, and Barwick v. Buba on
the other, may be thus stated. The promisee, if he pleases, may treat the
notice of intention as inoperative, and await the time when the contract is
to be executed, and then hold the other party responsible for all the
consequences of non-performance: but in that case he keeps the contract
alive for the benefit of the other party as well as his own; he remains
subject to all his own obligations and liabilities under it, and enables the
other party not only to complete the contract, if so advised,
notwithstanding his previous repudiation of it, but also to take advantage
of any supervening circumstance which would justify him in declining to
complete it.
On the other hand, the promisee may, if he thinks proper, treat the
repudiation of the other party as a wrongful putting an end to the contract,
and may at once bring his action as on a breach of it; and in such action he
will be entitled to such damages as would have arisen from the nonperformance of the contract at the appointed time, subject, however, to
abatement in respect of any circumstances which may have afforded him
the means of mitigating his loss.
The considerations on which the decision in Hochster v. De la Tour is
founded are that the announcement of the contracting party of his
intention not to fulfil the contract amounts to a breach, and that it is for
the common benefit of both parties that the contract shall be taken to be
broken as to all its incidents, including non-performance at the appointed
time; as by an action being brought at once, and the damages consequent
on non-performance being assessed at the earliest moment, many of the
injurious effects of such non-performance may possibly be averted or
mitigated.
It is true, as is pointed out by the Lord Chief Baron, in his judgment in this
case, that there can be no actual breach of a contract by reason of nonperformance so long as the time for performance has not yet arrived. But,
on the other hand, there isand the decision in Hochster v. De la Tour
proceeds on that assumptiona breach of the contract when the promisor
repudiates it and declares he will no longer be bound by it. The promisee
has an inchoate right to the performance of the bargain, which becomes
complete when the time for performance has arrived. In the mean time he
has a right to have the contract kept open as a subsisting and effective
contract. Its unimpaired and unimpeached efficacy may be essential to his
interests. His rights acquired under it may be dealt with by him in various
ways for his benefit and advantage. Of all such advantage the repudiation
of the contract by the other party, and the announcement that it never will
be fulfilled, must of course deprive him. It is therefore quite right to hold
that such an announcement amounts to a violation of the contract in

31

omnibus, and that upon it the promisee, if so minded, may at once treat it
as a breach of the entire contract, and bring his action accordingly.

**An anticipatory breach gives the aggrieved party a right


to terminate only where it amounts to a repudiation.
(Perhaps one might rename it as the doctrine of
anticipatory repudiation?) **
What happens where the anticipatory breach concerns a contractual
term, say a condition, but the consequences does not pass the test
of a discharging breach prescribed in Hong Kong Fir?
* RDC Concrete v Sato Kogyo [2007] 4 SLR(R) 413 esp [93-96]
* San International v Keppel Engineering [1998] 3 SLR(R) 447 esp
[25]
Karthigesu JA: Not every intimation of an intention not to perform or of an
inability to perform some part of a contract will amount to a renunciation.
In the case of an entire and indivisible contract, a refusal to perform any
part of the agreement will normally entitle the innocent party to treat the
contract as discharged. Otherwise, a renunciation of some but not all the
obligations under a contract will not entitle the innocent party to rescind
the contract unless the renunciation amounts to a breach of a condition of
the contract or deprive him of substantially the whole benefit which it was
the intention of the parties that he should obtain from the obligations of
the parties under the contract then remaining unperformed: Federal
Commerce and Navigation Ltd v Molena Alpha Inc; The Nanfri, The Benfri,
The Lorfri [1979] 1 All ER 307; Afovos Shipping Co SA v Pagnan; The
Afovos [1983] 1 All ER 449.
The crux of the matter under this issue is whether San International's
refusal to undertake the main office works unless they received additional
payment and an extension of time (if so found) was sufficiently serious
enough to justify Keppel Engineering terminating the subcontract on 29
November 1995.

* Federal Commerce and Navigation v Molena Alpha Inc (The


Nanfri)
[1979] AC 757 esp 778-779 (Lord Wilberforce)
Owners of vessel announced threatened breach; owner will
issue claused bills of lading instead of bills with freight prepaid. Breached an innominate term, not a condition.
Whether renunciation or repudiatory breach going to root of
contract; depriving charterers of substantially the whole
benefit of contract.
* Chua Chay Lee v Premier Properties Ltd [2000] 2 SLR(R) 464,
[2000] SGCA 34
esp [17-35] (Tan Lee Meng J)
Anticipatory breach of term not amounting to condition; time
of completion not of the essence. No right of termination; 12
months delay not frustrating delay; not a question of
reasonable period of time for performance. Must be
repudiating breach going to the root of the contract which
deprives party of substantially the whole benefit of the
contract.
Substantial
liquidated
damages
clause;
contemplated delay in completion and handing over of
apartments.

32

Does the doctrine of anticipatory breach apply to executed


contracts?
This question was considered (obiter dicta) by Belinda Ang J in The
STX Mumbai [2014] 3 SLR 1116; [2014] SGHC 122, [54] [74]

Incapacitating Oneself from Performing


A person may break a contract by incapacitating himself from
performing it. Thus a seller commits a breach of contract for the sale
of a specific thing if he sells it to a third party (Bowdell v Parsons
(1808) 10 East 359; Lovelock v Franklin (1846) 8 QB 371); and a
shipowner breaches a charterparty if he sells the ship to a third
party free from any ... charter engagement (Omnium
DEnterprises v Sutherland [1919] 1 KB 618).
But a person entitled to make a choice as to the method of
performance does not incapacitate himself merely by declaring that
he will perform in a way that is impossible. For example, a seller of
generic goods does not put himself in breach merely by telling the
buyer that he will make delivery from a source that does not exist.
He is normally entitled and bound to deliver from another source,
and is in breach only if he fails or refuses to do so (The Vladimir Ilich
[1975] 1 Lloyds Rep 322). (Treitel 835/830).
Performance Inconsistent with Contractual Obligation
Relevance of bona fide belief?
Establishing a breach of contract does not generally depend on
whether a party has been at fault, since contractual liability for
breach is in principle strict. However, there is a line of cases in
which the courts appear to have regard to the good faith of the
party in breach when deciding whether or not he had committed a
repudiatory breach entitling the other to terminate (eg, Vaswani v
Italian Motors).
The effect of Vaswani is to put the buyer in a difficult position when
the seller threatens non-performance. If the buyer refuses to pay
when faced with an erroneous but good faith demand by the seller
for an increased price (higher than his contractual entitlement), the
buyer might not be able to establish repudiatory breach by the
seller. Cases such as Vaswani show that courts are sometimes
reluctant to conclude that a party acting in good faith has
repudiated a contract. This is not altogether easy to reconcile with
the principle that a bad faith is not required for establishing a
breach of contract.
* Vaswani v Italian Motors [1996] 1 WLR 270 (Lord Woolf) (MK 793 /
789)
* Federal Commerce & Navigation v Molena Alpha (The Nanfri)
[1979] AC 757 esp 774-780 (Lord Wilberforce)

33

The central question to be asked in cases of this type is whether,


looking at all the circumstances objectively, that is from the
perspective of the of a reasonable man in the position of the
innocent party, the contract-breaker has clearly shown an intention
to abandon and altogether refuse to perform the contract
(Eminence Property Developments Ltd v Heaney [2010] EWCA Civ
1168, [2011] 2 All ER (Comm) 223). The answer given by a court to
that question will depend very heavily on the facts of the individual
case. In some cases the court has concluded that there is a
repudiatory breach (see, for example, Federal Commerce &
Navigation v Molena Alpha (The Nanfri)), while in others the court
has concluded that there was no repudiatory breach (see, for
example, Woodar Investment v Wimpey Construction). The motive
of the contract-breaker may be taken into account if it reflects
something of which the innocent party was, or a reasonable person
in his position would have been, aware and throws light on the way
the alleged repudiatory act would be viewed by such a reasonable
person.
(MK, 5th ed, 2012 at p.795; 2014 ed at p.789)
[ Earlier view of Prof McKendrick:
It might be possible to reconcile the cases on the basis that it is not
a repudiation for a party to put forward in good faith his genuine
interpretation of what the contract requires of him (Woodar
Investment v Wimpey Construction [1980] 1 WLR 277); but where
that party performs in a manner inconsistent with the terms of the
contract, it is no defence for the him to show that he had acted in
good faith (Federal Commerce & Navigation v Molena Alpha (The
Nanfri)).
In other words, the reconciliation proceeds by distinguishing
between actual breach and anticipatory breach. Where the breach is
anticipatory only and comprises the assertion that of an
interpretation of the contract which turns out to have been
erroneous, the courts are slow to infer that there has been a
repudiatory breach. Were the law otherwise, it would be difficult to
conduct negotiations, prior to the time of performance, about the
meaning of a contract without running the risk of repudiating the
contract. But, when it comes to the time of performance, and a
party performs inconsistently with the terms of the contract, he
should not be allowed to rely on his own good faith, but mistaken,
interpretation to say that his breach had not been repudiatory.
(MK, 4th ed, 2010 at p.800) ]
Eminence Property Developments Ltd v Heaney [2010] EWCA Civ
1168, [2011] 2 All ER (Comm) 223 (MK, 6th ed at p.789)
Election by Aggrieved Party
The aggrieved party may elect (i) to accept the repudiation,
terminate the contract and sue for damages; or (ii) keep the
contract alive.
* White and Carter (Councils) Ltd v McGregor [1962] AC 413
(Lord Reid) (MK 802 / 796, BBF734)
Appeal with 3-2 split in HL; claim in debt (or liquidated / fixed sum)
rather than damages. Election to affirm, not terminate, in face of
repudiation. No duty to mitigate loss / damages. No legitimate

34

interest, financial or otherwise, in performing the contract rather


than claiming damages.
Hochster v De la Tour (1853) 2 El & Bl 678, 118 ER 922 (Lord
Campbell CJ)
(MK 801 / 795, BBF 581)
Vitol SA v Norelf Ltd (The Santa Clara) [1996] 3 WLR 105 esp 113114
(Lord Steyn) (MK798 / 792, BBF583)
MP-Bilt Pte Ltd v Oey Widarto [1999] 1 SLR(R) 908, [1999] SGHC 70
esp [30-39]

Selvam J: The germ of that argument is a dictum of Lord Reid in White


and Carter. He said: It may well be that, if it can be shown that a person
has no legitimate interest, financial or otherwise, in performing the
contract rather than claiming damages, he ought not to be allowed to
saddle the other party with an additional burden with no benefit to himself.
If a party has no interest to enforce a stipulation, he cannot in general
enforce it: so it might be said that, if a party has no interest to insist on a
particular remedy, he ought not to be allowed to insist on it. ...
In any event the doctrine [in Lord Reids dictum] has a number of
limitations. First, it cannot apply retrospectively to accrued debts. Accrued
debts can be sued for even after acceptance of repudiation.
Next, it does not apply where the innocent party can[not] reasonably
perform his obligation without the co-operation of the contract-breaker.
Illustrations: a contractor who has undertaken to repair a house for a lump
sum cannot perform his obligation because the house owner can prevent
him by denying access. The contractor will need an order of court to force
the house owner to give him access which will ordinarily be refused as
damages would suffice. The only remedy in such instance is to sue for
damages and not the full contract price.
Thirdly and more importantly, the doctrine was conceived in the context of
the innocent party rejecting the repudiation by the other party and
exercising his right to complete performance when the former has a
legitimate interest to protect. A fortiori, the doctrine cannot apply when
the innocent party is under a legal obligation or practical compulsion to
complete performance of the contract in question and other contracts he
has entered into on the basis of the contract in question.

Obligation of Aggrieved Party


The victim of an anticipatory breach does not have to accept the
repudiation by terminating the contract. He can wait and see
whether the repudiating party will perform when the time of
performance arrives. However, if the contract is left in force, the
aggrieved party must himself tender performance as usual.
If the aggrieved party fails to perform, he will himself be in breach
when the time comes, giving the other party the right to terminate.
An exception is where the repudiating party made it clear that he is
not interested in receiving performance, the aggrieved party
according does not tender, and the repudiating party will then be
stopped from complaining (Fercometal v Mediterranean Shipping).
A second consequence of leaving the contract alive is that the
repudiating party can take advantage of any subsequent
circumstances (eg, a supervening frustrating event) that may
excuse him. In Avery v Bowden ((1855) 5 E&B 714, affd 6 E&B 953),
35

a ship was chartered to carry cargo from Odessa. The master was
told before the end of lay days that no cargo was available, but he
remained in port and urged the charteres to perform. The contract
was then frustrated by outbreak of the Crimean War. (BBF 584)
Fercometal SARL v Mediterranean Shipping Co SA (The Simona)
[1988] 3 WLR 200 esp 212 (BBF 584)
Lord Ackner: When A wrongfully repudiates his contractual obligations in
anticipation of the time for their performance, he presents the innocent
party B. with two choices. He may either affirm the contract by treating it
as still in force or he may treat it as finally and conclusively discharged.
There is no third choice, as a sort of via media, to affirm the contract and
yet to be absolved from tendering further performance unless and until A
gives reasonable notice that he is once again able and willing to perform.
Such a choice would negate the contract being kept alive for the benefit of
both parties and would deny the party who unsuccessfully sought to
rescind, the right to take advantage of any supervening circumstance
which would justify him in declining to complete.
Towards the conclusion of his able address, Mr. Boyd sought to raise what
was essentially a new point, neither argued before the arbitrators, Leggatt
J., nor the Court of Appeal. He submitted that the charterers' conduct had
induced or caused the owners to abstain from having the ship ready prior
to the cancellation date. Of course, it is always open to A, who has refused
to accept B's repudiation of the contract, and thereby kept the contract
alive, to contend that in relation to a particular right or obligation under
the contract, B. is estopped from contending that he, B, is entitled to
exercise that right or that he, A, has remained bound by that obligation. If
B. represents to A that he no longer intends to exercise that right or
requires that obligation to be fulfilled by A and A acts upon that
representation, then clearly B. cannot be heard thereafter to say that he is
entitled to exercise that right or that A is in breach of contract by not
fulfilling that obligation. If, in relation to this option to cancel, the owners
had been able to establish that the charterers had represented that they
no longer required the vessel to arrive on time because they had already
fixed the Leo Tornado and in reliance upon that representation, the owners
had given notice of readiness only after the cancellation date, then the
charterers would have been estopped from contending they were entitled
to cancel the charterparty. There is, however, no finding of any such
representation.

11.

CLAIMS BY THE DEAFULTING PARTY

Can the defaulting party, notwithstanding his breach, enforce the


aggrieved partys obligations under the contract?
(A) Entire Contract / Obligation
Cutter v Powell (1795) 6 Term Rep 320, 101 ER 573 (BBF 556)

36

The defendant at Jamaica delivered to Cutter (the intestate) a note


stating: Ten days after the ship Governor Parry, myself master,
arrives at Liverpool, I promise to pay to Mr. T. Cutter the sum of
thirty guineas, provided he proceeds, continues and does his duty as
second mate in the said ship from hence to the port of Liverpool.
Cutter boarded the ship Governor Parry and sailed from Kingston,
Jamaica, in August 1793, and proceeded to do his duty as second
mate until he died in September, before the ship's arrival at
Liverpool in October 1793.
Ashhurst J: This is a written contract, and it speaks for itself. And as
it is entire, and as the defendant's promise depends on a condition
precedent to be performed by the other party, the condition must be
performed before the other party is entitled to receive any thing
under it. It has been argued however that the plaintiff may now
recover on a quantum meruit: but she has no right to desert the
agreement; for wherever there is an express contract the parties
must be guided by it; and one party cannot relinquish or abide by it
as it may suit his advantage. Here the intestate was by the terms of
his contract to perform a given duty before he could call upon the
defendant to pay him any thing; it was a condition precedent,
without performing which the defendant is not liable. And that
seems to me to conclude the question: the intestate did not perform
the contract on his part; he was not indeed to blame for not doing it;
but still as this was a condition precedent, and as he did not perform
it, his representative is not entitled to recover.
(B) Divisible Contract
Taylor v Laird (1856) 1 H&N 266, 25 LJ Ex 329, 156 ER 1206
The defendant having contracted with the Admiralty to provide a
steam-vessel for exploring the river Niger, wrote to the plaintiff as
follows:I am willing to give you the command of the steamer
destined for an exploring and trading voyage up the river Niger and
its tributaries. Your pay to be at the rate of 50l. per month
commencing from the 1st December, 1853, and a commission of 20
per cent. on the net proceeds of the produce you may bring down.
In reply, the plaintiff wrote to the defendant as follows:In answer
to your letter of yesterday offering me the command of the vessel to
go out in a trading and exploring voyage to the river Niger and its
tributaries at a fixed pay of 50l. per month and 20 per cent. on the
net proceeds of the goods obtained, I beg leave to say that I accept
the service and the terms you mention.
The vessel proceeded up the Niger under the command of the
plaintiff as far as Dagbo when the plaintiff refused to proceed further
and abandoned the command.Held, that this was not an entire
contract for the whole voyage, but a contract which gave a cause of

37

action for the salary as each month arose, and which, when once
vested, was not subject to be lost or divested by the plaintiff's
desertion.
Pollock C. B.: We are of opinion that the plaintiff is entitled to a
verdict for 50l. on the first count, on the ground that the contract
between the parties was for a monthly payment, that eight of those
months had elapsed and only seven been paid for. In the
defendant's letter to the plaintiff, he uses the expression, Your pay
to be at the rate of 50l. per month. What would have been the
effect of these words had they been unqualified and unexplained by
anything subsequent, it is unnecessary to say, for in the plaintiff's
answer he uses the expression, pay of 50l. per month. If this does
not differ from the defendant's letter, it shews what it means; if it
does, it is a new or counter offer by the plaintiff, and being accepted
by the defendant, is the basis of the contract between them. Its
terms, therefore, supersede or explain those of the previous letter of
the defendant. There per month means each month, or
monthly; and gives a cause of action as each month accrues,
which, once vested, is not subsequently lost or divested by the
plaintiff's desertion or abandonment of his contract. The words are
plain; and no mercantile man would doubt what was meant. But
further, if this meaning is not given, the result would be, that had
the plaintiff died, or the voyage failed at the last moment, nothing
would be payable by the defendant, because, according to his
contention, the performance of the entire work contracted for was a
condition precedent to the right to receive anything. This cannot
have been intended.
Tong Aik (Far East) Ltd v Eastern Minerals & Trading (1959) Ltd
[1963] MLJ 322 (Winslow J).
The contract stipulated that the plaintiffs should be able to supply
the defendants with a minimum of 5,000 tons monthly. The plaintiffs
were also responsible for providing their own transport such as
lorries etc. and the cost of all fuel was to be borne by them. All
machinery operating at the mine would be provided by the
defendants. The plaintiffs were to be paid $6.50 per ton for
operations at the mine and $7.50 per ton for transportation
The plaintiffs claim a sum of $65,268.54 being the balance still owed
to them by the defendants as their agreed remuneration for work
and labour carried out at the mine until August 1961 and for
materials supplied by them to the defendants` account. The
defendants deny this liability on the ground that nothing is due to
the plaintiffs because they did not supply the defendants with
manganese ore according to specifications of the quantity of not
less than 5,000 tons per month and were thereby in breach of
contract and claim to set-off various sums said to be due to them

38

and also counter-claim for loss of profits and penalties incurred by


them as a result of the plaintiffs` breach, totalling nearly $800,000.
Mr Hoffman, for the defendants, submitted that the contract was
an entire or lump sum contract. He said that on the authority of
Sumpter v Hedges [1898] 1 QB 673 the plaintiffs` claim was
misconceived and that they could not recover from the defendants
in respect of work done as upon a quantum meruit for they had
abandoned the contract without producing 5,000 tons of manganese
ore per month as promised, there being no evidence of a fresh
contract to pay for the same. As against this view, Mr Hilborne
submitted that counsel for the defendants had misconceived the
law. In his submission this was a divisible contract and not an entire
or lump sum contract and that the plaintiffs should succeed on a
quantum meruit.
The distinction between "entire" and "divisible" contracts is set out
clearly in vol 8 of Halsbury`s Laws of England, 3rd Edn, at page 166
as follows:
"There is a distinction to be drawn between contracts which are
divisible and those which are indivisible, and the distinction is of
particular importance in regard to questions of illegality and
questions of payment. Contracts are indivisible where the
consideration is one and entire, or where it is stated or can be
gathered by necessary inference that no consideration is to pass
from one party till the whole of the obligations of the other party
have been completed; but where no such intention can be gathered,
and the contract resolves itself into a number of considerations for a
number of acts, as in the case of periodical payments for a number
of services which do not form one complete whole, the contract is
divisible.
In an indivisible or entire contract the right to payment does not
arise until the contract has been completely performed; but if there
has been substantial performance a claim will be allowed subject to
any counterclaim or set-off for omissions or defects in execution.
If a contract is divisible, for example where a seller of goods agrees
to deliver by instalments, the right to payment arises as each part
of the contract is performed and where there has been partial
performance a proportionate payment may be recovered.
A claim can also be made where it can be inferred from the
circumstances that there is a fresh agreement between the parties
that payment shall be made for work already done or goods already
supplied under the original contracts, as for example where a buyer
of goods accepts less than the stipulated quantity."

39

The following passage from Pollock on Contracts , 13th Edn, at page


209 throws further light on this distinction: "A contract which can be
fulfilled only as a whole, so that failure in any part is failure in the
whole, is said to be entire. A contract of which the performance can
be separated, so that failure in one part affects the parties` rights
as to that part only, is said to be divisible."
Applying these principles to the contract in question it would, in my
opinion, be wrong to hold that it must necessarily be construed to
be an entire or lump sum contract. What are the attributes of a lump
sum contract which it has? There is nothing in the contract to
suggest how long it was intended to last or that payment would only
be made on completion of any undertaking as a whole or after the
expiration of any stipulated period of time. By its very terms it is a
contract containing mutually concurrent and dependent promises
the performance of the promise of each party being conditional
upon the promise of the other being performed at the same time. In
short, on the provision of adequate machinery etc., by the
defendants, the plaintiffs undertook to be able to produce 5,000
tons per month to be remunerated at the agreed rates per ton
presumably until such time as the ore was exhausted or until
termination otherwise. Looked at in this way it does not seem to me
that this is a contract which was intended to be fulfilled only as a
whole. It possesses more of the characteristics of a divisible contract
to be fulfilled in parts. The distinction is not always easy to draw but
it is difficult to appreciate in what the "wholeness" of the contract
lies.
This is clearly not a contract in which the consideration is one and
entire nor is it so stated therein, nor can it be gathered by necessary
inference that no consideration is to pass from one party till the
whole of the obligations of the other party have been fulfilled. The
contract seems to resolve itself into a number of considerations for
a number of acts to be paid for at the agreed rates per ton. If the
defendants had meant otherwise they would have said "you must
supply a minimum of 5,000 tons monthly" and also made clear
provisions as to what would happen on failure. I have therefore
come to the conclusion that this is a divisible contract and that the
plaintiffs must be paid for the tonnages of ore actually produced
and/or transported to the stockpile.
(C) Substantive Performance
Building & Estates v AM Connor [1958] MLJ 173 (Whyatt CJ).
The plaintiffs claimed from the defendant a sum of $4,803 being the
amount of the purchase money which remained unpaid in respect of
a house which the plaintiffs built for the defendant pursuant to an
agreement whereby the defendant agreed to buy a plot of land

40

together with the house to be erected thereon for a lump sum of


$21,492. The defendant went into occupation of the house but
refused to pay the balance of the purchase price on the ground that
it was not built according to specification and much of the work was
defective and of inferior quality. She therefore denied liability for the
sum claimed and furthermore counterclaimed for the sum of
$12,063 which she said must be expended on the house to make it
correspond with the specification.
The first question to be decided is whether the plaintiffs are
entitled to sue for the balance of the purchase price, assuming for
the purpose of argument, the house has not been built exactly
according to specification. The answer to this question depends
upon the construction of the agreement entered into
It is an agreement for the sale of a plot of land together with the
house to be erected thereon for a lump sum of $21,492, and if the
ordinary rule governing the discharge of contracts by performance
were to be applied it would be necessary for the plaintiffs to show
that they had performed their obligations completely and precisely
before they could recover anything for the work they have done.
The rigour of the common law rule requiring exact performance by
the promisor as a condition precedent to his right of recovery under
a lump sum contract has been modified to some extent by judicial
decisions during the course of the last century and it is now well
established that in certain circumstances a promisor who has
substantially performed his side of the contract may sue on the
contract for a lump sum but, of course, remains liable in damages
for his partial failure to fulfil his contractual obligations. The doctrine
of substantial performance, as it has been called, is usually traced
back to Lord Mansfield`s judgment in Boone v Eyre 126 ER 160. It
has been re-affirmed in many cases since that date, and I take as
the most recent and authoritative statement of the law on this
matter the judgment of Lord Justice Denning (as he then was) in
Hoenig v Isaacs [1952] 2 All ER 176 where the learned Lord Justice
expressed himself thus :
".... the first question is whether, on the true construction of the
contract, entire performance was a condition precedent to payment.
It was a lump sum contract, but that does not mean that entire
performance was a condition precedent to payment. When a
contract provides for a specific sum to be paid on completion of
specified work, the courts lean against a construction of the
contract which would deprive the contractor of any payment at all
simply because there are some defects or omissions. The promise
to complete the work is, therefore, construed as a term of the
contract, but not as a condition. It is not every breach of that term
which absolves the employer from his promise to pay the price, but
only a breach which goes to the root of the contract, such as an

41

abandonment of the work when it is only half done. Unless the


breach does go to the root of the matter, the employer cannot resist
payment of the price. He must pay it and bring a cross-claim for the
defects and omissions, or alternatively, set them up in diminution of
the price. The measure is the amount which the work is worth less
by reason of the defects and omissions and is usually calculated by
the cost of making them good".
There is, in my opinion, no doubt at all that the agreement in this
case, upon its true construction, falls within the class of contract
which Lord Justice Denning had in mind in this passage. It is an
agreement providing for the erection of a house and the sale of the
plot of land on which it stands for a lump sum and as such it is, if
not identical, at least very similar, in character to the contract in the
case of H Dakin & Co Ltd v Lee [1916] 1 KB 566 which Lord Justice
Somervell (as he then was) stated in Hoenig v Isaacs, supra , was a
decision in which the true position on the construction of this class
of contract was re-affirmed. Accordingly in my view the plaintiffs are
entitled to sue the defendant for the contract price, on the basis, of
course, that they can show that the work which they have done
constitutes substantial compliance with the contract. On this point
the evidence is, in my judgment, overwhelmingly in favour of the
plaintiffs. The defects and omissions of which complaint is made by
the defendant relate to a number of miscellaneous items many of
them trivial or of only minor importance, and having listened to the
evidence of the parties and their expert witnesses, and further,
having had the advantage of inspecting the house myself, I am in no
doubt that the defects and omissions which have been proved,
whether taken singly or in the aggregate, are not such as to entitle
the defendant to say that the plaintiffs have not substantially
performed their promise under this contract. As Mr Koren, an
architect called by the plaintiff put it: "In its class, in this price
category, this house is a perfectly sound dwelling." I agree with Mr
Koren`s view and would only add that if I had felt any hesitation in
accepting it, it would have been dispelled by my inspection of the
house which left me with the impression that this dwelling,
notwithstanding certain defects which I will deal with presently, is a
sound and satisfactory structure. It follows, therefore, that the
defendant is liable to pay to the plaintiffs the balance of the contract
price, namely, $4,803, subject, of course, to the deduction of such
sum as may be found due on the counterclaim..
* Hoenig v Isaacs [1952] 2 All ER 176 (BBF 560) (defective
bookshelf)

42

* Bolton v Mahadeva [1972] 1 WLR 1009 (BBF 563) (installation of


central heating system).
Cases such as Hoenig v Isaacs are sometimes explained on the
ground that the claimant had substantially performed an entire
contract. It is submitted that the explanation is unsatisfactory since
it is based on the error that contracts, as opposed to particular
obligations are, can be entire. The basis of Hoenig v Isaacs is that
the builder even if he was under an entire obligation as to the
quantity of the work to be done, was under no such obligation as to
its quality. Defects of quality therefore fell to be considered under
the general requirement of substantial failure. To say that an
obligation is entire means that it must be completely performed
before payment becomes due. Suppose a contract is made to carry
goods from Melbourne to London and the freight is payable on
delivery in London. If the goods are carried only to Southampton,
the carrier may have substantially performed; but he is not
entitled to the freight. In relation to entire obligations, there is no
scope for any doctrine of substantial performance. (Treitel 827 /
822)
(D) Restitutionary Claim
Acceptance of partial performance: Quantum meruit
(services) / Quantum valebat (goods)
A defaulting party who renders incomplete performance of an entire
obligation may nevertheless claim remuneration where the
aggrieved party has freely accepted such partial performance or
otherwise waived the need for complete performance. In most
cases, such a claim will arise on a quantum meruit for a reasonable
sum for services rendered or work done by partial performance. But
this happens only if the aggrieved party has the option whether to
accept or refuse the partial performance. Originally, the basis of this
liability was said to be that accaeptance of partial performance
implies a fresh agreement to pay for the work done or goods
supplied, but such implication can be fictional. It is better to regard
the payment obligation as resting on unjust enrichment. (Anson
456).
Sumpter v Hedges [1898] 1 QB 673 (BBF 559)
The action was for work done and materials provided. The plaintiff, a
builder, had contracted with the defendant to build upon the
defendant's land two houses and stables for the sum of 565l. The
plaintiff did part of the work, amounting in value to about 333l., and
had received payment of part of the price. He then informed the
defendant that he had no money, and could not go on with the
work. The learned judge found that he had abandoned the contract.

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The defendant thereupon finished the buildings on his own account,


using for that purpose certain building materials which the plaintiff
had left on the ground. The judge gave judgment for the plaintiff for
the value of the materials so used, but allowed him nothing in
respect of the work which he had done upon the buildings.
AL Smith LJ: In this case the plaintiff, a builder, entered into a
contract to build two houses and stables on the defendant's land for
a lump sum. When the buildings were still in an unfinished state the
plaintiff informed the defendant that he had no money, and was not
going on with the work any more. The learned judge has found as a
fact that he abandoned the contract. Under such circumstances,
what is a building owner to do? He cannot keep the buildings on his
land in an unfinished state for ever. The law is that, where there is a
contract to do work for a lump sum, until the work is completed the
price of it cannot be recovered. Therefore the plaintiff could not
recover on the original contract. It is suggested however that the
plaintiff was entitled to recover for the work he did on a quantum
meruit. But, in order that that may be so, there must be evidence of
a fresh contract to pay for the work already done.
Collins LJ: I think the case is really concluded by the finding of the
learned judge to the effect that the plaintiff had abandoned the
contract. There are cases in which, though the plaintiff has
abandoned the performance of a contract, it is possible for him to
raise the inference of a new contract to pay for the work done on a
quantum meruit from the defendant's having taken the benefit of
that work, but, in order that that may be done, the circumstances
must be such as to give an option to the defendant to take or not to
take the benefit of the work done. It is only where the circumstances
are such as to give that option that there is any evidence on which
to ground the inference of a new contract. The mere fact that a
defendant is in possession of what he cannot help keeping, or even
has done work upon it, affords no ground for such an inference. He
is not bound to keep unfinished a building which in an incomplete
state would be a nuisance on his land. I am therefore of opinion that
the plaintiff was not entitled to recover for the work which he had
done.
Foo Song Mee v Ho Kiau Seng [2011] SGCA 45 at [18]
Chao JA: Claims based on quantum meruit can be found upon
contract or restitution. The former relates to cases where there is a
contract for the supply of services though this same contract lacks a
term on the quantum of remuneration, and the latter relates to
cases where there is no contract at all. This distinction was alluded
to in the case of Rabiah Bee bte Mohamed Ibrahim v Salem Ibrahim
[2007] 2 SLR(R) 655 at [122] [123], where Judith Prakash J
considered the English case of Serck Controls Limited v Drake &

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Schull Engineering Limited (2000) 73 Con. L. R. 100, and went on to


state:
...two types of quantum meruit exist viz contractual quantum
meruit and, secondly, restitutionary quantum meruit. Where there is
an express or implied contract which is silent on the quantum of
remuneration or where there is a contract which states that there
should be remuneration but does not fix the quantum, the claim in
quantum meruit will be contractual in nature. Where, however, the
basis of the claim is to correct the otherwise unjust enrichment of
the defendant, it is restitutionary in nature. It is also relevant that
there cannot be a claim in quantum meruit if there exists a contract
for an agreed sum and there cannot be a claim in restitution parallel
to an inconsistent contractual promise between the parties.
We should add that this distinction was recognised by this Court in
the earlier case of Gold Coin Ltd v Tay Kim Wee [1987] 2 MLJ 271
(Gold Coin) which applied Way v Latilla.

Incontrovertible Benefit (?)


The failure of the claim in respect of the partially erected building in
Sumpter v Hedges shows that the mere fact that a person appears
to have benefited from part performance does not suffice to ground
a claim in restitution. This is because unjust enrichment law allows
objective benefits to be subjectively devalued by a defendant.
However, where it can be shown that a recipient of part
performance has gained a readily realizable financial benefit or has
been saved expenses which he must have incurred, there is some
support for the view that the part performer would be entitled to
restitution (Hain SS Co Ltd v Tate & Lyle Ltd (1936) 41 Com Cas 350;
Miles v Wakefield [1987] AC 539), except where the parties have
made it clear that the risk of non-completion is to be borne by the
part-performer even if there is such benefit. (Anson 457).

Contract Law Teachers

Special thanks to Assoc Prof Kelry Loi

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