Breach of Contract

1 Introduction
 Definition – “A party breaches a contract, when, without lawful excuse, he or she fails to perform any
of his or her contractual obligations” – MCW.

 Does a finding of breach require fault? - No

o Most contractual obligations are strict liability – the promisor’s duty is to achieve a
particular state of affairs.

o The contract is breached when performance falls short of this, even if the defendant could
not have done any better.

o “It is trite that contractual liability is strict…it is immaterial why the defendant failed to fulfil
its obligation; it could not plead...that it had done its best” – at [134] of RDC Concrete v Sato
Kogyo [2007] 4 SLR 413.

o Treitel (14th ed, 2015) at 17-065-17-069: Buyer who cannot pay price because he is unable to
obtain a loan is still liable; seller who is unable to make delivery because supplier let him
down is still liable

 In some cases, breach is fault-based – most often in services contracts (e.g. solicitors, architects,
accountants or doctors). In these contracts, only duties of care are imposed as the person rendering
the services obviously does not guarantee a result.

o For instance, a lawyer does not guarantee successful litigation, and a doctor does not
guarantee successful treatment

 In some cases based on standard expressly specified in contract e.g. ‘reasonable endeavours’

o Lim Sze Eng v Lin Choo Mee [2018] SGCA 84, citing KS Energy Services v BR Energy [2014] 2
SLR 905

o A ‘best endeavours’ obligation is not a warranty (i.e. not absolute obligation) to procure the
contractually-stipulated outcome (e.g. to sell property, procure licence, etc.)

o The obligor has a duty to do everything reasonable in good faith with a view to procuring
the contractually-stipulated outcome... involves taking all those reasonable steps which a
prudent and determined man, acting in the interests of the oblige (promise) … and anxious
to procure the contractually-stipulated outcome within the available time, would have taken.

 The test for determining whether a “best endeavours” obligation has been fulfilled
is an objective test

Order of performance

 Potentially no breach if…

o Contingent condition/event upon which A’s performance depends

 E.g. A’s obligation to start work depends on parties acquiring regulatory

licence/planning permission

o A’s performance is dependent on B’s performance

 E.g. A’s obligation to start work depends on B first obtaining credit

o Supervening event amounting to frustration discharges A’s obligations

The Innocent Party’s Right to Terminate the Contract for Breach

 A. Why would the innocent party want to terminate?

 B. When does the innocent party have a right to terminate for breach?

 C. Anticipatory breach: If time for performance has not yet arrived, can the innocent party terminate?

 D. Election: Does the innocent party have a choice to terminate or affirm the contract? How does the
innocent party make this choice? What consequences follow

1.1 The Innocent Party’s Right to Terminate for Breach

Why: Reasons for the innocent party wanting termination for breach

 Innocent party no longer bound to accept/pay for further performance.

 Released from other obligations which he would otherwise have to perform.

 If the contract remains in force:

o Innocent party must perform his obligations and may itself be liable for breach.

o Defaulting party may be able to plead frustration as a defence.

 Non-termination ‘keeps the contract alive for the benefit of the other party as well as his own; he
[innocent party] remains subject to all his own obligations and liabilities under it, and enables the
other party not only to complete the contract…notwithstanding his previous repudiation of it, but
also to take advantage of any supervening circumstance (frustration) which would justify him in
declining to complete it’ - Frost v Knight (1872) LR 7 Ex 111 at pg 112.

When does the innocent party have a right to terminate for breach?

RDC Concrete Pte Ltd v Sago Kogyo (S) Pte Ltd and Anor [2007] 4 SLR 413

4 situations entitling termination (Commonly known as repudiatory breaches)

The term ‘repudiatory’ breach is sometimes used to denote all situations under which an innocent party is
entitled to terminate the contract for breach, see Phosagro [52]:

Situation 1 Situation 2 Situation 3(a) Situation 3(b)

Termination Clause Renunciation Condition-Warranty Hongkong Fir (Look at
(Classification) Approach Effects) Approach

Term clearly states events
entitling termination (e.g.
giving of notice to
terminate the contract)
Party in breach conveys
that it will not perform at
all
Party in breach has Consequences of the
breached a condition, as breach are to deprive
opposed to a warranty innocent party of
substantially the whole
benefit of the contract

Sports Connection Pte Ltd v Deuter Sports GmbH [2009] 3 SLR(R) 883

3.2 Situation 1 – Express Termination Clause

Cases where the Court gave effect to Termination clause in contract

3.2.1 RDC Concrete v Sato Kogyo [2007] 4 SLR 413

Court gave effect to termination clause in contract (breach of terms – considered repudiatory breach –
termination of contract

 Facts: RDC’s supply of concrete was unable to meet LTA’s requirements. Under clause 8, this was
expressly stated as a situation in which LTA could choose to terminate the contract.

3.2.2 Fu Yuan Foodstuff Manufacturer Pte Ltd v Methodist Welfare Services [2009] SGCA 23
Court gave effect to termination clause in contract

 Facts: Df nursing home terminated the service of Pf caterer for the illegal deployment of foreign
workers. Clause 3.2 read with clause 2.7.2 allowed for termination if Pf did not comply with Singapore
laws, especially those relating to food establishments and employment of staff. Court allowed the
termination as it fell within situation 1 in RDC (at [28]).

 Held – unlike Rice, there was no need to “read down” clause 3.2 as its literal interpretation did not
contradict common sense.

3.2.3 Chua Chian Ya v Music & Movements (S) Pte Ltd [2010] 1 SLR 607
Court gave effect to termination clause in contract

 Facts: C, a local singer, entered into a music publishing agreement with M&M. Clause 10 stated that
“A statement of all accounts shall be provided…” and clause 12 stated that “In the event that the
Publisher fails to account and make payment…the Writer…may elect to cancel or terminate this
agreement…”. Court held that M&M breached the clauses by failing to provide true and complete
statements of accounts to C when C highlighted discrepancies.

Case where Court did not give effect to Termination Clause in Contract
Court did not give effect to termination clause

3.2.4 Rice v Great Yarmouth Borough Council [2003] TCLR 1

English case where a termination clause was “read down” so that it would not operate

 Facts: Contractor (R) was to maintain several council facilities. Among other problems, R had not
completed several maintenance projects. The council terminated his employment. Clause 23 stated
that termination was allowed if the contractor commits a breach of any of his obligations.

 Held: R’s breach was not repudiatory. Contract involved ‘a myriad of obligations of differing
importance and varying frequency’. Using a ‘common-sense’ (not literal) approach, what is required is
an accumulation of breaches that as a whole can be described as repudiatory.

 Clause 23 was interpreted as an innominate clause, as interpreting it as a condition would fly in the
face of commercial sense.

o On the intentions of the parties - reasoning was that the innominate term could be broken in
many different ways with such varying consequences that the parties cannot have intended
for any breach to entitle the innocent party to terminate the whole contract.

 Discussed in Fu Yuan at [29]-[30] – COA in Great Yarmouth “read down” the scope of the termination
clause in order to control its operation.
  Distinguished from Fu Yuan – “business common sense” approach in Fu Yuan supports the literal
interpretation of the termination clause. In Great Yarmouth, it opposes the literal interpretation of
the termination clause.

o At [32] of Fu Yuan – “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).”

o This was because the charity organization in Fu Yuan would not have wanted to be
associated with criminal offences. Hence, it would have wanted the termination clause to
operate as it literally would have – consistent with the commercial reality between the
parties which centered on their desire to comply with the employment laws of Singapore

3.3 Situation 2 – Renunciation

3.3.1 Alliance Concrete v Sato Kogyo [2014] SGCA 35
SG case which defined renunciation; no renunciation was found on the facts

 Facts: Indonesian sand ban caused A to be unable to supply ready-mixed concrete to S. BCA supplied
some sand to A from its stockpile, but this was insufficient. A sought to raise the price of the concrete
because of the Sand Ban and S (in a counterclaim) argued that A had breached the contract by
refusing to supply the concrete at the agreed price.

 Holding: Contract had been frustrated by the Sand Ban. Prior to frustration, A’s conduct did not
evince renunciation.

 Held – on the definition of renunciation – quoting from San International Pte Ltd v Keppel
Engineering Pte Ltd [1998] 3 SLR(R) 447:

o At [59] – “… 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…”

 Held – on the facts of this case – A’s conduct did not amount to renunciation.

o At [105] – “In the first place, we are not satisfied that there is anything in the relevant
correspondence between the parties prior to 6 February 2007 which evinces a clear
intention on the part of ACS to breach the Contracts…

o ACS was trying its level best to foist upon SK a variation of the Contracts in relation to the
price which SK steadfastly resisted throughout.”

o A party’s attempts to renegotiate in some circumstances may not evince an intention to

renounce obligations altogether

o SK claimed that ACS did not supply concrete as promised

o ACS’s attempt to re-negotiate for higher price (given increased cost of sand) did not evince a
clear intention to breach – was trying its best to vary the agreement (at [105])

3.3.2 Alvin Nicholas Nathan v Raffles Assets (Singapore) Pte Ltd [2016] SGCA 18
SG case with clear repudiatory breach by renunciation

 Facts: A landlord terminated A’s two-year lease of the premises after one year. Court held that the
landlord was liable for breach.

 Held – this was a clear example of repudiatory breach by renunciation

o At [19] – “Clearly constituted a repudiatory breach of the Lease Agreement by renunciation

(see Situation 2 in RDC…), giving [tenant] an immediate right to terminate the contract”.

3.3.3 Biofuel Industries Pte Ltd v V8 Environmental Pte Ltd [2017] SGHC 184
SG case where a party’s questionable behaviour was not held to be a repudiatory breach by renunciation – very
similar to Alliance

 Facts: V8 collected waste and delivered it to B, who operated waste disposal facilities. B attempted to
increase its prices and to impose a requirement on the length of the wood chips delivered by V8
without a valid reason. B was held to not have breached the contract.

 Held – B’s conduct did not amount to repudiatory breach by renunciation. The test of whether a
reasonable person would have found the conduct as amounting to repudiation was applied.

o At [127] – “I am of the view that V8 has not established that a reasonable person would
consider Biofuel’s overall conduct as amounting to a repudiation of the BSA. While Biofuel
should be chastised for its attempts to raise prices in a fixed price contract and to introduce
the 100mm requirement as well as the occasions of rejection without a valid reason, its
conduct still did not amount to repudiation.”

3.4 Situation 3a – the Condition-Warranty Approach

 Note – the legal definition of a “condition” may not be the same as its common usage (e.g. as in
“terms and conditions”.

 Legal definition of a “condition” - intention of parties is to designate the term as one so important
that any breach will entitle the innocent party to terminate.

 Legal definition of a “warranty” - intention of parties is to designate term as one not so important
that no breach will ever entitle the innocent party to terminate.

 Above definitions are from RDC

 How to tell whether the term is a condition and not a warranty?

o 4 factors in Man Financial v Wong Bark Chuan David [2008] 1 SLR 663

o i) Statute classifies the term as a condition

o ii) Contract expressly states the term is a condition

o iii) Precedent classifying term as condition

o iv) Certain terms in mercantile transactions

o v) If all else fails, construe the contract!

3.4.2 A statute classifies a term as a “condition”

 Paradigm model is Sale of Goods Act 1979 – at [163] of Man Financial.
  Summary of Sale of Goods Act:

o Classified as Conditions: - LOOK AT 15A) IF IT IS MINOR DIFFERENCES

CANNOT
o S. 12(1) – Seller has right to sell

o S. 13 (1) – Goods to correspond with description (look at 15A)

o S. 14(2) – Goods are of satisfactory quality

o S. 14(3) –Goods are reasonably fit for purpose

o S. 15(2) – In sale by sample, quality of bulk to correspond with sample

o Classified as Warranties

o S. 12(2) – Freedom from charges/encumbrances and quiet possessions (??)

o S.15(a) Modification of remedies for breach of condition in non-consumer cases

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

o (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

o (b) the breach is so slight that it would be unreasonable for the buyer to reject them,

o 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.

o [43/96]

o (2) This section applies unless a contrary intention appears in, or is to be implied from, the
contract.

o [43/96]

o (3) It is for the seller to show that a breach fell within subsection (1)(b).

o **buyer must in the course of business

Case Law: Breach of implied condition that goods correspond with description

Arcos Ltd v Ronaasen [1933] AC 470

 Facts: There was a contract for the sale of wooden staves. The thickness was specified as 8/16 inches,
but the goods delivered were 9/16 inches thick. The buyers were allowed to reject the goods.

 The result in Arcos may appear to be harsh, especially since the buyers’ real reason for rejection was
to escape a bad bargain, as there was a fall in timber prices which the buyers would want to take
advantage of by acquiring timber from cheaper sources.

Chai Cher Watt v SDL Technologies Pte Ltd [2011] SGCA 54

 Facts: There was a contract for the sale of a drilling machine. The specified length was 11m, but the
delivered machine was 13.5m. The buyer was allowed to reject the goods.

 Held – regardless of the consequences, breach of a condition is a repudiatory breach.

  At [25] – “The contractual term specifying the length of the Drilling Machine is, as already noted, a
condition and any breach of it, regardless of the consequences, entitles the Appellant to elect to
treat the Drill Contract as discharged (see also the position at common law pursuant to the legal
principles set out in RDC Concrete…)”.

3.4.3 A contract expressly states that a term is a “condition”

 Held at [165] of Man Financial

 Courts will usually take parties’ own classification to be conclusive.

o Example: “It is a condition of this contract…”

 However – when is a “condition” not “condition”?

Case Law

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

Rare case where the court disregarded the parties’ classification of a condition
Court interpreted the parties intentions

 Facts: W was appointed as the sole distributor of L’s panel presses in the UK for 4.5 years. Clause 7
made it a “condition” that W’s 2 representatives should visit manufacturers at least once every week
to promote S’s goods during that period. W failed to do so.

 Held – “condition” was used in a layperson sense, rather than in a legal sense. – read down the terms
of the contract

 Held – if a term which is classified as a “condition” is so strictly worded such that the objective
intentions of the parties could not have been to apply it in a legal sense, it should not be held to be a
legal condition.

 Note: The majority of the HOL was clearly influenced by considerations of fairness, as the literal
reading of Cl 7 would mean that even one missed visit (out of 1,400 over the period) would
constitute a repudiatory breach entitling termination. Lord Reid noted that “the more unreasonable
the result, the more unlikely it is that the parties can have intended it”

 SGCA’s view on this case (in Man Financial):

o The majority judgment may have been influenced by considerations of fairness. However,
fairness also involves holding the parties to the bargain they have made.

o Cast doubt on the majority judgement and endorsed dissenting judgment by Lord
Wilberforce which warned against rewriting the clear intention of the parties that clause 7
be designated a “condition” in the legal sense.

o SGCA noted that the majority approach was in essence applying the HK Fir approach which
looks at the nature and consequences of the breach as opposed to the intentions of the
parties.

3.4.4 The availability of judicial precedent classifying a term as a “condition”

 Held at [171] of Man Financial

 Refers to a particular type of clause which has been previously classified as a “condition” by courts.
  SGCA’s view on this approach – there is still a need to analyse the reasoning in the precedent.

o At [172] of Man Financial – there would “still need to be an inquiry as to whether or not the
analysis and reasoning in the prior precedent passed muster in principle”.

Case Law

The Mihalis Angelos [1971] 1 QB 164

 Facts: The vessel was let to the charterer to load cargo in Vietnam and was expected to be ready to
load on 1 July. However, the vessel was still stuck in Hong Kong on 17 July. The charterer
terminated the charter lawfully as the “expected readiness to load on [date x]” term was considered a
condition, rather than a warranty.

 Held – the term was a condition as the court had ascertained it to be a condition in its previous
decisions, rather than a “mere warranty without a right to cancellation”

o Desire to maintain certainty and predictability in law – especially important in relation to

shipowners and charterers.

3.4.5 Certain terms in mercantile transactions

 Held at [173] of Man Financial

 Man Financial (at [173]): ‘[C]ourts are more likely to classify contractual terms as conditions in this
particular context, especially where they relate to timing’.

Case Law

Bunge Corp v Tradax [1981] 1 WLR 711

Notice of 15 days provision was held to be a condition

 Facts: Buyers agreed to buy soya bean meal from the sellers. Buyer was to nominate a vessel and give
the sellers notice to load. The contract (under clause 7) stipulated that the buyers should give the
sellers “at least 15 consecutive days’ notice of probable readiness of vessel(s) and of the approximate
quantity required to be loaded”. The buyers gave notice 5 days late, by which time less than 15 days
of the loading period remained. Sellers claimed repudiation of the contract on the basis that the term
as to notice was a condition.

 Held – the notice provision was a condition

o Time held to be of the essence in mercantile contract

 House of Lords held late notice to be a repudiatory breach due to need for certainty in commercial
transactions, in particular where these involve string contracts, or a chain of sales (e.g. B buys from A
to sell to C, or to perform sale contract already agreed with C).

 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”.
LED Linear (Asia) Pte Ltd v Krislite Pte Ltd [2017] SGHC 150
SG case: Delivery on time was considered to be a condition

 Facts: K contracted with L for the sale of LED lighting for South Beach (a construction project). L failed
to deliver on time. K was held to have breached the contract.

 Held – delivery on time was considered to be a condition

o Tan SJ citing Hartley v Hymans [1920] 3 KB 475 – “the rule clearly is that time is prima facie
of the essence with respect to delivery…it follows that a vendor who has failed to deliver
within the stipulated period cannot prima facie call upon the buyer to accept delivery…”

 NOTE (not in the case): Not all stipulations relating to timing are conditions. The fact that a contract
is a commercial one does not make every clause relating to timing a condition.

o Time for payment – not of the essence unless parties agree it should be – held in Ioannis
Valilas v Valdet Januzaj [2014] EWCA Civ 436

 Rationale – late payment is unlikely to cause serious prejudice to the seller (Treitel).

Ioannis Valilas v Valdet Januzaj [2014] EWCA Civ 436

Time for payment was not considered to be a condition

 Facts: The parties were both dentists. Df owned the premises in which Pf practised. Pf did not want to
make his usual monthly payments to Df as he did not trust Df to refund him the overpaid money at
the end of the year. However, Pf was willing to pay when he could ascertain exactly how much he
owed Df. Df found this unacceptable and excluded Pf from the practice.

 Held – the late payments did not constitute a breach of the contract. The time of payment was an
innominate term, and the nature and consequences of the breach were not serious enoughs to
amount to a repudiatory breach.

o late payment is unlikely to cause serious prejudice to the seller (Treitel).

3.4.6 Construction of the Contract

 Held at [174] of Man Financial: ‘[T]he categories of factors are not closed…In the final analysis, the
focus is on ascertaining the intention of the contracting parties…by construing the actual contract…’

 Stated in the UPA.

 S11(2) SGA

 (2) Whether a stipulation in a contract of sale is a condition, the breach of which may give rise to a
right to treat the contract as repudiated, or a warranty, the breach of which may give rise to a claim
for damages but not to a right to reject the goods and treat the contract as repudiated, depends in
each case on the construction of the contract; and a stipulation may be a condition, though called a
warranty in the contract.

Case Law

Bentsen v Taylor [1893] 2 QB 274

 Held – whether a stipulation in a contract is a condition or a warranty is to be decided by construing

the contract.

o At pg 280-281 – “But, assuming the Court to be of opinion that the statement made amounts
to a promise… it still remains to be decided by the Court, as a matter of construction,
 whether it is such a promise as amounts merely to a warranty, the breach of which would
sound only in damages, or whether it is that kind of promise the performance of which is
made a condition precedent to all further demands under the contract by the person who
made the promise against the other party - a promise the failure to perform which gives to
the opposite party the right to say that he will no longer be bound by the contract…there is
no way of deciding that question except by looking at the contract in the light of the
surrounding circumstances, and then making up one's mind whether the intention of the
parties, as gathered from the instrument itself, will best be carried out by treating the
promise as a warranty sounding only in damages, or as a condition precedent by the failure
to perform which the other party is relieved of his liability…”

Examples of cases where a clause was determined to be condition after reviewing the construction of the
contract

Man Financial v Wong Bark Chuan David [2008] 1 SLR 663

Term, non-solicitaiton, was held to be a condition as it constituted the employee’s consideration for payment
under the agreement

 Facts: Pf was MD and CEO of Df, a brokerage company. Pf was told to resign and eventually a
termination agreement was executed. Pf was due to receive compensation if he did not breach the
terms of the agreement. Before the compensation was due, Df was informed that Pf had breached
clause C.1 (soliciting the employment of certain Df employees for a period of 7 months from
termination) and clause C.3 (rendering advice to a competitor for a period of 7 months from
termination). Pf sued Df for the compensation.

 Held – non-solicitation (poaching of other employees) clause in the termination agreement was held
to be a condition. This was because it constituted the employee’s consideration for payment under
the agreement.

Phosagro Asia Pte Ltd v Piattchanine, Iouri [2016] SGCA 61

Term, obligation of “faithful service” and “best endeavors” was held to be a condition

 Facts: Pf worked for Df. Under clause 3, Pf was obligated to “faithfully serve the Company in all
respects and use his best endeavours to promote the interests of the Company”. Under clause 20, Df
was entitled to terminate Pf’s employment if he was guilty of any “serious misconduct” or “willful
breach” of any contractual stipulation. Pf abused the company’s credit card and Df sought to
terminate the contract.

 Holding: Clause 3 was a condition and Pf breached it by his “serious misconduct” under clause 20.
Ruling in favour of Df.

 Held – obligation of “faithful service” and “best endeavours” was held to be a condition, intended by
both parties to be of “utmost importance”.

PT Bayan Resources TBK and anor v BCBC Singapore Pte Ltd and anor [2018] SGCA(I) 6
Term which included the obligation to supply coal was held to be a condition as it was fundamental to the
commercial agreement

 Facts: The parties entered into a joint venture hoping to exploit a new technology to upgrade coal and
then sell it commercially. However, their relationship eventually collapsed. BR then ceased to supply
BCBC coal.

 Held – obligation to supply coal by BR was held to be a condition as it was fundamental to the joint
venture between the parties.
3.4.7 The status of warranties under the RDC framework
 Effacement of the “warranty” category:

o If one applies Situation 3(a) followed by Situation 3(b) under the RDC framework, any term
that does not fall within the scope of a condition under Situation 3(a) would then be
subject to the intermediate term analysis under Situation 3(b).

o This means that such terms would all become ‘intermediate’ terms instead of “warranties”.

o Phang JA in RDC – at [107-110] – this would “result in the concept of the warranty, as we
know it, being effectively effaced”…there would “virtually never be a situation in which there
would be a term, the breach of which would always result in only trivial consequences, and
a term which was not a condition would “necessarily become an intermediate term, subject
to the Hongkong Fir approach”.

 Academic critique:

o Goh Y H in Towards a Consistent Approach in Breach and Termination of Contract at

Common Law: RDC Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd:

 “If the parties quite clearly intended for a particular term to be a warranty (and
have its attendant effect on breach), then the court should recognize this and not
subject the analysis to the Hongkong Fir approach”.

o Carter in Intermediate Terms Arrive in Australia and Singapore:

 It is unreasonable to adopt an approach which assumes that commercial parties

never intend for a term to be a warranty – “Restated from the perspective of
intention, the tripartite classification posits three possible conclusions. In relation
to any promissory term their intention may be that: (1) every breach of the term,
irrespective of the consequences, is to give rise to a right to terminate; (2) only if
the breach has sufficiently serious consequences does a right to terminate arise; or
(3) no breach of the term, no matter how serious the consequences, is to give rise to
a right to terminate. Could anyone seriously suggest that commercial parties never
intend the third conclusion?”

 Subsequent restoration of the “warranty” category (but with little practical significance):

o SGCA in Sports Connection Pte Ltd v Deuter Sports GmbH [2009] 3 SLR(R) 883:

 At [57] – “We would therefore reaffirm the approach laid down in RDC Concrete for
the reasons set out above, subject to the extremely limited exception that, where
the term itself states expressly (as well as clearly and unambiguously) that any
breach of it, regardless of the seriousness of the consequences that follow from
that breach, will never entitle the innocent party to terminate the contract, then
the court will give effect to this particular type of term (viz, a warranty expressly
intended by the parties).”

 Nevertheless, at [32] – “In our view, a warranty expressly intended by the parties
is, however, likely to be rare (or at least uncommon) in practice. For this reason, we
are of the view that the critique in the articles…is, in the main, of theoretical
interest and should not (in the nature of things) raise matters of significance in
practice…”

3.5 Situation 3(b) – the Hongkong Fir Approach

(Intermediate/Innominate Term) Approach

 Previously assumed that every term could be classified at time of contracting as either a condition or
warranty

 The modern approach is to recognise a third category of intermediate or innominate terms

 The test – does the breach in question give rise to an event which will deprive the innocent party of
substantially the whole benefit which it was intended he should obtain from the contract? –
originates from Hongkong Fir [1962] 2 QB 26.

CONDITION INTERMEDIATE/INNOMINATE WARRANTY

We agree that if breached, We can’t tell in advance, so court has to We agree that if breached,
always gives right to ‘wait and see’ the actual consequences of never gives right to
terminate breach to determine if sufficiently serious to terminate
warrant termination

Hongkong Fir [1962] 2 QB 26

Original case setting out this approach

 Facts: Charterparty contract stipulated that the ship be “seaworthy” and to be "in every way fitted for
ordinary cargo service." However, the crew was insufficient in number and incompetent. Df
terminated contract and Pf sued.

 Holding – breach of the “seaworthiness” term was not breached in a sufficiently serious way. Ruling
in favour of Pf.

 Held – “seaworthiness” was an innominate term. Whether the contract had been breached depended
on the severity of the consequences of the breach of an innominate term.

 Held – “seaworthiness” could not be a condition.

o “[I]f a nail is missing…or two anchors are not on board…It is contrary to common sense [that
termination should follow]”.

 Held – on the facts – the breakdowns and delays did not substantially deprive the charterer of the
whole benefit of the contract. When measured against the 2 year charter, the delay of a few weeks
did not satisfy the standard of substantially depriving the charterer of the whole benefit of the
contract.

RDC Concrete Pte Ltd v Sago Kogyo (S) Pte Ltd and Anor [2007] 4 SLR 413
SG seminal case on contractual breach – focus on SG application of HK Fir approach

 Held – while the condition-warranty approach aims to ascertain the parties’ intentions in advance (i.e.
at the time of contracting), the Hongkong Fir approach confirms the right of the innocent party to
terminate the contract after the fact.

o At [100] – “Under the condition-warranty approach, the paramount aim of the court is to
ascertain the parties’ intention in relation to the nature of the contractual term in
advance, viz, at the time of contracting. The innocent party’s right to terminate the contract
upon breach depends wholly on whether the term is classified as a “condition” or a
“warranty”. In contrast, the Hongkong Fir approach requires a confirmation of the right on
the part of the innocent party to terminate the contract after the fact inasmuch as the
 parties have to “wait and see” what the nature and consequences of the breach actually
are”.

 Held – the condition-warranty approach tends more towards certainty, while the Hongkong Fir
approach tends more towards fairness.

o At [100] – “Conceptually, at least, the condition-warranty approach in Situation 3(a) above

tends more towards (especially commercial) certainty and predictability whilst the Hongkong
Fir approach (on the other hand) tends more towards fairness. This is essentially because
the Hongkong Fir approach prevents a party from terminating the contract on excessively
technical grounds in a bid to escape from unfavourable bargains.”

 Held – nevertheless, it is also fair to hold the parties to their bargain.

o At [100] – “However, it should also be noted that it is also fair to hold the contracting
parties to their bargain (under the condition-warranty approach) and that, therefore, there
is no sharp dichotomy as such between certainty and predictability on the one hand and
fairness on the other in so far as the two approaches just mentioned are concerned.”

 Held – on the nature of an intermediate term

o At [105] – “An intermediate term is, as an integral part of the Hongkong Fir approach,

defined (unlike the condition or warranty) not by reference to the nature of the term
breached but, rather, by reference to the actual consequences of the breach (what
Lord Wilberforce termed in Bunge ( at 716) as “the ‘gravity of the breach’ approach”). More
specifically, an intermediate term is defined as one which is neither a condition nor a
warranty simply because a breach of it could give rise to either very substantial or to very
trivial consequences.”

 Held – the Hongkong Fir approach should not be adopted wholesale as it would eclipse the condition-
warranty approach.

o At [105] – “a wholesale adoption of the Hongkong Fir approach in the manner just described

would result in its complete eclipse of the condition-warranty approach. We are of the view,
however, that this should not be the case. There is an appropriate legal role
for both approaches.”

 Held – rationalising the two approaches

o Condition-warranty approach takes precedence - at [106] – “the foremost consideration is

(and must be) to give effect to the intentions of the contracting parties. If so, then the
condition-warranty approach must take precedence over the Hongkong Fir approach
because (as we have seen at [100] above), it is premised on the intentions of the contracting
parties themselves.”

o Note – Hongkong Fir approach is to be applied only after it is determined that the term is
neither a condition nor expressly intended to be a warranty.

 At [106] – “Thus, in Bunge (at 716), Lord Wilberforce expressly cautioned that the
Hongkong Fir approach would be unsuitable in cases where the parties had
evinced an intention that the contractual obligation was to have the force of a
condition. In such cases, regardless of the consequences of the breach, the
innocent party would be entitled to terminate the contract.”

 Held – acknowledgement that this approach effectively effaces the concept of a true “warranty”.

o At [108] – “It is true that the approach adopted in the preceding paragraph would, in effect,
result in the concept of the warranty, as we know it, being effectively effaced since there
would virtually never be a situation in which there would be a term, the breach of which
would always result in only trivial consequences. In other words, if a term was not a
 condition under the condition-warranty approach, it would necessarily become
an intermediate term, subject to the Hongkong Fir approach”.

Case Law

Aero-Gate Ptd Ltd v Engen Marine Engineering Pte Ltd [2013] SGHC 148
HK Fir approach applied to terminate a contract

 Facts: Df was obliged to deliver 10 generators – 4 by end-Jan 2012, 4 by 1 Nov 2011 and 2 by 1 Jan
2012. On 16 Jan 2012, Df had only delivered 2 generators, with less than satisfactory quality.

 Held – Pf entitled to terminate the purchase orders. The lengthy delay substantially deprived it of the
whole benefit of the contract.

CAA Technologies Pte Ltd v Newcon Builders Pte Ltd [2017] SGCA 53
HK Fir approach applied to terminate a contract: substantial deprivation of the whole benefit of the contract

 Facts: Newcon had contract w/ JTC to build medical tech hub Subcontracted to CAA to design,
produce and install pre-cast concrete hollow core slabs (HCS). CAA failed to deliver HCS on a key area
– critical path of Newcon’s main contract works (Newcon could not erect columns) In breach of Letter
of Intent and construction schedule .

 Held – Newcon allowed to terminate as there was substantial deprivation of the whole benefit of the
contract.

o The breach contributed to a delay in the main contract works and exposed Newcon to
payment of liquidated damages to JTC (whom Newcon was contracted to).

The Hansa Nord [1976] QB 44

No substantial deprivation under the HK Fir approach

 Facts: There was a contract for the sale of citrus pulp pellets. A clause stipulated that the “[s]hipment
to be made in good condition”. The buyers initially rejected the pellets on the basis that some of them
were damaged by overheating. However, they later repurchased the same pellets more cheaply from
a third party, used for the same purpose (cattle feed).

 Held – the clause was an innominate term. Termination was held to be unlawful.

 Note – in hindsight, the courts came down very hard on the opportunistic behaviour of the buyers.

Cousins Scott William v RBS [2010] SGHC 73

No substantial deprivation under the HK Fir approach

 Facts: The employee had breached a confidentiality obligation in his redundancy agreement by
forwarding 2 emails to his Gmail account. However, he subsequently deleted them within the same
day.

 Held – the confidentiality obligation was an innominate term. There was no loss to the employer,
hence there was no repudiatory breach of the contract.

Sports Connection Pte Ltd v Deuter Sports GmbH [2009] 3 SLR(R) 883 (??)
SG case where there was no substantial deprivation under the HK Fir approach

 Facts: Df breached a Non-Competition Clause, stipulating that it could not sell any of its products in
competition with Pf’s products without written consent from Pf. SGCA held that the termination was
not rightful and both parties had to pay each other damages.
  Held – Df’s breach of the Non-Competition Clause did not substantially deprive Pf of the whole
benefit of the distributorship agreement.

5 Anticipatory Breach
 Typical scenario – before the time for performance, the defaulting party renounces his obligations or
performs an act that disables himself from performance, or is otherwise incapacitated or unable to
perform.

 Basic rationale – “To say that the law cannot logically give any remedy to enforce the contract against
the repudiator until he actually carries out his injurious threat seems as pacifistic as to say that a
country cannot take any measures to defend itself upon a mere declaration of war, but must wait
until it is actually invaded…” – at [50] of The STX Mumbai, quoting from H W Ballantine.

5.1 Classic examples of anticipatory breach

5.1.1 Hochster v De la Tour (1853) 2 E&B 678
Anticipatory breach via renunciation

 Facts: DT employed H to work from 1 June but changed his mind on 11 May. H sued on 22 May.

 Held – this was an anticipatory breach of the contract. H was entitled to damages and did not have to
remain ready to perform the contract until after the commencement date.

 Held – the renunciation of a contract of future conduct by one party immediately dissolves the
obligations of the other party.

o Lord Campbell CJ – “If a man contracts to sell and deliver specific goods on a future day, and
before the day he sells and delivers them to another, he is immediately liable to an action at
the suit of the person with whom he first contracted to sell and deliver them… it is surely
much more rational, and more for the benefit of both parties, that, after the renunciation of
the agreement by the defendant, the plaintiff should be at liberty to consider himself
absolved from any future performance of it, retaining his right to sue for any damage he
has suffered from the breach of it. Thus, instead of remaining idle and laying out money in
preparations which must be useless, he is at liberty to seek service under another employer,
which would go in mitigation of the damages to which he would otherwise be entitled for a
breach of the contract.”

5.1.2 Bowdell v Parsons 103 Eng. Rep. 811 (K.B. 1808)

Anticipatory breach via disablement, incapacity, inability, impossibility of performance

 Facts: P agreed to sell 12 loads of hay to B. After delivery of the 1st load, P sold off the rest of the hay
to a third party without B’s consent.

 Held – P’s act amounted to an anticipatory breach of the contract.

5.1.3 Universal Cargo Carriers v Citati [1957] 2 QB 401 (check)

Deals with the issue of when a delay may amount to an anticipatory breach

 Facts: Ship-owners terminated a charterparty on 18 July when the charterers had not provided any
cargo, nominated any berth or shipper as they were obligated to do by 21 July (when the lay days
were due to expire).
  Held – main issue was how long a ship is obliged to remain on demurrage and what are the rights of
the owner if the charterer detains her too long.

o Devlin J – “Translated into the terms of general contract law, the question is: Where time is
not of the essence of the contract – in other words, when delay is only a breach of warranty
– how long must the delay last before the aggrieved party is entitled to throw up the
contract? The theoretical answer is not in doubt. The aggrieved party is relieved from his
obligations when the delay becomes so long as to go to the root of the contract and
amount to a repudiation of it. The difficulty lies in the application, for it is hard to say where
fact ends and law begins…’

 Held – deciding what the threshold is before a delay may be said to amount to a repudiation of the
contract is controversial.

o To be decided by a judge who, having “some familiarity both with the legal principle and
with commercial matters and the extent to which delay affects maritime business, exercises
them both in a common-sense way”.

 Held – on the facts of the case, the delay was not long enough for it to be considered a repudiatory
breach.

o Held -  that where no time was stipulated, the preliminary obligations under the charterparty
had to be performed in sufficient time to allow the main obligation of loading to be
completed within the prescribed time and as, on the facts found, the loading could not have
been completed in the lay time remaining after July 18, by that date the time for nominating
a berth and providing a cargo had expired and the charterer was in breach of both those
terms; and in those circumstances it was not necessary to decide whether the nomination of
a shipper was a term of the charterparty. Moreover, the charterer, by putting it out of his
power to load the cargo within the lay time prescribed, had committed a further breach of
the charterparty; but that none of the breaches committed were breaches of condition and
therefore the owners were not ipso facto entitled to rescind.

5.2 Anticipatory breach – The STX Mumbai

The STX Mumbai [2015] SGCA 35

 Facts: Pf agreed to supply bunkers to Df’s vessel. 3 days before payment was due, Pf issued a letter of
demand for immediate payment by the close of the day. Pf felt that its demand was justified by
circumstances which demonstrated that payment would not be forthcoming when it fell due under
the contract (a company very closely related to Df became insolvent). Df did not pay by the close of
the day and Pf sued.

 Held – a logical contradiction within the doctrine of anticipatory breach

o At [41] – “At first blush, the doctrine of anticipatory breach appears to embody a logical
contradiction: how can the innocent party...be permitted to sue the other party …for breach
of contract when the time for performance has yet to arrive?...In fairness to the defendant,
ought it not to be penalised only when the time to perform has arrived...?”

 Held – the doctrine of anticipatory breach applies to both executed and executory contracts.

o At [44] – “However, we would respectfully differ and hold, instead, that the doctrine of
anticipatory breach does apply not only to executory contracts but
also to executed contracts.”

o Previously, the general approach was that the doctrine did not apply to executed contracts
as the implied promise was that “that [Df] would not prevent the plaintiff from performing
its (the plaintiff’s) obligations under the contract.” – at [45].
  Under this approach, anticipatory breach may not apply to executed contracts as
the plaintiff would not be prevented from performing its obligations if they had
already been performed.

o SGCA held that anticipatory breach is a breach of a separate and also implied promise “by
the defendant to the effect that it (the defendant) would not act in such a manner so as to
render the plaintiff’s performance of its obligations towards completion of the contract an
exercise in futility.” Hence, anticipatory breaches of executed contracts also breached this
promise – at [45].

 In addition, applying the doctrine to executed contracts is congruent with demands

of fairness. At [46] – “how could the plaintiff in the situation of an executed
contract (in which it had in fact performed all of its obligations under the contract)
be in a worse position compared to a situation in which it (the plaintiff) had yet
(although it was able and willing) to perform all of its obligations under the same
contract? …such a result would not only be contrary to logic but would also militate
against commonsense as well as a just and fair result…”.

o Thus, SGCA held that the doctrine applies to both executed and executory contracts.

o Summary of the critique of excepting executed contracts from the doctrine of anticipatory
breach:

 HCA in Progressive Mailing House at [44-45] (not in case list) – “The principles
relating to anticipatory breach put both a shield and a sword in the hands of an
innocent party who accepts the other party’s repudiation. His shield is the ending
of his executory obligations; his sword is an immediate right to damages. … [A
victim whose side of the contract is executed] has no need of a shield. But he may
wish to brandish a sword.”

o SGHC focused on the rationale of the doctrine itself as found in Hochster v De la Tour which
is to protect the innocent party’s ability to withhold performance, a rationale that does not
exist if the victim has already all his obligations under the contract.

o On the other hand, the SGCA held that the position of the SGHC would lead to the plaintiff in
an executed contract scenario being in a worse position than a P in an executory contract
scenario. This would militate against common sense as well as a just and fair result.

o @ [61] said that there might be future obligations that would be wasteful in the context of an
executed contract. The need to alleviate or eliminate past waste, just as the need to avoid
future waste equally justifies immediate remedies. There is thus no need to differentiate
between these two kinds of wastage.

 Held – on the rationale behind the doctrine:

o Traditional approach – anticipatory breach is a breach of an implied promise by the

defendant not to act in a manner so as to render the plaintiff’s performance of its
obligations towards the completion of the contract an exercise in futility – at [45].

 However, this approach is “somewhat strained and artificial”. It has been

academically criticised for two reasons. Firstly, because it is a fiction in certain
cases. Secondly, because the breach of an implied term is an actual, not an
anticipatory, breach of contract – at [48].

o Modern approach – the defendant’s conduct evincing a clear intention not to perform his
contractual obligations is a present actual breach albeit notified in advance to the plaintiff.

 At [51] – “If it is the case that the defendant has evinced a clear intention that it
will not perform its obligations under the contract, then we see little reason why
this very fact might not itself form the basis for holding that, in principle and logic,
an actual breach has, in substance, occurred –notwithstanding the fact that the
 time for the defendant’s performance has yet to arrive under the contract. This
seems to us to be a much less convoluted way of understanding the basis
underlying the doctrine of anticipatory breach, whilst simultaneously avoiding the
artificiality surrounding the use of the device of the implied promise.

 Held – reconciling anticipatory breach with the breach framework set out in RDC:

o Situation 1 (breach of express condition) – anticipatory breach does not apply – at [65].

o Situation 2 (renunciation) – anticipatory breach does apply. Anticipatory breaches typically

fall under section 2. SGCA notes that cases of renunciation of a contract under situation 2
would “by their very nature” be “anticipatory in nature” – at [65].

 However, SGCA notes in San International v Keppel Engineering [1998] 3 SLR(R)

447 that not all renunciations amount to an anticipatory repudiatory breach.

 At [25] of San International – “Not every intimation of an intention not to perform

or of an inability to perform…will amount to a renunciation... [A] renunciation of
some but not all the obligations under a contract will not entitle the innocent party
to [terminate]…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…The Nanfri [1979] 1 All ER 307; The
Afovos [1983] 1 All ER 449”.

o Situation 3(a) (breach of a condition) – it must be clear that a condition would definitely be
breached.

 At [66] – “key requirement of a (serious) absence of readiness or willingness to

perform on the part of the defendant”.

 At [66] – citing from [18] of The Bulk Uruguay [2014] 2 All ER (Comm) 196 – “what
is required is inevitability. It is not sufficient if something is done which makes
future performance unlikely, even very unlikely, still less that it renders
performance uncertain. That is why renunciation is often a more favoured basis for
invoking the doctrine of anticipatory breach.”

o Situation 3(b) (HK Fir approach) – it must be clear that there will be substantial deprivation
of the benefit of the contract.

 However, there is an argument that anticipatory breach excludes the knowledge of

the consequences of a breach under situation 3(b). This makes it inadvisable for the
court to allow anticipatory breach under this situation – at [67].

 Difficulties: Since time for performance has not come, how do you know the actual
nature and consequences of the breach

 SGCA held that there are difficulties with this argument. Firstly, even in actual
breach falling under situation 3(b), courts are required to “extrapolate or project to
some extent”. Secondly, even in cases of anticipatory breach, the consequences of
the breach might be known by the time the case is heard.

 Hence, distinction between an actual breach and an anticipatory one is very fine or
even non-existent – at [69].

 Evidence of consequences may be forthcoming given passage of time between

breach date and trial

o One remaining issue – situations where there is an inability to perform on the part of the
defendant.
  Such situations exclude situations where an external, catastrophic event beyond
the control of both parties occurs as that would fall under the doctrine of
frustration.

 At [76] – “situations which involve an inability to perform on the part of the

defendant can – depending on the precise facts of the case – fall within one (or
more) of the situations set out in RDC Concrete”. This is excluding situation 1.

 Hence, the former anticipatory breach scenarios of inability to perform, incapacity,

disablement, etc. should now be treated as falling within situations 2,3(a) or 3(b).

 Held – on the facts of the case ([79-89]):

o Insolvency per se will not amount to such an anticipatory breach entitling termination.
Insolvency will have to be considered together with all the circumstances of the case. The
court will then find if the insolvency constitutes an anticipatory breach under the tests in
RDC.

 RDC Framework

Situation Actual Anticipatory Breach

1 (express termination √ X
provision)

2 (renunciation) √ √ (most clear-cut)

3(a) (breach of condition) √ √ (but must be clear that condition would definitely be
breached)

Anticipatory breach: Executory and executed contracts?

 STX Mumbai (CA reversing HC): No difference – applies to both

 Executory (Innocent Party has  Executed (Innocent Party has performed

outstanding obligations) all obligations)

 HC  AB doctrine protects innocent  No such rationale applies here – AB not

party – allows immediate applicable
termination to avoid (wasteful)
performance

 Ca  Ditto  AB doctrine applicable - greater need to

protect innocent party where he has
already provided performance

Therefore AB applicable to both executory & executed

5.3 Illustration of anticipatory breach

5.3.1 Chua Chay Lee v Premier Properties [2000] 4 SLR 177
  Facts: A developer was to hand over new apartments to Pfs within 33 months. Before the 33 months
had elapsed, the developer informed Pfs that the project would be delayed by 12 months. Pf sued for
anticipatory repudiatory breach.

 Held – time was not of the essence in this agreement. Hence, the delay was not a breach of a
condition.

 Held – applied the principle in Universal Cargo Carriers – that where a delay is not a breach of a
condition, it has to go to the root of the contract.

o At [19[ of Chua Chay Lee, citing from Universal Cargo Carriers – “Where time is not of the
essence of the contract – in other words, when delay is only a breach of warranty – how
long must the delay last before the aggrieved party is entitled to throw up the contract?
The theoretical answer is not in doubt. The aggrieved party is relieved from his obligations
when the delay becomes so long as to go to the root of the contract and amount to a
repudiation of it.”

 Held – the delay did not go to the root of the contract. There was no substantial deprivation of the
benefit of the contract – at [35].

6 Election
6.1 The Innocent Party’s Right to Election
 An innocent party is not obliged to exercise his right to terminate performance of the contract.

 He can either terminate performance of the contract and claim damages or he can affirm the contract
and claim damages – held in Geys v Société Générale, London Branch [2013] 1 AC 513.

 Once repudiation is accepted, the contract is terminated prospectively rather than retrospectively.

o Both parties are discharged from their future and outstanding primary obligations under
the contract, but rights accrued prior to termination remain intact.

 Once terminated, a contract cannot be revived even by parties’ agreement.

o Such an agreement will instead be held to be a new contract.

6.2 The Innocent Party’s Exercise of the Right to Terminate

6.2.1 Clear and unequivocal communication

 This right must be exercised through clear and unequivocal communication of “acceptance of
repudiation”.

 However, this act of acceptance requires no particular form and does not have to be couched in the
language of acceptance – held in Vitol SA v Norelf Ltd [1996] AC 810.

o 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”.

6.2.2 Silence

 Usually does not amount to acceptance, unless that is the only construction derivable.
 o Lord Steyn at pg 811 of Vitol – example of employee who does not turn up for work after
being fired by his employer in repudiatory breach. This is an example of a case where a
failure to perform would suffice to constitute an acceptance.

6.3 How Long the Innocent Party Has To Make a Choice

 Election does not have to be immediate – held in Stocznia Gdanska SA v Latvian Shipping Company
(No.2) [2002] EWCA Civ 889.

o Rix LJ – “[T]here 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”.

 Whether a delay constitutes an affirmation of the contract depends on the context of the case – held
in Force India Formula One Team Ltd v Etihad Airways PJSC [2010] EWCA Civ 1051.

 However, the innocent party must remain willing and able to perform and cannot take too long to
decide – held in Stocznia Gdanska SA v Latvian Shipping Company (No.2) [2002] EWCA Civ 889.

o Stocznia Gdanska SA:

o ‘If he does nothing for too long, there may come a time when the law will treat him as
having affirmed… As long as 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 [his] rights…such as frustration or even his
own breach…’

6.3.1 Case Law

Force India Formula One Team Ltd v Etihad Airways PJSC [2010] EWCA Civ 1051
Case regarding the effect of delay on the right of election

 Facts: concerned a breach by an F1 team of its obligations owed to its sponsor (Etihad Airways and
another property developer, Aldar). When the team changed owners they inter alia rebranded the
team name from ‘Etihad Aldar Spyker F1 Team’ to ‘Force India. The sponsors waited for some time
before suing the team.

 Held – This was a repudiatory breach

 Held – the sponsor’s initial lack of complaint was not an affirmation of the contract.

o Rix LJ described this case as “‘the middle ground between acceptance of a repudiation and
affirmation of a contract which I discussed in the earlier Stocznia case”.

 Held – on whether a delay in termination constitutes affirmation of the contract:

o Depends on the context and whether there is urgency

 In cases where time is of the essence, a delay in termination is more likely to be held
as affirmation of the contract.

 However, in the present case, there was no hurry for the sponsor to make his
election.

 ‘Although delay may always be capable of being compromising, this contract,

especially during the winter break between two racing seasons, did not
[demonstrate affirmation]... Such cases typically occur where time is of the
essence…where markets are always on the move such as in a share transaction,
 or…in a sales of goods case where a seller has to know whether or not his buyer is
accepting the goods which have been delivered...

 The present case concerns a complex and medium term relationship…where it

necessarily and legitimately takes time for the consequences to become clearer
and for the innocent party to consider his position.”

Aero-Gate Ptd Ltd v Engen Marine Engineering Pte Ltd [2013] SGHC 148
SG Case applying the “wait and see” approach

 Facts: Df was obliged to deliver 10 generators – 4 by end-Jan 2012, 4 by 1 Nov 2011 and 2 by 1 Jan
2012. On 16 Jan 2012, Df had only delivered 2 generators, with less than satisfactory quality. HK Fir
approach was applied to terminate the contract.

 Held – parties are entitled to “wait and see” since they must assess the actual consequences of the
breach.

o At [124] – “Since determining whether a breach is a repudiatory breach necessitates an

assessment of the actual consequences of the breach, parties must be entitled to wait and
see what these consequences actually are: see RDC Concrete at [100]. Hence, it is not at all
inconsistent for the innocent party to treat the contract as alive post-breach and then to
terminate it subsequently when it transpires that the consequences of that breach operate
to deprive him of substantially the whole benefit of the contract. In this case, the plaintiff’s
conduct in treating PO 2 as alive can at best be an election to affirm the contract for the
time being. It cannot be an election to affirm the contract for all time, regardless of the
consequences of the breach as they became apparent over time”.

6.4 The Loss of the Innocent Party’s Right to Terminate

 3 ways:

o Affirmation

 Delay in election amounting to affirmation (covered above)

 Positive act amounting to affirmation – The Kanchenjunga [1990] 1 Lloyd’s Rep

391.

o Acceptance of goods under the Sale of Goods Act (sections 11(3) and 35)

o Waiver and Estoppel (NO NEED TO KNOW IN DETAIL)

6.4.1 Affirmation

 Delay (covered above)

 Positive act – The Kanchenjunga.

Motor Oil Hellas (Corinth) Refineries v Shipping Corp of India (The “Kanchenjunga”) [1990] 1 Lloyd’s Rep 391
shipowner pressing charterer to load despite latter nominating unsafe port – affirmation

 Facts: A shipowner pressured the charterer to load the vessel despite the charterer’s nomination of
an unsafe port (Kharg Island which was subjected to aerial bombardment during the Iran-Iraq War).

 Held – this act was a positive act which amounted to affirmation of the contract despite the
charterer’s breach.
6.4.2 Acceptance of Goods under the Sale of Goods Act

11(3) Subject to section 35A where a contract of sale is not severable and the buyer has accepted the goods
or part of them, the breach of a condition to be fulfilled by the seller can only be treated as a breach of
warranty, and not as a ground for rejecting the goods and treating the contract as repudiated, unless there is
an express or implied term of the contract to that effect.

35

(1) Subject to subsection (2), the buyer is deemed to have accepted the goods —

(a) when he intimates to the seller that he has accepted them; or

(b) when the goods have been delivered to him and he does any act in relation to them which is inconsistent
with the ownership of the seller.

(2)  Where goods are delivered to the buyer and he has not previously examined them, he is not deemed to
have accepted them under subsection (1) until he has had a reasonable opportunity of examining them for
the purpose —

(a) of ascertaining whether they are in conformity with the contract; and

(b) in the case of a contract for sale by sample, of comparing the bulk with the sample.

(3)  Where the buyer deals as consumer, the buyer cannot lose his right to rely on subsection (2) by
agreement, waiver or otherwise.

(4)  The buyer is also deemed to have accepted the goods when after the lapse of a reasonable time he
retains the goods without intimating to the seller that he has rejected them.

6.5 Consequences of Election

6.5.1 Consequences for termination – If you choose to terminate

 Termination operates prospectively, not retrospectively

o Both parties are released from future obligations and rights accrued prior to termination
are left intact.

 Some clauses may survive termination:

o Jurisdiction/choice of law clauses

o Dispute resolution clauses

o Restraint of trade/confidentiality clauses

 Specific remedies to be covered in detail in Remedies notes.

Photo Production v Securior Transport [1980] AC 827

 Held – breaches of primary obligations (failures to perform) give rise to substituted secondary
obligations (principally the obligations to pay damages).

 Held - in cases where there has been a repudiatory breach, two secondary obligations arise.
 o First, the obligation to pay damages.

o Second, the unperformed primary obligations of the other party are discharged.

6.5.2 Consequences for affirmation of the contract – If you choose to affirm and continue

 Both parties are bound to continue performance

o However, the innocent party can still claim damages for prior breaches

 Affirmation of the contract is irrevocable

o Exception for continuing repudiatory conduct – continued non-performance or fresh breach

Case Law

Johnson v Agnew [1980] AC 367

There may be circumstances in which revocation of affirmation is allowed

 Facts: The owners of a mortgaged property had trouble paying off the mortgage. The purchasers
agreed to buy the property at a price which allowed the owners to pay off the mortgage had won
orders for possession and sale of the property. However, they failed to complete the sale. The owners
affirmed the contract and sought specific performance but at the same time the mortgagees sold off
the property. The owners sought to revoke their election to affirm the contract and to terminate it
instead.

 Holding: Owners allowed to terminate the contract and claim damages.

 Held – there may be circumstances in which the innocent party may revoke his original election to
affirm the contract.

 Held – the time for assessment of damages is usually at the date of the breach, but this may be
changed if it would give rise to injustice.

 Held – on the facts – the time for assessment of damages was changed to the date on which the
mortgagees entered into an agreement to sell the property.

Safehaven Investments Inc. v Springbok Ltd. (1998) 71 P&CR 59

Continued repudiation allows for revocation of affirmation of the contract

 Held – innocent party may revoke his affirmation when the defaulting party continues to be in
repudiatory breach of it.

The Fortune Plum [2013] EWHC 1355

Continued repudiation allows for revocation of affirmation of the contract

 Facts: The charterers of the vessel did not make their payments. They then tried to amend the
contract to aid their position. The owners of the vessel discovered this breach on 1 Nov but waited till
11 Nov to decide that they wanted to terminate the contract. This delay was held to be an affirmation
by the lower court. On appeal, the court held that continued repudiation post-11 Nov would allow the
owners to revoke their affirmation.
  Held – continued repudiation would allow the innocent party to revoke their affirmation of the
contract.

National Skin Centre (Singapore) Pte Ltd v Eutech Cybernetics Pte Ltd [2001] 3 SLR(R) 801
New deadline given (affirmation) – innocent party allowed to terminate when the new deadline was not met

 Facts: E did not meet the original 8-month delivery deadline by Aug 1999. N initially decided not to
terminate and gave a 3-month notice period for delivery on Feb 2000.

 Holding: N was entitled to terminate when E was not able to meet the new deadline.

 Issues – this may allow the innocent parties to set unreasonable new deadlines as a way to
successfully resile its affirmation of the contract.

6.6 Restrictions on Affirmations Following an Anticipatory Breach

What restrictions are there on the right to affirm the contract following an anticipatory repudiatory breach

 E.g. Buyer repudiates contract – I wont pay when $ are due!

 Seller insists on continuing to work to claim contract price

White & Carter (Councils) Ltd v McGregor [1962] AC 413

 Facts: W were suppliers of litter bins who made money by displaying ads on the bins. M contracted
with W to advertise his garage business but cancelled the deal on the same day (said that their
manager acted without authority (Renunciation?)). W refused to accept the cancellation and
continued displaying the ads. When the first few payments were not made, W claimed the whole
contract price.

 Holding: HL by 3-2 margin allowed W’s claim.

 Held – the victim of anticipatory breach has an unfettered right to affirm the contract. (victim of
anticipatory breach has unfetted option to accept it (affirm the contract))

 Held – exceptions to the right to affirm:

a. If he needs the cooperation of the defaulting party

b. If he has no legitimate interest in performing the contract other than the claim damages.

However, in order for the innocent party’s to affirm:

 Must actually perform his obligations (Doherty v Fannigan Holdings [2018] EWCA Civ 1615 - D fails
to pay price under share sale agreement, F must execute transfer to successfully affirm)

 Cannot affirm if he needs the cooperation of the defaulting party

o Dicta in MP Bilt Pte Ltd v Oey Widarto [1999] SGHC 70 – contractor undertaking to repair
house for lump sum needs cooperation of owner who has control over access

 Must have a legitimate interest in performing the contract rather than claiming damages – Lord Reid’s
Dictum in White & Cater

6.6.1 If the Innocent Party Needs the Co-operation of the Defaulting Party
MP Bilt Pte Ltd v Oey Widarto [1999] SGHC 70

 Held – example given of a contractor undertaking to repair house sought to affirm the contract. He
needs the cooperation of the owner who controls access to the house.

o ‘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.’

6.6.1 The “Legitimate Interest” Principle in White & Carter

 Endorsed locally in MP Bilt

o Lord Reid’s dictum in White & Carter cited at [33] of MP Bilt – “[I]f 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.”

o Note: This dicta has been problematic. Firstly, Lord Reid’s remarks were clearly obiter, since
he was part of the majority in White and refused to say whether the claimants had any
“legitimate interest”. Secondly, his formulation was vague.

You have a legitimate interest given… Conversely, no legitimate interest if…

Difficulty of obtaining damages/speculative Performance is manifestly wasteful, unreasonable

damages to affirm

Non-pecuniary interest in performance (e.g.

reputational benefit)

Legal liability to 3P consequent on non-

performance

Examples of “Legitimate Interest” from Case Law

The Odenfield [1978] 2 Lloyd’s Rep 357

Legitimate interest found on 2 grounds – difficulty of obtaining damages and legal liability to 3P

 Facts: Owners entitled to affirm repudiated charterparty. They would have difficulty finding
alternative employment for the vessel and damages would be hard to assess (this was a “legitimate
interest”).

 Held – difficulty of obtaining damages as a legitimate interest

 Held – legal liability to a third party which would be consequent on non-performance as a legitimate
interest.

o Terminating the contract would put you in breach of other contractual obligations, or
statutory/regulatory duties,
Ministry of Sound (Ireland) Ltd v World Online Ltd [2003] EWHC 2178
Legitimate interest found on 1 ground – to protect or enhance one’s professional reputation

 Facts: Pf continued to publicise Df’s services as contracted despite Df’s refusal to pay.

 Held – Pf had legitimate non-financial interest in proceeding with the contract since its name was
associated with World Online’s publicity.

 Case discussed by Q Liu in “The White & Carter Principle: A Restatement” (2011) – “to protect or
enhance one’s professional reputation may also constitute a good reason for the victim to disregard
an anticipatory breach”.

The Puerto Buitrago [1976] 1 Lloyd’s Rep 250

No legitimate interest (and economically wasteful)

 Facts: Charterer returns ship early due to engine trouble. This was a repudiatory breach as the
charterer was bound to carry out necessary repairs during the charter. The repairs cost £2 million
while the ship’s repaired value is only £1 million. Owners not allowed to affirm the contract (insist on
repairs).

 Held – affirmation of contract may not be allowed if it is economically wasteful.

 NOTE: Courts usually side the innocent party as they seek to protect its performance interest. Hence,
it is usually on the defaulting party to show that the innocent party has no legitimate interest in
affirming the contract. However, it takes an extreme case like The Puerto Buitrago to show this.

o As stated in The Aquafaith [2012] EWHC 1077 at [23] citing The Dynamic [2003] 2 Lloyd’s
Rep 693:

 “1. The contract breaker has the burden of showing that the innocent party has no
legitimate interest in performing the contract rather than claiming damages.

 2. This burden is not discharged merely by showing that the benefit to the
innocent party is small in comparison to the loss to the contract breaker.

 3. This exception applies only in extreme cases: damages must be adequate to

protect the innocent party’s position and an election to affirm the contract must
be unreasonable.”

7 The defaulting Party’s rights: What can the contract breaker claim despite imperfect
performance?
 The breaching parties ability to claim for damages would generally depends on what the parties agree
as the order of performance and whether the obligation are dependant or independent.

o This depends on what the parties have agreed as the order of performance

 Obligations may be dependent or independent (innocent party must still perform his side of the
contract).

 English Law Commission’s report on Pecuniary Restitution on Breach of Contract (Law Com No 121,
1983), paras 2.1-2.4:

 A contract is an “entire contract” if complete performance by one party is a condition precedent to

the other’s liability to pay the agreed price or to render any other agreed counter-performance
  In general, a contract will also be considered to be an entire contract where the consideration
provided by one party is a promise to pay a lump sum, by which we mean a sum payable on and only
on completion of performance, and there is no provision for setting of a portion of this consideration
against a portion of the performance to be rendered by the other party.

 Entire contract differs from “severable contracts”. In a severable contract, there is an express or
implied agreement for payment in proportion to the extent of performance, or payments under the
contract is due from time to time as performance of specified parts of the contract is rendered.

 The question as to whether or not a contract is an entire contract is a question of construction,

depending on the intention of the parties.

 Where a party to an entire contract has incompletely performed his obligations under the contract
the question arises as to the extent, if any, to which he is entitled to recover in respect of his partial
performance.

7.1 Independent Obligations

 Innocent parties must still perform his side

 A common example is that of a tenant’s obligation to pay rent

o This is independent of the landlord’s obligation to repair and maintain the premises.

o Held in Taylor v Webb (1973) 2 KB 283 – tenant cannot simply stop paying rent until repairs
are carried out.

o Breaching an independent obligation – Both parties will be in breach if their respective

rental and repair obligations are not performed and to the extent that any of these reaches
are repudiatory (i.e. fitting within the RDC situations), they would entitle the other party to
terminate the contract.

 Though of course, the terminating party remains liable in damages for his own
breaches.

 Local instance of “double breach” - Alliance Concrete Singapore Pte Ltd v Comfort Resources Pte Ltd
[2009] SGCA 34

o Facts: AC did not pay/submitted late payment of sums due. Comfort subsequently breached
by refusing to supply sand.

o Held – Comfort’s obligation to supply sand was not a condition precedent to AC’s obligation
to pay sums due and owing for sand that had already been delivered.

 When it comes to obligations of payment for work done, the recipient of the goods/services will
often want to provide that his payment obligation is dependent on some level of work being first
performed, as protection for his side of the deal – hence one must usually examine the issue of
dependant obligations in this context.

7.2 Dependent Obligations

 These obligations are usually dependant on a particular party’s performance

 Divisible obligations – contract stipulates that payment due from time to time as parts of
performance rendered
  Entire obligations – innocent party can withhold as long as contract breaker has not completely
performed – condition precedent to IP’s performance.

o I.E. if complete performance by one party is a condition precedent to the other party’s
liability to pay the agreed price or to render any other agreed counter-performance.

o Also, where the consideration provided by one party is a promise to pay a lump sum
(payable on and only on completion of performance), and there is no provision for setting
off a portion of this consideration against a portion of the performance to be rendered by
the other party.

Case Law (Divisible Obligations)

Taylor v Laird (1856) 25 LJ Ex 329

 Facts: A seaman expressly agrees to serve at a fixed rate per month.

 Held – he may recover his pay for each completed month despite failing to complete the entire
voyage.

Tong Aik (Far East) Ltd v Eastern Minerals & Trading (1959) Ltd [1963] MLJ 322

 Facts: Pf contracted to supply manganese ore at a minimum of 5000 tons a month at agreed rates
(per ton).

 Held – the contract possessed characteristics of a divisible contract to be fulfilled in parts. Hence,
payment for the tonnage supplied was due.

Case Law (Entire Obligations)

Cutter v Powell (1795) 6 TR 320

 Facts: A seaman agreed to serve on a ship as the 2nd mate, to be paid 30 guineas 10 days after his
arrival, provided that he “does his duty…from hence [Jamaica] to the port of Liverpool”. However, he
died before completing the voyage.

 Holding: The seaman’s wife’s claim for a portion of his wages was denied.

 Held – contract consisted of an entire obligation which had to be performed before the plaintiff was
entitled to receive anything under it.

o “[A]s [the contract] 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 to entitled to receive any thing under it.”

 Background to the case - the ship involved was a slave ship. Mr Cutter was engaged after various
other crew members had died from disease, drowning, or were killed by slaves. Mr Cutter also
apparently had some special skill as a shipwright in carpentry, which was useful to his employers for
constructing secure barricades on the ship. He was paid a much higher rate of pay than the going
rates as part of the whole deal, but as a form of ‘insurance’ his employers intended that he should
complete the voyage before obtaining this higher pay.

7.3 Exceptions to the “Entire Obligations” rule

 Claim for substantial performance

 Claim in restitution
7.3.1 Claim for Substantial Performance

 Rationale – unfair if recipients of goods/services use minor imperfections as an excuse.

 Interpretation of “entire” – you must do all the work (quantitatively), but some minor defects
(qualitatively) do not bar you from claiming for the contract price.

Hoenig v Isaacs [1952] 2 All ER 176

Substantial performance of the contract found

 Facts: Pf was employed to decorate Df’s flat for £750. He finished the work with some minor defects
in the bookcase and wardrobe, which would cost £55 to rectify.

 Held – Df cannot refuse to pay the balance of the contract price.

o Lord Denning – “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…It was
substantially performed. The contractor is entitled to the contract price, less a deduction
for the defects…”

 Treitel – “The basis of Hoenig v Isaacs is that the builder, even if he was under an entire obligation as
to the quantity of work to be done, was under no such obligation as to its quality.”

 Phang – the exception of substantial performance is a question of construction as to what amounts

to “full and precise performance of the contract”. That is, an entire obligation can be sometimes
“watered down” slightly in the interests of protecting a provider of goods/services.

o However, the quality/quantity distinction can be elusive – there is sometimes a fine line in
practice between doing all the work, but defectively (a quality issue), and doing almost all
the work (a quantity issue).

Bolton v Mahadeva [1972] 1 WLR 1009

No substantial performance found

 Facts: Pf was contracted to install central heating in Df’s house for a lump sum payment. The system
was defective.

 Held – there was no substantial performance as the work was not only shoddy, but was “generally
ineffective”.

 Way to rationalise Bolton – (a) all the work was done but the qualitative defects were major, or (b)
the work was done so badly that it could not be said to have been completed (even from a
quantitative angle).

7.3.2 Claim in Restitution for unjust enrichment

 This is a claim for unjust enrichment at the expense of the claimant.

 A reasonable value for work done will be given

o Amount due not provided by contract

 Counter: A claim under unjust enrichment side-steps the “entire obligation” rule:
 o McFarlene and Stevens – “‘[T]he appeal to unjust enrichment seems to have the advantage
of side-stepping the entire obligation problem…if the description of an obligation as entire
merely describes the degree of performance needed to trigger a contractual duty, why
should it prevent the recipient of part performance being under a duty arising from their
unjust enrichment?’”

 Rationale for unjust enrichment:

o Enrichment at the expense of the defaulting party

 Part-performance may or may not benefit the innocent party (e.g. half a building)

 However, benefit might be proved if the other party has the option to reject but
voluntarily accepts part-performance. This shows that he values part-performance
– held in Sumpter v Hedges [1898] 1 QB 673.

o Enrichment is considered unjust

 Total or partial failure of consideration/counter-performance

Sumpter v Hedges [1898] 1 QB 673

 Facts: S agreed to build 2 houses for H for a lump sum. S did not complete and H completed the
houses himself.

 Analysis:

o S could not claim in restitution for work done as the fact that H reoccupied his own land
with partly completed buildings did not in and of itself mean H was benefitted, as he had no
real option but to accept what was done on his land.

o However, H did voluntarily make use of certain materials left by S to complete the work – H
was held liable for the reasonable value of these materials as he benefitted from the use of
them.

 Note – even without voluntary acceptance, one can prove enrichment if there is incontrovertible
benefit from the part-performance.

Criticisms of claims in restitution

 Against:

o Such a claim will override the parties’ agreed order of performance and amount to a re-
writing of the contract.

o Where an entire obligation is concerned, work is done in the expectation that it will be paid
for when complete.

 Hence, there is no shared expectation that part-performance is to be rewarded.

There is hence no failure of consideration if the part-performer is not paid.

 For:

o Fairness to the part-performing contract-breaker

o Consequences of denying restitution would be to provide a windfall to the recipient of

goods/services at the supplier’s expense.