Breach of contract in Singapore
When is there a breach of contract?
A contract is a valid and binding legal agreement. It could have been made orally or in writing. A breach of contract occurs when one party fails to perform his obligations under the contract, without lawful excuse.
Lawful excuses come in many forms. If any of these situations occur, there would be no breach of contract despite the failure to perform:
- Discharge by agreement. Parties are free to bind themselves to the terms of a contract. In the same vein, they are similarly entitled to negotiate for release from any obligations. Alternatively, contracting parties may release themselves from the obligations of the original contract by entering into a subsequent contract of release. A mutual release of outstanding obligations would generally be effective. However, if one party has fulfilled all his obligations under the contract, then the other party has to provide what is known as valuable consideration in exchange for the release from his obligations.
- Secondly, where the failure to perform is due to events beyond the control of either party, and which neither party could have reasonably foreseen, the contract may be said to be “frustrated”. Obligations in a contract may end after a frustrating event. Examples include destruction of the subject matter of the contract, incapacity or death, supervening illegality etc. In such cases, there are statutory rules which set out the extent to which advance payments made before the intervening frustrating event may be refunded and work done in preparation of the performance of the contract in advance of the frustrating event may be reimbursed.
- Alternatively, parties may have contractually provided for non-performance following certain events, in the form of a “force majeure” clause (e.g. outbreak of war, strikes, acts of God, etc). Such a clause may mean that parties are not liable for non-performance following the occurrence of such an event.
There are some other limited scenarios which may constitute a lawful excuse. In the absence of a lawful excuse, non-performance results in a breach of contract. A breach of contract has significant consequences.
If the party in breach causes loss to the other (the aggrieved party), he would have to pay damages to the aggrieved party, to put the aggrieved party in the same position, as far money can do, as if the contract had been performed. Contractual damages are based on the loss suffered by the aggrieved party, and are generally not punitive in nature.
Sometimes, the court may order specific performance instead of monetary damages. This means that the party in breach is ordered to perform exactly what he had agreed to perform under the contract.
The breach may also allow the aggrieved party to bring the contract to an end thus discharging his own outstanding obligations under the contract. This means that the contract ceases to bind the parties from the time the election to terminate the contract is effectively communicated to the other contracting party.
Alternatively, the aggrieved party may choose to affirm the contract and keep it alive. This means that all obligations under the contract remain operable and the breaching party has to perform the other obligations owed or he would be liable for further breaches of contract. Even if the aggrieved party elects to affirm the contract, he is still entitled to sue the breaching party for any losses that the aggrieved party had already suffered as a result of the original breach.
The above constitutes general information only. You should seek legal advice from experienced Singapore criminal lawyers in relation to your specific situation.