Overview: Singapore Contract Law
Whenever you’re starting a firm, you get introduced to several kinds of contracts. Be it related to equipment leases, office, deals with new workers, shareholder agreements, or customer contracts. So before starting a firm, you must consider if your nation’s laws will go with your agreements, and if the legal body of that nation will quickly, fairly, and cheaply settle any dispute that occurs. Singapore’s government understands this and that’s why it has taken measures to make Singapore the best destination in the world to sign financial contracts.
The contract law of Singapore is made as per the British common law because of its colonial history. It comprises the topics people relate to a contract like acceptance, offer, breach, consideration, and performance. It’s been 50 years since Singapore got free from Britain but it still follows the contract law given by Britain. Because of Singapore’s relation with the well-recognized and widely understood common law tradition makes it simpler for corporations to sign up contracts in Singapore. These contracts can also be signed up with foreign partners.
Singapore Contract Law
Because of historical impressions, the Singapore contract law is framed upon British common law. Talking about its history of it, the alignment of Singapore with the British goes back to the year 1819 when a port was built by Sir Stamford Raffles. This port was going to become Singapore to assist the British businessmen matching with Dutch ships. In the year 1824, this island completely became a British possession and then in the year 1926 with Penang and Malacca on the Malay Peninsula, it became the Straits Settlement coming under the hold of British India. Starting from there till Singapore finally separated in 1959 from England, the British laws were valid for Singapore. Singapore was devoid of its independent laws.
While this time was going on, all disputes related to contracts were settled by the British common law. After alignment with Malaysia, in 1965, Singapore became an independent nation. It got its constitution but unlike Malaysia, it didn’t change its contract law into rulings. The Singapore contract law remained just like it was during British rule.
Singapore has not been governed by British common law after independence, as when it was was a territory. Singapore contract law, on the other hand, adheres to its previous history, that of Britain. Especially now, if Singapore common law doesn’t quite tackle these issues posed in a lawsuit, the authorities will seek advice from British law. Furthermore, a few of the legislation Singapore has enacted to amend judge-made legislation, like the Contracts (Rights of Third Parties) Act, is modeled on British laws. Singapore, on the other hand, often does not imitate England. The Consumer Protection Act, for instance, is modeled on Canadian legislation.
Governing Law And Platform
If you open a company in Singapore, you’ll want any contracts you execute to be governed by Singapore law. That implies any disagreement you have around your contract would be decided using Singapore law as the basis. The prevailing law is used to decide if the agreement is valid &, if that’s so, what powers and defenses each side have underneath the agreement, as well as what civil recourse the injured party has. Various countries’ laws can give different solutions to each of these questions when it comes to the same agreement.
Singapore permits the sides to pick the law that will regulate their agreement. It is feasible, but not recommended, to declare that some international court will control your contract in Singapore. It does not enable you to pick where your agreement issue will be resolved. In Singapore, an agreement governing a trade must be contested there.
Since the courts and arbitrators in Singapore are the most knowledgeable about their nation’s laws, it stands to reason to utilize Singapore as the legislation of preference for contracts involving your business operations in Singapore. Indeed, given the benefits of Singapore’s contract laws, using Singapore as the regulating jurisdiction for your agreements may sound right.
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Features of Singapore Contract Law
Here are some of the most important aspects of Singapore’s contract law.
Singapore’s contract law mirrors that of common law jurisdictions including the United States and England due to its lengthy legal relationship with the United Kingdom. An agreement in these nations is a contract formed by the transfer of “consideration” among two or more “responsible” persons to generate a legal duty amongst them. The SLC, (Singapore Law Committee), which includes the Ministry of Law and the Singapore Academy of Law, has described the fundamentals of Singapore contract law. Its findings are outlined below.
Acceptance, consideration, and offer
An agreement is made in Singapore whenever:
1) one group offers an “offering” of a service or product,
2) the next person or party “acknowledges” the proposal, and
3) some kind of remuneration is exchanged between the sides.
The offering must convey or indicate a commitment to be obligated by the proposal and not merely be a request, sometimes called an invitation to offer, to fulfill the required criteria. Showing goods with costs, for instance, is just an encouragement to deal, not a formal “offering.”
Until it is approved, an offer might be revoked at any time. The approval must be unconditional and communicated in words or actions. Quietness is often not enough to be taken as acquiescence. The ETA, Electronic Transactions Act, permits parties to make contracts through electronic proposals and agreements. Finally, for a contract to be deemed an agreement, it should be considered valid, which implies that the sides must exchange anything of significance. If not, the purchase is treated as a donation. The value among the participants does not have to be equivalent; it can also be notional to one party. The value might be favorable, such as compensation, or unfavorable, like the decision not to construct on a parcel of land.
When people enter into contractual arrangements in Singapore, there is indeed a legal assumption that they want to be protected by law. Only an explicit statement from the parties stating that they did not wish to be bound might contradict this assumption. In social connections, on the other hand, a clear declaration of intent is required to be lawfully bonded.
An agreement is only valid if both sides are “capable” or have the contractual capacity to negotiate. A contract made with a child, an individual of inferior intelligence, or someone who is intoxicated might not be effective in Singapore. If those people did not grasp what it was they were committing to, they are declared incapable of contracting. An agreement with a corporation, on the other side, is always valid, even if it appears odd to credit “expertise” and “awareness” to a legal concept like a firm. Employers are recognized as “individuals” capable of entering into agreements.
Breach and performance
The law recognizes performance when both sides comply with the agreement’s requirements. When one or both sides fail to fulfill, the law considers the agreement to be breached. The offended party can then choose to terminate the contract and turn to the judicial process to punish the side that broke the agreement responsible for the defendant’s breach.
There didn’t have to be a real breach. The legal notion of anticipating repudiation allows the other side to cancel the deal before execution is necessary if it is evident that one of the sides has no plans to carry out the deal.
Breach resistance defenses
Responsibility often does not follow a breach. Consent, frustration, error, deception, duress, outsized influence, willful misconduct, or criminality can all be used to get out of an agreement.
The sides can agree to free one another from responsibility under the contract by:
- An original deal cancellation clause
- A clause is a freshly negotiated settlement that releases one another from responsibility.
- A force majeure provision stipulates that no side will be accountable for a violation if a specific condition arises.
The judicial notion of anger is another option for the participants to be removed from an agreement without obligation. If anything, that couldn’t be reasonably assumed renders one or more of the partners’ obligations impracticable, anger releases them from culpability.
When one or perhaps both sides signed a contract with a misunderstanding concerning a critical provision, the deal is void. An error will be if a retail store sold somebody a jacket that had been ruined or lost (unbeknownst to the business).
If the provision is less important, the judge will try to find the right balance between safeguarding the party that was misled and honoring the other group’s contract obligations.
However, failing to sign the terms before accepting it will prevent you from subsequently claiming a mistake because the law assumes you have studied it.
The agreement is void if one party uses deception to entice other parties entering into it (Section 10). The deception can be explicit or inferred. It could also be an oversight. Nevertheless, “fluff,” or an imprecise or overstated sales claim, is not a deception. A major misrepresentation is one on which a sane individual would base their decision to engage in the agreement.
If the deception was dishonest or careless, rather than innocent, the offended parties are allowed to cancel the contract and seek further damages.
5. Duress, Undue Influence, and Unconscionability
If a side is coerced into an agreement under duress because the other side harms or hurts the first side, his or her assets or financial interests, the agreement will be void. Outsized influence is a subtler kind of compulsion in which one party controls and destroys the autonomy of another. Parent-child, Director-company, attorney-client interactions, and doctor-patient are all thought to have disproportionate influence. Lastly, if an agreement is unreasonable, or outrageously unjust because of the sides’ uneven negotiating position, it can be invalid.
6. Illegality or Against Public Policy
An agreement that is unlawful or in violation of government policy will be canceled. Contracts such as these are examples:
- Lie to government officials
- sabotage justice
- Pose a risk to the public
- Commit a felony, deception, or tort
- Physical immortality is encouraged.
Until a contract restricting trade is acceptable, it’ll be considered unconstitutional. If the impropriety only affects a portion of the agreement, including a phrase in a contract of employment prohibiting workers from ever fighting against the company, that provision, or a portion of it, will be separated from the remainder of the agreement and knocked out, allowing the majority to stay intact.
Agreement terms and conditions
The agreement’s provisions define the partners’ responsibilities and privileges. The duration of the agreement, the amount paid for a service or product, and the specification of the service or good being supplied are all-important contract conditions. The main provisions of an agreement must be defined for it to be effective.
When there is no signed agreement, the law looks to the participants’ declarations and conduct to see if they show a willingness to be bound legally by them. The courts consider when the statement was delivered, the value the party ascribed to it, and the intelligence of the opponent when making this conclusion. When an agreement is signed down, Singapore follows the parole proof rule, which provides that just the formal agreement, not past discussions or other verbal or in writing proof, can be utilized to determine the contents of the contract.
If it is essential to hold out the parties’ objectives and doesn’t violate any clear provision in the agreement, the court may suggest a term. The judge may also infer a condition because it is required by law, like the Sale of Items Act, which compels sales agreements to include an implied contract that the buyer has the authority to sell.
After the court has approved the provisions, it should now analyze them. It does so by applying the “rational individual” test. Not how the real participants would know the definition, but how a sane individual would. Singapore judges place a strong emphasis on the factual context in which the agreement was created when determining how a sane individual would interpret it.
Parties to the agreement, for instance, employ exception provisions to reduce or eliminate obligations under this agreement. The Unfair Contract Terms Act (UCTA) in Singapore, which is modeled on an English statute, limits the validity of such provisions. The respective negotiating situations of the partners or if there was an enticement to accede to the provision are considered by the judges when determining what is acceptable. An amusement park in Singapore, for instance, will not be permitted to invoke an exemption clause to minimize its culpability that resulted in the harm or injury of a roller-coaster passenger. The Unfair Contract Terms Act 1977 does not protect some agreements, like insurance agreements. The First Schedule outlines these exclusions.
Legal remedies for a breach
When a site violates a contract, the court might compel that side to pay contract penalties, punitive damages, or an intervention to “redress” the violation. The side who has been wronged should bring a lawsuit as quickly and efficiently as possible. Specific performance and injunction are only allowed if the application is received as fast as the side is aware of the violation. A contract issue in Singapore has a six-year limitation period for damages.
The commission has the right to compel the side that broke the agreement to compensate the wronged side for any economic losses incurred as a consequence of the violation. Contract penalties are what they’re called. The judge compensates the alleged victim for the sum he or she might have received if there was no violation when assessing contract penalties. This can comprise the agreement’s value as well as any additional expenditures paid as a consequence of the violation. Instead, the judge can reimburse the offended party for the sum they spent depending on the agreement. Mental suffering is not compensated by the court. Furthermore, the judge will not pay the offended party for concerns originating from his or her inability to reduce damages.
Special damages would be those specified in an agreement by the sides as the actual damages in the event of a violation. The judge will impose those penalties if they are a real attempt to estimate the damage a party might suffer and not an effort to penalize the party who broke the law.
Whenever penalties are insufficient to recompense the offended party, the judge may order particular execution, which implies that the breaching party must fulfill the contract’s requirements. The judge might, for instance, compel aside to provide a picture or a certain patch of property if that picture or patch of property is the only one that will accomplish the goal.
To define injunction, it is just the opposite of specific performance. With the help of an injunction, the judge stops aside from carrying out an operation. When considering specific performance, this solution is rarely suggested.
Fast and Structured Dispute Resolution
The Government of Singapore is a big supporter of resolving disputes as a means of reducing the length and expense of litigation in the instance of contract violations. It established the Singapore International Arbitration Centre, Singapore Mediation Centre, Consumers’ Association of Singapore, and the Singapore Chamber of Maritime Arbitration, which all offer conciliation and adjudication services to various claimants.
Those groups have had a lot of luck. In July 2014, for instance, 73 percent of conflicts referred to the Singapore Mediation Centre were resolved without any need for a lawsuit. In 2012, the SNU, Singapore National University established the SIAA, Singapore International Arbitration Academy, to better strengthen arbitration expertise.
Because of Singapore’s proponents of innovative dispute settlement and its strong and successful judicial system, contract enforcement takes a minimum of 150 days in Singapore, as opposed to 510 days globally. Enforcement costs are merely 25% of the sum insured. These figures position Singapore among the finest locations around the globe for agreement enforcement.
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Singapore’s common contract law that it got because of its historical relationship with Britain and the general approach commenced by its official body after independence, makes Singapore an amazing destination to sign contracts. It has a powerful legal framework that offers strong deal enforcement. The speed and price offered by Singapore are quite reasonable too. If you wish to start a company in Singapore but don’t know about the contracts that need to be considered, you can reach out to us at ODINT Consulting. We will help you in achieving your goal in no time, and at minimal expense.
Singapore’s agreement law is similar to that of common law jurisdictions, with a contract defined as a contract among two or more persons with the constitutional backing to trade “consideration” to form a legal responsibility.
Whenever a party provides an offer of products or service, another party accepts the offer, and when any form of remuneration is exchanged amongst the 2 parties, then it is termed an agreement.
Whenever a contract that proves to be a lie, sabotages justice, is harmful to the public, encourages sexual immorality, etc, it is counted as illegal.
Sandeepan has great experience in business consulting and management, Sandeepan provides insightful resources in Company Formation, Business Expansion, and related areas.