Breach of Contract

We enter into contracts as part of our everyday lives – for example, when we buy food from the hawker centre, when we subscribe to a streaming service, or when we sign up for a mobile / cellular data service / package.

Most of the time, breaches of contracts are obvious, such as failing to pay your mobile service or utility bill, and most of time, these are easily remedied. However, there are times where the contract itself may be a bit more complex, and in turn, so does the breach of the contract.

What constitutes Breach of Contract?

When two parties enter into a contract, it gives rise to contractual obligations which legally binding on both the parties. From a simply conceptual perspective, when either of the parties fails to perform their legally binding obligation(s) without a legal reason, it can be considered to be a breach of contract. When that happens, the innocent party can initiate an action for breach of contract against the defaulting party.

Putting the above together, we get two simple basic elements in a breach of contract:

Failure to perform a legally binding obligation under a contract which amounts to a breach on the part of the defaulting party; and
There is no lawful reason or excuse for such failure to perform or for the breach.

1. Failure to perform can take many forms depending on exactly what was promised to be done – some examples include:

Committing an act which the parties promised not to commit – for example, disclosing key information about an exclusive launch when there is an express promise to keep it secret until the day of the launch;
Non-performance of the contract by either party; i.e., not fulfilling what was promised under the terms of the contract
Delayed / Late performance – failure to perform within a set timeline / by a set deadline, or delayed performance of the contract where time is absolutely key to the contract itself. For example, preparing a birthday cake to be delivered to someone on their birthday, but only delivering after the birthday;
Defective performance – for example, the defaulting party is contracted to fix a car, but only fixes part of the issue which would result in the issue recurring again

Failure to fulfil the obligation is sufficient to constitute breach of contract and it is not necessary to prove that the defaulting party has not taken reasonable precautions to avoid the breach.

In determining a breach of contract, it is thus necessary to understand what the express term required the defaulting party to do, i.e., what exactly was the defaulting party legally obliged to do. This is an exercise of contractual interpretation which may involve express terms or implied terms, and as such might require legal expertise and advice.

2. No lawful reason or excuse for failure to perform or for the breach

A lawful reason can be contractual, or provided by law.

Some contracts provide for a mechanism for an extension of time in certain stipulated events – for example based on overall supply chain conditions. As such, where there is delayed performance, this may not be a breach if the provisions in the contract allow for such delayed performance in certain situations.

Another possible lawful reason is that of unlawful interference by a third party or the other contracting party itself – such interference can be considered the other party’s breach.

What can be done to resolve a contractual dispute?

There are many forums for resolution of contractual disputes that typically depend on the value of the contract and the nature of the dispute.

If the contractual value is small and the claim is up to $20,000, the parties may seek to have the dispute resolved through the Small Claims Tribunals, (or up to $30,000 with the parties’ consent). Parties are not allowed to be represented by lawyers in Small Claims Tribunals proceedings.
For contractual disputes involving employment and employees covered by the Employment Act, the Employment Claims Tribunal or the Ministry of Manpower may be a viable option for resolving employment disputes
If the parties intend to resolve it in a less adversarial or confrontational manner, they can explore the option of private mediation. This mode of dispute resolution is focused on finding a mutually acceptable outcome rather than a winner-takes-all outcome.

If the parties seek to have the dispute and contractual issue formally decided, then court or arbitration proceedings would be the more appropriate forum. However, these tend to be more costly and confrontational.

Remedies under the law for breach of contract include:

Monetary compensation: The innocent party receives damages in monetary terms to the extent of loss suffered due to the breach of contract, provided that reasonable steps to minimize and mitigate such loss have been taken.
Termination of contract: The innocent party may terminate the contract, provided that there is a legal right to do so. Whether one has the legal right to do so depends on the contract and the terms themselves.
Order for Specific performance: This is granted in exceptional circumstances when monetary compensation is not adequate and the Court takes the view that it is fair and just to order specific performance.
Prohibitory injunction: Like specific performance, it is also granted in exceptional circumstances when the Court believes monetary compensation is not sufficient or inadequate and it is usually used to stop the defaulting party from continuing to breach the contract (for example, continuing to publish confidential information)

If you require any assistance, you may contact:

What constitutes Breach of Contract?

1. Failure to perform can take many forms depending on exactly what was promised to be done – some examples include:

2. No lawful reason or excuse for failure to perform or for the breach

What can be done to resolve a contractual dispute?

Remedies under the law for breach of contract include:

Anthony Wee, Managing Director

Francis Chan, Executive Director