What is a Breach of Contract?
As previously mentioned in our article on what signing contracts entails, having formally entered into an agreement with another party means that you express your intentions to enter the contract and you agree to all the stipulations written on the document. Most importantly, you’re legally bound to follow through with all the contract terms, conditions, and principal obligations that require your performance. This means that signed contracts also act as written evidence if a promise is unfulfilled — known as a breach of contract — and will entitle legal claims on damages to the aggrieved party.
Specifically, a breach of contract happens when a defaulting party fails to deliver/perform their principal or other contractual obligation without any lawful excuse.
That being said, the court does not automatically grant any claims on a contract breach. It is crucial to note that there is a standard set of criteria that will validate the claim and entitle you to compensation or indemnity, whichever is applicable. Let’s tackle them one by one.
What are the Prerequisites of a Valid Claim on Breach of Contract?
Now that you have an overview of a contract breach definition, let’s go through the important prerequisites before a claim on breach of contract is rendered valid and legally actionable:
- A valid contract exists.
One of the main requirements in proving that a breach of contract occurred is to show that a valid contract exists in the first place. If you recall our article on simple contracts, we discussed that a valid contract must clearly outline the parties’ valid intentions to enter the contract, offer and acceptance, consideration or object, and legal stipulations. Both parties must also have the capacity to be legally bound by the contract.
Note that all these elements are crucial as they form a valid and enforceable contract. Otherwise, if at least one of them is non-existent in the agreement, a claim of a contract breach is less likely to be accepted by the court because there was no validly recognized contract to begin with.
- The claimed breach of contract occurred.
Secondly, the violation of the contractual obligation must have occurred. This means that there must be evidence that the defaulting party has failed to deliver or perform a stipulation in the agreement whether that be the principal obligation or other terms legally agreed upon by both parties.
A signed and valid contract gives rise to a legal promise to fulfill the contract stipulations in good faith. Once this happens, any deviation, violation, or non-performance of such will cause a breach of contract.
- Damages were incurred from the breach.
Finally, if the contractual breach causes loss to the aggrieved party, the defaulting party may potentially be given Singapore court order to provide compensation which is computed and indicated by the judicial court. This is typically in the form of monetary damages for the losses due to the unperformed principal obligation on the contract.
In addition to damages, however, there are also other types of judicial remedies available for the aggrieved party depending on the nature of the breached obligation. These are outlined in Section 13 of the Singapore Contract Law.
Next, let’s get into the specifics of a failure to perform an obligation arising in a contractual breach.
What Constitutes a Failure to Perform the Contract Obligation?
A contract has multiple sections, terms, and conditions. These provide clear stipulations on what obligations and expectations are pressed upon the contracting parties once entered into. Likewise, this entails that there are many ways to define and recognize a failure to perform a contractual obligation. We’ve outlined them down below for you:
- Late performance - This means that the performance was done in delay, beyond the date or period formally agreed upon in the contract — arising in loss to the aggrieved party.
- Non-performance - This includes a defaulting party who refuses to deliver or perform the promised obligation.
- Defective performance - When the defaulting party fails to deliver the obligation satisfactorily in its agreed-upon quality, state, or disposition.
- Doing the very thing the defaulting party has promised not to do
- Preventing oneself from fulfilling a contractual obligation
In Singapore contract law, it is not necessary to show that the party-in-breach intentionally failed to deliver their obligation unless the contract explicitly demands this. Moreover, the aggrieved party also does not need to demonstrate that the party-in-breach failed to apply reasonable precautionary measures in fulfilling the promise.
However, it is crucial to note that not every failure to perform immediately results in a contractual breach. Alongside this, two other elements must occur before the court recognizes a failure to perform as a breach of agreement in Singapore.
What are the Essential Elements of a Breach of Contract in Singapore?
As previously mentioned, a contractual breach is a serious claim. That’s why courts in Singapore have standard criteria for identifying if the breach really occurred in order to grant legal process, impose charges, and provide compensation where it is due. Here are the two essential elements of a breach of contract in Singapore:
- The defaulting party must have failed to perform a contractual obligation.
While agreements can be entered into verbally or in written form, a contractual obligation is legally enforceable when documented in a contract’s express term.
In determining whether a party committed a breach of contract, the specific contract stipulation that obligates the party-in-breach to perform or not perform must be known. This allows courts to ascertain the implications of the stipulation or express term intended by the contracting parties.
Once the meaning of the breached stipulation is clear, the dispute on the existence of the failure to perform the promise can be identified on the evidence provided by the aggrieved party.
There are three other sources of contractual obligations or promises which may be material to a breach of contract in Singapore. These are statute, widespread trade usage, and court-implied terms.
- There must be no lawful excuse for the defaulting party’s failure to perform.
There can be varying circumstances that might cause a party’s failure to perform. However, there are only finite legal excuses to pardon an unfulfilled contractual obligation.
Excuses indicated in the contract or by the Singapore contract law constitute the “lawful” excuse. For instance, price adjustments done by contracted suppliers may only be legally permissible should this arise from new government regulations or economic changes like rising inflation rates.
On the other hand, excuses made on social or commercial considerations that do not fall exactly as lawful excuses are still recognized as a breach of contract. For instance, price adjustments made by the contracted supplier based on a sudden change of mind as another buyer offered to pay higher is not a lawful excuse. In this case, the aggrieved buyer can file a claim against the party in breach.
What are the Two Types of Breach of Contract in Singapore?
Now that you understand the definition and elements of a contractual breach, it is important to know that there are levels to the violation itself — not all breach of contract is the same.
Here are two specific types that will allow the court to determine the extent of compensation that an aggrieved party is entitled to:
- Material - When the failure to perform a contractual obligation results in a substantial loss to the aggrieved party, a breach is considered material. This includes receiving an entirely different object from the other party or being delivered a severely defective item.
In Singapore, when a breach is material, the aggrieved party is absolved of its contractual obligations and is entitled to all remedies possible for a breach of contract.
- Minor - If the party-in-breach fails to deliver or fulfill some aspect of the contract, yet the aggrieved party still received the agreed-upon object or service, the breach is considered minor. For instance, reasonable delays may be considered a minor breach of contract if the contract does not explicitly state that there is a specific or firm date of delivery. In this case, the aggrieved party is still required to perform but they may recover the loss arising from the breach.
What are the Legal Remedies for a Breach of Contract in Singapore?
Once the claim for a breach of contract is validated and recognized by the court, the aggrieved party is entitled to legal relief through Singapore law.
We’ve compiled a list of the four remedies available:
Monetary compensation or damages are the primary remedies for contractual breaches. This is usually computed by the court based on the losses suffered caused by the breach against the innocent party.
- Contract Termination
The aggrieved party may also choose to terminate the contract itself. This means that all the contractual obligations will no longer be enforceable onwards.
- Order of Specific Performance
In exceptional cases where damages are inadequate, the party-in-breach may be compelled to do a specific performance. This is more likely seen in contracts on unique properties like land.
- Prohibitory Injunction
To ensure that the party-in-breach honors their promise to not do an act, they may be ordered a prohibitory injunction. Like the order of specific performance, this is only available if damages are an insufficient remedy.
Where Can You File a Dispute in Case of a Breach of Contract in Singapore?
If you find yourself aggrieved by a contractual breach in Singapore, there are avenues to resolve and file a claim for you such as:
- Court Proceedings/Arbitration
- Small Claims Tribunals
- Ministry of Manpower for Employees
- Private Settlement or Mediation
How Can Lexagle Help with Contract Breaches?
Without a doubt, breach of contract can be quite daunting and confusing as it is a complex claim. That is why dealing with multiple contracts can double the burden of keeping track of whether contracting parties are fulfilling their legal promises in the agreement.
In navigating contracts, contract management software like Lexagle provides a full suite of tools to help businesses stay on top of their contractual obligations. By alleviating the manual processes of searching, reading, and tracking contracts, Lexagle eases business partners of inconveniences when dealing with a pile of agreements across teams — ensuring that your rights are upheld and protected.