We’ve all been there. You make a deal, shake on it, and feel confident that everything will go as planned. But then, a payment is missed, a deadline flies by, or the work delivered is just not what you agreed upon. That sinking feeling is often your first encounter with a potential breach of contract in Singapore.
It’s more than just a broken promise; it’s a legal issue that can leave you feeling stuck and unsure of what to do next. This guide will help you understand what it all means and what your options are.
What Exactly Is a Breach of Contract?
At its heart, what a breach of contract is quite straightforward. Think of a contract as a set of legally binding promises between two or more people. The breach of contract occurs when one person, without a lawful excuse, fails to fulfil their promise.
It’s a failure to perform their side of the bargain. This doesn’t just apply to massive corporate deals; it can happen with freelance agreements, tenancy contracts, or even a simple purchase agreement. The core idea behind breach of contract is that one party’s failure to act has negatively impacted the other.
Common Examples: What Is Considered a Breach of Contract?
It’s often easier to understand a legal concept when you can see how it applies to real life. A breach isn’t just one single action; it can show up in many forms. So, what is considered a breach of contract in day-to-day life? Here are a few common scenarios expanded with more detail:
Outright Refusal or Late Performance
This is the most obvious breach. If a party states they will not perform their obligations or simply fails to act by an agreed-upon deadline, they are in breach. For example, a catering company that doesn’t show up for an event, or a tenant who is consistently late with rent payments. Even partial performance, like a supplier delivering only half of an order, falls under this category.
Failure to Meet Quality Standards
Contracts often contain specific terms about the quality of goods or services. If a contractor uses subpar materials for a renovation or a web developer delivers a website full of bugs and broken links, they have likely breached the contract. The delivered product or service is not of a ‘satisfactory quality’ as implied or explicitly stated in the agreement.
Non-Payment for Goods or Services
This is a very common issue. When one party has fulfilled their side of the bargain (e.g., delivered goods or completed a service), the other party is obligated to pay the agreed amount. Failing to do so is a clear breach of their contractual duty.
Breaching a Specific Clause
Modern contracts can be very detailed. A breach can occur by violating a specific negative or restrictive clause. For instance, an ex-employee might breach a non-compete clause by immediately working for a direct competitor. Similarly, sharing confidential information with a third party when a non-disclosure agreement (NDA) is in place is a serious breach.
Remedies for Breach of Contract in Singapore
Discovering that a contract has been breached can be frustrating, but the law in Singapore provides several ways to seek justice and compensation. These are known as ‘remedies’, and the one that best suits your situation depends on the nature of the breach and the losses you have suffered.
1. Claiming Damages
This is by far the most common remedy for a breach of contract. The goal of damages is not to punish the party in breach, but to compensate the innocent party. The Court aims to put you in the financial position you would have been in had the contract been performed properly. There are a few different types of damage you might encounter:
- Compensatory Damages: This is the money awarded to cover the actual losses you incurred because of the breach. For example, if you hired a contractor to build a shelf for $500 and they failed to do it, and you had to hire someone else who charged $700 for the same job, you could claim $200 in compensatory damages.
- Nominal Damages: Sometimes, a breach occurs, but the innocent party suffers no real financial loss. In such cases, the Court may award nominal damages—a very small sum of money—to acknowledge that a legal wrong was committed.
- Liquidated Damages: Some contracts contain a ‘liquidated damages clause’. This is a pre-agreed amount of money that both parties decide will be paid if a specific type of breach occurs. For this to be enforceable, the amount must be a genuine pre-estimate of the potential loss, not an excessive figure designed to act as a penalty.
2. Seeking an Order for Specific Performance
In some rare cases, money simply isn’t an adequate solution. This is where an order for ‘specific performance’ might come in. This is a discretionary order from the Court that forces the breaching party to carry out their exact promise under the contract.
This remedy is not granted lightly. It is typically reserved for contracts involving something unique where damages would be insufficient compensation.
For example, contracts for the sale of a piece of land, a rare antique, or a valuable piece of art are common candidates for specific performance, as the subject matter is irreplaceable. The Court will not grant this if it would require constant supervision or if the service is personal.
3. Applying for an Injunction
An injunction is another powerful Court order, but instead of forcing an action, it typically stops one. It directs a party to refrain from doing something that would breach the contract.
There are two main types. A prohibitory injunction stops a party from starting or continuing a breach. For instance, if an ex-employee with a valid non-compete clause tries to start a rival business next door, you could seek an injunction to stop them.
A mandatory injunction, which is less common, requires a party to take a specific action to undo something that amounted to a breach. For example, it might compel a party to remove a structure that was built in violation of a contractual agreement.
Conclusion About Breach of Contract
Navigating a breach of contract can be a complex process. Understanding your rights and the legal avenues available to you is the first step towards a resolution. It is always wise to seek professional legal advice to understand the best course of action for your specific situation.
At Tembusu Law, we have a team of experienced lawyers, including the best corporate lawyer and criminal lawyer in Singapore, who can guide you through these challenges.
Contact us today for a free consultation and to see how we can help you.
Frequently Asked Questions About Breach of Contract
What Are The First Steps To Take If I Suspect A Breach Of Contract?
The first step is to review your contract carefully. Understand the specific terms and obligations of each party. Then, gather all relevant evidence, such as emails, invoices, and any other written communication. It is also a good idea to try to communicate with the other party to see if the issue can be resolved amicably before taking legal action.
Can A Verbal Agreement Be Considered A Contract In Singapore?
Yes, verbal agreements can be legally binding contracts in Singapore. However, they are much more difficult to prove in Court. Without a written agreement, it becomes your word against the other party’s. It is always best to have contracts in writing to avoid any disputes about the terms.
How Long Do I Have To Make A Claim For Breach Of Contract?
In Singapore, the Limitation Act states that you generally have six years from the date of the breach to file a claim in Court. If you miss this deadline, you may lose your right to take legal action.
What Is The Difference Between A Minor And A Major Breach Of Contract?
A minor breach, also known as a partial breach, is a less serious violation of the contract. The main purpose of the contract can still be fulfilled. A major breach, or a material breach, is a serious violation that goes to the heart of the contract and can give the non-breaching party the right to terminate the contract and sue for damages.
Can I Terminate A Contract If The Other Party Breaches It?
Whether you can terminate a contract depends on the severity of the breach. For a major breach, you typically have the right to terminate the contract and claim damages. For a minor breach, you can usually only sue for damages, and the contract remains in effect. It is important to get legal advice before terminating a contract to ensure you are within your rights to do so.
