Ch. 08A Remedies for Breach of Contract

SECTION 1 INTRODUCTION

8A.1.1 This report addresses the general positions under Singapore contract law for remedies available to the injured innocent party when there is a breach of contract. They include common law remedies and equitable remedies.

8A.1.2 Singapore contract law and the contract law in England and other Commonwealth jurisdictions share the same historical roots. The contractual remedies in Singapore therefore bear close resemblance to those available in English contract law, although Singapore has in certain aspects since diverged from the common law of England, such as in areas of the law on penalty clauses,[1] unconscionability[2] and contractual illegality.[3] The doctrine of stare decisis (or judicial precedent) means that there is a body of judge-made legal precedents such that a lower Singapore court will apply the law as set down by a higher Singapore court within the court hierarchy, providing stability and certainty. Decisions from the English courts and other courts in the Commonwealth are not binding although they may be persuasive given the common legal heritage.

8A.1.3 This report does not address the positions covered by specific Singaporean statutes where there has been statutory modification of Singapore contract law, such as in employment, consumer protection, domestic or international sale of goods, statutory construction adjudication or unfair contracts.

8A.1.4 This report also does not address the positions where parties expressly modify or contract out of the positions under general Singapore contract law by way of specific contractual clauses, such as limitation of liability clauses, exemption clauses or clauses that exhaustively provide a complete list of contractual remedies such as forfeiture clauses or termination for convenience clauses, or by agreeing to terms that clearly oust general contract law remedies.

8A.1.5 This report mentions only briefly remedies that are available only based on agreements between the parties in their contracts, such as liquidated damages.

SECTION 2 COMMON LAW REMEDIES FOR BREACH OF CONTRACT

8A.2.1 If there is a breach of contract by one party (“party in breach”) which causes loss or damage to the other party (“innocent party”), a common remedy sought by the innocent party is to seek compensation by means of a monetary award, with the quantum of that monetary compensation (“damages”) to be assessed or quantified by the Court.

8A.2.2 Generally speaking, there are two scenarios of damages, i.e., liquidated damages and unliquidated damages.

A. Unliquidated damages

8A.2.3 Where parties to a contract have not agreed on the quantum of damages payable in the event of a breach of contract or a formula for calculating the amount of damages (or where any attempt to reach such an agreement is invalid or not enforceable), the innocent party can claim for unliquidated damages.

1. Purpose

8A.2.4 The general rule is that damages are compensatory and not punitive.[4]

8A.2.5 To give effect to the compensatory principle, the innocent party is put, so far as money can do it, in as good a position as if the contract had been performed.[5]

8A.2.6 Where the innocent party is worse off because of the breach of contract, the loss is the difference between the position had the contract been performed and the position where the innocent party is in because of the breach of contract.

2. Requirements

8A.2.7 To make a claim for unliquidated damages for breach of contract, the innocent party must prove that:

• it has suffered loss;
• the loss claimed was caused by the breach of contract; and
• the loss claimed is not too remote.

8A.2.8 We explain each requirement in more detail below.

(a) Loss

8A.2.9 The innocent party bears the burden of proving the quantum of its loss. Some contracts, such as construction contracts, provide for a liquidated damages clause (whether as a fixed sum or by way of a formula for calculation) such that the innocent party does not have to prove the quantum of its loss but can rely on the liquidated damages to quantify its loss. Liquidated damages are briefly addressed separately below.

8A.2.10 The types of loss caused by a breach of contract may be pecuniary or non-pecuniary.

8A.2.11 Pecuniary loss is loss that can be measured financially, and may include, among others:

• Cost of curing the breach of contract;
• Increased cost of procuring performance of the breached obligation from a third party;
• Loss of profits; and
• Loss of opportunity, such as lost chance of a favourable outcome.

8A.2.12 Non-pecuniary loss is loss that cannot be financially measured, and may include, among others:

• Loss of amenity and enjoyment;
• Hurt feelings and mental distress; and
• Injury to reputation arising from the breach of contract.

8A.2.13 The innocent party can usually claim pecuniary loss arising from a breach of contract. On the other hand, non-pecuniary loss is generally not claimable,[6] but there can be exceptions such as:[7]

• Where the subject matter of the contract is to provide pleasure, relaxation, peace of mind or freedom from distress (e.g., a vacation package), and the breach of contract arises due to the failure to provide the same; or
• Where the breach of contract causes physical inconvenience or discomfort.

8A.2.14 Further, loss can be categorised in two main ways:

• Expectation loss, which is the value that the innocent party would have gained if the contract had been performed in accordance with its terms but has lost because of the breach;[8] and
• Reliance loss, which refers to the cost or expenses incurred by the innocent party in its performance of the contract that are now wasted or irrecoverable because of the breach.

8A.2.15 Generally, the innocent party will not be allowed to recover both the expectation loss and the reliance loss, but must choose which type of loss to pursue.[9] For example, the innocent party can either claim the expected revenue under a contract or the cost it has spent carrying out the contract, but not both. This is because the innocent party would have spent that cost in any event in order to generate the revenue.

8A.2.16 The loss will usually be assessed as at the time of the breach of contract, although a court may also take into account events occurring after the breach, such as whether the innocent party was aware of the breach when it happened or whether the innocent party was unable to deal with the breach when it occurred and the loss worsened.

(b) Causation between loss and breach

8A.2.17 In order to recover its loss, the innocent party must prove that its loss flowed directly from the breach of contract.

8A.2.18 For contracts that provide for obligations to occur absolutely regardless of external factors, such as a contract on the sale of X number of apples for Y dollars, proof of causation is usually straightforward. If the seller fails to deliver X number of apples or if the buyer fails to pay Y dollars, and is thereby in breach of the contract, the buyer’s loss of the cost of going out to the market to buy X number of apples, or the seller’s loss of Y dollars, flows directly from the breach.

8A.2.19 The legal test to be applied is whether the loss would not have been suffered “but for” the breach of contract. In other words, the claim will fail if the claimant cannot establish that the loss would have not been suffered but for the breach of contract.

8A.2.20 The situation is more complex where performance of the obligations under a contract or the anticipated outcomes under a contract depend on the performance of obligations by the innocent party and even the acts of third parties. The Court will sometimes apply the test of whether the breach of contract was the effective or proximate cause of the innocent party’s loss.

8A.2.21 The Court will generally take a pragmatic and common-sense approach to determine whether the loss was caused by the breach.[10] As an example, even if a building contractor is in breach of a contractual obligation to supply a ladder to a subcontractor, it is not liable for injuries caused when the subcontractor’s staff carried out works in a foolish manner because there was no ladder.

8A.2.22 Similarly, abnormal occurrences or intervening acts by third parties may “break” the chain of causation and the innocent party may not be able to claim the loss that arises.

(c) Remoteness of loss

8A.2.23 Only loss which is not too remote is claimable. Singapore contract law follows the well-established rule in the English case of Hadley v Baxendale[11] and categorises recoverable loss for breach of contract into two categories or “limbs”:

• First limb: “ordinary” damage or loss that arises naturally from the breach; and
• Second limb: “extraordinary” or “special” damage or loss that arises due to special circumstances which are within the knowledge of the party in breach or which the party in breach ought to have known.

8A.2.24 Losses that fall under the first limb are generally recoverable because they are losses that naturally flow from the breach of contract. Using the earlier example, the cost of going out to the market to buy X number of apples (i.e., substitute goods) if there is a failure by the party in breach to supply them falls under the first limb.

8A.2.25 Losses that fall under the second limb are recoverable only if the party in breach has actual or deemed knowledge of the special circumstances. For example, if the party in breach has been informed that the failure to deliver equipment will cause the innocent party to incur liquidated damages for delay.

3. Defences

(a) Mitigation of loss

8A.2.26 The innocent party must mitigate its loss caused by a breach of contract. If the innocent party fails to do so, the party in breach may rely on the defence of a failure to mitigate to reduce the amount of damages that the innocent party may recover.

8A.2.27 The basic principles for mitigation of loss are:[12]

• The innocent party must take all reasonable steps to mitigate the loss that arises due to the breach of contract, and cannot recover damages for loss which it suffered because of its unreasonable action or inaction;
• The innocent party who successfully avoids all loss will not be entitled to recover damages; and
• The innocent party may recover its expenses or further losses that arise because it took reasonable steps to mitigate (the original) loss. This may be the case even if such expenses or further losses end up being greater than the original loss suffered by the innocent party due to the breach of contract.

8A.2.28 The party in breach bears the burden of proving that the innocent party has failed to mitigate loss.

4. Benefits

8A.2.29 A claim for unliquidated damages is commonly invoked as a remedy to a breach of contract, so much so that it is said to be awarded “as of right”.

8A.2.30 This remedy gives a party a chance to recover all of its financial loss suffered as a result of a breach of contract.

5. Limitations

(a) Burden of proof

8A.2.31 The innocent party bears the burden of proving the requirements outlined above, and must show that the loss is a type of pecuniary loss that is recoverable, or in the case of non-pecuniary loss, that it falls within one of the exceptions.

(b) Limitation period

8A.2.32 The limitation period for a contractual claim, including a claim for unliquidated damages for breach of contract, is generally six years from the date on which the cause of action accrued.[13]

8A.2.33 The limitation period may be extended if the loss suffered is latent, i.e. the loss is not obvious at the time of breach and could not reasonably be discoverable.[14]

B. Liquidated damages[15]

8A.2.34 Under Singapore law, a claim for liquidated damages is a claim for a contractually stipulated amount to which the innocent party is entitled to be paid by the party in breach. Sometimes a contract will instead provide a formula for the calculation of liquidated damages.

1. Purpose

8A.2.35 The purpose of liquidated damages is to provide the innocent party with some level of certainty as to the quantum of damages that will be paid if the relevant obligation of the contract is breached. This may be particularly advantageous where the nature of the contract makes it difficult for the innocent party to prove the precise amount of loss suffered due to the breach. Liquidated damages clauses are common in construction projects contracts to provide the upstream party with damages in the event of delay without having to prove its actual loss due to the delay.

8A.2.36 Depending on the wording of a liquidated damages clause, it may also function as a cap on the amount of damages that the party in breach will have to pay, thus also providing the party in breach with certainty.

8A.2.37 The effects of a liquidated damages clause depend on an objective interpretation of its precise wording.

2. Requirements

8A.2.38 A liquidated damages clause is enforceable if it stipulates a genuine pre-estimate of the loss that may be suffered by the innocent party if there is a breach of contract. The genuine pre-estimate of loss is considered at the time of the parties entering into the contract.

8A.2.39 A liquidated damages clause is an unenforceable penalty if it is not a genuine pre-estimate of the loss that may be suffered by the innocent party if there is a breach of contract. The innocent party cannot rely on such a clause (because it is invalid) and must instead prove its loss and meet the requirements for quantification of unliquidated damages in the usual way (see above).[16]

8A.2.40 The language used by a liquidated damages clause is not conclusive evidence as to whether the clause is a genuine pre-estimate of loss. In other words, the fact that a liquidated damages clause states that it is not a penalty does not necessarily mean that the clause is indeed not a penalty.

3. Defences

8A.2.41 Accordingly, one defence against a claim for liquidated damages is that the liquidated damages clause is not a genuine pre-estimate of loss.

8A.2.42 As mentioned above, the party in breach can avoid liability for liquidated damages if it is able to show that the liquidated damages clause is a penalty clause. A liquidated damages clause that is “extravagant and unconscionable” in comparison with the greatest sum of loss that could conceivably be proven cannot be a genuine pre-estimate of loss, and is an unenforceable penalty.[17]

8A.2.43 The party in breach bears the burden of showing that the liquidated damages clause is a penalty.

8A.2.44 The position under Singapore contract law is quite different from that under English Law. In the English case of Cavendish Square Holding BV v Talal El Makdessi[18] (“Cavendish”), the United Kingdom Supreme Court decided that a liquidated damages clause could amount to a penalty clause if the amount of damages imposed was out of proportion to the party’s “legitimate interests” in the enforcement of the contract. Singapore courts have declined to follow the position in Cavendish.

8A.2.45 It should be noted that even if the party in breach succeeds in proving that the liquidated damages clause is an unenforceable penalty, the innocent party may still be entitled to claim general damages to be assessed for the breach of contract (i.e., unliquidated damages).

4. Benefits

8A.2.46 A liquidated damages clause is highly advantageous to the innocent party because the innocent party will not need to prove its actual loss but may rely on the liquidated damages clause to recover the quantum stipulated in that clause. The innocent party will be able to obtain substantial (and not nominal) damages as long as the liquidated damages clause is enforceable. The innocent party also does not need to show that it has reasonably mitigated its loss.

8A.2.47 Such a clause therefore provides certainty, avoids the risk of failing to prove loss, and reduces disputes on the quantum of the loss suffered.

8A.2.48 As mentioned above, the precise wording of a liquidated damages clause may also enable the clause to function as a cap on the amount of damages the party in breach will have to pay, providing the party in breach with certainty too.

5. Limitations

8A.2.49 A liquidated damages clause limits the quantum of damages payable.

8A.2.50 The innocent party thus sometimes seeks to argue that the liquidated damages clause only sets out the minimum amount of damages for loss it has suffered that it does not need to prove, and seeks to recover an amount of general unliquidated damages that is above the amount stipulated in the liquidated damages clause.

8A.2.51 However, depending on its wording, a liquidated damages clause may sometimes limit or cap the amount of unliquidated damages recoverable by the innocent party for a breach of contract. This will usually need to be expressly provided for in the liquidated damages clause, and whether or not the clause functions as a cap will turn on a proper interpretation of the contract as to whether the parties have intended there to be a maximum amount of damages that one party could recover. There have been cases where the argument that a liquidated damages clause was a cap on the amount of unliquidated damages did not succeed.[19]

(a) Limitation period

8A.2.52 A claim for damages for breach of contract under a liquidated damages clause is subject to the same limitation period as that for a claim for unliquidated damages (see above).

C. Nominal damages

1. Purpose

8A.2.53 Nominal damages are awarded if there is a breach of contract, but the innocent party has either suffered no actual loss or cannot prove that it has suffered substantial loss. Awards of nominal damages can range from $2 to a few thousand dollars.[20]

2. Requirements and defences

8A.2.54 The Court imposes nominal damages for breach of contract when it is not satisfied that there was any substantial loss suffered which merits a significant award of monetary damages.

8A.2.55 The party in breach bears the burden of proving the defence that there is no substantial loss suffered and that nominal damages should be awarded, although the innocent party is the one that must first prove that it has suffered substantial loss which should be remedied with damages.

3. Benefits and limitations

8A.2.56 The remedy of nominal damages seeks to prevent an innocent party who is unable to prove any substantial loss from wasting time and cost in going through a legal action. This is also a relevant factor in determining which party is entitled to recovery of its legal cost and if so, the quantum of the legal cost recoverable.

D. Restitutionary damages for breach of contract

1. Purpose

8A.2.57 Restitutionary damages focus on the gain that the party in breach has obtained as opposed to the loss that the innocent party has suffered. One example of this remedy is an “account of profits”, where there is a breach of a fiduciary duty or duty of loyalty that exists under a contractual relationship (such as a trustee under an express trust, an employee or a director of a company, etc.).

2. Requirements

8A.2.58 The Singapore Courts have suggested in principle that this remedy is available for breach of contract but there is no clear reported authority for the recovery of restitutionary damages for breach of contract, and the requirements for a claim for such damages are yet to be stated and developed.[21]

8A.2.59 There have been developments in other Commonwealth nations for restitutionary damages to be awarded for breach of contract, such as where an ex-British intelligence officer published a book in breach of his contractual obligation not to disclose information about his work even after his employment has ended.[22] The United Kingdom House of Lords awarded restitutionary damages to the British Government which was entitled to all royalties from sales of the book.

8A.2.60 It remains to be seen if the Singapore Courts will follow the position in English law.

3. Benefits and limitations

8A.2.61 Whether restitutionary damages will be awarded when there is a breach of contract remains unclear under Singapore law, and such a claim is not straightforward.

8A.2.62 That said, it is open for the innocent party to bring claims outside of contract, such as in unjust enrichment (which is a separate area of the law), instead of restitutionary damages for breach of contract.

E. Punitive damages

8A.2.63 The purpose of punitive damages is to punish the party in breach, so punitive damages do not serve any compensatory function.

8A.2.64 The general rule under Singapore law is that punitive damages cannot be awarded for breach of contract.[23] The Singapore Courts have opined that it would take a “truly exceptional case” to persuade them that punitive damages should be awarded for breach of contract and that even fraud may not be sufficient.[24]

F. Action for a fixed sum

1. Purpose

8A.2.65 Where a breach of contract solely relates to an obligation to pay money, the usual remedy is an action for the agreed sum under the relevant clause instead of a claim for damages.[25]

2. Requirements

8A.2.66 The innocent party must show that the contractual right to payment has accrued under the contract in order to succeed in an action for a fixed sum.

3. Benefits

8A.2.67 Unlike a claim for damages, an action for a fixed sum does not require the claimant to prove or mitigate loss. What is being enforced is the primary obligation to make payment under the contract.

4. Limitations

8A.2.68 In an action for a fixed sum, the innocent party is limited to recovery of the agreed sum only, even if the failure of the party in breach to make payment has caused other loss to the innocent party, e.g., interest on loans that the innocent party was forced to take since payment was not received.

8A.2.69 If the innocent party wishes to make further claims for other loss (whether less or more than the fixed sum), it must bring a separate action for unliquidated damages.[26]

(a) Limitation period

8A.2.70 A claim for a fixed sum is subject to the same limitation period as that for a claim for unliquidated damages (see above).

G. Right to terminate or affirm the contract

1. Purpose

8A.2.71 Under certain circumstances, a breach of contract gives the innocent party a right to terminate the contract.

8A.2.72 Termination brings the parties’ contractual relationship to an end, and both parties are no longer obliged to perform further obligations under the contract, subject to any clauses relating to the effect of termination.

8A.2.73 Alternatively, the innocent party is also entitled to affirm the contract and insist on further performance of the contract. If the contract is affirmed, the contract subsists and both parties remain bound by the contract and are obliged to continue performance.

8A.2.74 Once the innocent party has elected the remedy and communicated its choice to the party in breach, the innocent party cannot change its decision (unless the right arises again).

8A.2.75 Regardless of the innocent party’s decision (to terminate or affirm the contract), it would still be entitled to sue for damages for breach of contract separately.

2. Requirements

8A.2.76 Typically, a right to terminate the contract may arise as a result of breach of contract under three scenarios:[27]

• • Where a party, by words or conduct, evinces an intention that it will not perform its contractual obligations. This is known as a repudiatory breach of contract;
  • Where there is a breach of an express condition under the contract; and
  • Where a breach of contract deprives the innocent party of substantially the whole benefit that it intended to obtain under the contract.

3. Benefits

8A.2.77 Unlike damages where the innocent party will need to go to court to seek an award, termination is a “self-help” remedy which allows the innocent party to treat the contract as coming to an end. The innocent party no longer needs to carry out its obligations under the contract if the contract has been validly terminated.

4. Limitations

8A.2.78 Whether the right to terminate the contract has arisen under any of the three abovementioned scenarios involves some element of judgment, and accordingly there is the risk that the termination is invalid. Except in the clearest of cases, there will usually be arguments by either party and some dispute as to whether the right to terminate the contract has arisen.

8A.2.79 A party who terminates the contract but is later found to have done so wrongfully (as the right of termination has never arisen) may itself be liable for repudiatory breach of contract and non-performance of its contractual obligations.

8A.2.80 Termination of contract is therefore considered a risky strategy except in the clearest of cases or where there is some other commercial reason to do so. One example is a construction contract where the upstream party may be forced to terminate the contract in order to remove the party in breach from the construction site, so as to bring in a third party to carry out the work in lieu of the party in breach.

SECTION 3 EQUITABLE REMEDIES FOR BREACH OF CONTRACT

A. Declaratory relief

1. Purpose

8A.3.1 Parties to a contract may seek a declaration, i.e., a pronouncement by the Court on the rights and obligations under the contract, and whether or not a contractual right or obligation has been breached.

2. Requirements

8A.3.2 A declaration may be sought from the Court.[28] A court has discretionary power whether or not to grant declaratory relief, and usually will not do so unless there is a dispute that requires determination rather than a hypothetical or academic question. The applicant usually also needs to show that there is a real interest in bringing the action and that there is some sort of violation of a right of the applicant.

3. Benefits

8A.3.3 A declaration is useful in instances such as where the parties to the contract do not know what the contract requires to be carried out, or where there is a dispute on whether a party’s conduct constitutes a repudiatory breach of contract that entitles the other party to terminate the contract.

8A.3.4 If taken out early, a declaration can limit any dispute, save time and legal cost, and prevent the dispute from festering and becoming a full-blown dispute with much larger claims and cross-claims from both parties.

4. Limitations

8A.3.5 A declaration that there is indeed a breach of contract does not provide for compensation. The innocent party will need to bring a separate action for damages if it has suffered loss.

B. Injunctive relief

1. Purpose

8A.3.6 An injunction is a court order that either prohibits a party from taking certain actions, or compels a party to take certain actions.

8A.3.7 Non-compliance with an injunction may be contempt of court, which may lead to criminal liability for the party in breach of the injunction.

8A.3.8 Examples where injunctive relief can be sought include those arising from breach of contract due to the unauthorised use of confidential information, breach of non-disclosure agreements, or breach of non-compete and non-solicitation clauses in employment contracts. It is said that damages for breaches of such clauses may be difficult to quantify while the harm caused by such breaches to the innocent party’s business interests may be significant. Therefore, instead of seeking damages “as of right”, the innocent party may choose to seek an injunction to restrain the party in breach from breaching or continuing to breach those clauses, and/or to compel the party in breach from handing over the confidential information it has obtained.

2. Types

(a) Interim vs final injunction

8A.3.9 Final injunctions are awarded at the end of a legal action. However, a legal action may take some time before final resolution, during which a breach of the relevant contractual clause may result in irreparable damage to the innocent party or may even render the final injunction otiose.

8A.3.10 It is therefore usually necessary for the innocent party to first obtain an interim injunction which may be granted by the court before the final resolution of the dispute so as to preserve the innocent party’s position.

8A.3.11 For example, in a dispute over the sale and purchase of shares in a company, an interim injunction may be sought to restrain the party allegedly in breach from selling the shares to a third party until the final resolution of the dispute in court.

(b) Prohibitory vs mandatory injunction

8A.3.12 Injunctions are prohibitory if they forbid the commission or continuance of an act, while mandatory injunctions compel the defendant to do some positive act, such as to repair an omission or restore the status quo by undoing some act.[29]

3. Requirements

(a) Interim prohibitory injunctions

8A.3.13 Where a party is about to breach, or has already breached, a negative covenant or a clause in a contract that provides expressly that it is not to do what it threatens to do or has already done, an interim prohibitory injunction may be granted to restrain a prospective breach or further breach of contract.[30]

8A.3.14 If there is no clear contractual clause prohibiting the acts in question, then the innocent party will also have to show that the balance of convenience favours the grant of an interim injunction. Relevant factors in determining where the balance of convenience lies include the risk of irreparable damage and the potential hardship an injunction may have on the party enjoined.[31]

(b) Interim mandatory injunctions

8A.3.15 On the other hand, an interim mandatory injunction is “a very exceptional discretionary remedy” that may lead to irreparable prejudice to the party allegedly in breach, and will only be granted if:[32]

• There are special circumstances; or
• In a clear case, where there is a high degree of assurance that it will be rightly granted after a trial.

(c) Final injunctions

8A.3.16 The principles for granting a final prohibitory injunction are similar to those for granting an interim prohibitory injunction in the context of restraining the breach of a negative covenant in a contract.[33]

8A.3.17 The exercise of the Court’s direction to grant a final mandatory injunction after a trial will ultimately turn on the facts, and factors such as the reasonableness of the behaviour of the parties and the effect of the injunction sought, as the Court will try to do what is fair and just in the circumstances.

8A.3.18 In certain situations, there is little distinction between the test for a mandatory and a prohibitory injunction. For example, if a party in breach acts unreasonably by rushing to carry out an act and then argues that it is too late to grant a prohibitory injunction, a mandatory injunction may be granted by the Court to restore the prior position in such circumstances.[34]

4. Defences

8A.3.19 As the grant of injunctive relief stems from the Court’s equitable jurisdiction and is a matter of the Court’s discretion, general equitable defences may be relevant to persuade the Court from exercising its discretion to grant any injunction. Such defences and considerations in equity include, but are not limited to:[35]

• Undue hardship that may be caused by the injunction to the party in breach;
• Undue delay by the innocent party in seeking the injunction (i.e., doctrine of laches); and
• Inequitable conduct by the innocent party (i.e., doctrine of clean hands).

5. Benefits

8A.3.20 In some instances, an injunction may be the only practical way to protect a party’s commercial interests, especially where goodwill and market share are being threatened by the breach of contract. For example, there may be no business left and the company may be moribund, for damages to be a sufficient remedy, after the time for the parties to go through a trial.

8A.3.21 Interim injunctions may be critical to preserve the status quo pending the resolution of disputes between the parties. Interim injunctions can also be an important strategy in certain contexts to force the other party to the negotiating table to settle the disputes.

6. Limitations

8A.3.22 A party seeking to obtain an interim injunction needs to give an undertaking to pay damages to the other party in the event that the injunction is found to be wrongly granted at the end of the trial.[36] This prevents a party from seeking injunctive relief if there is a significant risk of damages due to the injunction. For example, if a party is prevented from completing a sale and purchase of shares, the price of the shares may fall; and if the applicant is ultimately found to have wrongfully obtained an interim injunction, the applicant may have to compensate the first-mentioned party for the fall in the share price.

C. Specific performance of the contract

1. Purpose

8A.3.23 In some situations, it is not enough for the innocent party to be compensated with damages to be paid by the party in breach. The innocent party instead wants the contract to be performed.

8A.3.24 An order of specific performance is a court order to compel the party in breach to perform a specific contractual obligation. Non-compliance with a court order, including an order of specific performance, may be contempt of court which may attract criminal liability.

2. Requirements

8A.3.25 Specific performance is a discretionary remedy.

8A.3.26 It is an extraordinary remedy which will only be granted “if under all the circumstances, it is just and equitable to do so”.[37]

8A.3.27 The principal factor affecting the Court’s discretion to order specific performance is whether damages would be an adequate remedy,[38] which is a threshold requirement for an order of specific performance.

8A.3.28 Where damages are an adequate remedy, it is rarely just and equitable to order specific performance.

8A.3.29 Examples where damages have been found not to be an adequate remedy for breach of a contractual obligation include:[39]

• Contracts for the sale or lease of land;
• Contracts for the sale of unique goods, such as antiques and works of art of unusual beauty or rarity (where only one such work exists in the whole world and the innocent party cannot simply go out to the market and buy a replacement); and
• Contracts for the sale and purchase of company stocks and shares which cannot be readily bought on the open market.

3. Defences

8A.3.30 As the grant of an order of specific performance stems from the Court’s equitable jurisdiction and is a matter of the Court’s discretion, general equitable defences may be relevant to persuade the Court from exercising its discretion to order specific performance. Such defences and considerations in equity include, but are not limited to:[40]

• Whether there is substantial hardship caused by the order of specific performance to the party in breach;
• Whether it is even possible for the party in breach to perform the relevant obligation;
• Whether there was delay by the innocent party in seeking the order of specific performance (i.e., doctrine of laches);
• Whether there was inequitable conduct by the innocent party (i.e., doctrine of clean hands);
• Whether there is any public policy reason not to enforce the contract. For example, where enforcing the contract could result in involuntary servitude, converting contracts of service into contracts of slavery. Courts are generally loath to force an employee to carry on working if he/she does not wish to do so, nor would it be a practical order to make; and
• Whether an order of specific performance would require subsequent supervision by the court to be carried out.

8A.3.31 These defences and considerations in equity are factors other than the threshold requirement that the courts will consider before deciding on whether or not to order specific performance.

4. Benefits and limitations

8A.3.32 An order of specific performance is the only remedy where the innocent party can compel the party in breach to perform its specific obligations under the contract. However, it is usually quite a difficult remedy to obtain, save where the facts are exceptionally in favour of it.

D. Equitable damages

1. Purpose

8A.3.33 Singapore courts are empowered with a discretion to award equitable damages in lieu of, or in addition to, a grant of specific performance or an injunction.[41]

2. Requirements

(a) Damages in addition to specific performance or injunction

8A.3.34 An order of specific performance or an injunction may not fully compensate the innocent party for the harm done by a breach of contract, and equitable damages may fill that gap.

8A.3.35 For example, in the sale and purchase of land, the seller may be ordered to convey the target property to the buyer and be accountable for any rent or profits that have accrued to the property from the contractual completion date to the date of actual completion.[42]

(b) Damages in lieu of specific performance or injunction

8A.3.36 The Court has a discretion to order damages in lieu of an order of specific performance or injunction. The measure of such damages is a matter of the Court’s discretion. It is open for the Court to apply principles similar to those of common law unliquidated damages (as outlined above), although the Court is not bound to do so.[43] For example, the Court may choose to award “negotiating damages”, i.e., damages on the basis of what might have fairly been charged for the voluntary relinquishment of the right which the Court has declined to enforce.[44]

8A.3.37 In Singapore, after declining to grant an injunction in a case involving breach of confidence, the Court of Appeal awarded equitable damages which were to be measured by “the cost saved by the [breaching party] in taking that information”.[45]

3. Defences

8A.3.38 As with any equitable remedy which is discretionary in nature, general equitable defences (see above) may be relevant to persuade the Court from exercising its discretion to order equitable damages.

4. Benefits and limitations

8A.3.39 As the remedy of equitable damages is a discretionary remedy arising from equity, the usual rules on unliquidated damages at common law do not strictly apply. The Court has more flexibility in the assessment of the quantum of damages.

8A.3.40 Equitable damages are therefore a useful remedy where the innocent party may only have been entitled to nominal damages under common law, and where the Court is unwilling to grant other equitable remedies such as an injunction.

8A.3.41 However, as with any discretionary remedy, the remedy of equitable damages is not available to the innocent party as of right. There will be a significant degree of uncertainty in pursuing equitable damages, and it would likely be a party’s alterative remedy as opposed to a primary one.

Updated as at 24 April 2024

Kelvin Teo

Director, Dispute Resolution

Drew and Napier LLC

Chester Su

Senior Associate

Drew and Napier LLC

Disclaimer:

Whilst every effort has been made to ensure that the information contained in this article is correct, the Singapore Academy of Law and the authors disclaim all liability and responsibility for any error or omission in this article, and in respect of anything, or the consequences of anything, done or omitted to be done by any person in reliance, whether wholly or partially, upon the whole or any part of the contents of this article.