The first prerequisite requires two steps: offer and acceptance.
An “offer” is described as a declaration of readiness to contract on specified terms, and it is made with the aim that it will become binding on the parties once accepted by the person to whom it is intended (the “offeree”). As a result, a “offer” must meet three criteria:
|➤ It comprises the terms of the exchange
|➤ It indicates the willingness of the person making the offer (the "offeror") to be bound by the contractual terms
|➤ It gives the offeree the authority to bind the offeror to the contract, so that the latter cannot withdraw the offer upon acceptance
The unconditional acceptance of all the terms contained in the offer is referred to as a “acceptance.” It must be disclosed to the offeror in order to be effective. It might be communicated to the offeror either in writing or orally.
The general rule under the second leg is that a promise is only enforceable if it is backed by consideration. “Consideration” is something that has legal worth and is provided in exchange for a promise. The “benefit-detriment analysis” can help you understand it. A simple example would be a merchant proposing to sell his goods to a buyer who promises to pay him in exchange for the things. In this case, the consideration is the price of the products paid – the offeree buyer accepts to incur a loss in terms of the money he pays to the seller, but the offeror seller profits by obtaining money from the buyer.
In the third limb, both parties must intend to establish legal relations. Based on the information at hand, the law makes a decision. In most cases, the law would be unlikely to find such an intention in a social or domestic situation. A husband, for example, who gives his wife a Prada bag in exchange for serving him breakfast for a week is unlikely to be bound by a formal contract. However, even if the parties involved had familial or close social links, the law will consider them otherwise in cases where agreements were entered into in a corporate or commercial environment.
Minors (those under the age of 21) and mentally incompetent individuals do not have the capacity to enter into a contract under the fourth limb. Certain contracts, such as those for the sale of goods, services, or employment, remain binding on minors.
Finally, it is a legal requirement that both parties willingly accede to the agreement. This means that if one party uses force or undue influence to compel the other to sign the contract, the law may reject its legitimacy.
Assuming a valid and legally enforceable business contract exists, a breach of contract occurs when a contracting party (the “defaulting party”) fails to perform a contractual obligation without lawful excuse.
Failure to perform might manifest itself in numerous ways:
|➤ Lack of punctuality
|➤ Noncompliance (i.e. when a defaulting party refuses to perform what he has promised to do)
|➤ Subpar performance (i.e. the defaulting party fails to fulfil a promised objective or end-state)
|➤ Performing the same act that the defaulting party has agreed not to perform
|➤ Refusing to execute a contractual obligation
There is no requirement to demonstrate that the defaulting party purposefully failed to perform. Unless the business contract expressly states otherwise, there is no requirement to demonstrate that the defaulting party failed to exercise reasonable caution in carrying out the commitment.
The vast majority of contracts that the average person encounters in his or her life, such as employment, hire purchase, or loan agreements, contain a clause stating the ‘governing law’ of the contract. A contract’s controlling law has far-reaching implications for contractual performance and remedies. A contract typically includes a number of terms. When a dispute develops, courts will interpret contractual provisions using the governing law of the contract. A contract’s governing law governs matters such as contractual validity, interpretation, consideration, party obligation, mode of performance, and discharge of the obligation or contract (to name a few).
Most legal systems recognize the autonomy and freedom of the parties to define contractual terms. Contracts signed or performed in Singapore may, as a result, specify a foreign controlling law. For example, an American multinational corporation (MNC) in Singapore may force its Singapore employees to sign employment contracts governed by American law. In the event of a dispute, the parties may sue in a court of law to have the contract enforced. If the lawsuit is filed in a Singapore court, the judge may be required to apply American law to enforce the contract.
Choosing a governing law is critical since different laws can result in different legal results for the same contractual conditions. Singapore, for example, recognizes the idea of a trust as well as other equitable obligations. Other foreign laws may not.
Furthermore, because contracts frequently specify which court will hear disputes, it may be prudent for the parties to select the same law to govern the contract. A business contract to be fulfilled in Singapore, for example, should ideally designate Singapore law as the controlling law and the Singapore courts as the court of choice. Because it is most familiar with the governing law, this consistency ensures that the chosen court will apply it appropriately. Applying foreign law in a Singapore court would necessitate the use of foreign expert witnesses, more evidence, and higher legal fees.
In some cases, international required rules may take precedence over a choice of governing legislation. For example, some of the provisions of Singapore’s Unfair Contract Terms Act apply even if the contract is governed by foreign law. Exceptionally, if the dispute is heard in Singapore, the choice of a foreign law that is repugnant to Singapore’s public policy may not be applied.
If no controlling law is selected and a dispute emerges, the court hearing the issue may use the law most closely related to the subject matter of the contract.