Significance: five-person bench of the Singapore Court of Appeal refuses to abolish the doctrine and requirement of valid consideration for variation of contracts, while suggesting that contracting parties may expressly agree to dispense with the requirement for varying a particular contract.
The highest courts of Singapore and the United Kingdom have recently issued decisions regarding the choice of law to govern arbitration agreements.
Singapore Courts’ Approach
In BNA v BNB and another  1 SLR 456;  SGCA 84 (“BNA”), the Singapore Court of Appeal adopted at - the following three-step approach from BCY v BCZ  3 SLR 357 (HC) (“BCY”):
- The parties’ express choice of proper law governing the arbitration agreement is first identified (the “Express Choice of Law”).
- If there is no express choice, the court ascertains the parties’ implied choice of law based on their intentions at time of contracting (the “Implied Choice of Law”).
- If an express or implied choice is absent, the law governing the arbitration agreement is the system of law with the closest and most real connection to it.
This is based on the framework in Sulamerica Cia Nacional de Seguros S.A. v. Enesa Engenharia S.A.  EWCA Civ 638 (“Sulamerica”).
An express choice of the proper law of the main contract does not, in and of itself, also constitute the proper law of the arbitration agreement: BNA at .
There is a presumption that the parties’ choice of law for the entire/main/underlying contract (containing the arbitration clause) also reflects the parties’ implied choice of law governing the arbitration agreement (BNA at ).
However, this presumption can be rebutted. The choice of a seat that is different from the place of the law of the main contract is not by itself sufficient to displace the starting point: BNA at ; BCY at .
The inquiry of whether the presumption is displaced only becomes relevant if the law of the seat is materially different from the (I suppose, putative) law governing the arbitration agreement (lex arbitri): BNA at . E.g. if the seat of arbitration is Singapore but the assumed lex arbitri by that point in the analysis is the law of the People’s Republic of China (PRC).
Significance: Court of Appeal partly allows appeal against High Court decision and declines to decide on whether the law in Singapore on penalty clauses should be modified in the light of the new UK Supreme Court test for penalty clauses in Cavendish Square Holding BV v Makdessi  AC 1172 (UKSC) (“Cavendish“) which the High Court below applied.
Singapore Court of Appeal (“CA“) decision in Quoine Pte Ltd v B2C2 Ltd  SGCA(I) 2 is groundbreaking for its analysis of contract formation through a deterministic algorithm code. Case summary here.
The majority of the CA (Jonathan Mance IJ dissenting) decided on the following key points:
When analysing mistake for contract vitiation, if a contract was formed through deterministic algorithms (i.e. it always produces the same output given the same input), it is the programmer’s state of knowledge that is relevant and to be attributed to the parties: at .
The inquiry should be whether, when programming the algorithm, the programmer was doing so with actual or constructive knowledge of the fact that the relevant offer would only ever be accepted by a party operating under a mistake and whether the programmer was acting to take advantage of such a mistake: at .
The relevant time frame within which the knowledge of a programmer or the person running the algorithm should be assessed is from the point of programming up to the point that the relevant contract was formed: at .
The CA held it was not necessary to decide whether cryptocurrency, specifically BTC, was a species of property that was capable of being held on trust. No express trust arose over the BTC in B2C2’s account as there was no certainty of intention to create a trust. The mere fact that Quoine’s assets were segregated from its customers’ could not in and of itself lead to that conclusion. On the facts, the manner in which the BTC was stored militated against the finding of a trust: at  and .
The CA did comment in obiter dicta that “[t]here may be much to commend the view that cryptocurrencies should be capable of assimilation into the general concepts of property. There are, however, difficult questions as to the type of property that is involved”: at .
Continue reading “Case Update: B2C2 Ltd v Quoine Pte Ltd  SGHC(I) 3; Quoine v B2C2  SGCA(I) 2 – SICC / Singapore Court of Appeal on cryptocurrency and mistake in contract formed using algorithm”
Significance: The Singapore International Commercial Court (SICC), coram Jeremy Lionel Cooke IJ, held that Barclays Bank entered into an implied contract with Maybank to make the payment according to the payment instruction sent prior and was not entitled to subsequently refuse payment on alleged suspicion of fraudulent circumstances of the payment. The SICC also held that Barclays failed to prove a market practice which could be implied by custom or usage as a term of the implied contract.
Comment: It is rare for an implied contract to be found. And for legal principles to be clarified in application to the inter-bank SWIFT system.
Significance: Singapore High Court held that contractual discretion in employment contract is subject to an implied term that the discretion is exercised rationally, not arbitrarily or capriciously, in good faith, and consistent with its contractual purpose. Further, the Court applied the new UK Supreme Court test for penalty clauses in Cavendish Square Holding BV v Makdessi  AC 1172 (UKSC) (“Cavendish“), observing that the clause in question is not a straightforward damages clause, hence the usefulness in applying the Cavendish test.
ACTAtek, Inc and another v Tembusu Growth Fund Ltd  SGCA 50 PDF
This case concerned a venture capital fund, Tembusu Growth Fund Ltd (“Tembusu“), suing an investee company ACTAtek Inc., which is part of a group of companies providing identification management solution, under the tort of misrepresentation in relation to two convertible loan agreements and its plan to list on the New Zealand stock exchange. The Singapore Court of Appeal reversed the High Court’s decision below, holding that the venture capital fund was in anticipatory repudiatory breach of the contract by wrongly calling events of default such that the investee company’s plan to list on the NZ stock exchange was derailed. The Court considered the interesting point of law being “what are the legal consequences that flow if an event of default is found to have been wrongly declared and damages are suffered as a result?” ([at ). The decision also traversed other issues of law including misrepresentation and the application of Sembcorp Marine Ltd v PPL Holdings Pte Ltd  4 SLR 193 principles regarding implied terms in contract.
Hewlett-Packard Singapore (Sales) Pte Ltd v Chin Shu Hwa Corinna  SGCA 19
Significance: Singapore Court of Appeal grants appeal to Hewlett-Packard who argued that a new commission remuneration metric was not ambiguous and that the scenario in question did not fall within the said metric entitling its ex-employee a substantially higher commission payment. Court clarifies and explains the principles on contra preferentem, among other things.
Significance: Singapore Court of Appeal clarifies the legal and conceptual basis for awarding and quantifying damages pursuant to a breach of a lease agreement. Court held that claims for expectation and reliance losses as damages for breach of contract are mutually exclusive.
One issue which may be of interest is whether oral contracts can amend written contracts. Oral contracts may be valid contracts if the necessary elements for a valid contract are present. Thus, an oral contract may, in theory, amend, vary or discharge an existing contract, including a written contract.