Key considerations for drafting, reviewing, and enforcing business contracts when working with local partners.
There is no statutory requirement in Singapore to follow such a sequence when working with a Singapore company. It is largely a commercial decision whether to include an NDA to protect confidential information shared between parties during negotiations. An MOU can be entered into during the early stages of negotiations between parties, to confirm their commitment to the deal, establish a shared understanding of the transaction's overall structure, and identify any significant misalignments in expectations at an early stage. Whether a deal may be deemed settled based on signing an MOU depends on the language of the MOU and the surrounding circumstances.
Why1. Generally, Singapore courts look beyond the title of a document and will consider the substance of the document and objective intentions of the parties to the document. This is usually fact dependent. 2. An MOU may potentially be deemed as a binding contract if: its terms are sufficiently certain and complete (eg: setting out essential terms); language of the MOU signals binding intent (eg: language stating that the MOU is construed as a binding document); and the parties conduct themselves consistently with the MOU (eg: making of payments, delivery of services / goods). 3. Conversely, an MOU may also contain terms such as "subject to contract", non-binding language and express reference to further agreements.
What To Do1. Consider whether highly sensitive information will be exchanged between parties during negotiations and discussions, which may require an NDA. 2. Before concluding whether the deal is settled solely based on an MOU, consider the language and the context of the MOU.
A contract may potentially be formed via email correspondence with a Singapore customer. Generally, Singapore courts apply an objective test to determine whether a contract has been formed. This includes considering whether based on the parties' correspondence and conduct, a reasonable person would conclude that the parties intended to be bound.
Why1. The Sale of Goods Act 1979 of Singapore expressly provides that a contract of sale "may be made in writing (either with or without seal), or by word of mouth, or partly in writing and partly by word of mouth, or may be implied from the conduct of the parties". 2. Read together with the Electronic Transactions Act 2010 of Singapore (the "ETA"), "an offer and the acceptance of an offer may be expressed by means of electronic communications" and that a contract "is not to be denied validity or enforceability solely on the ground that an electronic communication was used for that purpose". 3. Generally, essential elements of a contract include: offer and acceptance; consideration; and intention to create legal relations. 4. If the email correspondence contains terms such as "subject to contract / documentation", parties should be mindful that a binding contract between the parties may not have been formed.
What To Do1. Notwithstanding the email correspondence with the customer, you should still consider executing a formal written contract to clearly document the full terms. 2. These may include payment terms, warranties, limitation of liability, governing law, and dispute resolution. This may also reduce the risk of any future dispute over the scope of the parties' obligations.
For most commercial contracts with a Singapore company, a seal is no longer required, and electronic signatures are generally recognised under Singapore law. Although a seal is no longer required, deeds in Singapore should be executed by certain specified individuals.
Why1. If the contract is to be executed as a deed (which traditionally required a seal), the Companies Act 1967 of Singapore (the "Companies Act") allows a company to execute a deed without affixing a common seal, by having it signed by: a director and the company secretary; at least two directors; or a director in the presence of a witness who attests the signature. A document signed in this manner "has the same effect as if the document were executed under the common seal of the company". 2. Under the Electronic Transactions Act 2010 of Singapore (the "ETA"), electronic signatures can validly replace wet-ink signatures. However, please note that the ETA excludes certain matters from electronic records, signatures and contracts: the creation or execution of a will; the creation, performance, or enforcement of an indenture, declaration of trust, or power of attorney (except implied/constructive/resulting trusts and lasting powers of attorney); any contract for the sale or other disposition of immovable property, or any interest in such property; and the conveyance of immovable property or the transfer of any interest in immovable property.
What To Do1. If this is a standard commercial contract (not involving the abovementioned excluded matters), you may propose to your customer that an electronic signature be used instead. 2. However, consider whether the contract is a deed instead, which requires it to be executed by certain individuals prescribed under the Companies Act.
When the contract does not specify which country's law applies, a Singapore court or tribunal will determine the "proper law" of the contract. If an express choice of law is not stated in the contract, courts may examine the contract and surrounding circumstances to determine whether the parties impliedly chose a particular law. Such indicators may include but are not limited to, the language of the contract, the currency of payment, the use of legal concepts specific to a particular system of law, or the parties' course of dealing. For example, if the contract contains a clause submitting disputes to the Singapore International Arbitration Centre, a court may infer that Singapore law was the implied choice of the parties.
Why1. A contract can specify Singapore law as the governing law, while simultaneously specifying disputes to be heard in the courts of another country or by another arbitral tribunal. 2. Even if the contract is governed by Singapore law, a foreign court is not prevented from hearing the case if it has jurisdiction over the parties. 3. If there is no express clause in the contract specifying a court in Singapore as the dispute resolution forum, either party may commence proceedings in any court that has jurisdiction over a defendant. 4. Parties may specify that disputes be resolved by way of arbitration instead. Should a contract include an arbitration clause, the International Arbitration Act 1994 of Singapore provides that if a party brings court proceedings in respect of a matter covered by the arbitration agreement, the court must stay those proceedings in favour of arbitration, unless the arbitration agreement is "null and void, inoperative or incapable of being performed". 5. Parties are also free to include mediation clauses as a means of dispute resolution, before court or arbitration proceedings are commenced.
What To DoAs governing law and the dispute resolution clauses serve different functions, these should be addressed explicitly in the contract and can be discussed during the contract negotiation stage, to prevent ambiguity and potential litigation costs.