Singapore Court of Appeal clarifies rule against the use of non-contractual documents for purposes of incorporating terms into a contract

25 February 2022

Nambu PVD Pte Ltd v UBTS Pte Ltd [2021] SGCA 98

In Nambu PVD Pte Ltd v UBTS Pte Ltd, the Singapore Court of Appeal held that non-contractual documents cannot give rise to a course of dealing sufficient to incorporate contractual terms.

Facts

Nambu PVD Pte Ltd (“Nambu”) and UBTS Pte Ltd (“UBTS”) entered into a contract (“Contract”) for UBTS to transport a machine (“Machine”). UBTS’s vehicle, which was transporting the Machine, caught fire during the course of the carriage and the Machine was damaged.

Nambu sued UBTS for fire damage to the Machine. The High Court judge (“Judge”) found that the fire was due to UBTS’s negligence. He also held that UBTS could not rely on its own standard terms and conditions or the Singapore Logistics Association’s standard terms and conditions (“SLA T&Cs”) to limit its liability, since neither set of terms was, in his view, incorporated into the Contract.

Decision of the Court of Appeal

In the Court of Appeal, UBTS appealed against the Judge’s finding that the SLA T&Cs were not incorporated into the Contract. UBTS argued that the SLA T&Cs were incorporated into the Contract by virtue of either reasonable notice or a previous course of dealing. In both situations, UBTS relied on the invoices and delivery orders (“DOs”) issued by Nambu to UBTS for the various contracts entered into between them, and which contained express references to the SLA T&Cs. These invoices and DOs were always issued after a contract between Nambu and UBTS had been orally concluded. This was also the case for the Contract itself.

Nature of document

The Court of Appeal observed that if, generally speaking, it can be proven that the document containing the particular term sought to be incorporated into the contract is intended merely as a receipt and not as a contractual document as such, that term will not be incorporated into the contract. Its contents will be irrelevant simply because they have no contractual force.

Reasonable notice

With regard to UBTS’s arguments on incorporation by reasonable notice, the Court of Appeal observed that the invoice and DO for the Contract were issued only after the Contract was entered into and after the Machine had already been damaged. By that point in time, the doctrine of reasonable notice no longer applied. While there were other invoices and DOs issued before the Contract was entered into, such invoices and DOs concerned prior and unrelated contracts. Thus, UBTS’s argument on this point could not succeed.

Course of dealing

In respect of the course of dealing argument, UBTS argued that the invoices and DOs issued for the transactions prior and unrelated to the Contract (which the Judge found to be of no contractual effect) amounted to a previous course of dealing from which the SLA T&Cs could be incorporated.  Specifically, UBTS argued that non-contractual documents are capable of giving rise to a course of dealing sufficient to incorporate contractual terms.

The Court of Appeal dismissed UBTS’s arguments for the following reasons:

• A particular term can be incorporated in a particular contract if it can be shown that there has been a previous course of dealing in which the term has figured as part of the contracts concerned. A court would be prepared to incorporate that term in the present contract (thus conferring upon that term contractual effect) despite the fact that it was not otherwise incorporated (for example, by way of signature or reasonable notice) precisely because the contracting parties had consistently contracted with reference to that term on previous occasions in the past.
• The common law of contract is based on the reasonable objective expectations of parties. Permitting non-contractual documents to give rise to a course of dealing would amount to allowing terms which have been consistently treated by parties as non-binding to take on contractual effect, and no reasonable parties would countenance such a drastic shift in their legal relationship.
• This rule has the benefits of avoiding unnecessary litigation, whilst promoting greater certainty, inasmuch as contracting parties would be dissuaded from arguing that there are exceptional circumstances warranting reliance on non-contractual documents.

Comment

This case demonstrates the importance of expressly incorporating material terms (including any standard terms) in the relevant contractual documents. Where additional terms are sought to be incorporated after the conclusion of a contract, it would be prudent to ensure that those terms have contractual force by, for example, incorporating those terms by way of a supplemental agreement.

Reference materials

The judgment is available on the Singapore Courts website judiciary.gov.sg.