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In Charles Lim Teng Siang and another v. Hong Choon Hau and another [2021] SGCA 43, the Singaporean Court of Appeal declined to follow prevailing English authority when considering the legal effect of ‘no oral modification’ clauses. It endorsed instead a more liberal approach, finding that such clauses merely raise a rebuttable presumption that oral modifications are invalid.

Authors: Kohe Hasan Catriona Casha Gautam Lamba Michael N. Chee Kyri Evagora Adrian Aw (Resource Law LLC)

Summary

In Charles Lim Teng Siang and another v. Hong Choon Hau and another [2021] SGCA 43, the Singapore Court of Appeal (CoA) provided valuable insight on the legal effect of a ‘no oral modification’ clause, which prohibits “variation, supplement, deletion or replacement” of an agreement or any of its parts unless made in writing and signed by both parties (a NOM Clause).

The CoA considered the two approaches set out in the seminal English authority of Rock Advertising Limited v. MWB Business Exchange Centres Limited [2018] UKSC 24 (Rock Advertising), namely that any oral modification subsequent to an agreement containing a NOM Clause is invalid, albeit that parties can orally agree to deviate from the NOM Clause.

In the present case, the CoA endorsed a broader approach, in which NOM Clauses merely create a rebuttable presumption that oral modifications are invalid. Although the CoA’s approach did not form part of the decision (i.e., it was obiter), this Singaporean approach represents a material divergence from the position in English law, which takes a stricter approach to the enforcement of NOM Clauses.

What happened between the parties?

On 17 September 2014, the appellants signed a sale and purchase agreement (SPA) to sell shares to the respondents, who were acting on behalf of another party (the Buyer). The SPA required completion by 17 October 2014 (the Completion Date).

The SPA included a NOM Clause at clause 8.1, which stated that “[no] variation, supplement, deletion or replacement of or from this Agreement or any of its terms shall be effective unless made in writing and signed by or on behalf of each Party.”

The SPA also provided that (a) time was of the essence, and (b) delayed exercise of any right, remedy, power or privilege under the SPA was not a waiver.

The sale was never completed. About four years after the Completion Date, the appellants commenced action against the respondents, claiming damages for breach of the SPA.

What did the High Court decide and why?

The respondents argued that the SPA had been orally rescinded by mutual agreement in a phone call between the first appellant (for the appellants) and the Buyer (for the respondents) shortly after the Completion Date. Alternatively, they argued that the appellants were estopped from relying on their legal rights under the SPA. The appellants denied that the SPA had been rescinded or that they were estopped.

The Judge held that the SPA had been rescinded for the following reasons:

(a) The appellants did not serve a notice to complete the sale until May 2018, and there was no documentary evidence that the first appellant (on behalf of the appellants) chased the respondents to complete until that time; and

(b) The first appellant’s account of events was inconsistent and materially contradicted his own witnesses and conduct. 

The appellants appealed the Judge’s decision, raising a new argument that an oral rescission (if proven) was invalid by virtue of clause 8.1. This new point was permitted for appeal by the CoA.