In recent years cross-border agreements between Singapore and foreign companies have become more frequent. This applies especially to the relations between local companies and companies based in other ASEAN countries (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Thailand, and Vietnam).
Governing law in cross-border agreements
The Singapore contract law recognizes wide freedom of the contracting parties to define the terms of their agreement. This also applies to the choice of governing law and not just to commercial agreements but also to civil or employment contracts.
Choosing the governing law
When a Singapore company and a foreign company sign an agreement which is to be performed at least partially in Singapore or is to be signed in the country, they can choose which country’s law to govern their relationship.
In addition to the choice of governing law, the contracting parties may also choose a court where disputes are to be heard regarding the signing, execution or termination of the contract.
Governing law when a choice is not made
If the parties have not agreed upon the governing the law, it will be up to the court that hears a dispute, to choose which law to apply. The court will likely apply the law of the country that is most closely connected with the subject of the matter. For example, if the parties have agreed on the periodic provision of services to Malaysian citizens the Malaysian law is the one to be applied even if the service provider is a Singapore based company.
In some rare cases, there may be mandatory rules that override the choice of governing law. This is the case with the Singapore Unfair Contract Terms Act. Some regulations provided for in the act will apply regardless of what the parties may have agreed upon.
How to choose governing law and jurisdiction
It is fairly easy to include the choice of governing law in your commercial agreement. You only need to include a simple clause like the following:
“This Contract shall be governed by and construed in accordance with Singapore law.”
If you want to designate the Singapore court as the court to hear potential disputes you can use the following:
“The courts of Singapore have exclusive jurisdiction to settle any dispute arising out of or in connection with this Agreement(including a dispute regarding the existence, validity or termination of this Agreement).”
Forming a contract in Singapore
Singapore contract law is similar to the law of other common law countries. Under local law, a contract is “created” through an offer and acceptance between two or more parties.
Sending an offer
An offer is a legally binding invitation sent by one contracting party to the other. It can be withdrawn at any time before being accepted by the other party. Digital (electronic) offers are compliant with Singapore law and are fully binding.
Accepting the offer
An offer can be accepted through words or conduct but silence is almost never sufficient to be considered acceptance.
In addition to the general rules of offer and acceptance, there is a presumption in Singapore law that parties intend to be legally bound when entering into an agreement. This presumption is only overturned by a clear statement on the opposite.
Consideration is another important aspect of Singapore contract law. A consideration is something of value that is to be exchanged between the parties under the contract. A promise contained in an agreement is not enforceable unless it is supported by consideration or it is recorded in a written document executed as a deed.
Form of the agreement
Although advisable, it is not necessary to formulate the contract as a single document. It can be concluded even without being explicitly written down and physically signed by the parties. Digital contracts are also fully enforceable under Singapore law.