Contract Law Basics

A contract is only legally binding when all six elements are present. Remove any one and the agreement may be void, voidable, or unenforceable. The mnemonic is O-A-C-I-C-L: Offer, Acceptance, Consideration (or Deed), Intention to create legal relations, Capacity, Legality. In real estate, every OTP and S&P Agreement must satisfy all six.

Private property sales in Singapore use a two-contract structure. First contract: the seller grants the OTP; the buyer pays the option fee (typically 1%) as consideration for the right to buy within the option period. Second contract: the buyer exercises the option, pays the exercise money (typically 4%), and a binding sale contract is formed at that moment. CLA s.6(d) requires all real estate agreements to be in writing and signed.

The OTP structure protects both parties: the seller cannot withdraw once the option is granted; the buyer has time (typically 14 days) to conduct due diligence and secure financing before committing.

For an offer to be valid in real estate, it must be sufficiently certain. The 4Ps framework is the standard checklist: Parties (who is buying/selling), Property (which specific unit), Price (agreed sum in SGD), and Provisions (conditions, completion date, included items). A vague offer missing any of the 4Ps may not form a binding contract.

Acceptance must precisely mirror the offer. All four requirements must be satisfied: unqualified (no new conditions attached), communicated to the offeror, made before the offer expires, and in the stipulated mode if specified. Adding any condition — even a minor one — converts acceptance into a counter-offer, which terminates the original offer.

Every contract has two layers of terms. Express terms are explicitly agreed — written in the OTP or tenancy agreement (price, completion date, included fixtures). Implied terms are not written down but are automatically read into the contract by law, trade custom, or the courts.

An exemption clause(exclusion clause) tries to exclude or limit a party's liability for breach or loss. Common in real estate: “sold as-is, no warranty on fixtures” or “landlord not liable for flooding”. Three requirements must ALL be satisfied for the clause to be enforceable:

An indemnity clause requires one party (the indemnifier) to compensate the other for specified losses. Unlike an exemption clause which removes liability, an indemnity clause shifts it from one party to another. Common in:

• • Agency agreements: owner indemnifies agent against third-party claims arising from property management
• • Tenancy agreements: tenant indemnifies landlord for damage beyond fair wear and tear
• • S&P agreements: seller indemnifies buyer against undisclosed liabilities

Not everyone can legally enter a real estate contract. The Civil Law Act ss.35 & 36 (amended by the Civil Law (Amendment) Act 2009, in force 1 March 2009) lowered the general age of contractual capacity from 21 to 18: a person who has attained 18 is treated as an adult for most contracts. Real estate contracts are an exception carved out of that rule — they continue to be governed by common law. At common law, a minor's contract for the sale / purchase / mortgage / long lease (> 3 years) of real property is voidable — it exists, but the minor may affirm or rescind it within a reasonable time after turning 18. A short tenancy of 3 years or less (necessaries-type contract) is fully valid.

A contract's purpose must not be illegal or against public policy. An illegal contract is void ab initio — it has no legal effect and is treated as though it never existed. Neither party can sue on it or recover what was transferred.

When something goes wrong with a contract, the law classifies it into one of four states. The most frequently tested distinction is void vs voidable: void means no contract ever existed; voidable means a contract exists but one party can escape it. Unenforceable is a third category where the contract exists but courts will not assist enforcement.

Not all contract terms carry equal weight. A condition is a fundamental term that goes to the root of the contract — breach entitles the innocent party to both terminate the contract and claim damages. A warranty is a subsidiary term — breach entitles only damages; the contract cannot be terminated. In property contracts, “free from encumbrances” is classified as a condition.

Under CLA s.6(d), a contract for the sale or disposition of real property must be in writing and signed. An oral agreement to sell land is unenforceable. The equitable doctrine of part performance provides an exception: where a party has substantially performed an oral contract (paid deposit, taken possession, made improvements), equity may enforce the agreement.