Court Clarifies Conditions for Recovering Future Instalments - International Law Office

The Facts
Innocent Party's Rights
Recovering Future Instalments
Duty to Mitigate

The Facts

In MP-Bilt v Oey Widarto, the developer of a condominium applied for summary judgement against a purchaser for unpaid progress payments. The basis of the developer's claim was that the first progress payment was due because it had completed the foundation work of the development.

Due to the prevailing economic crisis, the purchaser was unable to pay the instalment. The thrust of his defence was that the developer was under a duty to mitigate its loss. The purchaser relied on Lord Reid's dicta in White and Carter (Councils) v McGregor [1962] AC 413. "If it can be shown that a person has no legitimate interest, financial or otherwise, in performing the contract rather than claiming damages, he ought not to be allowed to saddle the other party with an additional burden with no benefit to himself."

In giving judgement for the developer, the Singapore High Court held that a claim for arrears of progress payments already due is a claim in debt and not damages for a breach of contract. The court held that as the instalment was due, it was recoverable as a debt.

Innocent Party's Rights

The court clarified Lord Reid's statement and stated that it did not expect the innocent party to act to his detriment and settle for less than what he is legitimately due. As such, an innocent party has the right to elect whether to accept the repudiation and terminate the contract, or affirm the contract and keep it alive. In making this decision, the innocent party has no duty to act reasonably.

Recovering Future Instalments

The court further held that so long as the innocent party can perform the contract unilaterally, he may recover future instalments as a debt provided he is able to perform his part of the contract and make a demand. It is only if the innocent party is prevented from performing his part of the contract by the defendant's wrongful act that he cannot sue in debt, but must claim damages instead.

However, the court cautioned that the innocent party cannot recover future instalments as a debt before performance by asking for specific performance. If he desires to claim future payments in advance, then he must accept the repudiation and sue for damages and be subject to the obligation to mitigate.

Duty to Mitigate

Finally, the court affirmed the principle in White and Carter that the innocent party has no duty to mitigate if he decides to affirm the contract and sue for the contract price as a debt. This is because the duty to mitigate affects only a claim in damages and not debt. As such, instalments that have accrued and are due are recoverable as a debt even if the contract is rescinded subsequently. Where a plaintiff's contractual obligations are divisible, he can sue for each part of the contract price as the work relevant to that part is completed.

For further information on this topic contact Hri Kumar or Blossom Hing at Drew & Napier by telephone (+65 535 0733), by fax (+65 532 7149), or by email ( hri.kumar@drew-and-napier.com.sg or blossom.hing@drew-and-napier.com.sg). The Drew & Napier web site can be accessed at www.drewnapier.com .



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