[2007] 4SLR(R) SINGAPORE LAW REPORTS (REISSUE) 413RDC Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd and another appeal[2007] SGCA 39Court of Appeal Civil Appeals Nos 151 and 152 of 2006Chan Sek Keong CJ, Andrew Phang Boon Leong JA and V K Rajah JA8 May; 29 August 2007Contract Discharge Breach Party to contract failing to perform obligations Situations where innocent party entitled to terminate contract Whether breachof warranty by one party entitling innocent party to terminate contractContractFrustrationPartyinbreachofcontractinvokingforcemajeureclauses in contract Construction and effect of force majeure clauses Distinctionbetween doctrine of frustration and force majeure Whether force majeure clausesapplicable Whether doctrine of frustration excluded by force majeure clausesContract Remedies Damages Costs incurred from breach of contract by oneparty sought as damages by innocent party Whether such costs flowing directly andnaturally from breachFactsSatoKogyo(S)PteLtd(SatoKogyo),acontractorengagedbytheLandTransportAuthority(LTA)toconstructaMassRapidTransitstation,contractedtopurchaseready-mixedconcretefromRDCConcretePteLtd(RDC). Subsequently, LTA instructed Sato Kogyo to suspend RDCs supply ofconcrete(LTAssuspension)duetotheconcreteshowinganunacceptableamountofcubefailure.DuringtheperiodofLTAssuspension,SatoKogyoobtainedallitsconcretefromPanUnitedConcretePteLtd(PanUnited)atrates higher than those stipulated in its contract with RDC.Later on, LTA approved Sato Kogyos request to allow RDC to resume concretesupply,withsupplybeingrestrictedtoconcreteproducedatRDCsKakiBukitplant.Thereafter,RDCfailed,onatleast42occasions,tosupplyconcreteorderedbySatoKogyo,citingreasonsof:(a) shortagesofrawmaterial,ie,aggregates and cement; and (b) plant breakdowns. Sato Kogyo had to purchaseconcrete from alternative suppliers at higher rates. Pursuant to its contract withRDC,SatoKogyodeductedallthecostdifferentialsincurredfromtheoutstanding amounts due to RDC, which RDC maintained it was not liable forby invoking the contractual clauses relating to force majeure. As a result of non-paymentbySatoKogyo,RDCeventuallysuspendeditssupplyofconcrete(RDCssuspension)andSatoKogyoterminatedthecontractshortlythereafter.Sato Kogyo instituted proceedings to claim damages for breach of contract andRDC counterclaimed for amounts due under outstanding invoices for concretepaginator.bookPage 413Tuesday, December 8, 20093:41 PM414 SINGAPORE LAW REPORTS (REISSUE) [2007] 4SLR(R)supplied. The parties raised the following issues: (a) whether the contract was anexclusiveorsolesuppliercontract;(b) whetherthefailureofthecubetestsallowedSatoKogyotoclaimthecostdifferentialsofobtainingconcretefromalternativesuppliersincurredduringthesuspensionperiod;(c) whethertheforce majeure clauses exempted RDC from liability for the non- or short supplyof concrete during the period prior to RDCs suspension; (d) whether RDC wasentitledtosuspendthesupplyofconcrete;and(e) whetherSatoKogyowasentitled to terminate the contract after RDCs suspension.The trial judge held in favour of RDC with respect to issues (a), (b) and (d), andfound for Sato Kogyo with respect to issue (e). With regard to issue (c), the trialjudgefoundthattheforcemajeureclausesonlyexemptedRDCfromliabilityarisingduetoshortageofrawmaterials.SatoKogyoappealedagainstthetrialjudgesfindingsonissues (a),(b),(c)and(d)inCivilAppealNo 152of2006(CA 152),whilstRDCappealedagainstthefindingsonissues (c)and(e)inCivil Appeal No 151 of 2006 (CA 151).Held, dismissing CA 151 and allowing CA 152 in part: (1) The contract was not an exclusive or sole supplier contract. There was noexpress term as such and such a term could not be implied on either the businessefficacyorofficiousbystandertests.Implyingsuchatermwouldconsiderablyalter thenature of the bargain because it was not the intentions of both partiesthat Sato Kogyo would be deemed to be in breach whenever it obtained concretefromalternativesuppliersduringthecontractperiod,evenafterithadalreadypurchased the stipulated amount of concrete from RDC: at [25] to [32].(2) TheproperconstructionofthecontractshowedthatSatoKogyocouldclaimdirectcostsincurredasaresultofRDCsbreachevenifithadnotterminatedthecontract.Thiswasconsistentwiththepositionatcommonlawwhere even if the innocent party was not entitled to terminate the contract, or, ifso entitled, chose nevertheless not to terminate the contract, it would generallybeentitledtoclaimdamagesasofrightforlossresultingfromthebreachofcontract: at [39] to [41].(3) SatoKogyowasentitledtoclaimthecostdifferentialsofobtainingconcretefromPanUnitedincurredduringtheperiodofLTAssuspensionbecausesuchcostdifferentialsweredirectcostswhichfloweddirectlyandnaturallyfromRDCsinabilitytosupplyconcretethatmetwithLTAsrequirements.Itwaswithinthereasonablecontemplationofbothcontractingparties that such loss was likely to result from the breach of contract: at [42] to[44].(4) RDCcouldnotinvoketheforcemajeureclausesbecauseithadnotpleaded force majeure in its defence. In any case, the force majeure clauses wouldnothaveexemptedRDCfromliabilityforthenon-orshortsupplyasRDCcouldnotprovethattheshortageofrawmaterialsorplantbreakdownswerebeyonditscontrol.Assuch,RDCwasliabletoSatoKogyoforthecostdifferentials: at [50] to [52], [76] to [80].paginator.bookPage 414Tuesday, December 8, 20093:41 PM[2007] 4SLR(R) RDC Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd 415(5) RDCwasentitledtosuspenditssupplyofconcretebecauseSatoKogyohad wrongfully withheld a sum of money by imposing an administrative chargeon RDC: at [86].(6) Whereacontractclearlyandunambiguouslyprovidedfortheeventspursuanttowhichapartywasentitledtoterminatethecontract,theinnocentparty might elect to do so. Even where the contract did not provide as such, theinnocentpartymightelecttoterminatethecontractinthreesituations:(a) whereaparty,byhiswordsorconduct,clearlyconveyedtotheotherpartythat it would not perform its contractual obligations at all; (b) where there was abreachofatermwhichthepartieshaddesignatedassoimportantthatanybreachofitwouldentitletheinnocentpartytoterminatethecontract;and(c)where the breach in question would deprive the innocent party of substantiallythe whole benefit of the contract: at [90] to [101].(7) Eveniftheinnocentpartywasnotentitledtoterminatethecontract,itwouldalwaysbeentitled,subjecttoanyapplicablelegalconditionsorconstraints,toclaimdamagesasofrightforlossresultingfromthebreachofcontract. Pursuant to cl 8 of the contract, Sato Kogyo was entitled to terminatethecontractasRDCwasunabletomeetLTAsrequirementsandtoprovideuninterrupted supply as promised under the contract: at [114], [123] and [138].[Observation:Inconstruingaforcemajeureclause,thecourtswouldapplythepresumptionthattheclausewasrestrictedtosuperveningeventswhicharosewithout the fault of either party and for which neither of them had undertakenresponsibility: at [57] to [69].A force majeure clause could exclude the doctrine of frustration by clear andunambiguous language: at [60] and [61].A party who relied on a force majeure clause had the burden of showing notonlythatithadbroughtitselfsquarelywithintheclause,butalsothatithadtakenallreasonablestepstoavoiditsoperation,ormitigateitsresults:at[64]and [65].]Case(s) referred toAlfred McAlpine Plc v BAI (Run-Off) Ltd [2000] 1 Lloyds Rep 437 (refd)Andre & Cie SA v Tradax Export SA [1983] 1 Lloyds Rep 254 (refd)Bank Line, Limited v Arthur Capel and Company [1919] AC 435 (refd)Bentsen v Taylor, Sons & Co [1893] 2 QB 274 (refd)Brauer & Co (Gt Britain), Ltd v James Clark (Brush Materials), Ltd [1952] 2 Lloyds Rep 147 (refd)Bunge Corpn v Tradax SA [1981] 2 All ER 513 (refd)Bunge Corporation, New York v Tradax Export SA, Panama [1981] 1 WLR 711 (refd)C Czarnikow Ltd v Koufos, The Heron II [1969] 1 AC 350 (refd)Chan Buck Kia v Naga Shipping & Trading Co Ltd [1963] MLJ 159 (refd)Channel Island Ferries Ltd v Sealink UK Ltd [1988] 1 Lloyds Rep 323 (refd)paginator.bookPage 415Tuesday, December 8, 20093:41 PM416 SINGAPORE LAW REPORTS (REISSUE) [2007] 4SLR(R)China Resources (S) Pte Ltd v Magenta Resources (S) Pte Ltd [1997] 1 SLR(R) 103; [1997] 1 SLR 707 (refd)CHS CPO GmbH v Vikas Goel [2005] 3 SLR(R) 202; [2005] 3 SLR 202 (refd)Continental Grain Export Corporation v STM Grain Ltd [1979] 2 Lloyds Rep 460 (refd)Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696 (refd)Forefront Medical Technology (Pte) Ltd v Modern-Pak Pte Ltd [2006] 1 SLR(R) 927; [2006] 1 SLR 927 (refd)GIB Automation Pte Ltd v Deluge Fire Protection (SEA) Pte Ltd [2007] 2 SLR(R) 918; [2007] 2 SLR 918 (refd)Glahe International Expo AG v ACS Computer Pte Ltd [1999] 1 SLR(R) 945; [1999] 2 SLR 620 (refd)Hadley v Baxendale (1854) 9 Exch 341; 156 ER 145 (refd)Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26 (refd)Janagi v Ong Boon Kiat [1971] 2 MLJ 196 (refd)Jet Holding Ltd v Cooper Cameron (Singapore) Pte Ltd [2006] 3 SLR(R) 769; [2006] 3 SLR 769 (refd)Kriti Rex, The [1996] 2 Lloyds Rep 171 (refd)Magenta Resources (S) Pte Ltd v China Resources (S) Pte Ltd [1996] 2 SLR(R) 316; [1996] 3 SLR 62 (refd)Metropolitan Water Board v Dick, Kerr and Company, Limited [1918] AC 119 (refd)Multi-Pak Singapore Pte Ltd v Intraco Ltd [1992] 2 SLR(R) 382; [1992] 2 SLR 793 (refd)Nam Kee Asphalt Pte Ltd v Chew Eu Hock Construction Co Pte Ltd [2000] SGHC 45 (refd)Photo Production Ltd v Securicor Transport Ltd [1980] AC 827 (refd)Raineri v Miles [1981] AC 1050 (refd)Ross T Smyth & Co, Ltd v T D Bailey, Son & Co [1940] 3 All ER 60 (refd)Saint Line Limited v Richardsons, Westgarth & Co, Limited [1940] 2 KB 99 (refd)Seaflower, The [2001] 1 Lloyds Rep 341 (refd)Singapore Telecommunications Ltd v Starhub Cable Vision Ltd [2006] 2 SLR(R) 195; [2006] 2 SLR 195 (refd)State Trading Corporation of India Ltd v MGolodetz Ltd [1989] 2 Lloyds Rep 277 (refd)Suisse Atlantique Socit dArmement Maritime SA v NV Rotterdamsche Kolen Centrale [1967] 1 AC 361 (refd)Torvald Klaveness A/S v Arni Maritime Corporation [1994] 1 WLR 1465 (refd)Universal Bulk Carriers Ltd v Andre et Cie [2001] 2 Lloyds Rep 65 (refd)paginator.bookPage 416Tuesday, December 8, 20093:41 PM[2007] 4SLR(R) RDC Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd 417Woodar Investment Development Ltd v Wimpey Construction UK Ltd [1980] 1 WLR 277 (refd)Ymnos, The [1982] 2 Lloyds Rep 574 (refd)Legislation referred toFrustrated Contracts Act (Cap 115, 1985 Rev Ed) s 3(3)Rules of Court (Cap 322, R 5, 2006 Rev Ed) O 18 r 8(1)Sale of Goods Act (Cap 393, 1994 Rev Ed)Por Hock Sing Michael and Siva Sambo Krishnasamy (Tan Lee & Partners) for the appellant in Civil Appeal No 151 of 2006 and respondent in Civil Appeal No 152 of 2006; Tan Yew Cheng (Leong Partnership) for the appellant in Civil Appeal No 152 of 2006 and respondent in Civil Appeal No 151 of 2006.[Editorial note:Thiswasanappeal fromthedecisionof theHighCourtin[2006]SGHC 213.]29 August 2007 Judgment reserved.Andrew Phang Boon Leong JA (delivering the judgment of the court):1 The Mass Rapid Transit (MRT) Circle Line is a massive project thatinvolvesthelinkingofthepresentNorth-SouthLine,East-WestLineandNorth-East Line. It will cost approximately $6.7bn to build and will consistof 29 stations spanning some 33.3km. In June 2003, Sato Kogyo (S) Pte Ltd(the Plaintiff) was appointed by the Land Transport Authority (LTA) asthe main contractor forone ofthe 29stations,namely,the LorongChuanStation(theProject).Thepresentlitigationarisesinrelationtotheconstruction of that station.2 ThePlaintiffinvitedseveralsupplierstosubmitquotationsforthesupplyanddeliveryofready-mixedconcretefortheProject.ThePlaintiffeventuallycontractedwithRDCConcretePteLtd(theDefendant),anestablishedlocalsupplierofready-mixedconcrete,forthesupplyofconcreteatstipulatedratesfortheProject.ItwasnotdisputedthattheDefendantsrevisedquotationdated1 September2003andthePlaintiffsletterofintentdated16 September2003formedthecontractbetweentheparties.Thesetwodocumentswillhereafterbecollectivelyreferredtoasthe Contract.3 UndertheContract,theDefendantwastosupplyapproximately70,000m3ofconcretetothePlaintiffatthestipulatedpricesbetween1September 2003 and 30 June 2006. This was in accordance with cl 2 of theDefendants revised quotation, which provides:paginator.bookPage 417Tuesday, December 8, 20093:41 PM418 SINGAPORE LAW REPORTS (REISSUE) [2007] 4SLR(R)2. CONTRACT PERIOD AND CONCRETE QUANTITYThe above quoted prices shall be held firm from 1st September 2003 to30thJune 2006 and the concrete quantity to be supplied to the project isestimated to be approximately 70,000m3. This contract shall cease to bevalidupontheexpiryofthecontractperiodorthesuppliedconcretequantity, whichever is earlier.[emphasis in original]4 InMayandJune2004,severaltestswereconductedonthespecificstrengthoftheconcretesuppliedbytheDefendantanditwasfoundthattherewasanunacceptableamountofcubefailure.Asaresult,on3July2004, the LTA instructed the Plaintiff to suspend the Defendants concretesupply for structural elements. The LTA stipulated that the only approvedconcretesupplierduringthesuspensionperiodwasPanUnitedConcretePteLtd(PanUnited).TheDefendantcontinuedtosupplyconcretefornon-structural elements during the suspension period.5 On17 November2004,theLTAapprovedthePlaintiffsrequesttoallowtheDefendanttoresumeconcretesupply.Supplywas,however,restrictedtoconcreteproducedattheDefendantsKakiBukitplant.Inadditiontothe KakiBukit plant, the Defendant alsohadplants atKallangandGayWorld.InitslettertothePlaintiffdated17 November2004,theLTAstatedthatitwastobeinformedinadvanceiftheneedtouseotherplants arose.6 Thetrialjudge(theJudge)foundthattheperiodofsuspensioneffectively lasted from 7 July 2004 to 17 November 2004 (see Sato Kogyo (S)PteLtdvRDCConcretePteLtd[2006]SGHC 213(theGD)at[27]).During this period, the Plaintiff obtained all its concrete from Pan United.TherateschargedbyPanUnitedwerehigherthanthosestipulatedintheContract.Bywayofletterswrittenon3 July2004and12 July2004,thePlaintiff notified the Defendant that it would charge the Defendant for thecost differentials of obtaining concrete from alternative suppliers during thesuspension period.7 WhentheDefendantwasallowedtoresumesupplyfrom18 November2004onwards,itwasundisputedthattheDefendantfailed,on no fewer than 42 occasions, to supply concrete ordered by the PlaintiffundertheContract.TheDefendantwaseitherwhollyunabletomeetthePlaintiffsordersorcouldonlysupplypartofthevolumeofconcreteordered. The Defendant would give various reasons for its failure to supplytheconcrete.Thesereasonscanbebroadlycategorisedintotwoclasses:(a) shortage of raw materials, namely, aggregates and cement; and (b) plantbreakdowns.Ofthe42occasionsofnon-orshortsupply,therewerealsoinstanceswheretheDefendantdidnotprovideareasonforitsfailuretosupply.paginator.bookPage 418Tuesday, December 8, 20093:41 PM[2007] 4SLR(R) RDC Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd 4198 As a result, the Plaintiffs construction schedule was disrupted and itwassubjectedtodelayandinconvenience.ThePlaintiffhadtopurchaseconcretefromalternativesuppliers,inparticular,PanUnited,atrateshigherthanthosestipulatedintheContract.Pursuanttocl 8ofthePlaintiffsletterofintent,thePlaintiffdeductedallthecostdifferentialsincurredfromtheoutstandingamountsduetotheDefendant.Clause 8provides as follows:In the event that your supply is unable to meet LTAs requirements, oryouareunabletocontinueyoursupply,SatoKogyo(S)PteLtdreservestherighttoterminateyourcontractandretainanduseboththe retention sum and any outstanding payment due to you to seek foralternativesourceofsupply.Inaddition,SatoKogyo(S)PteLtdalsoreserves the right to seek from you any direct cost incurred due to yournon-compliance.9 TheDefendantmaintainedthatitwasnotliableforthecostdifferentials as the circumstances that gave rise to the non- or short supplyfell within the ambit of the force majeure clauses in the Contract. Clause 3 ofthe Defendants revised quotation provides as follows:3. FORCE MAJEUREIn the event of any circumstance constituting Force Majeure, which isdefinedasactofGod,orduetoanycausebeyondthesupplierscontrol,suchasmarketrawmaterialshortages,unforeseenplantbreakdownsorlabourdisputes,thedutyoftheaffectedpartytoperformitsobligationsshallbesuspendedorlimiteduntilsuchcircumstance ceases.Clause JofAppendix 1AoftheDefendantsrevisedquotation(incorporated by cl 5 of the same) similarly provides as follows:J. IntheeventofanycircumstanceconstitutingForceMajeure,whichisdefinedasactofGod,orduetoanycausebeyondTheSupplierscontrol,suchasmarketrawmaterialshortages,unforeseenplant breakdowns or labour disputes, the duty of the affected party toperformitsobligationsshallbesuspendedorlimiteduntilsuchcircumstanceceases.Inanyevent,TheSuppliershallnotbeliableinany way for loss or damage arising directly or indirectly through or inconsequence of such events or happenings.10 TheDefendantrepeatedlypursuedthePlaintifffortheoutstandingamounts due and payable to it for the concrete that it had already supplied.TheDefendantmaintainedthatitwasnotliableforthecostdifferentialsandthatthePlaintiffsdeductionofthesamefromtheoutstandingamounts due to the Defendant was unjustified and wrongful. As a result ofthePlaintiffsnon-payment,theDefendantsuspendedsupplyofconcreteon5 April2005.Thiswaspursuanttocl KofAppendix 1Aofthepaginator.bookPage 419Tuesday, December 8, 20093:41 PM420 SINGAPORE LAW REPORTS (REISSUE) [2007] 4SLR(R)Defendantsrevisedquotation(incorporatedbycl 5ofthesame),whichprovides:K. The Supplier reserves the right to suspend the supply of concreteto the Purchaser without notice in the event of the Purchaser exceedingthe credit limit or defaulting on payment beyond the credit term and inrecovering such outstanding payment, plus all resulting legal costs andexpenses and interest accrued.Clause 4 of the Defendants revised quotation also provides as follows:4. PAYMENT TERMThe term of payment is 30 days.[emphasis in original]11 On 30 May 2005, pursuant to cl 8 of the Plaintiffs letter of intent (setoutat[8]above),thePlaintiffterminatedtheContractontwogrounds:(a) persistent failure to supply concrete when ordered; and/or (b) failure tocomply with the LTAs requirements. It was a term of the Contract that theconcretesuppliedbytheDefendanthadtocomplywiththeLTAsrequirements. In particular, cl 3 of the Plaintiffs letter of intent provides asfollows:Notwithstanding[sic]theTermsandConditionsofSupplyinyourquotation,youarefullyawareandwillcomplywithLTAslatestrevisionofMaterialsandWorkmanshipSpecificationforCivilandStructural Works at no extra cost.Clause 4 of the same provides as follows:YouguaranteethatthetemperaturecontrolcriteriawillbemetwiththeuseofPBFCconcretewithchilledwaterasofferedinyourquotation,whetheritisfor28or56daysstrengthmix.Layerconcreting to meet the criteria is not acceptable.12 ThePlaintiffscomplaintwasthattheconcretesuppliedbytheDefendantdidnotpassthetestsat28daysstrengthandpeakcoretemperatureof70C.TheDefendantmaintainedthattheLTAsrequirementsof70Cand28daysstrengthweremutuallyexclusiveandproposedtochangethepeakcoretemperatureto80C.TheLTArejectedthe Defendants proposal.13 ThePlaintifftheninstitutedthepresentactiontoclaimdamagesforbreachofcontract.TheDefendantcounterclaimedfortheamountsdueunderoutstandinginvoicesinrespectofconcretethatithadalreadysupplied to the Plaintiff.paginator.bookPage 420Tuesday, December 8, 20093:41 PM[2007] 4SLR(R) RDC Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd 421Issues and findings in the trial court14 The following five issues were raised in the trial court:(a) Was the Contract an exclusive or sole supplier contract?(b) DidthefailureofthecubetestsallowthePlaintifftoclaimthecostdifferentialsofobtainingconcretefromanalternativesupplierincurredduringthesuspensionperiod(between7 July2004and17 November 2004)?(c) Aftersupplywasresumed,didtheforcemajeureclausesintheContractapplysoastoexempttheDefendantfromliabilityforthenon-orshortsupplyofconcretebetween18 November2004and5 April 2005?(d) WastheDefendantentitledtosuspendthesupplyofconcreteon 5 April 2005?(e) WasthePlaintiffentitledtoterminatetheContracton30 May2005?15 TheJudgeallowedthePlaintiffsclaiminpart.Insofarasissue (a)was concerned, the Judge held that the parties had not agreed to enter intoan exclusive or sole supplier contract. The main reason for this holding layinthefactthattherewasnoexpresstermstatingthattheContractwasexclusive. Further, the absence of a priority term in the Contract indicatedthat the Plaintiff was not entitled to priority in supply by the Defendant atthe expense of the Defendants other customers. The Judge also found thatthePlaintiffwasatlibertytoobtainconcretefromPanUnitedevenwhenthe Defendant was able to supply the same.16 In so far as issue (b) was concerned, the Judge found that the Plaintiffcouldnotclaimthecostdifferentialsincurredduringthesuspensionperiod.Thisstemmedfromherfindingthatcl 8ofthePlaintiffsletterofintentrequiredthePlaintifftofirstterminatetheContractbeforeitcouldclaim the cost differentials. As the Plaintiff only terminated the Contract on30 May2005,theJudgereasonedthatthePlaintiffwasprecludedfromclaimingthecostdifferentialsofobtainingconcretefromanalternativesupplierpriortothatdate.Secondly,theJudgealsoheldthatthecostdifferentials did not fall within the meaning of the term direct cost in cl 8.17 Insofarasissue (c)wasconcerned,theJudgeheldthattheforcemajeureclausesappliedtojustifynon-orshortsupplyduetoshortageofraw materials, but did not exempt the Defendant from liability arising fromunforeseenplantbreakdowns.Accordingly,theDefendantwasliableonlyfor the cost differentials incurred as a result of non- or short supply arisingfrom plant breakdowns.paginator.bookPage 421Tuesday, December 8, 20093:41 PM422 SINGAPORE LAW REPORTS (REISSUE) [2007] 4SLR(R)18 In so far as issue (d) was concerned, the Judge held that the Defendantwasentitledtosuspendsupplyon5 April2005assomepaymentsweremadebythePlaintifflaterthanthe30-daycredittermallowedundertheContract. Further, the Judge found that some of the deductions made by thePlaintifffromtheoutstandingamountsduetotheDefendantwereunjustified.19 Insofarasissue (e)wasconcerned,theJudgeheldthatthePlaintiffhaddischargeditsburdenofprovingthatitwasentitledtoterminatetheContractbothonthegroundsoftheDefendantsnon-orshortsupplyaswellasitsfailuretosupplyconcretethatadheredtotheLTAsspecifications.20 In addition, the Judge also entered judgment for the Defendant on itscounterclaimof$236,802.64.ThecounterclaimwasnotdisputedbythePlaintiff and is not an issue in this appeal.21 InCivilAppealNo 152of2006(CA 152),thePlaintiffappealedagainsttheJudgesfindingsonissues (a),(b),(c)and(d).InCivilAppealNo 151 of 2006 (CA 151), the Defendant appealed on the Judges findingswithrespecttoissues (c)and(e).Theseissueswillnowbeconsideredinturn.Issue (a) Was the Contract an exclusive or sole supplier contract?22 ThePlaintiffcontendedthatitwasanimpliedtermoftheContractthat the Contract was to be an exclusive or sole supplier contract. As aresult, the Plaintiff was obliged to obtain all its concrete from the Defendantduringthecontractperiod.TheimplicationofthisargumentisthatthePlaintiff would be entitled to look to the Defendant for the cost differentialsincurredasaresultofobtainingconcretefromalternativesuppliersiftheDefendantwasunabletomeetthePlaintiffsordersandtheforcemajeureclauses did not apply to relieve the Defendant of its obligations.23 It was not disputed that the Defendant was free to supply concrete toother contractors during the contract period. The only issue in contentionwaswhetherthePlaintiffwascontractuallyobligedtopurchaseallitsconcrete solely from the Defendant.24 The Judge held that the Contract was not an exclusive or sole suppliercontract for the following reasons (see the GD at [25]):(a) There was no term stating that the Contract was exclusive.(b) The absence of a priority term in the Contract indicated that thePlaintiffwasnotentitledtoprioritysupplybytheDefendantattheexpense of its other customers.paginator.bookPage 422Tuesday, December 8, 20093:41 PM[2007] 4SLR(R) RDC Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd 423(c) A project plant was not specifically set up to supply the Plaintiffwith concrete for the Project.(d) The Defendant fulfilled orders on a first come, first served basis.(e) The Plaintiff was at liberty to use Pan United even at times whenthe Defendant was able to supply concrete.25 We affirm the Judges finding that the Contract was not an exclusiveorsolesuppliercontract.Mostimportantly,andastheJudgehadnoted,this was not an express term of the Contract. This should be contrasted withthecontractsubsequentlyenteredintobetweenthePlaintiffandIslandConcretePteLtdon1 August2005whereincl 2.1expresslyprovidedthatthe pricesare specially quoted based on the condition that we will be thesolesupplierofready-mixedconcretetoyourabovejobsite[emphasisinoriginal].26 WerejectthePlaintiffsargumentthatasolesuppliertermcouldbeimplied into the Contract. It is established law that a court will only implytermsintoacontractwheresuchtermsarenecessarytogivebusinessefficacytothecontractorwherethetermrepresentstheobvious,butunexpressed, intention of the parties (see, for example, the Singapore HighCourt decision of Forefront Medical Technology (Pte) Ltd v Modern-Pak PteLtd[2006]1 SLR(R)927at[29][41]).Inordertoupholdtheconceptofsanctityandfreedomofcontract,courtshavegenerallybeenreluctanttoimplytermsintocontracts,especiallycontractsenteredintobetweentwocommercial parties. Based on the argument that the quotation for 70,000m3ofconcretewasabonafideestimateofthetotalvolumerequiredfortheProject,thePlaintiffsoughttoimplyatermthatonlyonesupplierwasrequiredfortheentireProject.Inparticular,thePlaintiffarguedthatthecommercialobjectivesofbothpartieswouldbeachievedwiththeimplicationofsuchatermasthePlaintiffcouldgetbetterfixedratesforbulkpurchaseandtheDefendantwouldbeabletosupplyasubstantialvolume of concrete to keep its production arm in operation.27 Itisappropriatetocommencetheanalysisofthisissuebyrevisitingcl 2 of the Defendants revised quotation, which provides as follows:2. CONTRACT PERIOD AND CONCRETE QUANTITYThe above quoted prices shall be held firm from 1st September 2003 to30thJune 2006 and the concrete quantity to be supplied to the project isestimated to be approximately 70,000m3. This contract shall cease to bevalidupontheexpiryofthecontractperiodorthesuppliedconcretequantity, whichever is earlier.[emphasis in original]paginator.bookPage 423Tuesday, December 8, 20093:41 PM424 SINGAPORE LAW REPORTS (REISSUE) [2007] 4SLR(R)28 Ona literalinterpretationofcl 2,theDefendantis obligedtosupplyapproximately70,000m3ofconcretetothePlaintiffatthestatedpricesduring the contract period. Conversely, the Plaintiffs obligation is to obtainupto70,000m3ofconcretefromtheDefendantatthestatedratesduringthecontractualperiod.WherethePlaintiffordersmorethan70,000m3ofconcrete, the stated prices no longer apply and the parties are free to engagein further negotiations for fresh rates.29 At this juncture, it is appropriate to refer to the Singapore High Courtdecision of Nam Kee Asphalt Pte Ltd v Chew Eu Hock Construction Co PteLtd [2000] SGHC 45.30 In that case, the court was concerned with a contract for the supply ofaggregates.Thecontractprovidedthattheestimatedquantitytobesupplied under the contract was 40,000 tonnes. On the facts, the defendantorderedandpaidforonly8,643.42tonnes.The plaintiffsoughtto recoverthelossofprofitsvis--vistheunsoldbalanceandarguedthatitwasanimpliedtermofthecontractthatthedefendantshouldpurchasefromtheplaintiff all the aggregates it required in respect of the contract, ie, that thecontract was exclusive in nature. Lee Seiu Kin JC (as he then was) rejectedthis argument, observing thus (at [15]):Consideringthefactorsabove,firstlythereisnothinginthelanguageofthecontractnorinthecircumstancesunderwhichitwasenteredinto that raises an inference that the parties had intended that there bean exclusivity clause. Such a clause is neither necessary to give businessefficacytothecontractnordoesitrepresenttheobviousintentionoftheparties.Itiscommonforavendortogiveanopenquotationtoapurchaserforthelattertomakeordersashedeemsnecessary.Implyingtheexclusivityclausedoesnotmakethecontractanymoreefficacious; instead it alters the nature of the bargain considerably. Assuch,Icannotseehowitcanpasstheofficiousbystandertest.Itherefore do not see any basis whatsoever to imply the exclusivity terminto the Aggregates Contract.31 Inasimilarvein,itisdifficulttoseehowtheimplicationofasolesuppliertermonthepresentfactswouldlendbusinessefficacytotheContractorwouldsatisfythetestoftheofficiousbystander.Infact,implying such a term would considerably alter the nature of the bargain asthe Plaintiff would be deemed to be in breach of the Contract whenever itobtainedconcretefromalternativesuppliersduringthecontractperiod,even if it had already purchased the requisite 70,000m3 of concrete from theDefendant.Thisresultcouldhardlyhavebeenintendedbytheparties.Infact, Yew, the Plaintiffs project manager, testified that more than 70,000m3ofconcretewouldbeneededfortheentireProject.Indeed,iftheProjecthadproceededalongfasterthanexpectedandresultedinthePlaintiffrequiringmorethan70,000m3ofconcreteduringthecontractperiod,counseldidnotsuggestthatthePlaintiffwouldbeinbreachhaditthenpaginator.bookPage 424Tuesday, December 8, 20093:41 PM[2007] 4SLR(R) RDC Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd 425purchasedconcretefromalternativesuppliers.Ofsignificance,too,isthefact that the Judge had accepted the evidence that the Plaintiff had obtainedconcrete from Pan United even when the Defendant was able to supply.32 Wewerefortifiedinourconclusionbynotingtheconspicuousabsence of a priority term in the Contract. Notably, a priority term wouldentailthededicationofaprojectplanttosupplyingconcreteforaprojectandwouldensurethatthecustomerhadpriorityofsupply.Insuchcases,theprojectplantcouldonlysupplyothercustomersaftertheprojectcustomersrequirementshadbeenfullysatisfied.ThePlaintiffmusthaveunderstoodthatitwouldobtainitssupplyfromacommercialplant(whichwouldentailtheDefendantssupplyofconcretebeingdistributedamongstitsmanycustomers),andnotfromadedicatedprojectplant.When the Plaintiff required more than the contract quantity, it was alwaysopen to the Plaintiff to purchase concrete from other suppliers.33 WethereforerejectthePlaintiffsargumentthattheContractisanexclusive or sole supplier contract and dismiss the Plaintiffs appeal on thisparticular issue.Issue (b) Could the Plaintiff claim for the cost differentials incurred during the suspension period (between 7 July 2004 and 17 November 2004)?Background and issues34 DuetothefailureofseveralcubetestsconductedbetweenMaytoJune 2004 on the concrete supplied by the Defendant, the LTA suspendedtheDefendantssupplyofconcretetothePlaintifffrom7 July2004to17 November 2004. During this period, the Plaintiff obtained concrete fromPanUnited.ThePlaintiffclaimedthattheDefendantwasliablefortheresultingcostdifferentialsanddeductedthesamefromtheoutstandingpayments due to the Defendant.35 This claim is based on cl 8 of the Plaintiffs letter of intent, which willbe set out once again for ease of reference:In the event that your supply is unable to meet LTAs requirements, oryouareunabletocontinueyoursupply,SatoKogyo(S)PteLtdreservestherighttoterminateyourcontractandretainanduseboththe retention sum and any outstanding payment due to you to seek foralternativesourceofsupply.Inaddition,SatoKogyo(S)PteLtdalsoreserves the right to seek from youany direct cost incurred duetoyournon-compliance. [emphasis added]36 The Plaintiff argued that the first sentence of cl 8 conferred on it dualrightsintheeventoftheDefendantsinabilitytomeettheLTAspaginator.bookPage 425Tuesday, December 8, 20093:41 PM426 SINGAPORE LAW REPORTS (REISSUE) [2007] 4SLR(R)requirementsand/ortocontinueitssupply,viz,therighttoterminatetheContract and/or the right to seek for alternative supply and recover the costdifferentialsfromtheDefendant,respectively.Thus,thePlaintiffcouldchoosetoexerciseeitherorbothoftheserightsand,consequently,couldclaimthecostdifferentialswithoutfirstterminatingtheContract.ThePlaintiffalsoarguedthatthecostdifferentialsfellwithintheambitoftheterm direct cost in the second sentence of cl 8.37 Inreply,theDefendantcontended,first,thatcl 8wouldonlyapplywherethePlaintiffhadfirstterminatedtheContract.SincethePlaintiffterminatedtheContractonlyon30 May2005,theDefendantarguedthatthePlaintiffcouldnotclaimthecostdifferentialsincurredbetween7 July2004 and 17 November 2004. Secondly, the Defendant denied that the costdifferentials were a direct cost. The Defendant argued that it was, instead,aconsequentiallossandthattheDefendantsliabilityforsuchlosswasthereforeexcludedbycl DofAppendix 1AoftheDefendantsrevisedquotation (incorporated by cl 5 of the same), which provides as follows:D. AllcubestrengthresultsmustbemadeknowntoTheSupplierwithin 7 days after the 28 days test result. Should there be cube failure,ThePurchaseristoinformTheSupplierinwritingwithin14days,otherwiseTheSuppliershallnotbeheldresponsibleforanysuchfailure.Shouldthe concretesupplied failtomeetallcompliancetests,The Supplier undertakes to supply to The Purchaser, free of charge, thevolume of concrete judged defective. The Supplier shall not be liable foranyclaimswhatsoeverforconsequentialand/orotherdamages.[emphasis added]38 Torecapitulate,theJudgeheldthatthePlaintiffwasnotentitledtoclaimthecostdifferentialsincurredduringthesuspensionperiodfortworeasons:(a) Undercl 8,itwasapreconditionthatthePlaintiffhadfirsttoterminatetheContractbeforeitcouldclaimthecostdifferentials.Since the Plaintiff did not terminate the Contract until 30 May 2005,itwasprecludedfromclaimingthecostdifferentialsofpurchasingconcrete from alternative suppliers prior to that date.(b) The cost differentials of purchasing concrete from an alternativesupplier were not a direct cost and therefore the Defendant was notliable for the same.The two sub-issues will be discussed separately.paginator.bookPage 426Tuesday, December 8, 20093:41 PM[2007] 4SLR(R) RDC Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd 427First sub-issue Whether termination of the Contract by the Plaintiff under clause 8 was a precondition to recovery of the cost differentials39 The determination of this issue hinges on the proper construction ofcl 8.Onaliteralinterpretation,itisclearthatintheeventwheretheDefendantssupplyisunabletomeettheLTAsrequirementsortheDefendant is unable to continue its supply, the Plaintiff expressly reservestworights:(a) therighttoterminatethecontractandretainanduseboththeretentionandoutstandingpaymentsduetotheDefendanttoseekalternativesourcesofsupply;and/or(b) therighttoseekanydirectcostsincurred by the Plaintiff due to the Defendants non-compliance. These tworightsaredisjunctiveinasmuchastherighttorecoverdirectcostsis[i]nadditionto,andnotdependenton,therighttoterminatetheContract.ThismeansthatwhilethePlaintiffsrighttoapplytheretentionandoutstandingsumsduetotheDefendanttowardsthecostdifferentialofobtainingconcretefromanalternativesupplierwascontingentonthePlaintiffs termination of the Contract, its right to seek direct costs was notsubjecttosuchaprecondition.Inotherwords,thePlaintiffcouldclaimdirect costs incurred as a result of the Defendants breach even if it had notterminated the Contract. We therefore respectfully disagree with the Judgesconstruction of cl 8.40 More importantly, the general position at common law is clear beyondperadventure: even if the innocent party (here, the Plaintiff) is not entitledtoterminatethecontractor,ifsoentitled,choosesneverthelessnottoterminatethecontract,itwill,generallyspeaking,alwaysbeentitledtoclaim damages as of right for loss resulting from the breach (or breaches) ofcontract:seetheHouseofLordsdecisionofRainerivMiles[1981]AC 1050. It is, of course, always open to the parties to contractually modifythecommonlawpositionbytheuseofclearandunambiguouswordsintheir contract.41 Returningtothefacts,itisclearthatthesecondsentenceofcl 8didnot modify the common law position and is, instead, entirely consistent withit. In the absence of clear words, therefore, the common law position that aplaintiffisentitledtodamagesuponadefendantsbreachwaspreservedandoperatedasaseparaterightwhichwasreferredtoin[39]above.ThePlaintiffisthereforeentitledtoclaimfordirectcostsincurredduetotheDefendantsinabilitytomeettheLTAsrequirementseventhoughthePlaintiffhadnotterminatedtheContract.Weturnnowtotheissueofwhetherthecostdifferentialsofobtainingconcretefromalternativesuppliers fall within the definition of the term direct cost.paginator.bookPage 427Tuesday, December 8, 20093:41 PM428 SINGAPORE LAW REPORTS (REISSUE) [2007] 4SLR(R)Second sub-issue Whether the cost differentials fall within the definition of direct cost under clause 842 Thelawinthisareaiswellsettled.Directloss(here,intheformofdirect costs) is loss that flows directly, naturally and in the ordinary courseofeventsfromthedefendantsbreach,withoutanyinterveningcauseandindependentlyofspecialcircumstances:seethedecisionofthiscourtinSingaporeTelecommunicationsLtdvStarhubCableVisionLtd[2006]2 SLR(R)195at[59]andtheEnglishHighCourtdecisionofSaintLineLimited v Richardsons, Westgarth & Co, Limited [1940] 2 KB 99 at 103. Thisconstitutes,infact,thefirstlimbofthetestpropoundedintheseminalEnglishdecisionofHadleyvBaxendale(1854)9 Exch341;156 ER145,whichrelatestonaturalorordinarydamage.Thisistobecontrastedwith the second limb in that case, which relates to special or non-naturaldamage.43 Insituationsrelatingtodirectloss(and,correspondingly,thefirstlimbofHadleyvBaxendale),thecrucialquestioniswhether,ontheinformationavailabletothedefendantwhenthecontractwasmade,thedefendantshould,asareasonableperson,haverealisedthatsuchlosswassufficiently likely to result from the breach of contract to make it proper tohold that the loss flowed naturally from the breach and, therefore, that thelossshouldhavebeenwithinthedefendantscontemplation:seetheoft-citedHouseofLordsdecisionofC CzarnikowLtdvKoufos,TheHeron II[1969]1 AC350at385,perLord Reid.Thus,thecourtisnotconcernedwith actual knowledge on the part of the defendant. The defendant is takento know, under the concept of imputed knowledge, that such damage wouldordinarily ensue as a result of the breach of contract: see the Singapore HighCourtdecisionofCHSCPOGmbHvVikasGoel[2005]3 SLR(R)202at[82].44 TheJudgeheldthattheDefendantwasnotliableforthecostdifferentialsbecauseitwouldbestrainingthelanguagetosaythepricedifferentialofanalternativesupplierwouldcomeunderthemeaningofdirect cost (see the GD at [52]). With respect, we are unable to agree withthe Judges conclusion. In our view, the cost differentials were a direct costor loss that flowed directly and naturally from the Defendants inability tosupplyconcretethatmetwiththeLTAsrequirements.SincetheProjectwas a major project of a public nature, the Defendant would or should haveknownthatitwouldbestringentlyregulatedbytheLTA.ItshouldhavebeenwithintheDefendantsreasonablecontemplationthat,hadtheconcreteitsuppliednotsatisfiedtheLTAsrequirements,theLTAwouldsuspenditssupplyforanindefiniteperiod.Infact,theDefendantshouldhave been well aware of the manner in which the LTA operated since it wasanexperiencedparticipantinthefieldandwouldhavebeenpreviouslyinvolvedinsimilarlarge-scaleconstructionprojects.Incircumstancespaginator.bookPage 428Tuesday, December 8, 20093:41 PM[2007] 4SLR(R) RDC Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd 429wheretheDefendantssupplywassuspended,itwasreasonableforbothpartiestocontemplatethatconstructionshouldcontinueandthatthePlaintiffwouldthereforehavetoseekalternativesourcesofconcreteelsewhere. This was particularly so because, at the material time, the partiesdid not know how long the suspension would last. In addition, the Plaintiffwas liable for a huge amount of liquidated damages to the tune of $100,000per day for delay. It would also have been in the reasonable contemplationof both parties that concrete, which would then have to be purchased fromthemarketonanadhocbasis,wouldnecessarilybemoreexpensivethantherateschargedbytheDefendant.Afterall,theDefendantitselfhadargued that the only reason why it was able to offer rock-bottom rates wasbecause the Plaintiff had purchased the concrete in bulk.45 ThePlaintiffisthereforeentitledtoclaimthecostdifferentialsofobtainingconcretefromPanUnitedincurredbetween7 July2004and17 November2004becausethiswasadirectcostthatnaturallyresultedfromtheDefendantsinabilitytomeetwiththeLTAsrequirements.ThePlaintiffs appeal on this particular issue is therefore allowed.Issue (c) Did the force majeure clauses in the Contract apply so as to exempt the Defendant from liability to the Plaintiff for non-supply of concrete between 18 November 2004 and 5 April 2005? Background and issue46 After the LTA suspension order was lifted on 17 November 2004, theDefendant resumed supply of concrete to the Plaintiff. It was, however, notdisputedthatfrom18 November2004to5 April2005,therewerenumerous occasions on which the Defendant was unable to supply all of thePlaintiffs requirements. The Defendant attributed this to two main causes:(a) ashortageof raw materials(in particular,cement andaggregates); and(b) plantbreakdowns.Ontheseoccasions,thePlaintiffhadtoseekalternativesourcesofsupplywhichwereinvariablyprocuredatahigherprice.ThePlaintiffclaimedthecostdifferentialsofobtainingalternativesupplies of concrete during this period.47 ThePlaintiffsclaimforthecostdifferentialsincurredduringthisperiod was based on cl 8. The construction of cl 8 as discussed above wouldsimilarly apply here. The Plaintiff was thus prima facie entitled to claim thedirectcostsincurredasaresultoftheDefendantsnon-orshortsupply.The only issue to determine is whether the force majeure clauses applied soas to exempt the Defendant from liability.48 The force majeure clauses in the Contract have already been set out at[9]above.Theeffectofboththeclausesisthesame:Ifthecircumstancesstatedthereinaresatisfied,theDefendantsobligationtosupplyconcretepaginator.bookPage 429Tuesday, December 8, 20093:41 PM430 SINGAPORE LAW REPORTS (REISSUE) [2007] 4SLR(R)willbesuspended.Thepracticalimplicationis,ofcourse,thattheDefendantwill,asaresult,notbeliableforanycostdifferentialsincurredduring this period.49 TheJudgeheldthatwhiletheDefendantcouldinvoketheforcemajeureclausestojustifynon-supplytothePlaintiffduetoamarketshortageofrawmaterials,itcouldnotdosofornon-supplyduetounforeseen plant breakdowns. The Defendant was therefore held liable forthe cost differentials incurred on occasions when the non- or short supplywas due to plant breakdowns, but not on other occasions when the non- orshort supply was due to the market shortage of raw materials.The issue of pleadings50 In our view, this particular issue can be easily resolved on the groundthattheDefendanthadnotevenpleadedforcemajeureinitsdefencetobeginwith.Initsdefenceandcounterclaimfiledon15 August2005,theDefendant only made passing reference to the fact that it could not meet thePlaintiffsrequestsforsupplyduetounavailabilityofmaterialsorplantbreakdowns. Thus, para 7 pleaded as follows:TheDefendantsshallaverthatundertheContract,especiallyunderParagraph 2oftheDefendantsLetter,theDefendantsmerelyhadtosupplythePlaintiffsready-mixedconcreteinbulktotheextentofapproximately70,000m3duringtheContractPeriod.Therewasnostipulationforspecificdateand/orvolumesforsupplyduringtheContract Period. The Defendants shall aver that on occasions when theycouldnotmeetthePlaintiffsrequestsforsupplyforwhateverreason(such as for insufficient notice, unavailability of materials or breakdownof plant), they would propose alternative supply dates or volumes basedontheirconstraints.However,itwasthePlaintiffswhowouldnotacceptsuchalternativeproposals,choosingtogotoalternativesuppliers instead. [emphasis added]51 This is insufficient to enable the Defendant to rely on the defence offorce majeure as embodied in the clauses set out at [9] above. In our view,thedoctrineofforcemajeureisamatterthatmustbespecificallypleadedbefore it can be relied on by a party. In this regard, O 18 r 8(1) of the RulesofCourt(Cap 322,R 5,2006 RevEd)stipulatesmattersthatmustbespecifically pleaded as follows:A party must in any pleading subsequent to a statement of claim pleadspecifically any matter, for example, performance, release, any relevantstatute of limitation, fraud or any fact showing illegality (a) whichheallegesmakesanyclaimordefenceoftheopposite party not maintainable;paginator.bookPage 430Tuesday, December 8, 20093:41 PM[2007] 4SLR(R) RDC Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd 431(b) which, if not specifically pleaded, might take the oppositeparty by surprise; or(c) which raises issues of fact not arising out of the precedingpleading.[emphasis added]52 Itistritelawthatthecourtisnotentitledtomakeadecisiononanissuewhichhasnotbeenraisedbythepartiesintheirpleadings:see,forexample,theMalaysianHighCourtdecisionofJanagivOngBoonKiat[1971]2 MLJ196andtheSingaporeHighCourtdecisionofMulti-PakSingaporePteLtd vIntracoLtd[1992]2SLR(R)382,bothofwhichhaveoftenbeencitedasauthorityforthisimportantpropositioninthelocalcontext.Itissufficient,onthisgroundalone,todisposeofthisissue.However,weshouldaddthatalthoughthecourtsdonotgenerallycountenancetheraisingofaridandtechnicalproceduralobjectionsthatwouldhindertheattainmentofjusticeinthecaseathand,theywould,equally, reject arguments (such as that now proffered) where there has beensuchabreachofproceduraljusticethatcountenancingitwouldresultinsubstantiveprejudiceandinjusticetotheinnocentparty(whichwouldbethecaseinthepresentappealinsofarasthePlaintiffwasconcerned).However, as the Judge had found that the force majeure clauses applied topartially exempt the Defendant from liability, and there is a dearth of localcaselawinrelationtothedoctrineofforcemajeure,itwouldbeusefultodiscussthisissueingreaterdetail(assuming,arguendo,thatthedefectivepleadings were not fatal to the Defendants case on this particular point). Tothis end, it would be appropriate to first set out some of the basic principlesapplicable to force majeure clauses.Some general principles relating to force majeure clauses53 Theprincipalpurposeofaforcemajeureclauseistocontractuallyallocatetherisksbetweenthecontractingpartieswithregardtotheoccurrenceoffutureeventsinspecificcircumstances,allofwhicharestipulated within the clause itself.54 Themostimportantprinciplewithrespecttoforcemajeureclausesentails,simultaneously,aratherspecificfactualinquiry:thepreciseconstruction of the clause is paramount as it would define the precise scopeand ambit of the clause itself. The court is, in accordance with the principleof freedom of contract, to give full effect to the intention of the parties in sofar as such a clause is concerned.55 Turningtomorespecificprinciples,anappropriatestartingpointwould be the following observations by Prof Sir Guenter Treitel, one of theleading academic commentators on contract law in the Commonwealth, inthe leading work in this particular area of the law (see Sir Guenter Treitel,paginator.bookPage 431Tuesday, December 8, 20093:41 PM432 SINGAPORE LAW REPORTS (REISSUE) [2007] 4SLR(R)Frustration and Force Majeure (Sweet & Maxwell, 2nd Ed, 2004) at para 12-001):Two main themes or policies underlie the law relating to the dischargeof contracts by supervening events [under the doctrine of frustration].Thefirstisthatthepurposeofthedoctrineofdischargeistofindasatisfactorywayofallocatingthelosscausedbysuchevents.Thesecondisthatthedoctrineshouldnotbesowidelyappliedastounderminethesanctityofcontractandthatitshouldthereforebeapplied only where the change brought about by the supervening eventisafundamentalone.Boththesepoliciesare,however,subjecttothegeneralprincipleoffreedomofcontract,whichinthepresentcontextcan operate intwoways.First,itcanexclude the doctrineof dischargewherethepartieshavecontractedontermswhichindicatethatthecontractistoremaininbeinginspiteoftheoccurrenceofaneventwhichwould,butforsuchaprovision[viz,theforcemajeureclause],havedischargedit.Secondly,itcanenablethepartiestoprovidefordischarge, or some other form of relief, on the occurrence of any eventwhich,butfortheprovision,wouldhavehadnoeffectontheirlegalrights and duties because the change of circumstances brought about bytheeventwasnotsufficientlyseriousorfundamentaltodischargethecontractunderthegeneralcommonlawdoctrine.Contractualprovisionsforsuperveningeventsmaytherefore,ontheonehand,excludefrustrationand,ontheother,providerelieffornon-frustratingevents. [emphasis added]56 Conceptually, it is true that a force majeure clause operates differentlyfromthedoctrineoffrustration.Whereasaforcemajeureclauseisanagreementastohowoutstandingobligationsshouldberesolvedupontheonsetofaforeseeableevent,thedoctrineoffrustrationconcernsthetreatmentofcontractualobligationsfromtheonsetofanunforeseeableevent: see the decision of this court in Glahe International Expo AG v ACSComputerPteLtd[1999]1SLR(R)945(Glahe)at[26].Theprevalentpracticeofincorporatingforcemajeureclausesintocommercialcontractstoday stems largely from the blunt nature of the doctrine of frustration as atooltoallocateloss.Ithasoftenbeensaidthatthejuridicalbasisforthedoctrine of frustration is unclear, the doctrine is difficult to invoke and theconsequencesofitsoperationaredrastic,inthesensethatthecontractisautomaticallybroughttoanend.Partiesthereforeoftenincludeforcemajeureclausesintheircontractstoavoidtheuncertaintyandhardshipthatmightotherwiseresultfromrelyingonthecommonlawdoctrineoffrustration. Uncertainty and inconvenience are avoided by incorporating awell-draftedclausethatclearlydefinestheeventsorcircumstancesthatconstituteforcemajeure.Hardshipisalsominimisedinsofarasaforcemajeure clause can be crafted to provide a more nuanced response to eventsofforcemajeure.Forexample,itmaybeprovidedthat,incircumstancesconstituting force majeure, an extension of time may be granted to the partyindefault,theremaybecancellationofthecontractattheoptionofonepaginator.bookPage 432Tuesday, December 8, 20093:41 PM[2007] 4SLR(R) RDC Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd 433party,orthedefaultingpartysdutytoperformthecontractwillbesuspended. The contract is thus not automatically brought to an end.57 Despitethisconceptualdistinction,weareoftheviewthattheprinciples relating to the doctrine of frustration are, in the vast majority ofcases,stillrelevanttotheconstructionandinterpretationofforcemajeureclauses. In this regard, it is important to note that, by their very nature andfunction, force majeure clauses would in the ordinary course of events betriggered only where there was a radical external event that supervened andthatwasnotduetothefaultofeitherofthecontractingparties.Itwillbeimmediately noticed that this is also a prerequisite to the invocation of thedoctrine of frustration. However, this, admittedly, is not invariably the case.Theremight,forinstance,beforcemajeureclauses,thelanguageofwhichfallsshortofmeetingthecriteriarequiredwithrespecttothedoctrineoffrustrationatcommonlaw(thisisclearlyenvisaged,forexample,byProf Treitel in the passage quoted in [55] above and see also Frustration andForce Majeure ([55] supra) at para 12-017). We should think, however, thatthis would not be common, especially if one accepts the basic premise thatthe doctrine of frustration centres (in large part at least) on the absence ofreasonablecontrolon the part ofthe contracting parties.As S Rajendran JobservedintheSingaporeHighCourtdecisionofMagentaResources(S)Pte Ltd v China Resources (S) Pte Ltd [1996] 2 SLR(R) 316 at [60] (MagentaResources)(affirmedinChinaResources(S)PteLtdvMagentaResources(S) Pte Ltd [1997] 1 SLR(R) 103, but without apparent consideration of thisparticular point):What is referred to as force majeure in our law (as opposed to Frenchlawfromwhichthattermoriginates)isreallynomorethanaconvenient way of referring to contractual terms that the parties haveagreedupontodealwithsituationsthatmightarise,overwhichthepartieshavelittleornocontrol,thatmightimpedeorobstructtheperformance of the contract. There can therefore be no general rule asto what constitutes a situation of force majeure. Whether such a (forcemajeure)situationarises,and,whereitdoesarise,therightsandobligations that follow, would alldependon what the parties, in theircontract, have provided for. [emphasis added]58 Everything depends, in the final analysis, on the precise language andactual facts of the case at hand (as pointed out both in the quotation aboveaswellasat[54]above).Inthepresentappeal,forexample,theforcemajeureclausesintheContract(reproducedat[9]above)refertocausesthatarebeyondthesupplierscontrol.Dependingontheprecisefactsbeforethecourt,thecauseoreventinquestioncouldbebeyondthesuppliers(here,theDefendants)controland,yet,notbeyondtheotherpartys control (here, the Plaintiff).59 In this regard, it should be emphasised that the doctrine of frustrationcanbesuccessfullyinvokedonlyiftheallegedfrustratingeventisanpaginator.bookPage 433Tuesday, December 8, 20093:41 PM434 SINGAPORE LAW REPORTS (REISSUE) [2007] 4SLR(R)externalonethatis,exhypothesi,beyondthecontrolofbothcontractingparties(alsobearinginmindtheimportantcomplementaryprinciplethattherecanbenoself-inducedfrustration).Intheoft-citedwordsofLord RadcliffeintheHouseofLordsdecisionofDavisContractorsLtdvFareham Urban District Council [1956] AC 696 at 729:[F]rustrationoccurswheneverthelawrecognizesthatwithoutthedefaultofeitherparty-acontractualobligationhasbecomeincapableof being performed because the circumstances in which performance iscalledforwouldrenderitathingradicallydifferentfromthatwhichwas undertaken by the contract. [emphasis added]Similarly,intheconstructionofaforcemajeureclause(similartothosefound in the present case), the courts will apply the presumption that theexpressionforcemajeureislikelytoberestrictedtosuperveningeventswhich arise without the fault of either party and for which neither of themhasundertakenresponsibility[emphasisadded]:seetheEnglishHighCourt decision of The Kriti Rex [1996] 2 Lloyds Rep 171 at 196, per Moore-Bick J (as he then was).60 However,whatevertheprecisecontentofaforcemajeureclause(which, coupled with the precise facts of the case, would determine, in turn,the precise relationship between that clause and the doctrine of frustration),it is important to emphasise that where a force majeure clause excludes thedoctrine of frustration, the principal effect and difference between the twoiswithrespecttothenatureoftherelief.Thereliefavailableunderaforcemajeure clause will, of course, be determined by the specific content of thatclause itself. In a situation where the doctrine of frustration is sought to beexcluded, the clause concerned would expressly stipulate that the contract isnottobedischargeddespitethefactthatthesituationwouldotherwisebeone that would have frustrated the contract.61 The force majeure clauses in the Contract in the present appeal are aparadigmillustration.Whilsttheyaretriggeredorcatalysedonlyiftherelevant event is beyond the suppliers control and, to that extent, appearto embody some of the common law principles relating to the frustration ofacontract,thecrucialdifferencelies,asmentionedintheprecedingparagraph,inthenatureofthereliefthatwillbegranted.Iftheseclausesapply,theContractshallbe suspendedor limited untilsuchcircumstanceceases [emphasis added]. In contrast, where a contract is frustrated underthe common law, it is automatically discharged by operation of law and theprecisereliefwouldbedeterminedbytheprovisionsoftheFrustratedContracts Act (Cap 115, 1985 Rev Ed) (the Act) instead (and see generallyAndrewStewart&J WCarter,FrustratedContractsandStatutoryAdjustment:TheCaseforaReappraisal[1992]CLJ 66).Itshouldalsobenotedthats 3(3)oftheActitselfclearlystipulatesthuswithrespecttoitsverylimitedapplicabilityinthecontextofforcemajeureclauses(thispaginator.bookPage 434Tuesday, December 8, 20093:41 PM[2007] 4SLR(R) RDC Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd 435provisionwasinfactreferredtointheSingaporeHighCourtdecisionofChan Buck Kia v Naga Shipping & Trading Co Ltd [1963] MLJ 159 at 160):WhereanycontracttowhichthisActappliescontainsanyprovisionwhich, upon the true construction of the contract, is intended to haveeffect in the event of circumstances arising which operate, or would butforthatprovisionoperate,tofrustratethecontract,orisintendedtohaveeffectwhethersuchcircumstancesariseornot,thecourtshallgiveeffecttothatprovisionandshallonlygiveeffecttosection 2tosuchextent,ifany,asappearstothecourttobeconsistentwiththatprovision.62 On the other hand, where the force majeure clause concerned does notexclude the doctrine of frustration, then, if the supervening event is indeed afrustratingeventthat,exhypothesi,liesbeyondtheboundariesofthatclause,thelegalconsequencesasdescribedabove(ie,whichflowfromanapplication of the common law doctrine of frustration and which entail anapplication of the relevant provisions of the Act) would follow instead. It isimportant,however,tonotethatthereisnoneedtocanvasstheissueofrelief in the present appeal as the only issue before us is whether or not theforce majeure clauses in the Contract apply to the facts at hand. Indeed, noattemptwas,inanyevent,madetoarguethatthedoctrineoffrustrationapplied to the present case.63 As we have already seen, it is clear that a force majeure clause can seektoexcludethedoctrineoffrustration.Itisimportant,inthisregard,toreiterate the basic proposition that contracting parties are, of course, free toexcludethedoctrineand,asemphasisedabove,thecourtmustgivefulleffecttosuchan agreementonthebasisthat thesepartiesareatliberty toallocatethepossiblerisksbetweentheminanymannertheyseefit.Nevertheless,itisclearthatinordertoactuallyexcludethedoctrineoffrustration, the clause concerned must be clear and unambiguous. It shouldbe noted, however, that the case law suggests that courts will construe forcemajeureclausesstrictly:see,forexample,theoft-citedHouseofLordsdecisions of Metropolitan Water Board v Dick, Kerr and Company, Limited[1918]AC 119(MetropolitanWaterBoard)andBankLine,LimitedvArthurCapelandCompany[1919]AC 435.Inotherwords,whatoftenappears, at first blush at least, to be an express provision covering the eventconcernedisofteninterpretedbythecourtsasnotintendedbythecontracting parties to cover so drastic an event as a frustrating event; hence,thedoctrineoffrustrationwouldcontinue,withtheattendantconsequencesorreliefbrieflyoutlinedintheparagraphsabove.Indeed,ithasbeenobservedasfollows(seeEwanMcKendrick,ForceMajeureandFrustrationofContract(LloydsofLondonPressLtd,2nd Ed,1995)atp 36):Itis,therefore,extremelydifficult,ifnotimpossible,todraftaforcemajeure clause which shuts out the doctrine of frustration completely,paginator.bookPage 435Tuesday, December 8, 20093:41 PM436 SINGAPORE LAW REPORTS (REISSUE) [2007] 4SLR(R)because even the widest of clauses may be held not to cover a particularcatastrophic event [such as in Metropolitan Water Board] 64 Anothergeneralprincipletonoteisthatapartywhoreliesontheforce majeure clause must show not only that it has brought itself within theclauseconcerned(aseparateandextremelyimportantpointinitself:seebelowat[65])butalsothatithastakenallreasonablestepstoavoiditsoperation, ormitigate itsresults: see the English Court of Appeal decisionofChannelIslandFerriesLtdvSealinkUKLtd[1988]1 Lloyds Rep323(ChannelIslandFerries)at327.Thisprincipleisnotonlycommonsensical but is also consistent with (and may even be a corollary of)the very nature and function of a force majeure clause which we have in factelaborateduponabove(at[53]).Tobrieflyrecapitulate,suchaclausepresupposesthateventsfallingwithinitsscopeandambitarebeyondthecontrolofthecontractingpartiesandthatlanguagetothiseffectwillinvariablybeutilisedintheclauseitself.Thus,intheEnglishHighCourtdecision of Continental Grain Export Corporation v STM Grain Ltd [1979]2 Lloyds Rep460(ContinentalGrainExport),RobertGoff J(ashethenwas) said (at 473) that a seller who invoked a prohibition of export clause(wheretherubric ofimpossibilitywas utilised)had toprovethat:(a) nogoods of the contract description were available to him to fulfil his contract;and (b) he could not, following notice of the event, obtain any such goodsby the exercise of any means reasonably open to him. This was approved(in relation to a similar clause) by the English Court of Appeal in Andre &Cie SA v Tradax Export SA [1983] 1 Lloyds Rep 254 at 258.65 Finally,itshouldalsobenotedthatapartywhoreliesonaforcemajeureclausehastheburdenofbringinghimselfsquarelywithinthatclause: see Channel Island Ferries (at 327); Magenta Resources ([57] supra at[98]);andChittyonContracts(Sweet&Maxwell,29th Ed,2004)vol 1atpara 14-140.66 Bearingtheaboveprinciplesinmind,wenowturntoconsiderwhether, had circumstances of force majeure been specifically pleaded, theforcemajeureclausesintheContractwouldapply,inthefirstinstance,toexempttheDefendantfromliabilityforthecostdifferentialsincurredwherethenon-orshortsupplywascausedbymarketrawmaterialshortages,inparticular,aggregatesandcement.Theapplicabilityoftheseclauses with respect to the non- or short supply caused by plant breakdownswillbeconsideredlater.Itisalsoimportanttoreiteratethatnoargumentcentring on the doctrine of frustration was proffered before either the Judgeorthiscourtandthat,therefore,ouronlytask,asjustmentioned,istoascertainwhetherornottheforcemajeureclausesintheContractwould,based on the facts before us, apply in the present appeal.paginator.bookPage 436Tuesday, December 8, 20093:41 PM[2007] 4SLR(R) RDC Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd 437Market raw material shortages67 Inourview,thefactsallegedlygivingrisetomarketrawmaterialshortageswereinsufficienttofallwithintheambitoftheforcemajeureclauses in the Contract. Consistent with the general principle set out above(at[54]),thepreciselanguageandintentoftheclausesarecrucialastheydefine(inturn)theprecisescopeoftheclausesthemselves.Itwouldtherefore be appropriate to set out the clauses once again. As the clauses (setout at [9] above) are word-for-word the same, it would suffice to set out thecontents of the clause just once, as follows:In the event of any circumstance constituting Force Majeure, which isdefined as act of God, or due to any cause beyond the suppliers control,such as market raw material shortages, unforeseen plant breakdowns orlabour disputes, the duty of the affected party to perform its obligationsshall be suspended or limited until such circumstance ceases. [emphasisadded]68 Turningtotheanalysisoftheclauseproper,wenote,first,thattheDefendantfailedtoproducesufficientevidenceprovingthattherewas,infact,amarketshortageofcement.TheonlyevidencebeforethecourtwastheoralevidenceoftheDefendantsgeneralmanagerwhotestifiedinre-examination that a drastic increase in freight charges in late 2004 had led tothe reluctance of cement suppliers to commit to shipping cement. This waswoefully insufficient.69 Secondly, in so far as the alleged shortage of aggregates is concerned,thereisevidencethat,sometimeinmid-2004toearly2005,therewasanacuteshortageofaggregatesinSingaporefromtraditionalsourcesinIndonesia.Thiswasdue,interalia,to:(a) abanbytheIndonesiangovernmentontheuseofexplosivesforblasting,therebyseverelyrestricting quarry operations; (b) unexpected operational problems by oneofthelargerIndonesianoperators;and(c) suspensionofsupplybytheBuilding and Construction Authority (BCA) from one of the Indonesianoperatorsduetosuspectedalkali-silicareactivity.Asaresult,theoveralloutputofthequarrieswasreducedandstockpilesweredepletedtopracticallyzero.Concreteproducerswerenotalwaysabletoobtainaggregates in sufficient quantity and at the exact time to produce concreteto meet their customers casting schedules. All these facts were documentedina letter written bytheReady-Mix Concrete Association ofSingapore tothe BCA.70 Despitethepresenceoftheabovefacts,wefindthattheDefendanthadnotdischargeditsburdenofprovingthattheforcemajeureclausesapplied vis--vis the shortage of aggregates. It is important, in this regard, tonotethepreciselanguageutilisedintheforcemajeureclausesconcernedwhichhavebeenreproducedat[67]above.Inparticular,thephrasebeyondthesupplierscontrolisofcrucialsignificance.Thisphrasepaginator.bookPage 437Tuesday, December 8, 20093:41 PM438 SINGAPORE LAW REPORTS (REISSUE) [2007] 4SLR(R)applies,interalia,tomarketrawmaterialshortages,asevidencedbythephrase such as which is interposed between that particular phrase and therest of the clause which refers to market raw material shortages. In otherwords,marketrawmaterialshortagesarebutoneinstanceofacausebeyondthesupplierscontrol[emphasisadded].Thatbeingthecase,itisclear that market raw material shortages would not constitute an event offorce majeurewithin the meaning ofthe clause unless such shortageswerebeyondthesupplierscontrol(here,beyondtheDefendantscontrol).Thisisclearlynotthecaseinthepresentappeal,asitwasstillwithintheDefendantspowertopurchaseaggregatesfromthemarket,albeitatahigher price. It will also be recalled that a defendant who wishes to invoke aforcemajeureclausemustprove,interalia,thatitcouldnotobtainthegoodsbytheexerciseofanymeansreasonablyopento[it](perRobertGoff J (as he then was) in Continental Grain Export ([64] supra) at 473). Inourview,itwasopentotheDefendanttoobtainaggregatesfromthemarketatahigherprice.TheContracthadmerelybecomemoreonerousfortheDefendanttoperform,butthecircumstancescertainlydidnotconstituteforcemajeurewithinthemeaningoftherelevantclausesintheContract.71 This conclusion is consistent with the earlier decision of this court inGlahe ([56] supra). In that case, the parties had entered into a contract forthesaleanddeliveryofcomputerstoMoscow.Thecourthadtoconsiderwhether the imposition of customs duty and/or the Russian inflation wereevents that fell within the force majeure clause, which provided as follows:NeitherPartyshallberesponsibleforthecompleteorpartialnon-performanceofanyofitsobligations,ifthenon-performanceresultsfromsuchcircumstancesasflood,fire,earthquake,andotherActsofGod,aswellaswar,militaryoperations,blockade,actoractionsofstateauthorities,oranyothercircumstancesbeyondthePartiescontrol that have arisen after the conclusion of the Contract (except forfailuretopayanysumwhichhasbecomedueundertheprovisionshereof).72 In so far as the imposition of customs duty was concerned, the courtheld(at[24])thattheimpositionofamere15%taxwasnotsohugeorastronomical as to constitute an event of force majeure. The court found (at[25])thatthetwoevents,takentogetherorsingly,didnotpreventtheappellant from performing the contract; they only made the performance ofthe contract more expensive and costly. As a result, the court held that theappellant was not exempted from liability under the force majeure clause.73 Similarly,theEnglishCourtofAppealinBrauer&Co(GtBritain),Ltd v James Clark (Brush Materials), Ltd [1952] 2 Lloyds Rep 147 held thata20%to30%increaseinpricesmerelymadeitmoreunprofitableforthepaginator.bookPage 438Tuesday, December 8, 20093:41 PM[2007] 4SLR(R) RDC Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd 439sellerstoperformtheircontractualobligations,butdidnotconstitutecircumstances of force majeure.74 In our view, the shortage of aggregates in the market merely made itmoreexpensiveandcostlyforthedefendanttoperformtheContract.Inaddition, we wonder whether the Defendant may have consciously opted tosupplyconcretetootherpurchaserswhowerewillingtopayhigherratesandwho,unlikethePlaintiff,werenotlockedintofixed-pricecontracts.Thiswould, of course,beunacceptable.Inarelatedvein,wenotethattheJudge had also observed as follows (see the GD at [137]):ItwasNobes[theDefendantsgeneralmanagers]evidencethatthedefendant was keen to secure the plaintiffs order, even at a (calculated)loss.Hence,thedefendantsvariousquotationswhichleduptotheeight[h] and final quotation dated 1 September 2003 gradually loweredthepricesofconcretemixesacrosstheboardbutforincrementallyhighervolumes.Ho[theDefendantsassistantgeneralmanager]hadearlierrevealedthatthedefendanttookabudgetedlossonthecontract In re-examination Nobes explained the rationale for thedefendantswillingnesstogiverockbottompricestotheplaintiff.Hesaid it was because the defendant wanted to retain its market share inthe ready-mix concrete industry to keep its plant running. It could onlydo that ifits order booksgenerated sufficient volume forthe capacityofitsplant.Thatwouldfurtherexplainthedefendantsreluctancetoabsorb the plaintiffs direct and consequential losses relating to non andor late delivery. [emphasis added]75 Be that as it may, on a consideration of all the circumstances, we findthat the alleged shortage of aggregates did not, in any event, fall within thescope and ambit of the force majeure clauses in the Contract. The Plaintiffsappeal on this issue therefore succeeds. We now turn to the issue of whethernon- or short supply resulting from plant breakdowns falls within the ambitof the force majeure clause (assuming that it had been specifically pleaded).Plant breakdowns76 The Judge held that the non- or short supply due to plant breakdownsdidnotfallwithinthescopeandambitoftheforcemajeureclausesintheContractbecauseintheeventthattheKakiBukitplantbrokedown,theDefendanthadtwoback-upplantsandtwofriendlysupplierstoaccommodatethesupplyofconcretetothePlaintiff(seetheGDat[95]).The Judge also found that the Defendant was estopped from arguing plantbreakdownstoavoidliabilitybecauseithadrepresentedtothePlaintiffduring negotiations that back-up plants were available (see the GD at [98]).77 Onappeal,theDefendantsmainargumentwasthattherewasnocontractual requirement to provide a back-up plant and, further, that at thepaginator.bookPage 439Tuesday, December 8, 20093:41 PM440 SINGAPORE LAW REPORTS (REISSUE) [2007] 4SLR(R)timeofthebreakdowns,onlytheKakiBukitplanthadbeenapprovedbythe LTA for the supply of concrete for the Project.78 We agree with the Judges finding that in so far as plant breakdownswere concerned, the force majeure clauses in the Contract do not apply andthe Defendant is accordingly liable for the cost differentials incurred duringthese occasions. In the first instance, the Defendant has to show (as with theallegedmarketrawmaterialshortages)thattheplantbreakdownsweresomethingbeyondthesupplierscontrol.Indeed,thisrequirementisdriven home by the fact that in the force majeure clauses themselves, there istheadditionalappellationunforeseenthatqualifiesplantbreakdowns.Wealsoreiteratethatinorderforadefendanttorelyonaforcemajeureclause,ithastoshowthatithastakenallreasonablestepstoavoiditsoperation, or to mitigate its results.79 On the facts, we find that the Defendant was unable to prove that theplantbreakdownswereunforeseenandbeyonditscontrol.Indeed,italsohadnottakenreasonablestepstoavoidormitigatetheconsequencesofaplantbreakdown.AftertheLTAhadallowedtheDefendanttoresumesupplyofconcreteinNovember2004,theLTAstipulatedthatonlyconcretefromtheKakiBukitplantmaybesupplied.Moreimportantly,however, the LTA also stated that it should be informed in advance in theevent that the need to use other plants belonging to the Defendant shouldarise. It was thus open to the Defendant, very early on, to avoid or mitigatethe consequences of any breakdown in the Kaki Bukit plant by seeking theLTAs approval to use the Gay World and Kallang plants. It also followed,therefore,thattheopportunitytoavoidtheeventthathappened(viz,theplant breakdowns) was clearly within the defendants control. However, theDefendantfailedtotakeanystepsinthisdirectionandopted,instead,torelysolelyontheoperationoftheKakiBukitplant.Thiswasnotareasonable cause of action to adopt since a plant breakdown must have beena foreseeable event, especially when only one plant was being utilised.80 The Defendants argument that there was no contractual requirementto provide a back-up plant is misconceived. Where a party seeks to rely on aforce majeure clause, the law places a burden on it to satisfy the court that itfallswithinthescopeandambitofthatclause.Inarelatedvein,thepartymust also show that there was truly nothing it could have done to avoid theoperation of the event or to mitigate its results. This is merely an extensionof the general principle that a party must be strictly held to its contractualobligationsandshouldonlybereleasedfromthemwheresuperveningevents make it impossible, and not merely onerous, to fulfil them. As notedat [57] above, the words frustration or force majeure typically connotesome sort of impossibility on the defendants part to perform his contractualobligations.Moreimportantly,thisgeneralprinciplehasbeenclearlyembodied withinthe force majeure clauses in the Contract inparticular,paginator.bookPage 440Tuesday, December 8, 20093:41 PM[2007] 4SLR(R) RDC Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd 441by the need for the Defendant to show that the plant breakdowns were notonlyunforeseenbutalso(andthis,infact,followslogically)thatsuchbreakdowns were beyond the suppliers [the Defendants] control. In thisregard,thefactthattheContractmaynothaveprovidedforallpossibleeventualitiesintheeventoftheDefendantsbreachdoesnot,andcannot,extinguishtheDefendantsdutytomitigatetheresultsofthesuperveningevent.Conclusion81 In sum, even if the Defendant had specifically pleaded circumstancesofforcemajeure,itwouldneverthelessnothavebeenexemptedfromliabilityundertheContract.TheDefendantsappealonthisissueistherefore dismissed, whilst the Plaintiffs appeal is allowed. In the result, wefindthattheDefendantisliableforallthecostdifferentialsincurredasaresult of non- or short supply between 18 November 2004 and 5 April 2005.Issue (d) Was the Defendant entitled to suspend supply of concrete on 5 April 2005?82 On5 April2005,theDefendantsuspendeditssupplyofconcretetothePlaintiffduetonon-paymentforallconcretesupplieduptoFebruary2005andthisincludedthenon-paymentofthe5%retentionsum.Thissuspensionofsupplywaseffectedpursuanttocl KofAppendix 1AoftheDefendantsrevisedquotation(incorporatedbycl 5ofthesame),whichprovides as follows:K. The Supplier reserves the right to suspend the supply of concreteto the Purchaser without notice in the event of the Purchaser exceedingthe credit limit or defaulting on payment beyond the credit term and inrecovering such outstanding payment, plus all resulting legal costs andexpenses and interest accrued.Clause 4 of the Defendants revised quotation provides as follows:4. PAYMENT TERMThe term of payment is 30 days.[emphasis in original]83 ItisnecessarytoexaminethevariousdeductionsmadebythePlaintiff.Theyconsistedofthefollowingitems(assetoutintheGDat [111]):paginator.bookPage 441Tuesday, December 8, 20093:41 PM442 SINGAPORE LAW REPORTS (REISSUE) [2007] 4SLR(R)84 We have already held above that the Plaintiff is entitled to claim, andaccordingly deduct, the cost differentials incurred between 7 July 2004 and5 April2005(Item4intheabovetable).TheDefendantalsodoesnotdispute that the Plaintiff is entitled to deduct Item2 and withhold Item7. Inparticular, cl 7 of the Plaintiffs letter of intent allows the Plaintiff to retain5%ofallpaymentsduetotheDefendantuntiltwomonthsafter30 June2006.85 However,theDefendantstronglydisputedliabilityforthe6%administrativechargeunilaterallyimposedbythePlaintiff(Item5).Inalettersenton6 April2005fromthePlaintifftoallitssub-contractors,theDefendant was notified that the Plaintiff would impose a 6% administrativechargeforadditionaladministrativeandaccountingworkundertakenbythe Plaintiff. The Plaintiff then proceeded to retrospectively impose the 6%administrative charge on the cost differentials incurred between 7 July 2004and5 April2005anddeductedthesamefromtheoutstandingpaymentsowed to the Defendant.86 Inourview,thePlaintiffwasnotentitledtounilaterallyorretrospectively impose the 6% administrative charge on the Defendant. SuchanadministrativechargewasnotprovidedforintheContractanditwasnot suggested that it operated as an implied term of the Contract. Further,no evidence was tendered that the unilateral imposition of such charges wasa market practice. In sum, there was absolutely no basis for the impositionoftheadministrativecharge.Asaresult,thePlaintiffhadwrongfullywithheld this sum from the Defendant. On this basis alone, we find that theDefendantwasentitledtosuspenditssupply,anditisthereforeNo. Item1 Safety fine imposed on 11 May 20042 T Y Lin design check cost for poor concrete3 LTAcostomissionofpoorconcretesuppliedfor16panelsaffected by low cube strength4 Costdifferentialsfromobtainingconcretefromalternativesuppliers:(a) from 7 July 2004 to 17 November 2004(b) from 18 November 2004 to 5 April 20055 6% administrative charge imposed by the Plaintiff6 Standby cost of batching plant due to non-delivery of concreteon 27 February 20057 Retention sum of 5%paginator.bookPage 442Tuesday, December 8, 20093:41 PM[2007] 4SLR(R) RDC Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd 443unnecessary to consider Items 1, 3 and 6 which were not, apparently and inany event, dealt with expressly by the Judge in the GD. The Plaintiffs appealon this issue is therefore dismissed.Issue (e) Was the Plaintiff entitled to terminate the Contract on 30 May 2005?Background and issues87 On 30 May 2005, pursuant to cl 8 of the Plaintiffs letter of intent (setout at [8] above), the Plaintiff terminated the Contract on two grounds:(a) thattheDefendanthadcontinuouslyfallenshortinsupplyand/orwasunabletosupplytheconcretewhenorderedbythePlaintiff; and/or(b) thattheDefendantssupplywasunabletomeettheLTAsrequirements.88 TheJudgeheldthatthePlaintiffwasentitledtoterminatetheContract onboth grounds.The Defendantappealedon bothfindings.Weproposetodiscusseachgroundseparately.Beforeproceedingtodoso,however, it would be helpful to first briefly outline the general legal positionwith respect to a breach of contract at common law not least because this isa confused and confusing area of contract law. It is nevertheless one of thekey areas of the law of contract that often arises and in a practical contextaswell.Itthereforestandsinurgentneedofclarification,notleastinthelocal context.General position at common law89 We consider, first, the general right to terminate a contract for breachand, secondly, the right to claim damages.The general right to terminate a contract for breach(1) The various situations90 Turning to the first issue, it is important to note, at the outset, that, inthe event of a breach of contract, there is no automatic legal right conferredon the innocent party to the contract (viz, the party who is not in breach ofcontract)toelecttotreatthecontractasdischarged(ie,toterminatethecontract). The circumstances under which such a party is entitled to elect toterminatethecontractatcommonlawdependsonwhichparticularsituationexists.Thesesituations(shornofmorespecificanddifficultlegalpaginator.bookPage 443Tuesday, December 8, 20093:41 PM444 SINGAPORE LAW REPORTS (REISSUE) [2007] 4SLR(R)issues,aswellasspecialruleswithrespecttocertainspecifictypesofcontracts)canbeclassifiedintotwobroadcategories.Thefirstbroadcategoryisclearandcomprisesonesituationonly.Thesecondcomprisesthree situations, the last two of which (whilst distinct) may (depending onthe precise facts of the case at hand) conflict with each other. The two broadcategoriesaswellasthespecificsituationsthereinmaybesummarisedasfollows:(A) WHERE THE CONTRACT CLEARLY AND UNAMBIGUOUSLY PROVIDES FOR THE EVENT OR EVENTS PURSUANT TO WHICH THE INNOCENT PARTY IS ENTITLED TO TERMINATE THE CONTRACT91 The first broad category (Situation 1) deals with the situation wherethe contract clearly and unambiguously states that, in the event of a certaineventoreventsoccurring,theinnocentpartywillbeentitledtoterminatethe contract. A clear example of this is, in fact, cl 8 of the Plaintiffs letter ofintentinthepresentappeal(setoutat[8]above).Hence,theothersituations are not directly applicable in the present appeal. However, for thesake of completeness and, more importantly, because this entire area is, asalreadymentioned,oneofthemoresignificant(yetcomplex)areasofthelaw of contract and there is little by way of clarification in the local case law,we set out briefly the remaining situations as well.(B) WHERE THE CONTRACT DOES NOT CLEARLY AND UNAMBIGUOUSLY PROVIDE FOR THE EVENT OR EVENTS PURSUANT TO WHICH THE INNOCENT PARTY IS ENTITLED TO TERMINATE THE CONTRACT(I) INTRODUCTION92 The second broad category deals with the situation where the contractdoesnotclearlyandunambiguouslyrefertotherighttoterminatethecontract (unlike Situation 1 above). Under this broad category, there are atleast three possible situations under which the innocent party may elect toterminatethecontract.Thefirst(Situation 2)isseparateanddistinctfrombothSituation 1aboveaswellastheothertwosituationsunderthisbroadcategory(Situations 3(a)and3(b),respectively).Thetwolast-mentioned situations (viz, Situations 3(a) and 3(b)), although separate anddistinct, may (under certain fact situations) conflict with each other.(II) SITUATION 293 Inthefirstsituationunderthisbroadcategory(Situation 2,overall),whereaparty,byhiswordsorconduct,simplyrenouncesitscontractinasmuch as it clearly conveys to the other party to the contract that it willpaginator.bookPage 444Tuesday, December 8, 20093:41 PM[2007] 4SLR(R) RDC Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd 445notperformitscontractualobligationsatall,thatotherparty(viz,theinnocent party to the contract) is entitled to terminate the contract.94 Itshouldbenotedthatwedonotconsiderherethemorecomplexsituation where the party allegedly renouncing the contract bona fide (albeiterroneously)concludesthatitwasjustifiedinnotproceedingwiththecontract(forarecentdiscussionofthisspecificissue,seetheSingaporeHighCourtdecisionofGIBAutomationPteLtdvDelugeFireProtection(SEA)PteLtd[2007]2 SLR(R)918,especiallyat[76][77](andtheauthorities cited therein in particular, the leading House of Lords decisionofWoodarInvestmentDevelopmentLtdvWimpeyConstructionUKLtd[1980] 1 WLR 277)).95 Thereisalsoasuggestioninaleadingtextbookthatwhereacontractingpartydeliberatelychoosesandis,indeed,determinedtoperform its part of the contract only in a manner substantially inconsistentwithhisobligations(perLord WrightintheHouseofLordsdecisionofRossT Smyth&Co,Ltd vT D Bailey,Son&Co[1940]3 All ER60at72,which is termed substantial breach by the author) then that, too, will alsojustifytheinnocentpartysterminationofthecontract(seeSir GuenterTreitel,TheLawofContract(Sweet&Maxwell,11th Ed,2003)atp 809(andtheauthoritiescitedtherein)).Withrespect,however,andhavingregardtothesubstanceof(and,moreimportantly,controversyinrelationship between) Situations 3(a) and 3(b) below, the preferable view, inour opinion, appears to be that whether or not the innocent party is entitledto terminate the contract concerned will depend, in the final analysis, uponwhetherornotthetestspursuanttoSituations 3(a)and3(b)belowaresatisfied and in the manner or order proposed below.96 Weacknowledge,however,thatthereissomemeritinProf Treitelssuggestion inasmuch as it can be argued that if the defaulting party choosestoperformthecontractinamannersubstantiallyinconsistentwithitscontractualobligations,itis,insubstanceandeffect,renouncingthecontract concerned. However, not having heard detailed arguments on thispoint,wewillleaveitopenforfurtherconsiderationshouldasuitableoccasionariseinthefuture.Itisinterestingtonote,however,thatiftheapproachprofferedbelowisadopted,thesameresultwould,insubstance,beachieved.Inotherwords,andanticipatingsomewhatinadvancetheanalysis that is to follow, if the party in breach had breached a condition ofthe contract, the innocent party would be entitled to terminate the contractbutifthepartyinbreachhadbreachedawarrantyinstead,theinnocentpartywouldstillbeentitledtoterminatethecontractiftherehadbeenasubstantial breach.paginator.bookPage 445Tuesday, December 8, 20093:41 PM446 SINGAPORE LAW REPORTS (REISSUE) [2007] 4SLR(R)(III) SITUATION 3(A) CONDITION/WARRANTY APPROACH97 Inthesecondsituation(Situation 3(a)),thefocusisonthenatureofthe term breached and, in particular, whether the intention of the parties tothe contract was to designate that term as one that is so important that anybreach, regardless of the actual consequences of such a breach, would entitletheinnocentpartytoterminatethecontract(thisis,however,nottosaythat the consequences of breach are irrelevant inasmuch as the parties have,exhypothesi,envisaged,inadvance,andhypothetically,seriousconsequences that could ensue in the event of the breach of that particularterm).Intraditionallegalterminology,suchatermwouldbetermedacondition.98 If,however,theintentionofthepartiestothecontractwastodesignatethattermasonethatisnotsoimportantsothatnobreachwillever entitle the innocent party to terminate the contract (even if the actualconsequencesofsuchabreachareextremelyserious),thensuchatermwouldbetermedawarranty(seealso,andinamoregeneralvein,theclassic exposition by Bowen LJ (as he then was) in the leading English Courtof Appeal decision of Bentsen v Taylor, Sons & Co [1893] 2 QB 274 at 281).This condition-warranty approach is in fact (in so far as the sale of goodscontextisconcerned)enshrinedwithintheSaleofGoodsAct(Cap 393,1994 RevEd).Itshouldbementioned,atthisjuncture,thattheinnocentpartywould(asweshallseebelowat[114])neverthelessbeentitledtoallthe damages that it can establish in law.(IV) SITUATION 3(B) THE HONGKONG FIR APPROACH 99 Inthethirdsituation(Situation 3(b)),thefocusisnot(asinthesecond(Situation 3(a)above))onthenatureofthetermbreached(ie,whether it is a condition or a warranty) but, rather, on the nature andconsequences of the breach. In particular, where the breach in question willgiverisetoaneventwhichwilldeprivethepartynotindefault[viz,theinnocent party] of substantially the whole benefit which it was intended thatheshouldobtainfromthecontract[emphasisadded],thentheinnocentparty is entitled to terminate the contract. The words just quoted are fromthe oft-cited judgment of Diplock LJ (as he then was) in the seminal EnglishCourtofAppealdecisionofHongkongFirShippingCoLtdvKawasakiKisen Kaisha Ltd [1962] 2 QB 26 at 70 (Hongkong Fir). Not surprisingly,perhaps, this approach has been termed the Hongkong Fir approach. It isanapproachunderwhichtheinnocentpartyisentitledtoterminatethecontractifthenatureandconsequencesofthebreacharesoseriousastogototherootofthecontract(seetheHouseofLordsdecisionofSuisseAtlantiqueSocitdArmementMaritimeSAvNVRotterdamscheKolenCentrale[1967]1 AC361at422,perLord Upjohn)andconstitutesafundamentalbreachofcontract(seealso perLord DiplockintheHousepaginator.bookPage 446Tuesday, December 8, 20093:41 PM[2007] 4SLR(R) RDC Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd 447of Lords decision of Photo Production Ltd v Securicor Transport Ltd [1980]AC 827 at 849, where the learned law lord also referred to the concept of thecondition in the sense referred to in Situation 3(a) above).100 Onemaindifferencebetweenthecondition-warrantyapproachinSituation 3(a)andtheHongkongFirapproachinSituation 3(b)shouldbehighlighted.Underthecondition-warrantyapproach,theparamountaimof the court is to ascertain the parties intention in relation to the nature ofthecontractualterminadvance,viz,atthetimeofcontracting.Theinnocentpartysrighttoterminatethecontractuponbreachdependswholly on whether the term is classified as a condition or a warranty. Incontrast, the Hongkong Fir approach requires a confirmation of the right onthepartoftheinnocentpartytoterminatethecontractafterthefactinasmuchasthepartieshavetowaitandseewhatthenatureandconsequencesofthebreachactuallyare(andseethereferencebyLord LowryintheHouseofLordsdecisionofBungeCorporation,NewYorkvTradaxExportSA,Panama[1981]1 WLR711(Bunge)at719to[t]hewaitandseemethod).Conceptually,atleast,thecondition-warrantyapproachinSituation 3(a)abovetendsmoretowards(especiallycommercial) certainty and predictability whilst the Hongkong Fir approach(on the other hand) tends more towards fairness. This is essentially becausethe Hongkong Fir approach prevents a party from terminating the contractonexcessivelytechnicalgroundsinabidtoescapefromunfavourablebargains.However,itshouldalsobenotedthatitisalsofairtoholdthecontractingpartiestotheirbargain(underthecondition-warrantyapproach) and that, therefore, there is no sharp dichotomy as such betweencertainty and predictability on the one hand and fairness on the other in sofarasthetwoapproachesjustmentionedareconcerned.Wewill,infact,elaborateonthismorebelow(at[102][110]).Further,aswehavenotedabove, the condition-warranty approach does not dispense with the conceptofconsequencesaltogether(althoughthatparticularapproachviewstheconceptofconsequencesofbreachinadvanceand,necessarily,therefore,from a hypothetical perspective).101 Notwithstanding the summary in the preceding paragraphs, and evenleavingasidethemorespecificlegaldifficultiesthatmightarise(see,forexample, (a) the issues mentioned in Situation 2 above at [94][96]; (b) thecriteriatobeutilisedinascertainingwhetherornotaparticulartermisaconditionunderthecondition-warrantyapproach;(c) someremainingissuesrelatingtotheapplicationoftheHongkongFirapproach(seetherecentarticlebyJ WCarter,G J Tolhurst&ElisabethPeden,Developingthe Intermediate Term Concept (2006) 22 JCL 268); as well as (d) the legalpositionapplicabletothesituationwherebothofthecontractingpartieshavebreachedthecontract(astowhich,seethiscourtsdecisioninJetHoldingLtdvCooperCameron(Singapore)PteLtd[2006]3 SLR(R)769,especially at [94][99], and where the observations by Kerr LJ in the Englishpaginator.bookPage 447Tuesday, December 8, 20093:41 PM448 SINGAPORE LAW REPORTS (REISSUE) [2007] 4SLR(R)CourtofAppealdecisionofStateTradingCorporationofIndiaLtdvMGolodetz Ltd [1989] 2 Lloyds Rep 277 at 286 were cited and applied (at[98])),thereis,nevertheless,amoregeneraldifficultythatstemsfromtherelationship(orpotentialtension,rather)betweenSituation 3(a)andSituation 3(b)whichhasbeenalludedtointheprecedingparagraph.Tothis extent, the above summary is not a final one, although it is very close toit. The final summary will in fact be set out later (at [111][113] below). Itwill,however,notd