Singapore: Implying Terms Of Due Diligence And When Time Is Of The Essence In Construction Contracts

A case study of CAA Technologies Pte Ltd v Newcon Builders Pte Ltd [2016] SGHC 246


In CAA Technologies Pte Ltd v Newcon Builders Pte Ltd [2016] SGHC 246, the Singapore High Court held that it could be appropriate to imply a term requiring contractors to perform their obligations with due diligence and expedition, and with respect to that, a term making time of the essence could be implied. The court also held that if, after the signing of a letter of intent, a party does not unequivocally signify its acceptance to a subsequent contract, that subsequent contract could not form part of the parties' contract.

This update takes a closer look at the decision.


CAA Technologies Pte Ltd (CAA) was engaged by Newcon Builders Pte Ltd (Newcon) to design, produce, and deliver pre-cast concrete hollow core slabs for a building project. The parties signed a brief three-page letter of intent containing only eight terms and conditions. The letter provided for the parties to replace its terms with a comprehensive contract (referred to as a "letter of acceptance" in the letter of intent) setting out their obligations in greater detail.

Newcon subsequently sent to CAA a 153-page letter of acceptance which expanded in great detail on the eight terms and conditions. Attached to the letter of acceptance was a one-page acknowledgement—which was not signed by CAA.

Newcon reminded CAA several times to deliver the slabs in accordance with the schedule in the letter of acceptance, but CAA failed to deliver those slabs. It did not help that installation of the slabs was part of the superstructure works—which were on the critical path. Newcon revised the delivery schedule to take into account CAA's failures, but even so, CAA again failed to meet the revised schedule. CAA eventually did deliver some of the slabs, but its delivery was out of sequence, incomplete, and badly behind schedule. Newcon sent a formal notice of delay to CAA and received no response. Newcon then terminated the contract pursuant to a termination clause in the letter of acceptance.

CAA claimed against Newcon for failing to pay CAA sums due under the contract and by purporting to terminate the contract without any basis in law to do so. Newcon counterclaimed against CAA for breach of contract, claiming among others, the additional cost of engaging a substitute contractor and liquidated damages.

Issues in dispute

The court was faced with four issues:

  1. Whether the letter of acceptance formed part of the parties' contract;
  2. What were CAA's contractual obligations, whether express or implied;
  3. Whether CAA breached those contractual obligations; and
  4. If so, whether that breach entitled Newcon to terminate the contract.

Status of the letter of acceptance

The court held that the letter of acceptance did not form part of the parties' contract.

CAA argued that it had positively rejected the letter of acceptance. The court found that this was not the case, as there was no documentary evidence showing any rejection. CAA did not sign the acknowledgement because of its own inertia, and such inertia did not constitute acceptance. CAA did nothing which manifested an unequivocal intent, objectively ascertained, to accept the offer set out in the letter of acceptance. Even if CAA did act on information in one clause in the letter of acceptance, that does not form an unequivocal indication of its intent to accept as contractually binding every clause of the letter of acceptance.

Thus, the claims and counterclaims stood or fell upon only the terms of the letter of intent.

CAA's obligations under the letter of intent

Express obligations

CAA had an express obligation under the letter of intent to produce and deliver slabs in order to follow Newcon's progress on site. CAA was to do so in accordance with a delivery schedule which the letter of intent envisaged would be provided, supplemented and revised from time to time. The letter of intent did not contain any schedule—instead, the schedule was found in the letter of acceptance. Although the court found that the letter of acceptance had no contractual effect, it does not mean that the letter is a total nullity. It had contractual effect not as a term of the letter of acceptance, but as a delivery schedule brought to CAA's attention post-contractually as the letter of intent envisaged. CAA is therefore obliged to follow the schedule.

Implied obligations

The court implied two terms in fact into the contract: (i) CAA had an implied obligation to proceed with its works with due diligence and expedition at all times until completion, and (ii) time was of the essence with respect to the first implied term (this was for this contract in question).

The court applied the three-step test set out in Sembcorp Marine Ltd v PPL Holdings Pte Ltd and another and another appeal [2013] 4 SLR 193 (Sembcorp):

  1. Ascertain how the gap in the contract arises. Implication will be considered only if the gap arose because parties did not contemplate the gap;
  2. Whether it is necessary in the business or commercial sense to imply a term in order to give the contract efficacy;
  3. Whether the specific term passes the 'officious bystander' test.

At the first Sembcorp step, the court found that the entire commercial purpose of the parties' contract was for CAA to supply structural elements to Newcon in full, in sequence, and in time. Despite this, the letter of intent contained no express provisions on this point. The gaps arose because parties failed to contemplate them and were a result of the "rudimentary" and "haste" form in which the parties reduced their agreement into writing in the letter of intent. Although express terms on the commercial purpose were found in the letter of acceptance—which indicated that Newcon did contemplate these gaps—it was only after the parties had themselves contractually bound by way of the letter of intent.

At the second Sembcorp step, the court commented that CAA knew of the direct connection between its timely delivery and Newcon's timely performance of its obligation to the Employer. The delivery also had to occur in a particular sequence as the main contract—and laws of physics—required the works to be performed in a particular sequence. Business efficacy therefore necessitates an implied term as to timeliness in the production and delivery of the slabs, and for a contractual consequence for breach of that implied term.

At the third Sembcorp step, the court accepted Newcon's submission that the commercial purpose of the parties' contract made it necessary to imply that CAA was to proceed with its works with due diligence and expedition at all times until completion. It was also necessary that time be of the essence (which was implied into this contract), but only with respect to the first implied term of due diligence and expedition. Without this implied term making time of the essence, Newcon would have to wait patiently for CAA to miss each delivery date and even then, it would have no right to terminate but a right only to sue for damages. The court stressed that this second implied term did not entitle Newcon to terminate for any breach of any time provision under the contract. Even then, it did not give Newcon the right to terminate for breach of the first implied term. Newcon could only terminate if the breach, taken together with other breaches, went to the root of the parties' bargain.

CAA's breach of obligations

The court found that CAA breached both the express and implied terms of the parties' contract. In relation to the express terms, it was clear that CAA had failed to meet the delivery schedule as set out in the letter of acceptance. In relation to the implied terms, CAA failed to proceed with its works with due diligence and expedition because it failed to plan its production to meet the schedule, and did fail to deliver on time.

Entitlement of Newcon to terminate the contract

Since the letter of acceptance did not form part of the contract, Newcon was not entitled to rely on the express right of termination.

Nevertheless, the court held that Newcon was entitled to terminate the contract. In light of the commercial purpose of the contract, both the express term in the letter of intent requiring CAA to follow progress on site and implied term of due diligence and expedition constituted conditions of contract. CAA's breach of these conditions were thus a repudiatory breach entitling Newcon to terminate either under (i) common law or (ii) implied term making time of the essence. Even if those two terms were not conditions, breaches of both terms deprived Newcon of substantially the whole benefit it intended to obtain from the contract, and were sufficient to trigger its right to terminate.

Concluding remarks by the court

Since Newcon did not wrongfully terminate the contract, the bulk of CAA's claim failed. However, CAA was entitled to be paid for the slabs it actually produced and delivered. Newcon, on the other hand, was allowed the additional cost in engaging a replacement sub-contractor as this cost was reasonably foreseeable from CAA's breach and Newcon acted reasonably in doing so. However, Newcon's claim for liquidated damages failed as it was only a right found in the letter of acceptance, which did not form part of the parties' contract. Nevertheless, Newcon's claim for liquidated damages paid to the Employer was allowed as this flowed directly from CAA's breach and was within the reasonable contemplation of the parties if CAA failed to perform its obligations.


This case is important as it signifies the willingness of the court to imply a term in a construction contract obliging a contractor to proceed with due diligence and expedition. More significantly, it is open to the courts to imply a term making time of the essence in relation to certain terms in the contract. Also, in order to safeguard the rights and obligations of both parties, parties have to be sure that any subsequent contract that arises after the signing of a letter of intent is properly signed and unequivocally accepted. Otherwise, the subsequent contract may not be taken to form part of the parties' contract at all.

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions