Contract Drafting Risks Revisited: Guidance From The Singapore High Court In The Johor Development Dispute

The Singapore High Court's decision in Arki-Tech International Private Ltd v Rentak Tabrau Sdn Bhd [2025] SGHC 233 is an exercise in the application of well-settled principles of contractual interpretation, demonstration of the effect of the contra proferentem rule, and resolution of questions of enforceability and ambiguity. This decision underscores the importance of clear drafting and the need to bear the rules of contractual interpretation in mind when preparing any binding agreements, or be exposed to costly risks. 

Introduction

Arki-Tech International Pte Ltd ("Arki-Tech") brought a claim of approximately SGD 26 million (USD 20 million) in the High Court of Singapore against Rentak Tebrau Sdn Bhd ("Rentak"), a Malaysian property developer, for value engineering services rendered to Rentak under a Development Management Agreement ("Agreement") for a proposed phased development project in Johor Bahru, Malaysia.

The construction of the Project eventually fell through and Rentak rejected Arki-Tech's request for payment, arguing the contract was void, unenforceable, or that Arki-Tech had not fulfilled its obligations under the Agreement.

One of the key issues considered by the Court which will be explored in this case update is whether the DM Agreement was enforceable or void for uncertainty. 

The Development Management Agreement was enforceable 

The Court set out a few applicable principles of contractual interpretation in addressing the question of enforceability. First, in order for a contract to be validly formed and enforceable, its terms must be certain ¹. Moreover, there is a presumption that contracts are valid, given that the prevailing law in Singapore is to endeavour to uphold an agreement instead of striking it down ². Where there is ambiguity to be resolved, the contra proferentem rule would apply against Arki-Tech, being the drafter of the Agreement; such that ambiguity would be resolved in Rentak's favour. 

It was found that the ‘VE Fee Option Clause' and the ‘Term Sheet Fee Clause' (which provided for the fees that Arki-Tech would be entitled to) were not so vague and uncertain to render the DM Agreement unenforceable. The Court considered that:

1. The language of the relevant terms of the contract are relevant to contract interpretation ³. On the facts, there was no uncertainty regarding the identification or selection of a formal quantity surveyor (“QS”) – one would be employed and appointed by Rentak, with cost estimates to be calculated by the QS and Arki-Tech's fees calculated on that basis (under Option 1 in the ‘VE Fee Option Clause'). 
2. On an objective construction of the ‘VE Fee Option Clause', ⁴  the Court found that the phase “20% of all cost savings from VE” in Option 1 of the ‘VE Fee Option Clause' was not uncertain, given that the cost savings were to be calculated expressly in accordance with the “detailed cost estimates”. There was likewise no uncertainty or varying interpretations with how the same phrase was to be interpreted in Option 2 of the ‘VE Fee Option Clause', albeit that it was to be calculated based on a fixed “construction rate of RM 250 per square feet”. The interpretations derived by the Court were also adjudged to make good commercial and practical sense.
3. Despite the lack of existence of an ‘Annex B' containing PDF drawings and planning data that the QS would have used in preparing the detailed cost estimates, the parties were found to have agreed on one. The Court referred to Section 97 of the Evidence Act 1893 (2020 Rev Ed), which provided that evidence was admissible to demonstrate what missing documents meant in a peculiar sense, ⁵ and thereby ascertained what the parties had intended ‘Annex B' to referred to. 
4. Agreements to agree are enforceable as long as the parties have demonstrated an intention to be bound by the essential terms ⁶. Rentak's argument that the ‘VE Fee Option Clause' is unenforceable and that the contract is void for uncertainty cannot succeed, as the clause was not an agreement to agree in the first place. 

Key takeaways

Singapore courts will, as far as possible, uphold the enforceability of ambiguous contracts. In doing so, the courts are careful to adopt interpretations that accord with sound commercial logic and practical outcomes. To prevent ambiguity from being resolved in a manner that departs from the parties' original intentions, it is essential that established principles of contractual interpretation are observed during the drafting process. This includes ensuring that any superseded documents, schedules, and annexures are properly aligned and harmonised to avoid unintended consequences. 

Footnotes

1. At [23], citing Gay Choon Ing v Loh Sze Ti Terence Peter and another appeal [2009] 2 SLR(R) 332 at [50]. 

2. At [23], citing Gardner Smith (SE Asia) Pte Ltd v Jee Woo Trading Pte Ltd [1998] 1 SLR(R) 950 at [10]. 

3. At [34], citing CIFG Special Assets Capital I Ltd (formerly known as Diamond Kendall Ltd) v Ong Puay Koon and others and another appeal [2018] 1 SLR 170 at [19(a)].

4. At [54], cf Jewellery Industries (S) Pte Ltd v Sintat Rent-a-Car Pte Ltd [1993] 1 SLR(R) 744 and G Scammell and Nephew Ltd v Ouston [1941] AC 251.

5. At [59].

6. At [72], citing Rudhra Minerals Pte Ltd v MRI Trading Pte Ltd (formerly known as CWT Integrated Services Pte Ltd [2013] 4 SLR 1023.

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