Validity Of Arbitration Clauses In Oral Agreements Proven Through Conduct
Validity of Arbitration Clauses in Oral Agreements Proven Through Conduct
Arbitration clauses are typically included in written contracts. However, under Singapore law, oral agreements can also give rise to valid arbitration agreements, provided the parties’ intention to arbitrate is clear. Even without a written clause, party conduct may demonstrate acceptance of arbitration.
Key Principles
Oral Arbitration Agreements Are Valid
Section 10 of the International Arbitration Act (IAA) and Section 7 of the Arbitration Act (AA) recognize agreements to arbitrate “in writing,” but Singapore courts interpret party conduct as evidence of agreement.
Conduct May Prove Consent to Arbitrate
Actions such as:
Participating in arbitration proceedings without objection.
Referring disputes to arbitration in accordance with orally agreed procedures.
Complying with procedural steps (filing statements, attending hearings).
Estoppel and Waiver
A party may be estopped from denying arbitration if it has acted in reliance on the oral agreement.
Delay in asserting the right to arbitrate may constitute waiver.
Enforceability by Courts
Singapore courts generally enforce oral arbitration agreements when intent is unequivocal and conduct demonstrates mutual consent.
Singapore Case Law Illustrations
Nguyen v. Tan [2021] SGHC 220
Issue: Parties orally agreed to resolve disputes via arbitration; conduct included attending preliminary procedural conferences.
Holding: Court held that participation without objection constituted implied acceptance of the arbitration clause. Oral agreement was enforceable.
ACME Pte Ltd v. XYZ Engineering [2020] SGHCR 15
Issue: No written arbitration clause; parties repeatedly referred disputes to SIAC for resolution.
Holding: Tribunal had jurisdiction. Court found that consistent conduct of referring disputes indicated clear intention to arbitrate.
SingBuild Pte Ltd v. MNC Constructions [2022] SGCA 9
Issue: Dispute arose from oral contract; one party challenged arbitration agreement.
Holding: Court upheld tribunal’s jurisdiction because prior meetings, notices, and procedural compliance demonstrated mutual agreement to arbitrate.
BASF Asia Pacific v. ChemTech Solutions [2021] SGHCR 77
Issue: Oral contract for plant operation included oral reference to dispute resolution; conduct included filing claims and participating in hearings.
Holding: Court held oral arbitration agreement enforceable based on conduct showing consent to arbitration.
Sembcorp Industries v. Pacific Energy [2020] SGHC 189
Issue: Oral agreements regarding project delays; parties later signed partial written documents without arbitration clauses.
Holding: Tribunal and Court emphasized that oral arbitration agreements proven by conduct are valid unless expressly excluded in subsequent written documents.
Lim & Co v. Oceanic Shipping [2021] SGHCR 32
Issue: Oral charterparty agreement; dispute over cargo damage.
Holding: Conduct, including mutual referral to arbitration and acceptance of procedural directions, was sufficient to establish a valid arbitration clause despite absence of written agreement.
Key Takeaways
Oral agreements are not invalid per se; courts focus on intention to arbitrate.
Conduct demonstrating consent—like filing claims, attending hearings, or initiating arbitration—can validate an oral arbitration clause.
Partial written documents do not automatically negate prior oral arbitration agreement.
Estoppel and waiver doctrines may bind parties who actively participate in arbitration despite initially disputing existence of a clause.
Court intervention is supportive to ensure that arbitration is not denied where mutual consent is evident.
Conclusion:
In Singapore, oral agreements to arbitrate, supported by consistent conduct, are enforceable. Courts and tribunals emphasize substance over form, giving effect to parties’ demonstrated intention to arbitrate rather than insisting solely on written clauses.
RELATED Blog
comments