Clifford Chance

Contracting out of unconscionability

12 June 2015

The Singapore Court of Appeal (CA) has overturned the High Court (HC) and ruled that parties can contractually exclude the unconscionability exception to calls on on-demand bonds (CKR Contract Services Pte Ltd v Asplenium Land Pte Ltd and another and another appeal and another matter [2015] SGCA 24).

Under Singapore law, a party may seek the assistance of the Courts to restrain calls on on-demand bonds on two grounds - on the ground of fraud, or on the separate ground of unconscionability. In this recent ruling, the CA found that where parties to a construction contract agree to limit the circumstances in which a contractor is entitled to seek an injunction restraining a call on a performance bond (ie to fraud only), Singapore courts will respect the parties’ freedom to agree to such terms and enforce the restriction where it is reasonable.

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