When walking away from an unfavourable bargain can cost you more: contractual risk, repudiation and damages in JKN v JKO [2026] SGSCT 23
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Lawyers
In the context of a house renovation work for an HDB flat, the Small Claims Tribunal (the “Tribunal”) in JKN v JKO [2026] SGSCT 23 (“JKN”) held that a party cannot simply pass losses arising from the risks it has assumed when the bargain becomes unprofitable (JKN at [35]).
This decision is a sober reminder that when a contractor finds itself in a loss-making project, it may carry out a cost-benefit analysis on whether to continue performing or to walk away. This is because repudiation may carry with it a larger financial consequence that simply absorbing the losses and performing.
Background
The claimant homeowner engaged the defendant company to renovate his HDB flat for $70,800. The contract was prepared and signed on the defendant’s behalf by one of its freelance interior designers, and the claimant paid $42,480, representing 60% of the contract price (JKN at [5]–[6]).
The defendant’s director subsequently alleged that the designer had committed the defendant to an unprofitable contract and siphoned off money intended for the defendant’s subcontractors, leaving the defendant out of pocket to the tune of S$32,000 (JKN at [7]).
The defendant then issued a revised quotation, increasing the renovation price by $15,466.50. This included charges for electrical works which was to be provided free of charge under the contract (JKN at [8]).
When the claimant refused to agree to the revised quotation, the defendant said it would not complete the electrical works, would remove those already installed, would not install the vinyl flooring and would place the renovation on hold (JKN at [9]).
The claimant then changed the gate lock and subsequently engaged a third-party to complete the unfinished works for $39,558 (JKN at [10] and [13]).
The claimant then brought proceedings for a refund of S$21,450, reflecting the value of the work for which the claimant already paid but for which the defendant did not carry out any work (JKN at [13] and [14](a)].
The decision
The Tribunal found that the defendant was bound by the contract (JKN at [17]). The defendant had adopted it and acted pursuant to it (JKN at [17] and [18]).
Further, the Tribunal found that the designer had actual authority to enter into contracts on the defendant’s behalf (JKN at [19(a)]). As to whether the designer’s misdeeds had any effects on the contract, the Tribunal bluntly said that “they were not the Claimant’s problem, and they did not relieve the Respondent of its obligations under the Contract” (JKN at [20]).
The Tribunal also rejected that the defendant’s revised quotation, which reflected a price increase of S$15,466.50, was attributable to changes in scope of work requested by the claimant.
It is trite law that a variation of a contract requires offer, acceptance and consideration to stand on (JKN at [25(a)]). As the claimant did not accept the revised quotation, there was no contractual variation (JKN at [25(b)]).
Importantly, the Tribunal found that the defendant was unable to prove that the price increase was “genuinely referable to any change in scope”, and that this was an attempt by the defendant to recoup its losses under the contract [JKN at [25(b)] and [26]).
Accordingly, when the claimant refused to accept the revised quotation, the defendant’s response that followed (i.e., its refusal to perform the contract) amounted to a repudiatory breach (JKN at [22]).
The claimant accepted the repudiation by changing the lock on the gate of the flat (JNK at [23]).
Turning to the question of damages, the Tribunal observed that a “lay consumer who suffers a breach of contract will often reach instinctively for a refund of what he has paid. That is understandable, but it is not how damages for breach of contract are computed in a case of this kind” (JKN at [36]).
The Tribunal held that “award of damages for breach of contract is to place the innocent party in the position he would have been had the breach not occurred” (JKN at [30]).
On the facts, the claimant incurred S$39,558 for engaging a third-party to carry out the unfinished renovation works. However, it sought only S$20,000 in order to bring the claim within the Tribunal’s jurisdiction. The Tribunal recognised that, although the claimant was entitled to S$39,558, it could only award S$20,000 (JKN at [31]).
Key takeaways
First, a party cannot pass on losses arising from risks it has contractually assumed. This means parties must be alive to commercial risks, such as provision of certain works to be carried out free of charge (as it happened in this case), and that they cannot bargain out of it once the contract is in full force.
Second, parties should weight the cost of performance against potential liability before refusing to proceed. Damages may reflect the reasonable cost of replacement performance, rather than the original price of the unfinished work. Here, the defendant sought an additional S$15,466.50 but ended up liable for S$20,000 (and it could have been more but for the Tribunal’s jurisdiction).
It is worth remembering that sometimes walking away from an unfavourable bargain may be more costly than honouring it.
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