OVERVIEW
Freedom of contract is a fundamental principle of Singapore
contract law. The Singapore courts generally uphold the freedom of
parties to determine their respective contractual obligations.
However, contractual freedom is not absolute and the courts will
not enforce a contractual provision which is found to be a penalty
clause pursuant to the rule against penalties. This is seen most
recently in the Court of Appeal decision in Ethoz Capital Ltd v
Im8ex Pte Ltd and others [2023] SGCA 3.
Briefly, in Ethoz, Ethoz Capital Ltd
("Ethoz") extended loan facilities to
Im8ex Pte Ltd ("Im8ex") of a principal
amount of $6.3 million at an interest rate of 3.75% per annum, with
instalment payments to be made monthly over 180 months. Im8ex
defaulted on payment and was subject to the payment of default
interest of 0.0650% per day with monthly rests (the
"Default Interest"), as well as the full
and immediate payment of total interest due on the principal amount
(that
