Virtual Learning Pte. Ltd. (VLPL) (a private enterprise) recently teamed up with Knowledge Hub Ltd. (KHL) (a government-linked company which is listed on the Singapore Exchange) to develop virtual reality devices to help students learn various topics under the life sciences. They signed a contract to collaborate in a joint venture. Under this contract, the two companies have agreed to share profits generated from their joint venture on a 70%-30% basis, with KHL taking 70% and VLPL taking 30%. VLPL is responsible for coordinating the research and development of the products, while KHL is responsible for commercialising the products, including marketing and distributing the products for sale. The virtual reality devices turned out to be a huge commercial success, and the sales were phenomenal. When VLPL received its share of the profits from KHL, the amount was less than what VLPLs management expected. Based on VLPLs own private investigations, they suspect that KHL has under-declared the amount of sales. The management of VLPL is deciding whether to commence a civil lawsuit against KHL for the amount that they believe is owed to VLPL.

(a) Discuss the concept of the rule of law, and explain how it can promote business activity, using examples from the above scenario to support your answer.