QUESTION NO.

: 22
Problem
Sulaiman obtained a loan of RM 5,000 from Public Bank. When Public Bank served him a notice
to pay he promised to give the title deeds of his house as security. Sulaiman did not hand over
the documents as promised. Public Bank sues Sulaiman for specific performance of the promise.

Introduction
In the above sample question, to say that the issue in the question is whether performance of the
promise between Sulaiman and Public Bank or not. This applied to almost every question
relating to the formation of a contract, whether the issue is on offer, acceptance, consideration or
intention to create legal relations, for ultimately one has to conclude whether or not there was a
contract between the parties.
Therefore students should state the issue or issues specifically. In the above case study, there are
several issues that have been discussed:
(a) Was Sulaiman broke the promise with the Public Bank?
(b) Were Public Bank sues Sulaiman for specific performance of the promise?
(c) Is this considered as performance of the promise?

FIRST ISSUE:
Was Sulaiman broke the promise with the Public Bank?

Laws involved:

According to Section 74(1) in Contract Act 1950, when a contract has been broken, the
party who suffers by the breach is entitled to receive, from the party who has broken the
contract, compensation for any loss or damage caused to him thereby, which naturally
arose in the usual course of things from the breach, or which the parties knew, when they
made the contract, to be likely to result from the breach of it.

According to Section 74(1) in Contract Act 1950, when a contract has been broken, if a
sum is named in the contract as the amount to be paid in case of such breach, or if the
contract contains any other stipulation by way of penalty, the party complaining of the
breach is entitled, whether or not actual damage or loss is proved to have been caused
thereby, to receive from the party who has broken the contract reasonable compensation
not exceeding the amount so named or, as the case may be, the penalty stipulated for.

According to Section 124 in Contract Act 1950, Bankers, factors, wharfingers, advocates
and policy brokers may, in the absence of a contract to the contrary, retain, as a security
for a general balance of account, any goods bailed to them; but no other persons have a
right to retain, as a security for such balance, goods bailed to them, unless there is an
express contract to that effect.

Apply the Laws:

In this case, Sulaiman had received RM 5,000 from Public Bank but when Public Bank served
him a notice to pay back the loan, he promised to give the title deeds of his house as security but
after a few months he still not hand over the documents of the tittle deeds of his house as what he
promised to the Public Bank. So from this case, it can be said that Sulaiman had broke the
promise.

Conclusion:
Sulaiman had broken the promise, so on behalf of the Public Bank,they have their right to take
an action to Sulaiman.

SECOND ISSUE:
Were Public Bank sues Sulaiman for specific performance of the promise?

Law involved:

According to Section 86 in Contract Act 1950, any variance, made without the
suretys consent, in the terms of the contract between the principal debtor and the
creditor, discharges the surety as to transactions subsequent to the variance.

According to Section 94 in Contract Act 1950, a surety is entitled to the benefit of

every security which the creditor has against the principal debtor at the time when
the contract of suretyship is entered into, whether the surety knows of the
existence of such security or not; and, if the creditor loses or, without the consent
of the surety, parts with the security, the surety is discharged to the extent of the
value of the security.

According to Section 98 in Contract Act 1950, in every contract of guarantee

there is an implied promise by the principal debtor to indemnify the surety; and
the surety is entitled to recover from the principal debtor whatever sum he has
rightfully paid under the guarantee, but not sums which he has paid wrongfully.

Apply the Laws:

Since the section 94 in contract Act 1950 stated so, Public Bank had given RM 5,000 to
Sulaiman and as a further security for the RM 5,000 by a mortgage of Sulaimans title deeds of
his house but suddenly after a few months Sulaiman did not given his title deeds of his house that
means Sulaiman had cancel his mortgage. Public Bank becomes insolvent and they sue Sulaiman
on the guarantee.

Conclusion
Even the existence of a contract in writing at the beginning, but the performances of the promise
had been broken by Sulaiman because he still did not paid back the loan and did not give his title
deeds of his house. So Public Bank has their right sue Sulaiman on what he had done.

THIRD ISSUE
Is this considered as performance of the promise?
Laws Involved:

According to Section 39 (1) in Contract Act 1950, where a promisor has made an
offer of performance to the promisee, and the offer has not been accepted, the
promisor is not responsible for non-performance, nor does he thereby lose his
rights under the contract.

According to Section 40 in Contract Act 1950, when a party to a contract has

refused to perform, or disabled himself from performing, his promise in its
entirety, the promisee may put an end to the contract, unless he has signified, by
words or conduct, his acquiescence in its continuance.

According to Section 48 in Contract Act 1950, when a promise is to be performed

on a certain day, and the promisor has undertaken to perform it without
application by the promisee, the promisor may perform it at any time during the
usual hours of business on the day and at the place at which the promise ought to
be application performed.

According to Section 51 in Contract Act 1950, the performance of any promise

may be made in any manner, or at any time which the promisee prescribes or
sanctions.

According to Section 55 in Contract Act 1950When a contract consists of

reciprocal promises, such that one of them cannot be performed, or that its
performance cannot be claimed till the other has been performed, and the
promisor of the promise last mentioned fails to perform it, the promisor cannot
claim the performance of the reciprocal promise, and must make compensation to

the other party to the contract for any losswhich the other party may sustain by the
non-performance of the contract.

Apply the law:

In this case, it is necessaries to apply the law as what state at the above in Contract Act 1950,
since specific of the performances are failure. It is valid for the Public Bank to sue Sulaiman on
what he had done in this performances.

GENERAL CONCLUSION

The compensation goal of contract law can be achieved by equiring the promisor to pay damages
or by requiring the promisor to render the promised performance. Under current law, a promisee
is entitled to a damage award as of right but the court retains discretion to decide whether
specific performance should be granted. Because specific performance is a superior method for
achieving the compensation goal, promisees should be able to obtain specific performance on
request. An expanded specific performance remedy would not generate greater transaction costs
than the damage remedy involves, nor would its increased use interfere unduly with the liberty
interests of promisors. Making specific performance freely available also would eliminate the
uncertainty costs of planning and litigation created by the difficulty of predicting whether the
remedy will be available. In addition, this reform would reduce the negotiation costs incurred by
parties in attempting to create forms of contractual specific performance such as liquidated
damage clauses.96 Further, defenses to requests for specific performance that rest on unfairness
of contract terms or prices and that differ from the defenses in actions at law should be
eliminated the grounds for denial of specific performance should be the same as those that now
will bar a damage suit. Finally, the defense based on difficulty of supervision should be greatly
restricted. If the law is committed to putting disappointed promisees in as good a position as they
would have been had their promisors performed, specific performance should be available as a
matter of course to those promisees who request it.

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