Law of Contract Discharge and Remedies

Topic Law of
Contract
7 (Discharge of
Contract and
Remedies)
LEARNING OUTCOMES
By the end of this topic, you should be able to:
1. Describe the various ways by which a contract may be
discharged;
2. Explain the lawful and unlawful ways of discharging a contract;
3. Discuss the remedies available to the parties in a contract;
4. Identify the circumstances under which remedies may not be
granted;
5. Explain the requirement of principles in various remedies
available; and
G
6. Distinguish the importance of each remedy in a contract.
INTRODUCTION
This topic explains the situations in which contracts can be discharged and the
remedies available to the parties in a contract. When a contract is terminated, it is
said to be discharged and the contracting parties are free from further obligations
arising from it. A contract may be discharged by any one of the following ways:
(a) Discharge by consent or agreement between parties; or
(b) Discharge by performance; or
98 TOPIC 7 LAW OF CONTRACT (DISCHARGE OF CONTRACT AND REMEDIES)
(c) Discharge by impossibility ; or

(d) Discharge by breach
7.1 DISCHARGE BY CONSENT OR AGREEMENT

BETWEEN PARTIES
A contract that is created by consent can be discharged by consent. Consent may
be given at the time of the contract or subsequently. For example, the parties may
agree at the time of making the contract that on the occurence of an event, the
contract will be discharged. Consent given subsequent to the contract may be a
waiver, release, novation, remission or rescission. Sections 63 and 64 of the
Contracts Act 1950 provide for the discharge of contract by consent.
7.1.1 Novation, Rescission and Alteration

According to Section 63 of the Contracts Act 1950,
if the parties to a contract agree to substitute a new contract for it, or to rescind
or alter it, the original contract need not be performed.
Novation is the substitution or replacement of a new contract for an earlier one.

The effect of novation is to release the obligation of the parties under the earlier
contract. For example:
Illustration (a)
A owes money to B under a contract. It is agreed between A, B and C that B

shall henceforth accept C as his debtor, instead of A. The old debt of A to B
is at an end, and a new debt from C to B had been contracted.
The consideration for the new agreement is the mutual discharge of the original
contract and consent of all parties is secured. For example:
TOPIC 7 LAW OF CONTRACT (DISCHARGE OF CONTRACT AND REMEDIES) ! 99
Illustration (c)
A owes B $1,000 under a contract. B owes C $1,000. B orders A to credit C with

$1,000 in his books, but C does not assent to the agreement. B still owes C
$1,000, and no new contract has been entered into.
An example of alteration of a contract, as follows:
Illustration (b)
A owes B $10,000. A enters into arrangement with B, and gives B a mortgage

of his (As) estate for $5,000 in place of the debt of $10,000. This is a new
contract and extinguishes the original contract.
7.1.2 Remission of Performance

Section 64 of the Contracts Act 1950 provides
every promisee may dispense with or remit, wholly or in part, the performance
of the promise made to him, or may extend the time for such performance, or
may accept instead of it any satisfaction which he thinks fit.
The provision allows the party to remit the performance of the contract, which
will apply to the following situations:
(a) Payment of a lesser sum in satisfaction of a larger sum. For example:
Illustration (b)
A owes B $5,000. A pays to B, and B accepts, in satisfaction of the whole

debt, $2,000 paid at the time and place at which the $5,000 were
payable. The whole debt is discharged.
(b) Payment of a lesser sum by a third party to satisfy a larger debt.
Illustration (c)
A owes B $5,000 and a third party, C, pays to B $1,000 and B accepts

them in satisfaction of his claim on A. This payment discharge the
whole claim.
(c) Payment accepted in satisfaction of an unascertained sum.
Illustration (d)
A owes B under a contract, a sum of money, the amount of which has

not been ascertained. A, without ascertaining the amount, gives to B,
and B, in satisfaction thereof, accepts the sum of $2,000. This is a
discharge of the whole debt, whatever may be its amount.
(d) An arrangement between a debtor and his creditors to settle debts.
Illustration (e)
A owes B $2,000, and is also indebted to other creditors. A makes an

arrangement with his creditors, including B, to pay them a composition
of fifty cents in the dollar upon their respective demands. Payment to B
of $1,000 is a discharge of Bs demand.
A case to illustrate further the application of the provision:
Kerpa Singh v Bariam Singh [1966] 1 MLJ 38
A third party, the son of the appellant debtor, made an offer of $4,000 to
the creditors solicitor in discharge of $8,650 (on the condition that the
creditor could either return the cheque to the offeror or retain it and
discharge the debtors debt).
The Court held: The creditors conduct in cashing the cheque and
retaining the money would be considered an agreement to discharge
the debtor from any futher liability.
7.2 DISCHARGE BY PERFORMANCE

A contract is said to be discharged when the parties to the contract has
performed what they have agreed to do in the contract. Section 38(1) of the
Contracts Act, 1950, provides that the parties to the contract must either
perform, or offer to perform, their respective promises, unless such performance
has been dispensed with or excused under this Act or of any other law.
Further, Section 38(2) of the Contracts Act 1950 provides,
promises bind the representatives of the promisors in case of the death of the
promisors before performance, unless a contrary intention appears from the
contract.
The following illustrations explain the provision:
Illustration (a)
A promises to deliver goods to B on a certain day on payment of RM1,000.

A dies before that day. A's representatives are bound to deliver the goods
to B, and B is bound to pay the RM1,000 to A's representatives.
Illustration (b)
A promises to paint a picture for B by a certain day, at a certain price. A

dies before the day. The contract cannot be enforced either by A's
representatives or by B.
Meanwhile, Section 40 of the Contracts Act 1950 provides,
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 word or conduct, his acquiescence in its
continuance.
It means that with the promisees consent, a contract will continue to exist even
though promisors act has already amounted to a breach of the contract.
7.2.1 Time and Place of Performance

Parties to the contract must perform their obligations according to the time and
place that they have agreed in the contract. Otherwise, the contract is voidable at
the option of the promisee. According to Section 47 of the Contracts Act 1950,
where, by the contract, a promisor is to perform his promise without application

by the promisee, and no time for performance is specified, the engagement must
be performed within a reasonable time.
The question "what is a reasonable time" is, in each particular case, a question of
fact.
In Section 48,
when a promise is to be performed on a certain day, and the promisor has

undertaken to perform it without of 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 performed.
For instance:
Illustration
A promises to deliver goods at B's warehouse on 1st of January. On that day,

A brings the goods to B's warehouse, but after the usual hour for closing it,
and they are not received, A has not performed his promise.
And according to Section 49,
when a promise is to be performed on a certain day, and the promisor has not
undertaken to perform it without application by the promisee, it is the duty of
the promisee to apply for performance at a proper place, and within the hours of
business.
Whether time of performance is to be of the essence of the contract, is stated in

the case of:
Yeoh Kim Pong (Realty) Ltd v Ng Kim Pong [1962] MLJ 118
In this case, the developer appellant was supposed to perform certain

obligations for the respondent. Nevertheless, the appellant delayed in
performing their obligation. Although the appellant was late, the
respondent allowed the delivery dates to pass by agreeing to the work
being done by the appellant and by further ordering extra work.
Held: The respondent cannot rescind the contract because he had waived
his right to do so by allowing the appellant to still perform the obligation
after the time had passed. Thus, the respondent had to treat the contract as
subsisting.
The statement of the Lordships: if in a contract in which time is of the

essence, a party fails to perform it by the stipulated time, the innocent
party has the right either to rescind the contract, or to treat it as still
subsisting. If he treats it either expressly or by conduct as still continuing,
the contract exists but time ceases to be of the essence and becomes at
large.
Place of performance of a contract is provided under Section 50 of the Contracts

Act 1950 which provides where no place is specified for performance, and the
promise is to be performed without application by the promisee, it is the duty of
the promisor to ask the promisee where he would like the contract to be
performed. For instance:
Illustration
If A undertakes to deliver a thousand gantangs of rice to B on a fixed day, A

must apply to B to appoint a reasonable place for the purpose of receiving it,
and must deliver it to B at that place.
7.2.2 Performance of Reciprocal Promise

According to Section 52 of the Contracts Act 1950,
when a contract consists of reciprocal promises to be simultaneously performed,

no promisor need perform his promise unless the promisee is ready and willing
to perform his reciprocal promise.
A case to explain the provision:
Central Malaysia Development Ltd v Chin Pak Chin [1967] 2 MLJ 174
There was an agreement for the sale of land where the defendant-vendor was
to execute a valid transfer and deliver vacant possession of the land to the
plaintiff upon paying the deposit.
Held : They were reciprocal promises to be performed simultaneously because

the plaintiff was ready and willing to perform. Since the defendant could not
give vacant posession by the due date, the defendant was in breach, which
entitled the plaintiff to repudiate the contract and obtain the return of the
deposit.
7.2.3 Performance by Third Party

Section 41 of the Contracts Act 1950, states,
if it is the intention of the parties that the contract should be performed by the
promisor himself, then it must be performed by him personally.
However according to Section 42, if a promisee accepts performance of the

promisee from a third party, he cannot afterwards enforce it against the
promisor. In the case of:
Chin Swee Onn v Puchong Realty Sdn. Bhd [1990] 1 MLJ 108
The parties agreed to transfer land to each other, the consideration for
the appellants parcel being $25,000 and that of the respondents, $14,000.
It was also agreed that the difference of $11,000 would be settled by two
sons of the respondent; one would be responsible for $4,000 and the
other for $7,000. The $7,000 was not paid and the appellant thereupon
claimed payment from the respondent.
Held: As the appellant had agreed to accept performance of the promise

from the third party, he could not under Section 42 of the Contracts Act
1950, enforce it against the respondent.
7.3 DISCHARGE BY IMPOSSIBILITY

Impossibility of performance covers two situations. Impossibility at the time a
contract is made and impossibility after it has been made.
Impossibility at the time a contract is made (under Section 57(1)) means, an

agreement to do an act impossible in itself, which is void. For example:
Illustration (a)
An agreement to discover treasure by magic is void.
Impossibility after a contract has been made (under Section 57(2)) means, a
contract becomes impossible to perform subsequent to their making. Section
57(2) of the Contracts Act 1950 states,
a contract to do an act which, after the contract is made, becomes impossible, or

by reason of some event which the promisor could not prevent, unlawful,
becomes void when the act becomes impossible or unlawful.
This principle covers the doctrine of frustration in common law. The frustration
doctrine is applied on the ground that there is supervening impossibility which
causes the whole purpose of a contract to be different from what was undertaken
by the contract or its performance has become unlawful. Therefore, frustration
refers to circumstances that occur, where there is no default by the contracting
parties to perform their contractual obligations. Supervening impossibility will

discharge a contract.
The circumstances under which a contract may be discharged by supervening

impossibility are as follows:
(a) Destruction of the subject-matter of the contract. Example of cases:
Taylor v. Caldwell (1863) B&S 826.
The defendant agreed to let the claimant have the use of a music hall
for the purpose of holding four concerts. Before the first concert was
due to be held, the hall was destroyed by fire without negligence by
any party. The claimant sued for damages for wasted advertising
expenses.
Held: The contract was impossible of performance and the defendant

was not liable.
H A Berney v Tronoh Mines Ltd [1949] MLJ 4
Held: the contract of employment was discharged by frustration on

the outbreak of war when Japan invaded Malaya.
(b) Supervening events defeat the whole purpose or object of the contract. As
in the case of:
Krell v Henry [1903] 2 KB 740
The claimant owned a room overlooking the proposed route of the Coronation
procession of Edward VII, and had let it to the defendant for the purpose of
viewing the procession. The procession did not take place because of the
Kings illness. The claimant sued for the agreed fee.
Held: The defendant could be excused from paying rent for the room as the
contract was frustrated. The fact that the procession had been cancelled
discharged the parties from their obligations, since it was no longer possible to
achieve the real purpose of the agreement.
(c) Death or personal incapacity of a party to the contract. Under this

circumstance, the party to the contract has undertaken a personal
obligation. Therefore, personal qualification and skill of the person are the
basis of the contract.
(d) Supervening illegality.This refers to a contract where its performance

becomes unlawful, due to a change in the law. A case for instance:
Lee Kin v. Chan Suan Eng [1933] MLJ 197
Held: A lease for five yearly renewals was frustrated by the

enactment of a new law prescribing annual renewals.
7.3.1 Effect of Frustration

When a contract is automatically terminated by reason of frustration, the contract
becomes void and Section 66 of the Contracts Act 1950 applies. According to
Section 66,
when an agreement is discovered to be void, or when a contract becomes void,

any person who has received any advantage under the agreement or contract is
bound to restore it, or to make compensation for it, to the person from whom he
received it.
For example:
Illustration (d)
A contracts to sing for B at a concert for RM1,000, which are paid in advance.
A is too ill to sing. A is not bound to make compensation to B for the loss of
the profits which B would have made if A had been able to sing, but must
refund to B the RM1,000 paid in advance.
Section 15 of the Civil Law Act 1950 (Revised 1972) is also relevant to frustration
contract. Section 15(2) provides that money due but not paid before frustration
ceases to be payable. But if the money has actually been paid, it must be restored.
If the party in the contract has incurred expenses in performing the contract
before frustration, the court has the discretion to order payment not exceeding
the amount of the said expenses.
7.4 DISCHARGE BY BREACH

Section 40 of the Contracts Act 1950 states,

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.
This means, when a promisor fails to perform his obligations or to tender

performance, there is a breach of the contract which entitles the party not in
breach to take appropriate action which may include repudiation. For example:
Illustration (a)
A is a singer, enter into a contract with B, the manager of the theatre, to sing
at his theatre two nights in every week during the next two months, and B
engages to pay her $100 for each nights performance. On the sixth night, A
wilfully absents herself from the theatre. B is at liberty to put an end to the
contract.
In the case of:
Ban Hong Joo Mine Ltd v. Chen & Yap Ltd [1969] 2 MLJ 83
Held: The deliberate refusal of the appellants to make fortnightly

payments for work already done and their order to the respondents to
stop work left the respondents with no option but to treat the contract as
having been repudiated, and to sue for payment for the work which had
been done.
The party not in breach has the option either to continue or repudiate the
contract. If the party not in breach chooses to continue with the contract, the
obligation of both parties sustains and the party not in breach could still claim for
damages. As illustrated below:
Illustration (b)
A, a singer, enters into a contract with B, the manager of a theatre, to sing at
his theatre two nights in every week during the next two months, and B
engages to pay her at the rate of $100 for each night. On the sixth night, A
wilfully absents herself. With the assent of B, A sings on the seventh night. B
has signified his acquiescence in the continuance of the contract, and cannot
now put an end to it, but is entitled to compensation for the damage sustained
by him through A's failure to sing on the sixth night.
SELF-CHECK 7.1
(a) How can a contract be discharged?
(b) What is the effect of novation?
(c) Under what situations remission of performance is allowed to
the party in contract?
(d) Is time of performance essential in a contract?
(e) Can the performance of a contract be done by a third party?
(f) What is the meaning of frustration in contract?
(g) What are the circumstances under which a contract may be
discharged by supervening impossibility?
(h) What is the effect of frustration?
(i) What is meant by breach that entitles the party to discharge a
contract?
ACTIVITY 7.1
Discuss the following problems by applying the relevant principles

of law:
(a) An action was brought by Mr Fernando for damages for non-
acceptance of 5,200 bags of Moghul rice by Mr Roshan. The
sold note stated that the rice was to be shipped during the
months of November and/or December 2007. A total of 5,100
bags was put on board ship on 31 October 2007, and the
remaining 100 bags on 3 November 2007. Mr Roshan refused to
take delivery because the rice was not shipped in accordance
with the terms of their contract. Discuss the rights of Mr
Fernando and Mr Roshan in the above contract.
(b) Edward agreed to let Daw to have a room for the purpose of
viewing the Parade for Visit Malaysia Year 2007 on 1 September
2007, for RM550. The contract provided that the money payable
immediately. The procession did not take place because of heavy
rain and flood. Daw who had paid RM300 on account, left the
balance unpaid. Daw sued to recover the RM300 and Edward
counter-claimed for RM250. Advise the parties on their rights in
the above contract.
(c) Steve agreed in April 2007 to engage Smith as a courier for

Malaysian travel, his duties to commence on 1 June 2007. On 11
May 2007, Steve wrote to Smith saying that he no longer required
Smiths services. Feeling unsatisfied, Smith decided to commence
an action for breach of contract on 22 May 2007. Steve contended
that there was no cause of action until the date due for
performance. Advise Smith.
7.5 REMEDIES
In cases of breach of contract, the party not in default may claim one or more of
the following remedies:
(a) Rescission of contract
(b) Damages
(c) Specific Performance
(d) Injunction
(e) Quantum Meruit
7.5.1 Rescission of Contract

Under Section 40 of the Contracts Act 1950,

performing, his promise, the promisee may put an end to the contract.......
It means that a non-performance of a contract by any of the party to the contract

will entitle the other party to rescind the contract.
7.5.2 Damages
The claim for damages in cases of breach of contract is provided under Sections
74 to 76 of the Contracts Act 1950. Section 74 provides the measure of damages
recoverable by the claimant. This section re-enacts the common law rule in the
case of Hadley v. Baxendale (1854) 9 Ex 341. The rule provides that an injured
party is entitled to the following:
(a) Damages arising naturally, that is, according to the usual course of things
resulting from the breach.
Lee Hin v. Mohamed Abubakar [1958] MLJ 25
Held: The loss which arises naturally resulting from the breach by the
defendant is the loss of plaintiffs profit which is usually the difference
between the contract price and the market price.
(b) If the party is claiming special damages for loss, he must show that the
other party knew at the time of making the contract that the special loss is
likely to result from the breach. This is explained in the case of:
East Asiatic Co. Ltd v. Othman [1966] 2 MLJ 38
The defendant agreed to buy the plaintiffs car for RM6,390. However,
the defendant committed breach and the plaintiff had to sell his car to
another company at a cheaper price, RM4,477.69. Plaintiff later claimed
damages amounting to RM1,912.31, being the difference between the
selling price that he could get from the defendant and the actual selling
price that he acquired from another company.
Held: Plaintiff was entitled to that amount.

Tham Chew Toh v. Associated Metal Smelters Ltd [1972] 1 MLJ 171
The defendant-appellant had agreed to sell a metal melting furnace

to the plaintiff-respondent, and giving an undertaking that the
melting furnace would have a temperature of not lower than 2,600
degrees F. This specification was not fulfilled and consequently, the
respondent brought an action alleging breach of condition and
claimed damages, including loss of profits.
Held: The appellant would not normally be liable for payment of

damages for loss of profits unless there was evidence that the special
object of the furnace had been drawn to their attention and they had
contracted on the basis that delay in delivery would make them
liable to payment for loss of profits.
Since the appellant knew of the requirement to deliver a furnace

capable of producing the specified temperature and the urgency of
delivery, they were liable to pay for certain loss of profits suffered by
the respondent.
(c) The compensation given is not for any remote and indirect loss or damage
sustained as a result of the breach.
Mitigation of loss
It is also the duty of the party to take reasonable steps to mitigate losses flowing
from a breach. If the party has failed to mitigate losses, he cannot later recover
any loss flowing from his neglect. A case to illustrate this:
Kabatasan Timber Extraction Co. v. Chong Fah Shing [1969] 2 MLJ 6
The respondent had purchased timbers, which were to be delivered to a

sawmill from the appellant. However, instead of delivering it to the
sawmill, the appellant left it 500 feet away from the sawmill. Thus, the
respondent had made a second purchase from other sources to make good
the shortage.
Held: It was the duty of the respondent to take reasonable steps to mitigate
the damages caused by the appellant. There was no need for the
respondent to have gone to the expense and trouble of buying logs from
elsewhere when the logs were lying a few hundred feet away and all that
required was additional expense for hauling them up to the sawmill.
Therefore, the court reduced the damages awarded to the respondent.
Classification of Damages
Substantial It is a pecuniary compensation that put the plaintiff in the

position he would have enjoyed if the contract had been
performed.
Nominal Small token of award that is given when the plaintiff has
proved there is a breach, but he did not suffer actual loss.
Exemplary A sum awarded which is far greater than the actual

pecuniary loss suffered by the plaintiff. It is commonly
given upon the breach of any duty that has been prescribed
by the statute.
Liquidated Damages Damages that may be assessed by mere arimethic

calculation.
Unliquidated Damages Damages that cannot be ascertained.
7.5.3 Specific Performance

Specific performance is a discretionary remedy granted by the court. It is a decree
of the court directing that the contract shall be performed specifically according
to its terms. The remedy is granted under the Specific Relief Act 1950. Section
11(1) of the Specific Relief Act 1950 provides that, specific performance may be
granted by the court in the following circumstances:
(a) When the act agreed to be done is in the performance, wholly or partly, of a
trust.
Illustration
A holds certain stock in trust for B. A wrongfully disposes of the stock.

The law creates an obligation on A to restore the same quantity of stock
to B, and B may enforce specific performance of this obligation.
(b) When there exists no standard for ascertaining the actual damage caused by
the non-performance of the act agreed to be done.
Illustration
A agrees to buy, and B agrees to sell, a picture by a dead painter and

two rare China vases. A may compel B specifically to perform this
contract, for there is no standard for ascertaining the actual damage
which would be caused by its non-performance.
(c) An act agreed to be performed is such that its non-performance would not
afford adequate relief.
Illustrations
(i) A contracts with B to sell him a house for RM1,000. B is entitled to a

decree directing A to convey the house to him, he paying the purchase-
money.
(ii) In consideration of being released from certain obligations imposed on it

by its Act of Incorporation, a railway company contracts with Z to make
an archway through their railway to connect lands of Z served by the
railway, to construct a road between certain specified points, to pay a
certain annual sum towards the maintenance of this road, and also to
construct a siding and a wharf as specified in the contract. Z is entitled to
have this contract specifically enforced, for his interest in its performance
cannot be adequately compensated for by money; and the court may
appoint a proper person to superintend the construction of the archway,
road, siding, and wharf.
(iii) A contracts to sell, and B contracts to buy, a certain number of railway-

shares of a particular description. A refuses to complete the sale. B may
compel A specifically to perform this agreement, for the shares are limited
in number and not always to be had in the market, and their possession
carries with it the status of a shareholder, which cannot otherwise be
procured.
(iv) A contracts with B to paint a picture for B, who agrees to pay therefor
RM1,000. The picture is painted. B is entitled to have it delivered to him
on payment or tender of the RM1,000.
(d) When it is probable that pecuniary compensation cannot be obtained for the
non-performance of the act agreed to be done.
Illustration
A transfers without endorsement, but for valuable consideration, a promissory

note to B. A becomes insolvent, and C is appointed as his assignee. B may
compel C to endorse the note, for C has succeeded to A's liabilities and a decree
for pecuniary compensation for not endorsing the note would be fruitless.
Further, Section 20(1)(a) of the Specific Relief Act 1950 clearly states that specific
performance will not be granted where monetary compensation is adequate.
7.5.4 Injunction
Injunction as a remedy is classified under Part III of the Specific Relief Act 1950
as Preventive Relief. It is granted at the discretion of the court and it can be
either temporary or perpetual (Section 50).
Section 51 of the Specific Relief Act 1950 explains the injunctions as follows:
1. Temporary injunctions (or interlocutory or interim injunction) are to

continue until a specified time, or until the further order of the court. They
may be granted at any period of a suit, and are regulated by the law
relating to civil procedure.
2. A perpetual injunction (or permanent injunction) can only be granted by

the decree made at the hearing and upon the merits of the suit; the
defendant is thereby perpetually enjoined from the assertion of a right, or
from the commission of an act, which would be contrary to the rights of the
plaintiff.
The temporary injunction is granted by the court to preserve the status quo
pending the resolution of a legal action. A perpetual injunction can only be
granted after a full trial and upon the merits of a case, and the defendant is
permanently prohibited from doing the act or asserting a right for which the
injunction was granted. In the case of:
Neoh Siew Eng & Anor v. Too Cheng Kwong [1963] MLJ 272
Held: The court granted a perpetual injunction by ordering the defendant

who was a landlord of the plaintiff to keep all communication pipes in
proper repair and to comply with all regulations of the Waterworks
Department so that water supply to the premises rented by the plaintiffs
would not be disconnected.
Further principles in Section 55 of the Specific Relief Act 1950 provides that
where a contract consists of affirmative agreement and negative agreement, the
court cannot compel specific performance of the affirmative agreement but shall
grant injunction to perform the negative agreement. For instance:
Illustration
A contract with B to sing for twelve months at Bs theatre and not to sing
elsewhere. B cannot obtain specific performance of the contract to sing but he
may be able to secure an injunction to restrain A from singing at any other
place of public entertainment.
An example of case:
Pertama Cabaret Nite Club Sdn. Bhd v. Roman Tam [1981] 1 MLJ 149
A singer had signed a contract to appear and sing at the appellants night
club for a number of days, and the contract provided that in the event of a
breach, the respondent should not perform in Kuala Lumpur during the
fixed period of the contract. Later, the singer dishonoured the contract by
singing in a rival club. The court had granted an interlocutory injunction.
7.5.5 Quantum Meruit

This remedy means that the claimant will be awarded as much as he has earned
or deserved. The remedy can be used contractually or quasi-contractually.
Contractually, quantum meruit may be used to recover a reasonable price or

remuneration where there is a contract for the supply of goods or services but the
parties have not fixed any precise sum to be paid.
Quasi-contractually, a claim of quantum meruit may be made where, for

instance, work has been done under a void contract. The claimant cannot recover
damages for breach because no valid contract exists, but he may recover on a
quantum meruit basis.
In the case of Craven-Ellis v. Canons Ltd [1936] 2 All ER 1066,
The claimant was employed as managing director by the company under a

deed which provided for remuneration. The articles provided that directors
must have qualification shares, and must obtain these within two months of
appointment. The claimant and other directors who appointed him never
obtained the required number of shares so that the deed was invalid.
However, the claimant had rendered services, and he now sued on a quantum
meruit for a reasonable sum by way of remuneration.
Held: He succeeded on a quantum meruit, there being no valid contract.
SELF-CHECK 7.2
(a) What are the remedies available to the parties in a contract?

(b) Can the plaintiff claim damages more than the amount of his
actual loss?
(c) What is the importance of mitigating losses in claim for
damages?
(d) When will the court grant the remedy of specific performance?
(e) In what circumstance specific performance is not to be granted?
(f) What is injunction?
(g) What is the difference between temporary injunction and
perpetual injunction?
ACTIVITY 7.2
Discuss the following problems by applying the relevant principles of

law:
(a) AG Sdn Bhd (AGSB) has been awarded a tender to supply sugar
for Yummy Biscuits Factory (YBF) for 2 years. According to the
agreement, AGSB has to deliver 500 bags of sugar every month to
the factory. Last month, AGSB managed to deliver only 200 bags of
sugar and due to that, YBF has to reduce their production and
reject orders from the customers. Advise YBF whether they can
claim damages from AGSB.
(b) On 3rd December 2007, Kenchana agreed to deliver a new boilder
to Dewi in two months time but she had failed to do so. Kenchana
had delivered the said boiler 12 weeks later, after the two months
period for delivery due. As a result, Dewi lost her normal business
profits during the period of delay and also the profits from dyeing
contracts which were offered to her during the period. Dewi now
wished to claim damages from Kenchana for her losses. Can she
succeed? Discuss.
(c) Cempaka, a distinguished actress, had entered into a contract in
which she agreed to act exclusively for the film company (Famous
Production) for 18 months. Subsequently, she was anxious to
obtain more money and thus she left Famous Production to enter
into a contract with another film company, Starhill Production.
Famous Production found out about this and asked for an
injunction to restrain Cempaka from carrying out the contract with
Starhill Production. Advise Famous Production on its chance of
success.
When a contract is terminated, it is said to be discharged and the contracting

parties are free from further obligations arising from it.
A contract that is created by consent can be discharged by consent.
The effect of novation is to release the obligation of the parties under the
earlier contract.
A contract is said to be discharged when the parties to the contract has

performed what they have agreed to do in the contract.
An agreement to do an act impossible in itself is void.
An injured party is entitled to damages arising naturally resulting from the
breach.
A claim for special damages requires the party to show that the other party
knows that the special loss is likely to result from the breach.
There is a general duty requiring that reasonable steps must be taken to
mitigate losses flowing from a breach.
Specific performance is a discretionary remedy granted by the court.
Injunction as a remedy is classified as Preventive Relief.
Agreement Injunction
Breach Performance
Damages Quantum Meruit
Discharge of contract Remedies
Frustration Specific performance
Text Books:
Harlina Mohamed On & Rozanah Ab. Rahman. (2007). Undang-Undang
Perniagaan Malaysia. Selangor: Kumpulan Usahawan Muslim Sdn. Bhd.
Keenan, D. (2006). Smith and Keenans Law for Business (13th ed.). UK:
Pearson and Longman.
Wu M. A. & Vohrah B. (2000). The Commercial Law of Malaysia (2nd ed.).
Selangor: Pearson and Longman.
Cases:
Ban Hong Joo Mine Ltd v. Chen & Yap Ltd [1969] 2 MLJ 83.
Central Malaysia Development Ltd v Chin Pak Chin [1967] 2 MLJ 174.
Chin Swee Onn v Puchong Realty Sdn. Bhd [1990] 1 MLJ 108.
East Asiatic Co. Ltd v. Othman [1966] 2 MLJ 38.
H A Berney v Tronoh Mines Ltd [1949] MLJ 4.
Hadley v. Baxendale (1854) 9 Ex 341.
Kabatasan Timber Extraction Co. v. Chong Fah Shing [1969] 2 MLJ 6.
Kerpa Singh v Bariam Singh [1966] 1 MLJ 38.
Krell v Henry [1903] 2 KB 740.
Lee Hin v. Mohamed Abubakar [1958] MLJ 25.
Lee Kin v. Chan Suan Eng [1933] MLJ 197.
Neoh Siew Eng & Anor v. Too Cheng Kwong [1963] MLJ 272.
Pertama Cabaret Nite Club Sdn. Bhd v. Roman Tam [1981] 1 MLJ 149.
Taylor v. Caldwell (1863) B&S 826.
Tham Chew Toh v. Associated Metal Smelters Ltd [1972] 1 MLJ 171.
Yeoh Kim Pong (Realty) Ltd v Ng Kim Pong [1962] MLJ 118.

Law of Contract Discharge and Remedies

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Topic Law of

(c) Discharge by impossibility ; or

7.1 DISCHARGE BY CONSENT OR AGREEMENT

7.1.1 Novation, Rescission and Alteration

Novation is the substitution or replacement of a new contract for an earlier one.

A owes money to B under a contract. It is agreed between A, B and C that B

A owes B $1,000 under a contract. B owes C $1,000. B orders A to credit C with

An example of alteration of a contract, as follows:

A owes B $10,000. A enters into arrangement with B, and gives B a mortgage

7.1.2 Remission of Performance

(a) Payment of a lesser sum in satisfaction of a larger sum. For example:

A owes B $5,000. A pays to B, and B accepts, in satisfaction of the whole

(b) Payment of a lesser sum by a third party to satisfy a larger debt.

A owes B $5,000 and a third party, C, pays to B $1,000 and B accepts

(c) Payment accepted in satisfaction of an unascertained sum.

A owes B under a contract, a sum of money, the amount of which has

(d) An arrangement between a debtor and his creditors to settle debts.

A owes B $2,000, and is also indebted to other creditors. A makes an

A case to illustrate further the application of the provision:

Kerpa Singh v Bariam Singh [1966] 1 MLJ 38

7.2 DISCHARGE BY PERFORMANCE

Further, Section 38(2) of the Contracts Act 1950 provides,

The following illustrations explain the provision:

A promises to deliver goods to B on a certain day on payment of RM1,000.

A promises to paint a picture for B by a certain day, at a certain price. A

Meanwhile, Section 40 of the Contracts Act 1950 provides,

when a party to a contract has refused to perform, or disabled himself from

7.2.1 Time and Place of Performance

where, by the contract, a promisor is to perform his promise without application

when a promise is to be performed on a certain day, and the promisor has

A promises to deliver goods at B's warehouse on 1st of January. On that day,

And according to Section 49,

Whether time of performance is to be of the essence of the contract, is stated in

In this case, the developer appellant was supposed to perform certain

The statement of the Lordships: if in a contract in which time is of the

Place of performance of a contract is provided under Section 50 of the Contracts

If A undertakes to deliver a thousand gantangs of rice to B on a fixed day, A

7.2.2 Performance of Reciprocal Promise

when a contract consists of reciprocal promises to be simultaneously performed,

A case to explain the provision:

Held : They were reciprocal promises to be performed simultaneously because

7.2.3 Performance by Third Party

However according to Section 42, if a promisee accepts performance of the

Held: As the appellant had agreed to accept performance of the promise

7.3 DISCHARGE BY IMPOSSIBILITY

Impossibility at the time a contract is made (under Section 57(1)) means, an

An agreement to discover treasure by magic is void.

a contract to do an act which, after the contract is made, becomes impossible, or

parties to perform their contractual obligations. Supervening impossibility will

The circumstances under which a contract may be discharged by supervening

(a) Destruction of the subject-matter of the contract. Example of cases:

Taylor v. Caldwell (1863) B&S 826.

Held: The contract was impossible of performance and the defendant

H A Berney v Tronoh Mines Ltd [1949] MLJ 4

Held: the contract of employment was discharged by frustration on

Krell v Henry [1903] 2 KB 740

(c) Death or personal incapacity of a party to the contract. Under this

(d) Supervening illegality.This refers to a contract where its performance

Lee Kin v. Chan Suan Eng [1933] MLJ 197

Held: A lease for five yearly renewals was frustrated by the

7.3.1 Effect of Frustration

when an agreement is discovered to be void, or when a contract becomes void,

7.4 DISCHARGE BY BREACH