LAW416

LAW OF CONTRACT
1. DISCHARGE OF CONTRACT
2. REMEDIES
1. DISCHARGE OF CONTRACT

• It means that the contract is terminated.

• There are four ways in which a contract can be discharged:-

• By performance
• By consent/agreement between parties
• Frustration
• Breach of contract

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a) Discharge By performance

• A contract is said to be discharged by performance when the

parties to contract has performed what they have agreed to do in
the contract.

• Sec 38(1) – parties to a contract must either perform or offer to

perform their respective promises.

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b) Discharge By Agreement

• A contract is said to be discharged by agreement if the parties to

contract agrees that the contract will be discharged. This agreement
can be made during the contract or after the contract has been made.

• Eg: You entered into contract with Siti. In the contract both of you
agree that the contract will be put to an end if the profit of your
business is less than RM1 million a year. If the profit is less, then the
contract is said to be discharged by agreement.

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c) Discharge by frustration

• A contract is terminated if the terms that the parties agreed to

do is impossible to perform. It can either be at the time the
contract was made or when the contract has been made that the
obligation became impossible to perform.

Taylor v Caldwell (1863)

• The Pt hired the Df’s hall for the purpose of performing

concerts. Unfortunately, the hall was accidentally burnt down
before the date of concert.
• The court held that the contract may be discharged by
frustration. 5
• Declaration of war would as general rule frustrate all contracts
with enemy aliens
• Iraq v US
• Israel v Palestine

Consequences of frustrations
• Frustration terminates the contract automatically and the contract
is void.

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d) Discharge by breach of contract

• A contract can be put to an end if a party to the contract did not do

what they have promised to do in the contract.

• Sec 40:-
When a party to a contract has refused to perform or disabled
himself from performing his promise in its entirely, the promise may
put to an end to the contract unless he has signified, by word or
conduct, his acquiescence in its continuance.

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The party who is not in breach of the contract has two (2) options:-

i) to continue with the contract and claim damages, or

ii) repudiate the contract

• Effect:- Contract is voidable

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Effect of breach of contract

• Sec 65:- If the party who is not in breach terminated the contract, he
must restore any benefits which he may have received from the other
party.

Example:
• Mah Wi, a singer entered into a contract with Ajai (manager of Planet
Hollywood) to sing at Planet Hollywood for two nights, every week during
the next two months.
• Ajai agrees to pay Mah Wi RM10,000.00 for each night. On the sixth night,
Mah Wi willfully absented himself from the show. Consequently, Ajai
rescinds the contract. Ajai must pay Mah Wi for the five nights on which he
had sung.
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2. REMEDIES FOR BREACH OF CONTRACT

• When there is a breach of contract, the injured party may

claim one or more of these remedies:-

1. Damages
2. Specific performance
3. Injunction

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a) Damages

• Damages are granted to a party as compensation for the damage, loss

or injury he has suffered through a breach.

• Law relating to damages arising from the breach of contract is found in

Section 74 to 76 of the Contract Act.

• The award of damages aims to put the Plaintiff in the position he would
have been if the contract had been performed.

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Brown v Hilton Hotels Corp (1974)

• The Hotel failed to honour the Plaintiff’s confirmed reservations.

• The Plaintiff were unable to find other accommodations and so
were forced to fly home.
• The Plaintiff received damages for breach of contract.

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b) Specific Performance

• This is when the court directs the party to the contract to do exactly
what he has promised in the terms of contract.
• It is given at the discretion of the court.
• It is governed by the Specific Relief Act 1950.

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 c) Injunction

• Injunction is a court order requiring something to be done

(mandatory injunction) or stopping something from being done
(prohibitory injunction).

• Two types of injunctions:-

(i) Temporary/Interlocutory
(ii) Perpetual or permanent

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Neoh Siew Eng v Too Chee Kwang [1963] MLJ 272

• In a dispute between the landlord and its tenants, the landlord had cut the
water supply.
• In this case, the court granted a perpetual injunction requiring the landlord
to keep water supply open for his tenants.
• The injunction was to ensure that water supply to the premises would not
be disconnected.
Pertama Cabaret Nite Club Sdn Bhd v Roman Tam (1981) 1 MLJ 149

• A singer has signed a contract to appear and sing at the Appellant’s night club for
a number of days.

• The contract provided that; in the event of breach, the respondent should not
perform in Kuala Lumpur during the fixed period of the contract.

• The Respondent declined to honour the contract and attempted to sing in a rival
club.

• Federal Court granted an interlocutory injunction.

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