Discharge of contract 1- by performance 2- by consent or agreement bet the parties

1. Discharge of contract 1- by performance 2- by consent or agreement bet the parties 3-by impossibility 4- by breach 1- Discharge by performance Performance of obligation of each contracting party will discharge the party from his contractual obligation

2. See s. 40 a) Time of performance General rule – time and place based on the contract s. 49 i- certain day - based on the application by the promisee; or

3. S 48 ii- certain day but no application by the promisee is required- based on the usual hour of business on the day and at the place promised S 47 iii- No time fixed- w/in reasonable time

4. S 56(1) performance of contract depend on the promised made by both parties Question of whether time is the essence depends on the terms of the contract or the nature of the contract

5. In Ganam d/o Rajamany v Samoo s/o Sinnah the court laid down 3 types of case where time can become the essence of the contract. i- expressly state in the contract that time is the essence ii- originally time is not the essence of the contract, but the party delayed his performance beyond reasonable time, the other party gives a notice demanding the performance to be done w/in the time stipulated in the notice

6. iii- from the type and the characteristics of the subject matter of the contract time is considered as the essence of the contract

7. 1 If the contract terms provide that “time is the essence of the contract” Sim Chio Huat v Wong Ted Fui 2 effects of delayed performance: i- the innocent party may choose to rescind the contract; or ii- continue with the contract. In this case the court held that by allowing the delivery dates to pass, by agreeing to the work being done by the developer and by further ordering extra work, the resp. had waived his right

8. to rescind the contract, and consequently was deemed to have opted to treat the contract as subsisting. The party who accepted delayed payment can’t claim compensation unless at the time he accepted the delayed performance he gives notice of his intention to claim compensation [s 56(3)]

9. 2 If contract terms do not specify that time is the essence of the contract Yeow Kim Pong (Realty) Ltd v Ng Kim Pong Whether time is the essence or not depend on the intention of the parties by examining the circumstances of the contract. If the time is not an essence of the contract – delay does not allow the promisee to rescind the contract – but can claim compensation

10. b) Place of performance Depends on the terms of the contract. If not in the terms – depends on the party’s choice - the person who wanted to perform can ask the other party to nominate the place of performance [s 50] c) Performance of reciprocal promise Reciprocal promise – two promises wh must be performed at the same time [s 52]

11. Central Malaysia Development ltd v Chin Pak Chin Both parties entered into an agreement for the sale of a parcel of land by the def to the plf. The agreement provides that the def must make a valid transfer of title and registered the land in the names of the plf, and deliver vacant possession once the plf paid the deposit. Def. could not performed his obligation although the plf was ready to do theirs. .

12. Held- both parties must perform their obligations reciprocally. Pld can rescind the contract for the non performance by the def. and claim its deposit If the contract fixed the order of performance – parties must follow the order [s 53] If the contract did not fix the order of performance – depend on the nature of the contract [s 53]

13. e.g. A contracted to sell land to B. A Promises to transfer title to B while B promises to pay the whole price of RM100,000. They forgot to mention who should perform first. The answer depends on the nature of the contract of sale of land Where the performance of the contract depends on prior performance by the other party – the second party cannot claim performance by the first party if he himself fails to perform his obligation. [s 55]

14. Indeed, the second party has to compensate the first party for the losses suffered by the latter due to non-performance by the second party If one of the parties to a contract cannot perform his reciprocal promise due to the act of the other party – the first party can rescind the contract & claim compensation for losses due to non- performance [ s 54]

15. d) Performance by 3rd party S 41 and s 42 If the intention of the parties was that the promisor must perform his promise, he must perform it Personally. e.g. contract involving personal skills or contract of employment If that intention is not present, the promise can be performed by other individuals on behalf of the promisor.

16. If the promisee accepted the performance by the 3rd party he cannot later on enforce it against the promisor. S 42 Haji Nik ishak bin haji Daud v Nik Zainab bt Nik Jaafar Def and plf agreed to transfer land to each other. The consideration for the Appl’s parcel was RM25,000 while that of the resp.’s was RM14,000. the difference between the price would be settled by the Resp.’s 2 sons. One would be responsible for RM4,000 and the other for RM7,000.

17. The RM7,000 was not paid. Appl. claimed payment from the resp. Held- the resp is not liable to pay the RM7,000 because he had agreed to accept performance by 3rd party 2 Discharge by agreement a) novation, termination or amendment S 63 when parties have agreed to replace the old contract with a new contract, or terminate the contract or amend it, the parties don’t have to perform the old contract.

18. In Lyl Hooker Sdn bhd v Tevanaigam Savisthri, novation was defined as a new contract that eliminate the rights and duties under the old contract. Mawar Awal (M) Sdn Bhd v Kepong Management Sdn Bhd & Anor “Novation is a new contract. It extinguishes rights and obligations under the old contract for which the new contract is made. Being a new contract, there must be consent by all parties and there

19. must be consideration, and rights and obligations under it are not those transferred from the old contract which is already extinguished” b) Waiver of performance S 64 allows the promisee to waive performance partly or wholly. In that case the other party is discharged of his obligation to perform his promise

20. Associated Pan Malaysia Cement Sdn Bhd v Syarikat Teknikal & Kejuruteraan Sdn Bhd “[A] promisee can effectually dispense with performance of a contract, in whole or in part without either an agreement by the promisor, or consideration for the dispensation” 3 Discharge by breach of contract S 40 breach of contract by one party releases the other from his obligations.

21. The breach must have been caused by: i- refusal to perform all his promise; or ii-inability to perform his promise The party who is not in breach can rescind the contract or continue with the contract Cheng Chuan Development Sdn Bhd v Ng Ah Hock The Resp entered into a contract for the purchase of a shop house. The Appll increased the price unilaterally. The booking fee was then refunded by the Appll to the Resp and the cheque was cashed by the solicitors for the Resp.

22. Held-the Appll committed a breach of contract by unilaterally increasing the contract price of the shophouse. By cashing the cheque the solitor acted for the Resp. had accepted the breach of contract by the Appl.

23. 4 Discharge by frustration / impossibility S 57 – two types of impossibility: i- impossible for the party to perform his obligation at the time the contract is made; S 57(1) A agreement to do an act wh is impossible is void. e.g. illustration (a) The party who was aware or knew or with reasonable diligence might have known about the impossibility he must compensate the other party who is ignorant for the loss suffered by that Person as a result of non-performance

24. See illustration (c) ii- impossibility of performance subsequent after the contract has been concluded S 57(2) at the time the contract was made, the performance is possible. Later on, things happen and they prevent the promisor from performing his obligation, and he cannot avoid the things This section does not refer to the intention of the parties. Hence, it is not necessary to show that the parties intended to release each other from their obligations.

25. The important elements are: i- Supervening impossibility; ii- it caused the whole contract to be radically different or its performance has become unlawful It must not be a self induce impossibility. Ramli bin Zakaria & ors v G’ment of Malaysia Self-induced frustration does not discharge a party of his contractual obligations

26. The events have substantially prevented the party from performing the contract as a whole Khaw Daw Yau v Kim Nam Realty Development Sdn Bhd The vendor sold proposed development lots before the status of the lands was changed from agriculture land to building lots. When they applied to change the status of the lands, the state authority attached extra conditions, i.e., certain lots have to be reserved for bumiputra purchaser

27. The developer choose not to complete the construction of the houses. Q- was there a frustration of contract as a consequence of the special conditions imposed by the state authority? Held- under the circumstances and based on the facts of the case there was no frustration. It was said that “the doctrine does not apply just because the promisor’s obligation has become, because of the change in circumstances, more onerous [burdensome, difficult, heavy etc] than what hh has contracted for.”

28. Hence, additional conditions that make it difficult for the promisor to perform his promise will not discharge him from his obligation on ground of Frustration Davis Contractors Ltd v Fareham U.D.C A building, which was supposed to take 8 months to complete, took 22 because of unexpected labour shortages. The contractors claimed that their contract was partially frustrated but the court disagreed.

29. The delay "was not any new state of things which the parties could not reasonably be thought to have foreseen.“ Yong Ung Kai v Enting Plf entered into a contract to buy timbers from the def. the def failed to get the licence to cut trees from the forestry Department. The agreement failed to mention about the licence. The Def had tried his best but did get the necessary licence.

30. Q- was there a frustration of contract that can discharge the def. from his obligation to deliver timbers? Held- there was an implied condition that the sale of timber depends on the licence. Because the licence could not be obtained by the def., there was impossibility of performance. The impossibility must be something wh cannot be expected

31. Khoo Than Sui v Chan Chiau Hee Plf and def entered into an oral agreement. Def agreed to move timbers along the Sungai sugut to the timbers pool in Sandakan for the Plf. Def managed to move only 11 timbers before torrential rain and storm affected the area. Def tried to free himself from his obligation by claiming frustration of contract.

32. Held- storm and torrential rain are things that can be expected in this kind of contract. Therefore the def should have taken steps to manage the possibility of their occurrences

33. Effect of Frustration Contract comes to an end automatically. S 66 – 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 the advantage. See illustration (d)

34. S 15 of the Civil Law Act: Money due but not paid before the frustration – need not be paid; if it has been paid, it has to be restored. In case the recipient had performed some part of the contract and incurred expenses – the court may at its discretion order payment not exceeding the amount of expenses incurred if it is just to do so in the c/stances of the case

35. e.g. A built a house for B. the contract provides that payment will be made upon completion. While the house was under construction, it was destroyed by a storm. The contract comes to an end. What about A, can he claimed the expenses he had incurred? S 15(3) of the Civil Law Act provides that if one party had obtained a valuable benefit before the time of discharge, as a consequence of the other party performing his obligation under the contract, the 2nd person may recover fr the 1st person a sum wh is considered just by the court.

36. If the contract is severable – the payment to be recovered is to the extent of the contract wh is not frustrated. While for the part came under frustration – it can be recovered according to the rule in case of frustration of contract. e.g. A entered into a contract for house renovation. Payment based on the renovation phases: Kitchen, lounge, painting. The house was destroyed after the kitchen and lounge had been completed but before painting is Done. The contract is frustrated as far as the last part is concerned.

37. A will get payment for the first two works. For the last part depends on recovery in case of frustration. Example of frustrated contract i- destruction of subject matter of the contract. Taylor v Caldwell, music hall hired by the Def. to the Plf was accidetally burnt down before the date of the concert.

38. In Berney v Tronoh Mines Ltd A contract of employment was frustrated by the outbreak of war when Japan invaded Malaysia. S 12 of the Specific Relief Act 1950 provides that the subject matter must be totally destroyed. e.g. A contracted to sell a house to B for RM10,000. a day after the contract, the house was destroyed by a storm. B may be compel to pay the purchase price.

39. ii- the supervening events defeat the whole purpose or object of the contract Krell v Henry A room was hired by H for the sole purpose of watching the coronation procession of King Edward VII. H/ever, the event was cancelled due to the King’s illness. It was held that H could be excused from paying for the room as the contracted was frustrated.

40. iii- death or personal incapacity in case of contract involving personal obligation such as a contract of employment. This is because the personal skill and qualifications of the person forms the basis of contract. iv- supervening illegality Illegality that was caused by changes in the law. Lee Kin v Chan Suan Eng A lease for 5 yearly renewals was held tto be frustrated by the enactment of law prescribing annual renewal