DISCHARGE OF

CONTRACT

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  MEANING: When a contract is discharged, it means a contract is
terminated

 Once a contract is discharged, there are no more rights available under

the contract and no more obligations to be performed under the contract

 Contract may be discharged by any one of these following ways:

i. By performance of
the contract

iv. By breach of ii. By consent or

contract by any of agreement between
the parties the parties

iii. By frustration or
impossibility of
performance
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 (i) DISCHARGED BY PERFORMANCE OF THE CONTRACT

 Initially, both parties are bound to perform their promises made under the
contract

 Section 38 (1): “The parties to a contract must…perform…their

respective promises…”

 When both parties have performed their contract by carrying out their
promises under the contract, the contract is completely discharged

 Example: A agreed to sell his car to B for RM50k. B agreed to buy for that
price. This contract is discharged after A has delivered the car to B and B
has fully paid RM50k to A

 Section 41: If the parties agreed that the contract should be performed by
the promisor himself, than it must be performed by the promisor personally

 However, if the promisee accepts performance of the contract by third

party, he cannot enforce it anymore against the promisor – Section 42

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 Discharged by Performance of the Contract

Time for performance:

 Section 51: The performance of any promise must be performed at the time
agreed by the parties
 Section 56 (1): If the time of the performance of the contract is essential or
important, any delay will make the contract voidable
 Example: A agreed to deliver food to B. It was agreed the food should be
delivered before 8.00p.m. However, A delayed. B has the right to terminate the
contract (the contract is voidable)
 Section 56 (2): If the time is not essential, the contract does not become
voidable, but the party is entitled to compensation

Place for performance:

 Section 50: If there is a place being specified, must perform at that place. If
not specified, the promisor is under a duty to ask the promisee to specify
 Example: A agreed to deliver 100 gantangs of rice to B on a fixed day. A must ask
B to appoint a place for receiving it and deliver the rice at that place

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 (ii) DISCHARGED by CONSENT or AGREEMENT between the PARTIES

 A contract may be discharged by the consent or agreements of

the parties in the form of substitution, alteration or rescission
of the original contract

 Section 63: “If the parties to a contract agree to substitute

a new contract for it, or to rescind it, the original contract
need not be performed”

 Example: A owes B RM1000. It is agreed between A, B and C that

B shall accept C as his debtor, instead of A. In this case, the
original contract between A and B is discharged

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 (iii) DISCHARGED by FRUSTRATION or IMPOSSIBILITY of
PERFORMANCE

 A contract is discharged if there is impossibility of

performance of the contract

 Two situations of impossibility of performance:

i. SECTION 57 (1) – The contract is in itself impossible to be

performed
Example: A agrees with B to discover treasure by magic. The
agreement is void

ii. SECTION 57 (2) – The contract becomes impossible to be

performed after it has been made

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 • There are several situations that make a contract becomes
impossible to be performed after it has been made:

a) Destruction of the subject matter of the contract

• TAYLOR v CADWELL (1863) 3 BSS 826 - A music hall rented by the

defendant from the plaintiff for a series of concert was burnt down before
the date of the concert
• HELD: The contract was discharged due to frustration

b) The supervening events defeat the whole

purpose or object of the contract

• KRELL v HENRY (1903) 2 KB 740 – A room was hired for the purpose of
watching the coronation procession of King Edward VII
• However, due to the King’s illness, the coronation procession was cancelled
• HELD: The defendant could be excused from paying a rent for the room as the
contract was frustrated
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 c) There is a change in the law which makes the contract
unlawful if it is performed or due to outbreak of war

• Example: A agreed to supply a supplement product to B. Later, the health

authority declared the product is banned in Malaysia. The contract is
discharged because it becomes illegal

d) Death or permanent incapacity

• If the contract involves personal skill or professional expertise of the

party, the contract may be discharged due to death or incapacity of the
party. It is impossible to be performed
• Example: A contracted to sing for concert organized by B. Before the
concert starts, A died. The contract is discharged
• Example: A and B contract to marry each other. Before the time is fixed
for the marriage, A goes mad. The contract becomes void and discharged
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 (iv) DISCHARGED by BREACH of CONTRACT

 Section 40: Where one party fails to perform his

promise, there is a breach of the contract. Such
breach entitles the party who is not in breach to
repudiate OR to continue with the contract

 If the party who is not in breach chose to repudiate

the contract, the contract is discharged

 Illustration (a) to Section 40: A, a singer enters into

a contract with B, manager of a theatre, to sing at his
theatre two nights in every week within two months.
On the sixth night, A absents herself. B can terminate
the contract
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 REMEDIES

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 ii.
DAMAGES

i. RESCISSION
iii. SPECIFIC
OF PERFORMANCE
CONTRACT

v. QUANTUM iv.
MERUIT INJUNCTION

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 Meaning of Remedies

• Remedies MEANS some kind of rights available for

the plaintiff as a redress for the injury suffered
by him due to the breach of contract by the other
party

• PURPOSE: To relieve the plaintiff from his loss,

pain or damage in consequence of the breach

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 i. Rescission of Contract

✓ If a party breaches his promise under a contract, the party

not in breach has the right to rescind or terminate the
contract

✓ Section 40: “When a party to a contract has refused to

perform…the promisee may put an end to the contract”

✓ Example: A agreed to sing at B’s place for one week. A then

refused to sing. A breached the contract with B. B has right
to rescind or terminate the contract

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 ii. Damages

✓ Damages is given to enable the innocent party to receive

monetary compensation for the loss or injury due to breach
of contract

✓ Section 76: “A person who rightly rescinds a contract is

entitled to compensation for any damage which he has
sustained through the non-fulfilment of the contract”

✓ Example: A agreed to sing at B’s place for one week. A then

refused to sing. B terminates the contract. B can claim
damages or monetary compensation from A for some loss or
injury. For instance, expenses to find a new singer. Without a
singer, the theatre could not operate as scheduled.
Therefore, A can also claim for the loss of profit
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 iii. Specific Performance

✓ Specific performance is an order by the court to the party at fault

to carry out the contract according to its terms

✓ The purpose is to order the defendant to continue with the

contract according to what he has agreed

✓ When the defendant received this order, he has to perform the

promise which he had refused or failed to perform

✓ However, this remedy is given at the discretion of court

✓ When granted? Normally, this remedy is given if damages or

monetary compensation is not adequate, not sufficient or not
satisfactory remedy for breach of contract

✓ Example: A contracts with B to sell him a house for RM100k. A then

refused to transfer the house to B. B can ask for specific
performance from court, directing A to transfer the house to him
since monetary compensation would not satisfy B
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 • Injunction is an order from court to restrain someone
from doing something or to require someone to
iv. Injunction perform a specific act
• Granted at the discretion of the court
• 2 types of injunction:

-Also known as permanent

-Also known as interim or

PERPETUAL
injunction
TEMPORARY

interlocutory injunction
-It can only be granted after a
full trial by the court
-It is granted at the -The defendant is permanently
discretion of the court for prohibited from doing the act
specific time until further which the injunction was granted
order by the court -Example: Neoh Siew Seng v
Too Chee Kwong [1963] MLJ 20
– The court order a perpetual
-Normally granted at any injunction ordering the landlord
period pending the to keep all water pipes in proper
resolution of a legal trial by repair so that water supply to
the premises rented by the
the court
plaintiff would not be
disconnected

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 • In breach of contract, the party injured maybe
entitled to claim for work done and services
v. Quantum
performed under the contract
Meruit
• It arises in two cases:

1) Where one party abandons or refuses to perform the contract

Planche v Colburn (1831) EWHC KB J56

• Plaintiff entered into a contract to write a book for the defendant for 100 Pounds. The
plaintiff started writing the book and had finished a lot of it. The defendant than decided
not to go ahead with the project and refused to pay the plaintiff
• Held: Plaintiff entitled to a Quantum Meruit for work he had already done

2) Where work has been performed under a void contract

Craven-Ellis v Canons Ltd [1936] 3 All ER 1066

• Plaintiff was appointed as managing director of Canons Ltd under a contract. However, the
director who made the contract was unqualified. Therefore, the contract of appointment
was void
• Held: Plaintiff could recover on a Quantum Meruit for work he has done as the managing
director

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 THANK YOU

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