IMPOSSIBILITY OF

PERFORMANCE –
FRUSTRATION
By
Dr Suzi Fadhilah Ismail
What is frustration?

• The doctrine of frustration operates in

situations where it is established that due
to subsequent change in circumstances,
the contract is rendered legally or
physically impossible to perform by an
event not due to the act or default of
either party.

• The parties to the contract are

discharged from further performance of
the contract (no breach)
 • S. 57(2) CA
• The courts in Malaysia have recognized that
under S.57(2), a contract can be frustrated and
discharged without breach or default of either
Statutory parties.
provision
• Case :
• HA Berney v Tronoh Mines [1949]MLJ 4
HA Berney v Tronoh
Mines[1949]MLJ 4
• The court held that the
invasion of Malaya by the
Japanese frustrated the
performance of the contract
& therefore there was no
breach of contract by the
Defendants.
Elements
• For frustration to
apply, it is necessary
to prove that the
parties have made no →where the parties have themselves
provision for such provided for the situation that has
events in their arisen, the provisions that they have
made for the situation in the contract
contract. applies, hence no frustration.
 Guan Aik Moh (KL) Sdn Bhd v Selangor
Properties Ltd [2007] 4 MLJ 201
• Gopal Sri Ram JCA – there are three elements
woven into the fabric of the doctrine of frustration:

• First, the event upon which the promisor relies as

having frustrated the contract must have been one
for which no provision has been made in the
contract. If provision has been made then the
parties must be taken to have allocated the risk
between them.
Guan Aik Moh • Second, the event relied upon by the promisor
(KL) Sdn Bhd v must be one for which he or she is not
responsible. Put shortly, self-induced frustration
Selangor is ineffective.
Properties Ltd • Third, the event which is said to discharge the
promise must be such that renders it radically
[2007] 4 MLJ different from that which was undertaken by
the contract.
201
 Act becomes impossible Illust (b), (d), & (e) to S. 57
to perform
• (b) A and B contract to marry each other. Before the time
fixed for the marriage, A goes mad. The contract becomes
void.

• (d) A contracts to take in cargo for B at a foreign port. A’s

Government afterwards declares war against the country in
which the port is situated. The contract becomes void when
war is declared.

• (e) A contracts to act at a theatre for six months in

consideration of a sum paid in advance by B. On several
occasions A is too ill to act. The contract to act on those
occasions becomes void.
 Impossible =
difficult?
Act becomes
impossible
to perform What if the act
becomes difficult to
perform?
Pacific Forest Industries Sdn Bhd v Lin Wen-Chih
[2009] 6 MLJ 293 CA
• If the act becomes difficult to
perform—no frustration.
“...if a party has no money to
pay his debt, it cannot be
considered impossible to
perform as it is not frustration.
Neither can he plead
frustration because the terms
of the contract make it difficult
to interpret...”
 • Illust. (d) S.57
Frustrating
• (d) A contracts to take in cargo for B at a foreign
event port. A’s Government afterwards declares war
against the country in which the port is situated.
happens The contract becomes void when war is declared.

after
formation
of contract
Frustrating event happens after
formation of contract

Event was Not necessary that the event

is unforeseen or unexpected
subsequent to the or not contemplated by the
formation of the parties; as long as they have
made no provision in their
contract. contract for such future event.
 →No frustration
Illust c
(c) A contracts to marry B, being already married to C, and
being forbidden by the law to which he is subject to practise
polygamy. A must make compensation to B for the loss
What if the caused to her by the non-performance of his promise.

promisor had • S.57(3)

prior
knowledge of
impossibility?
 Where the parties have
provided for the situation
Provisions in that has arisen, then the
provisions in the contract
the contract applies — No frustration.

intended to Case : Chan Buck Kia v Naga

have effect Shipping & Trading Co Ltd
[1963] MLJ 159 HC
 • A time charter party* contained a
provision that
Chan Buck • ‘if for any reason whatsoever the
Kia v Naga vessel shall be detained at any port
by any authority having dominion
Shipping & over the port, the charterer shall
Trading Co continue to pay the charter hire.’
Ltd [1963]
MLJ 159 • A time charter party is a contract whereby the lessor places a fully
equipped and manned ship at the disposal of the lessee for a period
of time for a consideration called hire. The lessor may be the ship owner or
demise charterer and the time charterer will be the lessee
 The Indonesian Govt detained the
Chan Buck ship when it sailed into an Indonesian
port until the end of charter period.
Kia v Naga
Plaintiff (the ship owner), claimed
Shipping & from the defendant (hirers) the hire
Trading Co charges.
Ltd [1963] Defendant pleaded frustration.
MLJ 159
 • The provision was intended to have
effect in the circumstances that had
arisen in this case; full effect should
Held: be given to it.
• The defendant must pay the hire
charges for the whole period of the
time charter party.
 • (1) Outbreak of war
INSTANCES
OF
• Refer to the case of
FRUSTRATION
HA Berney v Tronoh
Mines[1949]MLJ 4
 (2) -specific object essential
for performance of the
Destruction contract
of the
• The destruction of the specific
subject object essential for
matter performance of the contract
will frustrate it.
• Case : Taylor v Caldwell (1863)
EWHC QB J1
Taylor v Caldwell (1863)
Def. agreed to let to pl. the use of his music hall & garden
for the purpose of entertainment.

Before the day of the performance arrived, a fire

destroyed the music hall.

Def., through no fault of his own, was unable to perform

the contract (letting the hall to pl.)
 The contract was frustrated.

Parties had contracted on the basis of the

Held : continued existence of the music hall at the

time when the concerts were to be given, that
being essential to their performance.

The music hall having ceased to exist without

the fault of either party, both parties are
excused.
 Appleby v Myers (1867) LR 2 CP 651

• P undertook to erect machinery upon D’s premises, the work to be

paid for upon completion.
• When the work was almost completed, both the premises & the
machinery already erected were destroyed by fire.
Held:
• The contract was frustrated;
• P could recover nothing for the work done since the obligation to
pay did not arise until completion.
 The non-occurence of a specified event may
frustrate the contract.

(3) Non- Compare these two leading cases*:

occurrence of a
Krell v Henry [1903] 2 KB 740
particular
event Herne Bay Steamboat Co v Hutton [1903] 2 KB
683

*both cases arose from the delayed coronation of

Edward VII
 Henry(def) hired a room from Krell(pl)
for two days in order to view the
coronation procession of Edward VII, but
the contract itself made no reference to
that intended use.

Krell v Henry The King’s illness caused a

[1903] 2 KB postponement of the
procession.
740
Def refused to pay for
the room.
 Held:
The contract was frustrated.
Henry was excused from paying
the rent for the room. The
holding of the procession on the
dates planned was regarded as
the foundation of the contract.
For the contract to be frustrated
in this way, all commercial
purpose must have been
destroyed. If there is some
purpose to be found in the
contract then it will continue.
 The defendant contracted to hire a
steamship, following a public

Herne Bay announcement that a Royal naval

review was to take place.

Steamboat The contract was "for the

Co v Hutton purpose of viewing the naval

review and for a day's cruise
round the fleet".
[1903] 2 KB
Following the cancellation of the
683 coronation and of the naval review, the
defendant refused to make payment,
stating the contract was frustrated in
purpose.
Herne Bay Steamboat Co v Hutton [1903] 2 KB
68

Whilst at first instance the The object of the voyage is not

defendant succeeded in this
argument, it was reversed by
the Court of Appeal, who
deemed the contract was not
frustrated, and the balance in
full was due to the plaintiff.
limited to the naval review, but
also extends to a cruise round
the fleet. The fleet was there,
and passengers might have
been found willing to go round
it.
(4) Death or incapacity for personal service
• applies to contracts for personal services, e.g., contracts of
employment.
• Illust (e) to S.57

• (e) A contracts to act at a theatre for six months in

consideration of a sum paid in advance by B. On several
occasions A is too ill to act. The contract to act on those
occasions becomes void.
Sathiaval a/l Maruthamuthu v Shell Malaysia
Trading Sdn Bhd [1998] 1 CLJ Supp 65

•Employee’s inability to continue with his

employment with the employer due to 2-year
detention of the employee by the police under
the Emergency Ordinance rendered the
employment contract frustrated.
 (5) Statutory prohibition
• Where a performance of the contract is prohibited by a statutory order

• Case : Metropolitan Water Board v Dick Kerr [1918] AC 119.

• Respondent in 1914 agreed to construct for appellants a reservoir within 6

years.
• In Feb 1916, Minister of Munitions* ordered the respondent to cease work
& to disperse & sell the plant.

• *military weapons, ammunition, equipment, and stores.

 • Where the nature of
the contract
necessitated getting a
(6) Inability of licence for its
promisor to performance
obtain licence
• Case : Yong Ung Kai v
Enting [1965] 2 MLJ 98
 • Def entered into an agreement with the pl to
sell to pl the right to cut and take out certain
timber.

Yong • A licence from the forest dept was required.

• The agreement did not refer to the necessity of

Ung Kai obtaining a licence.

• Def did his best to get a licence but the dept
refused to grant one.
v Enting • Pl sued for breach of contract.

• Held : Refusal to grant a licence made the

contract legally impossible to perform.
(7) Grant of ➢Case : Standard Chartered Bank v Kuala Lumpur
Landmark Sdn Bhd [1991] 2 MLJ 251
an injunction ➢Case : Kuala Lumpur Landmark Sdn Bhd v
Standard Chartered Bank [1994] 2 MLJ 559
– may or • The decision was reversed on appeal.
may not • Issue : whether the injunction restraining both pl
& def from acting on the redemption agreement
frustrate a had rendered it impossible of performance
within the t&c of the agreement.
contract • Held:
• the injunction on the Monsia suit did not
frustrate the agreement.
 • Case : Public Finance Bhd v Ehwan bin
(8) Seizure or Saring [1996] 1 MLJ 331
compulsory
acquisition by • Respondent purchased a motorcar via
hire-purchase agreement.
the
• 6 weeks after the execution of the
government agreement, the Customs & Excise Dept
seized & forfeited the motorcar for an
alleged offence.
 Public Finance Bhd v Ehwan bin Saring

• Held :

• seizure by the Dept made it impossible for the appellants to assign

& make over all its rights, benefit & interest in the vehicle.
• Appellants have defective title, hire-purchase agreement become
void under S.57(2).
 • (1) Events causing carriage of goods by sea
INSTANCES OF NO more expensive

FRUSTRATION
• Case : Tsakiroglou & Co Ltd v Noblee Thorl
GMBH [1962] AC 93

• The case concerned a sale of groundnuts, c.i.f.,*

from Port Sudan to Hamburg.
• The parties envisaged shipping through the
Suez Canal, but the canal was closed after the
contract was concluded.

• [*CIF contracts (cost insurance freight) are the most common form of contract for
sale of goods to be supplied by sea.
A CIF contract is a type of contract wherein the price includes cost,insurance and
freight charges.]
Held:

• the contract was not

frustrated as the ship could go
round via the Cape of Good
Hope (there being no implied
term that carriage was to be
via Suez).
• The greater cost of the freight,
borne by the c.i.f. seller, was
not so great as to render this a
fundamentally different
adventure.
 (2) Shortage of labour and materials in building
contracts

• Case : Davis Contractors Ltd v Fareham UDC

• App. agreed to build 78 houses within 8 months for the
resp. for a fixed sum of £94k.
• Owing to unexpected shortage of skilled labour &
certain materials, the contract took 22 months instead
of 8 months to complete & cost £115k.
• App contended that there was frustration of the
contract & claimed quantum meruit for the actual cost
incurred.
 Davis HOL :
Contractors • no frustration.
Ltd v • The fact that the contract
became more onerous or
Fareham expensive to the app did not
UDC discharge the agreement.
(3) Occurrence of bad weather – Act
of God? • Kwan Sun Ming v Chak Chee Hing [1965] 1 MLJ
236 FC

• This was an action for damages for breach of

contract or alternatively damages for negligence
arising out of a contract to tow 303 logs from
Kampong Abai to Sandakan.
• The defence was that the 253 logs were lost in a
storm so violent as to amount to an "act of God"
& the defendant should be excused from all
liability for damages.
 Kwan Sun Ming v
Chak Chee Hin
• The learned judge held that;
• although there was a storm, it was not a
storm violent enough to be regarded as
an "act of God"
• The judge gave judgment against the
defendant & awarded the plaintiff
damages based on the cost at which the
logs were purchased.
 • Federal Court:
there was no justification for
interfering with the finding of
Kwan Sun Ming the learned trial judge on the
v Chak Chee question whether the storm
amounted to an "act of God"
Hin because his finding was based
on all the evidence given in this
case.
 Kwan Sun Ming v Chak
Chee Hin
• “A feature of both those definitions is that the
event must be one which could not have been
foreseen and which could not have been
guarded against. It is obvious that in a towage
contract of this nature, a storm must be
expected and would have to be guarded against,
especially in the open sea. The appellant would
therefore be bound as part of his contract to
take all precautions necessary against storms
that might reasonably be foreseen. For a storm
at sea to be regarded as an act of God it would
have to be a storm that could not have been
reasonably foreseen in the circumstances…”
Case : Khoo Than Sui v Chan Chiau Hee [1976]
1 MLJ 25
• The plaintiff & the defendant had entered into a verbal
contract whereby the defendant agreed to tow the
plaintiff's logs from Sungei Sugut to his log pond at
Sandakan.
• The defendant towed a total of 82 logs but only 11 logs
were delivered.
• The plaintiff claimed damages for the loss.
• The defences of the defendant were (a) act of God and
(b) frustration.
• It was alleged that the logs were lost in a storm at sea.
 Held:
• (1) the storm which was
encountered was not violent
enough to be regarded as an act
of God;

• (2) in a towing contract of this

nature, a storm must be
expected & would have to be
guarded against and therefore
the defence of frustration must
fail.
 (4) Compulsory acquisition by
government of small part of land

• Case : Wong Siew Choong Sdn Bhd v Anvest

Corporation Sdn Bhd [1999] 3 MLJ 577 CA

• Resp purchased a piece of land measuring 9377

sq metres from the app.
• Before the completion of the sale, the govt
acquired 1200 sq metres of the said land under
the Land Acquisition Act 1960.
Wong Siew Choong Sdn Bhd v Anvest
Corporation Sdn Bhd
• Held (FC) :
• the portion acquired was only a small
portion of the said land.
• The contract was not fundamentally altered
by the compulsory acquisition of a minor
portion of the land.
• The contract was not frustrated.
 (5) Difficulty in interpreting
the terms of the contract

Case : Pacific Forest Industries Sdn Bhd v Lin Wen-

Chih [2009] 6 MLJ 293
• There was a dispute as to the price that was to
be fixed for the sale of the timber products.
• The price agreed was at ‘a price consistent with
the prevailing market price’

• Held (CA ): because the parties could not agree

as to the ‘prevailing market price’ which was a
fundamental term, the agreement was
frustrated.
Pacific Forest Industries Sdn Bhd v Lin Wen-Chih

Held (FC) :

• The agreement was not

frustrated as there was no
impossibility of interpreting the
parties’ intentions.
• It may be difficult, but not
impossible or incapable.
THE TEST FOR FRUSTRATION
→ ‘Radical change from obligation’ test

• The court will not hold the parties to

further performance of the contract if
in the light of the changed
circumstances, there would be a
radical change in their obligations
under the contract.
• This test was adopted by the majority
of the House of Lords in:
• Case : Davis Contractors v Fareham
UDC [1956] AC 696.
 Davis Contractors v Fareham UDC [1956] AC
696.
• 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.

• The delay "was not any new state of

things which the parties could not
reasonably be thought to have
foreseen."
 • The court also stated that

• "frustration is not to be lightly invoked

Davis as the dissolvent of a contract.... It is
Contractors v not hardship or inconvenience or
Fareham material loss itself which calls the
principle of frustration into play. There
UDC [1956] must be as well such a change in the
AC 696 significance of the obligation that the
thing undertaken would, if performed,
be a different thing from that
contracted for."
 The test for frustration – cont’d

• Federal Court has applied the radical change in the

obligation test in:

Case : Ramli bin Zakaria v Government of Malaysia [1982]

2 MLJ 257
• The appellants were a group of 86 vocational school
teachers who were successful in their application for
teacher training.
 • One of the conditions of the offer;
the teachers would on completion of
the course be accepted as teachers
on the UTS scale.
Ramli bin
Zakaria v • By the time they completed their
course of training, the UTS scale had
Government of been abolished and the Abdul Aziz
scheme came into force.
Malaysia
• The appellants were offered salaries
under the Abdul Aziz scheme.
 • Appellants’ argument: they should have
been paid salaries & allowances under the
Ramli bin UTS scheme.
Zakaria v • Respondent’s argument: As the recruitment
Government of of teachers into the UTS had been
discontinued, the offer to employ them
Malaysia under the UTS had become frustrated.

• The learned trial judge dismissed appellants’

claim; they then appealed to FC.
 • (1) where after a contract has been
entered into there is a change of
circumstances but the changed
circumstances do not render a
fundamental or radical change in the
Held (FC): obligation originally undertaken to
make the contract something
radically different from that originally
undertaken, the contract does not
become impossible and it is not
discharged by frustration;
 Held (FC):

(2)in this case, it is wrong to say that the contract was not capable
of being performed & it was not therefore frustrated.
• On the acceptance of the Abdul Aziz recommendations, the
Government put into force an improved salary scale & this was
applicable to the appellants.
• Thus the UTS was abolished & ceased to apply to the appellants.
• After that the appellants were given a higher commencing salary
and a more favourable scale than that of UTS.
 SELF-INDUCED FRUSTRATION

→ when a person deliberately renders performance

impossible.
• Where the promisor himself is responsible for the
frustrating event, such self-induced frustration does
not discharge a party from his contractual
obligations.
• He will be liable for breach of contract if he does
not perform his obligation under the contract.
 Case : Maritime National Fish v Ocean
Trawlers [1935] AC 524
• Maritime chartered from Ocean a vessel
which could only operate with an otter
trawl*.
• Both parties realised that it was an offence to
use such a trawl without a government
licence.
• Maritime was granted three such licences,
but chose to use them in respect of three
other vessels, with the result that Ocean's
vessels could not be used.

*A large commercial fishing trawl which uses kite like wooden boards at
the corners of the mouth of the net.
 the charterparty had
not been frustrated.

Held: Maritime was liable to

pay the charter fee.

Maritime freely elected not to

licence Ocean's vessel,
consequently their inability to
use it was a direct result of
their own deliberate act.
 Case : Yee Seng Plantations Sdn Bhd v Kerajaan
Terengganu [2000] 3 MLJ 699 CA

• The appellant was the sub-lessee of certain lands in Kerteh

Terengganu.
• In the years 1984 and 1986, the government of the state of
Terengganu acquired some of the land.
• The appellant took out an action challenging the acquisition.
Yee Seng Plantations Sdn Bhd v Kerajaan
Terengganu
• The State Legal Adviser represented the
defendant (government).

• Following negotiations between the appellant's

solicitors and the State Legal Adviser, the action
was compromised, and the agreement was
recorded in the form of a consent order.
 • Difficulty arose when the state authority, ie
the State Executive Council ('the Exco')
rejected the appellant's application for the
Yee Seng alienation of the land referred to in the
Plantations consent order.
• The respondents/government commenced
Sdn Bhd v an action seeking for a declaration that they
Kerajaan were not bound by the terms of the consent
order. The decision of the Exco was a
Terengganu supervening event over which the
respondents had no control. As such the
consent order was frustrated.
 • The High Court agreed with
the respondents' argument
Yee Seng and granted the relief
sought by them. The
Plantations Sdn appellant appealed.
Bhd v Kerajaan
Terengganu • The issues before the Court
of Appeal were inter alia;
whether the consent order
had become frustrated;
 Held:

• It is well settled that the doctrine of frustration has no room

where there is fault on the part of the party pleading it.
• In the present case, the refusal of the Exco to alienate the land
in question was a deliberate act of non-compliance of the
consent order by a party to the first action.
• It was not a supervening event at all. In these circumstances, it
was not open to the respondents to rely on the doctrine.
CONSEQUENCES OF FRUSTRATION

THE CONTRACT BECOMES S.57(2) : THE CONTRACT IS

VOID. TERMINATED AS TO THE FUTURE S.66 : REMEDY
ONLY. IT IS NOT VOID FROM THE
VERY BEGINNING. OF RESTITUTION
 • Case : Public Finance Bhd v
Ehwan bin Saring [1996] 1 MLJ
331
CONSEQUENCES
OF • Pursuant to s 57(2) of the
FRUSTRATION Contracts Act 1950, the
agreement had become void;
the appellants were obliged to
return the RM57,000 to the
respondent under s 66 of the
Contracts Act 1950.
 S. 15(2) & (3) Civil Law Act 1956 : Remedy of
restitution

• S. 15 (2) CLA – The right to recover money paid

• Q: What happens to the sums paid before the time of
discharge? A : recoverable.
• Q: What if the party has incurred expenses in the
performance of the contract before the time of
discharge? A : he may retain the whole or any part of the
sum already paid, but not in excess of the expenses
incurred.
S. 15(2) & • Q: What happens to the sums
payable before the time of
(3) Civil discharge/frustration?

Law Act • A: it ceases to be payable. The party

1956 : may however recover the incurred
expenses ie the whole or any part
Remedy of of the sum payable, but not in
excess of the expenses incurred.
restitution
Case : National
Land Finance • Sale & purchase of certain immovable
Co-operative property.
Society Ltd v • It was a condition of the agreement that
the sale should be subject to the approval
Sharidal Sdn of the Foreign Investment Committee (FIC).
Bhd [1983] 2 • FIC refused its approval but suggested that
MLJ 211 the property be transferred to a joint
venture company of which at least 30% of
its equity is held by Bumiputras.
National Land • Respondents’ argument:
Finance Co- • the agreement became void when
the FIC refused to approve the
operative sale,
Society Ltd v • Appellants’ argument:
Sharidal Sdn
• the agreement did not become
Bhd void but still subsisted because
there was a conditional approval.
 • Trial judge:
National • the agreement became void; a
Land Finance number of consequential orders
Co-operative were made, inter alia, that the
Society Ltd v appellants deposit to be refunded
Sharidal Sdn under s.15(2) CLA.
Bhd • Federal Court affirmed the trial
judge’s decision.
 • The court applied s 1(2) of the
Law Reform (Frustrated Contracts)
Act 1943 since the Act is a statute
of general application which was
Case : Yong Ung applicable to Sarawak. The CLA
Kai v Enting was extended to Sarawak on 1
[1965] 2 MLJ 98 April 1972.
• The court ordered the defendant
to return to the plaintiff the
moneys advanced to him under
the terms of the agreement.
Force Majeure vs frustration
• whether a pandemic will be treated as 'Act of God' or 'Force Majeure' event,
to excuse a party of non-performance of contract or has frustrated the
contract rendering it impossible or impractical to perform.
• Force Majeure?
➢ "an event or effect that can be neither anticipated nor controlled, is unexpected
and which prevents someone from doing or completing something that he or she
had agreed or officially planned to do.“
• Webster's Dictionary defines Force Majeure as: "(1) Superior or irresistible force.
(2) an event or effect that cannot reasonably be anticipated or controlled”
The doctrine of Force Majeure is often intertwined &
overlapped with the doctrine of frustration of contract
or impossibility to perform.

• Force Majeure clauses are generally embodied in the

form of contractual provisions, agreed upon between
parties, to excuse non-performance of contract in cases
of events beyond their control - such as an Act of God,
natural calamities, war, labour unrest, epidemics,
pandemics, etc
Case-law:
Segi Astana Sdn Bhd v Mesra Indah Jaya Sdn Bhd & Ors [2022] MLJU 1344 HC

• an example of application of force majeure clauses

• The Defendants relied on the Covid-19 event, and the Movement Control
Order issued by the Government as Force Majeure event and invoked
clause 12.1.1 of the License Agreements.
• The Defendants alleged that the movement control order falls under one
of the events recognized under clause 2 of the said agreements and that
this event had caused them unable to undertake the operations at the said
premises.
 • Despite the issuance of the Movement
Segi Astana Control Order by the Government of
Malaysia on 18-3-2020, the First
Sdn Bhd v Defendant chose to execute the final
License Agreements on 18-7-2020.
Mesra • The issue of Force Majeure would no
longer apply as it is not an unforeseen
Indah Jaya event.
• Parties would have been aware of the
Sdn Bhd & continuation of the Movement Control
Ors [2022] Order on the said date but chose to
continue with the relationship and agreed
to execute the License Agreement for the
period between 1-5-2020 to 30-4-2022
What if a contract does not have a force
majeure provision?

• If there is no express force majeure provision in

the contract, it is necessary to examine whether
there are any other contractual provisions that
may have a similar effect.

• For example, “Material adverse change” (MAC) clauses

generally give buyers, lenders and investors a right to
withdraw from the deal if an adverse event detrimental to
the target or investment takes place. MAC clauses are
typically found in transactional contracts such as property,
business or share purchase agreements, and security and
financing documents.
 COVID-19 ACT 2020
• Malaysia Govt has passed an Act, known as
➢Temporary Measures For Reducing The Impact of Coronavirus Disease 2019 (COVID-19) Act
2020. [one of the relevant provisions is S.7]
➢ The Act has been gazetted and shall be in force for a period of 2 years from 23 October 2020 or until
such other extension(s) which may be made by the order of the Prime Minister.
The Relief under S. 7 of
the COVID-19 Act
• Upon enforcement of the COVID-19 Act, Section 7 of
the COVID-19 Act relieves businesses and individuals
from the performance of their contractual obligations
retrospectively from 18 March 2020 to 31 December
2020,
➢ provided that the inability to perform such contractual
obligations is due to the measures prescribed by the
authorities to control or prevent the spread of the
COVID-19 under the Prevention and Control of
Infectious Diseases Act 1988 (“PCID Act”).

• The non-defaulting party to a contract is prevented from

exercising its rights under the contract.