Topic > Law of 7 Contract _ (Discharge of Contract and Remedies) LEARNING OUTCOMES > 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 (6) Discharge by performance; or98 > TOPIC7 LAW OF CONTRACT (DISCHARGE OF CONTRACT AND REMEDIES) (©) Discharge by impossibility ; or (a) Discharge by breach 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: Ilustration (a) A owes mone¥ 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) <4 99 Ilustration (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: Ilustration (b) A owes B $10,000. A enters into arrangement with B, and gives B a mortgage of his (A’s) 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: Ilustration (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.100 > TOPIC 7 LAW OF CONTRACT (DISCHARGE OF CONTRACT AND REMEDIES) (b) Payment of a lesser sum by a third party to satisfy a larger debt. Ilustration (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. (©) Payment accepted in satisfaction of an unascertained sum. ‘Ilustration (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) Anarrangement between a debtor and his creditors to settle debts. Ilustration (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 B's demand. A case to illustrate further the application of the provision: ‘Kerpa Singh v Bariam Singh (1966) 1 ML] 38 A third party, the son of the appellant debtor, made an offer of $4,000 to the creditor's 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 debtor's debt). The Court held: The creditor's conduct in cashing the cheque and retaining the money would be considered an agreement to discharge the debtor from any futher liability.TOPIC 7 _LAW OF CONTRACT (DISCHARGE OF CONTRACT AND REMEDIES) <4 101 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: Ilustration (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. Ilustration (b) A promises.to paint a picture for B by a certain day, at a certain price. A dies before te 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 promisee’s consent, a contract will continue to exist even though promisor’s act has already amounted to a breach of the contract.102 > TOPIC7 LAW OF CONTRACT (DISCHARGE OF CONTRACT AND REMEDIES) 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 promise, 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: Ilustration A promises to deliver goods at B's warehouse on Ist 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 promise, it is the duty of the promisee to apply for performance at a proper place, and within the hours of business.”TOPIC 7 _LAW OF CONTRACT (DISCHARGE OF CONTRACT AND REMEDIES) << 103 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 t6 ask the promisee where he would like the contract to be performed.” For instance: Ihustration 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.104 > TOPIC 7 LAW OF CONTRACT (DISCHARGE OF CONTRACT AND REMEDIES) 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 ML] 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 thé Gontracts 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:TOPIC 7 _LAW OF CONTRACT (DISCHARGE OF CONTRACT AND REMEDIES) <4 105 ‘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 appellant's parcel being $25,000 and that of the respondent's, $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. ‘73, 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: lustration (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 Contract 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106 P TOPIC 7 LAW OF CONTRACT (DISCHARGE OF CONTRACT AND REMEDIES) 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. HA Berney v Tronoh Mines Ltd(1949] ML] 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 King’s 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.TOPIC 7 LAW OF CONTRACT (DISCHARGE OF CONTRACT AND REMEDIES) <4 107 (©) 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. (4) 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. Ais 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108 > TOPIC 7 LAW OF CONTRACT (DISCHARGE OF CONTRACT AND REMEDIES) before frustration, the court has the discretion to order payment not exceeding the amount of the said expenses. 7A DISCHARGE BY BREACH Section 40 of the Contracts Act 1950 states, “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 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) Aisa 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 night’s 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:TOPIC 7 _LAW OF CONTRACT (DISCHARGE OF CONTRACT AND REMEDIES) 4 109 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. (a) How cana contract be discharged? (b) What is the effect of novation? (©) Under what situations remission of performance is allowed to the party in contract? (d) _ Is time of performance essential in a contract? + (&) Can the performance of a contract be done by a third party? () Whatis the meaning of frustration in contract? (g) What are the circumstances under which a contract may be discharged by supervening impossibility? (h) | Whatis the effect of frustration? (i) What is meant by breach that entitles the party to discharge a contract? 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.110 TOPIC 7 LAW OF CONTRACT (DISCHARGE OF CONTRACT AND REMEDIES) (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 Smith’s 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. ‘75 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 (©) Specific Performance (d) Injunction’ * (e) Quantum Meruit 7.5.1 Rescission of Contract Under Section 40 of the Contracts Act 1950, “when a party to a contract has refused to perform, or disabled himself from 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.TOPIC 7 LAW OF CONTRACT (DISCHARGE OF CONTRACT AND REMEDIES) 111 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 He jeld: The loss which arises naturally resulting from the breach by the | defendant is the loss of plaintiff's 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 plaintiff's car for RM6,390. However, the defendant committed breach and the plaintiff had to sell his car to anotlier.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.112% TOPIC7 LAW OF CONTRACT (DISCHARGE OF CONTRACT AND REMEDIES) 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. (©) 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:TOPIC 7 _LAW OF CONTRACT (DISCHARGE OF CONTRACT AND REMEDIES) 4113 Kabatasan Timber Extraction Co. v. Chong Fah Shing [1969] 2 ML] 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 J} 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 Tt 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:114 > TOPIC7 LAW OF CONTRACT (DISCHARGE OF CONTRACT AND REMEDIES) (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. (0) Anact agreed to be performed is such that its non-performance would not afford adequate relief.TOPIC 7__LAW OF CONTRACT (DISCHARGE OF CONTRACT AND REMEDIES) 4 115 Illustrations () 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 itis 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.116 TOPIC7 LAW OF CONTRACT (DISCHARGE OF CONTRACT AND REMEDIES) 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:TOPIC 7 LAW OF CONTRACT (DISCHARGE OF CONTRACT AND REMEDIES) 4117 Ilustration A contract with B to sing for twelve months at B’s 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 appellant's 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.118 TOPIC 7 LAW OF CONTRACT (DISCHARGE OF CONTRACT AND REMEDIES) 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 fendered 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ep crv 72 TOPIC 7 _LAW OF CONTRACT (DISCHARGE OF CONTRACT AND REMEDIES) 4 NX 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. 119 / 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.120% TOPIC7 LAW OF CONTRACT (DISCHARGE OF CONTRACT AND REMEDIES) * A contract is said to be discharged when the parties to the contract has performed what they have agreed to do in the contract. * Anagreement 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’. sus 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 Keenan’s Law for Business (13th ed.). UK: Pearson and Longman. * WuM. A. & Vohrah B. (2000). Zhe Commercial Law of Malaysia (2nd ed.). Selangor: Pearson and Longman. Cases: * Ban Hong Joo Mine Ltd v. Chen & Yap Ltd [1969] 2 ML] 83.