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Discharge by Performance
Discharge by Performance
Outline
1. Performance must be complete;
2. Entire and divisible contracts;
3. Doctrine of substantial performance;
4. Partial performance and Quantum Meruit;
5. Performance prevented;
6. Time for performance;
7. Time of the essence of the contract;
8. Effect of failure to perform under section 56 of the Contracts
Act;
9. Waiver of right that time is of the essence.
Performance must be complete
The general rule in contractual relations is that performance
must be exact and precise and in accordance with what the
parties have agreed. The parties are discharged form the
contract once they have fully performed their respective
obligations. However, in practice, performance is often less
than perfect and consequently, a breach of contract arises.
In Chye Fook & Anor The Teng Seng Realty Sdn. Bhd.,
the High Court held that the plaintiff had a right to rescind
the contract where time was of the essence. The Court also
stated by way of obiter that under s76 of the Contract
Act, a party who rightly rescinds a contract is entitled
to compensation for any damage which he has
sustained through the non-fufillment of the contract.
It must be emphasised that the right to rescind applies only
when time is of the essence of the contract. The existence of
a completion date for a contract does not automatically
mean that time is of essence of the contract. This appear to
be the error of the plaintiff/vendor in Ganam d/o Rajamany
v. Somoo s/o Sinniah, who purported to rescind the sale
and purchase agreement for land on the ground that the
defendant/purchaser had failed to pay the balance purchase
price on the due date or a reasonable time thereafter.
Where the parties have not made time the essence of the
contract, then s56(2) of the Contracts Act applies. In this
situation, a failure to perform at the time specified does not
make the contract voidable but the promisee is only entitled
compensation from the promisor for any loss occasioned to
him by the failure to perform. If there is a liquidated
damages clause, the provision of the clause apply; otherwise
an assessment of the losses suffered will be made following
s74 of the Contracts Act.