Chapter 7 - Discharge by Breach Flashcards
DISCHARGE BY BREACH
Overview
1) Rescission
2) Breach under S.40
3) Doctrine of total failure of consideration
4) Doctrine of anticipatory breach
5) Election by innocent party
6) Action in contract for damages
7) Action in restitution for quantum meruit claim
8) Action in restitution for total failure of consideration
9) Action for rescission under S.34 SRA
RESCISSION
Overview
1) Meaning of rescission
2) Application of J v A in MY
RESCISSION
Meaning of rescission
Johnson v Agnew:
1) Rescission for vitiating factors:
- rescission ab initio;
- the contract is treated as if it does not exist;
2) Rescission for breach:
- e.g. repudiatory breach;
- the contract existed but has been put to an end.
RESCISSION
Application of J v A in MY
LSSC Development Sdb Vgd v Thomal a/l Iruthayam:
- Breach: best to avoid rescission, use “terminate” instead”.
BREACH UNDER S.40
Overview
1) Scope of S.40
2) Refusal to perform
3) Disabled himself from performing
4) In its entirety
BREACH UNDER S.40
Scope of S.40
Kwan Chew Holdings Sdn Bhd v Kwong Yik Bank Bhd:
- when a party breaks a ctt, choice is at the innocent party;
- innocent party must unequivocally & clearly accept the repudiation.
- if he chooses to affirm its continuance, he must himself perform his obligation or he runs a risk being in breach.
- unless a contract is clearly terminated, it remains in existence for the benefit of the wrongdoer & the innocent party.
BREACH UNDER S.40
Refusal to perform
Rasiah Munusamy v Lim Tan & Sons Sdn Bhd:
- Innocent party may elect to terminate or affirm its contract only when there is express & absolute refusal to perform.
- otf, disputes as to the interpretation of the ctt or its terms cannot mean that the party has refused to perform.
- i.e. there must be EXPRESS & ABSOLUTE refusal to perform.
BREACH UNDER S.40
Disabled himself from performing
Arkitek Tenggara Sdn Bhd v Mid Valley City Sdn Bhd:
- Include ANY ACT which has the effect of BRINGING THE CONTRACT TO AN END.
- i.e. any deliberate act that has the effect of bringing the contract to an end.
BREACH UNDER S.40
In its entirety
Ching Yik Development Sdn Bhd v Setapak Heights Development:
- No emphasis on its entirety;
- As long as the breach is related to a fundamental term, it is regarded as a failure to perform the contract in its entirety.
- Party who terminates or treats himself as discharged from breach of non-fundamental terms is himself guilty of breach of contract.
DOCTRINE OF TOTAL FAILURE OF CONSIDERATION
Attention to “in its entirety”
Berjaya Times Square Sdn Bhd v M-Concept Sdn Bhd:
- Special attention must be paid to “in its entirety”;
- If there is part-performance, S.40 is not activated;
- Innocent party may not terminate the contract in such a case as there is no failure to perform “in its entirety”.
DOCTRINE OF TOTAL FAILURE OF CONSIDERATION
Valueless part-performance
Damansara Realty Sdn Bhd v Bungsar Hill Holdings Sdn Bhd:
- There is total failure of consideration & S.40 is activated when the work completed is of little or no value at all;
- In such a situation, there is a right to terminate.
- If the part-performance is of some value, there has been no total failure of consideration & there is no right to terminate.
DOCTRINE OF ANTICIPATORY BREACH
Test for anticipatory breach
Damansara Realty Sdn Bhd v Bungsar Hill Holdings Sdn Bhd:
- whether delay by party performing its obligation was sufficient to justify the other party for treating the ctt as being repudiated;
- whether such delay would frustrate the commercial value;
- the delay must not be just commercially unacceptable delay but must be delay that frustrates the adventure.
- OTF, evidence adduced showed that the performance on time is highly impossible even though the date for performance is not yet on due.
- thus the notice of termination issued is not pre-mature.
ELECTION BY INNOCENT PARTY
Overview
1) Must be communicated
2) Examples of implied election
3) Waiver of breach & right to terminate
4) Exclusion of waiver
ELECTION BY INNOCENT PARTY
Must be communicated
Mintye Properties Sdn Bhd v Yayasan Melaka:
- For an election to be effective, innocent party must by words or conduct, communicate his decision to defaulting party.
- i.e. election may be expressed or implied from conduct.
ELECTION BY INNOCENT PARTY
Examples of implied election
1) Continuous performance - Chua Ngah Chin v Ng Kie En:
- affirmation
2) Ordering extra performance - Sim Chio Huat v Wong Ted Fui:
- affirmation
3) Reopening negotiations - Aquis Estates Ltd v Minton:
- affirmation
4) Commencement of proceedings - Tan Hock Chan v Kho Teck Seng:
- termination
5) Inactivity / inaction - Chin Kim v Loh Boon Siew:
- termination & not entitled to SP.
ELECTION BY INNOCENT PARTY
Waiver of breach & right to terminate
Sim Chio Huat v Wong Ted Fui:
- By allowing dates to pass & ordering extra work to be done, it amounts to waiver of breach & right to terminate.
- i.e. purchaser has impliedly elected to treat the contract as subsisting, waived his right to terminate & waived the breach.
ELECTION BY INNOCENT PARTY
Exclusion of waiver
Master Strike Sdn Bhd v Sterling Heights Sdn Bhd:
- Clause preventing operation of waiver is allowed in law.
- Parties can contract to exclude the operation of waiver.
ACTION IN CONTRACT FOR DAMAGES
Relief
i.e. damages & restitution
1) Muralidhar Chatterjee v International Film Company Ltd:
- S.65 applies to contracts which have been put to an end under S.40;
- In action in contract for breach, innocent party must restore any benefit which he has received from the other party;
- Innocent party rescinding also has right to damages under S.76;
- i.e. relief for action in contract for breach are S.65 & 66 and S.76.
2) Yong Mok Hin v United States Sugar Industries Ltd:
- Follows Muralidhar;
- Innocent party: S.65 & 66 + S.76
- Guilty party: S.65 + 66 (to be restored of any benefit he has given).
3) BTS Sdn Bhd v M-Concept Sdn Bhd:
- Contract breaker is not entitled to be restored of any benefit;
- But any benefit he has given is entitled to be set-off for the damages he has to pay.
ACTION IN RESTITUTION FOR QUANTUM MERUIT CLAIM
Scope & Relief
i.e. quantum meruit sum
THE LAW & CONDITIONS
1) The law:
S.71
2) Conditions - Siow Wong Fatt v Susur Rotan Mining Ltd & Anor:
- The work done must be lawful;
- The work done must be for another person;
- The work must not be intended to be done gratuitously;
- The work done must be such that the other person enjoys the benefit of the act.
SCOPE
Syarikat Binaan Utara Jaya v Koperasi Serbaguna Sungai Glugor:
1) When can be can be claimed:
- there is an express agreement to pay a reasonable sum;
- when there is no price fixed, but entitled to be paid a reasonable sum for work done.
2) Situations where it is usually arise:
- quasi-contractual situation;
- work is performed outside a contract;
- work is done under a void contract.
ACTION IN RESTITUTION BASED ON TOTAL FAILURE OF CONSIDERATION
Overview
1) Scope of & relief for restitutionary claims
2) Test for relief - UK position
3) Test for relief - MY position
ACTION IN RESTITUTION BASED ON TOTAL FAILURE OF CONSIDERATION
Scope of & relief for restitutionary claims
Goh Yew Chew & Anor Soh Kian Tee:
- innocent’s party rights to recover the money arises by operation of law;
- the money given by P is regarded as to be used by D to perform the contract;
- when there is failure of consideration, money must be able to be recovered by P since D has no further rights on it.
ACTION IN RESTITUTION BASED ON TOTAL FAILURE OF CONSIDERATION
Test for relief - UK position
1) Stoczania Gdanska SA v Latvian Shipping Co & Ors:
- whether the promisor has performed ANY part of the contractual duties.
2) Fibrosa Spolka v Fairbairn Lawson:
- Partial failure of consideration does not give rise for recovery of part that has been paid.
ACTION IN RESTITUTION BASED ON TOTAL FAILURE OF CONSIDERATION
Test for relief - MY position
1) Berjaya Times Square Sdn Bhd v M-Concept Sdn Bhd:
- part-performance = no restitution claim.
2) Damansara Realty Sdn Bhd v Bungsar Hill Holdings
- part-performance is of no or little value = no restitution claims.
ACTION FOR RESCISSION UNDER SRA
The law
S.34 SRA
