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Prepared by: Norazla Abdul Wahab. When there is a breach of contract, the party not in default may claim 1 or more of the respective remedies.

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Presentation on theme: "Prepared by: Norazla Abdul Wahab. When there is a breach of contract, the party not in default may claim 1 or more of the respective remedies."— Presentation transcript:

1 Prepared by: Norazla Abdul Wahab

2 When there is a breach of contract, the party not in default may claim 1 or more of the respective remedies.

3 REMEDIES OF CONTRACT DAMAGESSPECIFIC PERFORMANCEINJUNCTIONQUANTUM MERITRESCISSION

4 1. DAMAGES Categories of damages Types of Damages Liquidated damages

5 DAMAGES The award of damages is the common law remedy for a breach of contract. The purpose of damages:  to compensate the victim for the loss that caused him by the breach of contract  not to punish the party in default.

6 CATEGORIES OF DAMAGES 1.Substantial Damages 2. Nominal Damages 3.Exemplary or punitive damages

7 a. Substantial Damages Pecuniary / monetary compensation: intended to put the plaintiff in the position he would have enjoyed had the contract been performed.

8 a. Substantial Damages Damages has to be proved. To recover damages, the plaintiff has to prove the loss he has actually suffered. failure to do so will result the item of loss being disallowed.

9 Bonham-Carter v Hyde Park Hotel Ltd Lord Goddard stated : “Plaintiff must understand that if they bring an action for damages it is for them to prove their damages; it is not enough to write down the particulars, and so to speak, throw them at the head of the court, saying: “that is what I have lost; I ask you to give me these damages..” They have to prove it.”

10 Lee Sau Kong v Leow Cheng Chiang [1961] MLJ 17 The parties entered into an agreement in writing whereby the respondent agreed to purchase all the scrap iron lying within the Bundi Concession, Terengganu. Respondent paid deposit and advances which is totaling to RM22,600.00 and proceeded to remove metal. Later on, the appellant alleged that the Respondent had removed from the Concession’ machinery and metal other than scrap.

11 Lee Sau Kong v Leow Cheng Chiang [1961] MLJ 17 Eventually, they had a meeting for that and the Appellant then agreed that the respondent can continue with the said agreement but Respondent should pay RM 4,000.00 for that. The Respondent then paid via post dated cheque. Upon presented for payment, the said payment of the cheque had been stopped. The appellant then terminated the contract and claimed for damages.

12 Continue….. Held: The trial court found as a fact that the respondent was not in breach of contract. The Appellant had no justification for forbidding the respondent to remove further quantities of scrap iron and the act of Respondent to put the said agreement as at end is justified. Then, the respondent was entitled to such damages as he could prove.

13 b. Nominal Damages In exceptional situations, a plaintiff may be awarded ‘nominal damages’ i.e. a very small sum of damages. Nominal damages consists of small token award where the plaintiff has proved a breach of contractual rights but suffered NO ACTUAL LOSS.

14 b. Nominal Damages Nominal damages may also be awarded:  merely to acknowledge that his right have been breached or  he is a victim of breach of contract  but is unable to prove the loss that he claims.

15 Loh Kit On(t/a Fuji Hairdressing Saloon) v Tanjong Aru Hotel Sdn Bhd The Plaintiff was the sole proprietor of a hairdressing saloon. The Plaintiff entered into an agreement with the Defendant, the owner of Tanjong Aru Beach Resort whereby the Defendant let the said premises to the Plaintiff for a term of three years. Several months after the tenancy has been made the defendant then re entered the premises and evicted the Plaintiff. The Plaintiff claimed damages for breach of agreement.

16 Continue….. The defendant said that their re entry of the premises is justified and maintained that the plaintiff in fact breach of the contract because had caused illegal massage activities to be carried out on the premises which entitled them to terminate the agreement.

17 Continue….. Held: As there is no evidence as regard to that, the judge gave judgment in favour of Plaintiff. Since, there are no evidence as to the damages suffered by plaintiff. Therefore, nominal damages of RM1 and costs were awarded to the Plaintiff.

18 c. Exemplary or punitive damages Exemplary damages are also known as ‘punitive’ or vindictive’ damages. Consists of sum awarded which is far greater than the actual pecuniary loss suffered by the plaintiff.

19 c. Exemplary or punitive damages Awarded only in exceptional circumstances such as breach of contract of marriage, or when banker wrongfully dishonour a trader’s cheque or to recover a loan (i.e. Dato’ Abdullah b Hj Mohd Hashim v Sharma Kumari Shukla (no.3) [2001] 1 AMR 334.

20 The measure of damages recoverable which is set out in S.74 (1) of CA, 1950 is substantially re-enact the common law rule laid down in the judgment of Alderson B in Hadley v Baxendale (1854).

21 “Where 2 parties have made a contract, which one of them has broken, the damages which the other party ought to receive… should be considered arising naturally, i.e. according to the usual course of things from such breach of contract itself, or, such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract as the probable result of the breach of it.”

22 Hadley v Baxendle (1854) 9 Ex 341 Plaintiff were mill (kincir angin) owner in Gloucester. They engaged the Defendant, a carrier to take a broken crankshaft to Greenwich and asked for a new one. Defendant (carrier) promised that it would be there for following day, but Defendant had delayed in transporting the crankshaft. Consequently, the replacement was not delivered when it should have been. The mill remain idle for a longer time.

23 Continue…. The Plaintiff sued for damages for the loss of profit that would have been earned if the replacement of crankshaft available on time. The Defendant (carrier) said that the only information given “the article to be carried was the broken shaft of a mill and that the plaintiffs were the miller of the mill.

24 CONTINUE….. Held: The Defendants had not been told about or informed of the special circumstances that the mill would be inoperative until the new crankshaft delivered. Consequently, it would not be apparent to him the Plaintiff would sustain loss or profit by reason of the delay. It would not be reasonable in the circumstances to hold Defendant reasonable for the loss or profit.

25 Section 74 (Title) Compensation For Loss or Damage Caused by Breach of Contact Section 74(1) First Limb The party who suffers by the breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him which naturally arose in the usual course Section 74(1) Second Limb The parties knew when they made the contract, to be likely to result from the breach of it.

26 Section 74(1)(First Limb- damages arising naturally ) a) The situation that when the damage or loss caused to the injured party arose naturally in the usual course of things from the breach. To recover that damages, the Plaintiff has to establish that the loss he sustained was caused by the breach.

27 Section 74(1)(First Limb- damages arising naturally )  Illustration (f) Section 74:  A contracts to repair B’s house in a certain manner, and receives payment in advance. A repairs the house, but not according to the contract. B is entitled to recover from A the cost of making the repairs conform to the contract.

28 Section 74 (1) (Second Limb- special damages) b) the parties knew, when they made the contract, to be likely to result from the breach of it. (the party knew that because of that breach of contract, the other party will suffer loss). Or the defendant could foresee the loss.

29 Illustration (j) Section 74  A, having contracted with B whereby to supply B with tons of iron at RM100 a ton and to be delivered at a stated time. He (A) also contracts with C for the purchase of 1000 tons of iron at RM80 a ton, telling C that he does so for the purpose of performing his contract with B (supply to B). C fails to perform his contract with A, who cannot procure other iron, and B in consequence, rescinds the contract. C must pay to A RM20,000 being the profit which A would have been made by the performance of his contract with B

30 Victoria Laundry (Windsor) v Newman Industries Ltd [ 1949] 2 KB 528 Plaintiff (V) was a laundry company (launderers & dryers). The Plaintiff contracted to buy from a Defendant a boiler which is to be used in his business. The defendant (N) agreed to sell to V a secondhand boiler and to deliver on June. But the boiler was not delivered until 8 th Nov. The Defendant also knew that the boiler was required for the business and for immediate use.

31 Victoria Laundry (Windsor) v Newman Industries Ltd [ 1949] 2 KB 528 Because of that, V claimed for: i) loss of profits on laundry business which would have been earned if the boiler is delivered on time; and ii) loss of profits on certain dyeing contract from Minister of Supply.

32 Continue… Held: The laundry company was entitled to recover for the profits for ordinary laundry as N must foreseen their loss if there was delay. and not entitle for dyeing work.

33 Tham Cheow Toh v Associated Metal Smelters Ltd [1972] 1 MLJ 171 The D/A had agreed to sell a metal melting furnace to the P/R, and giving an undertaking that the melting furnace (leburan) would have a temperature of not lower than 2,600 degrees F. However, this specification was not fulfilled and consequently, the R brought an action alleging breach of the condition and claimed damages including the loss of profit

34 Held (Fed Court) A would not normally be liable for the said payment of damages for the loss of profit UNLESS there is evidence that the special object of the furnace had been drawn to their attention and they had contracted on the basic that delay in delivery would made them liable for loss of profits. In this case, the court satisfied that the A knew the requirement to deliver the furnace capable of producing the specified temperature and the urgency of delivery. (R was awarded special damages)

35 HOWEVER in… Section 74(2) Such compensation is not to be given for any remote and indirect loss or damage sustained by reason for the breach. (Remoteness of Damages). Illustration (n) Section 74  A contracts to pay a sum of money to B on a day specified. However, A does not pay the money on that day. B, in consequence of not receiving the money on that day, is unable to pay his debts and is totally ruined. A is not liable to make good to B anything except the principal sum he contracted to pay, together with interest up to the day of payment.

36 Illustration (p) Section 74 A contracts to sell and deliver 500 bales of cotton to B on a fixed day. A knows nothing about the nature of the B’s business or how B going to conduct his business. A then breaks his promise and because of not that; by not having the said cotton, B needs to close his mill/ factory. A IS NOT LIABLE /RESPONSIBLE to B for the loss caused by B by closing of the said mill.

37 In summary: The object of an award to damages is to place the plaintiff so far as money can do it in same position as if the contract has been performed. To succeed in his claim, the Plaintiff must show that the loss he has sustained was caused by the breach. However, the court will not award compensation to the Plaintiff for all the losses he has suffered as consequence of the breach. Where the loss or damage is too remote, the plaintiff is not entitled to compensation.

38 Sometimes, parties may fix the amount of damages to be paid in the event of breach of contract as a term of contract. LD: Amount of damages is stipulated or fixed by the parties under the contract. If there is breach of the contract, the party in default must pay damages up to the amount stipulated in the contract. (maximum limit of compensation). LIQUIDATED DAMAGES

39 Example of Clause in Agreement DEFAULT BY PURCHASER “ In the event the Purchaser fails to pay the Balance Sum as provided in Clause 3 of this Agreement for any reason whatsoever, the Vendor shall unless there are express conditions hereinafter contained to the contrary, be entitled to forfeit the deposit referred to in Clause 1 above or such other amount of money as may be hereinafter stipulated (hereinafter referred to as “the forfeitable sum”) as agreed liquidated damages …”

40 Under Common Law; the court will decide if they are liquidated damages or a form of penalty. Basically, there is no differences between the liquidated damages and penalty. Maniam v The State of Perak [1957] Thomson J viewed that: “ no differences between penalty and liquidated damages

41 Example: In the Sale and Purchase Agreement between the purchaser and the vendor. If the developer fails to complete the house within the stipulated time. The purchaser can claim for the liquidated damages.

42 Compensation for Breach of Contract where Penalty Stipulated for Section 75 of the CA, 1950.  “When a contract has been broken, if a sum is named in the contract as to the amount to be paid in case of breach,  The party complaining about the breach whether there is actual damage prove or not,  To receive from the party who has broken the promise the penalty”

43 Duty to mitigate losses Explanation to Section 74  In estimating the loss or damages arising from a breach of contract, the means which existed of remedying the convenience caused by the non performance of the contract must be taken into account.

44 There is a general duty requiring that reasonable steps to be taken to mitigate losses which is flowing from a breach of contract. (Before awarding such damages, the court will look at the duty of the party not in default to mitigate the loss). The Plaintiff cannot recover any part of the damages that he could avoided it by taking all reasonable steps possible in the circumstances.

45 Malaysian Rubber Development Corp Bhd v Glove Seal Sdn Bhd Facts: The appellant (Second Defendant) was the agent of the first Defendant. In its capacity as an agent, the appellant entered into contract with Respondent (Plaintiff) Under the agreement, The respondent was to supply to the First Defendant two million rubber gloves per months from Nov 1988 till Oct 1989 for a total price of USD 1,848,000. The agreement required the first Defendant to open an irrevocable letter of credit in favour of R, 30 days before the date of the first shipment of goods. But, he failed to do so.

46 Continue…. At the time of the breach, the Respondent (Plaintiff) aware that there was no ready market for rubber gloves. but he still continue manufacturing the said gloves. Held: The respondent (Plaintiff) was under a duty to mitigate its loss immediately upon the breach, if there was no market available. Thus, the R’s claim for damages was disallowed.

47 What is SP When SP may be GRANTED When SP CANNOT be GRANTED 2. SPECIFIC PERFORMANCE

48 In Malaysia, specific performance and injunction are forms of what is termed specific relief. Specific relief is embodied in a statute entitled the SPECIFIC RELIEF ACT 1950:

49 1. Section 4 of SRA, 1950; Specific Relief Act is given- (b) by ordering a party to do the very act which is under an obligation to do (Specific Performance). (c) By preventing a party from doing that which he is under an obligation not to do. (Injunction)

50 WHAT IS SP? Section 21(1) Specific Relief Act :  “The jurisdiction to decree specific performance is discretionary  The court is not bound to grant any such relief merely because it is lawful to do so;  But the discretion of the court is not arbitrary but sound and reasonable, guided by judicial principles and capable of correction by Court of Appeal.”

51 When Specific Performance available?  As an equitable remedy, specific performance is an order of Court requiring a party to perform in terms the very obligations he undertook to discharge on entering the contract.  The purpose of an order of specific performance is to put the parties in the position, to perform their obligation as what would have done by them.

52 2. Situations where Specific Performance may be granted Section 11 (1)(a) When the act agreed to be done is in the performance wholly or partly of a trust Illustration of Section 11(1), A holds a 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. Section 11 (1)(b) When there exist no standard for ascertaining the actual damage caused by the non performance of the act agreed to be done (subject matter) Illustration of Section 11(1), 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 cause by its non performances.

53 Section 11 (1)(c) When the act to be performed is such that pecuniary compensation for its non- performance would not afford adequate relief. Illustration (a) Section 11(1), A contract to B to sell him a house for RM 1,000. Then, he refused to convey the said house. B is entitled to a decree of SP, directing A to convey the said house to him since a monetary compensation would not satisfies B.

54 S. 11 (1) (C) “pecuniary compensation for its non- performance would not afford adequate relief.” GAN REALTY SDN BHD & ORS V NICHOLAS & ORS [1969] “ SP was granted to enforce a promise to sell certain shares not available in the open market”. DUNCUFT V ALBRECHT ( 1841) “SP had been granted for an agreement for the sale of railway shares, which were limited in numbers and not always to be in the open market ”.

55 Section 11 (1) (d) When it is probable that pecuniary compensation cannot be got for the non performance of the act agreed to be done. Illustration ; A made a contract with B for delivery of certain goods. Unfortunately A becomes insolvent and C is appointed as his assignee. B may compel C by SP to surrender the goods to him because it is impossible for B to get any compensation for the breach, since A is already insolvent.

56 Continue…. 5. Section 11(2), when there is a breach of a contract to transfer immovable property cannot be adequately relieved by compensation of money. Therefore, SP can usually enforce land transaction.

57 Zaibun Sa Binte Syed Ahmad v Loh Koon Moy & Anor [1982] The P contracted to sell to B certain pieces of land adjacent to some lands which B was carrying out for mining operation. Later A refused to continue with the contract. B sued A. The particular lands were important for use in association with B’s tin mining operation, and compensation by way of money i.e. damages would not afford adequate relief. Thus, court granted SP.

58 Privy Council considered S. 11 (1) (c ) and S.11 (2) and affirming the decision of the Federal Court by ordering SP of a contract for the sale of land. It was also pointed that although there was an alternative claim for damages but the Judges viewed that it was irrelevant to the exercised of their discretion in that case.

59 3. Situations where Specific Performance Cannot be Granted 1. Section 20 (1) : circumstances when a Specific Performance cannot be granted: (a) Where money compensation is an adequate relief; (b) A contracts which is so dependent on the personal qualifications or volition of the parties; (c )A contract the terms of which the contract cannot find with reasonable certainty. (d) A contract which is in its nature revocable (e) A contract made by trustees either in excess of their powers or in breach of their trust

60 Continue….. (f)A contract made by or behalf of a corporation created for special purposes. (g) A contract the performances of which involves the performance of a continuous duty exceeding over a longer period than three years from its date (h)A contract of which material part of the subject matter supposed by both parties to exist, has, before it has been made, ceased to exist.

61 2. Section 21(2)(a) of CA. 1950  Where the circumstances under which the contract is made are such as to give the Plaintiff an unfair advantage over the Defendant, Though they may be no fraud or misrepresentation on the Plaintiff’s part Illustration: A contract to sell B certain land. To protect the land from floods, it is necessary for its owner to maintain expensive embankment. B does not know of that circumstances and A conceals it from B. A cannot enforce the contract by SP.

62 3. Section 21(2)(b) of CA, 1950.  Where the performance of a contract would involve some hardship on the defendant which he did not foresee, whereas its nor performance would involve no such hardship on the Plaintiff.

63 Furthermore, in s. 18 (3): Specific Relief Act gives power to the court to award compensation in addition to SP if SP alone NOT SUFFICIENT to satisfy the justice in the case. LEE HOY & ANOR V CHEN CHI [1971] “the grant of compensation under this section is permissible only if SP is pleaded but not otherwise”.

64 What is INJUNCTION Types of INJUNCTION When INJUNCTION CANNOT be GRANTED 3. INJUNCTION

65 1. WHAT IS INJUNCTION? An order of Court to restrain the doing, continuance or repetition of some wrongful conduct which is against the contract.

66 Condition precedents for the grant of an injunction:  The Plaintiff must have interest to protect;  Damages must be shown not to be adequate remedy i.e. the Plaintiff will suffer irreparable harm if the injunction is not granted;  That is danger unless restrained,  the Defendant will breach the contract or continue with the breach

67 Section 4(c) Specific Relief Act,  By preventing a party from doing that which he is under an obligation not to do Section 50 Specific Relief Act  Preventive relief is granted at the discretion of the court by injunction, temporary or perpetual

68 A. Temporary injunction Section 51(1) Specific Relief Act  “Temporary injunctions are such as are to continue until a specified time, or until the further order of the court.  They may be granted at any period of the suit” Synonymous with Interlocutory or Interim Injunction The purpose is to preserve the “status quo” of the parties, pending resolution of a legal action.

69 American Cyanamid Co v Ethicon  Basic principles of temporary injunction/interlocutory injunction: “An interlocutory injunction is granted to maintain the status quo, if there were serious questions to be tried.”

70 b. Perpetual Injunction Section 51(2) Specific Relief Act  Perpetual injunction can only be granted after the full trial and upon the merits of the case; the Defendant is permanently/ perpetually prohibited from doing the act or asserting a right which the injunction was granted.  To prohibit the Defendant permanently and granted after a full hearing.  Also known as Prohibitory Injunction whereby direct the Defendants named therein not to do something or to cease doing something.

71 Neoh Siew Eng & Anor v Too Chee Kwong  Plaintiffs the tenants.  The Defendant was the landlord  One of the terms of the agreement would be that the Defendant as the landlord and the registered consumer in respect of water supply to pay RM2 and the Plaintiff to pay the amount in excess

72 Continue….  The Plaintiff had an uninterrupted flow of water.  The water works found that common pipe was badly corroded. The Defendant also did not take any action to change the pipes that was corroded badly.  Held:  Granted a Perpetual injunction by ordering the Defendant to keep all the communications pipes on and in proper repair and to comply all regulations of the Waterworks Department so that the water supply to the rented premises by plaintiff would not be disconnected.

73 Situations where Injunction cannot be Granted Section 54(f)Specific Relief Act ….to prevent the breach of contract the performance of which would not be specifically enforced. It means that, any contract that can not be enforced by SP, may also cannot be subjected to an Injunction in order to prevent the breach of it.

74 Exception: Section 55 Specific Relief Act Notwithstanding s.54(f) where a contract comprises an affirmative agreement to do a certain act, the circumstances that the Court is unable to compel Specific Performance of the affirmative agreement shall not preclude it from granting an Injunction to perform the negative agreement….. By virtue of this exception, any contract which consists of both positive and negative agreement, Injunction can be granted in order to prevent the breach of the negative agreement.

75 Continue…. Illustration (c) Section 55  A contracts with B to sing for twelve month at B’s theatre and not to sing in public elsewhere. B cannot obtain specific performance of the contract to sing, but he is entitled to an injunction restraining A from singing at any other place of public entertainment.

76 Pertama Cabarate Nite Club Sdn Bhd v Roman Tam The appellants were the owners of a night club in Kuala Lumpur. The respondent were a well known singer from Hong Kong. The respondent had agreed to appear and sing at the appellant's night club for a few days. Clause 15 of the said contract provided that if the respondent breached any of its term, the appellant can terminate the contract, and in that event of such termination, respondent was not to perform in Kuala Lumpur for three months (fixed period) thereafter.

77 Continue…. The respondent declined to honor his contract and began performing at another night club. The appellant sued for ex parte interim injunction Held: The Federal Court decided that, the Defendant is not a resident in the country, and had signed a contract of singing for the Plaintiff on certain dates. The defendant had also given a negative undertaking not to sing elsewhere in Kuala Lumpur for a certain period. Federal Court decided that as illustration (c) Section 55, the fact that the Court was unable to compel specific performance but the Court can grant an injunction to compel performance of the negative undertaking.

78 4. QUANTUM MERUIT Where a Plaintiff sues for unspecified amount for services rendered, he is said to sue on a quantum merit (as much as he has earned). Claim for reasonable remuneration. S. 71 of the CA, 1950. “ a person who is interested in the payment of money which another is bound by law to pay, and who therefore pays it, is entitled to reimbursed by the other”

79 When Quantum merit applicable? When there is an express or implied agreement to provide a service but no agreement as to price When the parties have not performed the terms of their contract but a new contract can be inferred from their conduct to have replace the original, a quantum merit award may be available for the value of the work done under the new implied contract.

80 Where a contract is terminated by breach after one party has performed his obligations, the party not in default may elect to accept the breach and sue on a QM for the value of work done. A QM is also available to a party who is prevented from completing his obligations by the other party.

81 De Bernady v Harding The P was an agent of the D. An agreement provided that P was to be paid for his work and for expenses he might incur. Before the P could complete his agency function, the defendant terminated the agency. T he D paid the expenses incurred by the P but refused to pay for the work. Held; The P could recover on a QM his expenses as well as payment for work he has done.

82 5. Rescission of Contract Section 40  When a party to a contract has refused to perform, or  Disabled himself from performing, his promise in its entirely  The promisee may put an end to the contract, unless he has signifies by word or conduct his acquiescence in its continuance

83 Section 66 Any person who 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.

84 Note: This Notes and Copyright therein is the property of Madam Norazla Abdul Wahab and is prepared for the benefit her students enrolled in the MGM3351 course for their individual study. Any other use or reproduction by any person without consent is prohibited.


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