7.2_law_of_contract.pdf

7.0 Law and Acts governing engineer (6 hours) 7.0 Law and Acts governing engineer (6 hours) 7.1 Environmental Quality Act 1974 7.2 Law of contract 7.3 Akta Suruhanjaya Pencegahan Rasuah Malaysia (SPRM) 7.4 Employment Act and Regulation 7.5 Insolvency & Bankruptcy Act 7.6 Cyber Law

EDIT BY BA 23 MAC 2018

LAW OF CONTRACT

Contract Act 1950

LESSON OUTLINE ► ►

INTRODUCTION ELEMENTS OF A CONTRACT: 1. Offer 2. Acceptance 3. Consideration 4. Capacity 5. Intention 6. Free Consent 7. Certainty 8. Valid Object

VOID AND ILLEGAL CONTRACT ► DISCHARGE OF CONTRACT ► REMEDIES ►

INTRODUCTION Contract defined by Sec. 2(h) - ‘an agreement enforceable by law is a contract’ ► Specific Legislation - Contract Act 1950 - but English law still applicable by virtue of Civil Law Act. ► Function of contract: ►

 to secure the expectation created by a promise of future performance or expectation will be paid for its breach.  facilitate forward planning of the transaction in terms of cost and value, responsibilities of parties and preparation for contingencies. ►

Contract therefore - the instrument by which separate and conflicting interests of the parties can be reconciled and brought to common goal.

ELEMENTS OF A CONTRACT: 1. Offer, 2. Acceptance 3. Consideration What is a Contract?  https://www.youtube.com/watch?v=slfN6eJLl8k

What is Offer and Acceptance? (Contracts) ► https://www.youtube.com/watch?v=6MRj-88m4bM&t=234s What is Consideration? (Contracts) ► https://www.youtube.com/watch?v=hmdW_95r2jI

ELEMENTS OF A CONTRACT: 4.0 Capacity ► legal

capacity in contract law ► https://youtu.be/VlBy6dUovuk?t=77

ELEMENTS OF A CONTRACT: 5.0 Intention ► What

are the Intentional Torts ► https://youtu.be/_hBaSpRgYCc?t=39

ELEMENTS OF A CONTRACT: 6.0 Free Consent ►

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Sec 10 of Contract Act - agreements are contracts if they are made by the free consent of the parties. Sec 14 - consent is free when not caused by one or more of the following: 1. Coercion - Sec 15 2. Undue influence - Sec 16 3. Fraud - Sec 17 4. Misrepresentation - Sec 18 5. Mistake - Sec 21, 22 and 23

Void - agreement that lacks any legal effect from the beginning - void ab initio. Voidable contract - Sec 2 (i) ‘an agreement which is

enforceable by law at the option of one or more parties, but not the others….’

ELEMENTS OF A CONTRACT: 6.0 Free Consent ► Coercion

Under Free Consent ► https://youtu.be/yaV_PfMq7fc?t=96 ► what

is informed consent.adult ► https://youtu.be/OrAA9Lq9xKU?t=54

ELEMENTS OF A CONTRACT: 7.0 Certainty ► Certainty

of Contract ► https://youtu.be/qxa-bF_-5IY?t=1

VOID AND ILLEGAL CONTRACT ► ►

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Void, Valid and Voidable. Know the difference for your real estate exam! https://youtu.be/qkprB53iAnk?t=44 Contract Enforcement, Breach, and Remedies https://youtu.be/NDXdHEqeOZk?t=80 Breach, Damages, and Remedies in Contract https://youtu.be/VtHtHPWOlQM?t=59 What is VOID CONTRACT? What does VOID CONTRACT mean? VOID CONTRACT meaning, definition & explanation https://youtu.be/uj7rv9XM9eo?t=52

DISCHARGE OF CONTRACT ►

Contract is discharged when it is terminated in one of these ways: 1. By performance. 2. By consent or agreement between the parties 3. By impossibility (frustration) 4. By breach.

► Discharge

of Contract ► https://youtu.be/bzQG6h-6u84?t=80 ► What

is a Breach of Contract ► https://youtu.be/uCG-RqHDGEo?t=117

REMEDIES ►

There are several remedies provided by the law to give relief to the party not in default in a breach of contract. 1. Rescission of Contract. - Sec 40 2. Damages. - Sec 74 to 76 3. Specific Performance. - The Specific Relief Act 1950 4. Injunction. - Specific Relief Act.

Remedies for Breach of Contract ► https://youtu.be/oH_ruOJxU5Q?t=5 ►

Rescission of a Contract https://youtu.be/7IvdNT7yzig?t=33

Student Reading

LESSON OUTLINE ► ►

INTRODUCTION ELEMENTS OF A CONTRACT: 1. Offer 2. Acceptance 3. Consideration 4. Capacity 5. Intention 6. Free Consent 7. Certainty 8. Valid Object

VOID AND ILLEGAL CONTRACT ► DISCHARGE OF CONTRACT ► REMEDIES ►

ELEMENTS OF CONTRACT1. OFFER

1. Offer

Sec.2 (a) - offer or proposal - when a person signify his willingness to do or abstain from doing anything. ► Proposal or offer - something which is capable of being converted into an agreement by its acceptance. ► Must be a definite promise to be bound - provided that certain specific terms are accepted. ► Lack of offer and acceptance - contract void ab initio ►

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Sec. 4 (1) -offer must be communicated - effective when it comes to the knowledge of the offeree.  R v. Clarke - communication of proposal regarding capture of convict

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Offer can be made to a particular person or to the general public  Carlill v. Carbolic Smoke Ball - offer made to the rest of the world but the contract is made with that limited portion of the public who come forward and perform the condition

ELEMENTS OF CONTRACT1. OFFER ►

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To be an offer, the offeror must not merely feeling his way towards an agreement – if that is the case, then it is not offer but is an invitation to treat Examples of ITT:  Advertisements in the paper for the post of a doctor - ITT  Auctioneer inviting a bid – ITT (but a bidder making a bid is an offer)  Catalogue advertising goods for sale  Goods on display in a shop

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Cases:  Boots Cash Chemist Ltd – sale of poison under pharmacist supervision  Majumder V. Attorney General of Sarawak – advertisement for the post of a medical officer

LESSON OUTLINE ► ►

INTRODUCTION ELEMENTS OF A CONTRACT: 1. Offer 2. Acceptance 3. Consideration 4. Capacity 5. Intention 6. Free Consent 7. Certainty 8. Valid Object

VOID AND ILLEGAL CONTRACT ► DISCHARGE OF CONTRACT ► REMEDIES ►

ELEMENTS OF CONTRACT2. Acceptance 2. Acceptance ► ► ► ►

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Sec.2 (b) - when the person to whom the proposal is made signify his assent thereto. Acceptance can be expressed or implied (inferred from conduct) Acceptance must be accepted on exactly the same terms as the proposal without any variation or modification – it must be absolute and unqualified Any modification / variation to the offer is a counter - proposal and is equivalent to rejection  Hyde v.Wrench - offer £1000, accept £950  Stevenson v. McLean - request for additional information is not counter proposal Acceptance must be communicated with some positive action – silence cannot be imposed as acceptance – Felthouse v. Bindley Exception : - proposer dispense with it - acceptance in form of performance Acceptance must be within reasonable time - Sec.6(b) Acceptance may also be revoked at any time before the communication of the acceptance is complete against the acceptor

ELEMENTS OF CONTRACT2. Acceptance ►

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Sec.4 - Acceptance through post - an exception to the general rule that acceptance must be communicated – a.k.a. The Postal Rule Sec.4 - communication of acceptance is completea. As against the proposer, when it is put in a course of transmission to him, so as to be out of the power of the acceptor b. As against the acceptor, when it comes to the knowledge of the proposer Illustration to the section: B accept A’s proposal by a letter sent by post The communication of the communication is complete: as against A, when the letter is posted as against B, when the letter is received by A

ELEMENTS OF CONTRACT2. Acceptance Termination of offer ► ► ►

Revocation must also be communicated – Fitch v.Snedaker Revocation of proposal possible if acceptance is not complete. Sec. 6 - A proposal may be withdrawn under four circumstances  By communication of notice of revocation by the proposer to the other party – Bryne V. Tienhoven  By lapse of time (prescribed or reasonable) – Ramsgate Victoria Hotel v. Montefiore  By failure of acceptor to fulfill a condition precedent to acceptance – Hyde V. Wrench  By death or mental disorder of the proposer if such fact comes to the knowledge of the acceptor before acceptance – Bradbury V. Morgan

LESSON OUTLINE ► ►

INTRODUCTION ELEMENTS OF A CONTRACT: 1. Offer 2. Acceptance 3. Consideration 4. Capacity 5. Intention 6. Free Consent 7. Certainty 8. Valid Object

VOID AND ILLEGAL CONTRACT ► DISCHARGE OF CONTRACT ► REMEDIES ►

ELEMENTS OF CONTRACT3. Consideration 4. Consideration ► ► ►

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Sec.26 - as a general rule - agreement without consideration is void Sec. 2 (d) defined what is consideration. Types of consideration i) Executory consideration ii) Executed consideration iii) Past consideration Consideration need not be adequate - Phang Swee Kim v. Beh Hock Consideration need not move from the promisee - Venkata Chinnaya v. Verikataramaya - consideration provided by mother Past consideration is good consideration - Kepong Prospecting Ltd.. Part payment from the full amount is valid consideration Exception to the rule that agreement without compensation is void - Section 26: a. agreement made on account of natural love and affection b.agreement to compensate for past voluntary act c. agreement to compensate act the promisor legally compelled to do d.agreement to pay a statute barred debt.

LESSON OUTLINE ► ►

INTRODUCTION ELEMENTS OF A CONTRACT: 1. Offer 2. Acceptance 3. Consideration 4. Capacity 5. Intention 6. Free Consent 7. Certainty 8. Valid Object

VOID AND ILLEGAL CONTRACT ► DISCHARGE OF CONTRACT ► REMEDIES ►

ELEMENTS OF CONTRACT4. Capacity

6. Capacity Parties to a contract should be competent to contract, i.e have the legal capacity to do so. ► Where one or more of the parties to a contract lack the capacity - contract invalid / void. - Tan Hee Juan ► Sec. 11 - ‘Every person is competent to contract who is of the age of majority ►

according to the law to which he is subject, and who is of sound mind, and is not disqualified from contracting by any law to which he is subject’.

Age of majority- 18 years - Age of Majority Act 1971 ► Exception: ►

     ► ►

contract for necessaries Nash V.Inman scholarship Govt. of Malaysia v. Gurcharan Singh Marriage contracts insurance Apprenticeship

Sound mind - Sec 12(1) - ..capable of understanding it and forming rational

judgement as to its effect upon his interest.’

Includes incapacity due to sickness, alcohol or drugs

PRIVITY OF CONTRACT ►

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After a valid contract has been formed - to whom does the obligation extend? What are the limits of the contractual agreement. The general rule under common law - no one but the parties to a contract can be entitled to it, or bound by it. Contract cannot confer rights on third party  Price v. Easton - payment of debt on behalf of another  Dunlop Pneumatic Tyre v. Selfridge.

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Contract cannot impose liability on third party  e.g. relationship between building owner - contractor - sub contractor

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However, a claim can still lie in tort.

CONTENTS OF A CONTRACT 1. EXPRESS AND IMPLIED TERMS ►

Contents made up of terms - expressed or implied 1. Express terms - has been specifically agreed upon by the parties -orally, in writing or both.  Express terms are straightforward and can be identified just by looking at the contract document. 2. Implied terms - term that is read into the contract by the court.  Form an integral part of the contract though not expressly provided necessary to give business efficacy to the contract

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Terms may be implied by : 1. Custom and usage pertaining to a particular transaction.  Preston Corporation - implied a term based on trade usage regarding ownership of film positives used to print books ► Must satisfy - notoriety, certainty and reasonableness 2. Statutory Provision  Statutes that imply terms into a contract: 1. Sales of Goods Act 1957 2. Hire - Purchase Act 1967 3. National Land Code 1965

CONTENTS OF A CONTRACT 3. The courts , based by the intention of the parties ► Cases:  Yong Ung Kai v. Enting - implied a term that must have been in the mind of the parties – to get license to cut the timber  the officious bystander test i.e. “ oh, of course!”.

2. Conditions and Warranties ► ► ►

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Another classification of terms Definition of both terms - given by Sales of Goods Act 1957 Sec 12 (2) SOGA - condition - ‘a stipulation essential to the main

purpose of the contract, the breach of which gives rise to a right to treat the contract as repudiated’. Sec 12 (3) SOGA - warranty - ‘ a stipulation collateral to the main purpose of the contract, the breach of which gives rise to claim for damages but not a right to reject the goods or repudiate the contract.’ Whether a term is a condition or warranty - depends on the intention of the parties - the court will help to determine.

CONTENTS OF A CONTRACT 3. Exemption Clause ►

Defined as ‘ a term of a contract that attempts either to modify the principal

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Common in standard contract - the operation of which depends on the construction of the contract. In case of disputes- court will interpret - contra proferentum. If the clause is ambiguous - will be interpreted to the disadvantage of the party who will benefit from clause. In case of negligence - need clear and unambiguous words to exclude liability. In case of serious / fundamental breach - exemption clause will not cover the parties who made the clause. - Port Swettenham v. T.W.Wu and Company

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obligation(s) arising out of the contract or to limit / exclude the liability of a party which would otherwise arise as a result of a breach by that party…’.

There are also some statutes which modify the effect of the exemption clause to provide more protection to consumers. ► Also - exemption clause cannot give benefit to third party nor make another party liable ►

LESSON OUTLINE ► ►

INTRODUCTION ELEMENTS OF A CONTRACT: 1. Offer 2. Acceptance 3. Consideration 4. Capacity 5. Intention 6. Free Consent 7. Certainty 8. Valid Object

VOID AND ILLEGAL CONTRACT ► DISCHARGE OF CONTRACT ► REMEDIES ►

ELEMENTS OF CONTRACT5. Intention To Create Legal Relation 3. Intention To Create Legal Relation ► ►

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Not provided by Contract Act but by case laws Mere agreement is not enough to contemplate the existence of a legal contract. Sometimes can be imputed from the nature of the agreement, for e.g :  acceptance to a dinner  acceptance to an offer to play a game of soccer  acceptance of an offer to pay for half of the petrol cost Thus parties to a transaction may state that they do not intend to enter into any binding obligation. Intention is particularly relevant when it comes to cases where legal contracts are not normally made like in domestic arrangements – Balfour v. Balfour However in a commercial agreements, the presumption is that there is intention to create legal relations- Winn V.Bull

LESSON OUTLINE ► ►

INTRODUCTION ELEMENTS OF A CONTRACT: 1. Offer 2. Acceptance 3. Consideration 4. Capacity 5. Intention 6. Free Consent 7. Certainty 8. Valid Object

VOID AND ILLEGAL CONTRACT ► DISCHARGE OF CONTRACT ► REMEDIES ►

ELEMENTS OF CONTRACT6.0 Free Consent Sec 10 of Contract Act - agreements are contracts if they are made by the free consent of the parties. ► Sec 14 - consent is free when not caused by one or more of the following: 1. Coercion - Sec 15 2. Undue influence - Sec 16 3. Fraud - Sec 17 4. Misrepresentation - Sec 18 5. Mistake - Sec 21, 22 and 23 ►

Void - agreement that lacks any legal effect from the beginning - void ab initio. ► Voidable contract - Sec 2 (i) ‘an agreement which is enforceable by law at ►

the option of one or more parties, but not the others….’

Free Consent :1. Coercion. 1. Coercion. ►

Coercion defined as ‘ committing or threatening to commit any act

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Kesarmal v. Valiappa Chettiar - transfer made under Sultan’s order in the presence of Japanese officers during the occupation considered voidable. Chin Nam Bee Development – payment of extra $4000 under threats to cancel booking of houses

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forbidden by the Penal Code, or the unlawful detaining of any person / property with the intention of causing any person to enter into an agreement’.

Free Consent :2. Undue Influence 2. Undue Influence ►

Exist when ‘ the relations subsisting between the parties are such that one of

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Therefore the elements of undue influence:

the parties is in the position to dominate the will of the other and uses that position to obtain an unfair advantage over the other’.  

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Position to dominate Use that position to obtain unfair advantage

Position to dominate exist when:

 Has real or apparent authority over the other – e.g.: parent-child ► Morley v. Loughnan  Stand in fiduciary relation to the other –e.g.: religious leader – follower, solicitor-client ► Allcard v. Skinner ► Tate v. Williamson  Made contract with a mentally incapacitated person by reason of age, illness or distress. ► Inche Noriah v. Shaikh Allie

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Burden of proving no undue influence - on the person in position to dominate

Free Consent :3. Fraud 3. Fraud ►

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Sec 17 – Five acts that would constitute fraud:  Suggestion of fact that is not true  Active concealment of fact - Horsfall v. Thomas - inserting metal plug in a cannon is active concealment  Promise made without intent to perform it  Other act fitted to deceive  Any acts the law declares to be fraudulent There must be an intention to deceive - that is made knowingly, without belief in its truth or reckless whether it true or false Generally – silence does not constitute fraud - the misled party has the duty to exercise ordinary diligence However, under certain circumstances silence or non -disclosure may constitute fraud –  Takes into account the relationship btw parties and where silence is equivalent to speech Duty to exercise ordinary diligence applies to fraud by silence only – not other cases of fraud  Weber v. Brown - number of rubber trees

Free Consent :4. Misrepresentation. 4. Misrepresentation. Misrepresentation refer to certain false statement of existing or past fact made by a person before or at the time of making the contract which induces a party to enter into a contract. ► Basic difference between misrepresentation and fraud is that in fraud the person making the representation does not himself believe in its truth - but for misrepresentation - may himself believe it true. ► Like fraud - when there is a duty to disclose - silence may amount to misrepresentation. ► However under the Contract Act - Sec 19 - misled party has duty to exercise due diligence ►

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Tan Chye Chew v. Eastern Mining Metals – contract not voidable despite the misrepresentation as the party has means of discovering the truth with ordinary diligence.

To be actionable:

1. There must be false representation - Keates v. Lord Cardogan 2. The representation is one of fact , not opinion - Bisset v. Wilkinson. 3. The statement was addressed to the party misled - Peek v. Gurney. 4. The statement must induce the contract - Attwood v. Small

Free Consent :5. Mistake. 5. Mistake ►

Sec. 21 of the Contract Act - ‘where both the parties under the agreement

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Sec 22 - mistake as to the law - contract not voidable due to mistake of law in force in Malaysia, but if the law not in force in Malaysia - like mistake of fact. Sec 23 - mistake as to one party (unilateral) - contract is valid Mistake of fact made by both parties can be as to :-

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are under a mistake as to a matter of fact essential to the agreement, the agreement is void’ - for lack of free consent.

 Existence of the subject matter ►

Strickland v. Turner. - annuity for a dead person

 Identity of the subject matter ►

Falck v. Williams - identity of charter parties

 Quality of the subject matter ►

Kennedy v. Panama Royal Mail. - shares in a mail company

 Possibility of performing the contract. ►

Sheikh Brothers v. Ochsner. - manufacture sisal

LESSON OUTLINE ► ►

INTRODUCTION ELEMENTS OF A CONTRACT: 1. Offer 2. Acceptance 3. Consideration 4. Capacity 5. Intention 6. Free Consent 7. Certainty 8. Valid Object

VOID AND ILLEGAL CONTRACT ► DISCHARGE OF CONTRACT ► REMEDIES ►

ELEMENTS OF CONTRACT7. Certainty 5. Certainty ► The terms of an agreement cannot be vague but must be certain. ► If uncertain or incapable of being made certain - void. ► Intentions of the parties will be frustrated because of uncertainty and the court will usually not interfere ► At common law - two aspects of uncertainty:  due to language used  failure to reach agreement on fundamental term of the agreement

In Contract Act - uncertainty provided by Sec. 30 - ‘agreements,the meaning of which is not certain, or capable of being made certain, are void. ► Case: ► - Karuppan Chetty v. Suah Thian - ‘lease at $35.00 per month as long as he likes’ ►

LESSON OUTLINE ► ►

INTRODUCTION ELEMENTS OF A CONTRACT: 1. Offer 2. Acceptance 3. Consideration 4. Capacity 5. Intention 6. Free Consent 7. Certainty 8. Valid Object

VOID AND ILLEGAL CONTRACT ► DISCHARGE OF CONTRACT ► REMEDIES ►

VOID AND ILLEGAL CONTRACT ► Sec

2 (g) - Contract which is not enforceable by law. ► Sec 24 –Contract with unlawful consideration / object is void i.e.: a- forbidden by law - Hee Cheng V. Krishnan – attempts to transfer TOL land b- of such nature as to defeat the law -Tan Bing attempts to assign logging rights c- fraudulent -Palaniappa Chettiar d-involves / implies injury to person / property. Ahamed Alhabshee V. Puteh e- immoral / against public policy - Pearce V. hire of vehicles for prostitution

Hock –

Syed Brooks –

VOID AND ILLEGAL CONTRACT ►

There are also Sec 25 to Sec 31 which provides for other instances that renders a contract void in law.

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Sec 25 - any part of a single consideration / any part of several consideration unlawful ► Chung Khiaw Bank Ltd. Sec 26 - agreement made without consideration. Sec 27 - agreement in restraint of marriage. Sec 28 - agreement in restraint of trade ► Wrigglesworth v. Anthony Wilson – restrained from practicing as lawyer within five miles from KB for two years Sec 29 - agreement to restraint legal proceeding ► Corporation Royal Exchange v. Teck Guan Sec 30 - agreement void for uncertainty. Sec 31 - agreement by way of wager.

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VOID AND ILLEGAL CONTRACT

Consequence Of Void And Illegal Contract. ► General rule under CA - ex turpi causa non oritur actio - no action will arise from a wrong done. ► Contracts under sec 27, 28 and 29 - not void in toto - severable. ► Sec 66 - Right of restitution - doctrine of unjust enrichment  Ahmad b. Udoh – paid $1500 as deposit for lease of padi land which was illegal  Yeep Mooi v. Chu Chin Chua – money deposited with a company carrying unlicensed business is recoverable

LESSON OUTLINE ► ►

INTRODUCTION ELEMENTS OF A CONTRACT: 1. Offer 2. Acceptance 3. Consideration 4. Capacity 5. Intention 6. Free Consent 7. Certainty 8. Valid Object

VOID AND ILLEGAL CONTRACT ► DISCHARGE OF CONTRACT ► REMEDIES ►

DISCHARGE OF CONTRACT ►

Contract is discharged when it is terminated in one of these ways: 1. By performance. 2. By consent or agreement between the parties 3. By impossibility (frustration) 4. By breach.

DISCHARGE OF CONTRACT 2. By Consent or Agreement. 1.By Performance.

►Performance must be strictly in accordance with terms of the contract. ►Sec 38 (1) - parties to a contract must either perform or offer to perform their respective promises unless such performance has been dispensed with by any law. ►When time is of the essence - Sec 56 ►Performance by third party - Sec 41 ► Letchumi Ammal – terms of contract that requires personal

performance must be done by promissor ►Haji Nik Ishak v. Nik Zainab – if a promisee accepts performance from a third party, cannot afterwards enforce it against promisor

DISCHARGE OF CONTRACT 2. By Consent or Agreement. 2. By Consent or Agreement. ► ►

Contract created by consent can be extinguished by consent either express or implied. Express consent may be given at time of contract or subsequent to that.  E.g. discharged at the occurrence of an event. Waiver, release, novation or rescission.

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Sec 63 - 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. Sec 64 - 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.

DISCHARGE OF CONTRACT 3. By Impossibility / Frustration. 3. By Impossibility / Frustration.

Two categories of impossibility of contract When impossibility is at the time of making the contract - an agreement to do an act impossible in itself is void. ► A contract is frustrated when there is a change in the circumstances which renders a contract legally or physically impossible of performance – not merely difficult or more onerous ► Sec 57(2) - 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, becomes void when the act becomes impossible or unlawful.

In applying the rule - court will examine the circumstances surrounding the frustration , including whether it is self induced or not. ► A contract may be discharged in any of the following circumstances: ►

1. Destruction of the subject matter - Taylor v. Caldwell ► there must be total destruction - not partial due to Sec 12 of SRA 2. Supervening event defeat the whole purpose / object of the contract. ► Henry v. Krell. 3. Death or personal incapacity especially in regards of personal obligation. 4. Supervening illegality - Lee Kin v. Chan Suan Eng.

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Effect of frustration - automatically end the contract Sec 66 CA provides for restitutionary remedy.

DISCHARGE OF CONTRACT 4. By Breach 4. By Breach ► Sec 40 - ‘When a party to a contract has refused to perform, or

disabled himself from performing, his promise in its entirety, the promisee to the contract, unless he has signified, by words or conduct, his acquiescence in its continuance.’

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Party not in breach has the option of continuing with the contract and claim damages or repudiate the contract. Sec 65 - ‘when a person at whose option a contract is voidable

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Cases :

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rescinds it, the other thereto need not perform any promise therein contained in which he is promisor. The party rescinding a voidable contract shall, if he has received any benefit thereunder from another party to such contract, restore the benefit, so far as may be, to the person from whom it was received.’  Choo Yin Loo v. Visuvalingam  Ban Hong Joo Mine Ltd. V. Chen & Yap

LESSON OUTLINE ► ►

INTRODUCTION ELEMENTS OF A CONTRACT: 1. Offer 2. Acceptance 3. Consideration 4. Capacity 5. Intention 6. Free Consent 7. Certainty 8. Valid Object

VOID AND ILLEGAL CONTRACT ► DISCHARGE OF CONTRACT ► REMEDIES ►

REMEDIES ►

There are several remedies provided by the law to give

relief to the party not in default in a breach of contract. 1. Rescission of Contract. - Sec 40 2. Damages. - Sec 74 to 76

3. Specific Performance. - The Specific Relief Act 1950 4. Injunction. - Specific Relief Act.

REMEDIES ►

There are several remedies provided by the law to give

relief to the party not in default in a breach of contract. 1. Rescission of Contract. - Sec 40 2. Damages. - Sec 74 to 76

3. Specific Performance. - The Specific Relief Act 1950 4. Injunction. - Specific Relief Act.

REMEDIES 1.Rescission 1.Rescission ►

as dealt with in the previous part under sec. 40

REMEDIES 2.Damages 2.Damages

Damages are granted to a party as compensation for the damage, loss or injury done / suffered through breach of contract - but damage can’t be too remote or indirect. ► Damages can be classified as substantial, nominal or exemplary. ► Sec 74 - ‘when a contract has been broken, the party who suffers is entitled to ►

receive…..compensation for any loss or damage….which naturally arose in the usual course of things..or which the parties knew, when they made the contract, to be likely to result from the breach’.

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Illustrations to sec74 also indicate that the aggrieved party may recover damages  for other expenses incurred as a result of the breach,  for loss of profits arising out of the breach,  for the difference btw the price of goods as contracted for and the actual price the goods were sold for as result of the breach.

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Sec 75 - ‘When a contract has been broken, if a sum is named in the contract

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The effect of fixing the sum - to determine the upper limit of compensation. Nevertheless, party seeking damages is also under the duty to mitigate the loss - Kabatasan Timber Extraction Co.

as the amount to be paid in case of such breach…or any other stipulation by way of penalty…the party complaining of the breach is entitled to receive…reasonable compensation not exceeding the sum named or the penalty stipulated for.’

REMEDIES 3. Specific Relief. 3. Specific Relief. ► ► ► ► ►

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The Specific Relief Act provides for the remedy of specific performance - which is discretionary by nature. It a decree of the courts directing the contract to be performed according to its terms. Sec 11 in trust cases and where no adequate relief. Sec 12 - presumption in cases of transfer of land Sec 18 - court has power to award damages in lieu of SP Sec 21 - court has discretion to refuse specific performance if cause undue hardship to the defendant. Sec 20 - circumstances where no SP can be enforced:  where money is adequate relief.  contract with minute details.  contract dependant on personal qualification.  contract that will need supervision of the court.  contract with uncertain terms.  contract revocable by nature.  contract made by trustee in excess / breach of their power  contract made on behalf of public or private corporation in excess of its power.  contract the involves performance of continuous duty extending over a period longer than three years from its date.  contract which a material part of the subject matter has ceased to exist even before the contract is made

REMEDIES 4. Injunction. 4. Injunction. An equitable remedy that can be varied or dissolved Sec 50 of SRA provides for two types of injunctions:

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1. Interim Injunction.     

Used by a party to maintain the status quo of a subject matter pending full trail of the case. To continue until a specified time / full order of the court. May be granted at any period during a suit. Must consider that there are serious question to be tried, that compensation would be adequate and it is proper on the balance of convenience. Can be mandatory injunction or a restraining order.

2. Perpetual Injunction.  

Granted by decree made after a full trial based on the merits of the case - defendant will be permanently prohibited. No injunction where the contract cannot specifically enforced.

► LAWS11061_2

Capacity to Contract ► https://www.youtube.com/watch?v=d1TZeV fXc5s

That’s All Folks!