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CONTENT:
A. BREACH OF CONTRACTS
Examples of breach of contracts
Effects of breach of contracts
Relief under sections 40 and 65,
Contracts Act1950
Effects under English law
Breach of Contract
Breach of contract happens where there
is an actual failure by a party to the
contract to perform his obligations under
the contract or an indication of his
intention not to do so.
(Oxford Dictionary of Law, 4th Edition)
cont
contract) although he may sue and
recover damages for non-performance of
the subsidiary term.
Ching Yik Development Sdn Bhd v
Setapak Heights Development Sdn Bhd
[1996] 3 MLJ 675
cont
Section 65 of the Malaysian Contracts
Act 1950 provides for consequences of
rescission of voidable contract.
Please refer.
Quantum Meruit
Specific performance
Injunction
Definition
A legal remedy - is the means with which
a CT of law, enforces a right, imposes a
penalty, or makes some other CT order
to impose its will.
There are several remedies for breach of
contract, such as damages, specific
performance, injunction, quantum meruit
and etc.
Damages
The purpose of awarding damages is to
compensate the Plaintiff for the loss
suffered due to the Defendants breach of
contract.
Damages is that sum of money which will
put the party who has been injured or who
has suffered, in the same position as if the
contract had been properly performed.
Types of Damages
Compensatory Damages
Nominal Damages
Punitive damages
Compensatory Damages.(AKA
Ordinary / General Damages)
Compensatory Damages cover the
loss the non-breaching party incurred as
result of the breach of contract.
The amount awarded is intended to make
good or replace the loss caused by the
breach.
cont
Compensatory damages can be divided
into:General damages cover the loss directly &
necessarily incurred by the breach.
Special damages cover any loss incurred by
the breach of contract because of special
circumstances / conditions that are not
ordinarily predictable.
Nominal Damages
Definition of nominal damages according
to Chitty on Contracts:Whenever a party is liable for breach of
contract, either express or implied, the
Plaintiff is generally entitled to nominal
damages although no actual damage is
proved; the violation of a right at common
law will usually entitle the plaintiff to
nominal damages without proof of special
damage.
..CONT
Nominal damages i.e a very small sum
of damages.
Nominal damages are awarded when,
e.g. a plaintiff who has sued for breach of
contract has suffered no loss.
Nominal damages are awarded merely to
acknowledge that his rights have been
breached.
Nominal Damages
In Industrial & Agricultural Distribution Sdn
Bhd v Golden Sands Construction Sdn Bhd
[1993] 3 MLJ 433, the Court further illustrated
the importance of proving damages and stated
that :
damages are not meant to be punitive in
nature but rather compensatoryIt is therefore
important for the plaintiff to establish his loss and
not, so much as what the defendant had gained
from the breach.
cont
NOTE: The law will impute to every
individual, knowledge of the loss that is
liable to result naturally or in the ordinary
course of things from a breach of contract.
Whether or not the contract breaker actually
has this knowledge is irrelevant.
That is to say, imputed knowledge relates to
the 1st limb of Hadley v Baxendale.
cont
NOTE: In addition to the imputed knowledge,
the defaulter may have knowledge of special
circumstances which are outside the normal
course of things & which will add or enhance the
damage that may be caused by a breach of
contract (i.e. actual knowledge).
It is actual knowledge of the special
circumstances that activates the 2nd limb of
Hadley v Baxendale
Remoteness of damages in
Malaysia
In Malaysia, Section 74 Contracts Act
1950 sets out the consequences of a breach
of contract:
(1) when a contract has been broken, 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 thereby, which
naturally arose in the usual course of things
Remoteness of damages in
Malaysia
from the breach, or which the parties
knew, when they made the contract, to be
likely to result from the breach of it.
(2) Such compensation is not to be given
for any remote and indirect loss or
damage sustained by reason of the
breach.
Remoteness of damages in
Malaysia
cont
Therefore, once it is shown that the losses
could fall under the 1st or 2nd limb, the
Defendant is liable to the full extent of it so
long as the extent of damages has been
shown on the balance of probabilities.
Mitigation of Damages
The duty to mitigate (i.e. minimise the
losses) only comes about when there is a
breach of contract.
The explanation in Section 74 CA 1950
provides that: In estimating the loss or
damage arising from a breach of contract,
the means taken to remedy the
inconvenience caused by the nonperformance of the contract must be taken
into account.
Principles of mitigating
The Plaintiff must take reasonable steps to
mitigate his loss and must not incur
unreasonable expenses.
What this means is that the plaintiff cannot
recover any part of the damages that he
could have avoided by taking all reasonable
steps possible in the circumstances.
Quantum Meruit
Quantum Meruit : where a plaintiff sues
for an unspecified amount for services
rendered (claim for reasonable
remuneration)
Quantum Meruit means as much as he
can earned.
cont
2. where the parties have not performed
the terms of their contract but a new
contract can be inferred from their conduct
to have replaced the original, a quantum
meruit award may be available for the
value of the work done under the new
implied contract.
Case: Smith Construction Co Ltd v Phit
Kirivatna (f) [1955] MLJ 8, HC
cont
3. 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 & sue on
quantum meruit for the value of work
done.
Case: De Bernady v Harding (1853) 8
Ex 822; 11 ER 1586
cont
4. A quantum meruit is also available to a
a prty who is prevented from completing
his obligations by the other party.
Case: Ban Hong Joo Mines Ltd v Chen
& Yap [1969] 2 MLJ 83, FC
cont
c) by preventing a party from doing that
which he is under an obligation not to do
d) by determining & declaring the rights of
parties otherwise than by an award of
compensation; or
e) by appointing a receiver
S.4(b) encompassed the order of specific
performance & s.4(c) may refer to the
injunction.
Specific Performance
SP is an decree/order of CT requiring a
party to perform in terms the very
obligations he undertook to discharge on
entering into the contract.
The purpose is to put the parties in the
position, in which the due performance of
their obligations would have placed them.
cont
b) if the subject matter of the contract is rare
(or unique); the reasoning is that damages
are not an adequate remedy because they
will not place the innocent party in position
he would have been in but for the breach.
c) exceptional circumstances where
damages would not be adequate remedy :
Beswick v Beswick [1968] AC 58.
Injunction
Injunction : are form of what is term as specific
relief & it is embodied in section 4(c) of the
Specific Relief Act 1950.
s.4: Specific relief is given (c) by preventing a
party from doing that which he is under an
obligation not to do
An injunction is an order of CT to prohibit
threatened / continuing illegal conduct of certain
kinds.
cont
It is awarded in circumstances where
damages would not be an adequate remedy
to compensate the claimant because the
claimant needs to restraint the defendant
from starting or continuing a breach of a
negative contractual undertaking
(prohibitory injunction) or needs to compel
performance of a positive contractual
obligation (mandatory injunction).
..cont
The condition precedent for the grant of an
injunction are:
a) the plaintiff must have an interest to
protect
b) damages must be shown not to be an
adequate remedy
c) there is danger that unless restrained, the
defendant will breach the contract / continue
with the breach complained of.