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.

REMEDIES OF CONTRACT

1. DAMAGES

DAMAGESThe 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.

CATEGORIES OF DAMAGES

a. Substantial Damages

Pecuniary / monetary compensation:

intended to put the plaintiff in the position he would have enjoyed had the contract

been performed.

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.

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.”

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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).

“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.”

Hadley v Baxendle (1854) 9 Ex 341Plaintiff 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.

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.

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.

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.

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.

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.

Illustration (j) Section 74A, 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

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 8th Nov. The Defendant also knew that the boiler was required for the business and for immediate use.

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.

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.

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

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)

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.

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.

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.

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

Example of Clause in AgreementDEFAULT 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 …”

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

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.

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”

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.

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.

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.

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.

2. SPECIFIC PERFORMANCE

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:

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)

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.”

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.

2. Situations where Specific Performance may be granted

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”.

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.

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.

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.

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

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.

2. Section 21(2)(a) of CA. 1950Where 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.

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.

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”.

3. INJUNCTION

1. WHAT IS INJUNCTION?An order of Court to restrain the doing,

continuance or repetition of some wrongful conduct which is against the

contract.

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

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 ActPreventive relief is granted at the

discretion of the court by injunction, temporary or perpetual

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.

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.”

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.

Neoh Siew Eng & Anor v Too Chee Kwong

Plaintiffs the tenants.The Defendant was the landlordOne 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

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.

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.

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.

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.

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.

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.

4. QUANTUM MERUITWhere 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”

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.

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.

De Bernady v HardingThe 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.

5. Rescission of ContractSection 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

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.

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.