DISCHARGE

LAW OF CONTRACT OF
CONTRACT
DISCHARGE OF CONTRACT
Happen when parties to the contract were made
free from the obligation owed under the terms of the
contract.
Take effect in the existence of the situations below:
1. Performance
2. Agreement
3. Frustration
4. Breach
 1) PERFORMANCE
GR: Performance of the contract must be exact and precise
Sec 38(1) CA; parties to a contract must either perform or offer to
perform their respective promises unless such performance has
been dispensed by law.
Sec 48 CA; promisor may perform it at any time during the usual
hours of business on the day & at the place which the promise
ought to perform
Sec 51 CA; provides that performance of any promise may be
made in any manner or at any time which the promisee prescribe
or sanction
Sec 56 CA; regulates the position when time is the essence of the
contract
TIME IS THE ESSENCE OF A CONTRACT
Case: Lim Yoh v Astana Strategi (M) Sdn Bhd
Contract entered between the Pltf & the Def for the purchase
of land. The Def must completed the contract on or before 19
May 1996 on Sunday and the next day is a public holiday.
The Def’s solicititor on 19 May had attempted payment to the
Pltf’s solicitor but their office was closed
Held: the Pltf’s solicitor is duty-bound to make themselves
available on the 19 May to ensure that the contract is
completed on that day. The fact that, the Def’s solicitor is
ready and able to complete the agreement on that day, they
were absolved from any fault.
 PARTIAL PERFORMANCE OF ENTIRE
CONTRACT
Entire contract is one of which the entire completion of the work
by contractor is a condition precedent to payment.
Case: Yong Mok Hin v United Malay States Sugar Industries Ltd
Appel, a building contractor, entered into 2 separate &
independent contract, A & B to construct 2 stores & office
building. During the progress, he has to make changes whereby
the 3rd stores was built. Due to extra expenditure, he was in need
of money. Resp refuse to pay Appel the amount of money thus
Appel abandon the project & sue Resp for the work partially
completed.
Held: the contract were an entire contract with stated that
the mode of payment agreed by the parties was that
“advance maybe made towards the contract during
progress of construction at the Resp’s discretion. The words
means, the Appel was not entitled as of right to receive
any advances on the contract price before the completion
of the work.
The law on entire contract has produced a great injustice.
THE DOCTRINE OF SUBSTANTIAL
PERFORMANCE
Case: KP Kunchi Raman v Goh Brothers Sdn Bhd
Doctrine of substantial performance modified rigors of the
common law rule. A promisor who had substantially performed
his side of the contract may sue on the contract for the agreed
sum, although he remains liable in damages for his partial
failure to fulfill his contractual obligations.
 ACCEPTANCE OF PARTIAL PERFORMANCE
If the injured party or promisee accepts the partial performance
of an entire contract, the other party may claim for quantum
meruit i.e reasonable sum in respect of the benefit conferred by
the partial performance.
Case: Sumpter v Hedges
Pltf failed to complete a contract to build certain buildings on the
Def’s land. The Def completed the buildings himself using the
materials left on the site by the Pltf.
Held: The Pltf cannot recover any sum in respect of the work done.
However he can claim for the value of the material used by the
Def.
 ACCEPTANCE OF PARTIAL PERFORMANCE
Case: Tong Aik (Far East) Ltd v Eastern Minerals &
Trading
Pltf contracted to extract & supply the Def 5000 tons of
maganese ore per month. The Pltf did not supply for the
said amount. Pltf claimed for the work done.
Held: The Def must pay the Pltf for all ore actually
produced. Even if the above contract was an entire
contract, the Pltf could claim for quantum meruit for
services actually rendered.
2) AGREEMENT
Sec 63 “ a contract need not be performed if the
parties to it agree to substitute a new contract to
it, or to rescind or t alter it.
3 ways to discharge a contract by agreement
1. Rescission
2. Novation
3. Variation
AGREEMENT - RESCISSION
Definition: parties can terminate an existing contract by a second
contract and not replace it
Case: Ramli bin Shahdan & Anor v Motor Insurers’ Bureau of
West Malaysia & Anor
1st agreement entered into between 1st Resp & Minister of
Transport in 1968. The 2nd agreement was entered between the
same parties in 1st January 1992 to substitute the 1st agreement
and was deemed to have rescinded the 1st agreement
Held: clause in 2nd agreement revealed the unequivocal intention
of both parties to mutually rescind the 1st agreement. Both of
them are no longer bound to perform any obligations in the 1st
contract.
 AGREEMENT - NOVATION
Definition : Substitution of a new contract
Sec 63, illustration (a) :
“A owes money to B under a contract. It is agreed
between A, B and C that B shall henceforth accept C as
his debtor, instead of A. The old debt of A & B is at end,
and a new debt from C to B has been contracted”.
The new contract between C & B which has substituted
the old contract is a novation.
For novation to be achieved all the parties concerned
must consent to the new contract
AGREEMENT - NOVATION
Case: Housing and Development Board v Lee
Sem Yoong Sdn Bhd
Novation occurs when an existing contract is
substituted by some other contract either between
the same parties or between different parties.
The consideration of the new contract is the
discharge of the old contract by both parties.
Novation comprises (a)annulment of one debt and
(b)the creation of a substituted debt in its place.
AGREEMENT - VARIATION
Definition : parties modify the terms of the old agreement
Case: Kepong Woods Products Co Sdn Bhd v Daishowa (M)
Wood Products Sdn Bhd
Pltf & Def enter in agreement on 17 January 1974 for the
sale & purchase of wood chips. In May 1974, the Def
requested the Pltf to increase the production & the Pltf
agreed. New machine has been bought to increase the
production. In March 1975, Def countermand the request ask
the Pltf to reduce the production. Pltf did not agree with the
request and the Def sought to repudiate the agreement. Pltf
sue Def for damages
 AGREEMENT - VARIATION
Held: court noted that, parties to the contract may vary some of
the terms of the existing contract without creating a new contract.
In this case, both parties had agreed to a new terms of the
contract in May 1974 whereby the Def had requested Pltf to
increase the production and Pltf agreed to the request. This does
not amount to a new contract but only variation of the terms in
existing contract. In this even, the Def had breached the contract
for failure to perform the agreement.
 3) FRUSTRATION
A contract is frustrated when, subsequent to its formation, a
change of circumstances renders the contract legally or
physically impossible of performance.
Sec 57(2) CA “ 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, unlawful, becomes
void when the act becomes impossible or unlawful”.
Effect: the contract becomes VOID.
The frustrating event brings the contract to an end
automatically in the future. The contract is not void from the
beginning. Contract start as a valid contract but comes to an
abrupt & automatic end.
FRUSTRATION
Act become impossible to perform
 Illustration (b)
A & B contracts to marry each other. Before the time fixed for
the marriage, A goes mad. The contract become void.
 Illustration (d)
A contracts to take cargo for B at a foreign port. A’s
government afterwards declare war against the country in
which the port is situated. The contract becomes void when
war declared.
 Illustration (e)
A contracts to act at a theater for 6 months in consideration of
a sum paid in advance by B. On several occasion A is too ill to
act. The contract to act on those occasions becomes void
FRUSTRATION
Characteristic:
Must be supervening or subsequent to the formation of the
contract
The supervening event is unforeseen or unexpected
Parties have made no provision for the situation in the
contract
Contract can be frustrated and discharged without breach
or default of parties
INSTANCES OF FRUSTRATION
Outbreak of war
Case: HA Berney v Tronoh Miles
When Japanese invaded Malaya, the Def evacuated
Malaya. The Pltf, a Swiss national, elected to remain and
claimed damages from the Def. Def argued, the contract
entered between Pltf & Def has been frustrated by the
outbreak of war when the Japanese invaded Malaya.
Held: Agree with Def’s defense & rule that invasion of Malaya
by Japanese forces frustrated the contract.
INSTANCES OF FRUSTRATION
Grant of injunction
Case: Standard Charted Bank v Kuala Lumpur Landmark Sdn
Bhd
Redemption agreement was held to be frustrated by an injunction
obtained by a third party restraining both the Pltf & the Def from
acting on the redemption agreement. The agreement was
impossible to perform.
Destruction of the subject matter
Case: TAYLOR V CALDWELL (1863)
The plaintiff hired the defendant’s hall for the purpose of
performance of concerts. Nevertheless the hall was accidently
burn down before the concert. Court held: the contract was
discharge by frustration.
INSTANCES OF FRUSTRATION
Seizure or compulsory acquisition by the government
Case: Public Finance Berhad v Ehwan bin Saring
The Resp purchased a motorcar from T and for the payment of the
balance purchase price entered into a hire-purchase agreement
with the Appel whereby the Appel as owner of the vehicle
advanced the said sum by the Resp. 6 weeks after, Custom &
Excise Department seized & forfeited the vehicle.
Held: the agreement has become void, as it would now be
impossible for the Appel to assign its rights & benefit in the
vehicle as they have now a defective title.
INSTANCES OF NO FRUSTRATION
Self – induce frustration
It is not amount to frustration
Parties will be liable for breach of contract
Case: Yee Seng Plantation Sdn Bhd v Kerajaan Negeri Terengganu
The Apple was a sub-lessee of certain lands in Terengganu. The state
government acquired the Appel’s land. Appel objected to it and after
the negotiations, consent order was entered. Later however the State
Executive Council rejected the application of the Appel for alienation.
Issue: whether the consent order was frustrated
Held: doctrine of frustration has no room where there is fault on the
part of the party pleading it. The refusal to alienate the land is due
to the non-compliance of the consent order by a party to the first
action.
INSTANCES OF NO FRUSTRATION
Contract expressly or impliedly makes provision for the frustrating
event
Case: Claude Neon Lt v Hardie
Claude Neon hired an illuminated sign to Hardie under 5 years
contract containing a clause to the effect that if Hardie’s premises
which the sign has been installed was extinguished or transferred,
the remaining rent become due and payable. 2 years later, the
premise were resumed & demolished. Claude Neon demand the
balance rent. Hardie argue the contarct had been frustrated by a
supervening event i.e the premises had been demolished.
Held: the demolishment of her premises is not a frustration event
since the terms of the contract had specifically mentioned about the
event and Hardie under the duty to follow the terms provided.
 INSTANCES OF NO FRUSTRATION
Where an obligation does not become impossible but
only more expensive
Case: Tsakiroglou & Co Ltd v Noble & Thorl GmbH
there was an agreement to load groundnuts at Port
Sudan for sale. The contract did not specified route to
use for the delivery. Normally the ship will travel through
the Suez Canal. However the Suez Canal was closed
and the alternative route was more costly.
Held: the fact that a contract had become more
expensive to perform, was not, by itself, adequate to
frustrate the contract.
INSTANCES OF NO FRUSTRATION
Supervening event defeat the whole purpose or object of the contract.
KRELL V HENRY (1903)
In this case, a room was hired for the sole purpose of watching the
coronation of procession of King Edward VII. Due to the king’s illness,
the procession was cancelled. The court held that the defendant could
be excused from paying the rent for the room as the contract was
frustrated.
4) BREACH
When one of the parties indicates to other either by
conduct or in clear terms an intention not to go with
the contract, the party is said to have repudiated or
renounced the contract.
A refusal to perform contract may occur:
1. Before the time of the performance due
2. During the performance
3. After the performance due
 BEFORE THE TIME OF THE PERFORMANCE
DUE
Case: Hochester v De la Tour
The Def contracted, in April 1852 to employ the Pltf with the
effect from 1 June 1852. On 11 May 1852, the Def wrote to the
Pltf saying that he no longer required his services. The Pltf then
sued for breach of contract. The argument by the Def is that, there
is no breach until the date due for the performance.
Held: the Def’s express repudiation was an anticipatory breach of
contract actionable straight away i.e the Pltf may bring the action
without the needs to wait till the date of due performance.
 DURING THE PERFORMANCE
Case: Choo Yin Loo v Vusuvalingam Pillay
The Pltf contracted to do certain work on the Def’s land. One of
the agreed terms was that the Pltf should, at all times have 30
workmen working on the land. One of the issues for decision was
the Def’s claim that the Pltf had breached this term by employing
less 15 workmen to work the land.
Held: the Pltf’s employing less than the half of the contracted
number of workmen constituted a breach which entitled the Def to
end the contract.
 EFFECT OF BREACH
Sec 40 CA “ when a party to a contract has refused to perform, or
disabled himself from performing, his promise in its entirety, the
promisee may put an end to the contract, unless he has signified, by
words or conduct, his acquiescence in its continuance”.
Illustration:
1. A, a singer, enters into a contract with B, a manager of a
theatre to sing at his theatre 2 nights in every week during
next 2 months, and B engages to pay her RM100 for each
night’s performance. On the 6th night, A willfully absent herself
from the theatre. B is at the liberty to put an end to the
contract
EFFECT OF BREACH
Sec 65 CA; if the innocent party has rendered services or
had supplied goods, he may recover a reasonable sum for
such services or goods rendered.
The party on default cannot terminate the contract which
he himself had broken