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UNIVERSITI TEKNOLOGI MARA KAMPUS SHAH ALAM Faculty Architecture, Planning and Surveying Department of Quantity Surveying Bachelor

in Quantity Surveying - AP 224 ASSIGNMENT

COURSE COURSE CODE SEMESTER TITLE LECTURER MARKS

CONSTRUCTION LAW QSM 507 03 LAW OF CONTRACT EN. AHMAD ARZLEE B HASSAN

Name Matrix 2011717069 Group

: NUR ATIQAH BINTI AZHAR : AP2243D

Date of Submission : 21st June 2013

TABLE OF CONTENTS
INTRODUCTION .................................................................................................................. 2 Law of Contract ..................................................................................................................... 2 Discharge by Frustration ....................................................................................................... 2 DISCUSSION........................................................................................................................ 3 Question 1 ............................................................................................................................ 3 Mr. Johnny v ABC Realty ................................................................................................... 3 Fact and background: ........................................................................................................ 3 Principle of law: ................................................................................................................. 3 Relevant Cases..................................................................................................................... 4 PROFESSIONAL PRACTICE OF A QUANTITY SURVEYOR IN LEGAL ENVIRONMENT ... 5 CONCLUSION ...................................................................................................................... 5 REFERENCES ..................................................................................................................... 6

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INTRODUCTION Law of Contract


The law of contract is based on the mutual exchange of obligations, in that each side must contribute something to the agreement to make it binding (Uff, 2009). In law, a contact can be defined as, a valid contract is a binding agreement between two or more parties which creates legal rights and obligations which the law will enforce. It is a legal enforceable agreement entered into by two or more different persons with legal capacity. The parties should have serious intention to create legally binding obligations. Their agreement needs to be within parities contractual capacity. Furthermore, parties should communicate such intention without vagueness each to the other and being of the same mind to the subject matter. The agreement or contract can be discharge by agreement, breach, frustration and performance.

Discharge by Frustration
A contract may be discharged by frustration. A contract may be frustrated where there exists a change in circumstances, after the contract was made, which is not the fault of either of the parties, which renders the contract either impossible to perform or deprives the contract of its commercial purpose. Where a contract is found to be frustrated, each party is discharged from future obligations under the contract and neither party may sue for breach (elawresources.co.uk, 2009). Based on section 57 of the Contract Act 1950(1) state that an agreement to do an act impossible in itself is void. This is means that any agreement with impossible action to do is void. In clause (2) stated that 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. War, change of law and natural disaster is example of the event that cannot be prevent from happen. This clause only applied after the contract is made as the event cannot be predicted during the contract is made. In section 57 of the Contract Act 1950(3) stated that where one person has promised to do something which he knew, or with reasonable diligence, might have known, and which the promise did not know, to be impossible, or unlawful, the promisor must make compensation to the promise sustains through the non-performance of the promise.

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DISCUSSION Question 1
Mr. Johnny v ABC Realty Fact and background: Based on question 1, On 15 April 2005, Mr. Johnny signed a contract for the purchase of a house with a housing developer, ABC Realty. The contract stipulated the date for completion and giving of possession of the house on 15 March 2007. Immediately thereafter, the Malaysian economy went through a very serious crisis that caused the whole housing project uneconomic and great loss to the developer. On March 2006 ABC Realty sent a letter to Mr. Johnny terminating the sale and purchase agreement for reason of frustration caused by the economic crisis. Mr. Johnny refused to accept the termination arguing that economic down turn was not a frustrating event.

Principle of law: In Section 57 of the Contract Act 1950(2) stated that an act that is impossible to do after the contract is made by reason of some event that could not be prevent will becomes void. Therefore the ABC Realty claims that they was not able to predict the Malaysia economy will faces a serious crisis that caused the company unable to perform the contract. Based on precedence cases, the court held that the recession was not the type of unanticipated, unforeseen event which qualified for a commercial frustration defence. Therefore the termination of contract by ABC Realty is not reliable.

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Relevant Cases
Carpenters District Council of Greater St. Louis and Vicinity v. Commercial Woodworking & Contracting, Inc., et al, Fact and background: Between April 26, 2004 and May 21, 2007, the Carpenters District Council of Greater St. Louis and Vicinity (Carpenters Union) made three loans to Commercial Woodworking & Contracting, Inc. and several individuals related to the corporation (Commercial Woodworking). The terms of the loan and its repayment were set forth in three promissory notes. Commercial Woodworking failed to repay upon the promissory notes. The Carpenters Union brought suit against Commercial Woodworking for repayment of the amounts remaining on the notes. Commercial Woodworking argued that they should not be obligated to repay the notes because the promissory notes were commercially frustrated by the recession. Court Decisions: Judge Autrey reasoned that Commercial Woodworkings commercial frustration defence was based not on an impossibility of performance, but rather on an unforeseen difficulty, i.e. the economic recession affecting the Commercial Woodworkings ability to repay the loans. Such difficulty, Judge Autrey stated, did not excuse their performance under the doctrine because the recession was not an act of God, the law, or the Union. The court held that the recession was not the type of unanticipated, unforeseen event which qualified for a commercial frustration defence Carpenters District Council represents just one of the many lawsuits originating out of the recession. As one of the first opinions to address the doctrine and the recession, it is unclear whether this analysis will be adopted by other courts to hold the doctrine of commercial frustration per se inapplicable to contracts affected by the recession or whether the doctrine may still be available to litigants under certain circumstances. Regardless of how that question is resolved, Carpenters District Council demonstrates the need for parties to consider the range of potential events which may affect their ability to perform the contract and clearly address such contingencies before signing off on the next contract or loan.

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PROFESSIONAL PRACTICE OF A QUANTITY SURVEYOR IN LEGAL ENVIRONMENT


A quantity surveyor should possess knowledge and understanding of the techniques for conflict avoidance, conflict management and dispute resolution procedures including for example adjudication and arbitration. The quantity surveyor also should be able to provide evidence of practical application in area of practice having regard to the relevant law. A good quantity surveyor also should be able to provide evidence of the application of the above in the context of advising clients in the various circumstances referred to legal environment (RICS, 2010).

CONCLUSION
There are four methods, a contract can be discharge which is by agreement, breach, frustration and performance. The discharge by frustration occur when a contract becomes unlawful or impossible to perform by a reason some event could not be prevent or the act will become lawful, it becomes void. However the recession was not the type of unanticipated, unforeseen event which qualified for discharge by frustration. As a quantity survey, he should possess knowledge and understanding of construction law and able to giving reasoned advice on different legal procedures relating to construction.

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REFERENCES
1. e-lawresources.co.uk, 2009. Frustrated contracts. [Online]
Available at: http://www.e-lawresources.co.uk/Frustrated-contracts.php [Accessed 16 Jun 2013]. 2. RICS, 2010. Quantity Surveying and Construction, Assessment of Professional Competence. [Online] Available at: http://www.rics.org/Global/pathway_guide_quantity_surveying_construction_dwl_pt.p df [Accessed 16 Jun 2013]. 3. Uff, J., 2009. Construction Law. 10th Revised Edition edition ed. s.l.:Sweet & Maxwell. 4. Zobel, D. A., 2013. Missouri Court Holds Great Recession Not Sufficient Basis for Commercial Frustration Defense. [Online] Available at: http://www.dannamckitrick.com/beyond-the-fine-print/2013/01/missouricourt-holds-great-recession-not-sufficient-basis-for-commercial-frustration-defense/ [Accessed 16 Jun 2013].

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