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DISCHARGE OF CONTRACT

Once a contract had been formed both parties will be obliged to uphold
what they have promised to do under the contract. The contract shall
come to an end, which is known as discharge of contract. Upon
discharged of contract both parties will be released from further obligation
arising from the contract.
Thus, when a contract is discharged, it is actually terminated. Once a
contract is discharged the contracting parties are free from further
obligations under the contract.
There are four ways to discharge a contract:
1. by performance of the contract;
2. by consent or mutual agreement between the parties to the
contract;
3. by impossibility of performance / frustration;
4. by breach of contract by one of the parties.
DISCHARGE BY PERFORMANCE

When the parties have performed their contracts, by carrying


out their promises under the contract, there is a complete
discharge of the contract.

If only one of the parties has performed his part under the
contract, he alone will be discharged from the contract. The
other party is still bound to the contract until he performs his
promise under the contract.

a ) Time For Performance

What happens to the contract if it is not performed according to


the time and place that have been agreed? The contract is
voidable at the option of the promisee.

If the time of the performance of the contract is essential/


important , any delay by one party, however slight, will entitled
the other party to free himself from any obligation of the
contract ie to make the contract voidable - refer to section 56
(1) of the Contracts Act 1950

However, if the time is not essential, the contract does not


become voidable but the promisee is entitled to compensation
for any loss suffered refer to section 56 (2) of the Contracts Act
1950

b) Place For Performance

If there is a place being specified for the performance of the


contract, the parties must perform the contract at the place
specified

If there is no place specified, the promisor is under a duty to


ask the promisee to specify the place of the performance of
the contract.

Refer Section 50 of the Contracts Act 1950

c) Performance By Whom?
If it is the intention of the parties that the contract should be
performed by the promisor himself then it must be performed
by him personally. Refer Section 41 of the Contracts Act
1950 (illustration b)
However, in some situations , a promisor may employ a
competent person to perform the contract , but the promisor
will be personally liable under the contract Refer Section 41
of the Contracts Act 1950 (illustration a)
d) Performance By Third party

If the promisee accepts performance from a third party, he


cannot enforce it anymore against the promisor.

Refer Section 42 of the Contracts Act 1950

DISCHARGE BY AGREEMENT
Both parties can terminate a contract by mutual agreement if both
of them consented that they need not perform the contract.
Agreement not to go on with the contract can be express or implied.
This agreement can be made during the contract or after the
contract has been made. For example the parties can make an
agreement that if certain events occur the contract between them
will be discharged.
Section 63 of the Contracts Act
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.
However, the consent must be secured from all parties. If any of the
parties does not agree with the substitution / alteration / rescission
of the original contract, then the contract is not discharged - Refer
to illustration c of Section 63 of the Contracts Act 1950
DISCHARGE BY FRUSTRATION
A contract is said to be frustrated, a special case to discharge a contract,
after the formation it is impossible or unlawful to perform the contract.

Thus, it may happen in 2 situations :


1.

The contract is in itself impossible to be performed.


The contract is discharged if either one or both parties aware of
the impossibility. (Section 57 illustration a)
If only one party knew of the impossibility, he must make
compensation to the other party.(Section 57 (3) illustration c )

2.

The contract becomes impossible to be performed after


it has been made.
(Section 57 (2) of the Contracts Act 1950)
It happens because of supervening impossibility which caused
the contract to become impossible to be performed or radically
difficult.

TAYLOR V CALDWELL
1.
(Destruction of the subject matter of the contract)
KRELL V HENRY
2.
(Supervening events defeat the whole purpose of the contract)
LEE KIN V CHAN SUAN ENG
3.
(Supervening illegality discharges a contract There is a change in
law which makes the contract becomes unlawful if it is performed )
4.

It may also be frustrated by death or personal incapacity of the


parties in a contract.
(Refer to Section 57 (illustration e)
Effect:
When a contract is discharge by frustration, the contract is
automatically void.
(Refer to Section 66 of the Contracts Act 1950)
When an agreement or contract is discovered to be void, any
person who has received any advantage under the agreement or
contract is bound to restore it, or to make compensation to it, to the
person from whom he received it.

DISCHARGE BY BREACH
Section 40 of the Contracts Act
When a party to a contract has refused to perform, or disabled him from
performing, his promise in its entirely; the promisee may put an end to
the contract unless he has signified, by words or conduct, his
acquiescence in its continuance.
The party who is not in breach of contract has 2 options;

1.
2.

to continue with the contract and claim damages


repudiate the contract

REMEDIES

When there is a breach of contract , the injured party may claim one or
more of these remedies :
1. Rescission of Contract
2. Damages
3, Specific Performance
4.Injunction
RESCISSION OF THE CONTRACT

If a party breaches his promise , under a contract , the party not


in breach has the right to rescind/ terminate the contract.

Refer Section 40 of the Contracts Act 1950

If the party not in default choose to rescind the contract , any


benefit which he has received from the defaulted party must be
restored / returned .

Refer Section 66 of the Contracts Act 1950 and illustration ( c )

DAMAGES

Damages is granted to a party as compensation for the


damage , loss or injury suffered due to a breach of contract .

Refer Section 76 of the Contracts Act 1950 and illustration

Categories of Damages
Under the Common law , damage smay be classified into 3 categories :1. Substantial damages
It is monetary compensation to put the plaintiff in the position he would
have enjoyed ,had the contract been performed.

2.Nominal damages
Consists of a small token awarded when the Plaintiff has proved the
breach of a contractual right but suffered no actual loss.
3. Exemplary damages
Consists of a sum awarded which is a far greater than the actual
monetary loss suffered by the Plaintiff .
They are awarded only in exceptional circumstances : example in a case
of breach of promise to marry or a banker wrongfully dishonours a
traders cheque .

SPECIFIC PERFORMANCE

SP is an order of the Court, to the party at fault to carry out the


contract according to its terms.

This remedy is given at the discretion of the Court.

Section 21 of The Specific Relief Act 1950 provides : The


jurisdiction to decree specific performance is discretionary .

When SP May be Granted ?

Normally this remedy would be granted if damages is not an


adequate remedy to breach of contract.

GAN REALTY SDN BHD VS NICHOLAS


SP was granted to enforce a promise to sell certain shares which were
not available in the open market.
DUNCUFT

VS

ALBRECHT

SP had been granted to enforce a promise to sell certain shares not


available in the open market.
It was held that the land in question was of particular importance for
theuse in association with Bs tin mining operations and compensation
by way of money ie damages would not afford to adequate relief . The
Court granted SP
When SP cannot be granted ?
Section 20 of the SRA 1950 on the other hand lays down the
circumstances in which SP cannot be granted :

1. Section 20 (1) (a) : a contract for the nonperformance of which


compensation in money is an adequate relief.
2. Section 20 (1) (b) : a contract which is so dependant on the personal
qualifications or volition of the parties.
3. Section 20 (1) (c) : a contract of the terms which the court cannot
find reasonable certainty
4. Section 20 (1) (d) : a contract which is in its nature revocable
INJUNCTION

Injunction is a court order to restrain the doing , continuance or


repetition of some wrongful conduct , which is againts the
contract .

It is ranted at the discretion of the Court.

Section 50 of the SRA provides :


Preventive relief granted at the discretion of the court by
injunction ; temporary or perpetual

Types of Injunction

Injunction can either be temporary or perpetual

Temporary Injunction

Section 51 (1) : Temporary injunctions are suh are as to


continue until a specified time ,oruntil the further order of the
court. They may be granted at any period of a suit

The purpose of Temporary Injunction is to preserve the status


quo of the parties , pending the resolution of a legal action.

Perpetual Injunction

Section 51 (2) : A Perpetual injunction can only be granted by


the decree made at the hearing and upon the merits of the suit ;
the defendant isthereby perpetully enjoined from theassertion of
a right , or from the commission of an act , which would be
contrary to the rights of the plaintiff .

Perpetual injunction is to prohibit the defendant permanently


from doing an act or asserting a right , which is againts the
Plaintiffs right.

It is only granted after a full trial by the Court.

NEOH SIEW ENG VS TOO CHEE KWONG


The Court granted a perpetual injunction by ordering the Defendant who
was a landlord of the Plaintiff , to keep all communication pipes in proper
repair and to comply with all regulations of the Waterworks Department
so that water supply to the premises rented by the Plaintiff would not be
disconnected.
When Injunction cannot be granted ?
A contract that cannot be enforced by SP could not also be subjected to
injunction.
Section 54 (f) of SRA provides :
an Injunction cannot be granted to prevent a breach of a contract the
performance of which could not be specifically enforced
This means that , any contract that cannot be enforced by SP , may also
cannot be subjected to an Injunction in order to prevent the breach of it
LUMLEY VS WAGNER
W an opera singer contracted to sing for L ata theatre for 3 months , and
promised that she will not sing elsewhere during that period without Ls
written permission .
W later agreed for a larger sum of money to sing for C at the Covent
Garden and abandoned her contract with L. L sued W for SP.
It was held that
the court granted an injunction restraining
singing for C at the Covent Garden.

W from

PERTAMA CABARET NITE CLUB V ROMAN TAM


Respondent had signed a contract to sing at the Appelantsnightclub for
anumber of days. The contract provided that in the event of a breach , the
respondent should notperformed in Kuala Lumpur during the fixed period
of the contract .
Thereafter, the respondent refused to honour the contract and tried to
sing at the rival club.
It was held that temporary injunction was granted.