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Penalties in a Commercial
Contract
By
Copyright
www.leesweeseng.com
sweeseng@tm.net.my
performance
Injunction
Liquidated Agreed Damages
Penalty Damages
Forfeiture of Deposit
Breach of Contract
Breach
Ching Yik Development Sdn Bhd v Setapak Heights Development Sdn Bhd [1996] 3 MLJ
675
Anticipatory Breach
Anticipatory
Anticipatory Breach
This
Damages
The
Types of Damages
Nominal
Damages
Pecuniary and Non-pecuniary damages
Liquidated and Unliquidated damages
Nominal Damages
Definition
Nominal Damages
Situations
Nominal Damages
In
Pecuniary damages
Pecuniary
Remoteness of Damages
Apart
528
The Court further explained the test of
Hadley v Baxendale in that:
A) the Plaintiff can always recover
foreseeable losses or damages which
arises naturally
B) what is reasonable foreseability depends
on the knowledge the parties had
C) knowledge is actual or imputed
knowledge
Remoteness of damages in
Malaysia
In
Remoteness of damages in
Malaysia
from
Remoteness of damages in
Malaysia
Section
Mitigation of Damages
The
Principles of mitigating
The
Dunlop Pnuematic Tyre Co. Ltd v New Garage and Motor Co Ltd [1915] AC 79
The Court
[1915]
ACmust
79 determine whether the
compared
[1915]
ACwith
79the loss which can be proved.
b)
The Malaysian
Section 75 of the Contracts Act 1950.
Section 75 provides that:
When a contract has been broken, if a sum
is named in the contract as the amount to
be paid in case of such breach, or if the
contract contains any other stipulation by
way of penalty, the party complaining of
the breach is entitled,
Proving Damages
As
Proving Damages
sufficient
The374
respondent filed an originating
summons seeking a declaration that the
agreement was terminated and that he
was entitled to forfeit the RM96,000 being
payment for the sale of medical practice.
The Federal Court clearly established the
principle that requires the plaintiff to prove
the actual damages in accordance with the
settled principles in Hadley v Baxendale
despite of the words in question.
CLJ
The374
words in Section 75 of the CA did not
dispense with the rule that a party claiming
damages must prove his loss.
Any failure to prove any damages will result
in the refusal of the court to award such
damages.
The Federal Court having reviewed, the
relevant Indian Supreme Court decisions,
recognised that the words in question were
intended to cover 2 kinds of contracts.
CLJ
374
In the
first class of cases, the Court finds it
difficult to assess such reasonable
compensation.
In the second class of cases, the Court
could assess such reasonable
compensation with settled rules.
The learned judges held that the words in
question are limited to cases where the
court finds it difficult to assess damages.
Therefore,
CLJ
374 where there is inherently any actual
The 250
defendant appealed against the decision
CLJ
of the Senior Assistant Registrar in favour of
the plaintiffs summary judgment.
The parties entered into a set-off agreement
for the purpose of settling debts.
It was a term that the defendant shall redeem
the property and deliver to the plaintiff a letter
of disclaimer failing which the defendant shall
pay the plaintiff as purchaser 12% interest on
daily rest on the purchase price.
CLJ
The250
Court tried to avoid the impact of
Selva kumar.
It can be done provided both parties are
agreeable to circumvent the rigours of
Selva kumar.
The Court held that the plaintiffs do not
have to prove the losses that they have
suffered before they could claim the
monetary damages because the so called
penalty clause was a term of an
CLJ
250 entered into mutually between
agreement
the plaintiffs and the defendant and thus,
under the law, binding and enforceable
against both the parties.
Therefore, the Court dismissed the
defendants appeal.
Forfeiture of Deposit
A deposit
Forfeiture of Deposit
The
Ailsa Craig Fishing Col Ltd v Malvern Fishing Co Ltd & Anor [1983] 1 All ER 101
The
By a fire
agreed to indemnify the respondent against
loss and damage occasioned from fire.
However, condition 19 of the fire policy
provides that:
In no case whatever shall the company be
liable for any loss or damage after the
expiration of twelve months from the
happening of the loss or damage.
http://en.wikipedia.org/wiki/Warsaw_Convention
Warsaw Convention
In
a)
b)
c)
Warsaw Convention
Article
22:
In the carriage of passengers the liability of
the carrier for each passenger is limited to
the sum of 250,000 francs (RM707,036.33).
In
The High
Court100
allowing the appeal held
that an exemption clause does not
exonerate the respondents from the
burden of proving that the damage caused
to the car were not due to their negligence
and misconduct.
They must show that they had exercised
due diligence and care in handling the car
The respondents
had not adduced any
evidence to show that they had exercised
due and care and there was ample
evidence to show that they had been
negligent.
Hence, the appeal is allowed.
CC's Liability
CC contracts with Shipper on the basis
that CC's liability is strictly limited to
direct loss only and to the per kilo/Ib
limits in this Section 6. All other types
of loss or damage are excluded
(including but not limited to lost profits,
income, interest, future business),
Delayed Shipments
CC will make every reasonable effort to
deliver the Shipment according to CC's
regular delivery schedules, but these are
not guaranteed and do not form part of the
contract. CC is not liable for any damages
or loss caused by delays.
Paul Klinger and Rachel Burnett, Drafting and Negotiating Computer Contracts, Butterworths,
1994
Kala Anandarajah, Professional Liability in Singapore & Malaysia - Accountants & Auditors
Liability of Barrister
Formerly,
Liability of Barrister
amended
Therefore,
a concurrent or alternative
liability in tort will not be admitted if its
effect would be to permit the plaintiff to
circumvent or escape a contractual
exclusion or limitation of liability for the
act or omission that would constitute the
tort.
Conclusion
As
Contribution
(Hons), CLP
END