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Research Buying of showroom / business.

Issue:

- There is a contract between A and B wherein A sells to B a showroom / business


(hereafter as showroom). Showroom is a property which was rented out to A.
- Due to disputes between A & B, A has unilaterally locked up the showroom.
- What recourse may be taken?

Possible recourse:

- Breach of contract claim damages and restitution


- Void / voidable contract claim damages and restitution

The Law:

Breach of contract

(A) Section 40:-

Promisor refuses of disables himself from performing:

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.

ILLUSTRATIONS

(a) A, a singer, enters into a contract with B, the manager of a theatre, to sing at his
theatre two nights in every week during the next two months, and B engages to pay
her RM100 for each night's performance. On the sixth night A wilfully absents herself
from the theatre. B is at liberty to put an end to the contract.

(b) A, a singer, enters into a contract with B, the manager of a theatre, to sing at his
theatre two nights in every week during the next two months, and B engages to pay
her at the rate of RM100 for each night. On the sixth night A wilfully absents herself.
With the assent of B, A sings on the seventh night. B has signified his acquiescence
in the continuance of the contract, and cannot now put an end to it, but is entitled to
compensation for the damage sustained by him through A's failure to sing on the
sixth night.

1) Rasiah Munusamy v Lim Tan & Sons Sdn Bhd [1985] 1 CLJ 541

- Lim Tan (hereafter as Vendor) contracted with Rasiah Munusamay (hereafter as


Purchaser) in a Sale and purchase Agreement for double-storey house
- Due to a dispute of extra Land, the Purchaser refused to pay the balance demanded
by vendor. The vendor took the stand that the agreement had been repudiated on the
ground of the purchaser's refusal to settle the balance sum towards a purchase price
after a reasonable time had been given.
- Issue : whether contract was repudiated by purchaser and whether a deliberate
breach will entitle the innocent party to treat himself as discharged.

Held:

- Not every refusal to perform some part of a contract will amount to renunciation.
There must be an absolute refusal to perform his part of the contract, for the other
party to be treated as discharged from the contract (applied in AINB Tech Sdn Bhd
v Telekom Malaysia Berhad [2011] 1 LNS 1122)

2) AINB Tech Sdn Bhd v Telekom Malaysia Berhad [2011] 1 LNS 1122

- AINBs (Plaintiff) claim is in respect of a dispute arising out of an agreement known


as Supply, Delivery, Installation, Testing, Commissioning and Support of One
Number Service entered into between Plaintiff and Telekom (Defendant).
- This case is distinguished from the case of Rasiah Munusamy above as the
Defendant here did not absolutely refuse to perform their obligations under the
contract. The Defendant had continued to market the service and give back up to the
Plaintiff

3) Choo Yin Loo v Visuvalingam Pillay [1930] 7 FMSLR 135

- It was held that where a party refuses to perform or disables himself from performing
his part, the other party has the right to rescind the contract entered into.

Remedies for S 40 Contracts Act 1950 :

- Claim damages as provided under S 76 Contracts Act 1950:-

A person who rightly rescinds a contract is entitled to compensation for any


damage which he has sustained through the non-fulfilment of the contract.

Leong Lai Kuen v Sentul Murni Sdn Bhd [2003] 1 LNS 426:-

Held regarding S 76 Contracts Act 1950:-

The principle for the award of compensation is : the injured party should go as far as
possible be placed in the same position in terms of money as if the contract had been
performed by the party in default [ Pollock & Muller on Indian Contract and Specific
Relief Acts, 11th Edition, Volume 2, page 801]

- Restitution as provided in the case of Yong Mok Hin v United States Sugar
Industries Ltd (1967) 2 MLJ 9

(B) Breach of condition or warranty (not refusal to perform)

1) Johnson V Agnew [1979] 2 WLR 489


- Where a condition of a term of the contract is breached, the innocent party may
terminate the contract and / or sue for damages
- But if a warranty is breached the innocent party may not terminate the contract but
may only sue for damages No rescission

2) Ching Yik Development Sdn Bhd v Setapak Heights Development Sdn Bhd [1997] 1
CLJ 287 CA

- Similarly here It was held in the Court of Appeal that contract terms can be divided
into 2 types: Fundamental terms which are conditions and less important terms which
are warranty
- Where fundamental terms are breached, the innocent party may consider himself
discharged and sue for damages
- However, where warranty is breached the innocent party cannot discharge himself
but may only sue for damages.

Void / Voidable Contracts restitution allowed

1) Voidable Contracts:-

- S 2 (i) Contracts Act:

In this Act the following words and expressions are used in the following
senses, unless a contrary intention appears from the context-

(i) an agreement which is enforceable by law at the option of one or more of the
parties thereto, but not at the option of the other or others, is a voidable
contract

- S 19 Contracts Act 1950:


(1) When consent to an agreement is caused by coercion, fraud, or
misrepresentation, the agreement is a contract voidable at the option of the
party whose consent was so caused.

- S 14 Contracts Act 1950


Consent is said to be free when it is not caused by-

(a) coercion, as defined in section 15;

(b) undue influence, as defined in section 16;

(c) fraud, as defined in section 17;

(d) misrepresentation, as defined in section 18; or

(e) mistake, subject to sections 21, 22 and 23.

Consent is said to be so caused when it would not have been given but for the
existence of such coercion, undue influence, fraud, misrepresentation, or
mistake.
2) Void Contracts:-

Example in the case of Tea Delights (M)Sdn Bhd & Anor v Yeap Win Nee & Anor [2015]
1 LNS 936 (High Court appeal):-

Basic facts:-

- Tea Delights (Defendant) introduced COMEBUY bubble tea brand from Taiwan to
the Plaintiffs claiming themselves as the master franchisee of the brand in Malaysia.
- As a results, the Plaintiffs set up partnership in preparation to purchase the franchise
rights of the COMEBUY franchise and the franchise was set up.
- The Defendant had failed to register the COMEBUY franchise with the Registrar of
Franchise as required by the Franchise Act 1998.

Held:-

- It was unlawful of the Defendant to sell the franchise rights without first registering it,
hence making the contract illegal, therefore void.
- S 2(g) Contracts Act states an agreement not enforceable by law is said to be
void.
- Referred to the case of SP Multitech Intelligent Homes Sdn Bhd v Home Sdn Bhd
[2010] 1 LNS 1286 which held that when a franchisor fails to register its franchise,
the franchise agreement is unlawful and void ab initio and as a result there ought to
be restitution and refund of all payments and benefits received by defendant to
plaintiff, as per S 65 and 66 Contracts Act 1950: -

S 65 : When a person at whose option a contract is voidable rescinds it, the


other party thereto need not perform any promise therein contained in which
he is promisor. The party rescinding a voidable contract shall, if he has
received any benefit thereunder from another party to such contract, restore
the benefit, so far as may be, to the person from whom it was received.

S 66 : When an agreement is discovered to be void, or when a contract


becomes void, any person who has 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.

Conclusion:

In the matter of the showroom between A and B, in applying the above laws, as it there is no
lack of consent, it will not be a voidable contract. In addition, it does not fall into the category
of a void contract as well, as there does not seem to be any illegality. Hence, perhaps the
only recourse is by way of breach of contract, in claiming damages and restitution by S 40
Contracts Act 1950; or by way of condition / warranty where the innocent party may only
claim damages but not restitution.