HADLEY V BAXENDALE ( 1854 ) EWHC J70

1) FACTS

a) The claimant, Hadley, owned a mill featuring a broken crankshaft. The

claimant engaged Baxendale, the defendant, to transport the crankshaft to the
location at which it would be repaired and then subsequently transport it
back.
b) The defendant then made an error causing the crankshaft to be returned to the
claimant a week later than agreed, during which time the claimant’s mill was
out of operation.
c) The claimant contended that the defendant had displayed professional
negligence and attempted to claim for the loss of profit resultant from the
unexpected week-long closure.
d) The defendant retorted that such an action was unreasonable as he had not
known that the delayed return of the crankshaft would necessitate the mill’s
closure and thus that the loss of profit failed to satisfy the test of remoteness.

2) ISSUE

a) Whether the loss of profits resultant from the mill’s closure was too remote
for the claimant to be able to claim ?

3) HELD

a) The Court found for the defendant, viewing that a party could only
successfully claim for losses stemming from breach of contract where the
loss is reasonably viewed to have resulted naturally from the breach, or
where the fact such losses would result from breach ought reasonably have
been contemplated of by the parties when the contract was formed.
b) As Baxendale had not reasonably foreseen the consequences of delay and
Hadley had not informed him of them, he was not liable for the mill’s lost
profits.

VICTORIA LAUNDRY ( WINDSOR ) LTD V NEWMAN INDUSTRIES LTD

 ( 1949 ) 2 KB 528

1) FACTS

a) Victoria Laundry Ltd (VLL) ordered a large boiler from Newman Industries
Ltd (NIL) in contemplation of some lucrative dyeing contracts.
b) NIL were aware of the nature of VLL’s business, and that it was intended for
the boiler to be put to use as soon as possible.
c) The delivery of the boiler was delayed by five months and VLL claimed for
breach of contract.

2) ISSUE

a) VLL claimed damages for their lost profits caused by the delay.
b) They argued losses which would reasonably foreseeably flow from the
breach would be recoverable and, therefore, since NIL knew the boiler was
required as soon as possible for business purposes, they must have
contemplated the use for which the boiler was to be put. VLL claimed it was
not necessary to prove actual knowledge of the precise loss.
c) NIL argued they had no special knowledge of running a laundry business or
that the boiler was necessary for immediate profit making and, therefore,
they were not liable for lost profits.
d) NIL claimed that lost profits amounted to special circumstances which must
have been explicitly brought to their attention prior to the breach if they were
to be held liable. They could not be assumed to have known the delay would
cause lost profits.

3) HELD

a) VLL successfully recovered the lost profits. NIL knew the boiler was
required for VLL’s business and had promised delivery by a specific date.
b) They could not reasonably argue they could not foresee that lost profits
would result from the delay.
c) It was unnecessary to prove NIL had specific knowledge of the specific
contracts which had been lost.
d) Damages would be awarded for losses which could reasonably have been
expected to be lost.

BEE CHUAN RUBBER FACTORY SDN BHD V LOO SAM MOI ( 1976 ) 2
 MLJ 14

1) FACTS

a) This was an appeal from the decision of Wan Suleiman FJ. The action arose
out of an agreement in writing whereby the appellants agreed to sell to the
respondent a piece of land in Seremban and to build for her a house thereon.
b) There was delay in the completion of the contract and the learned trial judge
found that the parties had by their conduct allowed the date for completion to
pass. However, the respondent had by letter dated 21 August 1970, given the
appellants one month to carry out the contract.
c) The learned trial judge held that this letter made time again the essence of the
contract and as the respondent was not given possession of the house till 4
April 1975, he gave judgment for the respondent for damages at the rate of
[dollar]100 a month from 21 September 1970 to 3 April 1975.
d) The learned judge who allowed part of the appellants’ counterclaim that is
for [dollar]850 for extra work gave costs to them on the counterclaim. The
appellants appealed and the respondent cross-appealed on the costs awarded
on the counterclaim.

2) HELD

a) Held, dismissing the appeal and cross-appeal:

b) The learned trial judge was correct in giving judgment for damages for the
respondent;
c) Damages recoverable for breach of contract for delay in the completion of an
ordinary dwelling house required for personal occupation include the
reasonable cost of living accommodation or living elsewhere if such
expenses were in fact incurred. In the present case, the respondent gave
evidence which was not challenged that she paid rent at [dollar]100 for her
living accommodation. The learned judge was therefore quite right in
awarding her damages at [dollar]100 per mensem for the relevant period;
d) As the appellants were partially successful on the counterclaim, the court
would not interfere with the learned judge’s order as to costs on the
counterclaim.

THAM CHEOW TOH V ASSOCIATED METAL SMELTERS ( 1972 ) 1 MLJ

 171

1) FACTS

a) This was an appeal from the decision of the High Court ( [1971] 1 MLJ
271 ).
b) The defendant/appellant had agreed to sell a metal melting furnace to the
plaintiff/respondent and had given an undertaking that the melting furnace
would have a temperature of not lower than 2,600 degrees F. This
specification was not satisfied.
c) The respondent brought an action alleging breach of an express condition of
the contract and claimed the total sum of $29,301.38 as damages.
d) The learned trial judge held that the failure on the part of the appellant to
supply a furnace according to specifications constituted a breach of the
condition of the contract entitling the respondent to treat it as a breach of
warranty, and awarded a total sum of $7,501.38 as damages for loss of
profits.
e) The defendant appealed.

2) HELD

a) Held, dismissing the appeal

b) The learned trial judge was correct in finding that there was a breach of a
condition of the contract which entitled the respondent[sol ]plaintiff to waive
it and to elect to treat the breach as a breach of warranty within the meaning
of s 13(1) of the Sale of Goods (Malay States) Ordinance 1957 (Ord 1[sol ]
1957);
c) This case fell within the provision of s 74(1) of the Contracts (Malay States)
Ordinance 1950, ie when the damages arising are such as may reasonably be
supposed to have been in the contemplation of both parties, at the time they
made the contract, as the probable result of the breach of it.

GIAN SINGH GURDUR SINGH V KEMPAS EDIBLE OIL SDN BHD ( 2012 )
 10 CLJ 389

1) FACTS

a) In his evidence the plaintiff states that prior to 4.1.2005, he was the
transporter for the defendant on an ad hoc basis. By the letter dated 4.1.2005,
the plaintiff said that the term of his appointment is fixed for three years and
that there is no term in the letter of appointment that the appointment may be
terminated at any time.
b) The plaintiff states that he asked for explanation from Francis Tan on the
words "which will be reviewed on a yearly basis" before he signed the
appointment letter and Francis Tan informed him that "review" relates to
paragraphs (a) and (b) of the letter dated 4.1.2005 (i.e. the charges) and that it
was for the purpose of improving the services of the plaintiff if the service is
not satisfactory.
c) It was further the evidence of the plaintiff that between 4 1:2004 until
1.11.2005 he had not received any complaints nor any show cause letters
relating to the transportation services and that there was no review done and
that even if the term review exists, one year has not expired from the
appointment date.
d) For the defendant evidence was led through SD1 and SD2.
e) SD1 was not in the employment of the defendant at the material time, hence
he had no specific knowledge of the contents of the letter of appointment
dated 4.1.2005. He said only Francis Tan had complete knowledge of the
contents of the said letter of appointment. SD2 similarly had no knowledge
of the appointment and termination of the transporters.
f) Francis Tan had since retired and was not willing to come forward to testify
although the defendant did issue a subpoena to him.
g) SD1 however did state in his witness statement that as a matter of practice,
the defendant's appointed transporter services were reviewed yearly for
performance appraisals and customer satisfaction. It was further his evidence
that based on the records, there were numerous complaints of late deliveries
by the plaintiff and that a meeting was held on 7.11.2005 to discuss the
complaints and the plaintiff was given an opportunity to explain but the
plaintiff was not able to give a reasonable explanation towards the various
complaints made by the customers.
h) In cross examination, SD1 admitted that if there was a complaint against the
plaintiff, it must be in the defendant's record. Nevertheless he states that he
did not have any records on the complaints against the plaintiff (the records
he was referring to earlier was in fact the statement of defence). SD1 also
admitted that there was no minutes of the meeting on 7.11.2005 and that no
show cause letter was issued to the plaintiff before the termination.
i) SD2 do not recall if there was any reporting on the plaintiff's services but his
testimony on the practice to subject the transporter to review is consistent
with that of SD1. According to SD2 the review is a form of the Key
Performance Indicator to ensure satisfactory rendering of services to the
defendant's clients. It is also the evidence of SD2 that the appraisal is not
done to terminate but to improve the services.
j) Learned counsel for the plaintiff submitted that the letter of appointment is
absolutely clear and that in the absence of any evidence contradicting the
 plaintiff's testimony, the appointment of the plaintiff is for the period of
1.1.2005 until 31.12.2008.
k) In this regard learned counsel referred to sections 73A, 91 and 92 of the 
Evidence Act 1950 to submit that the defendant cannot present any evidence
to contradict the contents of the letter of appointment.
l) For the defendant it was contended that no formal agreement had been signed
between the parties and that the plaintiff's appointment was a continuation of
an ongoing contract for the services already rendered by the plaintiff but with
a conditional commitment of 3 years in place of the ad-hoc appointment.

2) HELD

a) Based on all the above, judgment is entered against the defendant for the sum
of RM63.646.55 with interest of 4% per annum from 7.11.2005 until
realization and costs of RM 15,000.00.

CALTEX OIL MALAYSIA V SURIA MURNI ( SELANGOR ) ( 2010 ) 8 CLJ

824
1) FACTS

a) The plaintiff entered into a contract to sell diesel to the defendant, which was
in the business of purchasing diesel from several oil companies
in Malaysia and selling it to customers. In Malaysia, the price of diesel sold
for commercial inland use is controlled by the pricing formula termed as the
Automatic Pricing Mechanism ('APM').
b) In order to claim for the reimbursement of the subsidy from the sale of the
diesel, oil companies such as the plaintiff were then required to lodge a claim
with the Royal Customs and Excise Department ('Customs Department'),
which would reimburse the subsidy to the oil company in question after
ascertaining that the claim was related to diesel sold for commercial inland
use.
c) The plaintiff claimed that under the contract it had entered into with the
defendant it was agreed that the diesel sold was for the purposes of
commercial inland use and that the plaintiff would be able to claim for
reimbursement of subsidy from the sales of this diesel.
d) However, the Customs Department rejected the plaintiff's claim for
reimbursement of subsidy from its sale of diesel to the defendant on the
grounds that the diesel sold by the plaintiff to the defendant in February,
March and April 2000 was used for bunkering and not for commercial inland
use. A claim for reimbursement of subsidy in respect of the sale of diesel by
the plaintiff to the defendant in May 2000 was also rejected for the same
reason.
e) The plaintiff thereafter commenced two civil suits against the defendant,
which were consolidated by a court order, claiming for loss of
reimbursement of diesel subsidy of RM609,520.20 from the Customs
Department as a result of the breach of contract by the defendant.
f) It was the plaintiff's case that it was an express and/or implied term of the
contract that both parties agreed that the diesel sold was for the purposes of
commercial inland use and that the plaintiff would be able to claim for
reimbursement of subsidy from the sales of this diesel'...'

2) HELD

a) Held, allowing the plaintiff’s claim with costs

b) Although the parties gave two disparate versions, the court found that in the
light of the evidence adduced and the contemporaneous documents such as
the purchase orders, delivery orders and invoices that the prices quoted
related to the price of diesel for commercial inland use. Further, as the
defendant was in the business of purchasing and selling diesel since January
1999, it was highly unlikely that it did not know about the existence of the
subsidy scheme introduced by the government at the end of 1999. Thus,
when the parties entered into contract for the sale of diesel the defendant
knew it was for the purchase of diesel for commercial land use, which was
subsidised by the government
c) From the evidence adduced it was found that both parties had agreed to
follow a set procedure, which involved notifying the plaintiff of details such
as the name of the ship and loading date of the diesel, if the diesel was to be
 for bunkering purposes. Since the purchase orders did not contain details
such as the name of the ship or the loading date of the diesel, the sale could
not have been agreed by both parties to be for bunkering. On the totality of
the evidence adduced on the balance of probability the court found that that
the parties had agreed that the diesel sold by the plaintiff to the defendant in
February, March and April 2000 was for commercial inland use. Thus, as it
was a term of the contract that the diesel sold by the plaintiff to the defendant
was for commercial inland use, the fact that the defendant used the diesel for
bunkering showed that it had breached the contract of sale of diesel with the
plaintiff
d) The loss of reimbursement of subsidy of RM609,950.20 suffered by the
plaintiff was clearly within the ambit of s 74 of the Contracts Act 1950
because such loss naturally arose from the defendant’s breach of the terms of
the contract for the sale of diesel

TAHAN STEEL CORPORATION V BANK ISLAM MALAYSIA [2012] 2 MLJ

314; [2011] MLJU 962; [2012] 1 CLJ 959; [2012] 1 AMCR 397
1) FACTS

a) The respondent bank agreed to provide the appellant a banking facility in the

sum of RM97 million for the purpose of part-financing the appellant's project
to develop and construct a mill plant ('the project'). The financing provided
by the respondent took the form of an Islamic financing facility known as Al-
Istisnaa'.
b) Under the Al-Istisnaa' financing facility, the respondent purchased the project
from the appellant for a sum of RM97m, by way of the Al-Istisnaa' purchase
agreement ('APA') and concurrently sold the project back to the appellant at
an agreed price of RM185.36 million payable by the appellant by way of 40
quarterly installments, as evidenced by the Al-Istisnaa sale agreement ('the
ASA').
c) In addition to executing the APA and the ASA, the appellant executed nine
other documents as security for the Al-Istisnaa' facility (the security
documents). The RM97m was to be disbursed to the appellant in three
tranches upon the appellant meeting all the conditions contained in the APA.
The respondent bank allowed the appellant the first and second drawdowns
but refused the drawdown of the third and final tranche. The appellant
claimed that the respondent's refusal in releasing the third tranche was a
fundamental breach of the APA, which amounted to a repudiation of the
respondent's obligations under the financing facility.
d) The appellant wrote to the respondent accepting this repudiation and
terminated the facility. The appellant then commenced an action against the
respondent wherein it sought, inter alia, a declaration that that the termination
of the Al-Istisnaa' financing facility was valid and lawful, discharge of the
ASA and security documents, various injunctive reliefs to restrain the
respondent from enforcing the ASA and security documents, damages of
RM78,247,014.53, general damages, interest and costs.
e) It was the appellant's case that the failure of the project was due to the
respondent bank's failure to allow the third drawdown. The respondent
claimed that it was the appellant who had breached the APA by failing to
satisfy a condition precedent prescribed by the APA.
f) The respondent thus contended that it was justified in refusing the third
drawdown and counterclaimed against the appellant the sum of
RM143,590,488.09, which was the whole of the sale price under the ASA
less the amount drawndown and payments made by the appellant. The trial
judge found that the respondent's refusal of the third drawdown amounted to
a breach of the APA and that the appellant had rightly terminated the APA.
However, as the appellant had failed to prove its claim, it was awarded a
token sum of RM50,000 as damages with costs. The trial judge also
dismissed the appellant's prayers for various injunctive reliefs and discharge
of the ASA and security documents.
g) The trail judge also allowed the respondent's counterclaim in the sum of
RM143,590,488.09 less the undisbursed amount and profits. This was the
appellant's appeal against the High Court's quantum of general damages, the
dismissal of the rest of its claims and against the award of counterclaim
granted in favour of the respondent. The respondent cross appealed against
the High Court order, which allowed the undisbursed amount and profits to
be deducted.
2) HELD

a) Held, allowing the appellant’s appeal only in respect of the amount of the
counterclaim and dismissing the respondent’s cross-appeal, with each party
to bear its own costs:
b) (per Mohd Hishamudin JCA, dissenting in part) Although the trial judge
made the correct finding when she ruled that the respondent had breached the
APA and correctly granted the declaration sought by the appellant that the
termination of the facility was lawful and valid, she erred by refusing to grant
the consequential reliefs prayed for by the appellant. The security documents
were executed contemporaneously with the APA and ASA and could not be
segregated from them. Thus, the repudiation of APA by the respondent
would automatically result in a repudiation of the ASA and the security
documents must be treated as one with the APA and ASA. As such, the trial
judge ought not to have refused the reliefs on the security documents as
prayed for by the appellant. This refusal was inconsistent with her order
declaring the appellant’s termination of the APA and ASA to be lawful and
valid (see paras 35–43).
c) (per Mohd Hishamudin JCA, dissenting in part) After having made a
declaratory order on the lawfulness and validity of the termination by the
appellant of both the APA and ASA, it would be contradictory or
inconsistent for the trial judge to allow the respondent’s counterclaim. It is
settled principle that once a contract was lawfully terminated the contract
came to an end and the parties were absolved from all future obligations (see
para 59).
d) In the present case the trial judge was correct in finding that there was
insufficient evidence from the appellant to prove damages. The trial judge’s
findings were arrived at based on her appreciation of the evidence and her
assessment of the credibility and demeanour of the witnesses. The appellant
had not shown that the trial judge’s findings on the issue of proof of damages
were clearly wrong or that the trial judge had erred in law and principle (see
para 96).
e) Insofar as Islamic financing transactions are concerned, an Al-Istisnaa’
financing facility is similar to a BBA financing arrangement, in which a
property purchase agreement and a property sale agreement complete the
transaction. In a BBA transaction the security documents did not form part of
the financing transaction. Similarly, in the present case the security
documents were a security arrangement and not part of the APA and the
ASA. Hence the trial judge had not erred in refusing to grant the prayers
sought for in respect of the security documents (see para 98).
f) Further, the respondent’s rights against the appellant were preserved by the
terms of the ASA and there was no reason for the respondent to be restrained
from acting upon the security documents (see para 100).
g) In Islamic financing, profit was different from interest. As it was the
respondent who repudiated the APA resulting in its termination, the
respondent was only entitled to counterclaim the sums paid to the appellant
by way of the first and second drawdown totaling RM58,715,984.84 and the
corresponding profits thereon after deducting the amount of repayment, if
any. Thus, the appellant’s appeal against the amount of counterclaim was
 allowed and the respondent’s appeal on the counterclaim was dismissed

KABATASAN TIMBER EXTRACTION V CHONG FAH SHING ( 1969 ) 2

MLJ 6
1) FACTS

a) In this case, the appellants had contracted to supply timber to the respondent

to be delivered at the site of the sawmill to be erected by the respondent.
b) The timber was delivered in three lots. The learned trial judge found that the
second lot of 198 logs and 4 of the 22 logs in the third lot were not delivered
to the respondent, as they were dumped at a distance of more than 500 feet
from the sawmill.
c) The learned trial judge gave judgment for the appellants for [dollar]9,892.41
being the balance due under the contract and also awarded damages to the
respondent on his counterclaim for breach of contract for the sum of
[dollar]13,192.40.

2) HELD

a) Held, dismissing the appeal in respect of the claim and allowing the appeal in
respect of counterclaim by reducing the amount: it was the duty of the
respondent in this case to take reasonable steps to mitigate the damage.
b) There was no need for the respondent to have gone to the expense of buying
logs from elsewhere when the logs were lying a few hundred feet away from
the sawmill and all that was required was the additional expense for hauling
them up to the sawmill.
c) The appropriate damages to be awarded to the counterclaim was the
approximate cost of hauling the logs to the sawmill, which amounted to
[dollar]1,000.

MALAYSIAN RUBBER DEVELOPMENT CORP V GLOVE SEAL SDN BHD

( 1994 ) 3 MLJ 569
1) FACTS

a) The respondent ([lsquo ]the plaintiff[rsquo ]) and the appellant ([lsquo ]the
second defendant[rsquo ]), as agent for the first defendant, entered into a
written agreement ([lsquo ]the agreement[rsquo ]) whereby the plaintiff was
to supply to the first defendant two million rubber gloves per month from
November 1988 to October 1989 for a total price of US$1,848,000.
b) In breach of the agreement, the first defendant failed to issue an irrevocable
letter of credit in favour of the plaintiff 30 days before the date of the first
shipment of the goods.
c) The plaintiff brought an action against both defendants, claiming damages of
RM6,155,159 for loss of profits, interest, marketing costs and losses
incurred. The registrar granted summary judgment on the issue of liability
only against the second defendant and this was affirmed by the Supreme
Court.
d) In assessing damages, the High Court awarded the plaintiff, inter alia:
(i) RM3,102,926.95 for loss of profits based on the proposition that as there was
no available market for the gloves, the measure of damages was the difference
between the contract price and the price at which the gloves were eventually sold,
and not the difference between the contract price and manufacture cost since the
plaintiff was only obliged to supply the gloves and not manufacture them; and
(ii) RM108,434 for costs incurred in marketing the goods which should have been
supplied under the agreement. The second defendant appealed.

2) HELD

a) Held, allowing the appeal

b) Generally, the value of the goods should be determined at the time of breach
but if there is no available market, the value is likely to be based upon the
price at which the goods are eventually sold. However, the judge was wrong
in determining the value of the gloves at the price at which they were
eventually sold as there was no evidence that the gloves were unsaleable at
any realistic price at the time of the breach or immediately thereafter
c) In assessing the plaintiff[rsquo ]s loss of profits, the judge had erred in
holding that it was entitled to purchase the gloves instead of manufacture
them since, upon construction of the agreement, the plaintiff was obliged to
manufacture the gloves itself. This was important since the evidence showed
that the manufacture costs would have exceeded the purchase costs
d) The plaintiff was under a duty to take reasonable steps to mitigate its loss
immediately upon the breach, ie buy or sell in the market, if there was an
available market or, if there was none, act reasonably to mitigate its loss. The
question of what is reasonable in every case is a question of fact and not law.
From the evidence, the plaintiff had continued to manufacture
the gloves even after the breach although it would have been reasonable for it
to stop further production in view of the declining market
e) In the circumstances, the proper measure of damages was the difference
between the contract price and production costs. This should be calculated on
the assumption that the plaintiff had stopped production at the date of the
breach, ie by taking the contract sales value and deducting the forecasted
production costs, giving a net forecasted profit of RM717,770. The plaintiff
 was also entitled to RM210,512 as the costs of stopping production and
RM54,617 to restart production, being the consequential loss arising from the
stoppage and restarting of production. As these were only forecasted figures
provided by the second defendant, the total sum of RM1.2m was felt to be a
fair and reasonable amount for loss of profits
f) The sum of RM108,434.23 for marketing costs was reduced to RM29,063.47
as the plaintiff had failed to show that the amount of RM79,370.76 had been
incurred as a result of the first defendant[rsquo ]s breach. Interest of
8[percnt]pa was awarded on both sums from the date of writ to date of
satisfaction
g) (obiter) the normal measure of damages for breach of contract is prescribed
by s[nbsp ]74(1) of the Contracts Act 1950, which is the statutory
enunciation of Hadley v Baxendale (1854) 9 Ex 341. The courts have treated
the position under the second limb of s[nbsp ]74(1), that is loss or damage
which the parties knew, when they made the contract, to be likely to result
from the breach of it, to be similar to the second limb of Hadley v Baxendale,
ie the party may recover damages which may reasonably be supposed to have
been in contemplation of both the parties, at the time they made the contract.