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INTRODUCTION
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.
The contract may be discharged:
a) By performance of the contract; or
b) By consent or agreement between the parties of
the contract ; or
c) By impossibility or frustration; or
d) By breach of contract by anyone of the parties.
a) Discharge by performance
Under a contract, the parties to the contract are bound to
perform their part in the contract - Section 38(1) CA
Usual method to discharge a contract:
Parties need to perform or offer to perform
If both have carried out their obligations complete
discharge
If only one party carried out his obligations he alone is
discharged
It must be strictly performed in accordance with the terms
of the contract unless the parties have agreed otherwise
Section 40 CA 1950
Parties must be prepared to perform their obligations at the
time and place at which he is undertaken to do.
Performance by whom?
Section 41 CA 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.
However in some situations, the promisor may
employ a competent person to perform the
contract, but the promisor will be personally
liable under the contract.
If the promisee accepts performance from a third
party, he cannot enforce it anymore against the
promisor Section 42 CA
b) Discharge by Agreement
Section 63 CA A contract may be discharged by the
consent/ agreement of all parties in the form of substitution
/alteration/ rescission of the original contract.
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.
Illustrations (a) and (c) to S.63
impossibility
or
ii.
Consequences of frustration.
Frustration terminates the contract automatically. Therefore, the
contract is void as it is impossible to be performed.
Under S. 66, any person who receives advantage under the
contract is bound to restore it or make compensation for it to the
person from whom he received it.
Section 15(2) Civil Law Act money due but not paid, ceases to
be payable and if money has actually been paid, it must be
restored.
Example: There is a contract to rent a hotel room between A and B
and deposit RM100 was paid by the hirer, A. However before the
performance of the contract, there was a fire at the hotel and it
destroyed the hotel building. In this case there was a frustration
occurred because the subject matter of the contract was
destroyed. Parties are discharge from their obligation, no need to
perform the contract as it is impossible.
A can claim the deposit the remaining balance needs not be paid.
c) Discharge by Breach
When the promisor fails to perform his obligations, there is a
breach of the contract.
REMEDIES
INTRODUCTION
Remedy is the method by which an injured party
enforces a right or corrects a loss.
When there is a breach of contract, the party not
in default may claim one or more of the following
remedies:
1) Damages
2) Specific Performance
3) Injunction
4) Quantum Meruit
1)
Categories of Damages
Under the common law, damages may be
classified into 3 categories with reference to
the scale of its amount:
a) Substantial damages
It
is
pecuniary/monetary
compensation
intended to put the plaintiff in the position he
would have enjoyed, had the contract been
performed.
b) Nominal damages
Consists of a small token award where the
plaintif has proven the breach of a
contractual right but suffered no actual loss.
c) Exemplary damages
Consists of a sum awarded which is far
greater than the actual pecuniary/
monetary loss suffered by the plaintiff. They
are
awarded
only
in
exceptional
circumstances. Example breach of promise
of marriage.
2)
Specific Performance
3)
Injunction
4) Quantum Meruit
This mean that a party should be awarded as much as
he had earned .
If the parties enter into contractual agreement without
determining the reward that is to be provided for
performance, then in the event of any dispute, the
court will award reasonable sum.
It can arise where:
a) A defendant has prevented a plaintiff from carrying
out the remainder of their contractual duties;
b) The parties cannot agree on payment; and
c) The parties agree on payment for the partperformance but not the actual amount.