BREACH OF

CONTRACTS
CONTRACT LAW II

Prepared by : Syafinaz Idrus, Latifah Kaiyisah,

Norma Umairah, Nur Aqila Hatim, Nur Ameeraliza
 INTRODUCTION
When a party having a duty to perform fails to do that or
does an act whereby the performance of the contract by
him becomes impossible, or refuses to perform the
contract, there is said to be a breach of contract on his
part.

The party not in breach entitles to take appropriate action

may include repudiation/rescission of the contract.

In Malaysia, the right to rescind a contract flowing from a

breach is governed by Section 40 of Contracts Act
 SECTION 40 OF CONTRACTS ACT
1950
When a party to a contract has refused
to perform, or disabled himself from
performing, his promise in its
entirely, the promise may put an end to
the contract, unless he has signified, by
words or conduct, his acquiescence in its
continuance
Thus, under Section 40 of Contracts Act 1950, the innocent
party may rescind (in the words of Section 40 may put an
end to the contract) in two situations, first, the
defaulting party refuses to perform and second, the
defaulting party disables himself from performing,
his promise its entirely.

It is clear that the contract the contract does not come to

an end automatically, but the breach gives the innocent
party an option to rescind/terminate or to affirm/continue
with the contract.
 EXAMPLES OF
BREACH OF
CONTRACTS

Actual Anticipato
Breach ry breach

Minor Material
Breach Breach
 1. ACTUAL BREACH

An actual breach occurs when one of the parties does not

meet their obligations in the specified timeframe under the
contract, or breaches an essential term of the contract.

Example : X agreed to sell his car to Y on 1st June. But on 1st

June X refused to sell the car to Y. On Xs refusal to sell the car,
there occurred a breach of the contract. And Y can hold X
liable for the breach of contract.
 KYOYETA V MUTEBI [2015]
UGCOMMC 128
The defendant approached and represented to the plaintiff that he was the
rightful owner of the land comprised in Block 415, Plot 10, Mabira-Lwera,
Mawokota measuring 100 acres having acquired the land from one Mr Jehoash
Sibakyalwayo Mayanja Nkangi (the registered owner) and he was desirous of
selling the land.
Then, the plaintiff showed interest in buying the land and was presented a
signed transfer form and an application for consent to transfer signed by the
registered owner in his favour dated 15th September 2012 as proof of being the
owner of the land with the authority to sell and /or do anything with the land.
The plaintiff in honest belief that the defendant was the rightful owner of the
land on 12th February 2013 bought it from the defendant at a total purchase
price if UGX 250,000,000/=.
 Then, the plaintiff fulfilled his obligation by paying the
entire price in the sum of UGX 250,000,000/=.
The plaintiff took occupation and possession of the land
on which he excavated sand but barely a few weeks after,
he was thrown off the land by one Kakande who came
with a title to the land having bought it from Mayanja
Nkangi and claimed that he has never sold his land to the
defendant.
The defendant failed to hand over the duplicate
certificate of title to the plaintiff despite several demands
to do so as agreed in the land sale agreement.
Issue of the case
Whether the defendant breached the contract of sale
dated 12th Feb 2013

Court held
that the defendant breached the sale agreement
dated 12th February 2013 and is accordingly entitled
to a refund of the entire consideration as agreed.
 2. ANTICIPATORY BREACH

It occurs when prior to the due date of

performance, the promisor absolutely
refuses or disables himself from the
performance of his obligations. In other
words, it is a declaration by one party of his
intention not to perform his obligations under
the contract. Thus, the anticipatory breach is
the premature destruction of the contract.
 TEH WAN SANG & SONS SDN BHD V.
SEE TEOW CHUAN [1984] 1 MLJ 130

Facts of the case

The plaintiff in this case had entered into a tenancy agreement with the
defendant. The period of the agreement was for three years commencing from
12 October 1974 to 11 October 1977, at the monthly rate of $5928.75. On 11
February 1976, the defendant wrote to the plaintiff telling their intention to
repudiate the contract and vacated the premises. However, the plaintiff
refused to accept the letter and continued to claim rental for the premises.
During this time, there was an offer made to the plaintiff to rent the premises
at $4000 per month but the plaintiff rejected this offer. In April 1977, the
plaintiff succeeded in finding another tenant to rent the premises at the same
rate as that paid by the defendant. The plaintiff then claimed for damages for
the loss of rental from February1976 until April 1977.
 The defendant claimed that the plaintiff should only be entitled for the
difference between the original rental and the offered rental as the
plaintiff had failed to mitigate his losses by rejecting the $4000 per month
offer made earlier. On the other hand, the plaintiff claimed that by virtue
of White and Carter (Councils) Ltd, he was not obliged to mitigate unless
there was a breach of contract and further argued that a breach had not
yet occurred until he accepted the defendants breach when he accepted
a new tenant in April 1977.
The court held that, the breach occurred when the plaintiff finally
accepted the anticipatory repudiation that was when the plaintiff
finally took in a new tenant. As duty to mitigate losses can only arise if
there is a breach of contract, the plaintiff was under no obligation to
mitigate it when the defendant wrote him a letter of repudiation as there
was no breach then. So, the court allowed the claim for damages for the
loss of rental from February 1976 to April 1977
 HOCHSTER V DE LA TOUR
(1853) 2 E&B 678
Facts of the case
The claimant agreed to be a courier for the defendant for 3 months
starting on 1st June 1852.
On the 11th May the defendant wrote to the claimant stating he no longer
wanted his services and refused to pay compensation.
The claimant obtained a service contract elsewhere but this was not to
start until 4th July.
The claimant brought an action on 22nd May for breach of contract.
The defendant argued that there was no breach of contract on 22nd May
as the contract was not due to start until 1st of June
The issue of the case

Whether the courier could be sued immediately?

Court Held

Therefore, the court held that, it could as there was an anticipatory breach,
where the innocent party may either sue immediately.
 3. MINOR BREACH

A minor breach occurs when a party to

the contract fails to perform a part of a
contract. The failure is small and of
such a nonessential part that all
parties can otherwise fulfill any
remaining contractual obligations.
 Example : A homeowner hires a contractor to install new plumbing and
insists that the pipes, which will ultimately be hidden behind the walls,
must be red.
The contractor instead uses blue pipes that function just as well. Although
the contractor breached the literal terms of the contract, the homeowner
cannot ask a court to order the contractor to replace the blue pipes with
red pipes.
The homeowner can only recover the amount of his or her actual
damages. In this instance, this is the difference in value between red pipe
and blue pipe. Since the color of a pipe does not affect its function, the
difference in value is zero.
Therefore, no damages have been incurred and the homeowner
would receive nothing.
 JACOB & YOUNGS, INC. V.
KENT, 230 N.Y. 239 (1921)
The plaintiff built a house for the defendant under contract. The
defendant learned that some of the piping, instead of being made in
Reading, was Cohoes piping, contrary to one of the conditions in the
contract.
The Defendant asked the plaintiff via the architect to do the work all
over again supported by the perfect tender rule. Because the pipes
had already been encased within the walls except in a few places
where it had to be exposed, to replace the Cohoes Pipe with the
contracted-for Reading Pipe would have meant more than the
substitution of other pipe.
Plaintiff would have had to demolish, at great expense, substantial
parts of the completed structure. The plaintiff left the work
untouched, and asked for a certificate that the final payment was
due (arguing substantial performance) which was refused by Kent.
Issue of the case : Is Defendant entitled to the cost of
replacement of the pipe for Plaintiffs breach of contract
Court held : the plaintiff did not have to replace the
Cohoes pipe with the Reading pipe.
Reason : the defect is insignificant and excuses the
breach of using the same type and quality of pipe
which parties had agreed were the same except for
brand name. Measure of damages is not the cost to rip
out the old pipe and install the new, but the difference
in value which in this case is zero dollars.
 BEDFORD V PILGRIMS
GROUP LTD (2010) UKEAT
The employee had commenced employment as a security officer in August 2006, with
SGG at a site occupied by its client, SG.
In January 2008, the employer won a tendering competition for the SG security contract in
place of SGG. The employee's employment was transferred under the provisions of the
Transfer of Undertakings (Protection of Employment) Regulations 2006, SI 2006/246, on 7
January 2008.
Prior to the transfer date, the employer sent its standard form contract of employment to
SGG's employees on the SG contract.
A number of issues arose between the employee and employer resulting in the
employee's resignation
Those issues had included holiday entitlement and non-payment of wages. Following his
resignation, the employee brought a complaint of constructive unfair dismissal and
unauthorized deductions from wages before the employment tribunal. The tribunal
directed themselves on the last straw doctrine having received no assistance from the
 It found that the employers failure to pay four days holiday pay was a
breach of contract, but a minor breach and not one entitling the
employee to treat the contract as repudiated by the employer.
It accepted that subjectively the employee had lost trust and confidence
in the employer from the outset of his employment, but that a fair-
minded employee would not have considered that his employer had
broken the necessary bond of trust and confidence.
The breakdown of the employment relationship was not, the tribunal
found, due to the attitude of the employer but that of the employee.
Consequently he was not constructively dismissed and his unfair
dismissal claim failed.
However, the employee appealed. He submitted the tribunal had erred
with regards the pay issue and the last straw issue.
Court held
The appeal was dismissed because, it was not a situation akin to the
employer unilaterally reducing contractual pay, and there was no absolute
principal that non-payment of wages amounted to a fundamental breach of
contract.
 4. MATERIAL BREACH

A material breach would be considered

as a more serious form of breaking a
contract. A material breach negatively
affects the value of the contract and
considered a failure to perform an
essential element of the contract.
 SCC (NZ) LTD V SAMSUNG ELECTRONIC
NEW ZEALAND LTD [2015] NZCCLR 1

Facts of case
SCC (NZ) Ltd (SCC) provided call centre services to Samsung Electronics
New Zealand Ltd (Samsung). There was one system for recording
telephone inquiries and another system for recording email inquiries.
Under the call centre agreement (the agreement), Samsung paid
piecemeal rates for inquiries to the telephone system and a fixed annual
rate for inquiries to the email system.
Following an investigation, Samsung discovered SSC had recorded some
email inquiries as both email and telephone inquiries enabling SSC to
wrongfully claim payment for a fictitious telephone inquiry. The
investigation also uncovered other fictitious telephone with SSC admitted
to creating.
 Samsung claimed that, by deliberately issuing false
invoices, SSC failed to act in good faith and had
committed a material breach of the agreement entitling
Samsung to terminate the contract.
SSC applied for an interim injunction arguing that there
was a serious question to be tried over whether Samsung
was entitled to terminate the agreement.
Court Held
Application by SSC was refused. Therefore, Samsung was
entitled to terminate the agreement for breach of good
faith.
 STROUTH V. POOLS BY
MURPHY & SONS 79 CONN.
Facts of the case APP. 55 (2003)
the Strouths (plaintiffs) sought to have Pools by Murphy and Sons, Inc. (Pools by
Murphy) (defendant) install a swimming pool in their yard.
The Strouths selected a peanut-shaped pool with a circular spa from a brochure
and informed Pools by Murphy of its decision. The parties entered a contract
specifying that Pools by Murphy would construct a custom shaped pool for the
Strouths.
Construction commenced and Pools by Murphy excavated the yard and built a
steel frame.
However, the frame was in the shape of a kidney with an almond-shaped spa.
The Strouths ordered Pools by Murphy to discontinue construction. Pools by
Murphy eventually offered to complete construction of the kidney-shaped pool
with a circular spa.
The Strouths refused and brought suit against Pools by Murphy for breach of
contract.
Court held
The pools by Murphy substantially deviated
from the requirements of the contract
because construction of the kidney-shaped
pool was a material breach of the contract
and awarded the Strouths $10,618.63.
 8.2 EFFECTS OF BREACH OF
CONTRACT
a) Breach of contract always entitled the
innocent party to claim damages.

Although the consequences of a breach are generally

imposed by law an obligation to pay damages upon
breach is said to arise under the contract, it is an
obligation secondary to primary obligation to perform
the contract
 PHOTO PRODUCTION LTD V SECURICOR
TRANSPORT LTD [1980] UKHL 2

FACTS OF THE CASE

Photo Productions Ltd sued Securicor Transport Ltd after
Securicor's employee, Mr Musgrove, started a fire at Photo
Production's factory to warm himself while at work and
accidentally burnt it down, costing 648,000.
Securicor argued that an exclusion clause in its contract meant
they were not liable, as it said "under no circumstances be
responsible for any injurious act or default by any employee
unless such act or default could have been foreseen and avoided
by the exercise of due diligence on the part of [Securicor]."
 Photo Productions argued that the clause could not apply
under the could be applied under the doctrine of fundamental
breach? doctrine of fundamental breach, that the breach of
the contract went to the root of the contract and invalidated
the whole agreement, and extinguished the exclusion clause.

ISSUE OF THE CASE

Whether the exclusion clause could be applied under the
doctrine of fundamental breach?
Court held
The House of Lords overturned the Court of Appeal and held that
Securicor's exclusion clause was effective and exempt it from liability for
damage.
Lord Diplock held that the clauses effectiveness was a question of
construction of the contract, and that it did cover the damage.
He noted the reports are full of cases in which what would appear to be
very strained constructions have been placed upon exclusion clauses
though the need should have gone since the passage of the Unfair Contract
Terms Act 1977
b) A breach of a term may give rise to an
entitlement in the innocent party to treat
the contract as discharged as well as to
claim damages for the breach.
Such an entitlement arises where the breach
amounts to what the High Court has recently
discussed as being one or other of a
fundamental breach, or repudiation.
 PROGRESSIVE MAILING HOUSE PTY. LTD V
TABALI PTY. LTD
(1985) 157 CLR 17
FACTS OF THE CASE
Respondent [Tabali, lessor] leased a property to the Appellant [Progressive Mailing,
lessee].They had a lease in a registrable form which was left unregistered
.A clause allowed the Respondent to retake possession of the property [re-enter] if rent
was unpaid. Another clause required the Respondent to make certain arrangements
before the Appellant enters, and then notify the Appellant.

Appellant took possession of the property prematurely. He then contended that the
Respondent failed to make the arrangements. The Appellant failed to make payments,
and also made a number of other small breaches of the agreement, which the
Respondent demanded remedy for. None was supplied by the Appellant. The
Respondent sued in order to regain possession, obtain damages and outstanding rent
 Appellant took possession of the property prematurely. He
then contended that the Respondent failed to make the
arrangements.The Appellant failed to make payments,
and also made a number of other small breaches of the
agreement, which the Respondent demanded remedy for.
None was supplied by the Appellant.The Respondent sued
in order to regain possession, obtain damages and
outstanding rent.

ISSUES: Whether the contract amounted to repudiation?

COURT HELD
Proceedings were commenced in the Supreme Court of New
South Wales by the respondent. The statement of claim
accepted the appellant's repudiation and sought damages
accordingly.

The appellant was ordered to pay to the respondent the sum of

$85,000 by way of damages in respect of the loss, as a
consequence of re-entry, of the benefit of covenants contained
in the memorandum of lease. An appeal from that decision,
limited to the question whether his Honour had been correct in
awarding damages, was dismissed by the Court of Appeal.
REASON
In this case, the combination of the
unwillingness to pay rent as well as
other minor breaches formed a
conduct which amounted to
repudiation.
c) Repudiation does not automatically terminate a contract,
unless its effect is to render future performance of the
contract. Normally, the innocent party has, upon
repudiation, an option :
i) To insist upon performance of the contract. If he thus affirms
the contract his entitlement to damages nevertheless remains; or
ii) To accept the repudiation as discharging the contract.
Acceptance to repudiation is sometimes incorrectly described as
rescission of the contract; but that word should be reserved for the
rescission of a contract vitiated by mistake or misrepresentation.
 HARBUTT'S "PLASTICINE" LTD V WAYNE
TANK AND PUMP CO LTD [1970] 1 QB 447

FACTS OF THE CASE

A contract was entered into for the design and installation of
storage tanks for stearine, a greasy wax that is one of the main
ingredients of plasticine.
As part of the contract, the contractors designed a plastic pipeline
wrapped with electrical heating tape; the pipeline was to be used
to liquefy the stearine, in order to convey it from one point to
another. The plastic pipe became distorted under the heat. It
sagged and cracked, and the stearine escaped and became
ignited. The plaintiff's factory was completely gutted by the fire.
ISSUE OF THE CASE
Whether the contractor was in the fundamental breach of contract.

COURT HELD
The contract contained a provision that limited the contractor's
liability for accidents and damage to 2,300 pounds. The Court of
Appeal held that, because of the fundamental breach, the
contractors were not entitled to rely on the liability-limiting
provision. The contractors were held liable for the cost of
reinstating the factory, an amount determined at trial to be in
excess of 170,000 pounds.
 MCDONALD V DENNYS
LASCELLES LTD (1933) 48
CLR 457
FACTS OF THE CASE
The Plaintiff was assigned rights under a contract for a sale of
land. He became the vendor to a future purchase by Rye Grazing
Co. Rye Grazing needed more time to pay an instalment, and the
Plaintiff agreed so long as the Defendant served as a guarantor.
However, that sum was never paid by Rye Grazing or the
Defendant. The contract was later repudiated, and brought to an
end. The Plaintiff seeks to recover the amount of the instalment
from the Defendant (who served as guarantor).
ISSUES: Can the plaintiff get his right to the instalment?

HELD:
In this case, since no consideration was executed by the Plaintiff, he
does not 'get' his right to the instalment and thus the purchasers
have a right to recover it.
If there was an express statement saying that he gets to keep the
instalment even in the failure of the contract, he would be able to
retain it. But no such provision exists here.
 6.3 RELIEF UNDER SECTION 40 AND
SECTION 65 OF THE CONTRACTS ACT 1950

Relief under Section 40 of the Contracts Act 1950 (Act 136)

Section 40 of the Contracts Act 1950 = When a party to a contract has

refused to perform, or disabled himself from performing, his promise in its
entirety, the promise may put an end to the contract, unless he has
signified, by words or conduct, his acquiescence in its continuance.

Section 40 of the Contracts Act 1950 implies on the effect of refusal of

party to perform promise wholly.
Under this section 40 of the Contracts Act 1950 (Act 136), the innocent
party may rescind the contract in two situations.
The first situation is the default party refuses to perform.
The second situation is the default party has disability to perform.

However, it does not mean that the contract is automatically void. The
innocent party have two choices. Firstly, to either rescind or terminate
the contract. Or secondly, to either continue or affirm with the contract.

So, a contract that is breach is considered voidable at the option of the

innocent party when the other party has refused to perform or disabled
himself from performing his part of the contract.
 When a contract is breach, the innocent party had a choice to either terminate
or continue the contract:

Sim Chio Huat v Wong Ted Fui [1983] CLJ Rep 363

Facts:
The respondent agree to sell some housing lots to the appellant where part of
the consideration was to be paid in the form of houses to be built by the
appellant on four of the lots. Time was made the essence of the agreement.
However, the appellant was unable to deliver in time. So, the respondent sued
the appellant for liquidated damages and general damages.

Issue:
Whether a contract that is breach can be continue or not?
Held:
The court held that time was the essence of the contract as the parties
had agreed that it be so. The respondent was entitled to unliquidated
damages for breach of contract as the appellant had failed to build a
temporary house for him as agreed upon.
However, the respondent did not choose to treat the agreement as having
been repudiated. And by allowing the delivery dates to pass and by
acquiescing in the work continuing under the agreement and indeed by
ordering extra work to be done for each of these houses, the appellant
must be held to have waived his right to rescind the agreement on
account of repudiation and also the right to treat himself as discharged
therefrom. He must be deemed to have elected the agreement as still
continuing.
 ILLUSTRATIONS
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 nights performance. On the
sixth night A wilfully absents herself from the theatre. B is at liberty to put
an end to the contract.
Another illustration is 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 As failure to sing on the sixth night.
Section 40 of the Contracts Act 1950 (Act 136) embodies the common law
position.
The terms refusal to perform and disabled to perform are interpreted
by courts as reference to the common law concepts of repudiation and
fundamental breach. This view was mentioned by the High Court in the
case of Hwa Chea Lin & Anor v Malim Jaya (Melaka) Sdn Bhd [1996] 1 LNS
70 . Suriyadi J stated that,
In Malaysia, the terminology of fundamental breach, which is a concept of
the common law, though not in exact terms has become a creature of
statute. The relevant position is now enshrined in Section 40 of the
Contracts Act
 A) REFUSAL TO PERFORM
When one party of a contract unconditionally refuses
to perform his part of the contract as promised.

The refusal to perform may be indicated either

through words, actions or both.

This is regardless of when the performance is

supposed to take place.
 CORT AND GEE V THE AMBERGATE, NOTTINGHAM AND BOSTON
AND EASTERN JUNCTION RAILWAY COMPANY (1851) 117 E.R. 1229

Facts:
The plaintiff had agreed to supply the defendant with 3900
tons of railway chairs by instalment and at a fixed price.
The contract stated that the plaintiff will be paid after all
the railway chairs are delivered. When he had delivered
only 1787 tons of railway chairs, the defendant informed
him that they require no more. The plaintiff brought an
action to the court because the defendant did not execute
his part of the contract.
Issue:
Whether the defendant is considered to breach the contract when he
stop the order of the railway chairs?

Held:
It was held that the plaintiff could bring his action immediately and
that he would succeed as he was obviously willing to perform his part
of the contract but could not do so because of the defendant
company. If one party by his own actions makes it impossible for
himself to perform the contract, the other party may treat the
contract as renounced and commence an action at once. Hence, the
plaintiff decided to put an end to the contract with the defendant.
 CHOO YIN LOO V. VISUVALINGAM (1930) 7
FMSLR 135
Facts:
The plaintiff contracted to perform certain work on the defendants land. It
was agreed that the work should be done expeditiously by having 30 workers
on the land at all times. If on any day there should be less than 30 workers,
the plaintiff should be paid $1 per day for every worker short of the stipulated
numbers. The defendant agreed to pay fortnightly 70 percent of the value of
work completed. Work commenced and regular payments were made for a
time but the defendant later ceased further payment on the allegation that
there was shortage of the stipulated number of workers which entitled him to
damages amounted to $3,845. The plaintiff who to date have employed only
a total of 3,355 workers when he ought to have employed 7,200, stopped
work on account of the non-payment. He then proceeded to sue the defendant
for damages, claiming that he had been prevented by the defendants default
from completing the contract. The defendant counter claimed for damages.
Issue:
Whether the plaintiff is liable to be sued by the defendant for breach of
contract?

Held:
It was held that since the plaintiff had agreed to carry out the work
expeditiously, his action in employing less than half the number of
workers constituted a breach which entitles the defendant to put an end
to the contract.
 HWA CHEA LIN & ANOR V MALIM JAYA
(MELAKA) SDN BHD [1996] 1 LNS 70

Facts:
The plaintiffs had entered into an agreement with the defendant developer for the purchase of a
single story terrace house. The house was delivered to the plaintiffs. Unfortunately, the evidence
showed that the building was in poor conditions which required massive remedial works and
eventually had to be rebuilt.

Issue:
Whether a party not performing in a contract considered breach of contract?

Held:
The High Court later on held that this is amounted to a fundamental breach on the part of the
defendant which entitled the plaintiff to rescind the contract as the building which was delivered was
not what had been agreed upon.
 B) DISABILITY TO PERFORM

When a party disable himself from

performing his promise by any act on
his part. The disability to perform
may occur either before the time due
for performance or during the time of
performance.
 ROBINSON V DAVISON (1871) L.R. 6 EXCH.
269

Facts:
The plaintiff was a professor and giver of musical entertainments
contracted with the defendants wife where the defendant act as the agent.
Thereupon, in consideration of a certain fee to be paid by the plaintiff to
the defendant, the defendant promised the plaintiff that Arabella Davison,
the wife of the defendant, should perform at a certain musical
entertainment to be given by the plaintiff by playing the piano. However,
she was, on the day in question, unable to perform through illness. The
defendant did not procure a vocalist or piano. The contract contained no
express term as to what was to be done in case of her being too ill to
perform. The plaintiff was unable to give the entertainment, and suffered
loss in consequence.
Issue:
Whether the defendants wife is considered breaching the contract due to
disability to perform?

Held:
The Court held that even though the defendants wife had breach the
contract, it was not her fault that she had a disability to perform. Hence,
the plaintiff cannot claim for damages.
 RELIEF UNDER SECTION 65 OF THE
CONTRACTS ACT 1950 (ACT 136)

Section 65 of the Contracts Act 1950 = 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.

Section 65 of the Contracts Act 1950 implies on the

consequences of rescission of voidable contract.
Definition of Rescission =
Rescission is where a contract is cancelled, annulled, or abrogated by the parties,
or one of them. (Blacks Law Dictionary)
Rescission is to abrogate (a contract) and restore the parties to the positions they
would have occupied had there been no contract. (Merriam-Webster Dictionary)
Rescission is divided into two types which are rescission ab initio and rescission
for breach.
Rescission ab initio = Apply to contracts which are not freely entered into due
to vitiating factors such as coercion, undue influence, fraud and
misrepresentation.
Rescission for breach = Apply when an innocent party is given the right to
rescind when the defaulting party has refused or disabled himself from
performing under Section 40 of the Contracts Act 1950 (Act 136).
Consequences of rescission of voidable contract according to Section 65 of
the Contracts Act 1950 (Act 136):

When an innocent party putting an end to a contract, the innocent party

must restore any benefits which he may have received from the other
party. If the innocent party has rendered services or had supplied goods, he
may recover a reasonable sum for such services or goods. If the innocent
party has paid money under the contract, he may have entitled to recover
the sum paid.
 CHEAH SWEE HUAT & ANOR V HUN MENG
DEVELOPMENT SDN BHD [2016] 9 CLJ 449
FACTS OF THE CASE
A registered society named Cheah Kongsi was the registered owner of two pieces of
land known as lot 429 and lot 430 respectively in Georgetown, Penang. The plaintiff, a
property developer company entered into an agreement with Cheah Kongsi to develop
lot 429 and lot 430 together for a development project. The plaintiff obtain planning
approval from the relevant authorities and was given a power of attorney to enable
the plaintiff to pursue with the authorities, in the name of Cheah Kongsi, all necessary
action to obtain development approvals. The plaintiff subsequently wrote to Cheah
Kongsi informing them that the plans for subdivision had been approved by the land
authority and requested for the original title document for lot 429 to be forwarded to
the plaintiff with the undertaking to return the new title deed to Cheah Kongsi upon
receipt of the same by the Land Surveyor. Cheah Kongsi ignored the request/notice
and refused to surrender the title document to the plaintiff. The plaintiff thus filed this
suit alleging breach of contract and claimed for damages to be paid by Cheah Kongsi.
Issue:
Whether the defendant is liable to pay the compensation for breaching the
contract?

Held:
The High Court held that the defendant need to pay a sum of
RM3, 575,537 to the plaintiff for the breach of contract. This is because
expenses already incurred by the plaintiff due to almost completion of
phase 1 of the development project.
 BAN HONG JOO MINE LTD. V CHEN & YAP
LTD (1969) 2 MLJ 83

Facts:
The plaintiff was hired by the defendant for an earth excavation work of an
area of not less than three acres within a period of four months. The
defendants were to pay a sum of RM2, 000 as an advance as soon as the
plaintiffs conveyed an excavator to the site. The defendant made the first
progress payment of RM1, 500 and the second payment of RM1, 600 on the
first phase of the work. However, when the plaintiff next moved to the
second phase of their work but no progress payments were made in spite
of demands for them. So, the plaintiff decided to bring this issue to the
court.
Issue:
Whether the contract is considered repudiated or not?

Held:
The Federal Court ruled that the deliberate refusal of the appellant to make
fortnightly payments for work already done and their order to the
respondents to stop work left the latter with no option but to treat the
contract as having been repudiated, and to sue for payment of work that
have been done which is a total of RM1, 800.
 ABB TRANSMISSION & DISTRIBUTIONS SDN BHD
V SRI ANTAN SDN BHD & ANOR [2008] 10 CLJ 1

Facts:
The first defendant had successfully bid for a TNB contract for the design,
manufacture, testing of supply and erection of switchgears, ancillaries and
civil works for TNB. The first defendant engaged the plaintiff to design and
supply the transmission equipments for the TNB's Contract ("Subcontract").
The plaintiff claimed that the first defendant repudiated the Subcontract
when it not only failed to pay the plaintiff's outstanding invoices but had in
fact diverted monies from the TNB Contract which were supposed to be
assigned to the plaintiff as payment of the plaintiff's invoices to the first
defendant. The plaintiff filed an action against the first defendant claiming,
inter alia for a declaration that the first defendant had by its conduct
repudiated the Subcontract entered into between the plaintiff and the first
defendant. The plaintiff also claimed damages and the retention sum
Held:
The High Court held that the first defendant had breached the Subcontract
by diverting and pocketing the assigned payments from TNB. This act of
diversion alone entitled the plaintiff to treat that the first defendant as
having repudiated the Subcontract. The first defendant's repudiation of the
Subcontract presented the plaintiff with only one option, either, to affirm
the Subcontract or to accept the repudiation. This is an option recognized
by section 40 of the Contracts Act 1950. The plaintiff had chosen the latter
and accepted the first defendant's repudiation. If the contract in question
has been repudiated, both parties are discharge from further performance
of the contract and the retention money held which is trust money has to
be paid back to its rightful owner. In this regard, that would be the plaintiff.
 8.4 EFFECT OF BREACH
UNDER ENGLISH LAW
There is no much differences between English law and Contract Act 1950 for the
effect on breach of contract
Lord Ackner, Fercometal Sarl v MSC Mediterranean Shipping Co SA (The
Simona) [1988] 2 Lloyds Rep 199
The English Law does not require a party to perform empty formal gesture in
circumstances where the orther party to the contract has manifested an
unequivocal intention not to perform the contract in any event
Under the common law, there are two situations which give the innocent party
the right to be discharged form the contract
a repudiation/renunciation(abandonment), and
a fundamental breach.
Generally in English Law
There is no restriction impose on parties whom walk away from
agreement when there is issue arises.
Example, speculation of volatile market.
Contracting sides is free to decide whether to upheld their
obligation to contract if another side decide to discontinue
performance of contract.
Example
When one party announce that he is not going to perform, another
party has to elect whether to accept such behavior as repudiation
or not. Until such election has been made there is no breach.
 REPUDIATION

Repudiation is the rejection or refusal of an offered or available

right or privilege, or of a duty or relation(Black's Law Dictionary
Free Online Legal Dictionary 2nd Ed. )
Repudiation occurs when one of the parties intimates, through
words or conduct, that he has no intention to perform his obligation
when the obligation falls due in future. This act can be evinced
expressly through an unqualified statement to that effect as seen
in Hochster v. De la Tour.
When there is parties whom elect to neglect his obligation before
the due of the contract, this act indicate is said to be repudiation of
the contract
 HOCHSTER V DE LA TOUR (1853) 2 E & B
678

Fact of the case

Claimant has agree with the defendant to be his courier starting on 1 st June
1852 for 3 months.

Defendant tell claimant on 11 May that he doesnt want to use claimant

service and would no pay any compensation

The claimant brought the issue on breach of contract on 22 May

The defendant claim that there is no contract as the contract is terminated

before it even started
Issue
Whether the act of defendant repudiated from the contract before the
contract due is consider as anticipatory breach.

Held
Claimant claim is up held as the claimant is said to be suffered loss as the
defendant act on breach of contract.

As in anticipatory breach, there is no need of plaintiff to wait for the actual

breach to happened to bring the case to court and sued the party whom
repudiated their obligation of the contract.
 LOVELOCK V. FRANKLIN
[1846] 8 QB 371
Fact of the case
The defendant has enter an agreement of lease with plaintiff. However
before the due time of the lease to be made , defendant has enter a new
agreement of lease with another party.
Issue of the case
Whether the defendant act is regarded as repudiation of the contract.
Court Held
The defendant by his action had made the contract impossible of
performance, and the plaintiff could regard this as a repudiation. The
plaintiff could take immediate action for breach of contract.
 FUNDAMENTAL BREACH
Doctrine of fundamental breach :
Breach of contract which went to the root of contract and abuse the parties right and
benefit
A total failure by one party to carry out the contract discharges the other party from further
performance.
A serious breach of essential element of the contract which is a matter that must be
determined by the facts of each case
The distinction between condition and warranty, terms is used to determine whether the
innocent party may be discharge from the contract
Lord Denning has established the rule of fundamental breach through Karsales (Harrow)
Ltd v Wallis case.
 KARSALES (HARROW) LTD. V.
WALLIS, [1956] 1 W.L.R. 936
Facts of the case
Mr Wallis has viewed a used car which is in excellent condition, and he is
buying the car at 600 through Stinton whom arrange a financing through
a hire-purchase company (Karsales (Harrow) Ltd ).
Plaintiff then bought the car and sold it to Mutual Finance Ltd. Which then
defendant lent the car on hire-purchase terms.
However the car that has been send to him is entirely in different condition
that he viewed before
Wallis refused to pay for the car since it was not in the same condition as
when he agreed to make the purchase.
 Issue
Whether the exemption clause could excuse the plaintiff of fundamental breach?
Held
In the trial court has allowed plaintiff to recover the remaining cost against
defendant as according to the exemption clause claim by plaintiff which is No
condition or warranty that the vehicle is roadworthy or as to its age, condition or
fitness for any purpose is given by the owner or implied herein.
Court of Appeal
The judgement is reverse by Lord Jenning, where it is the obligation of the lender
to deliver the car on the previous condition viewed by the hirer
 HUNTER ENGINEERING CO. V SYNCRUDE
CANADA LTD., [1989] 1 SCR 426

Facts of the case

Respondent (Syncrude) has enter a contract of buying a gearboxes with
Hunter, which the gearbox was make by a subcontractor.
Then, respondent enter a contract with Allis-Chamber of extraction gearbox
supply which the design is built according to Hunter specification
The gearboxes entered service on November 24, 1977. Both contracts
included time-limited warranties of 24 months and 12 months.
In September and October of 1979 defects were discovered in the
gearboxes which were repaired at a cost of $400,000. Allis-Chambers
denied responsibility due to the expired warranty.
 Issue
Can Hunter take advantage of the exemption clause?
Held
Hunter was held to be liable for the repair of the gearboxes even though
failure was discovered after the contractual warranty period had expired,
because of a breach of implied warranty of fitness contained ins.15(1) of
theSale of Goods Act
S.15.There is no implied warranty or condition as to the quality or fitness for
any particular purpose of goods supplied under a contract of sale, except as
follows:
1. Where the buyer, expressly or by implication, makes known to the seller the
particular purpose for which the goods are required
CONCLUSION
THE END, THANK
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