Breach of Contract

Breach of
Contract
DATIN GRACE XAVIER ©
RESEARCH FELLOW
FACULTY OF LAW
UNIVERSITI MALAYA
Breach of Contract
Sale and purchase of property in Malaysia – the usual
breaches that can occur and the remedies.
Termination of Contract
Section 40 of the Contracts Act 1950
Section 34 of the Specific Relief Act 1950
Section 56 of the Contracts Act 1950
Section 40 CA 1950
As general rule, according to Section 40 of the
Contract Act 1950, if the party refused to perform, or
disabled himself from performing his promises, then
the contract will come to the end, unless he has
signified, by word or conduct, his acquiescence in its
continuance.
Section 34 SRA 1950
(1) Any person interested in a contract in writing may sue to have it rescinded, and
such rescission may be adjudged by the court in any of the following cases, namely:
(a)where the contract is voidable or terminable by the plaintiff;
(b)where the contract is unlawful for causes not apparent on its face, and the
defendant is more to blame than the plaintiff; and
(c)where a decree for specific performance of a contract of sale, or of a contract to
take a lease, has been made, and the purchaser or lessee makes default in payment of
the purchase-money or other sums which the court has ordered him to pay.
Section 56 of the Contract Act
1950
Section 56 of the Contract Act 1950 lays down the law
relating to the effects of time to the contract. Under Section
56(1), when a party to a contract fails to perform his
promises at or before the specified time, the contract
becomes voidable at the option of promise, if the time is
essence of the contract.
Nature of the Breach – Two
types of breaches
A fundamental breach refers to one of the parties in
the agreement not keeping their part of the deal by
failing to complete a contractual term that was
essential to the agreement so much so that another
party could not complete their own responsibilities in
the contract.
Ching Yik Devt v Setapak
Heights Devt [1996] 3 MLJ 675
In every contract, be it for the sale of land or any other
commodity, there are some terms that are of fundamental
importance and others of less or minor importance. Where
the term that has been flouted is fundamental to the
contract, the innocent party is entitled to treat himself as
being discharged from further obligations under it.
Non-fundamental breach?
But where the obligation that has been breached is
only subsidiary or minor in nature, the innocent
party may not treat himself as being free of his
obligations under the contract, although he may sue
and recover damages for the non-performance of
the subsidiary term.
Siah Kwee Mow v Kulim Rubber
[1979] 2 MLJ 190
Effect of a non-fundamental breach

which would not lead to termination
of the contract, but the innocent party
would still be entitled to damages.
Dynamic Mould v Ideal City
Devt [2000] 1 AMR 615
“The defendant, in the circumstances, was not entitled to forfeit the
deposit before expiry of the stipulated time period. The defendant’s
right to forfeit the deposit arises only if the plaintiff had failed to pay
the balance of the purchase price within the stipulated time. The
defendant’s notification to the plaintiff of the forfeiture of the
deposit, in the circumstances, was a premature notice of termination,
and amounted to a fundamental breach of the terms of the
agreement”
What about the innocent party?
What is the action that should be taken by the
party who does not breach contract?

Sim Chio Huat v Wong Ted Fui
[1983] 1 MLJ 151
Failure by the appellant to fulfil this condition
entitled the respondent to have an option of
treating the agreement either (a) as having
been repudiated and dismissing the appellant
or (b) as still continuing…
In this case the respondent did not choose to treat the contract as
having been repudiated. By allowing the delivery dates to pass by and
by acquiescing in the work continuing under the agreement and indeed
by ordering extra work to be done for each of the houses, for which the
agreement made no provision, the respondent 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 therefore. He must be
deemed to have elected the agreement as still continuing.
Goh Hooi Yin v Lim Teong Ghee
[1990] 3 MLJ 23
The right to rescind a contract of sale is lost if a
purchaser fails to exercise it immediately and
definitely as soon as he discovers want of title
in the vendor; otherwise he keeps the contract
alive as against himself as well as the vendor.
Why is the right lost?
The right to rescind is lost because a person who has open
to him two alternative courses or remedies must elect
between them and exercise such election in such a way
that the other party may know which attitude he is
adopting. Once he has exercised his option either way, he
is bound by it.
Further reading
Pusat Bandar Damansara Sdn Bhd & Anor v Yap Han Soo & Sons Sdn
Bhd [2000] 1 MLJ 513
Kluang Wood Products Sdn Bhd & Anor v Hong Leong Finance Bhd &
Anor [1999] 1 MLJ 193
Md Salim bin Hj Abdul Wahab v Syuen Corp Sdn Bhd [1999] 4 MLJ 192
Dial Kaur a/p Tara Singh v Mann Foong Realty Sdn Bhd [2000] 3 MLJ
153

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