REMEDIES

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Question

Briefly explain any two (2) remedies available to

innocent party when there is a breach of contract.

REMEDIES

Rescission of Contract

Damages

Specific PerformancesInjuction

Quantum Meruit

Rescission of ContractSection 40 of CA

When a party to a contract has refused to perform, or disabled himself from performing, his promisee in its entirety, the promisee may put an end to the contract, unless he has

signified, by words or conduct, is acquescence in its continuance.

If a party breaches his promise under a contract, the party not in breach

has the right to rescind or terminate the contract.

Section 65 of CA• 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.

If the party not in default chose to rescind the contract, any benefit which he has received from the defaulted party must be restored.

Illustration (c) to Section 66 of CA

Sing for 2 night in every week

Pay RM 100 for each night

On the 6th night of performance

A is absent

AB

B rescinds the

contract

B must pay for the five nights on which she

had sung.

Muralidhar Chatterjee v. International Film Co. Ltd

If a party had wrongfully refused to perform his part of the contract

The party not in default had rightly rescinded the contract under Section 40 of Contract Act

The party not in default is bound under Section 65 of Contract Act to restore to the party in default any

benefit received from him under the contract

Damages

A person who rightfully rescinds a contract entitled to compensation

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

Section 76 of CA explain that the party rightfully rescinding contract

entitled to compensation.

Sing for 2 night in every week

Pay RM 100 for each night

On the 6th night or performance

A is absent

AB

B rescinds the

contract

Illustration to Section 76 of CA

B is entitled to claim compensation for the damage which he has

sustained through the non-fulfilment of the contract.

Categories of

Damages

Substantial

NominalExemplary

Substantial Damages

Substantial damages is pecuniary compensation intended to put the plaintiff in the position he would have enjoyed, had the

contract been performed.

Nominal Damages

Nominal damages consists of small token awarded when the

plaintiff has proved the breach of contractual right but suffered no

actual loss.

Exemplary Damages

Exemplary damages consists of a sum awarded which is far greater than the actual pecuniary

loss suffered by the plaintiff.

Acts as the reminder to the defendants and public not to breach any contract in the future.

Types of Damages

Unliquidated Damages –

Section 74 (1) of CA

Arising naturallySpecial damages for any special loss sustained

Liquidated Damages– Section

75 of CA

Hadley v. Baxindale

Two parties have made a contract, which one of them has broken, the damages which the other party ought to receive from the party

who has broken the contract should be considered either;

arising naturally, that is according to the usual course of things from such breach of contract itself (damages arising naturally);

such as may reasonable 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 contract (special damages for any special loss sustained).

Illustration (f) to Section 74 of CA

Damages arising naturally is according to usual course of things resulting from the breach.

• A contracts to repair B’s house in a certain manner, and receives payment in advance.

• A repairs the house, but not according to contract.

• B is entitled to recover from A the cost of making the repairs conform to the contract.

Special damages for any special loss sustained

1. It is granted whenever the plaintiff suffered some special loss or loss of profit due to the breach of contract by the defendant.

2. For the special damages, the plaintiff must prove to court that the other party; defendant knew at the same time of making the contract, special loss is likely to result from the breach.

3. If the plaintiff failed to prove that the defendant could foresee the loss at the time of making the contract, then the plaintiff could not claim for this special damages.

Tham Cheow Toh v. Associated Metal Smelters Ltd.

The defendant agreed to sell a metal melting furnace to the plaintiff.

Defendant promised that the furnace would have a temperature of not lower than 2,6000F. This specification was not fulfilled.

The held stated that the defendant knew the requirement to deliver a furnace capable of producing the specified temperature.

Therefore, the defendant were liable to pay for certain loss of profit suffered by the plaintiff.

Victoria Laundry v. Newman

Victoria, launderers and dyers require another boiler to expand their dyeing contracts. Newman agreed to sell Victoria Laundry a second-hand boiler and

to deliver on 5th June. However, the boiler was not delivered until 8th November.

The loss of profit on laundry business which would have

been earned if the boiler had been delivered on time

The loss of profits on certain dyeing contract from the

Ministry of Supply.

Held of the case:

• Laundry profits were recoverable as Newman must have foreseen their loss if there was delay.

1st claim

• Loss of profits on certain dyeing contract from the Ministry of Supply could not have been foreseen was not recoverable.

• This is because, Newman are not aware that Victoria Laundry is expecting a contract from the Ministry of Supply.

2nd claim

Liquidated Damages

When a contract has been broken, if a sum is named in the contract as the amount to

be paid in case of such breach, or if the contract contains any other stipulation by

way of penalty, the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been

caused thereby, to receive from the party who has broken the contract reasonable

compensation not exceeding the amount so named or, as the case may be, the penalty

stipulated for.

Section 75 of CA

Scholarship agreement.

• This is were the amount of damages is stipulated or fixed by the parties under the contract.

• If there is a breach of contract, the party at fault must pay damages up to the amount stipulated in the contract.

• Such stipulated amount is the maximum limit of compensation.

Conclusion

Two remedies available to an innocent party when there is a breach of contract are 1) rescission of contract; 2) Damages

Rescission of Contract

If a party breaches his promise under a contract, the party not in breach has the right to rescind or terminate the contract.

Damages

1. 3 categories: substantial, nominal, exemplary.

2. 2 types of damages: unliquidated (arising naturally & special damages for any special loss) and liquidated damages .