Understand and explain situations where a contract can be discharged.
Discharge by Frustration
Doctrine of Absolute Liability: If a party promises to carry out an act, they are legally bound to their promise.
Case Example: Cutter v Powell (1795)
Facts: Cutter was to be paid for sailing from Jamaica to Liverpool but died en route. His widow's claim for a portion of his salary was denied because Cutter did not complete the voyage.
Judgment: No performance of the promised act, thus no right to salary.
Frustration Definition: A contract is frustrated when unforeseen changes render it impossible to perform legally or physically.
Section 57(2) of CA 1950: Contracts becoming impossible or unlawful are void.
Conditions for Frustration:
Unforeseen event altering obligations.
Neither party causes the event.
New circumstances make the original contract unjust.
Case Example: H A Berney v Tronoh Mines Ltd (1949)
Japanese occupation led to contract frustration and dismissal of breach claim.
Effects of Frustration:
Discharges contract from the time of the event.
Obligations before the event must still be fulfilled.
Money paid before frustration cannot be recovered.
Section 57(3) of CA 1950: Compensation required if promisor knew the act was impossible/unlawful.
Illustration: Marriage contract void if one party becomes insane or is already married illegally.
Discharge by Performance
General Rule: Must be exact, precise, and as promised.
Section 38(1) of CA 1950: Parties must perform or offer performance unless excused.
Section 42 of CA 1950: Accepting performance from a third party negates further claims against the promisor.
Discharge by Breach
Failure to perform obligations as agreed constitutes a breach.
Breach cases:
Non-compliance with contract terms.
Express intention not to perform.
Delay in performance when time is crucial.
Effects of Breach:
Innocent party can terminate the contract and claim damages.
Required restoration of previous position and return of benefits.
Section 65 of CA 1950: Rescission of voidable contracts requires restoration of benefits.
References
Lee Mei Pheng, Ivan Jeron Detta (2022), Business Law, 3rd Edition, Oxford University Press.
Dr Loganathan Krishnan et al. (2022), Principles of Business and Corporate Law, Malaysia, 4th Edition, CCH Malaysia.