contract performaance

1. DISCHARGE OF CONTRACT

2. INTRODUCTION
When a contract is terminated, it is said
to be discharged and the contracting
parties are free from further
obligations arising from it.

3. PERFORMANCE
CONSENT OR AGREEMENT
BY BOTH PARTIES
IMPOSSIBILITY/
FRUSTRATION
BREACH BY ONE PARTY
How to discharge a contract?

4. 1. DISCHARGE BY
PERFORMANCE
TIME FOR
PERFORMANCE
PLACE FOR
PERFORMANCE
BY THIRD
PARTY
PERFORMANCE
BY WHOM

5.  Generally, parties to contract are bound by an
obligation.
 Performance is the usual method for the
discharge of a contract

6.  Section 38(1) provides ;:
 they must either perform,
 or offer to perform their respective promises
 unless the performance is dispensed with or
excused under the law.

7.  When the parties have performed their
contracts, by carrying out their promises
under the contracts, there is a complete
discharge of the contract.

8.  If only one of the parties has performed
his part under the contract, he alone will
be discharged from the contract.
 The other party is still BOUND to the
contract until he performs his promise
under the said contract.

9. a) TIME FOR PERFORMANCE
• General Rule:
• A promisor must be prepared to perform
his obligation at the time and place at
which he has undertaken to do.

10. a) TIME FOR PERFORMANCE
Example:
If Ali promise to deliver goods to Muthu on
3 Jan 2012 on payment of RM3000.
Thus, Ali is bound to deliver the said goods
to Muthu on that day(3 Jan 2012) and
Muthu is bound to pay the RM3000.

11.  Thus, a delay even slight in performance
, will entitle the other party to free
himself from the contract.
 Time is said to be “ the essence of the
contract”.

12.  EFFECT OF FAILURE TO PERFORM AT
THE FIXED DATE WHEN TIME IS
ESSENTIAL
 Section 56(1)
 “When a party promise to do a certain thing at
or before the specified time,
 Fails to do such things, then
 The contract become voidable at the option of
one of the party.”

13. “ in a contract in which time is the essence
of the contract, a party fails to perform
it by the stipulated time, the innocent
party has the right either to rescind the
contract or to treat it as still

14. • EFFECT OF FAILURE TO PERFORM AT
THE FIXED DATE WHEN TIME IS NOT
ESSENTIAL
• When there is a failure of the parties to
perform the contract, the contract does not
become voidable but the promisee is entitled
to compensation for any loss he suffered

15. b) PLACE OF PERFORMANCE
 If there is a place being specified for the
performance of the contract, the parties
must perform the contract at the place
specified.
 If there is no place specified, the promisor
is under a duty to ask the promisee to
the place of the performance of the

16.  Section 50
 “When a promise to be performed without application
by the promisee, and where no place is fixed/
specified for the performance ; thus, it is the duty of
the promisor to ask promisee to appoint
reasonable place for the performance of the
promise”.
• Illustration
 A undertakes to deliver a thousand gantangs of rice to
B on a fixed day. A must apply to B to appoint a
reasonable place for the purpose of receiving it, and A
must deliver it to B at that place

17. c) BY WHOM CONTRACT MUST BE
PERFORMED
 Section 41
 “If it appears from the nature of the case, intention of
the parties that the contract should be performed
by the promisor himself,
 Then, such promise must be done by promisor
personally”.
 Illustration (b)
 A promise to paint a picture for B. A must
perform this promise personally.

18.  “However in other cases/ situations, a
promisor or his representatives may
employ a competent person to perform it.”
(Second limb of S. 41 of the CA, 1950)

19. Illustration (a)
“A promises to pay B a sum of money.
A may perform this promise either by personally
paying the money to B, or by causing it to be
paid to B by another; and if A dies before the
time appointed for payment, his representatives
must perform the promise or employ some
proper person to do so”.

20. d) PERFORMANCE BY THIRD PARTY
 Section 42
“ When a promisee accepts performance
from a third party, he cannot enforce it
anymore against the promisor.”

21. 2. DISCHARGE BY AGREEMENT
 1) Where both parties consented to
discharge the said contract ; or
 2)when there is alteration, substitution, or
rescission of the original contract.

22.  Section 63 :
“ If the parties to a contract agree to substitute a
new contract for it, or to rescind or alter it, the
original contract need not be performed”.
 See illustration (a)
A owes money to B under a contract. It is
agreed between A and B that C will become
the new debtor. The old debt between A and B
is at end (discharged) , and a new debt is
between A and C.

23.  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.
 Illustration ( c) to S. 63
“A owes B, RM 1,000 under a contract. B owes C
RM 1,000. B orders A to credit C with RM 1,000
his book. But C does not assent to that
agreement. Thus, B is still owes C and no new
contract has been entered into.

24.  3) The contract may also be discharged by
the consent / agreement of all parties in the
form of waiver/ release/remission.
 Section 64
 “ Every promisee may dispense with or remit,
 Wholly or in part, the performance of the promise
made to him; or
 May extend the time for such performance; or
 May accept instead of it any satisfaction which he
thinks fit.”

25.  Illustration (a) of S.64
 A promise to paint for B. B afterwards forbids him to
do so. A is nor longer bound to perform the promise.
 Payment of lesser sum in satisfaction of a larger sum
is binding on the promisee if he accepts it.
• Illustration (b) of S.64
 A owes B RM5,000. A pays to B RM2,000, and B
accepts, in satisfaction of the whole debt at the time
and place at which the RM5,000.00 were payable.
The whole debt is discharged.

26. 3. DISCHARGE BY IMPOSSIBILITY
OF PERFORMANCE/ FRUSTRATION
 A contract is discharged if there is impossibility of performance of the
contract.
 It may happen in following situations:
A. THE CONTRACT IS IN ITSELF IS
IMPOSSIBLE TO BE PERFORMED
B. AFTER CONTRACT HAS BEEN MADE , IT
IS IMPOSSIBLE TO PERFORMED

27. A. THE CONTRACT IS IN ITSELF
IS IMPOSSIBLE TO BE
PERFORMED
i) The contract is discharged if either one or both
parties aware of the impossibility .
 Section 57 (1)
“ an agreement to do an act impossible in itself is void”
 Illustration (a)
 A agrees with B to discover treasure by magis. The
agreement is void.

28. ii) If only one party knew of the impossibility, he
must make compensation to the other party.
Section 57 (3)
 “Where one person has promised to do something
which he knew or, reasonable diligence, might have
known and which the promisee did not know to be
impossible or unlawful, the promisor must make
compensation to the promise for any loss which the
promisee sustains through the non performance of the
promise” .

29. Continue…..
 Illustration (c) of S.57
A contracts to marry B, which is already
maried to C and it is being forbidden by
the law to which he is subject to practise
polygamy.
A must make compensation to B for the loss
caused to her by non performance of his
promise.

30. B) AFTER CONTRACT HAS BEEN MADE
IT IS IMPOSSIBLE TO BE PERFORMED
1. Destruction of subject matter of the
contract
2. Supervening event which defeats the
whole purpose or object
3. Death or personal capacity
4. A change of law

31. Section 57 (2) of CA, 1950.
 “ After the contract is made,
become impossible, or by
reason of some event which the
promisor could not prevent,
unlawful, becomes void when
the act becomes impossible or
unlawful.”

32. 1. DESTRUCTION OF SUBJECT MATTER
 The destruction of the subject matter of
the contract would frustrate the contract
as the contract cannot be performed as
contract.

33. Taylor v Caldwell
 a certain music hall was rented
but burnt down just before the
event.
The court held that the contract
was impossible to be performed
because of destruction of the
music hall.

34. 2. Supervining events defeat the whole
purpose of the contract
 If the contract is entered into for a specific
purpose known to the other party and
something happened beyond the control of
either party which results in the purpose of
the contract to be defeated, the contract is
frustrated.

35. Krell v Henry
 a room was hired for the sole purpose of
watching the coronation procession of King
Edward VII but because the King was sick the
procession was cancelled.
 The court held that Henry could be excused from
paying the rent for the room, as the contract was
frustrated.

36. 3. Death or personal incapacity
 A person who is deceased or
incapacitated cannot perform
the contract. Hence the contract
is frustrated.

37.  Illustration (e) Section 57
A contracts to act at a theatre for six
months in consideration of a sum paid in
advance by B. On several occasions A is to
ill to act. The contract to act on those
occasions becomes void.

38. 4. A change of law
 A contract may be legal when
formed but later, owing to a
change in law, its performance
may become unlawful.

39. Lee Kin v Chan Suan Eng
[1933] MLJ 197
A lease for five years renewals was
held to be frustrated by the
enactment of new law prescribing
annual renewals

40. CONSEQUENCE OF FRUSTRATION
 Frustration terminates the contract
automatically and since the contract is void.
 Section 66
Any person who received any advantage
under the agreement or contract is bound to
restore it, or to make compensation for it, to
the person from whom he received it.

41. Continue…..
 Illustration (d) Section 66
A contracts to sing for B at a concert for
RM1,000.00, which are paid in advance.
A is too ill to sing. A is not bound to make
compensation to B for the loss of the profits
which B would have made if A had been able
to sing, but must refund to B the RM1,000.00
paid in advance.

42. 4. DISCHARGE BY BREACH OF CONTRACT
When a promisor fails to perform his
obligations or to tender performance,
there is a breach of the contract.
 the party not in breach entitles to take
appropriate action may include
repudiation/rescission of the contract .

43. Continue…..
 Section 40 of CA, 1950.
 “When a party to a contract has refused to
perform, or
 Disabled himself from performing, his promise in
its entirely;
 The promisee may put an end to the contract,
unless he has signifies by word or conduct his
acquiescence in its continuance”.

44.  Illustration (a) section 40
A, a singer, enters into contract with B, the
manager of a theater two nights in every week
during the next two months, and B engages to
pay her at the rate of RM100 for each
performance for each nights performance. On
the sixth night A willfully absents herself from
the theater. B is at liberty to put an end to the
contract.

45. Smith Construction Co. Ltd v Phit Kirivata
[1955].
 Held :
 The refusal to issue an architect’s certificate as
agreed under a contract amounted to a breach of
contract because it prevented the contractor from
proceeding with the construction of the building.
 Since the time is important in the contract, the party
not in default has a choice either repudiating the
contract or treating it as subsisting.

46. Tan Hock Chan v Kho Teck Sang
 Facts:
 The respondent was a building contractor employed by appellant to build
certain shop houses and payment was to be made as progress payment.
 The respondent could not complete work on the final lot because of a claim
by the occupier of the land to tenancy rights.
• Held:
 The failure of the appellant to give effective possession of the land to the
respondent constituted a breach which entitled the respondent to rescind
the contract.

47. SUMAN JAIN
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