Rescission for breach allows an innocent party to terminate a contract when the other party is in fundamental breach. It restores the parties to their pre-contract positions. A party exercises this option by clearly communicating their decision to rescind within a reasonable time of the breach. Once rescinded, neither party needs to fulfill outstanding obligations, and benefits received under the contract must be restored. The rescission option is only available for valid contracts and when the breach goes to the core of the agreement. Malaysian courts have upheld this right while also placing restrictions like requiring unambiguous notice of the decision to rescind.

1. RESCISSION FOR BREACH

2. GROUP MEMBERS
 Ooi Liang Chia 1151300882 T8
 Ng Su Yin 1151302991 T7
 Lai Yong Jun 1151300740 T8
 Tan Wye Nye 1151300055 T11
 Narendran 1151303168 T7

3. Definitions
 Rescission means the abrogation of a contract,
effective from its inception, thereby restoring the
parties to the positions they would have occupied
if no contract had ever been formed
 It also means cancellation or termination of a
contract

4. When option to rescind arises
 One of the options to rescind a contract is in the cases of
breach of contract.
 Under common law, if a breach is so serious that it goes to
the root of the contract, the innocent party may elect to
terminate performance of the contract from that point or
affirm the contract and treat the contract as still
continuing
 Section 40 of Contracts Act 1950 states that “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”

5. Muralidhar Chatterjee v International Film
Co Ltd
It was held that a contract which may be put to
an end under section 40 of the Contracts Act is a
voidable contract and rescission under section 65
of the Contracts Act applies.

6.  Section 65 of the Contracts Act 1950 states that
“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 56(1) of Contracts Act 1950 deals with
specific breach. This section provides that “… the
contract, or so much of it as has not been

7. White and Carter(Councils) Ltd v McGregor
The Hous of Lord held that the appellants were
entitled to choose to go on with the performance
of the contract. However, the House of Lord laid
down two restrictions on the innocent party’s
right to affirm. Firstly, when the contract
requires the cooperation of both parties and that
cooperation is not approaching, the innocent
party
cannot affirm the contract. Other than that, if it
is
found that the party has no legitimate interest,

8. Exercise of option to rescind
(a) The contract does not terminate automatically
(b) The option must be exercised and
communicated within a reasonable time
(c) communication of rescission by giving notice
must be clear
(d) the option taken is final and binding
(e) the right to rescind the contract must be
waived are

9. (a) The contract does not terminate
automatically
P Palakrishnan a/l Perianana lwn
Lrishnamoorthy a/l Sinnah dan satu lagi
The High Court held that there is no concept of an
automatic termination. On the basis of the other
party’s breach, a party who intends to terminate a
contract must state his intention to do so in writing.
A notification is still necessary even if an agreement
provides for termination without having to give
notice. The exercise of option must be conducted by
the innocent party who has the option whether to
rescind or to affirm a contract. The decision must be
communicated to the other party within a reasonable
time.

10. (b) The option must be exercised and
communicated within a reasonable time
Chin Kim & Anor v Loh Boon Siew
Facts : the parties had entered into a contract for
the sale of a piece of land. On May 5, 1962, the
purchaser purported to exercise his option under
the contract of sale and sent $40,000 to the
vendors. On or about June 8, 1962, the vendors
returned the deposit on the ground that the option
had not been duly exercised. Until the writ in the
action was issued on August 29, 1966 in which he
claimed specific performance of the contract, the
purchaser took no further steps.

11.  Held : Federal Court held that the purchaser
should have made a clear stand as to whether or
not he accepted the repudiation or refused it on
the repudiation of the contract by the vendors.
The Federal Court further held that after the
breach of the sale and purchase agreement by the
vendors, it is not reasonable for a purchaser to
take four years to decide his action. The proper
inference was that he had accepted the
repudiation in the view of the delay of the
purchaser.

12. (c) Decision of rescinding must be
communicated
 Section 67 of the Contacts Act states that the
rescission of a voidable contract maybe
communicated or revoked in the same manner,
and subject to the same rules, as apply to the
communication or revocation of a proposal.
 Sections 3, 5 and 6 of the Contracts Act provide
the rules on the communication and revocation of
a proposal.

13. Perkayaan OKS No 2 Sdn Bhd V
Kelantan State Economic
Development Corp
 Facts : The appellants had entered into an
agreement with the respondents at which point
that the appellants were acknowledged to carry
out logging in a timber concession. By claiming
that the appellants had unexcused failure to do
the agreement by infringing clause 18, inter alia,
by assigning the main agreement to a third party
without the respondents’ written consent, the
appellants were served a notice to terminate the
agreement by the respondents

14.  Held : The Federal Court held that the
respondents’ notice to the appellants to
terminate the agreement was unfinished as the
matters set out were ambiguous and vague. The
notice of termination must contain clear details
for the termination to be effective. The
respondents’ accusation that the appellants had
assigned their rights under the main agreement
to third parties lacked details on the identity of
the third parties. In order to allow the appellants
to admit or to deny, the claim must be
sufficiently particularized. Such an ambiguous
notice did not amount to a legal notice

15. (d) Decision of rescinding is irrevocable
Goh Hooi Yin v Lim Teong Ghee & Ors
Held : A person who has open to him two
alternatives 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 (Haynes V Hirst
(1927) 27 SR (NSW))

16. (e) The right to rescind the contract must
be waived are the principles regulating
the exercise of the option to rescind
Sim Chio Huat v Wong Ted Fui
Federal Court gives the right to the respondent to
choose either action when the housing developer
failed to deliver his deliver the house in according
with to the time they had agreed. In facts on the
case, the respondent had decided to continue the
contract regarding of the breaching of the contract
and conduct it by allowing the delivery dates to
pass. But the respondent required extra work to be
done by the housing developer. So, as the
respondent wish to continue the contract, the time
is no longer important.

17. Effect of rescission
 Section 40 of Contracts Act 1950 has stated the
aftermath caused by the refusal of a party to
comply or perform the contract. It says that
‘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 signed, by
words or conduct, his acquiescence in its
continuance.

18. Choo Yin Loo v Visuvalingam Pillay
It was held that due to the failure of performance
of the contract, the other party of the contract is
entitled in repudiating the contract and claim for
rescission.

19.  Section 54 of Contracts Act 1950 can or should
be read together with Section 76 of Contracts
Act 1950 where both of the provision explains
that any person who chooses to or rightly
rescinds the contract is entitled for compensation
causing from the damage by the failure a party to
perform the contract.
 Section 66 of the Contracts Act 1950 also
explains the obligation of person who has
obtained benefits from the contract that has
become void. It states that, ‘When an agreement
is discovered to be void, or when a contract

20. Rescission under the specific relief act
Starting from Section 34 of the Specific Relief Act,
it provides the circumstances which may determine
or reject rescission:
When rescission may be adjudged or refused.-
(1)Any person interested in a contract 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

21. (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.
(2) When the purchaser or lessee is in possession of
the subject matter, and the court finds that his
possession is wrongful, the court may also order
him to pay to the vendor or lessor the rents and
profit, if any, received by him as possessor.

22. conclusion
 Rescission for breach occurs when there is a
repudiation or fundamental breach and at the
same time the rights to elect to terminate the
contract is given to the innocent party.
 There must be a valid contract and serious
breach that goes to the root of the contract for
“rescission for breach” to occur

23. references
 Contract Law in Malaysia (Student Edition),
Cheong May Fong (2015)
 Contracts Act 1950, International Law Book
Services (2014)
 Nicola Mallett (28 Feb 2012), Contractual
remedies: the different outcomes of rescission
and repudiatory breach, retrieved from
http://www.lewissilkin.com/Journal/2012/Februar
y/Contractual-remedies-the-different-outcomes-
of-rescission-and-repudiatory-
breach.aspx#.VnNoKPl97IU.

24. THANK YOU