Business Law

A friend of yours from abroad is considering setting business in Penang. Your friend would like to know the ways in which contractual liability can be discharged and the remedies available for breach of contract. Write a report for your friend, briefly explaining the following matters:

(a) How contractual performance can be discharged by performance?

Discharge by Performance: A contract terminates when both parties perform or tender performance of the acts they have promised. Tender is an unconditional offer to perform an obligation by a person who is ready, willing, and able to do so.

Complete vs. Substantial Performance: When a party fails to completely perform her contractual duties, the question arises whether the performance affords the other party substantially the same benefits as those promised. If so, then the first party is said to have substantially performed.

If a party substantially performs, the contract remains in force and the other party must still perform its duties – although it may be entitled to recover damages for the substantially performing party’s failure to perform fully. If a party fails to substantially perform, the other party’s remaining contractual obligations, if any, are discharged. Time for Performance: If no time is stated in the contract, performance is due within a reasonable time.

As a general rule, performance of a contract must be exact and precise and should be in accordance with what the parties had promised. Section 38 (1) of the Contracts Act 1950 provides that parties to a contract must either perform or offer to perform their respective promises, unless such performance has been dispensed with by any law.

For example: if Ali promises to deliver goods to Muthu on 3 January 2009 on payment of RM3000, Ali is bound t deliver the goods to Muthu on that day and Muthu is bound to pay RM3000.

Case: Re Moore and Landauer [1921] 2 KB 519

There was an agreement for the sale of 3,000 tins of canned fruit packed in...