Discharge of Contract

APRIL 2008

Issue: Whether the contract can be performed or discharge because of the office was caught on fire?

Principles: The contract becomes impossible to be performed after it has been made.

Section 57(2)

• It is stated that a contract to be executed after it is made, becomes void when the act becomes impossible or unlawful.

• There are few situations in which the contract cannot be performed or can be discharge. One of them is, destruction of a subject matter of the contract- it would frustrated the contract as the contract cannot be performed as contracted.

Section 66

Any party who received benefits from the void contract is bound to restore or refund or compensate to the other party.

Case

Taylor v Caldwell

A music hall was rented by the pf from the df for a series of concert. However the hall was accidentally burnt down before the date of the concert.

It was held that the contract was void due to the frustration.

Application

Mr Jack has entered into a contract to install air condition with Caparo Expert Ltd at the cost of RM10,000. However, before the contract is performed, Mr Jack office accidentally catches fire.

By applying the above principle, the contract between Mr Jack and Caparo Expert Ltd is void due to frustration because the office which is to be install with air conditioning system was no longer existed.Therefore, Caparo Expert Ltd has to refund RM10,000 to Mr.Jack.

Conclusion

The contract was void due to frustration.