Remedies in Contract

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REMEDIES IN CONTRACT

Definition of Remedy.

- A cure, a remedy is a redress for a wrong

- Any positive solution to a problem.

The Historical Development-Remedies are either legal or equitable.-Legal remedies are primarily monetary and

the most common in the remedy of

damages.

-Equitable remedies are usually specific and available only at the discretion of the court.

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The objectives of Remedy

- to provide an appropriate relief- to redress a wrong rather than to punish a defendant (civil remedy)

- Therefore in the study of remedies in contract, we are required to

- 1. have an ability to recognize which remedy is appropriate.- 2. have an ability to determine the likelihood of success.- 3. have an ability to seek/choose between alternative remedies- 4. have an understanding of how to calculate damages.

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• It can be said that the principal remedy for a breach of contract is damages.

• The law of damages is rather complex for various reasons:

• i) there are so many different types of contract• ii) there are so many ways they can be broken• iii) there are so many ways in which a breach can cause

financial loss

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• DAMAGES

• Definition of Damages:

‘Damages are pecuniary compensation obtainable by success in an action for a wrong which is either a tort of a contract, the compensation being in the form of a lump sum which is awarded unconditionally and is generally but not necessarily expressed in currency’.

Harvey McGregor

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• The basic principle in relation to contract damages is that there are compensatory.

• “damages are supposed to place the innocent party in the same position that he or she would have been had the contract been properly performed……”

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• DAMAGES IN CONTRACT

• Where a contract has been breached, damages are available as a matter of right.

• The underlying principle of the damage award is to compensate the claimant for his losses, rather than to measure the award by the amount of gain derived by the defendant.

• Damages aims to put the plaintiff as he would have been, if the performance had been rendered as promised, rather than to punish the defendant. i.e to fulfill the plaintiff’s expectation by putting him into as good as position as he would have been in if the contract had been performed.

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7

In British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric Rlys Co of London Ltd [1912] AC 673

Viscount Haldane LC held,

“The fundamental basis of an award of contractual damages is thus compensation for pecuniary loss naturally flowing from the breach.”

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• In the words of Baron Parke in Robinson v Harman (1848) 1 Ex.850 at 855, 15 ER at 365,

• ‘Where a party sustains loss by reason of breach of contract, he is so far as money can do it to be placed in the same situation with respect to damages as if the contract had been performed’

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• A claim for damages arises in circumstances where there has been a failure to perform without lawful excuse, one or more of the obligations (whether condition or warranties or intermediate terms ) contained in the contract.

• Where a contract has been breached, whether serious or not, damages are available as a matter of right to the innocent party.

• The object of awarding damages is to compensate the innocent party’s actual loss but is not to benefit the innocent party. Hence the function of damages is compensatory in nature. Never punitive.

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In Tan Sri Khoo Teck Puat & Anor v Plenitude Holdings

Sdn Bhd [1995] 1 AMR 41

The Federal Court held that the general principle which constitutes the starting point in assessment of damages for the breach of contract is to place a party who has sustained a loss by reason of breach, so far as money can do it, in the same situation as if the contract has been performed.

Parke r in Robinson v. Harman [1843-60]All ER Rep 383 at

385

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• Hence, since the award for damages is compensatory in nature, the burden of proving damages or loss lies with plaintiff.

• The Plaintiff need to prove causation between the defendant’s breach and his/her loss…..also that the loss is not too remote

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• See cases:• 1. Popular Industries Ltd v Eastern Garment

Manufacturing Sdn Bhd [1989]3MLJ 360• 2.Malaysian Rubber Development Corp Bhd v

Glove Seal Sdn Bhd [1994] 3AMR 2407

3.Tan Sri Khoo Teck Puat v Plenitude Holding Sdn Bhd [1995] 1AMR41

4.Letrik BandarHup Heng Sdn Bhd v.Wong Sai Hong[2002] 5MLJ247

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• The Principles Of Assessment

• A contract breaker is required to compensate the innocent party for the loss suffered as the result of the breach…however the contract breaker cannot be pinned with liability for every single loss suffered by the innocent party

• @ limitation factor

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• The Principles Of Assessment:

• 1. Remoteness of Damage

• 2. Mitigation Of Loss

• 3. Date of Assessment

• 4. Taxation of damages

• 5. Contributory negligence.

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• 1.Remoteness of Damage

• The law on remoteness has been laid down in the case of Hadley v Baxendale (1854) 9 Exch 341 then reinstated in Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949]2 KB 528

• See position in Malaysia:• Section 74 Contracts Act 1951

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• Courts have taken into consideration when rewarding awards for damages for breach of contract, the requirements of remoteness and mitigation……because the contract breaker cannot be liable for all losses.

• The function of the principle of remoteness is to control the extent of recovery of kinds and of quantum of loss.

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• The general common law formulation is in broad terms of foreseeability or contemplation of loss.

• These foundations of the remoteness formula for contract were laid in the mid 19th century

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• The rule in Hadley v Baxendale

• Facts: The plaintiff’s mill stopped functioning when a crankshaft broke and the defendants

were hired as carriers to send the crankshaft to the makers in Greenwich. They were informed that the article to be carried was the broken shaft of a mill and that the Plaintiff were the millers. As the result of the delay in delivery, the mill was inoperable for much longer than it would have been without the delay

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• The Plaintiff claimed for loss of profit. The court however held that the loss of profits was too remote and the defendants ….not liable.

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• Alderson B laid down the test of remoteness:

• When two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should first be such fairly and reasonably be considered either arising naturally

• i.e according to the usual course of things

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• Secondly, such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract as the probable result of the breach of contract.

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• In Hadley v Baxendale, the court came to a decision that the test when applied to the facts were not satisfied.

• First Limb : Arising naturally• (losses suffered by the plaintiff were not the natural

consequences of the defendants breach)

• Second Limb: In the contemplation• (the loss of profit was not within contemplation of both

parties, the defendants were not informed that the mill will be inoperable in the absence of the shaft)

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• In Victoria Laundry v Newman Industries

• Facts: The Plaintiff who bought a new boiler for their laundry and dry cleaning business from the defendants but received it 5 months after the contracted date of delivery. The defendants knows that the plaintiff required the boiler for the use of their business.

• The plaintiff claimed for the lost of profit it could have earned during the said period and lost of profit due from a lucrative contract made with the Ministry of Supply.

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• The Court of Appeal held that the plaintiff were entitled to the general loss of profit arising from the defendants delay in delivering the boiler but not entitled to the exceptional loss of profit, it would have made on the contract with the Ministry of Supply.

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• Lord Asquith stated that the two limbs in Hadley v Baxendale can be read as one, focusing much more on the issue of reasonable foreseeability.

• The loss suffered by the plaintiff must be at the time of the contract reasonably foreseeable as liable to result from the breach of contract. In determining what was reasonable by the parties, the court must take into account the knowledge possessed by the parties.

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• The knowledge possessed is of two kinds:

• 1. imputed knowledge

• 2. actual knowledge


• Imputed Knowledge:

• Any reasonable person is taken to know the “ordinary course of things” and consequently what loss is liable to result from the breach.

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• Actual knowledge:

• Where parties actually have knowledge of special circumstances outside the “ordinary course of things”

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• See position in Malaysia:

• Section 74(1) & (2) Contracts Act 1951


• Section 74(1) Contracts act 1950:• When a contract has been broken, the party who

suffers by the breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby which naturally arose in the usual course of things (1st) from the breach, or which the parties knew,(2nd) when they made the contract, to be likely to result from the breach

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• See illustrations for 1st limb :(a), (b), (c) (f) (g) (h)

• See illustrations for 2nd limb: (i) (j) (l)

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• Section 74(2) reinforces the principle of remoteness by providing as follows:-

• Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach

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• Hence, the innocent party seeking damages must show and prove the defendant’s breach caused his loss…

• But it does not mean that the defendant has to assume liability for all losses….

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• Cases:• Bee Chuan Rubber Factory Sdn Bhd v. Loo Sam Moi

[1976] 2MLJ 14, FC• Tham Cheow Toh v. Associated Metal Smelters Ltd

[1972] 1 MLJ 171• Dato’ Soo Lai Sing v. KumpulanSierramas(M) Sdn Bhd

&Anor [2004] 546• Bank Bumiputra Malaysia Bhd Kuala Terengganu v. Mae

Perkayuan Sdn Bhd & Ors [1993] 2MLJ76, SC

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• 2. Mitigation Of Loss

• “The fundamental basis is thus compensation for pecuniary loss naturally flowing from the breach: but this 1st principle is qualified by a 2nd., which imposes on the plaintiff the duty to take all reasonable steps to mitigate the loss consequent on the breach, and debars him from claiming any part of damage which is due to his neglect to take such steps…..” (See Burrows, Remedies for Torts and Breach of Contracts, p 22)

• Read : British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd.

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• In Malaysia, the principle of mitigation of damage is provided in Explanation to Section 74 Contracts Act 1950

• The objective behind this principle is one of policy that encourages the plaintiff to be self-reliant, avoid wastage & losses.

• Also not allowing the defendant to be pinned for all losses.

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• Kabatasan Timber Extraction v Chong Fah Shing [1969] 2MLJ6

• Facts: Appellants had contracted to supply timber to respondent, which was to be delivered at the site where the respondent had erected a sawmill. Three lots were subsequently delivered. The second lot, instead of being delivered at the mill was dumped more than 500 feet from the mill. The respondent purchased timber from elsewhere in substitution of the second lot and claimed for the cost of doing so.

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• Con’t…

• On appeal, the Federal Court decided that the respondent had a duty to take reasonable steps to mitigate its loss. Instead of expending money to purchase new logs, the respondent could have arrange to haul the logs which were lying a few hundred feet away from the sawmill to the sawmill. Damages allowed at High Court RM13,192.41. Federal Court only awarded RM1,000. for approximate cost of hauling the logs to the sawmill.


• The issue always is what would amount to reasonable steps?

• It is a question of fact depending on the circumstances of each particular case.

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• Cases:

• Tansa Enterprise Sdn Bhd v. Temenang Engineering Sdn Bhd [1994] 2MLJ 353

• Malaysian Rubber Development Corp Bhd v. Glove Seal Sdn Bhd [1994]

• Zasalim Development Sdn Bhd v. Lum Siew & Sons Sdn Bhd [2002] 4 AMR 4925

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• 3 main principles of mitigation :

• i) a plaintiff will not be able to recover damages for avoidable losses it should have avoided.

• ii) if a plaintiff avoids loss, damages are not recoverable for that loss

• iii) money spent in mitigating or attempting to mitigate losses is recoverable.


• i) Avoidable Losses

• A plaintiff will not recover damages for loss he should have avoided.

• ii) Avoided Losses

• If a plaintiff avoids a loss, damages are not recoverable for that loss

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• iii) Money spent in mitigation

• Money spent in mitigation or attempting to mitigate losses is recoverable

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• Read these cases:

• British Westinghouse Electric and Manufacturing Co Ltd v. Underground Electric Railways Co of London Ltd [1912] AC673

• Hoffberger v Ascot International Bloodstock Bureau Ltd (1976) 120 SJ 130

• Thor Eagle Maritime Agencies v Innovest Bhd [2009] 6 MLJ 74

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• TYPE OF LOSSES

Loss arising from a breach of contract can be broadly divided into pecuniary loss and non-pecuniary loss.

1.Pecuniary Losses Losses which can be quantified in financial terms such as loss of profit, loss of earnings, cost of repairs/replacements and expenses incurred.

2. Non-Pecuniary Losses Losses which are not economic or financial in nature. Cannot be precisely stated in financial terms such as physical pain and injury to feelings, mental distress and embarrassment.

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• Basic methods of calculating loss :

• (i) expectation loss or loss of bargain basis• (ii) reliance/wasted expenditure• (iii) restitution

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PECUNIARY LOSS

- It is said that the main objective of granting damages is to protect the interest of the innocent party, to protect the innocent party’s expectation of interest.

- i.e to put the innocent party in the position he would have been in had the contract been performed as expected.

- Expectation interest / loss is the income which the innocent party had expected to obtain out of the contract but was loss due to the breach of contract.

- i.e a claim of loss of profit- monetary gains

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• Secondly, the objective of granting damages is to protect the innocent party’s reliance interest.

• Besides the expectation interest, the law also protects the reliance interest of an injured party. Here…the law aims to put the plaintiff in a position he would have been in had he not entered into the contract with the contract breaker.

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• Reliance interest / loss or at times known as wasted expenses. Reliance loss arises where the plaintiff has incurred expenses in preparing to perform the contract which is then wasted….!

• Read : Mc Rae v Commonwealth Disposals Commission (1951) 84 CLR 377(High Court of Australia)

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• A claim for loss of capital expenditure, expenses incurred in preparing for the contract and performing obligations, these expenses are now wasted due to the breach of contract.

• For a claim on reliance interest/loss or wasted expenditure, the innocent party may recover expenditure incurred before or after the contract provided that the expenditure was reasonably contemplated. (must not be too remote)

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• In Anglia Television Ltd, the plaintiffs entered into a contract with the defendant to act in a film which the plaintiff were going to make. However at the last moment, the defendant in breach of contract, refused to act. Since the plaintiff could not find a replacement, they abandon the project. Plaintiff sued for breach of contract. They didn’t claim for loss of profit – no certainty of success of an unmade film. Instead they claim for 2,750 pounds as expenses incurred in the preparation of the film such as engaging a script writer, hiring other actors, scouting for locations

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• In Anglia Television Ltd v Reed [1972] 1QB 60

Lord Dening stated:

If the plaintiff claims the wasted expenditure, he is not limited to the expenditure incurred after the contract was concluded. He can claim also the expenditure incurred before the contract, provided that it was such as would reasonably be in contemplation of the parties as likely to be wasted if the contract was broken.

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• Also……

• Lord Dening stated that the plaintiff has an election, ..he can either claim for loss of profits or for his wasted expenditure ……

• Read : CCC Films (London) Ltd v Impact Quadrant Films Ltd [1961] QB 16

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• Is it possible to recover both expectation loss and reliance loss/wasted expenditure in one judgement?

• In principle, the innocent party has a free choice whether to claim on an expectation or reliance basis. The two type of damages measures are different but related things. Reliance losses measure to positive losses to the innocent party but expectation losses measure prospective gains and profits.

• In Cullinane v British ‘Rema’ Manfacturing Co Ltd [1954] 1 QB 292

the court of appeal held that a plaintiff could not claim both his capital loss i.e. expenditure incurred as well as his loss of gross profits. The plaintiff is required to choose between his two claims.

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• The same principle applies in Malaysia, however, in the case of Heller Factoring Sdn Bhd(previously known as Matang Factoring Sdn Bhd v. Metalco Industries (M) Sdn Bhd [1995] 2 MLJ 153, CA the Court of Appeal granted both expectation and reliance loss. In the words of Mahadev Shankar JCA,

• “The machine was not a standard item which was readily available in the market in terms of specification or price. The proper measure of damages to be awarded to Metalco was a sum of money which would restore Metalco to its status before the seizure of the machine by Matang, i.e. the difference in the price at which it was later resold by Matang plus all the abortive expenditure which Metalco had incurred in transporting and installing the machine in its premises.”

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• Which to claim, expectation loss or reliance loss/wasted expenditure?

• Reverting back to the function or aim of the award of damages is generally to compensate the innocent party.

• The innocent party should be adequately compensated but not over compensated/double recovery.

• (see case of Cullinane v British ‘Rema’ Manfacturing Co Ltd [1954] 1 QB 292

• Also to note is losses must not be too speculative. The innocent party should be able to show certainty.(see case of McRae v Commonweath Disposal Commission (1951 84 CLR 377)

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• The court in the case of CCC Films (London) Ltd v Impact Quadrant Films [1985] QB 16 decided that a

plaintiff claiming for breach of contract had an unfettered choice whether to claim for loss of profits or wasted expenditure.

• Read also, Tan Sri Khoo Teck Puat & Anor v. Plenitude Holdings Sdn Bhd [1995] 1 AMR 41; [1994] 3 MLJ 777,FC

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• Lastly, an innocent party may not claim to recover for wasted expenses when he has made a bad bargain.

• What then is a bad bargain?

Bad bargain is when the defendant can show that the loss is one which the innocent party would have suffered even if the defendant had not breached the contract.

• See case of C & P Haulage v Middleton [1983] 3 All ER 94

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NON- PECUNIARY LOSS

Lord Steyn in Farley v Skinner [2001] 4 All ER 801

“Awards in this case [of non pecuniary damages] should be restrained and modest. It is important that logical and beneficial developments in this corner of the law should not contribute to the creation of society bent on litigation.”

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• The difficulties of verifying genuine claims have caused the courts not to grant damages for non-pecuniary loss.

• Firstly because of the ‘floodgates argument’.• Secondly, the difficulty in assessing and accurately

quantifying the damages to be awarded.

• But non-pecuniary losses may be recoverable when they are within the contemplation of the parties.

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• Damages for non-pecuniary loss may be claimed under various heads:

1. Pain, suffering, loss of amenities and

expectation of life.

2. Physical inconvenience and discomfort

3. Injury to feelings/mental distress

4. Loss of reputation.

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1. Pain, suffering, loss of amenities and

expectation of life.

Often recoverable- i.e. a purchaser of goods may be injured from using or

consuming the said goods by reason of breach of warranty.

See cases: Summers v. Salford Corp[1943] AC 283

Godley v Perry [1960] 1All ER 36

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• The common law permits the recovery of damages for pecuniary loss and for physical discomfort and inconvenience but not for injured feelings that may accompany a breach of contract.

• See cases : Bailey v Bullock [1950] 2 All ER 1167• Watts & Morrow [1991]1 WLR 1421• Farley v Skinner [2001]4 All ER801, HL

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• In Hobbs and Wife v the London and South Western Railway Company (1874-75) LR 10 QB 111

• The court awarded damages for the physical inconvenience suffered by the plaintiff and his family who were set down by the defendant railway co. at a wrong station late at night. They had to walk five miles home in a drizzling rain, in absence of available transport or accomodation.

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• However the court emphasised that the award for inconvenience is strictly confined to “real physical” inconvenience !

• No award for mere inconvenience, annoyance, loss of temper……..

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In Watts & Morrow, the court held that,

“any distress, anxiety, displeasure, tension and aggravation” caused by the breach is irrecoverable.

See also case:

Farley v Skinner.

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• 3. Injury to feelings/mental distress

• Generally, the courts are reluctant to grant non pecuniary losses for injured feelings.

• In the case of Addis v Gramaphone Co Ltd [1909] AC488 stand to be an authority.

• However, courts are now more willing and ready to allow such awards but only in very clear exceptional cases, as in :

• 1. contract is one to provide enjoyment. see (i) Jarvis v Swans Tours Ltd [1973] QB 233 (ii) Abdul Karim v T & R United (S’pore) Pte Ltd[1987]Butterworth’s Law Digest para 949 (iii) James Yu v Raffles Hotel Ltd [1988] Butterworth’s Law Digest para 1182

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• 2. the contract is entered into with the aim to prevent further distress. see (i) Heywood v Wellers [1976] QB 446

• 3. where the plaintiff ‘s distress is a direct consequences of physical loss caused by the breach of contract.

see (i) Bliss v South East Thames Reginal Health Authority [1987] 1 ICR 700 (ii) Hayes & Anor v James & Charles Dodd[1990] 2 All ER 815

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• 4. Loss of Reputation.

• The courts in determining this form of non-pecuniary loss will regard it as the manner society regards the innocent party, not to the innocent party’s injured feelings.

• Examples ;• 1.breach of contract-mismanagement of advertising-

failure to include advertisement in a newspaper.• 2.a bank in breach of contract, refuses to honour

cheque.• 3.failure to supply goods which are not of quality sought

by innocent party’s customers

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• See cases:

(i) Malik v Bank of Credit and Commerce International SA ( in liquidation) [1997] 3 All ER 1

(ii) CCA Holdings Ltd v Palm Resort Bhd. [1998] 2AMR 3354

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• Types of damages

• 1. General Damages• 2. Special Damages• 3. Nominal Damages• 4. Exemplary Damages• 5. Aggravated Damages• 6. Liquidated and unliquidated Damages

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• TYPE OF DAMAGES:

• GENERAL DAMAGES & SPECIAL DAMAGES General Damages:

Damages that flow naturally from the commission of a wrong and which need not specifically pleaded or proven.

Damages that the law presumes to have resulted from the defendant’s breach of contract.


• -Damages that do not need to be pleaded as the law presumes that such damages result from the infringement of a legal right or duty.

• General damages are those losses, usually but not exclusively non pecuniary, which are not capable of precise quantification in monetary terms.

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• Example:

• Anticipated future loss• Damages for pain & suffering. Loss of amenity• Difference between contract price and market

price.• Reasonable expenses incurred.

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• Special damages are losses which can be calculated in financial terms

• “special damages are exceptional in their character, and therefore they must be claimed specifically and proved strictly…”

Lord Macnaghten in Stroms Bruks Aktie Bolag v

Hutchison [1905]AC 51

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Damages that must be specifically pleaded. The court would require the precise amount of pecuniary loss and relevant evidence must be adduced.

Damages which have accrued in the particular situation caused by the breach and which would not customarily flow from all situations of that type.

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N0MINAL DAMAGES

-Nominal Damages are usually of a small sum.

-In the Owners of The Steamship “Mediana” v The Owners, Master and crew of The Lightship “Comet” [1900]AC 113, Lord Halsbury LC stated:

• Essentially, nominal damages affirm that there has an ‘infraction of a legal right….though it gives you no right to any real damages at all, yet it gives you a right to the verdict or judgement because your right has been infringed.


• A small sum of money may be awarded to the plaintiff in the following situation:

• 1. plaintiff suffers no actual loss or fails to sufficiently prove such loss

• 2.plaintiff sustained actual loss, the loss not from the defendants wrongful act but from the conduct of the plaintiff himself

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• In Industrial & Agricultural Distribution Sdn Bhd v Golden Sands Construction Sdn Bhd [1993] 2 AMR 2275

• …the plaintiff’s claim that the excavators had depreciated in value owing to the defendants use of them over a two-month period.

• High Court awarded nominal damages of RM100, plaintiff failed to prove the depreciation.

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Read :1. Bee Wah Plastic Factory Sdn Bhd v Francis Soh Kai

Shuen (b/s Shatin Marketing & General Agencies)[1997] 4 MLJ 545.

2. Tan Sri Khoo Teck Puat & Anor v Plenitude Holdings

Sdn Bhd 3. Loh Ki On v Tanjung Aru Hotel Sdn Bhd [1994] 3 MLJ

766

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• Exemplary or Punitive Damages

• As the purpose of damages in contract is to put the plaintiff in the position he would have been in if the contract had been performed, the defendant ‘s conduct is irrelevant.

• In UK, exemplary damages are no longer available for a breach of contract.

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• In Malaysia however, exemplary damages have been awarded and used to punish a defendant in exceptional situations

• *a breach of promise to marry

• See: Dennis v Sennyah [1963] 1 MLJ95

• * an action to recover a loan• See Dato Abdullah Bin Hj Mohd Hashim v Sharma Kumari [2000] 1

AMR 334


• Aggravated Damages

• In certain circumstances the court may award more than the normal measure of damages, by taking into account the defendant’s motive and conduct……in the case of Huljich v Hall [1973] 2NZLR 270

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• In the case of Huljich v Hall [1973] 2NZLR 270

• “aggravated damages are extra compensation to

the plaintiff for injury to his feelings and dignity caused by the manner in which the defendant acted.

• “exemplary damages are damages in certain circumstances to punish the defendant.

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• Generally it can be said that the defendants motive and conduct are not to be taken into account in assessing damages…in cases for breach of contract, this is because they are too remote unless such damages are within the contemplation of the parties as likely to result from the breach.

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• Liquidated Damages

-A genuine pre-estimated of the actual loss that will be suffered by a party in the event that a contract

is breached.

-A fixed, contractually agreed sum of money which is payable by the defaulting party upon a breach of contract

• Damages are said to be unliquidated when plaintiff is not in a position to quantify his loss in monetary term

•

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• Read Section 75 Contracts Act

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• Section 75 Contract Act 1950

• ‘When a contract has been breached and if a sum is stated in the contract as the amount to be paid in case of such a breach, or if the contract contains any stipulation by way of penalty, the innocent party is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party in breach of the contract reasonable compensation not exceeding the amounts so named or the penalty stipulated for’.


• Occasionally, the sum termed as liquidated damages is far too large to be genuine pre-estimate of the loss and it is actually meant to terrorise the other party into performing his obligation under the contract.

• Hence, the large sum specified is then in a nature of a threat making it too expensive for the other party to breach the contract.

• The common law terms such a sum a “ penalty”

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• In Malaysia, the common law distinction between liquidated damages and penalty does not apply.

• In Linggi Plantations v. Jagatheesan [1972] 1 MLJ 89.

• The effect of section 75:- • The victim of the breach is entitled to receive from

the party who has broken the contract reasonable compensation not exceeding the amount named.

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• In order to claim compensation, the victim has to prove the damage he has actually suffered….the victim may recover the loss so proved but the compensation cannot exceed the sum named in the contract

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• In Selva Kumar a/l Murugiah v. Thiagarajah a/l Retnasamy [1995] 1 MLJ 817 FC

• Both the appellant and respondent, were medical practitioner. Both entered into an agreement in writing whereby, the respondent sold his clinic to the appellant for RM120,000. Pursuant to the agreement, the appellant paid the the respondent RM12,000., upon signing

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• Con’t

• Thereafter paid a further sum of RM48,000. The balance of RM60,000 was to be paid by 15 monthly installments of RM4,000 each.

• However when the appellant had paid up a total sum of RM96,000 towards the purchase price, he refused to pay the remaining six monthly installments

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• The respondent sought to forfeit the RM96,000 by replying on a clause in the agreement which in effect, provided that if the appellant defaulted, all moneys paid to date of such breach would be forfeited absolutely to the respondent as agreed liquidated damages and the agreement will be terminated.

• At High Court, respondent was successfully@ clause was valid and enforceable

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• On appeal it was decided that the words “whether or not actual damage or loss is proved to have been caused thereby” must be given a restricted construction.

• The plaintiff who is claiming for actual loss in an action for a breach of contract must still prove the actual damages or the reasonable compensation in accordance with settled principles in Hadley v Baxendale

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• However, for cases where the court finds it difficult to assess damages for the actual damage as there is no known measure of damages employable and yet the evidence clearly shows some real loss inherently which is not too remote the words in question will apply.

• The instant case falls into category of cases where damages could be proved by settled rules

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• Here, the respondent fail to prove the real loss, he was still entitled to forfeit a reasonable amount the deposit, The sum of RM12,000. was not too large to prevent it from being fully forfeitable.

• The respondent had to refund the sum of RM96,000 less the deposit….RM84,000 to the appellant.

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• Reliance Shipping & Travel Agencies v Low Ban Siong 2 AMR[1996]

• The appellants, who were tour & travel operators appointed the respondent as their tour representative. Pursuant to an agreement entered between the both of them, the employee undertook to serve the employer for a minimum period of 3 years in consideration for the on-the-job training given to him.

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• Under article VI if the agreement, the employee further agreed to pay RM20,000 as agreed compensation to the employer if he failed to fulfill his obligations in the agreement. The employee tendered his resignation after having served only 2 years and 2 ½ months and the employer sued him for the liquidated sum of RM20,000.

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• Court decidedon appeal• A clause in an agreement falling within sec 75

must be subjected to the court’s determination that such agreed damages is reasonable.

• Despite the qualifying words”whether or not actual damage or loss is proved to have been caused hereby” by the Act ….damages alleged suffered must be proved.

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• The qualifying words in Sec 75 are limited to those cases where the court would find it difficult to assess damages for the actual damage or loss.

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• Generally, the meaning of liquidated damages can be referred to a fixed contractually agreed sum of money which is payable by the defaulting party upon the breach of contract.

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“ Osman is a travelling sales representative who regularly uses Ah Meng’s workshop to service his company vehicle. On one occasion he is told that his car will be ready for him at 11 am the next day and he therefore, arranges to visit his most important client Oscar at noon. Osman arrives at the workshop at 11 am to be told by Ah Meng that the service is not yet finished because a mechanic has not turned up for work. The car is not usable. Osman abandons his plan to visit Oscar because of the non-availability of his vehicle. Oscar is annoyed and transfers his customer to another supplier. Osman having lost his most lucrative account is dismissed by his employer. Osman ‘s family suffers the trauma of the drastic reduction in income.”

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• In order to recover damages in Osman’s circumstances, he had to establish that the loss he sustained was caused by the breach. The question is whether the contract breaker is liable for all losses, no matter how indirect or remote, flowing from the breach or just those directly attributable to the breach.

• The courts have adopted the position that where a contract has been breached, the contract breaker is liable for in damages for all loss or damage caused by him provided that the damage or loss arose naturally in the usual course of things from such a breach which parties knew when they contracted. (See Section 74 Contracts Act 1950)

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• LIMITATIONS TO AWARDS OF DAMAGES

• As have been seen the purpose for damages is to place the innocent party in the same position insofar as money ca do, as if the contract had been performed.

• Compensatory damages are subject to limitation imposed by the rules preventing claims for losses which are deemed to be too remote from the breach. This is considering the fact that the contract breaker cannot be pinned with liability for every single loss suffered by the innocent party.

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• LIMITATIONS TO AWARDS OF DAMAGES

• Courts have taken into consideration the when rewarding awards of damages for breach of contract the requirements of remoteness and mitigation, since the contract breaker cannot be held liable for losses , though flowing from his breach of contract, that are too remote.

• The function of the remoteness principle is to control the extent of recovery of kinds and of quantum of loss.

• The general common law formulation is in broad terms of “foreseeability” or “contemplation of loss”.

• The foundations of the remoteness formula for contract were laid in the mid 19th century.

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• The rule in Hadley v. Baxendale

Facts:

The Plaintiff’s mill stopped functioning when a crankshaft broke, and the defendants were hired as carriers to send the crankshaft to the makers in Greenwich. The defendants were informed that the article to be carried was the broken shaft of a mill and that the Plaintiff were the millers of the mill. As the result of the delayed delivery, the plaintiff’s mill was inoperable for much longer than it would have been without the delay.

The plaintiff claimed for loss of profit. The court however held that the loss of profits was too remote and defendant not liable.

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• The rule in Hadley v. Baxendale

• Alderson B laid down the test of remoteness in two rules.

• “Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract, should [first] be such as may fairly and reasonably be considered either arising naturally, i.e according to the usual course of things from such breach of contract itself, or [secondly] such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it

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• The rule in Hadley v. Baxendale• The court came to the decision the test when applied to the facts

were not satisfied.

• First Limb: Arising naturally• Losses suffered by the Plaintiff were not natural consequences of

the defendants’ breach.

• Second Limb: In the contemplation • The loss of profit was not within the contemplation of both parties,

the defendants were never informed that the mill inoperable in the absence of the shaft.

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• In Victoria Laundry (Windsor) Ltd v Newman Industries Ltd

• Facts

• The Plaintiff who bought a new boiler for their laundry and dry cleaning business from the defendant but received it 5 months after the contracted date of delivery . The defendants know that the plaintiff required the boiler for the use in their business. The plaintiff claimed for lost of profit it could have earned during the said period including the lost of profit due to a highly lucrative dyeing contracts made with the Ministry of Supply.

• Court of Appeal held that the plaintiff were entitled to the general loss of profit arising from the defendants’ delay in delivering the boiler but not entitled to the exceptional loss of profit it would have made on the dyeing contract with the Ministry of Supply.

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• In Victoria Laundry (Windsor) Ltd v Newman Industries Ltd

• Lord Asquith stated that the two limbs in Hadley v Baxendale can be read as one, focusing much more on the issue of reasonable foreseeability.

• The loss suffered but the innocent party must be at the time of the contract reasonably foreseeable as liable to result from the breach of contract. In determining what was reasonably foreseeable by the parties, the court must take into account the knowledge possessed by the parties.

• The knowledge possessed is of two kinds :

(i) imputed knowledge

(ii) actual knowledge

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• (i) Imputed Knowledge

• Is the subject matter of the first limb of Hadley v. Baxendale. Any reasonable individual can be assumed to know the ‘ordinary course of things and to be aware of the loss that is liable to result from a breach of contract in the ordinary course. The law will impute or ascribe to every individual, knowledge of the loss that is liable to result naturally or in the ordinary course of things from a breach of contract.

• Whether or not the contract breaker actually had knowledge is irrelevant; as a reasonable person he is assumed to have it.

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• (ii) Actual Knowledge

• The second limb of Hadley v. Baxendale. • Parties may also possess actual knowledge of some

special circumstances which would enable a reasonable individual to foresee extraordinary loss.

• Whether the individual actually possesses it or not , there may have to be added in a particular case knowledge which he actually possesses of special circumstances outside the ordinary course of things of such kind that a breach in those special circumstances would be liable to cause more loss.

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• In Koufos v C Czarnikow Ltd [1969] 1 AC 350

• Facts

• The charterer chartered a ship from the shipowner to carry sugar from Constanza to Basrah. The charterer

had intended to sell the sugar as soon as the ship reached Basrah. Their intention was not communicated to the shipowner and the shipowner did not know about it. However it was shown that the

shipowner knew that there was a market for sugar in Basrah. In breach of contract for charter, the ship deviated and reached Barah 9 days late. During these 9 days the market price for sugar at Basrah fell and the charterer suffered loss.

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• H Parsons (Livestock) Ltd v. Uttley Ingham & Co Ltd [1978] 1 All ER 525

• Facts

• The defendants under a contract supplied the plaintiff a hopper for storing pig food. Due to the lack of proper ventilation in the hopper, the pig food became mouldy and many of the plaintiff’s pigs died from a rare intestinal disease. The hopper was defective and the plaintiffs sued for breach of contract and claimed damages.

• The Court of Appeal held that the defendants here could have contemplated a serious possibility that the pigs might become ill due to the defect in the hopper.

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• Position in Malaysia :

• The position on compensation for loss or damage as a consequence of a breach of contract in Malaysia in provided in Section 74(1) of the Contracts Act 1950.

• Read :• (i) Eikobina (M) Sdn Bhd v. Mensa Merchantile (Far East) Pte Ltd• (ii)Malaysian Rubber Development Corp Bhd v. Glove Seal Sdn Bhd• (iii)Eight Development (M) Sdn Bhd v Antara Steel Mills Sdn Bhd• (iv)Dato’ Soo Lai v Kumpulan Sierramas (M) Sdn Bhd & Anor• (v) Tham Cheow Toh v. Association Metal Smelters• (vi) Bee Chuan Rubber Factory Sdn Bhd v Loo Sam Moi

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• Duty to mitigate

• The common law imposes upon the victim of a breach of contract a duty to mitigate or minimize the losses flowing from the breach. Meaning, the innocent party cannot recover any part of the damages that he could have avoided by taking all reasonable steps possible in the circumstances

• Read : British Westinghouse Electric Co Ltd v Underground Electric Railway [1912] AC 673

• In Malaysia, look at the explanation in Section 74.• Read : (i) Kabatasan Timber Extraction Co v. Chong Fah Shing (ii) Malaysian Rubber Development Corp Bhd v. Glove Seal Sdn Bhd (iii) Esso Petroleum Co v. Mardon

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• Introduction:• A deposit is paid as a security for the

performance of a contract. Should a breach occur and is caused by the payer, then the payee can forfeit the deposit automatically without having to prove any actual loss cause by the breach.

• The rational:• A deposit is a guarantee for the performance of

the contract, if the contract is not performed, this guarantee can be called upon.

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• Meaning of Deposit

• An initial payment made under a contract to show that the payer is earnest ‘intensely serious’ in carrying out the contract.

• A deposit is also known as earnest money.

Lord Hailsham LC said in Linggi Plantations Ltd v Jagatheesan [1972] 1 MLJ 89;

‘A deposit is not merely a part payment but it is also an earnest money to bind the bargain entered into and creates by fear of its forfeit a motive in the payer to perform the rest of the contract’.

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The deposit therefore serves two purpose,

- that is if the purchase is carried out it goes towards the purchase price but the primary purpose for the deposit is to act as guarantee that the purchaser means business.

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Howe v Smith (1884) 27 Ch D 89, 101

• Facts : The plaintiff entered into a contract with defendant to purchase a property.

Plaintiff paid 500 pounds which was stated in the contract to be paid as ‘deposit’ and in part payment of the purchase price. Date of completion of the contract was specified, also in the event of the plaintiff defaulting in complying with the terms of the contract, the defendant was entitled to re-sell and recover any deficiency in price as liquidated damages. Plaintiff repeatedly delayed in paying the purchase price- Defendant, resold property. Plaintiff sued for specific performance.

Court of Appeal Held : Plaintiff not entitled to specific performance and on the issue of deposit, it

was a guarantee for the performance of the contract since the plaintiff defaulting in performing his contractual obligations he had no right to a return of the deposit.

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• In Guna Sittampalan & Anor v. Aik Hua Properties Sdn Bhd [1989] 2 MLJ 162

The court held that as a general rule, where money is deposited with either contracting party on the formation of a contract, prima facie, it will be interpreted as a security for performance, and hence be forfeited if the depositor in breach of the contract fails to perform his side of the bargain.

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Meaning of part-payment:

• An installment towards the contract price, unlike deposits part payments cannot be forfeited automatically upon a breach of contract. The innocent party will have to return these payments or installments to the party in breach but the former is entitled to sue the latter for any losses suffered as a result of the breach of contract.

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• In Mayson v Clouet [1924] AC 980

• A contract for sale of land was entered into between a vendor and a purchaser. The contract provided that a deposit should be paid immediately. It further provided that two installments of cash, being 10% of the rest of the agreed price should be paid at certain dates and that the balance of the price should be paid within 10 days of the production of a certificate of completion for certain buildings upon the land. It was provided also that in the event the purchaser failed to comply with the conditions of the contract his deposit might be forfeited and the land resold.

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• The purchaser paid the deposit and the two installments but defaulted in paying the balance of the price at the stipulated time. The vendor rescinded the contract. The purchaser sued to recover the installments paid

• The Privy Council decided that notwithstanding the purchaser’s default in complying with his obligations under the contract , he was entitled to recover the installments which he had paid to the vendor. This is because the contract had distinguished between the deposit and the installments and provided for a forfeiture of the deposit only.

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• In Dies v British & International Mining & Finance Corp[1939] 1KB 724

• The defendants contracted to sell to one Q certain rifles and ammunition for a total sum of 270,000 pounds. The contract provided that if the performance of the contract became impossible, the defendants will refund Q the whole of the payments made by the latter with the exception of the sum of 13,500 which was to remain with the defendants’ property by way of liquidated damages to compensate the defendants for their expenses, disbursements, trouble and care. Q paid 100,000 pounds but thereafter, in breach of the contract neither completed the payment of the purchase price nor took delivery of any rifles.

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• The defendants elected to treat the contract as at an end. Q then sued to recover the 100,000 less 13,500 which Q admitted that the vendors were entitled to retain under the agreement. There was nothing to indicate that the payment of 100,000 pounds was intended or was believed by either party to be in nature of a guarantee or earnest money for the performance of the contract. It was a part payment of the price of the goods sold and was so described.

• The court held that the payment of 100,00 was not in the nature of deposit but was a part payment of the price.

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• The distinction between a deposit which is forfeitable on the purchaser’s default and a part payment which is returnable is not confined for contracts for the sale of land but is of general application.

• Here, Q was held to be entitled to recover the sum of 100,000 pounds subject to the defendants claim to damages for Q breach of contract.

• Where the language used in a contract is neutral, the general rule is that the law confers on the purchaser the right to recover his money and that to enable the seller to keep it he must be able to point to some language in the contract from which the inference to be drawn is that the parties intended and agreed that he should.

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• In Morello Sdn Bhd v Jagues (International) Sdn Bhd [1995] 1MLJ 577

• The Federal court had to decide whether an advance payment was a deposit of a part payment. The court identified a number of factors which may be used to distinguish a deposit from a part payment.

• Crucial to the decision was the intention with which payment was made. If parties had intended the payment to be a deposit forfeitable upon breach by the purchaser, then it is a deposit. On the other hand if they had regarded it as an installment towards the final price, it was a part payment.

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• The reasonableness of the sum stipulated as a deposit in a contract is one of the most significant factors in determining whether or not it is a true deposit. A reasonable deposit would be a sum within the range of 10% of the purchase price.

• A deposit need not necessarily be paid on the signing of the contract. When there is an agreement to accept late payment of deposit does not mean that the promised initial payment lost its character of a deposit.

• The label that the parties attached to the payment “deposit” or “part payment” was important but not conclusive. The court would decide the character of the payment after examining all the facts of the case, including the parties intention.

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• The facts in Morello Sdn Bhd, the appellant entered into an agreement with the respondent to purchase a Jaques crushing plant for RM1,167.000. It was stipulated in the agreement that the buyer was to pay the seller RM116,700 being 10% of the purchase price as a deposit upon signing the agreement and the balance in four subsequent payments. The buyer requested for a few days to pay up the deposit but asked the seller in view of the urgency of commencement, to proceed with the contract, which it did. Buyer later failed to pay the deposit, seller terminated the agreement and sued the buyer.

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• Among the contentions were:

• - initial payment of 10% although expressly stipulated as a deposit in the agreement was not a true deposit and there being no proof of loss.

• The Federal Court held :• -in determining whether money has been paid by way of deposit or

by way of part payment, the court must have regard to the terms of the agreement as a whole and the surrounding circumstances.

• -the effect in law of the contractual obligation to pay a deposit is to vest an indubitable right in the vendor to receive the deposit upon the contract coming into existence. This is because the deposit is given as security for the performance of the contract. When a deposit is forfeited, it represent damages for the vendor for the loss of his bargain.

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• On the issue of unpaid deposit :• the vendor is entitled to sue for the recovery of unpaid

deposit upon termination for breach. Proof of damage is not necessary

• Edgar Jr. FCJ opined that the right to recover of an unpaid deposit or to forfeit a deposit which has been paid allows a vendor to obtain compensation without proving his damage and so there is no duty to mitigate.

• As the sum sought to be recovered was a genuine deposit and the amount thereof reasonable, relief against forfeiture under section 75 of Contracts Act 1950 was not granted.

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• In Sun Properties Sdn Bhd & Ors v. Happy Shopping Plaza Sdn Bhd [1987] 2MLJ 711

Facts : Respondent were to purchase from the Appellants all the shares(RM10 million) in a company. Respondent also paid RM 1 million as a deposit, the contract provided that in the event the respondent defaulted in paying any installments, the appellants will be entitled to ‘forfeit all sums paid by the purchaser’. The respondents failed to pay the first installment of RM4 million on the due date, appellants proceeded to repudiate the agreement and forfeit the RM 1 million paid as deposit. Respondent applied for a declaration that the deposit was illegal, null and void. The trial judge granted the declaration.

On appeal to the Supreme Court, the court decided that the RM 1 million was a true deposit, lawfully and properly forfeited by the appellants. The fact that the amount is RM 1 million did not alter the position since 10% of the purchase price is normally a standard amount put as deposit.

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• In Linggi Plantations ltd v Jagatheesan [1972] 1 MLJ 89,PC

• Vendor and Purchaser executed a sale and purchase agreement of land for the contract price of 3.7 million.

• A 10% deposit was paid and the contract provided that the vendor could forfeit the deposit if the purchaser failed to pay the balance of the contract price.

• The purchaser failed to do so and the vendor forfeited the deposit.

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• The purchaser attempted to recover the deposit and submitted:

• i) the deposit was a benefit under sec.65 Contracts Act• and should be restored.• ii) deposit comes within the meaning of “ any stipulation • by way of penalty” under sec. 75 Contracts Act• Thus entitling the purchaser to recover his deposit

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• Court held : • A deposit or earnest money is part of the purchase price

when the transaction goes forward; it is forfeited when the transaction falls through by reason of the fault or failure of the vendee.

• Also noted is that a deposit is not ‘a benefit received under the contract’ within the meaning of section 65 Contracts act 1950, but a security that the purchaser would fulfill his contract.

• Section 75 had no application to the forfeiture of a deposit.

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• The general rule is that a true deposit can be forfeited by the innocent party upon there being a breach of the contract.. However there are certain instances where the court may in its discretion grant equitable relief against the forfeiture of a deposit.

• In Stockloser v Johnson [1954] 1 AER 630• Dening LJ laid down two conditions before equity can

intervene to prevent forfeiture of moneys paid under a contract: (1)The forfeiture clause must be a penalty( must be of a penal nature in that the sum forfeited must be out of proportion to the damage.(2)it must be unconscionable for the defendant to retain the money.

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• Cases in Malaysia for equitable relief against forfeiture of deposit :

1. Umar Kandha Rajah v. Magness EL[1985] 1MLJ 116

2.Siah Kwee Mow v. Kulim Rubber Plantations Ltd [1979] 2 MLJ 190

3.Chen Chow Lek v. Tan Yew Lai [1983] 1 MLJ 170


• In K Umar Kandha Rajah v.EL Magness [1985]1MLJ116FC

• The vendor in a sale and purchase agreement allowed the purchaser to pay the contract price in instalments. The vendor agreed to deliver the title deeds to the purchaser before full payment was made to enable the purchaser to arrange for subdivision of the land. The purchaser paid the 1st. Installment but the vendor did not surrender the title to the land as agreed.

• Federal Court, allowed equitable relief against forfeited deposit.

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• SPECIFIC PERFORMANCE

• In contract cases, particularly for breach of contract, the primary remedy is damages.

• However, there are certain situations where equitable remedies are available.

• An example of an equitable remedy for a breach of contract is the remedy of Specific Performance.


• Specific performance is an order requiring a party to a contract to perform or complete the performance of his or her obligations in the contract.

• The effect of the order is therefore to put parties into the position they would have been in had the contract been performed and it is the equitable equivalent of damages in respect of the claimant’s expectation loss

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• The granting of specific performance is at the discretion of the court, unlike the remedy of damages, a plaintiff in an action for breach of contract is not entitled to specific performance as of right.

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• Section 21(1) of the Specific Relief Act 1950 provides that the jurisdiction to decree specific performance is discretionary and the court is not bound to grant specific performance merely because it is lawful.

• In exercising this discretion, the court must be guided by principles contained in Chapter 11 of the Specific Relief Act 1950 and judicial principles.

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• Definition

• In Zainab bte Mohamad @ Jenap bte Mahmood v Syarikat Permodalan Johor (PP) Sdn Bhd (in liquidation) Abdul Malik Ishak J stated as follows:

• ‘….specific performance is an equitable relief given by the court to enforce against a defendant the duty of doing what he agreed by the contract to do.’

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• The remedy of specific performance being an equitable remedy is awarded according to the discretion of the court.

• Section 21 Specific Relief Act 1950 provides for the exercise of court’s discretion.

• A party cannot obtain an order for specific performance if he himself breaches his obligation and is not ready and able to perform the contract.

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• Chapter II of the Specific Relief Act 1950 lays down the principles governing the remedy of specific performance.

• Section 11 provides for contracts which may be specifically enforced.

• Section 20 for contract which cannot be specifically enforced. • Besides these statutory provisions there are also several judicial principles

which the court will take into account in deciding whether or not to make an order of specific performance.

We will examine the judicial principles:

• Firstly, specific performance of a contract will only be granted where a valid and enforceable contract exists.

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• Secondly, the contract must be valid in form, has been made between competent parties and is unobjectionable in its nature and circumstances

• Read case of Abdul Rahim bin Syed Mohd v Ramakrishnan Kandasamy [1996] 3 AMR 2725.

Thirdly, parties must have agreed, expressly or impliedly to all the essential terms of the contract.

• See case of Lai Mew Seng v. Cosmopac Sdn Bhd [1998]2AMR 1100

• Fourthly, plaintiff must have performed or had been at all times ready and willing to perform his part of the bargain.

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• We will now explore section 11 of the Specific Relief Act 1950 to examine contracts which may be specifically enforced.

• Section 11 (1) of the SRA gives the discretion to the court to order specific performance in four categories of cases.. These are merely guidelines for the courts to take into account in exercising their discretion.

• (a) when the act agreed to be done is in the performance, wholly or partly of a trust.

• (b) when there exists no standard for ascertaining the actual damage caused by the non-performance of the act agreed to be done.

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• ( c) when the act agreed to be done is such that pecuniary compensation for its non performance would not afford adequate relief.

• (d) when it is probable that pecuniary compensation cannot be got for the non-performance of the act agreed to be done.

• Section11(1) (b) SRA• Generally, specific performance is granted where damages would

not be an adequate remedy to compensate the plaintiff for the losses caused by him by the defendant’s breach of the contract. If it is not possible to assess the losses suffered by the plaintiff in financial terms, it may not be possible to award damages. For example, where there is no available market for the subject matter of the contract and thus no market value for it.

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• See case of Gan Realty Sdn Bhd & Ors v. Nicholas & Ors [1969] 2 MLJ 110.

Facts: The defendants applied to dissolve an ex parte injunction granted to the Plaintiff restraining the defendants from selling their shares in the Oriental Bank. The defendants were the directors of the bank and they had agreed to sell their respective shares in the bank to the plaintiff. The plaintiff claimed inter alia for specific performance

Court held: that since the shares of the bank, a private company, were not available in the open market the court could therefore order specific performance of the agreement for the sale of the shares.

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• Section11(1) (c) SRA

• Provides that when the act agreed to be done is such that pecuniary compensation for its nonperformance would be inadequate, the court would more likely exercise its discretion to grant specific performance.

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When the court grants an order for specific performance, the contracting party who refuses to perform his obligation under the contract will be compelled to perform his obligations.Failure to do so will render him liable for contempt of court for non compliance with an order of court.

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Documents

Remedies in Contract