QUESTION 3

2. Because of the delay, Encik Basir is unable to let three of the rooms to Zuha, Zaza dan Zaha for a
monthly sum of RM 400.

The issue is whether Encik Basir is able to claim for damages for inability to let three
of the rooms to Zuha, Zaza, and Zaha for monthly sum of RM 400, against Adam due to his
breach of contract to decorate his house.

In Section 74(1) of the Contract Act 1950, it provides that a party who suffers from a
breach of contract is entitled to receive compensation for any loss or damages caused to him.
The provision also provides that the loss or damages must be one that naturally arose in the
usual course of things from the breach, or one which the parties had known would be the result
of the breach when they made the contract. This shows there exists two limbs in which first,
the loss or damages must be naturally arose in usual course of things from the breach, meaning
it refers to losses that are normally expected from a breach in question. Second, the loss or
damages is something that the parties had known when they entered into the contract, would
be the loss if one of them breach it.

The principle laid down in the said provision is similar to the principles in the Common
Law’s case Hadley v Baxendale. In this case, the Court laid down test of remoteness of damage
in two limbs i) when they arise naturally accordingly to the usual course of things from such
breach of contract itself, ii) when they have been in the contemplation of both parties at the
time when they made the contract as probable result of the breach of it. Further, in the case of
Toeh Kee Keong v Tambun Mining Co Ltd, Ong Hock Thye FJ said that Section 74(1) is the
statutory enunciation of the rule in Hadley’s. Section 74(2) provides that compensation is not
to be given for any remote or indirect damage sustained by reason of the breach, showing that
the party that breached a contract cannot be held liable for losses that are too remote,
eventhough it was due to his breach. Thus, in determining whether damages can be claimed or
not, there must be loss caused by a breach of contract and the loss is something that is not too
remote.

In the Hadley’s case, it was held that the losses suffered by the plaintiffs were not the
natural consequence of the defendants’ breach. In this case, the plaintiff’s mill suffered from a
crankshaft breakage and defendants were hired as carriers to send the crankshaft to the makers.
Damages could not be claimed due to loss being too remote. This was also applied in the case
of Victoria Laundry (Windsor) Ltd v Newman Indusries Ltd in which Asquith LJ stated that
the loss that the plaintiff seek to recover must be foreseeable as liable to result from the breach
at the time of the contract. In the case Bank Bumiputra Malaysia Sdn Bhd Kuala Terengganu
v Mae Perkayuan Sdn Bhd & Ors, the Supreme Court did not allow for the claim of loss of
profit for one of the project due to it being too remote.

In addition, Illustration (p) of Section 74 provides that A, who have no knowledge of

B’s mode of conducting business is not responsible to B for loss caused to B although A did
break his promise. This shows that although A breached his contract, A is not liable for the
losses suffered by B due to the breach as the losses is not foreseeable to A. In Illustration (l),
A, who breached the contract, is liable to compensate B for the loss of rent that B would have
received from C if A did not breached his contract, because A is informed of the contract to let
between B and C.

Applying in this case, there is nothing in the fact of the case that shows Adam had any
knowledge regarding the agreement to let the rooms between Encik Basir, Zuha, Zaza and
Zaha. Further, loss of rent is neither something that is naturally arose nor would normally be
expected from breach of a contract to decorate a house as it is not considered common or to be
expected for someone to rent out rooms. It would have been considered to be expected if Encik
Basir had informed Adam regarding the rent agreement he had with Zuha, Zaza and Zaha. Due
to that, although Adam did breached his contract with Encik Basir, Adam may not be liable for
loss of rent as the loss is too remote.

Thus, Encik Basir may not be able to claim for damages for the loss of rent against
Adam due to his breach of contract to decorate Encik Basir’s house.