DISCHARGE BY BREACH

RAMLAH MOHD NOH

Not every breach is capable of

resulting in its discharge
1. Breach of warranty / minor terms:
Contract not brought to an end / discharged

2. Breach of condition / important terms:

Innocent party entitled to refuse further of
obligation, & claims damages

DISCHARGE BY BREACH
Right to end a contract
REFUSAL / DISABILITY TO PERFORM A
CONTRACT
a) before the time for performance is due
(anticipatory breach)
b) at time of performance
Note : If disability is caused by events
beyond control of parties, frustration sets
in

DISCHARGE BY BREACH : S 40
Where a party
(1)refuse to perform or
(2) disabled from performing,
the other party [ innocent party ] has the
i. option to put an end to the contract [ ie to
terminate ]
ii. or rescind or
iii.affirm the contract & seek damages

DISCHARGE BY BREACH : S 40
2. The contract is discharged where D fails
to perform the contractual obligation
breach of essential part of contract /
breach of fundamental term
entitled party to repudiate the contract
Cases:
i. Wong Poh Oi v Getrude Guok
ii. Hong Kong Fir Shippings case

Refusal to perform contract:

Instances of breach
a) before the time of performance is due
> anticipatory breach, or
b) during time of performance itself

BREACH OF CONTRACT
1. Actual Breach
- where parties fail or refuse to properly perform
obligations which have already fallen due

2. Anticipatory Breach
- intimation [ indication ] on the part of the performing
party that he does not intend to perform a contractual
obligation which has not yet fallen due

OPTIONS OF INNOCENT PARTY

Option 1
Entitled to treat it as an actual breach, at the
point of time which the anticipatory breach
occurs.
> i. should communicate intention to guilty
party
> ii. entitled to all the remedies available as if
the contract had already been breached,
including termination [ if anticipatory breach
involves repudiation of contract. ]

OPTIONS OF INNOCENT PARTY

Option 2.
Innocent party may choose to wait until the time
of performance arrive to see if the other party
actually fails to perform his obligation when they
fall due
> known as the wait and see approach

CONSEQUENCES of the wait & see

approach
1. Where the obligation was still not performed when it was due
[ on the contractual date ]
Effect
actual breach has occured
Innocent party is entitled to remedies
ie repudiation and / or damages
OR
2 Where the obligation was subsequently performed by the
performing party on the contractual date
Effect
contract was not breached
OR

CONSEQUENCES

3. Where the intervening event which excuses

performance occurs before the contractual date for
performance
Effect
contract was not breached
no entitlement to remedies for beach of
contract
Contract was discharged by frustration

EFFECT OF BREACH
1. Right to elect
2. Acceptance of the breach
note : Delay in exercising rights would affect injured party
eg. entitlement to specific performance of contract

3. Treat the contract as subsisting

Note : Application of S65 to contracts put an
end to under S40
innocent party to restore benefits received

RESCISSION OF CONTRACT
Rescission of contract by the injured party
a.k.a.
brought contract to an end
termination of the contract
discharged the contract

EFFECT OF RESCISSION
future obligation under the contract has
been ended
Entitlement to damages : S76
Difference from rescission ab initio
( eg in cases of fraud, mistake )
Johnson v Agnew (1980) H/L