OUM BUSINESS SCHOOL

MASTER OF BUSINESS ADMINISTRATION

SEMESTER SEPTEMBER/2015

BUSINESS LAW
BMLW5103

NAME

MUHAMMAD ALIMIN BIN MAT REFFIEN

MATRICULATION NO.

CGS01065501

IDENTITY CARD NO.

850822-11-5773

TELEPHONE NO.

019-2028156

E-MAIL

aliminjan@yahoo.com

LEARNING CENTRE

KUALA LUMPUR

Q1 (a) How contract of agency can be created?

Contract of agency that has been created when the contract can be relied upon against or
by, third parties that have had dealings with the agent. In an agency contract there is an
extension, or grant, of contractual powers of the principal to their agent for those purposes
authorized in prior agreement. In simple words, the agent can act on behalf of principal to form
agreement with the third parties.1
Principal (P)

Creates
authority

Contract
directly with

Agent (A)

Deals with

Third Party
(TP)

Two points about contract of agency created:

1. There is an agreement between the principal and agent which creates the agency and
provides the agent with authority. This is simply a contract like any other. It may be
expressed or implied.
2. There is an exercise of that authority by the agent, which leads to the creation of privity
between the principal and third party. A contract made by the agent in the exercise of
their authority with a third party is enforceable both by and against the principal
In Malaysia, the provisions relating to agency law are found in the Contracts Act 1950.2
The agency situation involves three parties:
1. The principal, who passes authority to act to. According to the law, any person who is of
the age of majority, and who is of sound mind (section 136), may employ an agent. It has
been held that a guardian of a minor can appoint him (minor) as agent.
2. The agent, who is a person employed to do an act for another or to represent another in
dealings with a third part. Therefore, an agent in turn through this authority affects the

legal relations of the principal. Any person (whether he has contractual capacity or not
may become agent) can become an agent including minor. However, a person who is not
of the age of majority or of sound mind cannot be an agent so as to be liable to his
principal (Section 137)
3. The third party
The relationship between a principal and agent is akin to that of employer-employee or masterservant but they are not the same. While an employee or servant performs certain tasks for the
employer (subject to the control and direction of the employer), an agents main function is to act
as a go-between and bring about legal relations between his or her principal and third parties
Basically, there are three forms for creation of agency3:
1. Agency by express agreement
2. Agency by implied agreement
- Agency by estoppel
- Agency by holding out
- Agency by necessity
3. Agency by ratification

1. Agency by express agreement

In an express agency there is a legal relationship created between the principal and the agent by
agreement that may be created:
- Orally: Oral appointment is sufficient but a written appointment is the safest method as
it creates a degree of certainty between the parties.
- In writing: For reasons of security an appointment in writing is best.
- By deed: The appointment of an agent under seal (by deed) is necessary:
Where the principal can only carry out a particular transaction by deed; the agents
appointment for such a transaction must also be by deed (Civil Law Act 1956); or

Under a general power of attorney for example, that given to a solicitor by a client can
be under seal but where such power involves signing a transfer of land, the power of
attorney is required to be registered. (Section 210(1) of the National Land Code 1965)
2. Agency by implied agreement
The general rule is that an agreement may be implied where a reasonable person,
examining the conduct and actions of the parties, would conclude that one part had
authorized the other to act as agent and that both parties had assented to the agreement.
Two examples of implied agreement are cohabitation (Presumption of agency) and
partnership.
KGN Jaya Sdn Bhd v Pan Reliance Sdn Bhd
(1996) 1 MLJ 233 (Court of Appeal)
- Agency
by
estoppels
(Section
190)
In
this

Facts: The respondent, who carried on the business of an insurance agent, alleged that it had
appointed the appellant as its sub-agent to sell policies of Merchantile Insurance Sdn Bhd to
However,
thewas
appellant
to pay
after was
the respondent
hadreceive
sent a proposal
letter before
the
public. It
furtherfailed
claimed
that up,
the even
appellant
authorized to
forms,
action.
On
4
January
1993,
the
appellants
solicitors
wrote
to
deny
any
knowledge
on
the
to issue cover notes and to receive premiums from vehicle owners. Between February 1990part
of their
client of
the claim.
The respondent
then caused
a writ totobe
and moved
and
September
1991,
the respondent
sent statements
of account
theissued
appellant
which for
summarythe
judgement
in High
The appellant
defense
which
the
reflected
money which
hadCourt.
been received
by thedelivered
appellantafrom
the in
sales
thatithedenied
had made.
sub-agency. The judge found no triable issues, and he accordingly entered the judgement in
favour of the respondent.
Issue: In arguing the appeal, counsel for the appellant said, inter alia, that the judge was
wrong as: (i) the respondent had not produced any written agreement to support its claim that
the appellant had been appointed as its sub-agent, and (ii) the appellant had prompted asserted
that it was not liable to the respondent when it received the letter before action.
Decision: Dismissing the appeal:
(1): The Law does not require that an agency or sub-agency agreement must be in writing.
Further, Part X of the Contracts Act 1950, which contains the relevant provisions on agency,
does not contain any requirement that the appointment of an agent or sub-agent has to be in
writing. Hence, the appointment may be express or implied.
(2): A party may, by his conduct in all the circumstances of a particular case, be estopped
from asserting the absence of an agency relationship between him and he who claims to be
his principal.
(3): A reasonable man similarly circumstanced as the appellant would, if it were really true
that there had been no appointment of sub-agency as later claimed by it, have, post haste sent
the statements of account back to the respondent and denied any liability. But the appellant
remained silent. The denial by its solicitors letter of 4 January 1993 came long after the
delivery of the account.
(4) It does not lie in the mouth of the appellant to now deny the respondents claim. It would
be plainly inequitable to do so.

setting, a person by his words or conduct has willfully led another to believe that certain
set of circumstances or facts exist, and the other person has acted on that belief, he is
estopped from denying the truth of such statements although such a state of things did not
in fact exist. In the case between KGN Jaya v Pan Reliance, the judge also gave decision
based on agency of estoppel other than express agreement which is not in writing form.4
- Agency by holding out
By holding out means, more than estoppel the principal is bound by the acts of the
agent, if, on earlier occasion, he made other persons to believe that the person doing the
same acts on his behalf is doing with authority. In this situation, positive or affirmative
conduct of the principal is required. According to Fraser and Gibson 2005, for example,
B is a servant of A. B buys goods on credit from C and A pay for them regularly. B buys
the good from C on credit for personal use. A is liable to C for payments.
- Agency by necessity
As relationship between an agent and its principal is more than mere employer-employee
relationship, sometimes, it may arise a situation where a person who is entrusted with
anothers property finds it necessary to do something with it in order to preserve it. In this
case, which happens in extraordinary circumstances, a person may be compelled to act
without requiring the consent or authority. Even if there is no contractual agency, the
relationship of principal and agent is usually consensual. For example, a truck driver
carrying perishable goods who finds that the freezer units has broken down in the middle
of nowhere could bind the employer if the only way to save the cargo is to have
emergency repairs carried out on the freezer.
However, something to keep in mind is that this type of agency is not without certain conditions.
Actually, there are four criteria that must be fulfilled before such an agency can arise:

There must be a genuine emergency; (1)

It must be impossible or extremely difficult to get the principals instructions; (2)
The person must be entrusted with anothers property;
The agent must act bona fide in the principals interests, and not merely for their
own convenience. (3)5

In
Great Northern Railway v. Swaffield (1874) LR 9 EXCH 132
Facts: A racehorse was consigned by rail to Mr. Swaffield at one of the plaintiffs railway
stations. Mr. Swaffield was not at the station when the horse arrived. The railway did not have
his address or phone number so there was no way they could get in touch with him to tell him
it had arrived. As the horse could not be kept at the station, it was sent to a stable. The railway
paid for its care until Mr. Swaffield arrived to pick it up. When they sought to recover the
expenses for the upkeep of the horse Mr. Swaffield refused to pay.
Issue: Would the railway company have been in breach of their duty of care as a carrier, if
they have failed to take care of the horse?
Decision: The railway company were agents of necessity. There was a genuine emergency, it
was impossible to get in touch with the owner of the horse after being entrusted with his
property and by feeding the horse the railway was acting bona fide in the best interests of Mr.
Swaffield.
Malaysia, agency of necessity is covered under section 142 of the Contract Act.
Conditions (1) and (3) above are requirements under section 142 which speaks of an
emergency and the need for the agent to act as a person of ordinary prudence, while
condition (2) is stipulated by section 167. Apparently, in view of the above conditions,
and modern day technological advances in global communications, this type of agency
could arise at the present time only in very exceptional circumstances, if at all.
However, if instructions could be obtained from the owner of the goods, then condition
(2) could not be satisfied and agency of necessity could not be pleaded as in the case
below.6
Springer v Great Western Rail Co (1921) KB 257 (Court of Appeal)
3. Agency
by
ratification
In
this

Facts: S, in Jersey, had sent consignment of tomatoes to London. They arrived at Weymouth
three days late and owing to a railway strike, a further two days delay occurred in unloading.
They were found to be in poor condition and to minimize the loss, the railway company
decided to sell them local.
Held: The court held that the railway company was liable for the loss, as Ss instructions
could and should have been obtained when the condition of the tomatoes was discovered.

type of agency, the principal is given a chance to either ratify the transaction or reject it.
It happens when the agent has acted without the principals authority, but nevertheless
appeared to act on behalf of a principal. Thus, if the principal adopts the transaction, he is
said to be ratifying the act and thus, assuming the benefits and burdens from the time the
agent acted. By ratification, the relationship of principal and agent is created
retrospectively. This situation usually arises when the agent whether authorized or
unauthorized has exceeded their authority.
Acceptance by the agent on behalf of the principal must be complete and unconditional.
If acceptance is conditional (e.g., Accepted subject to the principals ratification), the
acceptance would date from the date of ratification rather than the time of acceptance by
the agent. Provisions on ratification are to be found in sections 149 to 153 of the Act. The
following conditions must all be satisfied or agent will be personally liable:

Purported agency agent must have purported to act on behalf of the principal

(section 149);
The principal must have been in existence or capable of being ascertained, when

the contract was made by the agent: implicit in section 149;

The principal must have the capacity to contract at the date of the contract and

date of ratification: requirement of majority in section 136;

Only the person for whom the agent acted can ratify the contract; implicit in

section 149;
At the time of ratification, the principal must have known all the material

circumstances under which the agent acted for him; section 151;
The principal must ratify the entire contract; he cannot ratify in part and reject in

part: section 152;

Ratification may be express or implied: section 150;
Ratification cannot injure third persons; section 153; and
Ratification must be done within reasonable time

Once the conditions for ratification have been fulfilled, the contract made by A with
TP is as though it was originally made on Ps authority: section 149. Consequently,
the contract is between P and TP and each may sue and be sued by the other. A, who

brought P and TP into a contractual relationship, usually drops out of the picture and
has no rights or obligations under contract, unless he himself is a separate party to the
transaction. Ratification, if effective, is retroactive to the date on which A did the act
as presented by the following case.7

In conclusion, contract of agency can be created by means of:

By Ratification
Express
Express
Bolton
Partners
v.
Lambert
(1889)
41
CH D 295
Agreement
Agreement
Facts: On 1 August L made an offer to buy land from A who in fact was manager and agent of
the property on behalf of BP. A had no authority to act for BP, but on 2 August he accepted
the offer on their behalf. On 6 August L revoked the offer, on 8 August BP ratified the
acceptance of A.
Issue: Can the unauthorized actions of the agent be ratified by the principal?
By Necessity
By Estoppel
By Holding Out
Decision: It was held that a contract existed as ratification related back to the moment when
the contract between A and L was concluded 2 August. Ls attempted revocation on August
6 was too late.

Q1 (b) Differences between actual and ostensible authority under contract of agency
Type of Authority
Actual (Express)
Actual (Implied)
Apparent/Ostensible

Description
Authority conferred by P either expressly or by action
Authority is inferred from the conduct of the parties
P creates the appearance of an agency by words or conduct when in
reality it does not exist

As shown in the above table, types of authority can be divided into three based on the way
authority is conferred to the agent.
Actual authority

It means real authority. It may be in the form of express or implied; section 139 and these
terms are defined in section 140. It is derived from the legal relationship of principal and
agent as a consensual agreement between parties.
Express: Authority given expressly to an agent either orally or in writing, for instance by
a power of attorney, would be actual authority. In the case of authority given by contract,
the exact scope and implications thereof would have to be determined by the application
of contractual principles. If the case is given by power of attorney, the provisions of the
powers of the Attorney Act 1949 may be relevant in considering the nature and extent of
authority.
Implied: In cases where the agency has been created by express agreement but needs may
arise to give business efficacy to transactions. Subsequently, an express power or
authority to do an act would include an implied power to do whatever is necessary or
incidental to achieve the act: section 141. For example, a power to sell, for instance
would also include additional power to execute the necessary documents to effect the
sale. Persons in professions, trades and businesses would also have implied authority to
act in the performance of their usual duties or functions. For example, A constitutes B his
agent to carry on his business of a shipbuilder. B may purchase timber or other materials
and hire workmen, for purpose of carrying on the business. In case below between
Watteau v Fenwick (1893), it was held that the agent, Humble was acting with an
authority that was inherently reasonable for an agent in that position.8

Apparent
(Ostensible)
Authority

Watteau v Fenwick (1893) 1 Q 346

Facts: In this case, the defendants owned a beerhouse that was managed by a man named
Humble (Humble had previously owned the beerhouse). Humble was instructed not to buy
cigars from anyone other than the defendants. In breach of this instruction, Humble bought
cigars on credit from the plaintiff. At the time of the contract, the plaintiff thought that
Humble was the owner. When he discovered the truth, he sought payment from the defendant.
The defendant resisted on the basis that Humble had no authority to bind him to the contract
as he had breached his instructions not to purchase cigars from anyone except the defendant.
Decision: The defendant was liable because it was within the usual authority of the manager
of a beerhouse to be able to buy cigars from any source. The fact that Humble was instructed
not to do so was irrelevant, since the plaintiff was unaware of this restriction. The defendant
was entitled to rely on Humbles usual authority.

In contrast to actual authority, there is no authority at all in part of A but P is bound by the
acts of A anyway if P makes it appear (hence apparent) to TP that A has authority. This
appearance of authority of A comes about by the words and/or conduct of P which
mislead TP into thinking that A in fact has authority. In these circumstances, if A makes a
contract with TP without actual authority or in excess of actual authority, P will be bound
by the contract: section 190. It is also known as agency of estoppel or holding out as
discussed earlier.
Despite the quite winding explanation, it can happen in some circumstances in our daily
lives. For example:

A former partner whose cessation as partner has not been made known to TP.
An agent whose cessation as partner has not been made known to TP.
An agent whose agency has been terminated, but TP has not been notified.
An example of authority through agency of holding out is:
A person who has not been appointed as A as such. If TP then enters into a contract with
A in belief that A in fact has authority because of holding out, the contract will be binding
on P.

As in the case below, even if the director K, did not have actual authority, the architects
found that he was acting in relation to the companys property as he was authorized by the board,
were induced to believe that he was authorized by the company to enter into contracts on behalf
of the company and thus, became liable.9
Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd (1964) 2 QB 480

Differences
Authority
Types
Principal

Facts: In this case, a company which used to deal in real estate had four directors but there
was no managing director. K, to the knowledge of the company, acted as its managing
director withoutActual
ever being appointed as such. KOstensible
instructed (Apparent)
a firm of architects to obtain
Has
real
authority
No
authority/ in
planning permits and do certain other related work. real
Subsequently,
theexcess
company refused to
pay the architects charges on the ground that it had
not authorized the work and was thus not
of authority
Ks principal. 1. Express 2. implied
1. Estoppel 2. Holding out
Consensual agreement
No consensual agreement
Held: K had apparent authority to act on behalf of the company and therefore, the company
between principal and agent
was held liable.between principal and agent

2. Remedies available in Malaysia for breach of contract.

A remedy is referred to the method by which an injured party enforces a right or corrects
a loss. The remedies available to the injured party will depend on the nature of the breach
and the results will differ between the parties. The commonest remedy for breach of
contract is an award of damages as in the case under my study. The case was reported in
Malayan Law Journal reports/2013/Volume 10/Dr Mohd Adnan bin Sulaiman v
Kumpulan Perubatan Johor Sdn Bhd (2013) 10 MLJ 781 19 September 2013.10
In this case, the breach of contract amounts to damages of prospective losses. In this situation,
the damage by the plaintiff is difficult to assess. The plaintiff claimed that the defendant, by
breaching the contract, prevented him from doing something that may or may not have enabled
him to make a profit or avoid a loss. Therefore, the damage is prospective or speculative in that
it may or may not have eventuated. The courts have not allowed the difficulty to assessing
damages in such situations to prevent the award of damages. As the case mentioned above, in
addition to actual loss, damages may be rewarded for perspective loss.
The federal court approved the principle established in Chaplin v Hicks.11

In this case,
she was
entitled for
her loss of
chance to
gain
employment.
According to
Vaughan

Chaplin v Hicks (1911) 2 KB 786; (1911 13) All ER 224

Facts: Hicks was an actor and theatrical manager. He advertised a beauty competition in
which newspaper readers were to select 50 young ladies from whom he would then interview
to select a final 12 who would be provided with theatrical engagements. Chaplin was one of
the 50 selected and was promised an interview. Through Hicks breach of contract, she was
not given a reasonable opportunity to attend the interview and was not present when the final
selection was made. She sued. Hicks argued that she could only be entitled to nominal
damages as she had had less than a one in four chance of being selected anyway.
Held: She was awarded 100 damages. Although it was problematical
whether she would have been selected, the possibility had to be
considered and she was entitled to be awarded damages on that basis.

Williams LJ: the fact that damages cannot be assessed with certainty does not relieve the
wrongdoer of the necessity of paying damages for his breach of contract."

For the injured parties to recover damages, they must follow certain principles based on these
five steps:

Step 1: Breach
The injured party has first to establish that there has been a breach. That is the other party to the
contract has failed to complete what has been agreed in the contract. In the case of Dr Mohd
Adnan bin Sulaiman v Kumpulan Perubatan Johor Sdn Bhd, the court held that plaintiffs had
established a breach of the JVA by the defendant. The setting up of the new hospital to compete
with Penawar Hospital (PH) was contrary to the spirit and objective of the agreement and
constituted a fundamental breach. The conflict of interest was so obvious and the competition
between PH and the new hospital would have been on unfair terms as the defendant, being a
shareholder in PH, was privy to all confidential information on PH which could be used to its
advantage.
Step 2: Causation
The plaintiff must first prove that the loss or damage which they have suffered is a consequence
of the defendants breach. That is, the loss or damage would not have been suffered but for the
defendants breach.
Step 3: Remoteness of damage
The court will only be interested in those losses reasonably related to the contract. Losses that
are too far removed from the wrongful act are regarded as too remote from breach and are
irrecoverable. The rule of Hadled v. Baxendale indicates that there are two types of loss for
which an injured party can claim:

Loss occurring from the breach of contract in the usual or normal course of things; and
Loss arising from special or exceptional circumstances where such loss was made known
to the offending party at the time the contract was entered into.

In the case of Dr Mohd Adnan bin Sulaiman v Kumpulan Perubatan Johor Sdn Bhd, the
plaintiffs and the defendant were in a fiduciary position as between themselves. They had a
contractual obligation under the JVA to prosper PH and not to act to its detriment. That
obligation was sacrosanct and anything done to contrary by either party violated that obligation.
Thus, the defendants breach causes direct loss to the plaintiff and the loss would not have
suffered but for it. The detrimental effect to PH of the establishment of the new hospital did not
take long to rear its head. The new hospital has lured three out of the 12 consultants of PH to new

hospital. As a matter of fact they were immediately offered jobs in the new hospital upon their
resignations from PH. Thus, step 2 & 3 are fulfilled.
Step 4: Amount of damages
The general principle is that an injured party should be put in a position they would have been in
had the breach never occurred. The injured party must be able to show that they have suffered
loss, if they are to recover ordinary damages. If this cannot be shown, then at best the injured
party will only be entitled to recover nominal damages by proving that the other party did breach
the contract. Court will generally not grant damages for anything other than provable or
economic losses. However, in certain instances the courts allow claims for damages for:

Expectation losses e.g., loss of a commercial opportunity and loss of profit arising from
the loss of the defendants performance; In the above case, the plaintiffs are claiming the
sum that is the maximum amount of damages based on their 70% shareholding in PH.
The amount claimed is based on the Ferrier Hodgson MH Report (the FHMH report)
and the expert testimony of the maker of the report, Andrew Heng who is a chartered
accountant and also incidentally a member of Malaysian Bar. His firm Messrs Ferrier
Hodgson Sdn Bhd is a corporate advisory, restructuring and turnaround company
originally from Australia and has partnering firms all across the globe. He was appointed
by the plaintiffs as an independent advisor to determine the potential losses suffered by
PH due to the breach of the JV agreement. His testimony is that the income statement
forecast for PH was for the year ending 2013 to the year 2029, i.e. a projection of 16
years. His estimation of the potential loss to the plaintiffs based on their 70% share for
that period is a minimum of RM70.486 million to a maximum of RM91.124 million.

However, the court granted minimum damage of RM70.486m to the plaintiffs;

Reliance losses, e.g. where it is impossible to calculate damages but expenditure can be

calculated as a result of relying on the defendants promise;

Anxiety, inconvenience, disappointment; frustration, discomfort, mental distress;
The courts seem to allow recovery of damage by a plaintiff for injured feelings, anxiety,
disappointment and distress in certain situations. For example if there is breach of an
express or implied term that the promisor would provide the innocent party with pleasure,
enjoyment or personal protection, and the failure to do so has caused physical injury or

inconvenience to the plaintiff. It can be difficult to determine the amount of damages to

be recovered by the injured party for a breach. Nevertheless, this is not a ground for
disallowing a claim. The courts will examine all the material in order to arrive at what
they believe is a reasonable approximation of the losses suffered by the injured party.
Step 5: Mitigation of damages
Mitigation is meant to minimize the loss; whether it be anticipatory or actual breach, it is the
responsibility of the injured party to take immediate steps to minimize the loss or face the
prospect of having the court reduce the amount of damages that can be recovered. If they fail to
take these steps, the amount of damages they can expect to recover will be reduced.
However, the burden of proof is always on the defendant. He/she has to show that the plaintiff
failed to mitigate their losses and this is a question of fact in the particular circumstances.
After fulfilling all these steps and it is established that the plaintiff is entitled to
compensation, it will have to be determined what type of damages will be awarded. This
will be determined by the seriousness of the breach and whether the contract has
specified the amount of damages to be paid in the event of breach.
Types of Damages

Nominal Damages
(No actual loss
suffered)

General

Exemplary
(Punitive)

Ordinary
(Usual remedy)

Special

1. Ordinary damages
These are also called compensatory damages which are the usual remedy in contract law.
This is the amount awarded by the court on its assessment of the loss suffered by the
innocent party as a result of the breach. To recover these damages, the plaintiff has to

prove the loss he actually suffered. This point was forcefully made by Lord Goddard in
the case of Bonham-Carter v Hyde Part Hotel Ltd (1948) 64 TLR 177 at 178 where he
observed that plaintiffs must understand that if they bring actions for damages it is for
them to prove their damage; it is not enough to write down the particulars, and, so to
speak, throw them at the head of the court, saying: 'This is what I have lost, I ask you to
give me these damages.' They have to prove it.12
Means of compensation can take two forms:

General damages, which follow as a general consequences from the breach; and
Special damages, which if they are to be claimed, have to be specifically proven
in court. In case of Dr Mohd Adnan bin Sulaiman v Kumpulan Perubatan Johor
Sdn Bhd the plaintiff specifically prove the damages based on the expert opinion
as mentioned previously.

From the above discussion, it can be concluded in the case of Dr Mohd Adnan bin Sulaiman v
Kumpulan Perubatan Johor Sdn Bhd that the remedy for breach of contract is in the form of
perspective special damages because of expectation losses under ordinary damage.

2. Nominal damages

These are awarded where the court feel that the innocent partys legal rights have
been infringed but they have suffered no actual loss.13
Charter v. Sullivan (1957) 2 QB 117
Facts: Sullivan entered into a contract with Charter to purchase a car. Sullivan subsequently
refused to go ahead with the purchase, and Charter sued for breach of contract, seeking the
profit he would have made if the sale had gone through. It was established that Charter would
have had no difficulty in reselling the car at the same price, and that he could have sold every
car of that make he could obtained.
Issue: Was Charter entitled to damages? If so, what sort of damages should he get?
Decision: While there was a breach of contract, Charter was not entitled to ordinary damages
because he could not show any loss, but he was entitled to nominal damages for the breach
(in this case 2)

Nevertheless, the innocent party would need to consider whether it was worth bringing an action
in the first place. The legal costs are high. At the same time, the processes are time consuming.
Sometimes, the cost and time involved far outweigh the compensation received unless the
innocent party was to be rewarded costs and there can be no guarantee that the court will do this.

3. Exemplary or punitive damages

Even though generally rare, the court may award exemplary or punitive damages if it
feels that it should punish the part in default. However, where the breach of contract has
resulted in inconvenience, disappointment or discomfort to the innocent party, the courts
have been prepared to award what are termed aggravated damages for non-pecuniary
loss in tort law.14 For example, in cases involving holiday packages where the facilities
or accommodation have been misrepresented by the travel agent or the person they
represent.
4. Liquidated and unliquidated damages

In liquidated damages, a fixed amount is mentioned in the contract. In this situation, the
parties already agreed beforehand on what should be paid in the event of a breach. The
clause is known as an agreed damage clause. It must be a genuine or bona fide preestimate of actual loss that will flow from the breach. The defaulting party will then have

to pay the amount without the innocent party even having to prove their actual damage,
and without worrying whether it equates to the actual loss suffered. For example, a clause
providing that a building contractor shall pay RM50 for every day beyond the agreed
construction period that a building remains uncompleted.
A problem will a liquated damages clause is that it can be difficult to arrive at a
satisfactory pre-estimate figure. If it is lower than the actual damage or loss
suffered by injured party, they would be held to this figure.
On the other hand, if the figure is too high, the court may decide that the figure is
in fact a penalty rather than a genuine pre-estimated figure and assess the

damage itself.
Unliquidated damages
These are awarded when a plaintiff is unable to assess precisely what should be the
amount of recoverable damages e.g. for pain and suffering, and disappointment. In most
cases no amount is mentioned in the contract and it is left to the court or the jury to
determine the amount that should be awarded.

5. Penalty
In effect this is an amount agreed upon as a security to ensure that a contract will be
performed. It is a threat to ensure performance and is imposed on the weaker party by the
stronger party. If the amount is too high, quite disproportionate to the loss that could be
suffered by an injured party, the courts will not enforce it. The courts are often faced with
the problem of deciding whether the sum is a penalty or liquidated damages. The question
in each case is whether the sum can be seen as genuine pre-estimate of the damages that
will result from the breach or a sum intended to punish the other party in the event of a
breach.
Nonetheless, in Malaysia the distinction between liquidated damages and penalties does not
apply. This presents in section 75 of the Contracts of Act 1950 doing away with the distinction.
In summary, any fixed amount in the contract expressed to be payable in case of breach thereof
are a penalty. The victim of the breach is entitled to receive from the party who has broken the
contract reasonable compensation not exceeding the amount so named. To claim the
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.

Other remedies for breach in contract in Malaysia include:

Type
Rescission

Description
An equitable remedy that entitles the injured party to set the contract

Restitution

aside and restores the injured party to their pre-contractual position.

Means restoration and is biased on the concept of unjust enrichment. D
must obtain a benefit or enrichment at Ps expense and it would be

Equitable remedies
1. Specific

unjust to allow D to keep that benefit of enrichment.

Description
An equitable remedy which is discretionary, directing a person to carry

performance

out their obligations under the contract, and is only used in contract

2. Injunction

actions where damages are inadequate.

An equitable remedy which is discretionary, restraining a person from
breaking their contract of from committing a wrongful act and will not

3. Quantum meruit

be awarded if damages if available.

Arises only in cases of part performance where there is a contract for
goods or services. The party taking the benefit of a breach must pay a

4. Anton Piller

reasonable amount for the work done.

Available only where it can be shown that D has incriminating

orders

evidence, necessary to Ps case, which may be destroyed before

discovery can be made.

Rescission
It is an equitable remedy which is more a right available to an injured party than a remedy
because it does not require the intervention of the court. The effect of a successful application for
rescission is to restore the parties as near practicable to their pre-contractual positions but it does
not cover damages which might flow naturally and reasonably from the injury.

Under section 40 of contract law, rescission is said when a party to a contract has refused to
perform, or disabled himself from performing, his promise in its entirety, the promisee may put

an end to the contract unless he has signified, by words or conduct, his acquiescence in its
continuance. Any non-performance contract of either party will entitle the other party to rescind
the contract.
Rescission may be granted because of mistake, misrepresentation, undue influence, duress,
unconscionability or under Consumer Protection Act 1999. Consumer is entitled to rescind a
contract for the supply of goods for breach of implied conditions as to title, correspondence with
description, merchantable quality, fitness for purpose and sale by sample corresponding to those
that are implied in contracts of sale under Sale of Goods legislation.15
Restitution
It is sometimes referred to as quasi-contract. It is not contractual and does not rely on the
plaintiff suffering loss or damage. Its basis is unjust enrichment (i.e. those situations where it
would be very unfair if the defendant was allowed to retain the money, or the goods or services
without payment). Restitutionary damages are meant to compensate the victim of breach of
contract, not only by putting him in the position he would have been if the contract had been
properly performed but also to punish the contract breaker by making him disgorge some of his
ill-gotten gains to the victim. The English courts have emphasized that restitutionary damages
would only be awarded in exceptional cases when the other forms of damages fail to do justice to
the victim of a breach of contract.
Basically, four requirements must be satisfied for plaintiffs claim to succeed:

The defendant has received a benefit and enrichment;

The benefit was at plaintiffs expense;
It would be unjust to allow the defendant to retain the benefit; and
The defendant has no defences available to them to rely upon;.

For example, in the case of Attorney-General v Blake (Jonathan Cape Ltd Third Party) (2001) 1
AC 268 is authority for the award of restitutionary damages.16
Specific performance
This is a discretionary order granted by the courts directing a person to carry out their
obligations under the contract. It is not generally used in breach of contract unless damages
prove to be inadequate. For example, with the purchase and sales of goods that are readily

obtainable elsewhere, damages would be considered an adequate remedy. This means that
specific performance is available in the following instances:
1.

Where the contract breached is for sale and purchase of land. Section 11(2) of the

Specific Relief Act 1950 creates a rebuttable presumption that the breach of a contract to transfer
immovable property cannot be adequately relieved by compensation in money.
2.

If the subject matter of the contract is rare (e.g. one of a few antique cars) or unique (e.g.

the Mona Lisa). The reasoning is that damages are not adequate remedy because they will not
place the innocent party in the position he would have been in but for the breach (i.e. in
possession of subject-matter).
3.

Exceptional circumstances where damages would not be an adequate remedy.

Limitations of specific performance which is embodied in the Specific Relief Act 1950.

Section 20 provides that the following contracts cannot be specifically enforced.

1.

A contract for the non-performance of which compensation in money is adequate.

2.

A contract the performance of which requires the constant supervision of court.

3.

A contract of personal service.

4.

Where the circumstances under which the contract is made are such as to give the

plaintiff an unfair advantage over the defendant, though there may be no fraud or
misrepresentation on the plaintiffs part.
5.

Where the performance of contract would involve some hardship on the defendant which

he did not foresee, whereas its non-performance would involve no such hardship on plaintiff.
6.

Where the plaintiff could not recover compensation for breach of contract.

7.

Where the plaintiff has become incapable of performing, or violates any essential term of

the contract that on his part remains to be performed

Finally, specific performance is not available where there has been an undue delay in
seeking it. This is from the fact that equity aids those who are vigilant in the defence of their
rights, not those who sleep on their rights.

Injunction
It is a discretionary court order. Unlike specific performance, this is a court order
restraining a party from breaking their contract or from committing a wrongful act (order of
prohibiting performance) and will not be awarded if damages are an adequate remedy.
It may be:

Prohibitory, preventing the breach of contract;

Mandatory, requiring a person to perform some contractual obligation; or
Interlocutory, where it freezes the status quo between the parties until the dispute can be
heard by the court. The applicant has to satisfy the court that they have a prima facie
chance of success.
As an injunction aim at enforcing a negative promise in an agreement, it can be enforced
even if the contract is one involving personal service and so it can be an indirect way of
ensuring performance of a contract of personal services.

Mareva injunction
It prevents the defendant from removing or disposing of any assets in the jurisdiction
until the court makes a decision (Freezing order). As a result of its potential to seriously interfere
with the defendant legal rights, a plaintiff must be able to establish that:

The defendant has assets that are in the courts jurisdiction;

There is a real risk that the defendant will remove or get rid of any assets before

judgement; and
The plaintiff can establish a substantive cause of action such as claim for damages.

Quantum meruit
It means as much as he has earned and only arises in cases of part-performance. The
contract may be discharged by breach, but where the contract is for goods or services, there is
new implied contract by law on the party taking the benefit that they will pay a reasonable
amount for the quantum or portion given. It is not available for party in breach.
It can arise:

Where the defendant has prevented a plaintiff from carrying out the remainder of their

contractual duties;
Where the parties cannot agree on payment; and
Where the parties agree on payment for the part performance but not the actual amount.

The court can make an award on the basis of what is deserved. If the contract was entire and
the plaintiff was not prevented from performing, or there was no free and willing acceptance
of partial performance by the defendant, the defendant may take the benefit.
Anton Pillar order
Lastly, this type of order happens in exceptional circumstances where it can be shown
that the defendant has incriminating evidence in their possession, which is necessary to
plaintiffs case and which may be destroyed before a court order for discovery can be made.17
This
order
function like
a search
grant
conferred by
the court to
search
agents
premises but

Anton Piller v. Manufacturing Processes Ltd (1976) CH 55

Facts: The Anton Piller company was under the belief that one of its agents was supplying
confidential information to one of its competitors. They believed that the agent had
documentation in their possession that would prove their breach. However, they were
concerned that a subpoena would give the agent advance warning of their intentions and that
any relevant documents would then be destroyed.
Issue: Could the company obtain an order that would enable them to enter the agents
premises to inspect the documents and remove or copy the relevant ones?
Decision: As there was a strong prima facie case of infringement which could cause damage
to the applicant, and clear evidence that the defendants had incriminating material in their
possession which they would destroy, the court granted them an order.

the power is
not without limitations. It cannot be misused to find new evidences.
Overall, remedies for breach of contract can take many different forms based on which
angle the court saw it and also the nature/content of the contract. Knowing this, the terms of
contract must be definite and clear especially in equitable remedies because equity cannot be
expected to enforce either an invalid or one that is so vague in its terms. It would be unjust for a
court to compel the performance of a contract according to ambiguous terms interpreted by the
court since the court might erroneously order what the parties never intended or contemplated.

Lastly, I would like to stress here that businesses are built on trust. Therefore, any cases of
breach of contract should be taken seriously and dealt ethically by the parties involved.
References:
1. Gibson, A. Fraser, D. (2005). Business Law (2nd Editiozzn). Forms of business owner ship:
Agency, page 489
2. Baksh, A.M, Arjunan, K. (2014). Business Law in Malaysia (2nd Edition). Chapter 20:
Elements of agency law, page 567
3. Kapoor, N.D. (2013). Elements of Mercantile Law
4. http://graguraman1.blogspot.my/2010/08/law-of-agency.html
5. http://swarb.co.uk/great-northern-railway-co-v-swaffield-1874/
6. http://www.lawteacher.net/free-law-essays/contract-law/determining-whether-an-agency-inthe-legal-sense-exists-contract-law-essay.php
7. https://indiancaselaws.wordpress.com/2012/01/15/bolton-partners-v-lambert/
8. http://www.casebriefs.com/blog/law/corporations/corporations-keyed-toklein/agency/watteau-v-fenwick/2/
9. https://en.wikipedia.org/wiki/Freeman_v_Buckhurst_Park_Properties_%28Mangal%29_Ltd
10.http://johor.kehakiman.gov.my/sites/johor.kehakiman.gov.my/attachments/DR_MOHD_ADN
AN_26.07.pdf
11. http://www.e-lawresources.co.uk/cases/Chaplin-v-Hicks.php
12. http://sstieh.blogspot.my/2014/09/malaysia-damages-must-be-proven.html
13. http://www.lawteacher.net/free-law-essays/contract-law/malaysian-contract-law-essay.php
14. http://www.hosseinilaw.com/types-of-damages-in-civil-litigation/
15.https://mystandard.kpdnkk.gov.my/mystandard_portal2014/document/akta_perlindunganpeng
guna1999.pdf
16. https://en.wikipedia.org/wiki/A-G_v_Blake

17. http://www.skrine.com/its-a-raid-march-2004