F4 MYS - Remedies for breach of contract

You will be expected to be able to suggest the most suitable remedies in the given scenario and explain why you choose it. Contract Act 1950 provides two types of remedies: damages and rescission while Specific Relief Act 1950 provides two equitable remedies: specific performance and injunction.

Damages
This means the compensation for losses suffered. It will normally be given by the court if the innocent party can prove that he suffered natural loss (loss which is connected to the breach of contract) or if the loss is foreseeable by the wrong party. Substantial damages will be given to compensate most of the loss suffered by innocent party, but if the innocent party suffered little or no loss, then nominal damages (small amount of money) will be given to innocent party. In certain circumstances, exemplary damages may be given in addition to substantial/nominal damages by the court to penalise the wrong party even if no loss has been suffered by innocent party.
In summary, use damages only if the innocent party suffered actual losses or losses which are foreseeable by the wrong party.

Rescission
This means to end the contract and both party returns to original position before contract. In this case, whatever benefit that the innocent party received must be returned to the wrong party and wrong party must do so as well.
Rescission is suitable if the contract is not so important for the innocent party.

Specific performance
This is a discretionary order by the court to request the wrong party to continue performing the contract. Since it is discretionary, court will not always order it as court will have to supervise the performance by the wrong party if order is made. Normal situations that court will order specific performance include:
1. Money is not enough to compensate the innocent party.
2. The amount of actual damage is difficult to ascertain.
3. Court will presume that breach of contract to transfer immovable property cannot be adequately compensated by money.
However court will not grant specific performance if money is enough to compensate the innocent party or it requires a lot of time from the court to follow-up the performance by the wrong party.
In summary, apply for specific performance if the innocent party wishes the performance of the contract to be completed and that money will not be sufficient to compensate the innocent party for non-performance of the contract. A good example will be when the contract is about some rare items or good prices.

Injunction
This is a preventive relief granted again at the court's discretion, this will prevent the wrong party from continuing the performance which will breach the contract. There are two types of injunctions:
1. Temporary injunction - court will grant this when there is no sufficient evidence to confirm that the wrong party's action will breach the contract.
2. Perpetual injunction - court will grant this when it is confirmed that if the wrong party continues the action, he will breach the contract.
In summary, injunction is suitable when the innocent party finds out that the wrong party is going to breach the contract which is important for the innocent party.

Example: Chicken enters into a contract with Duck to sell 100 chickens at RM250 and deliver to Duck in one week time. Duck paid RM50 to Chicken as initial payment and will pay the rest upon receiving the chickens. However as the inflation rate rose, Chicken refuses to perform the contract (RM50 is not returned to Duck) on the ground that RM250 is too less and should be RM400, then requiring Duck to pay RM350. Duck believes that Chicken has breached that contract and he knew there is something wrong with the conduct of Chicken, so he seeks your advice of which remedy is best in this case.
Tips: Damages is not suitable as Duck has not suffered any loss so far, Duck wants the price to be RM250 so rescission is again not suitable. Injunction is only useful if the contract is not yet breached.
Solution:
The issue here is whether Duck can compel Chicken to sell the chickens at RM250 by obtaining the order of specific performance.

According to Specific Relief Act 1950, specific performance is a discretionary court order requiring the party who breached the contract to perform his obligation under the contract. However, court will not grant the specific performance if money is enough to compensate the plaintiff's loss or if it can create great burden to the court, probably requiring long supervision period of following up the performance by the defendant. Court may grant the order if money is not enough to compensate the loss suffered.

In this case, since Duck has not suffered any losses (the RM50 is not considered as loss), damages is not a good remedy to go for. Compelling Chicken to sell 100 chickens at RM250 to Duck is not a complex issue, so it is quite probable that it does not create burden to the court.

In conclusion, Duck is advised that he has a good chance of obtaining the order of specific performance and so he may be able to get the price of RM250 from Chicken, then he will only need to pay another RM200.

The above is a very easy question, so you can easily identify the suitable remedy, however when you face some more difficult scenarios, always think what remedy will benefit the innocent party the most.