Chapter 6 - Discharge by Frustration Flashcards Preview

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Flashcards in Chapter 6 - Discharge by Frustration Deck (12)
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1
Q

DISCHARGE BY FRUSTRATION

Overview

A

1) Test for frustration
2) Conditions for a valid frustration
3) Examples
4) Effect of frustrated contracts
5) Frustration & COVID-19
6) Force majeure clause

2
Q

DISCHARGE BY FRUSTRATION

Test for frustration - English courts

A

1) Davis Contractors Ltd v Fareham UDC:

  • w/o default of either party, contractual obligation has become incapable of being performed;
  • the circumstances in which the performance is called for would render it a thing radically different from that which was undertaken by the contract.
  • not just more onerous or expensive to perform.

2) National Carriers Ltd v Panalpina (Northern) Ltd:

  • W/o default of either party, there is supervening event that significantly changes the nature of the outstanding contractual rights.
  • it will be unjust to hold parties to the literal sense of its stipulation in the new circumstances.
3
Q

DISCHARGE BY FRUSTRATION

Test for frustration - Malaysian courts

A

1) Ramli bin Zakaria v Govt. of Malaysia:
- FC adopted test in Davis Contractors and held that the contract is not frustrated.
2) Event must take place after formation of ctt - Goh Yew Chew v Soh Kian:
- The supervening event must takes place after the formation of the contract.
3) Meaning of impossibility - Satyabrata Ghose v Mugneeram Bangur:

  • Impossible does not mean physical or literal impossibility;
  • It means impracticable & useless from the point of view of the object & purpose which the parties had in view;
  • e.g. the supervening event totally upsets the very foundation of the contract.
4
Q

DISCHARGE BY FRUSTRATION

Conditions for valid frustration

A

Guan Aik Moh (KL) Sdn Bhd v Selangor Properties Bhd:

  • the event must one which has no provision provided for in the contract;
  • the event must not one which is a result of the promisor’s action;
  • the event must render the performance of the promise radically different from what was agreed upon;
  • court must find it practically unjust to enforce the original promise.
5
Q

DISCHARGE BY FRUSTRATION

Examples of frustrated or not frustrated contract

A

1) SARS outbreak - Li Ching Wing v Xuan Yi Xiong:
- not frustrated - tenancy contract was long, outbreak was short.
2) Cancellation of coronation - Krell v Henry:
- frustrated - the very purpose of the short-rental is upset due to the cancellation.
3) Depressed economy - Malaysia Land Properties Sdn Bhd v Tan Peng Foo (CA, 2018):
- not frustrated - ups & downs of business are part of the risk of doing business.
4) Unlawful event - Dato’ Yap Peng v Public Bank Bhd:
- Not frustrated - Illegal event which can be made by applying for license. Deliberately did not apply for license amount to self-induced frustration.
5) Onerous or difficult to perform / economic crisis - Tai Kim Yew & Ors v Sentul Raya Sdn Bhd:
- Not frustrated - every businessman should know the risk in commercial venture & must be prepared for any possibilities.
6) Difficult to perform / interpret - Pacific Forest Industries Sdn Bhd v Lin Wen-Chih:
- Not frustrated - contract is not discharged by reason of difficulties to perform or interpret.
7) Injunction - Standard Chartered Bank v KL Landmark Sdn Bhd (No. 1):
- Frustrated - ctt becomes difficult to perform.
8) Compulsory acquisition of land - Lee Seng Hock v Fatimah bte Zain:
- Frustrated.
9) Partial acquisition of land - Wong Siew Choong Sdn Bhd v Anvest Corporation Sdn Bhd:
- Not frustrated if the area affected is small compared to the whole area contracted.
10) imposition of condition on land - Kim Nam Development:
- Not frustrated. Imposition of conditions only makes it difficult, not impossible to perform.

6
Q

DISCHARGE BY FRUSTRATION

Effect of frustration

A

S.57(2)

S.66

7
Q

DISCHARGE BY FRUSTRATION

Frustration & COVID-19

A
  • depends on interpretation & terms of each case.
8
Q

FORCE MAJEURE CLAUSE

Overview

A

1) Meaning
2) FMC & frustration
3) Conditions for FMC
4) Example & application of FMC

9
Q

FORCE MAJEURE CLAUSE

Meaning

A
  • clause used as terms which the parties are entitled to be excused from the performance;
  • upon the happening of a specified event.
10
Q

FORCE MAJEURE CLAUSE

FMC & frustration

A
  • if there is no FMC, parties may resort to frustration under S.57(2);
  • both doctrines excused the performance of parties due to intervening event.
11
Q

FORCE MAJEURE CLAUSE

Conditions for FMC

A

1) Not be construed in isolation - Crest Worldwide Resources Sdn Bhd v Fu Sum Hou:
- FMC will not be construed in isolation; it must be construed as a whole together with other provisions in the ctt.
2) Burden of proof - Intan Payong Sdn Bhd v Goh Saw Chan Sdn Bhd:
- on the party who seeks to rely on the clause to be excused or released from the obligation.

12
Q

FORCE MAJEURE CLAUSE

Example & application

A

Tekno Kota Sdn Bhd v Setapak Heights Development Sdn Bhd:

  • “due to reasons beyond the control of the parties thereto”;
  • when there is FMC, operation of S.57(2) is excluded.