(a) (i) Explain the meaning of discharge of contract by performance. (3 marks)
(ii) Mark rented David’s hall for the purpose of holding a concert. They entered into a contract amounting to the sum of RM250,000. Meanwhile, Mark had sold all tickets to the concert. Two days before the date of the concert, the hall was accidentally burnt down.
Advise David on his obligations towards Mark regarding their contract. (4 marks)
(iii) State the circumstances a minor may be held bound to a contract. (3 marks)
(b) N/A Sale of Goods Act, 1957.
(c) State and explain any two (2) sources of unwritten law in Malaysia. (4 marks)
(i) See link in the question.
(ii) Discharging the contract by frustration.
Similar question was asked in:
MIA QE 2010/9 Q1 (a)(ii) Mark rented David's hall.
MIA QE 2012/9 Q1 (b)(ii) Explain how a contract may be ‘discharged by frustration’.
MIA QE 2011/3 Q1 (a)(ii) Mark entered into a contract with David Oil Palm Plantation.
MIA QE 2013/9 Q1 (b) Haron and Aziz purchase of timber but destroyed by flood.
2011 D02 Q2 Discharging obligation under contract.
LPPEH 2012 D02 Q1 Doctrine of frustration.
This is similar to a case under common law:
Taylor v Caldwell (1863), where discharge of obligation under a contract by frustration.
Due to unforeseen circumstances, much due to act of GOD, the contract was unable to perform and thus David was discharged of his obligation to the contract. This is discharge by frustration, quoting Taylor v Caldwell 1863.
Discharge of a contract by frustration
There may be instances where performance of the contract is impossible and it isn’t the fault of any of the parties that there are no provisions dealing with a circumstance arisen, therefore, allowing the parties to be released from further performance of the contract.
Frustration as a concept can be difficult to define and the test of frustration was stated by Lord Radcliffe in Davis Contractors Ltd v Fareham Urban District Council  AC 696, and approved by the High Court of Australia in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 336.
Lord Radcliffe in reference to the test of frustration stated:
“…frustration occurs whenever the law recognises that without default of either party a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract…it was not this that I promised to do.”
His Lordship further observed the importance in regards to unexpected events in terms of frustration by stating: “There must be as well such a change in the significance of the obligation that the thing undertaken would, if performed, be a different thing from that contracted for”.
Alternatively, there are three limitations to the doctrine of frustration:
- the frustrating event was not caused by either party to the contract;
- the frustrating event must not be one where it was reasonably foreseeable or contemplated by either party;
- the occurrence of the frustrating event was not caused by the party who is seeking to rely on frustration.
For the case of Taylor v Caldwell (1863), the case is describe below from e-lawresources.co.uk :
Taylor v Caldwell (1863) 3 B & S 826
The claimant hired out a music hall in Surrey for the purpose of holding four grand concerts. The claimant went to great expense and effort in organising the concerts. However, a week before the first concert was due to take place the music hall was destroyed by an accidental fire. The claimant sought to bring an action for breach of contract for failing to provide the hall and claiming damages for the expenses incurred.
The claimant's action for breach of contract failed. The contract had been frustrated as the fire meant the contract was impossible to perform.
Model answer by MIA
A contract is terminated if the things that the parties agreed to do is impossible to perform. It can either be at the time the contract was made or when the obligation became impossible to perform after the conclusion of the contract.
Section 57(1) – an agreement to do an act impossible in itself is void. Section 57(2) – a contract becomes impossible.
When a contract becomes impossible to perform, it becomes automatically void.
Effect of a void contract – Section 66, Contracts Act, 1950.
Past Year MIA QE at www.mia.org.my
(iii) See link in the question.
(c) See link in the question.