8 Relief or effect S572 provides that the contract becomes void on ground of

8 relief or effect s572 provides that the contract

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8. Relief or effect: S.57(2) provides that the contract becomes void on ground of frustration. This means that the contract becomes void at the date of frustration and not void ab initio. Any performance prior to the date of frustration is valid but any future obligation will be released. s.15(2) of the Civil Law Act 1956 provides for the effects of frustration: “All sums paid or payable to any party in pursuance of the contract before the time when the parties were so discharged (in this Act referred to as “the time of discharge”) shall, in the case of sums so paid, be recoverable from him as money received by him for the use of the party by whom the sums were paid, and, in the case of sums so payable, cease to be so payable: Provided that, if the party to whom the sums were so paid or payable incurred expenses before the time of discharge in, or for the purpose of, the performance of the contract, the Court may, if it considers it just to do so having regard to all the circumstances of the case, allow him to retain or,
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as the case may be, recover the whole or any part of the sums so paid or payable, not being an amount in excess of the expenses so incurred.” Simplifying 3 rules: I. Sums paid before the time of discharge by frustration All sums paid by a party before the time of the discharge of the contract is recoverable. However the other party may retain up to the sum paid for expenses he has incurred. *prepayments II. Any sum is due to pay/ outstanding does not need to pay anymore. All sums payable by a party before the time of the discharge cease to be payable. However, the other party may claim up to the sums payable for expenses he has incurred. *** If A has to pay RM 10,000/- pursuant to the contract before the time of discharge of the contract by frustration. Assuming A has only paid RM6,000/- and B has incurred expenses of RM 12,000/-. B can retain the RM 6,000/- paid, B also can recover the RM 4,000/- payable as he has incurred the expenses, but B cannot recover the balance of RM2,000/-. III. The right to recover a just sum where one party has provided a valuable benefit to the other (I & II stated above are subjected to ‘any reasonable sum needs to be paid if you have received benefits’. )
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s.15(3) provides that where a party has obtained a “valuable benefit” ( other than a payment of money which is covered by s.15(2) ) from the other party before the contract was discharged, the giver of the benefit may recover a sum not exceeding the value of the benefit from the party obtaining it as the court deems just having regard to all the circumstances of the case. In having regard to all the circumstances of the case, the court will have regard to: (a) the expenses incurred by the benefited party - s.15(3)(a) (b) Any sums paid or payable by the benefited party to any other party and retained or recoverable by any other party under s.15(2) ; (c) Whether the circumstances causing the frustration have affected the value of the benefit - s.15(3)(b) ( Scenario: You entered into a contract with the Hotel to hold your wedding dinner at the Hotel. You paid 50% first for the booking and the outstanding is to be paid after the wedding dinner. The Hotel offered a
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  • Winter '17
  • Daniel
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