Contract and Tort Law

2A) Fact and issues Entertainment Sdn Bhd rented the Very Lucky plaza hall for the pageant for RM500,000 and they also paid the deposit of RM100,000.The hall was old and dilapidated so Wan asked to touch up the places and it cost Very Lucky RM 50,000.However, a faulty wiring caused fire and burn down The Very Luck Hall. Entertainment is asking to refund the deposit but The Very Lucky Hall refused it and if fact they are asking to pay the balance of RM 400,000. Can Entertainment Sdn Bhd claim their deposit? Law Discharge Contract To Discharge Contract relates to the circumstances in which the contract isbrought toan end. Where a contract is discharged, each party is freed from their continuing obligations under the contract. A contract may be discharged in by Frustration, Specific performance, breach of contract or agreement. 1)Frustration In the law of contracts, the destruction of the value of the performance that has been bargained for by the promisor as a result of a supervening event. Frustration of purpose has the effect of discharging the promisor from his or her obligation to perform, in spite of the fact that performance by the promisee is possible, since the purpose for which the contract was entered into has been destroyed.

For example, an individual reserves a hall for a wedding. In the event that the wedding is called off, the value of the agreement would be destroyed. Even though the promisee could still literally perform the obligation by reserving and providing the hall for the wedding, the purpose for which the contract was entered into was defeated. Apart from a nonrefundable deposit fee, the promisor is ordinarily discharged from any contractual duty to rent the hall.In order for frustration to be used as a defense for nonperformance, the value of the anticipated counter performance must have been substantially destroyed and the frustrating occurrence must have been beyond the contemplation of the parties at the time the agreement was made. Type of Frustration Non occurrence of the event Non-occurrence of a particular event: The doctrine of frustration also applies to cases concerning the cancellation of an expected event. It is possible that the performance of a contract remains entirely possible, but owing to the non-occurrence of an event contemplated by both parties as the reason for the contract, the value of the performance is destroyed Case is Krell v Henry [1903]   Paul Krell (plaintiff) owned a suite of rooms at 56A Pall Mall. Krell left the country for a period of time and left instructions with his solicitor to sublease his rooms however he saw fit. On June 17, 1902, C.S. Henry (defendant) noticed a sign advertising Krell’s rooms for rent during the upcoming coronation of the King of England on June 26 and 27. Henry requested to rent the rooms from Krell for these two days for the sum of seventy-five pounds. Henry sent a letter to Krell with a deposit of twenty-five pounds and a promise to pay the remaining fifty pounds on June 24. Krell agreed to rent the rooms to Henry.

However, the King became very ill before the coronation and the coronation ceremonies were canceled. Henry refused to pay the remaining fifty pounds to Krell because the coronation did not occur, which he claimed was a condition precedent in the contract.

Henry also brought a counterclaim for return of the twenty-five pounds paid as a deposit, but he later withdrew this counterclaim. The trial court held there was an implied condition in the contract, the nonoccurrence of which made the contract unenforceable. The trial court entered judgment for Henry, and Krell appealed. Remedies When a contract has been discharge than neither party can obtain benefit. Some of these all or nothing defects with regard to frustrated contacts have been remedied in Section 15 and 16 of law civil act. If money has been paid, or has become payable, before the frustration than the payer can recover the sums paid, or will cease to be liable for sums payable except insofar as the court can allow payee to deduct, or to claim for out money due to expenses incurred in the performance of the contract. If any party has obtained benefit under the contract a ‘valuable benefit’ as a result of anything done by the other party before frustration than the person receiving the benefit can be made by court to pay such a benefit received so in short If any party obtain a benefits, there is a right to compensate to the other party. Application Applying the above discussion to the facts, the contract between Entertainment Sdn Bhd and The Very Lucky Plaza Hall is frustrated.

The contract was that Entertainment Sdn Bhd was chosen as the organizer for the Miss Jalan Beauty Pageant and then they rented The Very Lucky Plaza Hall for the pageant for RM500,000.Entertainment Sdn Bhd paid the deposit of RM100,000 and Wan asked the management to touch up the places and it cost very luck RM50,000.However, Due to faulty wiring, a fire broke and it burned the down Very Luck Hall. Entertainment Sdn Bhd can claim back their deposit but touch up cost will be subtracted from the deposit. So touch up cost will be subtracted from the deposit so the total amount Entertainment Sdn Bhd will be back is (RM 100,000 – RM50,000) RM50,000. Conclusion Yes they can get their deposit. 2B) Fact and issues Entertainment Sdn Bhd rented the Very Lucky plaza hall for the pageant for RM500,000 and they also paid the deposit of RM100,000.The hall was old and dilapidated so Wan asked to touch up the places and it cost Very Lucky RM 50,000.However, Very Luck rented the hall to another organizer on the same day of the pageant. Does Entertainment Sdn Bhd had to look for alternative venues? Law Discharge Contract To Discharge Contract relates to the circumstances in which the contract isbrought toan end. Where a contract is discharged, each party is freed from their continuing obligations under the contract. A contract may be discharged in by Frustration, Specific performance, breach of contract or agreement. Breach of contract Breach of contract can be defined as failing to perform any term of a contract, written or oral, without a legitimate legal excuse. This may include not completing a job, not paying in full or on time, failure to deliver all the goods, substituting inferior or significantly different goods, not providing a bond when required, being late without excuse, or any act which shows the party will not complete the work (anticipatory breach.) Breach of contract is one of the most common causes of law suits for damages and/or court ordered specific performance of the contract. 1)Section 40 of the contract act 1950. When a party to a contract has refused to perform, or disabled himself from performing his or her 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. Remedies Damages (sec 74(1) of the CA’56) Damages is a form of compensation given to the (innocent) party to put the parties in a position as if the contract has been performed. he loss caused by one person to another or to his property, either with the design of injuring him, with negligence and carelessness, or by inevitable accident. The loss which someone has sustained, and the gain which he has failed to make. He who has caused the damage is bound to repair it and, if he has done it maliciously, he may be compelled to pay beyond the actual loss.

When damage occurs by accident, without blame to anyone, the loss is borne by the owner of the thing injured; e.g., if a horse run away with his rider, without any fault of the latter, and injures the property of another person, the injury is the loss of the owner of the thing. When the damage happens by the act of God or inevitable accident, e.g., by tempest, earthquake or other natural cause, the loss must be borne by the owner. Compensation for loss or damages cause by breach of contract (Section 74) 1)When a contract has been broken, the party who suffers by the breach is entitled to receive, from the party who broken the contract, compensation for any loss or damage caused to him thereby Which the parties knew, when they made the contract, to be likely to result from the breach of it. Losses Types 2 )Monetary loss (loss of profit.) Monetary loss means the amount of money loss or asset by any organization where the money was invested or expected is known as monetary loss. There are 3 type of in Monetary loss which are loss of profit, wasted expenditure and loss of barging and in this it will be loss of profit. Remedies for Breach (Sec 74(1)) When a contract has been broken, the party who suffers by the breach is entitled to receive, from the party who broken the contract, compensation for any loss or damage caused to him thereby Which the parties knew, when they made the contract, to be likely to result from the breach of it. Mitigation of loss In assessing the amount of damages it is assumed that the plaintiff will take any reasonable steps to reduce o mitigate loss. Entertainment Sdn Bhd can try to look for another hall for their Miss Jalan TAR beauty pageant or they can also move the date further for their event. Application Applying the above discussion to the fact that of the case, Very Lucky breached the contract with Entertainment Sdn Bhd by renting the hall to another organizer on the same day of Pageant. The contract was that Entertainment Sdn Bhd was chosen as the organizer for the Miss Jalan Beauty Pageant and then they rented The Very Lucky Plaza Hall for the pageant for RM500,000.Entertainment Sdn Bhd paid the deposit of RM100,000 and Wan asked the management to touch up the places and it cost very lucky RM50,000 but Very Lucky rented the hall to another organizer on the day of the pageant.

Due to the breach of contract by Very Lucky so Entertainment can claim their RM100,000 deposit as well as entertainment Sdn Bhd has to look for another alternative venue and if alternative venue cost more than RM500,000 then Very Lucky has to pay for that extra cost.For example if other venue or alternative venue cost RM600,000 than (RM600,000 – RM500,000) RM100,000 will be paid by Very Lucky. Conclusion Yes Entertainment Sdn Bhd can sue Very Lucky and can claim back their deposit but they have to look for alternative venue. 1) Salomon v Salomon A company is a legal person ie,it is an entity in its own right this the doctrine of incorporation. Recognition that company has legal personality independent of its member was established century by the house of lords in Slaomon v Salmon. The decision of the House of Lords in the Salomon v. Salomon & Co. Ltd. case firmly established the separate legal entity doctrine, also known as corporate personality. The decision meant that legal entities be treated separately from the shareholders and in turn providing them with all the benefits needed to promote economic liberalism. However, the decision in Salomon’s case also enticed criticism from various groups. By treating small private corporations as separate legal entities, the doctrine is said to have encouraged fraud and transfer of legal obligations from the individual shareholders to the corporations. It will be argued, however, that the general effect of the Salomon case is a positive one. The effect of the Lords’ unanimous ruling was to firmly uphold the concept of a corporation as an independent legal entity, as set out in the Companies Act 1862. The 1862 Act created limited liability companies as legal persons separate and distinct from the shareholders.

Lord Halsbury stated that the statute “enacts nothing as to the extent or degree of interest which may be held by each of the seven shareholders or as to the proportion of interest or influence possessed by one or the majority over the others. The Veil of Incorporation It can be explained by the doctrine of limited liability. Most people decide to create a company rather than sole proprietorship or partnership instead due to the liability protection factor.

This is because a “company veil” will be created between the personal asset of members and shareholders with the company. The veil can also be described like a wall that separating between the company with the members. Anton Behr said that “Stand behind the veil of incorporation is the principle of limited liability that the court will use to prescribe that a company will be responsible for all the debts that have been incurred instead of its shareholders or members.” This company veil is one of the main advantages of establishing a company as it will provide a liability protection against lawsuits, creditors. Besides that, members and shareholders can enjoy limited personal liability up to the capital invested in the company when the company winding up. But however, it is crucial to remember that there are however times where there are some exceptional circumstances where the court would ignore the company principle of separate legal entity by the company and strip the company’s members and shareholders limited liability that they suppose to enjoy.

This is what called as lifting veil of incorporation. This legal separation and the concept of a company as an artificial entity means: A) Perpetual Succession A company is not dependent for its legal existence on the existence of members or directors (although there are obvious practical problems with no humans to do the work thus changes in membership(whether through death or otherwise) do not affect the legal existence of the company. B) Ownership of Property The company itself owns its own property, not the members or directors. Macaura vs Northern Life Insurance [1925]   In this precedent, the owner of a timber company insured the timber in his own name, then incorporated the business. Not long after the incorporation, a fire broke out and destroyed the insured property. As such he tried to claim but was held to have no insurable interest in the property anymore: it belonged to the company which had a separate legal personality. This was despite the fact he was the sole shareholder and was also a creditor of the company to a large extent. C) Limitation of Liability Since a company is itself legally the party to contracts it makes, it and it alone can be sue for breach of contract. It follows that members are not liable to creditors for the company debts. Further a member is able to contract with the company (the contact is contained the memorandum and Articles) to limit his liability to contribute to company’s debts. D) Separation of ownership and management Because the company, as a commercial enterprise is distinct from its members as proprietors it must have its own management in the form of a board of directors. E)The company can sue and be sued in its own name The company as a legal person will sue if a wrong is done on it. Individual shareholders cannot generally sue in such circumstances and the decision as to whether the company will sue or not rests with the members collectively in general meeting or with the board of directors. The rule that only the company can sue is known as the rule in Foss v Harbottle but there are some expectation to the rule. The Lifting of the Veil of Incorporation The principle that a company is a person separate from its members and also from the directors and others who mange it can produce unsatisfactory results in particular circumstances.

Company law therefore, recognizes a number of expectations to the principle . In those exceptional contexts the company is treated as in some degree identified with its members or mangers as if there were its distinction between them. Those expectations are described as lifting the veil of incorporations. Statutory Example Minimum Number of Members: S24 CA85 If the number of members of a company (other than private limited company) falls below two and this situation continues for six months, the remaining member , if he is aware of the situation, is liable (jointly and severally with the company) for the company’s debts contracted after the six months. Case Law Example Nationality In times of war it is illegal to trade with the enemy. It may be possible to lift the veil of incorporation so as to impute to a company the same nationality as its member. Daimler v Continental Tyre & Rubber Co [1916]   Facts: The defendant, a UK incorporated company, was owned by five individuals and a company incorporated in Germany. Only one individual was British and he held one share. Held: The plaintiffs need not discharge the debt to the defendants since effective control of the later was in enemy hands and hence to do so would be to trade with the enemy.  

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