In Malaysia, a fundamental breach of contract occurs when one party fails to meet its obligations under the terms of the contract, making it impossible for the other party to continue with the agreement. This type of breach is significant as it can lead to the termination of the contract and may result in legal action.
The Malaysian Contracts Act 1950 governs the law of contracts in Malaysia. Under Section 40, a fundamental breach of contract occurs when one party breaches a condition of the contract, rather than a warranty or an innominate term.
A condition is a fundamental term of the contract and is considered as a crucial aspect of the agreement. Breaching a condition of the contract entitles the innocent party to terminate the contract, seek damages, and pursue legal action against the party in breach.
On the other hand, a warranty is not considered as a fundamental aspect of the agreement, and breaching it does not qualify as a fundamental breach of contract. Breaching a warranty does not entitle the innocent party to terminate the contract but may still seek damages or legal action.
Moreover, an innominate term is a term that is not classified as either a condition or a warranty. Breaching an innominate term may or may not qualify as a fundamental breach, depending on the severity of the breach and the impact it has on the agreement.
In a fundamental breach of contract, the innocent party has the right to terminate the contract immediately, without fulfilling any further obligations under the agreement. The innocent party may also seek damages from the party in breach for any losses incurred as a result of the breach.
However, before terminating the contract, the innocent party should make sure that the breach is indeed a fundamental breach of contract under the law. If the breach is not a fundamental breach, terminating the contract without proper justification may result in legal action against the innocent party.
In conclusion, a fundamental breach of contract in Malaysia occurs when one party breaches a condition of the contract, making it impossible for the other party to continue with the agreement. It is essential to understand the distinction between conditions, warranties, and innominate terms, and their impact on the contract. If you find yourself in a fundamental breach of contract situation, seek legal advice to ensure that your actions are justified and in compliance with the law.