(delivering the Judgment of the Court): On March 11, 1986, in the High Court, Kuala Lumpur, the respondents/plaintiffs succeeded in their claim against the appellants /second defendants for breach of contract and obtained judgment for the sum of $90,838.85 as damages; and the sum of $27,480.00 as storage charges together with interest thereon at 8% per annum from the date of judgment to the date of realisation. Their claim against the first defendant was dismissed. The appellants were ordered to pay the taxed costs to the respondents and the first defendant.

The appellants being dissatisfied with the decision of the High Court filed notice of appeal on April 7, 1986. The appeal came before us for argument.

Before dealing with the relevant grounds of appeal, we would like to touch on the relevant facts.

On October 31, 1977, the respondents, a limitted company carrying on business inter alia as suppliers of Lesey clay and having its registered office in Kuala Lumpur entered into a written agreement with the first defendant, one Peter Chi Man Kwong, an accountant carrying on business in Singapore who acted in the capacity of receiver and manager of the property and assets of the Singapore Ceramics Limited which was then in liquidation (the company).

The agreement states:

"It is hereby agreed between the Receivers and Managers, Singapore Ceramics Ltd. on one part and Mr. Lee Sem Yoong trading as Lee Sem Yoong Sdn. Bhd. of the other part as follows:

In consideration of the Receivers and Managers advancing M$30,000 to Lee Sem Yoong Sdn. Bhd., Lee Sem Yoong undertakes to supply a minimum of 9,000 tons of Lesey Clay at M$28.00 per metric ton ex works to the Receivers and Managers. The Lesey Clay supplied should be of consistent quality, within limits. The M$30,000 payable to Lee Sem Yoon Sdn. Bhd. shall be secured by a Banker's Guarantee to be issued by Southern Bank Bhd., a bank incorporated in Malaysia under the laws of Malaysia. Repayment of the loan shall be by way of a deduction of M$10.00 per m/ton and Lee Sem Yoon Sdn. Bhd. shall supply a minimum of 200 m/ton per month, failing which the Receivers and Managers will notwithstanding deduct M$2,000 per month. The Receivers and Managers undertakes to purchase a minimum of 200 m/ton per month, subject to: . . . .

1) quality being consistent within limits.

2) unforeseen circumstances beyond the control of the Receivers and Managers.

The LESEY CLAY shall be supplied 2½ months after the signing of the Agreement and such clay supplied shall not exceed 25% moisture content. Any excess shall be deducted proportionately.

This Agreement is assignable in the event of a sale of the factory and undertaking by the Receivers and Managers. for and on behalf offor and on behalf of LEE SEM YOONG SDN. BHD.SINGAPORE CERAMICS LTD. . . . . Sgd.Sgd. LEE SEM YOONGPETER CHI . .Receiver and Manager . . . . Sgd. (Illegible)Sgd. (Illegible) WITNESSWITNESS." . .

It was accepted by the learned Judge from the evidence that the respondents started supplying clay ex works in January 1978 which was well within the two and a half month period as stipulated in the agreement and continued to do so until April 17, 1978, when the first defendant informed them by letter that the appellants had taken over the operation of the company and requested the respondents to continue the supply of Lesey clay to the appellants.

The letter reads:

"M/s Lee Sere Yoong Sdn. Bhd.,

84 Jalan Kilang,

Kuala Lumpur.

Dear Sirs,

This is to inform you that the Housing & Development Board has formally taken over the operation of the tile factory on 1st April 1978. I shall be pleased if you will deliver the clay as usual to the factory at 134 Hillview Avenue, Singapore 23. However, please indicate the name, Housing & Development Board Tileworks on all your delivery notes and invoices instead of Singapore Ceramics Ltd. As agreed, the Board will commence to deduct $10 per ton for each ton of clay delivered after 1st April 1