In the sessions court at Georgetown the respondents/purchasers had sued the appellants/vendors, a statutory body set up by the Penang State Government pursuant to the Penang Development Corporation Enactment 1971 (the Enactment), for the recovery of liquidated damages for breach of contract for late delivery of a dwelling house with interest thereon and costs. It will be more convenient if I refer to the appellants and the respondents as the defendants and the plaintiffs respectively.

More particularly, by a sale and purchase agreement in writing dated 12 December 1979 (the agreement) entered into by the plaintiffs as purchasers and the defendants as vendors, the plaintiffs had agreed to purchase from the defendants, a dwelling house known as 14 Lorong Mahsuri 10, Bandar Bayan Baru, Penang (the dwelling house) at a price of$ 82,364.

The agreement, by cl 11, provided that the dwelling house would have to be completed and vacant possession thereof given to the plaintiffs within 18 calendar months from the date of execution thereof.

By cl 25(b), it was provided that in the event of non-compliance by the defendants with the requirements of cl 11, the defendants would indemnify the plaintiffs by the payment of interest on the purchase price at the rate of 11%pa calculated from day to day commencing immediately from the due date until the date of delivery of vacant possession of the dwelling house.

It was common ground that although according to the terms of the agreement the defendants ought to have completed the dwelling house and delivered vacant possession thereof to the plaintiffs not later than 11 June 1981, the defendants did not do so until 12 August 1982 despite punctual payment in full of the purchase price by the plaintiffs. There was thus a delay of 427 days in respect of which the plaintiffs claimed liquidated damages amounting to $ 10,599 and interest thereon at the rate of 11%pa from 12 June 1981 until the date of realization.

In the court below, the defence had been amended, reamended and further reamended. In the event, the argument there revolved around the following issues:

(1) whether cl 11 was ultra vires the Enactment;

(2) if nay, whether cl 11 had been included in the agreement without

the authority of the defendants and so was not binding on it;

(3) whether cl 11 was inserted by mistake and in ignorance of s 2(1)

(b) of the Housing Developers (Control and Licensing) Act 1966 (

the Act) and, if so, whether it was binding on the defendants;

(4) in any event, if the agreement was found to be binding on the

defen, whether the delay in the delivery of vacant possession of

the dwelling house which had been caused by the contractor, who

by government policy was a bumiputra company, and who by the same

policy, could not have had its services terminated summarily,

constituted circumstances beyond the control of the defendants

within the meaning of the proviso to cl 11 so as to exempt the

defendants from liability.

The learned President found each of these defences to be unsustainable and gave judgment for the plaintiffs as prayed for in the statement of claim and from the judgment the defendants have now appealed to this court.

Before me, it was contended by counsel for the defendants that the learned Presidents interpretation of the relevant legislative provisions relating to authorized expenditure was incorrect and that, had it been correct, she ought to have found that cl 11, and consequently cl 25(b), were ultra vires the powers of the defendants. In particular, it was contended that cl 25(b) which provided for the payment of interest by way of indemnity for late delivery, was neither authorized nor sanctioned by the provisions of the Enactment.

Alternatively, it was contended that if contrary to the defendants primary submission