A valid claim for specific performance requires unequivocal obligations, and alleged collateral agreements must be clearly established to impact main contractual duties.

Abdul Aziz JCA:

1 This was an application by the plaintiffs for summary judgment on their claim for specific performance of an agreement dated 1 August 1997[2004] 3 MLJ 393 at 397 for the sale of shares in a company called Tenaga Ehsan Sdn Bhd ('the company') of which the plaintiffs, the defendant, and another person were the shareholders and directors.

2 It was an agreement in Malay and in effect it was a compendium of two agreements.

3 By cl 2 the defendant agreed to sell and the plaintiffs agreed to buy 1,689,600 shares. Clause 3 fixed the price at RM4,224,000 (RM2.50 per share) to be paid, as to RM422,400 (10%), on the execution of the agreement (which the plaintiffs did pay) and, as to the balance of RM3,801,600, within three months of the date of the agreement, that is by 30 October 1997, which period was subject to an automatic extension of three months, that is up to 31 January 1998, for which interest was payable at the rate of 12%pa.

4 Clause 4 was the crucial clause. In effect it had two parts. The first part provided that the plaintiffs' failure to pay the balance would result in the forfeiture of the first payment of RM422,400 to the defendant and thereafter the agreement shall come to an end. The effect of that part was to entitle the plaintiffs, if they were prepared to forfeit the sum of RM422,400, to refuse at any time to proceed with the purchase the defendant's shares.

5 That was what actually happened. On 26 January 1998, during the period of extension of three months that had commenced on 1 November 1997 but before its expiry on 31 January 1998, the plaintiffs' solicitors wrote to the defendant's solicitors to say that the plaintiffs were no longer interested to purchase the defendant's shares and would not be paying the balance purchase price.

6 To return to cl 4, the second part, which began immediately after the statement that the agreement shall come to an end, provided that the plaintiffs shall sell and the defendant shall buy the plaintiffs' 1,689,600 shares subject, mutatis mutandis, to the same terms as were contained in the agreement. That was why I said that the agreement was a compendium of two agreements, the second part of cl 4 being the formation of a second agreement.

7 Applying cl 3, mutatis mutandis, to the second agreement the defendant had to pay RM422,400 to the plaintiffs upon the formation of the second agreement, that is upon the cessation of the first agreement on 26 January 1998, and the balance of RM3,801,600 within three months of that date, that is by 25 April 1998, subject to an interest-bearing extension of a further three months until 26 July 1998. By their said letter of 26 January 1998, therefore, the plaintiffs' solicitors demanded payment of the sum of RM422,400, saying in effect that the second agreement came into force on the date of the letter, but they gave the defendant seven days within which to pay the sum.

8 When, after the first three months had passed, the defendant had not even paid the sum of RM422,400, let alone the balance, on 4 May 1998 the plaintiffs' solicitors wrote to the defendant's solicitors giving the defendant another four days to pay the first sum of RM422,400.[2004] 3 MLJ 393 at 398

9 The defendant's solicitors, a different firm this time, replied on 14 May to say that the defendant was prepared to proceed with the purchase of the plaintiffs' shares and would be paying the first sum of RM422,400 by the end of June 1998, that is before the end of the interest-bearing extension period of three months on 26 July 1988. The only thing in the nature of a complaint or dispute that the defendant raised through that letter was his failure to understand why he had to pay the sum within four days of 4 May 1998 since the agreement was silent as to the date of payment. Obviously the defendant (or their new solicitors) either did not appreciate the effect of the second part of cl 4 or had not seen or had overlooked the letter of the plaintiffs' solicitors dated 26 Janu