Gopal Sri Ram JCA:

[1]This is the plaintiff's appeal against the dismissal of its suit to recover the 10% deposit that had been forfeited by the defendant. The factual narrative may be shortly stated.

[2]On 27 November 1995, the plaintiff entered into an agreement with the defendant (a statutory body established under the Malacca Foundation Enactment 1984). By that agreement, the plaintiff purchased 147.05 acres of land in Bachang, Melaka from the defendant for a sum of RM33,308,589. There is a supplementary agreement of the same date. But nothing turns on it. So I will not refer to it at all in this judgment. It was a term of the agreement that the plaintiff shall develop the land in question and construct commercial, industrial and residential units on it for sale to the public. But the agreement did not specify the community of persons to whom the units may be sold or provide for any ratio of such community.

[3]The plaintiff fulfilled its part of the bargain by paying RM19,985,153.40 as required by clause 2 of the agreement. This represents 60% of the purchase price. The�agreement also required the plaintiff to obtain the approval of the Foreign Investment Committee (FIC). That approval was obtained.

[4]On 29 May 1996, the defendant wrote a letter to the plaintiff. In it the defendant informed the plaintiff that the State EXCO of Melaka had decided that all the units to be constructed must be sold only to Bumiputras. The plaintiff was given two weeks to decide whether it was prepared to go on with the project on the basis of this quota. This was a new requirement as the agreement does not contain any such term. Neither does the agreement contain a term permitting the defendant to unilaterally vary the terms of the contract. For completeness, I would mention that the defendant had itself been intimated of the EXCO's decision on 24 May 1996 as evidenced by the letter at p 291 of the record of appeal provided to us.

[5]What followed was an exchange of correspondence between the plaintiff and the defendant stretching over a period of about 18 months. The plaintiff asked for and was granted time to consider the new term that was being sought to be introduced into the existing contract between the parties. By a letter dated 14 August 1996, plaintiff appealed to the defendant to have the quota reduced in accordance with the proposal contained in that letter. The plaintiff wrote again on 10 September 1996 saying that in the event that the alternative quota suggested by it was accepted, it was prepared to complete the project. It was not until 29 October 1997 that the defendant responded. In its letter of that date, it enclosed a letter from the Melaka Tengah District and Land Office which informed of a reduction of the quota but not to the extent required by the plaintiff. A few days later, on 10 November 1997, the plaintiff once again appealed to have the quota reduced in terms of its proposal as set out in that letter. Having received no response to that letter, the plaintiff wrote on 10 December 1997, stating that it was not interested in proceeding with the project. In that letter, it accepted the defendant's offer to withdraw from the project and asked for a refund of the RM19,985,153.40. The defendant responded only on 9 February 1998. It said that it the plaintiff's withdrawal from the project and the legal effect and implications of such withdrawal. In reply the plaintiff in its letter dated 14 February 1998 contended that the withdrawal was not its proposal but an acceptance of the defendant's proposal. Matters came to a head when the defendant in its letter of 4�June 1998 (at p 216 of the appeal record), informed the plaintiff of its decision to rescind the agreement and forfeit RM3,330,858.90 being 10% of the purchase price. Such forfeiture was provided for in clause 9.1 which confers that right on the defendant in the event of the plaintiff's breach of its obligation to pay the sums due under the agreement. The letter o