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2026 MarsdenLR 106
HIGH COURT MALAYA JOHOR BAHRU
NOOR HISHAM ISMAIL, J
SHELL MALAYSIA TRADING SDN BHD – Appellant
Versus
MOTOR FUEL (M) SDN BHD – Respondent
[Originating Summons No: JA-24NCvC-259-03/2025]
An option is a binding unilateral contract when exercised strictly according to its terms. Specific performance is appropriate when contractual breaches involve loss of goodwill and reputation, which are incapable of being accurately quantified or adequately remedied by monetary damages.
Headnote:(A) Specific Relief Act 1950 - Section 11 - Specific performance of contract - Exercise of renewal option - Requirements for binding unilateral contracts - Doctrine of business common sense in commercial contract construction. (Paras 21-23, 28, 31-33)
(B) Contract Law - Option to renew - Notice requirements - Unilateral right must be exercised strictly in accordance with terms - Material breach of contract as a basis for denying specific performance - Loss of goodwill and reputation as factors for specific performance when damages are inadequate. (Paras 24-27, 34-42)
Facts of the case:
The plaintiff and defendant entered into an agreement for supply and operation of a retail business at a specific site. The agreement contained a renewal option. Following a dispute regarding the renewal terms, the plaintiff exercised its option to extend the agreement under the original terms and conditions. The defendant refused to continue, alleging that contractual breaches by the plaintiff precluded such renewal, and requested the plaintiff to vacate the site. The plaintiff filed an originating summons seeking a declaration of a valid renewal and specific performance of the agreement.
Findings of Court:
The court found that the plaintiff validly exercised the option within the stipulated notice period and in accordance with the agreement's terms. The court observed that the agreement did not provide that alleged breaches would disqualify a party from exercising the renewal option. Furthermore, the court held that because the business operation involved specialized branding, goodwill, and reputation that were not easily quantifiable in monetary terms, the court determined that damages would be an inadequate remedy, rendering specific performance appropriate.
Issues: The primary issues were whether the plaintiff validly exercised the option to renew the agreement, whether alleged breaches precluded the exercise of such option, and whether specific performance should be granted in lieu of damages.
Ratio Decidendi: An option is a unilateral contract that becomes binding upon strict compliance with its specified terms. Where the agreement does not link potential breaches to the right of renewal, such allegations cannot invalidate the exercise of the option. Specific performance is an appropriate remedy where an agreement involves significant intangible assets like brand reputation and goodwill that cannot be easily measured or compensated by mere pecuniary damages.
Result: Originating summons allowed with costs.
| Table of Content |
|---|
| 1. factual background regarding the agreement and its renewal dispute. (Para 1 , 2 , 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10 , 11 , 12 , 13 , 14 , 15 , 16 , 17 , 18 , 19 , 20) |
| 2. validity of unilateral contractual renewal options. (Para 21 , 22 , 23 , 24 , 25 , 26 , 27 , 28 , 29 , 30) |
| 3. adequacy of pecuniary compensation versus specific performance. (Para 31 , 32 , 33 , 34 , 35 , 36 , 37 , 38 , 39 , 40 , 41 , 42) |
| 4. final court order allowing the originating summons. (Para 43) |
JUDGMENT
(Enclosure 1)
Introduction
[1] Plaintiff ("P") via Originating Summons ("OS") dated 4 March 2025 (encl 1) moved this Court for the following reliefs:
(a) A declaration that there is a valid renewed Retailer Partner Agreement dated 13 March 2015 ("Agreement") for a further term of 10 years effective from 13 March 2025 until 12 March 2035;
(b)Specific performance of the renewed Agreement;
(c) Further or alternatively, damages to be assessed in addition to or in lieu of specific performance together with interest thereon.
[2] For the purpose of maintaining the status quo of the matter, this Court had on 20 May 2025 allowed an interlocutory injunction restraining the Defendant ("D") from carrying out any act that could interfere with the usual running of business relating to the Agreement pending the disposal of encl 1.
[3] After hearing both parties, this Court allowed encl 1 with costs of RM15,000.00 to be paid by D to P.
[4] D has now appealed to the Court of Appeal against this Court's decision.
[5] This is the Court's ground of judgment.
Salient Facts
[6] P is a company whose principle business involves blending of lubricating oils and marketing of petroleum products under a well- known brand 'Shell'.
[7] Pursuant to the said Agreement, P agreed to sell and supply grades and brand of Shell Petrol, automotive diesel and other fuels to D who in turn agreed to resell the same at the site where it operates a Shell petrol filing station and a convenience store outlet under its' chain label 'Select'.
[8] Further terms of the Agreement which are relevant to the instant matter include:
(a) the duration of the Agreement is for ten (10) years;
(b) the Agreement commences on 13 March 2015 until 12 March 2025; and
(c) the Agreement is subject to rights of termination as provided under cl 1.3 of the Agreement;
(d) upon the Agreement expiring, P is given the option to renew the agreement by giving 3 months' written notice to D prior to the expiration of the Agreement (Clause 1.4), and such renewal may be:
(i) for such further period as it deems fit either on the same terms and conditions of the Agreement save for the clause on renewal (First Limb); or
(ii) on such new terms and conditions as specified by P in a new agreement to be entered into by both parties (Second Limb).
[9] D had purported to terminate the Agreement by way of a letter dated 6 December 2023.
[10] P in response, by way of a letter dated 5 January 2024 reminded U among others that apart from the agreement being for a fixed term, the unlawful termination of the agreement before its expiry could amount to a material breach of the agreement.
[11] Subsequent to the above, U continued its obligations under the Agreement thus effectively retracting its prior letter dated 6 December 2023.
[12] P then via letter dated 17 September 2024 made an offer to U to extend the agreement until 13 March 3035 with new terms and conditions pursuant to the Second Limb of cl 1.4 of the Agreement. P repeated this offer to U via its' letters dated 4 November 2024 and 18 November 2024 respectively.
[13] A meeting was then held on 20 November 2024 between representatives of both P and U which was not fruitful.
[14] Consequently, P then by way of letter dated 12 December 2024 to U exercised its option to renew the Agreement until 12 March 2035 on the same terms and conditions pursuant to the First Limb of cl 1.4 of the Agreement. As such, P took position that the Agreement was renewed and extended till 12 March 2035.
[1
