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2026 MarsdenLR 1977
HIGH COURT SABAH & SARAWAK TAWAU
STEVE RITIKOS, JC
R & D ALLIANCE DEVELOPMENT SDN BHD – Appellant
Versus
SABAH SOFTWOODS BERHAD – Respondent
[Suit No: TWU-22NCvC-36-11/2024]
In an entire and lump sum contract, the right to payment is conditional upon complete and exact performance. A party who fails to substantially perform their contractual obligations cannot recover the contract price or claim damages for termination resulting from that breach.
Headnote:(A) Contract Law - Breach of Contract - Entire and lump sum contract - Principles of construction - An entire contract requires complete and exact performance by a party as a condition precedent to the other party's obligation to perform. A party who has not substantially performed their side of an agreement cannot recover the contract price. (Paras 10, 11, 12)
(B) Contract Law - Performance - Burden of Proof - Failure to perform - Where a party alleges breach of contract, they must demonstrate performance according to technical specifications. Failure to provide evidence of compliance with technical metrics results in a finding of no substantial performance. (Paras 15, 18, 19)
(C) Contract Law - Termination - Due Process - Contractual termination due to persistent non-performance does not amount to bad faith where the defaulting party was given notice and a reasonable opportunity to remediate. (Paras 22, 24)
Facts of the case:
The plaintiff sought damages for breach of contract following the termination of an agreement for road upgrading, rehabilitation, and maintenance. The defendant terminated the contract citing the plaintiff's failure to adhere to the technical specifications and performance requirements. The plaintiff claimed the contract was not an entire or lump sum contract, that the termination was wrongful, and that they were entitled to the full contract sum.
Findings of Court:
The court found that the agreement was an entire and lump sum contract. The evidence established that the plaintiff failed to execute the required upgrading or rehabilitation works and refused to participate in joint inspections. The termination was found to be lawful due to the plaintiff's fundamental breach and consistent failure to remediate performance issues.
Issues: The main issues were whether the defendant unilaterally varied payment terms, whether the plaintiff fulfilled its technical obligations, whether the termination followed due process, and whether the plaintiff was entitled to damages.
Ratio Decidendi: Under an entire contract, a party cannot recover the contract sum without complete and exact performance. As the plaintiff failed to demonstrate substantial performance and ignored clear technical specifications, the defendant was justified in terminating the agreement for fundamental breach.
Result: Plaintiff's claim dismissed in its entirety with costs awarded to the defendant.
JUDGMENT
Introduction
[1] The Plaintiff is suing the Defendant for breach of contract based on a Letter of Award (the "LOA" or "contract"), and seeking inter alia:
(i) Special damages of RM956,944.00 as of January 31, 2023, plus pre-judgment interest and post-judgment interest at 5% per annum until full settlement.
(ii) Loss of profit damages of RM5,133,758.20 for the remaining 112 months of the contract, calculated by an audit firm or assessed by the court, with similar interest terms
(iii) General damages to be assessed by the court, also with pre- and post-judgment interest at 5%.
(iv) Recovery of all legal costs and disbursements incurred, including those before the filing of the action.
(v) Any other relief deemed fit by the court.
Background Facts
[2] At all material times, the defendant carried on the business of reforestation, operation of oil palm plantations, a palm oil mill, and a chip mill.
[3] By way of the Letter of Award, the defendant awarded the plaintiff a contract for the upgrading, rehabilitation, and maintenance of the main road from Brumas to Sungai Udin Pengkalan, measuring approximately 38 kilometres.
[4] The contract was executed for a fixed tenure of ten (10) years commencing from 1 June 2022, subject to a fixed monthly contractual payment of RM119,618.00.
[5] The material terms of the contract required the plaintiff to provide all necessary machinery and equipment, employ lawfully documented and licensed operators, and execute chemical treatments to critical areas such as steep hills and sharp corners.
[6] On 25 January 2023, following ongoing performance concerns, the defendant terminated the contract. The plaintiff subsequently served a Letter of Demand dated 1 November 2023.
Issues For Trial
[7] The issues before the court are:
(i) Whether the defendant had unilaterally varied the terms of the contract by treating the contract as an "entire and lump sum contract" and payment shall be based on "actual work done" and not by way of a fixed monthly payment;
(ii) Whether the plaintiff had carried out and completed the works in accordance with Annexure A of the LOA, ie, carried out and complete upgrading/rehabilitation and maintenance works for all-weather road and plaintiff had adhered to the Technical Specifications in the LOA;
(iii) Whether the defendant had breached the terms of the contract by failing to follow due process in assessing performance and thereby issuing the termination letter to the plaintiff;
(iv) Whether the plaintiff is entitled to full payment for works done; and
(v) Whether the plaintiff is entitled for damages as claimed for the alleged wrongful termination of the contract by the defendant.
Contentions, Evaluations and Findings
First Issue: Whether the defendant had unilaterally varied the terms of the contract by treating the contract as an "entire and lump sum contract" and payment shall be based on "actual work done" and not by way of a fixed monthly payment.
[8] The Plaintiff claimed that the LOA is the governing contract which provides for "monthly rate is RM119,618.00 per month". The Plaintiff contended that the LOA does not provide for payment to be made based on "actual work done" and this term was unilaterally introduced by the defendant after the contract had commenced. The Plaintiff finds support for this contention from the evidence of DW3 at Q299 and Q233 and the evidence of DW4 at Q380.
[9] Further, relying on United Overseas Bank (Malaysia) Bhd v. Lee Yaw Lin & Anor; [2016] 4 CLJ 871, the Plaintiff contended that the LOA is very clear: "the monthly rate is RM119,618.00 per month". There is no ambiguity and no room to unilaterally impose a different payment mechanism.
[10] This court rejects the Plaintiff's interpretation. On a true construction of the Letter of Award and its appendices, the contract is an entire and lump sum contract.
[11] The legal position of a lump sum arrangement is well-settled. In Lembaga Pembangunan Industri Pembinaan Malaysia v. Konsortium JGC Corp
