Contracts Act 1950
Breach of Contract Lawyer in Malaysia
When a supplier, business partner, or counterparty fails to do what they agreed, the Contracts Act 1950 gives you specific remedies: damages, forcing performance, or ending the contract and recovering your position. Which one fits depends on what you actually need out of the dispute.
What counts as a breach of contract
Definition
A breach occurs when a party fails to perform an obligation the contract required, whether that is non-payment, late or defective delivery, refusing to complete a transaction, or acting outside what was agreed. Section 40 of the Contracts Act 1950 addresses the most serious case: where a party refuses to perform, or disables themselves from performing, their promise in its entirety, the innocent party may treat the contract as ended, unless they have shown by words or conduct that they accept its continuance.
Remedies available
Damages
Compensation for loss that naturally arose from the breach, or that both parties knew was likely to result from it. Loss that is too remote is not recoverable.
Liquidated Damages
Where the contract names a sum payable on breach, reasonable compensation up to that sum can be claimed without proving actual loss.
Rescission
Ending the contract and restoring both parties to their position before it, available for a voidable contract.
Specific Performance or Injunction
Where damages would not be an adequate remedy, such as a unique property or asset, the court can order the contract actually be performed, or restrain a threatened breach.
Liquidated damages clauses
Many commercial contracts name a fixed sum payable on breach, often called liquidated damages or a penalty clause. Section 75 of the Contracts Act 1950 allows the innocent party to claim reasonable compensation up to that named sum, and the Federal Court has confirmed there is no need to prove actual loss to enforce it. The party in breach can still argue the sum is unreasonable or penal, in which case the court will assess what compensation is actually reasonable.
Deadlines
| Situation | Deadline | Governing law |
|---|---|---|
| Standard breach of contract claim | 6 years from the breach | Limitation Act 1953, s.6(1)(a) |
| Breach involving fraud or deliberate concealment | 6 years from discovery of the fraud or concealment | Limitation Act 1953, s.29 |
Common mistakes
Waiting past 6 years
Once the limitation period expires, the claim is time-barred regardless of its merits. Track the breach date, not just when the relationship finally ended.
Continuing to perform after a clear repudiation
Continuing to act as if the contract is alive after the other side has clearly refused to perform can be read as accepting its continuance, which affects the remedies available under Section 40.
Assuming a penalty clause is automatically enforceable
Malaysian courts will reduce a liquidated damages sum found to be unreasonable or genuinely penal in nature, so it pays to assess the clause realistically before relying on it.
Frequently asked questions
What remedies are available for breach of contract in Malaysia?
The main remedies are damages under Section 74 of the Contracts Act 1950, specific performance or an injunction under the Specific Relief Act 1950 where damages are not an adequate remedy, and rescission of the contract under Section 65 where the innocent party elects to treat the contract as ended.
Do I need to prove my actual loss to claim liquidated damages?
No. The Federal Court has confirmed that under Section 75 of the Contracts Act 1950, a party can recover reasonable compensation up to the sum named in the contract without proving actual loss, though the defaulting party can argue the sum is unreasonable.
How long do I have to sue for breach of contract?
Generally 6 years from the date of the breach, under Section 6(1)(a) of the Limitation Act 1953. Where the breach involved fraud or was deliberately concealed, Section 29 postpones the limitation period until you discovered, or with reasonable diligence could have discovered, the fraud or concealment.
Can I end the contract if the other party refuses to perform?
Yes. Under Section 40 of the Contracts Act 1950, if a party refuses to perform or disables themselves from performing their promise entirely, the other party may treat the contract as ended, unless they have shown by words or conduct that they agree to it continuing.
Related reading
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WhatsApp a Lawyer NowThis page is general legal information current as of July 2026 and is not legal advice. It does not create a solicitor-client relationship and no outcome is guaranteed. Malaysian advocates and solicitors are not permitted to act on a "no win no fee" basis. Your specific circumstances may change which remedy applies — speak to one of our lawyers before acting on any deadline mentioned here.