Berjaya Times Square v M-Concept [2010] 1 MLJ 597: Frustration of Contract Modernised

Case at a glance

• Case name: Berjaya Times Square Sdn Bhd v M-Concept Sdn Bhd

• Citation: [2010] 1 MLJ 597

• Court: Federal Court of Malaysia

• Year: 2010

• Practice area: Corporate & Commercial Law

Background and facts

The dispute arose from a commercial contract relating to the iconic Berjaya Times Square development. The respondent contended that the contract had been frustrated — that is, performance had become impossible or radically different from what the parties contemplated when they made the agreement.

The issue before the court

What is the proper test under Malaysian law for determining whether a contract has been frustrated under section 57(2) of the Contracts Act 1950, and what consequences follow?

Holding and reasoning

The Federal Court held that frustration occurs only where, without default of either party, a supervening event so radically transforms performance that the contract is no longer the contract the parties had agreed to. The mere fact that performance has become more onerous or commercially less attractive does not amount to frustration.

Where frustration is established, the contract is automatically discharged from the date of the frustrating event. Section 66 of the Contracts Act 1950 governs restitution: any benefit conferred under the discharged contract may be recovered.

Why this case still matters

Frustration is invoked frequently — and granted rarely:

• Force-majeure clauses usually displace common-law frustration. If the contract has a force-majeure clause that covers the event, that clause governs.

• Pandemic disruption (such as COVID-19 era cases) — Malaysian courts have been reluctant to find frustration where parties could have performed at higher cost or after delay.

• Hardship is not frustration. A contract that becomes uneconomic is not frustrated; renegotiation is the commercial answer, not litigation.

Frequently asked questions

Is COVID-19 disruption a frustrating event?

Generally not, unless the supervening event made performance literally impossible (e.g., the subject of the contract was destroyed or rendered illegal). Malaysian courts following Berjaya Times Square have been cautious about declaring contracts frustrated due to economic disruption alone.

What if the contract has a force-majeure clause?

The clause displaces the common-law doctrine of frustration. The courts apply the clause’s terms first; frustration only fills the gap where the clause does not cover the event.

Can I recover money paid before the frustrating event?

Section 66 of the Contracts Act 1950 allows restitution of benefits conferred — but the analysis is fact-specific. We can advise on whether your situation supports recovery.

Frequently asked questions

Is COVID-19 disruption a frustrating event?

Generally not, unless the supervening event made performance literally impossible (e.g., the subject of the contract was destroyed or rendered illegal). Malaysian courts following Berjaya Times Square have been cautious about declaring contracts frustrated due to economic disruption alone.

What if the contract has a force-majeure clause?

The clause displaces the common-law doctrine of frustration. The courts apply the clause’s terms first; frustration only fills the gap where the clause does not cover the event.

Can I recover money paid before the frustrating event?

Section 66 of the Contracts Act 1950 allows restitution of benefits conferred — but the analysis is fact-specific. We can advise on whether your situation supports recovery.