Contract Terminated without providing reasons?

SPM MEMBRANE SWITCH SDN BHD v. KERAJAAN NEGERI SELANGOR

FEDERAL COURT, PUTRAJAYA

AHMAD MAAROP FCJ; HASAN LAH FCJ; ZAINUN ALI FCJ; JEFFREY TAN FCJ; RAMLY ALI FCJ

[CIVIL APPEAL NO: 01(f)-10-04-2013(B)]

13 NOVEMBER 2015

The Federal Court held that, as a matter of general law of contract, there is no requirement that a notice of termination would necessarily be bad in law in all cases if reasons are not stated in the notice. The Federal Court considered it too onerous to impose a requirement that reasons must be given in the event of termination. The Federal Court nevertheless recognised that there are certain circumstances in which, as a matter of construction of contract, the recipient of the notice of termination is entitled to know the reasons for termination. On the facts of the present case, the Federal Court held that, as a matter of construction of the termination clauses in the Agreement, SPM was entitled to know the reasons for termination and, accordingly, answered the question of law in the affirmative.

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