{"id":5124,"date":"2024-09-09T09:11:30","date_gmt":"2024-09-09T01:11:30","guid":{"rendered":"https:\/\/yhalaw.com.my\/?p=5124"},"modified":"2024-09-09T09:11:30","modified_gmt":"2024-09-09T01:11:30","slug":"employment-termination-tangles-when-performance-reviews-precede-contract-endings","status":"publish","type":"post","link":"https:\/\/yhalaw.com.my\/my\/employment-termination-tangles-when-performance-reviews-precede-contract-endings\/","title":{"rendered":"EMPLOYMENT &#8211; TERMINATION TANGLES: WHEN PERFORMANCE REVIEWS PRECEDE CONTRACT ENDINGS"},"content":{"rendered":"\n<h3 class=\"wp-block-heading\">ILLUSTRATIVE SCENARIO<\/h3>\n\n\n\n<p>X and Y entered into an agreement where X appointed Y to assist with a delivery service in Selangor. The agreement included a review procedure (Clause 8) for X to follow if Y&#8217;s performance was deemed unsatisfactory.<\/p>\n\n\n\n<p>A few months later, X alleged multiple breaches of contract by Y and issued a termination notice giving 30 days\u2019 notice under Clause 7. However, X\u2019s letter did not specify any reason for the termination.<\/p>\n\n\n\n<p><strong>Clause 7 \u2013 Termination<\/strong> X shall be entitled to terminate this agreement by giving thirty (30) days notice to Y if Y is unable to provide satisfactory services as provided under the agreement.<\/p>\n\n\n\n<p><strong>Clause 8 \u2013 Performance Review<\/strong> 8.1 In the event that X shall determine Y\u2019s performance of its obligations under this Agreement as unsatisfactory, Y shall be given thirty (30) days to remedy the unsatisfactory situation.<\/p>\n\n\n\n<p>8.2 If X finds the unsatisfactory situation is not remedied at the end of thirty (30) days given under Clause 8.1, X shall have the option of treating such unsatisfactory performance as an event of default which entitles X to terminate this Agreement pursuant to Clause 7 and accordingly X shall be entitled to all reliefs provided under Clause 7.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">KEY ISSUES<\/h3>\n\n\n\n<p>The issue is whether X can unilaterally terminate the contract under Clause 7 without specifying reasons in the termination notice?<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">LEGAL PRINCIPLES<\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>There are two possible interpretations of Clauses 7 and 8:\n<ol class=\"wp-block-list\">\n<li>Clause 7 can only be invoked after the procedure in Clause 8 is completed, requiring a notice with specific reasons.<\/li>\n\n\n\n<li>Clause 8 does not need to be invoked before Clause 7, as Clause 7 does not explicitly require reasons in the termination notice.<\/li>\n<\/ol>\n<\/li>\n\n\n\n<li>Case law suggests that a termination notice is not always invalid if reasons are not provided. However, if the contract includes a \u2018grace period\u2019 for the defaulting party to remedy its performance, the non-defaulting party may be required to communicate reasons for termination.<\/li>\n\n\n\n<li>Clause 8\u2019s review procedure is not unilateral and aims to protect both parties&#8217; interests, ensuring that unsatisfactory situations are remedied and Y can avoid breach and termination.<\/li>\n\n\n\n<li>Therefore, interpreting Clause 8 as a mandatory precursor to Clause 7 makes more commercial sense. X should have initiated a review and provided specific reasons before terminating the contract.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">APPLICATION TO SCENARIO<\/h3>\n\n\n\n<p>X was obligated to initiate a performance review under Clause 8 before terminating the contract and to provide specific reasons for termination. The failure to do so likely makes the termination notice invalid.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">REFERENCE CASE<\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>SPM Membrane Switch Sdn. Bhd. v. Kerajaan Negeri Selangor [2016] 1 MLJ 464<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>This update examines the contractual obligations of initiating a performance review before terminating an agreement. It highlights the importance of following procedural steps and providing specific reasons for termination, as illustrated in the case of X and Y.<\/p>","protected":false},"author":1,"featured_media":5125,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1573,1572],"tags":[3489],"class_list":["post-5124","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-employment","category-labor-law","tag-employment-law"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>EMPLOYMENT - TERMINATION TANGLES: WHEN PERFORMANCE REVIEWS PRECEDE CONTRACT ENDINGS | Yew Huoi, How &amp; Associates | Leading Malaysia Law Firm<\/title>\n<meta name=\"description\" content=\"This update examines the contractual obligations of initiating a performance review before terminating an agreement. 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