{"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 – TERMINATION TANGLES: WHEN PERFORMANCE REVIEWS PRECEDE CONTRACT ENDINGS"},"content":{"rendered":"\n

ILLUSTRATIVE SCENARIO<\/h3>\n\n\n\n

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’s performance was deemed unsatisfactory.<\/p>\n\n\n\n

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

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

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

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

KEY ISSUES<\/h3>\n\n\n\n

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

LEGAL PRINCIPLES<\/h3>\n\n\n\n
    \n
  • There are two possible interpretations of Clauses 7 and 8:\n
      \n
    1. 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
    2. 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
    3. 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
    4. Clause 8\u2019s review procedure is not unilateral and aims to protect both parties’ interests, ensuring that unsatisfactory situations are remedied and Y can avoid breach and termination.<\/li>\n\n\n\n
    5. 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

      APPLICATION TO SCENARIO<\/h3>\n\n\n\n

      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

      REFERENCE CASE<\/h3>\n\n\n\n
        \n
      • SPM Membrane Switch Sdn. Bhd. v. Kerajaan Negeri Selangor [2016] 1 MLJ 464<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"

        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"],"_links":{"self":[{"href":"https:\/\/yhalaw.com.my\/my\/wp-json\/wp\/v2\/posts\/5124"}],"collection":[{"href":"https:\/\/yhalaw.com.my\/my\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/yhalaw.com.my\/my\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/yhalaw.com.my\/my\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/yhalaw.com.my\/my\/wp-json\/wp\/v2\/comments?post=5124"}],"version-history":[{"count":1,"href":"https:\/\/yhalaw.com.my\/my\/wp-json\/wp\/v2\/posts\/5124\/revisions"}],"predecessor-version":[{"id":5126,"href":"https:\/\/yhalaw.com.my\/my\/wp-json\/wp\/v2\/posts\/5124\/revisions\/5126"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/yhalaw.com.my\/my\/wp-json\/wp\/v2\/media\/5125"}],"wp:attachment":[{"href":"https:\/\/yhalaw.com.my\/my\/wp-json\/wp\/v2\/media?parent=5124"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/yhalaw.com.my\/my\/wp-json\/wp\/v2\/categories?post=5124"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/yhalaw.com.my\/my\/wp-json\/wp\/v2\/tags?post=5124"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}