In the realm of legal agreements, contracts serve as the cornerstone of business transactions, outlining the rights and obligations of involved parties. Typically, parties are bound by the express terms laid out within the four corners of a contract, meaning that their rights and duties are confined to what is expressly stated within its confines. However, there are instances where the court may delve beyond these confines to assess the broader context and dynamics of the parties' relationship.
This principle stems from the recognition that contracts don't exist in isolation; they are forged within the framework of real-world relationships that may involve complexities and nuances not explicitly addressed within the written agreement. As such, courts occasionally find it necessary to look beyond the literal words of a contract to ensure justice and fairness prevail. In the case of Bank Kerjasama Rakyat v Ang Eng Hooi & Anor , represented by our partner, Lachman Kumar, the Court acknowledged and upheld the following:-
[33] Secondly, recall that the Letter of Undertaking does not exist independently of the Settlement Agreement. EKA had failed to comply with the terms of the Settlement Agreement, by failing to make the payment of RM35 million on or before 30.6.2018. I consider this an essential term and a pre-condition under the Settlement Agreement. Such pre-condition being unfulfilled, I find that D1’s undertaking to charge the Land in favour of the Bank, pursuant to the Letter of Undertaking, is rendered void. I refer to the following decisions of the Court of Appeal that are instructive on this point. [34] In Flyglobal Charter Sdn Bhd v. Alfajr Travel & Tours Sdn Bhd & Another Appeal [2023] 2 CLJ 888 at 899, the Court of Appeal held: [23] On the issue that the learned High Court Judge erred in law and fact in deciding the plaintiff’s case solely based on the LOU, we are in agreement with the plaintiff’s contention that the learned High Court Judge has erred in law and fact in deciding the plaintiff’s case solely based on the LOU as the contractual relationship between the parties are not only confined to the terms of the LOU and covered by the pertinent terms and conditions in the agreements which included a crucial third-party, namely NESMA. The learned High Court Judge is thus wrong to confine his consideration of the plaintiff’s case within the four corners of the LOU, in coming to his decision to dismiss the plaintiff’s claim.”
Further, one such situation where courts may transcend the four corners of a contract is in cases involving ambiguous language or latent ambiguities. If the terms of the contract are unclear or subject to multiple interpretations, courts may resort to extrinsic evidence such as the parties' prior dealings, industry customs, or oral agreements made alongside the written contract to discern the true intentions of the parties. Moreover, courts may also consider factors such as the parties' conduct, the course of performance, and the surrounding circumstances at the time of contracting. If one party can demonstrate that there was fraud, duress, undue influence, or unconscionability at play during the contract's formation, the court may intervene to rectify any unfairness or injustice. In essence, while contracts serve as the primary means of establishing legal rights and obligations, the fluid nature of human relationships and the complexities of commercial dealings sometimes necessitate judicial intervention beyond the four corners of a contract to uphold fairness and equity.
Between BANK KERJASAMA RAKYAT MALAYSIA BERHAD and ANG ENG HOOI TANG SOON HUAT