MARWIYA BT MISWAN v DEDE RESOURCES SDN BHD [2025] MLJU 2805
Liquidated damages clauses often create confusion once a breach happens. Some assume that once the clause exists, the stated amount can be claimed straight away without question. Others are just as confident that without proof of actual loss, the claim must fail. Both assumptions oversimplify how the law actually works.
In this case, the contract clearly set out a specific amount as liquidated damages in the event of a failure. When the breach occurred, the affected party claimed exactly that amount. The other side responded with the usual defence, arguing that there was no evidence of actual loss and therefore no compensation should be awarded.
The court turned to Section 75 of the Contract Act 1950. This provision allows the court to award reasonable compensation even without detailed proof of actual loss. But this is where many misunderstand the rule. The amount claimed must still be reasonable.
The court made an important distinction. Liquidated damages are not a punishment, not a penalty, and not a blank cheque to demand an excessive sum simply because it appears in the contract. Even though the law allows compensation without proof of actual loss, the court will still examine whether the amount is fair or whether it is extravagant or unconscionable.
In assessing the claim, the court looked at the entire context. The nature of the contract, the purpose of including the liquidated damages clause, and the circumstances surrounding the breach were all considered. The court found that the clause was intended to provide a genuine pre-estimate of loss rather than to penalise the other party, and the amount fixed was not excessive.
For that reason, the court allowed the liquidated damages claim even in the absence of detailed proof of actual loss. The decision was not because the clause operated automatically, but because the sum claimed qualified as reasonable compensation under Section 75.
The takeaway is straightforward. The law does not require proof of actual loss in every situation, but it also does not protect clauses that are clearly unfair. Liquidated damages are neither an automatic win nor an impossible claim. What matters is not the number written in the contract, but whether that number is fair and makes sense in the real world.
