1. ) DR. MUHAMMAD ILHAM BIN KHALIT 2. ) KHALIT BIN PIT 3. ) HALIMAH BINTI HASAN v UNIVERSITI SELANGOR (UNISEL)

Case Significance

Confirms that a study-leave or scholarship bond providing for a specified sum on breach is enforceable under section 5 of the Contracts (Amendment) Act 1976 without proof of actual loss, binding both the recipient and the guarantors to pay the agreed amount on early resignation.

This High Court decision at Shah Alam concerns an appeal against a Sessions Court judgment enforcing a study-leave bond. The first appellant had been employed by the respondent university, initially as a contract assistant lecturer and then as a permanent assistant lecturer, and had entered into a study-leave agreement (Perjanjian Cuti Belajar) under which he was funded to pursue further study; the second and third appellants were his guarantors. The agreement required him to serve the university for a bond period of six years and provided that, in the event of a breach such as resignation within that period, the appellants would be jointly and severally liable to pay liquidated damages of RM300,000. After a full trial, the Sessions Court had allowed the university's claim for breach of contract and damages of RM300,000, and the appellants appealed. The Court dismissed the appeal. It held that the parties were bound by the terms of the agreement they had entered into, that the first appellant could not credibly claim not to have understood the six-year bond clause — which he had never queried and which reflects a common practice in scholarship agreements — and that the appellants had been aware of and agreed to their joint and several liability to pay RM300,000 in the event of a breach. Section 5 of the Contracts (Amendment) Act 1976 reinforced that, in the context of scholarship agreements, a breach requires the recipient and the guarantors to pay the amount specified in the contract, without the sponsor having to prove its actual loss. Having enjoyed the benefits conferred by the offer and the study-leave agreement and then left within the bond period, the first appellant, together with his guarantors, was liable for the agreed sum, and the Court upheld the award of RM300,000. The decision illustrates that a party who has taken the benefit of a funded course of study cannot avoid the corresponding obligation to serve, or to pay the agreed sum in default, by disavowing the terms it freely accepted.