Law of Contract: Repudiation. Drastic Measure Last updated 12-Aug-2014

Repudiation is a drastic conclusion which should only be held to arise in clear cases of a refusal, in a matter going to the root of the contract, to perform contractual obligations.
Lord Wilberforce in Woodar Investment Development Ltd v Wimpey Construction UK Ltd [1980] 1 WLR 277 at p.283.

Right to terminate and consequences

Decision to terminate contract is wholly in hands of the contracting party, but the right to terminate is only accrued in certain circumstances. Therefore, while each of the parties to contract is free to stop his contractual performance when he considers that happening of certain events gave him a right to do so, such action if later be found by the court as a wrongful termination, may leave him liable for substantial damages. Thus, repudiation is a very important decision which if rightly exercised can become a highly effective remedy, but when wrongfully made may fire back with equal force.

The right to abandon a contractrepudiation is a very important decision which if rightly exercised can become a highly effective remedy, but when wrongfully made may fire back with equal force. vests only in the party who has been guilty of no default; and by him it must be exercised within a reasonable time.

To upheld repudiation the court shall satisfy itself beyond any doubt that a party in breach clearly evinced intention to abandon, or to refuse future performance of contract. Nothing less will suffice due to extreme rigour of such decision. This position was was stressed by Lord Wilberforce in Woodar Investment Development Ltd v Wimpey Construction UK Ltd [1980] 1 WLR 277.

A legal test whether there is a repudiatory breach which gives a right to the innocent party to treat himself as not bound by the terms of the contract anymore was formulated by Etherton LJ in Eminence Property Developments Ltd. v Heaney [2010] EWCA Civ 1168 at paras 61–64:

61.…It is whether, looking at all the circumstances objectively, that is from the perspective of a reasonable person in the position of the innocent party, the contract breaker has clearly shown an intention to abandon and altogether refuse to perform the contact.

62. Secondly, whether or not there has been a repudiatory breach is highly fact sensitive. That is why comparison with other cases is of limited value.

63. Thirdly, all the circumstances must be taken into account insofar as they bear on an objective assessment of the intention of the contract breaker. This means that motive, while irrelevant if relied upon solely to show the subjective intention of the contract breaker, may be relevant if it is something or it reflects something of which the innocent party was, or a reasonable person in his or her position would have been, aware and throws light on the way the alleged repudiatory act would be viewed by such a reasonable person.…

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