Law of Contract: Repudiation and Rescission
Positive Election
Devlin J noted in Universal Cargo Carriers Corpn v Citati [1957] 2 All ER 7, that when the object of the venture is destroyed, usually but not necessarily, there would be no value left in the charterparty:
Therefore usually aggrieved party would wish to rescind. But the rights given to a party under a contract may be wider than the object of the venture requires them to be. It may then be worth a party’s while to keep the contract alive for an ancillary purpose and compensate himself by damages for the loss of his main object.
Acceptance of repudiation generally must be communicated to the party in default, although no any particular form is required. In Vitol SA v Norelf Ltd [1996] AC 800, 810 Lord Steyn said:
An act of acceptance of a repudiation requires no particular form: a communication does not have to be couched in the language of acceptance. It is sufficient that the communication or conduct clearly and unequivocally conveys to the repudiating party that the aggrieved party is treating the contract as at an end.
Same is applicable when the aggrieved party elects to keep the contract alive.
It is appropriate at this point to look at the matter of an election. An injured party has a right but not obligation to make an election whether to accept repudiation or to treat the contract as subsisting. Although not obligatory, this decision, being a matter of choice for him, has to be made by the innocent party. As Lord Goff of Chieveley put it in Motor Oil Hellas (Corinth) Refineries SA v Shipping Corporation of India (The Kanchenjunga)[1990] 1 Lloyd’s Rep 391 it has to be made in the sense that:
…if he does not do so, the time may come when the law takes the decision out of his hands, either by holding him to have elected not to exercise the right which has become available to him, or sometimes by holding him to have elected to exercise it.
Per Lord Goff of Chieveley in Motor Oil Hellas (Corinth) Refineries SA v Shipping Corporation of India (The Kanchenjunga)[1990] 1 Lloyd’s Rep 391
Therefore it is said that there is no third option open to the innocent party in the sense that there is no way to affirm the contract and yet be absolved from tendering further performance. But there is a recognised decision making period of time between acceptance of repudiation and affirmation of the contract. This period of time although virtually not restricted in length, if too prolonged, may lead to situation when the law will treat the injured party as having affirmed. Moreover, the injured party may lose his right to rescind due to intervention of some frustrating event or even his own breach. He also runs the risk that the party in repudiation will eventually resume performance of the contract and thus end any continuing right in the innocent party to elect to accept the former repudiation as terminating the contract.
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