Law of Contract: Repudiatory Breach Last updated 29-Aug-2014

To constitute repudiation, the threatened breach must be such as to deprive the injured party of a substantial part of the benefit to which he is entitled under the contract. The measure of the necessary degree of substantiality has been expressed in a variety of ways in the cases. It has been said that the breach must be of an essential term, or of a fundamental term of the contract, or that it must go to the root of the contrac. … I venture to put the test in my own words as follows: Will the consequences of the breach be such that it would be unfair to the injured party to hold him to the contract and leave him to his remedy in damages as and when a breach or breaches may occur? If this would be so, then a repudiation has taken place.
Decro-Wall International S.A. v Practitioners in Marketing Ltd [1971] 1 WLR 361 per Buckley LJ. at p.380.

Breach which deprives innocent party of the whole benefit

Generally, any breach which goes to the root of the contract and gives a right to the aggrieved party to exercise his option to terminate the contract, or in the other words to repudiate the contract, is a repudiatory breach. Breach of condition therefore is always a repudiatory breach (for Conditions, Warranties and Innominate terms see Contractual Terms). The following acts illustrate accrual of the right to repudiate:

• Breach by the shipowner of implied common law undertakings to provide seaworthy ship;
• Breach of duty to commence and carry out the voyage contracted for with reasonable diligence and without unjustifiable deviation;
• Breach by the time charterer expressed or implied duty to pay hire accurately and in full.

Breach of warranty give rise to a claim for damages only and therefore cannot be repudiatory.

When innominate term has been broken, the right to terminate will depend upon the consequences of the breach. Between those factors which the courts take into consideration when deciding whether or not the breach of innominate term is sufficiently serious, McKendrick’s Contract Law enumerates the following, at p.948:

• losses caused by the breach,
• the cost of making performance comply with the terms of the contract,
• the value of the performance that has been received by the innocent party,
• the willingness of the party in breach to make good the consequences of the breach,
• the likelihood of a further breach by the party in breach,
• the adequacy of damages as a remedy to the innocent party.

Apart from actual breach the English law recognises also an anticipatory breach in instances when the time for performance has not yet arrived but one of the parties to contract by words or conduct evinces an intention no longer to be bound by the term of it. The innocent party may then elect to treat such declaration or conduct as a breach going to the root of the matter and to consider himself discharged from further performance. The threat to repudiate has no effect on the contract unless it is accepted by the other party, and only when accepted the injured party relieved from all future obligations. It follows that at any time before such acceptance the party who has so threatened may withdraw his repudiation and be in the same position as if he had never threatened at all. On the other hand, when the innocent party elects to keep the contract alive he remains subject to all the obligations and liabilities under it , with all the rights of defaulted party remaining unaffected.

The essence of the doctrine of anticipatory breach was aptly formulated by Lord Justice Salmon in Taylor v Oakes, Roncoroni & Co. (1922) 127 L.T. 267:

When A wrongfully repudiates his contractual obligations in anticipation of the time for their performance, he presents the innocent party B with two choices. He may either affirm the contract by treating it as still in force or he may treat is as finally and conclusively discharged. There is no third choice, as a sort of via media, to affirm the contract and yet to be absolved from tendering further performance unless and until A gives reasonable notice that he is once again able and willing to perform. Such a choice would negate the contract being kept alive for the benefit of both parties and would deny the party who unsuccessfully sought to rescind, the right to take advantage of any supervening circumstance which would justify him in declining to complete.

It follows that in cases of anticipatory breach the word ‘repudiation’ usually attaches to the wrongful act originated from erroneously presumed right to terminate the contract, as opposed by rescission which is a rightful response of the injured side. In this sense when confined to cases of an anticipatory breach the word ‘repudiation’ is thought to be capable of much clearer interpretation.

In Telford Homes (Creekside) Ltd v Ampurius Nu Homes Holdings Ltd [2013] EWCA Civ 577 the Court of Appeal helpfully summarised the principles to be considered when assessing whether a breach is in fact repudiatory. In particular, Lewison LJ observed at paras 51-52:

51. Whatever test one adopts, it seems to me that the starting point must be to consider what benefit the injured party was intended to obtain from performance of the contract. In our case, the benefit that Ampurius was intended to obtain from performance of the contract was, first and foremost, a leasehold interest of 999 years duration in four blocks. In other words, what Ampurius bargained for was the right to possession of those units for 999 years, and the right for a like period to exploitation of the rents and profits to be derived from them. It was to take the blocks in pairs, with a gap of seven months between each handover (although acknowledging that the seven month gap was dependent on meeting dates described as "Target Dates"). The first pair of blocks was to be handed over just over twenty one months after the contract was signed. I do not think that the judge gave adequate weight to the ultimate objective of the contract, viz. the grant to Ampurius of 999 year leases. He concentrated on the expected effects on the marketing period. This, in my judgment, permeates his consideration of what practical effect the breaches of contract had. 52. The next thing to consider is the effect of the breach on the injured party. What financial loss has it caused? How much of the intended benefit under the contract has the injured party already received? Can the injured party be adequately compensated by an award of damages? Is the breach likely to be repeated? Will the guilty party resume compliance with his obligations? Has the breach fundamentally changed the value of future performance of the guilty party’s outstanding obligations?

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