Law of Contract: Repudiation and Rescission
Repudiatory Breach
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, duty 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.
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