Law of Contract: Repudiation.Option to terminate Last updated 12-Aug-2014

An unaccepted repudiation is a thing writ in water and of no value to anybody: it confers no legal rights of any sort or kind.
Howard v Pickford Tool Co Ltd [1951] 1 KB 417 at per Asquith LJ p 421.

Option to terminate contract and consequences

In majority of cases innocent party may and will accept the repudiation and terminate contract. Termination of contract in case of breach generally means that primary obligations of both sides have come to the end and the innocent party or, in some cases, both parties are excused from further performance. In other words injured party is no longer bound to pay any further payments which had not yet fallen due at the time of rescission, but remains liable to perform obligations which had accrued before rescission.

For example, when wording of the contract clearly conveys an intention to give the shipowners an indefeasible right to freight, the charterers will remain liable to pay the owners full freight which thus survived the repudiation of the contract. Same rule applies to the party in breach.

Termination of primary obligations produces different effect for innocent and defaulted sides because by implication of the common law it invokes on the part of contract breaker the secondary obligation to pay monetary compensation to the other party for the loss sustained by him in consequence of the breach. Lord Diplock defined them as ‘general secondary obligations’ in Photo Production Ltd v Securicor Transport Ltd [1980] 1 All ER 556 at p.567.

Another, ‘the anticipatory secondary obligation’ – is a secondary obligation to pay monetary compensation to the other party for the loss sustained by him in consequence of their non-performance in the future.

Position of the injured side is symmetrically opposite: when money was to accrue to him only after the date of termination, he cannot sue for any such sum under the contract, because both sides released from their obligations under the contract. Injured party, however, can claim damages for wrongful repudiation, and in assessing these damages the court may take into account any sums which he should have received under the broken contract.

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