Breach of Contract

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this page was last time updated on: 16-Jan-2013

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Case Law

Boone v Eyre (1779), 1 H. Bl 273

Davidson v Gwynne (1810), 12 East 381

Howard v Pickford Tool Co. [1951] 1 K.B. 417

Raineri v Miles [1981] AC 1050

Motor Oil Hellas (Corinth) Refineries SA v Shipping Corporation of India (The Kanchenjunga)[1990] 1 Lloyd’s Rep 391

Co-operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd [1997] 3 All ER 297

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Law of Contract: Breach

Effect of Breach

When or if breach occurred the contract often specifically provides for remedies available to the aggrieved party, as for example in case of port delays in excess of agreed laytime the charterer becomes liable to pay the owner liquidated damages by way of demurrage. In all other cases the injured party usually sues to be put into the position in which it would have been if the contract had been completely performed.

Philosophy of contract law with regard to the breach and its consequences was stated by Lord Hoffmann in Co-operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd [1997] 3 All ER 297 at p.305:

It is true that the defendant has, by his own breach of contract, put himself in such an unfortunate position. But the purpose of the law of contract is not to punish wrongdoing but to satisfy the expectations of the party entitled to performance. A remedy which enables him to secure, in money terms, more than the performance due to him is unjust.

Thus, every breach of contract gives right to injured party to claim either damages or the agreed sum or specific performance or an injunction. In some circumstances the innocent party may be entitled to more than one of these remedies: e.g. to an injunction and damages, but not every breach gives to the innocent party the right to terminate the contract. The rule was stated by Lord Ellenborough CJ in Davidson v Gwynne (1810), 12 East 381, at p 389:

The principle laid down in Boone v Eyre (1779), 1 H. Bl 273 has been recognised in all the subsequent cases, that unless the non-performance alleged in breach of the contract goes to the whole root and consideration of it, the covenant broken is not to be considered as a condition precedent, but as a distinct covenant, for the breach of which the party injured may be compensated in damages.

Existence of the right to terminate can be evaluated by application of two principles: i) significance of the contractual term broken irrespective of the consequences of the breach; ii) in cases where broken term is neither condition, nor warranty, the law shall focus on the consequences of the breach.

It follows that a right to terminate will generally arise where the term broken is a condition and will not where such term is a warranty. Alternatively, where the term broken is innominate, i.e. neither condition, nor warranty, the right to terminate will depend upon the consequences of the breach.

Finally, when one party announce that he is not going to perform, another party has to elect whether to accept such behaviour as repudiation or not. Until such election has been made there is no breach.

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.
Dictum of Asquith LJ in Howard v Pickford Tool Co. [1951] 1 K.B. 417 at p.420.
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