Breach Flashcards
When will breach of an innominate term constitute a repudiatory breach? Main test + 3 points
When it deprives C of substantially the whole benefit in (HK Fir) or a substantial part of the benefit (Decro Wall) to which he was entitled under the contract.
- The test is to be applied at the date of the purported termination, not the date of the breach itself (HK Fir)
- The analogy drawn in HK Fir was with frustration, so clearly the threshold is very high indeed (Telford Homes)
- The main tests to be considered are first the ratio quantitatively which the breach bears to the contract as a whole, and secondly the degree of probability of such breach being repeated (Maple Flock)
Alan Auld
Multiple small breaches if substantial, persistent and cynical and met with repeated but ineffectual protest, may add up to repudiation of the agreement.
Valilas (2 points)
- Where the victim knows that he is not likely to be deprived of substantially the whole of the benefit of the contract, that will without more lend substantial weight to the conclusion that the victim was not justified in terminating the contract on the grounds of breach of an innominate term
- Breach of an innominate term does not have to constitute or threaten total non-performance to be repudiatory, for a declared intention by a party to fulfil a contract “but in a manner substantially inconsistent with his obligations and not in any other way” is a repudiation as well.
When may repudiation be inferred?
From conduct “evincing an intention to no longer be bound” and a “disregard for basic obligations going to the root of the contract” (Cordes).
Heaney suggests the test is whether a reasonable man in the innocent party’s position would see D as manifesting an unequivocal intention to abandon the contract.
Lovelock
If one party makes it impossible for himself to perform or continue performing his obligations (cf frustration which deals with externally-induced impossibility), this is a repudiation entitling C to terminate immediately
Woodar
The court will be reluctant to find repudiation even if the party misinterprets a contractual right to terminate, provided that misinterpretation is bona fide
Heaney
If D’s action would have been viewed as a mistaken application of the contract by any reasonable person (here a good faith termination when the right to terminate had not arisen) in V’s shoes, the requisite intention to abandon is missing
Distinguish repudiatory and anticipatory breach. What is the effect of the latter?
An anticipatory breach takes place before the specified time for performance. It may not be repudiatory but often is (since it usually consists of a declaration that D no longer intends to perform), giving rise to an accelerated right to terminate the contract which may be exercised immediately
What is the consequence of a repudiatory breach of contract?
Geys – a repudiatory breach of contract does not of itself operate to terminate the contract; it merely confers on the innocent party an election.
Santa Clara
To accept the repudiation C must communicate “clearly and unequivocally to the repudiating party that he is treating the contract as at an end.”
Heyman
Acceptance of a repudiation may occur impliedly by conduct
What if D has committed a repudiatory breach and C then, w/o knowledge of the breach, purports to himself repudiate the contract?
Stocznia - Where one party to a contract has repudiated it, the other may validly accept that repudiation by bringing the contract to an end, even if he gives the wrong reason for doing so or no reason at all.”
What is the effect of termination of a contract?
Photo Production – only operates prospectively, releasing parties from future obligations to perform their primary contractual obligations and replacing these w/ secondary obligations (e.g. pay damages), but leaving intact rights accruing prior to the termination of the contract
Two characteristics of affirmation post-repudiatory breach?
- Generally irrevocable and thus not lightly inferred.
- Usually a party will only be held to have affirmed if he had knowledge of the facts giving rise to the breach and his right to choose between affirmation and termination
What is the status of an unaccepted repudiation?
Howard - it is a thing writ in water.
Fercometal (“middle way”)
There is no middle way between termination and affirmation in the sense that C cannot both affirm and be absolved from tendering future performance until D gives notice that he is willing and able to perform
D has committed a repudiatory breach. C seeks advice on how speedily he must respond.
Stocznia – C is given a period of time in which to make up his mind, during which he “maintains the contract in being for the moment, while reserving his right to treat it as repudiated if D persists in his repudiation”.
However, if he delays, he runs the risk that D will resume performance and end any continuing right to accept the repudiation/that he will be treated as affirming the contract/that his own breach will intervene/that frustration (e.g. Avery) will occur.
Force India
Where there is no particular urgency or the situation is a complex one the innocent party may be given a longer period to make up his mind
The Simona
An innocent party who rejects a repudiation and keeps the contract alive runs the risk that D will later be able to invoke an express contractual right to terminate the contract (e.g. for C’s breach), unless D has been estopped from later saying he is entitled to exercise that right.
D has committed a repudiatory breach. C wants to urge D to reconsider, given their long-standing commercial r/s. Advise C.
Yukong – C does not automatically lose his right to treat the contract as discharged merely by calling on the other to reconsider his position and recognise his obligation.
However Stocznia indicates that C should expressly reserve his contractual rights while doing so; C’s failure to do so in Stocznia almost persuaded the CoA that he had affirmed.
Is affirmation always irrevocable?
Yes. The Fortune Plum - a C who has affirmed is nevertheless entitled to bring the contract to an end if there is a
o Continued refusal to perform by the party in breach and
o This amounts to further repudiatory conduct
but this might be viewed as a second repudiatory breach and is thus arguably not a true exception.
Fercometal
If C elects to affirm and await the time for performance, the contract remains alive for the benefit of both parties so that C must continue to perform his own obligations.
White & Carter
In the event of D’s anticipatory breach, C will have a right to affirm the contract and continue w/ performance, unless
(i) He requires D’s cooperation to continue performance, in which case the law will not compel D to cooperate
(ii) (Possibly) he lacks any legitimate interest, financial or otherwise in electing to proceed rather than claim damages
World Online
The underlying principle behind the “cooperation exception” in White & Carter is that a breach of contract cannot convert a dependent obligation into an independent one.
The Odenfeld
Any fetter on C’s right of election will only be applied where damages would be an adequate remedy and an election to keep the contract alive would be wholly unreasonable
The Dynamic
The burden is on the contract-breaker to show that C has no legitimate interest in performance, which is NOT discharged merely by showing that the benefit to the other party is small in comparison to the loss to the contract breaker
