Breach and Termination

Question 1

Decro‐Wall International SA v. Practitioners in Marketing Ltd. (CA 1971) Principle

Answer 1

• set out the test for fundamental breach
• must deprive the injured party a substantial part of the benefit he is getting under the contract
• otherwise it would be unfair to hold the other accountable

Question 2

Heyman v Darwins Ltd [1942] Facts

Answer 2

• arbitration clause survived termination
• if contract indicates that the parties want the clause to survive, they will
• between manufacurers and distributors
• concerning steel products
• term that any dispute should go to arbritation
• R repudiated the contract
o Tried to go to the courts to terminate the contract and collect damages
• C argued that they needed to go to arbitration first under the clause
• Held:
o Dispute fell under the arbitration clause
o That’s where the dispute should be regulated
o Followed in other arbitration cases
o Relates to any clause that is meant to survive beyond termination of the contract

Question 3

Heyman v Darwins Ltd [1942] Principle

Answer 3

• arbitration clause survived termination

* if contract indicates that the parties want the clause to survive, they will

Question 4

Johnson v Agnew [1980] Facts

Answer 4

• A was buying J’s farm
• Contract was ready, A did not do anything
• J tried to get specific performance to force A to fulfill the contract that she made
• Order for specific performance was not made until a year after the performance was supposed to occur
• In the meantime, J’s mortgage company had won an order for possession to sell the property (3rd party now involved)
• J said there is not point to make A buy the property
• J was bankrupt
• Mortgagees sold the property for lees than the mortgage
• J tried to sue A for the purchase price minus what the mortgagee sold the property for
• Held:
o J should receive damages
o Breach of a contract for sale
o Should be assessed at the date when the contract was lost
o Continuing repudiatory conduct form A, J could terminate

Rules from this case: (Below slide)
• 1) Termination for breach of contract is perspective (look forward, not backwards)
• Not like rescission
• 2) if you are trying to get specific performance, does not give up right to end the contract when he initially accepts D’s repudiatroy breach. (it is ongoing)

Question 5

Johnson v Agnew [1980] Principle

Answer 5

o Continuing repudiatory conduct form A, J could terminate

4 Rules:
• 1) Termination for breach of contract is “prospective”, not “retrospective”

• 2) A claimant for specific performance does not forfeit his right to terminate the contract by accepting a defendant’s repudiatory breach

• 3) When a specific performance decree is made, a court oversees performance, and it has the sole jurisdiction to determine whether that obligation can be discharged
o Makes it rare to happen
o Court does not like to get involved

• 4) Common law damages are assessed at the date of the breach of the contract, though the court may fix another date if justice requires

Question 6

Johnson v Agnew [1980] 4 Rules for continuing repudiatory breach?

Answer 6

• 1) Termination for breach of contract is “prospective”, not “retrospective”
• 2) A claimant for specific performance does not forfeit his right to terminate the contract by accepting a defendant’s repudiatory breach

• 3) When a specific performance decree is made, a court oversees performance, and it has the sole jurisdiction to determine whether that obligation can be discharged
o Makes it rare to happen
o Court does not like to get involved

• 4) Common law damages are assessed at the date of the breach of the contract, though the court may fix another date if justice requires

Question 7

Stocznia Gdanska S.A. v Latvian Shipping Co [1997] Facts

Answer 7

• contracted to build some ships
• contract was rescinded after part performance
• issue: breach was ongoing, could they choose to terminate the contract?
• Held:
o Yes
o Can choose to terminate
o Even if there is initial affirmation because breach is continuing

Question 8

Stocznia Gdanska S.A. v Latvian Shipping Co [1997] Principle

Answer 8

Innocent party can choose to terminate contract if breach is continuing, even if initially chose to affirm the breach

Question 9

London Borough of Waltham Forest v Omilaju [2004] EWCA Civ 1493, [2005] Facts

Answer 9

• Employee (O) worked for L for 9 years until 2001
• Between 1998- 2001, he issued a number of complaints against the council
• Alleged a number of different things
• All claims were dismissed
• L refused to pay his serious while he was absent from work in 2001, when he was at the hearings for all of these complaints
• He could of applied for special leave, but didn’t
• Resigned in 2001
• Said failure to pay his salary was the last straw of acts against him
• Held:
o Claim dismissed
o Reasonable not to pay because he was not working and could of applied for leave
o Last straw incident is possible to be enough for a constructive breach, but not in this case
o Principle
• Can be a number of smaller breaches, but the last straw breach can be the one that puts it over the edge

Question 10

London Borough of Waltham Forest v Omilaju [2004] EWCA Civ 1493, [2005] Principle

Answer 10

“law straw” in a series of acts

• Can be a number of smaller breaches, but the last straw breach can be the one that puts it over the edge

Question 11

Bentsen v Taylor [1893] Facts

Answer 11

• involved a charter party
• contract term that vessel was supposed to leave in March, didn’t leave until April
• it was a condition
• Breach was affirmed by innocent party
• Once you makes the decision, that is final, unless it is an ongoing breach

Question 12

Bentsen v Taylor [1893] Principle

Answer 12

Innocent party must choose between affirmation and termination

Breach was affirmed by innocent party
• Once you makes the decision, that is final, unless it is an ongoing breach

Question 13

Vitol SA v Norelf Ltd [1996] Facts

Answer 13

• N contracted to sell propane to V
• Propane of market was rough
• Cargo was shipped from US, should of left before March 7
• On March 8, it was still being loaded
• V sent telex to N repudiating the contract
• Ship was still loaded and sailed
• Market for propane dropped
• N sold propane at a lost
• Neither party did anything to affirm the contract
• N sued for damages for breach
• Held:
o Telex was an anticipatory breach
o It is possible that doing nothing can constitute acceptance of a breach
• It is fact specific
o We don’t know who won, they settled in arbitration
o Silence can amount to acceptance of repudiatory breach
• It is fact specific
• Case by case

Question 14

Vitol SA v Norelf Ltd [1996] Principle

Answer 14

Party wishing to terminate must notify party in breach that he is doing so


o Silence can amount to acceptance of repudiatory breach
• It is fact specific
• Case by case

Question 15

The Kanchenjunga [1990] Facts

Answer 15

•	Ship under charter
•	Supposed to go to certain ports
•	One port was really dangerous, and when it got there it was really dangerous situation so they left
•	Issue: was ship owner liable for leaving?
•	Held:
o	No
o	Terms allowed him to do that 
o	Has the right to affirm or waive

Question 16

The Kanchenjunga [1990] Principle

Answer 16

waiving the right to terminate after a serious breach

o Has the right to affirm or waive

Question 17

The Post Chaser [1982] Facts

Answer 17

• Sale of palm oil
• Seller sold to company B, who sold to C
• Sellers was supposed to give notice when the ship had sailed as soon as possible
• Sellers did not tell them until a month later
• Breached condition
• B had right to reject the shipment, but said nothing
• Same day B received notice, they told C
• 10 days later, B requested that Sellers send documents directly to C
• C then rejected the shipments
• 2 days later, B rejected the shipment
• Sellers had to sell on open market, got a lot less money
• Sued for the difference
• Issue: did B affirm the contract
• Held:
o Nothing inequitable to allow buyers to assert their legal rights
o No problem in rejecting the goods

Question 18

The Post Chaser [1982] Principle

Answer 18

waiving the right to terminate after a serious breach

Question 19

Peyman v Lanjani [1985] Facts

Answer 19

•	leasehold interest in a property 
•	repudiatory breach by seller
•	buyer affirmed 
•	buyer did not know about his right to terminate
•	Held:
o	Affirmation was not successful 
o	Must know right

Question 20

Peyman v Lanjani [1985] Principle

Answer 20

Plaintiff must know he has the right to rescind in order to affirm the contract

Question 21

Evans Marshall v Bertola [1973] Facts

Answer 21

• 3 parties
• clause that 2 parties had to go to Spain to resolve disputes
• there were 2 actions, 1 in UK other in Spain
• Held:
o Should only have one action
o Sent to Spain
o If you affirm the contract, you are subject to the terms

Question 22

Evans Marshall v Bertola [1973] Principle

Answer 22

o If you affirm the contract, you are subject to the terms

Question 23

White & Carter (Councils) v Macgregor [1962] Facts

Answer 23

• W was an advertising contractor
• W agreed with M. a garage proprietor, to display advertisements for his garage for 3 years
• On the same day, M refused to perform the agreement and requested W to cancel the contract
• W refused, and elected to treat the contract as still continuing
• W made no effort to re-let the space and displayed advertisements as agreed
• W sued for the full amount due
• M argued that since he renounced the contract before anything had occurred under it, W was not entitled to carry out the agreement and sue for the price. W was entitled only to damages.
• Held:
o Argument rejected
o W was entitled to the full contract sum
o W was not obliged to accept the breach of contract
o Adverts were already on the bins
• Would take more effort
o Innocent party can insist on performance n cooperation is not needed

Question 24

White & Carter (Councils) v Macgregor [1962] Principle

Answer 24

• Can affirm a contract, can carry on and get paid for it

• Did not need cooperation of the breaching party to continue in this case

o Innocent party can insist on performance n cooperation is not needed

Question 25

Hounslow LBC v Twickenham Garden [1971] Facts

Answer 25

• H entered into a building contract with T
• T was to carry out construction work on the land owned by H
• As part of the contract, H granted T a license to enter the site to carry out work
• H was unhappy about how slow T was going and wanted to terminate the contract
• T refused to accept that H could do this
• H attempted to obtain an injunction to force T to leave the site
• Held:
o Injunction refused
o Equity will not assist a man to break his contract
o No provision to prevent them from entering the land

Question 26

Hounslow LBC v Twickenham Garden [1971] Principle

Answer 26

If the cooperation of the breaching party is required, then White & Carter case does not apply

• Innocent has to have a legitimate interest to carry on the contract

o Equity will not assist a man to break his contract
o No provision to prevent them from entering the land