Material Breach and Recission (L18) Flashcards
What is rescission?
The exercise by the INNOCENT party of a right to terminate further performance of the contract.
What is repudiation?
A wrongful advance declaration by one party that it will refuse to perform its future contractual obligations.
What may entitle the other party to rescind.
NOT a remedy!
When is rescission available?
On material breach (Wade v Waldon).
On repudiation.
- i.e. advance notifications of non-performance of contractual obligations (Wyman Gordon Ltd v Proclad International Ltd).
What are the facts of Wade v Waldon?
Waldon was the manager of the Palace Theatre in Glasgow. Wade was a comedian, who contracted with Waldon in March 1907 to perform for one week a year later in March 1908 ‘at such times as shall be arranged by the manager, and to commence on Monday, the 16th day of March 1908’.
Contract condition 6 stated ‘all artists engaged at the Palace Theatre Glasgow must give fourteen days notice prior to such engagement, such notice to be accompanied with bill matter.’ (Bill matter is a summary of the content of his act).
Wade failed to observe condition 6 - but was this a material breach justifying rescission?
What does LP Dunedin (CSIH) in Wade v Waldon tell us about what constitutes a material breach?
“It is familiar law and quite well settled by decision that in any contract which contains multifarious stipulations there are some which go so to the root of the contract that a breach of those stipulations entitles the party pleading the breach to declare that the contract is at an end”.
What did Lord Johnston state in the CSOH on the status of the contract’s condition 6 (Wade v Waldon)?
“It is impossible to raise nine-tenths of these rules into anything higher than regulations for the conduct of the artistes during their engagements, breach of which could not possibly affect their contracts with the management.”
“It does not follow that failure to give the fourteen days notice ‘accompanied with bill matter’ … entitles the employer to refuse the services of the artiste if he offers otherwise to fulfil his engagement”
What can be concluded from Wade v Waldon?
Condition 6: “a stipulation which does not go to the root of the contract” (LP Dunedin, Inner House), therefore not material breach.
What did Lady Wolffe state in Apcoa Parking (UK) Ltd v Crosslands Properties Ltd [2021] CSOH 77 (paras 217-219)?
“By its nature as a metaphor, the phrase ‘going to the root of the contract’ is an open-textured and flexible test to be applied having regard to all of the circumstances. Therefore, it may also be important to consider the term concerned and its inter-relationship to other terms in the overall context of the parties’ agreement…
Once a term has been construed (or stipulated) as going to the “root of the contract”, then the question of whether its breach is material is treated as a question of fact…
What is clear is that breach of a term going to the root of the contract is not a low threshold.”
How was repudiation defined in Wyman Gordon Ltd v Proclad International Ltd 2011 SC 338?
Repudiation = “an objectively clear indication that, for whatever reason, material contractual obligations are not going to be performed at the due date”.
Effect? No effect in itself, but consequences depend on response of innocent party.
In Blyth v Scottish Liberal Club 1982 SC 140, what did Lord Dunpark say on repudiation?
“If by words or deed one party to a contract demonstrates that he will no longer be bound by his contract, that is actual repudiation which entitles the other party at once to cancel or rescind the contract”.
Following material breach or repudiation, what may the innocent party do?
Affirm –> Insist on continuing performance.
- White & Carter (Councils) Ltd v McGregor 1962 SC (HL) 1.
Rescind –> Future performance obligations come to an end, but not accrued rights.
- Graham v United Turkey Red Co. Ltd. 1922 SC 533.
The contract may still be effective for some purposes e.g. exemption clauses; liquidated damages clauses.
- Lloyds Bank v Bamberger 1993 SC 570.
What was the situation in White & Carter (Councils) Ltd v McGregor 1962 SC (HL) 1?
New contract agreed upon by sales manager, but cancelled the same day by McGregor.
Were White & Carter (Councils) Ltd still entitled to perform on 2 November, and demand payment? YES. (Affirming).
What did Lord Reid say in White & Carter?
“The general rule cannot be in doubt…. If one party to a contract repudiates it in the sense of making it clear to the other party that he refuses or will refuse to carry out his part of the contract, the other party, the innocent party, has an option.”
“He may accept that repudiation and sue for damages for breach of contract whether or not the time for performance has come; or he may if he chooses disregard or refuse to accept it and then the contract remains in full effect.”
“It is, in my judgment, impossible to say that the appellants should be deprived of their right to claim the contract price….”
What does Graham & Co v United Turkey Red Co Ltd 1922 SC 533 tell us about accrued rights and rescission?
Graham & Co acted as a sales agent for a dealer in cotton goods and sued for payment of its commission.
From July 1916 Graham in breach of provisions of the agency contract requiring it to act on an exclusive basis, and contract rescinded by UTR in November 1917.
Commission after July 1916 not recoverable but “prior to that date, I have come to be of opinion … that the pursuers are entitled to an accounting and to payment of any commission that may still be unpaid for orders obtained between February-March 1914 and July 1916” (LJC Scott Dickson).
I.e. accrued rights enforceable despite rescission.
What does Lloyds Bank v Bamberger 1993 SC 570 tell us about how contracts may still have effect after rescission?
After rescission “it is incorrect to say … the contract has come to an end” (LJC Ross):
“The innocent party may still bring an action for damages” and sue on the contract.
“Either party may still enforce … clauses in the contract which were plainly intended … to survive rescission” e.g. arbitration clauses, clauses prorogating jurisdiction or specifying the proper law of the contract.
Also “may be clauses in the contract affecting damages due for breach of contract” e.g. exclusion clauses, clauses limiting liability and clauses for liquidated damages.
