Repudiation and anticipatory Breach

Question 1

What is repudiatory breach?

Answer 1

Where a term is breached and it is a condition or an innominate term, the innocent party has the right to terminate performance of the contract. The technical term for this is repudiatory breach.

Note: The innocent party, does NOT have to terminate.They can terminate and claim damages R they can affirm contract and claim damages.

Question 2

Does the innocent party need to elect to terminate?

Answer 2

Yes. The contract does not terminate itself, unless there is a term in the contract or the parties have agreed otherwise.

Question 3

What happens when they terminate?

Answer 3

Where this happens, the innocent party must elect to terminate so as to treat the contract as no longer binding upon him.
It is not that the contract is rescinded from the very beginning, but both parties are discharged from future performance of the contract, but not existing rights.

Question 4

What amounts to an election to terminate?

Answer 4

1. Failure to perform on the part of the innocent party is an indication that they may have elected to terminate. Election can be done by conduct. Vitol SA v Norelf

Question 5

Vitol SA v Norelf

Answer 5

Concerned a cargo of Propane.
The cargo was to be loaded by a specific date.
Sellers were to tender the bill of loading and the buyers to pay 30 days later.
Loading was too slow, buyers though that the ship wouldn’t be loaded in time. They sent a fax and repudiated the contract.
Ship was actually loaded in time. Thereafter, neither party took further steps to perform contract.
The buyer had brought an end to the contract erroneously.
Did the seller accept the breach by not performing after that date?
Yes the seller did.
It is for an innocent party to terminate, then for the party in breach to challenge the termination.
In this case, it failed.

Question 6

The Mihalis Angelos

Answer 6

Concerning a charter party that was to be readied by the 20th July. The contract provided for a termination clause
It was clear the charter wasn’t going to be ready, so the innocent party terminated on the 17th.
The P’s argued that there was premature use of termination clause.
Courts said think of commercial convenience, it would have been better to terminate the contract.

Question 7

What if you’re slow in terminating the contract?

Answer 7

You run the risk of affirming the contract i.e. the other party thinks you want to continue with the contract.
The contract is alive, until you elect to terminate.
Latvian Shipping company.

Question 8

Is an election, when made final?

Answer 8

Yes, you can’t say you didn’t intend to.

Ogle v Combouro.

Question 9

Can you lose the right to terminate?

Answer 9

1. When they affirm the contract via conduct or words.
2. They are not ready and willing to perform. (This is usually where the innocent party is also in breach) (it’s usually where the breach by the innocent party is an innominate term or a condition).
   Where the breach by the innocent party is a warranty, the right to termination is NOT barred.(Foran v Wright)
3. Estoppel, where right is suspended if you lead the party in breach to believe you won’t exercise to terminate. It is suspended until the person gives notice to the party in breach that the person intends to rely on the strict legal right.
4. Relief against forfeiture. Where courts give you more time to pay. Legione v Hately
   Stern v McArthurt.

Question 10

Legione v Hately

Answer 10

This case, contract for sale of land.
Balance to be paid on 1 July. On 9th August, purchasers phoned and said they were ready to complete on the 17th. Solicitor said he’d have to get instructions.
On the 14th of August, vendors called giving notice and that they would terminate the contract under condition 5 of the contract.
Courts allowed relief on the basis:
1. Purcahser had live on land for many years, had a house on the land which made land more valuable.
2. The payment was the final installment. The vendors were essentially trying to bring the contract to an end and reclaim the land.
More time was given to party to pay.

Question 11

Relief against unconscionable termination

Answer 11

Stern v McArthur
Sale of land, instalments to be paid over a number of years. Husband and wife went into possession of house. Separated years later and husband stopped paying instalments.
WIfe was unaware until a year afterward.
Clause in the contract saying a default on any of the instalments, the balance became due.
Vendors activated the clause.
Courts held: Relief granted.
Stressed here that the vendors had acted unconscionably in that they knew marriage was over and had done nothing to inform the wife.

Question 12

When does a person affirm?

Answer 12

The innocent party, in order to affirm, needs to know the facts giving right to elect and the fact that they have a legal right to elect. Segeant v ASL Developments

Question 13

Can you elect accidentally?

Answer 13

You cannot elect without knowing the facts which give you a right to terminate.
Khoury v Government Insurance of NSW

Question 14

Is electing to affirm final?

Answer 14

Yes.

Question 15

Can the right to affirm be barred?

Answer 15

Yes.

1. White and Carter v McGregor
2. The Alaskan Trader

Question 16

White and Carter v McGregor

Answer 16

In this case. D entered into a contract with P. The P’s were to display advertisements of D on their bins. On the day of entering into contract, D called up P saying that they no longer wanted to be in contract.
P didn’t do anything and proceeded to display D’s advertisements.
P then sought payment.
Courts said that P could affirm the contract and carry on.

There are two situations in which the right to affirm is barred:

1. Where innocent party cannot continue their own performance without the co-operation of the party in breach
2. Where P has no interest in performing, the right to affirm is barred.

Question 17

The Alaskan Trader

Answer 17

P chartered ship to D for 2 yeras.
After 1 year, ship requires extensive repairs.
D tells P that they no longer need ship.
Yet nonetheless the ship owner (P) went ahead and spent money to repair ship.
P sought recovery of those losses.

Held: P had acted unreasonably in refusing to accept the breach.

Question 18

What can you get for termination?

Answer 18

If an innocent party chooses to terminate, then neither parties are obliged to perform their obligations after the point of termination.

Innocent party can receive damages for loss of bargain for past breaches and damages for unperformed future obligations.

Question 19

Rights prior to termination?

Answer 19

1. For deposits, A can’t retain the instalments they have to B. They instalments must be repaid. However, a deposit, can be retained. If the deposit hasn’t been paid and the contract is terminated, the vendor can still ask for it: Bot v Ristevski.
2. If the innocent party elects to affirm, then the innocent party’s obligations continue as well, not just the party in breach. Peter Turnbull v Mundus

Question 20

What is renunciation?

Answer 20

Where prior to the time performance is due, one of the parties by words or conduct, evidences an intention not to perform part or all of the contract. This is also known as anticipatory breach.
Koompahtoo v Sanpine

Question 21

What are the consequences of renunciation?

Answer 21

The other party can affirm or terminate.

Question 22

What is express renunciation?

Answer 22

Express renunciation occurs where there is a refusal to perform all of the contract. Foran v wright.

Question 23

What is renunciation by word or conduct?

Answer 23

In this case, the party does not expressly tell the other party.
Associate Newspapers v Bancks

Question 24

What is disablement?

Answer 24

Where the party disables themselves from performing e.g. A agrees to sell to B, but then A sells to C.

The party terminating must show that performance would not have occurred on the date of performance - Universal Cargo

Question 25

Universal Cargo

Answer 25

Concerned Charter party who had an obligation to provide cargo for loading by the 21st July. It was time dependent.
By 18th July, Cargo had still not materialised.
Had charterer disabled themselves from performing, because if they had, then it could be anticipatory breach and hence the innocent party could terminate.

Held: It would be a serious breach because it goes to the core of the contract.

The ship owner had to show that it wasn’t just reasonable grounds for believing there would be no performance, but that it would not be performed by the 21st.

Question 26

Is it possible to renunciate a contract erroneously? For example, A has a genuine belief that A does not need to perform, or more likely, perform in the manner prescribed by the contract.

Answer 26

An error in renunciation is not relevant. That is still valid renunciation. This is the general rule Woodar Investments v Wimpy.

It is only in exceptional cases that the courts will accept good faith in renunciation. This only applies to anticipatory breaches. Woodar v Wimpy.

Question 27

Woodar v Wimpy

Answer 27

P agreed to sell land to D. Completion was to occur after gaining planning permission.
D thought, mistakenly, that a clause in the contract enabled them to withdraw. This was not what the contract said.

Held: majority said D had done so in good faith. Therefore because they genuinely believed the clause would allow them to withdraw, there was no renunciation.